Q2 2024 Roku Inc Earnings Call
Okay.
Speaker Change: Ladies and gentlemen, thank you for standing by welcome to the second quarter 'twenty 'twenty four 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 one on your telephone you within here an automated message advising your hand is free to.
To withdraw your question. Please press star one one again.
Please be advised that today's conference is being recorded.
I would like now to turn the conference over to Conrad Grodd, Vice President of Investor Relations. Please go ahead.
Speaker Change: Welcome to Roku second quarter 'twenty 'twenty four earnings call on today's call are Anthony Wood, <unk>, founder and CEO, Dan Jeddah, our CFO and Charlie Collier, President Roku media, our full results and additional management commentary are available in our shareholder letter on our IR website at Roku Dotcom sportswear.
Speaker Change: Investor on this call, we'll make forward looking statements, which are subject to risks and uncertainties.
Please refer to our shareholder and periodic SEC filings for risk factors that could cause our actual results to differ materially from these forward looking statements.
Speaker Change: We will also present GAAP and non-GAAP financial measures reconciliations of non-GAAP measures to the most comparable GAAP financial measures are provided in our shareholder letter.
Speaker Change: Unless otherwise stated all comparisons will begin our results for the comparable 2023 period.
Speaker Change: Now I will hand, the call over to Anthony.
Anthony: Thanks, Conrad this quarter Roku continues to build on our foundation of unmatched scale and engagement, while remaining focused on operational discipline.
Anthony: We continue to lean into our unique asset the roku home screen, which is the beginning of the viewers TV experience.
Anthony: Every day U S households, representing more than a 120 million people begin their screaming journey on the Roku home screen.
Speaker Change: This fact, along with our development and operation of the pipeline makes me confident we will be able to accelerate our platform revenue in 2025.
Speaker Change: In Q2, we grew streaming household 14% year over year streaming hours, 20% year over year and platform revenue, 11% year over year.
Speaker Change: In the U S. Roku is the number one TV OS by both TV unit sales and our screen and our share of each is more than double the next largest operating system.
Speaker Change: The Roku channel is our number three app by both reach and engagement. This.
Speaker Change: This is a great achievement and demonstrates the Roku is building the lead into TV.
Speaker Change: Another result, we are proud of is our fourth straight quarter of delivering positive adjusted EBITDA and generating positive free cash flow.
Speaker Change: More than a year ago, we set a target of positive adjusted EBITDA for the full year 2024.
Speaker Change: That's an ambitious target was Ben we did the work of right sizing our cost structure and delivered on our full year early.
Speaker Change: Looking ahead, we will maintain the strong track record of execution as we focus on our monetization initiatives, including maximizing AD demand for roku, leveraging the roku home screen as the leading <unk> for TV and growing roku build subscriptions.
Speaker Change: Now, let me turn it over to Dan.
Dan: Thanks Anthony.
Dan: We ended Q2 with $83 6 million streaming households.
Dan: Up 14% year over year with sequential net adds of $2 million driven by both Tvs and streaming players.
Dan: We continue to drive strong growth and engagement with streaming hours up 20% year over year.
Dan: We also grew engagement per account globally with streaming hours per streaming household per day, a 4.0 hours in Q2 of 2024 up from $3 eight hours in Q2 of last year.
Dan: In Q2, we grew total net revenue, 14% year over year to $968 million.
Speaker Change: Platform revenue was $824 million up 11% year over year, driven by both streaming services distribution and advertising activities, while offset by a challenged M&A vertical.
Speaker Change: Streaming services distribution activities grew faster than overall platform revenue benefiting in part from subscription price increases.
Speaker Change: Devices revenue increased 39% year over year in Q2, driven by the expansion of the retail distribution of Roku branded Tvs.
Speaker Change: <unk> was $48 68 in Q2 on a trailing 12 month basis.
Speaker Change: That year over year.
Speaker Change: This reflects an increasing share of streaming households in international markets, where we are currently focused on growing scale and engagement with monetization efforts in early stages.
Speaker Change: Q2, total gross margin was 44% down slightly year over year.
Speaker Change: Platform gross margin of 53% was relatively in line year over year, while devices gross margin was negative, 11%, which was up six points year over year.
Speaker Change: Q2, adjusted EBITDA was $44 million, which was above our outlook.
Speaker Change: The better than expected performance was driven by our platform segment.
Speaker Change: Free cash flow was $318 million on a trailing 12 month basis, and we ended the quarter with $2 1 billion of cash and cash equivalents.
Speaker Change: We continue to see leverage in our operating model with our fourth straight quarter of positive adjusted EBITDA and free cash flow.
Speaker Change: Let me turn to our outlook for the third quarter.
Speaker Change: We anticipate total revenue of 1.01 billion.
Speaker Change: Gross profit of $440 million with gross margin of 44%.
Speaker Change: And adjusted EBITDA of $45 million.
Speaker Change: Our outlook for total net revenue anticipates, an 11% year over year increase.
Speaker Change: We expect Q3 platform revenue to grow 9% year over year.
Speaker Change: This takes into account a challenging year over year growth rate comparison within streaming services distribution, along with elevated positive 606 adjustments in Q3 of last year.
Speaker Change: While we expect M&A to remain challenged we anticipate the year over year growth of advertising activities to accelerate in Q3.
Speaker Change: Platform margin will be in line with Q2 at roughly 53%.
Speaker Change: On the device side, we expect Q3 revenue to grow 24% and margins to be in line with Q2, and the negative low double digits, reflecting continued expansion and investment in our Roku branded television program.
Speaker Change: We're benefiting from operational improvements we've made over the course of the past year and as a result, we continue to expect 2024 opex growth rates to be in the low single digits, when excluding impairment and restructuring charges.
Speaker Change: We are confident that year over year growth rates of platform revenue will begin to accelerate sequentially in Q4 of this year as a result of executing on our monetization initiatives to maximize AD demand and leverage our home screen as the lead in for TV.
Speaker Change: With that let's take questions.
Speaker Change: Operator.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: One moment for the first question. The first question comes from Shyam Patel with us.
Speaker Change: Susquehanna International Group your line is spent.
Shyam Patel: Hey, guys congrats on the nice results.
Shyam Patel: I had a couple of questions.
Shyam Patel: First there's been a lot of commentary recently about excess supply of inventory in the market and downward pressure on CPM I was wondering if you could just talk about this and maybe what Youre seeing and then second question can you talk about what your what you guys are currently seeing with <unk>.
Speaker Change: And just your expectations there. Thank you.
Shyam Patel: Hi, Sam this is Anthony.
Anthony: Yes, I'll be happy to take that question. So first I'll, just say that roku is not impacted.
Shyam Patel: By market driven pricing changes in the same way that.
Shyam Patel: Other streaming services seem to be and this is because we roku our streaming platform, we're not solely a streaming service and if you think about what that means.
