Q4 2020 Roku Inc Earnings Call

February 18, 2021

[music].

Okay.

Ladies and gentlemen, thank you for standing by and welcome to the walk was fourth quarter and for year 2020 earnings Conference call.

At this time all participants on the listen only mode. After the speaker's presentation there'll be a question and answer session to ask the question. During the session you will need to press. The Star then the one key on your touched on telephone. Please be advised that today's conference is being recorded.

The quad any part of assistance. Please press Star then zone I would now like to hand, the conference over to your Speaker of today Congress Quad. Please go ahead Sir.

Thank you good afternoon, and welcome to Roku, the financial results conference call for the fourth quarter and year ended December 31 2020.

I'm joined on the call today by Anthony Wood, Roku is founder and CEO, Steve Louden, our CFO and Scott Rosenberg Senior Vice President General manager of the platform business, who will be available for Q&A.

Full details of our results and additional management commentary are available in the shareholder letter, which can be found on the Investor Relations section of our website at IR Dot Roku Dot com the following discussion including responses to your questions reflect management's views as of today February 18 2021 only.

And we do not undertake any obligations to update or revise this information.

Some of the statements made on today's call are forward looking and are being.

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 of roku, including our financial perspective for the first quarter and full year 2021, the future of TV TV streaming and television advertising globally.

The impact of the COVID-19, pandemic honor of industry business and financial results and the future growth in our business and our industry. Our actual result may differ materially from those discussed on this call for a variety of reasons. Please refer today's shareholder letter and the company's periodic filings with the SEC for <unk>.

<unk> about factors, which could cause our actual results to differ materially from these forward looking statements.

You'll 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 IR Dot Roku Dot com and I encourage you to periodically visit our IR website for important content.

Finally, unless otherwise stated all comparisons on this call will begin our results in the comparable period of 2019 now.

The hand, the call over to Anthony.

Thank you Conrad and thanks to everyone for joining today's call.

I'm pleased to report that Roku had both the record 2020 and fourth quarter.

As the leading streaming platform in the U S. Roku is more important than ever to the TV ecosystem, we connect viewers content owners and advertisers at scale and the virtuous cycle that creates value for all participants.

In 2020 of Roku active accounts grew by 14 million accounts for over $51 million and streaming hours grew 55%.

Monetize video AD impressions were up over 100% in Q4 rebounding to pre COVID-19 growth levels.

Across the industry of the impacts of screening is increasingly evident.

<unk> of our cutting the cord fully a third of all American homes are now non pay TV households.

Leading media companies are reorienting around streaming and launching new streaming services.

The traditional TV upfronts are beginning to crumble as advertisers demand more flexibility better measurement and a broader audience.

We are pleased with the progress we made in 2020 and excited about the large opportunities that lie ahead and the streaming decade wood.

Let me hand, the call over to Steve.

Thanks Anthony.

2020 was the year that showcase our strong position and resilience along with the rest of the world Roku was forced to respond to wide ranging impacts of a global pandemic, we executed well in the face of many challenges and delivered record results for Q4 as well as the full year.

Before taking your questions I'll walk through operational and financial highlights and address outlook.

In Q4, we grew our active account base by over $5 million, resulting in a record $14 3 million incremental active accounts for the year and we ended 2020 with $51 2 million active accounts. Our scale has expanded rapidly over the last several years and to put it in perspective Roku the U S active account.

This is more than twice the size of the video subscribers of the largest cable company in the U S.

In addition to increasing our scale, we continue to see growing engagement with our platform with 2020 streaming hours of $20 9 billion year over year to a record $58 7 billion hours.

In Q4, we grew streaming hours, 55% year over year consistent with the year over year growth rate for the full year.

Furthermore, we grew average streaming hours per active account, 10% year over year in queue for demonstrating the strong engagement of our user base.

As a reminder, please see our shareholder letter for the full financial details from the quarter and the fiscal year, but I'll highlight a few items.

In Q4 total revenue increased 58% year over year.

$649 9 million.

Platform segment revenue was up 81% year over year two of record $471 2 million driven by strong advertising demand Q.

Q4 player revenue growth of 18% year over year with slightly lower than the growth rate in Q4, 2019, as COVID-19 restrictions and economic uncertainty muted holiday store traffic and consumer demands.

Our key financial performance metric is gross profit, which grew a vigorous 89% year over year in Q4, two of record $305 5 million.

Gross margin in the quarter was 47% fairly consistent sequentially as improvements in platform margin largely offset the seasonally lower player margins based on our holiday promotions.

Q4, adjusted EBITDA of $113 5 million produced the vast majority of our record of $150 million of adjusted EBITDA for the year and was the result of the confluence of strong performance.

Robust revenue growth strong gross profit leverage as we continue to move into higher margin platform business and leverage on opex growth in part due to our decision to be more conservative on head count growth in 2020.

It also demonstrates the potential leverage in our business as.

As we continue to drive scale and increased monetization of the platform.

We ended the quarter with almost $1 1 billion of cash cash equivalents restricted cash and short term investments.

With that let's turn to our thoughts on the outlook. We believe we have sufficient visibility into Q1 to offer formal outlook, but as we move further into the future of number of uncertainties make a formal outlook for 2021 difficult.

Rather we have provided some directional color for how we see the full year playing out for Roku.

Historically Q1 is our seasonally softest quarter from a revenue perspective.

Typically revenue has been roughly 25% lower sequentially than our seasonally strong Q4 or.

Q1 outlook calls for similar seasonality at the midpoint of total revenues of $485 million up 51% year over year with the platform segment, comprising roughly three quarters of total revenue.

We anticipate total gross profit of roughly $238 million at the midpoint of 69% year over year, implying an overall gross margin of approximately 49%.

Platform gross margin is expected to be roughly 60% while player gross margin is expected to be similar to Q1 2020.

As a reminder, Q1 player gross margin is seasonally high reflecting the traditionally lighter promotional period within the retail calendar for.

For the full year, we will continue our established and successful strategy of managing player gross margins to roughly zero given our focus on device sales as an important driver of the count growth.

We anticipate Q1 opex year over year growth to be in the similar year over year growth range as Q4, and thus showing strong leverage against the revenue and gross profit growth.

Which is expected to result in a Q1 adjusted EBITDA of $31 million at the midpoint.

For modeling purposes. Please note that Q1, adjusted EBITDA excludes stock based compensation of roughly $40 million and an estimated $10 million of depreciation and amortization and net other income.

In terms of the full year, we're mindful of that in 2021 year over year comparisons are likely to be quite volatile in.

In the first half of the year, we expect strong financial comparisons against the first half of 2020, which includes early impacts from COVID-19, and the resulting economic lockdown.

While in the second half of the year, we anticipate much tougher comparisons in part due to our record performance in the second half of 2020, which will significantly pressure year over year growth rates.

We expect our overall 2021 gross margin to be in the mid 40% range as platform margin remains fairly stable and we operate the players segment added gross margin close to zero given the size of our opportunity and progress to date, we will continue to aggressively invest in our business to enhance our competitive differentiation and <unk>.

The future growth, we anticipate the growth rate in operating expenses for 2021 to be more in line with 2019 year over year organic opex growth levels versus 2020, when we took precautionary steps at the outset of the pandemic to manage down the rate of expense growth.

As I was preparing for this earnings call I read my remarks from a year ago. It was very gratifying to read that we've materially surpassed our original outlook for 2020 revenue of $1 6 billion. Despite an unprecedented global health crisis and the related economic hardship that took place over the course of the year.

It was also very grounding to read the historical comparison from that call, which I will update and reprice here are.

For 2020 revenue of almost $1 8 billion represents over two times 2018 revenue.

Three times 2017 revenue for <unk>.

<unk> 2016 revenue and five times 2015 revenue.

The sustained level of robust earnings growth speaks of the strong fundamentals of our business. The strategic advantages we have achieved through our investments and are laser focused leadership and streaming.

We continue to be excited by the significant opportunities for Roku that lie ahead.

With that let's turn the call over for questions operator.

Ladies and gentlemen, as a reminder to ask the question you wanted to quest. The Star then the one key on your Touchtone telephone.

To move yourself from the queue at any time, please press the pound key.

Please standby, while we compile the Q&A last day.

And the first question coming from the line of credit cap Carpenter with Jpmorgan. Your line is now open.

Great. Thanks for the question I wanted to ask you that liquidity content acquisition I think it would be good to hear just your thoughts on why now is the right time to make the moving of exclusive content.

Maybe more broadly should we think of this as more of an opportunistic when all of purchase or does it signal, perhaps the broader ambition with exclusive content and then just as a quick follow up any details you can provide for.

For the specifically just on when it will be available on the platform for <unk>.

How long do you have the exclusive rights. Thank you.

Hi, Cory this is Anthony Thanks for the question, let me start by just talking a little bit about the Roku channel and then explaining how could the fits into that.

The deal that we did for the Roku channel. So if you just look at overall platform growth.

Of the Roku platform last year, we added $14 million incremental accounts and cross 51 million active accounts, but you can look at the Roku channel specifically is growing twice as fast as the platform overall so.

<unk> and streaming hours of the rest of the channel and growing twice the platform right.

We know the Roku channel now reach households, with approximately 63 million viewers. So the rest of the channel is doing extremely well for us.

And we're adding content continuously.

Continuously for the Roku channel for a bunch of different sources.

We added almost 100, we added about $100 million linear channels in 2020 for the Roku channel.

We have the content from Disney NBC, A&E discovery and more.

So.

The Roku channel is definitely.

Benefiting from this virtuous cycle, where more viewers, bringing more advertisers more advertising dollars brings in.

For content keep of content better content and then that cycle continues so.

Would that would that sort of backdrop, that's as our scale growth layers.

We're sourcing.

Different different types of content and we're looking at different types of content. So for the deal fits into that in the sense that it's premium content.

