ROKU INC

Previous wording

Our two reportable segments are the platform segment and the devices segment. 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).

Current wording

Our two reportable segments are the platform segment and the devices segment. Platform revenue is generated from the sale of digital advertising (including direct and programmatic video advertising, ads integrated into our user interface (“UI”), 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).

Previous wording

Devices revenue is generated from the sale of streaming players, Roku-branded TVs (beginning in March 2023), smart home products and services, audio products, and related accessories as well as revenue from licensing arrangements with service operators. We expect to continue to manage the average selling prices of Roku streaming devices in an effort to increase our Streaming Households. We expect that the trade off from devices gross profit or loss to grow Streaming Households should result in increased platform revenue and platform gross profit over time.

Current wording

Devices revenue is generated from the sale of streaming players, Roku-branded TVs, smart home products and services, audio products, and related accessories. We expect to continue to manage the average selling prices of Roku streaming devices in an effort to sell more devices, which we believe will increase our Streaming Households. We expect that this trade off from devices gross profit or loss to grow Streaming Households should result in increased platform revenue and platform gross profit over time.

Previous wording

Key Performance Metrics and Non-GAAP Measure

Current wording

Key Performance Metrics and Non-GAAP Measures

Previous wording

The key performance metrics we use to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions are currently Streaming Households, Streaming Hours, Average Revenue Per User (“ARPU”), and Free Cash Flow.

Current wording

The key performance metrics we use to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions are Streaming Hours, Platform Revenue, Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA), and Free Cash Flow.

Previous wording

We believe the number of Streaming Hours on our platform is an effective measure of user engagement and that the growth in the number of hours of content streamed across our platform reflects our success in addressing the growing user demand for TV streaming. We define Streaming Hours as the aggregate amount of time Roku streaming devices stream content on our platform in a given period. Hours streamed from The Roku Channel on non-Roku platforms are not included in this metric. Additionally, smart home products do not contribute to our Streaming Hours. We report Streaming Hours on a calendar basis.

Current wording

We believe the number of Streaming Hours on our platform is an effective measure of user engagement and that the growth in the number of hours of content streamed across our platform reflects our success in addressing the growing user demand for TV streaming. We define Streaming Hours as the aggregate amount of time Roku streaming devices stream content on our platform in a given period. Hours streamed from The Roku Channel on non-Roku platforms are not included in this metric. Additionally, smart home products do not contribute to our Streaming Hours.

Previous wording

Since the first quarter of 2020, all of our Roku streaming devices include a Roku OS feature that is designed to identify when content has been continuously streaming on an app for an extended period of time without user interaction. This feature, which we refer to as “Are you still watching,” periodically prompts the user to confirm that they are still watching the selected app and closes the app if the user does not respond affirmatively. We believe that the implementation of this feature across the Roku platform benefits us, our customers, content partners, and advertisers. Some of our leading content partners, including Netflix, also have implemented similar features within their apps. This Roku OS feature supplements these app features. This feature has not had and is not expected to have a material impact on our future financial performance.

Current wording

Since 2020, all of our Roku streaming devices include a Roku TV OS feature that is designed to identify when content has been continuously streaming on an app for an extended period of time without user interaction. This feature, which we refer to as “Are you still watching,” periodically prompts the user to confirm that they are still watching the selected app and closes the app if the user does not respond affirmatively. We believe that the implementation of this feature across the Roku platform benefits us, our customers, content partners, and advertisers. Some of our leading content partners, including Netflix, also have implemented similar features within their apps. This Roku TV OS feature supplements these app features. This feature has not had and is not expected to have a material impact on our financial performance.

Previous wording

We streamed 32.0 billion and 26.7 billion hours during the three months ended September 30, 2024 and 2023, respectively, reflecting an increase of 20%.

Current wording

We streamed 35.8 billion and 30.8 billion hours during the three months ended March 31, 2025 and 2024, respectively, reflecting an increase of 16%.

Previous wording

Our Free Cash Flow was $157.3 million and $100.8 million for the TTM periods ended September 30, 2024 and 2023, respectively.

Current wording

Our Free Cash Flow was $298.4 million and $426.8 million for the TTM periods ended March 31, 2025 and 2024, 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 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.

Current wording

We generate platform revenue from the sale of digital advertising (including direct and programmatic video advertising, ads integrated into our UI, and related services), as well as 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 throughout the Roku Experience, 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

We generate devices revenue from the sale of streaming players, Roku-branded TVs, smart home products and services, audio products, and related accessories. Our devices revenue also includes licensing arrangements with service operators. We generate most of our devices revenue in the United States. In our international markets, we primarily sell our devices through wholesale distributors which, in turn, sell to retailers.

Current wording

We generate devices revenue from the sale of streaming players, Roku-branded TVs, smart home products and services, audio products, and related accessories. We generate most of our devices revenue in the United States. In our international markets, we primarily sell our devices through wholesale distributors which, in turn, sell to retailers.

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 platform operations personnel, and amortization of acquired developed technology.