Shyam Patel: As a platform as a screening platform.
Shyam Patel: One of the benefits is that we have a diversified set of revenue streams.
Shyam Patel: Our platform business consists of our streaming services distribution.
Speaker Change: Activities, which are diversified as well as advertising, which we're also diversified so if you look at streaming service distribution.
Speaker Change: We're investing in areas like Roku, bill subscriptions as well as premium subscriptions.
Speaker Change: And then if you think about advertising activities, which are also diversified you know obviously, we have traditional video as traditional streaming ads on our platform across our platform.
Speaker Change: But.
Speaker Change: Unlike normal streaming service, we have a unique set of AD products and sponsorships that are only possible because we own the platform.
Speaker Change: And we integrate these throughout the viewer experience.
Speaker Change: So.
Speaker Change: We have diversified revenue streams platform level revenue.
Speaker Change: Revenue streams, and then if I, even take a step back and think about like what are the primary factors that drive our platform business. It's.
Speaker Change: Our platform business.
Speaker Change: Growth is driven by the growth of the different components of that business. So for example.
Speaker Change: We have we continue to maintain strong growth of streaming households.
Speaker Change: We added 2 million net adds in the quarter recently now up to $83 million almost 84 million streaming household.
Speaker Change: So we continue to add global streaming households.
Speaker Change: They're very strong streaming our engagement, but also continued strong in a lot of that is monetize will engagement for us and then of course.
Speaker Change: We continue to invest a lot of our R&D effort into building and creating new monetization products across the viewer experience. So.
Speaker Change: These these are the primary things that drive our growth and then another critical point I guess I'd like just like to mention is I know.
Speaker Change: We said it before but it's really important the roku home screen is one of our probably our most important asset.
Speaker Change: It's the reason we're the lead into TV every day U S households, with more than 120 million people start their streaming experience at the Roku home screen.
Speaker Change: That's super valuable scale to advertisers as well as promotion and promoting our own owned and operated properties, but for advertisers.
Speaker Change: Our home screen and our viewer experience for our platform reaches viewers before they decide what to watch.
Speaker Change: After they spent some time trying to decide what to watch they pick a streaming app and a fragment into different streaming apps and a lot of those same apps.
Speaker Change: And so.
Speaker Change: For many of our viewers.
Speaker Change: Promotions and advertising in our home screen is the only add they're going to see.
Speaker Change: The home screen is a very important part of our strategy for growing our monetization something's working well for us and then.
Speaker Change: If I just think about.
Speaker Change: What are the actual primary challenges through our platform business right now.
Speaker Change: <unk> mentioned a few times is continued weakness within the M&A vertical.
Speaker Change: But we have a great AD business, and we're well positioned to accelerate our ad business.
Speaker Change: I'll turn it over to Charlie to share some more details thanks, Anthony and thanks for the question I. Appreciate it there is a lot of supply in the market you are right.
Anthony: Anthony address are differentiating platform advantages why don't I speak about advertising directly.
Charlie: We are actively creating new revenue sources, all the time at Roku, We're building new AD products across our UI and each served two purposes. They both drive demand and they also fulfill demand.
Speaker Change: A few good examples are video ads on the home screen, our customizable Roku city buildings and cars sponsorships across our UI in our content destinations like the NFL experience our Olympic Zone, which is booming now actually I think you might be looking at it on your on your screen as we speak in the updated.
Speaker Change: Metal count.
Speaker Change: And it includes our all things food and all things home areas.
Shyam Patel: And then if you think about it shyam there'd be open and interoperable way, we partner with clients and use our unique AD targeting and measurement capabilities to help them meet their goals that's really important.
Shyam Patel: We talk a lot about how we come to market.
Speaker Change: Inherent in your question is that we've been competitively priced and we remain competitively priced and we built multiple products and partner collaborations each at different points across the demand chain and thats important because I've mentioned over the last few quarters.
Speaker Change: We have strategically pivoted to <unk>.
Speaker Change: All sorts of third party relationships third party DSP as channel partners and others and we are very much focused on meeting, our clients' where and how they wish to transact and Anthony mentioned it we have the flexibility to handle really well the market fluctuations you mentioned.
Speaker Change: Because of our increasing supply and thats possible for a bunch of reasons. One is that the roku channel is up over 75% year on year and it's also because of the growth across the entire roku platform experienced so I'll reiterate what Anthony led with which is as a streaming platform.
Anthony: We do have distinct advantages over the streaming services that compete on our platform. So our unique assets allow us to adapt and be less impacted than others seem to be by market supply dynamics and for all those reasons I'm really optimistic that will ramp revenue into the back half of 2024.
Speaker Change: Okay. Thank you that was sort of asked about.
Speaker Change: Thanks, and welcome but you also asked about M&A. So let me just talk about that for a second.
Speaker Change: In our prior calls.
Speaker Change: We mentioned that we expected.
Speaker Change: The M&A vertical to be challenged in 2024, and that's what we're seeing.
Speaker Change: But despite these challenges the challenges we're seeing in the M&A vertical we expect advertising activities on our platform to accelerate in the second half.
Speaker Change: And we expect to continue to grow platform revenue so.
Speaker Change: But I'll, let Charlie and then share more detail on that.
Speaker Change: This is Charlie he he's right, we've diversify the overall AD business well before I get into that I should note.
Charlie: Out of this we're really good at M&A and we are a must have for our M&A partners.
Charlie: One way we've diversified is that we've increased the number of AD categories and our AD units in the viewer experience, we've opened up inventory to new advertisers and it's inventory that used to be reserved almost exclusively for <unk> brands and performance advertisers and that diversification has worked well our.
Speaker Change: Our new marquee video AD unit on the home screen is one example, we actually announced that at the upfront and we opened a limited invite only beta for this new video AD unit and it sold out in the first month and the participation was exactly what we hope to see from Premier Premier brands like the home depot and Disney.
Speaker Change: Automotive in many so.
Speaker Change: Regardless of short term broad market softness across many in the marketplace. Our platform is still the best place to attract and retain viewers to build subscriptions and to help our partners manage churn.
Speaker Change: And let me, let me just add one point to that.
Speaker Change: Due to the efforts to diversify our AD demand and add products and our many growth initiatives.
Speaker Change: All the examples that Charlie just stated M&A is a significantly smaller percent of our overall platform business now versus the last several years. So while we are in a good position to benefit from any M&A rebound and any new M&A entrants into the market, we're not relying on the vertical for future growth.
Speaker Change: Great. Thank you guys.
Speaker Change: Thank you. Our next question comes from Jason <unk> with Oppenheimer. Your line is open.
Speaker Change: Thank you very much everybody.
Speaker Change: Right.
Speaker Change: It's really exciting that you are now supporting U R E.
Charlie: Charlie can I ask you what kind of lift are you expecting in demand or pricing from this partnership.
Speaker Change: And how long will it take to ramp demand from cranes at.
