Roku Inc at Needham Technology, Media & Consumer Conference Summary

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

Question: Laura Martin - Needham and Company - Analyst : <_ALACRA_META_ABSTRACT>Yes, maybe I'll invite you next year be good. No, I let's talk about -- to sort of level set and say tell us what Roku does and then tell us with your full year outlook, which you've given, was friendly part of your outlook when you provided it in February because you made this acquisition, maybe you should tell them about that. And if it's in guidance already.

Question: Laura Martin - Needham and Company - Analyst : That's big. Isn't it tiny?

Question: Laura Martin - Needham and Company - Analyst : And what's the average price? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 13, 2025 / 7:00PM, ROKU.OQ - Roku Inc at Needham Technology, Media & Consumer Conference

Question: Laura Martin - Needham and Company - Analyst : Okay. Okay. I just wouldn't have thought it was very big compared to your $4 billion of advertising. But I want to stay on this point. One of the things we talked about breakfast is that you went -- and it's not you, of course, it's Anthony -- you went from the high return on capital distribution, which was licensing everything to now we're making our own TVs, which is a lower return on capital. Here you've done it again. You started in streaming, which is where the world is going, and you backward integrated in the thing that's dying, which is linear TV. Please defend?

Question: Laura Martin - Needham and Company - Analyst : Okay. So I think of it as linear TV, which Wall Street has decided is dying, and I would --

Question: Laura Martin - Needham and Company - Analyst : But you think of it as a subscription business model, not as linear TV and you're trying to grow the subscription business model.

Question: Laura Martin - Needham and Company - Analyst : Because I would tell you that [Amobi] who's the back end for a lot of FAST. His most provocative statement from CES as FAST as dead. And he's the back office for FAST, which made it a very controversial statement. So you don't think FAST is dead.

Question: Laura Martin - Needham and Company - Analyst : Because you're adding new FAST channels, not same-store growth.

Question: Laura Martin - Needham and Company - Analyst : It's not same store.

Question: Laura Martin - Needham and Company - Analyst : The issue as FAST as there's 400 of them and discovery is really hard. Even if you'd love to watch the Tour to France, it's really hard to find anything [400] --

Question: Laura Martin - Needham and Company - Analyst : Okay. So you just gave a number that I need to -- I don't understand -- how can 125 million viewers be the right number when we have 90 million homes because there's 2.2 people per home -- are you telling me that there's -- that every home has a Roku device, an Amazon device and somebody uses the LG without any device --

Question: Laura Martin - Needham and Company - Analyst : Yes. But since you're counting a single home, why wouldn't it be 180 million people.

Question: Laura Martin - Needham and Company - Analyst : Does that speak to your confidence around the full year guide despite the macro uncertainty? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 13, 2025 / 7:00PM, ROKU.OQ - Roku Inc at Needham Technology, Media & Consumer Conference

Question: Laura Martin - Needham and Company - Analyst : Okay. So free cash flow has been where we've really seen big impact from you. I think within the first 12 months that you'd be in the free cash flow improved like $200 million, and you've been really driving -- I think your guidance for '25 is like $350 million of free cash flow. So can you talk about how much of the free cash flow growth is behind us? And how much is front of us? Like what inning are we in here?

Question: Laura Martin - Needham and Company - Analyst : Alright. Fantastic. I'm glad to hear that because you've done such a good job with free cash flow since you've been here. I was wondering where we're running now. I'm happy to --

Question: Laura Martin - Needham and Company - Analyst : Okay. Great. Let's talk about third-party DSPs. One of the things that's been really helpful to the stock is when you opened up your ad inventory Trade Desk and assuming [violence] and some of the other DSPs over time to fill, I think we assumed a 50% fill rate of ad units on the Roku Channel. Can you tell about -- talk about your learnings to date, what's been better? What's been worse? And I'm really interested in the relative CPM between what your ad sales force has been selling ever since you got there to the kind of CPMs. We had someone on the stage this morning, not Jeff Green, who was also on this stage, but not him, but somebody else say that the CPM discount is 50% versus a direct sales force. So can you speak to --

Question: Laura Martin - Needham and Company - Analyst : So you probably have a floor.

Question: Laura Martin - Needham and Company - Analyst : So let's stay with -- we want to be the most performative platform. How do you beat Amazon?

Question: Laura Martin - Needham and Company - Analyst : So when I think of performance, I think of a drive to purchase. So I don't understand how high iSpot helps you be performant? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 13, 2025 / 7:00PM, ROKU.OQ - Roku Inc at Needham Technology, Media & Consumer Conference

Question: Laura Martin - Needham and Company - Analyst : Okay. Fair enough. So you do think that -- what you said was premium here is sports, which is unique content, originals, unique content, and then the home screen and the home screen is sold like a billboard. It's almost don't reach practically. So it's a premium fee because of its location. So if you think those are where the pricing power is going to be -- everything else you said goes to programmatic. Doesn't that mean we're going to get a downdraft in CPM programmatic sales for less --

Question: Laura Martin - Needham and Company - Analyst : Okay. One of the things that's been a problem in the past with the old Internet, not connected television yet, is that a DSP will take your data and then find audiences that replicate that data at 1/10 of the cost. And so then they undermine your power. So how do you prevent your data from becoming their stocking horse and them making money.

