Conference Transcript - ROKU 2026-06-02

Rob Kulberth, Analyst — Evercore ISI

So, good afternoon, everybody. Welcome back to the conference. Rob Kulberth from the Evercore ISI Internet Research Team. Really pleased to have Roku's CFO, Dan Jeddah, here with us today. So, Dan, good to see you, and welcome to San Francisco.

Dan Jedda, CFO

Thank you. Thanks for having me.

Rob Kulberth, Analyst — Evercore ISI

Great. So, I guess, you know, maybe we can start with what's relatively new, six days ago. Exciting for me, personally. I've now, I've just told Conrad, I've now kitted out my entire house, not the kids' rooms, with Roku sticks, and we're excited about the new operating system. I bought them at Walmart, by the way, so I don't know if that helps, but that's where I bought them. I'll have a question on that later. But first of all, when you talked about it in April, it sounded like it was still early, you're still sort of kicking the tires on it. It sounded like it had been testing at scale. But I had gotten feedback from some people, hey, this is a little bit earlier than we expected. So people are asking me, was this baked into what you're expecting for Q2? And then if you could talk about how this drives the business. Yeah, you're referring to the new home screen, I assume. Absolutely.

Dan Jedda, CFO

Yeah, so let me talk about that home screen. We're very excited to roll it out. We have been talking about it for, I would say, two quarters. We've been testing it a long time because we wanted to roll it out right. Our home screen hasn't changed a lot prior to 2024, and so this was a pretty big move for us. We put a content row at the top of the home screen in 2024. we put video in the ad unit earlier and I think that also was 2024 but the by and large the the home screen remained relatively static and one of the one of the areas that we decided to focus on was making the home screen much more personalized because when we when we simply put a content row at the top of the home screen we saw engagement go up we saw subscriptions that we monetize go up we saw hours into the Roku channel go up it was it was and it was a win for streamers as well because they loved having that personalized row so we basically took that and said hey let's do let's look at the whole home screen so we spent many quarters months and quarters testing the right home screen which is what we're rolling out now it's about 20 percent rolled out and we'll slowly roll it out over the next couple of months and that new home screen does a couple different things. It makes the whole top of the homepage almost all of above the fold very personalized. It also collapses the left nav. There was a left there was a left nav unit that is now collapsed so you start your experience with the home screen you used to have to right-click over. So a couple of things that I love about it both from a streamer experience standpoint it's much more personalized will drive more engagement into areas that we monetize From a streamer experience standpoint, that's great. From my CFO hat, I love it because we can monetize the home screen better. And let me just give you a couple examples. First of all, now that video ad unit now automatically plays if it is a video ad unit. Sometimes it's a static display ad, sometimes it's a video ad unit, but you no longer have to click to the right to see that. It simply auto-plays its video right from the start. That means more ad impressions, that means bigger reach, that means more ways that we monetize that ad unit. Also within the personalized home screen now, we will drive more streamers into areas that we monetize, whether that's more into the Roku channel, more into Howdy, more into Friendly, more into subscriptions, premium subscriptions primarily, which I'm sure we'll talk about. We will drive more engagement into that. Now that's not why we did the home screen. We did the home screen literally to make it a better streamer experience, but we also are going to benefit from more monetization. And what you won't see, which is also very exciting, which I believe will eventually happen is now that we've laid out this home screen we can add more monetization into it with like a biddable in tile app unit which is something i'm very excited about and we'll eventually do that we're not going to do it right away but we'll eventually build in biddable ad units whether they're guaranteed cpa which is a cost per thousand impressions or an actual auctioned biddable ad unit we will eventually do that which is a another very unique way that we can not only personalize because it would be very endemic to the streamer experience, but it will also be a big monetization, a new ad product for us that we can monetize. We don't have a pure biddable ad unit yet on the platform, and so an area like that would be perfect for our first.

Rob Kulberth, Analyst — Evercore ISI

So the other questions that I've gotten about this are, so where do you think you are in terms of innings on home screen monetization today, and how much runway do you see for improvement there?

