Roku, Inc. (ROKU) Earnings Call Transcript & Summary

Okay. Good morning, everyone. Again, I'm John Hodulik, a media and telecom analyst here at UBS. And I'm very pleased to announce our next speakers come to us from Roku. We have Dan Jedda, the CFO; and Conrad from IR joining us as well. So we've got about 35 minutes of Q&A. I've got a list of questions run through. And then if anybody wants to lob one in, I can -- I've got the iPad here and I can work it into the conversation. So with that, again, thank you guys for joining us.

Yes. Thanks for having us, excited to be here.

Yes, as we do every year, could you just give us a sense of sort of how you see Roku position and what your priorities are for the company as you look out into 2025?

Yes. Sure. Well, so going into 2023, we said our main goal was to get profitable by 2024. We made that very clear back in January of '23. And we were able to accomplish that goal a whole year ahead of schedule. We hit EBITDA positive in 2023 at $4 million, but it was a huge win because we weren't expecting to do it until 2024. And as we exited the year, again, we made it very clear what our priorities were going into 2024, and that was on the monetization side of the business. So we rightsized our cost structure. We got it in line. And now our focus was and continues to be on growing our platform side of the business, which is our monetization. So that's basically focusing on ads -- on our ads business. It's focusing on our content distribution business. It's focusing on our subscriptions business. We've got a lot of product initiatives in all these areas. It is our top priority as we come out of 2024 and going forward. So we think we're well positioned to do that as well. I mean we've focused a lot on these as investment areas within our business throughout 2024.

So the move to streaming is obviously still very much in the early days here in the U.S. and even more so, I'd say, globally. What do you see as the biggest drivers of growth for Roku over the next several years?

So yes, first and actually quite importantly, the secular tailwinds in the industry are in our favor. There are tailwinds. So if you think about the overall ad market, the linear plus the CTV ad market, the shift is clearly moving from linear to CTV. The eyeballs and the hours moving much faster than the ad dollars. And so like when I look at the total addressable market, it's like 1/3 of the ads have moved from total advertising from linear to CTV. It's growing. It's increasing its growth rate. That's going to continue. That's a secular tailwind for us. It puts us in a great position. So that's a huge positive for us just in the industry itself. Now we, as a platform, are well positioned to take advantage of that shift because we control the home screen. We control the UI. I'm sure I'll get -- we'll get into some questions on that. But that allows us to take a particular advantage of this shift. Again, like the eyeballs and hours already happening. We've mentioned a lot of data points on the hours growth. Our hours growth are growing right around 20% in our total platform. They're in the hundreds of billions. It's very impressive the hours growth and the streaming households growth, which is what we call active accounts. We call them streaming households. So we're approaching and, in fact, are very close to half of broadband penetration in the U.S. So we have half the households, which means we have a tremendous amount of reach in our platform, and that allows us a particularly powerful position to take advantage of this TAM, if you call the CTV ad market, an addressable market. As the dollars shift over, we're in a unique position to take advantage of that.

Sure. Maybe we'll start with sort of the highest level of sort of competition in the CTV OS market, especially maybe in the U.S. How would you characterize the competition? Is it -- versus this year, say, versus a year or 2 years ago, how does competition appear to be shaping up to?

