roku-8k_20191106.htm
false 0001428439 0001428439 2019-11-06 2019-11-06

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): November 6, 2019

 

ROKU, INC.

(Exact name of Registrant as Specified in Its Charter)

 

Delaware

 

001-38211

 

26-2087865

(State or Other Jurisdiction

of Incorporation)

 

(Commission File Number)

 

(IRS Employer

Identification No.)

 

 

 

 

 

150 Winchester Circle

Los Gatos, California

 

 

 

95032

(Address of Principal Executive Offices)

 

 

 

(Zip Code)

(408) 556-9040

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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 value

“ROKU”

The Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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.  

 

 


Item 2.02

Results of Operations and Financial Condition.

On November 6, 2019, Roku, Inc. (the “Company”) announced its financial results for the quarter ended September 30, 2019. The Company’s Shareholder Letter, which is attached hereto as Exhibit 99.1, is incorporated herein by reference.

The information in this report shall not be treated as “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, except as expressly stated by specific reference in such filing.

 

Item 9.01

Financial Statement and Exhibits.

  

(d)

 

Exhibits.

 

 

 

 

 

Exhibit Number

 

Description

 

 

 

 

 

99.1*

 

Shareholder Letter dated November 6, 2019

 

 

 

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

*This exhibit is intended to be furnished and shall not be deemed “filed” for purposes of the Securities and Exchange Act of 1934.

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

Roku, Inc.

 

 

 

Dated: November 6, 2019

 

 

 

 

 

 

 

 

By:

 

/s/ Steve Louden

 

 

 

 

 

 

Steve Louden

 

 

 

 

 

 

Chief Financial Officer

 

roku-ex991_6.htm

Exhibit 99.1

 

November 6, 2019

Fellow Shareholders,

We continue to execute well against our long-term strategic plan as the TV market shifts to streaming. In Q3, we beat our outlook for revenue, gross profit, and adjusted EBITDA. Our business momentum and competitive differentiation make Roku an essential partner for content publishers and advertisers. This is evident in the launch of major new streaming services on our platform and by the growth in the number of advertisers who work with Roku. We believe the dataxu acquisition will accelerate our platform’s advertising technology roadmap, strengthen our already industry-leading TV streaming platform and give us the opportunity to create an even more appealing offering for advertisers.  

Q3 Highlights

 

Total net revenue of $260.9 million, up 50% Year-over-Year (YoY);

 

Platform revenue of $179.3 million, up 79% YoY;

 

Active Accounts of 32.3 million, a net addition of 1.7 million over last quarter;

 

Streaming Hours increased 0.9 billion hours over last quarter, to 10.3 billion;

 

Average Revenue Per User (ARPU) of $22.58 (Trailing Twelve Months), up 30% YoY;

 

Gross Profit of $118.5 million, up 50% YoY; and

 

Roku monetized video ad impressions again more than doubled YoY.

Key Operating Metrics

Q3 18

 

 

Q4 18

 

 

Q1 19

 

 

Q2 19

 

 

Q3 19

 

 

YoY %

 

Active Accounts (millions)

 

23.8

 

 

 

27.1

 

 

 

29.1

 

 

 

30.5

 

 

 

32.3

 

 

 

36

%

Streaming Hours (billions)

 

6.2

 

 

 

7.3

 

 

 

8.9

 

 

 

9.4

 

 

 

10.3

 

 

 

68

%

ARPU ($)

$

17.34

 

 

$

17.95

 

 

$

19.06

 

 

$

21.06

 

 

$

22.58

 

 

 

30

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Summary Financials ($ in millions)

Q3 18

 

 

Q4 18

 

 

Q1 19

 

 

Q2 19

 

 

Q3 19

 

 

YoY %

 

Platform revenue

$

100.1

 

 

$

151.4

 

 

$

134.2

 

 

$

167.7

 

 

$

179.3

 

 

 

79

%

Player revenue

 

73.3

 

 

 

124.3

 

 

 

72.5

 

 

 

82.4

 

 

 

81.6

 

 

 

11

%

Total net revenue

 

173.4

 

 

 

275.7

 

 

 

206.7

 

 

 

250.1

 

 

 

260.9

 

 

 

50

%

Platform gross profit

 

