Specialist
Former executive at Roku Inc
Agenda
- Roku’s (NASDAQ: ROKU) operating environment – ad spend and viewership dynamics
- Competitive threats from OEM disintermediation, Amazon (NASDAQ: AMZN), Disney (NYSE: DIS), Google (NASDAQ: GOOGL), Apple (NASDAQ: AAPL) and others
- Leadership changes and content development focus
- Smart home products push and company appetite for M&A
- Outlook for 2023 and beyond, highlighting smart home product push, M&A and active account growth
Questions
1.
Could you provide an overview of Roku’s operating environment and pull out 2-3 trends or drivers impacting the business?
2.
Roku’s platform drove almost 90% of revenue in Q2 FY22. Platform revenue has grown by 26% from Q2 FY21. Could you highlight the positioning of this revenue segment? What are your thoughts on future growth?
3.
Roku’s recent growth follows a slight pull back after the strong pull forwards at the onset of the pandemic. Might this 20%-or-so growth be tempered given the upcoming year-ago period won’t be compared against a slowdown period?
4.
Q2 FY22 saw a 14% growth in active account numbers from Q2 FY21, with a reported 63.1 million active accounts. What was your reaction to that active account growth number?
5.
What trends can we pull out from Roku’s active account growth? Do you think there’s much active account growth potential remaining in the US? What do international markets look like for the company?
6.
Roku’s shareholder letters note that there are approximately 68 million US households with legacy TV packages. What achievable 5-10-year ceiling for active accounts might the company be working towards? What range would indicate success?
7.
How might the launch of ad-supported tiers by Disney and Netflix for their streaming services affect Roku?
8.
You’ve mentioned that the launch of ad-supported tiers by Netflix and Disney could be a net positive for Roku, with opportunities for a partnership. What might that economic arrangement look like? Are there differences between how the company would interact with Disney and Netflix?
9.
Netflix, as you’ve highlighted, is reportedly seeking an above-industry-average USD 65 CPM. Could other streaming services having ad-supported tiers put pressure on Roku’s CPMs?
10.
Some analysts have highlighted just how high Netflix’s targeted USD 65 CPM is. Do you expect it to come under pressure fairly quickly? You’ve mentioned the general trajectory of CPMs being downwards.
11.
Roku’s content offerings and its strategy around that are quite interesting. Could you share your thoughts on the company’s content strategy and some of the recent changes it’s made in that regard?
12.
Will Roku seek to have more of the service-defining shows that it currently lacks, or does the company count on some lock-in to The Roku Channel after customers buy a device? Does it view a more economical approach – building slightly stronger content over time and slowly developing a fuller library – as preferable to taking some big swings, which it might not be able to sustain financially?
13.
Charlie Collier, a network executive who excelled in overseeing the creation of some key scripted content at AMC and unscripted content at Fox, is joining Roku as President of Roku Media. Does that type of hire indicate a major change in the company’s approach to content? Someone with Charlie’s background could be useful for a company looking to invest more in original content creation.
14.
Roku recently announced its intention to enter the smart home products area and has entered into a partnership to sell some products exclusively through Walmart. What is your reaction to this decision? Is it the right move? What do you make of the direction the company is taking to get into this space?
15.
Has Amazon’s success in the smart home sphere motivated Roku to chase this segment? Do you see its foray as more of a defensive than offensive move? It seems like this could be outside of the company’s core competency, which is TVs and the OS.
16.
Could you give an overview of the competitive landscape? Which companies are the key players and where does Roku stand in terms of those competitive match-ups?
17.
What changes have you seen from Google regarding its ambitions in the CTV [connected TV] market?
18.
Comcast and Charter announced a streaming JV in April 2022. What do you think about this from a competitive standpoint? Do you expect it to ramp up and have an impact in the near term?
19.
There are rumours that Roku may be acquired, potentially by Netflix. Do you have any views on the likelihood of the company being acquired or regarding which potential partners would make sense?
20.
Is there a time frame that a potential suitor for Roku may look at to gauge when an acquisition makes sense? Perhaps suitors will look at its data capabilities based on active account numbers. What indicators or factors might a suitor consider when investigating whether a deal for the company would be in its best interest?
21.
How differentiated is Roku’s offering? A lot of other players have taken market share – does Roku have a strong offering and general product experience?
22.
What do you think will be the impact of pricing pressures as competitors’ prices start to decline? Roku has historically sold its hardware roughly at cost to allow for more active account growth. Does the company have the ability to further lower its prices?
23.
What would you highlight as the top 2-3 spending and investment priorities that Roku should have?
24.
Could you comment on some of the international expansion challenges that Roku has encountered? Why might things not be moving at the speed they could? You’ve highlighted some of the different competitive dynamics overseas – could you expand upon that?
25.
What could Roku do better in its international expansion? Which markets should it prioritise expanding into? How can the company improve the rollout within existing markets?
26.
You’ve noted that Roku could utilise M&A opportunities to get further into the smart home sector. Is an acquisition necessary to get more expertise in this area? What might be the size of the company’s ambition in this space and what are its prospects for success? There are a lot of other options already out there, including Amazon, as you’ve mentioned, and from players that specialise in the sector.
27.
How would you describe Roku’s approach to innovation? Does the company generally prefer combining in-house development with an acquisition? Does it prefer to bring in outside expertise?
28.
You’ve mentioned that Roku is continuing to build out its ad stack and innovate in that area. What major points within the ad tech stack could be improved or further developed to enhance the business?
29.
What do you see as Roku’s largest risk or challenge?