Dan Jedda, CFO

Yeah, the home screen. So, you know, 125 million people start their experience on our home screen. So when you have that kind of reach, there's a lot of runway ahead of you to figure out how to optimize the home screen. You can, you know, we're going to be very smart about it. We're not going to have it be like a, you know, a plastered ad unit like a NASCAR race car with ad units everywhere. We would not do that. That is not the right streamer experience. But you can make it in a way that is both positive for the streamers and positive for the monetization. So, like I said, I think we're in very early innings of the home screen monetization. Again, prior to 2024, it was very static. It was just app tiles. There was an ad unit. It was a static ad unit, and it was app tiles. It's now changing quite a bit, and there's a lot more we can do. And the flexibility of the home screen is now dynamic. So imagine, like, if I take it to its nth degree, like, imagine where everybody in this room gets a different home screen experience based on true personalization of what they're watching, what we think, what our algorithms would tell us that they like to watch or should watch, whether it's areas that we can monetize more, using, you know, Gen AI to truly personalize. Like, that's the end, that's the, you know, down the road. Like, it can be very personalized. Right now, of course, this is literally like, you know, I would say very early innings on our focus on home screen monetization.

Rob Kulberth, Analyst — Evercore ISI

The other thing that I've noticed about it and, you know, my one ask on customization is maybe if I could change the color, purple's not my favorite, but, you know, the one thing that I've noticed about is, okay, you're lightning fast to actually get to watching something which is, you know, obviously sometimes you deal with analysis paralysis and, you know, bargaining and whatever about what we're going to watch. So, what have you seen in the test in terms of, you know, actually getting people more quickly into streaming content and then what kind of impact do you think that could have that could have on actual monetizable hours well sometimes like we may

Dan Jedda, CFO

intentionally not not put them right into streaming content because they don't know what to watch we might put them into the NFL zone where they can pick from a variety of games that they want to watch imagine like that's the power of owning the OS so maybe you don't know what you're gonna watch by the way some of this is like a testament to the personalization and the algorithms learning over time but yes we you know whether it's a continued watching whether it's a you know you may you may want this subscription or you may want to watch this show or you know if it's uh you know a bit of a lad unit where it's like you know a content partner that says hey i think this person should want to watch this new show like marshals and actually shows an actual creative to go watch marshals and sign up for paramount plus like we can do all that with this new home screen so and and i do think like there are many times where streamers come and they're not quite sure what to watch by the way we see this with fast a lot i mean that is the that was the reason why fast was so successful you go you pick a fast channel that you want to watch and you just start watching it because you're not quite sure um the home screen is not fast it's personalization but but the the theory is still the same like so a lot of folks don't know what they want to watch or we we can show them something that they hadn't thought of and they want to watch got it uh

Rob Kulberth, Analyst — Evercore ISI

i want to switch gears a little bit and talk about some of the dsp integrations obviously you've done you know you've you've gone from closed to open in a hurry and you've done a fantastic job there um we often get the comment from people in the industry that this is one of the best companies out there to partner with so i wanted to start with amazon dsp integration um yeah again the ending question how much further can you take that and how do you think about the progress that they're making in terms of bringing their demand to bear and against your inventory?

Dan Jedda, CFO

Right so um first of all like all the all the DSP integrations we've done and we've now integrated with all of them we most recently announced DB 360 uh which will launch in H2 uh we've signed the deal and announced that uh in partnership with with Google but uh specific to your question on Amazon I get this question a lot like how much is Amazon contributing let me just back up and remind you of our dsp strategy you're right we were closed this is a big difference between the roku of three years ago and the roku of today three years ago if you wanted to transact through a dsp you had to come through our dsp uh product we call one of you which is an acquisition that we made which is very limiting and we pivoted uh that strategy in uh probably late 2023 early 2024 to say hey let's open this up we have so much inventory trc is doing so well we have partner inventory that we can sell let's open up our demand-side platform strategy to up to more partners rather than force an advertiser who wants to run through a DSP to come through our DSP so so and and prior to that it's it's I'm being intentionally vague but prior to that like the DSPs were considered competitors so Trade Desk what would be Amazon now Yahoo they were actually competitors that's how we viewed them not as partners we've completely flipped that and we've integrated with all the DSPs and we've integrated with as deep as they're willing to go so if they have a unique identifier like UID 2.0 for Trade Desk there's an Amazon unique identifier we will adopt those unique identifiers and go as deep on the integration as they're willing to go the one unique difference is Amazon which is platform-wide and not just Roku as a publisher but from platform side so that is a fundamentally different shift a very that is a full-on pivot on where we were so you fast forward to where we are now we're integrated with all of them Amazon launched in q4 and is ramping and to answer your question because I'm not shying away from it is as the Amazon DSP ramps so will Roku in partnership it's a long-term deal it's a platform wide deal it's we're fully integrated with Amazon where we can match our customers to their purchase graphs and Amazon can do multiple things within their DSP because we allow them to from our platform for anyone that calls from our platform we will help Amazon recognize that and we will monetize that with Amazon so as Amazon DSP grows so will we will grow right along with them so part of the answer to your question is it really depends on the success of the Amazon DSPs as far as what ending we're in I personally think Amazon will do very well in the demand side platform I've got some experience with that I came from Amazon and I think they'll do very well but we do not tell our advertisers where to transact we integrated with all the demand side platforms and wherever the advertiser wants to transact via dsp we will be integrated and they can buy roku media through