70.5

 

 

 

109.4

 

 

 

93.8

 

 

 

109.7

 

 

 

112.2

 

 

 

59

%

Player gross profit

 

8.4

 

 

 

2.9

 

 

 

7.1

 

 

 

4.5

 

 

 

6.2

 

 

 

-26

%

Total gross profit

 

79.0

 

 

 

112.3

 

 

 

100.9

 

 

 

114.2

 

 

 

118.5

 

 

 

50

%

Platform gross margin %

 

70.5

%

 

 

72.2

%

 

 

69.9

%

 

 

65.4

%

 

 

62.6

%

 

 

-791

bps

Player gross margin %

 

11.5

%

 

 

2.4

%

 

 

9.8

%

 

 

5.5

%

 

 

7.6

%

 

 

-388

bps

Total gross margin %

 

45.6

%

 

 

40.7

%

 

 

48.8

%

 

 

45.7

%

 

 

45.4

%

 

 

-15

bps

R&D

 

45.4

 

 

 

51.0

 

 

 

55.7

 

 

 

62.0

 

 

 

68.5

 

 

 

51

%

Sales and marketing

 

25.6

 

 

 

34.6

 

 

 

33.8

 

 

 

36.6

 

 

 

46.7

 

 

 

82

%

G&A

 

19.8

 

 

 

21.2

 

 

 

22.1

 

 

 

26.0

 

 

 

29.9

 

 

 

51

%

Total operating expenses

 

90.7

 

 

 

106.8

 

 

 

111.6

 

 

 

124.6

 

 

 

145.0

 

 

 

60

%

Income (loss) from operations

 

(11.7

)

 

 

5.5

 

 

 

(10.7

)

 

 

(10.4

)

 

 

(26.5

)

 

nm

 

Adjusted EBITDA 1

 

2.0

 

 

 

24.5

 

 

 

10.0

 

 

 

11.1

 

 

 

(0.4

)

 

nm

 

Adjusted EBITDA margin %

 

1.1

%

 

 

8.9

%

 

 

4.8

%

 

 

4.4

%

 

 

-0.2

%

 

 

-130

bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outlook ($ in millions)

Q4 2019E

 

 

Full Year 2019E

 

Total net revenue

$380 - $396

 

 

$1,098 - $1,113

 

Total gross profit

$156 - $161

 

 

$489 - $494

 

Net income (loss)

($22)-($17)

 

 

($66) - ($61)

 

Adjusted EBITDA 2, 3

$7 - $12

 

 

$28 - $33

 

1 Refer to the reconciliation of net loss to adjusted EBITDA in the non-GAAP information in the tables accompanying this letter.

 

2 Full Year 2019E reconciling items between net loss and non-GAAP adjusted EBITDA consist of stock-based compensation of $84 million, and depreciation and amortization and other income of $10 million.

 

3 Q4 2019E reconciling items between net loss and non-GAAP adjusted EBITDA consist of stock-based compensation of approximately $25 million, and depreciation and amortization and other income of $4 million.

 

 


 

INDUSTRY TRENDS

An essential partner for reaching a highly engaged TV streaming audience

According to eMarketer, around 56 million households in total will have canceled cable or satellite TV subscriptions by 2023. Approximately 1.7 million consumers cut the cord in Q3 alone. Our own research indicates that roughly 50% of U.S. cord cutters are Roku customers, and cord cutters who choose Roku products are highly satisfied with the decision and extremely unlikely to consider returning to a traditional pay TV subscription.  

The growing number of major streaming services, increasing investment in original programming and related high-profile marketing campaigns are likely to reinforce consumer interest in moving from traditional pay TV to streaming – and to the Roku platform. Just last week Apple TV+ launched on our platform adding a desirable option for millions of Apple and Roku customers around the world. Disney+ and several new free ad-supported video on demand (AVOD) services coming to market are also expected to launch soon on our platform. Such new services will generate revenue for Roku when we promote their content to our customers, when customers sign up on our platform and when our customers view ads.  

GROWING ACTIVE ACCOUNTS

Refreshed Roku player lineup. Soundbars with players built-in.