Great content, we think it will appeal to roku viewers.

And.

So.

It was the.

The transaction, where we acquired the global content rights on a cost effective basis.

We're disciplined about making sure the content, we onboard into the Roku channel fits into the Avon business model for the Roku channel and the content.

Fit into that model the <unk>.

Growing scale of the Roku channel allows us to do deals like this where perhaps we couldnt have done them a couple of years ago. When you expect that to continue.

As the scale of growth will continue to look more broadly at all the different types of content that we can acquire and will be disciplined of them, making sure. The that content purchase price sits into whether it's licensed or purchased or whatever the financial details of our fit into R. R.

Our <unk> business model.

In terms of rolling out the content I don't think we've announced that.

Steve the fairly fairly soon.

And I don't know Scott if you had any anything you wanted to add about the specifics of the liquidity could be rollout in the exclusive rights and that sort of thing.

Yes.

I'll tag in here Corey.

Excited about the content 75, TV series of hundreds of hours.

And any nominations will be rolling them out those out progressively through the year and we do have a multiyear exclusive right to exploit the the content.

So we're excited to get it out there stay tuned for for our launch timing.

Great. Thank you both.

And our next question coming from the line of Mark <unk> from.

Rosenblatt Securities Your line is open.

Thanks, so much and congrats guys on a great year, just a couple.

I guess unrelated questions first on the stable gross margin outlook for the year, Steve I was just curious if there's any new.

Upward or downward pressures on platform gross margin debt.

You would like to point out that we should pay attention to.

Yeah, Hey, Mark.

Yeah as you mentioned, we didn't provide formal outlook for 2021 overall we.

Did mentioned.

In the former outlook for Q1 about the upper margin being around 60% and then remaining kind of roughly stable for the year.

As a reminder of Theres a lot of that goes into the platform. So there is always considerations of the underlying margin structure of say within the AD business or the content business.

And then the mix of the different pieces, but overall I don't think there is there any significant trends I would point out I mean, the business in general has very good momentum and over over the back half of <unk>.

2020, we saw.

Some good uplift in the.

The platform margins. So we're very happy with where the businesses. Both in terms of strong growth on the top line and.

Cable margins looking at.

Okay, and then real quick on.

Helpful.

Our pool, just curious how much downward pressure.

Seeing there in terms of outside.

Outside the U S. It's obviously been strong and Im just curious if that implies that.

This has not had a lot of downward pressure or when do you expect to see that and.

Perhaps maybe break out.

So U S and U S separately there.

Sure, Yes, certainly.

The U S.

The part of the most lucrative <unk> potential market and debt.

The U S. As the market is much farther ahead, the rest of the world.

And historically the vast majority of our account base has been in the U S.

Certainly we are growing our international presence and we mentioned in the letter of some great stats around the fact that the playbook.

The kind of three phase playbook around growing scale driving engagement and eventually monetize the is working well internationally.

So that is true, but we are focused on driving scale and engagement in the international markets for the <unk> is significantly lower on that so it is definitely is the dilutive effect on the overall are true.

In terms of visibility of yes, we understand the international as a strategic investment area and that visibility that would be helpful for investors and so we're working on breaking that out.

Hey tunes.

In the future, we'll have some more visibility for you.

Okay, great. Thanks, so much.

Sure.

And our next question coming from the line of the Sally Cask of with Cannonball Research. Your line is now open.

Thank you I think I have a couple for Scott.

The one you use.

Just to you every quarter before the big asphalt services launched of what you're used to say that.

You know this is our overall streaming hours growth of them, that's what the streaming hours growing slower than that and then add supported faster than debt. So now that you have this massive apps launching I wonder what that what those relative growth rates are and the.

Also following up on that is are you worried at all of that.

Peacocks of the World. The major Bureau of classes will cannibalize AD supported AD supported streaming hours and if not what what.

Why do we do anything there.

Europe was coming from.

Thank you.

Okay.

Hey, the silly.

Thanks for the question, yes, you're right, we've not delineated the growth of the different verticals recently, but but it remains true that AD supported dealing on the platform continues to grow faster than the platform overall and then the other segments and just as a reminder, when we talk.

About AD supported the.

Doing we would include dual revenue stream services like Peacock that are both subscription base and the carry ads now with regards to your question about.

Whether the services will cannibalize <unk> consumption.

First of all the day either in the case of Peacock already carry ads or in the case of HBO Max plan to carry ads.

I think we are.

We're <unk>.

Led mostly by the fact that the.

The services launching are drawing more consumers in the spring they are creating an even better case for consumers to cut the cord and move more of their viewership to roku to streaming and then the crews to deeper engagement across the board inclusive of AD supported.

The way and it's Furthermore, helpful that all of the recent direct to consumer services.

Have an AD supported strategy in place because of that bolsters. The overall narrative in the market that we've been on for years now about the importance of advertisers investing and OTT. So all in all we continue the launch of these services to be a good thing for roku for consumers and for advertisers.

Thank you very helpful for quick follow up and do you see in your data that viewership in general aggregating to the big <unk>.

The apps like the bigger ones, the keep getting bigger and the smaller ones of falling by the wayside, but does the state equaled the fragmented one day, if you have any comment on that.

Yes.

Well, what I'd say is that is the very vibrant market now with all of these big well funded services competing for consumer intention.

Good for Roku, because we're in the business of distributing the services and helping them grow so we've been able to partner more deeply with the broader set of content providers and of course, it's great for the consumer because it just makes their streaming experience on roku even richer.

So.

We think it's good and has driven actually more robust competition, among the services and the consumers ultimately the winter.

Thank you very much day facility. This is Anthony I'll, just add that Anthony.

Mentioned in the past and it still continues to be true if we think about.

No.

Competition in our advertising business really the.

It's not other services on our platform at the.

The primary impediment to our AD business growth, which is still growing obviously very nicely with monetize the ad impressions.

Doubled again in Q4.

But the biggest impediment to growth is just the behavior of TV AD buyers and how they traditionally.

By traditional linear TV and the shift of those behaviors the streaming which the pandemic I think has definitely caused that to move faster than it was before and that's the big that's the that's probably the biggest.

Obstacle for it and it's not.

It's not of a.

Long term of optical but thats the biggest short term obstacle to our Anthony.

Thank you very much.

Yeah.

And our next question coming from the line of Blue Blue led the charge for you from Bank of America. Your line is now open.

For taking my questions and congrats on the strong quarter.

I was wondering if you can talk about the programmatic AD spend do you see industry AD budgets moving more towards programmatic spend and in that vein can you talk a little bit about how the data zoo. One view platform is performing and what percentage of your AD revenues are coming from that today and how do you see that progressing over time.

Kind of a follow up.

Sure that sounds like a question for Scott.

Hey, Thanks. Thanks for the question, let me just taken in the reverse order. So 2020 was of great year for one view of foundational year and just the reminder of our value proposition with with the one view, we have natively integrated broking first party identity data and measurement capability.

<unk> and and enabled buyers three ones you the access the same capabilities that.

It's caused them to be buying Roku media for years now applied to when they are buying third party media <unk> has deepened our agency holding company relationships.

The licensing of one who has the components of the upfront agreements that we wrote in Q4 with all of the major agency holding companies.

Just by way of example, we've got brands like Lexis, using <unk> to now measure and optimize their spend across linear TV and OTT and using it to achieve better reach for the same dollar.

Is that sort of a perfect use case for one day of is optimizing your TV spend across dozens of apps and linear TV all at the same time with Roku data powering it now regarding the <unk>.

The other part of your question.

And the the role of programmatic. It is true today that the majority of the spending.

In OTT is still.

For traditional spending pattern insertion order based.

And thats largely because most of the money. The early none of that's flowed into OTT has come out of TV budgets and that's generally the way of television has been spent historically the programmatic is rising quickly. It's a key part of why we've been investing in <unk> and we do believe long term, although it is not the case today.

Day that programmatic will be a majority of how OTT is bought and sold not the least of which because programmatic is a superior way to leverage our data to leverage measurement to do dynamic optimization of your spend so.

In short.

Our strategy is to sell of the way buyers want to buy they are still buying both ways. It's still predominantly traditional but we do believe that it'll be heavily programmatic overtime.

Got it thanks for the details on that Scott.

For my follow up I just wanted to.

Ask about the international growth again, just to follow up on the prior question.

You know how would you measure of success in 2021. So if you can just kind of give us your playbook for this year I mean, what are your targets for international expansion and overall, how would you measure major success. This year in international I mean.

If you can just provide any details on whats your thoughts are for international that'd be great. Thank you so much.

Yes. This is Anthony I'll take that obviously screaming is a global phenomenon.

We got our start in the U S are doing extremely well here.

We are investing internationally and I would say a few things I guess about about that and how thats going first of all.

One of our strategies is to take the technology we've developed.

The strategy sort of work for us in the U S. The products we develop.

And the market trends, we believe which translate from the U S International markets.

Translate those strategies and.

Market entry points to international markets and that so that's what we're doing and that's working that's working well for us we're finding that the assets. We have worked well internationally as well as of the U S as well as our domestic market.

Another kind of higher level of point I guess is our international strategy involves the same the same three phases business model that.

Of that we adopted in the U S, which is focused first on growing active accounts than on an increasing engagement and then monetization and so internationally. We're still primarily in the growing active account sales, although we are.

Im starting to make some progress on on.

On monetization.

I think just some examples of progress we've made recently in international.

As well as being the number one TV OS in the United States. We're also the number one TV Pos in Canada with 31% of the TV market Smart TV market.

We expanded in Brazil about a year ago with also the first with Tvs and then also players. We recently added another television partner to Brazil, which is also doing well.

And Brazil is good we're happy with that.

We recently introduced the new player product called the <unk> the <unk>.

Stream bar, which is the two in one product that includes.

That of audio for your TV as well as streaming we launched that in the U S and the U K, Canada and Mexico all of the same time.

