Q4 2019 Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Q4 2019 Gokul earnings Conference call. At this time, all participants are in listen only mode.
The speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone please be advised to today's conference is being recorded.
Require any further assistance. Please press star zero I would now like to hand, the conference over to your Speaker Ms. Trisha MRD Vice President of Communications. Please go ahead.
Thank you good afternoon, and welcome to record financial results Conference call for the fourth quarter ended December 31st 2019.
I'm pleased to be joining on the call today with Anthony would focus founder and CEO, Steve loud in our CFO and Scott Rosenberg as VP and GM of our platform business, who will be available for two and guide.
Well details of our results an additional management commentary are available in our shareholder letter, which can be found on the Investor Relations section of our website at <unk>, our dot Roque crew dot com.
Following discussion, including responses to your questions reflect management's views as of today February 13, 2020, only and we do not undertake any obligation to update or revise this information.
Some of the statements made on today's call our forward looking at our based on our current expectations forecasts and assumptions and involve risks and uncertainties.
These statements include but are not limited to statements regarding the future performance, a broker including expected financial results for the first quarter and full year 2020.
And the future growth and our business in our industry.
Our actual results may differ materially from those discussed on this call for a variety of reasons.
Please refer to today's shareholder letter and the company's periodic filings with the FCC for information about factors, which could cause our actual results to differ materially from these forward looking statements.
You will find reconciliations of non-GAAP measures to the most comparable measures discussed today in our shareholder letter, which is posted on our Investor Relations website at <unk> IR Dot Roko dotcom and I encourage you to periodically visit our IR website for important context.
Finally, unless otherwise stated all comparisons on this call will be against our results for the comparable period of 2018.
Now I'd like the hand, the call oversee Anthony.
Thank you Tricia and thanks, everyone for joining todays call.
In Q4, we exceeded our outlook for revenue gross profit and EBITDA.
Moreover, 2019 was a tremendous year, both for the streaming industry and for Rocchio.
Our revenue thoughts $1.1 billion and our customers stream roughly 40 billion hours.
And only two years, we've doubled our topline an increase streaming hours by 170%.
Streaming has come a long way into last decade, 10 years ago. Netflix was about all I can stream on my TV and in fairly low resolution.
Recently I enjoy streaming the Super Bowl in brilliant for K via Fox Sports on my quantum Dot Roki TV with my Roku wireless speakers and support for.
In fact streaming is often the easiest and sometimes the only way for people to watch in Fourq.
Most TV is still delivered the old fashioned way streaming still has a long way to go and the streaming decade lies before us I couldn't be more excited about the innovation, we have planned for our TV software, our advertising platform broker channel and international expansion.
I will now turn the call over to Steve to discuss the financial details and our outlook.
Thanks, Anthony our strong fourth quarter performance, which exceeded our outlook capped off another great year.
We executed well and delivered record results.
Before taking your questions I'll walk through operational and financial highlights and address outlook.
We saw strong demand for our players in Tvs and the fourth quarter, which resulted in the incremental 9.8 million active accounts for the year.
And we ended 2018 with 36.9 million active accounts.
Our scale has expanded rapidly over the last several years.
We added just under 6 million active accounts in 2017.
Nearly 8 million more in 2018, and almost 10 million more in 2019.
In addition to increasing our scale.
We continue to see growing engagement on our platform.
With 2018 streaming hours up 16.3 billion year over year to a record 40 billion hours.
In Q4, the streaming our growth rate moderated somewhat versus Q4 2018 due in part to the timing of Black Friday. Following a week later in 2019.
And the partial rollout of the are you still watching feature.
Which prompt users to confirm there still watching after a period of in activity.
Leading channel partners like Netflix have already implemented similar features that we think create a level of consistency and establish a best practice across our platform.
As of early Q1, we have completed rolling out this feature to our entire installed base and estimate that it will moderate our streaming our year over year growth.
By approximately 10 to 15 percentage points in 2020.
We do not expect rollout of this feature to have a material impact on our financial performance.
Please see our shareholder letter for the full financial details from the quarter in fiscal year.
I'll highlight a few items and provide our Q1 in full year 2020 outlook.
Q4, total revenue exceeded our outlook, increasing 49% year over year Q4 hundred 11.2 million with the platform segment revenue up 71% year over year to a record 259.6 million.
And represented 63% of total revenue.
Layer segment revenue growth of 22% year over year again came in ahead of expectations driven by strong player sales with units up 33% year over year.
Highly effective holiday promotion strategy led to a 10% decrease in ASP.
Our key financial performance metric is gross profit, which exceeded our outlook and was up 44% year over year in Q4, two a record 161.6 million.
Gross margin was 39.3%, reflecting solid platform margins consistent with the prior quarter.
Partially offset by our decision to run the player business at roughly zero gross margin.
Q4, adjusted EBITDA of 15.1 million exceeded our outlook Q4, Opex was 179 million up 68% year over year as we continue to invest to extend our strategic advantages.
Excluding approximately 13 million of data do related opex and deal costs.
Effects would have grown roughly 56% year over year.
To date, we're making good progress on our integration of data dues operations with brokers AD business and its Q4 performance was consistent with expectations.
As we mentioned on the last call given the relative size of data zoo and our integration plans, we do not expect to breakout data do going forward rather it will be included as part of our platform segment.
We ended the quarter with 517.3 million of cash cash equivalents restricted cash and short term investments, which included net proceeds of 151 million from the sale of class a common stock in an app the market offering transaction.
