10-Q 1 roku-20220331.htm 10-Q roku-20220331
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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, 2022
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.)
1155 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 filer
Smaller 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, 2022, the registrant had 119,845,987 of Class A common stock, $0.0001 par value per share, and 16,124,644 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

NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q ("Quarterly Report") contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained 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. For example, statements in this Quarterly Report regarding the potential future impact of the COVID-19 pandemic on our business and results of operations are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “anticipate,” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “project,” “should,” “will” or the negative of these terms or other similar expressions. We caution you that the foregoing list 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 our ability to maintain and grow our profitability;
the impact of the COVID-19 pandemic, supply chain disruptions, inflationary pressures, and geopolitical conflicts on our business, operations, and the markets and communities in which we and our advertisers, content providers, Roku TV brand partners, other device licensees, manufacturers, suppliers, retailers, and users operate;
our ability to attract and retain users and increase streaming hours;
our ability to attract and retain advertisers;
our ability to attract and retain TV brands and service operators to license and deploy our technology;
our ability to produce or acquire rights to distribute popular content on our platform on favorable terms, or at all, including the renewals of our existing agreements with content publishers;
changes in consumer 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 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 security breaches and system failures involving our products, systems and operations;
our ability to maintain, protect, and enhance our intellectual property; 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 in various U.S. and international jurisdictions.
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.
ii

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 that we 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), 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, 2022December 31, 2021
Assets
Current Assets:
Cash and cash equivalents$2,235,092 $2,146,043 
Accounts receivable, net of allowances of $35,338 and $56,827 as of
675,705752,393
March 31, 2022 and December 31, 2021, respectively
Inventories72,86350,276
Prepaid expenses and other current assets119,127105,795
Total current assets3,102,7873,054,507
Property and equipment, net186,308177,567
Operating lease right-of-use assets401,154345,660
Intangible assets, net79,65984,126
Goodwill161,519161,519
Other non-current assets294,821258,766
Total Assets$4,226,248 $4,082,145 
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable$137,550 $124,921 
Accrued liabilities574,848549,055
Current portion of long-term debt88,6489,883
Deferred revenue, current portion54,40845,760
Total current liabilities855,454729,619
Long-term debt, non-current portion 79,985
Deferred revenue, non-current portion25,64728,726
Operating lease liability, non-current portion444,115394,724
Other long-term liabilities87,86782,485
Total Liabilities1,413,0831,315,539
Commitments and contingencies (Note 12)
Stockholders’ Equity:
Common stock, $0.0001 par value
1414
Additional paid-in capital2,929,5192,856,572
Accumulated other comprehensive income (loss)(41)41
Accumulated deficit(116,327)(90,021)
Total stockholders’ equity2,813,1652,766,606
Total Liabilities and Stockholders’ Equity$4,226,248 $4,082,145 
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, 2022March 31, 2021
Net Revenue:
Platform$646,904 $466,526 
Player86,795107,657
Total net revenue733,699574,183
Cost of Revenue:
Platform266,985154,590
Player101,90792,822
Total cost of revenue368,892247,412
Gross Profit (Loss):
Platform379,919311,936
Player(15,112)14,835
Total gross profit364,807326,771
Operating Expenses:
Research and development163,998101,581
Sales and marketing146,52288,873
General and administrative77,77760,511
Total operating expenses388,297250,965
Income (Loss) from Operations(23,490)75,806
Other Income (Expense), Net:
Interest expense(1,057)(742)
Other income (expense), net409441
Total other income (expense), net(648)(301)
Income (Loss) Before Income Taxes(24,138)75,505
Income tax expense (benefit)2,168(791)
Net Income (Loss)$(26,306)$76,296 
Net income (loss) per share — basic$(0.19)$0.59 
Net income (loss) per share — diluted$(0.19)$0.54 
Weighted-average common shares outstanding — basic135,539129,674
Weighted-average common shares outstanding — diluted135,539140,328
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, 2022March 31, 2021
Net Income (Loss)$(26,306)$76,296 
Other comprehensive loss, net of tax:
Foreign currency translation adjustment(82) 
Comprehensive Net Income (Loss)$(26,388)$76,296 
3