Of that products is also doing well so I think so.

For Us international is to keep doing what we're doing which is adding more TV partners to international markets. We also announced.

Last year that we were going to be working with tcl more internationally and sort of continuing to add more TV Oems continuing to.

Grow the the scale of each of the existing Oems internationally, we're obviously going to continue to look at.

TV companies and then there is our scale starts to pick up.

Also the sorry, we're also going to continue to look at.

Potentially new countries as long.

Does that makes sense and then.

I think.

Just overall.

The start.

As active account growth starts to build significant scale.

Leaning more into into monetization. So far we've launched for example, the rest of the channel in the U K.

And.

And in Mexico, So we will be doing more of that over time as well great. Thanks for all of the details congrats again on the quarter.

And our next question coming from the line of Steven Cahall from Wells Fargo. Your line is now open.

Thanks for the question.

Looks like monetize the impressions accelerated again this quarter. So maybe could you help us think about the drivers of that growth and monetize the impressions it'd be great. If you could kind of split that out between growth trends in home screen ads in the Roku channel and then the non roku content apps that have advertising.

And if we wanted to kind of then layer in your AD revenue over that monetize impressions, maybe just help us think about what like the effective CPM is kind of doing in all of that and then of a just a quick housekeeping one.

Sure so.

I don't think of that but before he does I just want to correct something I said I think I misspoke I said, the Roku channel lists in.

And Mexico is actually in the U K and Canada, but Scott do you want to take that.

Hey, Steve I will take your question.

The growth of our AD business is the result of.

As we highlighted in prior quarters, just ongoing major secular change is accelerated by the pandemic.

Just for context in traditional TV, there is 21% decline in broadcast primetime ratings last year According to Nielsen.

Even as rates in the Upfronts have gone up 13%.

Due primarily to scarcity and the.

The median age of the.

The other.

The viewer of the top three broadcast networks is now over 60 years old this pattern.

Not sustainable for TV marketers and it's in the pandemic really accelerated the decision.

By marketers by advertisers to right size their investment towards towards streaming.

And then on the side of streaming of just all sorts of SaaS. The support why there should be more spending.

Half of adults 18 to 30 for half of their viewing is now stream the third of U S households of cord cutters.

In our universe of 92% of Roku.

To cut the quarter very happy and don't plan to go back streaming hours as we mentioned in the shareholder letter up 55 per cent. So all of these changes are really accruing to driving a major shift towards OTT streaming.

The in Q4, we mentioned in the shareholder letter the six.

Largest agency holding company has more than doubled their spend with us. That's notable because those are the same agencies that control. The vast majority of television AD spending. So I think that's a pretty good indication of kind of of permanent reallocation of.

Of TV money.

And then just digging down a level, we see strength.

The whole bunch of categories beyond just traditional TV dollars TV spending sponsorships for the very fast growing segment.

For us performance based advertising this as advertising, where the marketer is optimizing for something other than reach of demographics.

Nearly quadrupled in the year, we've seen strength in retail.

As well in CTG.

And then our endemic category.

App and content marketing is also seeing strength so.

Strength across the board, but particularly strong growth in those in those segments.

Let's start here.

Sorry go ahead Anthony.

Alright.

I was just kind of add debt.

About the bigger picture of these changes that with the.

The progress that was made in 2020.

More and more viewers shifting to streaming for their TV.

More advertisers following their viewers the streaming.

More content companies launching major new streaming services I mean these are enduring structural changes that we don't think are just being pull forward some business being full for do we think that the pandemic has accelerated.

Permanently change the curve on the shift of screaming.

That's great and then maybe just a quick follow up on the.

The outlook for costs. So it looks like a lot of acceleration. This year could you maybe elaborate as a lot of that going to be in either R&D or marketing or kind of shared both and I think it implies that maybe you'll have a little less EBITDA. This year than you did in 2020 is that conservatism or is that just that you really want to push the gas on investing in the business with the really strong.

The top line and active account growth trends.

So this is Anthony I'll, just I'll offer my thoughts and I think Steve Steve Louden can provide some more color and detail the high level.

The screening as a huge global opportunity, we're still in pretty early days I mean, obviously, it's mainstream and were seeing big changes.

Given the fact that you know.

The 1 billion broadband households in the world and they're all going to wash their TV through streaming someday.

The huge opportunity and.

The scenario that we're going to unveil leader, obviously, the leader in the United States and growing rapidly international So it's an area, we're going to keep investing and we're going to invest in growth.

Investing in improving our <unk>.

Spanning our competitive advantages.

But.

And so it's an area, we're going to keep we're going to keep focusing on I mean, we are focused obviously.

I'm building, a large profitable business and thats, what roku will be but.

At this point, we are trying to keep.

Funnel as much as we can back into improving our competitive advantages and growing faster and some of our key investment areas like Roku TV International.

The Roku channel.

On the advertising.

But Steve did you want to did you want to add something to that.

Sure Yeah in terms of in terms of the.

Kind of of the pacing of the Opex of.

Obviously, we have more control over that than we do some of the uncertainties around the full year on revenue growth in some of these external factors, which is why we've given kind of more specific color on the opex versus.

The top of the top of the P&L.

Just a reminder, the.

The end of Q1 of 2020 was one of the Lockdown started happening when the scale of the pandemic started to reveal itself and so ourselves and a lot of other companies, we proactively manage down the rate of growth that we have been doing we primarily did that through.

Slowing the pace of head count and then there is also some other opex and Capex measures that we took that we thought were prudent at the time is.

As Anthony mentioned the business has proved resilient and we think Theres a lot of great opportunity you had and some of the structural shifts have been accelerated from Covid and so we feel more comfortable.

Investing aggressively.

Once you do the shareholder letter, we talked about some of them some.

Some examples.

The Opex is broad based in terms of how we're going to invest certainly we're an R&D company at heart and we have a lot of engineers, though R&D projects on things like new features.

Technology, bringing more content to the platform.

Growing the sales and marketing efforts that is really around continuing to drive increased scale and engagement of the user base and then and then the other thing we're.

And for the future we think the stream.

The streaming of the global phenomenon and so we're building out the G&A infrastructure support of global scale business. So so theres a lot of I mean.

Very fortunate Theres a lot of great things on our roadmap and so there is no dearth of of.

High ROI projects to go Green light and so that's.

That's why we feel comfortable kind of moving the opex growth back to the pre pandemic levels that we saw.

Thanks, a lot.

And our next question coming from the line of Shyam Patel with Susquehanna. Your line is open.

Hey, guys, it's Ryan on for Sean.

Just first how.

Are you thinking about your contact with the strategy going forward for the Roku channel post the acquisition.

And then secondly on an off Roku advertising is there any update there how's that progressing and.

The progress on the cross selling of traditional Roku O&M of advertisers to off Roku TV advertising.

Right.

Hey, Brian This is Anthony I'll take the first part of that question.

And then Scott can take the second part I mean, like I said before the the Roku channel is benefiting from this virtuous cycle of the driving more advertising dollars more content.

More viewing on that.

I think that line I'm.

Confident that trend is going to continue for some time, it's growing faster than the platform overall double the rate of the platform, which is also growing quite the quite nicely.

And I was just saying, we're not going to we don't that kind of detail specifically our exact content.

The plans and the strategy, but I think the big picture is that one we're focused on and Avon business model, which means licensing or sourcing content that is profitable on the Avon AD supported the basis.

But two at our scale growth.

More options of the type of content that we can source the matches that whether its licensing or or.

And the acquisition of global content rights like we did for liquidity I mean, we're open minded and we're going to continue to.

Look at ways to strategically source content that will drive growth of the of the of the Roku channel and a profitable Avon business model and so that's that's what we plan to do so.

I don't know if you want of adder.

Yeah, let me add to that and then I'll answer Ryan your question about about advertising off of.

The platform.

I mean, I think just to build on the Anthonys comments, one important thing to know about the Roku channel is it's another increasingly essential outlet for rights holders to be able to reach an incremental audience apart from or in addition to whatever DTC strategy. They may have so there's a ton of inbound interest in participating in the <unk>.

Roku channel because of its scale because of its user engagement because of our monetization potential so it <unk>.

Opens up just a lot of different avenues to <unk>.

Source content for the Roku channel over time beyond just say for example, the could be type deal that we just did.

Regarding your question about off platform advertising.

So.

Our greatest strength and working with an advertiser is the data the.

Identity or optimization of measurement capabilities that we have both when we sell media and when advertisers use our AD platform one view.

And one of the most potent ways that we go off platform is to show an advertiser, if we could deliver off platform effects, resulting from their buying on roku. So just like as an example, we've talked in the past about our Kroger shopper data partnership that of data.

About actual in store activity of the purchase of CPG products, and we've used that with Kroger with brands like Jif peanut butter brand to show that exposure of ads on Roku leads to a lift in site visits in CIT in product sales and ultimately for Jeff and increased share of wallet versus there.

Competitors.

Likewise with the Winn Dixie the retailer, we've been able to show through our device graph through our data and through both.

An examination of on platform traffic and off platform traffic that their ads with roku drove 56% more web traffic and increase the likelihood of of consumer going to a winn Dixie store by 76%.

One do you is a full omnichannel DSP and so it can execute simultaneously across media that roku is selling on the Roku platform media the publishers on the Roku platform are selling <unk>.

Third party OTT desktop and mobile, but the particular sweet spot for us as the company is when we're able to help of brand bring data or activity off the platform onto roku to re targeted user or to follow the user off roku to be able to.

Verify and show site.

Site visitation lift retail store visit lift product purchase lift that's where our off platform advertising capabilities really excel.

Yeah.

Great. Thanks.

Yes.

Our next question coming from the line of Laura Martin with Needham. Your line is now open.

Hi, there maybe a couple of philosophical question Anthony one of the day selling points. When we are taking the company public with it you didn't have channel conflict. The represented everybody equally but when you do a clear the deal.

