ROKU INC

7. STRATEGIC INVESTMENTS

Investment in Convertible Promissory Notes

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 and are recognized as Other non-current assets on the condensed consolidated balance sheets. The convertible promissory notes accrue interest at 5% per annum, and 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):

The convertible promissory notes contain 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, 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 convertible promissory notes.

Investment in Preferred Stock

In September 2024, the Company invested $20.0 million in cash in exchange for preferred stock in a privately-held company. The Company elected to apply the measurement alternative for equity securities without readily determinable fair values as there are no quoted market prices for the preferred stock. This investment is measured at cost and adjusted to fair value when there is an observable price change from orderly transactions of identical or similar investments, and assessed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. There were no adjustments recognized in the three months ended September 30, 2024. As of September 30, 2024, the carrying value of the Company’s investment was $20.0 million, and is included within Other non-current assets on the condensed consolidated balance sheet.