Roku Inc
NASDAQ:ROKU
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
51.67
98.57
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Roku Inc
You don't have any saved screeners yet
Ladies and gentlemen, thank you for standing by, and welcome to the Roku Third Quarter 2019 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Tricia Mifsud, Vice President of Communications. Thank you. Please go ahead, ma'am.
Thank you. Good afternoon, and welcome to Roku's financial results conference call for the third quarter ended September 30, 2019. I'm pleased to be joined on the call today with Anthony Wood, Roku's Founder and CEO; Steve Louden, our CFO; and Scott Rosenberg, GM 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 discussion, including responses to your questions, reflects management's views as of today, November 6, 2019 only and we do not undertake any obligation to update or revise such 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 full year of 2019 and the future growth in our business.
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 will 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 for the comparable period of 2018.
Now I'd like to hand the call over to Anthony.
Thank you, Tricia, and thanks, everyone, for joining today's call. Roku is well positioned as content publishers and advertisers shift to streaming. We continue to execute well against our plans and our Q3 financial results beat our expectations. Our performance allows us to continue to reinvest in ways that extend our strategic advantages and build even greater preference for Roku among consumers, content publishers, OEMs and advertisers.
I'd like to share a few highlights from the quarter. We launched our new streaming player lineup in North America, Latin America and key markets in Europe. Early reviews have been positive. For example, CNET named the Roku Streaming Stick+ the best overall streamer for a third year in a row. Our focus on TV streaming and our large, highly-engaged audience make Roku an essential partner for content publishers, advertisers and TV manufacturers. We build big audiences for major new services and brands. And when our partners succeed, we succeed. Just last Friday, Apple TV+ launched on our platform and we expect others to follow soon.
Roku monetized video ad impressions more than doubled again on a year-over-year basis. The Roku Channel contributed to this growth as ad impressions within the channel are growing faster than the ad impressions in the overall platform. We continue to be pleased with the growth of The Roku Channel.
Finally, we recently announced an agreement to acquire dataxu, a demand-side advertising platform. While we work with many leading DSPs and will continue to do so, we believe the dataxu acquisition will accelerate our OTT advertising road map and enable Roku to provide marketers a single data-driven software solution to plan, buy and optimize their ad spend across TV and OTT.
I'll now turn the call over to Steve to go through the financial details.
Thanks, Anthony. Before taking your questions, I'll walk through financial highlights and address our outlook. Please see our shareholder letter for more financial details from the quarter. Q3 revenue, gross profit and adjusted EBITDA exceeded our outlook, driven by robust growth in our Platform segment and continued strong demand for streaming players. Both revenue of $261 million and gross profit of $118 million grew 50% year-over-year and gross margin of 45.4% was similar to the prior quarter as well as the same quarter in the prior year.
Adjusted EBITDA of roughly breakeven and the net loss of $25 million were ahead of our outlook due to better-than-expected revenues and lower-than-expected sales and marketing expenses due in part to timing of retail and merchandising cost as well as headcount cost, primarily stock-based comp expenses. Strong platform growth continued as revenue of $179 million was up 79% year-over-year and Roku monetized video ad impressions once again more than doubled year-over-year. Player revenue grew 11% year-over-year, driven by a 21% year-over-year increase in player units, with ASPs down 9% year-over-year as we continue our strategy of attractive player pricing in order to drive unit sales and active accounts. We ended the quarter with $388 million of cash, cash equivalents, restricted cash and short-term investments.
Before turning to the outlook, I'll mention a new Roku OS feature that we began rolling out in Q3. This feature identifies when the channel has been continuously streamed for an extended period of time without user interaction. It prompts the user to confirm that they are still watching and closes the channel if the user doesn't respond. While we continue to expect robust growth in our aggregate streaming hours as we increase active accounts and user engagement, we believe our 2020 year-over-year streaming hour growth rates are likely to be lower than 2019 growth rates. Some of Roku's leading channel partners like Netflix have already implemented similar features and we think it is positive for Roku, our customers, partners and advertisers to have a level of consistency across our platform. We do not expect this rollout of this feature to have a material impact on our future financial performance.
