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Roku, Inc. (ROKU) Q4 2020 Earnings Call Transcript

ROKU Earnings Call - Final Transcript

Roku, Inc.  (NASDAQ: ROKU) Q4 2020 earnings call dated Feb. 18, 2021

Corporate Participants:

Conrad Grodd — Investor Relations

Anthony Wood — Founder, Chairman and Chief Executive Officer

Steve Louden — Chief Financial Officer

Scott Rosenberg — Senior Vice President and General Manager of Platform Business

Analysts:

Cory Carpenter — J.P. Morgan — Analyst

Mark Zgutowicz — Rosenblatt Securities — Analyst

Vasily Karasyov — Cannonball Research — Analyst

Ruplu Bhattacharya — Bank of America — Analyst

Steven Cahall — Wells Fargo — Analyst

Ryan — Susquehanna — Analyst

Laura Martin — Needham — Analyst

Michael Nathanson — MoffettNathanson — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Roku’s Fourth Quarter and Full Year 2020 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today Conrad Grodd. Please go ahead, sir.

Conrad Grodd — Investor Relations

Thank you. Good afternoon and welcome to Roku’s financial results conference call for the fourth quarter and year ended December 31, 2020. I’m joined on the call today by Anthony Wood, Roku’s Founder and CEO; Steve Louden, our CFO; and Scott Rosenberg, Senior Vice President, General Manager of our Platform Business who will be available for Q&A.

Full details of our results and additional management commentary are available in our shareholder letter, which can be found on the Investor Relations section of our website at ir.roku.com.

The following discussions, including responses to your questions, reflect management’s views as of today, February 18, 2021 only. And we do not undertake any obligations to update or revise this information. Some of the statements made on today’s call are forward-looking and are based on our current expectations, forecasts and assumptions and involve risks and uncertainties. These statements include, but are not limited to, statements regarding the future performance of Roku, including our financial perspective for the first quarter and full year 2021, the future of TV, TV streaming and TV advertising globally, the impact of the COVID-19 pandemic on our industry, business and financial results and the future growth in our business and our industry.

Our actual results may differ materially from those discussed on this call for a variety of reasons. Please refer to today’s shareholder letter and the company’s periodic filings with the SEC for information about factors which could cause our actual results to differ materially from these forward-looking statements. You’ll find reconciliations of non-GAAP measures to the most comparable measures discussed today in our shareholder letter, which is posted on our Investor Relations website at ir.roku.com and I encourage you to periodically visit our IR website for important content.

Finally, unless otherwise stated, all comparisons on this call will be against our results from the comparable period of 2019.

Now, I’d like to hand the call over to Anthony.

Anthony Wood — Founder, Chairman and Chief Executive Officer

Thank you, Conrad, and thanks to everyone for joining today’s call. I am pleased to report that Roku had both a record 2020 and fourth quarter. As the leading streaming platform in the U.S., Roku is more important than ever to the TV ecosystem. We connect viewers, content owners and advertisers at scale in a virtuous cycle that creates value for all participants.

In 2020, Roku active accounts grew by 14 million accounts to over 51 million and streaming hours grew 55%. Monetized video ad impressions were up over 100% in Q4 rebounding to pre-COVID growth levels. Across the industry, the impact of streaming is increasingly evident. Consumers are cutting the cord, fully a third of all American homes are now non-Pay-TV households. Leading media companies are reorienting around streaming and launching new streaming services. The traditional TV upfronts are beginning to crumble as advertisers demand more flexibility, better measurement and a broader audience.

We are pleased with the progress we made in 2020 and excited about the large opportunities that lie ahead in this streaming decade. With that, let me hand the call over to Steve.

Steve Louden — Chief Financial Officer

Thanks, Anthony. 2020 was the year that showcased our strong position and resilience. Along with the rest of the world, Roku was forced to respond to wide-ranging impacts of a global pandemic. We executed well in the face of many challenges and delivered record results for Q4, as well as the full year.

Before taking your questions, I’ll walk through operational and financial highlights and address outlook. In Q4, we grew our active account base by over 5 million resulting in a record 14.3 million incremental active accounts for the year. And we ended 2020 with 51.2 million active accounts. Our scale has expanded rapidly over the last several years and to put it in perspective, Roku’s U.S. active account base is more than twice the size of the video subscribers of the largest cable company in the U.S.

In addition to increasing our scale, we continue to see growing engagement with our platform, with 2020 streaming hours of 20.9 billion year-over-year to a record 58.7 billion hours. In Q4, we grew streaming hours 55% year-over-year consistent with the year-over-year growth rate for the full year. Furthermore, we grew average streaming hours per active account 10% year-over-year in Q4, demonstrating the strong engagement of our user base.

As a reminder, please see our shareholder letter for the full financial details from the quarter and the fiscal year. But I’ll highlight a few items. In Q4, total revenue increased 58% year-over-year to $649.9 million. Platform segment revenue was up 81% year-over-year to a record $471.2 million, driven by strong advertising demand. Q4 Player revenue growth of 18% year-over-year was slightly lower than the growth rate in Q4, 2019 as COVID restrictions and economic uncertainty muted holiday store traffic and consumer demand.

Our key financial performance metric is gross profit, which grew a vigorous 89% year-over-year in Q4 to a record $305.5 million. Gross margin in the quarter was 47%, fairly consistent sequentially as improvements in platform margin largely offset the seasonally lower Player margins based on our holiday promotions. Q4 adjusted EBITDA of $113.5 million produced the vast majority of our record $150 million of adjusted EBITDA for the year and was the result of a confluence of strong performance, robust revenue growth, strong gross profit leverage as we continue to move into higher margin platform business and leverage on opex growth, in part, due to our decision to be more conservative on account growth in 2020. It also demonstrates the potential leverage in our business as we continue to drive scale and increase monetization of the platform. We ended the quarter with almost $1.1 billion of cash, cash equivalents, restricted cash and short-term investments.