During the quarter net proceeds of 100 million from drawing on our term loan as part of our credit facility and reflecting the use of 68 million in net cash as part of the funding for the data do acquisition.
With that let's turn to our outlook for the full year 2020, which calls for a 1.6 billion in revenues at the midpoint of 42% year over year in 730 million of gross profit at the midpoint up 47% year over year.
The mix of revenue will continue to move towards the faster growing platform segment, which we anticipate will generate roughly three quarters of total revenues.
For modeling purposes, you should plan for full year platform gross margin in the high Fiftys to 60%.
As a percentage of revenue driven by continued mix shift to video advertising inclusion of data zoo and growth of premium subscriptions.
For players you should expect us to manage full year gross margin to roughly zero.
We remind you that we're not optimizing for player gross profit given our focus on device sales as an important driver of account growth. We believed that our strategy of trading player margin for account growth in platform revenue growth is working well.
Given our strong position within the shift toward streaming our goal for 2020 is to continue to invest our incremental gross profit back into our strategic growth opportunities and to manage the business to roughly breakeven on a full year adjusted EBITDA basis.
Modeling purposes. Please note the 2020 adjusted EBITDA excludes stock based compensation of roughly 135 million in an estimated 35 million of depreciation and amortization and net other income.
Implied in our 2020 outlook is roughly 905 million of GAAP operating expenses and while our revenue and gross profit can be quite seasonal our optics is not particularly seasonal but instead is better looked at on a sequential growth basis due to headcount and facility related expenses traditionally accounting for roughly three quarters.
Of total Opex.
Approximately 60% of our anticipated increases in operating expenses in 2020 are related to the full year impact of the 32% organic head count growth in 2019.
Increased facility costs, primarily related to our new headquarters and the inclusion of data zoo operating expenses.
In addition, we also plan to hire new employees at a similar organic rate to 2019.
Turning to our Q1 outlook, we remind you that Q1 is our seasonally soft this quarter from a revenue perspective.
With revenue that is roughly 25% lower sequentially and our seasonally strong fourth quarter.
Our Q1 outlook calls for similar seasonality with the midpoint of total revenues of 305 million up 48% year over year with platform accounting for roughly three quarters of the mix.
Gross profit of roughly 145 million at the midpoint is expected to be more than offset by higher operating expenses, resulting in an adjusted EBITDA loss of roughly 20 million.
In Q1, we expect player gross margins to be in the mid to high single digits, reflecting a traditionally lighter promotional period within the retail calendar.
Please note that our outlook does not include any material impacts resulting from the current.
Novel Corona virus outbreak, we're closely monitoring this outbreak and to date have only experienced minor impacts, but there is potential for more significant manufacturing and supply chain disruptions that the outbreak becomes more severe which may hamper, our and our partners abilities to replenish inventory after a strong holiday.
Season.
I will summarize by saying how pleased we are with the trajectory of the business and we'd like to share a little perspective on our historical and anticipated revenue growth.
Our 2020 revenue outlook of 1.6 billion at the midpoint represents roughly two times 2018 revenue.
Three times 2017 revenue.
Four times 2016 revenue and five times 2015 revenue.
The sustained level of robust revenue growth speaks to the fundamentals of our business the difficulty of replicating our strategic advantages in market, leading position and our laser focus and leadership and streaming. In addition, we are encouraged by the significant opportunities ahead as we are only just beginning the streaming decades.
With that let's turn the call over for questions operator.
Thank you.
I would remind you ladies and gentlemen to ask a question you want me to press Star one on your telephone we ask that you. Please limit yourself to one question and one follow up question. You May then return to the Q2 withdraw your question press the pound.
Please standby, while we compile the culinary roster.
Our first question comes from Elliott Alpha with D.A. Davidson.
Great. Thank you I wanted to ask a little bit on duplicate ads and how it pertains to roll through.
How is the our technology is allowing you to do that.
And secondly have you spoken on the number of active accounts that are equipped with this year.
Hi earlier. This is Scott Rosemarie can you just to repeat the question around around HCR. Please.
Yeah, mainly a duplicate ads and kind of how it pertains to broke through and how the easier technology.
Is maybe allowing you to do that.
And also if you've ever spoken on the number of active accounts that are equipped with HCR. Thanks.
Okay Gotcha.
So just for background HCR is a finger printing technology. It helps us to determine what what programs and as easy as being exposed to it broadly deployed in our televisions, it's very important component in our AD business and it's essential to how we help advertisers figure out the incremental reach delivered on that.
To add platform, that's one of the core value propositions of an advertiser investing OTI is knowledge that they're reaching users who are no longer reachable and linear television. So we use the HCR information together with LTT at exposure to produce a de duplicated view of fluid advertisers reached.
Answer your question.
Yes, Thanks, and then also.
It's more about the shareholder letter about adding more content onto the broker channel in 2020 could you expand or out anymore color on that would be helpful. Thanks.
Sure the Roka channel had at an amazing 2019.
Reached active accounts was about 56 million viewers parks associates called it a top three AD supported service in the US it's growing significantly faster than our and our already fast growing platform. We added 40 premium services 55 linear channels Kids and family. This is just a demonstration of the.
The growth of EUR of content available to consumers and the ROE to channel every quarter, we've had new announcements in that regard and it's led the Roes and channel to be one of the largest.
Channels on the platform and to deliver great reach for our advertisers. It's also a place where we can deploy new AD capability sponsorships and other types of brand integrations. Those types integrations are exciting per branch because they go beyond the 15 to 32nd spot.
