Roku - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 revenue and EPS beat consensus: Total net revenue was $1.021B vs $1.008B* consensus, and diluted EPS was -$0.19 vs -$0.26* consensus. Platform revenue grew 17% YoY to $881M, gross profit rose 15% YoY, and Adjusted EBITDA was $56M.
• Mix shift toward programmatic advertising and strong subscriptions drove outperformance; The Roku Channel became the #2 app in the U.S. by engagement and grew Streaming Hours 84% YoY, bolstering ad reach and monetization.
• Guidance reset: FY 2025 total net revenue lowered to $4.55B (from $4.61B prior), platform gross margin guided to ~52% (from 52–53%), while platform revenue ($3.95B) and Adjusted EBITDA ($350M) were reaffirmed; Q2 2025 guidance calls for $1.070B revenue, ~$465M gross profit, and ~$70M Adjusted EBITDA.
• Strategic catalyst: Roku announced the acquisition of Frndly TV for up to $185M to accelerate Roku-billed subscriptions and support platform revenue growth; management emphasized programmatic momentum and subscription initiatives as offsets to macro and tariff uncertainties.

Values with asterisks (*) are retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

• Platform strength: Platform revenue rose 17% YoY to $880.8M, in line with outlook; advertising activities (ex-M&E) grew faster than overall platform revenue and outperformed the U.S. OTT ad market.
• Engagement and monetization: The Roku Channel became the #2 U.S. app by engagement, with Streaming Hours up 84% YoY; AI-driven content row and Home Screen features increased ad reach and subscription sign-ups.
• Subscriptions and scale: Tens of millions of Roku-billed subscriptions, with Premium Subscription sign-ups a bright spot; streaming hours reached 35.8B (+5.1B YoY) and the platform exceeds half of U.S. broadband households.

Management quotes:

• “We reaffirmed our platform revenue and adjusted EBITDA outlook for the full year 2025… Advertisers… are shifting… to programmatic… and Roku’s good at all those things.” — Anthony Wood.
• “We do think… in the back half of the year… some of our new initiatives should help to offset [macro].” — Dan Jedda.
• “Our multiyear push to diversify demand is absolutely working… [SMBs via Roku Ads Manager] are net new to the platform.” — Charlie Collier.

What Went Wrong

• Margin headwinds from mix: Platform gross margin declined to 52.7% (vs 54.1% in Q4 and 54.2% in Q3) as guaranteed budgets gave way to shorter, nonguaranteed, programmatic campaigns; FY 2025 platform GM guided ~52%.
• Devices drag: Devices gross profit was -$19.3M with a -13.8% margin due to continued holiday promotional activity; devices revenue YoY growth came with losses.
• Outlook trimming: FY 2025 total net revenue and total gross profit were reduced (to $4.55B and $1.975B, respectively) amid macro uncertainty and evolving advertising product mix, though key platform targets were reaffirmed.

Transcript

Operator (participant)

Be advised, today's conference is being recorded. I would now like to turn the conference over to your speaker today, Conrad Grodd, Vice President of Investor Relations. Please go ahead.

Conrad Grodd (VP of Investor Relations)

Thank you, Operator. Welcome to Roku's Q1 2025 earnings call. On today's call are Anthony Wood, Roku's founder and CEO; Dan Jedda, our CFO; Charlie Collier, President Roku Media; and Mustafa Ozgen, President Devices. Our full results and additional management commentary are available in our shareholder letter on our IR website at roku.com/investor. On this call, we'll make forward-looking statements, which are subject to risks and uncertainties. Please refer to our shareholder letter and periodic SEC filings for risk factors that could cause our actual results to differ materially from these forward-looking statements. We'll also present GAAP and non-GAAP financial measures. Reconciliations of non-GAAP measures to the most comparable GAAP financial measures are provided in our shareholder letter. Unless otherwise stated, all comparisons will be against the results for the comparable 2024 period. With that, Operator, our first question, please.

Operator (participant)

Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your telephone. If your question has been answered and you wish to move yourself from the queue, please press star one one again. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Cory Carpenter of JPMorgan. Your line is open.

Cory Carpenter (Analyst)

Oh, great. Thanks, and good afternoon. Wanted to ask what's giving you confidence in reiterating the full-year platform guide and EBITDA guide, just given the current market environment and uncertainty around tariffs? Perhaps related to that, could you just talk about the recent trends you're seeing in the platform business, and in particular on the advertising side? Thank you.

