false0001428439December 31Q22024http://fasb.org/us-gaap/2024#NonoperatingIncomeExpenseP1Yhttp://fasb.org/us-gaap/2024#AccruedLiabilitiesCurrenthttp://fasb.org/us-gaap/2024#AccruedLiabilitiesCurrentP1YP1Y274365115395xbrli:sharesiso4217:USDiso4217:USDxbrli:sharesroku:segmentxbrli:pureroku:Classroku:vote00014284392024-01-012024-06-300001428439us-gaap:CommonClassAMember2024-06-300001428439us-gaap:CommonClassBMember2024-06-3000014284392024-06-3000014284392023-12-310001428439us-gaap:ServiceMemberroku:PlatformSegmentMember2024-04-012024-06-300001428439us-gaap:ServiceMemberroku:PlatformSegmentMember2023-04-012023-06-300001428439us-gaap:ServiceMemberroku:PlatformSegmentMember2024-01-012024-06-300001428439us-gaap:ServiceMemberroku:PlatformSegmentMember2023-01-012023-06-300001428439roku:DevicesSegmentMemberus-gaap:ProductMember2024-04-012024-06-300001428439roku:DevicesSegmentMemberus-gaap:ProductMember2023-04-012023-06-300001428439roku:DevicesSegmentMemberus-gaap:ProductMember2024-01-012024-06-300001428439roku:DevicesSegmentMemberus-gaap:ProductMember2023-01-012023-06-3000014284392024-04-012024-06-3000014284392023-04-012023-06-3000014284392023-01-012023-06-300001428439us-gaap:CommonStockMember2024-03-310001428439us-gaap:AdditionalPaidInCapitalMember2024-03-310001428439us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310001428439us-gaap:RetainedEarningsMember2024-03-3100014284392024-03-310001428439us-gaap:CommonStockMember2024-04-012024-06-300001428439us-gaap:AdditionalPaidInCapitalMember2024-04-012024-06-300001428439us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-04-012024-06-300001428439us-gaap:RetainedEarningsMember2024-04-012024-06-300001428439us-gaap:CommonStockMember2024-06-300001428439us-gaap:AdditionalPaidInCapitalMember2024-06-300001428439us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-06-300001428439us-gaap:RetainedEarningsMember2024-06-300001428439us-gaap:CommonStockMember2023-12-310001428439us-gaap:AdditionalPaidInCapitalMember2023-12-310001428439us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001428439us-gaap:RetainedEarningsMember2023-12-310001428439us-gaap:CommonStockMember2024-01-012024-06-300001428439us-gaap:AdditionalPaidInCapitalMember2024-01-012024-06-300001428439us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-06-300001428439us-gaap:RetainedEarningsMember2024-01-012024-06-300001428439us-gaap:CommonStockMember2023-03-310001428439us-gaap:AdditionalPaidInCapitalMember2023-03-310001428439us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310001428439us-gaap:RetainedEarningsMember2023-03-3100014284392023-03-310001428439us-gaap:CommonStockMember2023-04-012023-06-300001428439us-gaap:AdditionalPaidInCapitalMember2023-04-012023-06-300001428439us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-04-012023-06-300001428439us-gaap:RetainedEarningsMember2023-04-012023-06-300001428439us-gaap:CommonStockMember2023-06-300001428439us-gaap:AdditionalPaidInCapitalMember2023-06-300001428439us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-300001428439us-gaap:RetainedEarningsMember2023-06-3000014284392023-06-300001428439us-gaap:CommonStockMember2022-12-310001428439us-gaap:AdditionalPaidInCapitalMember2022-12-310001428439us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001428439us-gaap:RetainedEarningsMember2022-12-3100014284392022-12-310001428439us-gaap:CommonStockMember2023-01-012023-06-300001428439us-gaap:AdditionalPaidInCapitalMember2023-01-012023-06-300001428439us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-06-300001428439us-gaap:RetainedEarningsMember2023-01-012023-06-300001428439roku:AllowancesForSalesReturnsMember2024-03-310001428439roku:AllowancesForSalesReturnsMember2023-03-310001428439roku:AllowancesForSalesReturnsMember2023-12-310001428439roku:AllowancesForSalesReturnsMember2022-12-310001428439roku:AllowancesForSalesReturnsMember2024-04-012024-06-300001428439roku:AllowancesForSalesReturnsMember2023-04-012023-06-300001428439roku:AllowancesForSalesReturnsMember2024-01-012024-06-300001428439roku:AllowancesForSalesReturnsMember2023-01-012023-06-300001428439roku:AllowancesForSalesReturnsMember2024-06-300001428439roku:AllowancesForSalesReturnsMember2023-06-300001428439roku:AllowanceForSalesIncentivesMember2024-03-310001428439roku:AllowanceForSalesIncentivesMember2023-03-310001428439roku:AllowanceForSalesIncentivesMember2023-12-310001428439roku:AllowanceForSalesIncentivesMember2022-12-310001428439roku:AllowanceForSalesIncentivesMember2024-04-012024-06-300001428439roku:AllowanceForSalesIncentivesMember2023-04-012023-06-300001428439roku:AllowanceForSalesIncentivesMember2024-01-012024-06-300001428439roku:AllowanceForSalesIncentivesMember2023-01-012023-06-300001428439roku:AllowanceForSalesIncentivesMember2024-06-300001428439roku:AllowanceForSalesIncentivesMember2023-06-300001428439us-gaap:AllowanceForCreditLossMember2024-03-310001428439us-gaap:AllowanceForCreditLossMember2023-03-310001428439us-gaap:AllowanceForCreditLossMember2023-12-310001428439us-gaap:AllowanceForCreditLossMember2022-12-310001428439us-gaap:AllowanceForCreditLossMember2024-04-012024-06-300001428439us-gaap:AllowanceForCreditLossMember2023-04-012023-06-300001428439us-gaap:AllowanceForCreditLossMember2024-01-012024-06-300001428439us-gaap:AllowanceForCreditLossMember2023-01-012023-06-300001428439us-gaap:AllowanceForCreditLossMember2024-06-300001428439us-gaap:AllowanceForCreditLossMember2023-06-300001428439us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMemberroku:CustomerBMember2024-01-012024-06-300001428439us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2024-06-300001428439us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2023-12-3100014284392024-07-012024-06-300001428439us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMemberroku:CustomerIMember2023-04-012023-06-300001428439us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMemberroku:CustomerIMember2023-01-012023-06-300001428439us-gaap:DevelopedTechnologyRightsMember2024-06-300001428439us-gaap:CustomerRelationshipsMember2024-06-300001428439us-gaap:TradeNamesMember2024-06-300001428439us-gaap:PatentsMember2024-06-300001428439us-gaap:DevelopedTechnologyRightsMember2023-12-310001428439us-gaap:CustomerRelationshipsMember2023-12-310001428439us-gaap:TradeNamesMember2023-12-310001428439us-gaap:PatentsMember2023-12-310001428439roku:AllowanceForOtherAccountsReceivableMember2024-06-300001428439roku:AllowanceForOtherAccountsReceivableMember2023-12-310001428439roku:ComputerAndEquipmentMember2024-06-300001428439roku:ComputerAndEquipmentMember2023-12-310001428439us-gaap:LeaseholdImprovementsMember2024-06-300001428439us-gaap:LeaseholdImprovementsMember2023-12-310001428439roku:InternalUseSoftwareMember2024-06-300001428439roku:InternalUseSoftwareMember2023-12-310001428439roku:OfficeEquipmentAndFurnitureMember2024-06-300001428439roku:OfficeEquipmentAndFurnitureMember2023-12-310001428439roku:PlatformSegmentMember2024-06-300001428439roku:PlatformSegmentMember2023-12-310001428439roku:DevicesSegmentMember2024-06-300001428439roku:DevicesSegmentMember2023-12-310001428439us-gaap:LicenseMember2024-06-300001428439us-gaap:LicenseMember2023-12-310001428439roku:ProducedContentReleasedLessAmortizationMember2024-06-300001428439roku:ProducedContentReleasedLessAmortizationMember2023-12-310001428439roku:ProducedContentCompletedNotReleasedMember2024-06-300001428439roku:ProducedContentCompletedNotReleasedMember2023-12-310001428439roku:ProducedContentInProductionMember2024-06-300001428439roku:ProducedContentInProductionMember2023-12-310001428439roku:TotalProducedContentMember2024-06-300001428439roku:TotalProducedContentMember2023-12-3100014284392022-06-3000014284392022-04-012022-06-3000014284392023-01-012023-03-310001428439us-gaap:CashMember2024-06-300001428439us-gaap:FairValueInputsLevel1Memberus-gaap:CashMember2024-06-300001428439us-gaap:FairValueInputsLevel3Memberus-gaap:CashMember2024-06-300001428439us-gaap:CashMember2023-12-310001428439us-gaap:FairValueInputsLevel1Memberus-gaap:CashMember2023-12-310001428439us-gaap:FairValueInputsLevel3Memberus-gaap:CashMember2023-12-310001428439us-gaap:MoneyMarketFundsMember2024-06-300001428439us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2024-06-300001428439us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel3Member2024-06-300001428439us-gaap:MoneyMarketFundsMember2023-12-310001428439us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2023-12-310001428439us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel3Member2023-12-310001428439us-gaap:FairValueInputsLevel1Member2024-06-300001428439us-gaap:FairValueInputsLevel3Member2024-06-300001428439us-gaap:FairValueInputsLevel1Member2023-12-310001428439us-gaap:FairValueInputsLevel3Member2023-12-310001428439us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2024-06-300001428439us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2023-12-310001428439srt:MinimumMember2024-06-300001428439srt:MaximumMember2024-06-300001428439roku:EquityIncentivePlanMember2024-06-300001428439roku:TwoThousandSeventeenEmployeeStockPurchasePlanMember2024-06-300001428439roku:TwoThousandSeventeenEquityIncentivePlanMember2024-06-300001428439roku:TwoThousandSeventeenEquityIncentivePlanMemberus-gaap:EmployeeStockOptionMember2024-06-300001428439roku:TenPercentShareholderMemberroku:TwoThousandSeventeenEquityIncentivePlanMemberus-gaap:EmployeeStockOptionMembersrt:MinimumMember2024-01-012024-06-300001428439us-gaap:RestrictedStockUnitsRSUMember2023-12-310001428439us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-06-300001428439us-gaap:RestrictedStockUnitsRSUMember2024-06-3000014284392023-01-012023-12-310001428439roku:TwoThousandSeventeenEquityIncentivePlanMemberus-gaap:EmployeeStockOptionMembersrt:MinimumMember2024-01-012024-06-300001428439srt:MaximumMemberroku:TwoThousandSeventeenEquityIncentivePlanMemberus-gaap:EmployeeStockOptionMember2024-01-012024-06-300001428439roku:TwoThousandSeventeenEquityIncentivePlanMemberus-gaap:EmployeeStockOptionMember2024-01-012024-06-300001428439us-gaap:RestrictedStockUnitsRSUMembersrt:MinimumMember2024-01-012024-06-300001428439srt:MaximumMemberus-gaap:RestrictedStockUnitsRSUMember2024-01-012024-06-300001428439us-gaap:CostOfSalesMemberroku:PlatformSegmentMember2024-04-012024-06-300001428439us-gaap:CostOfSalesMemberroku:PlatformSegmentMember2023-04-012023-06-300001428439us-gaap:CostOfSalesMemberroku:PlatformSegmentMember2024-01-012024-06-300001428439us-gaap:CostOfSalesMemberroku:PlatformSegmentMember2023-01-012023-06-300001428439us-gaap:CostOfSalesMemberroku:DevicesSegmentMember2024-04-012024-06-300001428439us-gaap:CostOfSalesMemberroku:DevicesSegmentMember2023-04-012023-06-300001428439us-gaap:CostOfSalesMemberroku:DevicesSegmentMember2024-01-012024-06-300001428439us-gaap:CostOfSalesMemberroku:DevicesSegmentMember2023-01-012023-06-300001428439us-gaap:ResearchAndDevelopmentExpenseMember2024-04-012024-06-300001428439us-gaap:ResearchAndDevelopmentExpenseMember2023-04-012023-06-300001428439us-gaap:ResearchAndDevelopmentExpenseMember2024-01-012024-06-300001428439us-gaap:ResearchAndDevelopmentExpenseMember2023-01-012023-06-300001428439us-gaap:SellingAndMarketingExpenseMember2024-04-012024-06-300001428439us-gaap:SellingAndMarketingExpenseMember2023-04-012023-06-300001428439us-gaap:SellingAndMarketingExpenseMember2024-01-012024-06-300001428439us-gaap:SellingAndMarketingExpenseMember2023-01-012023-06-300001428439us-gaap:GeneralAndAdministrativeExpenseMember2024-04-012024-06-300001428439us-gaap:GeneralAndAdministrativeExpenseMember2023-04-012023-06-300001428439us-gaap:GeneralAndAdministrativeExpenseMember2024-01-012024-06-300001428439us-gaap:GeneralAndAdministrativeExpenseMember2023-01-012023-06-300001428439roku:ManufacturingMember2024-06-300001428439roku:ContentPublishersMember2024-06-300001428439roku:CurrentLiabilitiesMemberroku:ContentPublishersMember2024-06-300001428439us-gaap:OtherNoncurrentLiabilitiesMemberroku:ContentPublishersMember2024-06-300001428439roku:PlatformSegmentMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMemberroku:CustomerIMember2023-04-012023-06-300001428439roku:PlatformSegmentMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMemberroku:CustomerIMember2023-01-012023-06-300001428439roku:CustomerJMemberroku:PlatformSegmentMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2024-04-012024-06-300001428439roku:DevicesSegmentMemberus-gaap:CustomerConcentrationRiskMemberroku:CustomerAMemberus-gaap:SalesRevenueNetMember2024-04-012024-06-300001428439roku:DevicesSegmentMemberus-gaap:CustomerConcentrationRiskMemberroku:CustomerAMemberus-gaap:SalesRevenueNetMember2024-01-012024-06-300001428439roku:DevicesSegmentMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMemberroku:CustomerBMember2024-04-012024-06-300001428439roku:DevicesSegmentMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMemberroku:CustomerBMember2023-04-012023-06-300001428439roku:DevicesSegmentMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMemberroku:CustomerBMember2024-01-012024-06-300001428439roku:DevicesSegmentMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMemberroku:CustomerBMember2023-01-012023-06-300001428439roku:CustomerCMemberroku:DevicesSegmentMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2024-04-012024-06-300001428439roku:CustomerCMemberroku:DevicesSegmentMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2023-04-012023-06-300001428439roku:CustomerCMemberroku:DevicesSegmentMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2024-01-012024-06-300001428439roku:CustomerCMemberroku:DevicesSegmentMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2023-01-012023-06-300001428439country:US2024-06-300001428439country:US2023-12-310001428439country:GB2024-06-300001428439country:GB2023-12-310001428439roku:OtherCountriesMember2024-06-300001428439roku:OtherCountriesMember2023-12-310001428439roku:PlatformSegmentMemberus-gaap:EmployeeSeveranceMember2024-04-012024-06-300001428439roku:PlatformSegmentMemberus-gaap:FacilityClosingMember2024-04-012024-06-300001428439roku:PlatformSegmentMemberroku:ImpairmentChargesMember2024-04-012024-06-300001428439roku:PlatformSegmentMember2024-04-012024-06-300001428439roku:PlatformSegmentMemberus-gaap:EmployeeSeveranceMember2023-04-012023-06-300001428439roku:PlatformSegmentMemberus-gaap:FacilityClosingMember2023-04-012023-06-300001428439roku:PlatformSegmentMember2023-04-012023-06-300001428439roku:DevicesSegmentMemberus-gaap:EmployeeSeveranceMember2024-04-012024-06-300001428439roku:DevicesSegmentMemberus-gaap:FacilityClosingMember2024-04-012024-06-300001428439roku:DevicesSegmentMemberroku:ImpairmentChargesMember2024-04-012024-06-300001428439roku:DevicesSegmentMember2024-04-012024-06-300001428439roku:DevicesSegmentMemberus-gaap:EmployeeSeveranceMember2023-04-012023-06-300001428439roku:DevicesSegmentMemberus-gaap:FacilityClosingMember2023-04-012023-06-300001428439roku:DevicesSegmentMember2023-04-012023-06-300001428439us-gaap:ResearchAndDevelopmentExpenseMemberus-gaap:EmployeeSeveranceMember2024-04-012024-06-300001428439us-gaap:ResearchAndDevelopmentExpenseMemberus-gaap:FacilityClosingMember2024-04-012024-06-300001428439us-gaap:ResearchAndDevelopmentExpenseMemberroku:ImpairmentChargesMember2024-04-012024-06-300001428439us-gaap:ResearchAndDevelopmentExpenseMemberus-gaap:EmployeeSeveranceMember2023-04-012023-06-300001428439us-gaap:ResearchAndDevelopmentExpenseMemberus-gaap:FacilityClosingMember2023-04-012023-06-300001428439us-gaap:SellingAndMarketingExpenseMemberus-gaap:EmployeeSeveranceMember2024-04-012024-06-300001428439us-gaap:SellingAndMarketingExpenseMemberus-gaap:FacilityClosingMember2024-04-012024-06-300001428439us-gaap:SellingAndMarketingExpenseMemberroku:ImpairmentChargesMember2024-04-012024-06-300001428439us-gaap:SellingAndMarketingExpenseMemberus-gaap:EmployeeSeveranceMember2023-04-012023-06-300001428439us-gaap:SellingAndMarketingExpenseMemberus-gaap:FacilityClosingMember2023-04-012023-06-300001428439us-gaap:GeneralAndAdministrativeExpenseMemberus-gaap:EmployeeSeveranceMember2024-04-012024-06-300001428439us-gaap:GeneralAndAdministrativeExpenseMemberus-gaap:FacilityClosingMember2024-04-012024-06-300001428439us-gaap:GeneralAndAdministrativeExpenseMemberroku:ImpairmentChargesMember2024-04-012024-06-300001428439us-gaap:GeneralAndAdministrativeExpenseMemberus-gaap:EmployeeSeveranceMember2023-04-012023-06-300001428439us-gaap:GeneralAndAdministrativeExpenseMemberus-gaap:FacilityClosingMember2023-04-012023-06-300001428439us-gaap:EmployeeSeveranceMember2024-04-012024-06-300001428439us-gaap:FacilityClosingMember2024-04-012024-06-300001428439roku:ImpairmentChargesMember2024-04-012024-06-300001428439us-gaap:EmployeeSeveranceMember2023-04-012023-06-300001428439us-gaap:FacilityClosingMember2023-04-012023-06-300001428439roku:PlatformSegmentMemberus-gaap:EmployeeSeveranceMember2024-01-012024-06-300001428439roku:PlatformSegmentMemberus-gaap:FacilityClosingMember2024-01-012024-06-300001428439roku:PlatformSegmentMemberroku:ImpairmentChargesMember2024-01-012024-06-300001428439roku:PlatformSegmentMember2024-01-012024-06-300001428439roku:PlatformSegmentMemberus-gaap:EmployeeSeveranceMember2023-01-012023-06-300001428439roku:PlatformSegmentMemberus-gaap:FacilityClosingMember2023-01-012023-06-300001428439roku:PlatformSegmentMemberroku:ImpairmentChargesMember2023-01-012023-06-300001428439roku:PlatformSegmentMember2023-01-012023-06-300001428439roku:DevicesSegmentMemberus-gaap:EmployeeSeveranceMember2024-01-012024-06-300001428439roku:DevicesSegmentMemberus-gaap:FacilityClosingMember2024-01-012024-06-300001428439roku:DevicesSegmentMemberroku:ImpairmentChargesMember2024-01-012024-06-300001428439roku:DevicesSegmentMember2024-01-012024-06-300001428439roku:DevicesSegmentMemberus-gaap:EmployeeSeveranceMember2023-01-012023-06-300001428439roku:DevicesSegmentMemberus-gaap:FacilityClosingMember2023-01-012023-06-300001428439roku:DevicesSegmentMemberroku:ImpairmentChargesMember2023-01-012023-06-300001428439roku:DevicesSegmentMember2023-01-012023-06-300001428439us-gaap:ResearchAndDevelopmentExpenseMemberus-gaap:EmployeeSeveranceMember2024-01-012024-06-300001428439us-gaap:ResearchAndDevelopmentExpenseMemberus-gaap:FacilityClosingMember2024-01-012024-06-300001428439us-gaap:ResearchAndDevelopmentExpenseMemberroku:ImpairmentChargesMember2024-01-012024-06-300001428439us-gaap:ResearchAndDevelopmentExpenseMemberus-gaap:EmployeeSeveranceMember2023-01-012023-06-300001428439us-gaap:ResearchAndDevelopmentExpenseMemberus-gaap:FacilityClosingMember2023-01-012023-06-300001428439us-gaap:ResearchAndDevelopmentExpenseMemberroku:ImpairmentChargesMember2023-01-012023-06-300001428439us-gaap:SellingAndMarketingExpenseMemberus-gaap:EmployeeSeveranceMember2024-01-012024-06-300001428439us-gaap:SellingAndMarketingExpenseMemberus-gaap:FacilityClosingMember2024-01-012024-06-300001428439us-gaap:SellingAndMarketingExpenseMemberroku:ImpairmentChargesMember2024-01-012024-06-300001428439us-gaap:SellingAndMarketingExpenseMemberus-gaap:EmployeeSeveranceMember2023-01-012023-06-300001428439us-gaap:SellingAndMarketingExpenseMemberus-gaap:FacilityClosingMember2023-01-012023-06-300001428439us-gaap:SellingAndMarketingExpenseMemberroku:ImpairmentChargesMember2023-01-012023-06-300001428439us-gaap:GeneralAndAdministrativeExpenseMemberus-gaap:EmployeeSeveranceMember2024-01-012024-06-300001428439us-gaap:GeneralAndAdministrativeExpenseMemberus-gaap:FacilityClosingMember2024-01-012024-06-300001428439us-gaap:GeneralAndAdministrativeExpenseMemberroku:ImpairmentChargesMember2024-01-012024-06-300001428439us-gaap:GeneralAndAdministrativeExpenseMemberus-gaap:EmployeeSeveranceMember2023-01-012023-06-300001428439us-gaap:GeneralAndAdministrativeExpenseMemberus-gaap:FacilityClosingMember2023-01-012023-06-300001428439us-gaap:GeneralAndAdministrativeExpenseMemberroku:ImpairmentChargesMember2023-01-012023-06-300001428439us-gaap:EmployeeSeveranceMember2024-01-012024-06-300001428439us-gaap:FacilityClosingMember2024-01-012024-06-300001428439roku:ImpairmentChargesMember2024-01-012024-06-300001428439us-gaap:EmployeeSeveranceMember2023-01-012023-06-300001428439us-gaap:FacilityClosingMember2023-01-012023-06-300001428439roku:ImpairmentChargesMember2023-01-012023-06-300001428439us-gaap:EmployeeSeveranceMember2024-03-310001428439us-gaap:FacilityClosingMember2024-03-310001428439us-gaap:EmployeeSeveranceMember2023-03-310001428439us-gaap:FacilityClosingMember2023-03-310001428439us-gaap:EmployeeSeveranceMember2024-06-300001428439us-gaap:FacilityClosingMember2024-06-300001428439us-gaap:EmployeeSeveranceMember2023-06-300001428439us-gaap:FacilityClosingMember2023-06-300001428439us-gaap:EmployeeSeveranceMember2023-12-310001428439us-gaap:FacilityClosingMember2023-12-310001428439us-gaap:EmployeeSeveranceMember2022-12-310001428439us-gaap:FacilityClosingMember2022-12-310001428439roku:AnthonyWoodMember2024-04-012024-06-300001428439roku:AnthonyWoodMember2024-06-300001428439roku:DanJeddaMember2024-04-012024-06-300001428439roku:DanJeddaMay282024PlanMemberroku:DanJeddaMember2024-06-300001428439roku:DanJeddaMay282024PlanMemberroku:DanJeddaMember2024-04-012024-06-300001428439roku:DanJeddaMemberroku:DanJeddaMay202024PlanMember2024-06-300001428439roku:DanJeddaMemberroku:DanJeddaMay202024PlanMember2024-04-012024-06-300001428439roku:MatthewBanksMember2024-04-012024-06-300001428439roku:MatthewBanksMember2024-06-30
