Q4 2023 Roku Inc Earnings Call

February 15, 2024

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Speaker Change: Thank you.

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Operator: I'm not doing this the way you would. Welcome to the Rich Eisen Show, right here on the Roku Channel. Here he is, Chef Morimoto.

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Operator: And here's the best part of it: Good day, and thank you for standing by. Welcome to the fourth quarter 2023 Roku Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone.

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Speaker Change: We are.

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Conrad Grodd: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to the vice president of investor relations, Conrad Grodd. Thank you, operator.

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Speaker Change: Good day and thank you for standing by welcome to the fourth quarter 2023, Roku earnings Conference call. At this time all participants are in a listen only mode. After the speakers.

Conrad Grodd: Good afternoon, and welcome to Roku's fourth quarter and year-end 2023 earnings call. I'm joined today by Anthony Wood, Roku's founder and CEO, and Dan Jedda, our CFO. Also on today's call for Q&A are Charlie Collier, President, Roku Media, and Mustafa Ozgen, President, Devices. 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.com/investor. Our comments and responses to your questions on this call reflect management's views as of today only, and we disclaim any obligation to update this information. On this call, we'll 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 the macroeconomic environment.

Speaker Change: Some patients it will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone yogurt in here an automated message advice in your hand is raised.

Your question. Please press Star one again, please be advised that today's conference is being recorded.

Speaker Change: I'd now like to hand, the conference over to the Vice President of Investor Relations Conrad Grodd.

Conrad Grodd: Thank you operator, good afternoon, and welcome to Roku as fourth quarter and year ended 2023 earnings call I'm joined today by Anthony Wood, <unk>, founder and CEO and Dan <unk>. Our CFO also on todays call for Q&A are Charlie Collier, President Roku media and Mr. Austin President device.

Conrad Grodd: <unk>.

Conrad Grodd: 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 forward slash investor our comments and responses to your questions on this call reflect management's views as of today, only and we disclaim any obligation to update this information.

Conrad Grodd: <unk>.

Conrad Grodd: 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 the macroeconomic environment.

Conrad Grodd: These statements are based on our current expectations, forecasts, and assumptions, and involve risks and uncertainties. Please refer to our shareholder letter in 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. 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 the results for the comparable period of 2022. Now, I'd like to hand the call over to Anthony.

Conrad Grodd: These statements are based on our current expectations forecasts and assumptions and involve risks and uncertainties. Please refer to our Cheryl letter.

Conrad Grodd: <unk> 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.

Conrad Grodd: All comparisons on this call will be against our results for the comparable period of 2022, now I would like to hand, the call over to Anthony.

Anthony J. Wood: Thanks Conrad looking.

Anthony J. Wood: Thanks, Conrad. Looking back at 2023, I'm proud of our execution. We delivered positive adjusted EBITDA and pre-cash flow a year ahead of schedule by focusing on operational improvements and platform revenue growth, which we grew double-digits. We also drove record growth in our scale and engagement. A large share of my management team's attention in 2023 was spent on OPEX reduction and internal operational improvements. This year, we will be redirecting much of our attention to platform growth and innovation, where I see lots of opportunity. The core strategy for us is to take better advantage of our position as the programmer of the home screen to our 80 million active accounts globally. We use this to grow ad reach, which correlates to ad revenue, as well as through our streaming service distribution activities.

Anthony J. Wood: Looking back at 2023, I'm proud of our execution.

Anthony J. Wood: We delivered positive adjusted EBITDA and free cash flow a year ahead of schedule by focusing on operational improvements and platform revenue growth, which we grew double digits.

Anthony J. Wood: We also drove record growth in our scale and engagement.

Anthony J. Wood: A large share of my management teams attention in 2023 was spent on opex reduction and internal operational improvements.

Anthony J. Wood: This year, we will be redirecting much of our attention to platform growth and innovation where.

Anthony J. Wood: Where I see lots of opportunity.

Anthony J. Wood: Core strategy for us is to take better advantage of our position as the program or the home screen for our 80 million active accounts globally.

Anthony J. Wood: We use this to grow AD reach which correlates to add revenue as well as to grow our streaming service distribution activities.

Anthony J. Wood: For example, RokuCity is popular for the way it seamlessly integrates iconic brand imagery like McDonald's golden arches, as well as movies and TV show promotions, in ways that are delightful for viewers. Newer examples include our All Things Food and All Things Home viewer experiences, which aggregate the best culinary and home and garden content on the Roku platform. Or the Roku Sports Experience, which aggregates sporting events in a single central location. These are some early examples, and we are focused on improving these early efforts, as well as new experiences to engage viewers and help them find content across the streaming universe in ways that also drive monetization. Thinking about the state of the industry, I see two trends that are particularly important for us. One is the enormous volume of streaming content.

Anthony J. Wood: For example, Roku city is popular for the way it seamlessly integrates iconic brand imagery like Mcdonald's Golden arches, as well as movies and television show promotion.

Anthony J. Wood: In ways that are delightful for viewers.

Anthony J. Wood: Newer examples include our all things food and all things home viewer experiences, which aggregate the best culinary and home and garden content on the Roku platform.

Anthony J. Wood: Or the Roku sports experience, which aggregate sporting event in a single central location.

Anthony J. Wood: These are some early examples, and we are focused on improving these early efforts, as well as new experiences to engage viewers and help them find content across the streaming internet in ways that also drive money. Thinking about the state of the industry, I see two trends that are particularly important for us. One is the enormous volume of streaming content.

Anthony J. Wood: These are some early examples and we are focused on improving these early efforts as well as new experiences to engage viewers and help them find content across the screaming universe in ways that also drive monetization.

Anthony J. Wood: Thinking about the state of the industry, I see two trends that are particularly important for us. One is the enormous volume of streaming content. As I just mentioned, helping our viewers easily navigate and find what they want to watch is a big opportunity for Roku. Second, the industry has increased its focus, now more than ever, on building thriving and sustainable businesses. This means more ad-supported streaming service years, which will further accelerate the overall shift of ad dollars from traditional TV to streaming. Roku has the tools and expertise to help streaming services grow engagement, which is critical in an ad-supported environment. We expect strong demand for ad-supported tiers on Roku as many users seek value-priced streaming options. With our platform advantages, Love brand, first party relationships with 80 million active accounts, and deep user engagement, we're well positioned to accelerate revenue growth in future years. Now, I'll turn it over to Dan to discuss our results. Thanks, Anthony. In Q4, we grew active accounts by $4.2 million, ending 2023 with $80 million.

Anthony J. Wood: Thinking about the state of the industry ICT trends that are particularly important for US one is the enormous volume of screaming content as I, just mentioned, helping our viewers easily navigate and find what they want to watch is a big opportunity for roku.

Anthony J. Wood: As I just mentioned, helping our viewers easily navigate and find what they want to watch is a big opportunity for Roku. Second, the industry has increased its focus, now more than ever, on building thriving and sustainable businesses. This means more ad-supported streaming services, which will further accelerate the overall shift of ad dollars from traditional TV to streaming. Roku has the tools and expertise to help streaming services grow and engage, critical in a NAFTA-supported environment. We expect strong demand for ad-supported tiers on Roku as many users seek value-priced streaming. With our platform advantages, Love Brand, first party relationships with 80 million active accounts, and deep user engagement.

Anthony J. Wood: Second the industry has increased its focus now more than ever I'm building thriving in sustainable businesses.

This means more AD supported streaming service tiers, which will further accelerate the overall shift of AD dollars from traditional TV to streaming.

Anthony J. Wood: Roku has the tools and expertise to help streaming services grow engagement, which is critical in an AD supported environment.

Anthony J. Wood: We expect strong demand for AD supported tiers on roku as many users seek value price screaming auctions.

Anthony J. Wood: With our platform advantages Love brand first party relationships with 80 million active accounts and deep user engagement, we're well positioned to accelerate revenue growth in future years.

Dan Jetta: We're well positioned to accelerate revenue growth in future years. Now, I'll turn it over to Dan to discuss our, Thanks, Anthony. In Q4, we grew active accounts by $4.2 million, ending 2023 with $80 million.

Anthony J. Wood: Now I'll turn it over to Dan to discuss our results.

Dan: Thanks Anthony.

Dan Jedda: Thanks, Anthony. In Q4, we grew active accounts by $4.2 million, ending 2023 with $80 million. Full-year net ads of $10 million were above 2019 and similar to 2022 levels, driven primarily by the Roku TV program in the US and international markets. We're also growing engagement on our platform, with 2023 streaming hours up 18.6 billion year over year to a record 106 billion hours. We grew both Q4 and full year streaming hours by 21% year over year. Average streaming hours per active account per day were 4.1 hours in Q4 2023, up from 3.8 hours in Q4 2022 and 3.6 hours in Q4 2021. Average viewing time on traditional TV is 7.5 hours per day in the US, providing a significant opportunity for us to continue to grow our engagement. In Q4, total net revenue grew 14% year-over-year to $984 million. Platform revenue was $829 million, up 13% year-over-year, driven by both streaming services distribution and video advertising activities, offset by M&E. Streaming services distribution activities grew faster than overall platform revenue, benefiting from increased subscription signups along with recent price increases from SVOD partners. However, the year-over-year growth rate of streaming services distribution in Q4 was lower than the year-over-year growth rate in Q3 due to tougher comps in Q4.

Dan: In Q4, we grew active accounts by $4 2 million ending 2023 with $80 million.

Dan Jetta: Full-year net ads of 10 million were above 2019 and similar to 2022 levels, driven primarily by the Roku TV program in the US and international market. We're also growing engagement on our platform, with 2023 streaming hours up 18.6 billion year over year to a record 106 billion hours. We drew both Q4 and full year streaming hours by 21% year over year. Average streaming hours per active account per day were 4.1 hours in Q4 2023, up from 3.8 hours in Q4 2022 and 3.6 hours in Q4 2021.

Dan: Full year net adds of $10 million or above 2019, and similar to 2022 levels driven primarily by the Roku TV program in the U S and international markets.

Dan: We're also growing engagement on our platform with 2023 streaming hours up $18 6 billion year over year to a record 106 billion hours.

Dan: We grew both Q4 and full year streaming hours, 21% year over year.

Dan: Average streaming hours per active account per day or $4. One hours in Q4 2023 up from three eight hours in Q4, 2022 and $3 six hours in Q4 2021.

Dan Jetta: Average viewing time on traditional TV is 7.5 hours per day in the US, providing a significant opportunity for us to continue to grow our engaged, In Q4, total net revenue grew 14% year-over-year to $984 million. Platform revenue was $829 million, up 13% year-over-year, driven by both streaming services distribution and video advertising activities, offset by M&E. Streaming services distribution activities grew faster than overall platform revenue, benefiting from increased subscription signups along with recent price increases from SVOD partners. However, the year-over-year growth rate of streaming services distribution in Q4 was lower than the year-over-year growth rate in Q3 due to tougher comps in Q4.

Dan: Average viewing time on traditional TV is seven five hours per day in the U S providing significant opportunity for us to continue to grow our engagement.

Dan: In Q4 total net revenue grew 14% year over year to $984 million.

Dan Jedda: In Q4, total net revenue grew 14% year-over-year to $984 million. Platform revenue was $829 million, up 13% year-over-year, driven by both streaming services distribution and video advertising activities, offset by M&E. Streaming services distribution activities grew faster than overall platform revenue, benefiting from increased subscription signups along with recent price increases from SVOD partners. However, the year-over-year growth rate of streaming services distribution in Q4 was lower than the year-over-year growth rate in Q3 due to tougher comps in Q4. Devices revenue increased 15% year-over-year in Q4, driven by Roku-branded TVs, which launched in March 2023. ARPU was 39.92 in Q4 on a trailing 12 month basis, down 4% year over year, reflecting an increasing share of active accounts in international markets, where we are currently focused on growing scale and engagement. Q4 total gross margin was 44%. Q4 platform gross margin of 55% was stable year-over-year and sequentially when excluding the $62 million restructuring charge in Q3 related to the removal of select license and produced content from the Roku chain. Q4 devices' margin was negative 13%, which was up roughly 19 points year over year as a result of improved supply chain costs and limited promotional discounts.

Dan: Platform revenue was $829 million up 13% year over year, driven by both streaming services distribution and video advertising activities offset by M&A.

Streaming services distribution activities grew faster than overall platform revenue benefiting from increased subscription sign ups, along with recent price increases from <unk> partners.

Dan: However, the year over year growth rate of streaming services distribution in Q4 was lower than the year over year growth rate in Q3 due to tougher comps in Q4.

Dan Jedda: Devices revenue increased 15% year-over-year in Q4, driven by Roku-branded TVs, which launched in March 2023. ARPU was 39.92 in Q4 on a trailing 12 month basis, down 4% year over year, reflecting an increasing share of active accounts in international markets, where we are currently focused on growing scale and engagement. Q4 total gross margin was 44%. Q4 platform gross margin of 55% was stable year-over-year and sequentially when excluding the $62 million restructuring charge in Q3 related to the removal of select license and produced content from the Roku chain. Q4 devices' margin was negative 13%, which was up roughly 19 points year over year as a result of improved supply chain costs and limited promotional discounts.

Dan: Devices revenue increased 15% year over year in Q4, driven by Roku branded Tvs, which launched in March 2023.

Dan Jedda: ARPU was 39.92 in Q4 on a trailing 12 month basis, down 4% year over year, reflecting an increasing share of active accounts in international markets, where we are currently focused on growing scale and engagement. Q4 total gross margin was 44%. Q4 platform gross margin of 55% was stable year-over-year and sequentially when excluding the $62 million restructuring charge in Q3 related to the removal of select licensed and produced content from the Roku channel. Q4 devices' margin was negative 13%, which was up roughly 19 points year over year as a result of improved supply chain costs and limited promotional discounts.

Dan: <unk> was $39 92 in Q4 on a trailing 12 month basis down 4% year over year, reflecting an increasing share of active accounts in international markets, where we're currently focused on growing scale and engagement.

Dan: Q4, total gross margin was 44%.

Dan: Q4 platform gross margin of 55% was stable year over year and sequentially when excluding the 62 million restructuring charge in Q3 related to the removal of select licensed and produced content from the Roku channel.

Dan: Q4 devices margin was negative, 13%, which was up roughly 19 points year over year as a result of improved supply chain costs and limited promotional discounts.

Dan Jedda: Q4 adjusted EBITDA was $48 million, which was $38 million above our outlook. The better than expected performance was driven by our platform segment along with improvements to our operating expense profile. Please note that a one-time charge of $42 million, primarily related to lease impairments and workforce reductions, was added back to adjusted EBITDA. Pre-cash flow was $176 million on a trailing 12-month basis, and we ended the quarter with over $2 billion in cash and cash equivalents. Let me turn to our outlook for the first quarter. We anticipate total net revenue of $850 million, gross profit of $370 million, with a gross margin of 43.5%, and Breakeven Adjusted EBIT.

Dan Jedda: Q4 adjusted EBITDA was $48 million, which was $38 million above our outlook. The better than expected performance was driven by our platform segment along with improvements to our operating expense profile. Please note that a one-time charge of $42 million, primarily related to lease impairments and workforce reductions, was added back to adjusted EBITDA. Free cash flow was $176 million on a trailing 12-month basis, and we ended the quarter with over $2 billion in cash and cash equivalents. Let me turn to our outlook for the first quarter.

Dan: Q4, adjusted EBITDA was $48 million, which was $38 million above our outlook.

Dan: The better than expected performance was driven by our platform segment, along with improvements to our operating expense profile.

Dan: Please note that a one time charge of $42 million, primarily related to lease impairments and workforce reduction was added back to adjusted EBITDA.

Dan: Free cash flow was $176 million on a trailing 12 month basis, and we ended the quarter with over 2 billion in cash and cash equivalents.

Dan Jetta: Let me turn to our outlook for the first quarter. We anticipate total net revenue of $850 million, gross profit of $370 million, with a gross margin of 43.5%, and Breakeven Adjusted EBIT.

Speaker Change: Let me turn to our outlook for the first quarter.

Speaker Change: We anticipate total net revenue of $850 million.

Dan Jedda: We anticipate total net revenue of $850 million, gross profit of $370 million, with gross margin of 43.5%, and breakeven adjusted EBITDA. While we remain mindful of the challenging macro environment and uneven ad market recovery, we plan to increase revenue and free cash flow and achieve profitability over time. For total net revenue, we anticipate a seasonal percentage decline, in line with Q1 2023. We will face difficult year-over-year growth rate comparison in streaming services distribution and a challenging M&E environment for the rest of this year. We expect to maintain our Q4 2023 year-over-year platform growth rate of 13% in Q1. We expect a continued mixed shift away from M&E activities, which will compress platform margins in the near term. For Q1, we expect platform margin to be similar to Q1 of last year, of roughly 52%.

Speaker Change: Gross profit of $370 million with gross margin of 43, 5% and.

Speaker Change: And breakeven adjusted EBITDA.

Dan Jetta: While we remain mindful of the challenging macro environment and uneven ad market recovery, we plan to increase revenue and pre-cash flow and achieve profitability over time. For total net revenue, we anticipate a seasonal percentage decline, in line with Q1 2023. We will face difficult year-over-year growth rate comparisons in streaming services distribution and a challenging M&E environment for the rest of this year. We expect to maintain our Q4 2023 year-over-year platform growth rate of 13% in Q1. We expect a continued mixed shift away from M&E activities, which will compress platform margins in the near term. For Q1, we expect platform margin to be similar to Q1 of last year, at roughly 52%.

