Q2 2021 Roku Inc Earnings Call
Total more free programming and much much more extra watch it.
And.
And.
And.
Yes.
[music].
And want to feel the pain.
Sheffield and significant.
This is the a chance and do anything.
And we began this amazing the Alaska.
Hi.
Okay.
We arent interested in the world as it is.
And then.
We are interested in the world as it could be the kind of emotion.
And.
No.
Since the start of your journey.
And so on.
And we have to have that connection with everybody.
Okay.
And you're ready.
Things are going to go a little sideways.
Non-GAAP.
The beds.
Came up here to try and help you with debt.
The rate.
The customer changed.
Thanks.
And I'm excited and there's going to be really really fast.
Okay.
Okay, Great and I love that yeah.
Hello.
Okay.
And that's what I'm talking about the class nothing will ever be as big as debt.
[music] from region right now and when can we get from widening and lowest cost range.
Net.
And welcome to the distant future.
[music].
Yeah.
Good day, and thank you for standby walking to the second quarter 2021, Roku earnings conference call at the time, all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.
The asked the question go and attachment you'll need the press star 1 and your telephone.
B of ads of today's conference is being recorded.
If you require any part of that the please press star zero.
I would now like to hand, the conference over to your speaker today and with the Conrad Grodd, Vice President of Investor Relations.
Sure.
Thank you good afternoon, and welcome to Roku second quarter 'twenty, 1 earnings call I'm joined today by Anthony Wood, Roku is founder and CEO, Steve Louden, our CFO and Scott Rosenberg, the senior Vice President General manager of our platform business, who will be.
Available for Q&A.
For details of our result, and additional management commentary are available and our shareholder letter, which can be found on our investor Relations website at Roku Dot com for slash investor our comments and responses to your questions on this call reflect management's views as of today, only and we disclaim any obligation to update this information.
On this call we will make forward looking statements, which are predictions projections or other statements about future events, such as statements regarding our financial outlook future market conditions and other expectations regarding the continued impact of COVID-19 on our business and industry. These statements are based on our current expectation.
Forecasts and assumptions and involve risks and uncertainties.
Please refer to our shareholder letter and our periodic SEC filings for information on factors that could cause our actual results to differ materially from deed forward looking statements.
We will also discuss certain non-GAAP financial measures on today's call reconciliations of the most comparable GAAP financial measures are provided in our shareholder letter.
Finally, unless otherwise stated all comparisons on this call will be again, our results for the comparable period of 2020, 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 the Roku delivered a strong second quarter with record revenue growth that was driven by exceptional performance and flat for monetization audiences content and advertisers continue their shift to television screaming around the globe Roku.
Roku is a key enabler of this long term secular trend.
This quarter of platform revenue exceeded half of $1 billion for the first time driven by significant contributions from both content distribution and advertising activities.
On the content front, we are seeing direct to consumer streaming services lean into our platforms effective merchandising pool.
Also of note at the recent Upfronts, we closed commitments with all 7 major advertising agency holding companies.
We had a great Q2, and we are well positioned for the future wood.
Of that let me hand, the call over to Steve.
Thanks Anthony.
And Q2, 2021 we exceeded our outlook for revenue gross profit and adjusted EBITDA and continued to make significant operational and financial progress.
Before taking your questions I'll walk through highlights and discuss our approach the outlook given the current level of macro uncertainty.
We grew active accounts by $1.5 million and Q2, ending the quarter with $55.1 million.
Q2, 2021, net adds were higher than pre COVID-19 levels in Q2, 2019, but as expected lower than the pandemic related surge of Q2.2020.
Sales of player units were relatively flat year over year and.
And average selling price decreased 2% year over year.
Roku users streamed $17.4 billion hours in the quarter.
And increase of nearly 19% year over year.
But for monetization accelerated with our view of.
$36 and 46.
On a trailing 12 month basis up 46% year over year.
Total Q2 revenue increased a record 81% year over year to $645.1 million.
Platform segment revenue was up 117% year over year to $532.3 million.
Representing 83% of total revenue.
While player revenue was relatively flat year over year following the pandemic driven demand spike in Q2 'twenty for them.
Our key financial metrics gross profit grew 130% year over year, and Q2, Q3 hundred $38.3 million for us.
<unk> gross margin of 52%.
Plenty of growth margin of negative 6%.
Was lower than normal due to global supply chain issues, which are affecting logistics and component pricing.
Platform of growth margin of 65% was more than expected due to a favorable mix toward higher margin media and entertainment spend by content publishers.
Our strong revenue and gross profit performance allowed us to deliver a better than expected adjusted EBITDA of $122.4 million and Q2.
Q2, Opex was the $269 million up 42% year over year.
And we ended Q2 with approximately $2.1 billion of cash cash equivalents restricted cash and short term investments.
Our approach the outlook will be similar to the last few quarters for will provide formal guidance for the next quarter and additional color on our longer term view for the business.
For the third quarter, our outlook calls for a 51% year over year revenue growth to $680 million at the midpoint.
And 49% year over year gross profit growth Q3 hundred $20 million.
We expect adjusted EBITDA of $65 million at the midpoint and net income of roughly $2 million, which includes stock based comp of $52 million and $11 million of depreciation and amortization and net other income in the quarter.
This robust growth is the result of the secular shift of viewers content publishers and advertisers the TV streaming, which we believe will continue to drive growth and growth over the long term.
Looking ahead for the rest of the year, let me offer 3 key observation.
First we will face tough year over year comps across our business and the second half of 2021 due to pandemic related outperformance and the second half of 2020.
Second we will also face tough comps within the year over year growth rate of our active accounts and streaming hours given last year's demand site.
And third the secular trends toward streaming remains intact, and we will benefit from our strong position as the shift from television streaming contingent on.