Speaker Change: And do you expect kind of a similar integration with <unk> hundred 60 at some point. Thank you.
Speaker Change: Okay.
Speaker Change: Hey, Jason This is Anthony let me just kick this off and then ill turn it over to Charlie.
Speaker Change: We are very focused on accelerating our platform revenue and we have always mentioned as we have mentioned the variety of us.
Speaker Change: Initiatives to increase monetization and growth platform revenue.
Charlie: That we're executing against one of those initiatives is to grow our relationships with all third party platforms.
Charlie: And we're making progress on that and the announcement today around <unk> integration is one step in that in that strategy.
Charlie: I feel like we're making good progress against that strategy.
Charlie:
Speaker Change: But I think Charlie can talk more about it.
Charlie: Hello, and thanks for noticing it Jason it's really all about making roku more performance and efficient for our clients.
Speaker Change: On the trade desk, specifically, we're only a couple months in but the partnership with them has been really well received them are great to work with and our relationship is growing so to answer your time and questions. It's early days, but we're pleased with the progress and we look forward to continued innovations ahead. We think this will continue to drive demand.
Speaker Change: Unified I'd, two <unk> where <unk>.
Speaker Change: Is an identity solution developed by the trade desk and really for us it'll allow roku advertisers to achieve more precise targeting and enhanced data collaboration. So you asked about others. It's not just trade desk, we've grown relationships across the entire programmatic demand measurement ecosystem, including enhanced partnerships from folks like <unk>.
Speaker Change: Spot of matic magnate and more.
Speaker Change: The team and I talk a lot about the word interoperable and being open.
Speaker Change: We actually believe in addition to the benefits I just mentioned our flexibility and an open approach to partnerships are going to help differentiate roku and benefit advertisers. So it drives performance for our clients and demand as you as you asked for Roku media.
Speaker Change: No.
Speaker Change: Seriously our leadership position as the leader in TV, TV streaming where triple the streaming hours of the next largest platform in the U S and so partnerships like these the ones I've just described put roku and our partners right at the center of the open premium CTV ecosystem.
Speaker Change: Thank you.
Speaker Change: And the next question comes from Laura Martin with Needham Your line is open.
Laura Martin: Hi, So the first one I definitely think as for Anthony I think last quarter. You said you have everybody in your distribution activity is now reporting here, which is the concept by lot.
Speaker Change: Ikea three integration the execution you put in a note about the new contact Roe.
Speaker Change: <unk> subscription based apps with euro could pay and also the special thing and be seen around me or.
Speaker Change: My question is when you think about a year from now clean piece of paper, what's the North Star here are you trying to get the revenue.
Speaker Change: Etsy ads and that's called a subscription revenue stream is that products that you want to introduce because clients are asking for them.
Speaker Change: Talk to me about the next year and what we should expect to see a year from now it's driving the subscription revenue streams at Roku.
Speaker Change: Hey, Laura Thanks, Thanks for the question.
Speaker Change: Yeah, well I mean, obviously.
Speaker Change: A big goal for us.
Speaker Change: For this year and next year is to Reaccelerate, our reaccelerate our platform monetization if.
Speaker Change: I feel like we're making great progress on that we've talked about.
Speaker Change:
Speaker Change: Expanding our third party partnerships as a way to increase demand for our advertising there is a lot of opportunity there you know.
Speaker Change: It's an area that.
Speaker Change: Although we have invested a little bit in the past, we just mostly spend our time on other initiatives and now we're turning our attention to that one there's a lot of opportunities on that side and then the goal of that of course is just to drive more demand for our ask you've got a lot of supply that we have the ability to grow our supply so.
Speaker Change: We are highly focused on growing demand.
Speaker Change: And third party partnerships are one way to do that the other way we do that is building unique ad products.
Speaker Change: And through our UI.
Speaker Change:
Speaker Change: A simple example is roku city, which is very popular we added sponsored buildings throughout the city and its people.
Speaker Change: Company's loved loved that is the unique products and when they when they buy that product. They are we bundle other ad products with that so so.
Speaker Change: So increasing demand.
Speaker Change: You mentioned subscriptions. So there's a lot we can do on subscriptions, we have a large subscription business but.
Speaker Change: But given the scale of our engagement I believe theres a lot of opportunity to grow subscriptions. So we have a variety of initiatives there.
Speaker Change:
Speaker Change: And that involves signing up new subscribers, but also reducing churn there's things we can do on both of that both of those fronts.
Speaker Change: And then.
Speaker Change: A big focus for me is how do we make best use of our home screen.
Speaker Change: It's a key asset so again, we've done a lot over the over the years to build our business. There is areas. We focused on the areas with focus on less not because they were an important is we have to choose and the homescreen as something that is a huge asset for us. This iconic viewers love it but we have not really spent much time evolving over the last many years actually and so there's just a huge amount of op.
Speaker Change: Turning to keep an iconic but also make it more useful for viewers and also drive more monetization for driving more subscriptions driving more engagement.
Speaker Change: <unk> AD products and sponsorship built into the home screen. So I think if I think a year from now I think we will continue to see evolution of our homes. So far all we've really done is added that one content Roe at the top.
Speaker Change: Which has been working well for us, but that's really just that simple.
Speaker Change: The iceberg of what we can do.
Speaker Change: So.
Speaker Change: So those are the kinds of things that we're working on.
Speaker Change: Fantastic My other one is on M&A I can take the point that M&A is a lot smaller than it used to be but I'm really wall Street loves lead indicators. It feels to me like this Deadpool movie and Barbie and Oppenheimer. When these big movies come into the box office do they eventually show up in straining and.
Speaker Change: Therefore, they show up as an add on your front page are we able as wall Street to look at what's happening at the box office and then extrapolate that into your Anthony revenue two or three quarters later and so that.
Speaker Change: <unk> come to the streaming platforms.
Speaker Change: Well, let me take a shot of that and then I'll turn it over to Charlie who really understands our M&A business very well.
Charlie: M&A is pretty broad based it's not just I think you can't really just look at new releases and extrapolate from that.
Charlie: M&A is.
Charlie: We use that as an internal term is the term we use that means media and entertainment is the term we used to refer to our basically our endemic partners like <unk>.
Speaker Change: Services on the platform that wants to sign up new subscribers or increase engagement or sell or sell transactions.
Speaker Change: And all of those things happen through M&A in this and it's also distributed the one way we're good at it.
Speaker Change: Distributed throughout the platform. There is of course, the marquee add thats, a primary way, but theres a lot of other ways that we drive.
Speaker Change: Those those things for our partner subscriptions transactions engagement.
Speaker Change: And so.
Speaker Change: So that's it and it's complicated I mean, we do it is deeply integrated into the platform.
Charlie: So Charlie do you want to sure and Thats spot on and Laura the way I think about it as M&A is really a category for us because we are so good at driving people streaming business literally you click on an AD here and also watch it here. So it's a unique category to us and as it does.