And you get the money and you only have like a two or three of your license period doesn't that create channel conflict because your incentive to drive viewers and AD revenue, there and while that might not matter in the U S kind of Youre kind.

What's the anyone's gonna do the many of you got sure it is.

Potential joiners to your offshore channel think youre going to go into competition with them because youre kind of all of our pilot license growth of Panama local content.

I'm just really interested in how you think about the economics, because you were there day I'm sure you can buy lots of content that makes money and then Steve for you. This is the call every year, where you tell us the EBITDA is kind of be breakeven for the year for already and you were very careful not to say that for us.

Great.

So practically.

The number of friction or do we actually.

Can we outlook of higher zero EBITDA for how does your 2021.

Right.

Hey, Laura it's nice to hear from you.

So yes philosophically the way I think about our platform is that it's the content distribution platform.

And obviously, there's other important components to it as an AD platform, it's a great experience for viewers, but.

But at the core as we help we help content owners and publishers distribute their content.

And.

There's a lot of content out there that's available on a lot of different business models.

The content owners are looking for ways to monetize our content and so we so we have multiple ways to do that you know we don't you said you used the word channel conflict. We don't view anything we do really is channel conflict I mean, if we think if you think about.

The Roku channel.

Versus say someone building in the half of publishing and our App store our channel store I mean, those options are both available for content owners, sometimes content owners like say ABC news they'll do both the they'll distribute the content through the Roku channel or they'll write an app some content owners do just one.

Some content owners.

So some of them do just doing the axon of them just distribute the content theater of the channel the.

I think the point is that there is there is the only there's only so many companies that have the scale and expertise to launch of successful direct to consumer service.

But there's lots of other mid size or large.

Content services, the <unk> distribution of the Roku channel for many of those as a better way to distribute that.

Service, because we build the audience for them, we provide the monetization, whether it's billing or subscription or advertising.

We manage retention, we do recommendations we have of.

And then incredible UI team.

Very complicated proposition to build the successful.

Yes.

A lot of our asphalt services, so aggregating those viewers of being being that solution works well for a lot of content owners, so and content services. So I think we hit the most all very very complimentary of I think.

You mentioned two of three years for <unk> I don't I'm not sure if you've ever talked about what the actual deal terms of where but that's not it's not two or three years. So.

And then.

The.

So Scott I don't know if you'd have anything to add to that before I move onto the EBITDA with Steve.

I think it was great Steve do you want to take losses EBITDA question.

Sure Hey, Laura.

Yeah in terms of in terms of our perspective.

We still think it's early days in the shift to streaming.

But certainly we're getting more and more.

The proof points that the our position is strong and there is a lot of opportunity ahead.

Dreaming and so.

For us.

One of the things that's important is to invest too.

Maintain and grow our competitive differentiation and the seed future growth and so that's why we're.

The continued to invest.

<unk> in different aspects of the business model.

Certainly we didn't we didn't give formal guidance around the top part of the funnel in terms of the revenue growth obviously, the businesses had very strong momentum.

Especially in the back half of 2020.

We put out form of outlook for continued growth robust growth of over 50% in Q1, but then we're going to be facing tougher comps so difficult to say, where the EBITDA will the will line up for the year.

But I do think Q4 is the Great example of a confluence of.

Yes, the <unk> driving scale robust growth on the monetization coming together.

And producing significant EBITDA in Q4 and shows the really does show the the <unk>.

Potential leverage in the business model and we think over time will grow a.

A large and very profitable business.

Thanks, guys is of great numbers congratulations.

Thanks for thanks.

Our next question coming from the line of Michael Nathanson with most of that need to some of your line is open.

Thanks, I have a couple of key ask you a bit about the Roku channel.

You seem to have a trend on the Amazon I know you are.

You announced the development of Amazon Roku channel.

Amazon is there a noticeable difference of consumption maybe on the roku platform versus off the platform. That's one and two is if you can help us at all getting under the Hood of maybe the advertising revenue number I know people sort of asset wishes anything you can help us on on maybe roku sellout levels.

Fill rates, there and I guess price per impression how that's trended over the over 2020 of that'd be really helpful. Thanks.

Scott that's for you.

Okay, Hey, Michael I'll take both of those questions. So with regards to the Roku channel our biggest opportunity as we said in the past is on our own platform and we know the consumer deeply.

Where we have full access to the promotional tools the ability to personalize the experience for the user and great monetization capabilities, we do and will take the opportunity to take the Roku channel off platform, where we see an opportunity but to be clear the the biggest and best growth opportunity and our primary focus.

<unk> is on the Roku channel.

Our own platform.

With regards to your question about the.

The composition of of the AD revenue.

The.

Well I'd say that yes, the fill rate sellout levels, we've mentioned in the past debt, we still exist in the supply rich environment and that our biggest challenge or the biggest competition ultimately is competing dollars away from the traditional TV spending pattern, we're making great progress there.

As I mentioned earlier in the call and tracking of those dollars and I do think that there's a fundamental shift that was affected in 2020 as a result of the pandemic.

OTT remains of premium product and so price is quite well relative to the TV generally, but I think it's also important to recognize that there's a whole other class of advertisers coming into the OTT, who either couldn't invest or couldn't invest much in TV because of the meeting.

It didn't work for them.

It didn't give them the performance credentials the measurement that they needed and so these are advertisers who may have historically invested much more heavily in social media and search and display advertising, who are now able and interested in participating in OTT because of the ability to measure and optimize and those advertisers are.

<unk> always going to be buying the.

The traditional CPM basis, some of them are kind of by buying on a performance basis, our cost per click the cost per action basis, unless I think is one of the most interesting characteristics of OTT as a medium.

Is its future is not simply a top of funnel branding media like TV or a bottom funnel performance media like social and search is both and sort of advertisers of all shapes and sizes are going to be competing in a ultimately of common auction.

To reach the user and the pricing models of the variety of <unk>.

Financial and marketing tactics that those marketers use are going to be quite married I.

I hope that answers your question.

Can you just real quick follow up when we see the social have really strong impression quarters, because he was Facebook the price compression drops because of what you said the auction brings in.

A lot more.

Types of advertisers of all different types of requirements. So is it fair to assume when we see big surges of impressions.

As potentially the price compression is just gets weaker simply by the supply of all of them.

The questions of the marketplaces out of fair assumption, we're trying to build our models of trying to predict advertising growth.

Right.

Yeah. It is the case in in social media that when supply goes up a lot of.

The option prices go down.

Ultimately, that's not necessarily a bad thing for the social platform.

The greater volume of allows them to drive more of effect.

For the Advertiser and of course, we can cut the other way as pressure in the auction increases it can drive prices up and that may be disconnected from what the advertiser thinks the impression is ultimately where we mentioned in our shareholder letter I think an interesting case study with friendly a virtual Mvpds service, who actually took.

Social media money and moved it to two roku their goal is of course to acquire subs and they saw a near 16 Times Inc.

The lift in sign ups, and the 65% better return relative to their social media investments and so while it's still early I think in terms of OTT competing in that pond in the in that bucket. It has all of the credentials all of the data and identity and it's been a big part of.

Of our investment with one day to be able to compete.

For advertiser budgets when those budgets are mostly focused on bottom of funnel impact.

I recognize that might not get to where you're looking for in terms of the model, but that is the dynamic we see play out.

Thanks, Thank you.

Okay. Okay.

And our next question coming from the line of Mitch.

Filled with <unk> partners. Your line is open.

Hi, Thanks for taking the question.

If you're a brand and you want to reach connected TV viewers I was wondering if you could just help us understand the difference between two different scenarios.

One you go out and you buy Hulu, where peacock direct and a portion of that type of AD.

AD time that Youre buying ends up on Roku devices choice.

Choice two is you buy roku directly and of <unk>.

Portion of your spend may end up on of Hulu or of Peacock or even both.

I guess, if I'm thinking about this if I'm a marketer of brand y.

Why do I buy roku direct versus the other way around and the and what is buying roku direct achieve that simply can't be achieved by buying from the program of directly and ending up on the roku device.

Scott do you want to take that.

Hey, rich.

The short answer is it's the both and not an either or.

These content partners our partners and our goal is to add business is the complement not compete with them. There are many reasons of course debt you might buy directly with the network or an app on our platform.

For example, it could be part of a broader cross platform by your upfront commitment.

<unk> hundred 90 by the side of like if I just leave the upfront aside and say there is no upfront in the world where like you just had to put a dollar to work.

Why would I put a dollar into directly what wood.

What is the advantages that I get by buying Roku that I can't get by throwing it into a broader bi.

Yeah, so one of them.

Okay.

Yeah.

We're just gonna say one advantage is the ability that we also have access to what linear as that used that you've been seeing through our ACR in a roku Tvs and so.

Duplicated reach we can help you do that.

Uh huh.

And asked he.

He doesn't have that data can you can't really do that.

Yeah, Yeah, so just to build on that so one key reason rich is the ability to.

Reaching users that you arent going to reach just through the select a couple of publisher direct buy so one of the things we regularly do with our advertisers of producing only only both view of who they reached with each of their buys.

And we do that with linear too and we regularly show them that even though.

For example, they are heavily invested in Hulu. They didn't reach this whole other big class of users because they're either not active with those other publishers or theyre, not holistically optimizing across linear and their whole OTT by there are a lot of other reasons that advertisers in the best directly with US one is we excel at optimizing for the performance in day.

I mean, we've been investing for years and are in our data and our AD stack and we excel there we're not in the business as you know of selling context. So if you got of by the office and you've got a buy of specific show you're going to do that directly with the network, but if you're optimizing for.

Reach and frequency and performance.

Investing with Roku is a key factor that the other thing I'll mention here is that one for you as a key component in this discussion one of the reasons. We've invested so heavily in the one of your capability is.

