Streaming TV platform Roku (NASDAQ: NASDAQ:ROKU) beat analysts' expectations in Q3 FY2023, with revenue up 19.8% year on year to $912 million. The company also expects next quarter's revenue to be around $955 million, in line with analysts' estimates. Turning to EPS, Roku made a GAAP loss of $2.33 per share, down from its loss of $0.88 per share in the same quarter last year.
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Roku (ROKU) Q3 FY2023 Highlights:
- Revenue: $912 million vs analyst estimates of $855.7 million (6.58% beat)
- EPS: -$2.33 vs analyst expectations of -$2.10 (10.7% miss)
- Revenue Guidance for Q4 2023 is $955 million at the midpoint, roughly in line with what analysts were expecting
- Free Cash Flow of $239.1 million, up 85.4% from the previous quarter
- Gross Margin (GAAP): 40.4%, down from 46.9% in the same quarter last year
- Active Accounts: 75.8 million, up 10.4 million year on year (slight beat)
Spun out from Netflix (NASDAQ:NFLX), Roku (NASDAQ: ROKU) makes hardware players that offer access to various online streaming TV services.
Consumer SubscriptionConsumers 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 GrowthRoku's revenue growth over the last three years has been very strong, averaging 32.7% annually. This quarter, Roku beat analysts' estimates and reported 19.8% year-on-year revenue growth.
Guidance for the next quarter indicates Roku is expecting revenue to grow 10.1% year on year to $955 million, improving on the 0.2% year-on-year increase it recorded in the same quarter last year. Ahead of the earnings results, analysts covering the company were projecting sales to grow 9.74% over the next 12 months.
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 16% annually to 75.8 million. This is solid growth for a consumer internet company.
In Q3, Roku added 10.4 million monthly active users, translating into 15.9% year-on-year growth.
Key Takeaways from Roku's Q3 Results With a market capitalization of $8.43 billion, Roku is among smaller companies, but its $2.04 billion cash balance and positive free cash flow over the last 12 months give us confidence that it has the resources needed to pursue a high-growth business strategy.
We enjoyed seeing Roku exceed analysts' revenue expectations this quarter, driven in part by better active account growth. While revenue guidance for Q4 was in line, adjusted EBITDA guidance was well ahead, and that was probably the most exciting aspect of this earnings report. Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic. The stock is up 7.52% after reporting and currently trades at $64.2 per share.
The author has no position in any of the stocks mentioned in this report.