Roku Inc Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Cory Carpenter - JPMorgan - Analyst : Wanted to see if you could expand on the drivers of the platform acceleration and the beat relative to your guide in 3Q? And then as a follow-up, could you talk about the change in the KPIs and the rationale for removing streaming households and ARPU?

Question: Cory Carpenter - JPMorgan - Analyst : Thank you, guys. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 9:00PM, ROKU.OQ - Q3 2024 Roku Inc Earnings Call

Question: Justin Patterson - KeyBanc Capital Markets Inc. - Analyst : All right. Building off that last question, you've previously been talking about growth accelerating into 2025. So given just the momentum you have exiting this year, how should we think about just the ability to accelerate growth each quarter throughout 2025? And then separately, I wanted to hit on OpEx. Given sales and marketing and total OpEx are slightly down this year, how are you thinking about the right level of investment to support that growth into 2025?

Question: Vasily Karasyov - Cannonball Research - Analyst : Wanted to ask, Charlie, question about next year, but a different angle. So out of these 2 major advertising revenue-related initiatives, the partnership with the Trade Desk, which you said is already providing a positive impact and the potential for home screen video advertising. First of all, which one do you think could be a bigger benefit next year? And can you tell us how you expect them to ramp throughout next year so that we can keep track of them?

Question: Vasily Karasyov - Cannonball Research - Analyst : Okay. Dan, can I ask quickly how big this 606 adjustment was in the quarter? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 9:00PM, ROKU.OQ - Q3 2024 Roku Inc Earnings Call

Question: Laura Martin - Needham & Company Inc. - Analyst : Two. Connected television is moving full funnel as Amazon Connect purchases to connected television ad units. And what I'm wondering is about cost per thousand for Roku who really only has a top-of-funnel solution primarily. So I'm wondering if you are seeing cost per thousand pressure as other alternatives have more of a direct performance-based connected television alternative as part of their product set? That's my first one. The second one is Generative AI. You have -- you're talking about self-service here, which I think is intriguing for your small and medium businesses. My question is, are you integrating Generative AI into this self-service offering to get conversions up? And how are you using Generative AI today in your product set?

Question: Ruplu Bhattacharya - BofA Global Research - Analyst : I have 2. First one for Charlie. So you've integrated with TTD and you've integrated UID 2.0. Have you seen an uptick in fill rates? What portion of Roku's unsold inventory would you be willing to allocate to these third-party DSPs. And I'm asking that because also the shareholder letter talked about Roku's ability to serve the entire demand curve at multiple price points. So Charlie, what guardrail do you have on CPM?

Question: Ruplu Bhattacharya - BofA Global Research - Analyst : Okay. Just maybe a follow-up for Dan. Can you prioritize your areas of investment over the next 12 months. So how are you thinking about spending on original content or spending on programmatic and international expansion? Can you help us rank order that?

Question: Ruplu Bhattacharya - BofA Global Research - Analyst : Okay, thanks for all the details.

Question: Jason Bazinet - Citi - Analyst : I just had a strategic question. You said the Roku Channel, I think, is the number three app on your devices. And it's doing really well, but it's not number three, at least according to the gauge data from Nielsen. Have you ever thought about distributing the Roku Channel on devices that aren't Roku devices?

Question: Jason Bazinet - Citi - Analyst : And if I can just ask a follow-up. When you guys make innovations like, let's say, the Roku Sports Channel, is that something that gets refreshed on every single Roku device that's in the field? Or are there some old devices that can't really handle sort of these innovations that you're rolling out to maybe newer devices?

Question: Jason Bazinet - Citi - Analyst : That's great. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 9:00PM, ROKU.OQ - Q3 2024 Roku Inc Earnings Call

Question: Peter Supino - Wolfe Research - Analyst : Two, if I may. I wanted to ask you about your commentary on revenue growth. And I'm sorry if this duplicates a question we heard earlier, but I want to ask you again to expand on your outlook for 2025. I think there was a commentary in the prepared remarks that the business has been accelerating in Q3 and you expect it to accelerate again in Q4, but I'm wondering why the press release just as growth in 2025. And then on another topic, I wondered if you could talk about your outlook for 2025 gross margins, whether the puts and takes in that outlook are any different in '25 than those that have existed in '24?

Question: Steven Cahall - Wells Fargo Securities, LLC - Analyst : First, just to trying to put a finer point on it. So can you just help us make sure we understand what's driving the Q4 deceleration platform revenue growth? Is that conservatism? Is that the Olympics in Q3 or the political was a little lumpy in Q3 or the 606 or the M&E comp is just tougher? So

Question: Steve Hromin - Oppenheimer & Co., Inc. - Analyst : This is Steve Hromin, on for Jason. So just a question on next year OpEx growth? How should we think about that or views on a margin target for next year?

Question: Steve Hromin - Oppenheimer & Co., Inc. - Analyst : Great. Thank you.

Question: Cameron McVeigh - Morgan Stanley - Analyst : I was curious if you are more or less exposed to certain streaming services like Disney, Paramount Plus, Max or Peacock and whether one is driving an outsized impact on the streaming services distribution revenue given some of the recent price increases we've seen over the past year?

Question: Cameron McVeigh - Morgan Stanley - Analyst : Got it. And then secondly, I was curious if you could just talk about the international expansion plans a bit more and how that's trending and whether there's the biggest opportunity in one given country?

Question: Alan Gould - Loop Capital - Analyst : I've got 2 questions. First, I was wondering, Charlie, if you could just give us some sense of how the ad market is looking right now? And then on the hardware side, how are the -- for Anthony or whomever, how is the new Roku Pro Series TVs doing? And you've had your Roku-branded TVs now for a year plus or so? What impact, if any, have they had on your partner-branded TVs?

Question: Alan Gould - Loop Capital - Analyst : Okay, thanks, Mustafa.

Question: Ian Peterson - EVERCORE ISI - Analyst : This is Ian Peterson on for Mark. Two questions, if I may. First question, how much of a contribution from political ad revenue did we see in Q3? And how should we think about the political contribution in Q4? And secondly, for the Q4 platform revenue guide, any color on how much of a headwind there is in the guide related to SSD in the subscription price increases we saw in Q4 of last year. And secondly, should we expect easier video advertising comps related to the M&E and auto ad verticals from the strikes we saw in Q4 last year?