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
| | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2024
OR
| | | | | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-38211
Roku, Inc.
(Exact name of registrant as specified in its charter)
| | | | | | | | |
Delaware | | 26-2087865 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
1173 Coleman Avenue
San Jose, California 95110
(Address of principal executive offices including zip code)
Registrant’s telephone number, including area code: (408) 556-9040
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of Each Class: | Trading Symbol(s): | Name of Exchange on Which Registered: |
Class A Common Stock, $0.0001 par value | ROKU | The Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | |
Large Accelerated Filer | ☒ | | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
Emerging growth company | ☐ | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 30, 2024, the registrant had 127,357,624 shares of Class A common stock, $0.0001 par value per share, and 17,331,064 shares of Class B common stock, $0.0001 par value per share, outstanding.
Table of Contents
| | | | | | | | | | | |
| | | Page |
PART I. | | | |
Item 1. | | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Item 2. | | | |
Item 3. | | | |
Item 4. | | | |
PART II. | | | |
Item 1. | | | |
Item 1A. | | | |
Item 2. | | | |
Item 3. | | | |
Item 4. | | | |
Item 5. | | | |
Item 6. | | | |
| | |
GLOSSARY OF SELECTED TERMS
As used in this Quarterly Report on Form 10-Q (“Quarterly Report”), unless the context otherwise requires, references to the following terms have the respective meaning as defined below.
Active Accounts: See Streaming Households.
Ad-supported Video on Demand (AVOD): Streaming content supported by advertising that does not charge a fee to the viewer.
Apps: Primarily refers to the direct-to-consumer streaming applications on the Roku platform (e.g., The Roku Channel or Netflix). We also use “apps” to refer to mobile applications (such as our Roku Smart Home app).
Average Revenue per User (ARPU): Platform revenue for the trailing four quarters divided by the average of the number of Streaming Households at the end of the current period and the end of the corresponding period in the prior year. See Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Key Performance Metrics and Non-GAAP Measure, in this Quarterly Report for additional detail.
DSP: A demand-side platform (such as Roku’s OneView ad-buying platform), which allows buyers of digital advertising inventory to manage multiple ad exchange and data exchange accounts across multiple platforms through one interface.
FAST: Free, ad-supported linear streaming TV, which does not include on-demand content.
Licensed Roku TV partners: TV original equipment manufacturers (“OEMs”) that license the Roku OS and leverage our smart TV reference designs to build TVs.
Linear TV: A TV format that provides programming at specifically scheduled times.
Premium Subscriptions: Subscription-based streaming services from content partners (e.g., Paramount) offered through The Roku Channel.
Roku-branded TVs: TVs powered by the Roku OS that are designed, made, and sold by Roku. Roku-branded TVs include the Roku Select, Roku Plus, and Roku Pro Series TVs.
Roku Home Screen: The first screen the viewer sees when they begin streaming with a Roku streaming device. The viewer is also returned to the home screen by pressing the home button on the Roku remote or when exiting apps.
Roku Home Screen Menu: The left-hand navigation bar on the Roku Home Screen.
Roku Originals: Original content programming created by Roku.
Roku OS: Roku operating system that is purpose built for TV and powers Roku streaming devices.
Roku Pay: Our billing service that enables Streaming Households to place a method of payment on file that can be used to make purchases on the Roku platform without having to re-enter their payment information. It also enables users to sign up for certain subscription-based streaming services (including Premium Subscriptions).
Roku TV models: TVs powered by the Roku OS that are made and sold by our licensed Roku TV partners.
Streaming: The distribution of video, music, or other media content via the internet.
Streaming device: Any device that enables streaming. For Roku, this encompasses Roku streaming players, Roku TV models, and Roku-branded TVs.
Streaming Hours: The aggregate amount of time streaming devices stream content on Roku’s streaming platform in a given period. See Part 1, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Key Performance Metrics and Non-GAAP Measure, in this Quarterly Report for additional detail.
Streaming Households (previously Active Accounts): The number of distinct user accounts that have streamed content on our platform within the last 30 days of the period. Previously, we referred to “Streaming Households” as “Active Accounts.” While we have changed this term to better reflect the nature of our business, we calculate it using the same methodology that we used to calculate “Active Accounts.” See Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Key Performance Metrics and Non-GAAP Measure, in this Quarterly Report for additional detail.
Streaming platform: The technology that delivers the viewer experience and streaming apps (e.g., The Roku Channel and Netflix) over an internet connection to a user’s TV.
Streaming players: A device that connects to a TV via an HDMI connection to enable streaming to the TV (such as the Roku Express, Roku Express 4K, Roku Streaming Stick 4K, Roku Ultra, Roku Streambar, and Roku Streambar Pro).
Smart TV: A television that is connected to the internet through an operating system (e.g., the Roku OS).
Subscription Video on Demand (SVOD): Streaming content that is available on demand, requires a paid subscription, and can be ad-supported or ad-free.
TV streaming: The act of streaming content over the internet on a TV.
The Roku Channel: Roku’s owned and operated streaming service. The Roku Channel aggregates three types of content—AVOD, FAST, and Premium Subscriptions—within The Roku Channel app and through viewing experiences integrated throughout the Roku platform (e.g., Live TV on the Roku Home Screen Menu).
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts in this Quarterly Report, including statements regarding our future results of operations and financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “aim,” “anticipate,” “believe,” “continue,” “could,” “design,” “developing,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “project,” “should,” “will,” “would,” “target,” or the negative of these terms or other similar expressions. We caution you that the foregoing may not encompass all of the forward-looking statements made in this Quarterly Report.
Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available. These forward-looking statements are subject to a number of known and unknown risks, uncertainties, and assumptions, including risks described in the section titled “Risk Factors” and elsewhere in this Quarterly Report, regarding, among other things:
•our financial performance, including our revenue, cost of revenue, operating expenses, profitability, and our key performance metrics (including Streaming Households, Streaming Hours, ARPU, and Free Cash Flow);
•the impact of macroeconomic conditions, uncertainties, and geopolitical conflicts on our business, operations, and the markets and communities in which we and our advertisers, content partners, licensed Roku TV partners, other device licensees, manufacturers, suppliers, retailers, and viewers operate;
•our ability to attract and retain viewers and increase Streaming Hours;
•our ability to attract and retain advertisers that purchase video ad inventory in The Roku Channel, other video ad inventory on our platform that we acquire through our streaming services distribution agreements, and native display ads on the Roku Home Screen and screen saver;
•our ability to attract and retain TV brands, manufacturing partners, and service operators to license and deploy our technology;
•our ability to produce or acquire rights to distribute popular content on our streaming platform on favorable terms, or at all, including the renewals of our existing agreements with content partners;
•changes in TV viewing habits and the growth of TV streaming;
•the growth of our relevant markets, including the growth in advertising spend on TV streaming platforms, and our ability to successfully grow our business in those markets;
•our ability to adapt to changing market conditions and technological developments;
•our ability to develop and launch new products and provide ancillary services and support;
•our ability to integrate acquired businesses, products, and technologies;
•our ability to expand our products and services into adjacent markets, scale our operations in these markets, and do so profitably over time;
•our ability to compete effectively with existing competitors and new market entrants;
•our ability to successfully manage domestic and international expansion;
•our ability to attract and retain qualified employees and key personnel;
•our ability to address potential and actual cybersecurity incidents and system failures involving our products, systems, and operations;
•our ability to maintain, protect, and enhance our intellectual property;
•our ability to obtain financing on favorable terms, or at all;
•our ability to manage the selling prices of our products to increase Streaming Households; and
•our ability to comply with laws and regulations that currently apply or may become applicable to our business both in the United States and internationally, including compliance with privacy and data protection regulations.
