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.

Thank you. Thanks for having me.

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'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 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.

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 I also was 2024 but 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% 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 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's simply auto plays it's 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 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 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 that, which is 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 that would, you know, an area like that would be perfect for our first.

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

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 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 like 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 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 that's that 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 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 yeah that the 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 uh you know bargaining and whatever about what we're going to watch um 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 on actual monetizable hours well well sometimes like we may 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 going to 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, you know, you may want this subscription or you may want to watch this show, or, you know, if it's, you know, a bit of an ad 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 Marshalls, and actually shows an actual creative to go watch Marshalls and sign up for Paramount+. Like, we can do all that with this new home screen. So, 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 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 can show them something That they hadn't thought of and they want to watch Got it.

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 inning question how much further can you take that and how do you think about the progress that they're making in terms of and bringing their demand to bear and against your inventory 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 DB360, which will launch in H2. We've signed the deal and announced that in partnership with Google. But 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, a product we call one view which is an acquisition that we made which is very limiting and we pivoted 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 uh let's open up our demand side platform strategy to uh 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, not just Roku as a publisher, but from a 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 the DSP.

Got it. So I think you already touched on Google a bit, but I wanted to maybe put a finer point So recently announced Confidential Publisher Match, I think you were the launch partner, maybe the only announced launch partner, so that's, I think, a credit to you and your ability to partner there.

But it sounds like it's going to be ramping over the course of H2, do you think that's to be more or less up and running for the holidays it will be up and running and again but to that question like the success of the success of uh dv360 uh is is predicated on how well dv360 does uh as a demand side platform so you know i would say it this way like you know there's the there's this idea that the the there was an idea call it i want to say two years ago that the walled gardens i lived through this at roku it was 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 and so Amazon did announce a DSP and they don't 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 are them 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 hundred million households plus hundred 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 uh other outside uh data uh 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 bid on our inventory on the programmatic pipes and we'll do very well in that yeah I think 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 support of the companies are important but maybe Maybe 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.

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, is 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 the all the NFL which is owned by you know three or four players with prime video coming in with Thursday Night Football and you know if you have Fox and you have Paramount and you have ESPN and and now you have Netflix and so and there's like all this massive IP out there and I got this question is what is what is Roku's advantage well we have a hundred 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 that those hundred million streaming households in a way that's beneficial to the streamer in a way that's beneficial to us from a platform monetization standpoint. Because we have the, 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 just so everyone understands like how powerful that is The Roku channel is the number two app on platform So in the US 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 can people know who the number one app is but the Roku channel without you know 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.

Got it. I want to go back to the ability to partner and how that's influenced by sort of CTV industry supply dynamics and how those have maybe changed over the last couple years. You know, there was a sense that, 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?

Yeah. So, again, 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 budgets started to shift and 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 dollars in the US just talk for the US from its what 90 billion dollars of a little over a third of that has moved to CTV the hours 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 were that was not available on digital now that's not the case as a matter of fact now you have you know a lot of different sports specifically in the NFL that it'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 dollar 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 a from from an Advertiser perspective and it's a huge opportunity. We're very excited about it. So you do have the 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 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 it seems almost as though if you if not just your commentary but also more broadly if you talked 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. Is that 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 performance-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-performance 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 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 what where I'm going with this is the the the demand that we see is for the the high 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 a half of broadband households in the US 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.

Got it. I just want to switch gears a little bit to 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 for this cycle?

Yeah, you know, our indications are we think it's going to be similar to 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 geotargeted again that's something because everyone's logged in it's great for us we're very good at geo targeting so we 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.

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

It's end of Q3. It's definitely into Q4. October is a very big political month. It really does depend on where, you know, 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 um and 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 switch gears to subscription talk about that for a bit um you've had some you know sort of unique uh 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 things that can sort of experience at s curve if you will you know um 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 had a similar 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 Through real coupé 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 uh being uh being pushed to it there was no personalization uh at that point in time on roku so subscriptions wasn't uh wasn't a call it a top investment initiative now now it is we we changed that we said it very clearly exiting 2023 that subscriptions was going to be a high priority because it is 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 is really embedded in our UI so if you have a premium subscription the content is ingested on the Roku on Roku and you see that content throughout the user interface whether it could be it could be on 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 uh we've had we have multiple tier one uh partners sign up for premium subscriptions we just announced fox one we had peacock sign up we had apple tv sign up uh in last year we had hbo sign up for tier ones we We have a very, very strong torso and tail of tier two, tier three partners all in premium subscriptions, all driving 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 uh we launched howdy in mexico uh we'll launch more um more uh countries with premium subscriptions it's a huge positive for us got it and the streamers themselves are incentivized it sounds like because they get more uh more of their content displayed across the eui that drives more viewership it does more more 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. What will drive Subscriptions into those into those premium subscriptions.

Okay, and on howdy also you may be your newest howdy subscriber right here excellent You're welcome So it's doing very well. We're very it's it's it seems to be doing great based on the antenna data Do you think that that's, you know, a unique enough swim lane where you want to say, okay, you know, 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?