Anthony Wood (CEO)

Hey, Cory, this is Anthony. I'll be happy to take that. I'll take the first part, then I'll turn it over to Charlie to discuss the ads. Yes, that's correct. I mean, we are—in our letter, we reaffirmed our platform revenue and adjusted EBITDA outlook for the full year 2025. I mean, obviously, there's a lot of macro uncertainty, but there's a lot of Roku-specific positives that give us confidence—to give us the confidence to reaffirm our guidance for the full year. For example, the shift to streaming is a big secular trend. It continues. We're at the center of it. That's a big driver of our business. Advertisers have already been shifting their budgets from linear to streaming and from direct insertion orders to programmatic. Those are two big trends that are positive for Roku, and we're seeing that continue.

Macro uncertainty causes advertisers to look for more performance. They start looking for higher ROI, more performant ads, and more flexibility. Roku is good at all those things. Those are all positive for us. If we look at our execution over the last two years, it has really positioned our business to be in a better position to navigate environments like we are seeing now with the macro uncertainty. For example, we have really diversified our revenue streams. We have more diversified ad products, and we are less reliant on M&E. We are tapping into more ad demand sources through our deeper integration with third-party DSPs. We have a lot of supply that continues to grow. These are all positive trends in our ad business. If you look at our ad revenue in the quarter, it grew faster than the OTT ad market overall, for example.

Then also subscriptions. One of our—if you just think about the three tiers of our strategy that we're focused on in growing platform revenue, one is to grow ad revenue by leaning and deepening integrations with our DSPs. Another is to take better advantage of our home screen and the Roku experience, the UI viewers use to discover content. The third is subscriptions. To really lean into subscriptions, we build tens of millions of Roku subscriptions each month. That's growing. Premium subscriptions is a bright spot, and that's continuing to grow. Another example, today we announced the acquisition of Frndly TV, which is a skinny bundle, a subscription service that's growing both on and off Roku, both on and off the Roku platform.

It's also the kind of service that we have a lot of ability to lean into and grow faster with the platform promotional tools we have available to us. Those are some of the reasons that we're confident in renewing our outlook for the year. I'll let Dan add his thoughts on the question as well before we turn it over to Charlie on your question on ads.

Dan Jedda (CFO)

Yeah. Thanks, Anthony. Thanks for the question, Cory. I just want to add that in reaffirming our platform revenue and adjusted EBITDA outlook for the full year, we did assume some weakening in the macro, but our outlook does represent the most informed view we have based on the current trends we saw in Q1 and as we start Q2. We remain vigilant and adaptable to market conditions. As they evolve, we'll communicate any material impacts in future quarters. We feel very good about where we are right now, and we feel good about our forecast. Anthony mentioned we are not the same company that we were four or even two years ago. We have a very diversified platform revenue stream, including the subscriptions that are growing well and all the advertising initiatives that Anthony mentioned earlier.

We're confident in our strategy, and we continue to see the path to achieving positive operating income in 2026 and to achieving our guidance of $3,950 on the platform side and adjusted EBITDA of $350 for 2025. On the trends in advertising, I'll let Charlie take that one.

Charlie Collier (President of Roku Media)

Yeah. Thanks. Hey, Cory. It's a good question. We are continuing to see shifts in advertising, and most of it's driven by our clients' really understandable need for greater flexibility in this macro environment. Some of the results of that are shorter planning cycles. What used to be quarterly planning for some, not all, but for some can now even be as short-term as weekly. As a result, we are seeing changes in media buying patterns across our platform, particularly a shift from longer-term guaranteed commitments to shorter-term non-guaranteed campaigns, usually executed programmatically. I think there's a short-term trend, but Roku is well-positioned to capitalize on the shift. And that's the best news. Over the past couple of years, we've focused on building our programmatic capabilities, and that investment is absolutely paying off.

In an environment like this that demands agility, programmatic advertising is gaining share because, I think, Cory, most of all, it offers the flexibility and performance that advertisers need and that enables them to launch their campaigns quickly and adjust in real time. In the near term, we expect some of the high-touch guaranteed business to be delayed or possibly scaled back in favor of more flexible, non-guaranteed programmatic buys. This trend really aligns well with Roku's strategic direction and our focus on programmatic excellence.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from Brent Navon with Bank of America. Your line is open.