Speaker Change: While we remain mindful of the challenging macro environment and uneven AD market recovery, we plan to increase revenue and free cash flow and achieve profitability over time.

Speaker Change: Our total net revenue, we anticipate a seasonal percentage decline.

Speaker Change: In line with Q1 2023.

Speaker Change: So we will face difficult year over year growth rate comparison, and streaming services distribution and a challenging M&A environment for the rest of this year, we expect to maintain our Q4 2023 year over year platform growth rate of 13% in Q1.

Speaker Change: We expect a continued mix shift away from M&A activities, which will compress platform margins in the near term.

Speaker Change: For Q1, we expect platform margin to be similar to Q1 of last year of roughly 52%.

Speaker Change: On the devices side, we expect margins to improve from negative 13% in Q4 to negative mid single digits in Q1.

Operator: On the devices side, we expect margins to improve from negative 13% in Q4 to negative mid-single digits in Q1. Our outlook for the sequential improvement reflects a lighter retail promotional period in Q1. Turning to OPEX, we anticipate Q1 year-over-year growth rates of negative low to mid-teens, a significant improvement from OPEX year-over-year growth of approximately 40% in Q1-23. We'll continue to operate our business with discipline with a focus on driving increasingly positive pre-cash flow over time. After achieving positive adjusted EBITDA for full year 2023, we expect to deliver further improvements for full year 2024. As we've stated previously, we will balance this commitment with reinvestment to continue to expand our scale, engagement, and monetization. With that, let's take questions. Operator? Thank you, and as a reminder, to ask a question, simply press star 11 on your telephone and wait for your name to be announced. To withdraw the question, press star 11 again.

Dan Jedda: On the devices side, we expect margins to improve from negative 13% in Q4 to negative mid-single digits in Q1. Our outlook for the sequential improvement reflects a lighter retail promotional period in Q1. Turning to OPEX, we anticipate Q1 year-over-year growth rates of negative low to mid-teens, a significant improvement from OPEX year-over-year growth of approximately 40% in Q1 '23. We'll continue to operate our business with discipline with a focus on driving increasingly positive free cash flow over time. After achieving positive adjusted EBITDA for full year 2023, we expect to deliver further improvements for full year 2024. As we've stated previously, we will balance this commitment with reinvestment to continue to expand our scale, engagement, and monetization. With that, let's take questions. Operator?

Speaker Change: Our outlook for the sequential improvement reflects a lighter retail promotional period in Q1.

Speaker Change: Turning to Opex, we anticipate Q1 year over year growth rate to negative low to mid teens, a significant improvement from opex year over year growth of approximately 40% in Q1 'twenty three.

Speaker Change: We will continue to operate our business with discipline with a focus on driving increasingly positive free cash flow over time.

Speaker Change: After achieving positive adjusted EBITDA for full year 2023, we expected to deliver further improvements for full year 2024.

Speaker Change: As we've stated previously we will balance this commitment with reinvestment to continue to expand our scale engagement and monetization.

Speaker Change: With that let's take questions operator.

Speaker Change: Thank you and as a reminder to ask a question simply press Star one one on your telephone and wait for your name to be announced to withdraw the question Press Star one again.

Speaker Change: Our first question comes from the line of Sean <unk> with Susquehanna International Group. Please proceed.

Sean: Hey, guys nice job on the execution.

Sean: Had a couple of questions.

Sean: The first one what are the biggest priority.

For Roku this year, Anthony and then just to follow up on Amazon.

Sean: Are you guys thinking about the prime Avon lines.

Operator: Thank you, and as a reminder, to ask a question, simply press star 11 on your telephone and wait for your name to be announced. To withdraw the question, press star 11 again. Our first question comes from the line of Shyam Patil with Susquehanna International Group. Please proceed.

Sean: This threat as an opportunity maybe if you can talk about that a little bit. Thank you.

Sean: Hi, Sean Thanks for that this is Anthony.

Anthony J. Wood: Well like I just meant.

Anthony J. Wood: I mentioned in my prepared remarks last year of 2023.

Anthony J. Wood: As a management team we were we were very focused on improving our operational effectiveness efficiencies.

Anthony J. Wood: Right sizing Opex and we made a lot of progress in that area achieving.

Shyam Patil: Our first question comes from the line of Shyam Patil with Susquehanna International Group. Please proceed. Hey guys, nice job on the execution.

Our first question comes from the line of Shyam Patil with Susquehanna International Group. Please proceed.

Positive EBITDA for the full year a year ahead of our targets. So we're very happy with that I mean, obviously, we're going to continue this year.

Hey guys, nice job on the execution. I had a couple of questions. The first one: what are the biggest priorities for Roku this year, Anthony? And then, just to follow up on Amazon, how are you guys thinking about the Prime Video launch? You know, is this a threat? Is this an opportunity? Maybe you can talk about that a little bit. Thank you. Hey Shyam, thanks for that. This is Anthony.

Shyam Patil: Hey guys, nice job on the execution. I had a couple of questions. The first one: what are the biggest priorities for Roku this year, Anthony? And then, just to follow up on Amazon, how are you guys thinking about the Prime AVOD launch? You know, is this a threat? Is this an opportunity? Maybe if you could talk about that a little bit. Thank you.

Anthony J. Wood: Two.

Anthony J. Wood: Poussaint operational efficiencies, but we will have a lot more time this year as the management team to focus on innovation and growth and that's where I'll be spending a lot of my time.

Shyam Patil: I had a couple of questions. The first one: what are the biggest priorities for Roku this year, Anthony? And then, just to follow up on Amazon, how are you guys thinking about the Prime Video launch? You know, is this a threat? Is this an opportunity?

Anthony J. Wood: It is just driving some of the funds are improving and adding things to our platform that will drive more growth over the long term. So that's a big focus for us in 2024 is innovation and growth and.

Anthony J. Wood: Maybe I can just give a couple examples of the kinds of things that we're doing there just to give you a flavor for it I mean, there's a lot of things theres a lot of opportunity in this area, but.

Anthony J. Wood: Maybe you can talk about that a little bit. Thank you. Hey Shyam, thanks for that. This is Anthony.

Anthony J. Wood: Hey Shyam, thanks for that. This is Anthony. Well, like I just mentioned in my prepared remarks, last year, 2023, you know, as a management team, we were very focused on improving our operational effectiveness, efficiencies, right-sizing OpEx, and we made a lot of progress in that area, achieving, you know, positive EBITDA for the full year, a year ahead of our target. So we're very happy with that. I mean, obviously, we're going to continue this year to push on operational efficiencies, but we'll have a lot more time this year as a management team to focus on innovation and growth. And that's where I'll be spending a lot of my time, is just driving some of the [inaudible] or improving and adding things to our platform that will drive more growth over the long term. So that's the big focus for us in 2024 is innovation and growth. And maybe I could just give you a couple examples of the kinds of things that we're doing there, just to give you a flavor for it. I mean, there are a lot of things, there's a lot of opportunity in this area. So, one example is, I made some organizational changes recently, and one of the changes is that I tasked one of our most strategic executives, who reports to me, to focus on driving our subscription business. And, you know, we have a large subscription business, both for the Roku Channel premium subscriptions, as well as building and driving subscriptions for our streaming service partners. So it's not something that's new to us, but it's something that could be a lot larger and is a big opportunity for us. And so we're consolidating all the activities under one leader who reports to me.

Anthony J. Wood: So one example.

Anthony J. Wood: As I made some organizational changes recently and one of the changes is that Ipass one of our most strategic executives.

Anthony J. Wood: Well, like I just mentioned in my prepared remarks, last year, 2023, you know, as a management team, we were very focused on improving our operational effectiveness, efficiencies, right-sizing the decks, and we made a lot of progress in that area, achieving, you know, positive EBITDA for the full year, a year ahead of our target, so we're very happy with that. I mean, obviously, we're going to continue to push on operational efficiencies this year. But we'll have a lot more time this year as a management team to focus on innovation and growth. And that's where I'll be spending a lot of my time driving some of the fun or improving and adding things to our platform that will drive more growth over the long term. So that's the big focus for us in 2024: innovation and growth. Maybe I could just give you a couple examples of the kinds of things that we're doing there, just to give you a flavor for it. I mean, there are a lot of things.

Anthony J. Wood: Who reports to me to focus on driving our subscription business.

Anthony J. Wood: And we have a we have a large subscription business.

Anthony J. Wood: The Roku channel premium subscriptions as well as building and driving subscriptions for our streaming service partners.

Anthony J. Wood: It's not something that's new to us, but it's something that.

Anthony J. Wood: It could be a lot larger and is a big opportunity for us and so we're consolidating all of our activities under one leader who reports to me, we're going to increase resources there.

Anthony J. Wood: And I just think that's something that we can we can make a lot of good progress on so thats. One example.

Another example.

Anthony J. Wood: Is one of our core strategies and monetization is too.

Anthony J. Wood: Is to take advantage of our of the fact that 80 million households.

Anthony J. Wood: Approximately 80 million households, turn on their TV and start their streaming experience with roku.

Anthony J. Wood: The first thing they see when they turn on their TV is the roku.

Anthony J. Wood: Home screen.

Anthony J. Wood: And that's the place where they start to decide what do they want to watch what are they going to watch and so one of the things that we do is we build experiences that engage viewers that are entertaining and to help them decide where.

Anthony J. Wood: Which after they want to run what TV show, what TV show they want to watch and you can see that in things.

Anthony J. Wood: For example, there are features that we've already launched the Ddos. So for example.

Anthony J. Wood: We have the sports zone.

With sports is an area that is particularly challenging for viewers because it's so fragmented it's hard for them to figure out.

Anthony J. Wood: There's a lot of opportunity in this area. So, one example is, I made some organizational changes recently, and one of the changes is that I tasked one of our most strategic executives, who reports to me, to focus on driving our subscription business. And, you know, we have a large subscription business, both for the Roku Channel premium subscriptions, as well as building and driving subscriptions for our streaming service partners. So it's not something that's new to us, but it's something that could be a lot larger and is a big opportunity for us. And so we're consolidating all the activities under one leader who reports to me.

Anthony J. Wood: Where the game that they want to watch is playing.

Anthony J. Wood: It changes by day of week changes based on the the league is very complex and so our sports on helps viewers find.

Anthony J. Wood: So, one example is, I made some organizational changes recently, and one of the changes is that I tasked one of our most strategic executives, who reports to me, to focus on driving our subscription business. And, you know, we have a large subscription business, both Roku Channel premium subscriptions, as well as building and driving subscriptions for our streaming service partners. So it's not something that's new to us, but it's something that could be a lot larger and is a big opportunity for us. And so we're consolidating all the activities under one leader who reports to me. We're gonna increase resources there, and I just think it's something that we can make a lot of good progress on. So that's one example.

Anthony J. Wood: Games figure out where they're playing learn.

Anthony J. Wood: Learn more about sports on the platform as one example.

Things, we've launched more recently all things food.

Anthony J. Wood: Which helps with where we curate.

Anthony J. Wood: The best food content across our platform what to watch. So these are the kinds of experiences working on them. He called US programming, our home screen and it's a core strategy for us it's a big area of focus.

Anthony J. Wood: And it's basically.

Anthony J. Wood: Key strategy for us to engage with our viewers, while they're trying to decide what to watch and use that to drive drive viewing.

Anthony J. Wood: Both our owned and operated apps, but also in third party app. So it drives monetization at the same time it helps solve the big problems. The USAA, which is trying to decide what to watch across all of the content streaming universe. So those are just two examples.

Anthony J. Wood: But the big focus.

Anthony J. Wood: We're gonna increase resources there, and I just think it's something that we can make a lot of good progress on. So that's one example.

Anthony J. Wood: On innovation and growth for my management team this year.

Anthony J. Wood: And then I think your second question was about <unk> launches.

Speaker Change: So maybe what I'll say, there just kind of taking it up a level.

Anthony J. Wood: Another example is one of our core strategies in monetization is to take advantage of the fact that 80 million households, approximately 80 million households turn on their TV and start their streaming experience with Roku. You know, the first thing they see when they turn on their TV is the Roku Home Screen, and it's the place where they start to decide what do they want to watch, what are they going to watch. And so one of the things that we do, is we build viewer experiences to engage viewers that are entertaining, and that help them decide where, you know, which app do they want to run, watch TV shows, what TV shows they want to watch. And you can see that in things, you know, just for example, there are features that we've already launched to do this. So, for example, you know we have the Sports Zone, sports is an area that's particularly challenging for viewers because it's so fragmented. It's hard for them to figure out where the game that they want to watch is playing.

Speaker Change: What are the trends that's happening right now in the streaming world is that the streaming industry is maturing.

Speaker Change: So if you take <unk> for example, I mean, a couple of years ago. All the streaming services, we're just very focused on driving subscribers.

Speaker Change: At almost any cost now the industry is very focused on.

Speaker Change: Being <unk>.

Billings sustainable thriving businesses and one of the tools is being used is to add AD supported entry level apps for the tiers to streaming services. The mainstream solution is something that's been in the industry has done.

Anthony J. Wood: And it's the place where they start to decide what they want to watch, what they're going to watch. And so one of the things that we do is we build experiences to engage viewers that are entertaining, and to help them decide where, you know, which app they want to run, watch TV shows, what TV shows they want to watch. And you can see that in things, you know, just for example, there are features that we've already launched to do this. So, for example, sports is an area that's particularly challenging for viewers because it's so fragmented. It's hard for them to figure out where the game that they want to watch is being played.

Speaker Change: Since the beginning for TV, so it's not new but for me. It's a sign that the industry is really starting to mature.

Speaker Change: And I think the streaming industry and I think if you.

Speaker Change: Another example of I think.

Evidenced that the streaming industry is starting to mature is.

Speaker Change: The sports I mean, we're seeing new sports services launched used to be that you couldnt get access to sports content with that.

Speaker Change: Having a subscription traditional traditional pay TV, that's really changed almost all sports with an all sports are now available for unlicensed from channels on streaming is very fragmented it's hard.

Speaker Change: As to figure out where to watch it but it's there.

Speaker Change: It's an opportunity for us so.

Speaker Change: I think both of these.

Speaker Change: As examples.

Anthony J. Wood: So, for example, you know we have the Sports Zone, sports is an area that's particularly challenging for viewers because it's so fragmented. It's hard for them to figure out where the game that they want to watch is playing. The changes by day of the week, changes based on the league, it's just very complex. And so our Sports Zone helps viewers find games, figure out where they're playing, and learn more about sports on the platform. That's one example of things we've lost more recently all things food, you know which helps which where we curate the best food content across our platform. What to watch. So, you know, these are the kinds of experiences we're working on. We call this programming our home screen. And it's a core strategy for us. It's a big area of focus, and it's basically, https://www.youtube.com.uk, but a big focus on innovation and growth for our management. And then I think your second question was about AVOD's launch.

Anthony J. Wood: So, for example, you know we have the Sports Zone, sports is an area that's particularly challenging for viewers because it's so fragmented. It's hard for them to figure out where the game that they want to watch is playing. The changes by day of week, changes based on the league, it's just very complex. And so our Sports Zone helps viewers find games, figure out where they're playing, and learn more about sports on the platform. That's one example. Things we've launched more recently, All Things Food, you know which helps, which where we curate the best food content across our platform, what to watch. So, you know, these are the kinds of experiences we're working on. We call this programming our home screen, and it's a core strategy for us. It's a big area of focus, and it's basically a key strategy for us to engage with our viewers while they're trying to decide what to watch, and use that to drive, to drive viewing in both our own and operated apps, but also in third party apps. So it drives monetization and at the same time it solves a big problem viewers have, which is trying to decide what to watch across all the content in the streaming universe. So those are just two examples, but big focus on innovation and growth for my management team this year.

Speaker Change: More sports coming to screening the rise of Avon tiers and screaming.

Speaker Change: Our are examples of the industry maturing and I think what that means is that we're going to see even more viewers moving to streaming and in particular more AD dollars moving to screening.

Speaker Change: So for example in the U S alone.

Anthony J. Wood: The changes by day of the week, changes based on the league, it's just very complex. And so our Sports Zone helps viewers find games, figure out where they're playing, and learn more about sports on the platform. That's one example of things we've lost more recently all things food, you know which helps which where we curate the best food content across our platform. What to watch. So, you know, these are the kinds of experiences we're working on. We call this programming our home screen.

Speaker Change: TV AD business is over $60 billion, but theres still is really large gap between viewership and ad spend.

Speaker Change: Approximately 60% of screaming out of I'm, sorry, approximately 60% of TV viewing hours are on streaming versus traditional pay TV, but only about 30% of the AD dollars on connected TV. So that's a huge gap that as the industry matures, we'll start we'll start to close.

Speaker Change:

Speaker Change: And I guess, so that's one I think one aspect that they bought is just the maturing of the industry and I don't think it will accelerate cord cutting and it'll accelerate the shift of AD dollars moving to streaming the other the other thing I guess I would say is.

Speaker Change: As the program or the home screen for 80 million active accounts.

Speaker Change: We're good at and well positioned to help drive <unk> across our platform.

