Good day, and thank you for standing by. Welcome to the Second Quarter 2021 Roku Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Conrad Grodd, Vice President of Investor Relations.

Thank you. Good afternoon, and welcome to Roku's second quarter 2021 earnings call. I'm joined on the call today by Anthony Wood, Roku's Founder and CEO; Steve Louden, our CFO; and Scott Rosenberg, Senior Vice President, General Manager of our Platform business, who will be available for Q&A. Full details of our results and additional management commentary are available in our shareholder letter, which can be found on the Investor Relations website at roku.com/investor. Our comments in responses to your questions on this call reflect management's views as of today only and we disclaim any obligation to update this information. On this call, we'll make forward-looking statements which are predictions, projections, or other statements about future events, such as statements regarding our financial outlook, future market conditions, and other expectations regarding the continued impact of COVID-19 on our business and industry. These statements are based on our current expectations, forecasts and assumptions and involve risks and uncertainties. Please refer to the shareholder letter and our periodic SEC filings for information on factors that could cause our actual results to differ materially from these forward-looking statements. We'll also discuss certain non-GAAP financial measures on today's call. Reconciliations for most comparable GAAP financial measures are provided in our shareholder letter. Finally, unless otherwise stated, all comparisons on this call will be against our results for the comparable period of 2020. Now, I'd like to hand the call over to Anthony.

Thank you, Conrad, and thanks to everyone for joining today's call. I am pleased to report that Roku delivered a strong second quarter with record revenue growth that was driven by exceptional performance in platform monetization. Audiences, content and advertisers continue their shift to TV streaming around the globe. Roku is a key enabler of this long-term secular trend. This quarter, platform revenue exceeded $0.5 billion for the first time, driven by significant contributions from both content distribution and advertising activities. On the content front, we are seeing direct-to-consumer streaming services lean into our platform’s effective merchandising tools. Also of note, at the recent upfronts, we closed commitments with all seven major advertising agency holding companies. We had a great Q2 and we are well positioned for the future. With that, let me hand the call over to Steve.