Speaker Change: And as there are new entrants were always positioned to do well in that and that's why we break that out but your point is right as well when you think about the big movies.
Speaker Change: All of our strategy is to establish that were broad reach in the lead into TV and so with households, with 120 million people, which is really Super Bowl Super Bowl sides reach everyday we really can drive an impact and put people in seats that movie theaters, so as they spend more and as we do the improvements to the homescreen that Anthony.
Speaker Change: Talks about those are strategies that overlap and we will have more and more value to people who need broad reach because you can't fake scale and we have scale. So our home screen and the broad reach strategy and when he said we're just at the beginning of will drive broad reach advertising, which is stuff like what you've seen from Disney over the last few weeks I've had a nice run.
Speaker Change: And I'll tell you also our partnerships and a lot of what we're talking about in terms of making roku more performance and more efficient for our advertisers is also allowing us different types of partnerships. So we just did a deal with Fandango and Thats all about proving that we are not just effective for them, but the we can.
Charlie: Get people into seats and so I'm very enamored one of the reasons I came here is we're so good not just at the top of the funnel with a broad reach but with proving performance and youre seeing in our partnerships that theyre acknowledging it and then where we're driving outcomes and driving the Kpis of partners just like we will for the studios.
Speaker Change: Yeah, I mean, I'll just tell you that.
Speaker Change: Nothing.
Speaker Change: Yeah.
Speaker Change: Thanks, Laura This is Anthony I was just going to comment one last comment which is just that.
Speaker Change: I mean, we are very good at M&A, and we're getting better at it and it's a good business for us.
Speaker Change: But the key factor that's driving the reason this challenged is because it's.
Speaker Change: It's pretty simple.
Speaker Change: A lot of streaming services or pulling back on their marketing budgets and.
Speaker Change: And that is having some impact on the market and us as well.
Speaker Change: Thank you very much great numbers you guys.
Charlie: Thanks.
Vasily <unk>: And the next question comes from Vasily <unk> with Cannonball Research. Your line is open.
Vasily <unk>: Thank you I wanted to ask about distribution revenue first of all.
Vasily <unk>: 606 adjustments in the quarter. If there was would you mind, telling us how big it was.
Charlie: Then.
Speaker Change: Looking at the <unk>.
Speaker Change: But next year revenue acceleration.
Speaker Change: Does that assume that the distribution revenue continues to grow at the rate that seems to be growing now.
Speaker Change: Or should it accelerate because we're comping against a fairly big 606 adjustments.
Speaker Change: Last year, so we would appreciate it.
Speaker Change: Any help on this thank you.
Dan: Dan I'll take that yes, I'll take that one we did have a 606 adjustments in Q2. It was similar to the adjustment that we had last quarter and it was primarily due to the.
Speaker Change: Our our subscriptions increasing prices when our <unk> partners increased prices, we benefit from that not just in our revenue, but it can lead to a 606 adjustments we don't forecast 606 adjustments because the forecast takes that into account.
Speaker Change: But yes, we did have one or Q2 in terms of your question on acceleration as.
Speaker Change: As we look at as we we talked about.
Speaker Change: The acceleration that we expect to see in Q4, we talked also about the acceleration from Q2 into Q3 for advertising that was specific to advertising in my prepared remarks, I talked about SSD or the <unk>.
Speaker Change: Streaming distribution business, having difficult comps because of all the price increases and the subscription businesses that we saw in <unk> of last year and in each one of this year and it's very hard to predict those price increases and so if we see similar price increases.
Speaker Change: Across the five partners will benefit from that.
Speaker Change: We will also benefit from all the work that we're doing and driving more subscriptions that is what Anthony talked about earlier on the call.
Speaker Change: And how that compares from an acceleration standpoint, I do I would expect that SSD just based on the difficult comp.
Speaker Change: The acceleration is going to be led more by the advertising business with SSD moderating going forward, but again it really does depend on a lot of the price increases that we see from our supply partners.
Speaker Change: Thank you very much.
Peter <unk>: And the next question comes from Peter <unk> with Wolfe Research. Your line is open.
Peter: Hi, two questions one on.
Peter <unk>: One on third party AD sales and another on the cost of getting absent getting screen real estate on auto as I wanted to ask you why now on using third party DSP to sell Roku channel Ad inventory.
Speaker Change: Particularly the trade desk partnerships should we think about that as well.
Speaker Change: Over the long run a disinflationary Seri decision for you relative to your prior strategy in and why why why now obviously everybody wants to sell more volume, but there's a pro and con to that decision. So I'd love to hear your thoughts on that and then on the.
Peter: Huh.
Peter: Hi.
Speaker Change: Advantageous commercial terms.
Speaker Change: T V manufacturers over time, and also with streaming app owners overtime and I Wonder if there's any changes in the market for those relationships. Thank you.
Anthony: Aps is Anthony.
Speaker Change: On third party AD sales and why now.
Speaker Change: I'll, let Charlie give his thoughts, but I'll just say from my point of view.
Speaker Change: No.
Speaker Change: Over the years, we've created a streaming platform.
Speaker Change: It's not it's a lot of work [laughter] listen you've got to do a lot of different stuff.
Charlie: And Theres a lot of places you can spend you can focus there's a lot of different ways to make money and you sort of have to choose and so in the past. We've chosen we've chosen things that it worked really well for us to focus on and we obviously were not stopping doing those we're going to continue to do those.
Speaker Change: Integrating with third party partners is something we've done in the past it's not to this new it's just that we've never really focused on is a key initiative that we're going to really push on <unk>.
Speaker Change: And it was just a choice you made this other opportunities where we thought were better returns at that moment in time at this moment in time is the one that we've chosen and without going through the you know where do you rank different options I mean, we've got a lot of options on where we can spend our time.
Speaker Change: Is the one that we believe is going to have a big impact over the next next year and also a little bit related to the fact that the evolution of the industry.
Speaker Change: Advertising.
Speaker Change: Even though it's often deliver programmatically. These days is still often sold.
Speaker Change: Two people on the street.
Speaker Change: But it's increasingly going through programmatic demand platforms and demand is also increasingly being sourced in those platforms and its clear thats the future of the industry. So it's a question of how long is it going to take them. So.
Speaker Change: Sorry judgment now is the right time, so that's basically the answer I don't know Charlie do you have anything add to that.
Charlie: I agree with all that and look.
Charlie: Media this performance.
Charlie: <unk> differentiate us.
Charlie: There is something very empowering for us about being an open and interoperable platform.
Speaker Change: World that is not often open.
Charlie: <unk> opened and are interoperable certainly.
Charlie: Across the ecosystem, so we announced something called Roku exchange.
Speaker Change: It's a TV streaming first AD tech solution and it's the way we bring roku is differentiated tech stack to market. So to your point, we've benefited from our tech stack to date and now we're bringing it to market in a way that allows us to take all of the advertising capabilities from our DSP.
