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What changed in ROKU, INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ROKU, INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+549 added−571 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-16)

Top changes in ROKU, INC's 2023 10-K

549 paragraphs added · 571 removed · 417 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

84 edited+31 added−39 removed19 unchanged
Biggest changeWe measure monetization of our platform by calculating the average revenue per user (“ARPU”), which we believe represents the inherent value of our business model, and gross profit. ARPU (which we measure on a trailing 12-month basis) was $41.68 as of December 31, 2022 compared to $40.67 as of December 31, 2021.
Biggest changeEach user on our streaming platform creates multiple revenue opportunities for Roku through activities such as navigating through the Roku home screen, watching ad-supported content, or signing up for subscription services. We measure monetization of our platform by calculating the average revenue per user (“ARPU”), which we believe represents the inherent value of our business model, and gross profit.
We recognize that our employees are most likely to thrive when they have the resources to meet their needs and the time and support to succeed in their professional and personal lives. In support of this, we offer a variety of benefits and wellness offerings to employees around the world. Available Information Our website address is www.roku.com.
We recognize that our employees are most likely to thrive when they have the resources to meet their needs and the time and support to succeed in their professional and personal lives. In support of this, we offer a variety of benefits and wellness offerings to our employees around the world. Available Information Our website address is www.roku.com.
Since 2020, the launch of our formal diversity, equity, and inclusion (“DEI”) strategy, we have made considerable progress on elevating awareness of DEI, promoting dialogue and empathy, implementing employee resource groups, and expanding representation on The Roku Channel and the Roku platform.
Since the launch of our formal diversity, equity, and inclusion (“DEI”) strategy in 2020, we have made considerable progress on elevating awareness of DEI, promoting dialogue and empathy, implementing employee resource groups, and expanding representation on The Roku Channel and the Roku platform.
Our revenue and gross profit are traditionally strongest in the fourth quarter of each fiscal year and represent a high percentage of the total net revenue for such fiscal year due to higher consumer purchases and increased advertising during holiday seasons.
Our revenue and gross profit are traditionally strongest in the fourth quarter of each fiscal year and represent a higher percentage of the total net revenue for such fiscal year due to higher consumer purchases and increased advertising during holiday seasons.
Inclusive Customer Experience : As a TV streaming platform with both U.S. and international viewers, we believe our customer experiences should reflect the diversity of our customers.
Customer Experience : As a TV streaming platform with both U.S. and international viewers, we believe our customer experiences should reflect the diversity of our customers.
Our sales teams and products are organized into groups that specialize in the unique needs of each area: (i) agency holding companies and Fortune 500 brands, (ii) independent agency and mid-market clients, (iii) content publishers and entertainment brands, (iv) performance and direct to consumer brands, (v) international markets, and (vi) local advertising.
Our sales teams and products are organized into groups that specialize in the unique needs of each area: (i) agency holding companies and Fortune 500 brands, (ii) independent agency and mid-market clients, (iii) content partners and entertainment brands, (iv) performance and direct-to-consumer brands, (v) international markets, and (vi) local advertising.
In addition, we work with our licensed Roku TV partners to assist in all phases of the development of Roku TV models, including development, planning, manufacturing, and marketing.
We work with our licensed Roku TV partners to assist in all phases of the development of Roku TV models, including planning, manufacturing, and marketing.
To the extent regulators allow network operators to restrict the flow of content over the internet, such operators may seek to extract fees from us or our content publishers to deliver our traffic or may otherwise engage in blocking, throttling, or other discriminatory practices with respect to our traffic, which could adversely impact our business.
To the extent regulators allow network operators to restrict the flow of content over the internet, such operators may seek to extract fees from us or our content partners to deliver our traffic or may otherwise engage in blocking, throttling, or other discriminatory practices with respect to our traffic, which could adversely impact our business.
Our sales and marketing activities are primarily focused on building and expanding relationships with content publishers, advertisers, TV brands, retailers, and service operators, and driving sales of our products and our licensed Roku TV partners’ products to consumers through retail distribution channels.
Our sales and marketing activities are primarily focused on building and expanding relationships with content partners, advertisers, TV brands, retailers, and service operators, and driving sales of our products and our licensed Roku TV partners’ products to consumers through retail distribution channels.
Because our employees are trusted and encouraged to make decisions, our leadership communicates plans, milestones, and strategic context broadly, and our employees are trusted to maintain the confidentiality of such information. Our employees are encouraged to use our broad talent base for diverse points of view when making decisions.
Because our employees are trusted and encouraged to make decisions, our leadership communicates plans, milestones, and strategic context broadly, and our employees are trusted to maintain the confidentiality of such information. Our employees are encouraged to leverage our broad talent base for diverse points of view when making decisions.
In the face of this competition, we believe our success depends on building scale by growing our active accounts, growing engagement by increasing the hours of content streamed through our platform, and growing the monetization of the activities that consumers engage in through our platform.
In the face of this competition, we believe our success depends on building scale by growing our Active Accounts, growing engagement by increasing the hours of content streamed through our platform, and growing the monetization of the activities that viewers engage in through our platform.
Our data science team supports our sales and marketing efforts by analyzing data on our platform to increase effectiveness for our content publishers and advertisers as well as for our consumer marketing campaigns. Our relationship with content publishers is typically client-direct.
Our data science team supports our sales and marketing efforts by analyzing data on our platform to increase effectiveness for our content partners and advertisers as well as for our consumer marketing campaigns. Our relationship with content partners is typically client-direct.
Privacy laws also may limit the ability of advertisers to fully utilize our platform, which could have a negative impact on our business. In addition, the internet is a vital component of our business and is subject to a variety of laws and regulations in jurisdictions throughout the world.
Privacy laws also may limit the ability of advertisers to fully utilize our platform, which could have a negative impact on our business. 9 Table of Contents In addition, the internet is a vital component of our business and is subject to a variety of laws and regulations in jurisdictions throughout the world.
We make it easy for content publishers to distribute and monetize their streaming content through three primary business models: subscription video on demand (“SVOD”) that includes subscriptions to individual video on demand channels and so-called virtual multichannel video programming distribution (“vMVPD”) services; ad-supported, which includes advertising video on demand (“AVOD”) channels with on demand content that do not charge a subscription fee to users, as well as free ad-supported streaming TV (“FAST”), which we define as free, ad-supported linear streaming TV; and transaction video on demand (“TVOD”) that includes channels that offer a la carte content purchases or rentals.
We make it easy for content partners to distribute and monetize their streaming content through three primary business models: subscription video on demand (“SVOD”), which includes subscriptions to individual video on demand apps and so-called virtual multichannel video programming distribution (“vMVPD”) services; ad-supported video, which includes ad-supported video on demand (“AVOD”) apps with on demand content that do not charge a subscription fee to users, as well as free ad-supported streaming TV (“FAST”), which we define as free, ad-supported linear streaming TV; and transaction video on demand, which includes apps that offer a la carte content purchases or rentals.
Through Roku Pay, our proprietary platform billing solution, we are also able to assist content partners with billing services, including billing users for in-channel purchases like content rentals, managing subscriptions, and customer invoices.
Through Roku Pay, our proprietary billing solution, we are also able to assist content partners with billing services, including billing users for in-app purchases like content rentals, managing subscriptions, and customer invoices.
As of December 31, 2022, we employed approximately 3,600 full-time employees located in 14 countries. Only our employees in Brazil are represented by a labor union with respect to their employment. The majority of our employees have adopted a hybrid work schedule (consisting of both in-person work and working from home).
As of December 31, 2023, we employed approximately 3,150 full-time employees located in 15 countries. Only our employees in Brazil are represented by a labor union with respect to their employment. The majority of our employees have adopted a hybrid work schedule (consisting of both in-person work and working from home).