So that in the case, where youre doing a publisher direct buy you can still leverage roku identity Roku data capabilities to help optimize that publisher direct buy against all of your other activity.

Right so of that but I'm, just thinking out loud if the ultimate Wood you just said Scott to me is the most important but one of the optimized for reach frequency and performance I can't think of anything else.

Optimizing so that I can be on this is us seems suboptimal to optimizing for reach frequency and performance.

Okay.

Yeah.

Our focus as a company is on data and performance and outcomes for advertisers, but there are lots of reasons why advertisers also care about context and want to be in that show and that's not our law. That's the that's the the focus and capability of a lot of networks.

But.

Look we agree we're focused on leveraging our data and our tech capabilities to drive outcomes for advertisers and help them orchestrate their OTT investment even in the case, where theyre doing it directly with the publisher.

Thanks, very much yes.

And that's all the time, we have for questions today I would now like to turn the call back over to Anthony Wood for closing remarks.

Thanks, before we end the call I do want to say one more thing 2020 was the challenging year for businesses, but it was also a difficult time for people everywhere. The team of Roku did an incredible job under extraordinary circumstances and I wonder if the thank you to everyone together and we have a great future ahead of us.

Ladies and gentlemen that does conclude the conference for today. Thank you for your participation you may all disconnect.

Yes.

Yeah.

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Yes.

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[music] line.

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Workers' fourth quarter and for years 2020 earnings Conference call.

At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask the question. During the session you will need to press. The Star then the one key on you touched on the telephone please be advised that today's conference is being recorded.

If you require any further assistance. Please press Star then zone.

I would now like to hand, the conference over to your Speaker of today Congress Quad. Please go ahead Sir.

Thank you good afternoon, and welcome to Roku the financial results conference call for the fourth quarter and year ended December 31, 2020, I'm joined on the call today by Anthony Wood, Roku is founder and CEO, Steve Louden, our CFO and Scott Rosenberg Senior Vice President General manager of the platform business, who will be available for Q&A.

<unk>.

Full details of our results and additional management commentary are available in our shareholder letter, which can be found on the Investor Relations section of our website at IR Dot Roku Dot com the following discussion including responses to your questions reflect management's views as of today February 18 2021 only.

And we do not undertake any obligations to update or revise this information.

Some of the statements made on today's call are forward looking and are 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 of roku, including our financial perspective for the first quarter and full year 2021, the future of.

TV TV streaming and television advertising globally, the impact of the COVID-19 pandemic on our industry business and financial results and the future growth in our business and our industry.

Actual results may differ materially from those discussed on this call for a variety of reasons. Please refer today's shareholder letter and the company's periodic filings with the SEC for information about factors, which could cause our actual results to differ materially from these forward looking statements you'll find reconciliations of non-GAAP measure.

<unk> two of the most comparable measures discussed today in our shareholder letter, which is posted on our Investor Relations website at IR Dot Roku Dot com and I encourage you to periodically visit our IR website for important content.

Finally.

Otherwise stated all comparisons on this call will begin our results in the comparable period of 2019, now I'd like to hand, the call over to Anthony.

Thank you Conrad and thanks to everyone for joining today's call I am pleased to report that Roku had both a record 2020 and fourth quarter.

In 2020, Roku exit of accounts grew by 14 million accounts for over $51 million and streaming hours grew 55%.

Monetize video AD impressions were up over 100% of Q4 rebounding to pre COVID-19 growth levels.

Across the industry of the impact of the screening is increasingly evident consumers of cutting the cord fully a third of all of American homes are now non pay TV households.

The media companies are reorienting around streaming and launching new streaming services.

The traditional TV upfronts are beginning to crumble as advertisers demand more flexibility better measurement and a broader audience.

We are pleased with the progress we made in 2020 and excited about the large opportunities that lie ahead, and the streaming decade with that let me hand, the call over to Steve.

Thanks Anthony.

2020 was the year that showcase our strong position and resilience along with the rest of the world Roku was forced to respond to a wide ranging impact of a global pandemic the ex U.

You did well in the face of many challenges and delivered record results for Q4 as well as the full year.

Before taking your questions I'll walk through operational and financial highlights and address the outlook.

Is the more than twice the size of the video subscribers of the largest cable company in the U S.

In addition to increasing our scale, we continue to see growing engagement with our platform.

For 2020 streaming hours up $20 9 billion year over year to a record $58 7 billion hours in.

In Q4, we grew streaming hours, 55% year over year consistent with the year over year growth rate for the full year.

Furthermore, we grew average streaming hours per active account, 10% year over year in queue for demonstrating the strong engagement of our user base.

As a reminder, please see our shareholder letter for the full financial details from the quarter and the fiscal year, but I'll highlight a few items.

In Q4 total revenue increased 58% year over year to $649 9 million.

The platform segment revenue was up 81% year over year two of record $471 2 million driven by strong advertising demand Q.

Our key financial performance metric is gross profit, which grew a vigorous 89% year over year in Q4 to a record $305 5 million.

Gross margin in the quarter was 47% fairly consistent sequentially as improvements in platform margin largely offset the seasonally lower player margins based on our holiday promotions.

Q4, adjusted EBITDA of $113 5 million produced the vast majority of our record of $150 million of adjusted EBITDA for the year and was the result of a confluence of strong performance.

It also demonstrates the potential leverage in our business as.

As we continue to drive scale and increased monetization of the platform.

We ended the quarter with almost $1 1 billion of cash cash equivalents restricted cash and short term investments.

With that let's turn to our thoughts on the outlook. We believe we have sufficient visibility into Q1 to offer of formal outlook, but as we move further into the future of number of uncertainties make a formal outlook for 2021 difficult.

Rather we have provided some directional color for how we see the full year playing out for Roku.

Historically Q1 is our seasonally softest quarter from a revenue perspective.

Typically revenue has been roughly 25% lower sequentially than our seasonally strong Q4 or.

Q1 outlook calls for similar seasonality at the midpoint of total revenues of $485 million up 51% year over year with the platform segment, comprising roughly three quarters of total revenue.

We anticipate total gross profit of roughly $238 million at the midpoint of 69% year over year, implying an overall gross margin of approximately 49%.

Platform gross margin is expected to be roughly 60% while player gross margin is expected to be similar to Q1 2020.

As a reminder, Q1 player gross margin is seasonally high reflecting the traditionally lighter promotional period within the retail calendar for.

We anticipate Q1 opex year over year growth to be in a similar year over year growth range as Q4, and thus showing strong leverage against the revenue and gross profit growth.

Which is expected to result in a Q1 adjusted EBITDA of $31 million at the midpoint.

For modeling purposes. Please note the Q1 adjusted EBITDA excludes stock based compensation of roughly $40 million and an estimated $10 million of depreciation and amortization and net other income.

In terms of for the full year, we are mindful of that in 2021 year over year comparisons are likely to be quite volatile in.

In the first half of the year, we expect strong financial comparisons against the first half of 2020, which includes early impacts from COVID-19, and the resulting economic lockdown.

For the second half of the year, we anticipate much tougher comparisons in part due to our record performance in the second half of 2020, which will significantly pressure year over year growth rates.

We expect our overall 2021 gross margin to be in the mid 40% range as platform margin remains fairly stable and we operate the player segment added gross margin close to zero given.

Given the size of our opportunity and progress to date, we will continue to aggressively invest in our business to enhance our competitive differentiation and seed future growth.

This base of the growth rate in operating expenses for 2021 to be more in line with 2019 year over year organic opex growth levels versus 2020, when we took precautionary steps at the outset of the pandemic to manage down the rate of expense growth.

It was also very grounding to read the historical comparison from that call, which I will update in a price here or.

For 2020 revenue of almost $1 8 billion represents over two times 2018 revenue.

Three times 2017 revenue for <unk>.

<unk> 2016 revenue and five times 2015 revenue.

The sustained level of robust earnings growth because of the strong fundamentals of our business. The strategic advantages we have achieved through our investments and are laser focused leadership in streaming.

We continue to be excited by the significant opportunities for Roku that lie ahead.

With that let's turn the call over for questions operator.

Okay.

Ladies and gentlemen, as a reminder to ask the question you will need to press. The Star then the one key on your Touchtone telephone.

So looking at all from the queue at any time, please press the pound key.

Please stand by while we compile the Q&A last day.

And the first question coming from the line of Cory cap Carpenter with Jpmorgan. Your line is open.

Maybe more broadly should we think of this as more of an opportunistic when all the purchase or does it signal, perhaps the broader ambition with exclusive content and then just as a quick follow up any details you can provide for could be specifically just on when it will be available on the platform for <unk>.

How long do you have the exclusive rights. Thank you.

Hi, Cory this is Anthony Thanks for the question, let me start by just talking a little bit about the Roku channel and then explaining how could the fits into that.

The deal that we did for the Roku channel. So if you just look at overall platform growth.

Of the Roku platform last year, we added $14 million incremental accounts and cross 51 million active accounts, but if you look at the rest of the channel specifically is growing twice as fast as the platform overall so.

And the streaming hours of the rest of the channel and growing twice the platform right.

We know the Roku channel now reach households was approximately 63 millions of viewers. So the roku channel is doing extremely well for us.

And we're adding content continuously.

Continuously for the Roku channel for a bunch of the different sources.

We added almost 100, we added about $100 million linear channels in 2020, instead of the Roku channel.

We have the content from Disney NBC, A&E and discovery and more.

No.

The Roku channel is definitely.

Benefiting from this virtuous cycle, where more viewers, bringing more advertisers more advertising dollars brings in.

More content deeper content better content and then that cycle continues so would that would that sort of backdrop. That's.

As our scale growth there.

Looking for sourcing.

Different different types of content and we're looking at different types of content. So for the current deal fits into that in the sense that it's premium content was great content, we think it'll appeal to roku viewers.

And.

So.

It was the.

