ROKU INC
For the period ended Jun 30, 2024. Filed Aug 2, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 2, 2024
ROKU$160.52+0.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-04-26.
0001428439-24-000019
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-02.
0001428439-24-000034
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 92 previous paragraphs and 99 current paragraphs.
61 unchanged; 21 reworded; 14 added; 10 removed; 0 previous and 3 current paragraphs rearranged.
Tables are not compared: 8 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
Income Tax Expense (Benefit)
Current report
Comparison of the Three and Six Months Ended June 30, 2024 and June 30, 2023
Current report
Cost of Revenue
Current report
The cost of revenue, devices increased by $67.9 million, or 30%, during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increase was primarily driven by higher manufacturing costs of $52.3 million, higher freight costs of $9.1 million, and higher inventory related provisions including losses on firm purchase commitments of $6.8 million. The increase in manufacturing costs was driven primarily by the cost of manufacturing Roku-branded TVs.
Current report
Research and development expenses decreased by $16.9 million, or 9%, during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The decrease was primarily due to lower personnel-related expenses of $11.3 million and lower office facilities and IT infrastructure expenses of $6.4 million.
Current report
Sales and marketing expenses decreased by $5.5 million, or 2%, during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The decrease was due to lower personnel-related expenses of $9.9 million, lower marketing, retail, and merchandising expenses of $2.3 million, and lower office facilities and IT infrastructure expenses of $3.7 million, offset by higher restructuring charges of $7.6 million and higher consulting expenses of $2.5 million.
Current report
Sales and marketing expenses decreased by $37.3 million, or 8%, during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The decrease was due to lower personnel-related expenses of $26.2 million, lower marketing, retail, and merchandising expenses of $8.1 million, and lower office facilities and IT infrastructure expenses of $6.5 million, offset by higher restructuring charges of $1.8 million and higher consulting expenses of $1.9 million.
Current report
General and administrative expenses increased by $14.2 million, or 17%, during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was due to higher legal and consulting expenses of $8.1 million, higher restructuring charges of $2.2 million and higher bad debt expense of $3.3 million, offset by lower personnel-related expenses of $0.9 million and lower office facilities and IT infrastructure expenses of $0.7 million.
Current report
General and administrative expenses decreased by $4.2 million, or 2%, during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The decrease was due to lower restructuring charges of $8.5 million, lower personnel-related expenses of $3.5 million and lower office facilities and IT infrastructure expenses of $1.4 million, offset by higher legal and consulting expenses of $5.9 million and higher bad debt expense of $1.4 million.
Current report
Other Income, Net
Current report
Other income, net, increased $11.7 million, or 27%, during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increase was primarily driven by an increase in interest income of $10.2 million from higher interest rates on our cash balances and an increase in other income of $2.1 million from higher unrealized gains related to the change in the fair value of the Strategic Investment, offset by foreign exchange losses of $0.6 million due to fluctuations in exchange rates.
Current report
Income Tax Expense (Benefit)
Current report
Income tax expense decreased by $10.8 million, to reflect a benefit during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily due to a tax benefit from the release of a valuation allowance on certain foreign deferred tax assets.
Current report
Income tax expense decreased by $9.6 million, to reflect a benefit during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily due to a tax benefit from the release of a valuation allowance on certain foreign deferred tax assets.
Removed paragraphs (10)
Previous report
Prior to this Quarterly Report, 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,” and this change in terminology does not change any metrics we have reported in prior periods.
Previous report
Other Income (Expense), Net
Previous report
Income Tax Expense
Previous report
Comparison of Three Months Ended March 31, 2024 and March 31, 2023
Previous report
Cost of Revenue and Gross Profit
Previous report
The reduction in each category of operating expense is primarily the result of the restructuring efforts during the year ended December 31, 2023. See Note 15 to the condensed consolidated financial statements for additional details.