I'll now provide some additional color on each of these items.
First regarding the tough year over year comps and the player and platform segment.
And our player of business, we expect particularly tough year over year comps in Q3, given the surge in sales and the prior year period.
In addition, while we are actively managing our supply chain for assuming increasing negative player growth margin during the second half of the year.
Turning to our platform business and the mix shift and TV AD budgets the streaming combined with the launch of multiple new premium DTC services and the second half of 2020.
Resulted in exceptional growth in our platform revenue during that period.
While this will create tough year over year comps and the second half of 2021, we still expect robust growth.
Second regarding tough year over year comps and active accounts and streaming hours.
In 2020 pandemic related lockdowns and drove the surge and active accounts and engagement or.
For example, active accounts and streaming hours grew nearly 80% and 100% respectively from Q2.2019 for Q2.2021.
The surgeon streaming player and for TV sales in 2020 contributed to this growth.
And 2021 we expect the overall U S smart TV market to <unk>.
Drink on the year over year basis, as the Oems managed supply chain challenges.
Third regarding our strong market position.
Overall, roku remains very well positioned to benefit from the long term secular trend of audiences content and advertisers shifting to TV streaming around the globe.
Roku has been a leader and enabling the shift from television streaming advertising and is benefiting and streaming AD spend increases.
We remain optimistic about our ability to grow over time, given the significant size of the opportunity ahead and the early stage of monetization to date.
I'll summarize by saying how pleased we are with the performance of the business.
And the strong momentum we are seeing across the broader streaming landscape the benefits roku.
Operator.
Thank you again, if you'd like to ask the question. Please press Star then 1 when you touch tone telephone against the asked the question. Please press Star then 1.
1 on the player.
Our first question comes from Justin Patterson of Keybanc. Your line is open.
Great. Thank you 2 if I can first.
And as you unpack the drivers around the ARPA growth and more detail. Please and then second could you talk about learnings from the Upfronts and it sounds like there was some healthy growth of new advertisers of there. So curious to hear more about who's coming here that you didn't have before and how we should think about just that upfront strength trending at the second half of the year. Thank you.
Thank you.
Our next question comes from our suite of Jihad of Evercore ISI. Your line is open.
How long the operator.
The prior of analysts had a question.
Thank you Anthony without new.
Sorry, I was on the first was on the yes okay.
Yeah.
Hey, Justin and thanks for that this is Anthony.
Let me I'll turn it over to Steve and Scott and the second but let me just say the <unk>.
Obviously as the function of active accounts and.
And platform revenue and both grew nicely in the quarter.
Platform revenue and particular past half of $1 billion.
The key driver of our Q2 record revenue growth so.
We're just seeing we're just seeing strong interest and advertisers starting to fall of their viewers. The streaming that's 1 of the drivers were also seeing you know.
The launch of all of these new direct to consumer the streaming services.
And are becoming popular and we are of great platforms for merchandising promoting and distributing those services for both of those are contributing.
And to our overall platform revenue growth.
But.
Steve do you want to add anything about art the drivers.
Yeah sure. So just on RP drivers and and Scott can talk about the upfront.
And <unk> on a trailing 12 month basis was over $36 and that was up 46% year over year, that's actually the growth and <unk> has been accelerating over the last 3 or 4 quarters, which is great to see and really that's broad based.
The increases in the monetization, we had strong quarter in both the advertising side and budgets followed the viewers and advertisers start to prioritize more of the strict ship the streaming.
And follow the viewership as.
And as well as at the end that he mentioned strong competition.
Especially now that pretty much every legacy media company has shifted focus to the DTC services, we're seeing strong uptake and use of our media and entertainment tools and so that was the notable thing we mentioned in Q2 and so the combination of these things.
Continued to drive the <unk> up and just showed the strength of our monetization efforts and so I'll turn it over to Scott to talk about the Upfronts.
Yeah, Hey, Justin regarding your question about the upfront and it wasn't pretty transport is upfront fees and for us we.
Closed several months earlier and we have over the last couple of years concurrent with traditional TV networks. So I think that's an indication of streaming.
<unk> has arrived as the first class citizen and the way brands think about allocating their their annual budgets. The closed deals with all of sudden major agency holding companies and more than doubled commitments.
And in terms of the dollar basis. This is driven by a couple of things 1 of them and secular <unk>.
It's definitely coming out of the pandemic increased urgency by marketers of follow audiences.
Specialty amidst steep ratings declines Nielsen reported at 29% decline among adults 18 to 49 year over year.
But it's also a function of our scale and our capabilities, including 1 view of which play a pretty prominent role our AD platform and our DSP and our data.
And this this upfront season as well our ability to offer original and exclusive content.
And the performance of that content and the time spent as well as our new brand branded content studio offering really resonated with brands and stuff and not just brought in a significant uptick and dollars and earlier commitments. It also brought in a significant new set of advertisers who had not yet committed with us and the upper.
Front over 42% of our advertiser for first time upfront of advertisers with Roku. So overall, we're extremely pleased with how we get and the upfront and and also think it's a good harbinger for how it will perform throughout the year during the scatter period. Thanks for the question.
Okay.
Thank you.
Our next question is for Shredder from ever.
The class that's your line is open.
Okay. Thank you let me try 2 please 1 is.
Could you provide some context on the Roku channel and any way you could quantify the impact of the Roku channel in terms of dollar contribution growth and how we should think about the scale and size of that and then secondly on how what's the breakup of the brand and performance marketing spend you're seeing and how do you think that.
Well the shift over time with the back of 1 of you. Thank you.
Yes.
Hey, Sweat of this is Anthony on the Roku channel.
And that's a obviously a very successful product for us is doing extremely well.
It's our owned and operated streaming service, that's primarily free AD supported.
It's definitely benefiting.
Benefiting from this virtuous cycle of.