Thanks, Anthony. In Q2 2021, we exceeded our outlook for revenue, gross profit and adjusted EBITDA and continue to make significant operational and financial progress. Before taking your questions, I'll walk through highlights and discuss our approach to outlook, given the current level of macro uncertainty. We grew active accounts by 1.5 million in Q2, ending the quarter with 55.1 million. Q2 2021 net adds were higher than pre-COVID levels in Q2 2019, but as expected, lower than the pandemic-related surge of Q2 2020. Sales of player units were relatively flat year-over-year, and average selling price decreased 2% year-over-year. Roku users streamed 17.4 billion hours in the quarter, an increase of nearly 19% year-over-year. Platform monetization accelerated with ARPU of $36.46 on a trailing 12-month basis, up 46% year-over-year. Total Q2 revenue increased a record 81% year-over-year to $645.1 million. Platform segment revenue was up 117% year-over-year to $532.3 million, representing 83% of total revenue, while player revenue was relatively flat year-over-year following the pandemic-driven demand spike in Q2 2020. Our key financial metric gross profit grew 130% year-over-year in Q2 to $338.3 million, resulting in gross margin of 52%. Player gross margin of negative 6% was lower than normal due to global supply chain issues, which are affecting logistics and component pricing. Platform gross margin of 65% was more than expected due to a favorable mix toward higher-margin media and entertainment spend by content publishers. Our strong revenue and gross profit performance allowed us to deliver a better-than-expected adjusted EBITDA of $122.4 million in Q2. Q2 OpEx was up $269 million, up 42% year-over-year. And we ended Q2 with approximately $2.1 billion of cash, cash equivalents, restricted cash and short-term investments. Our approach to outlook will be similar to the last few quarters, where we’ll provide formal guidance for the next quarter and additional color on our longer-term view for the business. For the third quarter, our outlook calls for 51% year-over-year revenue growth to $680 million at the midpoint and 49% year-over-year gross profit growth to $320 million. We expect adjusted EBITDA of $65 million at the midpoint and net income of roughly $2 million, which includes stock-based comp of $52 million and $11 million of depreciation and amortization, and net other income in the quarter. This robust growth is a result of the secular shift of viewers, content publishers and advertisers to TV streaming, which we believe will continue to drive growth over the long term. Looking ahead to the rest of the year, let me offer three key observations. First, we will take tough year-over-year comps across our business in the second half of 2021 due to pandemic-related outperformance in the second half of 2020. Second, we will also face tough comps within the year-over-year growth rates of our active accounts and streaming hours given last year’s demand spikes. And third, the secular trend towards streaming remains intact, and we will benefit from our strong position as the shift in TV streaming continues. I will now provide some additional color on each of these items. First, regarding tough year-over-year comps in the player and platform segment: in our player business, we expect particularly tough year-over-year comps in Q3 given the surge in sales in the prior year period. In addition, while we're actively managing our supply chain, we're assuming increasing negative player gross margins during the second half of the year. Turning to our platform business, the mix shifts in TV ad budgets to streaming, combined with the launch of multiple new premium DTC services in the second half of 2020, resulted in exceptional growth in our platform revenue during that period. While this will create tough year-over-year comps in the second half of 2021, we still expect robust growth. Second, regarding tough year-over-year comps in active accounts and streaming hours: in 2020, pandemic-related lockdowns drove a surge in active accounts and engagement. For example, active accounts and streaming hours grew nearly 80% and 100%, respectively, from Q2 2019 to Q2 2021. The surge in streaming player and smart TV sales in 2020 contributed to this growth. In 2021, we expect the overall U.S. smart TV market to shrink on a year-over-year basis, as OEMs manage supply chain challenges. Third, regarding our strong market position, overall, Roku remains very well positioned to benefit from the long-term secular trends of audiences, content and advertisers shifting to TV streaming around the globe. Roku has been a leader in enabling the shift to TV streaming advertising, and it's benefiting as streaming ad spend increases. We remain optimistic about our ability to grow over time, given the significant size of the opportunity ahead and the early stage of monetization to date. I'll summarize by saying how pleased we are with the performance of the business and the strong momentum we are seeing across the broader streaming landscape that benefits Roku. With that, let's turn the call over for questions. Operator?

Thank you. Our first question comes from Justin Patterson of KeyBanc. Your line is open.

Great. Thank you. Two, if I can. First, could you unpack the drivers around ARPU growth in more detail, please? And then second, could you talk about learnings from the upfronts? It sounds like there were some healthy growth of new advertisers there, so curious to hear more about who's coming here that you didn't have before, and how we should think about that upfront strength trending into the second half of the year. Thank you.

Thank you. Our next question comes from Shweta Khajuria of Evercore ISI. Your line is open.

Hold on, operator.

Hi. I think the prior analyst had a question, so just want to make sure you resume.

Yes. Anthony was on mute. He is going to answer the first one.

Yes, sorry, I was on mute. Hey, Justin, thanks for that. This is Anthony. Let me — I'll turn it over to Steve and Scott in a second. But let me just say that ARPU is a function of active accounts and platform revenue, and platform revenue was the key driver of our Q2 record revenue growth. We're seeing strong interest from advertisers as they follow viewers to streaming, which is one of the drivers. We're also seeing the launch of many new direct-to-consumer streaming services and ARPU is benefiting from being a great platform for merchandising, promoting and distributing those services. So both of those are contributing to our overall platform revenue growth. Steve, did you want to add anything about ARPU drivers?

Yes, sure. So just on ARPU drivers, Scott can talk about the upfront. ARPU on a trailing 12-month basis was over $36 and that was up 46% year-over-year. That growth in ARPU has been accelerating over the last three or four quarters, which is great to see. It's broad-based increases in monetization. We had a strong quarter on the advertising side as budgets follow viewers and advertisers start to prioritize streaming. Also, as Anthony mentioned, strong competition in the form of legacy media companies shifting focus to their DTC services, we're seeing strong uptake and use of our media and entertainment tools. That was notable in Q2. The combination of these things continues to drive ARPU up and shows the strength of our monetization efforts. I'll turn it over to Scott to talk about the upfronts.

