Roku slumps 10% as the company reports more than usual ad cancellations in Q1

Roku Inc. (NASDAQ: ROKU) released its first-quarter earnings report on Thursday that topped the analysts’ estimate for revenue. The report offered an initial insight into the Coronavirus impact on the company’s financial performance as the pandemic pushed advertisers into slashing spending in recent months.

Following Roku’s announcement that ad cancellations were greater than usual in Q1, the stock was reported around 10% down in extended trading on Thursday.

Roku’s Q1 financial results versus analysts’ estimates

According to Refinitiv, experts had forecast the company to print £247.72 million in revenue in the first quarter. In terms of loss per share, they had estimated 36.3 pence. In its report on Thursday, Roku topped the estimate for revenue posting a higher £259 million in Q1 and matched the expectations of 36.3 pence of loss per share.

As COVID-19 restricted people to their homes, Roku announced 2.9 million new active accounts in Q1 that marks a 37% increase as compared to the same quarter last year. The company now has 39.8 million total accounts. Streaming hours, Roku added, were also 49% higher on an annualized basis to 1.6 billion in the recent quarter that brought the total to 13.2 billion hours.

As per the company, it generated £187.65 million in revenue in the first quarter from its platform that includes licensing fees for Roku’s software, and advertising. Device sales in its player business, on the other hand, registered £71.18 million in revenue for the company in Q1.

Roku’s statement in a letter to shareholders

Despite higher than usual ad cancellations in the recent quarter, Roku expressed confidence that its ad business will still grow in 2020 but a slower than expected pace. The company stated on Thursday:

“In summary, while our advertising business faces near-term challenges, our content distribution business, as well as overall consumer engagement, have benefitted from a surge in OTT usage. There can be no assurance that these patterns will continue through the remainder of the second quarter or throughout 2020; however, we believe that they may represent an acceleration of the longer-term trends reshaping the industry that were already well established prior to COVID-19.”

Roku had suspended its full-year financial outlook earlier this year. On Thursday, CFO Steve Louden highlighted that owing to the Coronavirus uncertainty, it was still difficult for the company to offer revised, meaningful guidance. The company, he added, is expected to see an adjusted EBITDA loss in 2020.

The £13.39 billion company is currently around 10% down year to date in the stock market.