Speaker Change: And adding intelligence layer that allows for our data driven media to be matched with the best product across the programmatic ecosystem. So Peter you think about the scale that we offer we talk a lot it's funny about having unmatched scale and the homes with 120 million people every day that means we also have the large.
Charlie: <unk> CTV dataset to match with someone like the trade desk and that will separate us in this market. So Anthony is right. The timing is right and it allows us to be confident that we're building with the right people in the right way.
Speaker Change: To grow into the future.
Charlie: And then your second question.
Speaker Change: I wasn't quite sure I understood, but I think it basically was.
Speaker Change: Are there any changes in dynamics around the apps on our platform.
Speaker Change: And perhaps you mentioned Oh, yes.
Speaker Change: I think real estate, yes exactly.
Speaker Change: Yeah. So.
Speaker Change: I think the main.
Speaker Change: I mean, the main change I would say is just the continued growth in our roku scale.
Speaker Change: I mean, we're approaching half of all broadband households, the United States 100 households, with 120 million people every day.
Speaker Change: Turn on a roku TV.
Speaker Change: You know.
Speaker Change: Put a chart in the shareholder letter that showed just the massive scale of our engagement compared to other platforms.
Speaker Change: We are a we're a must have platform if you're going to launch streaming service or if you want to build a market a streaming service and so.
Speaker Change: Certainly that scale is.
Charlie: It.
Charlie: It is impacting our relationships with.
Charlie: The streaming services I mean, obviously, there's a mutually beneficial relationship for both of us.
Charlie: But our large scale is making is really important to streaming services platforms and that's probably the main probably the main change.
Charlie: Okay.
Charlie: Next question comes from Michael Morris with Guggenheim Securities. Your line is open.
Michael Morris: Good afternoon. Thanks, guys. Thanks for all the information and for taking the question.
Michael Morris: I had two one I wanted to just ask a little bit more about the revenue guide at platform Daniel helped a little bit with the 606, but.
Speaker Change: I'm curious just to understand the at least reported deceleration going from 11% this quarter to 9% next quarter is the 606 impact that you're expecting in <unk>, where the comping that much bigger in <unk> versus <unk> and then also <unk>.
Matt: Price increases have been announced right. So I think peacock Matt.
Speaker Change: Max.
Speaker Change: Paramount plus if I remember correctly, so is that taken into account.
Speaker Change: In your third quarter guide or is that something that would be incremental and then I have a bigger picture one but love to hear your thoughts on that first.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yes, I'll take that question. So the 606 impact for Q3 of last year was similar to the $6 six of Q2 of lesser in Q2 of this year. So there is that impact on the sequential decline.
Speaker Change: And you could roughly call that around 200 basis points.
Speaker Change: But.
Speaker Change: The other piece, which we tried to lay out in the prepared remarks is the SSD comp streaming services district distribution comp just gets.
Speaker Change: A lot more challenging in.
Speaker Change: NH two of this year relative to H two last year simply because we are comping a lot of price increases that happened last year and yes. There are some price increases that happen this year, but not to the level from what we see that happened last year. So.
Speaker Change: <unk> business does have a much more difficult comp, which in which does play into that Q2 to Q3.
Speaker Change: Yes.
Speaker Change: So from 11% to the 9% that we guided.
Speaker Change: Also the 606 I just mentioned and then of course site.
Speaker Change: I said in my prepared remarks that we are expecting advertising to accelerate on a sequential basis during that quarter during from Q2 to Q3.
Speaker Change: Yeah.
Speaker Change: Okay. Thank you that's really helpful.
Speaker Change: And then my second question is on the data that you put in and Anthony just referenced about your share of the.
Speaker Change: U S C T V O S market right at almost 50%.
Speaker Change: Very impressive number.
Speaker Change: But your CTV revenue as part of share I think is much much smaller than that.
Speaker Change: My math would say less than 10%. So my question is do you see 50% is the number that investors should be thinking about as share of the market that you can be striving toward.
Speaker Change: How can we reconcile that share with how big you feel your company can be in the CTV marketplace.
Speaker Change: Yeah.
Speaker Change: This is Anthony I'll take that but before I answer I just want to make sure I understood. The question. So.
Speaker Change: What we what were you comparing it to.
Speaker Change: So our share of the.
Speaker Change: Yes.
Speaker Change: The CTV. So so I understand there are different revenue sources, I understand that but but showing that chart I think lead investors to see you as roughly half of the as you like to say that.
Speaker Change: At any point or the launch pad so.
Speaker Change: How much of that can translate to financial performance.
Speaker Change: Could you be 50% of the CTV marketplace over time.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah, I mean, I think that.
Speaker Change: There is that that scale and the scale. We can I mean, we expect to continue growing our scale both in the U S and internationally.
Speaker Change: Both in terms of active accounts, but also streaming hours per per account. So that's the basis one of the basis of which our growth is based on we're going to continue to drive that that scale does create the opportunity for us to continue the increased monetization per account.
Speaker Change: Yeah.
Speaker Change: You know in a variety of ways, including creating new products.
Speaker Change: The way that we own and operate or that we integrate into our platform and so yes, there's a lot of room to continue to grow.
Speaker Change: If you think about the streaming hours on our platform they range from hours that we completely monetize a 100% on like ours in the Roku channel.
Speaker Change: So hours that you know we make last monetization on so you know where it's going to land, it's hard for me to say.
Speaker Change: Great. Thank you I appreciate it.
Speaker Change: And the next question comes from Tim Nolan with Macquarie. Your line is open.
Speaker Change: Yes.
Tim Nolan: Hi, Thanks, very much can we switch to the devices side. Just curious you had some really strong growth in the quarter. It looks like some okay growth.
Speaker Change: Costs for Q3 as well.
Speaker Change: There was some question about your distribution by various retailers such as Walmart I Wonder if you could speak about how.
Speaker Change: How ya retailing strategy is going.
Speaker Change: And when do we actually comp against your own Tvs coming out I think it might be Q3, but I can't remember I'm, just kind of how much impact might we expect for that in Q3 and Q4. Thanks.
Speaker Change: Sure.
Speaker Change: Alright. Thanks, Tim This is Anthony I'll take that and then maybe I'll turn it over to Dan to talk about comping against our own Tvs.
Speaker Change: You know in general the device side of our business, which is focused on growing active accounts signing up new streaming households.
Speaker Change: He is doing really well I mean, we have a product that we spent the last 16 years building consumers love it.
Dan: Right products, it's a great brand.
Speaker Change: It's got strong momentum in the market like I said, we had a $2 million net accounts in the fourth quarter.
Speaker Change: <unk>.
Speaker Change: And you know that.
Speaker Change: That side of our business.
Speaker Change: The growing active accounts from selling devices comes from selling the sort of three pillars to that there is the the.