ROKU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
   AdditionalAccumulated Total
 Common StockPaid-inOther ComprehensiveAccumulated Stockholders’
 SharesAmountCapitalIncome (Loss)Deficit Equity
Three Months Ended March 31, 2022
     
       
Balance—December 31, 2021
135,137 $14 $2,856,572 $41 $(90,021)$2,766,606 
Issuance of common stock pursuant to equity incentive plans834 — 3,352 — — 3,352 
Stock-based compensation expense— — 69,595 — — 69,595 
Foreign currency translation adjustment— — — (82)— (82)
Net income (loss)— — — — (26,306)(26,306)
Balance—March 31, 2022
135,971 $14 $2,929,519 $(41)$(116,327)$2,813,165 
 
 AdditionalAccumulatedTotal
 Common StockPaid-inOther ComprehensiveAccumulatedStockholders’
 SharesAmountCapitalIncomeDeficitEquity
Three Months Ended March 31, 2021
 
Balance—December 31, 2020
128,004 $13 $1,660,379 $29 $(332,406)$1,328,015 
Vesting of early exercised stock options— — 4 — — 4 
Issuance of common stock pursuant to equity incentive plans1,663 — 6,705 — — 6,705 
Issuance of common stock in connection with at-the-market offering, net of issuance costs of $10,400
2,637 — 989,615 — — 989,615 
Stock-based compensation expense— — 40,677 — — 40,677 
Net income (loss)— — — — 76,296 76,296 
Balance—March 31, 2021
132,304 $13 $2,697,380 $29 $(256,110)$2,441,312 

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, 2022March 31, 2021
Cash flows from operating activities:
Net income (loss)$(26,306)$76,296 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization11,486 9,605 
Stock-based compensation expense69,580 40,537 
Amortization of right-of-use assets11,143 6,458 
Amortization of content assets44,452 9,818 
Provision for (recoveries of) doubtful accounts1,013 (54)
Other items, net(264)31 
Changes in operating assets and liabilities:
Accounts receivable75,675 32,608 
Inventories(22,587)12,649 
Prepaid expenses and other current assets(15,751)(19,001)
Other non-current assets(9,764)(60,484)
Accounts payable12,307 (18,857)
Accrued liabilities(45,513)29,052 
Operating lease liabilities(9,193)(12,436)
Other long-term liabilities(49)548 
Deferred revenue5,569 (10,971)
Net cash provided by operating activities101,798 95,799 
Cash flows from investing activities:
Purchases of property and equipment(14,764)(3,717)
Acquisition of businesses, net of cash acquired (102,804)
Net cash used in investing activities(14,764)(106,521)
Cash flows from financing activities:
Proceeds from equity issued under at-the-market offering, net of issuance costs 989,615 
Repayments of borrowings(1,250)(1,250)
Proceeds from equity issued under incentive plans3,352 6,705 
Net cash provided by financing activities2,102 995,070 
Net increase in cash, cash equivalents and restricted cash89,136 984,348 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(82) 
Cash, cash equivalents and restricted cash —beginning of period2,147,670 1,093,249 
Cash, cash equivalents and restricted cash —end of period$2,236,724 $2,077,597 
Cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents2,235,092 2,077,514 
Restricted cash, current 83 
Restricted cash, non-current1,632  
Cash, cash equivalents and restricted cash —end of period$2,236,724 $2,077,597 

5

Three Months Ended
March 31, 2022March 31, 2021
Supplemental disclosures of cash flow information:
Cash paid for interest$656 $647 
Cash paid for income taxes$511 $277 
Supplemental disclosures of non-cash investing and financing activities:
Unpaid portion of property and equipment purchases$3,413 $2,860 
Unpaid portion of acquisition-related expenses$ $1,595 
Unpaid portion of at-the-market issuance costs$ $105 
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 and related services including the OneView ad platform, content distribution services (such as subscription and transaction revenue shares, media and entertainment promotional spending, the sale of Premium Subscriptions, and the sale of branded channel buttons on remote controls), and licensing arrangements with service operators and TV brands and player revenue from the sale of streaming players and audio products.
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 of America (“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, 2021, filed with the SEC on February 18, 2022 (the “Annual Report”).
The condensed consolidated balance sheet as of December 31, 2021 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, 2022 are not necessarily indicative of the operating results to be expected for the full year or any future periods.
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;
valuation of assets acquired and liabilities assumed in connection with business combinations;
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.
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
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Two financial institutions managed 23% and 30% of the Company’s cash and cash equivalents balance
7

