Q4 2021 Roku Inc Earnings Call

February 17, 2022

Okay.

[noise].

All participants are in a listen only mode.

After the Speakers' presentation there'll be a question and answer session to ask a question at that time. Please press Star then one on you touched on telephone.

As a reminder, today's conference call is being recorded.

I'd now like turn the conference or the home with the Conrad Grodd, Vice President of Investor Relations. Sir you may begin.

Thank you good afternoon, and welcome to brokers fourth quarter and year ended 2021 earnings call I'm joined today by Anthony Wood, <unk>, founder and CEO , Steve <unk>.

Our CFO and Scott Rosenberg Senior Vice President General manager of our platform business, who will be available for Q&A.

All details of our results and additional management commentary are available in our shareholder letter, which can be found on our investor relations website at Roku Dot Com slash investor.

Our comments and responses to your questions on this call reflect management's views as of today, only and we disclaim any obligations 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 our expectations regarding the continued impact of global supply chain disruptions on our business and industry.

These statements are based on our current expectations.

Our cash 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 these forward looking statements.

We will also discuss certain non-GAAP financial measures on today's call.

Reconciliations to the most comparable GAAP financial measures are provided in our shareholder letter.

Finally, unless otherwise stated all comparisons on this call will be against our results for the comparable period of 2020.

Now I'd like to hand, the call over to Anthony.

Thank you Carmen and thank.

Thanks, everyone for joining us today.

Roku delivered another record year in 2021.

We have an enormous opportunity in front of US do we expect to capture.

We have built and continue to expand our set of unique assets for this purpose.

These include the Roku operating system, the Roku channel and our sophisticated screaming ad platform.

Our scale has passed 60 million active accounts and we remain focused on being the best and largest streaming platform.

The Roku operating system is poised to gain further market share as Tvs shift away from costly proprietary operating systems.

We expect manufacturers, who want a best in class operating system to choose the Roku OS which is purpose built for TV.

The Roku channel continues to gain momentum free.

Free AD supported services are the fastest growing segment in television streaming in just four years, we built a flywheel that propelled the roku channel to a top five position on our platform in the U S.

This success is a result of combining a robust content portfolio.

With our ability to send consumers to the Roku channel with superior content marketing and advertising features.

Our AD platform is built for TV streaming.

We believe large traditional TV advertisers will continue to shift to roku for the targeting measurement optimization and superior ROI that we provide.

And for digital first advertisers and small and medium businesses Roku makes advertising on TV more accessible.

We remain focused on maximizing our competitive differentiators extending our industry leadership.

And driving growth both in the U S and internationally.

With that let me hand, the call over to Steve.

Thanks Anthony.

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 $3 7 million, resulting in an $8 9 million incremental active accounts for the year.

Thus ending 2021 with $60 1 million active accounts.

While we continue to scale.

We believe that the slowdown in the active count growth rate in the second half of the year was in large part attributable to global supply chain disruptions that have impacted the overall U S TV market and our TV OEM partners in particular.

This was partially offset by Roku player unit sales in 2021 debt remained above pre COVID-19 levels.

In addition to increasing our scale.

We are also growing engagement on our platform with 2021 streaming hours up $14 4 billion year over year to a record $73 2 billion hours.

In Q4, we grew streaming hours, 15% year over year, while full year grew 25% year over year as we continue to outperform viewing our growth of both traditional TV and other TV streaming platforms.

Average streaming hours per active account per day was relatively flat year over year as we lap the pandemic related demand spike.

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

In Q4 total net revenue increased 33% year over year to $865 million.

Platform revenue was up 49% year over year to a record $704 million driven by strong content distribution and M&A growth.

This was partially offset by temporary softness in advertising spend within the auto and CPG verticals, which have been most impacted by product availability issues related to supply chain disruptions.

Q4 player revenue declined 9% year over year, but was up 7% versus Q4 2019.

Lower unit sales were relatively flat year over year for Q4 and down 4% year over year for 2021.

Gross profit one of our key financial performance metrics grew 24% year over year in Q4 to a record $380 million Q.

Q4 platform gross margin was 60%, which was down four five points sequentially as the platform business shifted toward a greater mix of video advertising.

So their margin was pressured by supply chain challenges as we chose to prioritize account acquisition and insulate consumers from higher cost.

We estimate that excluding the year over year impact of component and logistic cost increases on the player business.

Total gross margin would have been roughly four points higher for Q4 2021.

Q4, adjusted EBITDA was $87 million and we ended the quarter with over $2 1 billion of cash cash equivalents restricted cash and short term investments.

Looking to the first quarter, we anticipate.

Total net revenue of $720 million up 25% year over year.

Gross profit of $360 million with a gross margin of 50% and adjusted EBITDA of $55 million.

Now I'll provide additional color on each of these estimates.

Q1, total net revenue of $720 million reflects our expectations for standard Q1 seasonality combined with the ongoing impact of supply chain disruptions on advertising spend within certain verticals.

Next conditions that positively affected gross profit and gross margin in Q1 2021 have shifted.

The platform business, which had a larger portion of high margin content distribution. In Q1 2021 is expected to have a greater portion of video advertising in Q1 2022.

Additionally, the player business, which had a strong positive gross margin in Q1 2021 is expected to have a negative gross margin in Q1 2022, as we continue to absorb elevated supply chain related costs.

Finally, our outlook for Q1, adjusted EBITDA is $55 million due to higher Opex, which we expect to increase approximately 55% year over year.

As we plan to invest aggressively this year as.

As a comparison.

Adjusted EBITDA in Q1, 2021 was $126 million driven by a combination of very strong platform growth and lower opex growth as we slowed down investments due to COVID-19 uncertainty.

This demonstrates a strong return from prior monetization investments and the inherent leverage in our business model.

Looking to the full year I want to share my thoughts on supply chain, our investment strategy and our confidence in the business.

First supply chain.

While we have seen some component costs decrease relative to peak prices in 2021, overall component and logistics costs remain significantly elevated and available issues persist. Thus we believe these disruptions will continue to negatively affect the size of the TV market and our player margins in the short term.

And we assume that AD spend in certain verticals will continue to be impacted by ongoing inventory availability issues until conditions normalize.

Second we intend to continue to invest in our growth to date, our investments in people technology and content have been successful as demonstrated by our strong ARPA growth Roku.

Brokers U S. Active account base has surpassed the U S video subscribers of all of the cable companies combined.

Growing our share.

And extending our lead both in the U S and international markets is a core part of our plan.

For full year 2022, we plan to maintain adjusted EBITDA roughly in line with 2020 levels on an absolute basis as we continue to invest against a significant opportunity and drive continued innovation on the platform.

Third even with the volatility that is expected to result from ongoing supply chain disruptions. We believe brochu will continue to grow <unk>.

And our estimate for full year 2022 year over year revenue growth is in the mid <unk>.

Our core belief is that all of our secular growth drivers that favor streaming remain in place and we have an exceptional platform as our foundation to build upon.

There is the long runway of growth in front of us and we are investing to capture this opportunity.

We remain confident in our business and our ability to execute.

With that let's turn it over to discussion.

Operator.

Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one when you touched on California again to ask a question. Please press Star then one.

Our first question comes from Justin Patterson of Keybanc. Your line is open.

Great. Thank you very much.

Steve just going back to the annual revenue guidance of 35% that reflects a very healthy acceleration from Q1 levels could you talk about what gives you the confidence in that and perhaps tease out some of the contribution from player and platform to get there.

And then related you called out aggressive investment could you talk about some of the top priorities and whether things like controlling more TV manufacturing plan to that thank you.

Yeah.

Hey, Justin this is Anthony I'll kick off the answer and then turn it over to Steve.

At a high level the screening platform business that we're a leader in a very large global opportunity.

We're super well positioned to keep expanding our leadership in it so we're going to keep investing appropriate appropriately to the opportunity in our business.

If you think about what we've accomplished so far with the money we've invested in our business. We built an extremely valuable asset to the Roku operating system.

Which is the industry's only purpose built operating system for TV.

Number one TV OS in the country.

And is making great progress internationally, the Roku TV program itself.

Where we build complete reference designs license those to manufacturers and in health.

Merchandise them of retail and that's been Super successful program for Us the Roku channel.

Which is a top five channel on our platform.

Reached households with.

80 million people in the quarter and there's just been a big driver of our AD business.

Our very sophisticated AD platform, but those four assets, we built over the last few years, and we're going to keep investing in them and keep growing them in together.

There were instrumental in driving our gross profit.

For the year of $1 4 billion, which was up 74% so.

Over a tough comp so.

We just feel like there is so much opportunity is still in front of US is still early days and the streaming platform business.

Which is a big global business or will be a huge global business, we're going to keep investing for those reasons and then of course, Theres International which we're starting to see some good progress on but it's still very early as well.

But Steve do you want to add any specifics.

Sure Hey, Justin Thanks for the question, so adding to what Anthony said.

In general, we're providing formal outlook for the near term cornerstone in this case Q1, and some color on the full year.

You mentioned the.

The revenue growth, we said that we thought for the year that revenue would be in the mid <unk> on a year over year basis.

Things that factor into that obviously like Anthony said, we've had successful investments in these key strategic investment areas. Historically, we think theres a lot more opportunity out there both to drive scale and monetization.

In terms of the Q1 versus full year view.

On a revenue side on Q1, a couple of things to note in a lot of this has to do with the comp and then the current conditions that we saw coming into the year and Theres. A couple of things. One is I just point back to Q1 and this is similar to Q2 as well last year. That's a good example of where we thought cigna.

<unk> strong performance in the platform monetization side with revenue growth rates over a 100% year over year in Q1, and Q2 of 2021 at the same time, we were curtailing our investment growth in terms of incremental head count and other spend because of the COVID-19 uncertainty.

That aspect early in 2021 really shows the inherent leverage in the business. So when you fast forward to 2022 in Q1 in particular, what we see is we see more of the mix shifting into the AD business.

Such a strong comp on the content distribution side and <unk> side at the same time.

Kind of mid last year.

As we got through some of the worst uncertainty around the pandemic.

We decided that we would continue or are we kind of go back to our historical aggressive investment levels and so youre seeing strong investment in the back half of 2021 and into 2022 as a result, we think that.

In Q1, and those will be maybe slightly less tough as the.

For the year.

A year ago through it and the other part we're tracking is in the back half of 2021, we had.

From a supply chain disruption that we're still working through but we're hoping those will mitigate over time.

Thank you.