Ashley: The biggest pillar Ashley is the licensing program or we license Roku Tvs to other Oems.
Speaker Change: With the platform to other Oems that's the biggest piece, but also quite a biggest streaming players we sell a lot of streaming players and then roku branded Tvs or first party Roku Tvs, that's relatively new for US is growing it's ramping nicely like we think it's a good program.
Speaker Change: But it's still got a ways to go.
Speaker Change: And then in Q1.
Speaker Change: We mentioned that we added for it in terms of Roku TV first party Tvs Roku Roku.
Speaker Change: The Roku branded Roku Tvs.
Speaker Change: In Q1, we added we mentioned before that we added Amazon Costco Walmart Dot Com and then in this quarter, we expanded distribution to include target and some other specialty retailers so were expanding distribution.
Speaker Change: In April.
Speaker Change: We love.
Speaker Change: The new Roku Pro series hit the market.
Speaker Change: The pro series is our sort of higher performing roku branded Tvs, receiving really strong reviews.
Speaker Change: Selling well for example, Yahoo Tech named the Pro series their favorite TV 2024.
Speaker Change: I would say in general that part of the business is doing well and.
Speaker Change: And we expect it to continue to grow for the foreseeable future both actually in the U S, where we have very strong market share, but we still think there's room to grow there and then also globally of course is a big focus for us.
Speaker Change: Yeah.
Speaker Change: And then on the branded Tvs, you know like I said, it's still fairly early days for that I mean, it's starting to ramp up.
Speaker Change: The scale is.
Speaker Change: Is good.
Speaker Change: But theres a lot of room, I think a lot of room to continue to grow that but I'll, let I'll turn it over to Dan.
Dan: Yeah, I'll just add that we launched in Q1 of last year, but just as a reminder for all of last year, we were exclusive with best buy.
Anthony: Anthony labeled off all the distribution partners, we now have starting in Q1 of this year and adding.
Dan: In Q2, and this year as well with targeted and specialty media. So we're very well distributed in FY 'twenty four versus FY2023 so we do expect to the Roku branded Tvs you continue to ramp and you'll see that in our guide and in our reported results as we go forward, but we're happy with it we're happy with our distribution part.
Anthony: <unk>, we're seeing great results from it so its a big win for us.
Speaker Change: Thanks, and a quick follow up can we when can we think when can we expect to get closer to breakeven on gross profit.
Speaker Change: If you're ramping up more on the on the owned brand and Tvs, maybe at the higher price sets coming out now.
Speaker Change: And that helps you get closer to breakeven on gross profit.
Speaker Change: Yes, I'll take that one as well so we were at negative 11% and our device margin position.
Speaker Change: We guided to.
Anthony: Similar level in Q3, which is the low double digit negative low double digits because of Roku branded Tvs. So as Anthony mentioned, we're early on.
Anthony: In our ramp to scale and as we get scale, our component costs should come down I can't speak to market pricing, we watch that very closely as well, but we do believe that the <unk>.
Anthony: <unk> cost will continue to go down as we scale. So I expect over time that we will see improvements in device margin again, just as a result of us scaling and getting very good at managing the Bom cost. We saw this with players in brokerage is an exceptionally good job of managing it as a core competency of the company, but for the next several key.
Anthony: Orders I think we're going to be in this range just because it takes many quarters to get to the scale, where you start to see the benefit from component costs coming down.
Anthony: Thanks.
Speaker Change: So much.
Anthony: The next question comes from Cory Carpenter with J P. Morgan Your line is open.
Cory Carpenter: And two advertising questions.
Speaker Change: Charlie or Anthony first could you provide an update on the news front, maybe the broader market. What are you seeing anything Roku specific and then secondly, how.
Speaker Change: How are you thinking about the impact of advertising in the second half of the year from the.
Speaker Change: Our political and all three Olympics, given your announced partnership thank you.
Corey: Hey, Corey.
Anthony: Thanks for the questions Charlie Charlie will take both of those actually.
Kurt: Hey, Kurt.
Kurt: The answer is we're seeing good momentum.
Speaker Change: In the upfront.
Anthony: It's been a positive market for us and.
Kurt: We've been growing our share generally across the board.
Anthony: Continuing to embrace new ways of working in what is unquestionably.
Speaker Change: Monitor more digital first ecosystem you know the.
Speaker Change: The digital transition absolutely benefits Roku and our clients are good news is we're hearing a lot of excitement around our new products like the video ads in the Marquis and sports participation. You mentioned in your next question in the Olympics and all we've done with major League baseball.
Anthony: And we've also invested in this isn't quite as visible as those we've invested a lot in partnerships to make roku easier to buy and measure.
Anthony: So we've been getting the feedback we wanted which is that we're.
Anthony: We're making it easier to purchase Roku media and onboard new clients and then measure their performance and I think youre going to be hearing that more and more so.
Anthony: It's a different marketplace than it used to be.
Anthony: And we're ready for it.
Anthony: The video revenue was still purchase during the upfront and we're building that share.
Anthony: We also expect borrowing to be executed across a bunch of channels, both direct and programmatic all year long with all sorts of flexibility built in because.
Anthony: The market dynamic you mentioned in your question. So on the momentum we're closing the upfront with poised we're building share and we're having great conversations both about the upfront and establishing client kpis really well beyond the upfront and it's a change where we're ready for it and I feel so confident with our position.
Anthony: On the Olympics.
Anthony: And political look.
Anthony: Political.
Anthony: Holds us in a terrific position as we count down to November and the completion of the 24 election cycle.
Anthony: And while we're happy with our political AD sales. It really is just one part of our growing and diverse advertising business.
Speaker Change: What they are noticing like other categories as we have the tools in tech.
Anthony: That make roku, a strategic platform for advertisers, so they're taking advantage of our scale and our ability to target desirable audiences and geographies and in your answer.
Speaker Change: You said something earlier that I think bears repeating this is another category, where roku is getting better every cycle, we really are.
Anthony: Improving which is terrific the Olympics.
Speaker Change: I'm really excited about you just saw on the screen before.
Anthony: We customize that experience and if you understand roku strategy and market differentiation. The Olympics is a really great example of both.
Speaker Change: Talk a lot we did at our upfront we talk to advertisers all the time about our unique position that the lead into all of television and we are working so closely with Peacock and NBC to be the lead into the Olympics and it's clearly worked and I keep getting texts from folks in France that say you know we're on fire and we're helping drive their engagement so.
Anthony: What our Olympics partnership with them was in it was a series of custom integrations showed our ability to innovate and are also ability to build really bespoke AD supported experience around tentpole events, and what I like about it not just that it's working for our great partners.
Anthony: At NBC and Peacock, but we can do this.
Anthony: For all sorts of major events across TV, it's totally something Roku has the right to win so we have the scale and focus to be the lead into TV. That's a differentiator I said before you can't fake scale and you can't fake that we have homes with nearly 120 million viewers every day coming through our front door.