The transaction, where we acquired the global content rights on a cost effective basis.

We're disciplined about making sure of the content, we onboard into the Roku channel assistance of the Avon business model for the Roku channel and the could be content.

Fit into that model the <unk>.

The scale of the Roku channel allows us to do deals like this where perhaps we couldnt have done them a couple of years ago. When you expect that to continue.

As the scale of growth will continue to look more broadly at all of the different types of content. The week can acquire and will be disciplined about making sure that that content purchase price sits into whether it's licensed or purchased or whatever the financial details of our fit into R. R.

The <unk> business model.

In terms of of rolling out the for any content I don't think we've announced that.

Ctrip the fairly fairly soon.

And I don't know Scott if you had any anything you wanted to add about the specifics of the liquidity, including the rollout and the exclusive rights and that sort of thing.

Yeah.

I'll tag on here Corey.

Excited about the content 75, TV series of hundreds of hours.

Can any nominations will be rolling them out those out progressively through the year and we do have a multiyear exclusive right to exploit the the content.

So we're excited to get it out there stay tuned for for our launch timing.

Great. Thank you both.

And our next question coming from the line of Mike Good for Lakes from Rosenblatt Securities. Your line is open.

Thanks, so much and congrats guys on a great year, just a couple.

I guess unrelated questions. The first on the stable gross margin outlook for the year Steve.

Just curious if there's any new.

Upward or downward pressures on platform gross margin debt.

You would like to point out that we should pay attention to.

Yeah, Hey, Mark.

Yeah, Yeah as you mentioned, we do not provide formal outlook for 2021 overall.

We did mention.

In the form outlook for Q1 about the upper margin being around 60% and then remaining kind of roughly stable for the year.

As a reminder of Theres a lot of it goes into the platform. So there is always considerations of the underlying margin structures day within the AD business or the content business.

And then the mix of the different pieces, but overall I don't think there is there any significant trends I would point out I mean, the business in general has very good momentum.

And over over the back half of <unk>.

2020, we saw.

Some good uplift in the.

The platform margins. So we're very happy with where the businesses. Both in terms of strong growth on the top line and.

Cable margins looking at.

Okay, and then real quick on.

Helpful.

Our pool, just curious how much downward pressure.

Seeing there in terms of outside.

Outside the U S. It's obviously been strong and it just curious if that implies that.

<unk> has not had a lot of downward pressure or when do you expect to see that and.

Perhaps maybe break out.

So U S and U S separately there.

Sure, Yes, certainly.

For the U S is by far the most lucrative <unk> potential market and debt.

The U S. As the market is much farther ahead, the rest of the world.

And historically the vast majority of our account base has been in the U S.

Certainly we are growing our international presence and we mentioned in the letter of some great stats around the fact that the playbook.

The kind of three phase playbook around growing scale driving engagement and eventually monetize the is working well internationally.

So that is true, but we are focused on driving scale and engagement in the international market. So the <unk> is significantly lower on that so it is definitely is the dilutive effect on the overall are true.

In terms of visibility of yeah, we understand the international is the strategic investment area and that the.

<unk> ability that would be helpful for investors and so we're working on breaking that out.

Day tunes.

In the future, we'll have some more visibility for you.

Okay, great. Thanks, so much.

Sure. Thanks.

And our next question coming from the line of for Sally Cask off with Cannonball Research. Your line is now open.

Thank you I think I have a couple for Scott.

The one you use.

Most of them every quarter before the big asphalt services launched of what you're used to say debt.

You know this is our overall streaming hours growth of them, that's what the streaming hours growing slower than that and then at some point it faster than debt. So now that you have this massive apps launching I wonder what that what those relative growth rates are and.

Also of following up on that is are you worried at all of that.

<unk> of the world and they should be able classes.

Will cannibalize AD supported AD supported streaming hours and if not why.

What why do where do you think there viewership was coming from.

Yeah.

Okay.

Hey, the silly.

Thanks for the question, yes, you're right, we've not delineated the growth of the different verticals recently, but but it remains true that AD supported kneeling on the platform continues to grow faster than the platform overall and then the other segments and just as a reminder, when we talk.

Talking about AD supported the.

We would include dual revenue stream services like Peacock that are both subscription base and the carry ads now with regards to your question about.

Whether the services will cannibalize Eva consumption.

First of all the day either in the case of Peacock already carry ads or in the case of HBO Max plan to carry ads.

I think we are.

We're <unk>.

Led mostly by the fact that the.

The services launching are drawing more consumers in the spring they are creating an even better case for consumers to cut the cord and move more of their viewership to roku to streaming and the that then the crews to deeper engagement across the board inclusive of AD supported.

The way. It's Furthermore, helpful that all of the recent direct to consumer services.

Thank you very helpful. The quick follow up and do you see in your data that viewership in general aggregating to the big.

The apps like the bigger ones, the keep getting bigger and the smaller ones of falling by the way side of it does the state equal the fragmented one day, if you have any comment on that.

Well, what I'd say is that is the very vibrant market now with all of these big well funded services competing for consumer intention.

That's good for Roku, because we're in the business of distributing the services and helping grow so we've been able to partner more deeply with the broader set of content providers and of course, it's great for the consumer because it just makes their streaming experience on roku even richer.

So.

We think it's it's good and has driven actually more robust competition, among the services and that the consumers ultimately in the winter.

Thank you very much hey facility. This is Anthony I'll just add debt.

As mentioned in the past and it still continues to be true if we think about.

No.

The competition in our advertising business really the it's not other services on our platform at the primary impediment to our AD business growth, which is still growing obviously very nicely with the monetize the ad impressions.

Doubled again in Q4.

But the biggest impediment to growth is just the behavior of TV AD buyers and how they traditionally.

Obstacle for it and it's not at all.

It's not of a.

Long term obstacle, but that's the biggest short term obstacle to our anthos.

Thank you very much.

And our next question coming from the line of with Blue, but the check of you from Bank of America. Your line is now open.

For taking my questions and congrats on the strong quarter.

I was wondering if you can talk about the programmatic AD spend do you see industry AD budgets moving more towards programmatic spend and in that vein can you talk a little bit about how the data zoo. One of your platform is performing and what percentage of your AD revenues are coming from that today and how do you see that progressing over time.

And of a follow up.

Sure that sounds like a question for Scott.

Hey, Thanks. Thanks for the question, let me just taking in the reverse order. So 2020 was of great year for one view of foundational year and just the reminder of our value proposition with where the one view we have natively integrated broking first party identity data and measurement capability.

<unk> and and enabled buyers three one for you to access the same capabilities.

Caused them to be buying Roku media for years now applied to when they are buying third party media <unk> has deepened our agency holding company relationships.

The licensing of one he was the component of the upfront agreements that we wrote in Q4 with all the major agency holding companies.

Just by way of example, we've got brands like Lexis using one of you can now measure and optimize their spend across linear TV and OTT and using it to achieve better reach for the same dollar.

Is it sort of a perfect use case for one day is optimizing your TV spend across dozens of apps and linear TV all at the same time with Roku data powering it now regarding the.

The other part of your question and the.

Of the role of programmatic. It is true today that the majority of the spending.

OTT is still a more traditional spending pattern insertion order based.

That's largely because most of the money. The early none of that's flowed into OTT has come out of TV budgets and that's generally the way of television has been spent historically the programmatic is rising quickly. It's a key part of why we've been investing in <unk> and we do believe long term, although it is not the case today.

The programmatic will be a majority of how OTT is bought so not the least of which because programmatic is a superior way to leverage our data to leverage measurement to do dynamic optimization of your spend so.

In short.

Our strategy is to sell of the way buyers want to buy they are still buying both ways. It's still predominantly traditional but we do believe that it'll be heavily programmatic overtime.

Got it thanks for the details on that Scott.

For my follow up I just wanted to.

Ask about the international growth again, just to follow up on the prior question.

How would you measure of success in 2021. So if you can just kind of give us your playbook for this year I mean, what are your targets for international expansion and overall, how would you measure major success. This year in the international I mean.

If you can just provide any details on whats your thoughts are for international that would be great. Thank you so much.

Yes. This is Anthony I'll take that obviously screaming is a global phenomenon.

We got our start in the U S are doing extremely well here.

We are.

Investing internationally and I would say a few things I guess about about that and how that's going first of all.

One of our strategies is to take the technology, we have developed.

The strategy sort of work for us in the U S. The products we develop.

And the market trends, we believe which translate from the U S International markets and trends will translate those strategies and <unk>.

The market entry points to international markets and that so that's what we're doing and that's working that's working well for us we're finding that the assets. We have worked well internationally as well as in the U S as well as our domestic market.

Another kind of higher level of point I guess is our international strategy involves the same the same three phases.

This model that.

That we adopted in the U S, which is focused first on growing active accounts than on an increasing engagement and then monetization and so internationally, we're still primarily in the growing active accounts sales, although we are.

Starting to make some progress on an.

On monetization.

Just some examples of progress we've made recently in international.

As well as being the number one TV OS in the United States. We're also the number one TV Pos in Canada with 31% of the TV Mark of Smart TV market.

We expanded in Brazil about a year ago wood.

For the first with Tvs and then also players. We recently added another television partner to Brazil, which is also doing well so our progress in Brazil is good we're happy with that.

We recently introduced a new player product called the <unk>.

The stream bar.

As of two of them want a product that includes.

Better audio for your TV as well as screening.

We launched that in the U S and the U K, Canada, and Mexico all of the same time.

Net products is also doing well so I think so.

For Us international is to keep doing what we're doing which is adding more TV partners. The international markets. We also announced the.

Last year that we were going to be working with tcl more internationally, so continuing to add.

More TV Oems continuing to.

Grow the the scale of each of the existing Oems internationally, we're obviously going to continue to look at.

TV companies and then there is our scale starts.

Also the sorry, but you're also going to continue to look at.

Potentially in new countries as long.

