01—Abstract
Summary
Summary of the 10-K filed February 26, 2021. Cited figures are marked; the original filing is the authoritative source.
Roku, Inc. (Nasdaq: ROKU) reported full-year 2020 total net revenue of $1.78 billiona, up from $1.13 billion in 2019, with platform revenue of $1.27 billion (up $527.0 million, or 71%) and player revenue of $510.6 million (up $122.5 million, or 32%).
Gross profit rose to $808.2 millionb from $495.2 million, and the company narrowed its net loss to $17.5 million from $59.9 million. Active accounts reached 51.2 million, up from 36.9 million, and streaming hours were 58.7 billion versus 37.8 billion in 2019. ARPU increased to $28.76 from $23.14.
The company's growth was driven by the COVID-19 pandemic accelerating the shift from pay TV to streaming, which increased account activations and streaming hours, and by higher advertising revenue, including from the OneView Ad Platform built on the dataxu acquisition. The filing also disclosed a restatement-style adjustment to streaming hours caused by pause-time logging errors; the company estimated hours were approximately 5.8% lower for October 2018 through March 2020 after adjustment. Operating expenses grew 48% to $828.5 million, and operating loss narrowed to $20.3 millionc from $65.1 million.
Liquidity improved: cash and cash equivalents were $1.09 billiond at year-end, supported by $504.0 million gross proceeds from an at-the-market equity offering in May 2020 and $148.2 million of operating cash flow. The company has a $100.0 million revolving credit facility and a $100.0 million term loan A facility, with $95.0 million outstanding under the term loan at year-end. Key risks highlighted include dependence on a small number of content publishers and retailers (Amazon, Best Buy and Walmart accounted for 69% of player revenue), reliance on contract manufacturers in Asia, and a dual-class structure that gives CEO Anthony Wood majority voting control despite owning 13% of shares.
02—Key points
Key Highlights
- Total net revenue rose 58% to $1.78 billion in 2020 from $1.13 billion in 2019, with platform revenue up 71% to $1.27 billion.
- Gross profit grew 63% to $808.2 million, and the company narrowed its net loss to $17.5 million from $59.9 million.
- Active accounts reached 51.2 million at year-end 2020, up from 36.9 million, with licensing arrangements accounting for 62% of new accounts.
- Streaming hours rose to 58.7 billion from 37.8 billion, though the company disclosed pause-time logging errors that lowered prior-period hours by an estimated 5.8% for October 2018 through March 2020.
- ARPU increased to $28.76 from $23.14 on a trailing twelve-month basis.
- Cash and cash equivalents totaled $1.09 billion at December 31, 2020, after $504.0 million in gross at-the-market equity proceeds in May 2020.
- Dual-class structure gives CEO Anthony Wood majority voting control while he owns only 13% of outstanding Class A and Class B common stock.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2020, Roku lost $0.01.
- Revenue$1.78B100.0%
- Cost of revenue−$970.2M54.6%
- Gross profit$808.2M45.4%
- Operating costs−$828.5M46.6%
- Operating income−$20.3M1.1%
- Interest, other & tax$2.7M0.2%
- Net income−$17.5M1.0%
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 26, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $1.78B$1.13B | +57.5% |
| Cost of Revenue | $970.17M$633.70M | +53.1% |
| Gross Profit | $808.22M$495.22M | +63.2% |
| R&D Expenses | $355.78M$265.01M | +34.3% |
| Operating Expenses | $828.47M$560.28M | +47.9% |
| Operating Income | -$20.25M-$65.06M | +68.9% |
| Net Income | -$17.51M-$59.94M | +70.8% |
| EPS (Basic) | $-0.14$-0.52 | +73.1% |
| EPS (Diluted) | $-0.14$-0.52 | +73.1% |
| Shares Outstanding (Basic) | 123.98M115.22M | +7.6% |
| Shares Outstanding (Diluted) | 123.98M115.22M | +7.6% |
05—Questions
Frequently Asked Questions
How did Roku's revenue and profitability change in 2020?
Total net revenue increased to $1.78 billion from $1.13 billion, driven by platform revenue growth of 71% to $1.27 billion and player revenue growth of 32% to $510.6 million. Gross profit rose to $808.2 million from $495.2 million, and the net loss narrowed to $17.5 million from $59.9 million. Operating expenses increased 48% to $828.5 million.
What drove the growth in platform revenue?
The filing attributes platform revenue growth mainly to higher advertising revenues, including revenue from the demand-side platform acquired from dataxu in November 2019 and rebranded as the OneView Ad Platform. Higher content distribution and transactional revenues, including from Premium Subscriptions, also contributed.
Are there concerns about the reported streaming hours?
Yes. The company found that pause time was inadvertently included in streaming hours due to logging errors in certain past Roku OS releases. After adjustment, streaming hours were estimated to be about 0.5% lower for January 2017 through September 2018 and about 5.8% lower for October 2018 through March 2020. The company stated the errors had no impact on financial results and required revision only of streaming hours.
How strong is the company's liquidity and debt position?
Cash and cash equivalents were $1.09 billion at December 31, 2020, up from $515.5 million. The company had $95.0 million outstanding under its term loan A facility and $30.8 million of letters of credit against its $100.0 million revolving facility, and it was in compliance with its financial covenants. The filing states existing cash, operating cash flow and undrawn facility balances are sufficient for at least the next twelve months.
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