Other sections of this Quarterly Report may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report or to conform these statements to actual results or to changes in our expectations. You should read this Quarterly Report, and the documents referenced in and filed as exhibits to this Quarterly Report, with the understanding that our actual future results, levels of activity, performance, and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (roku.com/investor), U.S. Securities and Exchange Commission (“SEC”) filings, webcasts, press releases, and conference calls. We use these mediums to communicate with investors and the general public about our company, our products and services, and other issues. It is possible that the information that we make available may be deemed to be material information. We therefore encourage investors, the media, and others interested in our company to review the information that we post on our investor relations website. Roku, the Roku logo, and other trade names, trademarks, or service marks of Roku appearing in this report are the property of Roku. Trade names, trademarks, and service marks of other companies appearing in this report are the property of their respective holders.
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
ROKU, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value data)
(unaudited)
| | | | | | | | | | | |
| As of |
| June 30, 2024 | | December 31, 2023 |
Assets | | | |
Current Assets: | | | |
Cash and cash equivalents | $ | 2,058,465 | | | $ | 2,025,891 | |
| | | |
Accounts receivable, net of allowances of $39,864 and $34,127 as of | 669,136 | | | 816,337 | |
June 30, 2024 and December 31, 2023, respectively | | | |
Inventories | 96,351 | | | 92,129 | |
Prepaid expenses and other current assets | 153,434 | | | 138,585 | |
Total current assets | 2,977,386 | | | 3,072,942 | |
Property and equipment, net | 240,035 | | | 264,556 | |
Operating lease right-of-use assets | 338,422 | | | 371,444 | |
Content assets, net | 240,596 | | | 257,395 | |
Intangible assets, net | 34,551 | | | 41,753 | |
Goodwill | 161,519 | | | 161,519 | |
Other non-current assets | 111,865 | | | 92,183 | |
Total Assets | $ | 4,104,374 | | | $ | 4,261,792 | |
Liabilities and Stockholders’ Equity | | | |
Current Liabilities: | | | |
Accounts payable | $ | 276,118 | | | $ | 385,330 | |
Accrued liabilities | 724,467 | | | 788,040 | |
Deferred revenue, current portion | 95,974 | | | 102,157 | |
Total current liabilities | 1,096,559 | | | 1,275,527 | |
Deferred revenue, non-current portion | 23,471 | | | 24,572 | |
Operating lease liability, non-current portion | 553,375 | | | 586,174 | |
Other long-term liabilities | 40,180 | | | 49,186 | |
Total Liabilities | 1,713,585 | | | 1,935,459 | |
Commitments and contingencies (Note 11) | | | |
Stockholders’ Equity: | | | |
Common stock, $0.0001 par value | 14 | | | 14 | |
Additional paid-in capital | 3,773,831 | | | 3,623,747 | |
Accumulated other comprehensive income (loss) | (661) | | | 159 | |
Accumulated deficit | (1,382,395) | | | (1,297,587) | |
Total stockholders’ equity | 2,390,789 | | | 2,326,333 | |
Total Liabilities and Stockholders’ Equity | $ | 4,104,374 | | | $ | 4,261,792 | |
See accompanying Notes to Condensed Consolidated Financial Statements.
ROKU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2024 | | June 30, 2023 | | June 30, 2024 | | June 30, 2023 |
Net Revenue: | | | | | | | |
Platform | $ | 824,333 | | | $ | 743,835 | | | $ | 1,579,268 | | | $ | 1,378,453 | |
Devices | 143,846 | | | 103,351 | | | 270,380 | | | 209,723 | |
Total net revenue | 968,179 | | | 847,186 | | | 1,849,648 | | | 1,588,176 | |
Cost of Revenue: | | | | | | | |
Platform | 384,454 | | | 348,010 | | | 745,020 | | | 648,597 | |
Devices | 159,025 | | | 120,905 | | | 291,637 | | | 223,711 | |
Total cost of revenue | 543,479 | | | 468,915 | | | 1,036,657 | | | 872,308 | |
Gross Profit (Loss): | | | | | | | |
Platform | 439,879 | | | 395,825 | | | 834,248 | | | 729,856 | |
Devices | (15,179) | | | (17,554) | | | (21,257) | | | (13,988) | |
Total gross profit | 424,700 | | | 378,271 | | | 812,991 | | | 715,868 | |
Operating Expenses: | | | | | | | |
Research and development | 175,481 | | | 192,387 | | | 355,940 | | | 412,472 | |
Sales and marketing | 221,656 | | | 227,192 | | | 423,780 | | | 461,111 | |
General and administrative | 98,806 | | | 84,652 | | | 176,550 | | | 180,705 | |
Total operating expenses | 495,943 | | | 504,231 | | | 956,270 | | | 1,054,288 | |
Loss from Operations | (71,243) | | | (125,960) | | | (143,279) | | | (338,420) | |
Other income, net | 28,129 | | | 19,995 | | | 54,075 | | | 42,415 | |
Loss Before Income Taxes | (43,114) | | | (105,965) | | | (89,204) | | | (296,005) | |
Income tax expense (benefit) | (9,161) | | | 1,630 | | | (4,396) | | | 5,194 | |
Net Loss | $ | (33,953) | | | $ | (107,595) | | | $ | (84,808) | | | $ | (301,199) | |
| | | | | | | |
Net loss per share — basic and diluted | $ | (0.24) | | | $ | (0.76) | | | $ | (0.59) | | | $ | (2.14) | |
| | | | | | | |
| | | | | | | |
Weighted-average common shares outstanding — basic and diluted | 144,339 | | 141,033 | | 144,045 | | | 140,685 | |
| | | | | | | |
See accompanying Notes to Condensed Consolidated Financial Statements.
ROKU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2024 | | June 30, 2023 | | June 30, 2024 | | June 30, 2023 |
Net Loss | $ | (33,953) | | | $ | (107,595) | | | $ | (84,808) | | | $ | (301,199) | |
Other comprehensive income (loss), net of tax: | | | | | | | |
Foreign currency translation adjustment | (483) | | | 36 | | | (820) | | | 363 | |
Comprehensive Loss | $ | (34,436) | | | $ | (107,559) | | | $ | (85,628) | | | $ | (300,836) | |
See accompanying Notes to Condensed Consolidated Financial Statements.
ROKU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Income (Loss) | | Accumulated Deficit | | Total Stockholders’ Equity |
Three Months Ended June 30, 2024 | Shares | | Amount | | | | |
Balance—March 31, 2024 | 144,165 | | | $ | 14 | | | $ | 3,704,435 | | | $ | (178) | | | $ | (1,348,442) | | | $ | 2,355,829 | |
Issuance of common stock pursuant to equity incentive plans | 859 | | | — | | | 417 | | | — | | | — | | | 417 | |
Stock-based compensation expense | — | | | — | | | 88,396 | | | — | | | — | | | 88,396 | |
Shares withheld for taxes related to net share settlement of equity awards | (335) | | | — | | | (19,417) | | | — | | | — | | | (19,417) | |
Foreign currency translation adjustment | — | | | — | | | — | | | (483) | | | — | | | (483) | |
Net loss | — | | | — | | | — | | | — | | | (33,953) | | | (33,953) | |
Balance—June 30, 2024 | 144,689 | | | $ | 14 | | | $ | 3,773,831 | | | $ | (661) | | | $ | (1,382,395) | | | $ | 2,390,789 | |
| | | | | | | | | | | |
Six Months Ended June 30, 2024 | | | | | | | | | | | |
Balance—December 31, 2023 | 143,502 | | | $ | 14 | | | $ | 3,623,747 | | | $ | 159 | | | $ | (1,297,587) | | | $ | 2,326,333 | |
Issuance of common stock pursuant to equity incentive plans | 1,872 | | | — | | | 8,679 | | | — | | | — | | | 8,679 | |
Stock-based compensation expense | — | | | — | | | 183,028 | | | — | | | — | | | 183,028 | |
Shares withheld for taxes related to net share settlement of equity awards | (685) | | | — | | | (41,623) | | | — | | | — | | | (41,623) | |
Foreign currency translation adjustment | — | | | — | | | — | | | (820) | | | — | | | (820) | |
Net loss | — | | | — | | | — | | | — | | | (84,808) | | | (84,808) | |
Balance—June 30, 2024 | 144,689 | | | $ | 14 | | | $ | 3,773,831 | | | $ | (661) | | | $ | (1,382,395) | | | $ | 2,390,789 | |
| | | | | | | | | | | |
| Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Income (Loss) | | Accumulated Deficit | | Total Stockholders’ Equity |
Three Months Ended June 30, 2023 | Shares | | Amount | | | | |
Balance—March 31, 2023 | 140,785 | | | $ | 14 | | | $ | 3,332,222 | | | $ | 35 | | | $ | (781,630) | | | $ | 2,550,641 | |
Issuance of common stock pursuant to equity incentive plans | 723 | | | — | | | 614 | | | — | | | — | | | 614 | |
Stock-based compensation expense | — | | | — | | | 89,579 | | | — | | | — | | | 89,579 | |
Foreign currency translation adjustment | — | | | — | | | — | | | 36 | | | — | | | 36 | |
Net loss | — | | | — | | | — | | | — | | | (107,595) | | | (107,595) | |
Balance—June 30, 2023 | 141,508 | | | $ | 14 | | | $ | 3,422,415 | | | $ | 71 | | | $ | (889,225) | | | $ | 2,533,275 | |
| | | | | | | | | | | |
Six Months Ended June 30, 2023 | | | | | | | | | | | |
Balance—December 31, 2022 | 140,027 | | | $ | 14 | | | $ | 3,234,860 | | | $ | (292) | | | $ | (588,026) | | | $ | 2,646,556 | |
Issuance of common stock pursuant to equity incentive plans | 1,481 | | | — | | | 1,504 | | | — | | | — | | | 1,504 | |
Stock-based compensation expense | — | | | — | | | 186,051 | | | — | | | — | | | 186,051 | |
Foreign currency translation adjustment | — | | | — | | | — | | | 363 | | | — | | | 363 | |
Net loss | — | | | — | | | — | | | — | | | (301,199) | | | (301,199) | |
Balance—June 30, 2023 | 141,508 | | | $ | 14 | | | $ | 3,422,415 | | | $ | 71 | | | $ | (889,225) | | | $ | 2,533,275 | |
See accompanying Notes to Condensed Consolidated Financial Statements.