Rob Kulberth, Analyst — Evercore ISI

the dsp got it so i think you you already touched on google a bit but i wanted to to maybe put a finer point on that so recently announced confidential publisher match i think you were the the launch partner maybe the only announced launch partner so that that that's uh i think a a credit to you and your ability to partner there um but sounds like it's going to be ramping uh over the course of h2 do you think that's going to be more or less up and running uh for the holidays

Dan Jedda, CFO

it will be up and running and again but to that question like the success of the success of uh dv 360 uh is is predicated on how well dv 360 does uh as a demand side platform so you know i would say it this way like you know there's there's this idea that the the there was a idea call it i want I want to say two years ago that the walled gardens, I lived through this at Roku, where the walled gardens were going to rule all of CTV because the walled gardens had all the inventory. And by walled gardens, I mean Amazon, I mean Netflix, and YouTube for all intents and purposes. They were walled gardens, and they were the ones who are going to have all the inventory, and everybody else is in tough shape. You know, and we knew that that was not the case. We knew that our scale would give us an advantage over to partner with the DSPs rather than compete with the DSPs. And so Amazon did announce a DSP, and they don't just focus on Prime Video. They have a whole DSP strategy, and we're partnered with them. Trade Desk, we've been partnered with them for a while under UID 2.0, which is their hashed email that we've adopted. YouTube is now is no longer going to be complete Going to be a walled garden in so much as dv 360 will incorporate YouTube But they'll incorporate all other publishers as well. We're integrated with that you could go to Yahoo You can go to Whirl you can go to all the DSPs were integrated with all of them And so I say this in so much as there's no such the walled garden approach is really Is no longer accurate to say the walled gardens will win in CTV what will win in CTV? is the most performant ad inventory. And that is something we strive to do, is have the most performant ad inventory, because every streamer, all 100 million households plus, 100 million plus households are logged in. We know who they are. We know what they watch. And we can integrate our, we have amazing first-party data. We integrate with other outside data and measurement companies to make our platform very performant so if an advertiser wants to transact through amazon or through dv360 or through trade desk we will be a performant platform for which they can uh bid on our inventory uh on the programmatic pipes and we'll do very well in that yeah i think that

Rob Kulberth, Analyst — Evercore ISI

that you know as i was setting up all these devices i of course got the question about my acr data and i'm like you know i'm a big supporter of the company so i'm important um but uh maybe you I think you could talk a little bit about that, you know, some of the unique advantages of operating the platform and in terms of what you're able to offer advertisers in terms of reach and global reach and frequency control and things like that.

Dan Jedda, CFO

Yeah, so it's a great point and it's one I think is really important if I take a step back because this is also something that was talked about in, you know, 2023. It's like, hey, you know, there's companies out there that have massive IP, call it, you know, Lucas and Pixar or Stranger Things. There's all the NFL, which is owned by three or four players with Prime Video coming in with Thursday Night Football. And you know, you have Fox, and you have Paramount, and you have ESPN, and now you have Netflix. And so there's like all this massive IP out there. And I got this question is, what is Roku's advantage? Well, we have 100 plus million streaming households. And they start their experience every day, watching multiple hours a day with our UI. So we control the user interface. That is our competitive advantage. That is our version of the NFL, if you will. And I would say, over the last three years, we've gotten very good at monetizing those 100 million streaming households in a way that's beneficial to the streamer and a way that's beneficial to us from a platform monetization standpoint. Because we have, again, we have the data. We have the ACR data. We have, of course, what you watch on our platform within our owned and operated apps. We can integrate with other measurement companies. We can integrate other third-party data. And so we're in this unique experience to control the UI and therefore increase areas that we monetize. I get this. And as a litmus test, just so everyone understands how powerful that is. The Roku channel is the number two app on platform in the U.S. So we used to say it was a top five app. Then we said it was a top three app. Now we say it is a top two app. People know who the number one app is. But the Roku channel, without big sports budgets, without huge content budgets, is the number two app by streaming hours on the platform. And that is because of controlling the UI and nudging people where to go and where to watch content. Turns out that when you nudge streamers into certain areas, they'll go watch content if they know it's available.