Yes. There' -- that's a great question. So if you look at it -- I kind of look at it on 2 fronts. You have the competition in the advertising perspective. You have competition in the OS perspective or the platform. perspective. We look at it both ways, of course. Obviously, it's very obvious that companies have started to realize the potential for this space, not just in the ad dollars, but in the OS. You see more companies moving into advertising. You see more companies and some recent announcements of folks moving in -- companies moving into the OS space. It just tells you how valuable this industry, this space is. And one of the benefits of Roku and, really, to testament to Anthony, he saw this 15-plus years ago that this was going to be a big space. And Roku's first-mover advantage is tremendously helpful. Again, as we are #1 in this space and not by a little, we're #1 by a lot. It's a great position to be in. You do not want to be -- in the OS space specifically, I'm talking now, you do not want to be a #5 or #4 or even a #3 player is hard. You want to be #1 or #2. And that's Roku's unique advantage is we're #1 in the U.S. We're #1 in Mexico. We're #1 in Canada. We're gaining in the other areas. We see paths to being a dominant player in all our countries that we operate in. And so that is, again, a very unique position. And we've invested a lot to get there. You can't just come in and just become a market-scaled player in this space, in the OS space. We've invested a lot in the OS. It's a unique OS. It's built specifically for CTV streaming. Our streamers love it. They love the simplicity of it. Our advertisers are starting to see the benefit and the value of owning the OS in our reach, in our ad product, in our subscription service and what we can do. So while the competition is there, again, we're in a very unique position, being the #1 in terms of OS. We're growing that. It's not shrinking. It's actually growing. It's growing in every country that we operate, including the U.S. And then from the advertiser perspective, yes, there are a lot of different players that have moved into the "AVOD" space or ad space, again, tells you the testament on where the dollars are going in this space. And we're uniquely positioned to benefit from our different ad products. I'm sure we'll get into some questions on that as well. Not only do we have tremendous reach, 120 million people start their streaming experience in our home screen. That is incredibly powerful reach. And then within the ad product itself, our ability to target, our ability to differentiate ad product is really unmatched, in my opinion, in the market segment space.

Maybe if we drill down into a couple you said. There's some recent news on the CTV OS or competitive front. First, Walmart's acquisition of VIZIO. How much of a headwind or how does that impact Roku?

Yes. We obviously get that question, and this was not a surprise for us. We did see this coming. One of the things to say on that, first, our first-party TV is a differentiation strategy. It's an amazing product. It's doing very well. It's priced appropriately. And that helps us because now we're fully distributed for our first-party TV, where we started out originally for about 6 months exclusively with one retailer, Best Buy. At the start of this year, we have basically branched off, and we're fully distributed and becoming more so even on a regional basis. But with the big retailers, we're fully distributed with our first-party TV, including Amazon, including Target, including Best Buy, including Walmart, et cetera. So that's one piece. But getting back to the specifics of your question, we'll continue to do business with Walmart. We have a great relationship with Walmart. Our streamers love our products. They ask for Roku by name. And so I don't -- it's -- I do not believe that this will particularly impact us. And in fact, in our last quarter, we talked about reaching 100 million in broadband -- 100 million streaming households in the next 18 months. And we basically -- we said very clearly, like we're going to grow in all our countries, including the U.S. So we see a path to 100 million streaming households in this space. That's very powerful. We're at 85 million right now. That path is not like years and years away. It's relatively quickly. So we feel good about -- despite the competition, despite the movements of streamers in -- of content companies into the AVOD space, despite the move of more into the OS space, we feel very good about our position.

So you don't think it -- it sounds like, I don't know, words of mouth. But it doesn't sound like you think this deal is really going to change your account growth that we've seen.

Yes. We wouldn't have said $100 million if we did not see this path to it. That's very powerful. That's $15 million more from where we are now, and that's going to happen, call it, over the next 18 months, which is what we said when we had our last quarter earnings. And we feel good about it.

That's great. What about competition from big guys like Google and Amazon? I mean, obviously, they make -- with their devices and now their TVs or at least from Amazon Fire standpoint. But how should we think about competition? Obviously, these guys have big checkbooks. But at the same time, from what I understand, they're doing other things as well, not just CTV?