Anthony: So the good news about this and I'll end here is our Olympic experience is great for viewers. They are using it it's making the Olympics easier it's great for content owners, who are our partners and obviously a benefits advertisers in fact, we close hold the Olympics with NBC and that whole <unk> experience.
Anthony: So we launched the custom zone, that's going well we are doing similar things for major League baseball and through our NFL experience and again, it's a total differentiator and it proves our impact in our partnership capabilities.
Anthony: Youre going to see a lot more of it ahead.
Anthony: And the last question will come from David Joyce with Seaport Research. Your line is open.
David Joyce: Thank you very much could you. Please provide some more color on how fill rates are evolving and healthy increasing programmatic buying activity and AD tech partnerships and increased industry supply our inter playing there. Thanks.
Charlie: This is Charlie Hey, David.
Charlie: It's all of the piece so Anthony led with in it so impressive the entire platform is growing and in fact, the Roku channel is growing over 75% year over year. So you can imagine that.
Speaker Change: US in great stead to handle both pricing fluctuations in the market and demand fluctuations and then we're layering. These third party partnerships not just trade desk, but all sorts of third party partnerships over our.
Charlie: Our advanced data, our scale and our ability to handle supply. So fill rates are one metric metric of our success, but I think what youre going to see is a steady ramp of demand and a steady ramp of AD revenues into the back half of the year. So it all moves together and I think we're pretty uniquely positioned to drive.
Anthony: The type of opportunities we've been talking about on this call.
Speaker Change: Alright, thank you.
Speaker Change: Okay. At this time I would now like to turn the call back over to Anthony for closing remarks.
Anthony: Alright, Thank you everyone for joining and thanks to our employees customers partners and advertisers.
Speaker Change: Oh.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change: [music].
Speaker Change: [music].
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Ladies and gentlemen, thank you for standing by welcome to the second quarter 'twenty 'twenty four Roku earnings conference call. At this time, all participants are in a listen only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session.
Speaker Change: To ask a question. During this session you will need to press star one on your telephone you wouldn't hear an automated message advising your hand is free.
Speaker Change: To withdraw your question. Please press star one one again.
Speaker Change: Please be advised that today's conference is being recorded.
Speaker Change: I would like now to turn the conference over to Conrad Grodd, Vice President of Investor Relations. Please go ahead.
Speaker Change: Welcome to Roku second quarter 2024 earnings call on today's call are Anthony Wood Roke has found a few in Jeddah, our CFO and Charlie Collier, President Roku media, our full results and additional management commentary are available in our shareholder letter on our IR website at Roku Dotcom sportswear.
Speaker Change: <unk> investor on this call, we will make forward looking statements, which are subject to risks and uncertainties.
Speaker Change: Please refer to our shareholder and periodic SEC filings for risk factors that could cause our actual results to differ materially from these forward looking statements. We will also present GAAP and non-GAAP financial measures reconciliations of non-GAAP measures to the most comparable GAAP financial measures are provided in our shareholder letter.
Speaker Change: Unless otherwise stated all comparisons will begin our results for the comparable 2023 period.
Speaker Change: Now I'll hand, the call over to Anthony.
Anthony: Thanks, Conrad this quarter Roku continues to build on our foundation of unmatched scale and engagement, while remaining focused on operational discipline.
Anthony: We continue to lean into our unique asset the roku home screen, which is the beginning of the viewers TV experience.
Anthony: Everyday U S households, representing more than a 120 million people begin their streaming journey on the Roku home screen.
Speaker Change: This fact, along with our development and operations pipeline makes me confident we will be able to accelerate our platform revenue in 2025.
Anthony: In Q2, we grew streaming households, 14% year over year streaming hours, 20% year over year and platform revenue, 11% year over year.
Speaker Change: In the U S. Roku is the number one TV OS by both TV unit sales and our screamed and our share of each is more than double the next largest operating system.
Anthony: The Roku channel was our number three app by both reach and engagement. This.
Anthony: This is a great achievement and demonstrates the Roku is building the lead into TV.
Anthony: Another result, we are proud of is our fourth straight quarter delivering positive adjusted EBITDA and generating positive free cash flow.
Speaker Change: More than a year ago, we set a target of positive adjusted EBITDA for the full year 2024.
Ben: As ambitious as it started it was Ben we did the work of right sizing our cost structure and delivered on our full year early.
Speaker Change: Looking ahead, we will maintain the strong track record of execution as we focus on our monetization initiatives, including maximizing AD demand for roku, leveraging the roku homescreen as the lead in for TV and growing Roku built subscriptions.
Speaker Change: Now, let me turn it over to Dan.
Dan: Thanks Anthony.
Dan: We ended Q2 with $83 6 million streaming households, up 14% year over year with sequential net adds of $2 million driven by both Tvs and streaming players.
Dan: We continue to drive strong growth and engagement with streaming hours up 20% year over year.
Speaker Change: We also grew engagement per account globally with streaming hours per streaming household per day up 4.0 hours in Q2 of 2024 up from $3 eight hours in Q2 of last year.
Dan: In Q2, we grew total net revenue, 14% year over year to $968 million.
Dan: Platform revenue was $824 million up 11% year over year, driven by both streaming services distribution and advertising activities, while offset by a challenged M&A vertical.
Dan: Streaming services distribution activities grew faster than overall platform revenue benefiting in part from subscription price increases.
Speaker Change: Devices revenue increased 39% year over year in Q2, driven by the expansion of the retail distribution of Roku branded Tvs.
Speaker Change: <unk> was $48 68 in Q2 on a trailing 12 month basis flat year over year.
Speaker Change: This reflects an increasing share of streaming households in international markets, where we are currently focused on growing scale and engagement with monetization efforts in early stages.
Speaker Change: Q2, total gross margin was 44% down slightly year over year.
Speaker Change: Platform gross margin of 53% was relatively in line year over year, while devices gross margin was negative, 11%, which was up six points year over year.
Speaker Change: Q2, adjusted EBITDA was $44 million, which was above our outlook.
Speaker Change: The better than expected performance was driven by our platform segment.
Dan: Free cash flow was $318 million on a trailing 12 month basis, and we ended the quarter with $2 1 billion of cash and cash equivalents.
Dan: We continue to see leverage in our operating model with our fourth straight quarter of positive adjusted EBITDA and free cash flow.
Dan: Let me turn to our outlook for the third quarter.
Dan: We anticipate total revenue of 1.01 billion.
Dan: Gross profit of $440 million with gross margin of 44%.
Dan: And adjusted EBITDA of $45 million.
Dan: Our outlook for total net revenue anticipates, an 11% year over year increase.
Dan: We expect Q3 platform revenue to grow 9% year over year.
Speaker Change: This takes into account a challenging year over year growth rate comparison within streaming services distribution, along with elevated positive 606 adjustments in Q3 of last year.