Brent Navon (Analyst)

Hi. Thanks for taking the question. I guess just as a follow-up to your comments there, I mean, it sounds like some of the more idiosyncratic drivers are able to offset maybe some macro overall weakness. I guess I'm just trying to think through how much of a buffer do you still feel like you have with some of these idiosyncratic drivers, should macro trends deteriorate a little further going forward? Thanks so much.

Anthony Wood (CEO)

Hey, Brent. Dan will take that question.

Dan Jedda (CFO)

Yeah. Thanks for the question. Yeah, I know where you're going with this, Brent. I'll just say that, as I said earlier, we've seen a shift. Charlie talked about a shift from guaranteed to non-guaranteed. That actually has been favorable to us in terms of driving more volume our way. We see positives in that. We do have a lot of initiatives. When we gave our guide last quarter, we talked about a lot of initiatives. We have a lot of initiatives going on in the subscription and in the advertising activities. We announced we've talked a lot about advertising and new products, and the new initiatives, the growth of our supply. Now we're talking a lot more about subscriptions with the acquisition of Frndly TV and many more initiatives we have yet to announce.

I think some of these initiatives, we're going to keep doing new things, and these initiatives are going to play out over time. I do think in the back half of the year, some of the, if there is a greater macro environment, some of our new initiatives should help to offset that. Obviously, we're not immune if there is a major macro environment, recession-type, especially specifically in the ad market. We also have tremendous secular tailwinds as the market continues to shift from linear to digital. Now, the shift that Charlie just talked about from guaranteed to non-guaranteed, we're also very well positioned. One thing I'll just add on this is advertisers are asking more for ROI and measurement.

That is a space we play very well in, given all the initiatives we have to increase demand to our platform because we have the supply and increase our ability to measure that demand. These are positive tailwinds for us. There is a lot of positives going on now, and there will be more that we discuss in the future.

Brent Navon (Analyst)

Great. Thank you so much.

Operator (participant)

One moment for our next question. Our next question comes from Vasily Karasyov with Cannonball Research. Your line is open.

Vasily Karasyov (Analyst)

Thank you very much. Good afternoon. Charlie, I think I have a question for you, and it's about programmatic and the whole transition you're going through. What's the best way for us to think about the contribution of programmatic to platform revenue growth? Is this revenue that entirely incremental, or is it some inventory that was previously sold direct and now executed programmatic? There is some cannibalization going on. Programmatic guaranteed and open transitioning to open programmatic biddable, the same question: will it be—will you be accessing a completely incremental budget, or is there some offset that you're losing in direct? Thank you.

Charlie Collier (President of Roku Media)

Thanks, Vasily. This is Charlie. It's a really good question. The headline is that our multi-year push to diversify demand is absolutely working. Some of the programmatic revenue we're seeing is clearly incremental, especially what we're seeing through our platform partnerships. That's what we call our channel sales business. That's entirely net new. Overall, it is a mix. Many enterprise and independent clients who previously bought Roku directly through IOs or insertion orders are now transacting programmatically, particularly via programmatic guarantees, as you asked about, Vasily. One way to step back and think about it, and it might be helpful, is to think of programmatic not as a buying category, but as a method of execution. It's really how advertisers choose to execute. Even just by allowing more buyers to use their preferred DSP, we're allowing them easier access to our inventory inside their broader DSP-driven campaign.

We're making it easier for them to buy from us. That's even the case, by the way, when the business is sold directly by our sales team. Some of the advertisers who previously bought us directly, now they're using programmatic pipes. The clearest example of true incrementality comes from small and medium-sized businesses using our self-service product called Roku Ads Manager. It's early days, but these are D2C brands, mobile app marketers, and local advertisers. All those are net new to the platform. Vasily, at the heart of your question is a range of new and expanding partnerships, many of them truly incremental.

Our strategy to diversify demand and meet advertisers where they wish to transact, our ability to prove performance through our 100% authenticated identity, our scale, the unique ad units we talk a lot about, and our data interoperability, and our investment in tools and measurement, all of this is helping our partners, particularly as they invest in data and they match their data with Roku's high fidelity signals. All of it's unlocking new revenue. It's deepening existing relationships as well. It's strengthening, I think, our position as the most performant and easiest to work with CTV platform.

Vasily Karasyov (Analyst)

Thank you very much.

