Q1 2025 Roku Inc Earnings Call
The End
Speaker Change: Good day, and thank you for standing by. Welcome to the Roku First Quarter 2025 earnings call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session.
Speaker Change: To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised today's conference is being recorded. I would not like to turn the conference over to your speaker today. Conrad Grodd, Vice President of the Investor Relations, please go ahead. Thank you very much.
Speaker Change: Thank you, operator. Welcome to Roku's first quarter 2025 earnings call. On today's call, our Anthony Wood, Roku's founder and CEO , Dan Jedda, our CFO , Charlie Collier, President, Roku Media, and Mustafa Ozgen, President Devices.
Conrad Grodd: Our four results in additional management commentary are available in our shareholder letter on our IR website at Roku.com-4-investor
Conrad Grodd: On this call, we'll make four looking statements which are subject to risks and uncertainties. [inaudible]
Conrad Grodd: Please refer to our several letter and periodic SEC filings for risk factors that could cause our actual results to defer materially from these four-looking statements.
Conrad Grodd: We'll also present Gap and non-GAAP financial Measures. Reconciliation of non-GAAP measures to the most comparable GAAP financial Measures are provided in our shareholder letter. [inaudible]
Conrad Grodd: Unless otherwise stated, all comparisons will be against the results for the comparable 2020 or period. With that, operator, our first question please.
Speaker Change: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered you were to move yourself in the queue, please press star 11 again. We'll pause for a moment while we compile our Q&A roster.
Speaker Change: Our first question comes from Cory Carpenter with JP Morgan, your line is open.
Corey Carpenter: So, great thanks and a good afternoon. I wanted to ask what's giving you confidence in reiterating the full-year platform guide and even the guide, just given the current market environment in uncertainty around tariffs. And perhaps related to that, could you just talk about the recent trends you're seeing in the platform business and in particular on the advertising side? Thank you.
Thank you for watching!
Corey Carpenter: Hey Cory, this is Anthony, I'll be happy to take that and then I'll take the first part then I'll turn it over to
Uh...
Charlie, to discuss the ads. [inaudible]
Speaker Change: So, yes, that's correct, I mean, we are in our letter, we reaffirmed our platform revenue and adjusted the able to outlook for the full year 2025.
Speaker Change: I mean, obviously there's a lot of macro uncertainty, but there's a lot of Roku-specific positives to give us confidence to reaffirm our guidance for the full year. So, for example, you know, the shift to streaming is a big secular trend. It continues where the center of it. So, you know, the center of it. The center of it. The center of it.
That's the big drive of our business, advertisers. [inaudible]
Speaker Change: I've already been shifting their budgets from linear to streaming and from direct insertion orders to programmatic. Those are two big trends that are positive for Roku. Thank you.
and we're seeing that continue. Thank you.
Speaker Change: You know, a macro uncertainty causes advertisers to look for more performance. They start looking for higher ROI, more performance ads, a more flexibility in Roku's, get it all those things. So, those are all positive for us. Also, if we look at our execution over the last two years. [inaudible]
Speaker Change: It's really positioned our business to be in a better position to navigate environments like we're seeing now with the macro uncertainty. So, for example, we've really diversified our revenue streams, we have more diversified ad products, and we're less reliant on M&E.
Speaker Change: You know, we're we are tapping into more add demand sources through our deeper integration with third party DSPs
Speaker Change: and we have a lot of supply that continues to grow. Thank you very much.
Speaker Change: So, these are all positive trends in our ad business. If you look at our ad revenue in the quarter, it grew faster than the OTT ad market overall, for example.
Speaker Change: And then also subscriptions, you know, one of our, you know, if you just think about the three tiers of our strategy that we're focused on growing platform revenue, you know, one is to grow ad revenue by leaning and deepening integrations with our DSPs, another is to
take better advantage of our homescreen. [inaudible]
Speaker Change: and the Roku Experience DUI viewers used to discover content in the third of the subscriptions.
Speaker Change: Like to really lean into subscriptions, we built tens of millions of Roku.
Speaker Change: subscriptions each month, that's growing, things premium subscriptions is a bright spot and that's continuing to grow. And then another example today we announced the acquisition of friendly which is a skinny bundle a subscription service.
That's growing both on and off Roku. [inaudible]
both on and off the Rookie platform.
Speaker Change: It's also the kind of service that we're, you know, we have a lot of ability to lean into and grow faster with the platform promotional tools we have available to us. So, you know, those are some of the reasons we're confident in renewing our outlook for the year.