Yes. Hey, Justin. Regarding your question about the upfront, it was a pretty transformative upfront season for us. We closed it several months earlier than we have over the last couple of years, concurrent with traditional TV networks. I think that's an indication that streaming has arrived as a first-class citizen in the way brands think about allocating their annual budgets, because we closed commitments with all seven major agency holding companies and saw more than double commitments in terms of dollars. This is driven by a couple things: secular trends coming out of the pandemic with increased urgency by marketers to follow audiences, especially amidst steep ratings declines — Nielsen reported a 29% decline among adults 18 to 49 year-over-year. But it's also a function of our scale and our capabilities, including OneView which played a prominent role, our ad platform, our DSP, and our first-party data. This upfront season also benefited from our ability to offer originals and exclusive content, the performance of that content since launch, as well as our new branded content studio offering. These resonated with brands and not only brought in a significant uptick in dollars and earlier commitments, but also brought in a significant new set of advertisers who had not committed with us before; over 42% of our upfront advertisers were first-time upfront advertisers with Roku. Overall, we're extremely pleased with how we did in the upfront and also think it's a good harbinger for how we'll perform throughout the year during the scatter period. Thanks for the question.

Thank you. Our next question is from Shweta Khajuria of Evercore ISI. Your line is open.

Okay. Thank you. Let me take two, please. One is, could you provide some context on The Roku Channel? Any way you could quantify the impact of The Roku Channel in terms of dollar contribution growth and how we should think about the scale and size of that? And then second is on what's the breakup of brand and performance marketing spend you are seeing? And how do you think that will shift over time with the impact of OneView? Thank you.

Hey, Shweta. On The Roku Channel, that's obviously a very successful product for us; it’s doing extremely well. It's our owned and operated streaming service that's primarily free ad-supported. It's benefiting from the virtuous cycle of viewers seeking out free content, advertisers following viewers, and reinvesting the revenue back into better content. That virtuous cycle is growing extremely fast and is a big driver of our P&L. It's a great source of ad inventory for us as our ad business grows. In terms of specifics on dollar contribution, we don't break out detailed revenue by product in that way in the letter. Steve, did you want to add anything? And Scott can address performance marketing.

Hi, Shweta. Tagging onto Anthony's comments about The Roku Channel — it had an amazing quarter. It's been growing leaps and bounds and more than doubled in streaming hours year-over-year. It's growing much faster than the overall platform and even the broader AVOD segments. As a result, it is taking on increased prominence as a supply source for our video advertising. It's also a place where we can innovate and create new ad units and experiences in ways that are harder when placing ads into third-party channels on our platform. Regarding performance advertising, it's true that a majority of our advertising is still traditional TV-style brand advertising, but the performance segment, which we call our growth advertising segment, nearly tripled year-over-year. It's coming on strong. As a platform with first-party customer relationships, rich data and great ad tech, we can deliver for performance advertisers the kinds of outcomes they expect from search and social. We have case studies like Smartwool, which used OneView to combine streaming and desktop/mobile advertising and achieved a 72% increase in site visits. Headspace used our data to target across desktop and streaming and drove over a 200% increase in conversion rates to mobile app downloads. Those are examples where brands are using our tools as intended, exploiting our deep first-party relationship on the biggest screen in the home and combining that with multi-channel placement to deliver better outcomes. We're very bullish on the opportunity in the performance advertising segment in addition to competing for traditional TV ad dollars.

Thank you. Our next question comes from Corey Carpenter of JPMorgan. Your line is open.

Great, thanks for the question. Just maybe for Steve and Anthony given the response to your original content thus far, could you talk about how this informs your thinking around your content strategy going forward? Does it make you want to potentially get more aggressive? And then maybe for Steve specifically, how should we think about this impacting platform gross margins, maybe both in the near and long term? Thanks.