With that, let’s turn to our thoughts on the outlook. We believe we have sufficient visibility into Q1 to offer a formal outlook but as we move further into the future, a number of uncertainties make a formal outlook for 2021 difficult. Rather, we have provided some directional color for how we see the full year playing out for Roku. Historically, Q1 is our seasonally softest quarter from a revenue perspective. Typically, revenue has been roughly 25% lower sequentially than our seasonally strong Q4. Our Q1 outlook calls for a similar seasonality at the midpoint of total revenues of $485 million, up 51% year-over-year, with the Platform segment comprising roughly three quarters of total revenue.

We anticipate total gross profit of roughly $238 million at the midpoint, up 69% year-over-year, implying an overall gross margin of approximately 49%. Platform gross margin is expected to be roughly 60%, while Player gross margin is expected to be similar to Q1 2020. As a reminder, Q1 Player gross margin is seasonally high, reflecting the traditionally lighter promotional period within the retail calendar. For the full year, we will continue our established and successful strategy of managing Player gross margins to roughly 0%, given our focus on device sales as an important driver of account growth.

We anticipate Q1 opex year-over-year growth to be in a similar year-over-year growth range as Q4 and thus showing strong leverage against revenue and gross profit growth, which is expected to result in a Q1 adjusted EBITDA of $31 million at the midpoint. For modeling purposes, please note that Q1 adjusted EBITDA excludes stock-based compensation of roughly $40 million and an estimated $10 million of depreciation and amortization and net other income.

In terms of the full year, we are mindful that in 2021, year-over-year comparisons are likely to be quite volatile. In the first half of the year, we expect strong financial comparisons against the first half of 2020, which includes early impacts from COVID-19 and the resulting economic lockdown. While in the second half of the year, we anticipate much tougher comparisons in part due to our record performance in the second half of 2020, which will significantly pressure year-over-year growth rates.

We expect our overall 2021 gross margin to be in the mid-40% range as Platform margin remains fairly stable and we operate the Player segment at a gross margin close to 0%. Given the size of our opportunity and progress to date, we will continue to aggressively invest in our business to enhance our competitive differentiation and seed future growth. We anticipate the growth rate in operating expenses for 2021 to be more in line with 2019 year-over-year organic opex growth levels versus 2020 when we took precautionary steps at the outset of the pandemic to manage down the rate of expense growth.

As I was preparing for this earnings call, I read my remarks from a year ago. It was very gratifying to me that we materially surpassed our original outlook for 2020 revenue of $1.6 billion despite an unprecedented global health prices and the related economic hardships that took place over the course of the year. It was also very grounding to read a historical comparison from that call, which I will update and rephrase here. Our 2020 revenue of almost $1.8 billion represent over 2 times 2018 revenue, 3 times 2017 revenue, 4 times 2016 revenue, and 5 times 2015 revenue. This sustained level of robust earnings growth speaks to the strong fundamentals of our business, the strategic advantages we have achieved through our investments and our laser-focused leadership in streaming. We continue to be excited by the significant opportunities for Roku that lie ahead.

With that, let’s turn the call over for questions. Operator?

Questions and Answers:

Operator

[Operator Instructions] And our first question coming from the line of Cory Carpenter with J.P. Morgan. Your line is open.

Cory Carpenter — J.P. Morgan — Analyst

Great. Thanks for the question. Wanted to ask you about the Quibi content acquisition. I think it’d be good to hear just your thoughts on why now is the right time to make the move into exclusive content. And then maybe more broadly, should we think of this as more of an opportunistic one-off purchase or does it signal, perhaps, a broader ambition with exclusive content? And then just as a quick follow-up, any details you can provide for Quibi, specifically, just on when it will be available on the Platform and for how long you have the exclusive rights? Thank you.

Anthony Wood — Founder, Chairman and Chief Executive Officer

Hi, Cory. This is Anthony. Thanks for the question. Let me start by just talking a little bit about The Roku Channel and then explaining how Quibi fits into that; it’s a deal that we did for The Roku Channel. So if you just look at overall Platform growth of The Roku Platform last year, we added 14 million incremental accounts and crossed 51 million active accounts. But if you look at The Roku Channel, specifically, it’s growing twice as fast as the Platform overall. So reach and streaming hours of The Roku Channel is growing twice the Platform rate. We now — The Roku Channel now reach households with approximately 63 million viewers. So The Roku Channel is doing extremely well for us and we’re adding content continuously into The Roku Channel from a bunch of different sources. We added almost 100 — we added about 100 million linear channels in 2020 to The Roku Channel. We added content from Disney, NBC, A&E, Discovery and more.

So The Roku Channel is definitely benefiting from this virtuous cycle where more viewers bring in more advertisers, more advertising dollars brings in more content, deeper content, better content and then that cycle continues. So with that sort of backdrop, that’s — as our scale grows, we are looking — we’re sourcing different types of content and we’re looking at different types of content. So Quibi — the Quibi deal fits into that in the sense that it’s premium content is great content, we think it will appeal to Roku viewers. And so — and we — it was a transaction where we acquired the global content rights on a cost-effective basis. We’re disciplined about making sure the content we onboard into The Roku Channel fits into the AVOD business model for The Roku Channel and the Quibi content fit into that model.

The growing scale of The Roku Channel allows us to do deals like this where perhaps we couldn’t have done them a couple of years ago. We expect that to continue as the scale grows, we’ll continue to look more broadly at all the different types of content that we can acquire and we’ll be disciplined about making sure that that content purchase price fits into whether it’s licensed or purchased or whatever the financial details are fit into our AVOD business model.

