In this current climate, Roku needed a win. Despite the company reporting total net sales growth of 18% year over year to $764 million — a nice increase from $737.7 million last quarter — the company missed Wall Street expectations. Analysts expected revenue of $805 million, which would have been 25% year-over-year growth.
What is the fault of missing the target? Roku said in its letter to shareholders:“There was a significant slowdown in TV advertising spending due to the macroeconomic environment, which put pressure on our platform revenue growth. Consumers began to moderate discretionary spending and advertisers significantly curtailed their spending in the ad distribution market ( TV ads purchased during the quarter) We expect these challenges to continue in the near term as economic concerns put pressure on markets worldwide.”
During a conference call with reporters, CFO Steve Loudon said, “The severity of the downturn in the ad distribution market was not expected… This is a broad, significant drop.”
The company expects third-quarter revenue to grow 3% to $700 million from 2021, well below analyst expectations of $898.3 million.
Roku shares plunged 25% to $63.80 in after-hours trading on Thursday. The stock has fallen nearly 63% so far in 2022.
During the first quarter of 2022, the company added only 1.1 million incremental active accounts. This time around, Roku touted user growth this quarter, with 1.8 million accounts added, bringing the total to 61.3 million.
“While our sales and gross profit growth have slowed, we continue to gain advertising shares and grow active accounts,” the company added. “We remain confident in our TV streaming leadership, the magnitude of the opportunities ahead and our unique assets, which include the Roku TV operating system, The Roku Channel and our advertising platform.”
Streaming hours decreased slightly by 0.2 billion from the previous quarter, reaching 20.7 billion hours in the second quarter of 2022, an increase of 19% year-over-year.
Roku believes there is room to increase engagement and remind investors that the Roku operating system remains the best-selling smart TV system in the US and remains a “leader” in free, ad-supported TV streaming with the Roku Channel.
And while the ad environment remains challenging, Roku boasted that it had hit a $1 billion milestone in total commitments during this year’s Upfront, closing deals for the 2022-2023 TV season with all seven major agency holding companies. Twenty-five percent of these advertiser pledges were new, the company said.
When it comes to its free streaming hub, the Roku Channel, the company reported platform revenue growth of 26% year-over-year to $673 million, which was lower than expected, the company admitted.
on June 28, Roku partners with NBCUniversal Local to bring various local NBC news channels to the Roku channel. The partnership marks the first time that local news programs will be available to users on an ad-supported service.
On June 16, Roku signed an agreement with Walmart, a unique partnership, to make TV streaming the next destination for e-commerce shopping.
In May, Discovery+ became the Roku channel’s first premium subscription. That same month, Roku launched Apple’s premium music subscription service, Apple Music, on the Roku platform worldwide.
The company also announced a multi-year extension with Amazon for their distribution agreement.
During NewFronts, the company announced two new co-production deals with Marquee Brands and Milk Street Studios, bringing the Roku Channel more than 3,000 episodes of library content, as well as seven new original series starring food and lifestyle personalities Martha Stewart, Emeril Lagasse and Chris. Kimball .