ROKU’s Fourth Quarter Earnings Beat Estimates, Revenue Increases Year Over Year – February 18, 2022

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Roku (ROKU Free Report) reported fourth-quarter 2021 earnings of 17 cents per share, beating Zacks’ consensus estimate of 6 cents. The company reported earnings of 48 cents per share in the year-ago quarter.

Revenue rose 33.1% from the year-ago quarter level to $865.3 million, but missed consensus by 3.2%.

The Roku Channel’s growth in reach and engagement drove fourth quarter performance. Active accounts grew 17% year over year to 60.1 million, driven by the popularity of Roku streaming players and Roku TV models. Stream hours also increased 15% year over year to 19.5 billion.

Average revenue per user increased 43% from year-ago quarter levels to $41.03 (12-month basis).

In the fourth quarter, Roku’s monetized video ad impressions jumped 67% year-over-year, driven by increased acquisition, retention and spending per customer.

Quarter details

Platform revenue (81.3% of revenue) jumped 49.3% year-over-year to $703.6 million, driven by a significant increase in content distribution business and advertising.

However, player revenue (18.7% of revenue) was down 9.5% from the year-ago quarter level at $161.7 million.

In the fourth quarter, Roku announced the global expansion of its Roku TV Ready certification program. The expansion of the certification program makes it easier for third-party audio partners to join the platform.

The company’s new partners added during the 2021 tenure include JVC, Element, Pheanoo and Philips.

Polk Audio and Westinghouse are expected to join the platform in early 2022. The program has also expanded internationally with multiple audio partners, launching in Canada, Mexico and the UK.

Operation details

Gross margin, as a percentage of total revenue, contracted 310 basis points (bps) from the level of the quarter a year ago to 43.9%.

Operating expenses rose 49.1% year-on-year to $358.3 million. As a percentage of total revenue, the metric rose 440 basis points.

As a percentage of total revenue, research and development broke even year-over-year, while selling and marketing and general and administrative expenses increased 410 basis points and 30 basis points basis, respectively, on an annual basis.

For the fourth quarter, adjusted EBITDA margin — as a percentage of total revenue — contracted 740 basis points year-over-year to 10%.

Operating profit was $21.4 million in the quarter, compared to $65.2 million in the year-ago quarter.

Balance sheet

As of December 31, 2021, cash and cash equivalents were $2.15 billion, compared to $2.18 billion as of September 30, 2021.

As of December 31, 2021, the company had reported total debt of $89.9 million, compared to $91.1 million as of September 30, 2021.

Advice

For the first quarter of 2022, Roku forecasts total net revenue of $720 million. Zacks’ consensus estimate is currently pegged at $762.83 million.

Gross profit is expected to be $360 million. The company expects adjusted EBITDA to be $55 million.

Zacks Ranking and Stocks to Consider

Roku currently carries a Zacks rank #4 (sale).

Some top-ranked stocks in the Zacks Consumer Discretionary sector are PlayAGS (AGS free report), Accel Entertainment (ACEL free report) and Gildan Sportswear (GIL Free Report), each carrying a Zacks Rank #2 (Buy). You can see the full list of today’s Zacks #1 Rank stocks here.

PlayAGS is expected to announce fourth quarter 2021 results on March 10.

AGS is up 15.4% over the past year against the 28.9% decline in the gaming industry Zacks and the 21.3% drop in the consumer discretionary sector over the past year.

Accel Entertainment is expected to announce its fourth quarter 2021 results on March 15.

ACEL is up 28.3% over the past year against a 28.9% decline in the gaming industry Zacks and a 21.3% drop in the consumer discretionary sector.

Gildan Activewear is expected to announce its fourth quarter 2021 results on February 23.

The GIL is up 44.8% over the past year against the 7.6% decline in the Zacks Textile – Apparel industry and the 21.4% drop in the Consumer Discretionary sector.

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