Corey, this is Anthony. The Roku Channel is primarily an ad-supported offering and the content that goes into that channel comes primarily from licensing. We have a large number of licensing partners; we license both deep back-catalog content and newer, more expensive content. There's a range of content with short-term and long-term deals in place. As the scale of the platform grows and as viewers and advertisers grow, we're able to invest in better content. It's a portfolio approach and originals are part of that portfolio. Originals have benefits as well: they can be purchased quickly and can have halo effects with advertisers and help attract new customers to The Roku Channel. The primary source is still licensing, but originals are a valuable addition to the content mix. This approach maintains an AVOD business model, and you shouldn't see an adverse impact from The Roku Channel's expansion into originals on our overall gross margins because we manage the portfolio to maintain our margin structure. The advantage of originals is the halo effect for advertising and upfronts, and they help drive engagement, so we'll continue to invest in originals as appropriate. Steve, do you want to add?

No, I think you hit all the marks. I guess, I'll need to find a new CFO gig.

Thank you. Our next question comes from Michael Nathanson of MoffettNathanson. Your line is open.

Thanks, everyone. I have one for you. Anthony, on Alphabet's call I asked their CEO, Sundar Pichai, about their vision for Android TV and he described wanting to make Android TV more of a computing platform, sounds like they want to include gaming in a robust ecosystem. I wonder, how is your vision compared to what Google wants to do? And then broadly, bring it back to the current dispute you have with YouTube, whether or not that is any closer to resolution. And Steve, a quick number from you: you guys usually tell us The Roku Channel reach number, it was in the press release you haven't said so far? So that's a question I hope you'll answer. Thanks.

Hey, Michael, thanks. On our vision: we've been competing with large companies, including Google, since we started, and we've competed very well. The primary difference is we built from the beginning a software platform designed specifically for TV, whereas Google took their phone operating system and ported it to TVs. Purpose-built operating systems traditionally have advantages in new user environments, and that's where our competitive advantage comes from. TVs have tight cost structures and are highly price competitive; we've optimized our platform to run with less memory and smaller chips than competitors, which helps especially in the current supply-constrained environment. We're the number one streaming platform in the U.S. by a wide margin and we intend to maintain leadership by focusing on a purpose-built OS for TV. Regarding YouTube, I want to be clear we don't have new information to provide. This is not a carriage dispute about economics; we're not seeking more money. We want Google to agree not to dictate search behaviors on Roku, not to access data we don't make available to others, and not to require hardware or software changes to our platform that would harm our competitiveness, including with Chromecast. We think these are fair and reasonable asks. We're working to resolve it in a way that's good for Roku, consumers and Google, but we don't have a resolution today. Steve, do you want to take the question about reach?

Yes. In terms of The Roku Channel reach, The Roku Channel continues to grow nicely and streaming hours for The Roku Channel doubled year-over-year, which is great. We didn't update a specific reach number this quarter because it wasn't a materially new milestone relative to prior updates. Overall, The Roku Channel continues to do well and the content-advertiser flywheel continues to perform: more content and originals drive engagement, which drives more advertiser interest, which fuels more investment in content and continued scale.

Thank you. Our next question comes from Ruplu Bhattacharya of Bank of America. Your line is open.

Hi, thanks for taking my questions. I have two. The first relates to active account growth and international expansion. Roku had strong active account growth last year — I think you grew active accounts 14.3 million. That's a tough compare for this year, but at the same time you're expanding internationally. Do you have a sense for how much of the active account growth this year can come from international expansion? What's a reasonable level of penetration to expect over this year and next year in key markets like the UK and Brazil that you're targeting? And overall, how do you measure success in international expansion?

