Dan Jedda: Yeah. I’ll take the device gross margin. So again, Q1 device gross margin was negative 5%, which was typically flat if you exclude the $10 million positive service operator licensing catch-up in Q1 of last year. In terms of like, the near-term and the change from Q1 to Q2, it really is reflective of the ramp-up in our Roku branded devices. And again, that’s a positive. We are continuing to ramp that up. It is — we’re far more distributed now than we were in 2023. I’m sure Mustafa can talk on that, but we see that as a positive and we would expect those margins to be in the Q2 ballpark going forward. Again, as we grow and scale this program, we will improve our cost structure within devices. And over time, those margins will get better relative to where we are now. But again, we are in the ramp-up stage of Roku branded TVs. And so for the near term, as we ramp that program up, I would expect to see margins similar to Q2.
Anthony Wood: Yeah. And in terms of Roku Pay, I don’t think we’ve broken out the percentage of streaming households to use it. I’ll just say that it’s — the primary way that we drive subscriptions on our platform is through having viewers sign up to a subscription service with the ease of using Roku Pay and a lot of the way we improve — we plan and we had improved Roku Pay adoption on the platform is things like integrating SVOD content more throughout the recommendation engine. So for example, like I mentioned — just mentioned, we’re adding a — we just rolled out a content row — a recommendation of content — a row of recommended content at the top of our home screen that will include recommendations of SVOD content both entitled and unentitled SVOD content, meaning SVOD content that you have a subscription for, which will increase engagement, which will reduce churn as well as SVOD content that you don’t have a subscription for, which you then would sign up — get a free trial and sign-up using Roku Pay.
But we also — so we’re integrating SVOD throughout the platform more, but also the user experience of how easy it is to sign up with Roku Pay. Also — so technicalities of running a large-scale billing platform, things like passive cancellations, there’s just a lot of operational focus on improving the numbers in Roku Pay. And so it’s a big business and it’s — and there’s still lots of opportunities to continue to improve it.
Steven Cahall: Thanks.
Operator: Thank you. One moment for our next question, please. And it comes from the line of Ralph Schackart with William Blair. Please proceed.
Ralph Schackart: Good afternoon. Thanks for taking the questions. Dan, just a question on ARPU. It did increase sequentially. So I’m just kind of curious how we should think about that trendline going forward, particularly with some of the monetization efforts that Anthony highlighted. And then just maybe as a follow-up, maybe bigger-picture, a couple of quarters now of higher levels of EBITDA and free cash flow. Just kind of thinking or give some perspective if you could, how you’re thinking about just philosophically about these levels of sustained profitability? Thank you.
Dan Jedda: Yeah, okay. So I’ll take the ARPU question first. On — we were flat year-on-year in ARPU and that’s of course mixing out as — to more international than US where we’re in our scale and engage phase. We are starting to monetize in areas like Mexico and continue to monetize in areas like Canada, UK, and Germany. But essentially, a lot of our international growth does have a lower ARPU. So we do mix out. I will say what we do see, which is positive is one, if I were to just look at the US in isolation, we, of course, look at it in multiple ways. And on a trailing 12-month basis, US ARPU was up year-on-year and when we mix in international, it becomes flat for the total company. So that is a positive for us that we are improving ARPU on a trailing 12-month basis.
So we also look at it on a quarterly basis, that also was positive in the US, and looking at the most recent quarter, which is a positive. So I like the trends I see in terms of on a mix-adjusted basis in ARPU, but when we mix things out, the ARPU does tend to be flat just given the growth that we’re seeing for actives international, which again is a good thing as we continue to scale and grow engagement internationally. Ultimately, we will monetize international. We are monetizing pieces of it, but we’ll continue to monetize it and that should improve international ARPU over time.
Anthony Wood: And this is Anthony. I’ll just comment that we’re seeing great progress with our international growth plans. For example, in Mexico, we’ve now achieved 40% market share for TVs, 40% of TVs sold in Mexico are now Roku TVs, which is a great achievement for us. And we’re also starting to ramp up monetization. I mean, it’s still early days internationally, but we are starting to make progress with, for example, launching the Roku Channel in Mexico and things like that.
Dan Jedda: And I’ll just take the second part of that question, Ralph, on EBITDA and free-cash flow. So, we feel very good about EBITDA. We’ve — basically we have had our third straight quarter of positive adjusted EBITDA and we’ve guided to a positive adjusted EBITDA of $30 million for Q1. So four quarters inclusive of the guide. I feel very good about EBITDA going forward. We said that in the letter and Anthony repeated that as we focus on growing the growth rate of Platform in FY ’25, we will continue to grow EBITDA and free cash flow. I will say — I’ve said it many times, free cash flow, EBITDA — adjusted EBITDA will be a good proxy for free cash flow as we are CapEx light and will continue to be CapEx light for at least the next year.
I’m really, really happy with the capital that we have and how we’re focusing CapEx — being CapEx light. So adjusted EBITDA will be a great proxy for free cash flow. So we see that growing along with adjusted EBITDA. I will say one thing that we did do in Q1 was something called the net share settlement where when we issued our shares via our restricted stock units in Q1, we did offset some of that with net share settlement. So we offset a third of our dilution by essentially issuing less shares and paying the taxes in cash that had the impact of reducing the dilution impact of shares issued. That’s just one way we’ve utilized cash and as we continue to focus on free cash flow and free cash flow per share, that will have a positive impact.