as of March 31, 2022 and 30% and 27% of the Company’s cash and cash equivalents balance as of December 31, 2021, respectively.
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 consists of the following activities (in thousands):
 Three Months Ended
 March 31, 2022March 31, 2021
Beginning balance$6,015 $5,912 
Add: Charged to revenue3,521 2,526 
Less: Utilization of sales return reserve(5,437)(4,670)
Ending balance$4,099 $3,768 
Allowance for Sales Incentives: Allowance for sales incentives consists of the following activities (in thousands):
 Three Months Ended
 March 31, 2022March 31, 2021
Beginning balance$48,411 $30,838 
Add: Charged to revenue17,611 12,618 
Less: Utilization of sales incentive reserve(38,134)(23,320)
Ending balance$27,888 $20,136 
Allowance for Doubtful Accounts: Allowance for doubtful accounts consists of the following activities (in thousands):
 Three Months Ended
 March 31, 2022March 31, 2021
Beginning balance$2,158 $4,181 
Provision for (recoveries of) doubtful accounts1,013 (54)
Adjustments for recovery and write-off  
Ending balance$3,171 $4,127 
The Company did not have any customer that accounted for more than 10% of its accounts receivable, net balance as of March 31, 2022 and December 31, 2021.
Recently Adopted Accounting Standards
On January 1, 2022, the Company early adopted the guidance issued by the Financial Accounting Standards Board (“FASB”) in October 2021. The FASB issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, to require companies to apply Accounting Standards Codification, Revenue from Contracts with Customers (Topic 606) to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. The adoption did not have a material impact on the Company's condensed consolidated financial statements.
On January 1, 2021, the Company adopted the guidance issued in ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles and also simplifies areas such as franchise taxes, step-up in tax basis of goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate changes. The adoption did not have a material impact on the Company’s condensed consolidated financial statements.
8

3. REVENUE
The Company’s disaggregated revenue is represented by the two reportable segments discussed in Note 15.
The contract balances include the following (in thousands):
 As of
 March 31, 2022December 31, 2021
Accounts receivable, net$675,705 $752,393 
Contract assets (included in Prepaid expenses and other current assets)61,681 46,952 
Deferred revenue, current portion$54,408 $45,760 
Deferred revenue, non-current portion25,647 28,726 
Total deferred revenue$80,055 $74,486 
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 increased by $14.7 million during the three months ended March 31, 2022 primarily due to an increase in revenue from content publishers during the period combined with the timing of billing which falls into a subsequent period.
Deferred revenue reflects consideration invoiced prior to the completion of performance obligations and revenue recognition. Deferred revenue increased by approximately $5.6 million during the three months ended March 31, 2022 primarily due to the timing of fulfillment of performance obligations related to platform revenue contracts.
Revenue recognized during the three months ended March 31, 2022, from amounts included in total deferred revenue as of December 31, 2021, was $22.4 million. Revenue recognized during the three months ended March 31, 2021, from amounts included in total deferred revenue as of December 31, 2020, was $26.2 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 $1,427.4 million as of March 31, 2022 of which the Company expects to recognize approximately 39% over the next 12 months and the remainder thereafter.
The Company recognized revenue of $11.2 million and $29.0 million during the three months ended March 31, 2022 and 2021, respectively, from performance obligations that were satisfied in previous periods due to changes in the estimated transaction price of its revenue contracts.
The Company did not have any customer that accounted for more than 10% of its total net revenue during the three months ended March 31, 2022. Customer H accounted for 11% of the total net revenue during the three months ended March 31, 2021.
4. BUSINESS COMBINATIONS
Nielsen’s Advanced Video Advertising Business
On February 28, 2021, the Company entered into an Asset and Stock Purchase Agreement to purchase the Advanced Video Advertising (“AVA”) business from Nielsen Holdings PLC (“Nielsen”). The AVA business consists primarily of video automatic content recognition and dynamic ad insertion technologies. On April 15, 2021, the Company closed the transaction, acquiring from Nielsen the AVA business, consisting of certain assets and liabilities and all of the equity interests in a subsidiary associated with the AVA business (the “Acquisition”). In conjunction with the Acquisition, the Company and Nielsen entered into a strategic commercial arrangement under which the parties will provide certain advertising measurement solutions to each other. The Company acquired Nielsen’s AVA business to accelerate its launch
9

of an end-to-end linear ad replacement solution and to further integrate Nielsen’s ad and content measurement products into the Company’s ad platform.
The total purchase consideration for Nielsen’s AVA business was $53.4 million, which consisted of (i) $38.5 million paid in cash and (ii) $21.4 million of non-cash consideration related to obligations to deliver services to Nielsen, offset by (iii) $6.5 million of services to be received from Nielsen. The obligations to deliver services to Nielsen were recorded at fair value using the incremental cash flow method. The services to be delivered to Nielsen are recognized within Other income (expense), net in the condensed consolidated statements of operations over the six year service period. The services to be received from Nielsen represent contract terms that the Company entered into for future goods and services that were recorded at fair value using the incremental cash flow method. These services are recognized as Cost of revenue, platform in the condensed consolidated statements of operations over the six year service period. The Company incurred $3.9 million in acquisition-related expenses that were recorded in General and administrative expenses in the consolidated statements of operations during the year ended December 31, 2021.
The allocation of the purchase consideration to tangible and intangible assets acquired and liabilities assumed, reflecting measurement period adjustments through March 31, 2022, is based on estimated fair values and is as follows (in thousands):
Fair Values
Assets acquired
Cash and cash equivalents$3,057 
Prepaid expenses and other current assets85 
Property and equipment, net584 
Intangible assets:
Developed technology11,000 
IPR&D technology7,500 
Goodwill36,790 
Operating lease right-of-use assets1,235 
Other non-current assets1,905 
Total assets acquired62,156 
Liabilities assumed
Accounts payable and accrued liabilities(1,168)
Operating lease liabilities, non-current portion(830)
Other long-term liabilities(6,767)
Total liabilities assumed(8,765)
Total purchase consideration$53,391 
The excess of the total consideration over the tangible assets, intangible assets, and liabilities assumed is recorded as goodwill. Goodwill is primarily attributable to expected synergies in advertising offerings and cross-selling opportunities. The majority of the goodwill recorded is deductible for tax purposes.
The fair value of the developed technology is estimated using the relief-from-royalty method. The key valuation assumptions include the Company’s estimates of expected future earnings and royalty rate. The Company amortizes the fair value of the developed technology on a straight-line basis over its useful life. The fair value of the in-process research and development (“IPR&D”) technology is estimated using the multi-period-excess-earnings method. The key valuation assumptions include the Company’s estimates of expected future revenue and margin. Once the project reaches technological feasibility, the Company will amortize the fair value of the IPR&D technology on a straight-line basis over its useful life.
10

The valuation of the intangible assets acquired from Nielsen’s AVA business along with their estimated useful lives, is as follows (in thousands, except years):
Estimated Fair ValueEstimated Weighted-Average Useful Lives
(in years)
Developed technology$11,000 5.9
IPR&D technology7,500 
Estimated fair value of acquired intangible assets$18,500 5.9
This Old House
On March 19, 2021, the Company acquired all outstanding shares of TOH Intermediate Holdings, LLC (“This Old House”), a home improvement media business, according to the terms and conditions of an Equity Purchase Agreement. The Company acquired the This Old House business because the Company believes the content aligns with The Roku Channel’s ad-supported growth strategy.
The total purchase consideration for This Old House was $97.8 million, paid entirely in cash. The Company incurred $2.4 million in acquisition-related expenses that were recorded in General and administrative expenses in the consolidated statements of operations during the year ended December 31, 2021.
The allocation of the purchase consideration to tangible and intangible assets acquired and liabilities assumed, is based on estimated fair values and is as follows (in thousands):
 Fair Values
Assets acquired 
Cash and cash equivalents$7 
Accounts receivable5,830 
Prepaid expenses and other current assets7,310 
Property and equipment, net307 
Intangible assets:
Tradename20,000 
Customer relationships700 
Goodwill46,671 
Operating lease right-of-use assets5,498 
Other non-current assets23,487 
Total assets acquired109,810 
Liabilities assumed
Accounts payable and accrued liabilities(2,747)
Deferred revenue, current portion(4,146)
Operating lease liabilities, non-current portion(4,262)
Deferred revenue, non-current portion(816)
Other long-term liabilities(28)
Total liabilities assumed(11,999)
Total purchase consideration$97,811 
Other non-current assets include $22.5 million of content assets acquired. The fair value of the content assets is estimated using the income approach. Amortization expense related to the content assets is recorded on an accelerated basis according to the pattern of monetization.
The excess of the total consideration over the tangible assets, identifiable intangible assets, and assumed liabilities is recorded as goodwill. Goodwill is primarily attributable to expected synergies in the advertising offerings as the Company brings more free ad-supported content to the users. The goodwill recorded is deductible for tax purposes.
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The fair value of the tradename is estimated using the relief-from-royalty method. The key valuation assumptions include the Company's estimates of expected future revenue and royalty rate. The Company amortizes the fair value of the tradename on a straight-line basis over its useful life.
The valuation of the intangible assets acquired from This Old House along with their estimated useful lives, is as follows (in thousands, except years):
Estimated Fair ValueEstimated Weighted-Average Useful Lives
(in years)
Tradename$20,000 10.0
Customer relationships700 4.0
Estimated fair value of acquired intangible assets$20,700 9.8
5. 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 table is the summary of the Company’s intangible assets (in thousands, except years):
As of March 31, 2022
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted-Average Useful Lives
(in years)
Developed technology$73,367 $(28,362)$45,005 5.9
Customer relationships14,100 (8,277)5,823 4.0
Tradename20,400 (2,466)17,934 9.8
Patents4,076 (679)3,397 14.0
Intangible assets subject to amortization111,943 (39,784)72,159 6.7
IPR&D technology7,500 — 7,500 
Total Intangible assets$119,443 $(39,784)$79,659 
As of December 31, 2021
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Weighted-Average Useful Lives
(in years)
Developed technology$73,367 $(25,350)$48,017 5.9
Customer relationships14,100 (7,395)6,705 4.0
Tradename20,400 (1,966)18,434 9.8
Patents4,076 (606)3,470 14.0
Intangible assets subject to amortization111,943 (35,317)76,626 6.7
IPR&D technology7,500 — 7,500 
Total Intangible assets$119,443 $(35,317)$84,126 
The Company recorded expenses of $4.5 million and $3.6 million for amortization of intangible assets during the three months ended March 31, 2022 and 2021, respectively. During the three months ended March 31, 2022 and 2021, the Company recorded amortization of developed technology in Cost of revenue, platform and Research and development expenses. The Company recorded amortization of customer relationships and tradename in Sales and marketing expenses, and recorded amortization of patents in General and administrative expenses in the condensed consolidated statements of operations.
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As of March 31, 2022, the estimated future amortization expense for intangible assets for the next five years and thereafter is as follows (in thousands):
Year Ending December 31, 
2022 (remaining 9 months)$13,278 
202317,066 
202414,275 
202512,571 
20264,074 
Thereafter10,895 
Total$72,159 
6. BALANCE SHEET COMPONENTS
