The first quarter was as strong for Roku (ROKU 4.61%) as you probably expected it to be. The company behind the fast-growing streaming platform won't be posting its quarterly results covering the first three months of this year until May 7, but it did put out a well-received financial update shortly after Monday's market close.
Roku closed out the quarter with an estimated 39.8 million active accounts, 37% ahead of where it was a year earlier. Once again we see usage growing at a headier pace than the actual audience count. The 13.2 billion hours Roku users spent consuming content on the platform is 49% ahead of where it landed a year earlier. Work the math by dividing consumption by the number of active accounts and (in this case) the period's 91 days, and you see that the average Roku user streamed a record 3.64 hours a day. It's a metric that Roku doesn't break out, but it's an interesting and impressive number.
Image source: Roku.
It's a matter of time
A stat you're not used to tracking doesn't make sense unless you break things down, so let's go ahead and frame the engagement it illustrates. Usage continues to outpace the number of users on a year-over-year basis, but let's take a sequential swing to see how the broader trend plays out. Here is how the last few quarters went for Roku.
| Quarter | Active users | Hours Streamed | Days in Quarter | Daily Average Per User |
|---|---|---|---|---|
| Q1 2019 | 29.1 million | 8.9 billion | 90 | 3.4 |
| Q2 2019 | 30.5 million | 9.4 billion | 91 | 3.39 |
| Q3 2019 | 32.3 million | 10.3 billion | 92 | 3.47 |
| Q4 2019 | 36.9 million | 11.7 billion | 92 | 3.45 |
| Q1 2020 | 39.8 million | 13.2 billion | 91 | 3.64 |
Data source: Roku quarterly reports.
The sequential grinds aren't always a step up and there are rounding disparities, but the long-term trend is impressive heading into this past quarter's record performance. Go back two years to the first quarter of 2018 and the average user streamed 2.72 hours a day. It was 2.58 hours a day in the first quarter of 2017. The uptrend matters because Roku generates more platform revenue the more time it has with viewers to pitch ads and streaming services.
Roku expects revenue to land between $307 million and $317 million for the first quarter, a better-than-expected year-over-year gain of between 49% and 53%. Here is where things get interesting. The top-line gain is naturally well ahead of the 37% increase in viewers, but we can't assume it would be better than the 49% surge in consumption. Roku's platform revenue -- the part of its business that all of these particular metrics feed into -- is perpetually weighed down by slower growing hardware revenue. This is particularly true over the holidays when device sales as seasonal gifts become a bigger part of the sales mix. We saw this happen in Roku's fourth quarter when the 49% increase in total revenue was eclipsed by a 60% burst in the number of hours streamed.
Roku is clearly becoming a bigger part of a home life's daily routine, and the other interesting wrinkle here is that this first quarter's success is bigger than it seems at first. Roku's usage metric included passive viewing until earlier this year. It wasn't until just a couple of months ago that Roku began asking viewers if they were still watching after long periods of inactivity. Now, Roku exits video playback absent a positive response, meaning previous quarters were probably a bit inflated in terms of actual viewership.
It's pretty obvious that Roku is going to be very busy during this sheltering-at-home phase of the coronavirus crisis. Roku even revealed in Monday afternoon's update that it has experienced an acceleration in new account growth and an increase in viewing since folks began hunkering down late in the first quarter. It is withdrawing its guidance for all of 2020, but that's not necessarily a bad thing. Roku will likely continue to deliver surprises, especially with all of the new services launching that are going to want to get noticed by Roku's growing and more engaged audience.