Operator (participant)

One moment for our next question. Our next question comes from Justin Patterson with KeyBanc. Your line is open.

Justin Patterson (Analyst)

Great. Thanks for taking the question. Could you talk more about the significance of Roku Channel becoming the number two app on your platform in the U.S.? How does that change your conversation with content providers, just given that reach? At the same time, how does that change the timeframe to really do deeper integrations with more DSPs, since it seems like you've got a lot of supply there that needs to be filled? Thank you.

Anthony Wood (CEO)

Hey, Justin. This is Anthony. I'll start and then turn this over to Charlie. We have ad inventory access across our entire platform. The Roku Channel is part of it. It's obviously an important part of it. Like you mentioned, it's the number two app on the platform now by engagement. Globally, the Roku Channel engagement grew 84% year-over-year. I mean, it's a powerful asset to have access to that large amount of inventory engagement and reach. That is a powerful asset for us. We're going to continue to lean into that. I'll let Charlie talk more about your question.

Charlie Collier (President of Roku Media)

Sure. Hey, Justin. I appreciate the question about the relationship with content providers. We have an unmatched scale. We talk a lot about being the lead-in to television. If you think about it, before anyone makes a choice about what they're watching, we have a home screen that reaches households with over 125 million people in it every day, almost Super Bowl-sized ratings every day. As content providers, they absolutely look at us for unmatched scale and to provide audience that guides people into their content. From our position, we get to root for all of television and really use our unique assets, our home screen assets, to drive engagement. There is a really symbiotic relationship.

As they move toward performance and really have to watch every marketing dollar, as Dan said earlier, we prove performance, and we've invested in measurement and other tools that really make us very good at driving engagement, retention, and subscriptions. That is the content provider side. In terms of what it does for the DSPs, we talk a lot about being able to meet advertisers' demands at every price point and all up and down the demand curve, if you will. A great example of that, at the very top of that, are our home screen units, which are unique and of unique broad reach, and also the performance signals we can send to our clients. We also have live sports and Major League Baseball, and a lot of focused originals and content destinations.

If that's at the top of the pricing curve, you can say we have the tonnage you described, and that meets a lot of advertisers' needs and allows us to be flexibly priced. All the way down the demand curve, you might see us send fewer signals and less specific programming opportunities, and we can participate at the low end of the market as well. With respect to your question about timeframe and DSPs, to be as big as we are as an AVOD platform and the fastest growing, it really is a powerful one-two punch. The programmatic execution allows us to be the most performant as well.

Dan Jedda (CFO)

I just want to add one thing to that. I agree with everything Charlie said, but also that TRC becoming a top five, then a top three, and now number two on our platform really does showcase the power of the platform that we have. We do not have—we have great content in TRC, but we're not spending billions and billions of dollars in content. What we have is an amazing platform and an amazing OS that helps us drive engagement to TRC. It really does show the power of the platform. We're going to use that to drive subscriptions. We're going to use that to drive advertising. We're going to use that to drive Frndly as now part of Roku. There are a lot of positives that that home screen and the entire UI can do.

TRC becoming number two in relatively short order showcases that power.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from Laura Martin with Needham. Your line is open.

Laura Martin (Analyst)

Yeah. Great numbers, you guys. Congratulations on that, too. Anthony, you're not going to like this one, but start with the hard one. I understand that Frndly drives your subscription revenue. However, I would like you to tell us why you think the virtual MVPD market is a transitory market and going to zero. Staying on Frndly for this question, Charlie, can you talk about how it aids your bundle of ad services and why it doesn't look backwards into the linear TV space, which I think Wall Street thinks is dying, rather than stick to streaming, which is the growth aspect of advertising? That's my first one is on Frndly. Thanks.

Anthony Wood (CEO)

Hey, Laura. To Anthony, thanks for that hard question. Yeah. I don't think it's that hard. I mean, yeah, I agree that if you look at sort of cable subscriptions and their replication as virtual MVPDs, it's easy to think that, and it's easy to believe that that's going to not last as a bundle or as a market forever. Linear is a form of entertainment engagement that is very popular. It's actually growing in popularity. On our platform, linear channels, sometimes people call them FAST channels. These are streaming linear channels. They're very popular and a huge form of engagement. There's a lot of people that like to just flip through the channels. One way I think about Frndly is it's actually a lot of brands that I think will stick around, things like Lifetime, Hallmark, A&E. These are brands that are popular.