In terms of rolling out the Quibi content, I don’t think we’ve announced that. It will be fairly soon. And, I don’t know, Scott, if you had anything you want to add about the specifics of the Quibi rollout and the exclusive rights and that sort of thing.

Scott Rosenberg — Senior Vice President and General Manager of Platform Business

Yeah, I’ll tag in here, Cory. We’re excited about the content, 75 TV series, hundreds of hours and Emmy nominations. We’ll be rolling them out — those out progressively through the year and we do have a multi-year exclusive right to exploit the content. So we’re excited to get it out there. Stay tuned for our launch timing.

Cory Carpenter — J.P. Morgan — Analyst

Great, thank you, both.

Operator

And our next question coming from the line of Mark Zgutowicz from Rosenblatt Securities. Your line is open.

Mark Zgutowicz — Rosenblatt Securities — Analyst

Thanks so much and congrats, guys on a great year. Just a couple, I guess, unrelated questions. First on the stable gross margin outlook for the year. Steve, I was just curious if there’s any new upward or downward pressures on Platform gross margin that you would like to point out that now we should pay attention to.

Steve Louden — Chief Financial Officer

Yeah, hey Mark. Yeah, as you mentioned, we didn’t provide formal outlook for 2021 overall. We did mention in the formal outlook for Q1 about the Platform margins being around 60% and then remaining kind of roughly stable for the year. As a reminder, there is a lot that goes into Platform. So there is always considerations of the underlying margin structures there within the ad business or the content business and then the mix of the different pieces. But overall, I don’t think there’s — there are any significant trends I would point out. I mean, the business in general has very good momentum and over the back half of 2020, we saw some good uplift in the Platform margins. So we’re very happy with where the business is, both in terms of strong growth and the top-line and stable margins looking ahead.

Mark Zgutowicz — Rosenblatt Securities — Analyst

Okay. And then real quick on — that’s helpful. On ARPU, just curious how much downward pressure you’re seeing there in terms of outside U.S. It’s obviously been strong and just curious if that implies that OUS have not had a lot of downward pressure or when do you expect to see that, and perhaps maybe break out OUS and U.S. separately there.

Steve Louden — Chief Financial Officer

Sure. Yeah, certainly, the U.S. is by far the most lucrative ARPU potential market and the U.S. as a market is much further ahead than the rest of the world. And historically, the vast majority of our account base has been in the U.S. Certainly, we are growing our international presence and we mentioned in the letter some great stats around the fact that the playbook — the kind of three-phased playbook around growing scale, driving engagement and eventually monetizing is working well internationally, and so that is true. But we are focused on driving scale and engagement in the international market. So the ARPU is significantly lower on that. So it definitely has that dilutive effect on the overall ARPU.

In terms of visibility, yeah, we understand that international is a strategic investment area and that’s visibility that would be helpful for investors. And so we’re working on breaking that out. So stay tuned. In the future, we’ll have some more visibility for you.

Mark Zgutowicz — Rosenblatt Securities — Analyst

Okay, great, thanks so much.

Steve Louden — Chief Financial Officer

Sure. Thanks.

Operator

And our next question coming from the line of Vasily Karasyov with Cannonball Research. Your line is now open.

Vasily Karasyov — Cannonball Research — Analyst

Thank you. I think I have a couple for Scott. Number one, you used to — every quarter before the big SVOD services launched, you used to say that this is our overall streaming hours growth and SVOD streaming hours growing slower than that, and then ad-supported faster than that. So now that you have this massive apps launching, I wonder what that — what those relative growth rates are. And also following up on that is, are you worried at all that Peacocks of the world and HBO Plus’ [Phonetic] will cannibalize ad-supported streaming hours? And if not, where do you think their viewership is coming from? Thank you.

Scott Rosenberg — Senior Vice President and General Manager of Platform Business

Hey, Vasily. Thanks for the questions. Yeah, you’re right, we have not delineated the growth of the different verticals recently but it remains true that ad-supported viewing on the Platform continues to grow faster than the Platform overall than the other segments. And just as a reminder, when we talk about ad-supported viewing, we would include dual revenue stream services like Peacock that are both subscription-based and carry ads. Now with regards to your question about whether these services will cannibalize AVOD consumption. First of all, they either, in the case of Peacock, already carry ads or in the case HBO Max, plan to carry ads.

I think we’re led mostly by the fact that these services launching are drawing more consumers into streaming. They’re creating an even better case for consumers to cut their cord and move more of their viewership to Roku, to streaming. And that then accrues to deeper engagement across the board, inclusive of ad-supported viewing. And it’s furthermore helpful that all of the recent direct-to-consumer services have an ad-supported strategy in place because that bolsters the overall narrative in the market that we’ve been on for years now about the importance of advertisers investing in OTT. So all in all, we consider the launch of these services to be a good thing for Roku, for consumers and for advertisers.

Vasily Karasyov — Cannonball Research — Analyst

Thank you. Very helpful. A quick follow-up. And do you see in your data that viewership in general aggregating to the big apps, like, the bigger ones keep getting bigger and the smaller ones falling by the wayside or does it stay equally fragmented? Wonder if you have any comment on that.

Scott Rosenberg — Senior Vice President and General Manager of Platform Business

Well, what I’d say is that it’s a very vibrant market now with all of these big well-funded services competing for consumer attention. That’s good for Roku because we’re in the business of distributing these services and helping them grow. So we’ve been able to partner more deeply with a broader set of content providers and, of course, it’s great for the consumer, because it just makes their streaming experience on Roku even richer. So we think it’s good and has driven, actually, more robust competition among the services and the consumer is ultimately the winner.

Vasily Karasyov — Cannonball Research — Analyst

Thank you very much.

