Streaming TV platform Roku (NASDAQ: ROKU) reported Q1 FY2023 results topping analyst expectations, with revenue flat year on year at $741 million. The company expects that next quarter's revenue would be around $770 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. Roku made a GAAP loss of $193.6 million, down on its loss of $26.3 million, in the same quarter last year.
Is now the time to buy Roku? Access our full analysis of the earnings results here, it's free.
Roku (ROKU) Q1 FY2023 Highlights:
- Revenue: $741 million vs analyst estimates of $707.6 million (4.72% beat)
- EPS: -$1.38 vs analyst estimates of -$1.48 (6.73% beat)
- Revenue guidance for Q2 2023 is $770 million at the midpoint, roughly in line with what analysts were expecting
- Free cash flow was negative $207.7 million, compared to negative free cash flow of $58 million in previous quarter
- Gross Margin (GAAP): 45.6%, down from 49.7% same quarter last year
- Active Accounts: 71.6 million, up 10.3 million year on year
Spun out from Netflix, Roku (NASDAQ: ROKU) makes hardware players that offer access to various online streaming TV services.
Consumers today expect goods and services to be hyper-personalized and on demand. Whether it be what music they listen to or what movie they watch, or finding a date, online consumer businesses today are expected to delight their customers with simple user interfaces that magically fulfill demand. Subscription models have increased usage and stickiness of many online consumer services.
Sales Growth
Roku's revenue growth over the last three years has been very strong, averaging 39.7% annually. This quarter, Roku beat analyst estimates but reported a rather lacklustre 0.99% year on year revenue growth.
Guidance for the next quarter indicates Roku is expecting revenue to grow 0.73% year on year to $770 million, slowing down from the 18.5% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 6.93% over the next twelve months.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
Usage Growth
As a subscription app, Roku generates revenue growth by growing both the subscriber numbers, and the total lifetime value of the average subscriber.
Over the last two years the number of Roku's monthly active users, a key usage metric for the company, grew 18.3% annually to 71.6 million users. This is a solid growth for a consumer internet company.
In Q1 the company added 10.3 million monthly active users, translating to a 16.8% growth year on year.
Key Takeaways from Roku's Q1 Results
Since it has still been burning cash over the last twelve months it is worth keeping an eye on Roku’s balance sheet, but we note that with a market capitalization of $8.09 billion and more than $1.63 billion in cash, the company has the capacity to continue to prioritise growth over profitability.
It was good to see Roku outperform Wall St’s revenue, operating profit, and EPS expectations this quarter. And we were also glad to see the user growth. On the other hand, it was less good to see that the revenue growth was quite weak. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is up 6.18% on the results and currently trades at $60.04 per share.
Should you invest in Roku right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.
The author has no position in any of the stocks mentioned.