Previous report
Research and development expenses decreased by $39.6 million, or 18%, during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The decrease was due to lower personnel-related expenses of $14.9 million, lower restructuring charges of $12.9 million, lower consulting expenses of $7.5 million, and lower office facilities and IT infrastructure expenses of $3.8 million.
Previous report
General and administrative expenses decreased by $18.3 million, or 19%, during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The decrease was due to lower restructuring charges of $10.8 million, lower personnel-related expenses of $2.6 million, lower consulting expenses of $2.1 million, and lower office facilities, IT infrastructure, and other expenses of $2.8 million.
Previous report
Income Tax Expense
Previous report
Income tax expense increased by $1.2 million, or 34%, during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 and was due to increase in domestic tax expense driven by higher U.S. income offset by a decline in foreign tax expenses.
Reworded paragraphs (21)
Previous wording
We had 81.6 million and 71.6 million Streaming Households as of March 31, 2024 and 2023, respectively, reflecting an increase of 14%.
Current wording
We had 83.6 million and 73.5 million Streaming Households as of June 30, 2024 and 2023, respectively, reflecting an increase of 14%.
Previous wording
We streamed 30.8 billion and 25.1 billion hours during the three months ended March 31, 2024 and 2023, respectively, reflecting an increase of 23%.
Current wording
We streamed 30.1 billion and 25.1 billion hours during the three months ended June 30, 2024 and 2023, respectively, reflecting an increase of 20%.
Previous wording
ARPU stayed flat at $40.65 as of March 31, 2024 as compared to $40.67 as of March 31, 2023.
Current wording
ARPU stayed flat at $40.68 as of June 30, 2024 as compared to $40.67 as of June 30, 2023 due to an increasing share of Streaming Households in international markets which outpaced the monetization of our streaming platform and our growth in revenue.
Previous wording
Our Free Cash Flow was $426.8 million and negative $448.1 million for the TTM periods ended March 31, 2024 and 2023, respectively.
Current wording
Our Free Cash Flow was $317.9 million and negative $169.3 million for the TTM periods ended June 30, 2024 and 2023, respectively.
Previous wording
We generate 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). Our ad inventory includes video ad inventory from AVOD content in The Roku Channel, native display ads on our home screen and screen saver, as well as ad inventory we obtain through our streaming services distribution agreements with our content partners. To supplement supply, we purchase advertising inventory from our content partners, on an as needed basis. To date, we have generated most of our platform revenue in the United States.
Current wording
We generate 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). Our ad inventory includes video ad inventory from AVOD content in The Roku Channel, native display ads on the Roku Home Screen and screen saver, as well as ad inventory we obtain through our streaming services distribution agreements with our content partners. To supplement supply, we purchase advertising inventory from our content partners, on an as needed basis. To date, we have generated most of our platform revenue in the United States.
Previous wording
Cost of revenue, platform primarily consists of costs associated with acquiring advertising inventory and amortization costs of content, both licensed and produced, and revenue share with content partners. Cost of revenue, platform also includes other costs such as payment processing fees, allocated expenses associated with the delivery of our services that primarily include costs of third-party cloud services and salaries, benefits, and stock-based compensation for our customer support and platform operations personnel, and amortization of acquired developed technology.
Current wording
Cost of revenue, platform primarily consists of costs associated with acquiring advertising inventory and amortization costs of content, both licensed and produced, and revenue share with content partners. Cost of revenue, platform also includes other costs such as payment processing fees, allocated expenses associated with the delivery of our services that primarily include costs of third-party cloud services and salaries, benefits, and stock-based compensation for our platform operations personnel, and amortization of acquired developed technology.
Previous wording
Cost of revenue, devices is comprised mostly of manufacturing costs payable to third party manufacturers for devices we sell which include streaming players, Roku-branded TVs, audio products and smart home products. Cost of revenue, devices also includes technology licenses or royalty fees on devices we sell, inbound and outbound freight, duty and logistics costs, third-party packaging, inventory provisions, and allocated overhead costs related to facilities, third-party cloud services, customer support, and salaries, benefits, and stock-based compensation for operations personnel.