And you're seeking out free content.
Advertisers following viewers.
And reinvesting the revenue.
The revenue back into better and better content and so that's true and this virtuous cycle is growing extremely fast.
And that's the big that's the big driver of our P&L.
It's a great source of AD revenue for us sorry AD inventory for us as our AD business grows.
And as you know and it's doing well in terms of the.
Specifics of how.
How it's affecting the size of our business I'm not sure. If we've broken that out Steve do you have any did you want to add anything for that now and.
And then.
And performance marketing Scott to talk about that.
Yeah, Hi, sweat or the other.
This tag on the Anthony comments about Trc about the Roku channel and say that.
It's had an amazing quarter its been growing leaps and bounds at more than double in terms of streaming hours year over year, it's growing much faster than the overall platform and and even the Avon and supported segments overall and so as the result is taking an increased prominence increased importance over time, just as the supply source.
For our video advertising and is the answer.
And you alluded to it's also a place where we can innovate where we can create new AD units and experiences and a way that are not non.
And not feasible and we're placing ads and the third party channels on our platform with regards to your question about performance advertising. It's true that the majority of our advertising is still you know your traditional T. The top of funnel brand advertiser, but the performance segment, what we call internally our growth advertising segment nearly.
Hold year over year, so it's coming on strong and it's really a function of the fact that as the platform with the first party customer relationship rich data great AD Tech, we can deliver for performance and outcome oriented advertisers for the time.
As of the outcomes that they seek when they're investing in search and social and so that's the segment, we're very bullish on what competing in that case for for budgets outside of traditional TV budgets and as a whole is adjunct to our our growth opportunity and you've got some great case studies of brands like Smartwater and where.
And where they eat the used 1 for you to combine both the streaming advertising strategy and it desktop and mobile advertising strategy and the the 1.2 punch of combining those 2 media deliver.
Delivered of 72% increase and.
Site visits.
<unk> space.
And another brand used our data to also target across both desktop and and and streaming and drove the over 200 per cent increase and conversion rates of mobile app downloads.
So breakout you 2 examples of case studies, where brands are using our tools exactly as we intended and exploiting the fact that we've got that deep first party relationship on the biggest screen in the home and then of combining it together with our ability to help place ads on on a multi channel basis and desktop and <unk>.
And to deliver a bigger outcomes.
If the step back there were just very bullish on the opportunity and performance. The performance advertising segment. In addition to our competing for traditional TV AD dollars.
Okay. Thank you Anthony Thanks, Scott Thank.
Thank you.
Yes.
Thank you. Our next question comes from Cory Carpenter of Jpmorgan. Your line is open.
Great. Thanks for the question.
Just maybe for for Steve.
And Anthony just given given the response to your original content. Thus far could you talk about how this informs your thinking around your content strategy going forward.
Does it make you want to potentially get more aggressive and then maybe for Steve specifically.
How should we think about this impacting platform gross margins, maybe both in the near and long term. Thanks.
Hey, Corey this is Anthony.
So just a reminder, the you know the.
The Roku channel.
And that's primarily AD supported.
Offering that we make to our customers and.
The content that goes in that channel comes primarily from licensing.
We've got you know a large number of licensing partners, we license both sort of deep back catalog content as well as newer.
More expensive content and so there's a whole range of content that we license short term and long term deals in place there the.
And we're also at the scale of that platform grows and as the number of viewers grow and the number of advertisers grow we're able to invest and better and better content and so it's a portfolio approach and the original as a part of that portfolio. The.
The primary source of content and still licensing, but original have have benefits as well and and as part of the portfolio.
They are a great addition, so we're seeing good performance with our original as both liquidity original sort of your purchase of liquidity and then also.
We bought this old house.
As well and we'll keep we'll keep investing and original both you know.
From a variety of sources.
For example, we just recently renewed some of the liquidity originals that we purchased like.
Kevin and Kevin Hart's die of harder.
And but the the goal overall is to.
The.
To maintain a business model that works for us in terms of and Avon business model and so you shouldn't see any impact from the Roku channel expanding into the original has on our gross margins because the overall portfolio, we're maintaining the same the.
Same margin structure and that we have internally.
The other advantage of the original does of course, there's the Halo effect, but it's helpful. At the Upfronts is helpful with.
Our advertising business and.
And then it's helpful for bringing in new customers into the into the Roku channel as well.
So I don't know, Steve if you wanted to add anything or if I covered.
Over the.
No I think I think you hit all the all of the Mark So I guess I'll need to find the new CFO of gig.
Thank you.
Okay.
Thank you. Our next question comes from Michael Nathanson of market Nathan from your line is open.
Thanks, and 1 for Anthony and then Steve I wouldn't for you, so well and got a question to you.
Anthony on the alphabet call I asked the CEO of senior Buckeye about their vision for Android TV.
And he described and you wanted to manage the Andrew which would be more of a computing platform. It sounds like the only include gaming and a really robust.
Yeah.
Ecosystem I Wonder how is the revision compare to maybe what Google wants to do and then broadly bring it back to the current dispute you have with Youtube and whether or not there's any closer resolution to that and then Steve.
A quick number from you guys, usually tell us the Roku channel.
Number of people reached it wasn't in the press release, you haven't said so far so that's your question and hopefully you can answer it for me. Thanks.
Sure.
Yes.
Hey, Michael Thanks, and I'm glad you got the question for Steve.
Let's see so you know our vision the.
We've been competing.
With large companies, including Google and.
And our space for since since we started.
And we compete extremely well and you know the primary difference and the way we compete versus Google is that we built from the beginning of a software platform designed specifically for TV, whereas they take their there from an operating system Android and the reported the Tvs and so if you look at the history of computing platforms, where there is.