Accounts Receivable, net: Accounts receivable, net consisted of the following (in thousands):
 As of
 March 31, 2022December 31, 2021
Accounts receivable, gross$711,043 $809,220 
Less: Allowances
Allowance for sales returns4,099 6,015 
Allowance for sales incentives27,888 48,411 
Allowance for doubtful accounts3,171 2,158 
Other allowances180 243 
Total allowances35,338 56,827 
Accounts receivable, net$675,705 $752,393 
Property and Equipment, net: Property and equipment, net consisted of the following (in thousands):
 As of
 March 31, 2022December 31, 2021
Computers and equipment$39,913 $38,473 
Leasehold improvements194,788 182,229 
Internal-use software7,274 7,274 
Office equipment and furniture22,550 20,829 
Property and equipment, gross264,525 248,805 
Less: Accumulated depreciation and amortization(78,217)(71,238)
Property and equipment, net$186,308 $177,567 
Depreciation and amortization expense, for property and equipment assets, for the three months ended March 31, 2022 and 2021 was $7.0 million and $6.0 million, respectively.
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Accrued Liabilities: Accrued liabilities consisted of the following (in thousands):
 As of
 March 31, 2022December 31, 2021
Payments due to content publishers$177,724 $165,894 
Accrued cost of revenue106,866 142,014 
Marketing, retail, and merchandising costs67,388 47,428 
Operating lease liability, current43,273 37,116 
Content liability, current78,224 70,462 
Other accrued expenses101,373 86,141 
Total accrued liabilities$574,848 $549,055 
Deferred Revenue: Deferred revenue consisted of the following (in thousands):
 As of
 March 31, 2022December 31, 2021
Platform, current$33,181 $22,240 
Player, current21,227 23,520 
Total deferred revenue, current54,408 45,760 
Platform, non-current5,214 9,324 
Player, non-current20,433 19,402 
Total deferred revenue, non-current25,647 28,726 
Total deferred revenue$80,055 $74,486 
Other Long-term Liabilities: Other Long-term liabilities consisted of the following (in thousands):
As of
March 31, 2022December 31, 2021
Content liability, non-current$56,432 $51,211 
Other long-term liabilities31,435 31,274 
Total other long-term liabilities$87,867 $82,485 
7. CONTENT ASSETS
Content assets, net recorded as part of Other non-current assets consisted of the following (in thousands):
 As of
 March 31, 2022December 31, 2021
Licensed content, net$228,978 $199,290 
Produced content:
Released, less amortization21,013 20,030
Completed, not released1,235 881
In production10,455 3,512
Total produced content, net32,703 24,423
Total content assets, net$261,681 $223,713 
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Amortization of content assets is included in Cost of revenue, platform in the condensed consolidated statements of operations and is reflected in the table below (in thousands):
 Three Months Ended
 March 31, 2022March 31, 2021
Licensed content$41,625 $9,616 
Produced content2,827 202 
Total amortization costs$44,452 $9,818 
8. FAIR VALUE DISCLOSURE
The Company’s financial assets measured at fair value are as follows (in thousands):
 As of March 31, 2022As of December 31, 2021
 Fair ValueLevel 1Fair ValueLevel 1
Assets:    
Cash and cash equivalents:    
Cash$1,634,957 $1,634,957 $1,130,172 $1,130,172 
Money market funds600,135 600,135 1,015,871 1,015,871 
Restricted cash, non-current1,632 1,632 1,627 1,627 
Total assets measured and recorded at fair value$2,236,724 $2,236,724 $2,147,670 $2,147,670 
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. 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 or remaining maturity of three months or less at the date of purchase to be cash equivalents. The Company measured money market funds of $600.1 million and $1,015.9 million as cash equivalents as of March 31, 2022 and December 31, 2021, 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, 2022 and December 31, 2021.
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.
The Company did not have Level 3 instruments as of March 31, 2022 and December 31, 2021.
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.
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9. LEASES
The Company's operating leases are primarily for office facilities. The leases have remaining terms ranging from one year to eleven years and may include options to extend or terminate the lease. The depreciable life of right-of-use assets is limited by the expected lease term.
The components of lease expense are as follows (in thousands):
 Three Months Ended
 March 31, 2022March 31, 2021
Operating lease cost (1)
$15,357 $10,266 
Variable lease cost4,225 2,952 
Total operating lease cost$19,582 $13,218 
(1)Operating lease cost is presented net of sublease income. Sublease income for the three months ended March 31, 2022 and 2021, respectively, was not material.
Supplemental cash flow information related to leases is as follows (in thousands):
 Three Months Ended
 March 31, 2022March 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases$13,658 $16,224 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$66,690 $5,498 
Supplemental balance sheet information related to leases is as follows (in thousands, except lease term and discount rate):