Rob Kulberth, Analyst — Evercore ISI

Got it. I want to go back to the ability to partner and how that's influenced by CTV industry supply dynamics and how those have maybe changed over the last couple of years. You know there was a sense of you know when APV went to flip to free that that you know had an impact on the market It seems like that's largely digested now, and the market's looking for incremental sources of supply How do you think that plays out for Roku just given where you are in terms of fill rates in terms of CPMs and so forth?

Dan Jedda, CFO

Yeah, so again You're I think you're referring to the fact that we had a lot of supply over the course of the last many years and in the industry Yes, and that is absolutely true You know, it turns out as the hours shifted from digital, from linear to digital, the ad budget started to shift, and therefore there was a lot of monetizable impressions. You know, if you take a step back and just look at it from an industry perspective, first and foremost, the industry itself, it's about $90 billion in the U.S. Just talk to the U.S. for a minute, it's about $90 billion. A little over a third of that has moved to CTV. The hour is much more than a third. It's closer to two-thirds of the hours have moved to digital. So that's your supply. The demand is shifting faster and faster because now everything is available on CTV, whereas before sports were the last holdout of linear. A lot of sports was not available on digital. Now that's not the case. As a matter of fact, now you have a lot of different sports, specifically in the NFL, that's only available on digital. You have exclusive, you have Prime Video on Thursday Night Games. You have exclusive games on Peacock. You have Netflix having games. So some of the sports are only available on digital. My point is, is all the hours shifted in advance of the dollars shifting. And now that's catching up. But yes, because of all those hours shifted, there was a tremendous amount of ad inventory on the market. I do think that continues to normalize because the dollars are now shifting quite fast from linear into digital. There's also new TAMs, if you will, that are moving into CTV, specifically the SMB market, which is highly performant. Maybe we'll talk about that. That's a whole new bucket of dollars that are moving into CTV from an advertiser perspective, and it's a huge opportunity. We're very excited about it. So you do have the secular tailwinds of the TAM expanding to help out with this supply. But what happened when that supply was more than the demand is CPMs did compress that didn't scare us we were just fine with that because we had a lot of impressions that we had to fill but what I think ultimately happens now as more demand comes is I think the most performant ad inventory is what's going to be in demand so so what does that mean it means the inventory that is whatever you're trying to do from a performance standpoint whether it's reach whether it's a KPI whether it's an action that inventory is going to be in high demand and there's also lower demand at inventory out there that I think will just generate very low CPMs so I think you're going to have this CPM demand curve the good news for Roku is we play along the entire CPM demand curve we have ultra premium CPMs like the Roku home screen which is not available through programmatic Roku City which is not available through programmatic we have mid-tier CPMs because we have great first-party data, which, you know, we'll have CPMs, you know, call it into, you know, anywhere from $15 to $22, and then we can play in the low CPM space on some of our other inventory if it's like something like an app install, which generally has lower CPMs. So my point is, is we have, we play along the entire entire CPM demand curve, and so we're in a good spot from that.

Rob Kulberth, Analyst — Evercore ISI

It seems almost as though if you, not just your commentary, but also more broadly if you talk, you know, listen to the SSPs, like there was some kind of inflection point maybe around Q4 where it wasn't just the linear inventory coming into or the linear demand coming to bear but it was also some mix shift from you know traditional digital and so forth you know display and video that kind of stuff that was normally running in web or in mobile app that was suddenly coming to the market it says that's

Dan Jedda, CFO

something that you've observed as well we have observed a lot of demand coming our way for video which I would say is more performant based. Again, performance means different things. From a brand perspective, that's going to be very different than an action-based KPI from an SMB. But we are experiencing a lot of demand when it comes to, you know, having high-reach, high-performant inventory. Take the video on our home screen. We added video to our home screen about 18 months ago. That used to be a static display ad. that static display ad was really good for m e advertisers media and entertainment advertisers but not great for any other vertical if you will simply because those other areas like health and wellness like insurance like retail they wanted video like auto they wanted to see video in that so what we did is we added video to that ad unit um and it had what it did is it opened up that specific ad unit which which was 99% plus M&A to an entire set of new verticals now we have Walmart in there we have car dealerships autos in there we have insurance in there we have health and wellness in in that ad unit and it's doing very well some of that was incremental demand some of it was a shift from in-stream video to this new video ad unit but that's we're fine by that because that home screen video ad unit is very high margin there's no cost of goods sold for us on that so it's very very high margin it's a very high margin ad unit. So we're happy even if it does shift from, you know, from an in-stream video ad to this particular ad unit. But where I'm going with this is the demand that we see is for the performant-based inventory, which again is something Roku over-indexes on, because again we've got such broad reach at over a hundred million streaming households. Over half of broadband households in the U.S. have a Roku TV in their household. Again, they're logged in. we know who they are and therefore we can utilize that from from an advertising perspective