Anthony J. Wood: And it's a core strategy for us. It's a big area of focus, and it's basically, https://www.youtube.com.uk, but a big focus on innovation and growth for our management. And then I think your second question was about AVOD's launch.

Speaker Change: And we do that to promote our own owned and operated services like I mentioned, but we also we can use we also do it regularly to promote third party services across our platform and in particular.

Speaker Change: AD supported services are very.

Speaker Change: Very reliant on engagement.

Anthony J. Wood: And then I think your second question was about AVOD launches. So maybe what I'll say there, just kind of taking it up a level. You know, one of the trends that's happening right now in the streaming world is that the streaming industry's maturing. So if you take AVOD, for example, I mean, a couple of years ago, all the streaming services were just very focused on driving subscribers at almost any cost. Now, the industry is very focused on building sustainable, thriving businesses, and one of the tools that's being used is to add ad-supported, entry level ad-supported tiers to streaming services. The mainstream solution is something that the industry has done since the beginning for television. So it's not really new, but for me, it's a sign that the industry is really starting to mature, and I think the streaming industry, and I think if you, another example of I think evidence that the streaming industry is starting to mature, is sports. I mean we're seeing new sports services launch, used to be that you couldn't get access to sports content without having a subscription to traditional paid TV, that's really changed. Almost all sports, if not all sports, are now available on lots of different channels on streaming. It's very fragmented, it's hard for viewers to figure out where to watch it, but it's there, and it's an opportunity for us. So I think both of these examples, more sport coming to streaming, and the rise of AVOD tiers in streaming, are examples of the industry maturing. And I think what that means is that we're gonna see even more viewers moving to streaming, and in particular, more ad dollars moving.

Speaker Change: <unk> is highly correlates to revenue if you have ads and we're in a great position to help drive AD support engagement across our platform. So we expect it to continue to be a good business and growing for us to do that so.

Anthony J. Wood: So maybe what I'll say there is just kind of taking it up a level. You know, one of the trends that are happening right now in the streaming world is that the streaming industry is maturing. So if you take AVOD, for example, I mean, a couple of years ago, all the streaming services were just very focused on driving subscribers at almost any cost. Now, the industry is very focused on building sustainable, thriving businesses. And one of the tools that's being used is to add ad-supported entry level ad-supported tiers to streaming services. The mainstream solution is something that the industry did at the beginning for television. So it's not really new.

Speaker Change: So that's just a couple a couple of examples.

Speaker Change: Thank you Anthony volatile.

Speaker Change: Thank you one moment for our next question. Please.

Speaker Change: And it is from the line of Justin Patterson with Keybanc. Please proceed.

Justin Patterson: Great. Thank you very much and good afternoon to if I can.

Justin Patterson: Anthony I was hoping you could elaborate just on some of the progress you've made with third party partnerships on the AD Tech side and retail media networks over the past year.

Justin Patterson: What have you learned from those initial integrations and how should we think about that as just a bigger part of the business going forward and then perhaps for that I. Appreciate your commentary on it EBITDA being profitable over the course of the year. How should we think about just the puts and takes of what that what really drives the overall.

Anthony J. Wood: But for me, it's a sign that the industry is really starting to mature, and I think the streaming industry, and I think if you, Another example of, I think..., https://www.youtube.com.uk, having a subscription to traditional pay TV, that's really changed. Almost all sports, if not all sports, are now available on lots of different channels via streaming. It's very fragmented. It's hard for viewers to figure out where to watch it, but it's there, and it's an opportunity for us. I think both of these examples, more sport coming to streaming, and the rise of AVOD tiers in streaming, are examples of the industry maturing. And I think what that means is that we're gonna see even more viewers moving to streaming, and in particular, more ad dollars moving. So, for example, I mean, in the U.S. alone, the TV ad business is over $60 billion. But there's still this really large gap between viewership and ads. Approximately 60% 60% of TV viewing hours are on streaming versus traditional pay TV, but only about 30% of the ad dollars are on connected TV.

But for me, it's a sign that the industry is really starting to mature, and I think the streaming industry, and I think if you, Another example of, I think..., https://www.youtube.com.uk, having a subscription to traditional pay TV, that's really changed. Almost all sports, if not all sports, are now available on lots of different channels via streaming. It's very fragmented. It's hard for viewers to figure out where to watch it, but it's there, and it's an opportunity for us. I think both of these examples, more sport coming to streaming, and the rise of AVOD tiers in streaming, are examples of the industry maturing. And I think what that means is that we're gonna see even more viewers moving to streaming, and in particular, more ad dollars moving.

Justin Patterson: And expansion and potentially how you might be reinvesting.

Justin Patterson: Some strength you might see back into driving innovation and future platform growth. Thank you.

Speaker Change: Hey, Justin Thanks for that I'll, let Charlie take the third party partnership question. Okay. Thanks.

Charlie: Thanks, Anthony and thanks, Joseph for the question.

Charlie: Think about our focus on demand diversification, which continues to be a huge priority for us and our embrace of third party relationships underlying both of them are our focus on expanding upon.

Charlie: The many ways, we build our partners' businesses, we are opening up.

Anthony J. Wood: It's hard for viewers to figure out where to watch it, but it's there, and it's an opportunity for us. I think both of these examples, more sport coming to streaming, and the rise of AVOD tiers in streaming, are examples of the industry maturing. And I think what that means is that we're gonna see even more viewers moving to streaming, and in particular, more ad dollars moving. So, for example, I mean, in the U.S. alone, the TV ad business is over $60 billion. But there's still this really large gap between viewership and ads. Approximately 60% 60% of TV viewing hours are on streaming versus traditional pay TV, but only about 30% of the ad dollars are on connected TV.

Anthony J. Wood: So I think both of these examples, more sports coming to streaming, the rise of AVOD tiers in streaming, are examples of the industry maturing, and I think what that means is that we're gonna see even more viewers moving to streaming, and in particular, more ad dollars moving to streaming. So, for example, I mean, in the US alone, the TV ad business is over $60 billion dollars. But there's still this really large gap between viewership and ad spend. Approximately 60% of streaming, sorry, approximately 60% of TV viewing hours are on streaming, versus traditional pay TV, but only about 30% of the ad dollars are on connected TV. So that's a huge gap that as the industry matures will start to close. So, you know, and I guess that's one, I think one aspect about AVOD is just maturing the industry, and I think it will accelerate cord cutting, and it will accelerate the shift of ad dollars moving to streaming. The other thing I guess I would say is... as the programmer of the home screen for 80 million active accounts.

Charlie: New ways to prove the unique value of Roku and we'll continue to do that whichever ways are best for our clients to execute their marketing and advertising campaigns. So in 'twenty three we did make real progress expanding our relationships with third party platforms, Justin including retail media networks, DSP and other strategic part.

Charlie: <unk> and as a result, we've increased our roster of advertisers programmatic AD spend continues to grow on the platform and add investment through third party DSP is also growing well.

So, for example, I mean, in the U.S. alone, the TV ad business is over $60 billion. But there's still this really large gap between viewership and ads. Approximately 60% 60% of TV viewing hours are on streaming versus traditional pay TV, but only about 30% of the ad dollars are on connected TV. So that's a huge gap that as the industry matures will start to close. So, you know, and I guess that's one thing about AVOD is just maturing the industry, and I don't think it will accelerate cord cutting; it will accelerate the shift of ad dollars moving to streaming. The other thing I guess I would say is... as the programmer of the home screen for 80 million active accounts.

Charlie: Our strategy is really have allowed us to tap into new budgets from existing advertisers, while also growing and diversifying the number of new advertisers on roku.

Charlie: We built tech and enhance relationships that actually make it easier for small and medium sized businesses easier than ever before to access the roku platform and many of these are small, but they have the potential to grow into large advertisers for us. So.

Anthony J. Wood: So that's a huge gap that as the industry matures will start to close. So, you know, and I guess that's one thing about AVOD is just maturing the industry, and I don't think it will accelerate cord cutting; it will accelerate the shift of ad dollars moving to streaming. The other thing I guess I would say is... as the programmer of the home screen for 80 million active accounts.

Charlie: The names some names for you over the past year, we formed partnerships with a broad variety of third party is actually you mentioned retail platforms, we had door dash ins to cart Cox and best buy we've expanded third party DSP relationships now to really participate with all the major DSP and SSP and we're partnering also with new measurement.

Anthony J. Wood: The other thing I guess I would say is, as the programmer of the home screen for 80 million active accounts, you know, we're good at and well positioned to help drive viewing across our platform, and you know we do that to promote our own owned and operated services, like I mentioned, but we also do it, we can use, we also do it regularly to promote third-party services across our platform, and in particular, ad-supported services are very, very reliant on engagement. You know, engagement is highly correlated to revenue if you have ads, and we're in a great position to help drive ad-supported engagement across our platform. So we expect it to continue to be a good business and growing for us to do that. So that's just a couple examples.

Charlie: <unk> like <unk> spot and Comscore. So overall, Justin we are serving more partners and advertisers and we really continue to improve and expand on the performance and measurement capabilities that roku is providing for them. So on a third party.

Anthony J. Wood: You know, we're good at and well positioned to help drive you across our platform, and you know we do that to promote our own owned and operated services, as I mentioned, but we also do it we can use, we also do it regularly to promote third-party services across our platform, and in particular. Ad supported services are very, very reliant on engagement. You know, engagement is highly correlated to revenue if you have ads. And we're in a great position to help drive ad support engagement across our platform. So we expect it to continue to be a good business and grow for us to do that. So those are just a couple examples.

Overall.

Charlie: Very pleased with our third party partnerships, both in terms of our progress and our growth.

Charlie: I will take the next question Justin It's Dan Thanks for the question.

Dan: On your question.

Dan: On EBITDA and some of the puts and takes let me just talk a little bit about Q1, and the full year and as we mentioned earlier streaming services distribution performed very well in.

Dan: In FY 'twenty, three with very strong year over year growth rates.

Dan: And video advertising really rebounded well in the second half of 2023, and we expect both those areas to continue to grow.

Dan: In 2024, we did comment on the <unk> challenges that we faced in FY 'twenty, three and that we expect the M&A.

Shyam Patil: Thank you, Anthony, for all the collaboration. Thank you. One moment for our next question, please, and it is from the line of Justin Patterson with KeyBank. Please proceed. Great, thank you very much and good afternoon.

Shyam Patil: Thank you, Anthony, for all those [inaudible].

Operator: Thank you. One moment for our next question, please. It is from the line of Justin Patterson with KeyBank. Please proceed. Great, thank you very much and good afternoon.

Operator: Thank you. One moment for our next question, please. It is from the line of Justin Patterson with KeyBanc. Please proceed.

Dan: Markets to continue to be challenged this year.

Dan: So this will ultimately result in a difficult year over year comp on.

Dan: On the platform side because of the strong growth in SSD and the challenging M&A environment and if we see M&A accelerate from its current levels. It will have a positive impact on margins and our EBITDA.

Justin Patterson: Great, thank you very much and good afternoon. First, Anthony, I don't think you could elaborate just on some of the progress you've made with third-party partnerships on the ad tech side and the retail medium over the past year. What have you learned from those initial integrations, and how should we think about that as just a bigger part of the business going forward? And then, perhaps for Diane, I appreciate your commentary on EBITDA being profitable over the course of the year. But how should we think about just the puts and takes of what really drives the overall margin expansion and potentially how you might be reinvesting some strength you might see back in a driving innovation and future platform? Thank you. Hey Justin, thanks for that. I'll let Charlie take the third party part.

Justin Patterson: Great, thank you very much, and good afternoon. Two, if I can. First, Anthony, I was hoping you could elaborate just on some of the progress you've made with third-party partnerships on the ad tech side, and the retail media networks over the past year. What have you learned from those initial integrations, and how should we think about that as just a bigger part of the business going forward? And then, perhaps for Dan, I appreciate your commentary on EBITDA being profitable over the course of the year. How should we think about just the puts and takes of what really drives the overall margin expansion, and potentially how you might be reinvesting, some strength you might see back in driving innovation and future platform growth? Thank you.

Justin Patterson: First, Anthony, I don't think you could elaborate just on some of the progress you've made with third-party partnerships on the ad tech side and the retail medium over the past year. What have you learned from those initial integrations, and how should we think about that as just a bigger part of the business going forward? And then, perhaps for Diane, I appreciate your commentary on EBITDA being profitable over the course of the year. But how should we think about just the puts and takes of what really drives the overall margin expansion and potentially how you might be reinvesting some strength you might see back in a driving innovation and future platform? Thank you. Hey Justin, thanks for that. I'll let Charlie take the third party part.

Dan: Both on if we see it on the spot and the <unk> side will grow subscribers and engagement across the platform and that will have a positive impact for us.

Dan: On the margin side, we guided.

Dan: <unk> margin in Q1 to 52%, which was similar to Q1 of last year.

Dan: We're not providing guidance going forward, but I would anticipate that that our gross margin to improve on the platform side.

Dan: Slightly from Q1 levels as our volume of revenue growth, we do have some fixed costs up and platform margins and I would expect us to see some sequential improvement in gross margin going forward.

Dan: And then on the lastly on the Opex side, we ended Q4 at.

Dan: At just over $500 million in Opex, if you adjust for our Q4 impairment and restructuring charge.

Anthony J. Wood: Hey Justin, thanks for that. I'll let Charlie take the third party partnership question.

Dan: We talked a little bit about this last quarter. It's similar this quarter, if you annualize that out and apply.

Charlie Collier: Thanks, Anthony, and thanks, Justin, for the question. You know, when I think about our focus on demand diversification, which continues to be a huge priority for us, and our embrace of third-party relationships, underlying both of them are a focus on expanding upon the many ways we build our partners' businesses. You know, we're opening up new ways to prove the unique value of Roku, and we'll continue to do that in whichever ways are best for our clients to execute their marketing and advertising campaigns.

Dan: Mid single digit growth rate, that's the way I am thinking of Opex for 2024.

Dan: And as we've stated previously we do expect to see further improvements in 2024 and adjusted EBITDA, We had a very strong free cash flow year in 2023, we expect to be positive on free cash flow in 2024 and.

Dan: And lastly to where you see it.

Dan: Investment Anthony touched on this in the earlier question, we have multiple areas on the monetization side that that will reinvestment that we'll reinvest in specifically on.

Charlie Collier: So, in '23, we did make real progress expanding our relationships with third-party platforms, Justin, including retail media networks, DSPs, and other strategic partners. And as a result, we've increased our roster of advertisers, programmatic ad spend continues to grow on the platform, and ad investment through third-party DSPs is also growing well. Our strategies really have allowed us to tap into new budgets from existing advertisers while also growing and diversifying the number of new advertisers on Roku. We've built tech and enhanced relationships that actually make it easier for small- and medium-sized businesses, easier than ever before, to access the Roku platform. And many of these are small, but they have the potential to grow into large advertisers for us. So, you know, to name some names for you, over the past year, we formed partnerships with a broad variety of third parties. Actually, you mentioned retail platforms. You know, we have DoorDash, Instacart, Cox, and Best Buy.

Dan: On our subscriptions business as we look to expand that and accelerate that and we have a lot of other initiatives on AD product and the monetization side that will continue to reinvest as we look forward to accelerating growth in the years to come.

Speaker Change: Thank you.

Speaker Change: Thank you one moment for our next question. Please.

Evercore ISI: And he is from a threat could you react with Evercore ISI. Please proceed.

Evercore ISI: Okay. Thanks, a lot for taking my questions. Let me try two please one is on just the overall AD demand trends.

Evercore ISI: That you saw in Q4 and into Q1, so far.

Evercore ISI: Specifically as it relates to guarantee verticals that you could comment on or just the scatter market health and the caution or the lack of or the improvement of.

Evercore ISI: Sentiment among brand advertisers. That's question one and just a quick follow up on how are you how should we be thinking about political impact this year for you.

Speaker Change: I just want to thanks.

Speaker Change: Xanthian, but Charlie will take some questions. Thank.

Charlie: Thank you hey, good to hear from you sweat and thanks for the questions.

Charlie Collier: So, you know, to name some names for you, over the past year, we formed partnerships with a broad variety of third parties. Actually, you mentioned retail platforms, you know, we have DoorDash, Instacart, Cox, and Best Buy. We've expanded third-party DSP relationships now to really participate with all the major DSPs and SSPs, and we're partnering also with new measurement partners like iSpot and Comscore. So, overall, Justin, we are serving more partners and advertisers, and we really continue to improve and expand on the performance and measurement capabilities that Roku is providing for them. So, on the third-party, you know, overall, I'm, you know, very pleased with our third-party partnerships, both in terms of our progress and our growth.

Charlie: We continue to see actually a really solid rebound in video advertising in the fourth quarter I'm really pleased with the way video advertising has strengthened and general offsetting what has been and remains a challenging M&A marketplace. Now all that said about M&A. It remains a really important category for roku and we are unique and effective.

Charlie: Platform for driving engagement for our partners and building, our partners' businesses and driving engagement will always be core to roku success. So when when that grows we'll grow well. However by all accounts. The <unk> category went through a period of spending at unsustainably high levels and we are working with our partners now even more to help them figure out there.