This is Anthony. Streaming is a global business. The U.S. is ahead of most countries and there's still room to grow in the U.S., and even more room internationally. We grow not just by adding active accounts but also by increasing monetization on existing accounts. Unlike subscription services where active accounts directly correlate to revenue, Roku grows ARPU as a major driver. Internationally, our strategy mirrors the U.S. approach: build active accounts, engage users, then monetize them. We do that through selling streaming players and licensing our OS to TV manufacturers as Roku TVs. We're already the number one OS in Canada, and we're seeing success in Brazil, Mexico and the UK. In the UK, we've launched TCL Roku TVs which are getting excellent reviews. We've announced launches in additional markets like Germany. We'll continue to expand in markets where we've already established presence and go deeper in those regions.

Okay, thanks for all the details on that, Anthony. That's helpful. Maybe for my follow-up, I wanted to ask you about the new brand studio that you have. How many advertisers are making use of it now? Can you talk about what type of programs or commercials it's producing? Is there a way to quantify the revenue benefit from having this studio and the overall reception you've seen so far?

Sure. Scott, you want to talk about the brand studio?

Yes. A couple of points: we've been doing sponsorships and innovative ad executions for several years, and earlier this year we expanded that capability by acquiring a creative team to scale production. The brand studio allows us to produce new sponsored executions on our home screen and produce content in partnership with advertisers. It has a double effect: direct revenue impact by making deals larger, and a halo effect by reinforcing direct client relationships, since CMOs often drive creative execution. Examples include a show called 'The Show Next Door' featuring Randall Park and Maker's Mark, where he mixes a Maker's Mark cocktail and brings in comedian and athlete friends for casual conversation — a quick-hit production aligned with the brand that provides value to consumers. A larger production example is 'Roku Recommends,' a topical weekly show reviewing the top five shows of the week; Walmart was the launch sponsor and it's performing extremely well. We're still early in production but it's going very well, it increases deal sizes, brings brands to the platform and strengthens client relationships.

Thank you. Our next question comes from Steven Cahall of Wells Fargo. Your line is open.

Thanks. I was wondering if we could dive into ARPU and hours a little bit. I think streaming hours per account was about 3.6 per day in the quarter — that's ahead of 2019 but below the last four quarters due to pandemic effects. Could you talk about the trend there? Is there more live sports coming back and is that a mix headwind if folks use their cable boxes more? Also ARPU was really strong in the quarter, up substantially year-on-year per account. If people aren't watching more, that suggests either pricing, more Roku Channel usage, or a much stronger CPM. Could you help unpack ARPU trends a bit?

This is Anthony. Regarding streaming hours, because of pandemic variability and year-over-year comparisons, it's useful to compare to pre-COVID levels. The industry saw declines in overall TV viewership while our viewing was up 19% year-over-year, which compares favorably to the broader market. Streaming across platforms was down slightly overall, but we're taking share. Nielsen reports that among adults 18 to 45, 39% of TV watching is streaming, so there's still a majority of viewing on traditional TV that will migrate to streaming over time. Our users include cord-cutters and pay-TV households that also stream. We performed well in the quarter relative to peers, and there's much room to grow. On ARPU I'll let Steve or Scott add more detail.

This is Scott. The right way to think about streaming hours is that we took share — the slowdown is more of a secular trend in traditional TV and we grew within streaming trends. The average U.S. household watches about seven hours of TV today, and we're roughly around half that on streaming, so the transition has a lot more room to move toward streaming. The pandemic-related pullback is largely temporary and from a long-term perspective it's good for Roku because we take share.

On ARPU: you quoted about 66% year-over-year growth on a quarterly basis; on a trailing 12-month basis ARPU was up 46% year-over-year, and in either case growth is accelerating. That shows the world is moving to streaming and monetization is still in early days. Advertising budgets have been behind viewership historically, so part of the growth is budgets shifting to streaming. We also had strong growth in monetization metrics like video ad impressions. Competition from legacy media companies launching DTC services has increased use of our tools for media and entertainment, which also increases monetization. Given our scale and industry-leading tools, we expect to benefit from these trends.