Anthony Wood — Founder, Chairman and Chief Executive Officer

Hey, Vasily. This is Anthony. I’ll just add that as we’ve mentioned in the past and it still continues to be true, if we think about competition in our advertising business, really, it’s not other services on our Platform. The primary impediment to our ad business growth, which is still growing, obviously, very nicely with monetized ad impressions, doubled again in Q4, but the biggest impediment to growth is just the behavior of TV ad buyers and how they traditionally buy traditional linear TV and the shift of those behaviors to streaming which the pandemic, I think, has definitely caused that to move faster than it was before. And that’s the — that’s probably the biggest obstacle to our — and it’s not — obviously, it’s not a long-term obstacle, but that’s one of the biggest short-term obstacle to our ad business.

Vasily Karasyov — Cannonball Research — Analyst

Thank you very much.

Operator

And our next question coming from the line of Ruplu Bhattacharya from Bank of America. Your line is now open.

Ruplu Bhattacharya — Bank of America — Analyst

Thank you for taking my questions and congrats on the strong quarter. I was wondering if you can talk about programmatic ad spend. Do you see industry ad budgets moving more towards programmatic spend? And in that vein, can you talk a little bit about how the Dataxu OneView platform is performing and what percent of your ad revenues are coming from that today and how do you see that progressing over time? And I have a follow-up.

Anthony Wood — Founder, Chairman and Chief Executive Officer

Sure. That sounds like a question for Scott.

Scott Rosenberg — Senior Vice President and General Manager of Platform Business

Hey, Ruplu. Thanks for the question. Let me just take it in reverse order. So 2020 was a great year for OneView; a foundational year and just a reminder of our value proposition with OneView. We have natively integrated Roku first-party identity data and measurement capabilities and enabled buyers through OneView to access the same capabilities that has caused them to be buying Roku media for years, now applied to when they’re buying third-party media. OneView has deepened our agency holding company relationships and licensing of OneView as a component of the upfront agreements that we wrote in Q4 with all the major agency holding companies. Just by way of example, we’ve got brands like Lexus using OneView to now measure and optimize their spend across linear television and OTT and using it to achieve better reach for the same dollar. So it’s sort of a perfect use case for OneView is optimizing your TV spend across dozens of apps and linear television all at the same time with Roku data powering it.

Now Regarding the other part of your question and the world of programmatic, it is true today that a majority of the spending in OTT is still a more traditional spending pattern, and search and order-based and that’s largely because most of the money — the early money that’s flowed into OTT has come out of TV budgets and that’s generally the way TV has been spent historically. But programmatic is rising quickly. It’s a key part of why we’ve been investing in OneView and we do believe long term, although it’s not the case today, that programmatic will be a majority of how OTT is bought and sold, not the least of which because programmatic is a superior way to leverage our data to leverage measurement, to do dynamic optimization of your spend. So in short, our strategy is to sell the way buyers want to buy, they’re still buying both ways. It’s still predominantly traditional, but we do believe that it will be heavily programmatic over time.

Ruplu Bhattacharya — Bank of America — Analyst

Got it. Thanks for the details on that, Scott. For my follow-up, I just wanted to ask about international growth again, just to follow up on a prior question. How would you measure success in 2021? So if you can just kind of give us your playbook for this year. I mean, what are your targets for international expansion? And overall, how would you measure success this year in international? I mean, if you can just provide any details on what your thoughts are for international, that’ll be great. Thank you so much.

Anthony Wood — Founder, Chairman and Chief Executive Officer

Yeah. This is Anthony. I’ll take that. Obviously, streaming is a global phenomena, and we got our start in the U.S. and are doing extremely well here. But we are investing internationally. And I would say a few things, I guess, about that and how that’s going. First of all, one of our strategy is to take the technology we’ve developed, the strategies that have worked for us in the U.S., the products we developed and the market trends, we believe, which translate from the U.S. to international markets and translate those strategies and market entry points to international markets. And that’s — so that’s what we’re doing and that’s working well for us. We’re finding that the assets we have worked well internationally as well as in the U.S., as well as our domestic market.

Another kind of high level point, I guess, is our international strategy involves the same three phases of business model that we adopted in the U.S., which is focus first on growing active accounts, then on increasing engagement and then on monetization. And so internationally we’re still primarily in the growing active account phase, although we are starting to make some progress on monetization. I think, just some examples of progress we’ve made recently in international, as well as being the number one TV OS in the United States, we’re also the number one TV OS in Canada with 31% of the TV market — smart TV market. We expanded it in Brazil about a year ago with [Indecipherable] TVs and then also players. We recently added another TV partner to Brazil which is also doing well. So our progress in Brazil is good. We’re happy with that.

We recently introduced a new Player product called the, The Streambar which is a two-in-one product that includes better audio for your TV as well as streaming. We launched that in the U.S. and the U.K., Canada, and Mexico all at the same time. That product is also doing well. So I think success for us international is to keep doing what we’re doing, which is adding more TV partners to international markets. We also announced last year that we were going to be working with TCL more internationally, so continuing to add more TV OEMs, continuing to grow the scale of each of the existing OEMs internationally and we’re obviously going to continue to look at TV companies and then as our scale starts, we’re also going to continue to look at potentially new countries as long as that makes sense. And then I think just overall, start — as active account growth starts to build significant scale, leaning more into monetization. So far we’ve launched, for example, The Roku Channel in the U.K. and Mexico. So we’ll be doing more of that over time as well.

Ruplu Bhattacharya — Bank of America — Analyst

Great, thanks for all the details. Congrats again on the quarter.

Operator

And our next question coming from the line of Steven Cahall from Wells Fargo. Your line is now open.