Charlie Collier: We've expanded third-party DSP relationships now to really participate with all the major DSPs and SSPs, and we're partnering also with new measurement partners like iSpot and Comscore. So, overall, Justin, we are serving more partners and advertisers, and we really continue to improve and expand on the performance and measurement capabilities that Roku is providing for them. So, on the third-party, you know, overall, I'm, you know, very pleased with our third-party partnerships, both in terms of our progress and our growth. I'll take the next question. Hi Justin, it's Dan.

We've expanded third-party DSP relationships now to really participate with all the major DSPs and SSPs, and we're partnering also with new measurement partners like iSpot and Comscore. So, overall, Justin, we are serving more partners and advertisers, and we really continue to improve and expand on the performance and measurement capabilities that Roku is providing for them. So, on the third-party, you know, overall, I'm, you know, very pleased with our third-party partnerships, both in terms of our progress and our growth.

Charlie: <unk> to a greater AD supported focus and success again the engagement is something Roku is best suited to help them with so.

Speaker Change: That's a good transition now overall in the market to your question about categories, where we're executing well and I do expect the year on year growth rate of video advertising in the first quarter to be similar to what we saw in fourth quarter. There are ups and downs by verticals since you asked.

Speaker Change: A few specific categories, CPG health and wellness and telecom are growing nicely categories like financial services and insurance are not recovering as quickly. So sweat I overall I feel really good heading into the new fronts, the upfront and 25.

Dan Jedda: I'll take the next question. Hi Justin, it's Dan. Thanks for the question. On your question on EBITDA and some of the puts and takes, let me just talk a little bit about Q1 and the full year, and, you know, as we mentioned earlier, streaming services distribution performed very well in FY'23, with very strong year-over-year growth rates. And video advertising really rebounded well in the second half of 2023, and we expect both those areas to continue to grow in 2024. We did comment on the M&E challenges that we faced in FY'23 and that we expect the M&E markets to continue to be challenged this year. So this will ultimately result in a difficult year-over-year comp on the platform side because of the strong growth in SSD and the challenging M&E environment. And if we see M&E accelerate from its current levels, it will have a positive impact on margins and our EBITDA, both on, if we see it on the SVOD and the AVOD side we'll grow subscribers and engagement across the platform, and that will have a positive impact for us. On the margin side, we guided platform margin in Q1 to 52%, which was similar to Q1 of last year.

Dan Jetta: Thanks for the question. On your question about EBITDA and some of the puts and takes. Let me just talk a little bit about Q1 for the full year. And, you know, as we mentioned earlier, streaming services distribution performed very well in FY23 with very strong year-over-year growth rates. And video advertising really rebounded well in the second half of 2023, and we expect both those areas to continue to grow in 2024. We did comment on the M&E challenges that we faced in FY23 and that we expect the M&E markets to continue to be challenged this year. This will ultimately result in a difficult year-over-year comp on the platform side because of the strong growth in SSD and the challenging M&E environment.

Speaker Change: We'll continue to build upon our market, leading scale and platform advantages and we will continue to elevate roku is powerful AD products and tech offerings, all with a focus on diversifying demand and continuing to scale our AD supported businesses.

Speaker Change: I think your second question was about political.

Speaker Change: Political is.

Speaker Change: <unk> for us.

Speaker Change: Our tools and our tech make roku, a strategic platform for political advertising both for those by the way targeting scale and also those looking for specificity I will point out that in 'twenty four we expect political to grow but it will likely remain a relatively small contributor as a percentage of our whole really diverse AD business we know.

Speaker Change: Political obviously, it's a big opportunity and a big market and has just added as this category like other shifts from linear to CTV will be well positioned we have some product updates that will help us tap into these budgets more and more in the future, we're making those updates to our platform as well as other refinements that will make moving forward so over.

Speaker Change: Also we expect.

Speaker Change: <unk> political to grow over time for now it will grow but it will remain a relatively modest part of the overall AD mix of Roku.

Dan Jetta: And if we see M&E accelerate from its current levels, it will have a positive impact on margins and our EBITDA, both on the SVOD and the ABOD side. We'll grow subscribers and engagement across the platform, and that will have a positive impact for us. On the margin side, we guided platform margin in Q1 to 52%, which was similar to Q1 of last year.

Speaker Change: That's very helpful. Thank you.

Speaker Change: Yeah. Thanks, Dan I'll, just add a comment on M&A, although we've talked a lot about.

Speaker Change: M&A being pressured I will say that one of them.

Speaker Change: It's still it's still a opportunity a big opportunity for us we're very good at it.

Speaker Change: It's something that I expect to bounce back over time and be a growth area over time. This year, it'll probably it will continue to be pressured.

Dan Jedda: On the margin side, we guided platform margin in Q1 to 52%, which was similar to Q1 of last year. We're not providing guidance going forward, but I would anticipate that our gross margin to improve on the platform side slightly from the Q1 levels. As our volume of revenue grows we do have some fixed costs in platform margins, and I would expect us to see some sequential improvement in gross margin going forward. And then lastly, on the OPEX side, we ended Q4 at just over $500 million in OPEX if you adjust for our Q4 impairment and restructuring charge. We talked a little bit about this last quarter, it's similar this quarter. If you annualize that out and apply a mid-single digit growth rate, that's the way I'm thinking of OPEX for 2024. And as we've stated previously, we do expect to see further improvements in 2024 in adjusted EBITDA. We had a very strong free cash flow year in 2023. We expect to be positive on free cash flow in 2024.

Speaker Change: But the other thing we're doing is we're taking a lot of inventory and creating new inventory that we used to sell exclusively for M&A and we are using it now for brand advertisers.

Dan Jetta: We're not providing guidance going forward, but I would anticipate that our gross margin on the platform side will improve slightly from the Q1 levels as our volume of revenue grows. We do have some fixed costs in platform margins, and I would expect us to see some sequential improvement in gross margin going forward. And then lastly, on the OPEX side, we ended Q4 at just over $500 million in OPEX if you adjust for our Q4 impairment and restructuring charge. We talked a little bit about this last quarter. It's similar this quarter,

Speaker Change: Increasing number of advertisers we will.

Speaker Change: You have access to the inventory and getting the ample of that against brokers city, where she used to be entirely promotions for content.

Speaker Change: We started selling buildings, Mcdonald's and companies like that and that's gone extremely well for us as viewers love it it.

Speaker Change: It has tapped into new revenue sources, so we're going to continue to diversify.

Speaker Change: The advertising in our home screen that we used to use facility just for M&A, we're going to start using that for brand advertisers as well.

Speaker Change: Okay. Thanks, Anthony I appreciate it thanks Charlie.

Speaker Change: Okay. Thanks.

Speaker Change: And for our next question please.

Speaker Change: Comes from the line of Laura Martin with Needham. Please proceed.

Laura Martin: Hi, Dara great numbers, you guys congratulation.

Laura Martin: My first question is on the Roku branded Tvs I know that we've been really worried about channel conflict. So you were in <unk>.

Laura Martin: Best buy exclusively now youre announcing you're going into Costco Amazon.

Laura Martin: Can you tell us what you are.

Laura Martin: <unk>.

Laura Martin: Oems are saying about you expanding on what is the ultimate strategy are you going to have these roku branded Tvs in every channel outlet can you help us look forward on the future of this product.

Laura Martin: Hey, Lauren this is Anthony.

Anthony J. Wood: Hi, Adam and Tom will talk about thoughtful I'll talk about them.

Dan Jetta: If you annualize that out and apply a mid-single digit growth rate, that's the way I'm thinking of OPEX for 2024. And as we've stated previously, we do expect to see further improvements in 2024 and adjusted EBITDA. We had a very strong free cash flow year in 2023. We expect to be positive on free cash flow in 2024.

Anthony J. Wood: Yeah, Hi, Laura Thanks for your question.

Anthony J. Wood: As we as we announced the product and to explain then.

Speaker Change: Welcome to <unk> Tvs are basically a complementary program to our existing broker TV program.

Speaker Change: And we use the roku TV as a way to innovate.

Adam: In a hardware software combination historically, we have focused on software only India Roku TV context, now we're able to do more innovation using the hardware as well as a software and.

Dan Jetta: And lastly, where you see the reinvestment, Anthony touched on this in the earlier question, we have multiple areas on the monetization side that will reinvest, specifically in our subscriptions business as we look to expand that and accelerate that. And we have a lot of other initiatives on the ad product and the monetization side that will continue to reinvest as we look forward to accelerating growth in the years to come. Thank you. One moment for our next question. And it's from Shweta Khajuria with Evercore ISI.

Dan Jedda: And lastly, to where you see the reinvestment, Anthony touched on this in the earlier question, we have multiple areas on the monetization side that we'll reinvest, that we'll reinvest in, specifically on our subscriptions business as we look to expand that and accelerate that. And we have a lot of other initiatives on ad product and the monetization side that we'll continue to reinvest as we look forward to accelerating growth in the years to come.

And our build much better products that can then be given to consumers and also we are sharing that with our <unk>.

Adam: Turning to licensing partners and we are very open about that and then some of the improvements and innovations that we have already developed as part of the initial launch of the program is already being fed into our Roku TV ecosystem. Our partners are already benefiting from those improvements some of them are cost improvements being able to.

Adam: Further lower the cost of the hardware.

Adam: Some of them are performance improvements.

Adam: So both of these type of improvements have been shared with our partner then we'll continue to do so.

Adam: And in terms of distribution.

Thank you. One moment for our next question. And it's from Shweta Khajuria with Evercore ISI. Please proceed. Okay, thanks a lot for taking my questions. Let me try two, please.

Thank you. One moment for our next question. And it's from Shweta Khajuria with Evercore ISI. Please proceed.

Justin Patterson: Thank you.

Operator: Thank you. One moment for our next question, please. It is from Shweta Khajuria with Evercore ISI. Please proceed.

Adam: Definitely to make these programs successful and then.

Adam: For us to operate as a as a program we need to scale with a bit more and therefore, we are expanding our distribution.

Shweta Khajuria: Please proceed. Okay, thanks a lot for taking my questions. Let me try two, please.

Okay, thanks a lot for taking my questions. Let me try two, please. One is on just the overall ad demand trends that you saw in Q4 and into Q1 so far, and specifically as it relates to certain key verticals that you could comment on or just the overall market health and the caution or the lack of it among or the improvement of sentiment among brand advertisers. That's question one. And just a quick follow-up on how you are. How should we be thinking about political impact this year for you? Thank you, I swear, thanks, this is Nancy, but Charlie will... Thank you. Hey, good to hear from you, Shweta.

Shweta Khajuria: Okay, thanks a lot for taking my questions. Let me try two, please. One is on just the overall ad demand trends that you saw in Q4 and into Q1 so far, and specifically as it relates to certain key verticals that you could comment on, or just the scatter market health and the caution, or the lack of, or the improvement of sentiment among brand advertisers. That's question one. And just a quick follow-up on how you are, how should we be thinking about political impact this year for you? Thank you.

Adam: Because customers love the product we are receiving great reviews.

Shweta Khajuria: One is on just the overall ad demand trends that you saw in Q4 and into Q1 so far, and specifically as it relates to certain key verticals that you could comment on or just the overall market health and the caution or the lack of it among or the improvement of sentiment among brand advertisers. That's question one. And just a quick follow-up on how you are. How should we be thinking about political impact this year for you? Thank you, I swear, thanks, this is Nancy, but Charlie will... Thank you. Hey, good to hear from you, Shweta.

Adam: Every day.

Adam: And we want to be able to offer these products with customers and get their feedback and then that will be again used as a way for us to further improve and add new capabilities, then we'll share without.

Adam: Broker TV ecosystem partners.

Adam: Super helpful and then.

Speaker Change: My second and last question is when we think about the user interface I think one of the things I know you're really loves this whole city.

Speaker Change: But I think it's really ironic.

Speaker Change: The business and there is no video on our homepage and it feels like if you had some kind of carousel you cannot only put in cross promoting your stuff instead of a still image, but also you can sort of get more money from video postage stamps on page one could you talk I know Anthony you said, you're focusing on the homepage more.

Hi Shweta, thanks, this is Anthony, but Charlie will take this question. Thank you. Hey, good to hear from you, Shweta.

Anthony J. Wood: Hi Shweta, thanks, this is Anthony, but Charlie will take this question.

Anthony J. Wood: That's one of your light tactical focus isn't one of them can.

Speaker Change: Can you talk about.

Charlie Collier: Thank you. Hey, good to hear from you, Shweta, thanks for the questions. We continue to see actually a really solid rebound in video advertising in fourth quarter. I'm really pleased with the way video advertising has strengthened in general, offsetting what has been and remains a challenging M&E marketplace. Now, all that's said about M&E, it remains a really important category for Roku, and we are a unique and effective platform for driving engagement for our partners, and building our partners' businesses and driving engagement will always be core to Roku's success. So when that grows, we'll grow well. However, by all accounts, the M&E category went through a period of spending at unsustainably high levels, and we're working with our partners now even more to help them figure out their shift to a greater ad-supported focus and success. Again, engagement is something Roku is best suited to help them with, so that's a good transition. Now, overall in the market, to your question about categories, we're executing well. And I do expect the year-on-year growth rate of video advertising in the first quarter to be similar to what we saw in the fourth quarter. However, there are ups and downs by verticals.

Speaker Change: Other than just adding more brands to city are we going to see anything more.

Charlie Collier: Thanks for the questions. We continue to see a really solid rebound in video advertising in the fourth quarter. I'm really pleased with the way video advertising has strengthened in general, offsetting what has been and remains a challenging M&E marketplace. Now, all that's said about M&E, it remains a really important category for Roku, and we are a unique and effective platform for driving engagement for our partners. And building our partners' businesses and driving engagement will always be core to Roku's success. So when that grows, we'll grow well. However, by all accounts, the M&E category went through a period of spending at unsustainably high levels.

Anthony J. Wood: I'm going to use the word engaging for consumers from a roku homepage in 'twenty four.

Speaker Change: Hey, Laura the Anthony.

Speaker Change: Absolutely.

Speaker Change: The big area of focus for us.

Speaker Change: We mentioned.

Speaker Change: Yes.

Speaker Change: In our food down all things.

Speaker Change: And that's been.

Speaker Change: It's got a great reception for our viewers example building out an experienced this access from our home screen that integrates.

Speaker Change: Promotion.

Speaker Change: Static display promotion as well as.

Speaker Change: Promotes video as well.

Speaker Change: And.

It is.

Speaker Change: A small example of the kinds of things that we're going to be doing so it's not a reputation as one example of that.

Speaker Change: Lots of ways across the platform that we can drive.

Speaker Change: Great experiences that will engage viewers that.

Speaker Change: That will provide monetization opportunities.

Charlie Collier: And we're working with our partners now even more to help them figure out their shift to a greater ad-supported focus and success. Again, engagement is something Roku is best suited to help them with. So that's a good transition. Now, overall in the market, to your question about categories, we're executing well. And I do expect the year-on-year growth rate of video advertising in the first quarter to be similar to what we saw in the fourth quarter. However, there are ups and downs by verticals.

Speaker Change: And that will drive drive more engagement across our platform. So in terms of putting video directly on this.

Speaker Change: Or something that.

Speaker Change: We've thought about it.

Speaker Change: Something that we're thinking about testing, but it's not.

Speaker Change: It's an area that we've made any decision Budd.

Speaker Change: And I'll, just say I guess, the big picture is there's a long list of ideas of how we can.

Charlie Collier: Now, overall in the market, to your question about categories, we're executing well. And I do expect the year-on-year growth rate of video advertising in the first quarter to be similar to what we saw in the fourth quarter. However, there are ups and downs by verticals.

Charlie Collier: Now, overall in the market, to your question about categories, we're executing well, and I do expect the year-on-year growth rate of video advertising in the first quarter to be similar to what we saw in fourth quarter. However, there are ups and downs by verticals, since you asked to name a few specific categories, CPG, health and wellness, and telecom are growing nicely. Categories like financial services and insurance are not recovering as quickly. So, Shweta, overall, I feel really good heading into the new fronts, the upfront, and '25. We'll continue to build upon our market-leading scale and platform advantages, and we'll continue to elevate Roku's powerful ad products and tech offerings, all with a focus on diversifying demand and continuing to scale our ad-supported businesses. I think your second question was about politics.

Speaker Change: Craig viewer experiences that engage and entertain.

Speaker Change: On our platform around the home screen.

Speaker Change: A lot of those video, but there a video or something I don't understand that you have to approach carefully theres always this concern that it might alienate some viewers, but some years love. It. So it's just something that we will keep looking at and testing.

Speaker Change: But overall, thank you very much.

Charlie Collier: Since you asked to name a few specific categories, CPG, health, and wellness, and telecom are growing nicely. However, categories like financial services and insurance are not recovering as quickly. So, Swetai, overall, I feel really good heading into the new fronts, the upfront, and 25. We'll continue to build upon our market-leading scale and platform advantages. And we'll continue to elevate Roku's powerful ad products and tech offerings, all with a focus on diversifying demand and continuing to scale our ad-supported businesses. I think your second question was about politics.

Speaker Change: On list of Great things, we can do to add to our outstandings to drive engagement.

Speaker Change: Thank you.

Speaker Change: Thank you one moment for our next question.

Vasily Karasyov: And it comes from the line of Vasili cars shelf with Cannonball Research. Please proceed.

Vasily Karasyov: Thank you good afternoon, Charlie I have a question for you.

Vasily Karasyov: Wanted to ask you to talk about how.