Yes, yes. Again, it's really the same answer. We have been in this space for 15 years. They've always had big checkbooks. When I was at Amazon, they had a big checkbook as well. And you can't diminish being #1 in this space because it's the position you want to be in. And it's a position of strength, and that's where Roku comes from, a position of strength. And we're used to this. We're used to being surrounded by big companies. We also partner with those companies. So when you think of Amazon, yes, they have an OS and a player, but they also need to be on Roku. And there's a partnership there. Same with -- there's a partnership with Google. There's a partnership with Walmart. These are all partners and competitors, and that's fine. That keeps us on our toes. But again, I go back to being #1. We've always had this competition. We've been able to grow our share every year for the last several years in the U.S., the same in Mexico, the same in Canada, the same in Brazil, the same of what we call the rest of Latin America. So I don't see it changing going forward. And again, that #1 position is the position you want to be in, in this space. And it's not like we're #1 with 20% broadband penetration. We're #1 with close to 50% of broadband penetration in the U.S. Mexico is going to get there as well, to that level of penetration and relatively soon. And when you have that kind of penetration, a lot of good things happen because you've built the scale. Now it was expensive to get to that position, obviously, you have to build a great product, you have to invest in it, you have to distribute it, et cetera. That investment, we will continue to do, but a lot of that investment is behind us. So now we're focusing on monetization, monetizing all that scale that we spent years and years building.

I would just add one more point is we've never had a first-mover advantage. There was a little company called Google that was first to market the TV license OS. We just did it better. We're able to get to our market share that we had today.

Got you. Just a couple more, again, getting back to sort of recent events. The Trade Desk recently announced it was developing a CTV OS, even though the CEO said it won't necessary compete directly with Roku. Do you see this as an eventual risk for the company and maybe portending sort of changes to the business model?

I don't. I don't see it as a risk. Again, like -- I think it's more of a testament to companies that see the value of being in the OS space. Again, when you have a first-mover advantage, when you -- remember, we built this position over 15-plus years. We built it, again, not on a monetization side of it. That's what we're doing now. We built it on an amazing streamer experience. So our customers -- our streamers absolutely love the product. So you have to be able to do both. You have to actually have an OS that the streamers come in and want to use, and you have to have a way to monetize it. Again, we have both of that. Now will players come in and maybe try to get some small percentage of market share? Perhaps. I think that's playing defense. That's playing from behind. It's a very difficult position. I also think that, again, like with everything, we have great partnerships. We have a great partnership with Trade Desk. They're one of many DSPs that we integrate with and one that we integrate deeply with. So there's also a partnership there.

Got you. And just lastly on this. If you look at your crystal ball, I mean, how do you see the market over the next 5 years from a consolidation or M&A or -- we don't have to give names. But do you expect there to be consolidation? It seems to be, frankly, aside from Roku and your dominant market share, there's a lot of smaller players out there. Do you think they eventually get rolled up?

Well, that's a hard question. People have been talking about consolidation on the content side of it for many, many years. And some of that is happening. I think it's been slower than most expected. Who knows, with the new administration, how that changes on M&A. I find it hard to speculate in that area. I think it's -- for us, it's more important, like we're heads down focused on the operational execution of monetizing this incredible asset that we've built up over many, many years. And so if it happens, it happens. We'll be ready for it. We are forward looking in how we think about things. But it's really hard to predict what happens in any OS space, in any content space.from the different media companies out there, I just think that, regardless, I strongly believe that Roku is in a good position to take advantage of any -- whether it's status quo, whether there's more acquisitions in this space, whether there's more consolidation and/or leverage in the DSP space, I think regardless of any of that, we are in a very good position.

Got you. Now let's shift towards monetization of the platform. And maybe let's start with outside the U.S. or opportunities outside North America. First of all, what's competition like in terms of the OS market? And then how big is the opportunity, right? A lot of these markets aren't as advanced from an advertising standpoint, and they might even be behind from a streaming standpoint in general. So just how would you characterize the non-North American opportunity?