Information contained on or accessible through the websites listed above is not incorporated by reference nor otherwise included in this Annual Report, and any references to these websites are intended to be inactive textual references only. 13 Table o f Contents
Information contained on or accessible through the websites listed above is not incorporated by reference nor otherwise included in this Annual Report, and any references to these websites are intended to be inactive textual references only. 12 Table of Contents
Our competitors include: • companies that offer TV streaming devices that compete with Roku streaming devices and companies that license their operating systems for integration into smart TVs and other streaming products; • TV brands that offer their own TV streaming solutions within their TVs as well as other devices such as game consoles, DVD players, Blu-ray players, and set-top boxes that leverage their own operating systems; • mobile streaming platforms that enable users to stream content on phones and tablets; • companies that produce and aggregate TV streaming content with the goal of attracting wide audiences; • companies that offer advertisers the opportunity to reach consumers on other content and advertising mediums; • companies that offer users other sources for news and entertainment, including broadcast and cable television networks, newspapers and magazines, social networks, and video games; • companies that offer smart home products that compete with our new smart home products and services; and • companies that operate in the same locations as our offices that may be better able attract and retain top talent in engineering, research and development, sales and marketing, operations, and other organizations.
Our competitors include: • companies that offer TV streaming devices that compete with Roku streaming devices and companies that license their operating systems for integration into smart TVs and other streaming products; • TV brands that offer their own TV streaming solutions within their TVs as well as other devices such as game consoles, DVD players, Blu-ray players, and set-top boxes that leverage their own operating systems; • mobile streaming platforms that enable users to stream content on phones and tablets; • companies that produce and aggregate TV streaming content with the goal of attracting wide audiences; • companies that offer advertisers the opportunity to reach viewers on other content and advertising mediums, including on other ad-supported streaming services and social media apps; • companies that offer users other sources for news and entertainment, including broadcast and cable television networks, newspapers and magazines, social networks, and video games; • companies that offer products that compete with our audio products or our smart home products and services; and 10 Table of Contents • companies that operate in the same locations as our offices or offer remote work positions that may be better able to attract and retain top talent in engineering, research and development, sales and marketing, operations, and other organizations.
We believe our Roku-branded TVs will enable us to further grow our leadership position and expand into the higher-end spectrum of performance TVs. Roku-branded TVs will also help us innovate more quickly in all aspects of hardware and software and test directly with consumers, improving the product and consumer experience and strengthening the entire Roku TV ecosystem.
We believe our Roku-branded TVs will enable us to further grow our leadership position in TV streaming and expand into the higher-end range of performance TVs. Roku-branded TVs will also help us innovate more quickly in all aspects of hardware and software and test directly with viewers, improving the product and viewer experience and strengthening the entire Roku ecosystem.
As we grow our business, our goal is to ensure that Roku continues to be a great place to work and thrive. 11 Table o f Contents Diversity, Equity and Inclusion We are committed to being a diverse and inclusive organization.
As we grow our business, our goal is to ensure that Roku continues to be a great place to work and thrive. Diversity, Equity, and Inclusion We are committed to being a diverse and inclusive organization.
We have dedicated business development teams that develop and maintain relationships to promote and build awareness of the features and advantages of the Roku platform among content publishers, advertisers, TV brands, and service operators.
We have dedicated business development teams that develop and maintain relationships to promote and build awareness of the features and advantages of our streaming platform among content partners, advertisers, TV brands, and service operators.
The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding companies (including Roku) that file electronically with the SEC.
Through our dedicated content relationship management team, we enter into agreements with content publishers to distribute their app(s) on our platform, or license their content for The Roku Channel, or both.
Through our dedicated content partner relationship management team, we enter into agreements with content partners to distribute their apps on our platform, or license their content for The Roku Channel, or both.
Item 1: Business Overview Roku, Inc. (“Roku,” “the Company,” “we,” or “us”) is the leading TV streaming platform in the United States, Mexico, and Canada by hours streamed. We pioneered streaming to the TV. We believe that all TV content and all TV advertising will be streamed.
Item 1: Business Overview Roku, Inc. (“Roku,” the “Company,” “we,” or “us”) is the leading TV streaming platform in the United States by hours streamed. We pioneered streaming to the TV. We believe that all TV will be streamed.
Content publishers can use a variety of ad placements, including native display ads on the Roku home screen or a screen saver to drive channel downloads, promote a channel’s content, and direct traffic to their channels in order to drive subscriptions or movie and TV show consumption.
Content partners can use a variety of ad placements, including native display ads on the Roku home screen or a screen saver to drive app downloads, promote an app’s content, and direct traffic to their apps in order to drive subscriptions or movie and TV show consumption.
In determining each employee’s total compensation, we consider what they would be paid by another employer, what we would have to pay to replace them if they leave Roku, and the amount we would pay to retain them.
In determining each employee’s total compensation opportunity, we consider what that employee would be paid by another employer, what we would have to pay to replace that employee if the employee leaves Roku, and the amount we would pay to retain that employee.
They can also reach those users who no longer use or never used traditional TV services. As consumers shift to TV streaming, content publishers that use our platform are able to reach these streaming audiences at scale and engage users directly.
They can also reach and engage those viewers who no longer use or never used traditional TV services. As more viewers shift to TV streaming, content partners that publish apps on our platform are able to reach these streaming audiences at scale and engage viewers directly.
As part of our distribution agreements with AVOD channels, we typically secure direct access to the content publishers’ video ad inventory for our monetization, and our sales efforts are differentiated and complementary to that of our content publishers.
As part of our distribution agreements with AVOD apps, we typically secure direct access to a portion of the content partners’ video ad inventory for our monetization, and our sales efforts are differentiated and complementary to that of our content partners.
Sales and Marketing We engage in a wide variety of sales and marketing activities to continuously drive active account growth, engagement, and monetization and dedicate significant resources to this area.
Sales and Marketing We engage in a wide variety of sales and marketing activities to continuously grow scale, engagement, and monetization and dedicate significant resources to this area.
We also sell products internationally through distributors and to retailers. Amazon and Walmart collectively accounted for 59% of our devices revenue for the year ended December 31, 2022 and 57% of our devices revenue for the year ended December 31, 2021.
We also sell products internationally through distributors and to retailers. Amazon, Best Buy, and Walmart collectively accounted for 71% of our devices revenue for the year ended December 31, 2023 and 67% of our devices revenue for the year ended December 31, 2022.
We also compete with other entertainment providers, including other TV streaming companies and content publishers, in seeking high quality content to license for our platform and for talent and programming concepts for original content projects.
We also compete with other entertainment providers, including other TV streaming companies and content publishers, in seeking high quality content to license for our platform and for talent and programming concepts for original content projects. Increasingly, we also compete with these same publishers in seeking to sell advertising to support the distribution of streaming content.
Our direct relationship with our users provides us with detailed insights about their behavior on our platform, including certain content they search for, the channels they install, the channels they watch, and certain content that they purchase or subscribe to on our platform.
Our direct relationship with customers provides us with detailed insights about their behavior on our streaming platform, including certain content viewers search for, the apps viewers install and watch, and the types of content that viewers purchase or subscribe to on our platform.
Our external relationships are also focused on organizations that reflect underrepresented communities, including technical and non-technical women and underrepresented minority organizations, to enable our hiring managers and recruiters to attend or speak at related conferences, share our job descriptions, and tell our employer brand story to a wider audience.
Our external relationships are also focused on organizations that reflect underrepresented communities, including technical and non-technical women and underrepresented minority organizations, to enable our hiring managers and recruiters to attend or speak at related conferences, share our job descriptions, and tell our employer brand story to a wider audience. 11 Table of Contents Leading Inclusively : Our leaders are instrumental in sustaining inclusive employee and customer experiences.
This first party data enables us to develop actionable insights such as content recommendations to improve our users’ experience. 6 Table o f Contents Our significant scale, ability to reach highly engaged streamers, tools that enable seamless sign ups (like Roku Pay), and marketing/discovery features make us an attractive platform to content publishers.
This first party data enables us to develop actionable insights such as content recommendations to improve our viewers’ experience. Our significant scale, ability to reach highly engaged viewers, tools that enable seamless sign ups, and marketing/discovery features make us an attractive platform to content partners.
We continue to focus significant resources to advance the Roku OS; to provide an industry-leading platform for our consumers, content publishers, and advertisers; to obtain content for our platform that attracts users, including our own original content; and to extend Roku’s advantage as the global shift to TV streaming continues.