Current wording

Cost of revenue, platform primarily consists of costs associated with acquiring advertising inventory, content amortization costs for both licensed and produced content, costs for licensed premium subscriptions, and revenue share payments on licensed content. 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

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.

Current 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, consulting and outside services, 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, 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.

Current 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 facilities and overhead expenses.

Previous 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 nine months ended September 30, 2024, we released the valuation allowance on certain foreign deferred tax assets and recognized an income tax benefit.

Current wording

Our income tax (benefit) expense consists primarily of income tax expense in certain foreign jurisdictions where we conduct business and income tax (benefit) expense in the United States. We have a full valuation allowance against net deferred tax assets in the United States, and expect to maintain this valuation allowance for the foreseeable future.

Previous wording

Comparison of the Three and Nine Months Ended September 30, 2024 and September 30, 2023

Current wording

Comparison of the Three Months Ended March 31, 2025 and March 31, 2024

Previous wording

Platform revenue increased by $121.4 million, or 15%, during the three months ended September 30, 2024 as compared to the three months ended September 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 wording

Platform revenue increased by $125.9 million, or 17%, during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. The increase was primarily due to higher revenue from streaming services distribution, specifically increased revenue share on content subscriptions and higher Premium Subscriptions revenue, in addition to higher advertising revenue, despite continued weakness in the media and entertainment vertical.

Previous wording

Devices revenue increased by $28.8 million, or 23%, during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The increase was primarily due to higher revenue from Roku-branded TVs, offset by lower revenue from streaming players and accessories. During the three months ended September 30, 2024, the average selling price of all devices shipped increased by 11% and the volume of all devices shipped increased by 13% as compared to the three months ended September 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.

Current wording

Devices revenue increased by $13.3 million, or 11%, during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. The increase was primarily due to higher revenue from Roku-branded TVs. This was partially offset by lower revenue from streaming players. During the three months ended March 31, 2025, the average selling price of all devices shipped decreased by 2% and the volume of all devices shipped increased by 13% as compared to the three months ended March 31, 2024. The decrease in average selling price was due to higher promotions on Roku-branded TVs and 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.

Previous wording

The cost of revenue, platform increased by $7.8 million, or 2%, during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The increase was primarily driven by higher costs of acquiring content, higher cost of advertising inventory, and higher credit card processing fees, partially offset by lower impairment charges relating to content assets, and lower content asset amortization.

Current wording

The Cost of revenue, platform increased by $55.9 million, or 16%, during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. The increase was primarily driven by higher costs of acquiring content and higher costs of Premium Subscriptions.

Previous wording

The cost of revenue, devices increased by $99.0 million, or 28%, during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. The increase was primarily driven by higher manufacturing costs of $87.0 million, driven primarily by the cost of manufacturing Roku-branded TVs, and higher freight costs of $20.1 million.

Current wording

The Cost of revenue, devices increased by $26.5 million, or 20%, during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. The increase was primarily driven by higher manufacturing costs of $17.4 million, driven by the higher cost of manufacturing Roku-branded TVs, and higher freight costs of $13.0 million.

Previous wording

Research and development expenses decreased by $103.4 million, or 37%, during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The decrease was due to lower restructuring charges of $96.0 million, lower office facilities and IT infrastructure expenses of $5.2 million, and lower personnel-related expenses of $2.0 million.

Current wording

Research and development expenses increased by $4.1 million, or 2%, during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. The increase was primarily driven by higher consulting expenses of $5.2 million.

Previous wording

Sales and marketing expenses decreased by $108.0 million, or 14%, during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. The decrease was due to lower restructuring charges of $63.2 million, lower personnel-related expenses of $29.8 million, lower office facilities and IT infrastructure expenses of $11.9 million, and lower marketing, retail, and merchandising expenses of $7.7 million, partially offset by higher consulting expenses of $3.5 million.

Current wording

Sales and marketing expenses increased by $21.6 million, or 11%, during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. The increase was primarily driven by higher marketing, retail, and merchandising expenses of $11.1 million and higher personnel-related expenses of $8.2 million.

Previous wording

General and administrative expenses decreased by $28.7 million, or 22%, during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The decrease was mainly due to lower restructuring charges of $37.5 million, lower bad debt expense of $1.2 million, and lower office facilities and IT infrastructure expenses of $1.0 million, partially offset by higher legal and consulting expenses of $10.8 million and higher personnel-related expenses of $2.2 million.

Current wording

General and administrative expenses increased by $16.8 million, or 22%, during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. The increase was primarily driven by higher legal and consulting expenses of $10.1 million and higher personnel-related expenses of $4.7 million.

Previous wording

As of September 30, 2024, we had cash and cash equivalents of $2,127.0 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.

Current wording

As of March 31, 2025, we had cash and cash equivalents of $2,256.2 million. Approximately 4% of our cash was held outside the United States in accounts held by our foreign subsidiaries, which are used to fund foreign operations.