Steven Cahall — Wells Fargo — Analyst

Thanks for the question. It looks like monetized impressions accelerated again this quarter. So maybe could you help us think about the drivers of that growth in monetized impressions? It’d be great if you could kind of split that out between growth trends in home screen adds and The Roku Channel and then the non-Roku content apps that have advertising. And if we wanted to kind of then layer in your ad revenue over that monetized impressions, maybe just help us think about what like the effective CPM is kind of doing in all that. And then I have a — just a quick housekeeping one.

Anthony Wood — Founder, Chairman and Chief Executive Officer

Sure. So, Scott will take that. But before he does, I just want to correct something I said. I think I misspoke, I said the Roku Channel is in Mexico, it’s actually in the U.K. and Canada. But Scott, do you want to take that?

Scott Rosenberg — Senior Vice President and General Manager of Platform Business

Yeah. Hey, Steve, I’ll take your question. The growth of our ad business is the result of, as we highlighted in prior quarters, just ongoing major secular changes accelerated by the pandemic. Just for context, in traditional television, there was a 21% decline in broadcast primetime ratings last year, according to Nielsen even as rates in the upfronts have gone up 13% due primarily to scarcity and the median age of the — of a viewer of the top-3 broadcast networks is now over six years old. This pattern is not sustainable for TV marketers and the pandemic really accelerated the decision by marketers, by advertisers to right-size their investment towards streaming. And then on the side of streaming there’s just all sorts of stats to support why there should be more spending. Half of adults, 18 to 34 — half of their viewing is now streamed. A third of U.S. households are cord cutters. In our universe 92% of Roku accounts who cut their cord are very happy and don’t plan to go back. Streaming hours, as we mentioned in the shareholder letter, up 55%.

So all of these changes are really accruing to driving a major shift towards OTT streaming. In Q4, we mentioned in the shareholder letter, the six largest agency holding companies more than doubled their spend with us. That’s notable because those are the same agencies that control the vast majority of TV ad spending. So I think that’s a pretty good indication of kind of a permanent reallocation of TV monies. And then just digging down a level, we see strength in a whole bunch of categories beyond just traditional TV dollars, TV spending. Sponsorships was a very fast growing segment for us. Performance-based advertising, this is advertising where the marketers are optimizing for something other than reach or demographics, nearly quadrupled in the year. We’re seeing strength in retail, as well and CPG and then our endemic category, app and content marketing is also seeing strength. So strength across the board, but particularly strong growth in those segments. Let’s go to your — sorry, go ahead, Anthony.

Anthony Wood — Founder, Chairman and Chief Executive Officer

I was just going to add that if I think about bigger picture these changes that we — the progress that was made in 2020, more and more viewers shifting to streaming for their TV, more advertisers following their viewers to streaming, more content companies launching major new streaming services. I mean these are enduring structural changes that we don’t think they’re just being pulled forward, some business being pulled forward. We think that the pandemic has accelerated and permanently changed the curve on this shift to streaming.

Steven Cahall — Wells Fargo — Analyst

That’s great and then maybe just a quick follow-up on the outlook for cost. So looks like a lot of acceleration this year. Could you maybe elaborate if a lot of that going to be in either R&D or marketing or kind of shared both? And I think it implies that maybe you’ll have a little less EBITDA this year than you did in 2020. Is that conservatism or is that just that you really want to push the gas on investing in the business with the really strong top-line and active account growth trends? Thanks.

Anthony Wood — Founder, Chairman and Chief Executive Officer

So this is Anthony. I’ll just — I’ll offer my thoughts and I think Steve Louden can provide some more color and detail. At a high level, streaming is a huge global opportunity, we’re still in pretty early days. I mean, obviously, it’s mainstream and we’re seeing big changes. But given the fact that there is a 1 billion broadband households in the world and they’re all going to watch their TV through streaming someday. So it’s a huge opportunity and it’s an area that we’re going to — and we’re a leader, obviously, the leader in the United States and growing rapidly international. So it’s an area we’re going to keep investing in.

We’re going to invest in growth, investing and improving our — and expanding our competitive advantages. But — and so it’s an area we’re going to keep focusing on. I mean we are focused, obviously, on building a large profitable business and that’s what Roku will be, but at this point, we are trying to keep — funnel as much as we can back into improving our competitive advantages and growing faster in some Roku investment areas like Roku TV international, The Roku Channel and advertising. But, Steve, did you want to add something to that?

Steve Louden — Chief Financial Officer

Sure. Yeah, in terms of kind of the pacing of the opex, obviously, we have more control over that than we do some of the uncertainties around in the full year on revenue growth and some of these external factors, which is why we’ve given kind of more specific color on opex versus the top of the P&L. And just a reminder, the end of Q1 of 2020 was one the lockdowns started happening when the scale of the pandemic started to reveal itself and so ourselves and a lot of other companies, we proactively managed down the rate of growth that we had been doing. We primarily did that through slowing the pace of headcounts. And then there was also some other opex and capex measures that we took that we thought were prudent at the time.

As Anthony mentioned, the business has proved resilient and we think there’s a lot of great opportunity ahead and some of these structural shifts have been accelerated from COVID and so we feel more comfortable investing aggressively. I’d point you to the shareholder letter, we talk about some examples. The opex is broad-based in terms of how we’re going to invest. Certainly we’re an R&D company at heart and we have a lot of engineers. So R&D projects on things like new features, technology, bringing more content to the Platform, growing the sales and marketing efforts, that’s really around continuing to drive increased scale and engagement of the user base. And then the other thing we are investing for the future is we think streaming is a global phenomenon. And so we’re building out the G&A infrastructure to support a global scale business. So there is a lot of — I mean, we’re very fortunate there is a lot of great things on our roadmap and so there is no dearth of high ROI projects to go green light. And so that’s why we feel comfortable kind of moving the opex growth back to the pre-pandemic levels that we saw.