Vasily Karasyov: You are pricier scatter inventory may be help us triangulate your logic here in terms of how you do it relative to the upfront pricing relative to your competition I mean, we we understand how it is done in linear television is is it the same because with the new.

Vasily Karasyov: New entrants.

Vasily Karasyov: Trends into the <unk> space. There is a lot of discussion what will happen to your pricing.

Charlie Collier: businesses. I think your second question was about politics.

Charlie Collier: I think your second question was about political. You know, political is growing for us. Our tools and our tech make Roku a strategic platform for political advertising, both for those, by the way, targeting scale, and also those looking for specificity. I will point out that in '24, we expect political to grow, but it'll likely remain a relatively small contributor as a percentage of our whole really diverse ad business. We know political, obviously, is a big opportunity and a big market, and as this category, like others, shifts from linear to CTV, we'll be well positioned. You know, we have some product updates that'll help us tap into these budgets more and more in the future, we're making those updates to our platform, as well as other refinements that we'll make moving forward. So, overall, Shweta, we expect political to grow over time. For now, it'll grow, but it'll remain a relatively modest part of the overall ad mix at Roku.

Vasily Karasyov: There are industry press reports about where you are.

Vasily Karasyov: <unk> are relative to your competitors. So can you tell us.

Charlie Collier: You know, politics is growing for us. Our tools and our tech make Roku a strategic platform for political advertising, both for those, by the way, targeting scale, and also those looking for specificity. I will point out that in 24, we expect political to grow, but it'll likely remain a relatively small contributor as a percentage of our whole really diverse ad business. We know politics, obviously, is a big opportunity and a big market.

Vasily Karasyov: How you price your scatter inventory and what's kind of thinking goes into that and what factors will make you.

Vasily Karasyov: <unk>.

Vasily Karasyov: Raise your prices drop your prices and so on just help us understand directionally how to think about that thank you.

Vasily Karasyov: Okay.

So much for the question.

Speaker Change: Actually I was looking at something yesterday.

Speaker Change: The first thing you look at as you said in linear TV also holds true in CTV, which as you want as senior upfront advertisers who've come in early and make large commitments early do you want to see that pricing actually be less than what is occurring in scatter and sure enough that's happening our scatter rates have been very solid.

Charlie Collier: And as this category, like others, shifts from linear to CTV, we'll be well positioned. You know, we have some product updates that'll help us tap into these budgets more and more in the future. We're making those updates to our platform, as well as other refinements that we'll make moving forward. So, overall, Swetai, we expect political to grow over time. For now, it'll grow, but it'll remain a relatively modest part of the overall ad mix at Roku. That's very helpful.

And as this category, like others, shifts from linear to CTV, we'll be well positioned. You know, we have some product updates that'll help us tap into these budgets more and more in the future. We're making those updates to our platform, as well as other refinements that we'll make moving forward. So, overall, Swetai, we expect political to grow over time. For now, it'll grow, but it'll remain a relatively modest part of the overall ad mix at Roku.

Speaker Change: We continue to be so and I know theres been a lot of talk today about my beloved Roku city.

Speaker Change: All things food and some of those integrations what's remarkable.

Speaker Change: These integrations besides the fact that they're so immersive and engaging in their broad reach.

Speaker Change: Theyre also scarce. So we look at what scarcity does to drive pricing in Anthonys last answer about the opportunities that we see not just on the home screen, but throughout the entire streamers journey. So many of the sponsorships that as we said used to be M&A only are now.

That's very helpful. Thank you. Thank you. This is Anthony.

That's very helpful. Thank you. Thank you.

Shweta Khajuria: That's very helpful. Thank you.

Charlie Collier: Thank you. Thank you. This is Anthony.

Anthony J. Wood: Thanks, this is Anthony, I'll just add a quick comment on M&E. Although, you know, we've talked a lot about M&E being pressured, I will say that it's still a big opportunity for us. We're very good at it. It's something that I expect to bounce back over time and be a growth area over time. This year it probably, it will continue to be pressured, we project. But the other thing we're doing is we're taking a lot of inventory and creating new inventory that we used to sell exclusively for M&E, and we're using it now for brand advertisers. We're hoping, we're increasing the number of advertisers we will give access to that inventory. A good example of that, I think, is Roku City, which used to be entirely promotions for content. But, you know, we started selling buildings to McDonald's and companies like that, and that's gone extremely well for us. Viewers love it. It's tapped into new revenue sources, so we're going to continue to diversify the advertising in our home screen that we used to use exclusively just for M&E, we're going to start using that for brand advertisers as well.

This is Anthony. I'll just add a quick comment on M&E. Although, you know, we've talked a lot about it, I will say that it's still a big opportunity for us. We're very good at it. It's something that I expect to bounce back over time and be a growth area this year. The other thing we're doing is we're taking a lot of inventory and creating new inventory that we used to sell exclusively for M&E, and we're using it now for brand advertisers. We're increasing the number of advertisers, giving access to that inventory. A good example of that, I think, is Roku City, which used to be entirely promotions for content. But, you know, we started selling buildings to McDonald's and companies like that, and that's gone extremely well for us. Viewers love it. It's tapped into new revenue sources, so we're going to continue to diversify the advertising on our home screen that we used to use exclusively just for M&E. We're going to start using that for brand advertisers as well. Okay, thanks.

Anthony J. Wood: I'll just add a quick comment on M&E. Although, you know, we've talked a lot about it, I will say that it's still a big opportunity for us. We're very good at it. It's something that I expect to bounce back over time and be a growth area this year.

Speaker Change: Both MD and non endemic advertisers and whats terrific about that not only does it open up that scares you need a new bidding in new advertisers, but it's also driving pricing. So I would say the upfront we look at and those who have committed to us early have been rewarded and those coming in as scatter are.

Anthony J. Wood: The other thing we're doing is we're taking a lot of inventory and creating new inventory that we used to sell exclusively for M&E, and we're using it now for brand advertisers. We're increasing the number of advertisers, giving access to that inventory. A good example of that, I think, is Roku City, which used to be entirely promotions for content. But, you know, we started selling buildings to McDonald's and companies like that, and that's gone extremely well for us. Viewers love it.

Speaker Change: Seem to be responding to our changes toward opening up the sponsorships that Anthony mentioned and the pricing is good.

Speaker Change: <unk> intended with that so we feel like that's working in and it seems to be so both in <unk> and continuing now.

Speaker Change: Do you feel thats why advertisers pricing is an important factor when they decided between let's say the roku channel and other streaming opportunities.

Speaker Change: Well look obviously price is something that they.

Speaker Change: They need to look at when they when they purchase our value has been great. We're also a performance platform one of the things that are.

Anthony J. Wood: It's tapped into new revenue sources, so we're going to continue to diversify the advertising on our home screen that we used to use exclusively just for M&E. We're going to start using that for brand advertisers as well. Okay, thanks.

Speaker Change: Unmatched scale, the direct relationships with 80 million active accounts, what's great about it is we get the opportunity to be both top of the funnel and so we've seen people obviously, they look at us and compare us on price and we're very competitively priced but we also have the opportunity of being performance and so the fact that we can.

Shweta Khajuria: Okay, thanks, Anthony, appreciate it. Thanks, Charlie.

Laura Martin: Thanks. One moment for our next question, please, comes from the line of Laura Martin with Needham. Please proceed. Hi there.

Operator: Thanks. One moment for our next question, please. Comes from the line of Laura Martin with Needham. Please proceed.

Speaker Change: In a broad reach at the top of the funnel and also in.

Hi there. Great numbers, you guys. Congratulations. My first question is about the Roku-branded TVs. I know that we've been really worried about channel conflicts, so you were in Best Buy exclusively. Now you're announcing you're going into Costco and Amazon. Can you tell us what your 30, OEMs are saying about you expanding, and what's the ultimate strategy? Are you going to have these Roku branded TVs in every channel outlet? Can you help us look forward to the future of this product? Hey Laura, it's nice to hear from you. This is Anthony.

Laura Martin: Hi there. Great numbers, you guys. Congratulations. My first question is on the Roku-branded TVs. I know that we've been really worried about channel conflicts, so you were in Best Buy exclusively, now you're announcing you're going into Costco and Amazon. Can you tell us what your 30 OEMs are saying about you expanding, and what's the ultimate strategy? Are you going to have these Roku branded TVs in every channel outlet? Can you help us look forward on the future of this product?

Laura Martin: Great numbers, you guys. Congratulations. My first question is about the Roku-branded TVs. I know that we've been really worried about channel conflicts, so you were in Best Buy exclusively.

Speaker Change: And certain carrier category is truly lead in this way.

We're pricing well and were effective which is what I think has people coming back and then when we build these sponsorships on top of it.

Anthony J. Wood: Now you're announcing you're going into Costco and Amazon. Can you tell us what your 30, OEMs are saying about you expanding, and what's the ultimate strategy? Are you going to have these Roku branded TVs in every channel outlet? Can you help us look forward to the future of this product? Hey Laura, it's nice to hear from you. This is Anthony.

Speaker Change: Our creative solution for them as well so so thats right pricing matters of course, we're competitively priced but we also have some unique opportunities better.

Speaker Change: That are actually growing.

Speaker Change: Demand.

Speaker Change: Core pricing as well.

Speaker Change: Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And it comes from the line of Nicholas Sandler with Stephens. Please proceed.

Anthony J. Wood: Hey Laura, it's nice to hear from you. This is Anthony. I'll let Mustafa talk about [inaudible].

Nicholas Todd Zangler: Hey, guys congrats on the quarter.

Nicholas Todd Zangler: Given the headlines and the new competition arising.

Anthony J. Wood: Hi Anthony. Okay, we'll talk about it. Hi Laura.

Laura Martin: Hi Anthony. Okay.

Mustafa Ozgen: Hi Laura. Thanks for the question. Look, as we, as we announced the product and we explained then, Roku brand TVs are basically a complementary program to our existing Roku TV program. And we use the Roku TV as a way to innovate in a hardware/software combination. Historically, we focused on software only in the Roku TV context, now we are able to do more innovation using the hardware as well as the software and you know build much better products that can then be given to consumers, and also we are sharing that with our 30-plus licensing partners. And we are very open about that. And then we, you know, some of the improvements and innovations that we have already developed as part of the initial launch of the program is already being fed into our Roku TV ecosystem. Our partners are already benefiting from those improvements. Some of them are cost improvements, being able to further lower the cost of the hardware. Some of them are performance improvements. So both of these types of improvements have been shared with our partners and we'll continue to do so. And in terms of distribution, definitely to make this program successful and then, you know, for us to operate as a program, we need to scale it a little bit more. And therefore, we are expanding our distribution because customers love the product. We are receiving great reviews, you know, every day. And, you know, we want to be able to offer these products to the customers and get their feedback and, you know, that will be again used as a way for us to further improve and add new capabilities, then we'll share with our Roku TV ecosystem partners.

Nicholas Todd Zangler: Curious what you could tell us about your current relationship with Walmart both in regard to overall retail distribution and then placement within the on brand TV and just if there's any risk of any material changes in this relationship in the foreseeable future.

Anthony J. Wood: Thanks for the question. Look, as we announced the product, and we explained then, Roku and TVs are basically a complementary program to our existing Roku TV program. And we use the Roku TV as a way to innovate in the hardware and software combination. Historically, we focused on software only in the Roku TV context. Now we are able to do more innovation using hardware as well as software and build much better products that can then be given to consumers. And we are also sharing that with our 30 plus licensing partners. And we are very open about that.

Nicholas Todd Zangler: Hey, Nick this is Anthony.

Anthony J. Wood: I assume youre, referring to the article in the Wall Street Journal I mean, we can obviously can't comment on that.

Anthony J. Wood: That's a rumor but.

Anthony J. Wood: I'll just say a few comments in general first of all we're the industry leader with 80 million active accounts and growing.

Anthony J. Wood: One of them one of the things one of the primary reasons that we're the leader in streaming platforms that viewers love our products, They love our brand and love to delight and simplicity of our operating system.

Anthony J. Wood: And then we, you know, some of the improvements and innovations that we have already developed as part of the initial launch of the program are already being fed into our Roku TV ecosystem. Our partners are already benefiting from those improvements. Some of them are cost improvements, being able to further lower the cost of the hardware. Some of them are performance improvements. So both of these types of improvements have been shared with our partners and will continue to be shared with them. And in terms of distribution, Definitely, to make this program successful and then, you know, for us to operate as a program, we need to scale it a little bit more. And therefore, we are expanding our distribution because customers love the product. We are receiving great reviews, you know, every day.

Anthony J. Wood: One of the results of that as many of our viewers have multiple revenue devices in their home.

Anthony J. Wood: We've been the number one selling TV Pos in the U S for the past five years and we're installing those have all broadband households in the United States of course, you have a lot of international penetration as well.

Anthony J. Wood: Some of them are performance improvements. So both of these types of improvements have been shared with our partners and will continue to be shared with them. And in terms of distribution,

<unk> retail relationships, we have a great relationship with Walmart made a great relationship with relationships with lots of retailers.

Anthony J. Wood: Strong distribution, both inside and outside the United States.

Anthony J. Wood: Definitely, to make this program successful and then, you know, for us to operate as a program, we need to scale it a little bit more. And therefore, we are expanding our distribution because customers love the product. We are receiving great reviews, you know, every day.

Anthony J. Wood: We have a large engaged customer base they love our brands they asked for our brand.

Anthony J. Wood: Products <unk> products in their house.

Anthony J. Wood: You take that and you think about.

Anthony J. Wood: Our leading technology.

Our innovation in the industry, our singular focus on streaming are lower hardware costs get lower hardware cost than any other TV manufacturer.

Anthony J. Wood: And, you know, we want to be able to offer these products to customers and get their feedback. And, you know, that will be used as a way for us to further improve and add new capabilities, which we'll share with our Roku TV ecosystem. Super helpful.

And, you know, we want to be able to offer these products to customers and get their feedback. And, you know, that will be used as a way for us to further improve and add new capabilities, which we'll share with our Roku TV ecosystem.

Speaker Change: Im aware off.

Speaker Change: All of this gives me a lot of confidence.

Speaker Change: We're going to keep growing our distributions we added $10 million net active accounts last year, and we're going to add a lot more active accounts this year as well.

Super helpful. And then the other, my second and last question is, when we think about the user interface, I think one of the things, I know you really love this whole city thing, but I think it's really ironic that you have a CTV business and there's no video on the homepage. And it feels like if you had some kind of carousel, you could not only put in cross-promoting your stuff instead of a still image, but you could also sort of get more money from video postage stamps on page one. Could you talk? I know Anthony, you said you're focusing on the homepage more. That's one of your, like, tactical focuses in 24. Can you talk about? Other than just adding more brands to Citi, are we going to see anything more, I'm going to use the word engaging, for consumers from the Roku homepage in 24? Laura, this is Anthony.

Laura Martin: Super helpful. And then the other, my second and last question is, when we think about the user interface, I think one of the things, I know you really love this whole City thing, but I think it's really ironic that you have a CTV business and there's no video on the homepage. And it feels like if you had some kind of carousel, you could not only put in cross-promoting your stuff, instead of a still image, but you could also sort of get more money from video postage stamps on page one. Could you talk--I know, Anthony, you said you're focusing on the homepage more, that's one of your, like, tactical focuses in '24. Can you talk about, other than just adding more brands to City, are we going to see anything more, I'm going to use the word "engaging," for consumers from the Roku homepage in '24?

Laura Martin: And then the other, my second and last question is, when we think about the user interface, I think one of the things, I know you really love this whole city thing, but I think it's really ironic that you have a CTV business and there's no video on the homepage. And it feels like if you had some kind of carousel, you could not only put in cross-promoting your stuff instead of a still image, but you could also sort of get more money from video postage stamps on page one. Could you talk? I know Anthony, you said you're focusing on the homepage more. That's one of your, like, tactical focuses in 24.

Speaker Change: Got it.

Speaker Change: I appreciate your willingness to answer that.

Speaker Change: And then just for the second question you talked about M&A spend continuing to be pressured I'm. Just wondering if you'd expect that vertical to potentially improve meaningfully in at least the second half of 'twenty four.

Speaker Change: Obviously in that period, you would be lapping some easier comps.

Speaker Change: I would think new releases by that time, maybe come to market, but maybe in your view. The release slate is just too light and Thats why youre, calling for M&A to remain pressured for the duration of the year.

Speaker Change: But maybe just as you think about second half 'twenty four do you see potential for an inflection there or.

Anthony J. Wood: Can you talk about? Other than just adding more brands to Citi, are we going to see anything more, I'm going to use the word engaging, for consumers from the Roku homepage in 24? Laura, this is Anthony.

Speaker Change: Maybe you could just parse out the commentary on M&A being pressured throughout the duration of the full year. Thanks.

Charlie: Charlie will take that.

Charlie: Thanks for the question Nick.

Charlie: M&A is a really important category for us.