ROKU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| | | | | | | | | | | |
| Six Months Ended |
| June 30, 2024 | | June 30, 2023 |
Cash flows from operating activities: | | | |
Net Loss | $ | (84,808) | | | $ | (301,199) | |
Adjustments to reconcile net loss to net cash from operating activities: | | | |
Depreciation and amortization | 32,280 | | | 34,181 | |
Stock-based compensation expense | 183,028 | | | 186,051 | |
Amortization of right-of-use assets | 23,767 | | | 30,532 | |
Amortization and write-off of content assets | 108,022 | | | 102,314 | |
Foreign currency remeasurement losses | 2,385 | | | 1,760 | |
Change in fair value of the Strategic Investment | (3,634) | | | (3,090) | |
Impairment of assets | 11,506 | | | 4,338 | |
Provision for doubtful accounts | 4,344 | | | 2,962 | |
Other items, net | (1,489) | | | (224) | |
Changes in operating assets and liabilities: | | | |
Accounts receivable | 142,463 | | | 50,430 | |
Inventories | (4,222) | | | 13,533 | |
Prepaid expenses and other current assets | (25,012) | | | 3,736 | |
Content assets and liabilities, net | (91,226) | | | (120,522) | |
Other non-current assets | (17,279) | | | 4,379 | |
Accounts payable | (108,606) | | | 72,291 | |
Accrued liabilities | (66,715) | | | (92,289) | |
Operating lease liabilities | (27,751) | | | (5,754) | |
Other long-term liabilities | 320 | | | (1,074) | |
Deferred revenue | (7,284) | | | 11,286 | |
Net cash provided by (used in) operating activities | 70,089 | | | (6,359) | |
Cash flows from investing activities: | | | |
Purchases of property and equipment | (1,547) | | | (72,316) | |
Purchase of Strategic Investment | — | | | (10,000) | |
Net cash used in investing activities | (1,547) | | | (82,316) | |
Cash flows from financing activities: | | | |
Repayments of borrowings | — | | | (80,000) | |
Proceeds from equity issued under incentive plans | 8,679 | | | 1,504 | |
Taxes paid related to net share settlement of equity awards | (41,623) | | | — | |
Net cash used in financing activities | (32,944) | | | (78,496) | |
Net increase (decrease) in cash, cash equivalents and restricted cash | 35,598 | | | (167,171) | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (4,002) | | | 1,189 | |
Cash, cash equivalents and restricted cash —beginning of period | 2,066,604 | | | 1,961,956 | |
Cash, cash equivalents and restricted cash —end of period | $ | 2,098,200 | | | $ | 1,795,974 | |
| | | | | | | | | | | |
| Six Months Ended |
| June 30, 2024 | | June 30, 2023 |
Cash, cash equivalents and restricted cash at end of period: | | | |
Cash and cash equivalents | $ | 2,058,465 | | | $ | 1,755,261 | |
Restricted cash, current | 39,735 | | | 40,713 | |
| | | |
Cash, cash equivalents and restricted cash —end of period | $ | 2,098,200 | | | $ | 1,795,974 | |
Supplemental disclosures of cash flow information: | | | |
Cash paid for interest | $ | 61 | | | $ | 871 | |
Cash paid for income taxes | $ | 6,702 | | | $ | 3,955 | |
Supplemental disclosures of non-cash investing and financing activities: | | | |
Unpaid portion of property and equipment purchases | $ | 69 | | | $ | 4,094 | |
See accompanying Notes to Condensed Consolidated Financial Statements.
ROKU, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY
Organization and Description of Business
Roku, Inc. (the “Company” or “Roku”), was formed in October 2002 as Roku LLC under the laws of the State of Delaware. On February 1, 2008, Roku LLC was converted into Roku, Inc., a Delaware corporation. The Company operates in two reportable segments and generates platform revenue from the sale of digital advertising (including direct and programmatic video advertising, media and entertainment promotional spending, and related services) and streaming services distribution (including subscription and transaction revenue shares, the sale of Premium Subscriptions, and the sale of branded app buttons on remote controls). The Company generates devices revenue from the sale of streaming players, Roku-branded TVs, smart home products and services, audio products, and related accessories as well as revenue from licensing arrangements with service operators.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 16, 2024 (the “Annual Report”).
The condensed consolidated balance sheet as of December 31, 2023 has been derived from the audited consolidated financial statements as of that date but does not include all of the information and footnotes included in the Company’s Annual Report. The interim financial information is unaudited, but reflects all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the operating results to be expected for the full year or any future periods.
Certain prior period amounts reported in our condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period presentation.
Use of Estimates
The preparation of the Company’s condensed consolidated financial statements in accordance with U.S. GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, net revenue, and expenses. Significant items subject to such estimates and assumptions include:
•revenue recognition: determining the nature and timing of satisfaction of performance obligations, variable consideration, determining the stand-alone selling prices of performance obligations, gross versus net revenue recognition, and evaluation of customer versus vendor relationships;
•the impairment of intangible assets;
•amortization and the impairment of content assets;
•the impairment of operating lease right-of-use assets and property and equipment;
•valuation of the Strategic Investment (defined in Note 7);
•useful lives of tangible and intangible assets;
•allowances for sales returns and sales incentives; and
•the valuation of deferred income tax assets.
The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results may differ from the Company’s estimates and assumptions.
Principles of Consolidation
The condensed consolidated financial statements, which include the accounts of Roku, Inc. and its wholly-owned subsidiaries, have been prepared in conformity with U.S. GAAP. All intercompany accounts and transactions have been eliminated in consolidation.
Cash and Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents consist primarily of bank deposit accounts and investments in money market funds.
The Company’s restricted cash balance as of June 30, 2024 is $39.7 million and is included in Prepaid expenses and other current assets in the condensed consolidated balance sheets. It is used to secure outstanding letters of credit related to operating leases for office facilities. See Note 11 to the condensed consolidated financial statements for additional details.
The Company maintains its cash, cash equivalent, and restricted cash balances with high credit quality financial institutions and continuously monitors the amount of exposure to any one institution and diversifies as necessary in order to minimize its concentration risk. Such balances often exceed regulated insured limits.
Accounts Receivable, net
Accounts receivable are typically unsecured and are derived from revenue earned from customers. They are stated at invoice value less estimated allowances for sales returns, sales incentives, doubtful accounts, and other miscellaneous allowances. The Company performs ongoing credit evaluations of its customers to determine allowances for potential credit losses and doubtful accounts. The Company considers historical experience, ongoing promotional activities, historical claim rates, and other factors to determine the allowances for sales returns and sales incentives.
Allowance for Sales Returns: Allowance for sales returns consisted of the following activities (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2024 | | June 30, 2023 | | June 30, 2024 | | June 30, 2023 |
Beginning balance | $ | 6,766 | | | $ | 5,845 | | | $ | 7,808 | | | $ | 7,417 | |
Add: Charged to revenue | 4,966 | | | 5,275 | | | 8,574 | | | 8,164 | |
Less: Utilization of sales return reserve | (5,356) | | | (3,728) | | | (10,006) | | | (8,189) | |
Ending balance | $ | 6,376 | | | $ | 7,392 | | | $ | 6,376 | | | $ | 7,392 | |
Allowance for Sales Incentives: Allowance for sales incentives consisted of the following activities (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2024 | | June 30, 2023 | | June 30, 2024 | | June 30, 2023 |
Beginning balance | $ | 16,520 | | | $ | 11,672 | | | $ | 23,024 | | | $ | 28,903 | |
Add: Charged to revenue | 32,772 | | | 16,993 | | | 56,033 | | | 27,550 | |
Less: Utilization of sales incentive reserve | (22,651) | | | (11,237) | | | (52,416) | | | (39,025) | |
Ending balance | $ | 26,641 | | | $ | 17,428 | | | $ | 26,641 | | | $ | 17,428 | |
Allowance for Doubtful Accounts: Allowance for doubtful accounts consisted of the following activities (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2024 | | June 30, 2023 | | June 30, 2024 | | June 30, 2023 |
Beginning balance | $ | 1,656 | | | $ | 4,506 | | | $ | 2,213 | | | $ | 3,498 | |
Provision for doubtful accounts | 4,351 | | | 1,072 | | | 4,344 | | | 2,962 | |
Adjustments for write-off | (138) | | | — | | | (688) | | | (882) | |
Ending balance | $ | 5,869 | | | $ | 5,578 | | | $ | 5,869 | | | $ | 5,578 | |
Customer B accounted for 10% of the Company’s accounts receivable, net balance as of June 30, 2024. The Company did not have any customer that accounted for more than 10% of its accounts receivable, net balance as of December 31, 2023.
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures, which requires companies to provide enhanced disclosures about significant segment expenses within its reportable segment disclosures on an annual and interim basis. The guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The guidance applies retrospectively to all prior periods presented in the financial statements. The Company is currently in the process of evaluating the effects of the new guidance.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, which requires incremental disclosures within the income tax disclosures that increase the transparency and usefulness of income tax disclosures. The updated disclosures primarily require specific categories and greater disaggregation within the rate reconciliation, disaggregation of income taxes paid, and modifying other income tax-related disclosures. The guidance is effective either prospectively or retrospectively for fiscal years beginning after December 15, 2024. The Company is currently in the process of evaluating the effects of the new guidance.
3. REVENUE
The Company’s disaggregated revenue is represented by the two reportable segments discussed in Note 14.
The contract balances include the following (in thousands):
| | | | | | | | | | | |
| As of |
| June 30, 2024 | | December 31, 2023 |
Accounts receivable, net | $ | 669,136 | | | $ | 816,337 | |
Contract assets (included in Prepaid expenses and other current assets) | 3,471 | | | 17,964 | |
| | | |
Deferred revenue, current portion | $ | 95,974 | | | $ | 102,157 | |
Deferred revenue, non-current portion | 23,471 | | | 24,572 | |
Total Deferred revenue | $ | 119,445 | | | $ | 126,729 | |
Accounts receivable are recorded at the amount invoiced, net of allowances for sales returns, sales incentives, and doubtful accounts. Payment terms can vary by customer and contract.
The timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets are created when invoicing occurs subsequent to revenue recognition. Contract assets are transferred to accounts receivable when the right to invoice becomes unconditional. The Company’s contract assets are current in nature and are included in Prepaid expenses and other current assets. Contract assets decreased by $14.5 million during the six months ended June 30, 2024 due to the timing of billing to customers.
Total deferred revenue reflects consideration invoiced prior to the completion of performance obligations and revenue recognition. Total deferred revenue decreased by $7.3 million during the six months ended June 30, 2024 primarily due to the timing of fulfillment of performance obligations offset by an increase in deferred revenue from higher Premium Subscriptions.
Revenue recognized during the three and six months ended June 30, 2024, from amounts included in total deferred revenue as of December 31, 2023, was $15.0 million and $82.3 million, respectively. Revenue recognized during the three and six months ended June 30, 2023, from amounts included in total deferred revenue as of December 31, 2022, was $11.4 million and $66.9 million, respectively.
Revenue allocated to remaining performance obligations represents estimated contracted revenue that has not yet been recognized which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods. Estimated contracted revenue for these remaining performance obligations was $981.0 million as of June 30, 2024, of which the Company expects to recognize approximately 52% over the next 12 months and the remainder thereafter.
The Company recognized $16.2 million and $10.3 million of revenue during the three and six months ended June 30, 2024, respectively, and recognized $17.6 million and $32.6 million during the three and six months ended June 30, 2023, respectively, from performance obligations that were satisfied in previous periods due to changes in the estimated transaction price of its revenue contracts.
No customer accounted for more than 10% of the Company’s total net revenue during the three and six months ended June 30, 2024. Customer I accounted for 11% and 12% of the Company’s total net revenue during the three and six months ended June 30, 2023, respectively.
4. GOODWILL AND INTANGIBLE ASSETS
Goodwill
Goodwill represents the excess of purchase consideration in a business combination over the fair value of tangible and intangible assets acquired net of the liabilities assumed. All goodwill relates to the Company’s platform segment.
Intangible Assets
The following tables summarize the Company’s intangible assets for the periods presented (in thousands, except years):
| | | | | | | | | | | | | | | | | | | | | | | |
| As of June 30, 2024 |
| Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Weighted-Average Useful Lives (in years) |
Developed technology | $ | 73,367 | | | $ | (54,992) | | | $ | 18,375 | | | 5.9 |
Customer relationships | 14,100 | | | (14,100) | | | — | | | — |
Tradename | 20,400 | | | (6,966) | | | 13,434 | | | 9.8 |
Patents | 4,076 | | | (1,334) | | | 2,742 | | | 14.0 |
Total Intangible assets | $ | 111,943 | | | $ | (77,392) | | | $ | 34,551 | | | 6.7 |
| | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2023 |
| Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Weighted-Average Useful Lives (in years) |
Developed technology | $ | 73,367 | | | $ | (49,087) | | | $ | 24,280 | | | 5.9 |
Customer relationships | 14,100 | | | (13,948) | | | 152 | | | 4.0 |
Tradename | 20,400 | | | (5,966) | | | 14,434 | | | 9.8 |
Patents | 4,076 | | | (1,189) | | | 2,887 | | | 14.0 |
Total Intangible assets | $ | 111,943 | | | $ | (70,190) | | | $ | 41,753 | | | 6.7 |
The Company recorded amortization expense of $3.5 million and $4.4 million for intangible assets during the three months ended June 30, 2024 and 2023, respectively. The Company recorded amortization expense of $7.2 million and $8.8 million for intangible assets during the six months ended June 30, 2024 and 2023, respectively.
The Company recorded amortization of developed technology in Cost of revenue, platform during the three and six months ended June 30, 2024, and in Cost of revenue, platform and Research and development expenses during the three and six months ended June 30, 2023. The Company recorded amortization of customer relationships and tradename in Sales and marketing expenses and amortization of patents in General and administrative expenses in the condensed consolidated statements of operations for all periods presented.
As of June 30, 2024, the estimated future amortization expense for intangible assets for the next five years and thereafter is as follows (in thousands):
| | | | | |
Year Ending December 31, | |
2024 (remaining 6 months) | $ | 7,050 | |
2025 | 12,533 | |
2026 | 4,074 | |
2027 | 2,737 | |
2028 | 2,291 | |
Thereafter | 5,866 | |
Total | $ | 34,551 | |
5. BALANCE SHEET COMPONENTS
Accounts Receivable, net: Accounts receivable, net consisted of the following (in thousands):
| | | | | | | | | | | |
| As of |
| June 30, 2024 | | December 31, 2023 |
Accounts receivable, gross | $ | 709,000 | | | $ | 850,464 | |
Less: Allowances | | | |
Allowance for sales returns | 6,376 | | | 7,808 | |
Allowance for sales incentives | 26,641 | | | 23,024 | |
Allowance for doubtful accounts | 5,869 | | | 2,213 | |
Other allowances | 978 | | | 1,082 | |
Total allowances | 39,864 | | | 34,127 | |
Accounts receivable, net | $ | 669,136 | | | $ | 816,337 | |
Property and Equipment, net: Property and equipment, net consisted of the following (in thousands):
| | | | | | | | | | | |
| As of |
| June 30, 2024 | | December 31, 2023 |
Computers and equipment | $ | 50,669 | | | $ | 51,320 | |
Leasehold improvements | 291,105 | | | 292,418 | |
Internal-use software | 5,916 | | | 6,980 | |
Office equipment and furniture | 36,802 | | | 36,900 | |
Property and equipment, gross | 384,492 | | | 387,618 | |
Less: Accumulated depreciation and amortization | (144,457) | | | (123,062) | |
Property and equipment, net | $ | 240,035 | | | $ | 264,556 | |
Depreciation and amortization expense for property and equipment assets for the three months ended June 30, 2024 and 2023 was $12.3 million and $14.1 million, respectively. Depreciation and amortization expense for property and equipment assets for the six months ended June 30, 2024 and 2023 was $25.1 million and $25.4 million, respectively.
During the six months ended June 30, 2024 and 2023, the Company recognized an impairment charge of $0.5 million and $0.5 million, respectively, related to property and equipment associated with the leased office facilities that are part of its restructuring efforts. See Note 15 to the condensed consolidated financial statements for additional details.
Accrued Liabilities: Accrued liabilities consisted of the following (in thousands):
| | | | | | | | | | | |
| As of |
| June 30, 2024 | | December 31, 2023 |
Payments due to content partners | $ | 231,550 | | | $ | 239,196 | |
Accrued cost of revenue | 129,034 | | | 147,875 | |
Marketing, retail, and merchandising expenses | 53,601 | | | 147,853 | |
| | | |
Operating lease liability, current | 74,070 | | | 68,099 | |
Content liability, current | 51,663 | | | 54,319 | |
Other accrued expenses | 184,549 | | | 130,698 | |
Total Accrued liabilities | $ | 724,467 | | | $ | 788,040 | |
Deferred Revenue: Deferred revenue consisted of the following (in thousands):
| | | | | | | | | | | |
| As of |
| June 30, 2024 | | December 31, 2023 |
Platform, current | $ | 65,808 | | | $ | 66,636 | |
Devices, current | 30,166 | | | 35,521 | |
Total deferred revenue, current | 95,974 | | | 102,157 | |
Platform, non-current | 390 | | | 625 | |
Devices, non-current | 23,081 | | | 23,947 | |
Total deferred revenue, non-current | 23,471 | | | 24,572 | |
Total Deferred revenue | $ | 119,445 | | | $ | 126,729 | |
Other Long-term Liabilities: Other Long-term liabilities consisted of the following (in thousands):
| | | | | | | | | | | |
| As of |
| June 30, 2024 | | December 31, 2023 |
Content liability, non-current | $ | 17,365 | | | $ | 24,115 | |
Other long-term liabilities | 22,815 | | | 25,071 | |
Total Other long-term liabilities | $ | 40,180 | | | $ | 49,186 | |
6. CONTENT ASSETS
Content assets, net consisted of the following (in thousands):
| | | | | | | | | | | |
| As of |
| June 30, 2024 | | December 31, 2023 |
Licensed content, net and advances | $ | 143,381 | | | $ | 148,777 | |
Produced content: | | | |
Released, less amortization | 60,165 | | | 77,951 |
Completed, not released | 21,478 | | | 11,235 |
In production | 25,012 | | | 38,275 |
Total produced content, net | 106,655 | | | 127,461 |
Total Content assets, net and advances | $ | 250,036 | | | $ | 276,238 | |
| | | |
Current portion (included in Prepaid expenses and other current assets) | $ | 9,440 | | | $ | 18,843 | |
Non-current portion | $ | 240,596 | | | $ | 257,395 | |
Amortization of content assets is included in Cost of revenue, platform in the condensed consolidated statements of operations and is as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2024 | | June 30, 2023 | | June 30, 2024 | | June 30, 2023 |
Licensed content | $ | 37,234 | | | $ | 44,648 | | | $ | 74,235 | | | $ | 87,236 | |
Produced content | 11,090 | | | 8,264 | | | 21,980 | | | 15,078 | |
Total amortization costs | $ | 48,324 | | | $ | 52,912 | | | $ | 96,215 | | | $ | 102,314 | |
During the three and six months ended June 30, 2024, the Company wrote-off $11.8 million of unamortized costs related to produced content assets that were removed from the content library on The Roku Channel. No unamortized costs of licensed or produced content assets were written off during the three and six months ended June 30, 2023.
7. STRATEGIC INVESTMENT
In June 2022, the Company agreed to provide financing of up to $60.0 million in the aggregate to a counterparty with whom the Company has a commercial relationship. The advances are in the form of convertible promissory notes (the “Strategic Investment”) and are recognized as Other non-current assets on the condensed consolidated balance sheets. The Strategic Investment accrues interest at 5% per annum. The convertible promissory notes have maturity dates as reflected in the table below or are due upon a redemption event or in the event of a default.