Thank you. Our next question comes from Laura Martin Needham Your line is open.

Hey, there.

Thanks for taking the question do.

Do we have got on the line today are now.

Yes, Sir.

Oh Fabulous, Okay, Anthony one for you one for Scott Fantastic.

Data Anthony years, its data, so vizio make $40 million of you're selling some of their data. Your data is better because you have three times as many Scott. My question is would you ever consider as a new revenue stream Sally part of your data, although off keeping bunch of for your proprietary it to others as a new revenue stream Scott for you I'm sorry.

Interested in hearing from you what you think you're most excited about as the AD revenue driver in 2022.

National address new markets like Mexico is it the upfront that's coming up in May is that the integration of bottom of funnel ecommerce with advertising I'm really interested in where you see the most growth upside and what you're most excited about with <unk>. Thanks guys.

Hey, Laura.

That's great to hear from you again sure I'll take the first question on data I think generally we view our data that we generate in lots of different ways, including ACR automatic content recognition, which I think is the data youre probably referring to.

I mean, that's an existing video business.

But we view we view.

That data is basically a key part of our AD platform and a key competitive advantage and so we don't have any.

Capella.

Cell adds we saw lots of ads in that business we've got.

Growing incredibly fast and our data is one of the key drivers.

And I don't know when Scott takes the question maybe he might have an opinion on data as well.

Yeah, I'll, just add I'll just add to that.

Yeah data is our most valuable asset and so it is not something we've thought though.

The wrong move from a consumer perspective.

And frankly, we will quickly revenue optimal use of data.

Keep it and use it or.

Optimizing consumer experience and optimizing advertising. So there are lots of reasons, we've chosen to hold back close consumer oriented and commercial and I think actually if you will get some of those other platforms. They are actually we're grabbing their decision in some cases pulling that data back.

With regards to my excitement about 2022 AD opportunity their therapy things one is as you'll recall, we bought a division out of Nielsen last year that includes ACR and linear AD replacement technology.

We will be rolling that out of the data in partnership.

Programmers I'm very excited about that because it's a whole other AD units to be sold into the marketplace to extend our reach.

I'm also excited about our continued progress in the growth or performance advertising category.

Really shine or we can leverage our data and our AD stack will help advertisers drive real outcome.

Product purchases.

Visits et cetera.

2022 is a big year for one view is while we've made good progress with <unk>.

Selling <unk> into agency holding companies and lots of other advertisers and I think it will be a breakout year for us.

Last week announced Nielsen Dar guarantees and <unk>, enabling advertisers to use our data and our AD stack to optimize for age gender goals when buying from programmers in the Roku ecosystem, we have sold that product with our own media for years, we're extending it now and what the industry.

First to all.

All impressions on the Roku platform.

So those are just a few highlights of categories I'm excited about I mean, I guess the punch line is there's just tons of growth opportunity for the AD business.

We might have driven 43% lift in ARPA year over year, but were nowhere near the ceiling of the ad potential.

And its contribution to the Roku platform business.

Yes. This is this is Anthony I mean, you didn't ask me, Laura but I'll answer I'll answer anyway, what am I, most excited about with our AD business and I think I would.

To highlight two things one is just the overall industry.

State, which is that consumers spend 45% of their time, the TV time watching streaming TV, but advertisers have only moved about 18% of their budgets.

Over to streaming and.

All TV advertising is going to move to streaming. So there's just there's just still so much opportunity for us there.

To capture those existing budgets and to continue to innovate and then the second thing I would highlight is just.

The how powerful the Roku channel has become as a source of AD inventory for us and how that's driving.

Just this incredible virtuous cycle around content advertisers and viewers and how that allowing our scale to invest in original and just becoming just really upping the scale needed to be successful in that business.

Trading is trading a big opportunity for us as well.

Thank you. Our next question comes from Cory Carpenter of Jpmorgan. Your line is open.

Great. Thanks for the questions.

You can expand a bit on the on the job here has not led to revenue.

Excuse me led to revenue coming in below your expectations in <unk>, but it's simply the auto and CPG verticals being weaker than expected or anything else to call out there.

And then on the supply chain are you starting to see any signs of improvement at all or maybe if you could just talk about how you expect that to impact active accounts in 2022. Thank you.

Hey, Corey this is Anthony.

I'll start with some comments commentary on our.

Platform business.

Nonetheless, Scott wants to jump in or Steve talk about supply chain.

In general.

Our platform business is doing extremely well if you just look at the big picture on.

Net revenue in 2021 grew 55% to $2 8 billion and that was driven by an 80% year over year increase in platform revenue.

And then there was some extraordinary circumstances, you should take a look at our shareholder shareholder letter for the details but.

Fundamentals are strong I mean, <unk> in the quarter was up 43% year over year and Theres lots of room to keep growing that I mentioned, a stat about how such a small part of the AD business has moved to streaming.

<unk> with Laura's question I mean, that's just so true and there's so much room to keep growing <unk>.

Monetize video AD impressions nearly doubled in 2021.

If you look at the Roku channel, which is the key.

A key driver of inventory and add and add revenue for us.

Reached an estimate households, with an estimated 80 million people.

The business is very strong and still has a lot of room for growth a diversified business theres a lot of different sources of revenue in that business advertising different kinds of advertising M&A.

Content distribution billing, there's just a lot of sources of revenue into our platform business and they're all they're all doing great, but I don't know status you Havent heard Steve if you guys want to add.

Yes, I'll just add a little more color on that and I think there is a surprise to the supply chain questions better for Steve to answer yes.

Corey just breaking down the platform business a little bit more.

<unk> this is our.

Endemic advertising businesses promoting partner apps and content on the platform certainly it moderating after some major app launches in 2020, 'twenty early 2021, but it still is growing very significantly faster than the platform overall, our growth or performance advertisers segment. These are advertisers who are optimizing the bottom funnel outcome.

<unk> roughly doubled our brand studio, which is our.

Sales of sponsorships and unique brand integrations and executions on the platform had its largest quarter, yet and with regard to the brand AD sales advertising, excluding our M&A category, we're still going strong there I don't want to overemphasize the.

The temporary softness in auto and PPD. It was a relatively minor factor in the quarter. It was also not unique to roku and other segments for our brand AD business were up strongly restaurants.

Travel was up buybacks, a real bounce back from Covid financial services.

So bottom line is we remain bullish on the continued growth of the platform business.

Steve do you want to yes, and just on the just.

Just on the supply chain side as I mentioned earlier.

Yes.

The World continues to see seek supply chain disruption.

We think those those are.

Coming into 2022.

Both in terms of elevated component and logistics costs as well as some continued.

Inventory of component availability issues I.

I guess the good news is in some cases component cost.

Come back a bit from their peaks that we saw in 2021, but they're still overall very elevated so theres a way to go between between here and normal, but we do expect those to normalize over time.

He has done a good job on the player side of keeping the streaming players in stock and so the main impact there has been on the gross margin where we are.

Had the flexibility thanks to our increasing <unk> to insulate consumers for the prices.

Thats the main impact is on negative gross margin, but.

We said in our outlook that we do expect that the.

The overall U S TV sales market will be will be down.

Below pre COVID-19 levels at least in the short term and so that's something.

A bit of a headwind for for our business in the industry.

Thank you our next.

Question comes from Sweaters Haryana.

Evercore ISI your line is open.

Okay. Thank you very much let me try two please.

On.

Supply chain could you please remind us what raw Roku you play within the supply chain and as a follow up to that is.

Why not make your own television.

And then the quick.

<unk> for Steve is on EBITDA, Steve did you say 2020 through EBITDA could be same level of 2020, I just wanted to make sure heard it right. Thanks a lot.

Thanks.

This is Anthony I'll start and then turn it over to Steve.

We interact with the.

TV supply chain and a bunch of different ways. So.

When we talk about <unk>.

<unk>.

Our screening players supply chain issues.

Those are products that we build we design and build a manufacturer ourselves.

These contract manufacturers like the entire industry, but but we manage that process.

We source the key components or help source the key components.

So supply chain supply chain issues around players impact us when the main ships or what I call <unk> become the when they become in short supply because of just general semiconductor shortages that causes the price to go up that impacts us in a bunch of ways, including.

It costs more to build the products, but also causes our engineering teams have to spend time redesigning products to use alternate.

So that we can get access to more supply so it impacts us in a couple of ways, but we in general we are managing through that those.

Those issues are mitigating overtime in terms of television.

Tvs.

Our role with the Roku TV program, which has been.

I'll take a quick second one.

Talking about the Roku TV program I mean, it's been hugely successful for US. This is the program, where we design the reference designs for TV.

And then we work with.

Manufacturing and brand partners to build and sell those Tvs and then we work with retailers to help help merchandise them as well and that program has been super successful for US continues to be successful. We're the number one TV platform in the country by unit sales.

As well as our screamed and.

We've become the number one TV platform in Mexico by our extremely ROI in Canada by our screen, we're making great progress in other international markets a lot of that through our Roku TV program, but with.

So that program and that program those Tvs are built by <unk>.

TV manufacturers around the world consulting retailers around the world and so that that's the supply chain on what's been happening in Tvs is that theres been a shortage of panels and then there's also been.

It's been much more expensive to ship televisions and more expensive to ship players as well, but Tvs are bigger and so it impacts them more. So the result of all that is TV prices has gone up a lot more consumers and that's reduced demand.

For Tvs and so that's the big picture of what's happening.

In terms of us, making our own TV theres rumors around that we don't we don't speculate on rumors I'll just point out that the Roku TV program is a big area of investment for US it's been Super successful and were successful not just because we have.

Great.

Sure.

Purpose built operating system for TV, but we also are a great partner for manufacturers with Tvs, we offer a full stack solution and are really very helpful for them growing their smart TV market share so.

That has some thoughts on roku TV supply chain I don't know, Steve if you want to or is there anything you'd like to add.

Yes, I think you've got it on the supply chain.

Your second question was just around the 2022 EBITDA levels compared to 2020.

Yes in the prepared remarks, what we talked about is the.

Opex investment levels, and we're investing aggressively against.

A significant opportunity and a lot of great growth vectors and we have.

A great platform to build upon.

We've talked about some of those things around investing in the Roku operating system investing in the Roku channel itself and then the AD platform of course, so yes.

One of the key things dimension in terms of the comparison to 2021 or 'twenty 'twenty is the fact that 2020 was a pre COVID-19 era, a more normalized basis, when we were growing opex aggressively against these opportunities.

In 2021.

Or kind of mid 2020 and into 2021.

