Roku Inc (ROKU) 2017 Q3 法說會逐字稿

Good day, ladies and gentlemen, and thank you for your patience.

You have joined the Q3 2017 Roku earnings conference call.

(Operator Instructions).

As a reminder, this conference may be recorded.

I would now like to turn the call over to your host, Mr. James Samford at Investor Relations.

Sir, you may begin.

Thank you.

Good afternoon and welcome to Roku's financial results conference call for the third quarter ended September 30, 2017.

I am pleased to be joined on the call today with Anthony Wood, Roku's Founder and CEO; Steve Louden, our CFO; and Scott Rosenberg, our GM of Advertising will be available for Q&A.

The following discussion, including responses to your questions, reflect management's views as of today, November 8, 2017, only and we do not undertake any obligation 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 expected financial results for the fourth quarter and the future growth of the business.

Our actual results may differ materially from those discussed on the call for a variety of reasons.

Please refer to today's shareholder letter and the Company's filings with the SEC for information about factors which could cause our actual results to differ materially from these forward-looking statements.

You will find reconciliations of non-GAAP measures to the most comparable measures discussed today in our shareholder letter, which is posted on the Company's Investor Relations website at IR.

Roku.com.

I encourage you to periodically visit our IR website for important content.

Finally, unless otherwise stated, all comparisons on this call will be against the result of a comparable period in 2016.

Now I would like to turn the call over to Anthony.

Thanks, James, and thanks, everyone, for joining our first earnings call.

We had an outstanding quarter and now believe that we are on track to reach or exceed $500 million in revenue this year, a big milestone for Roku.

We are more excited than ever about our streaming platform, our competitive position in the industry and the massive shift of the TV ecosystem to streaming.

The Roku story may be relatively new to many of you, so I will recap some highlights.

I will then hand the call over to Steve to review our results and our outlook.

I have also asked Scott Rosenberg, GM of our Ad business, to join us for Q&A.

If you haven't already done so please take a look at our third-quarter shareholder letter posted on the IR website for more details.

TV and TV advertising is in a massive shift to streaming and billions of dollars are moving to new platforms and services.

When the Internet disrupts large existing businesses the opportunity emerges to create a new large scale platform.

That is what Roku is, the leading platform for streaming TV in the US.

Many of you probably first learned about Roku through our popular streaming players and Roku TVs, but buying a Roku device is simply the beginning of the relationship we have with our viewers.

Almost 90% of our gross profit comes from our advertising, audience development and content distribution services in our Platform segment.

This segment is driving our strong gross profit and revenue growth.

The Platform segment grew 137% this quarter and our ad business, which contributed two-thirds of our Platform revenue, grew even faster.

As we add more content publishers like DIRECTV NOW, and as our content partners enhance their streaming channels like Hulu Live and we make a wealth of free ad supported content available, users continue to use the Roku platform or more.

Our value proposition to content publishers and advertisers is clear.

Roku is a large scale platform that monetizes the hard-to-reach and valuable TV streaming audience.

Many streamers start their OTT experience with ad-free services like Netflix, but ad supported content is the fastest-growing segment on the Roku platform and free is one of our most popular search terms.

To better service our viewers and advertisers, we launched the Roku Channel in September.

It features tons of great movies and TV shows all free ad supported.

And while it's still early days with the Roku Channel, we are pleased with the progress so far.

The Roku Channel is already a top 20 app in the Roku Channel store in just the first month since it launched.

We grow our active accounts primarily by licensing to TV manufacturers and selling our streaming players.

In the third quarter active accounts were up 48% year-over-year to 16.7 million with over half of new accounts coming from licensed sources in the quarter.

For further scale and perspective, if Roku were a traditional cable company or service operator, we would be the fourth largest in the country.

But while consumers move to streaming and the incumbent video distributors shed viewers, Roku's account base has been consistently growing over 40% year-over-year.

Our Roku TV program has great momentum and is contributing to our scale.

At the end of last year one out of every eight smart TVs sold in the US were Roku TVs made by brands like TCL, Insignia and Sharp.

So far this year one in five smart TVs sold in the US is based on a Roku TV reference design and our operating system.

Our low-cost reference design is a key advantage for our TV manufacturing partners to benefit from lower bill of materials costs and the best-in-class purpose built TV operating system.

I'm very pleased with the progress we are making with our licensed programs like Roku TV and Roku Powered.

In fact we hit a new milestone this quarter with over 50% of new accounts coming from licensed sources.

Roku is the leading streaming platform in the country based on streaming hours, but why is that?

It's because we are focused on winning customer reviews and word-of-mouth using a purpose built for TV Roku operating system.

If you look back in time, operating systems rarely, if ever, made the transition from leading on one type of computing platform to leading on another.

For example, Microsoft Windows became the OS for PCs; mainframe operating systems didn't.

Android and iOS became the operating systems for phones; not Windows.

We believe Roku is very well positioned to maintain its lead as the OS for TV streaming.

We've been busy getting ready for the holiday sales season and we believe that we are well positioned.

We just refreshed our entire streaming player lineup to excellent reviews.

For example, our new Streaming Stick+ just won CNET editor's choice award.

We have been working with our Roku TV partners to launch lots of new TV models.

A great example we are proud of is the progress we have made with one of our partners, TCL.

By combining TCL's huge manufacturing scale and great picture quality with the Roku OS, TCL achieved the number two spot for smart TV sales in September and is number four year to date in 2017, up from number 19 for the full year of 2014.

That's pretty amazing.

Streaming is mainstream and a huge market.

We believe every TV will one day run a streaming OS and what we're seeing now is just the beginning.

I will now turn it over to Steve to discuss Q3 results and our Q4 outlook.

Thanks, Anthony.

Q3 was indeed a great quarter.

The full details of our financial results and key operating metrics are available in our shareholder letter, so I will focus my comments on key trends in the business and our outlook for the fourth quarter.

Unless otherwise specified, all comparisons are on a quarterly year-over-year basis.

As Anthony mentioned, our growth strategy involves growing scale, growing engagement and growing monetization.

Our key metrics that measure our progress are active accounts, which is defined as accounts that have streamed in the last 30 days; streaming hours and average revenue per user, or ARPU, which we define as trailing 12-month Platform revenue divided by the average active accounts at the end of Q3 2017 and the end of Q3 2016.

Active accounts grew 48% to 16.7 million with over 50% of new accounts coming from license sources, primarily Roku TVs.

Streaming hours for the quarter were up 58% to 3.8 billion.

And ARPU increased 37% year-over-year to $12.68 on a trailing 12 months basis per account, with the largest and fastest-growing portion of that coming from video advertising which includes 15- and 30-second video ads inserted on ad supported channels -- as well as audience development ads that our content publishers use to acquire subscribers or to promote their content, like the recent Game of Thrones home [screen] takeover when HBO launched the new season.

The streaming industry continues to move in our direction as OTT advertising adoption and IP distribution of content trends continue to drive our rapid growth.

Turning to our results, total Q3 revenue increased 40% year-over-year to $124.8 million and year-to-date revenue through Q3 increased 29% to $324.5 million.

Our focus is on gross profit growth which we generate primarily from the higher margin services businesses in our Platform segment.

Gross profit increased 92% to $49.9 million and year-to-date gross profit through Q3 increased 65% to $126.4 million.

Gross margin expanded 11 percentage points to a record 40% as we continue to benefit from a mix shift to our faster growing higher-margin Platform segment.

Operating expenses increased 44% to $58 million resulting in an operating loss of $7.9 million, an improvement compared to the loss of $14.1 million last year in Q3.

Adjusted EBITDA loss improved $7 million year-over-year to a loss of $3.7 million in Q3, down from a loss of $10.7 million in Q3 last year.

Turning to our segments, Platform revenue grew 137% year-over-year to $57.5 million with the largest contributor coming from advertising.

Our Platform segment represented 46% of our total revenue, up from 27% last year.

Platform gross profit grew at an even faster pace, up 156% year-over-year to $44.6 million and represented 89% of our total gross profit dollars in Q3, up from 67% last year.

Platform gross margin of 77% increased 5 percentage points year-over-year driven by a favorable mix of higher-margin owned ad inventory.

While Q3 was a great margin quarter, we expect the source of inventory to be more balanced in the fourth quarter thus bringing Platform gross margins back down closer to 70% in Q4.

We acquire accounts through our operating system licensing programs, both Roku TV and Roku Powered, which are our fastest-growing sources of new accounts and through the direct sales of our streaming players.

In the third quarter player sales generated $67.3 million in revenue, up 4% year-over-year.

Our Q3 player revenue benefited from a strong new product lineup launch at the end of the quarter with a more powerful Roku Express and a new 4K HDR Roku Streaming Stick.

We are leveraging our cost advantage to strategically drive down the prices of streaming players to drive account growth which we monetize over the life of the account.

Our highly successful low-price Roku Express remains very popular and was a key driver of our 35% year-over-year player unit growth in the third quarter.

But was also a big contributor to the 23% year-over-year decline in player ASPs and lower player gross profit dollars.

We are happy to make the trade-off of player revenue growth for faster account growth as we view this as an attractive account acquisition path and we believe our low-cost leadership in the industry is a competitive advantage.

Player gross profit dropped 38% year-over-year with player gross margin down 5 percentage points year-over-year to 8%.

In addition to the pricing mix dynamics discussed, we also gave incremental discounts to clear the way for the new product lineup launch at the end of the quarter.

And we had some incremental airfreight costs that directly impacted gross margin.

We will continue to focus on account growth, streaming hours and ARPU as key metrics and our low-cost player strategy combined with our Roku TV strategy are clearly working to drive these higher.

Operating expenses increased 44% year-over-year to $57.8 million in the third quarter, largely driven by headcount growth with a 57% year-over-year increase in R&D expense.

We continue to see tremendous opportunities to invest in future growth and strengthen our leadership position in the streaming ecosystem and will continue to reinvest a large portion of our gross profit back into innovation and platform development.

Our net operating loss for the quarter was $7.9 million, an improvement from our net operating loss of $14.1 million in the third quarter of 2016.

Adjusted EBITDA loss of $3.7 million improved $7 million year-over-year compared to $10.7 million lost in the prior year.

As a percent of revenue adjusted EBITDA loss improved 9 points year-over-year to 3 percentage points.

GAAP net income loss of $46.2 million and EPS loss of $8.79 a share include the one-time non-cash $37.7 million expense related to the change in fair value from our preferred stock warrants to common stock as a result of the IPO and does not account for the conversion of preferred shares into common.

Adjusting for this one-time non-cash item, pro forma EPS loss was $0.10 based on basic and diluted share count on an as if converted basis, an improvement compared to the $0.17 loss in the third quarter last year on the same basis.

Please see our shareholder letter for GAAP to non-GAAP reconciliations.

We ended the quarter with $67 million in cash and cash equivalents and $23 million of term debt.

After the end of the quarter we received approximately $135 million in net proceeds from the IPO and have subsequently pay down the term debt.

With that, let me turn to our outlook for Q4.

Based on what we know at the time of this call, we are providing the following Q4 outlook.

For the fourth quarter 2017 we expect to generate total net revenue between $175 million to $190 million, up 24% year-over-year at the midpoint; total gross profit between $58 million to $64 million, up 37% year-over-year at the midpoint; and adjusted EBITDA ranging from negative $6 million to breakeven or negative 2% as a percent of revenue at the midpoint.

Please see our shareholder letter for GAAP to non-GAAP reconciliation items included in our outlook.

We plan to provide Q1 and full-year 2018 guidance on our Q4 earnings call in February, but I want to provide a quick reminder about seasonality.

As you can see from our Q4 outlook, there's a significant seasonality to our business with nearly 36% to 38% of total annual revenues typically coming in in the fourth quarter.

Revenues typically decline sequentially in Q1 and we expect this trend to continue in 2018.

Overall, Roku remains on a compelling trajectory with robust year-over-year top-line growth, expanding gross margins and decreasing operating losses.

And while we continue to make significant investments against several strategic initiatives, if trends persist we expect to reach EBITDA breakeven or better in 2019.

And now I will turn the call over for questions.

Operator?

(Operator Instructions).

Mark Mahaney, RBC.

Great, thank you very much.

Congrats on the nice -- really nice quarter out of the gate.

Three questions please.

First, can you talk about the drivers of that ad revenue?

And if you could maybe qualitatively talk about the difference and the drivers of volume, access to inventory amongst some of the OTT ad supported channels and pricing?

So just peal that ad revenue back a little bit.

Secondly, in terms of the trade-off between the player gross margins and active accounts, any updated thoughts on the guardrails you want to put around those margins, how low are you willing to run those gross margins?

Or does it make sense to actually run it at a negative gross margin given the big boost you're seeing to active accounts?

And then third, just if you'll talk briefly about what are the major toggles that would cause EBITDA to reach breakeven earlier or later than what you are looking at, than what you just talked about in fiscal 2019.

Like what's going to be key there for you figuring out when to take that to breakeven?

Thank you.

Hey, Mark, thanks.

This is Anthony.

I will turn it over to Scott in a second to answer your question about ads.

But in terms of players, we don't have a specific plan on how low we would take gross margins and what makes sense there.

So I don't really have any color to add.

But our strategy is working.

Active accounts grew 48% year-over-year and players are a big contributor.

So we are happy with the way things are trending there.

In terms of ads, Scott, did you want to talk about some of the drivers there?

In terms of the key drivers of our ad revenue this quarter, I would attribute it to a couple of factors.

One is we continue to make great inroads with agencies.

We have written upfronts or annual commitments with two other major holding companies.

We continue to have great progress penetrating TV buying teams who control of course $70 billion of ad spend.

We have had great progress in some of the newer ad products.

One of our goals as an ad team is to bring innovation to the table.

So our sponsorships category has really been strong in Q3.

In terms of CPMs and pricing, we continue to drive them.

As I think we've mentioned in the past, we sell in the $30-plus CPM range.

And we continue to seek good growth there as we layer in more products and capabilities.

And then I think in terms of EBITDA breakeven, Steve, do you want to --?

Yeah, hey, Mark, it's Steve.

Yes, so in terms of the trajectory of the business, we feel very good about the business, robust pipeline growth as we continue to mix over to the Platform segment.

It is faster growing higher margin, so continued gross margin expansion there has been helpful.

As you know, on the OpEx side we are investing significantly into a massive opportunity and that is largely headcount based.

So in terms of the levers that are related to the EBITDA trajectory, we feel confident in the guidance about 2019.

But really it's the relationship in terms of how fast that gross profit -- gross profit dollars are growing and the margin is expanding relative to the investment rate.

So that was really what would tweak the timing out of the breakeven trajectory.

Ben Swinburne, Morgan Stanley.

I have two questions.

Anthony, could you talk a little more about the Roku Channel, which is obviously off to a great start.

That's a little bit of a different business in that you are getting in your own content that you're monetizing directly with the consumer, licensing and/or rev sharing it with studios.

How big of a business do you think that can be for you over time?

And does it create any complexity in your conversations with all your other partners on the content front who are in that business?

I'm just wondering if you could talk about the opportunity and also how it may or may not change your relationships with other players.

And then I have a follow-up for Steve.

Sure.

So, the Roku Channel addresses a couple different areas for us.

One is -- and just to set the record straight, there's lots of content in the Roku Channel that is also available on other apps on our platform.

So it doesn't compete directly with existing content partners.

Instead it provides a new way for existing content partners to reach audience and monetize their content.

I mean there are 5,000 apps on Roku.

Many of them are free ad supported; but many customers are just not willing to look in every app.

So, one point of the Roku Channel for us is to start doing a better job of merchandising and recommending content with a contact first UI to our customers.

So that's -- and that helps our existing channel partners.

The other point about studios, I mean Roku is a large-scale publishing platform.

And we see over time a lot of content will become -- will come directly to Roku, published directly on Roku through a mechanism we call Roku Direct Publisher.

I mean there is a lot of content out there that's not being monetized, that is owned by companies that don't have direct-to-consumer marketing ability, don't have ad sales teams and would love to monetize that content on the big screen.

So that is another purpose of the Roku Channel.

And I guess finally, the third point of the Roku Channel is that consumers want free content.

Free is one of the top search terms on our website.

Consumers are looking -- when they move -- when a consumer cuts the cord and moves to streaming, they obviously want a better experience but they are also looking for better value.

And so that's -- so free is important and the Roku Channel really addresses that.

So yes, I'm super bullish on the Roku channel.

It's just the beginning of a big strategic effort for us.

Right.

And maybe if I can just be a little greedy and ask a follow-up to that for you or Scott.

It is an hour of viewing on the Roku Channel worth more to Roku than an hour viewing in other ad supported engagement on the platform generally speaking as a rule of thumb?

This is Scott.

I'll answer it qualitatively.

One of the benefits of Roku bringing forward a channel like the Roku Channel is we fully control the playback experience.

And we can optimize it to be a great consumer experience and a great opportunity for advertisers.

So the Roku Channel brings forward all the advanced ad tech that we've put into our operating system and it lets us sell at premium rates.

It also integrates sponsorship so we can create new opportunities for brands within the Roku Channel.

In our opinion, it's one of the best ways to monetize ad supported attention on our platform.

Right.

Okay, that's helpful.

And then just, Scott -- I mean Steve, excuse me -- I think I did this right.

It looks like the guidance for the fourth quarter implies a pretty decent gross margin step down from Q3 to Q4 in Platform.

I think you mentioned mix of inventory driving that.

Can you just remind us why seasonally Q4 has maybe more rev share advertising versus O&O versus Q3?

Just maybe -- that would be helpful color.

Yes, sure, Ben.

So based on my prepared remarks, Q3 had a relatively high percentage of Roku owned inventory and that is at very high margin.

And we also help content publishers sell their inventory, so we are a great source of demand for them.

Then we share the revenue back for them.

So there is a margin differential between Roku owned and partner inventory that we sell.

In Q4 there is a significant step up just in the overall Roku business both on the player side and the platform side.

And specifically in advertising there's a big step up in the number of impressions.

And so, we are helping the content publishers sell -- we are asked to help them sell more of their inventory and hence the mix shifts back over to a more balanced first Roku owned and partner owned, which puts a little headwind on the overall gross margin for advertising and thus the Platform segment.

And (multiple speakers) as you know from this quarter, Platform was 89% of the overall gross margin.

So as the Platform gross margin goes so goes the Company gross margin.

Sure, that makes sense.

Thank you.

Mark May, Citibank.

I had a couple just back on the Platform gross margin.

You commented obviously around Q4, but maybe if you could just talk a little bit about how we should be thinking about that longer-term and how the mix of the various inventory sources may likely trend over time and how we should be thinking about long-term Platform gross margins.

And then, in the quarter, just looking at sort of average streamed hours per account, which I think was 8%, year on year, how are you seeing the new express users in terms of their propensity to stream average hours relative to your existing customer base?

This is Anthony.

Why don't I talk about the Express hours first and then a little bit about Platform and turn that over to Steve?

Hours are growing strong; as consumers shift their viewing to streaming and watch more and more of their household viewing on streaming we see per user hours growing.

I don't have anything specific to comment on Express.

I would add a little color I guess about Roku TVs.

Roku TVs we are seeing, at least in some of the early data, that Roku TV customers do stream a little bit less than a streaming box customer.

But they are still great customers, they still stream a lot.

And we also have lots of ways -- we have other ways to monetize TVs that we don't actually have on streaming boxes.

For example, every interaction with your TV starts with a Roku home screen where we run ads.

We have technology like ACR that we're starting to use to monetize traditional linear TV viewing as well as our traditional streaming monetization, so --.

In terms of the Platform business, it's going extremely well.

Ads -- both big parts of our Platform business, advertising and content distribution, were really doing excellent in the quarter and both have grown nicely.

And I'll turn it over to Steve to maybe add some color on trends.

We will have -- as mentioned in the prepared remarks; we'll have some more detail on the outlook for 2018 in our next call.

But just to give you some qualitative thoughts on the Platform makeup.

So if you remember, Platform is ads, content distribution and then a little bit of licensing in there.

So ads is two-thirds, it is growing; it's the fastest-growing piece within Platform.

Content distribution is the majority of that remaining third.

And then there's a little bit of licensing from the Roku TV and Roku Powered program.

Most of that value is on the balance sheet in deferred revenue.

So if you think about the components, within advertising you have audience development, which is -- a great example of that is our home screen ads.

And that tends to be very high margin.

Within video ads, which is the biggest piece within advertising, as we talked about in the other question we have Roku owned inventory, which is very high margin.

An example of that is the inventory we get through as an inventory split for distribution of channels that are ad supported.

And then we help our partners sell their inventory and then we rev share back on that.

So that has higher COGS than the Roku owned.

And then we also have content sponsorships which tend to have a high margin.

So, a lot of what's involved in the margin trends of the Platform segment is really around the mix, mix of the ad business relative to other parts of the Platform segment.

And then within the ad business the mix between primarily the Roku owned inventory as well as the third-party inventory.

But can also be the relative growth rates associated with how fast video ads are growing versus audience development or sponsorships.

So really, it's the moving pieces and the mix between them that largely determines the overall margin profile of the Platform segment.

Laura Martin, Needham.

Great quarter, thank you for over-delivering all the [assessments] and I love this engagement number you guys are showing.

So a couple things.

One is your -- you've had a little bit of a revenue headwind is we mark down the player revenue which you were telling us about.

But I'm very interested in the breakeven economics of that.

So if you take $10 off a player, I get the fact that what you're playing for is the annuity stream of the ongoing revenue that comes from that customer.

Does that take 12-month breakeven to get back that $5, $10 discount you gave on the player, two years or three years?

How do you guys think about the breakeven that justifies lowering upfront player cost?

And then for you, Scott, I'm really interested in endemic advertisers, which as you think about your whole ad pie.

What I'm sort of asking is what like categories, like is it travel or is it -- normally I would ask like travel or consumer products.

But what I want to know is how many are endemic that are just advertising their channel on Roku versus how many are what I would call normal branded advertisers?

And what are the reported growth rates of those two categories?

Thanks.

In terms of active accounts and players specifically, active accounts growth is strong.

We have 48% year-over-year increase in growth in active accounts coming from both players and Roku TV.

One way I think about it is that both of those sources of new accounts are in essence negative customer acquisition costs.

We get paid a license fee from Roku TV partners when they ship a Roku TV.

And we get a positive gross margin when we sell a player.

But you are right that our primary objective with players is to sell as many as we can and unit sales were up 35% year-over-year in the quarter.

One of the levers we use to increase sales is price.

And so, coming out with a great product at a great value is important to us.

But -- and the Platform business does support lowering the margins on players.

ARPU increased 37%, for example, year-over-year on the Platform business.

So there's no -- currently there's no sort of period to make up gross margin on players because players are positive gross margin for us.

And then on the sources of ads on our platform, I will let Scott talk about that.

Great questions.

On the -- as you might expect on the endemic front or entertainment clients, we certainly over index there.

We are an entertainment platform, and so whether it is an app promotion for an app on our platform, a theatrical tune in, virtual MVPD -- those class of advertisers spend significantly with us.

And it's a great category for us because it's very data-driven.

We can predict, based on behaviors on our platform, how users are likely to engage that context.

But it is not a majority of our ad revenues.

A majority of our ad revenues do derive from traditional advertisers.

And we are active across every ad vertical out there whether that is travel, financial services, QSR, CPG, retail.

And that's because those are huge categories and we are a TV platform first and foremost.

So every TV advertiser is investing in OTT across all categories.

We are already now, by the way, about half of all top 200 Ad Age advertisers are now investing with Roku.

Okay.

And you're not seeing any downdraft in CPG or retail because you are just too early in the growth curve?

Sorry, can you repeat that?

We're not seeing any down -- what's that?

Downdraft in CPG or retail?

Oh, you mean to get changes in those categories themselves?

Yes.

Oh, yes, I don't have that data, but I would say those categories are big for us as well alongside all the other categories.

I mean the big trend is that we are still in very early days and billions of dollars of traditional TV advertising just moving to OTT to follow their viewers.

Perfect, thank you.

Ralph Schackart, William Blair.

Just on Platform revenue, I think you called out advertising being about two-thirds of that revenue mix in the quarter.

Can you give us a sense of how that compared to last year and how that progressed through 2017?

And then as a follow-up to that, can you give us an update on what percent of hours streamed were from ad supported content?

And then also how that would have compared from last year?

And I have a follow-up.

Hey, Ralph.

This is Steve.

Thanks for the question.

So in terms of Platform revenue, yes, as are about two-thirds of the Platform revenue.

It is the fastest-growing piece.

We haven't specifically talked about the historical breakdown.

But it has been gaining share pretty consistently driven by the video ad business within ads which, as Scott and Anthony talked about, is a massive opportunity that we are at early days.

So it has been growing the fastest and we think there's a huge opportunity for that to continue.

And so, we are very happy with the progress there.

And then maybe just on the ad supported channel question.

Yes, so ad support -- I mean in general viewing on Roku that includes ads continues to grow.

And there's still a lot of upside in streaming hour growth on Roku as consumers spend more and more of their time watching streaming versus traditional linear TV.

And our view is that a big chunk of that is going to go to ad supported content just like ad supported content is a big chunk of mainstream traditional TV viewing.

Anthony maybe a follow-up.

Just can you give us a sense of what you are hearing from your retail channel partners and maybe the OEMs for this holiday season?

Maybe more specifically within the player and smart TV category.

And then sort of how Roku is positioned this year versus last year?

Roku is positioned well.

We just launched an entirely new line of products, the Roku Streaming Stick+ won CNET Editor's Choice award.

TCL in September was the number two seller of smart TVs in the country selling more smart TVs than any TV company except for Samsung.

So we've got a lot of new models.

We'll see, but I think we are well set for the holidays.

Jason Helfstein, Oppenheimer.

A few questions.

So on the Roku Channel, did it have any impact on ARPU this quarter or just was the launch too late to matter?

And do you think it will impact ARPU in the fourth quarter?

And then another question, Roku Channel outside of Roku on tablets and browsers, any thought?

And then to the extent that that strategy is going well, would you consider M&A for assets to bolster the Roku Channel and that strategy overall?

Thanks.

It's still early days in the Roku Channel.

Did it contribute to ARPU?

It probably did a little bit because it's doing well for a brand-new channel.

And I think it's premature to talk about Q4.

I guess the big picture I think is that we think the Roku Channel is the beginning of a shift in content viewing or at least a lot of content viewing away from apps and into a content first user interface.

And we think the Roku Channel is a great way to do that.

So, we are very bullish on the Roku Channel and we're going to keep investing in it.

And I don't have any comments on taking it off Roku or M&A.

And then maybe one follow-up.

Do you think you saw any pull forward of active accounts or increasing streaming activity given the publicity generated by the IPO?

Jason, can you repeat that?

We are having a hard time hearing you.

Sure.

Do you think -- as a result of the publicity generated by the IPO, do you think you saw any pull forward in active account activations or a picked up increase in streaming usage?

Hey, Jason; this is Steve.

I wouldn't attribute any significant change based on the IPO.

The IPO was late in the quarter regardless, but Roku has got a great consumer brand and we have been the leading TV plan form.

Our active account growth has been robust, 40%-plus for a while.

It was a little higher at 48% this quarter and that was really driven by the Roku TV business really in the kind of middle to late part of the quarter around back to school.

So, I think that is unconnected to the IPO, although certainly the IPO -- there was great press around the IPO itself.

This is Anthony.

I think the main effect of the IPO was to increase awareness among investors and others about what Roku's business really is.

That we are a platform business, that we -- we're becoming a large ad platform and a big way to distribute content -- our real business.

And the streaming players that we make are awesome, but they're just one of the ways we acquire accounts.

Thank you.

Thank you.

At this time I would like to turn the call back over to Anthony Wood for any closing remarks.

Sir?

Thanks, everyone, for dialing in for our first earnings call.

We had a great quarter.

We were super happy.

It was a milestone quarter for Roku.

We more than doubled the size of our Platform business, we refreshed the entire line of players, we released Roku 8 with exciting new features for Roku TV and we expanded our reach significantly.

So it's a great time to be in the streaming business and thanks, everyone.

Ladies and gentlemen, this concludes today's conference.

Thank you for your participation and have a wonderful day.