At a new way for them to reach viewers in this new streaming experience.
Now this is Anthony I'll, just add that through the channel is.
An example of an area, where we are investing in and it's a strategy. This working really well for us it's driving a lot of engagement the content the content.
You asked about in the broker channel, obviously that we've been improving that that gets.
A deeper librarian more breadth every quarter, but a big part of our focus is improving the capabilities of the Roki channel, making it more integrated with our platform things like machine learning.
So there are many ways, we can drive viewership as well as content in that particular application.
Great appreciate it.
Thank you. Our next question comes from the silly Carousel with Cannonball research.
Thank you have a clarification then a question in the Investor let a shareholder letter you say that and what that does can use their capabilities to buy ads from publishes directly can you clarify what what that means does it mean that you sell third party apps inventory.
Using data as it is DSP and if so what is the economics so over this relationship.
Sure.
Thanks for the question facility.
The.
Broken is built a leading AD platform on the core value proposition of our scale, our first party consumer relationships our data our management are targeting capabilities and.
The data do acquisition really helped accelerate our ability to provide those same capabilities to an advertiser as they buy media more broadly across the road platform and off the platform. It is a DSP a demand side platform. So it's ultimately is a tool set to help brands plan and and bye.
Advertising programmatically across the platform and while they will buy broken media through our DSP. They will also by third party media. That's what we meant by the comments in the shareholder letter.
And do you get a commission for that or you don't participate at all in that.
Right.
Definitely participate as part of the core business that we as an artifact of.
Adding data and transactional capabilities.
Machine learning and optimization to help an advertiser optimized to to outcomes.
Those are all things that.
We earned from as a as an advertiser users our tools and one of my favorite anecdotes of from an early execution was with the direct to consumer brand called third love. It's a women's underwear company and just as an example, they they are now using our DSP to both by media on road through and then follow up.
With exposures on desktop and mobile and they showed a 319% improvement in conversion rates by doing that one two punch. That's just an example of the kinds of executions that we're able to offer advertisers with this new capability.
Oh, great. So they go up sorry.
I was going to say that the they do acquisition was a big milestone for us in that it is going well we've started integrating the team that seems rashly, mostly integrated and we're starting to see some early success. It's obviously you know shows that we believe that the TV advertising World will eventually move to data driven self serve programmatic tools like the.
Traditional web and mobile industries.
So the follow up to this is them while since you bought data as Amazon publisher services has been actively onboarding fire TV apps on its private marketplace to sell the inventory. So it seems like that a completely different.
New competitive dynamic emerged in the past several months here. So I would have been correct to say that it's more that that is competition to the service. It just described and.
The if so what gives you confidence and budget positioning and this situation and ability to do when budgets and hopefully grow share going forward with.
I'm, a P.S. competing against it for budgets most problem.
Sure Amazon of course is both a partner and a in a competitor.
Thing I'd remind you of is our main competition here is inertia is the traditional TV spending pattern. We offer a platform that does that scale with logged in user proprietary data and broad reach across the platform. These are all the horrible hallmarks of leading AD platforms, and but we think fuzzy.
Missions us uniquely to help marketers reach broke the users in the on their role to devices as well as.
Platform in the example, I just gave you a third love. So we think we're uniquely positioned to compete aggressively in the space.
Thank you very much.
Thank you. Our next question comes from Laura Martin with Needham.
Hey, there can you guys hear me okay.
Now let me tell you okay, great great numbers you guys. So I got a couple of speed. The most important one is you.
Six so six.
When you sell it does mean, if you signed up in the hypothetical all the Disney plus sub.
John do you have to Oh Disney the five box, but then accrue on this cash flow statement the deferred revenue because you can't recognize it and is that why we're seeing these big swings in deferred revenue and please just remind us every single line item not on the income statement, where Disney plus sign up happens. Please.
Hey, Laura.
Really not a six question I appreciate that.
Well now talking about any specific terms in any one deal in general our content distribution agreements are.
Multiple element arrangements certainly breast Vod services are.
Traditional structure is the Rev share, but there's often a.
Tenants of that.
The minimum guarantees or promotions that we might give as a result.
Yes, the material agreements under six of six.
Come under the multiple element arrangements accounting.
So it really just depends in terms of.
Well the different elements the value that we have described to these elements and then the performance obligations that are are basically put against these these revenue streams and so that can lead to some lumpiness within the life of the deal where we are valuing the entire.
Agreements and placing value on that and so it's not necessarily.
Immediately and 100% correlated with the underlying.
Cash or business stream to your point so.
So it can be lumpy overtime and certainly with some of these new services that can lead to a bit of a disconnect between the underlying driver and how it shows up on the PML or the balance sheet.
Okay. So you can you give us the line items that have mostly effects.
Well the again it depends on the deal, but but certainly there can be on the BNL a revenue or a.
Cogs impact can say gross profit impact from content distribution agreements.
And then there can be an impact on the deferred side on the balance sheet.
Again is highly dependent on.
On the deal Okay. Just wanted to make sure and then the Anthony what are the things you've told us in the past is that I.
I'm interested in an update to a number of Tvs sold in Q4 that were ROE cooties and be number of people that you reach that linear TV does not reach any longer if you have those two numbers.
Yeah, well rookie TV, obviously is a great program for US hugely successful you know we've seen consistent growth there in terms of driving our active accounts.
For the for the full year last year.