 As of
 March 31, 2022December 31, 2021
Operating lease right-of-use assets$401,154 $345,660 
Operating lease liability, current (included in Accrued liabilities)$43,273 $37,116 
Operating lease liability, non-current444,115 394,724 
Total operating lease liability$487,388 $431,840 
Weighted-average remaining term for operating leases (in years)8.478.38
Weighted-average discount rate for operating leases3.70 %3.98 %
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Future lease payments under operating leases as of March 31, 2022 are as follows (in thousands):
Year Ending December 31,Operating Leases
2022 (remaining 9 months)$42,216 
202366,166 
202464,539 
202568,737 
202669,013 
Thereafter273,507 
Total future lease payments584,178 
Less: imputed interest(84,730)
Less: expected tenant improvement allowance(12,060)
Total$487,388 
As of March 31, 2022, the Company’s commitment relating to operating leases that have not yet commenced was $192.6 million. These operating leases will commence starting in fiscal year 2022 with lease terms of approximately three to eleven years.
10. DEBT
The Company’s outstanding debt as of March 31, 2022 and December 31, 2021 is as follows (in thousands, except interest rates):
 As of
 March 31, 2022December 31, 2021
 Amount
Effective
Interest Rate
Amount  
Effective
Interest Rate
Term Loan A Facility$88,750 3.4%$90,000 2.0%
Less: Debt issuance costs(102)(132)
Net carrying amount of debt$88,648 $89,868 
The carrying amount of debt approximates fair value due to its variable interest rates. The interest expense for the three months ended March 31, 2022 and 2021 was $0.8 million and $0.5 million, respectively.
Senior Secured Term Loan A and Revolving Credit Facilities
On February 19, 2019, the Company entered into a Credit Agreement with Morgan Stanley Senior Funding, Inc. (as amended on May 3, 2019, the “Credit Agreement”), which provides for (i) a four-year revolving credit facility in the aggregate principal amount of up to $100.0 million (the “Revolving Credit Facility”), (ii) a four-year delayed draw term loan A facility in the aggregate principal amount of up to $100.0 million (the “Term Loan A Facility”) and (iii) an uncommitted incremental facility subject to certain conditions. See Note 10 to the consolidated financial statements in our Annual Report for additional details regarding the Credit Agreement.
On November 18, 2019, the Company borrowed an aggregate principal amount of $100.0 million from the Term Loan A Facility. The Company elected an interest rate equal to the adjusted one-month LIBOR rate plus an applicable margin of 1.75% based on the Company’s secured leverage ratio. The borrowings under the Credit Agreement mature or have to be repaid in full by February 2023.
The Company had outstanding letters of credit against the Revolving Credit Facility of $38.0 million as of March 31, 2022 and December 31, 2021.
As of March 31, 2022, the Company was in compliance with all of the covenants of the Credit Agreement.
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11. 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, 2022 and December 31, 2021, 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.
At-the-Market Offering
On March 2, 2021, the Company entered into an Equity Distribution Agreement with Morgan Stanley & Co. LLC, Citigroup Global Markets Inc. and Evercore Group L.L.C., as its sales agents, pursuant to which the Company could offer and sell from time-to-time shares of its Class A common stock for aggregate gross proceeds of up to $1,000.0 million. In March 2021, the Company sold approximately 2.6 million shares of Class A common stock at an average selling price of $379.26 per share, for aggregate gross proceeds of $1,000.0 million and incurred issuance costs of $10.4 million.
Common Stock Reserved for Future Issuance
At March 31, 2022, the Company’s common stock reserved for issuance in the future is as follows (in thousands):
 As of March 31, 2022
Common stock awards granted under equity incentive plans12,291 
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 Plan30,103 
Total reserved shares of common stock47,483 
(1) The Company has not issued any common stock pursuant to the 2017 Employee Stock Purchase Plan.
Equity Incentive Plans
The Company has two equity incentive plans, the 2008 Equity Incentive Plan (the “2008 Plan”) and 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”). No additional equity grants have been made pursuant to the 2008 Plan subsequent to the 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.
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, 2022 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, 2021
3,286 $169.76 
Awarded3,796 140.48 
Released(395)99.76 
Forfeited(136)160.81 
Balance as of March 31, 2022
6,551 $157.20 
As of March 31, 2022, the Company had $913.3 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 2.82 years.
Stock Options
The following table summarizes the Company’s stock option activities under the 2008 Plan and 2017 Plan for the three months ended March 31, 2022 (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, 2021