That's a great question. So they are all very different in where they are, not just on the CTV and the OS side, in other words, CTV moving to digital. They're also very different on where they are on the ad perspective -- on the advertising side. So the way we look at -- every country is very unique and very different, and we're at different stages in every country. So for example, in Canada, we have -- we're basically in the monetization space. We've got enough scale. We're monetizing it. The Roku Channel is there. We're investing in the subscriptions business in Canada, just like the U.S., and we're in a good position. Mexico, we're just -- we have tremendous market share broadband penetration in Mexico. It's exceptional. And we're getting to a point now to where we're really focused on starting to monetize. Brazil, we're not yet there in terms of -- we're building scale and building it very fast. It's just further behind, and it's going to take us more time to get to the scale we need to trend the market to truly monetize Brazil and the same with rest of -- what we call the rest of Latin America. So we're at different stages. I will say, though, that even though they're at different stages, the cost to grow market share is very different. It's -- obviously with the U.S. being very mature, it's more expensive to get scale in the U.S. via distribution. That is -- it's just different when you're at different stages of it. And being in early is a huge advantage because it just doesn't cost us much to get to the scale. And we've already built the OS. We may have to make modifications in different countries, of course, but the core OS that we've done is already built, and it does port over to the different countries. So a lot of the investment -- it's not like you are incrementally investing a significant additional amount of money for the OS to go into Mexico. Now you do -- we do have The Roku Channel in Mexico, and that's very different than The Roku Channel in the U.S. But your investment in the OS is different. Your cost to get fully distributed is different. And so being in early is really important. And that's how we think of our international expansion is where can we grow to be a significant presence so when the market is ready and when we have scale, we can turn around and start to monetize that just like we're doing in the U.S. and Canada and just starting to do in Mexico.

And speaking of monetization in the U.S., so you laid out, I think, the landscape. 40% of the viewership, just based on our numbers, has migrated to stream, but just 25% of the ad dollars. So do you think just given the initiatives we've seen more recently at Amazon, Netflix and Disney and some of the other sort of media co. D2C services, is that -- the shift in the ad dollars gaining momentum in your view? Or how do you see that over the next...

It absolutely is getting momentum for a variety of reasons. You have -- obviously, you've had big content available on streaming. That's always been helpful. Now you have sports moving over, which is helpful to gain in terms of advertising. The lines are starting to blur between like all sports being on linear. Now you actually have exclusive games on digital, which is a tailwind for us. You have unique ad products in digital that are not available in linear, which I believe, if it hasn't helped already, is going to be the catalyst that allow more dollars to come over. That's where I think our expertise lies. And so -- and then, of course, you just have pure scale. The scale is changing. The scale is becoming digital, more digital, which matters from the brand advertiser perspective. So again, like all this is what I referred to earlier from the secular tailwinds perspective and why we think we're in a very unique position to take advantage of it.

Yes. What are the impediments to growth? Because you would think now that the sort of the inventory is growing so rapidly that the dollars would be flowing very quickly, but we often hear that bill rates are not where you'd like them to be?

I think it is a little -- and not perplexing, but yes, some of the dollars are moving slower than the hours. You'd think they move, if not quicker, at least at the hours or the eyeballs. That's not happening, but that will happen over time because that's where the performance is going to be. And I think as new -- and new and innovative ad products come out, that actually should speed up that because you'll be able to measure. Think about it like if you could truly have a good ROAS measurements and/or the best targeting imaginable, which will allow CPMs to adjust to whatever the market CPMs are for highly targeted and depending on where they go. I think all this will come into play over time. And I think -- I don't have great answers as to why some of it's legacy, some of it sports is still on linear. I think as all that transitions, that it'll -- the dollars are going to follow. And I don't think they're going to follow in a slow way. I actually think they're going to follow in a fast way because there's going to be ability to not only get the broad reach, but to measure the efficacy of what you're trying to -- whatever you're trying to measure from an advertising perspective, the efficacy is going to be far better in the digital world than it is in the linear world.

Got you. How is the relationship with The Trade Desk count here in '24?