We dedicate significant resources to build, maintain, and advance the Roku OS; to provide an industry-leading streaming platform for our viewers, content partners, and advertisers; to obtain content for our streaming platform that attracts viewers, including our own original programming (Roku Originals); and to extend Roku’s leadership as the global shift to TV streaming continues.
Our Strategy Our mission is to be the global TV streaming platform that connects and benefits the entire TV ecosystem of consumers, content publishers, and advertisers. Through our TV streaming platform, we connect consumers to the entertainment they love, enable content publishers to build, engage, and monetize large audiences, and provide advertisers with unique capabilities to reach consumers.
Through our TV streaming platform, we connect viewers to the entertainment they love; enable content partners to build, engage, and monetize large audiences; and provide advertisers with unique capabilities to reach viewers.
And for both content owners and advertisers, The Roku Channel delivers a large and engaged audience at scale that we believe will continue to grow.
For content partners, The Roku Channel provides a variety of options to distribute and monetize content through both licensing agreements and Premium Subscriptions. And for both content partners and advertisers, The Roku Channel delivers a large and engaged audience at scale that we believe will continue to grow.
We also derive revenue from the sale of branded channel buttons on streaming player and Roku TV remote controls that are intended to increase incremental usage of the channel by allowing users to launch straight into the channel from any screen. Our analytics and reporting assist content publishers with analyzing viewership trends and metrics for specific titles.
We also derive revenue from the sale of branded app buttons on streaming player and Roku TV remote controls that are intended to increase incremental usage of an app by allowing viewers to launch straight into the app from any screen.
Our contracts do not obligate them to supply products to us in any specific quantity or at any specific price. Our manufacturers procure components and assemble our products to demand forecast we establish based upon historical trends and analysis from our sales, operations, and product management functions.
Our manufacturers procure components and assemble our products to demand forecast we establish based upon historical trends and analysis from our sales, operations, and product management functions.
In addition, all employees have access to on-demand technical and non-technical skill development through LinkedIn Learning. We intend to continue to review, refresh, purchase, and custom-build additional training materials to support our global employees’ performance and development needs. 12 Table o f Contents Compensation and Benefits Our total compensation program is designed to attract, retain, and reward talented professionals.
We intend to continue to review, refresh, purchase, and custom-build additional training materials to support our global employees’ performance and development needs. Compensation and Benefits Our total compensation program is designed to attract, retain, and reward talented professionals.
We are also developing relationships with more third-party platforms (e.g., retail media networks, demand side platforms, and other strategic partners) to reach marketers buying programmatic advertising on such platforms and to create demand opportunities for Roku ad inventory.
We sell advertising to a wide range of advertisers helping them reach their goals across numerous key performance indicators. 8 Table of Contents We are developing relationships with more third-party ad-buying platforms (e.g., retail media networks, DSPs, and other strategic partners) to reach marketers buying programmatic advertising on such platforms and to create more demand opportunities for Roku ad inventory.
Additional promotional advertising opportunities include shoppable ads that allow consumers to buy products right from the TV screen and content sponsorships that give users the opportunity to experience a free movie or show and sponsored themes in our user experience.
Additional promotional advertising opportunities include content sponsorships that give viewers the opportunity to experience a free movie or show and sponsored themes in our viewer experience and shoppable ads that allow viewers to buy products directly from the TV screen. With shoppable ads, we are adding more performant tools and more partnerships to expand the capabilities we can offer advertisers.
We must regularly update and enhance our platform to meet evolving consumer behavior and provide a best-in-class content delivery and advertising platform. We must provide content publishers with best-in-class publishing tools and actionable audience insights. We must continue to innovate and invest in our advertising capabilities and technology so that we attract and encourage incremental advertising spend on our platform.
We must regularly update and enhance our streaming platform to meet evolving viewer behavior and provide a best-in-class content delivery and advertising platform. We must provide content partners with best-in-class publishing tools and actionable audience insights.
Culture We want our employees to be proud to work at Roku. Our entrepreneurial, execution-focused culture emphasizes recruiting talented individuals, encouraging teamwork, and expecting our employees to perform at a high level. Across Roku, teams are expected to communicate clearly, in real time.
Culture We want our employees to be proud to work at Roku. Our entrepreneurial, execution-focused culture emphasizes recruiting talented individuals, encouraging teamwork, and expecting our employees to perform at a high level. We also emphasize integrity, transparency, and honesty in our internal and external conduct of business.
We generally do not pay cash bonuses (other than to employees eligible for sales commissions) or have performance-based equity awards because our employees are expected to work at the highest level regardless of possible bonus payouts or awards.
Generally, we pay employees total compensation that is comprised of salary and equity awards rather than offering specific benefits or perks that might be valued differently by different employees. We generally do not pay cash bonuses (other than to employees eligible for sales commissions) or have performance-based equity awards because our employees are expected to work at the highest level.
To that end, all recruiters are equipped to discuss DEI best practices with hiring managers to ensure we continue to widen the candidate pipeline for all roles and create inclusive recruiting experiences.
In addition, every member of our Talent Acquisition team is trained on how to source, engage, and recruit candidates from different backgrounds. To that end, our recruiters are equipped to discuss DEI best practices with hiring managers to ensure we continue to widen the candidate pipeline for all roles and create inclusive recruiting experiences.
To establish and protect our proprietary rights, we rely on a combination of intellectual property rights, including patents, trademarks, copyrights, trade secret laws, license agreements, confidentiality procedures, employee disclosure and invention assignment agreements, and other contractual rights. As of December 31, 2022, we had approximately 1,000 issued patents and 500 pending applications in the United States and foreign countries.
Intellectual Property Our success depends in part upon our ability to protect our core technology and intellectual property. To establish and protect our proprietary rights, we rely on a combination of intellectual property rights, including patents, trademarks, copyrights, trade secret laws, license agreements, confidentiality procedures, employee disclosure and invention assignment agreements, and other contractual rights.
And Roku’s powerful universal search makes it fast and easy for users to find the content they are looking for — regardless of the channel it is on. Additionally, users have choice in how much they want to spend on content through a broad array of options on an ad-supported, subscription, or transactional basis.
Additionally, Roku’s powerful universal search makes it fast and easy when viewers are looking for specific content. We also empower viewers to choose how much they want to spend on content by offering them a broad array of ad-supported, subscription, and transactional options.
In addition to mandatory training covering anti-harassment, anti-discrimination, and privacy, we offer employees a suite of highly encouraged training offerings covering topics such as high-performance feedback, active listening, and communication and presentation skills. Managers are provided with training on expectations for managers, interviewing and hiring, and performance management to support new and newly promoted leaders in managing and leading effectively.
In addition to mandatory training covering anti-harassment, anti-discrimination, and privacy, we offer employees a suite of highly encouraged training offerings covering topics such as high-performance feedback, career development, change management, and communication skills.
Consumers connect their Roku streaming devices to our streaming platform via a broadband network and are able to access a wide selection of content through a streaming experience that is both delightful and easy to use.
The Roku OS connects viewers to our streaming platform via a broadband network, giving them access to a wide selection of content through a streaming experience that is both delightful and easy to use. We provide updates via the Roku OS to continuously deliver an exceptional TV streaming experience.
Furthermore, in preparation for the fourth quarter holiday season, we recognize significant discounts in the average selling prices of our streaming device sales through retailers in an effort to grow our active accounts, which typically reduce our devices gross margin or results in a devices gross loss in the fourth quarter. 9 Table o f Contents Research and Development Our research and development model relies on a combination of in-house staff and out-sourced design and manufacturing partners to cost-effectively improve and enhance our platform, and to develop new players, audio products, TVs, smart home devices, features, and functionality.
Furthermore, in preparation for the fourth quarter holiday season, we recognize significant discounts in the average selling prices of our streaming device sales through retailers in an effort to grow our Active Accounts, which typically reduce our devices gross margin or results in a devices gross loss in the fourth quarter.
Audio is an important part of the TV streaming experience, and we also offer the Roku Streambar (a soundbar with a built-in streaming player), Roku wireless speakers that seamlessly connect to TVs powered by Roku OS, and Roku Wireless Subwoofers. Additionally, we offer customers the choice to build an audio experience with third-party products through The Roku TV Ready program.