Just under one in three smart TV sold in the United States, where roka Tvs, making movies TV. The number one streaming TV brands in the United States and that was up from the prior year. It was one in four.
Smart Tvs sold.
So uh huh.
You know so that he does it's going well in the great business for US, let me take and the lines about okay about that reach so that we mentioned in prior calls not half our user base doesn't have a pay TV package in their homes. So by definition, they're not reachable through linear television the other half tend to be very light Lynn.
Here TD viewers, so on the whole across dozens and dozens of campaigns really hundreds we've been able to show advertisers that the vast majority of the users that they reach when they buy advertising from both who have not actually been reached through linear there's very little duplications between the executions.
Okay. That's super helpful and that's up a lot from a year ago. So thanks very much.
Thank you. Our next question comes from Mark Mahaney with RBC.
Okay. Thanks, two questions platform gross margins have been trending down and you gave guidance for this next year, but platform gross margins were flattish Q3 to Q4 any particular reason why they weren't down and then secondly international its international contributing at all materially so far to any of the metric streamed hours active.
Accounts those two in particular and if not you want to lay out any benchmarks in your guidance for this next year is there is there some sort of phage number in there for international or early guess number when does it become materials, especially those metrics. Thanks a lot.
Hey, Mark the C., but I can it's those and we can give some color from the other gentlemen, if they want to sort of the platform gross margins you referenced the outlook, there which is for the high fiftys to around 60%.
In the quarter Q4, it was very similar on the platform gross margin side.
To last quarter.
In the.
Low 60% a lot of it has to do with just the relative mix of the video advertising business.
And so it was similar.
Between Q3, Q4, and you've got the outlook for 2020 assumed that because of the video advertising businesses the biggest opportunity and it's been fast growing the mix of that continues to shift 2020 is also.
Factored in.
The premium subscription business, which is on a gross revenue treatment has lower gross margin is great for revenue dollars in gross profit dollars, but because the grocery minutes. It shows up at the lower gross margin. We assume that that will continue to grow and then also includes the day to do business, which historically has been a mix of.
Net and gross treatment.
That's what on the margins.
Those are some of the contributing factors.
In terms of international we haven't broken out the metrics.
The vast majority of the active account base is still in the U.S., Although international is growing and.
We are continuing to expand our presence in existing international markets, We mentioned that.
Our share of TV continues to increase in is now one in four.
Canada, which is great progress there Mexico, we're going from.
Two TV brands to nine.
Kind of in recent Oh, we just signed up recently seven so there's a lot of progress on international and you know as as we go we'll have more announcements and and I do think at some point will be will be breaking that out, although probably not not for a bit.
Okay. Thank you Steve.
Thanks Mark.
Thank you. Our next question comes from Cheyenne Patel with Susquehanna.
Hi, Thanks, its Ryan on for from.
So first I was wondering if you could talk about how we should think about OEM deal economics, and how those might evolve over the next few years.
And then secondly.
You just talked about your progress on the data integration. So far kind of where are you in that road map and how long will be until you kind of get to where you'd like to be thanks.
Yeah. This is lance now I'll take the question on Oems and then.
Scott will probably answer the question Monday disease. So.
No I assume you're talking about TV Oems like where we license our TV operating system to TV manufacturers, the and obviously as we discussed its been a great program for US is doing extremely well as well as the progress we've made in market share in active accounts. We believe were the best partner for TV manufacturers, we have a lot of advantages of purpose built.
Operating system that for television that brings them a lower cost structure lower returns.
Automatic software updates on the brand that consumers love.
In terms of what what what attracts Oems the to the Roki program I mean, the number one the primary reason that the Rocky TV program as the successful I mean is obviously is the number one.
Streaming TV brand in the United States in the primary reason, it's successful as it is very valuable to our partners.
For the reasons I discussed its a brings them a lot of benefits in terms of technology customers retailers no managing the content and the software updates and consumers and retailers are asking for it. So that you know that's the main reason that.
We see partners.
Attracted the Roka TV program.
And I'll take your question on data as you were about 90 days in post close the integrations gone great.
It's a testament I think to the clarity of vision, we had in in acquiring them and integrating them into our our plans and accelerating our AD Tech roadmap as was the strength of the team. So we've already released a number of features enhancements for example, the ability to use a route the data.
Our that any info and there's a whole very compelling road map of things that we're doing together as part of the new combined.
Roadmap the teams as Anthony mentioned have already been fully integrated into Roque is and we're in market, although still early and the proposition. The core proposition I mentioned earlier those of having royalties data measurement targeting capabilities natively available in a planning and buying platform is really resonating with.
Our client so so far so did and.
And we're executing well on that integration.
Thank you for this event.
This Nancy I'll just add that.
No I'm Super excited about the they deserve acquisition is going extremely well I think is shipping SD one of our.
Best investments yet.
Thank you. Our next question comes from Matthew Thornton with Suntrust.
Hey, good afternoon, guys I'm answering the question, maybe maybe two if I could first just going back to the question on OEM kind of economics, Steve Steve remind me I think you guys. You're typically recognized some licensing revenue from a TV OEM partner and then I think there was also probably some co marketing and they've got a retail channel support that would flow back through I think the the retail other than the more.
In light of not mistaken.
I think the net output was kind of like a zero sum.
I'm just curious if you think that that will change as we as we kind of go forward here from having been may become a neutral economic to maybe shift towards the TV OEM more toward you guys.
