Roku, Inc. (NASDAQ:ROKU) Q2 2019 Earnings Conference Call - Final Transcript

Aug 07, 2019 • 05:00 pm ET


Roku, Inc. (NASDAQ:ROKU) Q2 2019 Earnings Conference Call - Final Transcript


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Steve Louden

outlook does not include the impact if any of new tariffs that maybe imposed on foreign sourced goods as there are still too many uncertainties related to the timing, scope and level of potential near-term changes in this area. We along with our partners are taking steps to mitigate potential adverse impacts. Based on strong first half results and momentum in the second half, we are raising our 2019 revenue outlook to $1.085 billion at the midpoint, representing roughly 46% year-over-year growth, up from 40% year-over-year growth in our prior outlook. We expect platform revenue to represent roughly two-thirds of total revenue. We are raising our total gross profit outlook to $485 million at the midpoint, up from $470 million previously.

For modeling purposes, you should continue to model full year platform gross margins in the low 60s as a percentage of revenue driven by the continued mix shift to video advertising and the ramp up of premium subscription as the year progresses. We expect player gross margins to be in the low single digits for 2019, and similar to last year, we expect player gross margins to be the lowest in Q4. As a reminder, we are not optimizing for player gross profit as our strategy of trading player margin or account growth and platform revenue growth continues to work well.

Our strategy is to reinvest incremental gross profit in our business to further strengthen our competitive advantages and growth drivers. Given our performance in the first half, we are raising our full-year adjusted EBITDA outlook to a range of $30 million to $40 million. We anticipate sequential increases in operating expenses from our continued investments in talent, product development and sales and marketing efforts, as well as the impact of increased facility costs. The stock-based comp estimate for 2019 has increased to roughly $90 million from $75 million in the prior outlook, largely due to higher stock price and additional equity refresh grants.

Depreciation and amortization and other net income of $10 million are reflected in our outlook for roughly $66 million of net income loss in 2019 . Our Q3 outlook calls for a 46% year-over-year revenue growth to $252.5 million at the midpoint and 47% year-over-year gross profit growth to $116.5 million. We anticipate a particularly large sequential increase in operating expenses in Q3, primarily due to increased headcount related costs, facility costs and timing of expenses shifting from Q2. As a result, we expect our adjusted EBITDA loss to be roughly $8 million in Q3 at the midpoint, and a net income-loss of roughly $37 million, which includes stock-based comp of $26 million and $3 million of depreciation and amortization and other net income in the quarter.

I'll summarize by saying how pleased we are with the performance of the business in the first half of the year and with the strong momentum we possessed going into the second half. With that let's turn it over for your questions. Operator ?