The windows on Pcs or Android on phones or Roku on Tvs purpose built operating systems traditionally have always 1 in terms of market share and it's because.
When you build something from the ground up for a new user environment for new business models is just more effective and so that's that's really the kind of where the source of our competitive advantages come from and it's.
The working well for US and has worked historically you know we compete extremely well over the number 1 stream platform and the <unk>.
And by a pretty wide margin.
And and it's it's really those advantages the the accrue from having a purpose built platform. So for example, you know the.
The cost structure of the television is really important Tvs are super price competitive.
And how much of cost to build the TV is very important in terms of market share because it affects the price you can sell the T V for and you know we've put a lot of reference and making our software platform run with less less memory and the.
Smaller chips and our competitors and so right now for example, although in the entire industry is suffering from the supply chain issues and the shortage of chips and the related to increases in pricing, it's impacting us less than others, because we use less memory that all of our competitors products for example, so.
So I think our.
Our vision is that.
Most Tvs are going out and a licensed operating system that we're the leader and that and we will maintain that leadership by being very focused in building first of all.
So some of the television and that's what we do.
So in terms of the Youtube I'll, let Scott take that 1.
Yeah.
Yeah, I'll answer that question, but let's make sure to get a question back to see sort of.
[laughter] Oh, we really don't have news.
Information to provide on the you tube situation.
As a reminder of this is not a carriage dispute or.
We're not seeking more money or economics, and this relationship we want Google to agree not to try and dictate search behaviors on roku or access data. They don't make available the others or require hardware software changes to our platform that would harm our competitiveness with other competing platforms, including your own Chromecast week. Thank you.
And it pretty fair and reasonable asks where we're working to resolve it in a way that's good for roku and consumers and Google, but we don't have the resolution today and if you wanted to take your part of the question.
Yes.
Yeah ironic because the trc reaches more of of Scott question that I'll do my best Scott impression here [laughter], Yeah in terms of the CRC reach we are the Trc continues to grow nicely as other said you know the streaming hours doubled year over year there.
And which is great. We didn't we didn't update the reach number it didn't hit of particularly different milestone and so that's that's kind of why we didn't add that so in general Trc continues to do well and you know.
The other thing to mention the Sun's here you see the the content.
And the flywheel. It just continues to be very good right more content and we talked about roku original driving more engagement, which drives more advertisers would spend and churn gives us.
More money to invest and more content and and fuel continued increase and scale and growth. So yeah, we're very happy with with the reach and the growth of the Trc.
Yeah.
Thank you.
Our next question comes from group of the batch Italia of Bank of America of your line is open.
Hi, and thank you for taking my questions I have 2 the first 1 relates to the active account growth and international expansion.
So roku had strong active account growth last year.
I think of your roof active accounts for $14.3 million. So that's you know a tough compare sort of for this year, but at the same time of your expanding internationally. So do you have a sense for how much of the active account growth. This year can come from international expansion and what's the reasonable reasonable level of penetration that we should expect over this.
Here and next year in key markets like UK, and Brazil that you're targeting and overall, how do you measure of success and international expansion.
And this is Anthony I'll I'll I'll take that.
In terms of and our international expansion I mean, obviously streaming the global business.
The U S is ahead of most companies countries, there's still room to grow and the U S. A and there's there's even more room to grow internationally in terms of in terms of active accounts and I'll come back to the I mean, the other way we growth not just active accounts. We also grow by increasing the monetization on existing accounts of big difference and a company like Roku and Ah.
Subscription and service is the subscription and services active accounts correlate directly to revenue Roku is.
As growing and investing and building the monetization on the per customer basis, just as much as we are on growing our active accounts and so and absolutely I mean and places like the United States. There's a tremendous amount of room to continue to grow ARPA and that'll be a big driver of growth as well as active accounts in terms of growing.
The growing active accounts globally.
You know its.
The strategy and we're using is the same that worked for us well and the U S, which is the focus on.
The building active accounts Ah well in terms of our business model internationally and it's the focus on building active accounts.
Engaging those users and the monetizing those users and you know the way we are building active accounts is through selling our streaming players and licensing of our operating system for the TV manufacturers and coming to market with Roku Tvs. Both of those are working well for us we're starting to see as.
We're definitely seeing success there. So for example, we are already the number 1 operating system and Canada.
You know things are going well, and Brazil, India, and Mexico, and the U K and we just launched a TV with Tcl and new Tcl Roku TV bring increasing the number of Oems that are selling roku Tvs and the U K and that T. V's getting excellent reviews. It just got a 5 star reviews. So that's going well and then we just announced debt.
We will be launching products and Germany as well.
So.
You know, we're going to continue to.
The build out and lesions that were in and go deeper and the reason that the variety and.
Okay. Thanks for all the details on that Anthony that's a that's helpful. Maybe.
Maybe for my follow up wanted to ask you about of the new brand studio that you have.
And how many advertisers are making use of it now can you talk about like what type of programs for commercials is it producing and instead of a way to quantify the revenue benefit for from having the studio and just overall reception that you've seen so far.
Sure Scott and you want to talk about the <unk>.
And Syria.
Yeah, I'll take that thanks for the question so.
A couple of things 1 is we have been doing some form of sponsorships or innovations with advertisers for several years now.
Earlier this year, we acquired the team that of funny or die and really upsized the super sized debt. So that we could not just produced new executions off of our home screen that were sponsored by brands, but also produce content.
In partnership with advertisers and I would say, it's got a double effect and direct answer to your question 1 is and our revenue is that.
And there's no question that as brands come and invest with us that they're being driven primarily by the ability to the target and measure and optimize all of the benefits of streaming advertising relative to traditional TV, but they're also looking for breakout of execution and execution of for example that would reach a viewer who may be in.