Rob Kulberth, Analyst — Evercore ISI

got it uh just want to switch gears a little bit to uh you know the political environment what your expectations are maybe political and cyclical events we can lump those together but are you seeing any sort of early indications of what political shape could shape up to be

Dan Jedda, CFO

for this cycle yeah our you know our indications are we think it's going to be similar to the the general election of 2024. It's a little hard to judge that right now. It's a little early. We're seeing bookings on par with what we saw in the general. But political comes very late because, of course, they need to figure out where to spend specifically. It comes very late, hence why a lot of it is run through programmatic, which is great for us because that's where we really do shine, is on the programmatic side. A lot of political is hyper-geo-targeted. Again, that's something, because everyone's logged in, It's great for us. We're very good at geo-targeting. So we feel like we're in a good position for this year's political, and I would be pretty surprised if it didn't equal the general election in this midterm cycle, but it's a little early for us to tell.

Rob Kulberth, Analyst — Evercore ISI

And the last cycle, how did that come in for you in terms of the pacing? Some people say it's Q3-weighted. Some people say last six weeks. Yeah, it's a good question.

Dan Jedda, CFO

It's end of Q3. It's definitely into Q4. October is a very big political month it really does it really does depend on where you know I that one I'm not quite sure how that is with the general versus the midterms I think the dollars are going to be similar how they're spent up until November early November is to be seen and you know I'm not quite sure on that it depends on what the competitive elections are and what are the outcomes that you know all the spend goes against but it does hit October and the first part of November are quite heavy but by far the heaviest month is October now you do have a full Q3 spend because the spend does really start in you know call it this the earlier part of Q3 and is pretty in in in pretty heavy throttle at the end of q3 so as you exit september but october is a big month uh for political okay um want to

Rob Kulberth, Analyst — Evercore ISI

switch gears to subscription talk about that for a bit um you've had some you know sort of unique tailwinds uh you know over the past uh 12 months you've obviously added friendly you launched howdy uh you've added some more premium subscriptions just how are you thinking about a sort of sustainable growth trajectory of the subscription business um and uh just given some of those you know particular tailwinds and maybe maybe they're those some of those things are are things that can

Dan Jedda, CFO

sort of experience at s curve if you will you know yeah so similar to how i talked about our dsp business going from 2023 to now premium subscriptions uh sorry subscriptions of which premium subscriptions is a major part of subscriptions has a similar uh call it ramp if you will of focus so we've had a subscription business for a long time we have a payments product a lot of what we call direct to consumer or d2c subscriptions which is where you sign up with the partner but on our payments platform uh through real coupe and we said before we've monetized tens of millions of subscriptions but it had not prior to 2024 it had not been a big focus it didn't have a leader There was not a lot of product, not a lot of innovation being pushed to it. There was no personalization at that point in time on Roku. So subscriptions wasn't a, call it a top investment initiative. Now it is. We changed that. We said it very clearly exiting 2023 that subscriptions was going to be a high priority because overall platform monetization was a high priority. So you fast forward to today. where Premium Subscriptions now is doing extraordinarily well. And it's doing well because of the way the Premium Subscriptions is really embedded in our UI. So if you have a Premium Subscription, the content is ingested on Roku, and you see that content throughout the user interface. Whether it could be on the personalized home screen, it will definitely be in the Roku channel, all that Premium Subscription content is part of the unique experience. As opposed to a D2C subscription, the real only way into that is directly through an app. You have to go into the partner's app. Maybe you have a button. It could be the button. It's an app or a button. You're not going to see a lot of it on the content row. You might see a little bit, but most of the ingress into the partner is going to be through the app tile. That's not the case for premium subscriptions. The ingress is very little of it is through the app tile. Most of it is through the user interface, the user experience throughout the UI that we control so we've done we've had we have multiple tier one partners sign up for premium subscriptions we just announced Fox one we had Peacock sign up we had Apple TV sign up in last year we had HBO sign up for tier ones we have a very very strong torso and tail of tier two tier three partners all in premium subscriptions all driving that premium that premium subscription initiative Also, what premium subscriptions does allow us to do is have more product focus on the subscription itself. I get a lot of questions like, hey, has it reduced churn? We haven't had a noticeable impact in churn yet, although I think that will change over time. But what it does allow us to do is do bundles, for example, which we're testing right now. It allows us to, again, put the experience into the checkout process, for example. If you're on another app and you just want to add a new app, like Howdy, which we do now, where you're checking out on something, hey, you want to add Howdy for $2.99, you can do that. Premium subscriptions allows us to have much more unique features in the subscription business, more unique experience within the Roku OS, and that's driving a lot of the subscribers in premium subscriptions. It's been a big win for us. We also launched it in Mexico. We launched Howdy, which Howdy is a premium subscription partner. Friendly isn't there yet, but we're working on that. It will be soon. There's just some technical things we're still working through on the Friendly side. But Howdy is a PS partner. We launched PS in Mexico. We launched Howdy in Mexico. We'll launch more countries with premium subscriptions. It's a huge positive for us.