Speaker Change: But I'll let Dan add his thoughts on the question as well before we turn it over to Charlie on your question on ads.
Dan Jedda: Yeah, thanks, Anthony, and thanks for the question, Cory. I just want to add that, you know, in reaffirming our platform revenue and adjusted EBITDA outlook for the full year, we did assume some $1.00.00.00.00.00.00.00.
Dan Jedda: Awakening in the macro, but our outlook does represent the most informed view we have based on the current trends.
Dan Jedda: We saw in Q1 and as we start Q2 and we remain vigilant and adaptable to market conditions and as they evolve
Speaker Change: We'll communicate any material impacts in future quarters but we feel very good about where we are right now and we feel good about our forecast. I am Anthony mentioned we are not the same company that we were four or even two years ago we have a very diversified. Thank you very much.
Speaker Change: Platform Revenue Stream, including the subscriptions that are growing well and all the advertising initiatives that Anthony mentioned earlier. So,
Speaker Change: We're confident in our strategy and we continue to see the path to achieving positive operating income in 2026 and just achieving our guidance of 3950 on the platform side and adjusted EBITDA of 350 for 2025.
Speaker Change: on the trends in advertising, I'll let Charlie take that one. Thank you.
Charlie Collier: Hey, Cory, it's a good question. We are continuing to see shifts in advertising and most of it's driven by our clients.
A really understandable need for greater flexibility in this.
Charlie Collier: Macro Environment, some of the results of that are shorter planning cycles.
Charlie Collier: What used to be quarterly planning for some, not all but for some can now even be, you know, as short term as weekly. So, please, please.
Charlie Collier: So as a result, we are seeing changes in media buying patterns across our platform, particularly a shift from longer-term guaranteed commitments
Charlie Collier: to shorter-term non-guaranteed campaigns, usually executed programmatically. Again, I think this is a short-term trend, but...
Charlie Collier: Roku's well positioned to capitalize on the shift, and that's the best news. You know, over the past couple of years, we focused on building our programmatic capabilities, and that investment is absolutely paying off. That's a lot of fun.
Charlie Collier: in an environment like this that demands agility and programmatic advertising is gaining share because [inaudible]
Corey Carpenter: I think, Cory, most of all, it offers the flexibility and performance that advertisers need and that enables them to launch their campaigns quickly and adjust in real time. So, in the near term, we expect some of the high-touch guarantee business to be delayed or...
Corey Carpenter: Possibly scaled back in favor of more flexible non-guaranteed programmatic buys, but this trend really aligns well with Roku's strategic direction and our focus on programmatic excellence. [inaudible]
[inaudible]
Thank you one moment for the next question.
Thank you for watching!
Corey Carpenter: Our next question comes from Brett Novan with Bank of America, your line is open. Thanks for taking the question. I guess this is a follow-up.
to your comments there. I mean it sounds like...
Corey Carpenter: and some of the more idiosyncratic drivers are, you know, able to offset maybe some macro overall weakness, and I guess I'm just...
Corey Carpenter: I'm trying to think through how much of buffer do you still feel like you have with some of these idiosyncratic drivers? Should macro trends deteriorate a little further going forward? Thanks so much.
Thank you.
Hey Brent, Dan will take that question.
Dan Jedda: Yeah, thanks for the question. Yeah, I know you're going with this brand and I'll just say that
Dan Jedda: As I said earlier, we've seen a shift.
Speaker Change: Charlie talked about a shift from guaranteed to non-guaranteed and that actually has been favorable to us in terms of driving more volume our way. Thank you.
Speaker Change: and so we see positives in that. We have a lot of initiatives. When we gave our guide last quarter, we talked about a lot of initiatives. We have a lot of initiatives going on in the subscription and in the advertising activities. We've talked a lot about advertising. [inaudible]
Speaker Change: and New Products and the new initiatives, the growth of our supply, and now we're talking a lot more about subscriptions with the acquisition of friendly and many more initiatives we have yet to announce. So,
Speaker Change: You know, I think some of these initiatives, you know, we're going to keep doing new things and these initiatives are going to play out over time and so I do think like in the back half of the year some of the you know if there is a greater macro environment some of our new initiatives. Thank you.
Speaker Change: It should help to offset that. Obviously, we're not immune if there is a major macro environment recession type, especially in the ad market. It's not a big deal, it's a big deal.
Speaker Change: But we also have tremendous secular tailwinds as the market continues to shift from linear to digital and now the shift that Charlie just talked about from guaranteed to non-guaranteed, we're also very well positioned. One thing I'll just add on this is [inaudible]
Speaker Change: You know, advertisers are asking more for ROI and measurement. That is a space we play very well in given all the initiatives we have to increase demand to our platform because we have to supply and increase our ability to measure that demand. Let's go ahead.
Speaker Change: These are positive tailwinds for us and so there's a lot of positives going on now and there'll be more that we discuss in the future.
Speaker Change: Great, thank you so much. One moment for our next question.
Thank you.
Speaker Change: Our next question comes from Vasily Karasyov with Cadden Ball Research, your line is open.
Speaker Change: Thank you very much, good afternoon. Charlie, I think I have a question for you, and it's about programmatic and the whole transition you're going through. What's the best way for us to think about the contribution of programmatic to platform revenue growth?
Is this revenue done? [inaudible]
Speaker Change: in Pyle in Cramental, or is it some inventory that was previously sold direct and now executed at Programmatic, so there's some cannibalization going on and then...
Speaker Change: Programmatic guaranteed and open transitioning to open programmatic, beatable. The same question will it be will it be accepting a completely incremental budgets or there is some, you know, offset that you're losing indirect. Thanks.
Thank you.
Speaker Change: Thanks, Vasily. This is Charlie. It's a really good question. And the headline is that our multi-year push to diversify demand is absolutely working.
Speaker Change: You know, some of the programmatic revenue we're seeing is clearly incremental, especially what we're seeing through our platform partnerships. That's what we call our channel sales business. That's entirely net new. But overall, it is a mix, many enterprise and independent clients who previously bought Roku directly through IOs or insertion orders are now transacting programmatically, particularly via programmatic guarantees as you asked about Vasily. You know, one way to step back and think about it.
Speaker Change: And that's even the case, by the way, when the business is sold directly by our sales team. So,
Speaker Change: Some of the advertisers who previously bought us directly, now they're using programmatic pipes and the clearest example of true incrementality comes from small and medium-sized businesses using our self-service product called Roku Asmanter. Now it's early days but these are DDC brands, mobile app marketers and local advertisers and all those are our net new to the platform so.
Speaker Change: You know, Vasily, the heart of your question is a range of new and expanding partnerships. Many of them truly incremental. Our strategy to diversify demand and meet advertisers where they wish to transact our ability to prove.
Speaker Change: Performance through our 100% authenticated identity or scale, the unique ad units we talk a lot about in our data in our operability. Thank you very much.
Speaker Change: and our investment in tools and measurement. All of this is helping our partners, particularly as they invest in data and they match their data with Roku's high fidelity signal. So,
Speaker Change: All of it's unlocking new revenue, it's steepening existing relationships as well, and it's strengthening I think our position is the most performant and easiest to work with CTV platform.
Thank you very much
One more for our next question.
Thank you for watching!
Speaker Change: Our next question comes from Justin Patterson with Keybank, Your Line is Open. Thank you very much.
Speaker Change: Great. Thanks for taking the question. Could you talk more about the significance of Roku channel, becoming the number two app on your platform in the US? How does that change your conversation with content providers? Just given that reach? And at the same time, how does that change the timeframe to really do deeper integrations with more DSPs? Since it seems like you've got a lot of supply there, that needs to be filled. Thank you. Thank you very much.
Speaker Change: Hey Justin, this is Nancy, I'll start and then turn this over to Charlie.
Charlie Collier: You know, we have adamatory access across our entire platform. The Roku channel is part of it. It's obviously an important part of it. Like you mentioned, it's the number two app on the platform now by engagement. Globally, the Roku channel engaged from grew 84% year over year. [inaudible]
Thank you.
Charlie Collier: And that is a powerful asset for us, so we're going to continue to lean into that, but I'll let Charlie talk more about your question.
Speaker Change: Hey Justin, I appreciate the question about the relationship with content providers, you know we we have an unmatched scale we talk a lot about being the lead into television and if you think about it before anyone makes a choice about what they're watching, you know we have a home screen
Speaker Change: that reaches households with over 125 million people in an every day, almost super bold size ratings every day.
Speaker Change: and so, as content providers, they absolutely look at us for unmatched scale and to provide audience that guides people into their content. And then from our position, we get to root for all of television and really use our unique assets, our home screen assets to drive engagement. So there's.
Speaker Change: There's a really symbiotic relationship, and as they move toward performance and really have to watch every marketing dollar, as Dan said earlier, you know, we prove performance and we've invested in measurement and other tools that really make us very good at-
Speaker Change: at Driving Engagement, Retention, and Subscriptions. So that's the content provider side. In terms of what it does for the DSPs, we talk a lot about being able to meet advertisers, demands at every price point and all up and down, the demand curve, if you will, and a great example of that. At the very top of that are...
Speaker Change: You know, our home screen units, which are unique and a unique broad reach and also the performance signals we can send to our clients. We also have, you know,
Speaker Change: Life Sports and Major League Baseball on a lot of focused originals and content destinations if that's at the top. [inaudible]
Speaker Change: of The Price and Curve. You can say we have the tonnage you described and that meets a lot of advertiser's needs and allows us to be flexibly priced.
Speaker Change: and all the way down the demand curve, you might see us send fewer signals and less specific programming opportunities and we can participate at the low end of the market as well. So with respect to your question about time frame in DSPs, you know, to be...
Speaker Change: As big as we are as an AVOD platform and the fastest growing, it really is a powerful one-two punch, and then the programmatic execution allows us to be the most performant as well.
Speaker Change: TRC, becoming, you know, a top five, then a top three, and now, number two on our platform.
Speaker Change: is really does showcase the power of the platform that we have. We do not have, you know, we have great content in TRC but we're not spending billions and billions of dollars. Let's start with the first.
Speaker Change: In content, what we have is an amazing platform and an amazing OS . . . . .
Speaker Change: that helps us drive engagement to TRC and it really does show the power of the platform and we're going to use that to drive subscriptions, we're going to use that to drive advertising, we're going to use that to drive friendly as now part of Roku, like there's a lot of positives. [inaudible]
Speaker Change: that, that home screen and the entire UI can do and TRC becoming number two and relatively short order showcases that power.
Thank you for watching!
Thank you, one moment for our next question.
Thank you for watching!
Speaker Change: The next question comes from Laura Martin with Needham, your line is open.
Speaker Change: They're great numbers, you guys, congratulations, but that's two. Anthony, I don't like this form, but start with the hard one.
Speaker Change: So, I understand that friendly drive your subscription revenue. However, I would like you to tell us—
Speaker Change: Why you think the virtual MDPD market is a transitory market and going to zero. [inaudible]
Corey Carpenter: And then stay on friendly for this question, Charlie, can you talk about how it aids your...
Corey Carpenter: Bundle of ad services, and why it doesn't look backwards into the linear TV space, which I think Wall Street thinks is dying, rather than stick to streaming, which is the growth aspect of advertising. So that's that first one is on-premise. Thanks.
Speaker Change: Hey, Laura, Anthony, thanks for that hard question. Yeah, well, I don't think it's that hard. I mean, so, you know, I agree that if you look at sort of table subscriptions. Thank you, Jason.
Speaker Change: And their replication is virtual and VPD, it's easy to think that it's easy to believe that that's going to not last as a bundle or as a market forever.
Speaker Change: Linear is a form of entertainment engagement that is very popular. [inaudible]
Speaker Change: It's just, and it's actually growing in popularity on our platform, linear channels. Sometimes people call them fast channels. You know, these are screaming linear channels are very popular and a huge form of engagement. There's a lot of people that like to just flip through the channel. And, you know, one way I think about. [inaudible]
Speaker Change: Friendly, it's actually, it's a lot of brands that I think will stick around, things like Lifetime, Hallmark, A&E. These are brands that are popular, they have good content and
Speaker Change: You know, I don't think of them as a virtual MVP. I think of them as linear channels that's in a paid tier that we can grow the paid tier of linear channels and there's a linear channels are very popular in streaming as well. They're very popular in streaming and they're very popular on our platform as well. [inaudible]
and then I'll let Charlie answer a question about.
Speaker Change: Capable, and able to elevate content that it's great to be able to do this for us alongside doing it for our partners.
Speaker Change: I'd just like to quickly add on to that that you know friendly is growing and growing well you know we brought in as a growth company and we do think that we can grow it faster. Thank you very much sir.
Speaker Change: It also will be adjusted EBITDA margin accretive in its first full-year force.
Fantastic. Okay, my second was on data. Yeah.
Speaker Change: So Wall Street has decided that third part of data is going to zero.
Speaker Change: and that first party data is basically the only thing that has most.
at Competitive Advantage.
You guys have world-class. [inaudible]
for its party data, but you do not sell it independently. Definitely.
Speaker Change: Two-third parties, either the Ellen Lemme, which would make easy sense because it's 80% margins or even two, five spots, but to these guys that aggregate and actually make a living, I'm selling CTVs, let me call it on a smaller scale [inaudible]
Speaker Change: So, can you explain the logic of not bundling topics? It's really packaging your excellent first-party data for CCD and selling it to others for a revenue standpoint?
Thank you for watching!
Speaker Change: 100% authenticated audience, which Roku does, and to have unmatched scale the way we do with over half the broadband households using Roku as their front door to television. It really is a differentiator, but I would step back and say one of the terrific things about Roku writ large is that we still have more opportunities to exploit over time, but the way I think about our data relationships are this, which is [inaudible]
Speaker Change: We have a multi billion dollar business and all the opportunity Dan and Anthony have been talking about on this call and the best way to take care of our partners which are the advertisers and the content companies inside of the media side of the business is to make sure that we we serve them and all the data that they're investing in which is the missing part of your question I think is made only better and more powerful and the media more performant by matching it with our high fidelity signals so for the short and probably the medium . . . .
Speaker Change: The best way for us to deploy the data is to create this remarkable differentiated platform that's growing as much as it is and for us to hydrate their data with ours and then prove outcomes. [inaudible] I'm sorry, I'm sorry, I'm sorry
Speaker Change: for our customers. You know, I talk a lot about how Roku has moved from building incrementality and we are now building fundamental really the base of their performance businesses and that's what I'm focused on and I think that's the best use of our data. [inaudible]
Speaker Change: This is Anthony again, I'll just add, sorry, I'm just going to say that, um, [inaudible]
Speaker Change: I mean, I think Charlie covered it, but just to be super clear about it, if you're an advertiser and you buy ads from Roku but you go through a third party DSP, you can have access to those arrangements often have access to our data. Okay, I mean those are-
Speaker Change: And targeting based on our data is part of those deals and is part of the reasons, you know, amateurs just want to work with us. I'll also say though.
Speaker Change: We understand the value of our data, and there's a lot of activities going on to expand the way we monetize your data. We just haven't
Hmm.
Thank you very much [inaudible]
One moment for our next question.
Thank you.
Speaker Change: Our next question comes from Matt Thornton with FB insecurities, your line is open.
Matt Thornton: Hey, good afternoon guys. I guess two if I could. We'll first want the housekeeping one probably for Dan. Friendly TV, is that assumed in full year or two Q guidance or would that be incremental? That's the first question. Second question, as you think about.
Matt Thornton: Terrace, and the impact on the devices, business, and volumes, and the balance, which I'm just kind of curious about.
Matt Thornton: kind of what you're assuming for the balance of your in guidance and you know tied to that how quickly can you move sourcing production warehousing I'm sure you've got lots of different scenarios kind of planned out I guess you know that's something that can get moved. [inaudible]
Matt Thornton: in days or weeks or as that months are our quarters once we get final clarity on the end tariff race. Thanks guys.
Matt Thornton: Yeah, hi, Matt. Thanks for the question. When we gave full your guidance in February , we assumed several initiatives that have not yet launched in both our subscriptions and advertising activities.
Matt Thornton: We mentioned at the time, or I mentioned at the time, that we're giving a full year outlook grounded in the best information we had at the time. Friendly was one of the many initiatives we've been working on. I'm excited to have them as part of Roku. Thank you.
Matt Thornton: We're very confident that we can leverage the power of our home screen and platform and grow friendly subscriptions even faster again it's one of many initiatives [inaudible]
Speaker Change: that we had at the time, so yes, friendly is included. We have, as Anthony said, we have many other initiatives that we look at when we provide guidance. And so again, we'll update you more as those initiatives launch. Thank you very much.
Matt Thornton: And I also mentioned earlier, we do expect friendly to be a Jesse DeBita margin accretive in the first foe year. I think I'll turn it over to Mustafa for the tariff question.
Matt Thornton: Yeah, hi, Matt. This is Mustafa. Look, we have a diversified manufacturing strategy already in place. We manufacture in multiple countries with multiple factor partners that provide us quite of a fragility and flexibility.
Matt Thornton: and Hal Smitigade, Dean Packer of the tariffs. And our teams are continue working to optimize the overall manufacturing footprint. And as things change, they are ready to be able to move quickly from one place to another. So that's a part of our plan. And, and uh,
Matt Thornton: and they can do some work on that. Based on the current terrorist structure that's in place, we do not anticipate a material change to our device's gross profit dollars for the full year.
Matt Thornton: And at the same time, we already implemented some small price increases, so we're passing some of the cost of consumers and you know, we're continuously monitoring the environment remaining flexible in terms of price increases or price increases as well. Just want to make sure we stay competitive, but at the same time continues to monitor the demand environment. Thank you very much.
Matt Thornton: And, you know, the other point around the demand and then some mitigating factor for us that's on the positive side is how we actually distribute our Roku operating system to consumers. [inaudible]
Matt Thornton: O.S. Distribution Strategy has three pillars. We use our streaming players that are made and sold by us.
Matt Thornton: We have our first part of TVs also made and sold by us under the Roku Bren. And then we have the third part of TVs that are made and sold by our Roku TV licensing partners. Thank you very much.
Matt Thornton: So, not all of the care for mitigation or the impact is carried by Roku. Thank you.
Matt Thornton: Some of them are carried by and mitigated by our third part of TV partners, but more importantly, in case the TV prices increase due to tariffs and the demands soften from there.
Matt Thornton: Our streaming players are actually a great way for consumers to upgrade an extended life of their existing TVs at a much lower price point. You know, we have great selection of streaming players and their price point ranges from $20 all the way to $99, so they are a great option. I'll turn it for the consumers to upgrade the streaming.
Hey Matt, this is Anthony, I'll just add...
Matt Thornton: Quickly, you know, one possible outcome of tariffs is that the overall TV unit sales decline.
Matt Thornton: or Declan, I don't think they'll decline a lot, but they might decline slightly. I just think it's important that that's unlikely to hurt our market share. We're well positioned, much better positioned than others given our significant penetration in over half of U.S. broadband households. [inaudible]
Matt Thornton: Also, our scale is continuing to grow in terms of households, and we're on track to achieve 100 million streaming households a milestone we set to achieve a couple calls ago.
Thank you, one moment for our next question.
Speaker Change: Our next question comes from Jane Tainley with Jeffries, your line is open [inaudible]
Speaker Change: Great, thanks for the question. Dan, can you just walk us through how we should be thinking about the revenue trajectory for platform growth just for the remainder of the year? I know you'll have the tough political comp in the second half but just any other puts and takes that we should be considering. Thank you very much.
Thank you for watching!
Speaker Change: Yeah, I mean, we gave the Q2 guide, we gave the full year guide. I think Q3 and Q4 will have, you know, probably, there'll be probably a smaller growth rate in Q4 simply because of the very large quarter we had in Q4 of last year with 25% and it was, I believe 19%
Speaker Change: Excluding Political, but essentially, you know, I think you're really asking what Q3 and Q4 looks like and again I think that we'll probably have a slight sequential step down in growth rate in Q4 but but we'll see and we'll update you again we have many initiatives. Thank you very much.
Speaker Change: that we're working on and we'll update you on that on Q3 and Q4 when we report our Q2 results.
Speaker Change: One reminder, there is probably one thing I should remind you of is
We did have a lot of 606 adjustments. Thank you very much.
Speaker Change: in FY24, and actually Q2 was the largest of the 606 adjustments at just over 16 million.
Speaker Change: We also had a fairly large 6-6 adjustment in Q3 and a much smaller one. [inaudible]
Speaker Change: in Q4, we had no 606 adjustments in Q1 as we said. [inaudible]
Speaker Change: We didn't expect to have, nor do we expect to have, nor does our guide imply any 6-0-6 adjustments for Q2 or the rest of this year. So we are clomping, especially in Q2 and Q3 some 6-0-6 adjustments, as a matter of fact, if you back out 6-0-6
Speaker Change: In Q2, we have the same growth rates in the platform business, very close to the same growth rate as we achieved in Q1. So it's very close to that 17% if you back out 606 in Q2.
Speaker Change: Okay, yeah, great, appreciate the extra detail, and maybe just one more just on home screen. We're just love to hear, you know, how you're thinking about the growth drivers outside of the M&E vertical and then, you know, just curious if there's any verticals you call out where you've seen traction and others that you're, you know, looking to expand into just on home screen. Thanks.
Sure, James, this is Anthony, I'll take that so...
Speaker Change: Yeah, just to remind everyone, our initiative or strategy to grow platform revenue, one is grow our ad business, and a big part of that is integration with third party DSPs, really embracing them as partners and deepening our integration with them. [inaudible]
Speaker Change: Another is focusing on our subscription business, which we think has a lot of room to continue to grow. And then third is just overall arching to really lean into the Roku experience. [inaudible]
Speaker Change: You know, users start their TV experience every time they sit down to watch television with a Roku home screen and then there's a lot of UI elements or, you know, adjacent to the home screen aren't exactly on the home screen. [inaudible]
Speaker Change: and we have an iconic, simple, powerful home screen that's very popular with our customers.
You know, for example, [inaudible]
Speaker Change: And it's definitely not just focused on M&E. I mean, that's how our ad business started with the M&E vertical and the ads on the home screen, but, you know, the home screen is these days it used to drive a lot of businesses besides M&E.
Speaker Change: So, for example, we added, you know, not too long ago, we added a single new row to the home screen with recommendations, and we're seeing that drive, you know, significantly increases in subscription signups as well as significant.
Speaker Change: Engagement, I mean, it's one of the reasons that the Roku channel grew 84% globally year over year in the quarter. So that's just one example But there's lots of other things we're looking at and testing on the home screen. It's really an area that we haven't. [inaudible]
Speaker Change: Touched significantly over the, you know, in a long time in several years. We now have a team working on it. We're testing lots of different...
Speaker Change: The experience is in the home screen and I think we're going to continue to roll out changes that will be test them and they test positive and it's going to have a material impact on our growth.
Thank you.
Charlie Collier: Oh, and Charlie wants to add something. Yeah, you know, in James, from the ad source point of view, you know, I mentioned earlier that the home screen reaches 125 million households with 125 million people in it every day. That kind of reach is so unique that it obviously. [inaudible]
Charlie Collier: has been a great place for us to partner with advertisers and inherent in your question, you know it works really well for M&E.
Charlie Collier: But I think in the letter, we put a picture of what we call our marquee video ad unit, and that one was for helmets. We've seen a lot of people who are pushing toward performance, utilized the home screen, especially marquee video, some of the takeovers. We recently had one for the Simpsons that got a lot of, you know, viral support and social chatter. It's really powerful, and we're seeing it well beyond the M&E vertical. The M&E vertical. The M&E vertical. The M&E vertical. The M&E vertical.
Charlie Collier: I'll appreciate it. Thank you, Roku. Let me think about the Humstrune, we also think about the Roku experience more broadly and
Charlie Collier: It includes experiences that are actually engaging in their own right like Roku City for example which is extremely popular. We're aware.
Charlie Collier: And we just keep adding new features and new promotions inside Roku City and new features for people to watch.
Thank you for watching!
One moment for our next question.
Speaker Change: My next question comes from Stephen Cahall, with Wells Fargo, your line is open on.
Thank you,
Stephen Cahill: Dan, if we could maybe just dig in a little more to what you're talking about with the platform revenue growth. So thanks for that math I was kind of getting at the same place that Q2 looks a lot like Q1 underlying. If we think about the back half of the year and we take out both 606 in political is it logical to assume some deceleration just as you start to comp some of the. Yeah.
Stephen Cahill: DSP integrations and other things that you started to do towards the end of 2024. Or do you think that that, you know, kind of teens growth rate is sustainable for a little longer because I know there's a lot of work that is still ongoing. So we're just love to get kind of a sense of that underlying, you know, growth rate, maybe more for the medium term. [inaudible]
Stephen Cahill: and then the 51% platform margins for Q2. That's a little bit of a degradation from what we've seen historically. Not a lot, but a little bit. Is that just mixed because you're growing avod so much faster than some of the other parts of the platform revenue or anything else we should think about in the margin mix it platform. Thank you. Thank you.
Stephen Cahill: Yeah, thanks, thanks, Steven, for the question. Let me take the second part of that question first on the 51%.
Stephen Cahill: Guide, and maybe I'll talk a little bit about the full year guide at 52% Thanks for watching, and I'll see you next time.
Stephen Cahill: And so in February , we mentioned platform Gorse Margin, would be 52 to 53%, which is roughly in line with our prior year margins when you exclude 606 adjustment in FY 24.
Stephen Cahill: And, you know, within Q1 and into the first month of Q2, Charlie talked about this. We've seen a greater shift from the guaranteed to the non-guaranteed. And therefore, just much more on the programmatic side given the uncertain macro environment. Thank you very much.
Stephen Cahill: We view this as a positive, as we're able to meet the advertiser along any point of the CTM demand curve. I mean, Charlie talked in detail about why the shift does have a positive impact on us as we're able to measure the higher ROI's, etc. But that makes shifts from guaranteed to non-guaranteed does have a modest impact on margins within our advertising and platform segment. That's why we're guiding to 52% for the full year. It's a very modest shift.
Stephen Cahill: , , , , , , , , , , , , ,
Stephen Cahill: We'll see if the non-guaranteed versus guaranteed states where it's at now, or if it goes back to more, let's just say, pre-macro environment levels in H2, that would have a slight positive impact on margins, but right now we're expecting...
Stephen Cahill: That trend to stay where it's at, which is why we're seeing 52% margins. I said it many times, I do believe that we can maintain and in fact grow our margins over time on a mixed adjusted base and a mixed adjusted basis and mix, and with the mix. [inaudible]
Stephen Cahill: because we've got a lot of positive initiatives going on that can help margins as well as all the volume and increase in the platform revenue that we discussed.
Stephen Cahill: To the first part of your question, I absolutely believe Team Growth Rate is sustainable over the longer period of time and I do believe that if you back out 606 in political, you'll see that growth rate
Stephen Cahill: in the back half of the year as well. The only caveat would be maybe Q4 is a slight deceleration because there was so much volume after political in the month of December but that might happen again and we're in a great position if it does happen again to take advantage of that given our supply. Bye.
Stephen Cahill: So even once you back out political and if you back out 606, you'll see that we are growing in that 15-ish percent range and I firmly believe that's sustainable.
You.
[inaudible]
Next question.
Hello, Michael. Your line is open.
Thank you for watching!
Great, can you hear me?
Speaker Change: Yes, I can hear you. Are you guys there? Great, thanks
Conrad, are you still there? [inaudible]
We're still here now.
Speaker Change: Thank you. I just want to get an update on devices. In fourth quarter letter, you thought you'd grow 12% this year, and now you're saying it should be flat. So I know you've had a good start the year, but so once you review on just device demand over the year and why, why the flattening of the outlet versus where you were a couple months ago.
Speaker Change: This is Nancy, I'll turn this over to Mustafa and then.
Speaker Change: or Dan. But I'll just say, overall, we're not focused on device revenue, we're focused on growth in Roku using households.
Speaker Change: and both come in large part from our partners, our TV partners.
Speaker Change: But also our own devices, but you know you can lower prices and sell more devices and get more households. So we're you know I'll let Dan talk about revenue but it's really not something device revenue but we're not focused on that we're focused on [inaudible]
Speaker Change: DeVice, Unit Sales, and especially third-party partners, and also growth in, which results in growth in Roku and Roku Household, that's our KPR.
Yeah, I
Speaker Change: Anthony's absolutely right and thanks for the question, Michael. We are not focused on device revenue. Device revenue now can be very lumpy because it's driven by our first party TVs which we recognize revenue on whereas opposed to our third party. [inaudible]
Speaker Change: OEM-based TV, we don't recognize Revenue On. Players, we've always recognized Revenue On, and that is actually fairly steady for us and
Speaker Change: We've got good margins on that, etc. But on the first party TVs, it can be very lumpy depending on the quarter, depending on what our actual sell, what we call our sell is to the distributor. And so it's not something that we pay a ton of attention to, what we look at is our units, our market share in terms of units and our streaming households, which are growing in all countries, including the US. We think it'll continue to grow in all countries.
Countries including the U.S., Anthony mentioned.
We're on track to hit 100 million streaming households.
Speaker Change: So we feel very good about that and that's again why we guide to platform revenue is because that is where we monetize those one you know those basically over 90 million streaming households that we currently have so device revenue is just very difficult and very lumpy in the short term and it's not something we particularly pay attention to just it's more about the unit volume that we that we fork that we ship. . .
Okay, thanks a lot.
Anthony Wood: Ladies and gentlemen, so that's conclude the Q&A portion of today's conference. I'd like to turn the call back over to Anthony for closing remarks. Thank you very much.
Anthony Wood: I just like to say thanks to our employees, customers, advertisers and content partners, and thank you for listening.
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