That session isn't going to watch and AD supported street and they're Gonna go into Netflix for some other AD free experience and so we're still early in the production exercise, but it's going very well, we just launched a show called the show next door, featuring Randall Park with Maker's, Mark where he mixes of the anchors Martin.
Cocktail at the start of the show and the brings in a bunch of the Canadian and athlete friends for casual conversation.
We know that that's the.
Quick hit kind of production, that's totally aligned with their brand and for the fund format. It's valuable for consumers that's exactly the kind of experience that we have.
And we aimed to be able to produce a bigger production you know and something that I think.
Perfect fit for Hulu Roku is is our Roku recommended shows topical weekly show, where we reviewed top 5 shows the last week, that's performing extremely well.
Right down the middle of the kind of thing and consumer might've stat from Roku and also a highly sponsor of all experienced Walmart was our launch sponsor there so.
And what I'd say about the brand studio has the direct economic impact it makes the deal sizes bigger, but it also has the halo effect because it brings in a lot of brands. It reinforces our client direct relationships because it's often the CMO the the.
And the client.
Himself or herself, who is driving the creative execution as opposed to a pure media execution, which often originates out of the AD agency and overall, great progress with Nebraska, and we're very excited about it.
Okay. Thanks for all of the details appreciate it Scott.
Thank you and next question comes from Stephen Kahala Wells Fargo. Your line is open.
Thanks.
And I was wondering if we could dive into our crew and hours of little bit. So I think the streaming hours per account was about 3.6 per day and the quarter. That's the head of 19, it's below the last 4 quarters or so obviously, the pandemic really skewed things and the last 4 quarters, but I was just wondering if you could talk a little bit.
About what the trend might be there is there more of live sports coming back is that a bit of a mixed headwind for you of folks who are using their cable box a little more so maybe just unpacking the streaming hours per account would be helpful. And then the flip side of the ARPA, which was really strong and the quarter I have it up about 66% year on year per account and.
So if people are watching you know no more for the dollars are going up and that says to me that there is either some pricing going on there or more roku channel or unaffected C. P. M. That's really strong. So maybe if you could just help us unpack the trends and Arca of a little of that that'd be helpful. Thank you.
Well. This is hey, this is Anthony in terms of the streaming hours you know you're right the because of all of the variability around the pandemic and year over year stats. We saw the the industry saw TV overall saw and 19% decline year over year and viewership of our viewing was up 19%.
So well ahead of the overall industry, we are very happy with that that even compares favorably to streaming is the whole streaming was down to the screen. All platforms was down a couple of per cent in terms of the streaming hours.
But you know I think I think.
The Big picture for me is that we're still in the middle of this.
Transition where viewers advertisers and the industry is moving 100% of screaming, we're just not there yet but the.
But you know its.
And it's moving its moving and its happening if you look once that I think that's interesting from Nielsen is debt. If you look at 18 to 45 year olds.
39% of their TV watching of streaming so that means there's still the majority of TV as traditional TV and that's all of them and move to streaming.
And our viewers of our combination of cord cutters and people to ask have you know the traditional pay TV subscriptions as well as screaming and obviously so you know I was.
I'd say just in summary, we performed well and the quarter relative to the market and our peers are.
And that Theres, a lot of room to grow still.
In terms of ARPA of I don't know Scott.
Scott or Steve if you want to.
On the Hey, this is Scott I'll, let Steve talk about RFP, but I just wanted to tag onto your comment that streaming hours you know I think the the right way to think about this as we see them as we we took share.
And that the Anthony said is the the slowdown was more of a secular trend and T V and we grew even while traveling and the T V shrank and straining shrink. So we agree we took share and the other thing to think about it the average U S household and about 7 hours of television viewing of day.
So were only around half and then the other 50 per cent is getting.
Completely the streaming so I wouldn't interpret.
The secular.
Transition as anything anything other than people getting out.
After a year and of half of the pandemic and and all of the whole and good for Roku, because we took share Steve you want to.
The address the arb good question.
Yes, sure just on the <unk>.
Yeah, you quoted the 66% year over year of growth and <unk>.
On a quarterly basis on trailing.
Trailing 12 month basis the.
46% year over year, either way, the accelerating which is the great great indicator that the.
The world is moving the streaming and that the the monetization of its still early days you know Anthony talked about the viewership levels the streaming.
Now are being strong and and that bad about 39% of key demographic viewing is the truth is the advertising budgets are well behind that right and so.
With the pandemic day.
They found sort of a new focus on mixing into streaming.
Because not only that's where the viewers are increasingly watching but also the fact that they're now kind of held to a higher standard in terms of demonstrating the ROI for their TV spend which you can do on roku and other streaming platforms. So that's an important distinction on that front.
And you know when you look at how do you know what's driving that you know the advertising dollars moving over and Thats. The positive indicator. The advertising business has grown has been growing tremendously we had another quarter, where we more than doubled year over year on the Roku monetized video ad impression.
So competition on the service side right more of the legacy media companies pretty much all of them have.
And DTC services and for others, increasing use of Roku tools of our media and entertainment tools to help drive viewership and engagement on their on their services and so that's another thing that's increasing the monetization. So we're very happy with those trends that favors roku and kind of in that middle of that shift and.
Given our scale in our industry leading tools.
B of beneficiary of the trends.
Okay.
Thanks.
Thank you. Our next question comes from Shyam Patil and thought.
E R and is open.
Hey, guys out of couple of questions, Steve I had 1 for you.
You've talked a lot about active accounts and the streaming hours kind of and a year over year basis. I was just wondering if you could talk the talk to them on a sequential basis should we see.
Growth and active accounts sequentially, and <unk>, and <unk> and and if so how much maybe that might be easier for for modeling externally and then just a broader question.
The there continues to be a lot of privacy changes for digital advertising overall, but it seems like the TD is 1 of the areas that that's not impacted by that just wondering if that's becoming a tailwind or consideration and conversations.