Anthony J. Wood: Hey Laura, this is Anthony. Absolutely. I mean, it's a big area of focus for us. You know, we mentioned our food zone, All Things Food, I mean that's something that's been, that's gotten a great reception from our viewers. Just an example of building out an experience that's accessed from our home screen that integrates promotion, both static display promotion as well as, you know, it promotes video as well. And, you know, and it's a small example of the kinds of things that we're going to be doing. So it's not, you know, RokuCity is one example, but there are lots of ways across the platform that we can drive, we can create experiences that will engage viewers, that will provide monetization opportunities, and that will drive drive more engagement across our platform. So, you know, in terms of putting video directly on the home screen, it's not something, it's something that we've thought about, and it's something that we're thinking about testing, but it's not an area that we've made any decisions on. And I'll just say, I guess the big picture is, there's a long list of ideas of how we can create viewer experiences that engage and entertain on our platform around the home screen. A lot of those do include video, but video is something on the home screen you have to approach carefully, you know there's always this concern that it might alienate some viewers, but some viewers love it. So, you know, it's just something that we will keep looking at and testing. But overall, there's a long list of great things we can do to add to our home state of driving. Thank you. Thank you. One moment for our next question. And it comes from the line about Vasily Karasyov with Cannonball.

Charlie: What does it tell you that what we really focus on is helping them right now.

Anthony J. Wood: Absolutely. I mean, it's a big area of focus for us. You know, we mentioned our food zone, all things food.

Speaker Change: Shifting our focus toward.

Speaker Change: Engagement.

Speaker Change: Really interesting to me to watch.

Speaker Change: As they do so and I think in the second half of the year as they not just have to.

Anthony J. Wood: I mean, that's something that's gotten a great reception from our viewers. It's an example of building out an experience that's accessed from our home screen that integrates promotion, both static display promotion as well as, you know, video promotion as well. And, you know, and it's just a small example of the kinds of things that we're going to be doing. So it's not, you know, RokuCity is one example, but there are lots of ways across the platform that we can drive. We can create experiences that will engage viewers, that will provide monetization opportunities, and that will drive more engagement across our platform. So, you know, in terms of putting video directly on the home screen, it's not something that we've thought about, and it's something that we're thinking about testing, but it's not an area that we've made any decisions about.

Speaker Change: Yes people to subscribe, but got paid media have people watch their shows and watch the commercials that we are probably their best partner in helping them do so on the platform. So when they are back.

Speaker Change: We're ready for them I would say.

Speaker Change: One of the things we're doing to make sure where we are.

Speaker Change: We're offering opportunities not just for M&A advertisers, but for other categories is to diversify in the way that Anthony said.

Speaker Change: We've been doing a lot of work to make sure. Our AD offerings are places where everybody can advertise but then have opened it up to the other categories. So that pivot to engagement will be successful for us and we'll be ready for them. When they return also I think we'll be able to offer offer those opportunities to a lot of different categories.

Speaker Change: Great. Thanks, so much.

Speaker Change: Go ahead, sorry, I'll just add.

Speaker Change: A couple of a couple of comments I guess.

Speaker Change: You can see a lot of interest in M&A I will just say that.

Speaker Change: Like you said it was pressured and will continue to be pressure for a while but despite that our platform revenue grew 13%.

Speaker Change: And then in Q4 the year over year growth for the video ads on our platform outperformed.

Speaker Change: Both the streaming industry overall as well as obviously the traditional TV industry I mean, what's going on with M&A is pretty straightforward.

Anthony J. Wood: And I'll just say, I guess the big picture is, there's a long list of ideas of how we can create viewer experiences that engage and entertain on our platform around the home screen. I don't a lot of those do include video, but video is something on the home screen you have to approach carefully. You know, there's always this concern that it might alienate some viewers, but some viewers love it.

Speaker Change: We're a great platform for M&A spend we have the most advanced tools in the industry.

Are very good at it we're good at helping Cisco.

Speaker Change: Payment services build subscribers and increase engagement and they spent a lot of money on M&A and that Gogo years.

The Covid pandemic now that they're retrenching and focusing on sustainable business that spending is normalized online it down a little bit, but it's going to continue to pick back up and over time, it will be a growth business for us.

Speaker Change: Great Great. Thank you very much I appreciate it guys.

Anthony J. Wood: So, you know, it's just something that we will keep looking at and testing. But overall, there's a long list of great things we can do to add to our home state of driving. Thank you. Thank you. One moment for our next question. And it comes from the line about Vasily Karasyov with Cannonball.

Speaker Change: Thank you.

Speaker Change: And then for our next question please.

Anthony J. Wood: Thank you very much. But overall, there's a long list of great things we can do to add to our home state of driving. Thank you. Thank you. One moment for our next question. And it comes from the line about Vasily Karasyov with Cannonball.

Laura Martin: Thank you very much.

Speaker Change: And it is from the line of Jason Bazinet with Citi. Jason. Please go ahead.

Anthony J. Wood: But overall, there's a long list of great things we can do to add to our home screen to drive engagement. Thank you. Thank you. One moment for our next question. And it comes from the line about Vasily Karasyov with Cannonball.

Anthony J. Wood: But overall, there's a long list of great things we can do to add to our home screen to drive engagement.

Jason Boisvert Bazinet: I just had a quick question for Anthony given your focus on <unk>.

Jason Boisvert Bazinet: Growth that you talked about unless on costs.

Anthony J. Wood: Thank you. Thank you. One moment for our next question. And it comes from the line about Vasily Karasyov with Cannonball.

Laura Martin: Thank you.

Operator: Thank you. One moment for our next question. And it comes from the line about Vasily Karasyov with Cannonball Research. Please proceed.

Jason Boisvert Bazinet: What's sort of your aspiration in other words, what metric do you think is most important to focus on given all of the metrics you disclosed.

Vasily Karasyov: Please. Thank you. Good afternoon.

Please.

Vasily Karasyov: Thank you. Good afternoon. Charlie, I have a question for you and wanted to ask you to talk about how your price, your scatter inventory, maybe help us triangulate your logic here in terms of how you do it relative to upfront pricing, relative to your competition. I mean, we understand how it's done on linear TV, is it the same? Because with the new entrance into the AVOD space, there is a lot of discussion what will happen to your pricing. There are industry press reports about where your CPMs are relative to your competitors. So can you tell us how you price your scatter inventory and what kind of thinking goes into that, and what factors will make you you know raise your prices, drop your prices, and so on? Just help us understand directionally how to think about that. Thank you.

Jason Boisvert Bazinet: And what do you think is a reasonable aspiration, where you would say.

Vasily Karasyov: Charlie, I have a question for you and wanted to ask you to talk about how Your Price, Your Scatter Inventory could maybe help us triangulate your logic here in terms of how you do it relative to upfront pricing relative to your competition. I mean, we understand how it's done on linear TV. Is it the same?

Anthony J. Wood: We've been successful in our effort to to reinvigorate the top line growth.

Anthony J. Wood: So I think so first of all just on costs.

Anthony J. Wood: It is obviously.

Anthony J. Wood: The big issue.

We're not saying I'm, not saying that we're not on cost I mean as a company.

Anthony J. Wood: Operational discipline very seriously, we just made a lot of progress last quarter, sorry last year and so this year, we have more time to work on some other initiatives and growth is one of those big initiatives.

Vasily Karasyov: Because with the new entrance into the Aboard space, there is a lot of discussion about what will happen to your pricing. There are industry press reports about where your CPMs are relative to your competitors. So can you tell us how you price your scatter inventory and what kind of thinking goes into that, and what factors will make you raise your prices, drop your prices, and so on? Just help us understand in a direction how to think about that. Thank you.

Anthony J. Wood: And for US for me anyway.

Anthony J. Wood: There's just so many opportunities across our platform.

Anthony J. Wood: It drives on particular monetization growth.

Anthony J. Wood: That means that we've worked on historically, but we've never put a huge.

Anthony J. Wood: Out of effort.

Anthony J. Wood: A focus.

Anthony J. Wood: In terms of monetization growth and so as to renew their area for US certainly the area of focus and success to me means accelerating platform growth rates, John what we're seeing this year.

Charlie Collier: Just help us understand in a direction how to think about that. Thank you. Hey Vasily, thank you so much for the question. You know, actually, I was looking at something yesterday.

Just help us understand in a direction how to think about that. Thank you.

Anthony J. Wood: Just in dollars dollars per hour or is there any sort of metric that you think is more important.

Charlie Collier: Hey Vasily, thank you so much for the question. You know, actually, I was looking at something yesterday, and the first thing you look at, as you said, in linear television also holds true in CTV, which is you want to see your upfront advertisers who come in early and make large commitments early. You want to see that pricing actually be less than what is occurring in scatter, and sure enough, that's happening. Our scatter rates have been very solid and continue to be so. And I know there's been a lot of talk today about my beloved Roku City and All Things Food and some of those integrations. What's remarkable about these integrations, besides the fact that they're so immersive and engaging in their broad reach, is that they're also scarce.

Let me just add onto that so when we look at both the current year in out years.

Speaker Change: We're very focused on absolute free cash flow.

Charlie Collier: And the first thing you look at, as you said, in linear television also holds true in CTV, which is you want to see your upfront advertisers who come in early and make large commitments early. You want to see that pricing actually be less than what is occurring in scatter. And sure enough, that's happening. Our scatter rates have been very solid and will continue to be so. And I know there's been a lot of talk today about my beloved Roku City and all things food and some of those integrations. What's remarkable about these integrations, besides the fact that they're so immersive and engaging in their broad reach, is that they're also rare.

John: And we're going to get that through acceleration of growth rate on the platform business.

John: Again, when we when we look at investments we ask ourselves how does this impact in a positive way an extremely experienced and how what's the ROI on this.

John: Component is really how we evaluate.

John: We invest in so again, we see tremendous opportunity to monetize our platform. We're really just getting started we're doing a good job in 2023 was very strong, but there's a lot of opportunity as we've grown it means 80 million actives.

John: But when we think about it again it is not.

John: We don't focus so much on a margin percent or an EBITDA were focus on absolute free cash flow and free cash flow per share and driving that up over time.

Charlie Collier: So we look at what scarcity does to drive prices, and Anthony's last answer about the opportunities that we see, not just on the home screen, but throughout the entire streamer's journey. So many of the sponsorships that, as we said, used to be M&E only are now both M&E and non-endemic advertisers. And what's terrific about that, not only does it open up that scarcity to new bidding and new advertisers, but it's also driving prices. So I would say the upfront we look at and those who have committed to us early have been rewarded, and those coming in and scattering seem to be responding to our changes toward opening up the sponsorships that Anthony mentioned, and the pricing has grown in tandem with that. So we feel like that's working, and it seems to be so both in forth and continuing now. Do you feel that for advertisers, pricing is an important factor when they decide between, let's say, the Roku channel and other streaming opportunities?

Charlie Collier: So we look at what scarcity does to drive pricing, and Anthony's last answer about the opportunities that we see, not just on the home screen, but throughout the entire streamer's journey. So many of the sponsorships that, as we said, used to be M&E only are now both M&E and non-endemic advertisers. And what's terrific about that, not only does it open up that scarcity to new bidding and new advertisers, but it's also driving pricing. So I would say the upfront, we look at, and those who have committed to us early have been rewarded, and those coming in as scatter are, seem to be responding to our changes toward opening up the sponsorships as Anthony mentioned, and the pricing has grown in tandem with that. So we feel like that's working, and it seems to be so both in fourth and continuing now.

Speaker Change: Thank you.

Speaker Change: And my focus.

Speaker Change: It is also just the fundamental drivers.

Speaker Change: What are the what are the features and what are the areas of product and what's the strategy there.

Speaker Change: That will fundamentally just drive increased revenue platform revenue.

Speaker Change: Thank you very much.

Speaker Change: Thank you one moment for our next question. Please.

And he is from the line of Barton Crockett with Russian Brad. Please proceed.

Barton Crockett: Okay. Thanks for taking the question I.

Barton Crockett: I was curious about international and.

Barton Crockett: In terms of your active account growth.

Barton Crockett: Can you give us any sense of the contribution of international too.

Speaker Change: To the over 4 million active account growth in the fourth quarter and $10 million over the year is it a minority of the net increase or a majority or is there any kind of.

Speaker Change: Kind of sense, you can give us that contribution to growth.

Speaker Change: The first question and then the second question is just to drill into this idea of.

Speaker Change: Your market share is the leading platform.

Vasily Karasyov: Do you feel that for advertisers, pricing is an important factor when they decide between, let's say, the Roku Channel and other streaming opportunities?

Speaker Change: Smart TV OS.

Speaker Change: Pos in the U S.

Speaker Change: And some other markets.

I understand you've kept a number one ranking for a number of years in the U S, but as youre absolute market share and that also been steady or has there been any change up or down in your market share of smart TV OS in the U S.

Charlie Collier: Well, look, obviously price is something that they, you know, they need to look at when they when they purchase. Our value has been great. We're also a performance platform. One of the things that our, you know, unmatched scale, and direct relationships with, you know, 80 million active accounts. What's great about it is we get the opportunity to be both top of the funnel and bottom of the funnel. So we see people, obviously, they look at us and compare us on price, and we're very competitively priced. But we also have the opportunity of being performant, and so the fact that we can be broad reach at the top of the funnel and also, you know, in certain categories, truly lead in this way, we're pricing well, and we're effective, which is what I think has people coming back. And then when we build these sponsorships on top of it, we are a creative solution for them as well. So that's right. Pricing matters, of course; we're competitively priced. But we also have some unique opportunities that are actually growing in demand, and therefore pricing as well.

Speaker Change: Hey, Barton I'll take the I'll start with the <unk>.

Speaker Change: For the.

Speaker Change: Kind of some high level thoughts on international and then.

Speaker Change: And then Dan is with docs.

Speaker Change: In General I think overall, we're pleased with our progress internationally. We're the number one in Mexico as well as the U S doing extremely well in Canada, we're doing well in all of Latin America, we're making great progress in Brazil. So we don't breakout our active accounts by by region, but.

Charlie Collier: So we see people, obviously, they look at us and compare us on price, and we're very competitively priced. But we also have the opportunity of being performant. And so the fact that we can be broad reach at the top of the funnel and also, you know, in certain categories, truly lead in this way, we're priced well, and we're effective, which is what I think has people coming back. And then when we build these sponsorships on top of it, we are a creative solution for them as well. So that's right.

Speaker Change: A lot of them are international at this point.

Progress, we're also doing well.

Speaker Change: In the U K so.

Speaker Change: And then do you want to add something about it.

Speaker Change: I'll just comment.

Speaker Change: I think it's important to note that we will as.

Speaker Change: As we talk about $80 million.

Speaker Change: We are growing in both U S and international and while international of course given.

Speaker Change: Charity of the markets are growing faster than the U S continues to grow very well for us on net new accounts and as part of that is a significant part of that Tim but those those 10 million ads that we have and we expect both markets, both our international and our U S.

Charlie Collier: Pricing matters, of course; we're competitively priced. But we also have some unique opportunities that are actually growing in demand, and therefore prices as well. Thank you. Thank you all for a moment for our next question. And it comes from the line between Nicholas Zangler and Stephens.

Pricing matters, of course; we're competitively priced. But we also have some unique opportunities that are actually growing in demand, and therefore prices as well. Thank you.

Pricing matters, of course; we're competitively priced. But we also have some unique opportunities that are actually growing in demand, and therefore prices as well.

Speaker Change: To continue to grow.

Speaker Change: One comment just as it relates to the platform revenue at <unk>, We've talked that we talk we stated our ARPA was down 4% due to the fact that international is growing so fast and that is that is that is true but in the U S. We are actually seeing <unk> flash.

Vasily Karasyov: Thank you.

Operator: Thank you. One moment for our next question. And it comes from the line between Nicholas Zangler with Stephens. Please proceed.

Nicholas Todd Zangler: Please proceed. Hey guys, congrats on the quarter. You know, given the headlines and the new competition arising, I'm curious what you could tell us about your current relationship with Walmart, both in regard to overall retail distribution and then placement within on-brand TV. And just if there's any risk of any material changes in this relationship in the foreseeable future. Hey Nick, this is Anthony. Um, I think you're referring to the article in the Wall Street Journal. I mean, we can't, obviously, comment on that. Uh, that's that's a rumor, but you know, I'll just say a few comments in general.

Please proceed.

Nicholas Todd Zangler: Hey guys, congrats on the quarter. You know, given the headlines and the new competition arising, I'm curious what you could tell us about your current relationship with Walmart, both in regard to overall retail distribution and then placement within on-brand TV. And just if there's any risk of any material changes in this relationship in the foreseeable future. Hey Nick, this is Anthony. Um, I think you're referring to the article in the Wall Street Journal. I mean, we can't, obviously, comment on that. Uh, that's that's a rumor, but you know, I'll just say a few comments in general.

Speaker Change: We don't break it out, but we are seeing year over year growth rates in <unk> and its really mix. It's all mix, that's causing that slight contraction in our <unk>. So it just shows you in different stage, obviously and the monetization of our international costs, but those will monetize over time, where we are in that scale that ski.

Speaker Change: We'll phase that engagement phase and in that monetization based depending on the international markets, but we feel very good about the growth rate in both U S and international.