Steven Cahall — Wells Fargo — Analyst

Thanks a lot.

Operator

And our next question coming from the line of Shyam Patil with Susquehanna. Your line is open.

Ryan — Susquehanna — Analyst

Hey, guys. It’s Ryan on for Shyam. Just first, how are you thinking about your content, I mean, your strategy going forward for The Roku Channel, post the Quibi acquisition? And secondly on off-Roku advertising, is there any update there? How is that progressing and what’s the progress on the cross-selling of traditional Roku O&O advertisers to off-Roku fee TV advertising? Thanks.

Anthony Wood — Founder, Chairman and Chief Executive Officer

Hey, Ryan, this is Anthony. I’ll take the first part of that question. And then Scott can take the second part. I mean, like I said before, The Roku Channel is benefiting from this virtuous cycle of just driving more advertising dollars, more content and more viewing and that — and I think that — well, I’m confident that trend is going to continue for some time. It’s growing faster than the Platform overall, double the rate of the Platform, which is also growing quite nicely. And I would just say, we are not going to detail specifically our exact content plans and strategy.

But I think the big picture is that, one, we’re focused on an AVOD business model, means — which means licensing or sourcing content that is profitable on an AVOD ad-supported basis. But two, as our scale grows, we have more options, the type of content that we can source that matches that, whether it’s licensing or an acquisition of global content rights, like we did for Quibi. I mean, we’re open minded, and we’re going to continue to look at ways to strategically source content that will drive growth of The Roku Channel in a profitable AVOD business model. And so that’s what we plan to do. Scott, I don’t know if you want to add or take that…

Scott Rosenberg — Senior Vice President and General Manager of Platform Business

Yeah, let me add to that and then I’ll answer, Ryan, your question about advertising off-Platform. I mean, I think, just to build on Anthony’s comments, one important thing to know about The Roku Channel is it’s another increasingly essential outlet for rights holders to be able to reach an incremental audience apart from or in addition to whatever D2C strategy they may have. So there is a ton of inbound interest in participating in The Roku Channel because of its scale, because of its user engagement, because of our monetization potential. So it opens up just a lot of different avenues to source content for The Roku Channel over time beyond just, say, for example, the Quibi-type deal that we just did.

Regarding your question about off-Platform advertising, so our greatest strength in working with an advertiser is the data, the identity, our optimization and measurement capabilities that we have, both when we sell media and when advertisers use our ad Platform, OneView. And one of the most potent ways that we go off-Platform is to show an advertiser that we can deliver off-Platform effects resulting from their buying on Roku. So just like as an example, we’ve talked in the past about our Kroger shopper data, partnership-added data that’s about actual in-store activity, the purchase of CPG products and we’ve used that with Kroger with brands like Jif, the peanut butter brand to show that exposure of ads on Roku leads to a lift in site visits, in product sales and ultimately for Jif, an increased share of wallet versus their competitors.

Likewise with Winn-Dixie, the retailer, we’ve been able to show through our device graph, through our data and through both an examination of on-Platform traffic and off-Platform traffic that their ads with Roku drove 56% more web traffic and increased the likelihood of a consumer going to a Winn-Dixie store by 76%. OneView is a full omnichannel DSP and so it can execute simultaneously across media that Roku is selling on The Roku platform; media that publishers on The Roku platform are selling third-party OTT desktop and mobile. But the particular sweet spot for us as a company is when we’re able to help a brand bring data or activity off the Platform onto Roku to re-target a user or to follow a user off Roku to be able to verify and show site visitation lifts, retail store visit lift, product purchase lift. That’s where our off-Platform advertising capabilities really excel.

Ryan — Susquehanna — Analyst

Great, thanks.

Operator

And our next question coming from the line of Laura Martin with Needham. Your line is open.

Laura Martin — Needham — Analyst

Hi, there. Maybe a couple of philosophical questions. Anthony, one of the big selling points when you were taking this company public was that you didn’t have channel conflicts, you represented everybody equally. But when you do a Quibi deal and you give them money and you only have like a two or three-year license period, doesn’t that create channel conflict because you’re incented to drive viewers and ad revenue there? And while that might not matter in the U.S. because you’re huge and what’s anyone going to do, the minute you get offshore, if potential joiners to your offshore channel think you’re going to go into competition with them, because you’re going to own or buy license, local channels — local content, I’m just really interested in how you think about the economics because with your data I’m sure you can buy lots of content that makes money.

And then Steve for you, this is the call every year when you tell us the EBITDA is going to be breakeven for the year forward and you were very careful not to say that once during this call. So, I’m wondering if, philosophically, for a material EBITDA number for Q4, do we actually have — can we outlook a higher zero [Phonetic] EBITDA this year in 2021? Thanks, guys.

Anthony Wood — Founder, Chairman and Chief Executive Officer

Hey, Laura. It’s nice to hear from you. So yeah, philosophically, the way I think about our Platform is that, it’s a content distribution Platform. Obviously, there is other important components to it, it’s an ad Platform. It’s a great experience for viewers. But at the core is we help content owners and publishers distribute their content and there’s a lot of content out there, it’s available on a lot of different business models, content owners are looking for ways to monetize their content. And so we have multiple ways to do that. We don’t — you said — you used the word channel conflicts. We don’t view anything we do really as channel conflict. I mean, if we think — if you think about The Roku Channel versus, say, someone building an app and publishing it in our app store or channel store, I mean, those options are both available to content owners. Sometimes content owners like, say, ABC News, they’ll do both, they’ll distribute their content through The Roku Channel or they’ll write an ad. Some content owners do just one. Some content owners — so some of them do — just do an ad. Some of them just distribute the content through The Roku Channel.