They have good content. I do not think of them as a virtual MVPD. I think of them as linear channels that are in a paid tier that we can grow, the paid tier of linear channels. Linear channels are very popular in streaming as well. They are very popular in streaming, and they are very popular on our platform as well. I will let Charlie answer your question about the bundle of ad services.

Charlie Collier (President of Roku Media)

Yeah. Thanks, Laura, for the question. I actually think Dan answered it in the last question, which is the power of our platform is staggering. I'll answer this first as a programmer because I have the whole media business. I have the content side and that team, and the ads team. I look at the content team and the way they use the power of the platform to really elevate partners' content. I think there are brands inside Frndly that will be elevated simply by being focused on by Roku. That is exciting for us as programmers, and it allows us to do what we're here to do, which is root for all the television and provide a better lead-in for it. This is a good home for that bundle of services.

On the ad side, I actually think Frndly will benefit simply by being inside of our recommendation engines, being inside of our sales team. Both of these teams are so capable and able to elevate content that it is great to be able to do this for us alongside doing it for our partners.

Dan Jedda (CFO)

I'd just like to quickly add on, too that Frndly TV is growing and growing well. We brought it in as a growth company, and we do think that we can grow it faster. It also will be adjusted EBITDA margin accretive in its first full year for us.

Laura Martin (Analyst)

Fantastic. Okay. My second one is on data. Wall Street has decided that third-party data is going to zero, and that first-party data is basically the only thing that has most, a competitive advantage. You guys have world-class first-party data, but you do not sell it independently to third parties, either to LLMs, which would make easy sense because it's 80% margins, or even to iSpot, Samba, to these guys that aggregate and actually make a living on selling CTV, let me call it on a smaller scale. Can you explain the logic of not bundling, really packaging your excellent first-party data for CTV and selling it to others for a revenue stream, please?

Anthony Wood (CEO)

Yep. Charlie will take that.

Charlie Collier (President of Roku Media)

Sure. Laura, first of all, I love the way you describe our data. You're absolutely right. We took a really unique approach to the upfronts this year. We spoke directly to each holding company. The reason is because they are all solving unique problems for their clients that all come back to the same desired result, which is proving outcomes for businesses. To have a 100% authenticated audience, which Roku does, and to have unmatched scale the way we do with over half the broadband households using Roku as their front door to television, it really is a differentiator. I would step back and say one of the terrific things about Roku writ large is that we still have more opportunities to exploit over time.

The way I think about our data relationships are this which is we have a multi-billion dollar business, and all the opportunity Dan and Anthony have been talking about on this call. The best way to take care of our partners, which are the advertisers and the content companies inside of the media side of the business, is to make sure that we serve them. All the data that they're investing in, which is the missing part of your question, I think, is made only better and more powerful, and the media more performant by matching it with our high fidelity signals.

For the short and probably the medium term, the best way for us to deploy the data is to create this remarkable differentiated platform that is growing as much as it is, and for us to hydrate their data with ours and improve outcomes for our customers. I talk a lot about how Roku has moved from building incrementality, and we are now building fundamental, really the base of their performant businesses. That is what I am focused on. I think that is the best use of our data.

Anthony Wood (CEO)

This is Anthony again. I'll just add.

Laura Martin (Analyst)

Thank you, Ben.

Anthony Wood (CEO)

Sorry. I was just going to say that I mean, I think Charlie covered it, but just to be super clear about it, if you're an advertiser and you buy ads from Roku, but you go through a third-party DSP, you can have those arrangements often have access to our data. I mean, and targeting based on our data is part of those deals, and it's part of the reasons advertisers want to work with us. I will also say, though, we understand the value of our data, and there's a lot of activities going on to expand the way we monetize our data. We just haven't necessarily announced what they are or talked about them directly.

Laura Martin (Analyst)

Thank you very much.

Operator (participant)

One moment for our next question. Our next question comes from Matt Thornton with FBN Securities. Your line is open.

Matt Thornton (Analyst)

Hey, good afternoon, guys. I guess two, if I could. First one's a housekeeping one, probably for Dan. Frndly TV, is that assumed in full year or to Q guidance, or would that be incremental? That's the first question. Second question, as we think about tariffs and the impact on the devices business and volumes and the balance of the year, I'm just kind of curious kind of what you're assuming for the balance of the year in guidance. Tied to that, how quickly can you move sourcing, production, warehousing? I'm sure you've got lots of different scenarios kind of planned out, but I guess is that something that can get moved in days or weeks, or is that months or quarters once we get final clarity on the end tariff rates? Thanks, guys.