Audio is an important part of the TV streaming experience, and we also offer Roku-branded wireless speakers and subwoofers that seamlessly connect to TVs powered by the Roku OS. Through our streaming devices and the Roku platform, we provide viewers tremendous choice, value, and an exceptional viewer experience.
The foundation of our platform is the Roku operating system (the “Roku OS”), which is purpose built for TV streaming. The Roku OS powers our Roku streaming devices.
Our Strategy and Business Model The foundation of our platform is the Roku operating system (the “Roku OS”), which is purpose built for TV streaming, and powers Roku streaming devices. The Roku OS is designed to run on low-cost hardware, which enables Roku streaming devices to be sold to customers at competitive prices.
Likewise, foreign jurisdictions in which we operate impose different, and sometimes more stringent, consumer and privacy protections, compared to the United States. Consumer privacy laws are constantly changing and may become more diverse and restrictive over time, increasing the challenges and costs associated with complying with these laws in all jurisdictions.
Consumer privacy laws, and regulators’ interpretations of these laws, may become more diverse and restrictive over time, increasing the challenges and costs associated with complying with these laws in all jurisdictions.
If we fail to comply with these laws and regulations, we may be subject to significant liabilities and other penalties as well as harm to our reputation.
If we fail to comply with these laws and regulations, we may be subject to significant liabilities and other penalties as well as harm to our reputation. For additional information about government regulation applicable to our business and associated risks, see Item 1A, Risk Factors, elsewhere in this Annual Report.
Business Growth Investment in Growth We believe that our future performance will depend on the success of the investments in our business that we have made, and will continue to make, to further differentiate our platform and increase the value we deliver to our users, content publishers, and advertisers.
Owning and operating both The Roku Channel and the streaming platform creates unique value, making us a leader in free content, positioning us to be a valuable partner to content partners, and providing a large source of ad inventory. 7 Table of Contents Business Growth Investment in Growth We believe that our future performance will depend on the success of the investments in our business that we have made, and will continue to make, to further differentiate our streaming platform and increase the value we deliver to our viewers, content partners, and advertisers.
The manufacturers ship our products to our third-party warehouses in the United States, the United Kingdom, Germany, and Brazil where we ship our products directly to retailers, wholesale distributors, and consumers. Government Regulation Our business and our products and platform are subject to numerous U.S. federal, U.S. state, and foreign laws and regulations covering a wide variety of subject matters.
The manufacturers ship our products to our third-party warehouses in the United States and to our distributors in the United Kingdom and Brazil where we ship our products directly to retailers, wholesale distributors, and consumers.
We offer advertisers a unique and effective set of tools to reach consumers both on and off the Roku platform. Advertisers are able to leverage the combination of our significant scale, our direct relationship with our users, and our advertising capabilities to serve relevant advertisements.
Advertisers are able to leverage the combination of our significant scale, our direct relationship with viewers, and our advertising capabilities to serve relevant advertisements. Advertisers on our platform also can measure both the effectiveness of the ads served and their return on investment.
Monetization: Growing our revenue and gross profit by monetizing user activity We generate platform revenue primarily through advertising and content distribution services. Our sophisticated and leading TV streaming platform enables advertisers and content publishers to reach audiences that are increasingly unreachable on traditional TV.
Previously, we referred to streaming services distribution as content distribution services. Our TV streaming platform enables content partners and advertisers to reach audiences that are increasingly unreachable on traditional TV.
We work closely with content publishers, advertisers, licensed Roku TV partners, and service operators to understand their current and future needs. We have designed a product development process that captures and integrates their feedback. In addition, we solicit user feedback in the development of new features and enhancements to the Roku platform.
We work closely with content partners, advertisers, licensed Roku TV partners, and service operators to understand their current and future needs. We have designed a product development process that seeks to take input from our partners into account when making decisions about our future product and service offerings.
We intend to continue to significantly invest in research and development to bring new devices to market and enhance our platform and capabilities. Manufacturing We outsource the manufacturing of our products to our contract manufacturers and original design manufacturers. All of our products are manufactured in the People’s Republic of China, Southeast Asia, and Brazil.
In addition, we solicit user feedback in the development of new features and enhancements to our platform. We intend to continue to invest significantly in research and development to bring new or improved products and services to market. Manufacturing We outsource the manufacturing of our products to our contract manufacturers, original design manufacturers, and other contractors and vendors.
In 2022, we continued our U.S. pay equity analysis to help ensure we pay fairly and equitably across gender and ethnicity, year over year. Our six voluntary and employee-led ERGs are highly engaged and foster a diverse and inclusive workplace, build internal community, encourage career growth and networking, and support social impact partnerships.
Our six voluntary and employee-led ERGs are highly engaged and foster a diverse and inclusive workplace, build internal community, encourage career growth and networking, and support social impact partnerships. In 2023, we delivered DEI offerings in the areas of bias, inclusive conversations, bridging gaps across differences, and allyship.
We also license the Roku OS and our streaming player designs, as well as provide ongoing technology and support services, to certain international pay TV and telecommunications service operators that distribute co-branded players to their subscribers in their markets. Through the Roku platform, we provide consumers tremendous choice, value, and an exceptional user experience.
We also license the Roku OS and our streaming player designs, as well as provide ongoing technology and support services, to certain international pay TV and telecommunications service operators that distribute co-branded streaming players to their subscribers in their markets. 5 Table of Contents The Roku ecosystem extends beyond TV streaming to smart home devices that include cameras, video doorbells, a home monitoring system, plugs, light bulbs, and light strips, along with our Roku Smart Home mobile application for iOS and Android.
These areas comprise our three-part DEI framework: Inclusive Employee Experience, Inclusive Recruiting, and Inclusive Customer Experience. Inclusive Employee Experience : We facilitate an inclusive employee experience through our pay equity analysis, learning and development offerings, internal and external communications, employee resource groups (“ERG”), and mentoring.
Employee Experience : We facilitate an inclusive employee experience through our pay equity analysis, learning and development offerings, internal and external communications, employee resource groups (“ERG”), and mentoring. In 2023, we continued our U.S. pay equity analysis to help ensure we pay fairly and equitably across gender and ethnicity, year over year.
Using machine learning, we also can help content publishers target new audiences that are more likely to subscribe to their services. Just as ads evolved decades ago when TV replaced radio as the primary entertainment medium, ads on TV streaming offer new and more performant opportunities than traditional TV.
Just as ads evolved decades ago when TV replaced radio as the primary entertainment medium, ads on TV streaming offer new and more performant opportunities than traditional TV. We offer advertisers a unique and effective set of tools to reach viewers both on and off our streaming platform.
Whereas our publishers typically feature their brand and content in their sale, we focus on delivering a large streaming audience across many channels at once using our own data. We sell advertising to a wide range of advertisers helping them reach their goals across numerous key performance indicators.
Whereas our content partners typically feature their brand and content in their sale, we focus on delivering a large streaming audience across many apps and via other Roku branded experiences such as our home screen at once using our own data.
Roku Pay allows publishers to enable a frictionless, “one-click” signup within the app, and we believe this key benefit simplifies user subscription signups and drives purchase and retention for our content publishers. 7 Table o f Contents Content publishers also have access to our media and entertainment promotional capabilities and tools to help them attract, engage, and retain viewers by investing in promoting their content to our users on our platform.
Roku Pay allows content partners to enable a frictionless signup within their app, and we believe this key benefit simplifies user subscription signups and drives purchase and retention for our content partners.
Scale: Increasing the number of active accounts We make access to TV streaming affordable in part by offering a broad lineup of streaming players, at various price points, that customers can use to easily turn (nearly) any TV into a smart TV.
Scale: Increasing the number of Active Accounts We make access to TV streaming affordable through a broad lineup of devices, at a variety of competitive price points, including Roku TV models, Roku-branded TVs, and Roku streaming players.
Competition The TV streaming industry is highly competitive and, as it continues to evolve, we will continue to face strong competition in every aspect of our business. We compete with much larger companies which have resources and brand recognition that pose significant competitive challenges.