With that, let's turn to our outlook for the full year. Reflecting our Q3 performance and the inclusion of dataxu for part of Q4, we are increasing our revenue and gross profit outlook for the full year 2019. Our raised revenue outlook midpoint of $1.106 billion represents roughly 49% year-over-year growth, up from 46% year-over-year growth in our prior outlook. We expect Platform revenue to represent roughly 2/3 of total revenue, including approximately $13 million in revenue from dataxu. We are raising our total gross profit outlook for 2019 to roughly $492 million at the midpoint, up from roughly $485 million previously.
For modeling purposes, we continue to expect full year Platform gross margins in the low 60s percent, driven primarily by continued mix shift to video advertising. For players, we expect Player gross margin to be in the low-single digits for 2019 and we expect Player gross margin to be roughly 0% in Q4. As a reminder, Q4 is seasonally our strongest quarter and is back-end loaded with a significant portion of our revenues related to Black Friday through the end of the year. So Q4 is still heavily dependent on how the holidays stack up, given a highly competitive retail environment.
Similar to last year, given a seasonally higher mix of Player revenues in Q4, the overall company gross margin is expected to be sequentially lower in Q4, between the upper 30s and 40%. We have updated our 2019 adjusted EBITDA outlook midpoint to $30 million from $35 million previously, reflecting continued investment in the business as well as roughly $5 million negative impact to adjusted EBITDA in Q4 related to dataxu operations and dataxu acquisition-related expenses. We plan to publish historical pro forma financials related to the dataxu acquisition prior to our next earnings call, which will provide some additional detail.
Given the relative size of dataxu in our integration plans, we do not expect to break out dataxu going forward, but rather it will be included in our Platform segment. As we have done previously, we plan to provide outlook for next year on our Q4 call.
In Q4, we anticipate a greater sequential increase in operating expenses from our continued investments in talent, sales and marketing efforts, the impact of increased facility costs, as well as the inclusion of dataxu. The stock-based comp estimate for 2019 has decreased to roughly $84 million from $90 million in the prior outlook. Depreciation and amortization and net other income of $10 million are reflected in our outlook for roughly $64 million of net income loss in 2019. I'll summarize by saying how pleased we are with the performance of the business in the quarter.
With that, let's turn the call over for questions. Operator?
[Operator Instructions]. Our first question comes from Ralph Schackart with William Blair.
Two, if I could. Just first on the EBITDA guide. Steve, it sounds like perhaps there were some more expenses in Q4. Is there anything specific in Q4 that you'd call out for expenses? Because it looks like the guide, even with a beat and contemplating dataxu, has maybe decreased relatively to the prior outlook, first question. And second question, just on ARPU. I know that could bounce around, but it looks like it lagged account growth in the quarter. Any color you can add to that? Anything from 606 you'd call out? That would be helpful as well.
Ralph, it's Steve. I'll take the first one on EBITDA. So as I mentioned in my remarks, part of the Q3 overperformance on OpEx relative to our prior expectations related to the timing of certain costs. And so similarly, Q4 reflects some lower - some expectations in Q4 related to the timing of certain costs that are shifting in Q4 as well as the expected SBC difference. In terms of the ARPU, the ARPU growth rate on a trailing 12-month basis has been growing in a similar range in the high 20s and 30%. So there's not anything in particular I would say on that. It's been on a fairly consistent ARPU year-over-year growth trajectory as of the last couple of quarters.
This is Anthony. I'll just add that at the beginning of the year, we set a goal to operate the business at roughly EBITDA breakeven for the year and that we are on track for that.
Our next question comes from Vasily Karasyov with Cannonball Research.
I wanted to ask a question about the expectations in terms of relative growth of ad-supported versus SVOD viewership, given that you have Disney+, you have Apple TV+. Are you not worried - or should we not be worried that they will take share of viewing on Roku and then that would impact your ability to monetize advertising inventory and that would somehow impact advertising revenue growth? How do you think about what's going to happen in the next 12 to 24 months with viewing on your platform? And what will be the puts and takes between the SVODs and AVOD apps?