Yes. Trade Desk's going very well. We've integrated -- we've been integrated with Trade Desk for a while, but more importantly, we did a deeper integration with UID2.0. That has the tendency to allow more volume to come our way. And once more volume comes our way -- because we're not sold out on The Roku Channel, as more volume comes our way, we can fill that volume. And it's really about performance and measurement. So we're doing a lot with The Trade -- not just with The Trade Desk, but with other DSPs. That's going to continue. More volume will come our way. Then it's all about performance. And when you think of what we're doing, we're integrating with measurement companies. We're developing our own measurement capabilities. We believe that our ad products will perform. And the good news is if they don't perform to some sort of standards, we'll quickly adjust because we have the capabilities to measure the performance. That's why we integrate with companies like iSpot and other ad measurement capabilities. So we're ensuring that the efficacy of the ads are what our advertisers and our partners want.

Got you. Moving over to Roku Channel. Me and the team look at the Nielsen gauge numbers very closely, cuts the numbers in a bunch of different ways, and you guys have had phenomenal growth. So what's driving that growth maybe even versus a lot of the other fast guys? And then do you think that you can continue to grow at those rates?

Yes. Great question. I mean I'm so proud of what Roku has done on The Roku Channel. So let me give a few data points. I love data points. Let me just give a few data points on The Roku Channel. First of all, like we've said this before, about 1/4 of ingress of entering The Roku Channel is done through the app. The other 75% is done outside the app via the home screen and/or the UI. So we are unique as a platform in that we can have 5, 6, 7 ingress points into The Roku Channel because we control the home screen and UI. It shows you the power of owning the home screen as a platform. That drives a lot of eyeballs and streamers into The Roku Channel. The Roku Channel has great content. It doesn't have the most exclusive content. It doesn't have Netflix-type original content, but it has great content. And streamers love to be told where great content is that they can go stream. And so whether it's fast, whether it's fixed content that people want to watch or our own set of originals, the streamers love that they simply need to be told where it is and how to get there. Here's another data point. We talked about the home screen, the power of the home screen. The home screen was static for many, many years. We're now making changes to the home screen. That is our focus on monetization. So one of the first changes that we made is the top bar we put in the content row at the top of our home screen was one of the first changes we've done in a while. We do -- the left nav changes a lot. But from the actual -- from the app grid, the top, we put in the content row. That content row is a machine learning-based content row. And version one of that content -- it's relatively new. It's about 6 months old, maybe a little longer. Version 1 of that content row increased our reach 6%, literally version 1, our ad reach, our monetizable ad reach by 6% just by putting the content row up at the top because, again, it's a machine learning-based content row that's showing streamers what to watch. A lot of that sits in The Roku Channel. A lot of that sits with our premium subscription partners, et cetera. That -- as everyone knows, like reach is a KPI that advertisers want to see. Now we already have broad reach, but we were able to increase it 6%. That's a big number.just by putting the content row. And it had a positive streamer experience because ours went up relative to the AB test we ran, and subscriptions went up because we put some of our partner subscriptions in that content row. I mean it is a win-win-win in the form of our home screen that we got more monetization out of it. We got our content partners to get more subscriptions out of it and our streamers loved it. That is just an example of the power of the home screen and driving eyeballs and hours to The Roku Channel. Okay, I want to give you one more data point. So I'll give you another data point on The Roku Channel. This is a big one. Like in the U.S. -- we don't say this often, but I think it's such an important one and something I'm so proud of for the team for doing. In the U.S., 2/3 of our streaming households, that's what we call active accounts, streaming households, 2/3 engage in The Roku Channel. That puts us as the #2 app on our platform. That is the growth. That is the power of the home screen. So when you think about it, there's only one partner who's ahead of us in terms of active accounts or streaming households who engage in The Roku Channel in the U.S. That is incredibly powerful. And it shows you how we can generate a lot of supply for ad impressions in The Roku Channel. Now we got to talk about demand. I'm sure we'll get there. That's where ad product and integration with DSPs come in is to drive more demand. Supply, not an issue. It's actually pretty easy for us to generate supply of ad impressions on our platform.

