01—Abstract
Summary
Summary of the 10-K filed March 1, 2018. Cited figures are marked; the original filing is the authoritative source.
Roku, Inc. reported its 10-K for the year ended December 31, 2017, its first annual report after its October 2017 IPO on NASDAQ under the ticker ROKU.
Revenue rose to $512.8 milliona from $398.6 million, driven by platform revenue of $225.4 million (up 115%), while player revenue slipped to $287.4 million (down 2%). Gross profit reached $199.8 million versus $121.0 million, and the total gross profit margin rose to 39% from 30%. The company still lost money: net loss attributable to common stockholders was $63.5 million, or $2.24 per share, and included a $40.3 million non-cash charge from the change in fair value of preferred stock warrants.
Operating drivers were active accounts of 19.3 million (up from 13.4 million) and 14.8 billion hours streamed (up from 9.4 billion). ARPU rose 48% to $13.78b. The filing states that licensing partners accounted for 48% of new accounts in 2017, up from 42% in 2016.
Management describes advertising as the fastest-growing monetization segment, and the company says that the majority of its gross profit now comes from platform revenue. Operating expenses rose 33% to $219.4 millionc, led by research and development at $107.9 million. Cash was $177.3 million at year-end, after the IPO generated net proceeds of $131.6 million.
The filing notes concentration risks, including Netflix accounting for approximately one-third of hours streamed, three retailers (Amazon.com, Best Buy and Walmart) accounting for 61% of player revenue, and a single contract manufacturer, Foxconn. The company also expects an adoption of ASC 606 to reduce its accumulated deficit by $32.0 million to $42.0 milliond.
02—Key points
Key Highlights
- Total net revenue rose to $512.8 million in 2017 from $398.6 million in 2016, with platform revenue up 115% to $225.4 million.
- Gross profit increased to $199.8 million from $121.0 million, and total gross margin improved to 39% from 30%.
- Net loss attributable to common stockholders was $63.5 million ($2.24 per share), including a $40.3 million charge from preferred stock warrant fair value changes.
- Active accounts reached 19.3 million at year-end 2017, up from 13.4 million, and hours streamed reached 14.8 billion, up from 9.4 billion.
- ARPU increased 48% to $13.78 from $9.28, and licensing partners accounted for 48% of new accounts in 2017 versus 42% in 2016.
- The October 2017 IPO generated net proceeds of $131.6 million, and cash stood at $177.3 million at December 31, 2017.
- Concentration risk: Netflix accounted for approximately one-third of streaming hours, Amazon.com, Best Buy and Walmart together accounted for 61% of player revenue, and all players are manufactured by Foxconn.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2017, Roku lost $0.12.
- Revenue$512.8M100.0%
- Cost of revenue−$312.9M61.0%
- Gross profit$199.8M39.0%
- Operating costs−$219.4M42.8%
- Operating income−$19.6M3.8%
- Interest, other & tax−$43.9M8.6%
- Net income−$63.5M12.4%
04—Financials
Financial Highlights
Figures from 10-KFY2017filed March 1, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $512.76M$398.65M | +28.6% |
| Cost of Revenue | $312.93M$277.60M | +12.7% |
| Gross Profit | $199.83M$121.05M | +65.1% |
| R&D Expenses | $107.94M$76.18M | +41.7% |
| Operating Expenses | $219.45M$164.41M | +33.5% |
| Operating Income | -$19.62M-$43.36M | +54.8% |
| Net Income | -$63.51M-$42.76M | −48.5% |
| EPS (Basic) | $-2.24$-9.01 | +75.1% |
| Shares Outstanding (Basic) | 28.31M4.75M | +496.5% |
05—Questions
Frequently Asked Questions
How did Roku's revenue mix change in 2017?
Platform revenue grew 115% to $225.4 million, making up 44% of total net revenue, up from 26% in 2016. Player revenue declined 2% to $287.4 million, as average selling prices fell 22% while unit volume rose 25%. The filing attributes the platform growth mainly to advertising and content distribution, including subscription and transaction revenue, which totaled $119.3 million of the increase.
Is Roku profitable?
No. The company reported a loss from operations of $19.6 million in 2017, improved from $43.4 million in 2016. The net loss attributable to common stockholders was $63.5 million, compared with $42.8 million in 2016. The filing notes that the company has experienced net losses and negative operating cash flows for its entire history, though operating cash flow was positive at $37.3 million in 2017.
What are the main customer and supplier concentrations?
Netflix accounted for approximately one-third of all hours streamed on the platform, but the filing says Netflix revenue was not material. Amazon.com, Best Buy and Walmart each accounted for more than 10% of player revenue, and together they represented 61% of player revenue in both 2017 and 2016. All players are manufactured by Foxconn, under a contract that does not commit it to any specific quantity or price.
What did the company do with IPO proceeds and how much debt does it carry?
The IPO sold 10.4 million Class A shares at $14.00 per share, and net proceeds were $131.6 million after underwriting discounts and offering costs. The company reported no long-term debt at December 31, 2017, after repaying $40.4 million in borrowings during the year. Its $30.0 million Silicon Valley Bank revolving line had no borrowings outstanding at year-end, and $1.5 million of letters of credit were outstanding.
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