Dan Jedda (CFO)

Yeah. Hi, Matt. Thanks for the question. When we gave full-year guidance in February, we assumed several initiatives that have not yet launched in both our subscriptions and advertising activities. We mentioned at the time, or I mentioned at the time, that we're giving a full-year outlook grounded in the best information we had at the time. Frndly was one of the many initiatives we've been working on, and we're excited to have them as part of Roku. We're very confident that we can leverage the power of our home screen and platform and grow Frndly subscriptions even faster. Again, it's one of many initiatives that we had at the time. Yes, Frndly is included. As Anthony said, we have many other initiatives that we look at when we provide guidance. Again, we'll update you more as those initiatives launch.

As I also mentioned earlier, we do expect Frndly to be adjusted EBITDA margin accretive in the first full year. I think I'll turn it over to Mustafa for the tariff question.

Mustafa Ozgen (President of Devices)

Yeah. Hi, Matt. This is Mustafa. Look, we have a diversified manufacturing strategy already in place. We manufacture in multiple countries with multiple factory partners. That provides us quite a bit of agility and flexibility and helps mitigate the impact of the tariffs. Our teams are continuing to work to optimize the overall manufacturing footprint. As things change, they are ready to be able to move quickly from one place to another. That is sort of a part of our plan, and they continue to work on that. Based on the current tariff structure that is in place, we do not anticipate a material change to our devices' gross profit dollars for the full year. At the same time, we already implemented some small price increases, so we are passing some of the costs to consumers.

We're continuously monitoring the environment, remaining flexible in terms of price increases as well. Just want to make sure we stay competitive, but at the same time, continue to monitor the demand environment. The other point around the demand, and then some mitigating factor for us that's on the positive side, is how we actually distribute our Roku Operating System to consumers. Our OS distribution strategy has three pillars. We use our streaming players that are made and sold by us. We have our first-party TVs also made and sold by us under the Roku brand. Then we have the third-party TVs that are made and sold by our Roku TV licensing partners. Not all of the tariff mitigation or the impact is carried by Roku. Some of them are carried and mitigated by our third-party TV partners.

More importantly, in case the TV prices increase due to tariffs and the demand softens, our streaming players are actually a great way for consumers to upgrade and extend the life of their existing TVs at a much lower price point. We have a great selection of streaming players, and their price point ranges from $20 all the way to $99. They are a great option and alternative for the consumers to upgrade the streaming.

Anthony Wood (CEO)

Hey, Matt. This is Anthony. I'll just add quickly. One possible outcome of tariffs is that the overall TV unit sales decline or decline. I don't think they'll decline a lot, but they might decline slightly. I just think it's important to note that's unlikely to hurt our market share. We're well-positioned, much better positioned than others, given our significant penetration in over half of U.S. broadband households. Also, our scale, it's continuing to grow in terms of households, and we're on track to achieve 100 million streaming households, a milestone we set to achieve a couple of calls ago.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from James Heaney with Jefferies. Your line is open.

James Heaney (Analyst)

Great. Thanks for the question. Dan, can you just walk us through how we should be thinking about the revenue trajectory for platform growth just for the remainder of the year? I know you'll have the tough political comp in the second half, but just any other puts and takes that we should be considering.

Dan Jedda (CFO)

Yeah. I mean, we gave the Q2 guide. We gave the full-year guide. I think Q3 and Q4 will have probably a smaller growth rate in Q4 simply because of the very large quarter we had in Q4 of last year with 25%, and it was, I believe, 19% excluding political. Essentially, I think you're really asking what Q3 and Q4 looks like. Again, I think that we'll probably have a slight sequential step down in growth rate in Q4, but we'll see, and we'll update you. Again, we have many initiatives that we're working on, and we'll update you on that on Q3 and Q4 when we report our Q2 results.

James Heaney (Analyst)

Great. Maybe just.