During Q3, we saw strong unit sales for both Roku TV and players. We continue to lead in smart TV operating system (OS) licensing as the #1 licensed TV OS in North America. We believe that Roku TV represented more than one in three smart TVs sold in the U.S. during the first nine months of the year.

In September, we introduced a new line up of streaming players for North America, Latin America and markets in Europe. These new players make streaming affordable with an entry price point of $29.99 MSRP for the redesigned Roku Express. Our goal is to drive scale and reach of the platform and we will do so by offering consumers exceptional devices and appealing prices rather than optimizing for hardware gross profit. We are pleased that our popular Roku Streaming Stick+ recently won the CNET Editor’s Choice Award for the third consecutive year and was once again deemed their favorite streamer overall.

In the U.S. we launched new audio devices – a smart soundbar and a wireless subwoofer under the Roku brand at Best Buy and exclusive models under the onn. • Roku brand at Walmart. The smart soundbar makes it easy to add both premium sound and powerful streaming to a TV. The wireless subwoofer seamlessly expands the premium audio of the smart soundbar or Roku TV™ Wireless Speakers with even deeper, richer bass. With a streaming player built inside, these smart soundbars are another way for us to drive account growth and increase engagement on the Roku platform.

This fall our TV OEM partners began shipping a range of new Roku TV models across North America. Of note is the new TCL Roku TV 8 Series which just began shipping in the U.S. This advanced, high-end TV combines stunning 4K HDR and QLED technology plus features HDR 10 and Dolby Vision support along with Dolby Atmos. And it's the first Roku TV to use mini-LED technology, which promises even better contrast.

 

Lastly during the quarter, we began to roll out Roku OS 9.2. Among other updates, this release brings new search and discovery features and enhanced Roku Voice functionality to Roku devices.

                                    onn. Roku brand audio devices at Walmart

2

Roku Q3 2019 Shareholder Letter


 

Our competitive advantages support our international expansion

As we continue to lay the foundation for further international expansion, the key advantages that set us apart in the U.S. are expected to play an important role in new markets. Our purpose-built OS, engineering expertise, OEM partnerships, and free TV capabilities are among the many factors that we expect to contribute to our ability to attract content providers and consumers, and quickly build scale in new markets.

At IFA, the European consumer electronics show held in Germany, we announced plans to bring Roku TV to Europe beginning with the UK market. Our Roku TV launch partner Hisense is expected to ship the first Roku TV models in the UK before the end of this year. Roku TVs in the UK will include FreeView Play as well as a strong lineup of local streaming content publishers and global brands.

We look forward to bringing Roku TV to more international markets as well as deepening our selection in the UK. We plan to share more of our plans in early 2020.

THE POWER OF THE ROKU PLATFORM

A leap forward for our industry-leading advertising capabilities

Q3 was another quarter of strong progress for the Platform segment led by advertising. According to eMarketer, in the U.S., advertisers today spend more than $70 billion dollars on traditional linear TV and these dollars are still in the early stages of shifting to streaming. According to Magna Global, OTT accounts for 29 percent of U.S. TV viewing, but so far has only captured three percent of TV ad budgets. That gap is starting to close. For example, Magna Global forecasted $5 billion OTT ad spend for 2020. We believe that we are well positioned to benefit from this trend.    

Roku monetized video ad impressions more than doubled again year-over-year. The Roku Channel contributed to this growth as impressions within the channel are growing faster than our impressions within the overall platform. While we continue to work with the majority of the Ad Age 200, our ad clientele continues to diversify and now also includes a wider range of small- and medium-sized businesses as well as local, direct-to-consumer, mid-market, performance, programmatic and direct-response advertisers. Average annual advertiser spend is increasing on our platform and we are bringing in new advertisers. This includes strong interest in increasing ad effectiveness with anonymized first-party data and audience guarantees. Our sponsorships business – an ad product within the consumer user experience, such as a home screen takeover is also growing faster than the overall business.