Current wording
Cost of revenue, devices is comprised mostly of manufacturing costs payable to third party manufacturers for devices we sell which include streaming players, Roku-branded TVs, audio products and smart home products. Cost of revenue, devices also includes technology licenses or royalty fees on devices we sell, inbound and outbound freight, duty and logistics costs, third-party packaging, inventory provisions, and allocated overhead costs related to facilities, third-party cloud services, and salaries, benefits, and stock-based compensation for operations personnel.
Previous wording
Sales and marketing expenses consist primarily of salaries, benefits, commissions, and stock-based compensation for our employees engaged in sales and sales support, marketing, communications, data science and analytics, business development, product management, and partner support functions. Sales and marketing expenses also include marketing, retail and merchandising expenses, and allocated facilities and overhead expenses.
Current wording
Sales and marketing expenses consist primarily of salaries, benefits, commissions, and stock-based compensation for our employees engaged in sales and sales customer support, marketing, communications, data science and analytics, business development, product management, and partner support functions. Sales and marketing expenses also include marketing, retail and merchandising expenses, and allocated facilities and overhead expenses.
Previous wording
General and administrative expenses consist primarily of salaries, benefits, and stock-based compensation for our finance, legal, information technology, human resources, and other administrative personnel. General and administrative expenses also include outside legal, accounting, and other professional service fees as well as allocated facility and overhead expenses.
Current wording
General and administrative expenses consist primarily of salaries, benefits, and stock-based compensation for our finance, legal, information technology, human resources, business operations support, and other administrative personnel. General and administrative expenses also include outside legal, accounting, and other professional service fees as well as allocated facility and overhead expenses.
Previous wording
For the three months ended March 31, 2024, and 2023, other income (expense), net primarily consists of interest income on cash and cash equivalents, income recognized related to non-cash consideration associated with the delivery of services as part of a strategic commercial arrangement, foreign currency re-measurement, transaction gains and losses, and net change in the fair value of the Strategic Investment (as defined in Note 7 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report).
Current wording
For the three and six months ended June 30, 2024, and 2023, other income, net primarily consists of interest income on cash and cash equivalents, income recognized related to non-cash consideration associated with the delivery of services as part of a strategic commercial arrangement, foreign currency re-measurement and transaction gains and losses, and net change in the fair value of the Strategic Investment (as defined in Note 7 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report).
Previous wording
Our income tax expense consists primarily of income taxes in certain foreign jurisdictions where we conduct business and income taxes in the United States. We have a full valuation allowance against net deferred tax assets in the U.S. and any jurisdiction where it is more-likely-than-not the deferred tax asset will not be realizable. We expect to maintain this valuation allowance for the foreseeable future.
Current wording
Our income tax expense (benefit) consists primarily of income taxes in certain foreign jurisdictions where we conduct business and income taxes in the United States. We have a full valuation allowance against net deferred tax assets in the U.S. During the three months ended June 30, 2024, we released the valuation allowance on certain foreign deferred tax assets and recognized an income tax benefit.
Previous wording
Platform revenue increased by $120.3 million, or 19%, during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The increase was primarily due to higher advertising revenue in addition to higher revenue from streaming services distribution, such as revenue share on content subscriptions and Premium Subscriptions through The Roku Channel. The growth in advertising revenue is due to the overall improvement in the advertising market during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.
Current wording
Platform revenue increased by $80.5 million, or 11%, during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was primarily due to higher revenue from streaming services distribution, such as revenue share on content subscriptions and Premium Subscriptions through The Roku Channel, in addition to slightly higher advertising revenue, despite continued weakness in the media and entertainment vertical.