Dan Jedda (CFO)

Also, just one reminder. I think one thing I—sorry. There is probably one thing I should remind you of is we did have a lot of 606 adjustments in FY2024, and actually, Q2 was the largest of the 606 adjustments at just over $16 million. We also had a fairly large 606 adjustment in Q3 and a much smaller one in Q4. We had no 606 adjustments in Q1, as we said. We did not expect to have, nor do we expect to have, nor does our guide imply any 606 adjustments for Q2 or the rest of this year. We are comping, especially in Q2 and Q3, some 606 adjustments. As a matter of fact, if you back out 606 in Q2, we have the same growth rate in the platform business, very close to the same growth rate as we achieved in Q1.

It's very close to that 17% if you back out 606 in Q2.

James Heaney (Analyst)

Okay. Yeah. Great. Appreciate the extra detail. Maybe just one more, just on home screen. We'd just love to hear how you're thinking about the growth drivers outside of the M&E vertical, and then just curious if there's any verticals you'd call out where you've seen traction and others that you're looking to expand into just on home screen. Thanks.

Anthony Wood (CEO)

Sure, James. This is Anthony. I'll take that. Just to remind everyone, our initiatives or strategy to grow platform revenue, one is grow our ad business, and a big part of that is integration with third-party DSPs, really embracing them as partners and deepening our integration with them. Another is focusing on our subscription business, which we think has a lot of room to continue to grow. Third is just overall arching to really lean into the Roku experience. Users start their TV experience every time they sit down to watch television with a Roku home screen, and then there's a lot of UI elements that are adjacent to the home screen, aren't directly on the home screen. We have an iconic, simple, powerful home screen that's very popular with our customers.

There are just a lot of ways to continue to use that to drive both subscriptions as well as engagement and ad reach. For example, and it's definitely not just focused on M&E. I mean, that's how our ad business started was with the M&E vertical and the ads on the home screen, but the home screen these days is used to drive a lot of businesses besides M&E. For example, we added not too long ago, we added a single new row to the home screen with recommendations, and we're seeing that drive significant increases in subscription signups as well as significant engagement. I mean, it's one of the reasons that the Roku Channel grew 84% globally year-over-year in the quarter. That's just one example, but there are lots of other things we're looking at and testing on the home screen.

It's really an area that we haven't touched significantly over the last, in a long time, in several years. We now have a team working on it. We're testing lots of different experiences in the home screen, and I think it's going to continue. We're going to continue to roll out changes as we test them, and they test positive, and it's going to have a material impact on our growth. Charlie wants to add something.

Charlie Collier (President of Roku Media)

Yeah. James, from the ad sales point of view, I mentioned earlier that the home screen reaches 125 million or households with 125 million people in it every day. That kind of reach is so unique that it obviously has been a great place for us to partner with advertisers. Herman, in your question, you know it works really well for M&E, but I think in the letter we put a picture of what we call our marquee video ad unit, and that one was for Hellmann's. We've seen a lot of people who are pushing toward performance utilize the home screen, especially marquee video. Some of the takeovers we recently had one for The Simpsons that got a lot of viral support and social chatter. It's really powerful, and we're seeing it well beyond the M&E vertical.

James Heaney (Analyst)

Great. Appreciate it. Thank you.

Anthony Wood (CEO)

When we think about the home screen, we also think about the Roku experience more broadly, and it includes experiences that are actually engaging in their own right, like Roku City, for example, which is extremely popular. We just keep adding new features and new promotions inside Roku City and new features for people to watch.

Operator (participant)

One moment for our next question. Our next question comes from Steven Cahall with Wells Fargo. Your line is open.

Steven Cahall (Analyst)

Thank you. Dan, if we could maybe just dig in a little more to what you're talking about with the platform revenue growth. Thank you for that, Matt. I was kind of getting to the same place. The Q2 looks a lot like Q1 underlying. If we think about the back half of the year and we take out both 606 and political, is it logical to assume some deceleration just as you start to comp some of the DSP integrations and other things that you started to do towards the end of 2024? Or do you think that that kind of teens growth rate is sustainable for a little longer? I know there's a lot of work that is still ongoing. We'd just love to get kind of a sense of that underlying growth rate, maybe more for the medium term.

The 51% platform margins for Q2 that's a little bit of a degradation from what we've seen historically. Not a lot, but a little bit. Is that just mix because you're growing AVOD so much faster than some of the other parts of the platform revenue, or anything else we should think about in the margin mix at platform? Thank you.