Sure. This is Anthony. Overall, we're excited about the launch of all the new services coming to the industry and to our platform. We think that they are good for Roku in a bunch of ways. They are obviously going to drive viewing overall on our platform or engagement, which is good. We can discuss why, but engagement on our platform is very good for us. They're going to increase the interest in viewership moving from traditional TV to streaming. We think that eventually, all TV is going to be streamed and that this will be a - the rise of all these new services will help encourage that transition.
So we have customers that want to watch paid premium services. We have customers that want to watch free content. We have customers that want to watch both. And so we think all those business models are supported on our platform. We monetize all those business models. We see advertising as growing the fastest, but they're all generally good for our business. So I don't know, Scott, if you have anything you want to add?
Yes. I'd just like to add to Anthony's comment that we think our biggest competition is attracting linear TV ad spending out of linear into OTT. That's the competition. Today, according to Magna, only 3% of TV budgets are spent in OTT, but 29% of audiences are already there. That's the big opportunity. That's what we're focused on over the next 12 to 24 months. And there could be lots of winners on our platform, including these new services.
So in other words, you think that the conglomerates that are behind those AVOD apps, they would be pushing advertisers to shift budgets and that's how you will benefit in the long term?
I do think that in the aggregate, yes. The more attention and energy that's put into OTT advertising, the better for everybody. I think Roku especially is uniquely situated to serve TV advertisers as they move their budgets to OTT because we can prove incremental reach. We've got the tools to prove the measurement and effectiveness of that spending. We've got a first-party relationship with our consumers.
Our next question comes from Jason Helfstein with Oppenheimer.
Two. So first, can you say if the guidance assumes any impact from Disney+, Apple+ in the fourth quarter? And then there's just been a lot of - still part of this question. A lot of questions just around the accounting treatment, particularly kind of in ASC 606, because Disney, for example, becomes a very large customer over a period of time, kind of how that flows into the numbers on a quarterly basis? So any help or commentary there I think would be helpful. And then can you just say what the impact - what you are assuming the impact of dataxu is on gross profit in the fourth quarter?
Yes. Jason, this is Steve. I'll take those. In terms of guidance, our outlook does anticipate Apple+ has obviously just launched. And we anticipate other services to launch soon. So they are included. You noted the accounting 606 impact. I think, a reminder that the - in 606, these multiple element arrangements are valued for the totality of the arrangement, which could be a couple of years. And there's different elements and different performance obligations. And so there isn't necessarily a direct 1:1 and immediate revenue recognition when these services launch or when we sign up people. It's more complicated than that and the timing can be lumpy as we've talked about in different calls.
In terms of the impact of dataxu, we mentioned that the inclusion includes roughly $13 million of revenue for a subperiod in Q4 based on the anticipated close date here soon, as well as a $5 million negative impact to the EBITDA. We'll be publishing some pro forma financials related to the dataxu acquisition between now and the next call and so you will have more detail on the shape of the P&L there.
Our next question comes from Laura Martin with Needham.
Great, and thank you, Jason, for asking my accounting question. And I think, Anthony, you're on track to actually earn $40 million of EBITDA this year, but forget that. So I want to go back to dataxu, Anthony. So I'm interested, are you going into competition with Trade Desk? Are we pivoting the business a little bit so that dataxu isn't going to be captive to Roku and instead we're going to be a demand-side platform and compete in the open Internet? I am very interested in how you see dataxu progressing over the next 3 to 5 years. Let's start with that one and then I'll do my follow-up.
Okay. Sure. So we haven't closed the deal with dataxu yet or begun the integration. But with that sort of disclaimer aside, it's a very strategic acquisition for Roku. It's in line with our strategy of how we expect the market to play out over the next several years. Today, our ads that we sell are mostly sold direct. But we think the ad buying is going to become more automated over time and this acquisition's primary goal is to accelerate our road map for our ad tech. I will let Scott talk a little bit more about that.