Rob Kulberth, Analyst — Evercore ISI

Got it. And the streamers themselves are incentivized, it sounds like, because they get more of their content displayed across the EUI. That drives more viewership, more ad revenue.

Dan Jedda, CFO

It drives more hours into that content. It drives more experience. We'll have, on the left nav, we'll have zones. We'll have sport zones. So we can have these zones have, whether it's an NFL zone or, you know, as World Cup comes, our soccer zone, etc. We'll drive subscriptions into those premium subscriptions.

Rob Kulberth, Analyst — Evercore ISI

And on Howdy, also, maybe your newest Howdy subscriber right here. Excellent. You're welcome. It's doing very well. We're very happy with it. It seems to be doing great based on the antenna data. Do you think that that's a unique enough swim lane where you want to say, okay, more people need to know about this. Yeah, we promote it on, you know, obviously on the platform, on the home screen and so forth. And it sounds like you're also doing something to attach it to, you know, your other premium subscription sales. Do you think about putting more marketing dollars more generally behind that?

Dan Jedda, CFO

Yes, all the time. We launched it off Roku. It's actually available on Prime Video, doing very well on Prime Video. Why is it doing well on Prime Video? Well, it's a very inexpensive ad-free subscription with great content. So it does very well off Roku as well. We launched it in Mexico. We'll launch it in more countries, so stay tuned on that. So, yeah, we – and we're putting more marketing beyond the owned and operated marketing that we currently have. We are absolutely doing that.

Rob Kulberth, Analyst — Evercore ISI

Got it. So, I want to switch over to devices a bit. So, I was just in my neighborhood Walmart, like I told you, and there were absolutely Roku-powered On devices still very much on sale. But that's a question we get from investors, you know, what the runway is there for that, you know, that you know the continuation of the the roku partnership with on uh is it an opportunity to

Dan Jedda, CFO

maintain some skew share there over time well certainly the partnership with walmart will continue to be ongoing whether it's with uh the private label brand which is what you're referring to and on is to be seen but definitely uh we will be at walmart we will sell millions of units at walmart um through our oem partners uh we also have our own first party uh tv where we are the hardware and the software provider that's doing very well and of course we still have players so um you know i would say that our our overall footprint in walmart has shrunk because of the on transition but our footprint in other retailers continues to grow our expansion with our oem partners continues to grow and is doing very well because of a variety of reasons one we're investing more in our oem partners too there's a memory cost advantage with the roku os that's really important right now and we're seeing a lot of benefit from that i can i can i can touch on that but our overall distribution strategy is still working uh notwithstanding the on transition

Rob Kulberth, Analyst — Evercore ISI

got it and you've talked about you know sending the incentives that you may bring to bear particularly in the back half of this year um and then of course you have the bomb cost advantage that you have to, you know, obviously just structurally, but then in addition to the memory cost issues that are, you know, obviously taking place across the space. So you could talk about maybe, you know, your ability across partners, broadly speaking, to gain skew share.