We recently announced our agreement to acquire dataxu – a demand-side platform (DSP) that enables marketers to plan and buy video ad campaigns. This acquisition is expected to reinforce our leadership in several ways. dataxu’s advanced DSP, device graph, and data science will enhance our existing advanced advertising platform whose advantages include first-party consumer relationship, technology, data, publisher relationships and scale. We are committed to being an open platform and continuing our work with leading DSPs and ad tech providers across the ecosystem. At the same time, the acquisition of dataxu will help accelerate our advertising product roadmap and our strategy of providing marketers with an integrated, data-driven solution to plan, buy, and optimize their ad spend across TV and OTT. Automated media buying solutions like Roku’s new DSP are expected to unlock more advertising investment into OTT. In addition to a step forward in our ad stack roadmap, dataxu will accelerate our ability to place advanced tools in the hands of buyers. We will gain an experienced team that complements our industry leading OTT ad tech talent. This includes expertise in DSP software engineering, data science and analytics. We will work with new and existing advertisers as the TV advertising community moves to streaming.

Experts in Free TV

We were early to recognize the appeal that streaming free content has for consumers. AVOD is growing in quality and usage. It delivers value to consumers, especially to “cord-cutters.” Consumers are willing to watch ads in exchange for free TV content. In a survey we conducted, 73% of respondents said they watch AVOD, while 45% watch AVOD the most out of all streaming video options.

In August, we launched Kids & Family within The Roku Channel making it easy for families to find a wide selection of free and Premium Subscription content in one, easy-to-access destination. The Roku Channel’s Parental Control features give parents control

3

Roku Q3 2019 Shareholder Letter


 

over what their kids can playback within the channel. At launch we partnered with LEGO SYSTEMS as a sponsor on The Roku Channel Kids & Family home screen allowing the iconic kids brand to gain visibility while offering our viewers free access to a collection of movies. We believe these sponsorships are successful in driving engagement with our viewers.

 

 

Lego Systems sponsorship of Kids & Family home screen

 

OUTLOOK

We are increasing our revenue and gross profit outlook for 2019 reflecting our strong Q3 performance and the inclusion of dataxu for part of Q4. Our raised revenue outlook midpoint of $1.106 billion represents roughly 49% year-over-year growth, up from 46% year-over-year in our prior outlook. We expect Platform revenue to represent roughly two-thirds of total revenue including approximately $13 million in revenue from dataxu. We are raising our total gross profit outlook for 2019 to roughly $492 million at the midpoint, up from roughly $485 million previously. We have updated our 2019 adjusted EBITDA outlook midpoint to $30 million from $35 million previously reflecting continued investment in the business as well as an approximately $5 million headwind to adjusted EBITDA in Q4 related to dataxu operations and dataxu acquisition related expenses.

CONCLUSION

Consumers are reaping the benefits as the biggest and best names in TV programming embrace the transition to streaming. Investment in content is soaring and free options are proliferating. Just as advertisers are hungry to reach consumers who no longer watch linear TV, they want to measure campaigns and have access to tools that automate them. Roku is well positioned as a neutral party that helps the whole ecosystem build value in OTT. We make it easy for our large and highly engaged TV audience to find the content they love. We are taking the strengths that have made us the leading TV streaming platform in the U.S. and laying the groundwork for enlarging our international footprint.

Happy Streaming!

Sincerely,

Anthony Wood, Founder and CEO; and Steve Louden, CFO

4

Roku Q3 2019 Shareholder Letter


Exhibit 99.1

 

 

Conference Call Webcast – 2 p.m. PST November 6, 2019

The Company will host a webcast of its conference call to discuss the Q3 2019 results at 2 p.m. Pacific Time / 5 p.m. Eastern Time on November 6, 2019. Participants may access the live webcast in listen-only mode on the Roku investor relations website at ir.roku.com. An archived webcast of the conference call will also be available at ir.roku.com following the call.

About Roku, Inc.

Roku pioneered streaming to the TV. We connect users to the streaming content they love, enable content publishers to build and monetize large audiences, and provide advertisers with unique capabilities to engage consumers. Roku streaming players and Roku TVTM models are available around the world through direct retail sales and licensing arrangements with TV OEMs and service operators. Roku audio products are available through direct retails sales in the U.S.A. Roku is headquartered in Los Gatos, Calif. U.S.A.

Roku, the Roku logo and other trade names, trademarks or service marks of Roku appearing in this shareholder letter are the property of Roku. Trade names, trademarks and service marks of other companies appearing in this shareholder letter are the property of their respective holders.