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 in it's a very inexpensive ad-free uh subscription with with great content uh so um it does very well off roku as well um we launched in mexico we'll launch it in more countries so stay tuned on that um so yeah we and and we're we're putting we're putting more marketing beyond the owned and operated marketing that we currently have we are absolutely doing that got it so i want I want to switch over to devices a bit.

So I was just in my neighborhood Wal-Mart, 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. What the runway is there for the continuation of the Roku partnership with On? Is there an opportunity to maintain some skew share there over time?

Well, certainly the partnership with Wal-Mart will continue to be ongoing, whether it's with the private label brand which is what you're referring to and on is to be seen but definitely we will be at Walmart we will sell millions of units at Walmart through our OEM partners we also have our own first-party TV where we are the hardware and the software provider that's doing very well and of course we still have players so you know I would say that 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 variety of reasons one we're investing more in our OEM partners to 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 notwithstanding the on transition.

Got it, and you've talked about some of the incentives that you may bring to bear, particularly in the back half of this year, and then of course you have the BOM 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 broadly speaking, to gain SKU share?

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 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 which is branded, which is a private label for Target, but it is it is our It is our hardware and software doing very well at Target. But to your point on on memory, memory has gone up exponentially And that's only now starting to hit the market. It's gone. It's gone for a while. It went up, you know, call it six months ago But those that that new memory is just now hitting the market through the manufacturing cycle What the benefit of Roku is it's a purpose-built operating system for TVs It's not the same. It's not the same memory footprint as a phone or a laptop It's 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 BOM 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, you know, 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 cost that memory, bill of materials cost, BOM cost stands for bill of materials, the percent of the bill of materials cost 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 US We want to do more outside the US 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 bit on this, but But, you know, I think Sony and TCL just did a tie-up. I perceive maybe an opportunity to sort of march higher into the more premium range of the market. Maybe that has a follow-on.

Yeah, that's always on our mind. We're always working on that. I think that will happen. I do think that operating systems will consolidate. I think Roku is going to be the winner in there, of course, because of not just our overall penetration and our market share, but simply because we have the best operating system from a user experience standpoint. I mean the streamers just love it. They love the Roku channel. They love the latency of it. They love the home screen. They love the remote. There's so much going for it. Clearly still price is the biggest input into buying a TV. I fully agree with that. But in addition, as long as we can maintain price competitiveness, and we can, the operating system is just unbeatable from a streamer experience standpoint. So like there's a lot of opportunity to go upscale into into other areas higher it higher Call it the higher ends. We're always looking at that But for right now, you know, 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 in the non Walmart retail outlets specifically target amazon's doing very well best buy and a lot of the regional uh areas we're doing very well in and we continue to gain share from from that perspective got it and in those specific areas yeah and so just wanted to talk a little bit about the or touch on the opex trajectory and um you know just you know any any thoughts there on on sort of you know um margin directions margin ceilings and And and how we should be thinking about yeah, it wouldn't be a fireside chat if we didn't talk about OPEX Yeah, I have to talk a little bit about numbers. Yeah, can I can I talk a little bit about free cash flow to you? Yeah, that's also really important. Excellent. Excellent. So to answer your question on OPEX We've said we we said for several years now We are 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. Well, we grow our platform business double digits and you know our growth rate is is doing very well we've accelerated our growth rate coming into q1 and into q2 relative to prior uh quarters while actually maintaining that mid single digit opex growth for uh 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 We grew 260 basis points of margin in 2025. We're going to get to 330 basis points. I believe 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, it's going to be more than EBITDA. We said that in 2024 our free cash flow was, I believe, $480 million, 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 All this means our dilution is essentially was negative dilution for the first time in the company's history in Q1. We were, you know, our gross dilution was 2 to 3 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 in that I think I publicly stated that we will hit a billion dollars in free cash flow by the end of 2028, if not sooner. 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 light 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 when we write it up. So we have 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 cash flow per share.

Okay. Last one, just on, you know, given all that, which sounds great, the 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 of cash on our balance sheet. We have no debt. We're in a great position. It's a very enviable position. I feel honored to, you know, as a CFO to be in this position. And, of course, figuring out the utilization of that cash is a top, is always a top priority. Right now, we've invested 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. We're very selective. We're very thoughtful on acquisitions. But in the meantime, we're going to continue to generate free cash flow. I suspect we'll continue on our share buyback, all else pending from a capital allocation perspective.

We've got a grand total of three minutes left. I'll open it up and see if there are any questions in the audience. And seeing none, I guess we'll leave it there.

There's one Yeah, great question. 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 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 DB 360 is a DSP their 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 ours between the Roku channel and the partners. So it's a very, like, we feel very good. Our partnership with Amazon is extraordinarily strong. And so from that standpoint, I just, I feel like we're 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 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 SMB's didn't know how to produce 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 TRC our partners we 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're doing very well 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 great we'll leave it there thanks so much thanks everyone appreciate you coming