Previous wording
Devices revenue increased by $20.2 million, or 19%, during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The increase was primarily due to higher revenue from Roku-branded TVs and to a lesser extent higher revenue from streaming players. This was offset by lower revenue from licensing arrangements with service operators and lower revenue from audio products and accessories. During the three months ended March 31, 2024, the average selling price of devices shipped increased by 34% and the volume of devices shipped increased by 1% as compared to the three months ended March 31, 2023. The increase in average selling price is due to increased sales of Roku-branded TVs which generally sell at higher prices compared to streaming players. The increase in the volume of devices shipped was mainly due to higher sales of Roku-branded TVs offset by lower sales of streaming players, audio and smart home products.
Current wording
Devices revenue increased by $40.5 million, or 39%, during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was primarily due to higher revenue from Roku-branded TVs and to a lesser extent higher revenue from streaming players and accessories. This was offset by lower revenue from audio and smart home products and services. During the three months ended June 30, 2024, the average selling price of all devices shipped increased by 22% and the volume of all devices shipped increased by 13% as compared to the three months ended June 30, 2023. The increase in average selling price is due to increased sales of Roku-branded TVs which generally sell at higher prices compared to streaming players. The increase in the volume of devices shipped was mainly due to higher sales of Roku-branded TVs and to a lesser extent higher sales of streaming players, offset by lower sales of audio and smart home products.
Previous wording
The cost of revenue, platform increased by $60.0 million, or 20%, during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The increase was primarily driven by higher costs of acquiring content, higher costs of Premium Subscriptions, and higher credit card processing fees, partially offset by lower content asset amortization and lower cost of advertising inventory.
Current wording
The cost of revenue, platform increased by $36.4 million, or 10%, during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was primarily driven by higher costs of acquiring content, write-off of content assets, and higher credit card processing fees, partially offset by lower content asset amortization and lower cost of advertising inventory.
Previous wording
The cost of revenue, devices increased by $29.8 million, or 29%, during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The increase was primarily driven by higher manufacturing costs of $22.2 million, higher freight costs of $4.4 million, and higher device related other costs of $3.0 million that include costs such as royalties, inventory provision, and overhead cost allocation. The increase in manufacturing costs was driven primarily by the cost of Roku-branded TVs and the cost of smart home products.
Current wording
The cost of revenue, devices increased by $38.1 million, or 32%, during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was primarily driven by higher manufacturing costs of $30.1 million, higher freight costs of $4.7 million, and higher inventory related provisions including losses on firm purchase commitments of $8.0 million. The increase in manufacturing costs was driven primarily by the cost of manufacturing Roku-branded TVs. The increases were offset by lower royalty costs and rebates of $4.4 million.
Previous wording
Sales and marketing expenses decreased by $31.8 million, or 14%, during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The decrease was due to lower personnel-related expenses of $16.3 million, lower marketing, retail, and merchandising expenses of $5.9 million, lower restructuring charges of $5.8 million, and lower office facilities, IT infrastructure, and other expenses of $3.9 million.
Current wording
Research and development expenses decreased by $56.5 million, or 14%, during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The decrease was due to lower personnel-related expenses of $26.2 million, lower restructuring charges of $12.1 million, lower office facilities and IT infrastructure expenses of $10.2 million, and lower consulting expenses of $6.7 million.
Previous wording
Total other income, net, increased $3.5 million, or 16%, during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The increase was primarily driven by an increase in interest income of $4.5 million from higher interest rates on our cash balances, a reduction in interest expense of $0.7 million, and foreign exchange gains of $0.4 million due to fluctuation in exchange rates, offset by a decrease in other income of $2.0 million from lower unrealized gains related to the change in the fair value of the Strategic Investment.
Current wording
Other income, net, increased $8.1 million, or 41%, during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was primarily driven by an increase in interest income of $5.7 million from higher interest rates on our cash balances and an increase in other income of $3.1 million from higher unrealized gains related to the change in the fair value of the Strategic Investment, offset by foreign exchange losses of $1.0 million due to fluctuations in exchange rates.