For information about the intellectual property risks applicable to our business, see Item 1A, Risk Factors, elsewhere in this Annual Report. Competition The TV streaming industry is highly competitive and, as it continues to evolve, we will continue to face strong competition in every aspect of our business.
We believe that the value our business delivers to consumers, content publishers, advertisers, licensed Roku TV partners, other device licensees, and retailers is as compelling in international markets as it is in the United States. Today Roku streaming devices are available in 20+ countries.
International Markets The shift from traditional TV to TV streaming is a global phenomenon, as it offers viewers better choice and greater control over their entertainment. We believe that the value our business delivers to viewers, content partners, and advertisers is as compelling in international markets as it is in the United States.
We also recently announced the launch of a new line of Roku-branded TVs (the Roku Select and Roku Plus Series TVs) that will be designed, made, and sold by us in 2023. These TVs will complement our successful Roku TV licensing program.
In 2023, we launched Roku-branded TVs, which are designed, made, and sold by us. The Roku Select and Roku Plus Series TVs are available at Best Buy, Amazon, and Costco in the United States, and the Roku Pro Series TV is expected to be available in spring 2024. Roku-branded TVs complement our successful Roku TV licensing program.
In 2022, licensed Roku TV partners launched new Roku TV models in Mexico, Canada, and Germany, and we expanded into Australia with Roku TV models. In international markets, we will continue to focus on building scale first, increasing customer engagement, and ultimately driving monetization.
In the United Kingdom, we announced Roku TV models with JVC (at Currys stores), Polaroid, and Sharp. And in Germany, we expanded our Roku TV program with our third TV OEM partner, Coocaa. In international markets, we will continue to focus on building scale first, increasing engagement, and ultimately driving monetization. We are successfully growing The Roku Channel internationally.
In 2022, The Roku Channel was a top 5 channel on our platform in the U.S. by both Active Account Reach and Streaming Hour engagement. The Roku Channel is a core strategic asset that simultaneously benefits consumers, content partners, and advertisers, while generating increasing platform revenue.
The Roku Channel is also a core strategic asset in our monetization efforts that simultaneously benefits viewers, content partners, and advertisers, while generating increasing platform revenue. For viewers, The Roku Channel is a compelling destination for a diverse selection of free and paid entertainment.
Advertisers on our platform also can measure both the effectiveness of the ads served and their return on investment. OneView is our ad buying platform built for TV streaming. Advertisers use OneView to set up, make changes, and measure ad campaigns entirely on their own.
Advertisers can use third-party DSPs or OneView (our ad-buying platform) to set up, make changes, and measure ad campaigns entirely on their own. We offer engagement analytics such as ad impressions served, click-through rates, and video completion rates.
Engagement: Growing streaming hours We believe that offering users a wide range of content and an easy-to-use interface drives increased engagement by delivering a better overall streaming experience. Streaming hours on our platform grew from 73.2 billion hours in 2021 to 87.4 billion hours in 2022, as our active accounts grew through the distribution of Roku streaming devices.
We grew Streaming Hours from 87.4 billion hours in 2022 to 106.0 billion hours in 2023 through the increased distribution of Roku streaming devices, increasing our Active Accounts, and continuing to enhance our viewer experience.
We also license the Roku OS to licensed Roku TV partners that manufacture and sell Roku TV models that integrate the Roku OS to enable basic TV functions and connect to our TV streaming platform. We have driven strong active account growth through our Roku TV licensing program.
Roku TV models are TVs made and sold by our Roku TV partners, which are TV original equipment manufacturers (“OEMs”) that license the Roku OS and leverage our smart TV reference designs. We have driven strong Active Account growth through our Roku TV licensing program, which we launched 10 years ago.
Similar to our TV streaming business model, we plan to build scale with these devices and then monetize through smart home services. 5 Table o f Contents Our Business Model Three core areas of focus define our business model. First, we grow scale by increasing our active accounts.
Similar to our TV streaming business model, we build scale by selling Roku Smart Home devices and then monetize through smart home services. We offer subscription plans for our cameras, video doorbells, and home monitoring system.
Essentially every major media company has entered TV streaming and launched a streaming service, with several expanding beyond pure subscription models to new ad-supported options. Similarly, advertisers can use TV streaming to reach consumers that are increasingly unreachable on traditional TV while also benefiting from the digital advertising capabilities that TV streaming platforms deliver.
Advertisers use TV streaming to reach viewers who are increasingly unreachable on traditional TV while also benefiting from the digital advertising capabilities that TV streaming platforms can deliver. Our Mission Our mission is to be the global TV streaming platform that connects and benefits the entire TV ecosystem of viewers, content partners, and advertisers.
U.S. federal and state consumer protection regulators generally exercise oversight of consumer privacy protections and the security of online services. And an increasing number of states have passed, or are considering, legislation to govern consumer privacy; the U.S. Congress also is considering comprehensive federal privacy legislation.
And an increasing number of states have passed, or are considering, legislation to govern consumer privacy. Likewise, foreign jurisdictions in which we operate impose different, and sometimes more stringent, consumer and privacy protections, compared to the United States.
We launched our original programming, “Roku Originals” on The Roku Channel in 2021 and have continued to build upon this library as it offers compelling, exclusive value to both consumers and advertisers. Our content spend is intended to be commensurate with the growth trajectory of The Roku Channel and also the broader macro environment.
Our content spend is intended to be commensurate with the growth trajectory of The Roku Channel and with the broader macroeconomic environment. The Roku Channel is available on devices powered by the Roku OS in the United States, the United Kingdom, Canada, and Mexico.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisk Factors Summary Below is a summary of the principal factors that make an investment in our Class A common stock speculative or risky: Risks Related to Our Business and Industry • the highly competitive nature of the TV streaming industry that is rapidly evolving; • the acceptance and growth of over-the-top advertising and advertising platforms; • our ability to further monetize our streaming platform; • our ability to attract advertisers and advertising agencies to our demand-side advertising platform; • our ability to develop, maintain, and expand relationships with licensed Roku TV partners, manufacturing partners, and service operators; • our ability to establish and maintain relationships with important content publishers; • popular or new content publishers not publishing their content on our streaming platform; • the non-renewal or early termination of our agreements with content publishers; • maintaining an adequate supply of quality video ad inventory on our platform and selling the available supply; • content publishers electing not to participate in platform features that we develop; • irrelevant or unengaging advertising or media and entertainment promotional spending campaigns on our platform; • our operation of The Roku Channel; • users signing up for offerings and services outside of our platform; • the evolution of our industry and the impact of many factors that are outside of our control; • our and our licensed Roku TV partners’ reliance on retail sales channels to sell products; • our ability to build a strong brand and maintain customer satisfaction and loyalty; • advertiser or advertising agency delayed payment or failure to pay; • maintaining adequate customer support levels; • our introduction of new products and services; • our and our licensed Roku TV partners’ reliance on contract manufacturers and limited manufacturing capabilities; • our reliance on licensed Roku TV partners’ operations for the supply of Roku TV models; • our ability to forecast manufacturing requirements and manage our supply chain and inventory levels; • decreased availability or increased costs for materials and components used in the manufacturing of our products and our licensed Roku TV partners’ products; • our ability to obtain key components from sole source suppliers; • interoperability of our products with content publishers’ and other third parties’ offerings, technologies, and systems; • detecting hardware defects and software errors in our products before they are released to end users; • component manufacturing, design, or other defects that may render our products permanently inoperable; • our ability to obtain or maintain necessary or desirable third-party technology licenses; Risks Related to Operating and Growing Our Business • our history of operating losses; • volatility of our quarterly operating results that could cause our stock price to decline; 14 Table o f Contents • our ability to manage our growth; • our ability to successfully expand our international operations; • seasonality of our business and its impact on our revenue and gross profit; • attracting and retaining key personnel and managing succession; • maintaining systems that can support our growth, business arrangements, and financial rules; • our ability to successfully complete acquisitions and investments and integrate acquired businesses; • our ability to comply with the terms of our outstanding credit facility; • our ability to secure funds to meet our financial obligations and support our planned business growth; Risks Related to Cybersecurity, Reliability, and Data Privacy • significant disruptions of information technology systems or data security incidents; • legal obligations and potential liability or reputational harm related to the protection of personal and confidential information; • disruptions in computer systems or other services that result in a degradation of our platform; • changes in how network operators manage data that travel across their networks; Risks Related to Intellectual Property • intellectual property infringement claims and litigation resulting in significant costs or the loss of important intellectual property rights; • failure or inability to protect or enforce our intellectual property or proprietary rights; • our use of open source software; • our agreements to indemnify certain of our partners if our technology is alleged to infringe on third parties’ intellectual property rights; Risks Related to Macroeconomic Conditions • the impact of supply chain disruptions, inflationary pressures, recessionary fears, the COVID-19 pandemic, natural disasters, geopolitical conflicts, or other natural or man-made catastrophic events on our business; Legal and Regulatory Risks • enactment of or changes to government regulation or laws related to our business; • changes in U.S. or foreign trade policies, geopolitical conditions, and general economic conditions that impact our business; • U.S. or international rules (or the absence of rules) that permit internet access network operators to degrade users’ internet service speeds or limit internet data consumption by users; • liability for content that is distributed through or advertising that is served through our platform; • our ability to maintain effective internal controls over financial reporting; • the impact of changes in accounting principles; • compliance with laws and regulations related to the payment of income taxes and collection of indirect taxes; • changes to U.S. or foreign taxation laws or regulations; • regulatory inquiries, investigations, and proceedings; Risks Related to Ownership of Our Class A Common Stock • the dual class structure of our common stock; • volatility in the market price of our Class A common stock; • potential dilution or a decline in our stock price caused by future sales or issuance of our capital stock or rights to purchase capital stock; • a decline in our stock price caused by future sales by existing stockholders; • dependency on favorable securities and industry analyst reports; • the significant legal, accounting, and other expenses associated with being a publicly traded company; • the absence of dividends on our Class A or Class B common stock; • anti-takeover provisions in our charter and bylaws; and • the limitations resulting from our selection of the Delaware Court of Chancery and the U.S. federal district courts as the exclusive forums for substantially all disputes between us and our stockholders. 15 Table o f Contents Risks Related to Our Business and Industry The TV streaming industry is highly competitive and many companies, including large technology companies, content owners and aggregators, TV brands, and service operators, are actively focusing on this industry.