Thank you. Our next question comes from Shyam Patil of SIG. Your line is open.

Hey, guys, I had a couple of questions. Steve, I had one for you. You talked a lot about active accounts and streaming hours year-over-year. Could you talk about them on a sequential basis? Should we see growth in active accounts sequentially in Q3 and Q4, and if so, how much? That might be easier for external modeling. Also, there continue to be many privacy changes for digital advertising overall, but it seems like CTV is one of the areas less impacted. Is that becoming a tailwind in conversations with advertisers now, and will it be more pronounced going forward? Thank you.

Good question on sequential trends. Given the pandemic surge in 2020, year-over-year comps will be challenging for a few quarters. Looking at pre-COVID levels is instructive in the near term. On active accounts, we grew the base by 1.5 million in Q2 to over 55 million, which is below Q2 2020's surge but favorable to Q2 2019. Streaming hours were around 3.5 to 3.6 hours per account per day, roughly in line or slightly favorable to pre-COVID levels, which is where we expect to be as things normalize. There's still macro uncertainty with factors like variants affecting the recovery. So sequentially, comparing to pre-pandemic levels is probably more informative than year-over-year comparisons in the near term.

On privacy: it's a more challenging environment for independent ad tech and small publishers who don't have first-party consumer relationships, as cookies get scarcer and device identifiers become harder to access. I wouldn't call it a tailwind for CTV overall, but it's an advantage for platforms like Roku that have first-party relationships. That first-party relationship allows us to onboard client data, target more precisely, measure and drive impact. So relative to independent ad tech without first-party data, we have a meaningful advantage.

Thank you. Our next question comes from Alan of Loop Capital. Your line is open.

Thanks for the question. I was wondering if you could drill down a little bit as to how much of the platform revenues are coming from streaming companies, or how quickly the streaming companies in aggregate are growing. Any more data on how much of the 100+ percent growth we're getting is from the streamers specifically?

We had a very robust quarter for the platform business driven by strong performance in both content distribution and advertising. Many of our major streaming service partners are still early in growth and are acquiring consumers heavily, investing with us and taking advantage of our scale and marketing tools to acquire users. We saw strength in revenue shares from those relationships and strong investments in marketing, button purchases, and media and entertainment products. The media and entertainment vertical, our advertising segment, saw particularly strong growth and was more than triple year-over-year in some areas. Traditional advertising also had strong performance with large advertisers, and our performance or growth advertising segment — though still smaller — nearly tripled year-over-year. Broadly, strength was across the board, with especially robust content vertical performance and strong growth in advertising.

I'd add that both content distribution and advertising are still relatively early compared to their potential, so there's a lot of room to grow. From our day-to-day perspective, it's gratifying that both groups of customers have shifted from experimental to more all-in approaches, which is good to see.

Thank you. Our next question comes from Jason Helfstein of Oppenheimer. Your line is open.

So, I guess there's clearly increased focus on changes in active accounts. Maybe talk about your ability to drive hours. If you purchase more content for The Roku Channel, presumably you can drive more hours and then get dollars. Even if active accounts were slow, how much do you still have to drive hours and monetize? Also, did anyone ask a 606 question? I don't see it, but I wanted to check whether there was any notable 606 impact this quarter versus the first quarter. And any thoughts about how the Olympics will impact you in the third quarter?

Let me start. Active accounts at 55 million is a proxy for households, but the potential market is huge — there are roughly a billion broadband households worldwide that will transition to streaming over time, and many will get streaming embedded in TVs. Our position as the leading platform in the U.S. and growing internationally gives us a lot of potential for active account growth. Driving hours is a core competency: our home screen experience helps consumers find content and influences what they watch. We work with content partners proactively; for example, for the Olympics we worked with NBC in the months leading up to the Games to build an Olympics experience on our home screen to help viewers find how to watch, highlights and schedules. The execution drove usage and helps viewers find content. Those kinds of experiences enhance engagement and are positive for our platform. Steve, do you want to address the 606 question?