With advertisers.
You know right now and if you expect that to become more pronounced going forward. Thank you.
Yeah.
Yeah.
Steve you want to take that and maybe I'll turn it over the Scott for the the privacy for question.
Sure.
Yeah no. Good question on the the streaming hours and the active accounts.
As we mentioned in the the letter and in my prepared remarks that certainly given the pandemic surge and demand and engagement last year. We've got some is some kind of challenging year over year comps not only on those key operating metrics you asked about but also on certain parts of the P&L depending on the quarter.
So I do think looking at it sequentially looking at those metrics relative to pre COVID-19 levels of is probably more.
And informative in the short term and so you know starting with active accounts. We grew the active account base by $1.5 million active accounts in Q2 up over 55 million and that's.
As expected below the the comparison and what we grew last Q2, given the the surge and demand, but it's favorable to the increase in Q2.2029, So I think that.
Got the good comp there in terms of the streaming hours.
Similar similarly the.
As mentioned earlier and the call you and we're at kind of 3536.
Hours per stream and accounts per day.
Which again is kind of in line or slightly favorable to the.
The pre COVID-19 level so.
And.
You know that.
Kind of where where we more of where we would expect to be at or get.
Get back to normal and again apologies and I think I might have said 2029, I meant Q2, 'twenty and 19, so I'm not a 2 fer temporary volume and future yeah.
But anyway back because of that and so I think looking and looking back to the.
Pre COVID-19 levels is probably very instructive as we as we look ahead here and the in the interim certainly theres a lot of uncertainty still around and the macro environment around recovery and the economy open up for the Delta variant and taking hold and and kind of putting us back of that but but.
And I think I think looking at the pre COVID-19 levels and understanding of the year over year comparisons are a bit challenged here.
And for another few quarters at least is an important perspective.
And I'll turn it over to Scott now for the other piece.
Yeah, Hey, Sean let me take the privacy question, what I'd say is that it is definitely a more challenging environment for marketers for independent AD Tech for small publishers, who don't have the first party direct consumer relationship as cookies get more scarce as regulators make.
And use of consumer data harder as companies like Apple and make moves to make device Ids and harder to access I would not characterize that as a tailwind for CTV generally, but rather a benefit or an advantage for platforms and services like Roku, who got it for.
First party relationship it's our strongest advantage when working with the marketer that we know our consumers we can onboard their data and we can target more precisely measure drive more impact that's not the case for independent of the attack for.
The for entities, who don't have that direct consumer relationships. It's definitely I would definitely say that were less affected.
The relative to those entities because of this privilege direct consumer relationship that we've got.
Great. Thank you guys.
Yes.
Thank you. Our next question comes from Alan Gould of Loop capital. Your line is open.
Yeah. Thanks for the question of.
Scott I was wondering if you could drill down a little bit of how much of the revenue platform revenue was coming from the streaming companies or how quickly of the streaming companies and aggregate are growing just any more data on how much of the 100 plus per cent growth for getting from the streamers. Thank you.
Yes, we had a very very robust quarter for the platform business and it owes to the strong performance on both of the content and advertising activities of the business and just taking it and parts.
Most of our big <unk>.
Dreaming service providers are still relatively early in their growth. So they are still acquiring consumers.
Heavily the they're investing heavily with us and taking advantage of our scale and our marketing tools to acquire users. So we definitely saw good strength in terms of not just the the revenue shares that we derive from those relationships, but also their their investments and marketing purchases of buttons and the media and entertainment vertical.
And in particular, which is the advertising segment.
Of our business, where we're selling marketing and product to our content providers more than tripled year over year. So it was very strong.
The segment, but but but also we had a very very strong traditional advertising quarter as well with strength from large large what we call of our large customer segment and fortune 500 type advertisers and.
The question earlier and the call. We're also seeing really.
Great strength from performance of growth advertisers as well that that category for us which is still.
A smaller part of our overall AD business more than tripled for nearly tripled year over year. So.
And I'd, just say the broadly the strength across the board, but all of it but our content.
Vertical was particularly robust and and especially the M&A segment.
Yeah.
This is Anthony and I would just add debt I would characterize both.
Both areas content distribution and advertising is still relatively early compared to the potential of those businesses and so there's a lot of room for growth.
The grow but I would also say that like from you know from.
The point of view of someone who has been the day to day that it's gratifying that both of those both of those customers have kind of switched their out of it seems recently from <unk>.
Experimental thinking about it too all in life, we need sort of serious about this and as the <unk>.
Great to see.
Okay. Thanks, Scott Thanks, Stephanie.
Okay.
Thank you.
Our next question comes from Jason The housekeeping of Oppenheimer. Your line is open.
Thanks, a few sales.
I guess the you know, there's obviously increased focus on any change and in the active accounts for any kind of slowdown but I.
Just maybe talk about your ability to kind of drive hours I mean.
Clearly it's.
It's the counterbalance between you purchase more of content for the Roku channel, presumably you can and drive more hours and then you get dollars and kind of balancing that so maybe talk about like.
Even if the U S. Active accounts were to slow how much you still have with kind of again driving hours and then monetize Inc. I don't I just did anybody ask of fixed or fixed question I don't see it.
And you know relative to the first quarter there was more of elastic so 6 impact and then maybe last.
Any thoughts about how the Olympics will impact you and the third quarter strength.
Let me start with that and then I'll then Steve can jump in for a 6 or 6 discussion the.
And you know I would say this first of all and on active accounts I mean, there. There are you know we've had 55 million active accounts, which is a proxy for the household.
But if you look at the the potential market is just huge I mean, theres 1 billion households around the world to have broadband and watch TV and all of those all of those accounts are going.
All of those households are going to transition over time to streaming for all of their television and.
