The Rundown: Roku’s active account base reaches 61 million, but growth weighed down by ongoing supply chain issues

Despite the account growth deceleration and hardware revenue decline, Roku did report upticks in its platform business, including with respect to its free, ad-supported streaming TV service, suggesting the choppy waters that Netflix has encountered may be more moderate for ad-supported streamers.

The key numbers:

• $733.7 million in total revenue, up 28% year over year
• $646.9 million in platform revenue, up 39% year over year
• $86.8 million in player revenue, down 19% year over year
• 61.3 million active accounts, up 14% year over year
• 20.9 billion hours worth of video streamed through Roku, up 14% year over year
• Average revenue per user of $42.91, up 34% year over year

The hardware hit

Amid the ongoing supply chain issues, Roku’s hardware business — which the company labels “player” — recorded a 19% year-over-year revenue decline, and sales of its streaming player slid by 12% year over year. 

To be clear, Roku’s hardware business only represented 12% of the company’s total Q1 revenue. However, the growth of its “platform” business — which spans the money Roku makes from selling ads and streaming subscriptions on its platform — is connected to the health of its hardware business. 

Indeed, Roku’s active account growth has decelerated over the past year, and in a letter to shareholders published on April 28, Roku attributed the ebbing to the discontinuation of government stimulus checks that gave people the funds to pick up new smart TVs and CTV dongles as well as the supply chain issues that have driven up TV prices in the U.S.

During a call with reporters after Roku released its earnings report on Thursday, Roku CFO Steve Louden declined to say whether Roku has seen the trend of active account deceleration continue in the second quarter. “What we’ve seen effectively is a similar situation to what we’ve seen the last three quarters where you have supply chain disruptions creating some headwinds both from the U.S. TV market size as well as player costs,” he said.

The streaming view

Despite the cloudy picture for Roku’s hardware business, the view from its platform business appears somewhat sunny. Not only did streaming watch time increase year over year, but the average amount of time spent streaming per active account also ticked up.

In Q1 2022, the average active account globally spent 3.8 hours streaming video on Roku’s platform, up from 3.5 hours in Q3 2021. Moreover, the amount of time that people spent streaming Roku’s FAST service, The Roku Channel, also seemed to tick up to become, in Q1, a top 5 service in the U.S. in terms of streaming hours for the first time. However, Roku did not report how much time people spent streaming The Roku Channel, either on average per day or cumulatively over the course of the quarter.

Additionally, while Roku acknowledged in the shareholder letter that macroeconomic trends — such as inflation, in addition to the supply chain issues — “have the potential to reduce or delay ad spend in certain verticals,” the company appears to have largely held on to advertisers’ dollars, though it doesn’t break out advertising revenue as a portion of platform revenue. 

In Q1, the average spend among returning advertisers increased by more than 50% year over year, and Roku retained 96% of the advertisers that spent at least $1 million on the platform over the preceding four quarters. Of course, these are cherry-picked stats that could be designed to obfuscate any areas of weakened demand. 

That being said, Roku said that it projects total revenue to increase by 25% year over year to hit $805 million in Q2 2022. So given the supply chain challenges are unlikely to abate anytime soon and to the extent Netflix’s expected subscriber drop is representative of friction within the broader subscription-based streaming market, advertising is likely to be the big reason behind that revenue growth as it grows its share of Roku’s overall revenue mix.

“The ad business continues to grow, and we’re mixing more into the video ad business,” Louden said during the company’s earnings call with investors on Thursday.