Curtailed our investment growth.

Because of the Covid uncertainty and then we kind of step back on the gas so that the opex investment is a bit more aggressive like it was pre COVID-19 levels. So that combined with where we're at in terms of a more normalized growth in the platform business compared to 2021, where especially in the front half you had platform going.

100% based on strong content distribution and media and entertainment.

As well as the fact that the Opex investment levels were growing much slower that's leading us I think to a better comp in the pre COVID-19 level. So we did say that we got 2022 EBITDA levels would be around the same.

Range as 2020, EBITDA on an absolute basis. So I think that is a better a fair comparison versus the surge we saw on the top line in 2021, and some curtailed investment growth.

Tom.

Okay. Thank you Steve Thanks Anthony.

Sure, Steve you might it might be worth just mentioning a little bit about the.

Howard how are TV OEM partners were disproportionately affected by some of the supply chain issues.

Yes sure so.

When you when you think about the supply chain impacts on the industry, we talked about sort of weaker demand because TV component prices and thus TV consumer prices went up it's a low margin business. So those largely got passed along so the overall TV market size did go down.

In 2021, and we think that below pre COVID-19 levels, and we think that will continue in the short term the other piece, which impacts TV Oems in terms of their unit sales and market share and thus the roku TV market shares was some of our OEM partners had specific component and.

Tori outages and so that impacted.

Some of their sales in Q3, and Q4 and so that's a big piece of this.

A headwind for us on the TV side, Yes, we were fortunate on the player side to largely have inventory available. Thanks to our team internally leveraging our scale and our relationships. So we didn't have the inventory availability on the player side, but that is a material factor the last couple of quarters on the TV side.

Okay. Thanks, Steve Thanks, Anthony.

Sure.

Thank you. Our next question comes from Kelly can sound a cannonball.

Research Your line is open.

Got it.

Scott I think Thats, where you would just wanted to ask him to speak in more detail about Midland Entertainment.

<unk> revenue can you tell us about the auctions that youre offering currently at two <unk>.

Advertisers, how that price may be a CPM versus performance based et cetera, and then if you could also tell us how effective CPM evolve over time in this.

Type of advertising and what do you see driving growth going forward is that.

Sell through growth in impression.

Thank you have pricing power or to drive effective pricing up so get a lot of questions about this revenue stream. So I appreciate it.

Speaking in more detail about it.

Yeah, Great question. Thanks.

Our north star and the.

Got it.

On the call.

Yes, maybe you could mute alright.

On this end.

Our north star on the M&A business is driving outcomes for our clients and we are uniquely positioned to do this as Roku first we've got a promotional units all throughout the roku experience from the time, you're setting your device.

The add on the home screen themes video ads E mail in many ways. We are at the checkout counter at the moment that the consumer is trying to make a choice of what to what we're there to influence it.

Reason, we're uniquely positioned to do that because we've got the data to target and optimize these promotions.

And then the third reason is especially for our <unk> clients the conversion events the download of the App.

<unk>.

Subscription to their service happens on our platform and so we've got a beautiful closed loop data driven way of optimizing the outcome that our M&A clients care about which is <unk>.

New users engaged users retained users.

And that all basically enables us to drive the outcomes more efficiently for our M&A clients and then the other media they might buy.

On social media or in linear television.

For your question about how we price it and how that might evolve today, we priced on both P M or impression basis as well as on a performance basis, you can buy it either way for us.

Most of our clients, whether they buy on a CPM or a CPA basis are ultimately measuring on the outcome that they care about that.

Netted out to that our pricing is a function of a lot of factors in Q4.

Such competition.

As Lou programming coming out that we often land scarcity.

Yes.

Sensibility pricing, but we're also creating more supply throughout the user experience as we build more user engagement in the Roku home screen. So thats, an offsetting factor and then of course at the end of the day. This is basically an auction among various it or trying to get our attention primrose with consumers subscribe to their services so that tends to do.

<unk> pricing ultimately, though.

Our pricing will be driven by our ability to drive the outcomes.

M&A client.

And as long as we keep getting better at driving outcomes, which we're doing.

Does have our innovation around how we grow these services and our use of data we're confident in our ability to keep growing the M&A business and drive deal sizes and pricing I hope that answers your question.

Thank you. Our next question comes from Michael Morris Guggenheim. Your line is open.

Thank you guys. Good afternoon, I have a question about revenue.

The question about cost first on the revenue side on video advertising revenue you guys noted monetized AD impressions on Roku channel up 67% this quarter, I believe which is pretty big.

A big number, but still a meaningful slowdown from the doubling you guys had been seen before I'm, hoping you could break down a little bit for us how much of that was driven by these supply chain challenged industries.

Spoke about versus how you sort of feel about what that growth trajectory looks like going forward.

And my second question I really want to come back to this.

Spending growth next year.

By my math it looks like your spending is going to almost double to well over $1 billion.

Just using your revenue and EBITDA guidance, it's pretty huge number.

And Steve I think you just said kind of goes back to pre COVID-19 levels or behaviors, but.

There are multiples of what you were spending at that time now you're obviously much bigger company now, but I think this is a really big deal coming out of the call. So I want to take one more opportunity to ask sort of a.

A more detailed what youre spending on like which areas do you think this is going to power and when we should expect to see the return.

The top line on this incremental spend thanks.

Scott do you want to take the.

67% question, which.

I'm not sure if that was correct.

Yeah, sure I think that that Youre, citing Michael is our total monetized video AD impressions not specific to the Roku channel we don't we don't.

That out further roku channel specifically broker channel is growing much more much faster generally in terms of.

You said streaming hours added press release.

Then the platform as a whole.

So very significant growth rate for us and.

Ah represents a huge opportunity for us to keep growing into all the video AD volume.

On our platform.

I think sorry your other question is.

On an opex, maybe you want to take that.

Yes.

Hey, Michael.

Yes in terms of in terms of investment areas, you mean, Anthony talked about.

Three core investment areas around the Roku operating system there.

Broker channel.

And the AD business and it will also throw in these investments are not only in the U S. But there also.

In support of international markets as well.

In terms of how we usually invest the main source of investment is people based and so that.

Head count expense is the largest single line item on our Opex and so we're continuing.

Continuing to invest in.

Employee expense existing where we've been ramping up our hiring rates. So that's very important to the investment.

In terms of some of the specific item that we'll talk about.

Yes around the Roku channel in particular, one of the things that we've talked about recently is this flywheel effect. So the Scott mentioned, the Roku channel is growing much faster than the platform overall.

<unk> is driven by content, which is driving increased reach and viewership, which then allows us.

Since it's primarily primarily Avon supported.

Based on the supply from the Roku channel really the scale of the Roku channel in that growth trajectory is allowing us to invest more in the content and its combination of licensing we got 200, plus licensing partners there, but but also in 2021, we basically came out with the Roku original.

Out of the house.

Which we kick started with the acquisition of could these content distribution rights, but we've done a lot on that front as well and so that is a big piece of that but with fame within our our <unk> model.

And then the AG business. There is continued opportunity there so we're continuing to invest in.

Parts of the technology features there is a lot of innovation on our on our various roadmaps.

Alright.

Yes, yes.

Yes, sorry, sorry, I just want to jump in and just just from my point of view at a high level.

The way I think about this is that the streaming platform businesses is a very large business and it's going to become an even larger future bigger business and it's got a huge amount of potential and is the kind of business, where there is only going to be a small number of winners.

In some ways, it's very similar to what happened with.

Let's go buy desktops for example, where.

So you spent a lot of different companies to make TC operating systems and PC software now there's every PC in the world comes to either Microsoft Windows are Apple Mac OS same thing happened with phone there used to be lots of different companies, making phones and phone software stacks and now every time that you can buy it comes with either Android or iOS and the same thing's happening in Tvs Tvs.

Yes.

<unk> historically been very fragmented lots of different software providers lots of different places you can get a smart TV operating system.

And as consolidating and this consultant is going to consolidate down to a handful of winners and roku as the leading operating system in the United States right now.

We're making great progress.

Other countries as well.

And we're just extremely well positioned to keep investing in that leadership position and grow that leadership position as consolidation continues to happen in the TV and the platform space.

It also applies to.

Other areas like the AD stack scale are super important in the AD platform business that applies to content. The Roku channel has been hugely successful for us we've been a leader in AD supported free content.

We've gone from licensing a few low cost old movies to producing our own multimillion dollar original and that's happened on the back of hugely increasing scale.

And that scale supports that kind of investment and so it's just it's just there's just a huge opportunity the stakes are getting bigger.

And we're in a unique position that we lead in all of these areas and we can grow our leadership position and so that's why for us.

We continue to invest really just makes a lot of sense financially for the quest to build a huge large business and I think we I think we ran this sort of accidental experiment during COVID-19 , where we pulled back on the gas on investment in the future and we saw how EBITDA started flowing to the bottom line.

So that's what will happen eventually we will.

To normalize but and.

These days, where we're still pretty early in the in the building of these streaming platforms, we want to maintain and keep winning with our leadership position.

So can I just ask is wage inflation.

Meaningful part of this increase or how much is just sort of like existing wage inflation versus how much is expanding the areas. You are spending on just given your comment that the peoples such a big part of where the spending is going.

Yes, Steve I mean, certainly there it's a very competitive market out there. So certainly wages are going up and like I said, that's our number one component.

Our opex so that is certainly part of whats factored into the outlook.

But the main drivers, we just keep hearing a lot more people.

As we.

As we expand each of these key areas.

Just one small example, we didn't use to make a reasonable now we have a whole team working on Roku originals. We didn't use this ltvs in Brazil, now we're building more and more models for Brazil. So those are those replacement. Those are examples of places where we increased head count.

And the head count investments usually comes ahead of the results we have to work on it for a year or two before you start seeing the results.

Thank you.

Our next question goes to Jason <unk> of Oppenheimer. Your line is open.

Hey, guys. Thanks for taking my question, so I'm going to applaud the investments for years, we heard from investors that you aren't spending enough so I'm going to echo that.

Albeit a tough day to report earnings Okay, sorry about that so I just wanted to ask I don't think anybody asked but did you clarify why you missed the revenue guide in the quarter, Steve just maybe kind of give us just some color there and then my second question.

When asked this.

So the announcement with the resale agreement with Contra vision, Mexico, maybe you could talk a bit about what you expect out of that could that start to be like the first material bucket of international revenue. Thank.

Thank you.

International AD revenue. Thank you.

Scott can take the.