Speaker Change: While we expect M&A to remain challenged we anticipate the year over year growth of advertising activities to accelerate in Q3.
Speaker Change: Platform margin will be in line with Q2 at roughly 53%.
Speaker Change: On the device side, we expect Q3 revenue to grow 24% and margins to be in line with Q2, and the negative low double digits, reflecting continued expansion and investment in our Roku branded television program.
Speaker Change: We're benefiting from operational improvements we made over the course of the past year and as a result, we continue to expect 2024 opex growth rates to be in the low single digits, when excluding impairment and restructuring charges.
Speaker Change: We are confident that year over year growth rate of platform revenue will begin to accelerate sequentially in Q4 of this year as a result of executing on our monetization initiatives to maximize AD demand and leverage our home screen as the lead in for TV.
Speaker Change: With that let's take questions.
Speaker Change: Operator.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question. Please press star one again.
Speaker Change: One moment for the first question. The first question comes from Shyam Patel with us.
Speaker Change: Susquehanna International Group your line.
Speaker Change: <unk>.
Shyam Patel: Hey, guys congrats on the nice results.
Shyam Patel: I had a couple of questions.
Shyam Patel: First there's been a lot of commentary recently about excess supply of inventory in the market and downward pressure on CPM I was wondering if you could just talk about this and maybe what Youre seeing and then second question can you talk about what your what you guys are currently seeing with M&A.
Speaker Change: And just your expectations there. Thank you.
Speaker Change: Hi, Sam this is Anthony.
Anthony: Yes, I'll be happy to take that question. So first I'll, just say that roku is not impacted.
Speaker Change: By market driven pricing changes in the same way that.
Speaker Change: Other streaming services seem to be and this is because we roku our streaming platform, we're not solely a streaming service and if you think about what that means.
Speaker Change: As a platform as a screening platform.
Speaker Change: One of the benefits is that we have a diversified set of revenue streams.
Speaker Change: Platform business consists of our streaming services distribution.
Speaker Change: Activities, which are diversified as well as advertising, which we're also diversified so if you look at streaming service distribution.
Speaker Change: We're investing in areas like Roku, bill subscriptions as well as premium subscriptions.
Speaker Change: And then if you think about advertising activities, which are also diversified and obviously, we have traditional video as traditional streaming ads on our platform across our platform.
Speaker Change: But.
Speaker Change: Unlike a normal streaming service, we have a unique set of AD products and sponsorships that are only possible because we own the platform.
Speaker Change: We integrate these throughout the viewer experience.
Speaker Change: So.
Speaker Change: We have diversified revenue streams platform level revenue rec.
Speaker Change: Our revenue streams, and then if I, even take a step back and think about like what are the primary factors that drive our platform business. It's.
Speaker Change: Our platform business.
Speaker Change: Growth is driven by the growth of the different components of that business. So for example.
Speaker Change: We have we continue to maintain strong growth of streaming households, we added 2 million net adds in the quarter recently now up to $83 million almost 84 million streaming households.
Speaker Change: So we continue to add global streaming households.
Speaker Change: They're very strong streaming our engagement, but also continued strong in a lot of that is monetize will engagement for us and then of course.
Speaker Change: We continue to invest a lot of our R&D effort into building and creating new monetization products across the viewer experience. So.
Speaker Change: These these are the primary things that drive our growth and then another critical point I guess I'd like just like to mention is that.
Speaker Change: We said it before but it's really important the roku home screen is one of our probably our most important asset.
Speaker Change: It's the reason, we're the leading TV every day U S households, with more than 120 million people start their streaming experience at the Roku home screen.
Speaker Change: And that's super valuable scale to advertisers as well as promotion and promoting our own owned and operated properties, but for advertisers.
Speaker Change: Our home screen and our viewer experience for our platform reaches viewers before they decide what to watch.
Speaker Change: And after they spent some time trying to decide what to watch they pick a streaming app and a fragment into different streaming apps and a lot of those same apps don't have ads and so.
Speaker Change: For many of our viewers.
Speaker Change: Promotion and advertising in our home screen is the only add they're going to see.
Speaker Change: So the home screen is a very important part of our strategy for growing our monetization something is working well for us and then.
If I just think about.
Speaker Change: What are the actual primary challenges to our platform business right. Now is like we mentioned a few times is continued weakness within the <unk> vertical.
Speaker Change: But we have a great AD business, and we are well positioned to accelerate our ad business.
Speaker Change: Ah.
Speaker Change: I'll turn it over to Charlie to share some more details.
Charlie Hey: Thanks, Anthony and thanks for the question I. Appreciate it there is a lot of supply in the market you are right.
Charlie Hey: Anthony address are differentiating platform advantages why don't I speak about advertising directly.
Charlie Hey: We're actively creating new revenue sources, all the time at Roku, we're building new AD products across our UI and each served two purposes. They both drive demand and they also fulfill demand.
Charlie Hey: Good examples are video ads on the home screen, our customizable Roku city buildings and cars sponsorships across our UI in our content destinations like the.
Charlie Hey: NFL experience our Olympics zone, which is booming now actually I think you might be looking at it on your on your screen as we speak in the updated.
Charlie Hey: Metal count.
Charlie Hey: It includes our all things food and all things home areas.
Charlie Hey: And then if you think about at Cheyenne.
Speaker Change: Open and interoperable way, we partner with clients and use our unique AD targeting and measurement capabilities to help them meet their goals, that's really important and we talk a lot about how we come to market.
Speaker Change: And your question is that we've been competitively priced and we remain competitively priced and we built multiple products and partner collaborations each at different points across the demand chain and thats important because I've mentioned over the last few quarters.
Speaker Change: We have strategically pivoted to.
Speaker Change: All sorts of third party relationships third party DSP as channel partners and others and we're very much focused on meeting, our clients' where and how they wish to transact and Anthony mentioned it we have the flexibility to handle really well the market fluctuations you mentioned.
Anthony: Because of our increasing supply and thats possible for a bunch of reasons. One is that the roku channel is up over 75% year on year and it's also because of the growth across the entire roku platform experience. So I'll reiterate what actually led with which is as a streaming platform.
Anthony: We do have distinct advantages over the streaming services that compete on our platform. So our unique assets allow us to adapt and be less impacted than others seem to be by market supply dynamics and for all those reasons I'm really optimistic it will ramp revenue into the back half of 2024.
Speaker Change: Okay. Thank you that was really asked about.
Speaker Change: Thanks, Youre welcome, but you also asked about M&A. So let me just talk about that for a second.
Speaker Change: In our prior calls.
Speaker Change: We mentioned that we expected.
Speaker Change: The M&A vertical to be challenged in 2024, and that's what we're seeing.
Speaker Change: But despite these challenges the challenges we're seeing in the M&A vertical we expect advertising activities on our platform to accelerate in the second half.