Laura, I'll make a couple of points here. First is this is a natural progression of our strategy more generally, to provide advertisers with better planning and buying tools. Our goal ultimately is to present a holistic TV and OTT planning and buying solution for TV advertisers and help support them as they migrate their spending out of traditional linear TV into OTT.
Our real goal in this deal is to both expand the business we do with current clients, give them new data and measurement products, prove more efficacy across a broader portion of their media. And it also helps us work with a broader spectrum of clients who may want to participate more in OTT than they can today and would value, programmatic, API, self-serve type access to OTT.
We are combining the unique advantages of Roku's first-party consumer relationship, our scale, our proprietary data and inventory, together with some great talent, device graph technology, data science capabilities from dataxu. And we do think that will present some unique opportunities to our buyers. But I do want to emphasize that being an open ecosystem is essential to how we operate here. It's both good for the ecosystem and good business. And so we don't anticipate any slowing down of the work that we do with folks like Adobe, the Trade Desk, et cetera.
Okay. That's super helpful, Scott. Let's go to your gross margins. So your gross margins were a little light this quarter and also next quarter, they're a little light. I just want to make - there's a couple of good reasons that gross margins might be down. The Roku Channel has 50% margin, anything you guys are probably doing on the subscription revenue side, which is diversified revenue sources, lower gross margin. Tell me what's going on with the gross margin line, please? Why is that under pressure?
Yes. Laura, it's Steve. Yes, in terms of the gross margins, in our prior outlook, and we mentioned it for Q4, that the Platform margins would be in the low 60% range. So it actually was in that same range that we assumed it would be. The primary driver is - and we talked about this phenomena, is the continued mix shift over to the video ad business, which tends to operate at a 50-plus-percent gross margin versus some of the other components within Platform that are significantly higher margin because there's little cost in our UI of some of these things like sponsorships or rev shares.
Okay. Good. And Scott, I guess Roku Channel continues to - is it any higher in the ranking than fifth?
It continues to be fifth in terms of reach and growing much faster than the platform as a whole. It's also growing as a contributor of ad inventory into our overall sale. We just launched Kids & Family this quarter, that was a great new addendum to our overall content offering. And our goal here is to keep feeding this virtuous cycle of bringing more users in, that enables us to invest more in a broader array of content which then, of course, brings yet more users in. And we are executing on that strategy very well and it's an exciting growth story.
Scott, this ARPU of 30% is like blowing everybody else away in TV. So you guys are doing great work on the CPM side. So congratulations, guys.
Thanks.
Our next question comes from Ben Swinburne with Morgan Stanley.
Just staying on the dataxu topic, can you guys give us a sense for how fast that business is growing and whether you expect the integration of the asset into Roku to accelerate that growth rate? And I'll just ask my follow-up on the international side. Anthony, you noted that you've announced some new partnerships heading into the U.K. Can you just help us think about sort of the international opportunity in the context of what you guys have been doing in the U.S.? Is the business model broadly the same? What - how quickly might you start monetizing? I know you have to build audience scale. Just any help on thinking about that ramp would be great.
Ben, it's Steve. I'll take the first one on dataxu. As Anthony mentioned, the deal hasn't quite closed yet and we haven't started the integration. So in terms of kind of overall aspects on integration and growth rate, we'll talk more about that in the next call, where we'll also be providing overall 2020 guidance. And then as I mentioned before, we will be publishing pro forma financials, so you will have a lot more information soon regarding the historical growth rates of dataxu.
Fair enough, thought I'd try.
Yes. This is Anthony. I mean just to add to that, I mean the primary reason that we acquired dataxu was for the talent and the technology to accelerate our technology road map. So that's how it's really - I mean we already have a very strong ad platform, but this makes it even stronger. In terms of international, there's obviously a lot of potential in international, 1 billion TV households around the world. It's a greenfield with a lot of potential. These big new services that are coming into the market, like Disney+ and Apple and already Netflix, are - have global ambitions, so - and we are making progress. Now we said in the past that the first thing we're going to focus on international is building our scale and then monetization will follow, the same trend that we saw in the U.S., in building out the U.S. market.