I think the point is that there’s only so many companies that have the scale and expertise to launch a successful direct-to-consumer service, but there’s lots of other mid-sized or large content services that want distribution and The Roku Channel for many of those is a better way to distribute that service because we build the audience for them, we provide the monetization, whether it’s billing or subscription, or advertising. We manage retention, we do recommendations. I mean, — then we have an internal UI team. I mean, it’s a very complicated proposition to build a successful AVOD or SVOD service. And so aggregating those viewers and being that solution works well for a lot of content owners so — and content services. So I think we view them as all very complementary.

I think you you mentioned two or three years for Quibi, I don’t — I’m not sure if we’ve ever talked about what the actual deal terms were, but that’s not — it’s not two or three years. So and then — so Scott, I don’t know if you have anything to add to that before we move on to EBITDA with Steve?

Scott Rosenberg — Senior Vice President and General Manager of Platform Business

Yeah, I think it was great. Steve, you want to take Laura’s EBITDA question?

Steve Louden — Chief Financial Officer

Sure. Hey, Laura. Yeah, in terms of our perspective, we still think it’s early days in the shift to streaming. But certainly, we’re getting more and more proof points that the — our position is strong and there is a lot of opportunity ahead in streaming. And so, for us, one of the things that’s important is to invest to maintain and grow our competitive differentiation and to seed future growth. And so that’s why we’re going to continue to invest aggressively in different aspects of the business model.

Certainly we didn’t give formal guidance around the top part of the funnel in terms of the revenue growth. Obviously, the business has had very strong momentum, especially in the back half of 2020 and we put out formal outlook for continued robust growth over 50% in Q1, but then we’re going to be facing tougher comp. So difficult to say where the EBITDA will line up for the year, but I do think, Q4 is a great example of a confluence of continued driving scale, robust growth on the monetization coming together and producing significant EBITDA in Q4 and shows — really does show the potential leverage in the business model and we think, over time, we’ll grow a large and very profitable business.

Laura Martin — Needham — Analyst

Thanks, guys. These are great numbers. Congratulations.

Steve Louden — Chief Financial Officer

Thanks, Laura.

Anthony Wood — Founder, Chairman and Chief Executive Officer

Thanks.

Operator

Our next question coming from the line of Michael Nathanson with MoffettNathanson. Your line is open.

Michael Nathanson — MoffettNathanson — Analyst

Thanks. I have a couple. Can I ask you a bit about The Roku Channel that [Indecipherable] have a trend on Amazon? I know you announced the development of Amazon — Roku Channel and Amazon. Is there a noticeable difference in consumption maybe on the Roku Platform versus off the Platform? That’s one. And, two is if you could help us at all getting under the hood of maybe advertising revenue number. I know people are trying to ask that, which is anything you can help us on maybe Roku sell-out levels, fill rates there. And I guess price per impression, how that’s trended over 2020, that’d really helpful. Thanks.

Anthony Wood — Founder, Chairman and Chief Executive Officer

Scott, that’s for you.

Scott Rosenberg — Senior Vice President and General Manager of Platform Business

Yeah, okay. Hey, Michael. I’ll take both those questions. So with regards to The Roku Channel, our biggest opportunity, as we said in the past is on our own Platform, where we know the consumer deeply, where we have full access to the promotional tools, the ability to personalize the experience for the user and great monetization capabilities. We do and will take the opportunity to take The Roku Channel off Platform where we see an opportunity. But to be clear, the biggest and best growth opportunity and our primary focus is on The Roku Channel, on our own Platform.

With regards to your question about the composition of ad revenue, the way I’d say this, yes, that fill rate and sell out levels, we’ve mentioned in the past that we still exist in a supply-rich environment and that our biggest challenge or biggest competition ultimately is competing dollars away from the traditional TV spending pattern. We’re making great progress there, as I mentioned earlier in the call, in tracking those dollars and I do think that there is a fundamental shift that was affected in 2020 as a result of the pandemic.

OTT remains a premium product and so price is quite well relative to television generally. But I think it’s also important to recognize that there is a whole other class of advertisers coming into OTT who either couldn’t invest or couldn’t invest much in television, because as a medium, it didn’t work for them. It didn’t give them the performance credentials, the measurement that they needed. And so these are advertisers who may have historically invested much more heavily in social media, in search, in display advertising, who are now able and interested in participating in OTT because of the ability to measure and optimize. And those advertisers are not always going to be buying on a traditional CPM basis. Some of them are going to be buying on a performance basis, a cost-per-click, cost-per-action basis. And this I think is one of the most interesting characteristics of OTT as a medium is its future is not simply a top funnel branding media like television or a bottom funnel performance media like social and search. It’s both.

And so advertisers of all shapes and sizes are going to be competing in a — ultimately a common auction to reach the user and the pricing models, the variety of financial and marketing tactics that those marketers use are going to be quite varied. I hope that answers your question.

Michael Nathanson — MoffettNathanson — Analyst

It does. Can you answer a quick follow-up? When we see social have really strong impression quarters, especially with Facebook, the price compression drops because of what you said, the auction brings in a lot more types of advertisers, all different types of requirements. So is it fair to assume when we see big surges in impressions, it’s — potentially the price compression is — it just gets weaker simply by the supply of impressions in the marketplace? Is that a fair assumption? We’re trying to build a model to try to predict advertising growth.

Scott Rosenberg — Senior Vice President and General Manager of Platform Business

Right. Yeah, it is the case in social media that when supply goes up a lot, auction prices go down. Also, that’s not a bad thing for the social platform, the greater volume allows them to drive more effect for the advertiser and, of course, you can cut the other way. As pressure in the auction increases, it can drive prices up and that may be disconnected from what the advertiser thinks the impression is ultimately. We’re — we mentioned in our shareholder letter, I think an interesting case study with Frndly, a virtual MVPD service who actually took social media money and moved it to Roku. Their goal is, of course, to acquire subs and they saw a near 16 times lift in sign-ups and a 65% better return relative to their social media investments.