So you've talked about the strength and the -- of the home screen in terms of getting viewers or suggesting what to watch for viewers and how effective that is. And one of things that we had to -- that was hard for us as we looked at the company, it's just where you are in terms of monetization of that. And you would think that as the -- so we cover all the media companies, D2C companies move from new subscriptions to driving revenues based on engagement and advertising that the value of that home screen is, if it really is that big of a driver on viewership, would just go up. You know what I mean. It would increase in value as we move more towards advertising-based D2C models. Can you help us get a sense for what inning we are in terms of your monetization of the home screen as a result of that?

Great question. Baseball analogy inning's hard. Like it's not 1, it's probably 2, inning 2, so early, we're very early. And let me tell you why. First of all, to answer your question on content partners, one of the things we've been very clear about is M&E. The M&E vertical continues to be challenged. And we're not counting on M&E&A going back to 2022 levels. We were very smart when we saw that M&E start to decline to diversify -- not diversify, I mean, we'll always be a great place for M&E partners, but to diversify into other ad verticals, think health and wellness, think insurance, think CPG, et cetera. So everything in my world, when I look at forward-looking, is we are not expecting M&E market to bounce back, and we're totally fine with that. If it does bounce back, it's going to be even more positive for us because we're sort of a must-have spend from our -- for our M&E partners to drive engagement. But to answer your question on where we are in the home screen, I talked about the content row. In the -- in our marquee unit, remember, there's 120 million people start their streaming experience on the Roku home screen. I talked about the marquee -- we have an ad unit in the right slide -- in the right-hand side of the home page that we call it the marquee unit. That never had ad video on it. It's a static -- call it a static display ad. Now it has video into it. That's a diversification strategy that's going to allow more advertisers because they want video that come in and advertise us. So think trailers, which I guess is a version of M&E, but think the autos, they all want video. Now they got that. That's a new ad unit. It just -- we just released it this last quarter for general availability. It's doing well. On the left hand -- I talked about the content row. On the left-hand side of the home screen, on the left-hand nav, we make changes all the time. For example, the ones can -- there's sport zones, there's other zones. That is a UI we control where we put the content in those zones, and we monetize a lot of that streamer's journey experience through sponsorships, through content that we monetize with ads, et cetera. A great example is the Olympics where we had the Olympic zone with -- in partnership with Peacock on the left nav of our screen. We also had it in nav. But on the left-hand nav, where it was a great experience where streamers could come in and they could start their Olympic experience with that journey that we partnered. And we drove more sponsorships, we drove a lot of subscriptions for Peacock that we monetized in addition to Peacock monetizing, again, all part of the left nav. That -- again, we're just getting started on the home screen. There's more things we're doing in the flat nav. There's more things that we're doing on the home screen that are coming. These are not conceptual. These are products that are being built and tested as we speak. So there's a lot of opportunity from the home screen perspective. And the UI. It's not just the home screen, it's the UI we control. It's into different zones that we have. It's into TRC. It's into even the Roku City, which is an amazingly cultural phenomenon that we've been able to monetize, and we're working on more ways to monetize because people love the screen saver of Roku City, et cetera.

Got it. So it sounds like you got -- you have the -- from a home screen standpoint, you're optimizing the platform with these new products. And at the same time, the M&E market obviously has been under pressure. I mean we got to the point so you have these sort of conflicting issues because the M&E segment has been the largest buyer historically. Maybe putting them on the -- first of all, do you at least -- can we, at this point, say that M&E has bottomed at this point? Or what do you think are the trends in the spending there?