Anthony J. Wood: Hey Nick, this is Anthony. Um, I assume you're referring to the article in the Wall Street Journal. I mean, we can't, obviously, can't comment on that, uh, that's, that's a rumor, but, you know, I'll just say a few comments in general. First of all, we're the industry leader with 80 million active accounts and growing. And one of the, one of the things, one of the primary reasons that we're the leader in streaming platforms is the viewers love our products, they love our brand, they love the delight and simplicity of our operating system. Uh, you know, and one of the results of that is that many of our viewers have multiple Roku devices in their home. So, we've been the number one selling TVOS in the US for the past five years, and we're installed in almost half of all broadband households in the United States. And, of course, we have a lot of international penetration as well. We have strong retail relationships. We have a great relationship with Walmart. We have a great relationship with, relationships with lots of retailers, and we have strong distribution both inside and outside the United States. You know, we have a large, engaged customer base. They love our brand, they ask for our brand. They have multiple products, multiple Roku products in their house. You know, you take that and you think about our leading technology, our innovation in the industry, our singular focus on streaming, our lower hardware costs--we have lower hardware costs than any other TV manufacturer that I'm aware of. You know, all of this gives me a lot of confidence that we're going to keep growing our distribution. We added 10 million active, net active accounts last year, and we're going to add a lot more active accounts this year as well.

Speaker Change: And this is Anthony again, just on your question about market share instead of Europe are down and you asked but I'll just take that question so globally.

Anthony J. Wood: If you look at if you look at regions outside the U S. Let's say outside the U S and Canada mature more mature for us you've seen strong and steady upward trends.

Anthony J. Wood: First of all, we're the industry leader with 80 million active accounts and growing. And one of the primary reasons that we're the leader in streaming platforms is that viewers love our products. They love our brand. They love the delight and simplicity of our operating system. Uh, you know, and one of the results of that is that many of our viewers have multiple Roku devices in their home. So, we've been the number one selling TVOS in the U.S. for the past five years, and we're probably known in half of all broadband households in the United States. And, of course, we have a lot of international penetration as well. We have strong retail relationships. We have a great relationship with Walmart. We have a great relationship with relationships with lots of retailers, and we have strong distribution both inside and outside the United States. You know, we have a large, engaged customer base. They love our brand. They ask for our brand.

Anthony J. Wood: Market share growth rates.

Anthony J. Wood: U S. Also also we launched Roku TV 10 years ago.

Anthony J. Wood: Since that launch we've seen steady increases in market share growth rate, we've seen a bounce bounce around quarter to quarter.

Anthony J. Wood: Uh, you know, and one of the results of that is that many of our viewers have multiple Roku devices in their home. So, we've been the number one selling TVOS in the U.S. for the past five years, and we're probably known in half of all broadband households in the United States. And, of course, we have a lot of international penetration as well. We have strong retail relationships. We have a great relationship with Walmart.

Anthony J. Wood: Sometimes it goes up sometimes it goes down but in general on average that's been going up steadily since we launched Roku TV and I actually think there is.

Anthony J. Wood: Phil quite a bit of room to grow our market share even in the United States because there will continue to be consolidation. There is still a lot of Tvs sold that.

Anthony J. Wood: One our proprietary Pos is what I've always said and still believe strongly that <unk>.

Anthony J. Wood: And consolidation to a small number of license tvo's ambitious. They just have a bigger economies of scale. They just have a big head start in terms of user experience with a leasing lifestyle Pos and we expect to be a beneficiary of that so.

Anthony J. Wood: We have a great relationship with relationships with lots of retailers, and we have strong distribution both inside and outside the United States. You know, we have a large, engaged customer base. They love our brand. They ask for our brand.

Anthony J. Wood: I think the sort of the trends in market share for Tvs are in our favor.

Anthony J. Wood: United States I expect over time.

Anthony J. Wood: To continue to climb although like I said, they do bounce around.

Anthony J. Wood: They have multiple products, multiple Roku products in their house. You know, you take that and you think about our leading technology, our innovation industry, our singular focus on streaming, and our lower hardware costs. We have lower hardware costs than any other TV manufacturer that I'm aware of. You know, all of this gives me a lot of confidence that we're going to keep growing our distribution. We added 10 million net active accounts last year, and we're going to add a lot more active accounts this year as well.

Anthony J. Wood: In a quarter.

Speaker Change: Okay. Thank you very much.

Speaker Change: Thank you and our last question one moment please.

Speaker Change: Comes from the line of Jason <unk> with Oppenheimer. Please proceed.

Jason Boisvert Bazinet: Hey, Thanks for getting me in there. So two questions do you expect media and entertainment revenue to start growing again in the second quarter and then on the three P. AD platforms. You gave obviously some color on the note. There is no question.

Jason Boisvert Bazinet: Comments or questions about that but what would it take to see a material increase in participation from major DSP, such as trade desk and <unk> 16 in your ecosystem.

Hey, Jason This is Anthony So I think Dan will take that first question then.

Anthony J. Wood: Charlie can talk about ESG is sure.

Nicholas Todd Zangler: Got it, I appreciate your willingness to answer that. And then, just for the second question, you talk about M&E spend continuing to be pressured. I'm just wondering if you'd expect that vertical to potentially improve meaningfully in at least the second half of '24. You know, obviously, in that period, you'd be lapping some easier comps. I would think new releases by that time might come to market. But, you know, maybe, in your view, the release plate is just too light, and that's why you're calling for M&E to remain pressured for the duration of the year. But maybe, just as you think about second half '24, do you see potential for an inflection there? Or maybe you could just parse out the commentary on M&E being pressured throughout the duration of the full year. Thanks.

Anthony J. Wood: Sure.

Anthony J. Wood: We talked about M&A.

Speaker Change: And that.

Speaker Change: We do think it was challenged in 'twenty, three and we will be challenged going forward.

Speaker Change: I am not going to break out what the <unk>.

Speaker Change: Growth rates that we're expecting.

Speaker Change: We do think it could grow year over year, but it's going to be growing less than our overall platform business, most likely and that's what we're anticipating and thats all the work that Charlie's doing on.

Diversification when he talked about.

Speaker Change: What we're focused on but we'll update you more on M&A ESP as we get into the second half Q2 and in the <unk>.

Nicholas Todd Zangler: And that's why you're calling for M&E to remain pressured for the duration of the year. But maybe, just as you think about second half 24, do you see potential for an inflection there? Or maybe you could just parse out the commentary on M&E being pressured throughout the duration of the full year. Thanks.

But we're not we don't break that specific activity.

Speaker Change: And our advertising.

Charlie: Thank you Jason I like the way, we say we have one more question. So you have two questions. That's good I'll take the second one.

Charlie: We are now actually in relationships with all the major DSP and SSP is an and.

Charlie: The way I look at it is that we win and prioritize demand diversification and we've done a good job because we're balancing.

Anthony J. Wood: Charlie will take that. Thanks for the question, Nick. Look, you know, M&E is a really important category for us, and, you know, I wanted to tell you that what we really focus on is helping them right now as they shift their focus toward engagement. It's really interesting to me to watch as they do so, and I think in the second half of the year, as they not just have to get people to subscribe, but have people watch their shows and watch the commercials, we are probably their best partner in helping them do so on the platform. So when they're back, we're ready for them.

Anthony J. Wood: Charlie will take that.

Charlie: Direct relationships, we have some of whom wish to execute their transactions on the DSP is and then there is the opening up of.

Charlie Collier: Thanks for the question, Nick. Look, you know, M&E is a really important category for us, and, you know, I wanted to tell you that what we really focus on is helping them right now as they shift their focus toward engagement. It's really interesting to me to watch as they do so, and I think in the second half of the year, as they not just have to get people to subscribe, but need to have people watch their shows and watch the commercials, that we are probably their best partner in helping them do so on the platform. So when they're back, we're ready for them. I would say, you know, one of the things we're doing to make sure we're, we're, You know, offering opportunities not just for M&E advertisers but for other categories is to diversify in the way that Anthony said. We've been doing a lot of work to make sure our ad offerings are places where M&E can advertise, but then we have opened it up to other categories. So that pivot, you know, to engagement will be successful for us, and we'll be ready for them when they return. Also, I think we'll be able to offer those opportunities to a lot of different categories. Great, thank you so much, and good luck!

Charlie Collier: Thanks for the question, Nick. Look, you know, M&E is a really important category for us, and, you know, I wanted to tell you that what we really focus on is helping them right now as they shift their focus toward engagement. It's really interesting to me to watch as they do so, and I think in the second half of the year, as they not just have to get people to subscribe, but need to have people watch their shows and watch the commercials, that we are probably their best partner in helping them do so on the platform. So when they're back, we're ready for them. I would say, you know, one of the things we're doing to make sure we're, we're, you know, we're offering opportunities not just for M&E advertisers but for other categories, is to diversify in the way that Anthony said. You know, we've been doing a lot of work to make sure our ad offerings are places where M&E can advertise, but then have opened it up to the other categories. So that pivot, you know, to engagement will be successful for us, and we'll be ready for them when they return. Also, I think we'll be able to offer those opportunities to a lot of different categories.

Charlie: Demand to two smaller.

Charlie: It has really grown in the thousands for us and a lot of those smaller accounts will become bigger and bigger over time. So we built those relationships I feel good about the growth both in dollars and active accounts and then I think you'll see the small and medium sized business, it's really a good results.

Charlie: Because my hope medium.

Charlie: Size businesses, but we think the strategy is solid and that we're executing well.

Speaker Change: Thank you.

Speaker Change: Thank you James.

Speaker Change: And with that ladies and gentlemen, we conclude the Q&A session I will turn it back to Anthony Wood for final comments.

Thank you everyone.

Anthony J. Wood: Thank you everyone for joining thanks to our employees customers content partners and advertisers I look forward to an exciting year of TV streaming.

Charlie Collier: I would say, you know, one of the things we're doing to make sure we're, we're, You know, offering opportunities not just for M&E advertisers but for other categories is to diversify in the way that Anthony said. We've been doing a lot of work to make sure our ad offerings are places where M&E can advertise, but then we have opened it up to other categories. So that pivot, you know, to engagement will be successful for us, and we'll be ready for them when they return. Also, I think we'll be able to offer those opportunities to a lot of different categories. Great, thank you so much, and good luck!

Anthony J. Wood: Yeah.

Anthony J. Wood: Okay.

And thank you all for participating.

Anthony J. Wood: Okay.

Anthony J. Wood: Yes.

Okay.

Anthony J. Wood: As a trailer moment.

Anthony J. Wood: Okay.

Anthony J. Wood: We changed the game.

Anthony J. Wood: Namely that.

Yeah.

Anthony J. Wood: Okay.

Anthony J. Wood: We.

Anthony J. Wood: Yeah.

Anthony J. Wood: Okay.

Anthony J. Wood: Sure.

Anthony J. Wood: Okay.

Anthony J. Wood: Sure.

Anthony J. Wood: The best part about it.

Anthony J. Wood: Great.

Anthony J. Wood: Yes.

Anthony J. Wood: Sandy you stop a one four start.

Okay.

Anthony J. Wood: Right.

Anthony J. Wood: Yes.

Anthony J. Wood: Welcome to the rich Eisen show right here on the Roku channel.

Nicholas Todd Zangler: Great, thank you so much, and good luck! [inaudible] Go ahead.

Anthony J. Wood: Yes.

Anthony J. Wood: Sorry, I'll just add a couple of comments, I guess, since there seems to be a lot of interest in M&E. I'll just say that you know like we said, it was pressured, it will continue to be pressured for a while, but despite that, our platform revenue grew 13%. And then, in Q4, the year-over-year growth of the video ads on our platform outperformed both the streaming industry overall, as well as, obviously, the traditional TV industry. I mean, you know, what's going on with M&E is pretty straightforward. We're a great platform for M&E spend, we have the most advanced tools in the industry. We are very good at it, we're good at helping streaming services build subscribers and increase engagement. And they spent a lot of money on M&E in the go-go years of the COVID pandemic. Now that they're retrenching and focusing on a sustainable business, that spending has normalized, normalized down a little bit, but it's gonna continue to pick back up, and over time, it will be growth business for us.

Morimoto: He is morimoto.

Morimoto: I definitely see this as a battle I'm here to fight.

Morimoto: Okay.

Morimoto: Yes.

Yes.

Morimoto: Okay.

Morimoto: Yes.

Morimoto: Okay.

Morimoto: Yes.

Morimoto: Yeah.

[music].

Okay.

Morimoto: Yeah.

Morimoto: Yes.

Okay.

Anthony J. Wood: We're a great platform for M&E spend. We have the most advanced tools in the industry. We are very good at it. We're good at helping streaming services build subscribers and increase engagement. And they spent a lot of money on M&E in the go-go years of the COVID pandemic.

Morimoto: [music].

Morimoto: Okay.

Morimoto: [music].

Morimoto: Okay.

Yes.

Morimoto: [music].

Morimoto: Yes.

Morimoto: Okay.

Morimoto: Yes.

Morimoto: Okay.

Morimoto: [music].

Morimoto: Yes.

Morimoto: Okay.

Morimoto: [music].

Morimoto: Okay.

Morimoto: [music].

Anthony J. Wood: Now that they're retrenching and focusing on a sustainable business, that spending has normalized, normalized down a little bit, but it's gonna continue to pick back up. And over time, it will be growth. Great, I agree. Thank you very much.

Now that they're retrenching and focusing on a sustainable business, that spending has normalized, normalized down a little bit, but it's gonna continue to pick back up. And over time, it will be growth.

Sure.

Morimoto: Okay.

Morimoto: [music].

Great, I agree. Thank you very much. Appreciate it, guys. Thank you. One moment for our next question, and this is from the line of Jason Bazinet with Citi. Jason, please go ahead.

Nicholas Todd Zangler: Great, I agree. Thank you very much. Appreciate it, guys.

Morimoto: Okay.

Morimoto: [music].

Jason Boisvert Bazinet: Appreciate it, guys. Thank you. One moment for our next question, and this is from the line of Jason Bazinet with Citi. Jason, please go ahead.

Operator: Thank you. One moment for our next question, please. And it is from the line of Jason Bazinet with Citi. Jason, please go ahead.

Jason Boisvert Bazinet: I just had a quick question for Anthony: given your focus on growth that you talked about and less on cost, what's sort of your aspiration, in other words, what metric do you think is most important to focus on, given all the metrics you disclose? And what do you think is a reasonable aspiration where you would say, "You know, we've been successful in our effort to reinvigorate the top line and get growth"? So I think, first of all, just on cost. I mean, cost is obviously a big issue.

Morimoto: Okay.

Morimoto: [music].

Anthony J. Wood: So I think, first of all, just on cost. I mean, cost is obviously a big issue. You know, we're not we're not saying I'm not saying that we're not on cost. I mean, as a company, we just made a lot of progress last year, and so this year we have more time to work on some other initiatives, and growth is one of those big initiatives. And for us, for me anyway, there's just so many opportunities across our platform to drive, in particular, monetization growth, which we, you know, that we've worked on historically but we've never put a huge amount of effort into making a focus in terms of monetization growth. And so it's a renewed area for us, a renewed area of focus. And, you know, success for me means accelerating platform growth rates beyond what we're seeing this year. Just in dollars, dollars per hour. Is there any sort of metric that you think is more important?

Anthony J. Wood: So I think, so first of all, just on cost. I mean, cost is obviously a big issue. You know, we're not, we're not saying, I'm not saying that we're not on cost. I mean, as a company, we take operational discipline very seriously, we just made a lot of progress last quarter, I mean sorry, last year, and so this year we have more time to work on some other initiatives, and growth is one of those big initiatives. And for us, for me anyway, there's just so many opportunities across our platform to drive, in particular, monetization growth, that, you know, that we've worked on historically but we've never put a huge amount of effort and made a big focus in terms of monetization growth. And so it's a renewed area for us, a renewed area of focus. And, you know, success to me means re-accelerating platform growth rates beyond what we're seeing this year. Just in dollars, dollars per hour. Is there any sort of metric that you think is more important?

Morimoto: Great.

Morimoto: [music].

Morimoto: Okay.

Anthony J. Wood: You know, we're not we're not saying I'm not saying that we're not on cost. I mean, as a company, we just made a lot of progress last year, and so this year we have more time to work on some other initiatives, and growth is one of those big initiatives. And for us, for me anyway, there's just so many opportunities across our platform to drive, in particular, monetization growth, which we, you know, that we've worked on historically but we've never put a huge amount of effort into making a focus in terms of monetization growth. And so it's a renewed area for us, a renewed area of focus. And, you know, success for me means accelerating platform growth rates beyond what we're seeing this year. Just in dollars, dollars per hour. Is there any sort of metric that you think is more important?

Morimoto: [music].

Morimoto: Okay.

Morimoto: [music].

Morimoto: Okay.

Morimoto: Yes.

[music].

Jason Boisvert Bazinet: Just in dollars, just dollars per hour? Is there any sort of metric that you think is more important?

Anthony J. Wood: Is there any sort of metric that you think is more important?

Charlie Collier: Let me just add on to that. So when we look at both the current year and out years, we are very focused on absolute free cash flow. And we're going to get that through acceleration of growth rates on the platform business. So, again, when we look at investments, we ask ourselves, how does this, of course, impact in a positive way the streaming experience, and what's the ROI on this? That second component is really how we evaluate what we invest in. So, again, we see tremendous opportunity to monetize our platform. We're really just getting started. We're doing a good job, 2023 was very strong. But there's a lot of opportunity as we've grown to these 80 million actives. But when we think about it, again, it's not, you know, we don't focus so much on a margin percent or an EBITDA. We're focused on absolute free cash flow and free cash flow per share and driving that up over time. and my focus, and that, you know, is also just the fundamental driver, like what are the features and what are the areas of the product? What's the strategy that will fundamentally just drive increased platform revenue? Thank you very much.

