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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 March 31, 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)
Delaware26-2087865
(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 valueROKUThe 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 FilerAccelerated filer
Non-accelerated filerSmaller 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 March 31, 2024, the registrant had 126,833,602 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.
i

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, 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 payments and billing service that handles method of payment, account information, and billing for the associated Streaming Household. Roku Pay enables content publishers to provide users with quick and easy purchases on the Roku platform without having to enter their payment information. It also enables users to easily sign up for subscription-based streaming apps (on those that have Roku Pay enabled).
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, 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. 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.” See Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Key Performance Metrics, 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 to enable streaming (such as the Roku Express, Roku Express 4K, Roku Streaming Stick 4K, Roku Ultra, Roku Streambar SE, 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).
ii

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, and profitability;
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;
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.
iii

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
ROKU, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value data)
(unaudited)
 As of
 March 31, 2024December 31, 2023
Assets
Current Assets:
Cash and cash equivalents$2,055,728 $2,025,891 
Accounts receivable, net of allowances of $26,161 and $34,127 as of
716,727 816,337 
March 31, 2024 and December 31, 2023, respectively
Inventories94,531 92,129 
Prepaid expenses and other current assets129,144 138,585 
Total current assets2,996,130 3,072,942 
Property and equipment, net251,487 264,556 
Operating lease right-of-use assets358,105 371,444 
Content assets, net249,526 257,395 
Intangible assets, net38,076 41,753 
Goodwill161,519 161,519 
Other non-current assets96,912 92,183 
Total Assets$4,151,755 $4,261,792 
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable$385,656 $385,330 
Accrued liabilities672,440 788,040 
Deferred revenue, current portion101,650 102,157 
Total current liabilities1,159,746 1,275,527 
Deferred revenue, non-current portion23,491 24,572 
Operating lease liability, non-current portion568,627 586,174 
Other long-term liabilities44,062 49,186 
Total Liabilities1,795,926 1,935,459 
Commitments and contingencies (Note 11)
Stockholders’ Equity:
Common stock, $0.0001 par value
14 14 
Additional paid-in capital3,704,435 3,623,747 
Accumulated other comprehensive income (loss)(178)159 
Accumulated deficit(1,348,442)(1,297,587)
Total stockholders’ equity2,355,829 2,326,333 
Total Liabilities and Stockholders’ Equity$4,151,755 $4,261,792 
See accompanying Notes to Condensed Consolidated Financial Statements.
1

ROKU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 Three Months Ended
 March 31, 2024March 31, 2023
Net Revenue:
Platform$754,935 $634,618 
Devices126,534 106,372 
Total net revenue881,469 740,990 
Cost of Revenue:
Platform360,566 300,587 
Devices132,612 102,806 
Total cost of revenue493,178 403,393 
Gross Profit (Loss):
Platform394,369 334,031 
Devices(6,078)3,566 
Total gross profit388,291 337,597 
Operating Expenses:
Research and development180,459 220,085 
Sales and marketing202,124 233,919 
General and administrative77,744 96,053 
Total operating expenses460,327 550,057 
Loss from Operations(72,036)(212,460)
Other Income (Expense), Net:
Interest expense(10)(681)
Other income, net25,956 23,101 
Total other income, net25,946 22,420 
Loss Before Income Taxes(46,090)(190,040)
Income tax expense4,765 3,564 
Net Loss$(50,855)$(193,604)
Net loss per share — basic and diluted$(0.35)$(1.38)
Weighted-average common shares outstanding — basic and diluted143,751140,333
See accompanying Notes to Condensed Consolidated Financial Statements.
2

ROKU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
Three Months Ended
March 31, 2024March 31, 2023
Net Loss$(50,855)$(193,604)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment(337)327 
Comprehensive Loss$(51,192)$(193,277)
See accompanying Notes to Condensed Consolidated Financial Statements.
3

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 March 31, 2024SharesAmount
Balance—December 31, 2023143,502 $14 $3,623,747 $159 $(1,297,587)$2,326,333 
Issuance of common stock pursuant to equity incentive plans1,013 — 8,262 — — 8,262 
Stock-based compensation expense— — 94,632 — — 94,632 
Shares withheld for taxes related to net share settlement of equity awards(350)— (22,206)— — (22,206)
Foreign currency translation adjustment— — — (337)— (337)
Net loss— — — — (50,855)(50,855)
Balance-March 31, 2024144,165 $14 $3,704,435 $(178)$(1,348,442)$2,355,829 
 Common Stock
Additional
Paid-in Capital
Accumulated
Other Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
Three Months Ended March 31, 2023SharesAmount
Balance—December 31, 2022140,027 $14 $3,234,860 $(292)$(588,026)$2,646,556 
Issuance of common stock pursuant to equity incentive plans758 — 891 — — 891 
Stock-based compensation expense— — 96,472 — — 96,472 
Foreign currency translation adjustment— — — 327 — 327 
Net loss— — — — (193,604)(193,604)
Balance-March 31, 2023140,785 $14 $3,332,223 $35 $(781,630)$2,550,642 
See accompanying Notes to Condensed Consolidated Financial Statements.
4

ROKU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Three Months Ended
 March 31, 2024March 31, 2023
Cash flows from operating activities:
Net Loss$(50,855)$(193,604)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization16,473 15,636 
Stock-based compensation expense94,632 96,472 
Amortization of right-of-use assets11,876 15,301 
Amortization of content assets47,891 49,402 
Foreign currency remeasurement (gains) losses997 1,395 
Change in fair value of the Strategic Investment(574)(3,210)
Impairment of assets851 4,338 
Provision for (recoveries of) doubtful accounts(7)1,890 
Other items, net(748)(24)
Changes in operating assets and liabilities:
Accounts receivable99,500 55,608 
Inventories(2,402)(2,491)
Prepaid expenses and other current assets6,665 4,964 
Content assets and liabilities, net(50,059)(55,539)
Other non-current assets(4,763)4,008 
Accounts payable919 (60,055)
Accrued liabilities(109,591)(92,504)
Operating lease liabilities(12,704)(1,597)
Other long-term liabilities170 (91)
Deferred revenue(1,588)6,689 
Net cash provided by (used in) operating activities46,683 (153,412)
Cash flows from investing activities:
Purchases of property and equipment(672)(54,243)
Purchase of Strategic Investment (5,000)
Net cash used in investing activities(672)(59,243)
Cash flows from financing activities:
Repayments of borrowings (80,000)
Proceeds from equity issued under incentive plans8,262 891 
Taxes paid related to net share settlement of equity awards(22,206) 
Net cash used in financing activities(13,944)(79,109)
Net increase (decrease) in cash, cash equivalents and restricted cash32,067 (291,764)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(2,230)573 
Cash, cash equivalents and restricted cash —beginning of period2,066,604 1,961,956 
Cash, cash equivalents and restricted cash —end of period$2,096,441 $1,670,765 

5

Three Months Ended
March 31, 2024March 31, 2023
Cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents$2,055,728 $1,630,052 
Restricted cash, current40,713 40,713 
Cash, cash equivalents and restricted cash —end of period$2,096,441 $1,670,765 
Supplemental disclosures of cash flow information:
Cash paid for interest$29 $867 
Cash paid for income taxes$2,144 $1,452 
Supplemental disclosures of non-cash investing and financing activities:
Unpaid portion of property and equipment purchases$86 $10,492 
See accompanying Notes to Condensed Consolidated Financial Statements.
6

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 months ended March 31, 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.
7

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 March 31, 2024 is $40.7 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
 March 31, 2024March 31, 2023
Beginning balance$7,808 $7,417 
Add: Charged to revenue3,608 2,889 
Less: Utilization of sales return reserve(4,650)(4,461)
Ending balance$6,766 $5,845 
Allowance for Sales Incentives: Allowance for sales incentives consisted of the following activities (in thousands):
 Three Months Ended
 March 31, 2024March 31, 2023
Beginning balance$23,024 $28,903 
Add: Charged to revenue23,261 10,556 
Less: Utilization of sales incentive reserve(29,765)(27,787)
Ending balance$16,520 $11,672 
Allowance for Doubtful Accounts: Allowance for doubtful accounts consisted of the following activities (in thousands):
Three Months Ended
 March 31, 2024March 31, 2023
Beginning balance$2,213 $3,498 
Provision for (recoveries of) doubtful accounts(7)1,890 
Adjustments for write-off(550)(882)
Ending balance$1,656 $4,506 
The Company did not have any customer that accounted for more than 10% of its accounts receivable, net balance as of March 31, 2024 and December 31, 2023.
8

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, that 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, that 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
 March 31, 2024December 31, 2023
Accounts receivable, net$716,727 $816,337 
Contract assets (included in Prepaid expenses and other current assets)4,467 17,964 
Deferred revenue, current portion$101,650 $102,157 
Deferred revenue, non-current portion23,491 24,572 
Total Deferred revenue$125,141 $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 $13.5 million during the three months ended March 31, 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 $1.6 million during the three months ended March 31, 2024 primarily due to the timing of fulfillment of performance obligations.
Revenue recognized during the three months ended March 31, 2024, from amounts included in total deferred revenue as of December 31, 2023, was $67.3 million. Revenue recognized during the three months ended March 31, 2023, from amounts included in total deferred revenue as of December 31, 2022, was $55.5 million.
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 $1,030.9 million as of March 31, 2024 of which the Company expects to recognize approximately 48% over the next 12 months and the remainder thereafter.
The Company did not recognize any material revenue during the three months ended March 31, 2024, and recognized $19.5 million during the three months ended March 31, 2023, 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 total revenue for the three months ended March 31, 2024. Customer I accounted 12% of the Company’s total net revenue during the three months ended March 31, 2023.
9

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 March 31, 2024
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted-Average Useful Lives
(in years)
Developed technology$73,367 $(52,039)$21,328 5.9
Customer relationships14,100 (14,100) 
Tradename20,400 (6,466)13,934 9.8
Patents4,076 (1,262)2,814 14.0
Total Intangible assets$111,943 $(73,867)$38,076 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 relationships14,100 (13,948)152 4.0
Tradename20,400 (5,966)14,434 9.8
Patents4,076 (1,189)2,887 14.0
Total Intangible assets$111,943 $(70,190)$41,753 6.7
The Company recorded amortization expense of $3.7 million and $4.4 million for intangible assets during the three months ended March 31, 2024 and 2023, respectively.
The Company recorded amortization of developed technology in Cost of revenue, platform for the three months ended March 31, 2024, and in Cost of revenue, platform and Research and development expenses for the three months ended March 31, 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 March 31, 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 9 months)$10,575 
202512,533 
20264,074 
20272,737 
20282,291 
Thereafter5,866 
Total$38,076 
10

5. BALANCE SHEET COMPONENTS
Accounts Receivable, net: Accounts receivable, net consisted of the following (in thousands):
 As of
 March 31, 2024December 31, 2023
Accounts receivable, gross$742,888 $850,464 
Less: Allowances
Allowance for sales returns6,766 7,808 
Allowance for sales incentives16,520 23,024 
Allowance for doubtful accounts1,656 2,213 
Other allowances1,219 1,082 
Total allowances26,161 34,127 
Accounts receivable, net$716,727 $816,337 
Property and Equipment, net: Property and equipment, net consisted of the following (in thousands):
 As of
 March 31, 2024December 31, 2023
Computers and equipment$51,279 $51,320 
Leasehold improvements290,346 292,418 
Internal-use software5,916 6,980 
Office equipment and furniture36,813 36,900 
Property and equipment, gross384,354 387,618 
Less: Accumulated depreciation and amortization(132,867)(123,062)
Property and equipment, net$251,487 $264,556 
Depreciation and amortization expense for property and equipment assets for the three months ended March 31, 2024 and 2023 was $12.8 million and $11.2 million, respectively.
During the three months ended March 31, 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
March 31, 2024December 31, 2023
Payments due to content partners$243,994 $239,196 
Accrued cost of revenue124,818 147,875 
Marketing, retail, and merchandising expenses54,283 147,853 
Operating lease liability, current71,076 68,099 
Content liability, current45,282 54,319 
Other accrued expenses132,987 130,698 
Total Accrued liabilities$672,440 $788,040 
11

Deferred Revenue: Deferred revenue consisted of the following (in thousands):
 As of
 March 31, 2024December 31, 2023
Platform, current$70,561 $66,636 
Devices, current31,089 35,521 
Total deferred revenue, current101,650 102,157 
Platform, non-current625 625 
Devices, non-current22,866 23,947 
Total deferred revenue, non-current23,491 24,572 
Total Deferred revenue$125,141 $126,729 
Other Long-term Liabilities: Other Long-term liabilities consisted of the following (in thousands):
As of
March 31, 2024December 31, 2023
Content liability, non-current$20,284 $24,115 
Other long-term liabilities23,778 25,071 
Total Other long-term liabilities$44,062 $49,186 
6. CONTENT ASSETS
Content assets, net consisted of the following (in thousands):
 As of
 March 31, 2024December 31, 2023
Licensed content, net and advances$145,923 $148,777 
Produced content:
Released, less amortization59,452 77,951
Completed, not released25,359 11,235
In production34,804 38,275
Total produced content, net119,615 127,461
Total Content assets, net and advances$265,538 $276,238 
Current portion (included in Prepaid expenses and other current assets)$16,012 $18,843 
Non-current portion$249,526 $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
 March 31, 2024March 31, 2023
Licensed content$37,001 $42,588 
Produced content10,890 6,814 
Total amortization costs$47,891 $49,402 
12

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 March 31, 2024
Date of InvestmentAmount of InvestmentDate of Maturity
June 15, 2022$40,000June 15, 2025
March 23, 2023$5,000March 23, 2026
May 23, 2023$5,000May 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 March 31, 2024As of December 31, 2023
Fair ValueLevel 1Level 3Fair ValueLevel 1Level 3
Assets:
Cash and cash equivalents:
Cash$570,464 $570,464 $ $594,493 $594,493 $ 
Money market funds1,485,264 1,485,264  1,431,398 1,431,398  
Restricted cash, current40,713 40,713  40,713 40,713  
Other non-current assets:
Strategic Investment54,390  54,390 53,816  53,816 
Total assets measured and recorded at fair value$2,150,831 $2,096,441 $54,390 $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
March 31, 2024March 31, 2023
Beginning balance$53,816 $39,468 
Purchase of Strategic Investment 5,000 
Change in estimated fair value of the Strategic Investment574 3,210 
Ending balance$54,390 $47,678 
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.
13

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 $1,485.3 million and $1,431.4 million as cash equivalents as of March 31, 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 March 31, 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 March 31, 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 $0.6 million and $3.2 million, in Other income (expense), net related to the adjustment to fair value of the Strategic Investment for the three months ended March 31, 2024 and March 31, 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 March 31, 2024 and 2023, the Company recorded impairment charges of $0.5 million and $0.5 million, respectively, related to property and equipment, and $0.6 million and $3.8 million, respectively, related to operating lease right-of-use assets, 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 ten 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
 March 31, 2024March 31, 2023
Operating lease expense
$18,133 $21,475 
Variable lease expense5,522 6,292 
Sublease income(910) 
Total operating lease expense$22,745 $27,767 
14

Supplemental cash flow information related to leases is as follows (in thousands):
 Three Months Ended
 March 31, 2024March 31, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases$21,257 $16,993 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$ $2,057 
Decrease in operating lease right-of-use assets due to impairment (See Note 15 for details)$576 $3,790 
Supplemental balance sheet information related to leases is as follows (in thousands, except lease term and discount rate):
 As of
 March 31, 2024December 31, 2023
Operating lease right-of-use assets$358,105 $371,444
Operating lease liability, current (included in Accrued liabilities)$71,076 $68,099
Operating lease liability, non-current568,627 586,174
Total operating lease liability$639,703 $654,273
Weighted-average remaining term for operating leases (in years)7.77.9
Weighted-average discount rate for operating leases3.95 %3.94 %
Future lease payments under operating leases excluding any sublease income from sublease arrangements as of March 31, 2024 are as follows (in thousands):
Year Ending December 31,Operating Leases
2024 (remaining 9 months)$68,024 
202598,152 
202699,777 
202799,558 
202899,997 
Thereafter282,452 
Total future lease payments747,960 
Less: imputed interest(103,702)
Less: expected tenant improvement allowance(4,555)
Total (1)
$639,703 
(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 March 31, 2024, the Company had no commitments relating to operating leases that have not yet commenced.
As of March 31, 2024, the Company expects to receive approximately $43.9 million from its sublease arrangements which have a weighted average remaining lease term of approximately 5.7 years.
15

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 March 31, 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 March 31, 2024, the Company’s common stock reserved for issuance in the future is as follows (in thousands):
As of
 March 31, 2024
Common stock awards granted under equity incentive plans12,816 
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 Plan35,560 
Total reserved shares of common stock53,465 
(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.
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Restricted Stock Units
Restricted stock unit activity for the three months ended March 31, 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 
Awarded42 81.29 
Released(791)108.91 
Forfeited(206)97.87 
Balance as of March 31, 2024
7,719 $96.04 
As of March 31, 2024, the Company had $591.9 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 2.2 years.
Stock Options
Stock option activity for the three months ended March 31, 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
Granted25 78.74 — 
Exercised(222)37.20 — 
Forfeited and expired(16)194.35 — 
Balance as of March 31, 2024
5,097 $76.87 6.7$77,496 
 
Options exercisable as of March 31, 2024
3,368 $64.93 5.8$67,257 
As of March 31, 2024, the Company had $58.8 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 2.0 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 months ended March 31, 2024 and 2023 (in thousands):
 Three Months Ended
 March 31, 2024March 31, 2023
Cost of revenue, platform$414 $339 
Cost of revenue, devices899 804 
Research and development37,590 38,663 
Sales and marketing32,521 34,139 
General and administrative23,208 22,527 
Total stock-based compensation$94,632 $96,472 
17

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 March 31, 2024, the Company had $184.7 million of non-cancelable purchase commitments for inventory.
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 March 31, 2024, the Company's total obligation for licensed and produced content was $249.6 million, of which the Company recorded $45.5 million in Current liabilities and $20.3 million in Other long-term liabilities in the condensed consolidated balance sheets. The remaining $183.8 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 9 months)$142,038 
202560,818
202627,576
202712,959
20283,324
Thereafter2,917
Total content obligations$249,632 
Letters of Credit
As of March 31, 2024 and December 31, 2023, the Company had irrevocable letters of credit outstanding in the amount of $37.5 million 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 months ended March 31, 2024 and 2023, the Company did not have any loss contingencies that were material.
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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 expense was $4.8 million and $3.6 million for the three months ended March 31, 2024 and 2023, respectively. The increase in income tax expense for the three months ended March 31, 2024 is due to increase in domestic tax expense driven by higher U.S. income offset by a decline in foreign tax expenses.
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 March 31, 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. and certain foreign 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
March 31, 2024March 31, 2023
Numerator:
Net Loss$(50,855)$(193,604)
Denominator:
Weighted-average common shares outstanding — basic and diluted143,751140,333
Net loss per share — basic and diluted$(0.35)$(1.38)
For the three months ended March 31, 2024, outstanding equity awards of 12.8 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 months ended March 31, 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.
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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:
 Three Months Ended
 March 31, 2024March 31, 2023
Platform segment revenue:
Customer I*14 %
Devices segment revenue:
Customer A23 %*
Customer B17 %11 %
Customer C29 %38 %
* Less than 10%
Revenue in international markets was less than 10% in each of the periods presented.
Long-lived assets, net
The following table presents long-lived assets, net, which consist primarily of property and equipment and operating lease right-of-use assets, by geographic area (in thousands):
As of
March 31, 2024December 31, 2023
United States$479,482$497,024
United Kingdom105,595109,315
Other countries24,51529,661
Total$609,592$636,000
The Company recorded impairment charges for certain operating lease right-of-use assets and property and equipment during the three months ended March 31, 2024 and 2023. See Note 15 to the condensed consolidated financial statements for additional information.
20

15. 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 months ended March 31, 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 March 31, 2024Three Months Ended March 31, 2023
Employee TerminationsFacilities Exit CostsAssets Impairment ChargesTotalEmployee TerminationsFacilities Exit CostsAssets Impairment ChargesTotal
Cost of revenue, platform$(10)$ $ $(10)$ $ $ $ 
Cost of revenue, devices1  5 6     
Research and development383 37 533 953 13,850   13,850 
Sales and marketing686 2 173 861 6,677   6,677 
General and administrative(130)(24)140 (14)4,712 1,693 4,338 10,743 
Total restructuring charges$930 $15 $851 $1,796 $25,239 $1,693 $4,338 $31,270 
The asset impairment charges for the three months ended March 31, 2024 include $0.6 million of operating lease right-of-use assets impairment, and $0.5 million of property and equipment impairment, offset by $0.3 million of adjustments to other long-term liabilities and assets. The asset impairment charges for the three months ended March 31, 2023 include $3.8 million of operating lease right-of-use assets impairment, and $0.5 million of property and equipment 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 March 31, 2024Three Months Ended March 31, 2023
Employee TerminationsFacilities Exit CostsTotalEmployee TerminationsFacilities Exit CostsTotal
Beginning balance$12,661 $1,198 $13,859 $22,093 $ $22,093 
Restructuring charges incurred930 15 945 25,239 1,693 26,932 
Payments made(11,248)(309)(11,557)(22,133)(398)(22,531)
Ending balance$2,343 $904 $3,247 $25,199 $1,295 $26,494 
21

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report and with our audited consolidated financial statements included in our Annual Report for the year ended December 31, 2023, filed on February 16, 2024, with the SEC.
Overview
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).
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.
Key Performance Metrics and Non-GAAP Measure
The key performance metrics we use to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions are Streaming Households, Streaming Hours, Average Revenue Per User (“ARPU”), and Free Cash Flow.
Streaming Households
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.
We believe that the number of Streaming Households is a relevant measure to gauge the size of our user base. We define Streaming Households as the number of distinct user accounts that have streamed content on our platform within the last 30 days of the period. We refer to such accounts as “Streaming Households” because a given user account does not necessarily represent a single viewer or a single Roku streaming device. Rather, a single account may be used by multiple viewers and linked to multiple devices. As a result, we may identify more than one Streaming Household within a single dwelling, and more than one dwelling may constitute a Streaming Household.
Users who streamed content from The Roku Channel only on non-Roku platforms are not included in this metric. Additionally, users who only register an account for use of one of our smart home products are not included in our reported number of Streaming Households.
We had 81.6 million and 71.6 million Streaming Households as of March 31, 2024 and 2023, respectively, reflecting an increase of 14%.
Streaming Hours
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.
Additionally, we believe that over time, increasing user engagement on our streaming platform increases our platform monetization because we earn platform revenue from various forms of user engagement, including advertising, as well as revenue shares from subscriptions and transactional video on-demand. However, our revenue from content partners is not tied to the hours streamed on their streaming apps, and the number of Streaming Hours does not correlate to revenue earned from such content partners or ARPU on a period-by-period basis. Moreover, Streaming Hours on our platform are measured whenever a Roku streaming device is streaming content, whether a viewer is actively watching or not. For example, if a Roku player is connected to a TV, and the viewer turns off the TV, steps away, or falls asleep and does not stop or pause the player, then the particular streaming app may continue to play content for a period of time determined by the streaming app. We believe that this also occurs across a wide variety of non-Roku streaming devices and other set-top boxes.
22

