Streaming TV platform Roku (NASDAQ: ROKU) reported Q4 FY2023 results beating Wall Street analysts' expectations, with revenue up 13.5% year on year to $984.4 million. Guidance for next quarter's revenue was also better than expected at $850 million at the midpoint, 1.8% above analysts' estimates. It made a GAAP loss of $0.55 per share, improving from its loss of $1.36 per share in the same quarter last year.
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Roku (ROKU) Q4 FY2023 Highlights:
- Revenue: $984.4 million vs analyst estimates of $967.1 million (1.8% beat)
- EPS: -$0.55 vs analyst expectations of -$0.55 (small miss)
- Revenue Guidance for Q1 2024 is $850 million at the midpoint, above analyst estimates of $834.8 million
- Free Cash Flow of $12.81 million, down 94.6% from the previous quarter
- Gross Margin (GAAP): 44.5%, up from 42% in the same quarter last year
- Active Accounts: 80 million, up 10 million year on year
- Market Capitalization: $13 billion
Spun out from Netflix, Roku (NASDAQ: ROKU) makes hardware players that offer access to various online streaming TV services.
Consumer Subscription
Consumers today expect goods and services to be hyper-personalized and on demand. Whether it be what music they listen to, what movie they watch, or even finding a date, online consumer businesses are expected to delight their customers with simple user interfaces that magically fulfill demand. Subscription models have further increased usage and stickiness of many online consumer services.
Sales Growth
Roku's revenue growth over the last three years has been strong, averaging 29% annually. This quarter, Roku beat analysts' estimates but reported mediocre 13.5% year-on-year revenue growth.
Guidance for the next quarter indicates Roku is expecting revenue to grow 14.7% year on year to $850 million, improving on the 1% year-on-year increase it recorded in the same quarter last year.
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Usage Growth
As a subscription-based app, Roku generates revenue growth by expanding both its subscriber base and the amount each subscriber spends over time.
Over the last two years, Roku's monthly active users, a key performance metric for the company, grew 15.6% annually to 80 million. This is solid growth for a consumer internet company.
In Q4, Roku added 10 million monthly active users, translating into 14.3% year-on-year growth.
Revenue Per User
Average revenue per user (ARPU) is a critical metric to track for consumer internet businesses like Roku because it measures how much the average user spends. ARPU is also a key indicator of how valuable its users are (and can be over time). 
Roku's ARPU has declined over the last two years, averaging 2.2%. Although the company's users have continued to grow, it's lost its pricing power and will have to make improvements soon. This quarter, ARPU declined 0.7% year on year to $12.31 per user.
Key Takeaways from Roku's Q4 Results
It was good to see Roku beat analysts' revenue expectations as it grew its user base and outperformed in its Platform and Devices segments. We were also glad its revenue guidance for next quarter topped analysts' expectations.
On the other hand, the company seemed skittish when discussing its full-year 2024 EBITDA forecast (it stated that EBITDA would be "positive" rather than sharing a number - Wall Street was expecting $100 million of EBITDA for 2024). Furthermore, it cited slowing TV unit sales in the U.S. and an uneven ad market recovery.
Overall, this quarter's results seemed fairly positive, but the market was likely expecting more with other advertising-dependent companies like Meta reporting good quarters. The stock is down 14.8% after reporting, trading at $80.55 per share.
So should you invest in Roku right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.