Roku Hits 60 Million Active Accounts, but Supply Chain Struggles Slow Growth

Roku maintained its dominance in the connected TV landscape to close out 2021, hitting 60.1 million active accounts in the fourth quarter. The connected TV platform added 3.7 million active accounts in the fourth quarter of 2021, up from the 1.3 million it added in the previous quarter. Roku added 8.9 million total accounts throughout 2021 and said the 60 million active accounts in the U.S. has now surpassed the video subscribers of all the country's cable companies combined. However, growth rate slowed in the second half of the year, which the company again attributed to global supply chain issues. Streaming hours increased by 1.5 billion to reach 19.5 billion hours, up from the 0.7 billion last quarter and a significant improvement from the drop of nearly a billion hours in the second quarter of last year. Accounts averaged 3.6 streaming hours a day, a slight uptick from Q3. Roku Adds Nielsen’s Digital Ad Ratings Audience Guarantees Ahead of Upfront While revenue grew 33% year-over-year in the quarter to $865.3 million, it was still lower than the $894 million predicted by analysts and down from the 51% growth that the company saw in the third quarter. Roku is predicting $720 million in total net revenue for Q1 of this year. The Roku operating system, the company’s AVOD offering The Roku Channel and its advertising platform are some of the company’s biggest investment opportunities for 2022, CFO Steve Louden told reporters ahead of the company’s earnings call. While Roku doesn’t break out its user projections, Louden said in 2022 the company will be growing the platform in both the U.S. and international markets. “We think there's plenty of opportunity, not only on the building scale of the platform side but also on the monetization side,” said Louden, noting that ARPU has grown “very significantly” in 2021 to reach $41.03, up 43% year-over-year. “But there’s a lot more opportunity for both scale and monetization growth,” he added. The Roku Channel had another successful quarter, reaching an estimated 80 million households in Q4, with streaming hours more than doubling for the full year. The company released its first original film, Zoey’s Extraordinary Christmas, in December, which Roku said became the No. 1 on-demand title on the AVOD by reach in the fourth quarter. Expect to see more original content from The Roku Channel as the company plans to develop more than 50 original shows over the next two years as part of its overall content strategy. Supply chain woes continue The company was once again negatively impacted by ongoing supply chain issues, both in account growth slowdown and a drop in Roku player unit sales. Player gross margins were down over 28%, nearly double the 15% drop Roku saw the prior quarter. Back in Q1, Louden had anticipated player margins going slightly negative in Q2 and more negative in the back half. Roku expects those problems to continue into 2022. “I think it’s important to look at it in terms of what’s the macro impact, what’s the industry impact and what’s the Roku impact on that front?” said Louden. “On the account acquisition side, we’re basically acquiring accounts through the Roku TV program and the Roku player program, so the disruptions are manifesting themselves a little differently.” On the TV side, Louden noted that overall U.S. TV market in terms of total sales has declined to below pre-pandemic levels, with the elevated component in shipping logistics costs causing a significant increase in TV prices. “That's tamping demand down and so that's resulting on a lower overall market size,” said Louden. “The other piece which is impacting negatively the market size, and also specifically to some of the Roku TV OEM partners, is inventory availability issues.” Louden said in Q3 and Q4 certain TV OEM partners faced inventory availability issues, making the components “very expensive” and also in short supply. “These conditions are persisting into 2022, so we do expect similar conditions where the TV market is down in a year-over-year basis,” said Louden. When asked about a recent Business Insider report that Roku is planning to manufacture its own smart TVs— following in the footsteps of rivals like Amazon and Comcast—Louden declined to comment. “The Roku TV program is very successful, it’s the leading TV operating system in the U.S., and we’re very happy with the progress we’ve had over the last five years,” said Louden. “It’s mutually beneficial for us and our TV OEM partners.”