And the way, they're going together and I think price ultimately will be embedded in their TV and and so you know the whole question is market share.
For Smart Tvs, and we're the number 1 and the U S. We're number 1 and in the markets where.
Entering where we're doing extremely well so so I'd say it's of lots of potential for active accounts in terms of our ability to drive hours.
It's at the core competency that where we continue the build out. So you know it's really 1 of the primary goals of our home screen experiences to help consumers find content influence what content they watch.
And be a trusted partner with our viewers and finding content and so I think of good example, and so we have a lot of ability to do that and and we view it actually is an important and.
Important that we we help our viewers find content and so for example.
And now with the Olympics, we spent the 6 months prior to the Olympics working with and.
D C a.
To build out into our home screen and Olympics hubs the way to help viewers find out when the Olympics start how do I watch the Olympics, what's happening how do I get highlights and so just to make it easy for our viewers to find content and that you know that hub is getting a lot of use is doing extremely well so.
You know theres, just lots of ways like that where we can become more important and want to become more trusted.
Our viewers and helping them the side want to watch.
And hopefully that helps you answered the question and then 6 other states.
Yes.
Yeah, Hey, Jason and Steve.
Thank you for keeping our tradition of lives with the specifics related question.
Nothing of particular note this quarter on 6 of 6 as a reminder for everyone. Yeah. The 6 to 6 we of a portfolio of material deal models every quarter, we look at that we update our assumptions.
You know, if they're new services or.
Specific.
Terms of change on the deal we for news you know that would be of case too.
The model or create a new model and in the in the quarters, where we talk about the 6 of 6 impact it's usually.
At quarter, where you've had some kind of change and assumption or some other factor that.
Created a large a large increase in deal models across the portfolio.
In the standard of quarter, we have Gil deal values to go up we have dual models that go down and then many stay relatively the same and so kind of this is 1 quarter, where there's nothing particular to note.
Thank you Steve do you want to the only also.
The address of the question about Olympics effect in Q3.
I can take it.
Okay, Scott and let's see.
And we really wanted to Steve.
Alright, well look I do think you know of Olympics is a key T V drivers generally.
And what will happen.
And how.
How it has and how it affects the overall view.
And it's certainly been on 24, 7 and amount of household.
As Anthony said I think the the thing we're proudest of is our execution and together with N D. C and it's it's really indicative of the kinds of things that roku can uniquely provide to drive viewership and increase consumption of the streaming.
Okay.
Yeah.
Thank you. Our next question comes from Jason Bazinet Citi. Your line is open.
Yeah. Thanks, you guys called out how the chip shortages and supply chain issues impacted player gross margins and will continue into future I. Just wonder is there any scope for that to ripple over and effect.
Sort of heck.
Active accounts.
<unk>.
In other words because of the shortage of gets sort of acute it actually affects the metric that people care about.
As of just because our share.
Yeah, and you want to take that Steve.
Yes sure.
Yeah. So in terms of the supply chain issues I mean, certainly since the pandemic started the industry and roku have been dealing with the cause.
Ponant shortages.
And especially recently.
Ponant price increases and seem to accelerate.
And my team and operations team have done a really good job over time.
Minimizing the impact certainly last quarter on the call. We mentioned as part of our outlook that we thought the given the cost increases that the.
And then our player gross margin could go negative, which it did it was negative 6%.
The gross margin per player in the quarter. We said, we think that will increase and the back half.
And certainly this is an industry issue. So this is not only and impacting us but competitors on the on the player side, but also on the TV side. So you know there is a strong surge and.
T V sales last year.
Some of the industry research firms are assuming that those number of the smart TV market is going to go down year over year, and certainly many TV Oems whether the roku.
T V bar or you know because of the low margin business are pushing for those price increase those cost increases and the price increases debt.
Our testing and the elasticity of man. So certainly the these kind of conditions do not do not help the industry in terms of driving player and TV sales forward and so that that is something that we're factoring in.
Okay. Thank you.
Okay.
Okay and the net the last question comes from a lot of rich Greenfield of likes the partners. Your line is open.
Hi, Thanks for taking the question.
You know I guess 2 questions 1 on sort of as you become more of a you know I'm going to use John Malone's word for roku sort of more and more of a gatekeeper to short of the streaming world curious, how you think about ultimately being able to get them.
Scripted and revenue sort of a fee for usage or of fee for being on the platform. It seems like nobody can sort of be in the streaming world without being on roku as evidenced by all of the deals youre able to get done over the last couple of years, and then sort of on a different topic at the sort of relate to this whole streaming world.
Topic that I'm pushing on.
And when you think about sort of the media and entertainment spending that was called out and your investor letter.
How do you think about the.
The sustainability of that I mean, we're seeing a lot of.
A lot of platform spending and a lot I mean, you're not the only wanted to call. It out Twitter did too on their conference call. We were seeing a tremendous amount of spending and and wondering like the investors are sort of curious like whether this can be sustained in terms of how much of their spending to acquire subs and how are you thinking that's repeatable over the next couple of years or do you think that gets more challenging thanks.
Hey, rich great to hear from you and last but not least of.
You know I wouldn't characterize us as the gatekeeper and husbands, even say that word out loud I mean, you know we exist and a very competitive industry, we have lots of big huge competitors.
And consumers had lots of choice.
And I, just roku, but they have choice of Samsung.
Google Amazon and so forth so.
We're very confident of the ability to compete but but it's the competitive industry.
In terms of like charging for access to Roku and that's just not the way we think about it and we think about it as a.
The distributing of People's content.
And the partnership and the win win type situations type deal how do we help them build a customer base of customers build subscription bases and.
The increase engagement and how do we how do we participate and that success when we when we achieve it and so you know we're focused on structure and deals that result in more and more viewers watching streaming from a variety of services and us participating and the economics of that by being really good at it and bringing a lot of value to the to the table.
