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Roku stock (NASDAQ:ROKU) has seen an accelerated after-hours slide, now off 21.8% postmarket following a fourth-quarter revenue miss and guidance for more of the same in the current quarter.
A lengthy question-and-answer session on the company’s earnings conference call hammered repeatedly at one theme affecting the entirety of the report: worldwide supply-chain issues that are having multiple effects, maybe most visible in a 9% decline in Player sales.
The supply-chain issues cited aren’t just about Players, though, but also television components, significantly higher logistics costs and crimped ad spending from companies facing their own supply issues.
On the account acquisition side, there were smaller TV sales in the broader market, amid some higher TV prices – up some 33% in Q4, Chief Financial Officer Steve Louden says. “And then we had specific TV OEM partners that had inventory availability challenges.”
With TVs in particular, “there’s been a shortage in panels … and it’s much more expensive to ship TVs now.” On Roku players, “system-on-chip” semiconductors are in short supply, causing prices to go up and Roku’s team to try to design products using alternate SOCs, he says.
Along with that though is the cutback in ad spending from verticals particularly affected by the supply chain – notably automobiles and consumer products.
Guidance for revenue of $720 million in the first quarter (below consensus for $756 million) reflects not only some standard seasonal decline, Louden said, but also the ongoing disruption to ad spend from the supply-chain woes.
Other factors in the tough guidance come from a comparison to Q1 2021, he says. The Player business, which had a positive gross margin a year ago, is expected to show a negative gross margin in Q1 2022.
Asked whether the company has different views about its total addressable market, executives were upbeat: Platform chief Scott Rosenberg says “the market’s reception to this or that streaming comp’s results notwithstanding … the total addressable market hasn’t changed.”
The market is paying attention to the coming and going of various streamers in a shifting market, but “while we think individual streamers … will rise and fall, eventually they’ll all be on Roku competing for share,” Rosenberg says.
As for making its own television sets, executives stayed mum. The program whereby Roku offers reference designs, and helps manufacturers make sets and helps retailers sell them, has been “hugely successful,” CEO Anthony Wood says. “There’s rumors around that; we don’t speculate on rumors. … We’re a great partner for manufacturers of TVs.” That followed Wednesday’s report that Roku was considering departing from its partner-program approach to make its own sets.