Investor Relations

ir@roku.com

 

Media

Tricia Mifsud

tmifsud@roku.com

 

Diane Carlini

dcarlini@roku.com

 

Use of Non-GAAP Measures

In addition to financial information prepared in accordance with generally accepted accounting principles in the United States (GAAP), this shareholder letter includes certain non-GAAP financial measures. These non-GAAP measures include Adjusted EBITDA. In order for our investors to be better able to compare its current results with those of previous periods, we have included a reconciliation of GAAP to non-GAAP financial measures in the tables at the end of this letter. The Adjusted EBITDA reconciliation adjusts the related GAAP financial measures to exclude other income (expense), net, stock-based compensation expense, depreciation and amortization, and income tax (benefit)/expense where applicable. We believe these non-GAAP financial measures are useful as a supplement in evaluating our ongoing operational performance and enhancing an overall understanding of our past financial performance. However, these non-GAAP financial measures have limitations, and should not be considered in isolation or as a substitute for our GAAP financial information.

Forward-Looking​ ​Statements

This shareholder letter contains “forward-looking” statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “may,”  “seek,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking

Roku Q3 2019 Shareholder Letter

5

 

 


 

 

 

 

statements. Forward-looking statements represent our beliefs and assumptions only as of the date of this letter. These statements include the benefits of the acquisition of dataxu, including the acceleration of our ad platform, gaining an experienced ad tech workforce, and the benefits and features of future product or service offerings of the combined entity, such as unlocking more advertising investment into OTT, the benefits, impact, features and availability of streaming services launching on our platform,  the benefits, impact, features and availability of our new line of streaming players, our new audio devices and the new Roku TV models, our international expansion, the capabilities expected to help us build scale and contribute to our international expansion, the timing, benefits and features of the  Roku TV models launching in the UK, the shift of advertising spend from linear TV to OTT, diversification of our ad clientele, increases in advertiser spend per campaign, our strategic plan, the strength of the Roku brand, OS and platform, the growth and monetization of The Roku Channel, the importance of our direct customer relationship and data, the importance of our partners and sponsorships, our financial outlook for the fourth quarter of 2019 and for the full 2019 fiscal year, our investments, and our overall business trajectory. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. Further information on factors that could cause actual results to differ materially from the results anticipated by our forward-looking statements is included in the reports we have filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2018 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.  Additional information will also be available in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2019.  All information provided in this shareholder letter and in the tables attached hereto is as of November 6, 2019, and we undertake no duty to update this information unless required by law.

 

 

 

 

 

 

 

 

 

 

Roku Q3 2019 Shareholder Letter

6

 

 


 

 

 

 

ROKU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)

(unaudited)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

2019

 

 

September 30,

2018

 

 

September 30,

2019

 

 

September 30,

2018

 

Net Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Platform

 

$

179,322

 

 

$

100,050

 

 

$

481,157

 

 

$

265,468

 

Player

 

 

81,606

 

 

 

73,331

 

 

 

236,534

 

 

 

201,299

 

Total net revenue

 

 

260,928

 

 

 

173,381

 

 

 

717,691

 

 

 

466,767

 

Cost of Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Platform (1)

 

 

67,075

 

 

 

29,504

 

 

 

165,419

 

 

 

78,498

 

Player (1)

 

 

75,376

 

 

 

64,884

 

 

 

218,695

 

 

 

168,412

 

Total cost of revenue

 

 

142,451

 

 

 

94,388

 

 

 

384,114

 

 

 

246,910

 

Gross Profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Platform

 

 

112,247

 

 

 

70,546

 

 

 

315,738

 

 

 

186,970

 

Player

 

 

6,230

 

 

 

8,447

 

 

 

17,839

 

 

 

32,887

 

Total gross profit

 

 

118,477

 

 

 

78,993

 

 

 

333,577

 

 

 

219,857

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development (1)

 

 

68,487

 

 

 

45,370

 

 

 

186,219

 

 

 

119,692

 

Sales and marketing (1)

 

 

46,666

 

 

 

25,603

 

 

 

117,041

 

 

 

68,180

 

General and administrative (1)

 

 

29,873

 

 

 

19,769

 

 

 

77,992

 

 

 

50,768

 