The convertible promissory notes and their date of investment and maturity are as follows (in thousands):
| | | | | | | | | | | | | | |
As of June 30, 2024 |
Date of Investment | | Amount of Investment | | Date of Maturity |
June 15, 2022 | | $40,000 | | June 15, 2025 |
March 23, 2023 | | $5,000 | | March 23, 2026 |
May 23, 2023 | | $5,000 | | May 23, 2026 |
The Strategic Investment contains certain redemption features that meet the definition of embedded derivatives and require bifurcation. The Company elected to apply the fair value option and account for the hybrid instrument containing the host contract and the embedded derivatives at fair value as a single instrument, with any subsequent changes in fair value included in Other income (expense), net in the condensed consolidated statements of operations. See Note 8 to the condensed consolidated financial statements for additional details on the fair value of the Strategic Investment.
8. FAIR VALUE DISCLOSURE
The Company’s financial assets measured at fair value on a recurring basis are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of June 30, 2024 | | As of December 31, 2023 |
| Fair Value | | Level 1 | | Level 3 | | Fair Value | | Level 1 | | Level 3 |
Assets: | | | | | | | | | | | |
Cash and cash equivalents: | | | | | | | | | | | |
Cash | $ | 587,231 | | | $ | 587,231 | | | $ | — | | | $ | 594,493 | | | $ | 594,493 | | | $ | — | |
Money market funds | 1,471,234 | | | 1,471,234 | | | — | | | 1,431,398 | | | 1,431,398 | | | — | |
Restricted cash, current | 39,735 | | | 39,735 | | | — | | | 40,713 | | | 40,713 | | | — | |
Other non-current assets: | | | | | | | | | | | |
Strategic Investment | 57,450 | | | — | | | 57,450 | | | 53,816 | | | — | | | 53,816 | |
Total assets measured and recorded at fair value | $ | 2,155,650 | | | $ | 2,098,200 | | | $ | 57,450 | | | $ | 2,120,420 | | | $ | 2,066,604 | | | $ | 53,816 | |
The following table reflects the changes in the fair value of the Company’s Level 3 financial assets (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2024 | | June 30, 2023 | | June 30, 2024 | | June 30, 2023 |
Beginning balance | $ | 54,390 | | | $ | 47,678 | | | $ | 53,816 | | | $ | 39,468 | |
Purchase of Strategic Investment | — | | | 5,000 | | | — | | | 10,000 | |
Change in estimated fair value of the Strategic Investment | 3,060 | | | (120) | | | 3,634 | | | 3,090 | |
Ending balance | $ | 57,450 | | | $ | 52,558 | | | $ | 57,450 | | | $ | 52,558 | |
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal market (or most advantageous market, in the absence of a principal market) for the asset or liability in an orderly transaction between market participants at the measurement date. Further, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs in measuring fair value and utilizes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value.
The three levels of inputs used to measure fair value are as follows:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Financial assets and liabilities measured using Level 1 inputs include cash, cash equivalents, restricted cash, accounts receivable, prepaid expenses, accounts payable and accrued liabilities.
The Company considers all highly liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents. The Company measured money market funds of $1,471.2 million and $1,431.4 million as cash equivalents as of June 30, 2024 and December 31, 2023, respectively, using Level 1 inputs.
Level 2—Observable inputs other than quoted prices included within Level 1, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs other than quoted prices that are observable or are derived principally from, or corroborated by, observable market data by correlation or other means.
The Company did not have Level 2 instruments as of June 30, 2024 and December 31, 2023.
Level 3—Unobservable inputs that are supported by little or no market activity, are significant to the fair value of the assets or liabilities and reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
As of June 30, 2024, the Company measured the Strategic Investment using Level 3 inputs. The fair value of the Strategic Investment on the date of purchase was determined to be equal to its principal amount. The Company recorded an unrealized gain of $3.1 million and an unrealized loss of $0.1 million, in Other income (expense), net related to the adjustment to fair value of the Strategic Investment during the three months ended June 30, 2024 and June 30, 2023, respectively. The Company recorded an unrealized gain of $3.6 million and an unrealized gain of $3.1 million, in Other income (expense), net related to the adjustment to fair value of the Strategic Investment during the six months ended June 30, 2024 and June 30, 2023, respectively.
The Company classified the Strategic Investment as Level 3 due to the lack of relevant observable market data over fair value inputs. The fair value of the Strategic Investment was estimated using a scenario-based probability weighted discounted cash flow model. Significant assumptions include the discount rate, and the timing and probability weighting of the various redemption scenarios that impact the settlement of the Strategic Investment.
Assets and liabilities that are measured at fair value on a non-recurring basis
Non-financial assets such as goodwill, intangible assets, property and equipment, operating lease right-of-use assets, and content assets are evaluated for impairment and adjusted to fair value using Level 3 inputs, only when impairment is recognized.
During the three months ended June 30, 2024, the Company recorded impairment charges of $10.7 million related to operating lease right-of-use assets associated with the leased office facilities that are part of its restructuring efforts. The Company did not record any impairment charges during the three months ended June 30, 2023. During the six months ended June 30, 2024 and 2023, the Company recorded impairment charges of $11.2 million and $3.8 million, respectively, related to operating lease right-of-use assets, and $0.5 million and $0.5 million, respectively, related to property and equipment, both associated with the leased office facilities that are part of its restructuring efforts. See Note 15 to the condensed consolidated financial statements for additional details.
9. LEASES
The Company's operating leases are primarily for office facilities. The leases have remaining terms ranging from less than one year to nine years and may include options to extend or terminate the lease. The depreciable life of operating lease right-of-use assets is limited by the expected lease term. The Company has executed sublease agreements for a portion of its available office space. The subleases are also classified as operating leases.
The components of lease expense are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2024 | | June 30, 2023 | | June 30, 2024 | | June 30, 2023 |
Operating lease expense | $ | 18,247 | | | $ | 21,671 | | | $ | 36,380 | | | $ | 43,146 | |
Variable lease expense | 5,231 | | | 6,080 | | | 10,753 | | | 12,372 | |
Sublease income | (1,975) | | | — | | | (2,885) | | | — | |
Total operating lease expense | $ | 21,503 | | | $ | 27,751 | | | $ | 44,248 | | | $ | 55,518 | |
Supplemental cash flow information related to leases is as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2024 | | June 30, 2023 | | June 30, 2024 | | June 30, 2023 |
Cash paid for amounts included in the measurement of lease liabilities: | | | | | | | |
Operating cash outflows from operating leases | $ | 22,466 | | | $ | 18,327 | | | $ | 43,722 | | | $ | 35,320 | |
Right-of-use assets obtained in exchange for lease obligations: | | | | | | | |
Operating leases | $ | 2,885 | | | $ | 9,352 | | | $ | 2,885 | | | $ | 11,909 | |
Decrease in operating lease right-of-use assets due to impairment (See Note 15 for details) | $ | 10,656 | | | $ | — | | | $ | 11,232 | | | $ | 3,790 | |
Supplemental balance sheet information related to leases is as follows (in thousands, except lease term and discount rate):
| | | | | | | | | | | |
| As of |
| June 30, 2024 | | December 31, 2023 |
Operating lease right-of-use assets | $ | 338,422 | | | $ | 371,444 |
| | | |
Operating lease liability, current (included in Accrued liabilities) | $ | 74,070 | | | $ | 68,099 |
Operating lease liability, non-current | 553,375 | | | 586,174 |
Total operating lease liability | $ | 627,445 | | | $ | 654,273 |
| | | |
Weighted-average remaining term for operating leases (in years) | 7.5 | | 7.9 |
Weighted-average discount rate for operating leases | 3.96 | % | | 3.94 | % |
Future lease payments under operating leases excluding any sublease income from sublease arrangements as of June 30, 2024 are as follows (in thousands):
| | | | | |
Year Ending December 31, | Operating Leases |
2024 (remaining 6 months) | $ | 46,136 | |
2025 | 99,185 | |
2026 | 100,833 | |
2027 | 99,840 | |
2028 | 100,017 | |
Thereafter | 282,510 | |
Total future lease payments | 728,521 | |
Less: imputed interest | (97,817) | |
Less: expected tenant improvement allowance | (3,259) | |
Total (1) | $ | 627,445 | |
(1) Total lease liabilities include liabilities related to operating leases right-of-use assets which were included in the impairment charges as part of the Company’s restructuring efforts reflected in Note 15 to the condensed consolidated financial statements.
As of June 30, 2024, the Company had no commitments relating to operating leases that have not yet commenced.
As of June 30, 2024, the Company expects to receive approximately $45.3 million from its sublease arrangements which have a weighted average remaining lease term of approximately 5.3 years.
10. STOCKHOLDERS’ EQUITY
Preferred Stock
The Company has 10 million shares of undesignated preferred stock authorized but not issued with rights and preferences determined by the Company’s Board of Directors at the time of issuance of such shares. As of June 30, 2024 and December 31, 2023, there were no shares of preferred stock issued and outstanding.
Common Stock
The Company has two classes of authorized common stock, Class A common stock and Class B common stock. Holders of Class A common stock are entitled to one vote for each share of Class A common stock held on all matters submitted to a vote of stockholders and holders of Class B common stock are entitled to ten votes for each share of Class B common stock held on all matters submitted to a vote of stockholders. Except with respect to voting, the rights of the holders of Class A and Class B common stock are identical. Shares of Class B common stock are voluntarily convertible into shares of Class A common stock at the option of the holder and are generally automatically converted into shares of the Company's Class A common stock upon sale or transfer. Shares issued in connection with exercises of stock options, vesting of restricted stock units, or shares purchased under the employee stock purchase plan are generally automatically converted into shares of the Company’s Class A common stock.
Common Stock Reserved for Future Issuance
As of June 30, 2024, the Company’s common stock reserved for issuance in the future is as follows (in thousands):
| | | | | |
| As of |
| June 30, 2024 |
Common stock awards granted under equity incentive plans | 12,076 | |
Common stock awards available for issuance under the 2017 Employee Stock Purchase Plan (1) | 5,089 | |
Common stock awards available for issuance under the 2017 Equity Incentive Plan | 35,777 | |
Total reserved shares of common stock | 52,942 | |
(1) The Company has not issued any common stock pursuant to the 2017 Employee Stock Purchase Plan.
Equity Incentive Plans
The Company currently grants equity under the 2017 Equity Incentive Plan (the “2017 Plan”). The 2017 Plan became effective September 2017 in connection with the Company’s initial public offering (“IPO”). The 2017 Plan provides for the grant of incentive stock options to the Company’s employees and for the grant of non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards, and other forms of equity compensation to the Company’s employees, directors and consultants. The outstanding equity relates to the 2017 Plan and the 2008 Equity Incentive Plan (“2008 Plan”), a pre-IPO plan. No additional equity grants have been made pursuant to the 2008 Plan subsequent to the IPO.