Dan Jedda, CFO

Yeah. So, you know, part of it is there's a couple things going on. One, of course, you know, as Walmart has transitioned, we've taken our hundreds of millions of dollars that we invest in distribution and we invested in other areas. That's just part of it. So we've invested it with other retailers, we've invested it more with our OEM partners, which is helpful to just gain more of their share on the third-party side. And our own first-party TV continues to grow very well across the retail distribution channels. We've also come up with some unique SKUs. For example, we have a product called Hero at Target, which is branded, which is a private label for Target, but it is our hardware and software doing very well at Target. But to your point on memory, memory has gone up exponentially, and that's only now starting to hit the market. It's gone up a while. It went up, you know, call it six months ago, but that new memory is just now hitting the market through the manufacturing cycle. The benefit of Roku is it's a purpose-built operating system for TVs. It's not the same memory footprint as a phone or a laptop. It's a much lower memory footprint. And because it's a lower memory footprint, and we're the only ones out there, at least on the TV side, that has that low memory footprint, because we have a much lower memory footprint, The bomb cost for our operating system is significantly less than our competitors and peers. And that matters a lot to the OEMs, to the third-party OEMs, because now in this type of environment where memory is up 7 to 15x, when you think about a 45 or a 55 or even a 75-inch TV, but specifically on the smaller models, the percent of the BOM costs that memory, Bill of Materials costs, BOM costs stands for Bill of Materials, the percent of the Bill of Materials costs that memory represents has gone up tremendously. And we can help, we do help our partners offset that in a very material way. So not only are we investing more in terms of dollars into our OEMs, but we're also giving them an opportunity to significantly lower their bomb costs and that is working very well oems are contacting us saying hey we want to do more with roku we want to do more in the u.s we want to do more outside the u.s because not only is your operating system amazing and streamers love it but guess what it has a far lower bomb cost as well maybe i'm getting over my skis a little

Rob Kulberth, Analyst — Evercore ISI

bit on this but uh yeah i think sony and tcl just did a tie up i i perceive maybe a an opportunity sort of march higher into the more premium range of the market maybe that has a follow-on yeah

Dan Jedda, CFO

that's always on our mind we're we're always working that i think that will happen i do think that uh operating systems uh will consolidate i think roku is going to be the winner in there of course um because of our uh not not just our our overall penetration um and our market share but simply because we have the best operating system from a user experience standpoint i mean streamers just love it they love the roku channel they love the the latency of it they love the home screen they love the remote uh there's so much going for it um clearly still price is the biggest different is the biggest input in into uh into buying a tv i i fully agree with that but in addition as long as we can maintain price competitiveness and we can uh the operating system is just unbeatable from a streamer experience standpoint so like there's a lot of opportunity to go upscale into uh into other areas uh higher higher uh call it the higher ends we're always looking at that But for right now, you know, TCL and Hisense are two very large OEM partners. We just signed multi-year agreements with them. We have many other mid-tier OEM partners that we're signing more. I could list them, but there's so many of them. We're doing – we're growing our share in the non-Walmart retail outlets, specifically Target, Amazon's doing very well, Best Buy, and a lot of the regional areas we're doing very well in, and we continue to gain share from from that perspective got it and in those specific areas

Rob Kulberth, Analyst — Evercore ISI

and so just wanted to talk a little bit about the or touch on the opex trajectory and um you know just um you know any any thoughts there on on sort of you know um margin directions margin ceilings and and how we should be thinking about uh yeah it wouldn't be a fireside chat if we didn't talk

Dan Jedda, CFO

about opex you have to talk a little bit about numbers yeah can i can i talk a little about Well, free cash flow, too, because that's also really important. Yes, absolutely. Excellent. So, to answer your question on OPEX, we've said for several years now, we're going to grow our OPEX at mid-single digits. We've actually come in lower than that. We said for this year, mid-single digits is what we're going to grow our OPEX while we grow our platform business double digits, and, you know, our growth rate is doing very well. growth rate coming into Q1 and into Q2 relative to prior quarters while actually maintaining that mid-single-digit OPEX growth for for the full year of 2026 per our guidance. Let me just take a step back. In 2025 we did 421 million of EBITDA. We guided to 675 million of EBITDA in 2026. That's a, you know, we grew 260 basis points of margin in 2025. We're going to go get to 330 basis points I believe that's that's what the 675 equates to 330 basis points of improvement in EBITDA margin for 2026 we've said that free cash flow is going to grow more that is going to be more than EBITDA we said that in 2024 our free cash flow was I believe four hundred and eighty million dollars if I'm not mistaken in 2025 free cash flow again will be higher than EBITDA for 2026. The guide is 675. We'll do over 700 million of free cash flow in 2026. Our SBC, which is a very real expense, something I track very closely, is going down. We were down 25 million in SBC in 25. Our guide implies another 25 million to about 325 million on a run rate for SBC, which all this means our dilution is essentially was negative dilution for the first time in the company's history in q1 uh we were you know our gross dilution was two to three percent we're now negative dilution so all this is to say that our north star is free cash flow and free cash flow per share we're doing very well and that um i think i publicly stated that we will hit a billion dollars in free cash flow by the end of 2028 if not sooner um i i you know i'm optimistic on the on the not on the if sooner part on that billion dollars so all in all you know opex was your question but i look at the holistic picture with our north star of free cash flow and free cash flow per share and i think that we can continue to grow i think that margin will continue to improve i think lastly one of the important parts i mentioned is that pre-cash flow is higher than ebitda we're one of the very few companies that can say that we're capex lite our investment is in our r d team which is fully expensed is not capitalized and we have a deferred tax asset that i'll eventually write up probably in q3 or q4 it's right now on our books on a net of zero it's going to be about 1.2 billion dollars when we write it up so we have a a a deferred tax asset that will help from cash taxes perspective so i expect that free cash flow for the next several years will be above adjusted ebitda and again that's our north star's free cash flow and free