Total operating expenses

 

 

145,026

 

 

 

90,742

 

 

 

381,252

 

 

 

238,640

 

Loss from Operations

 

 

(26,549

)

 

 

(11,749

)

 

 

(47,675

)

 

 

(18,783

)

Other Income, Net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(767

)

 

 

(112

)

 

 

(1,436

)

 

 

(220

)

Other income, net

 

 

2,065

 

 

 

2,162

 

 

 

4,272

 

 

 

2,971

 

Total other income, net

 

 

1,298

 

 

 

2,050

 

 

 

2,836

 

 

 

2,751

 

Loss Before Income Taxes

 

 

(25,251

)

 

 

(9,699

)

 

 

(44,839

)

 

 

(16,032

)

Income tax benefit

 

 

(96

)

 

 

(172

)

 

 

(619

)

 

 

(397

)

Net Loss

 

$

(25,155

)

 

$

(9,527

)

 

$

(44,220

)

 

$

(15,635

)

Net loss per share —basic and diluted

 

$

(0.22

)

 

$

(0.09

)

 

$

(0.39

)

 

$

(0.15

)

Weighted-average shares used in computing net

  loss per share —basic and diluted

 

 

116,681

 

 

 

106,884

 

 

 

114,064

 

 

 

103,035

 

 

 

 

(1)

Stock-based compensation was allocated as follows:

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

2019

 

 

September 30,

2018

 

 

September 30,

2019

 

 

September 30,

2018

 

Cost of platform revenue

 

$

120

 

 

$

29

 

 

$

238

 

 

$

67

 

Cost of player revenue

 

 

287

 

 

 

136

 

 

 

776

 

 

 

247

 

Research and development

 

 

10,230

 

 

 

5,561

 

 

 

28,020

 

 

 

10,658

 

Sales and marketing

 

 

6,415

 

 

 

3,277

 

 

 

16,555

 

 

 

5,673

 

General and administrative

 

 

5,566

 

 

 

2,496

 

 

 

13,564

 

 

 

4,592

 

Total stock-based compensation

 

$

22,618

 

 

$

11,499

 

 

$

59,153

 

 

$

21,237

 

 

Roku Q3 2019 Shareholder Letter

7

 

 


 

 

 

 

ROKU, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data)

(unaudited)

 

 

As of

 

 

 

September 30,

2019

 

 

December 31,

2018

 

Assets

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

385,999

 

 

$

155,564

 

Short-term investments

 

 

1,496

 

 

 

42,146

 

Restricted cash

 

 

868

 

 

 

 

Accounts receivable, net of allowances

 

 

196,044

 

 

 

183,078

 

Inventories

 

 

73,531

 

 

 

35,585

 

Prepaid expenses and other current assets

 

 

28,908

 

 

 

15,374

 

Deferred cost of revenue, current

 

 

45

 

 

 

1,188

 

Total current assets

 

 

686,891

 

 

 

432,935

 

Property and equipment, net

 

 

61,878

 

 

 

25,264

 

Operating lease right-of-use assets

 

 

142,110

 

 

 

 

Intangible assets, net

 

 

1,061

 

 

 

1,477

 

Goodwill

 

 

1,382

 

 

 

1,382

 

Other non-current assets

 

 

3,983

 

 

 

3,939

 

Total Assets

 

$

897,305

 

 

$

464,997

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

241,519

 

 

$

148,562

 

Deferred revenue, current

 

 

35,912

 

 

 

45,442

 

Total current liabilities

 

 

277,431

 

 

 

194,004

 

Deferred revenue, non-current

 

 

12,932

 

 

 

19,594

 

Operating lease liability, non-current

 

 

142,134

 

 

 

 

Other long-term liabilities

 

 

1,031

 

 

 

6,748

 

Total Liabilities

 

 

433,528

 

 

 

220,346

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value

 

 

12

 

 

 

11

 

Additional paid-in capital

 

 

761,883

 

 

 

498,553

 

Accumulated other comprehensive loss

 

 

(2

)

 

 

(17

)

Accumulated deficit

 

 

(298,116

)

 

 

(253,896

)

Total stockholders’ equity

 

 

463,777

 

 

 

244,651

 

Total Liabilities and Stockholders’ Equity

 