I do expect us to continue to do that for the rest of this year, which should offset about a third of the dilution of future issuances.
Ralph Schackart: That’s helpful. Thanks, Anthony. Thanks, Dan.
Operator: Thank you. One moment for our next question. All right. It comes from the line of Rich Greenfield with LightShed Partners. Please proceed.
Rich Greenfield: Hi, Thanks for taking the question. Anthony, earlier in the call, you touched on this idea of this personalized feed that you’ve rolled out at the top of Roku. For a long time, Roku was always about apps or clicking on apps, and curious sort of fundamentally what made you take the shift, because it seems like a pretty big fundamental shift in how content is sort of surfaced. And as you think about this personalized feed, obviously, as you think about directing the traffic to the Roku channel where you sell ads or apps that you could subscribe to, it seems to give you a lot of power to drive revenue. And I’m trying to think about how the interplay between purely what a user might want to watch next versus how it drives revenue at Roku and how you think about that balance going forward — and sort of just how this evolves for Roku would be really interesting to hear. Thanks.
Anthony Wood: Hey, Rich. Yeah, so I think there’s a few different things that I think about when I think about putting a content row on the Home Screen. One is our viewers. The fundamental driver of our success has been building a custom-built operating system for television that has a simple and delightful viewer experience. And we have an iconic Home Screen that’s differentiated and recognizably different than our competitors. So we don’t — we obviously don’t want to lose that and we’re not going to lose that. But also, if you just look at the evolution of what people view on a platform like Roku, it used to be that a lot of things spread out, a lot of different apps. Now, I say, for example, the number, we said the number three app on the platform is the Roku channel.
But it’s not really an app. I mean, of course, it is an app, but it’s also more than that. It’s content that we have. It’s fast content, it’s premium subscription content, it’s AVOD content. It’s content that we’ve licensed directly, that we have direct distribution deals with, and that we integrate throughout our user experience. One way to access that content is through the Roku channel app, but you can also access it through the more ways to watch, interface on our UI. You can access it through the Sports Zone. There’s just lots of different ways. And it’s one of the fundamental parts of our business model is to expose content to viewers and drive engagement with content while being disciplined about how much we spend for content. And we can do that by integrating it into our UI.
So it’s a — it’s important for our viewers to expose that content. And this is super important for our business model to expose content. So — and then, of course, this year — last year for me was the year of focusing on operational efficiencies. This year I’m focused on driving platform revenue growth. There’s tons of opportunity. One of the big ones is just the Home Screen. It’s iconic but it hasn’t changed, really in a long time. And there’s a lot of ways to still keep what’s made it great, but also make it more useful for our viewers and drive revenue. So that’s sort of the different kind of aspects.
Rich Greenfield: Maybe asked another way. Do you think ultimately it becomes a content feed and not an app feed, like long term?
Anthony Wood: Well, I don’t want to design our Home Screen on this — on the earnings call, but the Home Screen, my goal with the Home Screen is that it will evolve while maintaining its iconic differentiation and while increasing monetization and increasing its usefulness for viewers. And a big part of the strategy for that, some of it is content. But it’s not — it’s also about what we call experiences, things like the sports experience, which is just a — you bring it up a lot because it’s just a good example. It’s an experience for helping viewers find sports content across the app — across the platform. So I think one of the things we plan to do with the Home Screen is build more of these types of experiences to make them more useful for viewers and to use those ways to integrate advertising and promotion and sponsorship as well.
So that — you might see more of that kind of thing integrated into our Home Screen long term. But no, I don’t think it’ll ever become just content recommendations.
Rich Greenfield: Thank you.
Operator: Thank you. One moment for our next question. And it comes from the line of Ruplu Bhattacharya with Bank of America. Please proceed.
Ruplu Bhattacharya: Hi. Thanks for taking my questions. I have two, one on active account growth and one on programmatic revenues. On active account growth, do you see more growth in the US, or do you think that more growth now comes from international markets? And with respect to the Walmart-VIZIO deal, do you see any impact from that? And do you see yourself maybe potentially gaining share at other retailers? And then the second question on programmatic. Charlie, I wanted to ask you, what innings are we in with respect to opening up to other DSPs. And have you seen a meaningful uptick in the fill rate and any impact on CPMs? Thank you.
Anthony Wood: Right, cool. So this is Anthony, and I actually see, I think, three questions in that question. So I’ll take the first part. Turn it over to Mustafa to talk about Walmart-VIZIO and then Charlie to talk about DSPs. I mean, in terms of active account growth, we’re seeing growth — I mean, obviously there’s more future growth [Technical Difficulty] US because there’s just a lot more humans with broadband households that watch TV outside the US than inside the US. And certainly, we’re seeing stronger growth at this point outside the US than inside the US. But. there’s still, I believe, plenty of room to continue to grow active accounts inside the US for a while. And of course, there’s tons and tons of room to continue to grow active accounts outside the US, which we’re making good progress there.
