Lets talk $ROKU...

It's all about winning.

Hello all. I wanted to present some points on ROKU's latest quarter. This quarter was truly amazing ---- there was an acceleration in not just performance, but in the thinking behind the business. Related commentary:

1. The total annual spend on “Upfronts” are $21Bn per annum. Look, much of that revenue went away from linear this quarter and to digital. In fact, ROKU telegraphed that no so salient point in their Q ---- but nobody is really speaking to it. It's key that you understand this opportunity.

“When released from their annual TV upfront commitments, marketers took the opportunity to reallocate advertising spend more aggressively toward TV streaming. We have also closed 2021 Upfront deals with all six major agency holding companies at significantly increased levels of commitments.” LETS NOT DISCOUNT THAT. 2019 Upfront advertising spend in billions from 2016 through 2019 was $18.6Bn, $19.7Bn, $20.7Bn, and $21.2Bn respectively. 2020 was estimated at $21.6Bn ---- but who knows how that actually played out this year w COVID. Remember, ROKU generated $319M in “platform revenue” this last quarter. That’s a massive runway cleared for growth w Upfronts alone ---- and Anthony and team have started the ascent up the "Upfronts" runway.

2. Signed deals w just about all content providers ---- most recently NBC. HBOMax is a matter of time. ROKU has serious pricing power and bargaining power as the ONLY true INDEPENDENT CTV ONLY player out there. Look, on your TV, you want optionality. You may want to watch your SVOD subs, you may want to do some AVOD stuff, you may want to do some TVOD, you may want to have your phone display on the screen. ROKU gives you all that optionality ---- and has been busy fighting that w several content providers and is winning. They are just about done laying down all the foundational work.... The fruit is coming and it coming BIG.

3. Speaking of early fruit. ARPU accelerated from 2% QoQ to 8% QoQ. More accounts – accounts grew 7% QoQ. Platform revenue growth went up 30% QoQ. Platform GM% grew from 56.6% QoQ to 61%. Revenue growth YoY was 73%. And EBITDA for those counting was the strongest since I’ve been tracking the last 2 years ---- perhaps the strongest of all time. You can figure out what their Rule of 40 is ---- STRONG.

4. TTD hides in their CTV numbers and relies on Jeff Green’s superpowers and salesmanship in every quarter’s opening comments. Anthony Wood isn’t that guy ---- he has a few opening comments and then is letting his numbers speak. And the most recent quarter ---- the numbers are speaking LOUDLY.

5. Jeff Green speaks to 95% customer retention. The big boys are spending BIG dollars w ROKU on CTV. Stat ---- Nearly 50% of all programmatic OTT and CTV advertising goes to Roku devices, dwarfing other device makers, according to a third-quarter 2020 survey from ad-technology company Pixalate.

Additionally, 97% of TV advertisers that spent $1 million or more with Roku in Q3 2019 continued to invest in Q3 2020

6. Speaking of acceleration, lets talk TV’s:
a. Roku TV US brands in 2020 include ATVIO, Element, Hisense, Hitachi, InFocus, JVC, Magnavox, onn., Philips, Polaroid, RCA, Sanyo, TCL and Westinghouse.
b. Player unit sales were up 57% YoY. Remember, this is a razor and the blade story at play. They aren’t trying to make a major margin at the razor (currently at 15% GM). It’s all about platform revenue margins (acceleration to 61% GM).
c. Let’s talk Mexico searches - https://trends.google.com/trends/explore?date=today%205-y&am...BOOM!
d. Let’s talk Brazil searches - https://trends.google.com/trends/explore?date=today%205-y&am...BOOM BOOM!

7. ROKU Channel. That thing is killing it ---- its streaming hours grew faster than any other top 10 channel on the ROKU platform on a YoY growth basis . Why do you think Amazon ceded to ROKU and allowed ROKU to participate on the Amazon TV platform? They know where the viewers are going ---- and the numbers are speaking loudly on ROKU Channel too. Amazon stands to lose subscribership if they don’t open it up to ROKU Channel ---- and so they did.

8. One more thing on ROKU Channel ---- they have figured it out w the “live TV channel guide”. Super smart. Why do you think the content providers are saying, heck, I don’t want to just build an app and be ANOTHER APP on the TV homescreen. They are building their content DIRECTLY into the ROKU Channel. Super smart play by ROKU.

9. ROKU also has now mandated ROKU Pay. If you want to buy your content subscription to whatever app on the ROKU network, ROKU now forces participation in that transaction ---- think how Apple does it on the App store. In fact, prior to that mandate, ROKU Pay was already up 130% in Q3 YoY.

10. ROKU owns "user mindshare" on the platform. Once you are used to the platform, do you want to learn a new platform? No, you don’t. Think about you IOS users that have never used Android. Do you really wish to try Android? Some of you will. Most of you will not. You will ask for ROKU OS or a ROKU device on your next TV as well. I have a Sony TV as well ---- it has Android OS. That thing is a dog of an OS ---- slower than molasses. Good idea BUT very wrong execution. This is what happens when you have a biz that is not your core biz ---- and CTV is NOT a core biz to Google. Just because they have figured out web search/advertising, does not mean that they can figure it out on their platform. And, Amazon makes their own content ---- and therefore has inherit bias. ROKU comes as the ONLY INDEPENDENT CTV ONLY company out there. And they own your mind ---- and don't rely on any dumb Unified ID thinking.

DISCLOSURES: I have been long TTD for 3.5 years. It's been a massive winner for me. I've trimmed it quite a bit recently and am now down to a 8.2% position. The street is in love w Jeff Green ---- but have started to move that $$$ over to ROKU. It's now a 19% position for me ---- my largest. I plan to sell more TTD in the early parts of next year ---- as I continue to have massive tax consequences for it.

Anyway, I could go on, but I’ll stop. SO much to like about ROKU. Last thing ---- anyone can debate the merits of anecdotal commentary. BUT, as a mentor of mine says, FOLLOW THE NUMBERS. The numbers are speaking VERY very loudly………

I called ROKU as my top pick for 2020 ---- and I know, it's up a paltry 101% compared to many of our other 2020 winners. Pretty sure I was only off by one year. ;-)