Rob Kulberth, Analyst — Evercore ISI

cash flow per share okay uh last one just on you know given all that which sounds great uh the

Dan Jedda, CFO

capital allocation you know priorities for the business yeah you know we have you know just i believe it's about 2.4 2.5 billion dollars of cash on our balance sheet we have no debt uh we're in a great position uh it's a very enviable position i feel honored to you know as a cfo to be in this position and of course uh figuring out the utilization uh of that cash is is a top is always a top priority right now we've invested in our in our share buyback we've strategically done acquisitions we're very selective in our acquisitions we'll continue to look at them there's nothing imminent uh we're very selective we're very thoughtful uh on acquisitions uh but in the meantime we're going to continue to generate free cash flow i suspect we'll continue on our share buyback uh all else pending um from a capital allocation perspective okay we've got a grand

Rob Kulberth, Analyst — Evercore ISI

total of three minutes left i'll open it up see if there are any questions in the audience And seeing none, I guess we'll leave it there. MR. Oh, there's one.

Speaker 2

MR. Go ahead. Speaking of the competitive set, you know, there's a misperception years ago of who you were actually competing with. Do you see yourself competing with just time and engagements? MR. Yeah, great question.

Dan Jedda, CFO

I actually thank you for bringing up some of the performance advertising. It's an area we didn't cover and one I feel very important to address. So, you know, the entire industry is both competitors, peers, and partners, and that's how we approach it. So, you know, there was this idea, I mentioned that the walled garden of Amazon Amazon was a pure competitor two years ago, maybe two and a half years ago. Guess what? Amazon's a great partner of ours. Trade Desk was a competitor three years ago. They're a great partner with us. YouTube, competitor in the firm of ours, DB360 is a DSP. They're a partner with us. All of the content companies, Paramount, HBO, Disney, all of them, they're all partners with us, and we help them drive subscriptions. They also spend money on advertising to drive subscriptions, but we're all competing with hours uh between the roku channel and the partners so um it's it's a very like we feel very good our partnership with amazon is extraordinarily strong um and so from that standpoint i i just i feel like we're in a in a very good spot to your point on you brought up some of the performance-based advertisers that's interesting now they used to not be a competitor and i'm going to hold that they are now a competitor because ctv is an excellent area now to focus on performance advertising we have a product called ads manager which is growing extraordinarily well it's it's it's getting to be a sizable business for us we just launched it 18 months ago that is a self-service ad product where as an smb you can come in pick your budget pick your kpi maybe you want site visits maybe you want conversion maybe you want uh you know a lead gen for calls to a 1-800 number you pick your performance metric on the self-service you upload a gen ai created video or any video most of them now are gen ai related because smbs didn't know how to produce a a video ad now we can with gen ai within seconds and within five to six click you put in a budget within the five to six clicks you are up and running a performance-based ad campaign across our operate across our os our our our trc our partners we can go off roku if we need to that is a unique and relatively new feature where performance ad budgets i believe are going to shift because ctv why wouldn't you want to try out ctv if you can get certain performance metrics and we are seeing that within ads manager we um we're doing very well uh from an ads manager perspective and that Now, that's a whole new TAM. Call it 600 billion of SMBs. That's what they spend. There's 200 billion of true performance-based advertising out there. That TAM, some of that TAM is going to come in to see TV, and that's a huge opportunity for Roku. That's a great question.

Rob Kulberth, Analyst — Evercore ISI

Great. We'll leave it there. Thanks so much, Dan.

Dan Jedda, CFO

Thanks, everyone. Appreciate you coming.