01—Abstract
Summary
Summary of the 10-K filed February 18, 2022. Cited figures are marked; the original filing is the authoritative source.
Roku, Inc. reported a strong 2021 driven by its platform segment.
Total net revenue was $2,764.6 milliona, up 55% from $1,778.4 million in 2020. Platform revenue rose $1,017.2 million, or 80%, to $2,284.9 million, while player revenue fell 6% to $479.7 million, with the volume of streaming players sold down 4% and average selling prices down 7%. Gross profit grew 74% to $1,408.6 million, and the company reported net income of $242.4 million, compared with a net loss of $17.5 million in 2020.
Player gross margin turned negative (a gross loss of $52.4 millionb) due to component and shipping cost increases, which management expects to persist until those conditions normalize. Key operating metrics improved meaningfully. Active accounts reached 60.1 million, up 17%, streaming hours rose 25% to 73.2 billion, and ARPU increased 43% to $41.03.
Cash and cash equivalents ended the year at $2,146.0 millionc, supported by a $1,000.0 million at-the-market equity offering in March 2021 (net proceeds of $989.6 million). The company acquired Nielsen's AVA business and This Old House and acquired Quibi content rights, and it expanded its content investments through The Roku Channel. Investors should weigh the risks the filing highlights.
Founder and CEO Anthony Wood controls a majority of combined voting power while owning 12.0%d of the outstanding Class A and Class B common stock. The company depends on a small number of content publishers for most streaming hours, its Credit Agreement carries a February 2023 maturity, and it has a full valuation allowance against U.S. and Netherlands deferred tax assets.
02—Key points
Key Highlights
- Total net revenue of $2,764.6 million in 2021, up 55% from $1,778.4 million in 2020.
- Platform revenue of $2,284.9 million, up 80%, now 83% of total net revenue; gross profit grew 74% to $1,408.6 million.
- Player segment posted a gross loss of $52.4 million in 2021 due to supply chain-driven component and shipping cost increases; management expects negative player gross margin until conditions normalize.
- Net income of $242.4 million (diluted EPS $1.71) versus a net loss of $17.5 million in 2020.
- Active accounts reached 60.1 million (up 17%), streaming hours reached 73.2 billion (up 25%), and ARPU rose to $41.03 (up 43%).
- Cash and cash equivalents of $2,146.0 million at year-end, aided by $989.6 million of net at-the-market equity proceeds in 2021.
- Dual-class structure gives CEO Anthony Wood majority voting control while he owns 12.0% of outstanding Class A and Class B common stock.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Roku kept $0.09.
- Revenue$2.76B100.0%
- Cost of revenue−$1.36B49.0%
- Gross profit$1.41B51.0%
- Operating costs−$1.17B42.4%
- Operating income$235.1M8.5%
- Interest, other & tax$7.3M0.3%
- Net income$242.4M8.8%
Where FY2021 revenue went
$2.76B- Cost of revenue: $1.36B, 49% of revenue
- Other operating costs: $711.9M, 26% of revenue
- R&D: $461.6M, 17% of revenue
- Operating income: $235.1M, 8.5% of revenue
Kept 8.5% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 18, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $2.76B$1.78B | +55.5% |
| Cost of Revenue | $1.36B$970.17M | +39.8% |
| Gross Profit | $1.41B$808.22M | +74.3% |
| R&D Expenses | $461.60M$355.78M | +29.7% |
| Operating Expenses | $1.17B$828.47M | +41.6% |
| Operating Income | $235.10M-$20.25M | +1260.8% |
| Net Income | $242.38M-$17.51M | +1484.5% |
| EPS (Basic) | $1.83$-0.14 | +1407.1% |
| EPS (Diluted) | $1.71$-0.14 | +1321.4% |
| Shares Outstanding (Basic) | 132.71M123.98M | +7.0% |
| Shares Outstanding (Diluted) | 141.67M123.98M | +14.3% |
05—Questions
Frequently Asked Questions
What drove Roku's revenue growth in 2021?
Platform revenue increased $1,017.2 million, or 80%, primarily from higher content distribution services, including media and entertainment promotional spending and Premium Subscriptions, as well as higher advertising revenue, which includes OneView ad platform revenue.
Why did Roku's player business report a gross loss?
Player gross profit fell to a loss of $52.4 million because of higher direct manufacturing costs from global supply chain disruptions that drove component prices higher, combined with lower player revenue. The company also cited higher freight costs, and it expects player gross margin to remain negative until these conditions normalize.
How strong is Roku's balance sheet and liquidity?
As of December 31, 2021, Roku had cash and cash equivalents of $2,146.0 million and total stockholders' equity of $2,766.6 million. Its Term Loan A balance was $90.0 million, and the Revolving Credit Facility was undrawn apart from $38.0 million in letters of credit. The company stated it was in compliance with all Credit Agreement covenants and believes its resources are sufficient for the next twelve months.
What are the main concentration risks for investors?
The top three streaming services represented over 50% of hours streamed in 2021, and Amazon, Best Buy, and Walmart together accounted for 69% of player revenue in both 2021 and 2020. Control is also concentrated: CEO Anthony Wood controls a majority of combined voting power despite owning 12.0% of the outstanding common stock.
How did Roku fund its 2021 acquisitions and content investments?
Roku raised $1,000.0 million gross through an at-the-market equity offering in March 2021, selling about 2.6 million Class A shares at an average price of $379.26. It used $136.8 million in cash for business acquisitions, mainly Nielsen's AVA business and This Old House, and content assets rose $215.8 million, including content acquired from Quibi.
06—Continue