Dan Jedda (CFO)

Yeah. Thanks, Steven, for the question. Let me take the second part of that question first on the 51% guide, and maybe I'll talk a little bit about the full year guide of 52%. In February, we mentioned platform gross margin would be 52%-53%, which is roughly in line with our prior year margins when you exclude 606 adjustment in 2024. Within Q1 and into the first month of Q2, Charlie talked about this. We've seen a greater shift from the guaranteed to the non-guaranteed. Therefore, just much more on the programmatic side, given the uncertain macro environment, we view this as a positive as we're able to meet the advertiser along any point of the CPM demand curve.

I mean, Charlie talked in detail about why the shift does have a positive impact on us as we're able to measure the higher ROIs, etc. That mixed shift from guaranteed to non-guaranteed does have a modest impact on margins within our advertising and platform segment. That is why we're guiding to 52% for the full year. It is a very modest mixed impact. We'll see if the non-guaranteed versus guaranteed stays where it's at now, or if it goes back to more, let's just say, pre-macro environment levels in H2, that would have a slight positive impact on margins. Right now, we're expecting that trend to stay where it's at, which is why we're seeing 52% margins. I've said it many times.

I do believe that we can maintain and, in fact, grow our margins over time on a mix-adjusted basis and within mix because we've got a lot of positive initiatives going on that can help margins, as well as all the volume and increase in platform revenue that we discussed. To the first part of your question, I absolutely believe team growth rate is sustainable over the longer period of time. I do believe that if you back out 606 and political, you'll see that growth rate in the back half of the year as well. The only caveat would be maybe Q4 is a slight deceleration because there was so much volume after political in the month of December, but that may happen again, and we're in a great position if it does happen again to take advantage of that, given our supply.

Even once you back out political, and if you back out 606, you'll see that we are growing in that 15% range, and I firmly believe that's sustainable.

Steven Cahall (Analyst)

Thank you.

Operator (participant)

Next question.

Anthony Wood (CEO)

Hey, can you hear me?

Operator (participant)

Yes, I can hear you. Are you guys there, Anthony?

Anthony Wood (CEO)

Oh, great. Thanks.

Operator (participant)

Conrad, are you still there?

Anthony Wood (CEO)

We're still here.

Operator (participant)

Go ahead. Go ahead.

Thank you. I just wanted to get an update on devices. In the Q4 letter, you saw it grow 12% this year, and now you're saying it should be flat. I know you've had a good start to the year, but what's your view on just device demand over the year and why the flattening of the outlook versus where you were just a couple of months ago?

Anthony Wood (CEO)

This is Anthony. I'll turn this over to Mustafa and then over to Dan. I'll just say overall, we're not focused on device revenue. We're focused on growth in Roku using households. Those come in large part from our partners, our TV partners, but also our own devices. You can lower prices and sell more devices, and get more households. I'll let Dan talk about revenue, but it's really not something in device revenue. We're just not focused on that. We're focused on device unit sales and especially through third-party partners and also growth, which results in growth in Roku households. That's our KPI.

Dan Jedda (CFO)

Yeah. Anthony's absolutely right, and thanks for the question, Michael. We are not focused on device revenue. Device revenue now can be very lumpy because it's driven by our first-party TVs, which we recognize revenue on, whereas opposed to our third-party OEM-based TVs, we don't recognize revenue on. Players, we've always recognized revenue on, and that is actually fairly steady for us. We've got good margins on that, etc. On the first-party TVs, it can be very lumpy depending on the quarter, depending on what our actual sell, what we call our sell-in, is to the distributor. It's not something that we pay a ton of attention to. What we look at is our units, our market share in terms of units, and our streaming households, which are growing in all countries, including the U.S.

We think it'll continue to grow in all countries, including the U.S. Anthony mentioned we're on track to hit 100 million streaming households. We feel very good about that. That's, again, why we guide to platform revenue, is because that is where we monetize those basically over 90 million streaming households that we currently have. Device revenue is just very difficult and very lumpy in the short term, and it's not something we particularly pay attention to. It's more about the unit volume that we ship.

Okay. Thanks, Must.

Operator (participant)

Ladies and gentlemen, that has concluded the Q&A portion of today's conference. I'd like to turn the call back over to Anthony for closing remarks.

Anthony Wood (CEO)

I'd just like to say thanks to our employees, customers, advertisers, and content partners, and thank you for listening.

Operator (participant)

Ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day.