Roku shares were down almost 22% in after-hours trading Wednesday night as investors were apparently jittery about Q1 guidance that fell below expectations and concerns about whether the streaming specialist can keep its growth engine stoked.
As for the cause of the stock drop, Roku said sales in Q1 would be in the range of $120 million to $130 million, versus analyst expectations of $132 million, according to Bloomberg.
Investors didn’t give Roku much credit for Q4 revenues of $188.3 million that handily beat estimates of $182.5 million, led by its fast-growing Platforms unit that includes advertising, subscription revenue sharing, and licensing fees from TV makers that integrate Roku’s OS and streaming platform.
While total net revenues rose 28% year-on-year, player revenues dipped 7%, to $102.82 million. Platforms-related revenues soared 129%, to $85.43 million.
In its shareholder letter, Roku, which went public last September, reiterated that the primary focus of the players business is to boost active accounts and not maximizing hardware revenues and hardware gross profit, which played out in its use of lower suggested retail pricing and pricing promos. That focus has also driven growth of lower cost models such as the Roku Express, and a decline in higher-end models, such as the Roku Ultra.
Update: Player units, however, were up 25% for the year as a whole, Roku CFO Steve Louden noted on the company’s earnings call, adding that Roku also lowered the MSRP of the Ultra from $129.99 to $99.99.
Roku, he added, also “experienced some supply disruption that impacted player availability for certain models as well as drove higher airfreight charges.”
Roku said it ended 2017 with 19.3 million active accounts, up 5.9 million, or 44% year-on-year. Streaming hours also rose 55%, to 4.3 billion, and ARPU jumped 48%, to $13.78.
The company also provided an update on The Roku Channel, a curated, free ad-based offering launched last fall. That offering is now a top 20 channel on Roku devices based on hours streamed and has become the number three ad-supported channel on the Roku platform.
Scott Rosenberg, GM of Roku’s Platforms business, said The Roku Channel has exceeded expectations and is already a “material contributor” to the video inventory it sells.
For Q1, Roku is also projecting a net loss of $15 million to $21 million, and gross profit of $52 million to $58 million.
Among opportunities being targeted by Roku in 2018 are efforts centered on the smart home, where Roku is pushing ahead on smart sound bar and smart speaker reference designs for licensees and other potential partners that integrate with the Roku OS.
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Update: Regarding Roku’s international focus going forward, CEO Anthony Wood said on the call that will continue to center on Roku Powered, a licensing program that has already landed partners such as Sky and Telstra.
He also talked up the Roku’s use of ACR (automatic content recognition) as a way to help the company monetize linear viewing, but said that’s a “longer conversation.” In its shareholder letter, Roku noted that, in Q4, it started to use ACR capabilities “to demonstrate to TV advertisers the incremental (nonduplicated) TV viewers they could reach on the Roku platform relative to a linear-only ad campaign.”