Previous wording
As of March 31, 2024, we had cash and cash equivalents of $2,055.7 million. Approximately 5% of our cash was held outside the United States in accounts held by our foreign subsidiaries, which is used to fund foreign operations.
Current wording
As of June 30, 2024, we had cash and cash equivalents of $2,058.5 million. Approximately 6% of our cash was held outside the United States in accounts held by our foreign subsidiaries, which is used to fund foreign operations.
Previous wording
Our operating activities provided cash of $46.7 million for the three months ended March 31, 2024. Our net loss of $50.9 million for the three months ended March 31, 2024 was adjusted by non-cash charges of $171.4 million comprised primarily of stock-based compensation, amortization of content assets, depreciation and amortization of property and equipment and intangible assets, and amortization of operating lease right-of-use assets. The changes in our operating assets and liabilities used cash of $73.9 million, primarily due to a decrease in accrued liabilities due to timing of payments, payments made to acquire content, payments made for operating leases liabilities, an increase in other long-term assets and the inventory balance, and a decrease in deferred revenue. This was offset mainly by a decrease in the accounts receivable balance.
Current wording
Our operating activities provided cash of $70.1 million for the six months ended June 30, 2024. Our net loss of $84.8 million for the six months ended June 30, 2024 was adjusted by non-cash charges of $360.2 million comprised primarily of stock-based compensation, amortization and write-off of content assets, depreciation and amortization of property and equipment and intangible assets, and amortization of operating lease right-of-use assets. The changes in our operating assets and liabilities used cash of $205.3 million, primarily due to a decrease in accounts payable and accrued liabilities due to timing of payments, payments made to acquire content, payments made for operating leases liabilities, a decrease in deferred revenue, an increase in prepaid expenses and other current assets, other long-term assets and the inventory balance. This was offset mainly by a decrease in the accounts receivable balance.
Previous wording
Our investing activities for the three months ended March 31, 2024 included cash outflows of $0.7 million consisting of purchases of property and equipment.
Current wording
Our investing activities for the six months ended June 30, 2024 included cash outflows of $1.5 million consisting of purchases of property and equipment.
Previous wording
Our financing activities used cash of $13.9 million for the three months ended March 31, 2024. The cash outflow related primarily to the tax payments of $22.2 million made by us on net settlement of the equity awards vested during the period offset by $8.3 million received from proceeds from the exercise of employee stock options.
Current wording
Our financing activities used cash of $32.9 million for the six months ended June 30, 2024. The cash outflow related primarily to the tax payments of $41.6 million made by us on net settlement of the equity awards vested during the period offset by $8.7 million received from proceeds from the exercise of employee stock options.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Platform revenue increased by $200.8 million, or 15%, during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increase was primarily due to higher revenue from streaming services distribution, such as revenue share on content subscriptions and Premium Subscriptions through The Roku Channel, in addition to higher advertising revenue, despite continued weakness in the media and entertainment vertical.
Current report — wording carried from elsewhere
Devices revenue increased by $60.7 million, or 29%, during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increase was primarily due to higher revenue from Roku-branded TVs and to a lesser extent higher revenue from streaming players and accessories. This was offset by lower revenue from licensing arrangements with service operators and lower revenue from audio and smart home products and services. During the six months ended June 30, 2024, the average selling price of all devices shipped increased by 26% and the volume of all devices shipped increased by 7% as compared to the six months ended June 30, 2023. The increase in average selling price is due to increased sales of Roku-branded TVs which generally sell at higher prices compared to streaming players. The increase in the volume of devices shipped was mainly due to higher sales of Roku-branded TVs and to a lesser extent higher sales of streaming players offset by lower sales of audio and smart home products.
Current report — wording carried from elsewhere
The cost of revenue, platform increased by $96.4 million, or 15%, during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increase was primarily driven by higher costs of acquiring content, write-off of content assets, and higher credit card processing fees, partially offset by lower content asset amortization and lower cost of advertising inventory.