Our National revenue question, and then Steve do you want to answer the.

The other question.

Yes.

Jason Thanks, Thanks for the kind words.

And I appreciate you.

Mentioning the investment investors that wanted to incremental investment so, yes, I mean, I think frankly the.

Incremental investments just shows that we're bullish on the opportunity and the growth trajectories have great great Roadmaps.

Ahead of us. So we think that's the right strategic decision as Anthony.

<unk> talked about.

The industry is going to consolidate around and we're in a leading position.

In terms of Q4.

Yes, the biggest theme in terms of the results versus the original outlook expectations were around the level of supply chain disruptions that impacted the industry.

Our partners and us in particular, both on the account acquisition side like we said it was a smaller smaller television sales size in the market because of the higher TV prices I had mentioned that TV prices were up.

33% year over year in Q4, which.

Tamped down on demand and then we had specific.

CV OEM partners that had inventory availability challenges and so the main impact of that was certainly on the account acquisition side, but what we also talked about was we saw some some temporary softness in some verticals around auto and CPG, where they have their own inventory availability challenges.

And so deferred some of the revenue spend and so that was more pronounced than what we originally thought it would be going into the into the quarter and that was the biggest driver of the disconnect.

Yeah.

This is Scott I'll just tag on to answer to that question and then I'll answer your question, Jason about Entravision in Mexico.

One other thing I'd say about about Q4.

Was we were comping over a really robust Q4 2020, if you roll.

Roll back to 2020 advertisers really suppressed spending in Q2 2020, and then they made up for it in Q4 drove a really strong Q4 for us in our AD business and frankly across the business and so we had a strong quarter.

Q4 for the AD business Q4 'twenty one.

Right.

Comp.

In addition to a couple of the.

Softness in a couple of the verticals as Steve mentioned were the real drivers of the.

Of the Miss off of the guide.

With regards to Mexico.

This is a great.

<unk> story, great part of our narrative of going going abroad and of course, we have big scale.

By getting televisions and players when the consumers and then we try to drive engagement and then we monetize and in Mexico. We are we.

We are through the first and second phases, there with significant winning posture in terms of household penetration and user engagement and so it was very timely for us to launch the Mexican AD business, we're doing it in partnership with Entravision.

Sure.

Internationally I'd also call out our success in Canada, where we've been scaling our AD business in our M&A business for several years now. So we're excited about the progress in Mexico and of course, it's also a great entre into activity elsewhere in Latam.

Yes. This is Anthony I mean, if you think about just international in the countries.

In the Americas, South of the United States the biggest one of our.

The biggest market by far in Brazil, and Mexico. So that's why we focused on those primarily and we're doing great in both of those markets in Mexico. We're the number one streaming platform by hours streamed.

And we just announced that we passed 20% market share for Tvs with the Roku TV program.

And so our skills and growing there for a few years now that's why we're starting to.

Add on monetization in that in that region.

Thank you. Our next question comes from Jason Bazinet of Citi. Your line is open.

There was a little bit of a question on the buy side about whether or not you guys would provide sort of a full year outlook, which I think is unusual for you and correct me if I'm wrong.

I'd be curious about two things why you decided to do that and then to.

Sort of what what Youre, what youre sort of level of conservatism is or isn't when you sort of lay out a full year guide versus a quarterly guide, which presumably is much easier.

Scott I'm, sorry, Steve that's a Steve question.

Yes in terms of our approach to outlook.

Since the start of the pandemic so coming on two years.

We have focused on providing a formal outlook for the near and quarter. In this case Q1, and providing some color on the longer term or the annual view to the extent we have visibility.

So what we talked about in the shareholder letter is continuing on with that strategy permanently and tweaking the outlook moving from a range to our best estimate.

So.

Yes, that's really no different than what we've been doing for last couple of years I think it reflects the fact that obviously, we have better visibility into the short term.

In this case, we didn't provide formal outlook for the full year, but we did provide some color on what we thought the trends were for the full year and we provided a a rough outlook for the revenue year over year growth range as well as the EBITDA level. So.

We're kind of somewhere in between but we think that's prudent just given the level of uncertainty.

In in that factor.

Okay. Thank you.

Thank you. Our next question comes from renewable military Bank of America. Your line is open.

Hi, Thank you for taking my questions I have two one on platform revenues and one on.

Your comments on the Roku OS.

With respect to platform revenues.

<unk> and the full year, the M&A spend media and entertainment spend.

It was very strong it grew faster than the platform revenues can you give us your thoughts on M&A spend for the full year 2022, and just maybe talk about.

In the shareholder letter it says our delayed AD spend and verticals most impacted by imbalances may continue into 2022, if we go back to the pandemic in <unk> of 'twenty.

Advertisers have pulled back but they came back pretty quick after that and <unk> were pretty strong quarters for your platform revenues.

Just reading the shareholder letter it seems that.

This comeback this year might be delayed so just your thoughts on when you think the CPG in the auto advertisers might come back.

Spend more on the on the <unk>.

Platform.

Scott.

Hey, Rupert.

Yeah, Let me take a take this in parts here first of all again.

Wouldn't.

Would not overstate the impact of those verticals, we saw some softness I think it's anybody's guess.

How the CPG and auto businesses deal with their supply chain issues, but we see robustness broadly across the rest of the AD business and so.

Yes.

It's a relatively minor factor in the Grand scheme of the Q4 and our outlook going forward.

With regards to the M&A business, we don't guide to that business specifically.

Say that it continues to grow strongly.

Did they get services have launched on roku, but they continue to spend very significantly with us because they are not done acquiring users and as they hit scale retaining users becomes critical.

Very competitive environment, we've seen quite a bit of share shifting within the top 10 apps as they compete for user attention consumers aren't going to have.

Subscription for all of these services, they are going to pick and choose and in a streaming world it's easy for them to.

Subscribe and unsubscribe and so there's a lot of competitive pressure on our partners to stay front and center when they invest in big new programming, they want to get behind it and promoted aggressively to users and as I answered in the question earlier, we're just one of the best possible choices for a program or two.

It's drive awareness and tune in to their programming. So overall we remain.

Really really bullish on the.

The future of the <unk> business I don't know, if Steve or Anthony if you want to add anything.

Well this is Steve I'll, just add because you mentioned the kind of Q2 2020, and it popped back pretty quick with advertisers.

I think that that part is certainly there was a pullback in advertising there, but I think it was a very different situation right that was early days of the pandemic. There was a lot of uncertainty across the board for advertisers that their business was going to drop off a cliff and so.

Yes that was much more of the.

Stabilize the ship lower the operating expense burn.

And see where the world's going in this case, where you have certain weakness.

In the advertising or a temporary slowdown in the advertising and in large part. These companies are selling everything they can produce and I can tell you being in the market for an auto.

Lot of pricing power on what they are producing right and so there they are actually in a position of strength as opposed to a position of concern and weakness, but because of the supply chain constraints, there's kind of an artificial disconnect where where they're not having to market, but there is a strong case for marketing and advertising once things normalize on that front.

To Scott's point I think it's.

Certainly the supply chain disruptions are the main determinant on in certain verticals about kind.

Kind of what their whether their spend levels will be normalized or not but I actually think a lot of these companies are in a very strong position and it's just the temporary disconnect of supply and demand.

Created a temporary stop in spend but otherwise they are in great shape versus at the start of the pandemic they were quite fearful for their therapy wellbeing.

So roughly I don't know if that answered your question or not and also.

Did you have something about you wanted to ask about Roku OS I wasn't sure.

That was the question there.

Thank you. Our final question is rich Greenfield of lights and your line is open.

Hi, Thanks for taking my questions.

I guess two big picture questions one.

Anthony when you think about sort of the change in consumer behavior.

Moving from Dongles to Tvs.

Just wondering.

Do you have any way of telling how many people because I think one of the things people are investors fear is that as people move from sort of Roku dongles and then they buy a new television.

Some of those are sort of inactive or those sort of active accounts become inactive accounts I'm. Just wondering it's sort of like is the shift from dongles and television play out how do you like what are you seeing what are you seeing over the last year and what do you think happens over the next couple of years.

And then obviously I mean, it's sort of the obvious that everyone is sort of panic.

About the state of streaming after seeing the results from some of the players most notably Netflix earlier in the quarter.

Sort of revising long term Tam and I just.

When you think about the Tam of streaming.

$300 million $500 million of billion adjacent kayalar sudden someone's going to get to $1 billion curious what you think of the streaming market globally, and where you think the Tam really lies.

Time to get to that Tam. Thanks.

Sure Great questions, we have zero minutes left I'll do my best.

Let's see on Tvs streaming players.

<unk>.

They're both important to us to our business, we are and we still sell.

Millions of millions of both.

I think.

And I think so some of the dynamics there are.

That we sell a lot of streaming players to people that have an older TV or a competitor smart TV and it doesn't quite have the features that they would like to get or the content that they want.

And then when someone buys a new television.

I'll take the older TV and move it into a bedroom.

And then they'll often want to upgrade that with the streaming player and so there's just a lot of different dynamics. There theyre both important they're both big sources of active accounts theyre, both not going away anytime soon.

But I would say I guess strategically Tvs or probably more.

More important.

Just because.

When you buy a smart TV, if you buy smart Roku TV and then you know whatever you had before you don't need because it it's a great. It's a great solution and people keep them for about seven years roughly.

There is questions about how long will software updates happen on a smart TV, we try very hard to keep updating our smart Tvs for a long time.

We're better than everyone I think everyone else in the industry, if you will sometimes abandoned.

<unk> stopped doing software updates to their TV. After a few years that also becomes a great place for us to Stella streaming player too so they're both they're both really important and if you look when you go overseas.

There's a lot of older Tvs and so they're both they're both just very important for us that have suddenly different dynamics, but I think the main messages as we need to do both and we do do both very well.

In terms of the Tam.

Okay.

Think of it as every broadband households.

<unk> TV is going to switch to streaming so it's a 1 billion households.

Yes.

Do you have any if you have any feel or just why it slowed down so much.

Sorry, why right.

Do you have any sense of like why do you think theres been a slowdown that's sort of been panic investors.

I'm talking about <unk> I'm talking about the entire streaming sector that people are sort of starting to really just get concerned.

Well I think.

Go ahead Scott.

Hey look.

The market's reception to this or that streaming companies results and.

Notwithstanding as Anthony said, the number of households, consuming TV, what they spend on TV, what their eyeballs are worse in terms of advertising hasn't changed through all of it.