And any color there and then just secondly, the 2020 guidance just curious what that assumes for.
A political spend for the year any lift there and then just also some of the new services that are that are coming online weatherization feel max or or Peacock or you, obviously Disney plus going international just any color on kind of what you're thinking there in the 20 guide thanks guys.
I'll start this is anthony with the.
Some more color on U.S. licensing business.
Now let the.
Scott or Steve took the rest of the question. The you know the the business deals obviously very my OEM and we're not really going to get into the details of the deal.
It is true that the biggest reason that they.
Come to us or that we strike a partnership is that we bring a lot of value a lot of non direct monetary value to their business. We help them gain market share broker Oems are generally gaining market share. We we help them with retail placement, we do have a.
Retail merchandising budget that we spend to promote roki TV with retailers and they benefit from that.
And then of course, you know the all the other reasons I mentioned, we also have for example, very strong reference designs for hardware, we take a lot of the engineering load Theres just a lot of benefits and I think the result of all these benefits and just generally in the industry is that we expect all smart Tvs to end up licensing unless it's just a much assist a much better economics.
Model for the TV business.
Yeah, Hey, Steve just in terms of 220 guidance I mean, certainly.
Factors like anticipated new service launches.
In the upcoming elections are factored into the outlook.
We do sell some political ads is not a major focus for us in a and so really the the opportunity there is largely around bringing more traditional TV ad spend over as they need or viewership and certainly the new services are good for Roque you in general the more content, we got on the platform the more it attracts people too.
Streaming and road to in particular and drives engagement. So that's all good and reflected in the numbers that we put out today.
Thank you next question comes from Ben Swine Bang with Morgan Stanley.
Thank you.
Scott I was curious if the if the shorter holiday week period last quarter had any impact on fourth quarter advertising.
And secondly, just to go back to the broker channel content discussion earlier.
How do you guys think about.
Sort of the pitch to publishers moving their content.
Sort of out of their apps into their broker channel answered the opportunity that offers them versus maybe their own desire to keep the consumer in in the App. There's been a lot of sort of press coverage recently about your to your relationships with your publishers and and that's come up. So I'm just curious about if you could shed a little bit of light on how how you think about that and what the this sort of pick.
Which is to publishing partners on bringing content over into the broker channel for monetization.
Okay and then so on your first question about the.
Thanksgiving basically cutting a week later than it typically as we didnt see that as a major factor in our AD business in a in Q4.
With regards to the Roka channel, we had a great year. The definitely think about the broker channel is ultimately another tool to help content owners succeed and streaming it's got a best in class user experience she learning driven recommendations.
As to class marketing, a monetization capabilities and our view is it can play an essential role in helping content owners reach yet more audience and monetize more effectively it's not a.
It's not an either or proposition to having a channel on our platform.
But it does represent a large incremental opportunity to generally having a standalone them.
Thanks, a lot.
Thank you. Our next question comes from Ken Nolan with Macquarie.
Hi, Thanks, I'd like to come back on the topic of international if I could please is there anything you could tell us about whether it's more player devices or whether it's more TV OEM integrations that are leading the way in your early phases, you move into more international sales.
Then how long does it take to establish and an installed base. So that you can then build in monetizing that business or are you already doing some good work monetizing that on the advertising side, and lastly, and related we again on international.
Can we assume that a good chunk of the investment that you laid out in 2020 will be for international expansion or have you already taking care of a lot of that cost in 2019. Thanks.
This is answer I'll take the first question on players versus TV is I mean, generally we believe that the.
Strategies the work for us in the United States to become the number one screaming awareness is will work for us and are working for us internationally as well.
Obviously the to be components of that our players and TV. So they're both tools that will use internationally in the order and the specifics are our country dependent so no. We recently launched.
TV isn't rocket Tvs in Brazil, we don't yet have players in Brazil. So I think that's probably the first market, where we lead with Tvs.
You know, we've we've added more TV partners in Mexico, which is a very fast growing market for US now we mentioned that Canada is now one and we have us from market share of one in four so I think just generally you're going to see us use both both tools.
International expansion.
Hey, Jim as Steve just on your last question about the investment.
Certainly international was a investment area in 2019, along with broken TV Road, Q channel and the AD business and we those investments have been working well and we're continuing to invest them in 2020.
Certainly we've made great progress internationally anthem described some of the milestones we hedge but the international is a big opportunity for us and there's there's certainly more countries and and more parts of the road you ecosystem that we can bring to bear I think you know Canada might be a good ones you just talked about the different basie right.
We want to gain scale in the market, we want to drive engagement and then we can start to monetize and in Canada. We again good scale as with most notably that one in four Smarttv sold a staff. This represents great progress on that market share side.
But in addition, we've launched the broker channel in that market, we are starting to to ramp up the AD sales posts component of that and like Trc is already top five by reaching Canada. So you can start to see that model of scale engagement and monetization is going Canada.
Further our they're ahead of some of the other ones, but it I think it's a good proof point about the model can work.
Great. Thanks very much.
Thank you. Our next question comes from Jason Helfstein with Oppenheimer.
Thanks, two questions. So you talked about the Canada Smart TV market. So just think about when you first entered Canada and you know what.
Competitive landscape look like.
Samsung versus Android supported TV is versus others and you obviously kind of you said kind of where it is today and how successful you've been do you think that's representative of what UK, Brazil, and Mexico look like today and kind of that was the point for example, and then the second question just to dig a little bit deeper into publisher deals.
Maybe just talk about how you think about Avon versus S. Vod in row crews rolling in monetization and so brass rod it's reasonably straightforward with respect to revenue share for sign ups and retention.
Obviously differs by publisher, but I think we're going all kind of get it.
For free Avon services are you joining a red line.
In the sand that requires.
Economics for every channel.
Perhaps maybe you know you to being kind of the early early exemption. So just any color specifically on how we should think about monetizing third party Vod services. Besides the broker channel. Thank you.
Hi, This is anthem I'll take the international question.
I would say that every country is quite different so you know in terms of like where they are on their screaming curves you know what what are the factors that go into making a successful we really do customize it my country. So for example, I think Canada was a bit more mature when it comes to screaming than say, Brazil is Brazil on the other half.
And still has a lot of streaming the dynamics of the type of streaming.
Are also different so I think our strategy. If we have one is to the customize the approached by country and figure out the right instead of local partners.
To be successful in that country and that's that's working for us.
Jason with regards to your question about publisher deals first I'll say that our philosophy is the same across both Avon NASCAR, which is that for an essential platform. We can play a key role in helping streaming services exceeding our platform and and as we help them create value. We look to we look to participate to share in that that upsides Phil.
Sophocles Thats our goal is to first help them succeed and second participate in the upside in the subscription services model. It's a it's Rev share and marketing relationship and in the Avon model its participation in the in the AD business publisher runs at digital.
An important part of our relationship with publishers that we participate in those economics.
Thank you know next question comes from Chris a kind with singular research.
[laughter].
Uh huh.
Hi, everyone.
I had had a question on Mexico.
I wanted to see [noise].
Hi, Mexico, your fastest growing country right now.
Yes.
Hey, Chris is Steve we haven't broken out that it certainly.
We have been growing fast in Mexico, and many other markets in and certainly the player business has done well historically, we launched a the TV business with a couple of Oems and we've had great reception, there and we've signed up seven new.
TV brands.
For this year, so and certainly the engagement on the platform is growing nicely. So it's in the last year. So Mexico has been a very strong growth market for us.
That makes no naive.
Oh size advance how is this is Anthony I was just going to say that in terms of Mexico. The the growth rate and we're experiencing the we experienced last year is the fastest rate of growth in Mexico since we see launch there.
Okay.
And you mentioned that use all nine Tvs now nine TV brands with grow cooling Mexico is there are you guys going to cap, it's not at some point I mean or are you going to keep adding adding anatomy.
Yeah, We said that we've added seven we have the seven brands last year in Mexico to bring the total to nine.
We don't have a hard we don't have a hard cap it depends it depends on a lot of factors and it's not just the number I mean, where you know obviously proud that we have nine different brands selling broker TV in Mexico and mix the Mexican market is going well for us, but it you know there's a lot of factors, including.
Retailers retail demand these market share of Oems. So there's lots of different factors that drive the number ran through the deals with.
Okay. Thanks, Thanks for that.
Yeah.
Thank you. Our next question comes Sir Alan Gould within this capital.
Thanks for taking the question three questions. Please.
First Scott you know over the years a few years ago advertisers were buying you I think more in their experimental pool. It's a few years later half that relationship changed are you getting into the up an upfront buying cycle with the advertisers in the agency is there any change on the Cpms et cetera.
Second for Anthony It's interesting that you led off with talking about watching the Super Bowl on Fox There was a little issue with you and Fox the right before the Super Bowl is that a one off or should we expect the.
More of those similar to how we see happening with the cable operators in cable networks.
And lastly for Steve.
I know you breakout that is due but can you give us some coal, whereas so what portion of the growth some sense of how much of the growth rate in the going forward in the model on the outlook is due to adding that to do into the platform revenue. Thank you.
And I'll take your first question we're years past the mode of advertisers buying us in an experimental fashion we've got.
Annual Upfronts with all major agency holding companies most brands that are buying with us are in.
Multiple years of renewal.
With us they often an advertiser will come to us and the their first goal in working with US is simple it's incremental reaches its reaching people are no longer available in linear television and then they they get to see the outcomes the measurement the advanced capabilities, both TTM they expand there.
Their business with us as a general.
Flow of our relationships with advertisers.
I should also mentioned as well that were significantly diversifying the client base.
With the acquisition that data into a new capabilities. We felt we are making great inroads in a performance direct to consumer brand advertising midmarket local advertising.
Basically anybody who invest in TV, and then brands, who historically have been digital only now can participate in TV advertising because its digital mediums are buying from us so very significant.
Congrats on her at business.
Hi. This is Anthony you asked about the relationship with partners and content partners or I guess I would say that we've invested a lot in building our platform aggregating a large audience developing the tools. The partners can use to reach that audience and sell them subscriptions line them up reduce churn.
So you know weve built a lot of capabilities into our platform in our business model in our philosophy is to help parse our partners are streaming content partners build their stream business reached this large audience helped make them make their business very successful then you know when we do that when they succeed we see.
Exceed we participate in some of that upside that we help create.
In terms of deals I mean, we renewed thousands of deals a year and generally we're able to reach mutually agreeable terms is not a zero sum game you know like if you compare and contrast that to the traditional distribution deal on Roki versus say the traditional pay TV deal.
In the pay TV World you know there was a fix size Bill you know to consumer would spend let's say a thousand dollars a year on a bundle and then there would be a fight between the.
The distributor and the networks over how to split that bill in the case a streaming it's a new business for everyone. It's it's just a different dynamic the dynamic is we're trying to help build businesses.
And we're trying to succeed when our partner succeed. So it's just the gist of different different business is not as zero sum game at all.
You mentioned Fox I mean, we have a long term relationship with Fox.
I'm happy that we reached to deal with clocks. It was it was a deal that was good for both parties and I'm looking forward to continuing to work with them.
Yeah, like I said I am I.
My introductory remarks, I enjoyed streaming the Super Bowl in Fourq and spots for spot.
Sports on my local TV.
Hey, I'm, Steve just on your question around Dezhou as you mentioned.
Due to the the integration plan Scott was talking about there.
The already largely being integrated into various rocky departments in the relatively small size, we will not be breaking that out.
We publish pro Formas historical performance with data do so you can see their standalone growth trajectory, which was basically fairly flat and running at a at a a.
A bit of the EBITDA loss, but we think integrated into the offering that theres a lot of synergies over time and so on those expectations our.
Encompassed within the outlook we provided.
Okay. Thank you gentlemen.
Thank you. My next question comes from Michael Morris with Guggenheim.
Hi, Thank you good afternoon, two questions I'll start with the first one which is Disney plus added.
26 million subscribers in the fourth quarter can you talk about how that impacted your business financially and how it might impact you going forward.
Hey, Michael it's Steve.
Yes, there is certainly as a new services come on that that's good overall for Roque you in terms of driving books for the platform and increasing engagement.
And certainly our business models are set up so that when partners create value on our platform and we're well positioned to.
Bring them, a large audience and best in class tools that they.
They can create value we can share in that as I mentioned in Laura's question.
Certainly these are multiple element arrangements.
And so that they there can be some some lumpiness on there but in general you know the new services are good for us.
But nothing specific in terms of Disney in the quarter, whether it was.
So being able to participate in those sign ups, whether it was their advertising on your platform anything like that that.
Represented a step up.
Yeah again, we we don't talk about specific commercial terms, but certainly as you know we sign up subscribers for Disney and there is there was dollars in the quarter and others in the outlook related to.
New services, like Disney plus or Apple or others.
This is Anthony I'll, just I'd, just add hats off to Disney for reaching 26, and a half million subscribers in three months I mean that was incredible I think.
An important assigned to the screaming decade has really started.
And you know they they have great content effective marketing, but one other things Disney did as they really lean into the tools that we have available on our platform and when companies do that I mean, we've built a lot of great ways to sign of subscribers. So I think we were an important part of them reaching that milestone.
Great. Thanks for that they did in six weeks actually.
Oh, maybe more.
Even even even more impressive my second question is about flat from Comcast They they talked about having a good success with that product and leaning into it more going forward. What's your view of the competitive dynamic there, especially given that they can deliver that with their broadband subscriptions.
How do you compete with that if it's being delivered sort of for free with the broadband subscription.
You know the wrote to offers a I mean, our customers love. The route to experience is sticky they like the content selection, we have delight. They like the fact that were built into their Tvs often.
We don't we just don't see competing with table distribute traditional table distributors as a big part of our competitive dynamic.
But I.
I think I would say that.
There's a lot of reasons people love their broker and prices wanted limits, we offer a great price, but theres a lot of other reasons as well.
We also have the exit of the App on Roka no I haven't on my Roka and that's what I use the watch TV sometimes.
We would you also expect then to Conversely have the picked back up on on Roku.
We're in essential partner for any streaming services trying to build a.
International audience in the United States. So I think it would be natural to assume that.
Now with some sort of deal done there.
But we haven't I don't think we've announced anything.
And announce anything yet.
Great. Thank you.
Thank you. Our next question comes foods in Israel with Bank of America.
Great. Thanks for taking my question Congrats on on the Great results. So following the introduction of different plus an apples.
Have you seen any users shifting away from watching free content, even temporarily and maybe more broadly is it true to say like is it still true to say that they vote is growing faster than the ethanol, despite new assets services coming to market.
[noise] Ziv I'll take that question. So generally these new services are additive that they create yet more reasons for consumers to cut or shape. The card spend more time streaming and we've seen that for years now across lots of new service launches I would say that's the case here as well it.
It's stealing time from linear from traditional TDV like rather than.
Rather than from his training and yes. It is still true that Avon is growing faster than other segments, 70% of.
Rhodesia watch Dave on the platform and so.
The prospect of free that value proposition is very powerful with consumers.
Great. Thanks.
Yeah, I mean hours were sorry, those are things coming hours or over 40 billion hours last year. So it was the incredible year and ARPU increase over $5 a lot of that was driven by every time.
Yes, but and then for for Steve.
So you mentioned the video.
Should continue to grow as percent of platform revenue from 20 to 20, So how do you balance that with the going up with Dundee from.
Content distribution revenues, given given new that's what services recent launch on the ones that O'donnell.
Yes so.
Yeah, we have a a strong outlook and certainly we said that platform overall the mix was continuing to move forward that given its faster growing.
And so it was about two thirds of overall revenue in 19, and we think that will be about three quarter. I think it's a I think it's an opportunity there there's a big opportunity on both sides of the equation right. It's a you know certainly the move to streaming in terms of the account.
Account growth you know, we signed up almost or net increase of.
Most 10 million active accounts and in 2019, and and we're still have a ways to go in the U.S. and then certainly international.
And I think both are important components of the value proposition of streaming. So I don't think it's a zero sum game in terms of that a vod or asphalt needs steel from one or the other what we see on the platform is the per user engagement continues to tick up over time, we're a little over half of the if you believe the estimate of about.
Seven hours of household viewing per per day, our account our streaming hours per account is I think roughly 3.6 hours per day, and thats been moving up overtime and so I think it's a matter of the pace that both of them are moving up as as opposed to one has to take from the other.
Okay, great. Thank you.
Thank you know next question comes from Kyle Evans with Stephen.
Hi, Thanks, I know, it's still early and clearly not going to break data due out but you do so I'm very pleased with it I wondered if there were other parts of the AD Tech stack that you might have looked at in the futures and I'm, specifically interested in commentary around data management platform more supply side platforms.
Sure I'm not going to comment generally this is Scott on the on forward looking product capabilities I will note we have around the DMP week with built at a long time ago, and it's pretty powerful asset for us in terms of.
Understanding or users.
Applying machine learning to recommendations and AD targeting we continue to innovate broadly in our AD strategy.
For for several years now we've helped advertisers understand the incremental reach they can achieve when they when they buy ads on road.
For example, with Arby's as an example, we.
We were able to guarantee incremental reach that's an example, taking the next step and delivering even richer AD product to it to a partner. There also are innovating a lot in the sponsorships area. The video AD business remains the backbone the core of our AD sales, but the opportunity to cozy up against.
Cool content is the is very attractive and.
And brings deep involvement with the brand, so Jaguar and and.
Discovery for examples sponsor the the Red carpet pre show with people TD and we've done in dozens of sponsorship executions in the quarter.
So you know we continue to innovate.
Not just new placements within the home screen, but also new interactive formats around around video ads themselves as well.
Great and I feel like probably taken this six crack at international but could you talk about any R&D kind of engineering hurdles that are still.
I need to clear she can get kind of broad European launch. Thank you.
[laughter]. This is Anthony so just in terms of engineering I mean.
Generally speaking the the software capabilities, we've built over the last several years are.
Generally applicable to international markets as well as U.S. markets I mean, there is some.
Region by region specific engineering work, we often have to do you know as necessary.
We're doing that.
So in terms of Europe, specifically I mean, I don't you know the that there's only a there's a few things there's GDPR, but in general you know we take our privacy.
With our customers very seriously.
We're happy to implement the kinds of features the GDPR requires us to implement is has a lot of overlap with the California privacy law. For example, so those are the again those kinds of features a generally globally applicable.
So yeah, I think that there's lot of leverage in engineering that we built in our product.
Okay. Thank you.
Thank you and I final question will come from Mark So, let's let's put us in black.
Excellent.
Hi, guys that just a couple of questions on a audience development.
And also.
[laughter] mix I think.
No that's been seeing a lot more Netflix 50, plus sort of email marketing.
I'm wondering if that's a trend line.
It will continue with the other platforms and then on the sponsorship Admixed side can you give some direction in terms of.
What that mix looks like relative to video in sort of the.
The premium.
Level CPM, there relative to a.
Core video as well thanks.
Sure.
This is Scott audience development remains a core and a significant part of our AD vertical it's a key way that we partner with content providers on our platform to drive awareness at their channels and their content and if you use the device you'll see you'll see us messaging you every day.
In the in the home screen through a budget through ads in the.
Great rail of our home screen for example, placements in the channel store, if you're a new user we're talking to you about about these services buttons. So there's all kinds of placements throughout the road to lifecycle, where we're helping partners drive discovery.
Of the platform.
I mean of these new services with regards to sponsorship executions, we just have a whole myriad ways in which we place brands.
Next to cool content I mentioned the Oscars.
Red carpet execution, we do executions like limited commercial interruptions movies, where you will just get an add one added a break.
We will do content on lots we showed an example in the.
In the earnings letter with Energizer sponsoring a discounted.
Just kind of movie on Fandango.
And what we're constantly innovating new ways to put brands creatively in front of users the brands love It consumers love it because they get great value out of it.
It is a minority part of the AD business, but it is also growing very quickly and it's a it's a central way that we get advertisers to invest in of DTC advertising.
Thanks, Scott that's helpful. Maybe just a quick follow up on audience development.
But just trying to get a sense of whether there's an acceleration there perhaps as it relates to more marketing around you know more competitive marketing if you will kind of speaking to that Netflix Disney plus.
Scenario there are you seeing as you get more.
And your platforms.
On board.
They maybe using you given your scale at 35 million.
As a.
As a critical sort of competitive.
Tool and specific shows et cetera.
Absolutely.
Audience development is central way in which we partner with content providers to help them succeed in the most sophisticated partners are the ones that are really taking advantage of it. This is not your linear tune in form of.
Oh linear channel marketing, we've got data that helps us predict whose likely to be the next CBS. All access the next Disney plus the next Apple the ore and and we we deploy those capabilities in partnership with content providers to help them do better faster.
Customer acquisition and retention.
It's it's an essential tool for content providers to build big streaming services.
Got it thanks much.
Thank you I'm showing no further questions from the phone lines at this time, a well now turn the call back it was like a mr. Anthony went for any further <unk>.
Thanks in summary, I would say, we had a strong fourth quarter and increased active accounts by 4.65 million our largest increased to date.
For the full year, we passed the $1 billion revenue milestones in 40 billion hours for the first time.
The companys executing well tracking outstanding talent and becoming stronger in fundamental ways broker is well positioned as the industry enters the streaming decade.
Thank you again for your support unhappy screaming.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
[music].
[music].
[music].
[music].