Previous wording

Our primary sources of cash are receipts from platform and devices revenue. The primary uses of cash are costs of revenue including costs to acquire advertising inventory, costs to license and produce content, third-party manufacturing costs for our products, as well as operating expenses such as personnel-related expenses including employee termination payments, consulting and professional service expenses, facilities expenses, and marketing expenses. Other uses of cash include purchases of property and equipment and mergers and acquisitions.

Current wording

Our primary sources of cash are receipts from platform and devices revenue. The primary uses of cash are costs of revenue including costs to acquire advertising inventory, costs to license and produce content, third-party manufacturing costs for our products, as well as operating expenses such as personnel-related expenses, consulting and professional service expenses, facility expenses, and marketing expenses. Other uses of cash include purchases of property and equipment and mergers and acquisitions.

Previous wording

We believe our existing cash and cash equivalents balance, and our undrawn available balance under our Credit Agreement (as discussed further below), will be sufficient to meet our working capital, capital expenditures, and material cash requirements from known contractual obligations for the next twelve months and beyond. Our future capital requirements, the adequacy of available funds, and cash flows from operations could be affected by various risks, uncertainties, including, but not limited to, those detailed in Part II, Item 1A, Risk Factors in this Quarterly Report and the effects of the current macroeconomic environment. While the current macroeconomic environment has not severely impacted our liquidity and capital resources to date, it has contributed to disruption and volatility in local economies and in capital and credit markets, which could adversely affect our liquidity and capital resources in the future.

Current wording

We believe our existing cash and cash equivalents balance, and our undrawn available balance under our Credit Agreement (as discussed below), will be sufficient to meet our working capital, capital expenditures, and material cash requirements from known contractual obligations for the next twelve months and beyond. Our future capital requirements, the adequacy of available funds, and cash flows from operations could be affected by various risks, uncertainties, including, but not limited to, those detailed in Part II, Item 1A, Risk Factors in this Quarterly Report and the effects of the current macroeconomic environment. While the current macroeconomic environment has not severely impacted our liquidity and capital resources to date, it has contributed to disruption and volatility in local economies and in capital and credit markets, which could adversely affect our liquidity and capital resources in the future.

Previous wording

We may attempt to raise additional capital through the sale of equity securities or other financing arrangements. If we raise additional funds by issuing equity, the ownership of our existing stockholders will be diluted. If we raise additional financing by the incurrence of indebtedness, we may be subject to fixed payment obligations and also to restrictive covenants. Additionally, due to the current macroeconomic environment, we may be unable to obtain debt or equity financing on terms that are acceptable to us.

Current wording

We may attempt to raise additional capital through the sale of equity securities or other financing arrangements. If we raise additional funds by issuing equity, the ownership of our existing stockholders will be diluted. If we raise additional financing by the incurrence of indebtedness, we may be subject to fixed payment obligations and also to restrictive covenants. Additionally, we may be unable to obtain debt or equity financing on terms that are acceptable to us.

Previous wording

We had outstanding letters of credit secured by the Credit Agreement of $36.4 million as of September 30, 2024. As of September 30, 2024, we had not borrowed against the Credit Agreement, and we were in compliance with all of the covenants of the Credit Agreement.

Current wording

We had outstanding letters of credit secured by the Credit Agreement of $39.7 million as of March 31, 2025. As of March 31, 2025, we had not borrowed against the Credit Agreement, and we were in compliance with all of the covenants of the Credit Agreement.

Previous wording

Our operating activities provided cash of $138.8 million for the nine months ended September 30, 2024. Our net loss of $93.8 million for the nine months ended September 30, 2024 was adjusted by non-cash charges of $548.0 million comprised primarily of stock-based compensation, amortization and write-off of content assets, depreciation and amortization of property and equipment and intangible assets, amortization of operating lease right-of-use assets, and impairment of assets. The changes in our operating assets and liabilities used cash of $315.4 million, primarily due to a decrease in accounts payable 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, increases in other long-term assets, and increases in inventory. This was partially offset by a decrease in the accounts receivable balance and an increase in accrued liabilities.

Current wording

Our operating activities provided cash of $138.7 million for the three months ended March 31, 2025. Our net loss of $27.4 million for the three months ended March 31, 2025 was adjusted by non-cash charges of $180.6 million comprised primarily of stock-based compensation, amortization of content assets, depreciation and amortization of property and equipment and intangible assets, amortization of operating lease right-of-use assets, fair value change of strategic investment in convertible promissory notes, and impairment of assets as part of restructuring charges. The negative impact from changes in our operating assets and liabilities of $14.4 million was primarily due to decreases in accounts payable and accrued liabilities due to timing of payments, payments made to acquire content, and payments made for operating lease liabilities, as well as an increase in prepaid expenses and other current assets. This was partially offset by a decrease in accounts receivable, a decrease in inventories, and an increase in deferred revenue.

Previous wording

Our investing activities for the nine months ended September 30, 2024 included cash outflows of $22.6 million consisting of purchases of property and equipment of $2.6 million and a purchase of a strategic investment of $20.0 million.

Current wording

Net cash used in investing activities of $8.9 million for the three months ended March 31, 2025 included purchases of property and equipment of $1.9 million and a purchase of a strategic investment of $7.0 million.