Roku Blames Missed Q2 Earnings on “Significant Slowdown in TV Ad Spend” Due to Broader Economy – Deadline
Roku delivered second-quarter earnings well below Wall Street expectations, blaming a slowdown in TV advertising amid economic uncertainty.
The streaming giant said it lost 82 cents per share, compared to a profit of 52 cents the year before, and posted revenue of $764 million. Analysts had expected a loss of 68 cents and revenue of $805 million.
Roku stock plunged more than 25% on the news during after-hours trading. It was in the $63 range, a level not seen since early 2019.
During the quarter, the company wrote in a letter to shareholders, “There was a significant slowdown in television advertising spend due to the macro-economic environment, which put pressure on our platform’s revenue growth. Consumers have begun to moderate their discretionary spending and advertisers have significantly reduced spending in the ad serving market (TV ads purchased during the quarter). We expect these challenges to continue in the near term as Economic concerns are pressuring markets around the world.”
The number of active accounts ended the quarter to June 30 at 63.1 million, up 14% from a year ago, but again the economic climate had a negative impact. “Reduced consumer discretionary spending is putting pressure on many verticals, including TV and player sales,” the shareholder letter said. “Retailers managed on the back of high US TV inventory and a temporary drop in TV prices in the second quarter, which helped to mitigate lower TV unit sales in the quarter.”
Roku had been a charmed company during the coronavirus pandemic. Like many subscription-based streaming apps found on its menu, it flourished as more of its customers were forced to stay home and the overall streaming audience exploded. Eventually, not only did people start streaming more (although Nielsen indicated that streaming continues to gain record share), but a series of macro issues hit home. Because Roku has licensed its interface to a number of smart TV makers and is now in more than a third of all sets in North America, supply chain issues and inventory issues resulted in fewer units on store shelves and fewer new streaming customers. .
Like other tech stocks, Roku’s has been beaten this year, but the damage has been particularly severe. While shares have recovered from recent 52-week lows, they are within 20% of their high of $472. Despite the company’s dominant position in streaming, more and more investors are skeptical about the profit model in the sector and some analysts have questioned the company’s ability to stave off much bigger rivals like Amazon or Comcast.
In a conference call with reporters, Chief Financial Officer Steve Loudon said “the severity of the advertising/broadcast market pullback was not expected.” But he also said it was “not unlike” the downturns in 2020 and other times of disruption.