So that's a that's kind of how we think about it and the other.
And then I guess the other so that's on the M&A M&A side I mean, you know obviously advertising advertising is the huge part of our businesses of the fewer switch the streaming all ads or switch are moving to streaming.
And you know, it's a sort.
The huge.
And usually large business that we're very focused on so and that's going to keep growing.
So I don't I don't know, if Steve or Scott if you have any other specific answers.
Yeah. This is Scott.
Great question Rich.
Just to add to that.
The the suggestion of a gatekeeper term suggests the 1 and done kind of a relationship but as Anthony just highlighted the success of the services and our ability to earn alongside them is an ongoing exercise it's not just without acquiring the user it's about retaining and easier, especially as the services get.
Big.
Shifting the frame to not just use your acquisition, but also retention is critical.
It's also of global market and and so yes, I do think that we're in.
And in a phase, where there's very very heavy investment and I also and bullish on the long term potential to partner with the services to continue to drive and retain viewership and their services.
Scott I think that's an incredible point that probably doesn't get enough focus when you think about.
The user acquisition spend versus the Reengagement spend is there anyway and it like when you. When you made that comment about sort of the the robust growth substantially outpacing the overall platform revenue growth.
Is there any way to think about how much of that spend now is coming from reengagement versus sub acquisition.
Oh, well, let's I'll say, it's still relatively modest most of the service providers are still very much in user acquisition mode.
But it it becomes critical as you can you just run the math if you if you lose 5 per cent of your users monthly at 10 million subs. That's what 500000 either of you got it right you got to acquire just to the.
Just to replace the use of glass. So some of it is just the scale of problems and I think that our partners are bringing more focus to it. It's an area where we can certainly help we talked about the Olympics execution here a couple of times, it's executions like that that don't just get the easier to sign up for the service, but get them to keep coming back and holding the.
And the service so it wasn't that monthly bill hit they don't cancel the service that is critical and we are we are we've got a great tool set to help there and predict churn to predict whats going to engage the user and we're bringing more attention to it with our content partners.
Yeah.
Thank you very much.
I would I guess my 1 last comment is I think I've been a little surprised about the willingness of consumers to sign up for multiple screening services.
And there was a big question about how will the streaming services all survive how many will survive and.
And I don't think we know the answers to that but I do think we're seeing consumers interested in more than just 1 or 2 streaming services and willing to sign up for those multiple services and still save money versus what they're spending on the pay TV.
Yeah.
Pay TV and expensive.
And indeed.
And not very good.
Yes.
Sorry that was an editorial.
That was the risks of opinion.
Thanks Anthony.
Yes.
Thank you.
I'd now like to turn the call back over to Anthony Wood for any closing remarks.
And.
Okay.
I would like to thank our employees customers and partners for an excellent quarter, we believe our competitive advantages and the broad secular trends of driven our growth continued to position us for success.
For joining us today.
Yeah.
Each generation is faced with the.
Issues of their times.
And we don't want to feel the same.
And to feel significant.
This is the chance to do anything.
So we begin this amazing day.
Yes.
Thank you.
We arent interested in the world as it is.
[laughter].
Well, you're interested in the world and it could be and kind of them.
Moshe.
Okay.
Yeah.
Certain of your journey.
Okay.
The time, we have to have the connection with everybody.
And then.
And you're ready.
Yeah.
Things are going to go a little sideways.
Hum.
Yes.
And then.
The the beds.
And came up for you to try and help you with that.
And <unk>.
The main thing.
And I'm excited and there's going to be really really fun.
Okay, Great and I love.
Love that yeah, none of them.
Uh huh.
Now and that's what I'm talking about.
Nothing will ever be as big as the.
The year.
Right now and when can we get some channel right now and lowest.
Okay.
And welcome to the distant future.
And.
Right.
And.
Yes.
[music].
Yes.
[music].
Yeah.
Yeah.
[music].
And.
[music].
Yes.
Okay.
[music] per se.
Yeah.
And.
And.
And.
And so.
[music].
The.
Yes.
[music].
Sure.
And.
[music].
Yes.
Okay.
[music].
Okay.
[music].
And.
Okay.
And.
[music].
And.
And with.
[music].
And.
[music].
And.
[music].
Thank you.
The <unk>.
[music].
And then.
And.
[music].
And then.
And <unk>.
[music].
Yes.
[music].
And then.
[music].
Okay.
[music].
And.
[music], Inc.
And then.
And.
[music].
Okay.
[music].
Yes.
Okay.
[music].
Okay.
And.
[music].
And then.
[music].
Okay.
[music].
And.
And.
[music].
The.
Yes.
Okay.
The.
[music].
Okay.
Right.
Okay.
[music].
And.
And then.
[music].
And then.
Okay.
Okay.
And then.
Right.
Okay.
And then.
And.
[music].
And then.
[music].
And.
[music].
And.
And then.
Yes.
And.
Okay.
[music].
Thanks.
Okay.
Okay.
[music].
Okay.
And.
Okay.
And.
And.
Great.
Okay.
And.
And.
And.
Okay.
Okay.
And.
And.
The.
[music] and.
Okay.
Inc.
And.
[music] range.
Okay.
[music].
Okay.
And.
Yes.
Okay.
Okay.
Great.
Okay.
Okay.
And.
The team.
And.
Okay.
[music].
Okay.
Ladies and gentlemen.
Okay.
True.
And.
Okay.
[music] disclaims any duty range.
And then.
[music] sales.
And then.
And then.
[music].
And then.
[music].
And.
Okay.
Okay.
[music].
Okay.
And.
[music].
And.
Yes.
Yes.
And.
And.
[music], Inc.
Yes.
Yes.
Okay.
[music].