Biggest changeRisk Factors Summary Below is a summary of the principal factors that make an investment in our Class A common stock speculative or risky: Risks Related to Our Business and Industry • the highly competitive nature of the TV streaming industry that is rapidly evolving; • the acceptance and growth of streaming TV advertising and advertising platforms; • our ability to further monetize our streaming platform; • our ability to successfully run our demand-side platform and work with other third-party demand sources; • our ability to develop, maintain, and expand relationships with licensed Roku TV partners, manufacturing partners, and service operators; • our ability to establish and maintain relationships with important content partners; • popular or new content publishers not publishing their content on our streaming platform; • the non-renewal or early termination of our agreements with content partners; • maintaining an adequate supply of quality video advertising inventory on our platform and effectively selling the available supply; • content partners electing not to participate in platform features that we develop; • irrelevant or unengaging advertising or media and entertainment promotional spending campaigns on our platform; • our operation of The Roku Channel; • users signing up for offerings and services outside of our platform; • our and our licensed Roku TV partners’ ability to develop, maintain, and expand relationships with important retail sales channels that we and they rely on to sell our streaming devices and other products; • our ability to build a strong brand and maintain customer satisfaction and loyalty; • advertiser or advertising agency delayed payment or failure to pay; • maintaining adequate customer support levels; • our introduction of new products and services; • our and our licensed Roku TV partners’ reliance on contract manufacturers and limited manufacturing capabilities; • our reliance on licensed Roku TV partners’ operations for the supply of Roku TV models; • our ability to forecast manufacturing requirements and manage our supply chain and inventory levels; • decreased availability or increased costs for materials and components used in the manufacturing of our products and our licensed Roku TV partners’ products; • our ability to obtain key components from sole source suppliers; • interoperability of our products with content partners’ and other third parties’ offerings, technologies, and systems; • detecting hardware defects and software errors in our products before they are released to end users; • component manufacturing, design, or other defects that may render our products permanently inoperable; • our ability to obtain or maintain necessary or desirable third-party technology licenses; • our use of artificial intelligence (“AI”) technologies in some of our products and services; Risks Related to Operating and Growing Our Business • our history of operating losses; • volatility of our quarterly operating results that could cause our stock price to decline; 13 Table of Contents • our ability to manage our growth; • our ability to successfully expand our international operations; • seasonality of our business and its impact on our revenue and gross profit; • attracting and retaining key personnel and managing succession; • maintaining systems that can support our growth, business arrangements, and financial rules; • our ability to successfully complete acquisitions and investments and integrate acquired businesses; • our ability to secure funds to meet our financial obligations and support our planned business growth; • adverse developments affecting financial institutions, including bank failures; Risks Related to Cybersecurity, Reliability, and Data Privacy • significant disruptions of information technology systems or data security incidents; • legal obligations and potential liability or reputational harm related to our collection, storage, and use of personal and confidential information related to the users of our products and services; • disruptions in computer systems or other services that result in a degradation of our platform; • changes in how network operators manage data that travel across their networks; Risks Related to Intellectual Property • intellectual property infringement claims and litigation resulting in significant costs or the loss of important intellectual property rights; • failure or inability to protect or enforce our intellectual property or proprietary rights; • our use of open-source software; • our agreements to indemnify certain of our partners if our technology is alleged to infringe on third parties’ intellectual property rights; Risks Related to Macroeconomic Conditions • the impact of macroeconomic conditions, natural disasters, geopolitical conflicts, or other natural or man-made catastrophic events on our business; Legal and Regulatory Risks • enactment of or changes to government regulation or laws related to our business; • changes in U.S. or foreign trade policies, geopolitical conditions, and general economic conditions that impact our business; • U.S. or international rules (or the absence of rules) that permit internet access network operators to degrade users’ internet service speeds or limit internet data consumption by users; • liability for content that is distributed through or advertising that is served through our platform; • our ability to maintain effective internal controls over financial reporting; • the impact of changes in accounting principles; • compliance with laws and regulations related to the payment of income taxes and collection of indirect taxes; • changes to U.S. or foreign taxation laws or regulations; • litigation, claims, regulatory inquiries, investigations, and other legal proceedings; Risks Related to Ownership of Our Class A Common Stock • the dual class structure of our common stock; • volatility in the market price of our Class A common stock; • potential dilution or a decline in our stock price caused by future sales or issuance of our capital stock or rights to purchase capital stock; • a decline in our stock price caused by future sales by existing stockholders; • dependency on favorable securities and industry analyst reports; • the significant legal, accounting, and other expenses associated with being a publicly traded company; • the absence of dividends on our Class A or Class B common stock; • anti-takeover provisions in our charter and bylaws; and • the limitations resulting from our selection of the Delaware Court of Chancery and the U.S. federal district courts as the exclusive forums for substantially all disputes between us and our stockholders. 14 Table of Contents Risks Related to Our Business and Industry The TV streaming industry is highly competitive and many companies, including large technology companies, content owners and aggregators, TV brands, and service operators, are actively focusing on this industry.
Seasonal consumer shopping patterns significantly affect our business. Specifically, our revenue and gross profit are traditionally strongest in the fourth quarter of each fiscal year and represent a high percentage of the total net revenue for such fiscal year due to higher consumer purchases and increased advertising during holiday seasons.
Seasonal shopping patterns significantly affect our business. Specifically, our revenue and gross profit are traditionally strongest in the fourth quarter of each fiscal year and represent a high percentage of the total net revenue for such fiscal year due to higher consumer purchases and increased advertising during holiday seasons.
Any attempts by threat actors to disrupt our platform, streaming devices, smart home products, website, computer systems, or mobile apps, if successful, could harm our business, subject us to liability, be expensive to remedy, cause harm to our systems and operations, and damage our reputation.
Any attempts by threat actors to disrupt our streaming platform, streaming devices, smart home products, website, computer systems, or mobile apps, if successful, could harm our business, subject us to liability, be expensive to remedy, cause harm to our systems and operations, and damage our reputation.