Hard to say if it's bottomed. I'd like to say yes. It's very hard to say. I do think like for -- while some M&E might go down, there's others that could potentially come in and help offset that, think of venue, think of ESP and D2C, think of -- if other of our content partners do D2C. There's possibilities. There will be new entrants. And any new entrants, again, is going to want to partner with Roku because we're half of broadband households. So you want to partner with us to drive that subscription. Hard to say if it has, in fact, bottom out. I will say from our standpoint, and I've said this many times, M&E is a significantly smaller part of our overall platform revenue then in 2023. We don't disclose what it is, but it's really gone down a lot from where it was at our peak. And so that is our focus on diversifying beyond M&E as a vertical. It's still an important vertical for us, and again, we'll continue to do well with our partners on that. But where it bottoms out, when and where, a little unclear at this point.

Makes sense. Maybe just shifting to distribution for a little bit. Obviously, it's an important growth driver. The number of new sort of sign-ups has slowed, but price increases have been a tailwind. How do you see growth in the SSD business as you look into 2015?

Yes. The biggest driver within SSD is our subscriptions business, and it's a great -- I'm glad you asked the question. I probably haven't done justice as to how much we're investing in the subscriptions business. Unlike ad products where you could just issue a new product and you'll get a lot of demand, subscriptions takes time. You have to build. Subscription is all about building the streamer experience that ultimately leads to more monetization. We have tens of millions of subscriptions that we monetize on our platform, of course. And it has never been a big investment area for Roku until recently. We've always had a payments platform, which was an investment called Roku Pay, which has been -- served us very well. But now we have a dedicated team whose focus is building the subscriptions experience that allows us to better monetize our subscriptions and also, very importantly, creates a very positive streamer experience. Whether that's the journey of signing up or reducing churn, bundles of subscriptions, subscription-type manager products, so you know where all your subscriptions are, there are so many different areas we can improve. And we are improving, and we are investing in this area. I do believe it's going to be a growth driver for us. Again, that takes a little bit of time because you have to actually build the product. It has to be an amazing product for our streamers. And then we -- again, but we're building it with the context of having it be an exceptional streamer experience that will ultimately lead to more monetization as we monetize all the subscriptions that come through our Roku Pay product.

Got you. I got to sort of move ahead. We have only a couple more minutes. Platform margins have been in the low to mid-50s range for the past couple of years. How should we think of this, given the evolution of the business and the different parts that you've laid out there? And how should we think of that progressing from here?

Yes. It's a good question. We've been in that 52% to 54%. We have activities within the platform business that have higher margins. We have activities that have slightly lower margins. How I look at it is I want -- on a mix-adjusted basis, I want us going up and to the right. That's how we look at it across our businesses. Are we getting better through more efficiency, things like delivery -- cloud delivery costs, cloud storage, being more efficient with our content spend, et cetera, having add that are higher-margin ad products? And we are getting better. The mix does play an impact on it. And how I think about it is on a mix-adjusted basis, we'll get better. On a mix unadjusted basis, I think we'll be in that 52% to 53%. So anything that's growing faster that lower margin, we'll be able to offset it with just being more efficient. So I don't see us going too much below that, and we're always striving to go above it. I think as we develop ad product, if we can find those ad products that are 80-ish percent margins, that will be a big tailwind for us. But right now, I see margins in that 52% to 53%.

Got it. And then 4Q guidance implies that you'll come in at $200 million plus of EBITDA in 2024. How should we think about the trajectory of EBITDA growth from here as we look out to '25?

I think we made it pretty clear that we are investing, but we're investing with capital reallocation and focusing in these investment areas. I do not see OpEx growing double digits. I've been pretty clear on that. I think it's going to grow, excluding impairment charges, in that mid-single digits. I think our revenue is going to grow double digits. And so when that happens, you obviously get adjusted EBITDA leverage. And so I see us getting leverage over time. I -- that's always our goal. I also have made it -- I think I made the point that our free cash flow mirrors our EBITDA. So as EBITDA gets leveraged, I fully expect our free cash flow, which is our ultimate North Star KOM, to get leverage as well.

That's great. I think that's a great place to leave it. Dan, Conrad, thanks for being here.

Thanks.

Thank you so much.