roku-8k_20201105.htm
false 0001428439 0001428439 2020-11-05 2020-11-05

 

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 5, 2020

 

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.)

 

 

 

 

 

1155 Coleman Ave

San Jose, California

 

 

 

95110

(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 5, 2020, Roku, Inc. (the “Company”) announced its financial results for the quarter ended September 30, 2020. 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 5, 2020

 

 

 

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 5, 2020

 

 

 

 

 

 

 

 

By:

 

/s/ Steve Louden

 

 

 

 

 

 

Steve Louden

 

 

 

 

 

 

Chief Financial Officer

 

roku-ex991_6.htm

Exhibit 99.1

 

 

November 5, 2020

Fellow Shareholders,

In Q3, Roku delivered outstanding financial and operational results led by robust demand for TV streaming products, strong growth in advertising and the expansion of content distribution partnerships. As the ongoing COVID-19 pandemic continued to accelerate the shift of viewing away from traditional linear and pay TV, we continued to invest in competitive differentiation and execute well against our strategic plan. During the quarter, we achieved a 43% year-over-year active account growth rate and doubled the active account reach of The Roku Channel. Despite continued uncertainties caused by the pandemic, we are pleased with the trajectory of our business and believe that Roku remains well positioned to help shape the future of televisionincluding TV advertising around the world.

Q3 2020 Highlights

 

Total net revenue grew 73% year-over-year (YoY) to $452 million;

 

Platform revenue increased 78% YoY to $319 million;

 

Gross profit was up 81% YoY to $215 million;

 

Roku added 2.9 million incremental active accounts in Q3 2020 to reach 46 million;

 

Streaming hours* increased by 0.2 billion hours over last quarter to 14.8 billion;

 

Average Revenue Per User (ARPU) grew to $27.00 (trailing 12-month basis), up 20% YoY;

 

The Roku Channel reached U.S. households with an estimated 54 million people. 

 

Key Operating Metrics

 

Q3 19

 

 

Q4 19

 

 

Q1 20

 

 

Q2 20

 

 

Q3 20

 

 

YoY %

 

Active Accounts (millions)

 

 

32.3

 

 

 

36.9

 

 

 

39.8

 

 

 

43.0

 

 

 

46.0

 

 

 

43

%

Streaming Hours (billions)*

 

 

9.6

 

 

 

10.9

 

 

 

12.3

 

 

 

14.6

 

 

 

14.8

 

 

 

54

%

ARPU ($)

 

$

22.58

 

 

$

23.14

 

 

$

24.35

 

 

$

24.92

 

 

$

27.00

 

 

 

20

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Summary Financials ($ in millions)

 

Q3 19

 

 

Q4 19

 

 

Q1 20

 

 

Q2 20

 

 

Q3 20

 

 

YoY %

 

Platform revenue

 

$

179.3

 

 

$

259.6

 

 

$

232.6

 

 

$

244.8

 

 

$

319.2

 

 

 

78

%

Player revenue

 

 

81.6

 

 

 

151.6

 

 

 

88.2

 

 

 

111.3

 

 

 

132.4

 

 

 

62

%

Total net revenue

 

 

260.9

 

 

 

411.2

 

 

 

320.8

 

 

 

356.1

 

 

 

451.7

 

 

 

73

%

Platform gross profit

 

 

112.2

 

 

 

162.4

 

 

 

130.6

 

 

 

138.5

 

 

 

194.7

 

 

 

73

%

Player gross profit

 

 

6.2

 

 

 

(0.7

)

 

 

10.5

 

 

 

8.4

 

 

 

20.2

 

 

 

224

%

Total gross profit

 

 

118.5

 

 

 

161.6

 

 

 

141.1

 

 

 

146.8

 

 

 

214.8

 

 

 

81

%

Platform gross margin %

 

 

62.6

%

 

 

62.5

%

 

 

56.2

%

 

 