Further, we, our service providers and our business partners use tracking technologies, including cookies, device identifiers, and related technologies, to help us manage and track our users’ interactions with our platform, devices, website, and partners’ content to deliver relevant advertising and personalized content for ourselves and on behalf of our partners on our products.
Further, we, our service providers and our business partners use tracking technologies, including cookies, device identifiers, and related technologies, to help us manage and track our users’ interactions with our platform, devices, website, and partners’ content and deliver relevant advertising and personalized content for ourselves and on behalf of our partners on our products.
For example, in developing the reference design of TVs powered by Roku OS, we were required to understand, address, and comply with an evolving regulatory framework for developing, manufacturing, marketing, and selling TVs.
For example, in developing the reference design of TVs powered by the Roku OS, we were required to understand, address, and comply with an evolving regulatory framework for developing, manufacturing, marketing, and selling TVs.
If we fail to adequately address or comply with such regulations regarding the manufacture and sale of TVs, we may be subject to fines or sanctions, and we or our licensed Roku TV partners may be unable to sell TVs powered by Roku OS at all, which could harm our business and our ability to grow our user base.
If we fail to adequately address or comply with such regulations regarding the manufacture and sale of TVs, we may be subject to fines or sanctions, and we or our licensed Roku TV partners may be unable to sell TVs powered by the Roku OS at all, which could harm our business and our ability to grow our user base.
Our directors, employees, and certain contingent workers are subject to our quarterly trading window, which generally opens at the start of the second full trading day after the public dissemination of our annual or quarterly financial results and closes (i) with respect to the first, second, and third quarter of each year, at the end of the fifteenth day of the last month of the such quarter and (ii) with respect to the fourth quarter of each year, at the end of the trading day on the Wednesday before Thanksgiving.
Our directors, employees, and certain contingent workers are subject to our quarterly trading window, which generally opens at the start of the second full trading day after the public dissemination of our annual or quarterly financial results and closes (i) with respect to the first, second, and third quarter of each year, at the end of the fifteenth day of the last month of such quarter and (ii) with respect to the fourth quarter of each year, at the end of the trading day on the Wednesday before Thanksgiving.
In such event, we could be required to make portions of our proprietary software generally available under similar open source software license terms to third parties, including competitors, at no cost, to seek licenses from third parties in order to continue offering our products, to re-engineer our products, or to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis or at all, any of which could harm our business.
In such event, we could be required to make portions of our proprietary software generally available under similar open-source software license terms to third parties, including competitors, at low or no cost, to seek licenses from third parties in order to continue offering our products, to re-engineer our products, or to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis or at all, any of which could harm our business.
For example, the EU General Data Protection Regulation (“GDPR”) imposes detailed requirements related to the collection, storage, and use of personal information related to people located in the EU (or which is processed in the context of EU operations) and places new data protection obligations and restrictions on organizations, and may require us to make further changes to our policies and procedures in the future beyond what we have already done.
For example, the EU General Data Protection Regulation (“GDPR”) imposes detailed requirements related to the collection, storage, and use of personal information related to people located in the EU (or which is processed in the context of EU operations) and places data protection obligations and restrictions on organizations, and may require us to make further changes to our policies and procedures in the future beyond what we have already done.
If we do not effectively train, update, and manage our third-party customer support organization to assist our users and licensees, and if that support organization does not succeed in helping them quickly resolve issues or provide effective ongoing support, it could adversely affect our ability to monetize our streaming platform, to sell our products to consumers and could harm our reputation with potential new customers and our licensees.
If we do not effectively train, update, and manage our third-party customer support organization to assist our users and licensees, and if that support organization does not succeed in helping them quickly resolve issues or provide effective ongoing support, it could adversely affect our ability to monetize our streaming platform, to sell our products to users and could harm our reputation with potential new customers and our licensees.
In addition, our gross margin and operating margin percentages, as well as overall profitability, may be adversely impacted as a result of a shift in device, geographic, or sales channel mix, component cost increases, price competition, or the introduction of new products, including those that have higher cost structures with flat or reduced pricing.
In addition, our gross margin and operating margin percentages, as well as overall profitability, may be adversely impacted as a result of a shift in device, geographic, or retail sales channel mix, component cost increases, price competition, or the introduction of new products, including those that have higher cost structures with flat or reduced pricing.
If one or several retailers or distributors were to discontinue selling our products or our licensed Roku TV partners’ products, choose not to prominently display those devices in their stores or on their websites, or close or severely limit access to their brick and mortar locations, the volume of our products or our licensed Roku TV partners’ products sold could decrease, which would harm our business.
If one or several retailers or distributors were to discontinue selling our products or our licensed Roku TV partners’ products, choose not to prominently display those products in their stores or on their websites, or close or severely limit access to their brick and mortar locations, the volume of our products or our licensed Roku TV partners’ products sold could decrease, which would harm our business.
For example, if the current tensions between Taiwan and China escalate and impact the operations of our contract manufacturers and their Taiwanese suppliers, our supply chain and our business could be adversely affected. We believe that the international location of these facilities increases supply risk, including the risk of supply interruptions, tariffs, and trade restrictions on exports or imports.
For example, if the tensions between Taiwan and China escalate and impact the operations of our contract manufacturers and their Taiwanese suppliers, our supply chain and our business could be adversely affected. We believe that the international location of these facilities increases supply risk, including the risk of supply interruptions, tariffs, and trade restrictions on exports or imports.
Increased use of mobile or other platforms for TV streaming could adversely impact the growth of our streaming hours, harm our competitive position, and otherwise harm our business. We expect competition in TV streaming from the large technology companies and service operators described above, as well as new and growing companies, to increase in the future.
Increased use of mobile or other platforms for TV streaming could adversely impact the growth of our Streaming Hours, harm our competitive position, and otherwise harm our business. We expect competition in TV streaming from the large technology companies and service operators described above, as well as new and growing companies, to continue to increase in the future.
In addition, if we are unable to compete with social media and other digital platforms to win business from advertisers and agencies who have traditionally advertised on these platforms, such as direct-to-consumer and small or medium-sized businesses, our ability to grow our business may be limited.
In addition, if we are unable to compete with social media and other digital platforms to win business from advertisers and advertising agencies who have traditionally advertised on these platforms, such as direct-to-consumer and small or medium-sized businesses, our ability to grow our business may be limited.
In addition, typically, we are contractually required to pay advertising inventory data suppliers within a negotiated period of time, regardless of whether our advertisers or advertising agencies pay us on time, or at all. In addition, we typically experience slow payment cycles by advertising agencies as is common in the advertising industry.
In addition, typically, we are contractually required to pay advertising inventory data suppliers within a negotiated period of time, regardless of whether our advertisers or advertising agencies pay us on time, or at all. Further, we typically experience slow payment cycles by advertising agencies as is common in the advertising industry.
Delays, component shortages, quality issues, and other manufacturing and supply problems have impaired, and could in the future impair, the retail distribution of our products and ultimately our brand. Furthermore, any adverse change in our contract manufacturers’ financial or business condition could disrupt our ability to supply our products to our retailers and distributors.
Delays, component shortages, quality issues, and other manufacturing and supply problems in the past have impaired, and could in the future impair, the retail distribution of our products and ultimately our brand. Furthermore, any adverse change in our contract manufacturers’ financial or business condition could disrupt our ability to supply our products to our retailers and distributors.
Delays or problems associated with any improvement or expansion of our operational and financial systems and controls could adversely affect our relationships with our users, content publishers, advertisers, advertisement agencies, licensed Roku TV partners, or other licensees; cause harm to our reputation and brand; and result in errors in our financial and other reporting.
Delays or problems associated with any improvement or expansion of our operational and financial systems and controls could adversely affect our relationships with our users, content partners, advertisers, advertisement agencies, licensed Roku TV partners, or other licensees; cause harm to our reputation and brand; and result in errors in our financial and other reporting.
As a result, our devices revenue may not increase as rapidly as it has historically, or at all, and, unless we are able to continue to increase our platform revenue and grow the number of active accounts, we may be unable to grow gross profit and our business will be harmed.
