Year is the last company to report a negative impact on revenue this quarter due to a slowdown in ad spend.
The company missed second-quarter revenue expectations and reported revenue of $764 million, compared to its estimate of $805 million. Active accounts grew 1.8 million to 63.1 million this quarter, adding more accounts than in the previous quarter, but at the same year-over-year growth rate.
“Consumers began to moderate discretionary spending and advertisers significantly curtailed spending in the ad distribution market [TV ads bought during the quarter]. We expect these challenges to continue in the near term as economic concerns weigh on markets worldwide,” Roku said in his investor letter on Thursday.
To try to combat headwinds in the second quarter, the company said it took steps to “significantly slowing growth in both operating costs and workforce.” Speaking to the media ahead of Thursday’s investor call, Steve LoudenRoku’s chief financial officer, said the majority of the company’s content spending is centered around third-party licensing, with spending on Roku Originals programming making up a “minority” of that spending. Still, he said both areas are under consideration.
“We’ve definitely looked at the total spend that we have on the Roku channel, as well as the timing of the productions that we can control on the Roku Originals piece,” Louden said.
The company currently has a major release, the feature film WEIRD: The Story of Al Yankovicslated to debut on the channel November 4.
In the letter to investors, Roku said the content “will be commensurate not only with the scale and growth of The Roku Channel, but also with the broader macro environment.”
The company has not made any layoffs or a layoff, Louden told reporters, but has previously cut its hiring rate after four years of “extremely fast growth.”
Roku issued guidance for the third quarter and said it expects sales to rise to $700 million and total gross profit to be approximately $325 million. However, the company withdrew its full-year revenue forecast due to “the uncertainties and volatility in the macro environment.”
Roku shares plunged 26 percent after hours on Thursday.
Despite the difficult ad environment, Roku said it has pre-negotiated deals with all seven major agency holding companies for the 2022-2023 television season, resulting in total pledges of $1 billion, which will be realized by the company at a later date.
As for the current advertising climate, Roku CEO Anthony Wood said he believes advertisers are pulling back on spend in the scatter market, particularly because of its flexibility.
“We see that advertisers are concerned about a possible recession. And so we see them cutting their spending in places that they can easily turn off and on again,” Wood said.
Snap executives made similar comments last week, when the company joined Meta and Alphabet’s YouTube have all quoted reduced ad demand as the cause of lower revenues this quarter.
However, Roku executives remained optimistic about the company’s long-term outlook as they see more advertising dollars move from traditional TV to streaming and as the platform’s active accounts continue to grow.
They maintained this view even when asked about increasing competition from Netflix and Disney+, as both plan to launch an ad-supported offering in competition with the Roku Channel, saying those two companies will make streaming ads “more mainstream.” make, which will ultimately benefit Roku. also.