56.6

%

 

 

61.0

%

 

 

-161

bps

Player gross margin %

 

 

7.6

%

 

 

-0.5

%

 

 

11.9

%

 

 

7.5

%

 

 

15.2

%

 

 

759

bps

Total gross margin %

 

 

45.4

%

 

 

39.3

%

 

 

44.0

%

 

 

41.2

%

 

 

47.6

%

 

 

216

bps

Research and development

 

 

68.5

 

 

 

78.8

 

 

 

88.3

 

 

 

84.4

 

 

 

88.4

 

 

 

29

%

Sales and marketing

 

 

46.7

 

 

 

61.8

 

 

 

68.2

 

 

 

64.2

 

 

 

71.0

 

 

 

52

%

General and administration

 

 

29.9

 

 

 

38.4

 

 

 

39.7

 

 

 

40.5

 

 

 

43.5

 

 

 

46

%

Total operating expenses

 

 

145.0

 

 

 

179.0

 

 

 

196.3

 

 

 

189.0

 

 

 

202.9

 

 

 

40

%

Income (loss) from operations

 

 

(26.5

)

 

 

(17.4

)

 

 

(55.2

)

 

 

(42.2

)

 

 

12.0

 

 

nm

 

Adjusted EBITDA 1

 

 

(0.4

)

 

 

15.1

 

 

 

(16.3

)

 

 

(3.4

)

 

 

56.2

 

 

nm

 

Adjusted EBITDA margin %

 

 

-0.2

%

 

 

3.7

%

 

 

-5.1

%

 

 

-1.0

%

 

 

12.4

%

 

 

1260

bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

___________________________

* Reported streaming hours data reflects adjustments to our streaming hours calculations for current and prior periods. In August 2020, we reported adjustments to our previously reported streaming hours data for periods from Q1 2017 thru Q1 2020, which had inadvertently included some pause time in the streaming hours data due to logging errors in a central database. During August 2020, we deployed a software update to address the root cause of the pause time logging errors.

Roku Q3 2020 Shareholder Letter

1

 

 


 

Growing Active Accounts

Year-over-year active account growth continued to accelerate in Q3. Active accounts rose 43% and reached 46 million thanks to strong sales of players and Roku TVTM models in both the U.S. and international markets.  

Player unit sales grew 57% year-over-year, resulting in our strongest year-over-year player revenue growth in over seven years. Player unit sales more than doubled year-over-year in both Canada and the UK. Strong demand led to tight inventory levels for certain products which enabled us to run fewer promotions than normal which in turn lifted player gross margins. Schools largely stayed closed to in-person education which resulted in a weaker than expected Back-to-School selling season.  

In Q3, we introduced several innovative streaming devices. We recently announced the new Roku Ultra, our top-of-the-line, 4K HDR streaming player that supports Dolby Vision and Dolby Atmos. We also introduced a new category of streaming devices, the Roku® Streambar™ in the U.S., UK, Canada, and Mexico. Combining 4K HDR streaming and soundbar capabilities into a compact form factor, the Roku Streambar is an exceptionally easy and affordable two-in-one upgrade of streaming and sound for any TV with HDMI. The Roku Streaming Stick®+ also recently received CNET’s prestigious Editor’s Choice award for “best streamer overall” which marked the 9th year in a row a Roku product earned a CNET Editor’s Choice award.

In October, we expanded our presence in Brazil with the launch of the Roku Express player. We believe that offering Roku players and Roku TV models strengthens our position and will enable us to build scale in Brazil more quickly.  

Our OEM partners had very strong sales of Roku TV models in Q3. This included some of our newer OEM partners who achieved substantial year-over-year unit share gains in the U.S. The Roku OS is the No. 1 smart TV OS in the U.S and in Canada, and powered more than one in three smart TVs sold in the U.S. during the first nine months of 2020 according to NPD.


On the software side, we recently began to roll out Roku OS 9.4. Among other updates, this release will bring our live TV channel guide for Streaming Channels to Roku TV models, provide surround level control for multi-channel audio on audio products and will enable Apple Airplay2 and Homekit support later this year. The addition of support for Airplay2 wireless content streaming along with the Apple TV+ channel is expected to make the Roku platform more beneficial to consumers who also use Apple iPhone, iPad, or Mac computers.

The compact Roku® Streambar adds powerful 4K HDR streaming and premium audio to any TV

 

 

 

 

Roku Q3 2020 Shareholder Letter

2

 


 

Platform Monetization

Q3 was the strongest quarter in the Platform segment’s history driven by strong growth in advertising as brands embraced connected TV platforms like Roku, we expanded the reach of The Roku Channel, and saw a significant increase in content distribution activities.

Ad Business Strength

In Q3, we saw clear evidence that marketers accelerated their shift out of traditional TV and into TV streaming, precipitated by a 17% year-over-year drop in linear TV viewing among adults 18-49. When released from their annual TV upfront commitments, marketers took the opportunity to reallocate advertising spend more aggressively toward TV streaming.

This advertising spend reallocation benefitted Roku. Q3 monetized video ad impressions grew almost 90% year-over-year, versus roughly 50% year-over-year in Q2. First-time advertiser clients more than doubled year-over-year, driven by performance marketers using our OneView ad platform, as well as TV advertisers focused on new products like incremental reach guarantees. For instance, DraftKings aimed to reach sports fans who had shifted TV viewing to streaming. DraftKings tripled its ad spend year-over-year with Roku, trusting OneView to engage consumers not only on the Roku platform, but also across desktop, mobile and other TV streaming platforms. Product innovation in solutions like the Shopper Data Program with Kroger also continued to drive growth. For instance, Campbell Snacks’ Snyder’s of Hanover found that Roku users who saw their advertising spent five times more on the brand’s products than the average Kroger shopper, leading to a 250% return on advertising spend.

We have also seen that when TV advertisers shift spending to Roku, they tend to become return customers. Ninety-seven percent of TV advertisers that spent $1 million or more with Roku in Q3 2019 continued to invest in Q3 2020. We have also closed 2021 upfront deals with all six major agency holding companies at significantly increased levels of commitments.

The Roku Channel Growth

During the quarter, The Roku Channel reached U.S. households with an estimated 54 million people and grew streaming hours faster than any other top 10 channel on the Roku platform on a year-over-year growth basis. The Roku Channel grew more than twice as fast as the Roku platform overall, on both a streaming hours and active account reach basis. Our new live TV channel guide, which now includes over 115 channels supported this rapid growth and demonstrates our ability to roll out popular content-discovery features. As we continue to offer users more content and features in The Roku Channel, we believe our viewers will stream more content from within it and it will become an even more important source of economics to our content partners. For example, A&E recently highlighted its success reaching an extensive audience across The Roku Channel saying that Roku helped create “tremendous value for A+E’s content through their incredible ad monetization.”

Expanding Content Distribution Partnerships

The pandemic continued to accelerate the shift to streaming and Roku’s content distribution business benefited as a result. Not only did major content producers continue to re-organize around streaming, but also our rapid rate of active accounts growth was accompanied by strong consumer demand for ad-supported viewing, subscription services and premium movie rentals. These factors led to significant increases in the content distribution business and in our estimates of lifetime deal values with an outsized portion of that deal value increase being recognized in Q3.    

An important investment area for Roku is building valuable endemic content marketing and payment capabilities that help content publishers build and monetize large streaming audiences. Services that adopt a growth-marketing mindset and lean into these capabilities are winning. For example, Roku Pay enables our partners to generate subscriptions and transactions more effectively on the Roku platform. In fact, the number of transactions and partner payouts on Roku Pay increased over 130% in Q3 2020 year-over-year. During the quarter, we also reached a mutually beneficial agreement with NBCUniversal to distribute Peacock that includes collaboration around marketing, advertising, and content for The Roku Channel. Building on that partnership, we launched NBC News in The Roku Channel in time for the final presidential debate, expanding the overall reach and monetization for NBC News alongside its standalone NBC News app on the Roku platform. Increasing scale, building effective capabilities that drive partner growth, and reaching mutually beneficial distribution agreements with partners allow Roku to fund continued innovation and provide consumers with a great experience.

Roku Q3 2020 Shareholder Letter

3

 


 

NBC News now streams live content, like the Final Presidential Debate and Election coverage, in the Roku Channel

 

 

 

Looking Forward

Coming out of Q3, we are pleased with the resilience of our business and cautiously optimistic about the holiday season. However, we are also aware of the potential for COVID-19 or economic-related disruptions, as well as the potential impact to historical consumer spending levels or shopping patterns as we enter the holiday season.

The short-term macro environment remains both variable and uncertain. Therefore, rather than providing a formal outlook we are providing perspective on how we believe the quarter could develop. We anticipate that the overall Q4 year-over-year revenue growth will likely be in the mid-40% range, similar to the growth rate in the last few holiday seasons, and we expect platform revenue to account for roughly two-thirds of total revenue. In line with our typical promotional approach to the holiday season, we plan to keep Q4 player gross margins close to breakeven, while we expect Q4 platform gross margins to be in the mid-50% to 60% range which is between the Q2 and Q3 levels.

Given the size of the streaming opportunity we remain committed to our strategic investment areas. We anticipate the sequential expense growth rate from Q3 to Q4 to be in line with last year driven primarily by headcount and sales and marketing expense growth.

Conclusion

Roku pioneered streaming to the TV and continues to innovate and lead the industry as consumers, content publishers and advertisers seize the benefits of TV streaming. Our purpose-built TV OS, deep industry expertise and strong TV OEM partnerships have made Roku’s smart TV OS No. 1 in the U.S. and Canada. We are becoming a pre-eminent programmer of AVOD, live, and SVOD content via The Roku Channel. We created a superior set of advertising solutions that enable brands to reach consumers who no longer watch traditional linear TV. We are bringing these advantages to key international markets in pursuit of global scale. And, as the content publisher landscape continues to adapt and re-organize around direct-to-consumer models, Roku is a principal partner helping them succeed. Forging mutually beneficial partnerships allows us to reinvest in innovation, scale and capabilities that help the whole ecosystem move forward into the Streaming Decade at an even faster pace.

Thank you for your support and Happy Streaming!

Sincerely,

Anthony Wood, Founder & CEO; Steve Louden, CFO

Roku Q3 2020 Shareholder Letter

4

 


 

Conference Call Webcast – 2 p.m. Pacific Time November 5, 2020

The Company will host a webcast of its conference call to discuss Q3 2020 results at 2 p.m. Pacific Time / 5 p.m. Eastern Time on November 5, 2020. 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 TV-related audio devices are available in the U.S. and in select countries through direct retail sales and licensing arrangements with service operators. Roku TV models are available in the U.S. and in select countries through licensing arrangements with TV brands. Roku is headquartered in San Jose, Calif. U.S.

Roku, the Roku logo, Roku TV, Streambar, Streaming Stick 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.

IR - Conrad Grodd

cgrodd@roku.com

Media - Tricia Mifsud

tmifsud@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 statements. Forward-looking statements represent our beliefs and assumptions only as of the date of this letter. These statements include those related to our ability to help shape the future of television and TV advertising globally; the benefits, impact, features, and availability of the new Roku streaming lineup and Roku OS 9.4; our ability to innovate our products and services to drive growth; our ability to have return customers, including with TV advertisers; the commitment levels in our deals with ad agencies;  the growth and adoption of TV streaming and the global trend towards streaming; our progress on building global scale in key markets, including in Brazil, and the timing thereof; the impact of the COVID-19 pandemic on the shift to TV streaming and the re-organizing of content producers around streaming; the ability of Roku Pay to enable our partners to more effectively generate subscriptions and transactions on the Roku platform; the impact of the COVID-19 pandemic on U.S. advertising expenditures and our ability to drive growth in our ad business in spite of such impacts; the impact of the COVID-19 pandemic on our results of operations, including net revenues, earnings and cash flows, and on our operating expenses and capital expenditures; our prospects for financial performance and growth following the COVID-19 pandemic; the addition of content to our platform; our strategic investments; the strength of the Roku brand, OS and platform; the importance, growth and monetization of The Roku Channel, including the impact of the live TV channel guide and its economic importance to our partners; our financial prospective for the fourth fiscal quarter of 2020 and for the full 2020 fiscal year; 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 and Quarterly Reports on Form 10-Q.  All information provided in this shareholder letter and in the tables attached hereto is as of November 5, 2020, and we undertake no duty to update this information unless required by law.

Roku Q3 2020 Shareholder Letter

5

 


 

ROKU, INC.

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

(unaudited)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

2020

 

 

September 30,

2019

 

 

September 30,

2020

 

 

September 30,

2019

 

Net Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Platform

 

$

319,231

 

 

$

179,322

 

 

$

796,565

 

 

$

481,157

 

Player

 

 

132,432

 

 

 

81,606

 

 

 

331,937

 

 

 

236,534

 

Total net revenue

 

 

451,663

 

 

 

260,928

 

 

 

1,128,502

 

 

 

717,691

 

Cost of Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Platform (1)

 

 

124,568

 

 

 

67,075

 

 

 

332,828

 

 

 

165,419

 

Player (1)

 

 

112,271

 

 

 

75,376

 

 

 

292,913

 

 

 

218,695

 

Total cost of revenue

 

 

236,839

 

 

 

142,451

 

 

 

625,741

 

 

 

384,114

 

Gross Profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Platform

 

 

194,663

 

 

 

112,247

 

 

 

463,737

 

 

 

315,738

 

Player

 

 

20,161

 

 

 

6,230

 

 

 

39,024

 

 

 

17,839

 

Total gross profit

 

 

214,824

 

 

 

118,477

 

 

 

502,761

 

 

 

333,577

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development (1)

 

 

88,388

 

 

 

68,487

 

 

 

261,053

 

 

 

186,219

 

Sales and marketing (1)

 

 

70,956

 

 

 

46,666

 

 

 

203,368

 

 

 

117,041

 

General and administrative (1)

 

 

43,510

 

 

 

29,873

 

 

 

123,744

 

 

 

77,992

 

Total operating expenses

 

 

202,854

 

 

 

145,026

 

 

 

588,165

 

 

 

381,252

 

Income (Loss) from Operations

 

 

11,970

 

 

 

(26,549

)

 

 

(85,404

)

 

 

(47,675

)

Other Income, Net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(773

)

 

 

(767

)

 

 

(2,670

)

 

 

(1,436

)

Other income, net

 

 

1,202

 

 

 

2,065

 

 

 

3,020

 

 

 

4,272

 

Total other income (expense), net

 

 

429

 

 

 

1,298

 

 

 

350

 

 

 

2,836

 

Income (Loss) Before Income Taxes

 

 

12,399

 

 

 

(25,251

)

 

 

(85,054

)

 

 

(44,839

)

Income tax (benefit) expense

 

 

(548

)

 

 

(96

)

 

 

(241

)

 

 

(619

)

Net Income (Loss)

 

$

12,947

 

 

$

(25,155

)

 

$

(84,813

)

 

$

(44,220

)

Net income (loss) per share —basic

 

$

0.10

 

 

$

(0.22

)

 

$

(0.69

)

 

$

(0.39

)

Net income (loss) per share —diluted

 

$

0.09

 

 

$

(0.22

)

 

$

(0.69

)

 

$

(0.39

)

Weighted-average shares used in computing net

   income (loss) per share —basic

 

 

125,687

 

 

 

116,681

 

 

 

122,837

 

 

 

114,064

 

Weighted-average shares used in computing net

   income (loss) per share —diluted

 

 

136,669

 

 

 

116,681

 

 

 

122,837

 

 

 

114,064

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)  Stock-based compensation was allocated as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of platform revenue

 

$

206

 

 

$

120

 

 

$

649

 

 

$

238

 

Cost of player revenue

 

 

362

 

 

 

287

 

 

 

1,010

 

 

 

776

 

Research and development

 

 

14,873

 

 

 

10,230

 

 

 

41,476

 

 

 

28,020

 

Sales and marketing

 

 

11,572

 

 

 

6,415

 

 

 

31,244

 

 

 

16,555

 

General and administrative

 

 

7,894

 

 

 

5,566

 

 

 

20,969

 

 

 

13,564

 

Total stock-based compensation

 

$

34,907

 

 

$

22,618

 

 

$

95,348

 

 

$

59,153

 

Roku Q3 2020 Shareholder Letter

6

 


 

ROKU, INC.

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

(unaudited)

 

 

As of

 

 

 

September 30,

2020

 

 

December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,047,478

 

 

$

515,479

 

Restricted cash

 

 

746

 

 

 

1,854

 

Accounts receivable, net of allowances

 

 

391,277

 

 

 

332,673

 

Inventories

 

 

62,609

 

 

 

49,714

 

Prepaid expenses and other current assets

 

 

30,985

 

 

 

25,943

 

Total current assets

 

 

1,533,095

 

 

 

925,663

 

Property and equipment, net

 

 

158,634

 

 

 

103,262

 

Operating lease right-of-use assets

 

 

267,094

 

 

 

283,291

 

Intangible assets, net

 

 

65,737

 

 

 

76,668

 

Goodwill

 

 

73,058

 

 

 

74,116

 

Other non-current assets

 

 

6,392

 

 

 

7,234

 

Total Assets

 

$

2,104,010

 

 

$

1,470,234

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

412,798

 

 

$

313,574

 

Current portion of long-term debt

 

 

4,872

 

 

 

4,866

 

Deferred revenue, current

 

 

48,004

 

 

 

39,861

 

Total current liabilities

 

 

465,674

 

 

 

358,301

 

Long-term debt, non-current

 

 

91,087

 

 

 

94,742

 

Deferred revenue, non-current

 

 

18,134

 

 

 

15,370

 

Operating lease liability, non-current

 

 

311,072

 

 

 

301,694

 

Other long-term liabilities

 

 

1,668

 

 

 

1,701

 

Total Liabilities

 

 

887,635

 

 

 

771,808

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value

 

 

13

 

 

 

12

 

Additional paid-in capital

 

 

1,616,045

 

 

 

1,012,218

 

Accumulated other comprehensive income

 

 

29

 

 

 

29

 

Accumulated deficit

 

 

(399,712

)

 

 

(313,833

)

Total stockholders’ equity

 

 

1,216,375

 

 

 

698,426

 

Total Liabilities and Stockholders’ Equity

 

$

2,104,010

 

 

$

1,470,234

 

Roku Q3 2020 Shareholder Letter

7

 


 

ROKU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

(unaudited)

 

 

Nine Months Ended

 

 

 

September 30,

2020

 

 

September 30,

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(84,813

)

 

$

(44,220

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

26,567

 

 

 

9,170

 

Stock-based compensation expense

 

 

95,348

 

 

 

59,153

 

Amortization of operating lease right-of-use assets

 

 

22,422

 

 

 

13,603

 

Amortization of content license assets

 

 

17,131

 

 

 

1,344

 

Provision for doubtful accounts

 

 

3,097

 

 

 

114

 

Other items, net

 

 

345

 

 

 

191

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(62,767

)

 

 

(13,080

)

Inventories

 

 

(12,895

)

 

 

(37,946

)

Prepaid expenses and other current assets

 

 

(3,595

)

 

 

(15,216

)

Deferred cost of revenue

 

 

 

 

 

1,143

 

Other noncurrent assets

 

 

842

 

 

 

(44

)

Accounts payable and accrued liabilities

 

 

71,275

 

 

 

68,050

 

Operating lease liabilities

 

 

18,116

 

 

 

856

 

Other long-term liabilities

 

 

(833

)

 

 

(2,639

)

Deferred revenue

 

 

10,907

 

 

 

(16,192

)

Net cash provided by operating activities

 

 

101,147

 

 

 

24,287

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(76,012

)

 

 

(38,054

)

Purchases of short-term investments

 

 

 

 

 

(12,365

)

Sales/maturities of short-term investments

 

 

 

 

 

53,310

 

Proceeds from escrows associated with acquisition

 

 

1,058

 

 

 

 

Net cash provided by (used in) investing activities

 

 

(74,954

)

 

 

2,891

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from borrowing, net of issuance costs

 

 

69,325

 

 

 

 

Repayments made on borrowings

 

 

(73,075

)

 

 

 

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

 

 

497,242

 

 

 

179,360

 

Proceeds from equity issued under incentive plans

 

 

11,206

 

 

 

24,765

 

Net cash provided by financing activities

 

 

504,698

 

 

 

204,125

 

Net increase in cash, cash equivalents and restricted cash

 

 

530,891

 

 

 

231,303

 

Cash, cash equivalents and restricted cash—Beginning of period

 

 

517,333

 

 

 

155,564

 

Cash, cash equivalents and restricted cash—End of period

 

$

1,048,224

 

 

$

386,867

 

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

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

1,047,478

 

 

 

385,999

 

Restricted cash

 

 

746

 

 

 

868

 

Cash, cash equivalents and restricted cash—End of period

 

$

1,048,224

 

 

$

386,867

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

2,798

 

 

$

2,215

 

Cash paid for income taxes

 

$

624

 

 

$

683

 

Supplemental disclosures of non-cash investing and financing

   activities:

 

 

 

 

 

 

 

 

Unpaid portion of property and equipment purchases

 

$

4,966

 

 

$

8,931

 

Unpaid portion of at-the-market offering costs

 

$

11

 

 

$

 

 

Roku Q3 2020 Shareholder Letter

8

 


 

 

ROKU, INC.

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

(unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

2020

 

 

September 30,

2019

 

 

September 30,

2020

 

 

September 30,

2019

 

Reconciliation of Net Loss to Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

12,947

 

 

$

(25,155

)

 

$

(84,813

)

 

$

(44,220

)

Other income (expense), net

 

 

(429

)

 

 

(1,298

)

 

 

(350

)

 

 

(2,836

)

Stock-based compensation

 

 

34,907

 

 

 

22,618

 

 

 

95,348

 

 

 

59,153

 

Depreciation and amortization

 

 

9,319

 

 

 

3,493

 

 

 

26,567

 

 

 

9,170

 

Income tax (benefit) expense

 

 

(548

)

 

 

(96

)

 

 

(241

)

 

 

(619

)

Adjusted EBITDA

 

$

56,196

 

 

$

(438

)

 

$

36,511

 

 

$

20,648

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly streaming hours published vs. revised streaming hours (billions) 0b 2b 4b 6b 8b 10b 12b 14b 2017 q1 2017 q2 2017 q3 2017 q4 2018 q1 2018 q2 2018 q3 2018 q4 2019 q1 2019 q2 2019 q3 2019 q4 2020 q1 published streaming hours revised streaming hours

 

Roku Q3 2020 Shareholder Letter

9