$

897,305

 

 

$

464,997

 

Roku Q3 2019 Shareholder Letter

8

 

 


 

 

 

 

ROKU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

(unaudited)

 

 

Nine Months Ended

 

 

 

September 30,

2019

 

 

September 30,

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(44,220

)

 

$

(15,635

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

9,170

 

 

 

5,824

 

Stock-based compensation expense

 

 

59,153

 

 

 

21,237

 

Provision for doubtful accounts

 

 

114

 

 

 

755

 

Non-cash interest expense

 

 

471

 

 

 

216

 

Loss from exit of facilities

 

 

 

 

 

450

 

Loss on disposals of property and equipment

 

 

 

 

 

8

 

Amortization of premiums on short-term investments

 

 

(280

)

 

 

(164

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(13,080

)

 

 

(1,369

)

Inventories

 

 

(37,946

)

 

 

(36,171

)

Prepaid expenses and other current assets

 

 

(15,270

)

 

 

1,357

 

Operating lease right-of-use assets

 

 

13,603

 

 

 

 

Deferred cost of revenue

 

 

1,143

 

 

 

1,945

 

Other noncurrent assets

 

 

(44

)

 

 

(1,098

)

Accounts payable and accrued liabilities

 

 

69,448

 

 

 

16,943

 

Operating lease liabilities

 

 

856

 

 

 

 

Other long-term liabilities

 

 

(2,639

)

 

 

(541

)

Deferred revenue

 

 

(16,192

)

 

 

(3,054

)

Net cash provided by (used in) operating activities

 

 

24,287

 

 

 

(9,297

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(38,054

)

 

 

(13,363

)

Purchases of short-term investments

 

 

(12,365

)

 

 

(44,900

)

Sales/maturities of short-term investments

 

 

53,310

 

 

 

3,000

 

Net cash provided by (used in) investing activities

 

 

2,891

 

 

 

(55,263

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from equity issued under at-the-market program, net of offering costs

 

 

179,360

 

 

 

 

Proceeds from equity issued under incentive plans

 

 

24,765

 

 

 

25,480

 

Holdback payment for a prior business acquisition

 

 

 

 

 

(500

)

Net cash provided by financing activities

 

 

204,125

 

 

 

24,980

 

Net Increase (Decrease) in cash, cash equivalents and restricted cash

 

 

231,303

 

 

 

(39,580

)

Cash, cash equivalents and restricted cash—Beginning of period

 

 

155,564

 

 

 

177,250

 

Cash, cash equivalents and restricted cash—End of period

 

$

386,867

 

 

$

137,670

 

Cash, cash equivalents and restricted cash at end of period:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

385,999

 

 

 

137,670

 

Restricted cash

 

 

868

 

 

 

 

Cash, cash equivalents and restricted cash—End of period

 

$

386,867

 

 

$

137,670

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

2,215

 

 

 

455

 

Cash paid for income taxes

 

$

683

 

 

$

404

 

Supplemental disclosures of non-cash investing and financing

   activities:

 

 

 

 

 

 

 

 

Unpaid portion of property and equipment purchases

 

$

8,931

 

 

$

1,828

 

Roku Q3 2019 Shareholder Letter

9

 

 


 

 

 

 

 

ROKU, INC.

NON-GAAP INFORMATION (in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

2019

 

 

September 30,

2018

 

 

September 30,

2019

 

 

September 30,

2018

 

Reconciliation of Net Loss to Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(25,155

)

 

$

(9,527

)

 

$

(44,220

)

 

$

(15,635

)

Other income, net

 

 

(1,298

)

 

 

(2,050

)

 

 

(2,836

)

 

 

(2,751

)

Stock-based compensation

 

 

22,618

 

 

 

11,499

 

 

 

59,153

 

 

 

21,237

 

Depreciation and amortization

 

 

3,493

 

 

 

2,218

 

 

 

9,170

 

 

 

5,824

 

Income tax benefit

 

 

(96

)

 

 

(172

)

 

 

(619

)

 

 

(397

)

Adjusted EBITDA

 

$

(438

)

 

$

1,968

 

 

$

20,648

 

 

$

8,278

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Roku Q3 2019 Shareholder Letter

10