Yes, Jason. On ASC 606, we have a portfolio of material deal models and we evaluate them quarterly. If there are changes in assumptions, new services or different terms, we update the models accordingly. In quarters where we highlight 606 impacts, it's usually because there was a meaningful change in assumptions across the portfolio. In a standard quarter like this one, some deal values go up, some go down, and many stay the same. There's nothing particular to note on 606 this quarter.

On the Olympics, it's a key TV driver. We're proud of our execution with NBC, and it's an example of how Roku can uniquely provide features that drive viewership and increase streaming consumption.

Thank you. Our next question comes from Jason Bazinet of Citi. Your line is open.

Thank you. You called out how chip shortages and supply chain issues are impacting player gross margins and will continue in the future. Is there any scope for that to ripple over and affect active account growth? In other words, could the shortage get so acute it actually affects metrics that matter, beyond margins?

Steve, do you want to take that?

Sure. Since the pandemic started the industry and Roku have been dealing with component shortages and recently accelerating component price increases. Our supply chain and operations teams have done a good job minimizing impacts. Last quarter we noted that due to cost increases we expected player gross margins to go negative, which they did at negative 6% in Q2. We expect player gross margins to be pressured in the back half of the year. This is an industry-wide issue affecting player and TV OEMs. Some industry research suggests the smart TV market could decline year-over-year as a result, and OEMs are pushing through price increases which tests elasticity. These conditions don't help the industry for driving player and TV sales and are being factored into our outlook. So yes, supply constraints can impact device sales and therefore active account growth, but we've been managing these issues actively.

And the last question comes from Rich Greenfield of LightShed Partners. Your line is open.

Hi, thanks for taking the question. Two questions: as you become more of a gateway to streaming, how do you think about ultimately being able to get subscription revenue, like a fee for usage or a fee for being on the platform? It seems like nobody can be in the streaming world without being on Roku. Second, on the media and entertainment spending by services you called out in your investor letter — how sustainable is that level of spend? Platforms are spending heavily to acquire subscribers; is that repeatable over the next few years or does it get more challenging?

Hey, Rich. I wouldn't characterize Roku as a gatekeeper; we operate in a very competitive industry with many big competitors and consumers have lots of choices, including Samsung, Google and Amazon. Charging for access to Roku isn't how we think about the business. We focus on distributing partners' content in a partnership model: we help them build customer bases, increase engagement and participate in the economics via partnerships that deliver value to both sides. Advertising is a large and growing part of our business as viewers switch to streaming and ad dollars follow. We're focused on structuring deals that drive viewership and participation in the economics through value creation.

I'll add that describing Roku as a gatekeeper implies a one-and-done relationship, but the reality is ongoing partnership: success is about acquisition and retention. As services scale, retention becomes critical — if you lose a percentage of users monthly at scale, that requires significant acquisition to maintain net growth. We're focusing on helping partners with both acquisition and re-engagement to retain users. That retention piece is increasingly important as services grow, and it's an area where Roku's tools can be helpful.

Scott, that's an important point that probably doesn't get enough focus. When you think about user acquisition spend versus reengagement spend, is there any way to think about how much of the spending you're seeing is reengagement versus sub acquisition?

Most service providers are still in user acquisition mode, so reengagement spend is relatively modest today. But it's critical: if you lose users monthly and scale to many millions, replacing churn is expensive. We're seeing partners bring more focus to retention, and that is an area where Roku's tools — predicting churn and identifying engagement drivers — can add value. The Olympics example earlier is a good case of an execution that not only acquires but helps retain users by driving them back to a service. We're early in this cycle, but consumers are willing to sign up for multiple services today; they still save money versus pay TV in many cases, and multiple services can coexist in a household.

Thank you. And now I will turn the call back over to Anthony Wood for any closing remarks.

I would like to thank our employees, customers and partners for an excellent quarter. We believe our competitive advantages and the broad secular trends that have driven our growth continue to position us for success. Thanks for joining us today.