And so while it’s still early, I think, in terms of OTT competing in that pond, in that bucket, it has all the credentials, all the data and identity and it’s been a big part of our investment with OneView to be able to compete for advertiser budgets when those budgets are mostly focused on bottom funnel impact. I recognize that might not get you where you’re looking for in terms of the model, but that is a dynamic we see playing out.

Michael Nathanson — MoffettNathanson — Analyst

Thanks. Thank you. I tried.

Scott Rosenberg — Senior Vice President and General Manager of Platform Business

Okay. Okay.

Operator

And our next question coming from the line of Rich Greenfield with LightShed Partners. Your line is open.

Richard Greenfield — LightShed Partners — Analyst

Hi, thanks for taking the question. If you’re a brand and you want to reach connected TV viewers, I was wondering if you could just help us understand the difference between two different scenarios. One, you go out and you buy Hulu or Peacock direct and a portion of that ad time that you’re buying ends up on Roku devices. Choice two is you buy Roku directly and a portion of your spend may end up on a Hulu or a Peacock or even both. I guess if I’m thinking about this, if I’m a marketer brand, why do I buy Roku direct versus the other way around? And what does buying Roku direct achieve that simply can’t be achieved by buying from the program or directly and ending up on a Roku device?

Anthony Wood — Founder, Chairman and Chief Executive Officer

Scott, do you want to take that?

Scott Rosenberg — Senior Vice President and General Manager of Platform Business

Yeah. Hey, Rich. I guess, the short answer is it’s at both end; not an either or. These content partners are our partners and our goal as an ad business is to complement not compete with them. There are many reasons, of course, that you might buy directly with the network or an app on our Platform. For example, it could be part of a broader cross-platform buy, your upfront commitment. You may be buying…

Richard Greenfield — LightShed Partners — Analyst

Sure, but if I were to leave that aside, like I just leave the upfront aside and say there is no upfront in a world where like you just had to put a dollar to work. Why would I put a dollar into direct, like, what is the advantages that I get by buying Roku that I can’t get by throwing it into a broader buy?

Scott Rosenberg — Senior Vice President and General Manager of Platform Business

Yeah. So it’s…

Anthony Wood — Founder, Chairman and Chief Executive Officer

One…

Scott Rosenberg — Senior Vice President and General Manager of Platform Business

Go head, Anthony.

Anthony Wood — Founder, Chairman and Chief Executive Officer

Sorry.

Scott Rosenberg — Senior Vice President and General Manager of Platform Business

Yeah.

Anthony Wood — Founder, Chairman and Chief Executive Officer

I was just going to say one advantage is the ability that we also have access to what linear ads that you’ve been seeing through our ACR and our Roku TVs and so in terms of unduplicated reads, we can help you do that. An app [Phonetic] that doesn’t have that data can’t really do that.

Scott Rosenberg — Senior Vice President and General Manager of Platform Business

Yeah. Yes. So just to build on that. So one key reason, Rich, is the ability to reach users that you aren’t going to reach just through those select couple of publisher direct buys. So one of the things we regularly do with our advertisers is produce an only-only both view of who they reached with each of their buys. And we do that with linear too and we regularly show them that even though, for example, they’re heavily invested in Hulu, they didn’t reach this whole other big class of users as they are either not active with those other publishers or they’re not holistically optimizing across linear and their whole OTT buy.

There are a lot of other reasons that advertisers invest directly with us. One is we excel at optimizing for performance using data. We’ve been investing for years in our data and our ad stack and we excel there. We’re not in the business as you know of selling context. So if you got to buy for the office, you got to buy a specific show, you’re going to do that directly with the network. But if you’re optimizing for reach and frequency and performance, investing with Roku is a key factor.

The other thing I’ll mention here is that OneView is a key component in this discussion. One of the reasons we’ve invested so heavily in the OneView feasibility is so that in the case where you’re doing a publisher direct buy, you could still leverage Roku identity, Roku data and capabilities to help optimize that publisher direct buy against all your other activity.

Richard Greenfield — LightShed Partners — Analyst

Right. So — but I’m just thinking out loud, like, if the ultimate — what you just said, Scott, to me is the most important. But I want to optimize for reach, frequency and performance, I can’t think of anything else just optimizing so that I can be on this-is-us seems sub-optimal to optimizing for reach, frequency and performance.

Scott Rosenberg — Senior Vice President and General Manager of Platform Business

Look, our focus as a company is on data and performance and outcomes for advertisers. But there are lots of reasons why advertisers also care about context and want to be in that show. And that’s not our lot, that’s the focus and capability of a lot of networks. But, look, we agree. We’re focused on leveraging our data and our tech and capabilities to drive outcomes for advertisers and help them orchestrate their OTT investment even in the case where they’re doing it directly with a publisher.

Richard Greenfield — LightShed Partners — Analyst

Thanks very much.

Scott Rosenberg — Senior Vice President and General Manager of Platform Business

Yeah.

Operator

And that’s all the time we have for questions today. I would now like to turn the call back over to Anthony Wood for closing remarks.

Anthony Wood — Founder, Chairman and Chief Executive Officer

Thanks. Before we end the call, I do want to say one more thing. 2020 was a challenging year for businesses. But it was also a difficult time for people everywhere. The team at Roku did an incredible job under extraordinary circumstances and I want to say thank you to everyone. Together, we have a great future ahead of us.

Operator

[Operator Closing Remarks]

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