Morimoto: Right.

Morimoto: [music].

Morimoto: Sure.

Morimoto: Okay.

[music].

Dan Jetta: But there's a lot of opportunity as we've grown to these 80 million active users. But when we think about it, again, it's not – we don't focus so much on a margin percent or an EBITDA. We're focused on absolute free cash flow and free cash flow per share and driving that up over time, and my focus, and that, you know, is also just the fundamental driver, like what are the features and what are the areas of the product? What's the strategy that will fundamentally just drive increased platform revenue? Thank you very much.

Charlie Collier: Thank you. and my focus, and that, you know, is also just the fundamental driver, like what are the features and what are the areas of the product? What's the strategy that will fundamentally just drive increased platform revenue? Thank you very much.

Jason Boisvert Bazinet: Thank you.

Anthony J. Wood: And my focus, that, you know, is also just the fundamental drivers. Like what are the features and what are the areas of the product. What's the strategy that will fundamentally just drive increased platform revenue growth. Thank you very much.

Morimoto: Yes.

Morimoto: [music].

Morimoto: Yes.

Jason Boisvert Bazinet: Thank you very much.

Operator: Thank you. One moment for our next question, please, and it's from the line of Barton Crockett with Rosenblatt. Please proceed.

Morimoto: Yes.

Morimoto: Yeah.

Barton Crockett: Please. Thanks for taking the question. I was curious about international in terms of your active account growth. Can you give us any sense of the contribution of international to the over 4 million active account growth in the fourth quarter and the 10 million over the year? Is it a minority of the net increase or a majority?

Please.

Barton Crockett: Okay, thanks for taking the question. I was curious about international, in terms of your active account growth. Can you give us any sense of the contribution of international to the over 4 million active account growth in the fourth quarter, and the 10 million over the year? Is it a minority of the net increase or a majority? Or is there any kind of sense you can give us of that contribution to growth? That's the first question. And then the second question is just to drill into this idea of your market share, you know, you as the leading platform smart TVOS in the US and some other markets. You know, I understand you've kept a number one ranking for a number of years in the US, but as your absolute market share, has that also been steady, or has there been any change up or down in your market share of smart TVOS in the US? Hey, Martin, I'll take the I'll start with this is Anthony for some kind of high-level thoughts on international affairs, and then Dan has some thoughts.

Morimoto: Okay.

Morimoto: Yeah.

Morimoto: [music].

Morimoto: Okay.

Morimoto: [music].

Morimoto: Okay.

Morimoto: Thank you.

Morimoto: [music].

Anthony J. Wood: Or is there any kind of sense you can give us of that contribution to growth? That's the first question. And then the second question is just to drill into this idea of your market share, you know, you as the leading platform for smart TVOS in the U.S. and some other markets. You know, I understand you've kept a number one ranking for a number of years in the U.S., but as for your absolute market share, has that also been steady, or has there been any change up or down in your market share of smart TVOS in the Hey, Martin, I'll take the I'll start with this is Anthony for some kind of high-level thoughts on international affairs, and then Dan has some thoughts.

Morimoto: Yes.

Morimoto: Okay.

Morimoto: [music].

Morimoto: Okay.

Morimoto: [music].

Anthony J. Wood: Hey, Barton, I'll take the, I'll start with a--this is Anthony--with a kind of a some high-level thoughts on the international, and then Dan has some thoughts. Just in general, I think overall we're pleased with our progress internationally. We're number one in Mexico, as well as the US, doing extremely well in Canada, we're doing well in all of Latin America, and we're making great progress in Brazil. So we don't break out our active accounts by region, but a lot of them are international at this point. You know, we're making good progress. We're also doing well in the UK. So, Dan, did you want to add something about that?

Morimoto: Yes.

Morimoto: [music].

Anthony J. Wood: Just in general, I think we're pleased with our progress internationally. We're number one in Mexico, as well as the US doing extremely well in Canada, we're doing well in all of Latin America, and we're making great progress in Brazil. So we don't break out our active accounts by region, but a lot of them are international at this point, you know. We're making good progress. We're also doing well in the UK. Sam, did you want to add something about that?

Morimoto: Yes.

Morimoto: [music].

Morimoto: Okay.

Dan Jedda: Yeah, I'll just comment. I just think it's important to note that we, you know, as we talk about the 80 million actives, we are growing in both the US and international, and while international, of course, given the maturity of the markets are growing faster, the US continues to grow very well for us on net new accounts. And as part of that, you know, a significant part of that is those 10 million ads that we have. And we expect both markets, both our international and our US, to continue to grow on actives. One comment, just as it relates to platform revenue in ARPU, we've talked that, you know, we talked, we stated our ARPU was down 4% due to the fact that international is growing so fast, and that is true. But in the US, we are actually seeing ARPU flat to up. We don't break it out, but we are seeing year-over-year growth rates in ARPU, and it's really mixed. It's all mixed that's causing that slight contraction in ARPU. So it just shows you, and we're at a different stage, obviously, in the monetization of our international accounts, but those will monetize over time. We're, you know, in that scale, that scale phase, that engagement phase, and in that monetization phase, depending on the international markets. But we feel very good about the growth rate of both US and international. This is Anthony again.

Morimoto: Sure.

Morimoto: Yes.

Morimoto: [music].

Morimoto: Yes.

Morimoto: [music].

Morimoto: Yeah.

Morimoto: [music].

Dan Jetta: So it just shows you, and we're at a different stage, obviously, in the monetization of our international accounts, but those will monetize over time. We're, you know, in that scale phase, that engagement phase, and in that monetization phase, depending on the international markets. But we feel very good about the growth rate of both U.S. and international. This is Anthony again.

Morimoto: Okay.

Morimoto: [music].

Anthony J. Wood: This is Anthony again. Just on your question about market share, has it been steady or up or down in the US? Well, I'll just take that question. So globally, you know, if you look at regions outside the US, let's say outside the US and Canada, which are more mature for us, we've seen strong and steady upper trends of growth, market share growth rates. In the US, also, you know, we launched Roku TV 10 years ago. And since that launch, we've seen steady increases in market share growth rate. You know, we've seen our [inaudible] bounce around from quarter to quarter, you know, sometimes it goes up, sometimes it goes down. But in general, on average, it's been going up steadily since we launched Roku TV. And I actually think, you know, there's still quite a bit of room to grow our market share, even in the United States, because there will continue to be consolidation. There are still a lot of TVs sold that run on proprietary TVOSs, and I've always said and still believe strongly that we're going to see consolidation to a small number of licensed TVOSs because there's just, they just have bigger economies of scale. They just have a big head start in terms of user experience. We're the leading licensed TVOS, and we expect to be a beneficiary of that. So I, you know, I think that sort of the trends in market share for TVs are in our favor. And the United States, I expect over time the growth rate to continue to climb, although, like I said, they do bounce around, you know, quarter to quarter.

Anthony J. Wood: Just on your question about market share, has it been steady or up or down in the U.S.? Well, I'll just take that question. So globally, you know, if you look at regions outside the U.S., I don't say outside the U.S., in Canada, which are more mature for us, we've seen strong and steady higher trends of market share growth rates. In the U.S., also, you know, we launched Roku TV 10 years ago.

Morimoto: Yes.

Sure.

Morimoto: Yes.

Yes.

Morimoto: [music].

Anthony J. Wood: And since that launch, we've seen steady increases in market share growth rate. You know, we've seen our bounce around from quarter to quarter. You know, sometimes it goes up, sometimes it goes down. But in general, on average, it's been going up steadily since we launched Roku TV. And I actually think, you know, there's still quite a bit of room to grow our market share, even in the United States, because there will continue to be consolidation. There are still a lot of TVs sold that run on proprietary TV OSs. And I've always said and still believe strongly that we're going to see consolidation to a small number of licensed TV OSs because there's just they just have bigger economies of scale.

Morimoto: Okay.

Morimoto: [music].

Morimoto: Sure.

Okay.

Morimoto: [music].

Anthony J. Wood: They just have a big head start in terms of user experience. We're the leading licensed TV OS, and we expect to be a beneficiary of that. So I, you know, I think that sort of the trends in market share for TVs are in our favor. And the United States, I expect the growth rate to continue to climb, although, like I said, they do bounce around quarter to quarter.

Morimoto: Okay.

Morimoto: [music].

Anthony J. Wood: Okay, thank you very much. Thank you. And our last question, one moment, please, comes from the line of Jason Helfstein with Oppenheimer. Please proceed. Thanks for getting me in there. So two questions. Expect median entertainment revenue to start growing again. And then on the 3P ad platforms, you gave, obviously, some color in the video. What would it take to see material in, Trae Depp, Hey Jason, this is Anthony

Barton Crockett: Okay, thank you very much.

Thank you. And our last question, one moment, please, comes from the line of Jason Helfstein with Oppenheimer. Please proceed. Thanks for getting me in there. So two questions. Expect median entertainment revenue to start growing again. And then on the 3P ad platforms, you gave, obviously, some color in the video. What would it take to see material in, Trae Depp, Hey Jason, this is Anthony

Operator: Thank you. And our last question, one moment, please, comes from the line of Jason Helfstein with Oppenheimer. Please proceed.

Morimoto: Yes.

Morimoto: Okay.

Morimoto: [music].

Thanks for getting me in there. So two questions. Expect median entertainment revenue to start growing again. And then on the 3P ad platforms, you gave, obviously, some color in the video. What would it take to see material in, Trae Depp, Hey Jason, this is Anthony

Jason Helfstein: Thanks for getting me in there. So two questions. Do you expect median entertainment revenue to start growing again in the second quarter. And then on the 3P ad platforms, you gave, obviously, some color in the notes, and there's been questions or comments, questions about that. What would it take to see a material increase in participation from major DSPs, such as Trade Desk and DV360 and [inaudible].

Hey Jason, this is Anthony So I think Dan will take that first question and then Charlie can talk about DSG. Sure. You know, we talked about M&E and that, you know, we do think it was challenged at 23 and will be challenged going forward.

Anthony J. Wood: Hey Jason, this is Anthony. So I think Dan will take that first question, and then Charlie can talk about DSPs.

Jason Helfstein: So I think Dan will take that first question and then Charlie can talk about DSG. Sure. You know, we talked about M&E and that, you know, we do think it was challenged at 23 and will be challenged going forward.

Morimoto: Sure.

Dan Jedda: Sure. You know, we talked about M&E and that, you know, we do think it was challenged at 23 and will be challenged going forward. And we're not, I'm not going to break out this, you know, what the growth rates that we're expecting for M&E and, you know, we do think it could grow year over year, but it's going to be growing less than our overall platform business, most likely. And that's what we're anticipating. And that's all the work that Charlie's doing on diversification, and what he talked about is what we're focused on. But we'll update you more on M&E as we get into the second half, you know, Q2 and H2. We're actually not; we don't break that specific activity out in our average.

Jason Helfstein: Sure.

Dan Jedda: Sure, you know, we talked about M&E and that, you know, we do think it was challenged at '23 and will be challenged going forward. And we're not, I'm not going to break out this, you know, what the growth rates that we're expecting for M&E and, you know, we do think it could grow year over year, but it's going to be growing less than our overall platform business, most likely. And that's what we're anticipating. And that's all the work that Charlie's doing on diversification, what he talked about is what we're focused on. But we'll update you more on M&E as we get into the second half, you know, Q2 and H2. We're actually not, we don't break that specific activity out in our advertising.

Morimoto: [music].

Dan Jetta: And we're not, I'm not going to break out this, you know, what the growth rates that we're expecting for M&E and, you know, we do think it could grow year over year, but it's going to be growing less than our overall platform business, most likely. And that's what we're anticipating. And that's all the work that Charlie's doing on diversification, and what he talked about is what we're focused on. But we'll update you more on M&E as we get into the second half, you know, Q2 and H2. We're actually not; we don't break that specific activity out in our average.

Okay.

Morimoto: [music].

Morimoto: Okay.

Dan Jetta: Jason, I like the way we say we have one more question, so you have two questions. That's good. I'll take the second one on DSPs. We are now actually in relationships with all the major DSPs and SSPs. And the way I look at it is this: we went and prioritized demand diversification. And we've done a good job because we're balancing the direct relationships we have, some of whom wish to execute their transactions on the DSPs. And then there's the opening up of demand to smaller accounts that have really grown in the thousands for us. And a lot of those smaller accounts will become bigger and bigger over time. So we've built those relationships. I feel good about the growth, both in dollars and active accounts. And then, I think you'll see small and medium-sized businesses really have good results and become, I hope, medium and large-sized businesses. But we think the strategy is solid and that we're executing well. Thank you. And with that, ladies and gentlemen, we conclude the Q&A session. I will turn it back to Anthony Wood for final comments.

Charlie Collier: Jason, I like the way we say we have one more question, so you have two questions. That's good. I'll take the second one on DSPs. We are now actually in relationships with all the major DSPs and SSPs, and the way I look at it is this: we went and prioritized demand diversification. And we've done a good job because we're balancing the direct relationships we have, some of whom wish to execute their transactions on the DSPs. And then there's the opening up of demand to smaller accounts that has really grown in the thousands for us. And a lot of those smaller accounts will become bigger and bigger over time. So we've built those relationships. I feel good about the growth, both in dollars and active accounts. And then I think you'll see small and medium-sized businesses really have good results and become, I hope, medium and large-sized businesses. But we think the strategy is solid and that we're executing well.

Morimoto: [music].

Charlie Collier: We are now actually in relationships with all the major DSPs and SSPs. And the way I look at it is this: we went and prioritized demand diversification.

Yes.

Morimoto: Yes.

Charlie Collier: And we've done a good job because we're balancing the direct relationships we have, some of whom wish to execute their transactions on the DSPs. And then there's the opening up of demand to smaller accounts that have really grown in the thousands for us. And a lot of those smaller accounts will become bigger and bigger over time.

Morimoto: Okay.

Morimoto: Yes.

Okay.

Morimoto: Okay.

Morimoto: [music].

Charlie Collier: So we've built those relationships. I feel good about the growth, both in dollars and active accounts. And then, I think you'll see small and medium-sized businesses really have good results and become, I hope, medium and large-sized businesses.

Charlie Collier: But we think the strategy is solid and that we're executing well. Thank you. And with that, ladies and gentlemen, we conclude the Q&A session. I will turn it back to Anthony Wood for final comments.

Morimoto: Thanks.

Morimoto: Right.

Operator: Thank you. And with that, ladies and gentlemen, we conclude the Q&A session. I will turn it back to Anthony Wood for final comments.

Jason Helfstein: Thank you.

Morimoto: Yes.

Operator: Thank you. And with that, ladies and gentlemen, we conclude the Q&A session. I will turn it back to Anthony Wood for final comments.

Morimoto: [music].

Anthony J. Wood: Thank you everyone for joining. Thanks to our employees, customers, content partners, and advertisers. I look forward to an exciting year of TV streaming. And thank you all for participating.

Anthony J. Wood: Thank you everyone for joining. Thanks to our employees, customers, content partners, and advertisers. I look forward to an exciting year of TV streaming.

Morimoto: Okay.

Morimoto: Alright.

Morimoto: Yes.

Okay.

Morimoto: Yes.

Morimoto: Okay.

[music].

Morimoto: Yes.

Morimoto: Right.

Morimoto: Sure.

Morimoto: [music].

Operator: And thank you all for participating.

Operator: The President has sent you to stop the world before it starts. I'm not doing this the way you would. Welcome to the Rich Eisen Show, right here on the Roku Channel. Here he is, Chef Morimoto.

Morimoto: Yes.

Morimoto: Thanks.

Morimoto: Yes.

Morimoto: Sure.

Morimoto: Okay.

Okay.

Morimoto: Okay.

Morimoto: Thanks.

Morimoto: Okay.

Morimoto: Please proceed.

Morimoto: [music].

Morimoto: Please.

Morimoto: Yes.

Morimoto: Okay.

Okay.

Morimoto: [music].

Morimoto: Okay.

Morimoto: [music].

Morimoto: Yes.

Morimoto: Thanks.

Morimoto: [music].

Morimoto: Yes.

Morimoto: Okay.

Morimoto: [music].

Morimoto: Yes.

Morimoto: Okay.

Morimoto: Sure.

Morimoto: Yes.

Morimoto: Okay.

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Morimoto: [music].

Morimoto: Okay.

Morimoto: Yes.

Operator: I definitely see this as a battle. I'm here to fight. The Rich Eisen Show.

Morimoto: [music].

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Morimoto: Okay.

Morimoto: [music].

Morimoto: Okay.

Morimoto: [music].

Morimoto: Okay.

Morimoto: Yes.

Morimoto: [music].

Morimoto: Sure.

Morimoto: Yes.

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Morimoto: Okay.

Morimoto: [music].

Morimoto: Okay.

Morimoto: Sure.

Morimoto: Okay.

Morimoto: Great.

Morimoto: [music].

Morimoto: Sure.

Morimoto: Okay.

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Morimoto: Okay.

Morimoto: [music].

Morimoto: Yes.

Morimoto: [music].

Morimoto: Hum.

Morimoto: Yes.

Morimoto: Okay.

Morimoto: [music].

Morimoto: Some.

Morimoto: Okay.

Yes.

Morimoto: Okay.

Morimoto: Yeah.

Q4 2023 Roku Inc Earnings Call

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