Zhitong Finance learned that Roku (ROKU.US) announced financial results for the first quarter. According to financial reports, Q1 revenue increased 19% year over year to reach US$881.5 million, exceeding expectations of 15%. Operating losses narrowed sharply, from $212.5 million in the same period last year to $72 million due to increased revenue and a 16% reduction in operating expenses. The loss per share was $0.35, and the market expected a loss of $0.62.

Revenue from the platform business (including digital advertising and ad-free subscriptions) increased 19% to US$754.9 million, while revenue from the equipment business increased 19% to US$126.5 million. Gross profit (driven by the platform business because the equipment business had a slight loss) increased 18% to $394.4 million. Gross margin fell 1.5 percentage points to 44.1%.

Roku is the leading streaming platform in the US and continues to dominate the market with its innovative streaming devices and smart TV operating systems. The company's strategic focus is on operational efficiency and has achieved positive adjusted EBITDA and free cash flow for the third consecutive quarter, underscoring its commitment to sustainable growth. Operating cash flow was US$456 million, compared to -US$243 million in the same period last year; free cash flow was US$426.8 million, compared to -448.1 million US dollars in the same period last year.

Roku's operational discipline is evident, with total operating expenses down 16% year over year to $460.3 million, and operating losses reduced 66% to $72 million. The company's focus on innovation and market expansion is also reflected in the launch of the new Roku Pro series TVs and the enhanced Roku operating system.

In terms of operating indicators, the number of streaming households increased 14% year over year, 1.6 million month over month to 81.6 million, streaming time increased 23% to 30.8 billion hours, while average revenue per user (ARPU) remained flat at 40.65 US dollars, the same as year on year.

Roku said the results were “steady” — growth in platform revenue and active users and length of play. “We also achieved positive adjusted EBITDA and free cash flow growth for the third consecutive quarter, which shows our continued focus on operating efficiency,” the company stated.

Jamie Lumley, senior analyst at Third Bridge, said: “In an environment where user engagement is critical, the size of Roku's user base and the time users spend on the platform continues to grow strongly.”

Despite the positive results, Roku faced challenges such as competitive pressure in the streaming market and the need to constantly innovate to maintain its leading position in the market. Roku expects total net revenue of US$935 million (slightly higher than market expectations of US$933.3 million), gross profit of US$410 million, net loss of US$65 million, and adjusted EBITDA of US$30 million. The company's outlook for the second quarter of 2024 reflects a cautious optimism about its ability to maintain its growth momentum.

Roku sells streaming devices and has its own free advertising channel, and as price increases and economic uncertainty from major streaming companies such as NFLX.US (NFLX.US) put pressure on consumer spending, more and more people are turning to Roku's platform. But the company's executive said Roku is facing “a relatively difficult year-over-year growth rate in streaming service distribution activity. This headwind is due to past price increases and a shift to a higher mix of ad-supported products.”

In an uncertain economic environment, major streaming service companies, including Netflix, have been working over the past year to add more affordable ad-supported services to keep users growing. However, Roku's earnings for the first quarter and sales estimates for the second quarter were higher than Wall Street estimates, indicating that the company benefited from strong ad sales and the trend of shifting from cable TV to streaming media.

The company expects second-quarter revenue of $935 million, and although the results were better than expected, Roku warned that streaming rival launches ad-supported subscription services could drag down its growth this year, overshadow its strong quarterly results, and cause its stock price to drop nearly 3% in Thursday's after-hours trading.

The company's CEO, Anthony Wood, highlighted Roku's strategic initiatives to increase audience engagement and monetization opportunities in a letter to shareholders, particularly through advertising and enhanced Roku's paid features. These efforts are aimed at securing a larger share of the expanding digital advertising market and supporting long-term growth.

Overall, Roku's results for the first quarter of 2024 are a testament to its resilience and strategic acumen in this dynamic industry. With continued investment in technology and content, Roku is well-positioned to take advantage of the ongoing shift from traditional TV to streaming. However, maintaining this momentum in the face of intense competition and market fluctuations is critical to continued success.