ROKU INC
For the period ended Sep 30, 2024. Filed Oct 31, 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.
Sep 30, 2024 · Filed Oct 31, 2024
Contents
16. Restructuring
- RESTRUCTURING
The Company began efforts to reduce its operating expense growth rate due to economic conditions in the fourth quarter of fiscal 2022. The Company recorded employee termination expenses and an impairment charge related to abandoned technology assets during the year ended December 31, 2022.
During the year ended December 31, 2023, the Company implemented additional measures including consolidating its office space utilization, performing a strategic review of its content portfolio, reducing outside services expenses, and slowing its year-over-year headcount expense growth rate through a workforce reduction and limiting new hires, among other measures. As a result of these measures, the Company recorded restructuring charges associated with employee termination expenses consisting primarily of severance payments, employee benefits contributions, payroll taxes and related costs, impairment charges related to decisions to sub-lease and cease the use of certain office facilities and related property and equipment, and impairment charges related to removing select licensed and produced content from The Roku Channel during that period.
During the three and nine months ended September 30, 2024, the Company recorded restructuring charges associated with employee termination expenses consisting primarily of severance payments, employee benefits contributions, payroll taxes and related costs, and impairment charges related to decisions to sub-lease and cease the use of certain office facilities and related property and equipment.
Restructuring charges are recorded as follows (in thousands):
| Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | |||||||
|---|---|---|---|---|---|---|---|---|
| Employee Terminations | Facilities Exit Costs | Assets Impairment Charges | Total | Employee Terminations | Facilities Exit Costs | Assets Impairment Charges | Total | |
| Cost of revenue, platform | $— | $— | $— | $— | $764 | $1 | $61,995 | $62,760 |
| Cost of revenue, devices | — | — | — | — | 408 | 6 | 2,792 | 3,206 |
| Research and development | — | 52 | (1,418) | (1,366) | 17,736 | 1,462 | 75,442 | 94,640 |
| Sales and marketing | — | 717 | 16,271 | 16,988 | 22,013 | 319 | 59,679 | 82,011 |
| General and administrative | — | 140 | 2,759 | 2,899 | 9,445 | 67 | 30,919 | 40,431 |
| Total restructuring charges | $— | $909 | $17,612 | $18,521 | $50,366 | $1,855 | $230,827 | $283,048 |
| Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | |||||||
|---|---|---|---|---|---|---|---|---|
| Employee Terminations | Facilities Exit Costs | Assets Impairment Charges | Total | Employee Terminations | Facilities Exit Costs | Assets Impairment Charges | Total | |
| Cost of revenue, platform | $(3) | $— | $— | $(3) | $764 | $1 | $61,995 | $62,760 |
| Cost of revenue, devices | 1 | — | 5 | 6 | 408 | 6 | 2,792 | 3,206 |
| Research and development | 368 | 98 | (603) | (137) | 31,039 | 1,462 | 75,442 | 107,943 |
| Sales and marketing | 697 | 719 | 24,641 | 26,057 | 29,300 | 319 | 59,679 | 89,298 |
| General and administrative | (116) | 117 | 5,075 | 5,076 | 14,230 | 1,670 | 35,257 | 51,157 |
| Total restructuring charges | $947 | $934 | $29,118 | $30,999 | $75,741 | $3,458 | $235,165 | $314,364 |
The asset impairment charges for the three months ended September 30, 2024 primarily include $11.4 million of operating lease right-of-use assets impairment and $6.5 million of property and equipment impairment. The asset impairment charges for the nine months ended September 30, 2024 include $22.6 million of operating lease right-of-use assets impairment and $7.0 million of property and equipment impairment, offset by $0.5 million of adjustments to other long-term liabilities and assets. The asset impairment charges for the three months ended September 30, 2023 include $101.1 million of operating lease right-of-use assets impairment, $68.1 million of property and equipment impairment, and $61.6 million of content assets impairment. The asset impairment charges for the nine months ended September 30, 2023 include $104.9 million of operating lease right-of-use assets impairment, $68.7 million of property and equipment impairment, and $61.6 million of content assets impairment.
A reconciliation of the beginning and ending balance of employee termination restructuring charges and facilities exit costs, which are included in Accrued liabilities in the condensed consolidated balance sheets, is as follows (in thousands):
| Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | |||||
|---|---|---|---|---|---|---|
| Employee Terminations | Facilities Exit Costs | Total | Employee Terminations | Facilities Exit Costs | Total | |
| Beginning balance | $181 | $839 | $1,020 | $422 | $820 | $1,242 |
| Restructuring charges incurred | — | 909 | 909 | 50,366 | 1,855 | 52,221 |
| Payments made | (181) | (326) | (507) | (3,128) | (1,180) | (4,308) |
| Ending balance | $— | $1,422 | $1,422 | $47,660 | $1,495 | $49,155 |
| Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | |||||
|---|---|---|---|---|---|---|
| Employee Terminations | Facilities Exit Costs | Total | Employee Terminations | Facilities Exit Costs | Total | |
| Beginning balance | $12,661 | $1,198 | $13,859 | $22,093 | $— | $22,093 |
| Restructuring charges incurred | 947 | 934 | 1,881 | 75,741 | 3,458 | 79,199 |
| Payments made | (13,608) | (710) | (14,318) | (50,174) | (1,963) | (52,137) |
| Ending balance | $— | $1,422 | $1,422 | $47,660 | $1,495 | $49,155 |
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