In terms of building out active accounts, we announced that the Roku TVs with Hisense coming to the U.K. and we just launched in last quarter, our new lineup of streaming players. The first time - this was the first time that we launched our Roku Express with a global launch in multiple countries around the world at the same time. So we are - so that's an example of how we're getting more serious about expanding our reach with - in the international markets.
Our next question comes from Elliot Alper with D.A. Davidson.
I wanted to ask if you guys have any more plans on launching more apps outside of The Roku Channel? This doesn't mean content like The Roku Channel, but maybe interactive apps or platforms on your platform that could drive more traffic and ad inventory.
This is Anthony. So the way we think about The Roku Channel is - the way I think about the Roku platform overall is its primary purpose is to distribute content to viewers. And there are multiple ways - if you're a content publisher, there are multiple ways to distribute that content. One way is to write a streaming channel, and companies are still doing that, obviously. Another way is - that's becoming increasingly popular is to publish your content in The Roku Channel. And so we're continuing to add more and more content to The Roku Channel and more and more content categories. So for example, we just added Kids & Family, which was a great launch for us.
The Roku Channel, we continue to expand in multiple dimensions. There is, at this point, over 80,000 free and paid movies and TV shows. We've added live linear services like ABC News. There's over 40 live linear services now. Premium subscriptions we added recently, so over 40 million - 40 different premium subscriptions now, like HBO and SHOWTIME. Nearly 30 Kids & Family content partners. So we think that you'll - well, not we think, you will see more and more content coming to The Roku Channel, different categories and you will see it integrated into different points in the UI. And so that's really our approach for - in terms of being a one-stop distribution channel.
Our next question comes from Mark Mahaney with RBC Capital.
Let me try two, please. First, just on the - I think it was Ben who was asking about the way to think about the duration or the timing related to international and I guess revenue contribution or profit contribution from international, do you want to set out any - help us with any expectations there? And then just back to the streaming launches. And I want to ask the question this way, if you think about the revenue you get from Disney+ and Apple+ and everybody else who's launching, it seems like a slew of them, do think that's going to be showing up in your - for you more as customer acquisition ad revenue, subscription ad revenue shares or advertising revenue share? Like of those three buckets, where do you think the impact to you from these streaming wars is going to be most likely seen?
So I'll take international. I think Scott will take your second question. We don't really have much more to talk about in terms of our plans for international than we've already disclosed. Obviously, we have a lot of work going on under the covers. But we haven't announced any specific timing related to revenue for international.
On these new service launches, Mark, Disney+, Apple, et cetera, we're excited. For us, this is ultimately about giving consumers even more options in OTT and we're partnering very deeply with these companies to help launch their services, acquire subs, drive engagement. And I won't comment on the economics of any specific partner except to say that our relationships are multifaceted. We're mutually incented to drive the success of these services through the Roku ecosystem.
And then one follow-up question for Anthony. Anthony, do think it's possible that this could lead to a scenario whereby you can actually start seeing material revenue shares from Netflix if the environment becomes a lot more competitive, which it's clearly doing, that may increase their incentive to actually start sharing economics with you? Any thought on that?
Well, we have business terms with them, with all of our partners. But I don't want to comment about any specific deal or any specific partner. I will say that one of the benefits of, at least in our platform, for these content partners that are launching, these new services that they're launching, is that we have built into the platform a lot of tools for them to be able to promote their services and sign up subscribers. And so - and they're taking advantage of those tools, right? So it's kind of like when you go into retail, you pay a percentage of your revenue to the retailer for placement on the shelf, and then there's a lot of other options that they have, do you want to be in the circular, do you want to buy endcaps. And so for us, with the subscription service, it's the same model. There's a rev share for customers that we sign up and that is going to continue to grow. But there is also a lot of marketing opportunities and ways for them to build their subscribers and they're very effective, more effective than probably any other way they spend their marketing dollars. And so that's the big way that we make money for new content partners.