Tam really has not changed and and while I think individual streamers, while they're there they're fate in their perception in the market will rise and fall. According to their performance at the end of the day, they're all going to be on roku and competing for share.

And we see that playing out.

Never before on our platform.

And it's great ultimately for the consumer and great for Roku.

Yes, I mean, I would just say there's important differences strategic differences between a screening service on a streaming platform like roku.

They are both great businesses to be in right now.

In terms of the fact that there they're all growing but our goal as a platform has to offer.

As many different services as possible and give our consumers options.

And.

I think if you're a streaming service youre dynamics or different use.

You're one of the early streaming services you didn't really have much competition for a long time and now consumers have other options. So that's one dynamic.

And also Theres, just a lot of change happening right now.

Yes.

And then there is a free free streaming services like the Roku channel, which is doing gangbusters I mean, there's just a lot of different dynamics affecting the industry, but but at a high level for us.

<unk> built a business model, where we can monetize.

And we do monetize.

Most streaming services on our platform and provide tools to allow them to be successful and provide them try and do a great partner try and provide a good marketplace.

Try and help the consumer find content just.

Just provide a solution that works for the entire industry.

And just on a.

Of course, <unk> is going to keep growing and there'll be 1 billion households.

Using smart TV to watch television.

And there is not going to be there's only in EMEA.

Small number of those different platforms that win.

Okay.

Thank you.

I'd like to turn the call back over to Andy for any closing remarks.

Yes.

Yeah.

Alright, well I just want to say thanks to everyone. Thanks to our employees.

And our investors for joining the call today, and we're looking forward to.

Continuing our growth and the robust streaming business therein, continuing so thanks, everyone.

Thank you ladies and gentlemen, this does conclude today's conference. Thank you all for participating you.

You may now disconnect have a great day.

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All participants are in a listen only mode.

After the Speakers' presentation there'll be a question and answer session to ask a question at that time. Please press Star then one on your Touchstone telephone.

As a reminder, today's conference call is being recorded.

I'd now like turn the conference with you with the Conrad Grodd, Vice President of Investor Relations, Sir you may begin.

Thank you good afternoon, and welcome to brokerage fourth quarter and year ended 2021 earnings call I'm joined today by Anthony Wood, <unk> founder and CEO , Steve loud.

Our CFO and Scott Rosenberg Senior Vice President General manager of our platform business, who will be available for Q&A.

Full details of our results and additional management commentary are available in our shareholder letter, which can be found on our investor Relations website at Roku Dot Com Flash investor.

Our comments and responses to your questions on this call reflect management's views as of today, only and we disclaim any obligations to update this information.

On this call we will make forward looking statements, which are predictions projections or other statements about future events.

Statements regarding our financial outlook future market conditions, and our expectations regarding the continued impact of global supply chain disruptions on our business and industry.

These statements are based on our current expectations 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 these forward looking statements.

We'll also discuss certain non-GAAP financial measures on today's call we.

Reconciliations to the most comparable GAAP financial measures are provided in our shareholder letter.

Finally, unless otherwise stated all comparisons on this call will be against our results for the comparable period of 2020, now I'd like to hand, the call over to Anthony.

Thank you Carmen.

And thanks, everyone for joining us today.

Roku delivered another record year in 2021.

We have an enormous opportunity in front of US do we expect to capture.

We have built and continued to expand our set of unique assets for this purpose.

These include the Roku operating system, the Roku channel and our sophisticated screaming ad platform.

Our scale has passed 60 million active accounts and we remain focused on being the best and largest streaming platform.

The Roku operating system is poised to gain further market share stv's shift away from costly proprietary operating systems.

We expect manufacturers, who want a best in class operating system to choose the Roku OS which is purpose built for TV.

The Roku channel continues to gain momentum.

This success is a result of combining a robust content portfolio.

With our ability to send consumers to the Roku channel with superior content marketing and advertising features.

Our AD platform is built for TV streaming we believe large traditional TV advertisers will continue to shift to roku for the targeting measurement optimization and superior ROI that we provide.

And for digital first advertisers and small and medium businesses Roku makes advertising on TV more accessible.

We remain focused on maximizing our competitive differentiators extending our industry leadership.

And driving growth both in the U S and internationally.

With that let me hand, the call over to Steve.

Thanks Anthony.

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 $3 7 million, resulting in an $8 9 million incremental active accounts for the year.

Thus ending 2021 with $60 1 million active accounts.

While we continue to scale.

We believe that the slowdown in the active account growth rate in the second half of the year was in large part attributable to global supply chain disruptions that have impacted the overall U S TV market and our TV OEM partners in particular.

This was partially offset by Roku player unit sales in 2021 debt remained above pre COVID-19 levels.

In addition to increasing our scale.

We are also growing engagement on our platform with 2021 streaming hours up $14 4 billion year over year to a record $73 2 billion hours.

In Q4, we grew streaming hours, 15% year over year, while full year grew 25% year over year as we continue to outperform viewing our growth of both traditional TV and other TV streaming platforms.

Average streaming hours per active account per day was relatively flat year over year as we lap the pandemic related demand spike.

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

In Q4 total net revenue increased 33% year over year to $865 million.

Platform revenue was up 49% year over year to a record $704 million driven by strong content distribution and M&A growth.

Q4 player revenue declined 9% year over year, but was up 7% versus Q4 2019.

Clear unit sales were relatively flat year over year for Q4 and down 4% year over year for 2021.

Gross profit one of our key financial performance metrics grew 24% year over year in Q4 to a record $380 million Q.

Q4 platform gross margin was 60%, which was down four five points sequentially as the platform business shifted toward a greater mix of video advertising.

So their margin was pressured by supply chain challenges as we chose to prioritize account acquisition and insulate consumers from higher cost.

We estimate that excluding the year over year impact of component and logistic cost increases on the player business.

Total gross margin would have been roughly four points higher for Q4 2021.

Q4, adjusted EBITDA was $87 million and we ended the quarter with over $2 1 billion of cash cash equivalents restricted cash and short term investments.

Looking to the first quarter, we anticipate.

Total net revenue of $720 million up 25% year over year.

Gross profit of $360 million with a gross margin of 50%.

And adjusted EBITDA of $55 million.

Now I'll provide additional color on each of these estimates.

Q1, total net revenue of $720 million reflects our expectations for standard Q1 seasonality combined with the ongoing impact of supply chain disruptions on advertising spend within certain verticals.

Next conditions that positively affected gross profit and gross margin in Q1 2021 have shifted the <unk>.

Platform business, which had a larger portion of high margin content distribution. In Q1 2021 is expected to have a greater portion of video advertising in Q1 2022. Additionally.

Finally, our outlook for Q1, adjusted EBITDA is $55 million due to higher opex.

Which we expect to increase approximately 55% year over year.

As we plan to invest aggressively this year as.

As a comparison.

Adjusted EBITDA in Q1, 2021 was $126 million driven by a combination of very strong platform growth and lower opex growth as we slowed down investments due to COVID-19 uncertainty.

This demonstrates a strong return from prior monetization investments and the inherent leverage in our business model.

Looking to the full year I wanted to share my thoughts on supply chain, our investment strategy and our confidence in the business.

First supply chain.

And we assume that AD spend in certain verticals will continue to be impacted by ongoing inventory availability issues until conditions normalize.

Second we intend to continue to invest in our growth to date, our investments in people technology and content have been successful as demonstrated by our strong ARPA growth.

Brokers use active account base has surpassed the U S video subscribers of all of the cable companies combined.

Growing our share.

Extending our lead both in the U S and international markets is a core part of our plan.

Third even with the volatility that is expected to result from ongoing supply chain disruptions. We believe brochu will continue to grow.

And our estimate for full year 2022 year over year revenue growth is in the mid <unk>.

Our core belief is that all of our secular growth drivers that favor streaming remain in place.

And we have an exceptional platform as our foundation to build upon.

There is a long runway of growth in front of us and we are investing to capture this opportunity.

We remain confident in our business and our ability to execute.

With that let's turn it over to discussion.

Operator.

Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one when you touch tone telephone against the ask a question. Please press Star then one.

Our first question comes from Justin Patterson of Keybanc. Your line is open.

Great. Thank you very much Steve.

<unk> just coming back to the annual revenue guidance of 35% that reflects a very healthy acceleration from Q1 levels could you talk about what gives you the confidence in that and perhaps tease out the contribution from player and platform to get there and then related you called out aggressive investment could you talk about.

Some of the top priorities and whether things like controlling more TV manufacturing plan to that thank you.

Hey, Justin this is Anthony I'll kick off the answer and then turn it over to Steve.

At a high level the screening platform business that we're a leader in a very large global opportunity.

And we're super well positioned to keep expanding our leadership in it and so we're going to keep investing appropriate appropriately to the opportunity in our business.

If you think about.

What we've accomplished so far with the money we've invested in our business, we built an extremely valuable asset to the Roku operating system.

Which is the industry's only purpose built operating system for TV and as the <unk>.

Number one TV OS in the country.

And is making great progress internationally brokerage television program itself.

Where we build complete reference designs license those to manufacturers and in health.

Merchandise them a retail it's been Super successful program for us the Roku channel.

Which is a top five channel on our platform.

Reached households with.

80 million people in the quarter and there's just been a big driver of our AD business.

Our very sophisticated AD platform, but those four assets, we built over the last few years, and we're going to keep investing in them and keep growing them in together.

There were instrumental in driving our gross profit.

For the year of $1 4 billion, which was up 74% so.

Over a tough comp so.

We just feel like there's so much opportunity is still in front of US is still early days and the screening platform business.

But Steve do you want to add any specifics.

Sure Hey, Justin Thanks for the question.

To what Anthony said.

In general, we're providing formal outlook for the near term quarters. So in this case Q1, and some color on the full year.

You mentioned.

The revenue growth, we said that we thought for the year that revenue would be in the mid <unk> on a year over year basis.

Some things that factor into that obviously like Anthony said, we've had successful investments in these key strategic investment areas. Historically, we think theres a lot more opportunity out there both to drive scale and monetization.

In terms of the Q1 versus full year view.

Such a strong comp on the content distribution side and <unk> side at the same time.

Mid last year.

As we got through some of the worst and uncertainty around the pandemic.

We decided that we would continue or are we.

Kind of go back to our historical aggressive investment levels, and so youre seeing strong investment in the back half of 2021 and into 2022 as a result, we think that.

In Q1, and those will be maybe slightly less tough as the.

For the year.

Year go through it and the other part we're tracking is in the back half of 2021, we had.

From a supply chain disruption that we're still working through but we're hoping those will mitigate over time.

Thank you.

Thank you. Our next question comes from Laura Martin of Needham Your line is open.

Hey, there.

Thanks for taking the question do.

Can we have got on the line today are now.

Yes, yes, yes.

Oh Fabulous, Okay, Anthony one for you one for Scott Fantastic.

Data Anthony Here's this data, so vizio make $40 million and you're selling some of their data. Your data is better because you have three times as many Scott. My question is would you ever consider as a new revenue stream selling part of your data I'll go off keeping bunch of for your proprietary to others as a new revenue stream Scott.

I'm very interested in hearing from you.

You are most excited about as the odd revenue driver in 2022 International Ad growth.

Mexico is it the upfront that's coming up in May is that the integration of bottom of funnel ecommerce with advertising I'm really interested in where you see the most growth upside and what you're most excited about with <unk>. Thanks guys.

Hey, Laura.

Wait to hear from you again sure I'll take the first question on data I think generally we view our data that we generate lots of different ways, including ACR automatic content recognition, which I think is the data youre probably referring to.

I mean, thats, an existing video business.

But we view we view.

That data is basically a key part of our AD platform and a key competitive advantage and so we don't have any.

And the seller.

We sell ads, we saw lots of ads in that business.

Growing incredibly fast and our data is one of the key drivers.

And I don't know.

I'll take the question, maybe he might have an opinion on data as well.

Yes, I'll just add I'll just add to that.

Yeah data is our most valuable asset.

So it is not something we've thought.

The wrong move from a consumer perspective and frankly.

Revenue optimal use of data is to keep it and.

Use it or.

Optimizing consumer experience and optimizing advertising. So there are lots of reasons, we've chosen to hold back close to consumer oriented and commercial and I think actually if you will get some of those other platforms. They are actually we're grabbing their decision and in some cases pulling that data back.

With regards to my excitement about 2022 add opportunity. There is there a few things one is as you'll recall, we bought a division out of Nielsen last year that includes ACR and linear AD replacement technology.

We will be rolling that out of the data and partnership.

Programmers I'm very excited about that because it's a whole other AD units to be sold into the marketplace to extend our reach.

I'm also excited about our continued progress in the growth or performance advertising category.

Really shine or we can leverage our data and our AD stack to help advertisers drive real outcome.

Product purchases.

Visits et cetera.

2022 is a big year for one view is while we've made good progress with <unk>.

Selling <unk> into agency holding companies and lots of other advertisers and I think it will be a breakout year for us.

Lastly, announced Nielsen Dar guarantee with <unk> enables advertisers to use our data and our AD stack to optimize for age gender goals when buying from programmers in the Roku ecosystem, we have sold that product with our own media for years, we're extending it now and what's an industry.

First to all.

All impressions on the Roku platform and so those are just a few highlights of categories. I'm excited about I mean, I guess the punch line is there's just tons of growth opportunity for the AD business.

We might have driven 43% lift in ARPA year over year, but were nowhere near the ceiling of the ad potential.

And its contribution to the Roku platform business.

Yes. This is this is Anthony I mean, you didn't ask me, Laura but I'll answer I'll answer anyway, what am I, most excited about with our AD business and I think I would highlight two things one is just the overall industry.

State, which is that consumers spend 45% of their time, the TV time watching streaming TV, but advertisers have only moved about 18% of the budgets.

Over to streaming and.

All TV advertising is going to move to streaming. So there's just there's just still so much opportunity for us there.

To capture those existing budgets and to continue to innovate and then the second thing I would highlight is just.

The how powerful the Roku channel has become as a source of AD inventory for us and how that's driving.

This incredible virtuous cycle around content advertisers and viewers and how thats, allowing us scale to invest in originals, and just becoming just really upping the scale needed to be successful in that business.

Creating is creating a big opportunity for us as well.

Thank you. Our next question comes from Cory Carpenter of Jpmorgan. Your line is open.

Great. Thanks for the questions.

Hoping you could expand a bit on the on the job here has not led to revenue.

Excuse me led to revenue coming in below your expectations in <unk> simply the auto and CPG verticals being weaker than expected or anything else to call out there.

And then on the supply chain are you starting to see any signs of improvement at all or maybe if you could just talk about how you expect that to impact active accounts in 2022. Thank you.

Hey, Corey this is Anthony.

I'll start with some comments commentary on our.

Platform business.

Nonetheless, Scott wants to jump in for Steve talk about supply chain, but just in general.

Our platform business is doing extremely well if you just look at the Big picture net revenue in 2021 grew 55% to $2 8 billion and that was driven by an 80% year over year increase in platform revenue.

And then there was some extraordinary circumstances, you should take a look at our shareholder shareholder letter for the details but.

The fundamentals are strong I mean, <unk> in the quarter was up 43% year over year and Theres lots of room to keep growing that I mean, I mentioned the stat about.

How it's such a small part of the AD business has moved to screening before with Laura's question. I mean, that's just so true and there's so much room to keep growing <unk> monetize video AD impressions nearly doubled in 2021.

If you look at the Roku channel, which is the <unk>.

Key driver of inventory and add and add revenue for us.

Reached an estimate households, with an estimated 80 million people.

The business is very strong and still has a lot of room for growth a diversified business theres a lot of different sources of revenue in that business advertising different kinds of advertising M&A.

<unk>.

Content distribution billing Theres, just a lot of sources of revenue into our platform business and they are all they're all doing great, but I don't know status you Havent heard Steve if you guys want to add.

Yes, I'll just add a little more color on that and I think there is a supply the supply chain questions better for Steve to answer yes.

Corey just breaking down the platform business a little bit more.

<unk> this is our.

Endemic advertising business promoting partner apps and content on the platform certainly moderating after some major app launches in 2000 22000 early 2021, but it's still is growing very significantly faster than the platform overall, our growth or performance Advertiser segment. These are advertisers who are optimizing the bottom funnel outcome.

Roughly doubled our brand studio, which is our.

The temporary softness in auto and PPD. It was a relatively minor factor in the quarter. It was also not unique to roku and other segments for our brand AD business were up strongly.

Strong.

Travel was up buybacks, a real bounce back from Covid financial services assets.

The Bottomline is we remain bullish on the growth of the platform business.

Okay.

Steve do you want to yes, and just on the just on the supply chain side as I mentioned earlier.

Yes.

The World continues to see seek supply chain disruption.

We think those deserve.

Coming into 2022.

Both in terms of elevated component and logistics costs as well as some continued.

Inventory or component availability issues.

I guess the good news is in some cases component costs have come.

Come back a bit from their peaks that we saw in 2021, but they're still overall very elevated so theres a way to go between between here and normal, but we do expect those to normalize over time the.

The team has done a good job on the player side of keeping the streaming players in stock and so the main impact there has been on the gross margin where we had.

The flexibility thanks to our increasing <unk> to insulate consumers for the prices.

Thus the main impact is on negative gross margin, but.

We said in our outlook that we do do expect that the <unk>.

Overall U S TV sales market will be will be down.

Below pre COVID-19 levels at least in the short term and so that's something that's a bit of a headwind for for our business in the industry.

Thank you.

Our next question comes from Sweaters Haryana.

Evercore ISI your line is open.

Okay. Thank you very much let me try two please one on.

Supply chain could you please remind us what raw Roku you play within the supply chain.

And as a follow up to that is.

Why not make your own television.

And then the quick.

Quick question for Steve is on EBITDA.

Did you say 2020 through EBITDA could be same level of 2020, I just wanted to make sure heard it great. Thanks a lot.

Hey.

As Anthony I'll start and then turn it over to Steve.

We interact with.

TV supply chain and a bunch of different ways. So.

When we talk about.

Device.

Our screening player supply chain issues those are products that we build we design and build a manufacturer ourselves.

These contract manufacturers like the entire industry, but.

But we manage that process.

We source the key components or help source key components.

And so supply chain supply chain issues around players impact us when the main ships or what I call <unk> become the when they become in short supply because it just general semiconductor shortages that causes the price to go up that impacts us in a bunch of ways, including.

It costs more to build the products that also causes our engineering teams have to spend time redesigning products to use alternate.

So so that we can get access to more supply so it impacts us in a couple of ways, but we in general we are managing through that.

Issues are mitigating overtime in terms of television.

Tvs, we don't our role with the Roku TV program, which has been just I'll take a quick second.

Talk about the Roku TV program I mean, it's been hugely successful for US. This is the program, where we design the reference designs for TV.

And then we work with.

Manufacturing and brand partners to build and sell those Tvs and then we work with retailers to help help merchandise them.

As well and that program has been super successful for US continues to be successful. We're the number one TV platform in the country by unit sales.

As well as our screamed and.

We've become the number one TV platform in Mexico by our screen number one in Canada by our screen, we're making great progress in other international markets a lot of that through our Roku TV program, but.

So that probably in that program those Tvs are built by <unk>.

TV manufacturers around the world consulting retailers around the world and so that's the supply chain and what's been happening in Tvs is that theres been a shortage of panels and then there's also been.

It's been much more expensive to ship televisions is getting more expensive to ship players as well, but Tvs are bigger and so it impacts them more. So the result of all that is TV prices have gone up a lot for consumers and thats reduced demand.

For Tvs and so that's the big picture of what's happening.

In terms of us.

Our own TV theres rumors around that we don't we don't speculate on rumors I will just point out that the Roku TV program is a big area of investment for US it's been Super successful and were successful not just because we have a.

Great.

<unk>.

Purpose built operating system for TV, but we also are a great partner for manufacturers with Tvs, we offer a full stack solution.

It really very helpful for them growing their smart TV market share so.

So that has some thoughts on roku TV supply chain I don't know, Steve if you want to if there's anything you'd like to add.

Yes, I think you've got it on the supply chain sort of your second question was just around the 2022 EBITDA levels compared to 2020.

So yes in the prepared remarks, what we talked about is the opex.

Opex investment levels, and we're investing aggressively against.

A significant opportunity and a lot of great growth vectors and we have.

A great platform to build upon.

We've talked about some of those things around investing in the Roku operating system investing in the Roku channel itself and then the AD platform of course, so yes.

One of the key things to mention in terms of the comparison to 2021 or 'twenty 'twenty is the fact that 2020 was a pre COVID-19 era, a more normalized basis. When we were growing opex aggressively against these opportunities in 2021.

Or kind of mid 2020 and into 2021.

<unk>.

Curtailed our investment growth.

Because of the Covid uncertainty and then we kind of step back on the gas so that the opex investment is a bit more aggressive like it was pre COVID-19 level, so that combined with where we're at in terms of a more normalized growth in the platform business compared to 2021, where especially in the front half you had platts.

Going 100% based on strong content distribution and media and entertainment.

As well as the fact that the Opex investment levels were growing much slower that's leading us I think to a better comp in the pre COVID-19 level. So we did say that we thought 2022 EBITDA levels would be around the same.

Range as 2020, EBITDA on an absolute basis. So I think that is a better.

For comparison versus the surge we saw on the top line in 2021, and some curtailed investment growth.

At the same time.

Okay. Thank you Steve Thanks Anthony.

Sure, Steve you might it might be worth just mentioning a little bit about the.

Hi.

Our TV OEM partners were disproportionately affected by some of the supply chain issues.

Yes sure so.

When you when you think about the supply chain.

Impacts on the industry, we talked about sort of weaker demand because TV component prices and thus TV consumer prices went up it's a low margin business. So those largely got passed along so the overall TV market size did go down.

<unk> outages and so that impacted.

Some of their sales in Q3, and Q4 and so that's a big piece.

That's a headwind for us on the TV side, Yes, we were fortunate on the player side to largely have inventory available. Thanks to our team internally leveraging our scale and our relationships. So we didn't have the inventory availability on the player side, but that is a material factor the last couple of quarters on the TV side.

Okay. Thanks, Steve Thanks, Anthony.

Sure.

Yes.

Thank you. Our next question comes from Kelly <unk> Cannonball Research your line is open.

Scott I think is for you just wanted to ask him to speak in more detail about Midland Entertainment.

Promotional revenue can you tell us about the options that youre offering currently to.

Advertisers.

The price may be a CPM versus performance based et cetera, and then if you could also tell us how effective CPM evolve over time in this.

Type of advertising and what do you see driving growth going forward does it sell through growth in impression do think you have pricing power or our product to drive the effective pricing up so get a lot of questions about this revenue stream. So I appreciate it.

Speaking in more detail about it.

Yeah, Great question. Thanks Heiko.

Yes.

Our north star and the.

And on the call.

Yes, maybe you could mute alright.

On this end.

Northstar on the M&A business is driving outcomes for our clients and we are uniquely positioned to do this as Roku first we've got the promotional units all throughout the Roku experience from the time, you're setting your device.

The add on the home screen themes video ads E mail.

Many ways, we are at the checkout calendar at the moment that the consumer trying to make that choice of what to what we're there to influence the.

The second reason, we are uniquely positioned to do that because we've got the data to target and optimize these promotions and then the third reason is especially for our <unk> clients the conversion events the download of the App.

Subscription to their service.

<unk> on our platform and so we've got a beautiful closed loop data driven way of optimizing the outcome that our M&A client care about which is <unk>.

New users engaged users retained users.

It all basically enables us to drive outcomes more efficiently for our M&A clients and then the other media they might buy.

On social media or linear TV, that's part of your question about how we price it and how that might evolve today, we priced on both.

M or impression basis as well as on a performance basis.

By either way for us.

Most of our clients, whether they are buying a CPM or a CPA basis are ultimately measuring on the outcome that they care about.

Netted out to that or.

Pricing is a function of a lot of factors in Q4.

Such competition.

As Lou programming coming out that we often have scarcity.

Got that.

Sensibility pricing, but we're also creating more supply throughout the user experience as we built or user engagement in the roku home screen.

That's an offsetting factor and then of course at the end of the day. This is basically an austin among various it or trying to get our attention primrose consumers subscribe to their services that tends to drive pricing ultimately though.

Our pricing will be driven by our ability to drive the outcome.

And the client.

At peak and as long as we keep getting better at driving outcomes, which we're doing.

Cause of our innovation around how we wrote these services and our use of data we're confident in our ability to keep growing the business and drive deal sizes and pricing I hope that answers your question.

Thank you. Our next question comes from Michael Morris Guggenheim. Your line is open.

Thank you guys. Good afternoon, I have a question about revenue.

The question about cost first on the revenue side on video advertising revenue you guys noted monetized AD impressions on Roku channel up 67% this quarter, I believe which is pretty big.

A big number, but it's still a meaningful slowdown from the doubling you guys had been seen before I'm, hoping you could break down a little bit for us how much of that was driven by these supply chain challenge industries that you spoke about versus how you sort of feel about what that growth trajectory looks like going forward.

And my second question I really want to come back to this.

Spending growth next year.

By my math it looks like your spending is going to almost double to well over $1 billion.

Just using your revenue and EBITDA guide, it's pretty huge number.

And Steve I think you just said kind of goes back to pre COVID-19 levels or behaviors, but.

Multiples of what you were spending at that time now Youre, obviously, a much bigger company now, but I think this is a really big deal coming out of the call. So I want to take one more opportunity to ask sort of.

A more detailed what youre spending on like which areas do you think this is going to power and when we should expect to see the return.

The top line on this incremental spend thanks.

Scott do you want to take the.

67% question, which I'm not sure if that was correct.

Yeah, sure I think that that Youre, citing Michael is our total monetize video AD impressions not specific to the Roku channel we don't.

Break that out for the Roku channel specifically broker channel is growing much more much faster generally in terms of.

Yes, its streaming hours that impressive.

Then the platform as a whole.

So very significant growth rate for us and.

Ah represents a huge opportunity for us to keep growing into all of the video AD volume.

On our platform.

I think your other question is.

On an opex, if you want to take that.

Yes, I can.

Hey, Michael.

Yes in terms of in terms of investment areas I mean, Anthony you talked about.

<unk> core investment areas around the Roku operating system there.

Broker channel.

And the AD business and it will also throw in that these investments are not only in the U S. There also.

In support of international markets as well.

In terms of how we usually invest the main source of investment is people based and so that.

Head count expense is the largest single line item on our Opex and so we're continuing in <unk>.

Continuing to invest in.

Employee expense existing where we've been ramping up our hiring rates.

So that's very important to the investment.

In terms of some of the specific items that we'll talk about.

Yes around the Roku channel in particular, one of the things that we've talked about recently is this flywheel effect. So the Scott mentioned the Roku channel is growing much faster than the platform overall that flywheel is driven by content, which is driving increased reach and viewership, which then.

<unk>.

Since its primary primarily Avon supported to sell more ads based on the supply from the Roku channel really the scale of the Roku channel in that growth trajectory is allowing us to invest more in the content and its combination of licensing we got 200, plus licensing partners, there, but but also.

In 2021, we basically came out with the Roku original side of the house.

And then the AG business. There is continued opportunity there so we're continuing to invest in.

Parts of this technology features there is a lot of innovation on our various roadmaps.

Yes.

Okay Alright.

Alright.

Yes.

Yes, sorry, sorry, I just want to jump in and just just from my point of view at a high level.

In some ways, it's very similar to what happened with my.

By Desktops for example, where.

So you spent a lot of different companies to make TC operating systems on PC software now there's every PC in the world comes to either Microsoft Windows are Apple Mac OS same thing happened with phones or used to be lots of different companies, making phones and phone software stacks and now every time that you can buy it comes with either Android or iOS and the same thing happening in Tvs Tvs.

Yes.

<unk> historically been very fragmented lots of different software providers lots of different places you can get a smart TV operating system.

And this consolidating.

That's going to consolidate down to a handful of winners and roku as the leading operating system in the United States right now.

We're making great progress.

In other countries as well.

And we're just extremely well positioned to keep investing in that leadership position and grow that leadership position as consolidation continues to happen in the TV and the platform space.

It also applies to.

Other areas like the AD stack scale are super important in the AD platform business. It applies to content. The Roku channel has been hugely successful for US we've been a leader in AD supported free content.

We've gone from licensing a few low cost old movies to producing multimillion dollars original and that's happened on the back of hugely increasing scale.

And that scale supports that kind of investment and so it's just it's just there's just a huge opportunity the stakes are getting bigger.

And we're in a unique position that we lead in all of these areas and we can grow our leadership position and so that's why for us.

Continuing to invest really just makes a lot of sense financially.

Quest to build a huge large business.

I think we ran this sort of accidental experiment.

Covid, where we pulled back on the gas on investment in the future and we saw how EBIT started flowing to the bottom line.

So that's that.

That's what will happen eventually we will.

Start to normalize but and.

These days, where we're still pretty early in the in the building of these streaming platforms, we want to maintain and keep winning with our leadership position.

So can I just ask is wage inflation.

A meaningful part of this increase or how much is just sort of like existing wage inflation versus how much is expanding the areas. You are spending on just given your comment that peoples such a big part of where the spending is going.

Yes, Steve I mean, certainly there it's a very competitive market out there. So certainly wages are going up and like you said, that's our number one component.

Our opex. So that is certainly part of what's been factored into the outlook.

But the main drivers, we just keep hearing a lot more people.

As we.

As we expand each of these key areas.

Just one small example, we didn't use to make a reasonable now we have a whole team working on Roku originals. We didn't use this ltvs in Brazil, now we're building more and more models for Brazil. So those are those are places those are examples of places where we increased our head count.

And the head count investment it usually comes ahead of the results we have to work on it for a year or two before you start seeing the results.

Thank you.

Our next question goes to Jason helpful thing of Oppenheimer. Your line is open.

Hey, guys. Thanks for taking my question, so I'm going to applaud the investment for years, we heard from investors that you aren't spending enough so I'm going to echo that.

Albeit a tough day to report earnings so sorry about that so I just wanted to ask I don't think anybody asked but did you clarify why you missed the revenue guide in the quarter, Steve just maybe kind of give us just some color there and then my second question.

I want to ask this.

So the announcement with the resale agreement with Entre vision, Mexico, maybe just talk a bit about what you expect out of that could that start to be like the first material bucket of international revenue.

International AD revenue. Thank you.

Scott can take the.

<unk> revenue question.

And then Steve do you want to answer the.

Another question.

Yes.

Jason Thanks for the kind words.

And I appreciate you.

Mentioning the investment investors that wanted to incremental investment. So yes, I mean, I think frankly, the incremental investments just shows we're bullish on the opportunity and the growth trajectories have great great Roadmaps.

Ahead of us So we think thats the right strategic decision as Anthony.

About the.

Industry is going to consolidate around and we're in a leading position.

In terms of Q4.

Yes, the biggest theme in terms of the results versus the original outlook expectations were around the level of supply chain disruptions that impacted the industry.