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.
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%.
Average Revenue per User
We measure our platform monetization progress with ARPU, which we believe represents the inherent value of our business. We define ARPU as our 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. ARPU measures the rate at which we are monetizing our Streaming Households base and the progress of our platform business.
ARPU stayed flat at $40.65 as of March 31, 2024 as compared to $40.67 as of March 31, 2023.
Free Cash Flow (Non-GAAP Measure)
We use Free Cash Flow as a primary metric to measure the performance of our business because we believe maximizing Free Cash Flow helps indicate the financial strength of our business, as well as provide an indication of cash generated or (used) by the business. Our goal is to continuously increase Free Cash Flow over time. We define Free Cash Flow as our trailing 12-month (“TTM”) cash flows from operating activities excluding purchases of property and equipment and the effects of exchange rates on cash.
Our Free Cash Flow was $426.8 million and negative $448.1 million for the TTM periods ended March 31, 2024 and 2023, respectively.
Free Cash Flow is a non-GAAP financial measure. The Free Cash Flow reconciliation excludes purchases of property and equipment and effects of exchange rates on cash from the cash flows from operating activities, in each case where applicable. We believe Free Cash Flow is useful as a supplement in evaluating our ongoing operational performance and enhancing an overall understanding of our past financial performance. However, this non-GAAP financial measure has limitations, and should not be considered in isolation or as a substitute for our GAAP financial information, such as GAAP cash flows from operating activities. For additional information about cash flows from operating activities, see “Liquidity and Capital Resources” below. In addition, Free Cash Flow may not be comparable to similarly titled metrics of other companies due to differences in methods of calculation.
The following table presents a reconciliation of Free Cash Flow to the most directly comparable GAAP financial measure for each of the periods indicated (in thousands):
Trailing Twelve Months Ended
March 31, 2024March 31, 2023
Net cash provided by (used in) operating activities$455,951 $(243,415)
Less: Purchases of property and equipment(29,048)(201,175)
Add/(Less): Effect of exchange rate changes on cash, cash equivalents and restricted cash(149)(3,515)
Free cash flow (TTM)$426,754 $(448,105)
Components of Results of Operations
Revenue
Platform Revenue
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.
23

Devices Revenue
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.
Cost of Revenue
Cost of Revenue, Platform
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.
Cost of Revenue, Devices
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.
Operating and Other Expenses
Research and Development
Research and development expenses consist primarily of salaries, benefits, and stock-based compensation for our development teams as well as outsourced development expenses. In addition, research and development expenses include allocated facilities and overhead expenses.
Sales and Marketing
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.
General and Administrative
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.
Other Income (Expense), Net
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).
Income Tax Expense
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.

24

Results of Operations
The following table sets forth selected condensed consolidated statements of operations data as a percentage of total revenue for each of the periods indicated.
 Three Months Ended
 March 31, 2024March 31, 2023
Net Revenue:
Platform86 %86 %
Devices14 %14 %
Total net revenue100 %100 %
Cost of Revenue:
Platform41 %40 %
Devices15 %14 %
Total cost of revenue56 %54 %
Gross Profit (Loss):
Platform45 %46 %
Devices(1)%— %
Total gross profit44 %46 %
Operating Expenses:
Research and development20 %30 %
Sales and marketing23 %32 %
General and administrative%13 %
Total operating expenses52 %75 %
Loss from Operations(8)%(29)%
Other Income (Expense), Net:
Interest expense— %— %
Other income, net%%
Total other income, net%%
Loss Before Income Taxes(5)%(26)%
Income tax expense%— %
Net Loss(6)%(26)%
25

Comparison of Three Months Ended March 31, 2024 and March 31, 2023
Net Revenue
Three Months Ended
March 31, 2024March 31, 2023Change $Change %
(in thousands, except percentages)
Platform$754,935 $634,618 $120,317 19 %
Devices126,534 106,372 20,162 19 %
Total net revenue$881,469 $740,990 $140,479 19 %
Platform
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.
Devices
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.
Cost of Revenue and Gross Profit
Three Months Ended
March 31, 2024March 31, 2023Change $Change %
(in thousands, except percentages)
Cost of Revenue:
Platform$360,566 $300,587 $59,979 20 %
Devices132,612 102,806 29,806 29 %
Total cost of revenue$493,178 $403,393 $89,785 22 %
Gross Profit (Loss):
Platform$394,369 $334,031 $60,338 18 %
Devices(6,078)3,566 (9,644)(270)%
Total gross profit$388,291 $337,597 $50,694 15 %
Platform
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.
Devices
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.
26

Operating Expenses
Three Months Ended
March 31, 2024March 31, 2023Change $Change %
(in thousands, except percentages)
Research and development$180,459 $220,085 $(39,626)(18)%
Sales and marketing202,124 233,919 (31,795)(14)%
General and administrative77,744 96,053 (18,309)(19)%
Total operating expenses$460,327 $550,057 $(89,730)(16)%
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.
Research and development
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.
Sales and marketing
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.
General and administrative
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.
Other Income, Net
Three Months Ended