Our next question comes from Matthew Thornton with SunTrust.
I want to come back to - and maybe this is for Steve. If we think about the fourth quarter, obviously we've got a lot of new services coming, you can certainly see how they would contribute to content distribution revenue, certainly audience development revenue makes a ton of sense. But you can also see because they are kind of shiny new objects, they could pull some engagement away from other channels, including The Roku Channel, so you can actually see some headwind to video ad revenues. My question is, is that something that is kind of contemplated in the forecast? And then secondly, given the ASC 606 accounting, would we even see that? Would that even matter in the short term? Any color there would be helpful.
Yes. Matthew, this is Steve. So yes, as I mentioned before, I mean because of 606 and because these are multiple element arrangements and there are performance obligations, there is not an immediate - necessarily an immediate and direct correlation between sort of the underlying actions like signing up subscribers or spend from these services into that quarter's revenue. So it's more complicated on that and that's why we often talk about as a result of these 606 models and the treatment, that the associated content distribution revenue can be lumpy. And so I would just make sure that people are aware of that fact because there are some big new services that are launching or will launch soon, but that won't necessarily connect into this quarter's revenue.
We have factored those into the outlook. We - the outlook is strong. We did increase the outlook for the full year for revenue and gross profit. The revenue at the midpoint is now $1.1 billion, that's 49% revenue growth at the midpoint. And so we feel pretty good about the business. But certainly, we want to make sure that people understand the accounting that underpins these services and the deals that we have.
This is Anthony. Let me just add a couple of points. These new services as well as existing services that have come onto the platform over the years, they're in no way negative for Roku. They're all just very positive. We're an essential partner for these services. They'll drive more people to adopting streaming, we're the country's most popular streaming platform, that will drive Roku viewers. There's lots of room to grow engagement on the platform. And our primary competitor is not other services on the platform. The primary competitor is linear TV. Most TV in the country is still regular linear TV and people are moving to streaming and cutting the cord and this will help drive that. So they're all very - for our business, they are all very, very positive.
Maybe I'll just ask 1 quick follow-up, if I could. Ad load on The Roku Channel, number one, I guess, just any changes there? And just kind of what you are observing maybe other AVOD services across the platform? Are you seeing any trend, stable, up and any color you could provide there?
Matthew, Scott here. Our goal with The Roku Channel and its ad load has not changed. We still believe it's - that about half of the linear TV ad load is the right recipe for monetization and consumer experience. In general, we think that's going to be proven to be the case broadly across OTT, that ads have got to get smarter and fewer in order to hit that balance right. But every provider on the platform has a different mix of program to ad time.
Our next question comes from Shyam Patil with Susquehanna.
It's Ryan on for Shyam. So first, how do you feel about your ad tech after the dataxu deal? And do you think it might make some sense to add some further technology on the supply side? And then secondly, how do you see the acquisition impacting dataxu's Fire TV partnership?
Ryan, Scott here. I'll take that. dataxu is a natural progression, a natural step in the road map we've been pursuing. We have already started to provide planning and buying tools to advertisers to help them proactively plan their spending across TV and OTT. We launched Roku reach insights going into the upfronts to help advertisers basically simulate plan their spending across TV and OTT in order to optimize for reach and frequency. We wrote a partnership with Innovid this quarter to help measure reach and frequency and audience across multiple video platforms. And so we look at dataxu as another important step in that progression that will help us not only activate our data and aid buyers in allocating their spend more aggressively to OTT, but also prove the effect through better data science and attribution, which we think ultimately is a long-term goal for - as TV advertising dollars move into OTT.
And I won't comment on the Amazon Fire TV partnership, except to say that dataxu is an omnichannel DSP. And our focus with it - with the dataxu assets and the people and the capabilities is really to enable our advertisers to spend smartly in OTT and to better measure the effect in terms of reach, in terms of ROI as they move TV ad spending into OTT.
Our next question comes from Mark Zgutowicz with Rosenblatt Securities.
Maybe just a follow-up on dataxu. I'm curious how it will work alongside your network sales team. So if we think about sort of nondirect business, will this run - will you have sort of a media take rate through the standard DSP model and sort of run that through the agencies at a sort of media take rate on sort of lower-end - longer-tail type inventory? That's on dataxu.
And then maybe just a follow-up on gross margin. As you look at 4Q and potentially into 2020, I'm just curious if there's any changes in the pieces there? Obviously, the pieces are content distribution, audience development and video. Maybe specific to content distribution, are you seeing The Roku Channel, that content distribution business ramp faster, which is potentially putting a little bit downward pressure on gross margin? Just maybe some puts and takes there.
Mark, I'll take your question on dataxu. You are right, that dataxu is ultimately a SaaS or platform or tools play. And so it is a different model generally than a media sale. The power we think though, is we're already in a position where we're something of a category captain with our advertisers, advising them not just on their spending with Roku for Roku media, but on Roku more broadly with our publishers and across OTT generally. And so dataxu is a new tool in our toolbox that will help us help advertisers to better plan and spend their money in OTT. Steve, do you want to take the gross margin...?
Yes. Sure. Mark, it's Steve. Just in terms of the GP, so in terms of 2020, we'll be providing guidance on that in the next call. But we did mention for Q4, we expect Platform gross profit to be in a similar range of the low 60s sequentially. And then we talked about the guidance around Player gross profit operating around 0 for Q4, just given the promotional environment, which is similar to prior years, where that's been kind of the lowest quarter usually.
But in general, the biggest thing to think about in terms of the gross margin trend has just been - within Platform has been the increased mix of the video ad business. As the video ad business continues to grow fast, that tends to be at that 50-plus-percent gross margin level versus some of the higher ones as I mentioned earlier.
And then within TRC, as Scott mentioned earlier, TRC in terms of a source of Roku monetized video ad impressions, is growing faster than the network as a whole. But really, the margin difference is more around video ads versus other parts of Platform versus a specific TRC, non-TRC mix.
[Operator Instructions]. Our next question comes from Ziv Israel with Merrill Lynch.
So maybe first on gross margins. How much of the year-over-year decrease in Platform margin is due to higher mix of premium subscriptions, if at all? And then you mentioned investments driving some of the change to your adjusted EBITDA guide. What areas are the investment in? Any color there would be helpful. And then I have a quick follow-up.
Yes. Ziv, it's Steve. Just on your first question with gross margins. We didn't - we have mentioned previously that the premium subscription business, because that has a - that is on a gross revenue stream and that's good for revenue and gross profit dollars but it does show up as a lower margin. In terms of this quarter, we mentioned in the prepared remarks that the primary driver of the sequential gross margin change was around the mix shift in the video ad business. So that's the key driver there.
In terms of investing in the adjusted EBITDA, as Anthony mentioned earlier, we had a goal that we set out at the start of the year that we're going to operate around EBITDA breakeven, just given our strategic position and that it's early days with a big opportunity. The four investment areas we talked about are around the ad business, Roku TV, The Roku Channel and then international. And in terms of Q4 specifically, it's really in the form of more talent, sales and marketing as well as some of the other options that we have to kind of secure our position going forward.
Yes. This is Anthony. Let me just add in terms of investment, I'll give you some examples of products and services that we shipped in Q3 that were invest - that we weren't talking about necessarily before but were investments that we've made prior to Q3. So for example, we launched Roku TVs in the U.K. with Hisense in the quarter. We did our first global launch of players around the world. We refreshed our entire player lineup. We launched Kids & Family, a new content category in The Roku Channel. We launched Smart Soundbar as a new product category, a new way for us to build active accounts. And we did a lot more than that. So we are pushing our business forward on multiple fronts and these are all areas that are going to pay off in the future.
Okay. That's helpful. Just quickly on dataxu. As you grow in programmatic and it becomes a bigger percent of sales, how do you see that impacting maybe the overall profitability of the Platform segment? Do you expect higher or lower CPM in programmatic versus a more direct relationship type of business?
Well, we look at it primarily as a vehicle to continue bringing significant new demand into the ecosystem from TV. I think that's the main and first cut of the strategy behind dataxu. We do anticipate that programmatic as well as other forms of automation, API-based buying, self-serve will become a growing part of OTT. It is still a minority of total spend. Magna Global has commented that there'll be about $5 billion in OTT spending in 2020. Majority of that will not yet be programmatic, but over time, we see that growing very significantly.
We also look at these technologies as a way to onboard a broader class of advertisers who would have invested in TV but for difficulty in accessing it or the inability to prove ROI. That's really the power here for us. So I wouldn't characterize dataxu in terms of pressure on margins or pricing as much as a broader array of clients and an acceleration of spending into OTT.
Our next question comes from Michael Morris with Guggenheim.
A couple from me. Can you share how streaming hours that you guys are able to monetize with advertising, how those hours are pacing relative to that growth in overall hours streamed? Is it growing faster or more slowly? Can you share how much of your available inventory that you have access to that you're delivering at a premium CPM? You talked about this gap between sort of dollars in the industry and streaming in the industry overall. Does that look a lot like how much you monetize relative to what you have access to?
And then on the international side, you guys just mentioned the global player launch and refresh again. Were there any new markets there? Or were there expanded sort of retail partnerships, more inventory? Anything you can help us with specifically on how that moves you forward, based on those comments you made, Anthony?
Michael, I'll take your first two questions. First, I'd described it as a funnel. Ad supported viewing is growing faster than underlying than the total platform viewing. And then our monetization of advertising on the platform is growing faster than that. So we are growing, in some sense, our share of - or our participation in advertising on the platform significantly.
As we've commented before in prior earnings calls, we generally would not characterize the business as supply-constrained as much as demand-constrained. We're in the process of bringing over significant new demand from TV advertising. And so we view our task as primarily driving that demand function. We have, in the case of The Roku Channel as well as our ad-supported channel distribution agreement, access to sufficient inventory to support that very aggressive growth. Anthony, you want to take the question on international?
Yes. I'd also just add, monetized video ad impressions more than doubled in the quarter. The ad business is doing really well and - yet most of that TV ad dollars has not started to move over to streaming yet. So it's still a big opportunity for us. In terms of international, I think we covered most of the points there. I mean we launched our new streaming player lineup in the United States, obviously, but also Canada, Mexico, Latin America, the U.K. and a few other countries as well.
So I guess I would say the main way we think about our international expansion is not about adding more countries, because we are already in most of those countries. It's about bringing more focus and more dedicated resources to international, being more competitive international, accelerating the active account acquisition in the international market. That's really what we're focused on.
So does that mean hiring people on the ground in those markets? Or what kind of resources are you speaking of?
Yes. That involves hiring more people in market, that involves writing more partnership deals, that involves more manufacturers that are focused on specific regions, that involve content partners for specific - in region, it involves more engineering and talent inside Roku focused on international. We think our strategy that's worked for us in the U.S. with just TV players works internationally as well. And the technology we've built also works internationally. We just need to take the formula and apply it more aggressively to international markets and that's what we're starting to do.
Is the runway for players outside the U.S. longer, like early in the life cycle than operating systems in the TVs - Roku-branded TVs?
I think both players and TVs are great opportunities for international for us.
I'm not showing any further questions at this time. I would now like to turn the call back over to Anthony Wood for any further remarks.
Thanks. We had another good quarter and we are pleased with our outlook for the full year. Roku is getting stronger in fundamental ways. We are executing well. Our streaming devices continue to stand apart and we are attracting impressive content publishers and advertisers to drive our Platform segment. The world is transitioning to streaming faster than ever and we are well-positioned to capture the benefits. We look forward to the holiday season and sharing more with you in the New Year. Thank you and happy streaming.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.