Question: Laura Martin - Needham and Company - Analyst : Okay. Okay. And with the iSpot data, is that a different data than you use? Or do you just give -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 13, 2025 / 7:00PM, ROKU.OQ - Roku Inc at Needham Technology, Media & Consumer Conference

Question: Laura Martin - Needham and Company - Analyst : Those of it undermines the pricing power of your direct sales.

Question: Laura Martin - Needham and Company - Analyst : You have this a lot because Google used to link out to a lot of websites and now they're not because they're just answering your questions. Google Search is answering your questions. So a lot of people, supply is dwindling and a lot of these websites that used to get traffic from Google.

Question: Laura Martin - Needham and Company - Analyst : Okay. Let's talk about ROIs on hardwood related revenues such as home security, owned Roku-branded TVs. And in light of your $5 billion impairment charge in '23 for audio and its subsequent deemphasis -- it feels like hardware is a riskier -- lower returns for sure than the old business, but also riskier from a point of view, sometimes it doesn't work.

Question: Laura Martin - Needham and Company - Analyst : Right. Okay. So returns on capital are lower, but it's strategically important because you need to be able to control your own destiny.

Question: Laura Martin - Needham and Company - Analyst : I can't -- sorry, sorry, just thinking about your P&L, the gross margins have gone negative on the hardware business.

Question: Laura Martin - Needham and Company - Analyst : That was true before. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 13, 2025 / 7:00PM, ROKU.OQ - Roku Inc at Needham Technology, Media & Consumer Conference

Question: Laura Martin - Needham and Company - Analyst : Why would first-party TVs grow your households?

Question: Laura Martin - Needham and Company - Analyst : And you don't think if you just had players, they would just buy those instead of the TVs?

Question: Laura Martin - Needham and Company - Analyst : Okay. But the margins are falling on hardware.

Question: Laura Martin - Needham and Company - Analyst : Yes, exactly. Okay. So you've been introducing new products and features offshore Canada, Mexico, UK, A lot of these are now like first in the country for OTT backbone. In several countries in Central and South America, and successful markets take three years to five years to actually get to the point where you've got enough penetration to start actually monetizing through advertising. So can you talk about why this is a good return on capital for Roku compared to just stick into the US, building new products, focusing on the US, where you have really nice unit economics?

Question: Laura Martin - Needham and Company - Analyst : Why were you in Mexico in the first place.

Question: Laura Martin - Needham and Company - Analyst : There's no ad market there.

Question: Laura Martin - Needham and Company - Analyst : The ad market was always huge.

Question: Laura Martin - Needham and Company - Analyst : And then the box office closed. Well, we saw the dependence on that.

Question: Laura Martin - Needham and Company - Analyst : Alright. Questions from the audience? Anything from the audience. Okay. Great. Alright. So I love that. Let's do new revenue streams. Let's talk about data as a revenue stream. We did a little bit. But should you be selling your data to LLMs on an anonymized basis because they're out of data, they need to -- and should they be selling data, I get that you're doing a little deal with iSpot they're tiny. Should we be selling data more aggressively the way the [vizio] does --

Question: Laura Martin - Needham and Company - Analyst : One of the things Trade Desk said is they don't want to do creative on their own platform, but they're going to create a marketplace where you can just select which creative and then they'll charge it -- they take a 15% take.

Question: Laura Martin - Needham and Company - Analyst : And then a lot of guys on my stage are like, no, no, we have created built-in that part of the self-serve as you start here, the next step just download all your existing creative from stills like from TikTok, whatever, and then their Gene on platform makes the creative and then the segment and then you send it out. But so you can either do a captive or you can just put a marketplace.

Question: Laura Martin - Needham and Company - Analyst : I think Wall Street believes that SMBs will be the primary driver of connected television revenue growth next three years.

Question: Laura Martin - Needham and Company - Analyst : That was one of my learnings from the CTV panel. I just asked a simple question like who do you think your primary competitors? One guy says YouTube, which makes sense to me. Another guy says TikTok because they're taking social dollars into his platform for CTV because it is performative -- and other vets like they had all -- it was four guys on a panel. No one thought they competed with the same person. I'm like what we can't define the competitive set, but the takeaway was actually a different company can compete with different ones depending on what you think you do better as a CTV option to what was before which is super interesting flexibility of CTV.