Our partners and us in particular, both on the account acquisition side like we said it was a smaller.

Smaller television sales size in the market because of the higher TV prices I had mentioned that TV prices were up 33% year over year in Q4, which.

Was it tamped down on demand and then we had specific.

TV OEM partners that had inventory availability challenges and so the main impact of that was certainly on the account acquisition side, but what we also talked about was we saw some some temporary softness in some verticals around auto and CPG, where they have their own inventory availability challenges.

This is Scott I'll, just tag on to that sort of that question and then I'll answer your question Jason was on Entravision in Mexico.

One other thing I'd say about about Q4.

Was we were comping over a really robust Q4 2020, if you roll.

Q4 for the AD business Q4 'twenty one.

Right.

Comp.

In addition to a couple of the.

Softness in a couple of the verticals as Steve mentioned were the real drivers of the.

Of the Miss off of the guide.

With regards to Mexico.

This is a great.

A story, great part of our narrative of going going abroad of course, we can.

Scale.

By getting TV to players on the consumer and then we try to drive engagement and then we monetize and in Mexico. We are we.

Yes. This is Anthony I mean, if you think about just international in the countries.

In the Americas, South of the United States.

The biggest one but the biggest market by far are Brazil, and Mexico. So that's why we focused on those primarily and we're doing great in both of those markets in Mexico. We're the number one streaming platform by hours streamed.

And we just announced that we passed 20% market share for Tvs with the Roku TV program.

And so our skills and growing there for a few years now thats why we are starting to.

Add on monetization in that in that region.

Thank you. Our next question comes from Jason Bazinet Citi. Your line is open.

There was a little bit of a question on the buy side about whether or not you guys would provide sort of a full year outlook, which I think is.

Unusual for you can correct me if I'm wrong.

I'd be curious about two things why you decided to do that and then to.

Sort of what you know.

What youre, what youre sort of level of conservatism is there isn't any sort of lay out our full year guide versus a quarterly guide, which presumably is much easier.

Scott I'm, sorry, Steve that's a Steve question.

Yes in terms of our approach to outlook.

Since the start of the pandemic so coming on two years, we have focused on providing a formal outlook for the near in quarter. In this case Q1, and providing some color on the longer term or the annual view to the extent, we have visibility and so.

What we talked about in the shareholder letter is continuing on with that strategy permanently.

And tweaking the outlook moving from a range to our best estimate and so.

That's really no different than what we've been doing for last couple of years I think it reflects the fact that obviously, we have better visibility into the short term.

We're kind of somewhere in between but we think that's prudent just given the level of uncertainty.

In that factor.

Okay. Thank you.

Thank you. Our next question comes from renewable military Bank of America. Your line is open.

Hi, Thank you for taking my questions I have two one on platform revenues and one on.

Your comments on the Roku OS with.

With respect to platform revenues.

<unk> on the full year, the M&A spend media and entertainment spend.

It was very strong it grew faster than the platform revenues can you give us your thoughts on M&A spend for the full year 2022, and just maybe talk about.

In the shareholder letter it says delayed AD spend and verticals most impacted by imbalances may continue into 2022, if we go back to the pandemic in <unk> of 'twenty.

Advertisers have pulled back but they came back pretty quick after that and <unk> were pretty strong quarters for your platform revenues.

Just reading the shareholder letter it seems that.

This comeback this year might be delayed so just your thoughts on when you think the CPG in the auto advertisers might come back.

Spend more on on the <unk>.

Excellent.

Scott.

Hey, Rupert.

Yes, let me take a take this in parts here first of all again.

Would.

Would not overstate the impact of those verticals, we saw some softness I think it's anybody's guess.

How the CPG and auto businesses deal with their supply chain issues, but we see robustness broadly across the rest of the AD business and so.

Yes.

It's a relatively minor factor in the Grand scheme of the Q4 and our outlook going forward.

With regards to the M&A business, we don't guide to that business, specifically I'll, just say that it continues to grow strongly.

<unk>.

Did they get services have launched on roku, but they continue to spend very significantly with us because theyre not done acquiring users and as they hit scale retaining users becomes critical.

Very competitive environment, we've seen quite a bit of share shifting within the top 10 apps as they compete for user attention consumers aren't going to have.

Subscriptions to all of these services they are going to pick and choose and in a streaming world it's easy for them to.

Subscribe and unsubscribe and so there's a lot of competitive pressure on our partners to stay front and center when they invest in big new programming, they want to get behind it and promoted aggressively to users and as I answered. The question earlier, we're just one of the best possible choices for a program or to utilize it.

Drive awareness and tune in to their programming. So overall, we remain really really bullish on the.

The future of the entity business I don't know, if Steve or Anthony if you want to add anything.

Well this is Steve I'll, just add because you mentioned the kind of Q2 2020, and it popped back pretty quick with advertisers.

Yes that was much more of the.

Stabilize the ship lower the operating expense burn.

And see where the world's going in this case, where you have certain weakness.

In the advertising or a temporary slowdown in the advertising in large part. These companies are selling everything they can produce and I can tell you being in the market for an auto.

Lot of pricing power on what they are producing right and so they're actually in a position of strength as opposed to a position of concern and weakness, but because of the supply chain constraints, there's kind of an artificial disconnect where they're not having to market, but there is a strong case for marketing and advertising once things normalize on that front.

But to Scott's point I think it's.

Certainly the supply chain disruptions are the main determinant on in certain verticals about.

Kind of what their whether their spend levels will be normalized or not but I actually think a lot of these companies are in a very strong position and it's just a temporary disconnect of supply and demand.

It is a temporary stop in spending but otherwise they are in great shape versus at the start of the pandemic they were quite fearful for their therapy wellbeing.

So roughly I don't know if that answered your question or not and also.

You had something about you wanted to ask about Roku OS I wasn't sure.

The question there.

Thank you. Our final question is rich Greenfield of light Sir Your line is open.

Hi, Thanks for taking my questions.

I guess two big picture questions one.

Anthony when you think about sort of the change in consumer behavior moving from dongles to Tvs.

Just wondering.

Do you have any way of telling how many people does any one of the things people are investors fear is that as people move from sort of a roku dongles and then they buy a new television.

Some of those are sort of inactive or those sort of active accounts become inactive accounts I'm. Just wondering is sort of like is this.

A shift from Dongles television play out how do you like what are you seeing what are you seeing over the last year and what do you think happens over the next couple of years.

And then obviously I mean, it's sort of the obvious that everyone is sort of panic.

About the state of streaming after seeing the results from some of the players most notably Netflix earlier in the quarter.

Sort of revising long term Tam and I just.

When you think about the Tam of streaming.

$300 million 500 million or billion adjacent Kayalar said someone's going to get to $1 billion curious what you think of the streaming market globally, and where you think the Tam really lies.

Time to get to that Tam. Thanks.

Sure Great questions, we have zero minutes left I'll do my best.

Let's see on television streaming players.

<unk>.

They are both important to us to our business.

And we still we.

Millions of millions of both.

I think.

And I think so some of the dynamics there are.

That we sell a lot of streaming players to people that have an older TV or a competitor smart TV and it doesn't quite have the features that they would like to get or the content that they want.

And then when someone buys a new television.

Take the older TV and move it into a bedroom.

They'll often want to upgrade that with streaming player and so there's just a lot of different dynamics there theyre both important they're both big.

Sources of active accounts they are both not going away anytime soon.

<unk>.

But I would say I guess strategically Tvs are probably more important.

Because.

When you buy a smart TV, if you buy smart Roku TV than whatever you had before you don't need because it's a great. It's a great solution.

We'll keep them for about seven years roughly.

His question is about how long will software updates happen on the smart TV, we try very hard to keep updating our smart Tvs for a long time.

We're better than everyone I think everyone else in the industry, who will sometimes abandoned.

<unk> stopped doing software updates to their TV. After a few years that also becomes a great place for us to sell our streaming player too so they're both they're both really important and if you look when you go overseas.

There's a lot of older Tvs and so they're both they're both just very important for us that have suddenly different dynamics, but I think the main message is just we need to do both and we do do both very well.

In terms of the Tam.

Okay.

If it is every broadband households.

<unk> TV is going to switch to streaming so it's 1 billion households.

Yes.

Do you have any do you have any feel of just why it slowed down so much.

Sorry.

What do you have any sense of like why do you think theres been a slowdown thats sort of panic investors.

Talking about <unk> I'm talking about the entire streaming sector that people are sort of starting to really just get concerned.

Well I think.

Go ahead Scott.

Hey look.

The market's reception to this or that streaming companies results and.

Notwithstanding as Anthony said, the number of households, consuming TV, what they spend on TV, what their eyeballs are worth in terms of advertising hasn't changed through all of it.

So the Tam really has not changed and and while I think individuals' streamers.

They're there.

Their fate in their perception in the market will rise and fall. According to their performance at the end of the day. They are all going to be on roku and competing for share.

And we see that playing out.

Like never before on our platform.

And it's great ultimately for the consumer and great for Roku.

Yes, I mean, I would just say there's important differences strategic differences between a screening service on a streaming platform like roku.

They're both.

Great businesses to be in right now.

In terms of the fact that they are all growing but our goal is the platform has to offer.

As many different services as possible and give our consumers options.

And.

I think if you're a streaming service youre dynamics or different use.

If you're one of the early streaming services you didn't really have much competition for a long time and now consumers have other options. So that's one dynamic.

And also Theres, just a lot of change happening right now so.

Adam.

And then the rise of free free streaming services like the Roku channel, which is doing gangbusters I mean, theres, just a lot of different dynamics affecting the industry, but at a high level for us.

We've built a business model, where we can monetize.

And we do monetize off.

Most streaming services on our platform and provide tools to allow them to be successful and provide them try and be a great partner to try and provide a good marketplace.

Try and help the consumer find content and.

And just provide a solution that works for the entire industry.

And just.

Of course, <unk> is going to keep growing and there'll be 1 billion households.

Use the smart TV to watch television.

And there's not going to be there is only going to you.

Small number of those different platforms that win.

Okay.

Thank you.

I'd like to turn the call back over to Andy for any closing remarks.

Yes.

Alright, well I just want to say thanks to everyone. Thanks to our employees.

And our investors for joining the call today, and we're looking forward to.

Continuing our growth and the robust streaming business therein, continuing so thanks, everyone.

Thank you ladies and gentlemen, this does conclude today's conference. Thank you all.

May now disconnect have a great day.

Q4 2021 Roku Inc Earnings Call

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