Roku users streamed more than 10 billion hours of entertainment in the September quarter, helping the company to once again rake in big bucks with digital advertising. However, investors were apparently taken aback by Roku’s accelerating losses as well as a slight decline in hardware revenues, sending the stock down around 15% in after-hours trading.
Roku generated $260.9 million in revenue during the quarter ending September 30, compared to $173.4 million during the same quarter a year ago. Net losses for the quarter came in at $26.5 million, compared to $7.9 million for Q3 of 2018. This translates to a loss of $0.22 per share. Analysts had expected losses of $0.28 per share on revenue of $257 million.
The company now predicts to generate between $1.098 billion and $1.113 billion in revenues in 2019, and book net losses anywhere between $66 and $61 million for this year. Both are better predictions than what Roku had forecast a quarter ago.
Roku may still be best known for its hardware business, but most of that revenue was driven by ads running against those billions of hours of streaming content: In Q3, Roku generated 69% of its overall revenue, or $179.3 million, with advertising and services, while hardware sales were responsible for just $81.6 million.
However, this doesn’t mean that Roku is abandoning the hardware business: The company introduced a range of new devices in recent weeks, including new audio hardware, which Roku CEO Anthony Wood specifically mentioned during Wednesday’searnings callwhen asked about the company’s growing costs. Roku uses these devices as a way to grow its market share, and then monetize its audience via advertising.
On Wednesday’s call, Roku executives faced multiple questions about the launch of ad-free subscription services like Disney Plus and Apple TV Plus on their platform. Wood and CFO Steve Louden declined to comment on specifics of their deals with companies like Apple and Disney, but said that both the overall momentum towards streaming as well as advertising and revenue sharing deals with such services would ultimately benefit the company.
âTheyâe in no way negative for Roku,â Wood said about the new streaming video providers. âThe primary competitor is not other services on the platform, the primary competitor is linear tv.â
In a follow-up interview with Variety, Louden said that the company was expecting to increase its revenue both from advertising as well as subscription services. “We think there is a lot more opportunity for them both to grow,” he said.
And while Roku broke the 10 billion hours streaming barrier this past quarter, Louden cautioned that these metrics may be impacted by a new feature the company recently introduced. Called bandwidth saver, the feature suspends streams after 4 hours of inactivity to make sure the viewer hasn’t fallen asleep, or walked away. Netflix has had a similar feature for some time, and Louden called it “good industry practice,” while also suggesting that it won’t have a material impact on Roku’s ad revenue.More from Variety
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