Does that makes sense and then.

I think.

Just overall.

The.

The start.

As active account growth starts to build significant scale.

Any more into the monetization so far we've launched for example of the Roku channel in the U K.

And.

And in Mexico, So it will be the more of that over time as well.

Great. Thanks for all of the details congrats again on the quarter.

And our next question coming from the line of Steven Cahall from Wells Fargo. Your line is now open.

Thanks for the question.

It looks like monetize the impressions accelerated again this quarter. So maybe could you help us think about the drivers of that growth and monetize the impressions it'd be great. If you could kind of split that out between growth trends in home screen ads in the Roku channel and then the non roku content apps that have advertising.

And if we wanted to kind of then layer in your AD revenue over that monetize impressions, maybe just help us think about what like the effective CPM is kind of doing and all of that and then of a just a quick housekeeping one.

Sure so.

Scott I'll take that but before he does I just want to correct something I said I think I misspoke I said, the Roku channel is an and.

Mexico is actually in the U K and Canada, but Scott do you want to take that.

Yeah, Hey, Steve I will take your question.

The growth of our AD business is the result of.

As we highlighted in prior quarters, just ongoing major secular change is accelerated by the pandemic.

Just for context in traditional TV, there is 21% decline in broadcast primetime ratings last year According to Nielsen.

Even as rates in the Upfronts have gone up 13% due primarily the scarcity.

The median age of the other.

The viewer of the top three broadcast networks is now over six years old this pattern.

Not sustainable for TV marketers and it's in the pandemic really accelerated the decision.

By marketers by advertisers to right size their investment towards towards streaming.

And then on the side of the streaming they're just all sorts of staff the support why there should be more spending.

Half of adults 18 to 34 half.

They're viewing is now streaming the third of the U S households are cord cutters.

In our universe of 92% of Roku accounts, who cut the quarter very happy and don't plan to go back streaming hours as we mentioned in the shareholder letter up 55 per cent. So all of these changes are really accruing to driving of major shifts towards OTT streaming.

The in Q4, we mentioned in the shareholder letter the six.

Largest agency holding companies more than doubled their spend with us. That's notable because those are the same agencies that control. The vast majority of television AD spending. So I think that's a pretty good indication of kind of of permanently allocation of.

Of TV money.

And then just digging down a level, we see strength and a whole bunch of categories beyond just traditional TV dollars TV spending sponsorships for the very fast growing segment for.

For us performance based advertising this as advertising, where the marketer is optimizing for something other than reach of demographics.

Nearly quadrupled in the year, we're seeing strength in retail.

As well in CTG.

And then our endemic category.

<unk> and content marketing is also seeing strength so.

The strength across the board, but particularly strong growth in those in those segments.

Let's start here.

Sorry go ahead Anthony.

I was just.

I was just kind of add debt, if I think about the bigger picture of the changes that the.

Of the progress that was made in 2020.

More and more of viewers shifting to streaming for their TV.

More advertisers following their viewers the streaming.

More content companies launching major new streaming services I mean these are enduring structural changes that we don't think are just being pulled forward some business being full for do we think that the pandemic has accelerated.

Permanently change the curve on the shift of screaming.

That's great and then maybe just a quick follow up on the.

The outlook for costs. So it looks like a lot of acceleration. This year could you maybe elaborate as a lot of that going to be in either R&D or marketing or kind of share. Both in I think it implies maybe you'll have a little less EBITDA. This year than you did in 2020 is that conservatism or is that just that you really want to push the gas on investing in the business with the really strong.

The top line and active account growth trends. Thanks.

So this is Anthony I'll, just I'll offer my thoughts and I think Steve Steve Louden can provide some more color in detail for the high level.

The streaming is a huge global opportunity we're still in pretty early days I mean, obviously, it's mainstream and were seeing big changes.

Given the fact that.

The 1 billion broadband households in the world and they're all going to wash their TV through streaming someday.

The huge opportunity and.

The scenario that we're gonna Unreal leader, obviously as the leader in the United States and growing rapidly international So it's an area, we're going to keep investing in we're going to invest in growth.

Investing in improving our <unk>.

Spanning our competitive advantages.

But.

And so it's an area, we're going to keep we're going to keep focusing on I mean, we our focus obviously.

I'm building, a large profitable business and thats, what roku will be but.

At this point, we are trying to key.

Funnel as much as we can back into improving our competitive advantages and growing faster and some of our key investment areas like Roku TV International.

The Roku channel.

On the advertising.

But Steve do you want to did you want to add something to that.

Sure Yeah in terms of in terms of.

The kind of the pacing of the Opex.

The top of the top of the P&L.

Just a reminder.

The end of Q1 of 2020 was one of the Lockdowns started happening when the scale of the pandemic started as the reveal itself and so ourselves and a lot of other companies, we proactively manage down the rate of growth that we had been doing we primarily did that through.

Look slowing the pace of head count and then there is also some other opex and Capex measures that we took that we thought were prudent at the time.

Investing aggressively.

Once you do the shareholder letter, we talked about some of the.

Some examples the <unk>.

Opex is broad based in terms of how we're going to invest certainly we're an R&D company at heart and we have a lot of engineers the R&D projects on things like new features.

Technology, bringing more of contents of the platform.

Growing the sales and marketing efforts that is really around continuing to drive increased scale and engagement of the user base and then and then the other thing we're in.

Best thing for the future of we think the stream.

The streaming of the global phenomenon and so we're building out the G&A of infrastructure support of global scale business. So so theres a lot of I mean.

Very fortunate Theres a lot of great things on our roadmap and so there is no dearth of of.

High ROI projects to go Green light and so that's.

That's why we feel comfortable kind of moving the opex growth back to the pre pandemic levels that we saw.

Thanks, a lot.

And our next question coming from the line of Shyam Patel with Susquehanna. Your line is open.

Hey, guys, it's Ryan on for Sean.

Just first how are you thinking about your contact with the strategy going forward for the Roku channel on post the <unk> acquisition.

And then secondly on an off Roku advertising is there any update there how's that progressing and.

The progress on the cross selling of traditional Roku O&M of advertisers to off Roku TV advertising.

Right.

Hey, Brian This is Anthony I'll take the first part of that question.

And then Scott can take the second part.

Like I said before the the Roku channel is benefiting from this virtuous cycle of the driving more advertising dollars more content.

More viewing in that.

I think that line.

Confident that trend is going to continue for some time, it's growing faster than the platform overall double the rate of the platform, which is also growing quite the quite nicely.

And I was just saying, we're not going to we don't that kind of detail specifically are our exact content.

Plans and the strategy, but.

The Big picture is that one we're focused on enabling business model means which means licensing or sourcing content that is profitable on a board as reported basis.

But two at our scale growth.

More options of the type of content that we can source the matches that whether its licensing or or.

And the acquisition of global content rights like we did for liquidity.

Openminded and we're going to continue to look.

Look at ways to strategically source content that will drive growth of the of the.

The of the Roku channel and a profitable Avon business model and so that's that's what we plan to do.

Scott I don't know, if you want to add or take the.

Yes, let me add to that and then I'll answer Ryan your question about about advertising off of.

Platform.

The channel because of its scale because of its user engagement because of our monetization potential so it <unk>.

<unk> is up just a lot of different avenues to.

Source content for the Roku channel over time beyond just say for example, the could be type deal that we just did.

Regarding your question about off platform advertising.

So you know.

Our greatest strength and working with an advertiser is the data the identity of our optimization of measurement capabilities that we have both when we sell media and when advertisers use our AD platform one view.

And one of the most potent ways that we go off platform is to show an advertiser that we can deliver off platform effects, resulting from their buying on roku. So just like as an example, we've talked in the past about our Kroger shopper data partnership added data.

Actual in store activity of the purchase of CPG products, and we've used that with Kroger with brands like Jif peanut butter brand to show that exposure of ads on Roku leads to a lift in site visits in CIT in product sales and ultimately for Jeff and increased share of wallet versus their <unk>.

<unk>.

Likewise with the Winn Dixie the retailer.

We've been able to show through our device graph through our data and through both of them.

An examination of on.

<unk> traffic and off platform traffic that their ads with roku drove 56% more web traffic.

And increase the likelihood of of consumer going to a winn Dixie store by 76%.

One do you is a full omnichannel DSP and so it can execute simultaneously across media that roku is selling on the Roku platform media the publishers on the Roku platform are selling.

Third party OTT desktop and mobile, but the particular sweet spot for us as the company is when we're able to help the brand bring data or activity off the platform onto roku to re targeted user or to follow the user off roku to be able to <unk>.

Terrifying show site.

Site visitation lift retail store visit lift product purchase lift that's where our off platform advertising capabilities really excel.

Great. Thanks.

<unk>.

Our next question coming from the line of Laura Martin with Needham. Your line is now open.

Hi, there maybe a couple of philosophical question Anthony one of the day when we are taking the company public with it you didn't have channel conflict. The represented everybody equally but when you do a clear the deal.

And you get that money and you only have like a two or three of your license period doesn't that create channel conflict because your incentive to drive viewers and AD revenue there.

Might not matter in the U S kind of Youre here, what's the anyone's Gonna day. It was the many of you got sure.

Potential joiners to your offshore channel think youre going to go into competition with them because youre going to all of our pilot license local channel the local content.

I'm just really interested in how you think about the economics.

Their day I'm sure you can buy lots of content that makes money and then Steve for you. This is the call every year, where you tell us the EBITDA is going to be breakeven for the year forward and you were very careful not to say that for sure.

Of course.

Great.

So the publicly.

The net number of friction for it.

Right.

Can we outlook are higher the early but the other.

Curious price when you what thanks Scott.

Hey, Laura it's nice to hear from you.

So yes philosophically the way I think about our platform is that it's the content distribution platform.

And obviously there is other important components to it it's an AD platform, it's the great experience for viewers, but.