The equity granted under the 2017 Plan is subject to continuous service. Stock options granted under the 2017 Plan generally are granted at a price per share equivalent to the fair market value on the date of grant. Recipients of option grants who possess more than 10% of the combined voting power of the Company are subject to certain limitations, and incentive stock options granted to such recipients are at a price per share no less than 110% of the fair market value on the date of grant.
Restricted Stock Units
Restricted stock unit activity for the six months ended June 30, 2024 is as follows (in thousands, except per share data):
| | | | | | | | | | | |
| Number of Shares | | Weighted-Average Grant Date Fair Value per Share |
Balance as of December 31, 2023 | 8,674 | | | $ | 97.33 | |
Awarded | 316 | | | 62.30 | |
Released | (1,585) | | | 110.11 | |
Forfeited | (416) | | | 100.37 | |
Balance as of June 30, 2024 | 6,989 | | | $ | 92.66 | |
As of June 30, 2024, the Company had $507.9 million of unrecognized stock-based compensation expense related to unvested restricted stock units that is expected to be recognized over a weighted-average period of approximately 1.9 years.
Stock Options
Stock option activity for the six months ended June 30, 2024 is as follows (in thousands, except years and per share data):
| | | | | | | | | | | | | | | | | | | | | | | |
| Number of Shares | | Weighted- Average Exercise Price | | Weighted- Average Remaining Contractual Life (Years) | | Aggregate Intrinsic Value |
Balance as of December 31, 2023 | 5,310 | | | $ | 75.55 | | | 6.8 | | |
Granted | 92 | | | 64.34 | | | — | | | |
Exercised | (287) | | | 30.24 | | | — | | | |
Forfeited and expired | (28) | | | 141.30 | | | — | | | |
Balance as of June 30, 2024 | 5,087 | | | $ | 77.54 | | | 6.5 | | $ | 61,416 | |
| | | | | | | |
Options exercisable as of June 30, 2024 | 3,572 | | | $ | 68.52 | | | 5.8 | | $ | 55,185 | |
As of June 30, 2024, the Company had $50.7 million of unrecognized stock-based compensation expense related to unvested stock options that is expected to be recognized over a weighted-average period of approximately 1.8 years.
Stock-Based Compensation
The Company measures the cost of employee services received in exchange for an equity award based on the grant date fair value of the award. Stock options granted to employees generally vest over one to four years and have a term of ten years. Restricted stock units generally vest over one to four years.
The following table shows the total stock-based compensation expense for the three and six months ended June 30, 2024 and 2023 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2024 | | June 30, 2023 | | June 30, 2024 | | June 30, 2023 |
Cost of revenue, platform | $ | 282 | | | $ | 349 | | | $ | 696 | | | $ | 688 | |
Cost of revenue, devices | 139 | | | 812 | | | 1,038 | | | 1,616 | |
Research and development | 33,365 | | | 34,824 | | | 70,955 | | | 73,487 | |
Sales and marketing | 31,431 | | | 31,225 | | | 63,952 | | | 65,364 | |
General and administrative | 23,179 | | | 22,369 | | | 46,387 | | | 44,896 | |
Total stock-based compensation | $ | 88,396 | | | $ | 89,579 | | | $ | 183,028 | | | $ | 186,051 | |
11. COMMITMENTS AND CONTINGENCIES
Manufacturing Purchase Commitments
The Company has various manufacturing contracts with vendors in the conduct of the normal course of its business. In order to manage future demand for its products, the Company enters into agreements with manufacturers and suppliers to procure inventory based upon certain criteria and timing. Some of these commitments are non-cancelable. As of June 30, 2024, the Company had $326.0 million of non-cancelable purchase commitments for inventory. As of June 30, 2024, the Company had accrued $14.0 million related to anticipated losses on firm purchase commitments of inventory. The accrual is recorded in Accrued liabilities in the condensed consolidated balance sheets and the related expense is recorded in Cost of revenue, devices in the condensed consolidated statements of operations.
Content Commitments
The Company enters into contracts with content partners to license and produce content for streaming. When a title becomes available, the Company records a content asset and liability on the condensed consolidated balance sheets. Certain agreements include the obligation to license rights for unknown future titles for which the ultimate quantity and/or fees are not yet determinable as of the reporting date. The Company does not include any estimated obligation for these future titles beyond the known minimum amount. The unknown obligations could be material. The Company also licenses content under arrangements where the payments are variable and based on the revenue earned by the Company. Since those amounts cannot be determined, they are not included in the obligations below.
As of June 30, 2024, the Company's total obligation for licensed and produced content was $262.6 million, of which the Company recorded $55.1 million in Current liabilities and $17.4 million in Other long-term liabilities in the condensed consolidated balance sheets. The remaining $190.1 million is not yet recognized on the condensed consolidated balance sheets as the content does not meet the criteria for asset recognition.
The expected timing of payments for these content obligations are as follows (in thousands):
| | | | | |
Year Ending December 31, | |
2024 (remaining 6 months) | $ | 112,426 | |
2025 | 104,217 |
2026 | 26,109 |
2027 | 9,625 |
2028 | 5,429 |
Thereafter | 4,839 |
Total content obligations | $ | 262,645 | |
Letters of Credit
As of June 30, 2024 and December 31, 2023, the Company had irrevocable letters of credit outstanding in the amount of $36.8 million and $37.5 million, respectively, related to operating leases for office facilities. The letters of credit have various expiration dates through 2030. The outstanding letters of credit are secured by the Company’s existing cash balance, a portion of which is restricted for that purpose. See Note 2 to the condensed consolidated financial statements for additional information.
Contingencies
The Company accounts for loss contingencies, including liabilities for intellectual property licensing and other claims, when it believes such losses are probable and reasonably estimable. These contingencies are reviewed at least quarterly and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, and other information and events. The resolution of these contingencies and of other legal proceedings can be, however, inherently unpredictable and subject to significant uncertainties.
The Company is, and may become, subject to various lawsuits, stockholder derivative actions, class action lawsuits, individual or mass arbitration proceedings, and other types of legal proceedings, as well as other disputes, claims, and regulatory or governmental inquiries and investigations in the ordinary course of business, relating to commercial, contract, consumer protection, privacy, data protection, intellectual property, tax, employment, corporate governance, and other matters. Although the results of these legal proceedings, disputes, claims, and inquiries and investigations cannot be predicted with certainty, the Company does not believe that the final outcome of any matters that it is currently involved in is reasonably likely to have a material adverse effect on its business, financial condition, or results of operations. Regardless of the outcome, such legal proceedings, disputes, claims, and inquiries and investigations can have an adverse impact on the Company because of legal fees, other litigation costs, and settlement costs, diversion of management resources, reputational harm, and other factors. During the three and six months ended June 30, 2024 and 2023, the Company did not have any loss contingencies that were material.
Indemnification
In the ordinary course of business, the Company has entered into contractual arrangements which provide indemnification provisions of varying scope and terms to business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements and out of intellectual property infringement claims made by third parties. The Company’s obligations under these agreements may be limited in terms of time or amount, and in some instances, the Company may have recourse against third parties for certain payments. In addition, the Company has entered into indemnification agreements with its directors and certain of its officers that will require it, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers.
It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each agreement. To date, the Company has not incurred any material costs as a result of such obligations and has not accrued any liabilities related to such obligations in the condensed consolidated financial statements.
12. INCOME TAXES
Income tax benefit was $9.2 million and income tax expense was $1.6 million for the three months ended June 30, 2024 and 2023, respectively. Income tax benefit was $4.4 million and income tax expense was $5.2 million for the six months ended June 30, 2024 and 2023, respectively.
The increase in income tax benefit for the three and six months ended June 30, 2024 is primarily attributable to the release of the valuation allowance on certain foreign deferred tax assets, offset by an increase in U.S. income taxes. The Company recorded a discrete tax benefit of $11.1 million related to the release of its valuation allowance against certain foreign deferred tax assets, which are expected to be utilized based on future forecasted income.
A valuation allowance must be established for deferred tax assets when it is more likely than not that they will not be realized. As of June 30, 2024, the Company analyzed all available objective evidence, both positive and negative, and believes it is more-likely-than-not that some deferred tax assets will not be realizable. Accordingly, the Company has provided a valuation allowance against its U.S. deferred tax assets.
13. NET LOSS PER SHARE
The Company’s basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. The Company uses the two-class method to calculate net loss per share. Except with respect to certain voting, conversion, and transfer rights and as otherwise expressly provided in the Company’s amended and restated certificate of incorporation or required by applicable law, shares of the Company’s Class A common stock and Class B common stock have the same rights and privileges and rank equally, share ratably, and are identical in all respects as to all matters. Accordingly, basic and diluted net loss per share are the same for both classes.
For purposes of the calculation of diluted net loss per share, options to purchase common stock and restricted stock units are considered common stock equivalents. Dilutive shares of common stock are determined by applying the treasury stock method. The dilutive shares are excluded from the calculation of diluted net loss per share in the period of net loss, as their effect is antidilutive.
The following table presents the calculation of basic and diluted net loss per share (in thousands, except per share data):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2024 | | June 30, 2023 | | June 30, 2024 | | June 30, 2023 |
Numerator: | | | | | | | |
Net Loss | $ | (33,953) | | | $ | (107,595) | | | $ | (84,808) | | | $ | (301,199) | |
Denominator: | | | | | | | |
| | | | | | | |
Weighted-average common shares outstanding — basic and diluted | 144,339 | | 141,033 | | 144,045 | | 140,685 |
Net loss per share — basic and diluted | $ | (0.24) | | | $ | (0.76) | | | $ | (0.59) | | | $ | (2.14) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
For the three and six months ended June 30, 2024, outstanding equity awards of 12.1 million shares of common stock are excluded from the calculation of diluted net loss per share because of their anti-dilutive effect.
For the three and six months ended June 30, 2023, outstanding equity awards of 13.7 million shares of common stock are excluded from the calculation of diluted net loss per share because of their anti-dilutive effect.
14. SEGMENT INFORMATION
The Company is organized into two reportable segments as follows:
Platform
Platform revenue is generated from the sale of digital advertising (including direct and programmatic video advertising, media and entertainment promotional spending, and related services) and streaming services distribution (including subscription and transaction revenue shares, the sale of Premium Subscriptions, and the sale of branded app buttons on remote controls).
Devices
Devices revenue is generated from the sale of streaming players, Roku-branded TVs, smart home products and services, audio products, and related accessories as well as revenue from licensing arrangements with service operators.
Customers accounting for 10% or more of segment revenue, net, were as follows: