Roku posts Q4 profit despite slumping hardware revenues

roku tv
Roku’s streaming device and TV licensing still account for the majority of the company’s revenues. (Image: Roku)

Roku’s fourth-quarter operating income jumped 181% year over year after three straight quarterly losses, despite the company’s player revenue declining 7% annually.

Roku’s player segmentwhich includes its streaming device and Roku TV licensing businessesstill accounts for the majority of the company’s revenues, bringing in about $103 million during the quarter. But platform revenue rose 129% during the quarter, totaling about $85 million. And the platform segment’s gross profit of nearly $67 million accounted for the vast majority of Roku’s $73.5 million in gross profit, up 64% year over year.

“We saw continued strong acceleration of our platform segment in 2017, driven by large secular forces that are reshaping the TV industry overall, and prior investments that are beginning to bear fruit. The traditional cable industry is experiencing accelerated cord cutting, losing 2.6 million consumers in just the first nine months of 2017 compared to 1.7 million in all of 2016, according to a study by MoffetNathanson. Linear prime-time TV impressions in December 2017 also declined 10% year over year, according to Pivotal Research. In contrast, to this linear TV decline, our active accounts increased and streaming hours increased 44% and 55% year over year in Q4 2017, respectively,” the company wrote in an earnings release.

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Roku said that advertising accounted for about three-fourths of its platform revenue. In 2017, Roku launched its own ad-supported streaming channel. The company also began offering TV advertisers guaranteed delivery against their target age and gender, and began using ACR technology to boost nonduplicated viewer reach on its platform.

“Looking forward to 2018, we are excited about this momentum, and the opportunity to create more advanced new ad products, like the ACR-based ad products that we began beta-testing with clients in Q4 and Q1, as well as the new suite of measurement products called Roku Ad Insights announced in January,” said Roku.

As far as the player segment, Roku said its primary focus with that business is to increase active accounts, and that the company is not focused on maximizing hardware revenue and hardware gross profit.

“Our deliberate strategy to drive account growth through our Roku TV licensing program, emphasizing sales of lower-cost players and building up our player licensing program continues to prove effective, as demonstrated by 44% active account growth in the fourth quarter of 2017,” the company said.

Overall, Roku’s total net revenue for the fourth quarter rose 28% to $188 million and its net income from operations totaled $9.5 million.

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