But at the core as we help we help content owners and publishers distribute their content.

And.

There's a lot of content out there that's available on a lot of different business models.

Content owners are looking for ways to monetize our content and so we so we have multiple ways to do that you know we don't you said used the word channel conflict. We don't view anything we can do really is channel conflict I mean, if we think if you think about.

The Roku channel.

Versus say someone building an app of publishing it in our App store of our channel store I mean, those options are both available for content owners, sometimes content owners like say ABC news there'll be both the they'll distribute the content through the roku channel or they'll write in the App. Some content owners do just one.

Some content owners.

So some of them do just doing the axon them just distribute the content the interest of channel the.

The I think the point is that there is there's only there's only so many companies that have the scale and expertise to launch of successful direct to consumer service.

But there's lots of other mid size or large <unk>.

And services the one distribution of the Roku channel for many of those as a better way to distribute that.

That service because we build the audience for them, we provide the monetization, whether it's billing or subscription or advertising.

We worked we manage retention we do recommendations we have of an incredible UI team I mean, it's so it's very complicated proposition to build of successful.

Avon aim of our asphalt services, so aggregating those viewers and being being that solution works well for a lot of content owners, so and content services. So I think many of them was all very very complementary I think Hugh.

You mentioned two of three years for <unk> I don't I'm not sure if you've ever talked about what the actual deal in terms of where but that's not it's not two or three years. So.

And then.

So Scott I don't know if you'd have anything to add to that before I move on to the EBITDA with Steve.

Yes, I think it was great Steve do you want to take or is the EBITDA question.

Sure Hey, Laura.

Yeah in terms of in terms of our perspective.

We still think it's early days in the shift to streaming.

But certainly we're getting more and more.

The proof.

Proof points that the our position is strong and there is a lot of opportunity ahead.

Dreaming and so.

For us.

One of the things that's important is you invest too.

Maintain and grow our competitive differentiation and the seed future growth and so that's why we're.

The continued to invest in.

<unk> in different aspects of the business model.

Certainly we didn't we didn't give formal guidance around the top part of the funnel in terms of the.

The revenue growth, obviously, the businesses had very strong momentum.

Especially in the back half of 2020.

We put out form of outlook for continued growth robust growth over 50% in Q1, but then we're going to be facing tougher comps so difficult to say, where the EBITDA will the will line up for the year.

But I do think Q4 is the Great example of a confluence of.

Yes, <unk> driving scale robust growth on the monetization coming together.

And producing significant EBITDA in Q4 and shows it really does show the.

The potential leverage in the business model and we think over time will grow a of.

A large and very profitable business.

Thanks, guys is of great numbers congratulations.

Thanks, Laura.

Our next question coming from the line of Michael Nathanson with most of that lead to some of your line is open.

Thanks, I have a couple of key ask you a bit about the Roku channel.

You have a trend on the Amazon I know you.

You announced the development of Amazon Roku Channel Amazon is there a noticeable difference of consumption maybe on the roku platform versus off the platform. That's one and two is if you can help us at all getting under the Hood of maybe the.

Advertising revenue number I know people sort of asset wishes, Andy if you can help us on on maybe roku sellout levels.

The fill rates, there and I guess price per impression how that's trended over the over 2020 of that really helpful. Thanks.

Scott Thats for you.

Yeah, Okay, Hey, Mike I'll take both of those questions. So with regards to the Roku channel.

The biggest opportunity as we've said in the past is on our own platform.

No the consumer deeply.

Focus is on the Roku channel.

One platform.

With regards to your question about the composition of of AD revenue.

The way I'd say that yes, the fill rate sellout levels, we've mentioned in the past debt, we still exist in the supply rich environment and that our biggest challenge or the biggest competition ultimately of competing dollars away from the traditional TV spending pattern, we're making great progress there.

As I mentioned earlier in the call and tracking those dollars and I do think that there's a fundamental shift that was affected in 2020 as a result of the pandemic.

OTT remains of premium product and so price is quite well relative to TV generally, but I think it's also important to recognize that there is a whole other class of advertisers coming into the OTT, who either couldn't invest or couldnt invest much in TV, because there's a need.

It didn't work for them I didn't give them the performance credentials of the measurement that they needed and so these are advertisers who may have historically invested much more heavily in social media and search and display advertising, who are now able and interested in participating in OTT. The causes of the ability to the measure.

For an optimized and those advertisers are not always going to be buying the.

The traditional CPM basis, some of them are kind of by buying on a performance basis, the cost per click the cost per action basis.

He is one of the most interesting characteristics of OTT as a medium.

Its future is not simply of top of funnel branding media like TV or a bottom funnel performance media like social and search is both.

Advertisers of all shapes and sizes are going to be competing in a ultimately of common auction.

To reach the user and the pricing models of the variety of.

Of <unk>.

<unk> financial.

Marketing tactics that those marketers use we're gonna be quite married I.

I hope that answers your question.

Can you just real quick follow up when we see the social have really strong impression quarters. If you see what Facebook the price for pushing drops because of the way you send the auction brings in.

A lot more.

Types of advertisers of all different types of requirements. So is it fair to assume when we see big surges of impressions.

As potentially the price compression is just gets weaker simply by the supply of all of them.

Impressions of the marketplaces out of fair assumption, we're trying to build our models of trying to predict advertising growth.

Yes.

Right.

Yeah. It is the case in in social media that when supply goes up a lot of.

Auction prices go down.

Ultimately, that's not necessarily a bad thing for the social platform.

The greater volume of allows them to drive more effect for.

For the Advertiser and of course, if you can cut the other way as the.

Pressure in the auction increases it can drive prices up and that may be disconnected from what the advertiser thinks the impression is ultimately where we mentioned in our shareholder letter I think an interesting case study with friendly a virtual mvpds servicing actually took social media money and moved it to two roku.

Their goal is of course to acquire subs and they saw near 16 Times Inc.

Lift in sign ups, and the 65% better return relative to their social media investments.

So while it's still early I think in terms of OTT competing in that.

And that in that bucket. It has all of the credentials all of the data and identity and it's been a big part of our investment with one day to be able to compete.

For advertiser budgets when those budgets are mostly focused on bottom of funnel impact.

I recognize that might not get to where you're looking for in terms of the model, but that is the dynamic we see play out.

I tried.

Okay. Okay.

Right.

And our next question coming from the line of Rich Greenfield with <unk> partners. Your line is open.

Hi, Thanks for taking the question.

If you're a brand and you want to reach connected TV viewers I was the.

Wondering if you could just help us understand the difference between two different scenarios.

One you go out and you buy Hulu or Peacock direct and a portion of that debt.

Time that youre buying ends up on Roku devices.

Choice two is you buy roku directly and of.

A portion of your spend may end up on of Hulu for of Peacock or even both I guess, if I'm thinking about this if I'm a marketer of brands.

Why do I buy roku direct versus the other way around and the.

And what is buying roku direct achieve that simply can't be achieved by buying from the program of directly and ending up on the roku device.

Scott do you want to take that.

Hey, Rich I guess the short answer is it's the both Ann.

Not an either or.

These content partners are our partners and our goal is that business is the complement not compete with them. There are many reasons of course debt you might buy directly with the network or an app on our platform.

For example, it could be part of a broader cross platform by your upfront commitment.

Germany, maybe by the side I like them I just leave the upfront aside and say there is no upfront in the world where like you just had to put a dollar to work why.

Why would I put a dollar into directly.

What is the advantages that I get by buying Roku that I can't get by throwing it into a broader bi.

Yeah, so one of them.

Okay.

Yeah.

Just going to say one advantage is the ability that we also have access to what linear as that used us seeing through our ACI on a roku Tvs and so.

Duplicated reach we can help you do that.

Uh huh.

And asked he doesn't have that day. They can you can't really do that.

Yeah, Yeah, so just to build on that so one key reason rich is the ability to.

Reaching users that you arent going to reach just through those select couple of publisher direct buy so one of the things we regularly do with our advertisers of produced and the only only both view of who they reached with each of their buys.

And we do that with linear too and we regularly show them that even though.

For example, they are heavily invested in Hulu. They didn't reach this whole other big class of users because they're either not act is with those other publishers or theyre, not holistically optimizing across linear and their whole OTT by there are a lot of other reasons that advertisers invest directly with US one is we excel at optimizing for the performance data.

I mean, we've been investing for years in our in our data and our AD stack and we excel there we're not in the business as you know of selling contact. So if you got of by the office of you've got a buy of specific show.

Youre going to do that directly with the network, but if you're optimizing for.

The reach and frequency and performance.

The investing with Roku is a key factor.

The other thing I'll mention here is that one for you as a key component in this discussion one of the reasons. We've invested so heavily in the one of your capability is.

So that in the case, where youre doing a publisher direct buy you could still leverage roku identity Roku data capabilities to help optimize that publisher direct buy against all of your other activity.

Right so of that but I'm, just thinking out loud if the.

Ultimate Wood you just said it's got to me is the most important but one of the optimized for reach frequency and performance I can't think of anything else.

Optimizing so that I can be on this is us seems suboptimal to optimizing for reach frequency and performance.

Okay.

Yeah.

Our focus as the company is on data and performance and outcomes for advertisers, but there are lots of reasons why advertisers also care about context and want to be in that show and that's not our lot. That's the that's the the focus and capability of a lot of networks.

But.

Thanks, very much yes.

Yeah.

And that's all the time, we have for questions today I would now like to turn the call back over to Anthony Wood for closing remarks.

Thanks, before we end the call I do want to say one more thing 2020 was the challenging year for businesses, but it was also a difficult time for people everywhere. The theme of Roku did an incredible job under extraordinary circumstances and I want to say thank you for everyone. Together, we have a great future ahead of us.

Ladies and gentlemen that does conclude the conference for today. Thank you for your participation you may all disconnect.

Q4 2020 Roku Inc Earnings Call

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