As a result, our devices segment revenue may not increase as rapidly as it has historically, or at all, and, unless we are able to continue to increase our platform segment revenue and grow the number of Active Accounts, we may be unable to grow gross profit and our business will be harmed.
Under our agreements with many of our content publishers, licensees, distributors, retailers, contract manufacturers, and suppliers, we are required to provide indemnification in the event our technology is alleged to infringe upon the intellectual property rights of third parties. In certain of our agreements we indemnify our content publishers, licensees, distributors, retailers, manufacturing partners, and suppliers.
Under our agreements with many of our content partners, licensees, distributors, retailers, contract manufacturers, and suppliers, we are required to provide indemnification in the event our technology is alleged to infringe upon the intellectual property rights of third parties. In certain of our agreements we indemnify our content partners, licensees, distributors, retailers, manufacturing partners, and suppliers.
Our current and potential partners include TV brands, cable and satellite companies, and telecommunication providers. Under these license arrangements, we generally have limited or no control over the amount and timing of resources these entities dedicate to the relationship.
Our current and potential partners include TV brands, retailers, cable and satellite companies, and telecommunication providers. Under these license arrangements, we generally have limited or no control over the amount and timing of resources these entities dedicate to the relationship.
If we are unable to develop adequate plans to ensure that our business functions continue to operate during and after a disaster or other catastrophic event and to execute successfully on those plans in the event of a disaster or catastrophic event, our business would be harmed.
If we are unable to develop adequate plans to ensure that our business functions continue to operate during and after a natural disaster or other catastrophic event and to execute successfully on those plans in the event of a disaster or catastrophic event, our business would be harmed.
U.S. patent laws, and the scope of coverage afforded by them, have recently been subject to significant changes, such as the change to “first-to-file” from “first-to-invent” resulting from the Leahy-Smith America Invents Act.
U.S. patent laws, and the scope of coverage afforded by them, have been subject to significant changes, such as the change to “first-to-file” from “first-to-invent” resulting from the Leahy-Smith America Invents Act.
Additionally, following Russia’s invasion of Ukraine, the United States and other countries imposed economic sanctions and severe export control restrictions against Russia and Belarus, and the United States and other countries could impose wider sanctions and export restrictions and take other actions should the conflict further escalate.
Following Russia’s invasion of Ukraine, the United States and other countries imposed economic sanctions and severe export control restrictions against Russia and Belarus, and the United States and other countries could impose wider sanctions and export restrictions and take other actions should the conflict further escalate.
We have no control over these offerings, technologies, and systems beyond our channel certification requirements, and if Roku streaming devices do not provide our users with a high-quality experience on those offerings on a cost-effective basis or if changes are made to those offerings that are not compatible with Roku streaming devices, we may be unable to increase active account growth and user engagement or may be required to increase our hardware costs, and our business will be harmed.
We have no control over these offerings, technologies, and systems beyond our app certification requirements, and if Roku streaming devices do not provide our users with a high-quality experience on those offerings on a cost-effective basis or if changes are made to those offerings that are not compatible with Roku streaming devices, we may be unable to increase Active Account growth and user engagement or may be required to increase our hardware costs, and our business will be harmed.
We may not have sufficient resources to continue to make the investments needed to maintain our competitive position. In addition, most of our competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical, sales, marketing, and other resources than us, which provide them with advantages in developing, marketing, or servicing new products and offerings.
We may not have sufficient resources to continue to make the investments needed to maintain our competitive position. In addition, many of our competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical, sales, marketing, and other resources than us, which provide them with advantages in developing, marketing, or servicing new products and offerings.
Based on the decreasing scale of our licensing program for service operators, including termination of these relationships, we expect that the number of active accounts generated from this program will continue to decline, which may impact the overall growth rate of our active accounts in international markets. Our licensing arrangements are complex and time-consuming to negotiate and complete.
Based on the decreasing scale of our licensing program for service operators, including termination of these relationships, we expect that the number of Active Accounts generated from this program will continue to decline, which may impact the overall growth rate of our Active Accounts in international markets. Our Roku TV licensing arrangements are complex and time-consuming to negotiate and complete.
Our ability to collect and use such data could be restricted by a number of factors, including users having the ability to refuse consent to or opt out from our, our service providers’, or our advertising partners’ collection and use of this data, restrictions imposed by advertisers, content publishers, licensors, and service providers, changes in technology, and developments in laws, regulations, and industry standards.
Our ability to collect and use such data could be restricted by a number of factors, including users having the ability to refuse consent to or opt out from our, our service providers’, or our advertising partners’ collection and use of this data, restrictions imposed by advertisers, content partners, licensors, and service providers, changes in technology, and developments in laws, regulations, and industry standards.
If our users spend most of their time within particular channels where we have limited or no ability to place advertisements or leverage user information, or our users opt out from our ability to collect data for use in providing more relevant advertisements, we may not be able to achieve our expected growth in platform revenue or gross profit.
If our users spend most of their time within particular apps where we have limited or no ability to place advertisements or leverage user information, or our users opt out from our ability to collect data for use in providing more relevant advertisements, we may not be able to achieve our expected growth in platform revenue or gross profit.
Our efforts to monetize our streaming platform through ad-supported content are still developing and may not continue to grow as we expect, and our platform revenue growth has been, and may continue to be, lower than expected due to advertisers significantly curtailing or pausing advertising spending due to inflationary pressures, recessionary fears or other reasons that are out of our control.
Our efforts to monetize our streaming platform through ad-supported content may not continue to grow as we expect, and our platform revenue growth has been, and may continue to be, lower than expected due to advertisers significantly curtailing or pausing advertising spending due to inflationary pressures, recessionary fears or other reasons that are out of our control.
If any of our existing licensed Roku TV partners choose to work exclusively with, or divert a significant portion of their business with us to, other operating system developers, this may adversely impact our ability to continue to license the Roku OS and our smart TV reference design to TV brands and our ability to continue to grow active accounts and monetize the Roku OS.
In addition, if any of our existing licensed Roku TV partners choose to work exclusively with, or divert a significant portion of their business with us to, other operating system developers, this may adversely impact our ability to continue to license the Roku OS and our smart TV reference design to TV brands and to grow Active Accounts and monetize the Roku OS.
We and our content publishers and advertisers could be at risk for violation or alleged violation of these and other privacy, advertising, children’s online protection, or similar laws. Changes in U.S. or foreign trade policies, geopolitical conditions, general economic conditions, and other factors beyond our control may adversely impact our business and operating results.
We and our content partners and advertisers could be at risk for violation or alleged violation of these and other privacy, advertising, children’s online protection, or similar laws. Changes in U.S. or foreign trade policies, geopolitical conditions, general economic conditions, and other factors beyond our control may adversely impact our business and operating results.
In addition, most network operators that provide consumers with access to the internet also offer consumers multichannel video programming, and some network operators also own streaming services. These network operators have an incentive to use their network infrastructure in a manner adverse to the continued growth and success of other companies seeking to distribute similar video programming.
In addition, most network operators that provide users with access to the internet also offer users multichannel video programming, and some network operators also own streaming services. These network operators have an incentive to use their network infrastructure in a manner adverse to the continued growth and success of other companies seeking to distribute similar video programming.
If we invest substantial time and resources to expand our international operations and are unable to do so successfully and in a timely manner, our business and financial condition may be harmed. Our revenue and gross profit are subject to seasonality, and if our sales during the holiday season fall below our expectations, our business may be harmed.
If we invest substantial time and resources to expand our international operations and are unable to do so successfully and in a timely manner, our business and financial condition may be harmed. Our revenue and gross profit are subject to seasonality, and if our sales during the holiday seasons fall below our expectations, our business may be harmed.
For example, despite our efforts to secure our information technology systems and the data contained in those systems, including our efforts to educate or train our employees, we and our third-party vendors have experienced, and remain vulnerable to, data security incidents, including data breaches, phishing attacks, and improper employee access of confidential data.
For example, despite our efforts to secure our information technology systems and the data contained in those systems, including our efforts to educate or train our employees, we and our third-party vendors have experienced, and remain vulnerable to, data security incidents, including data breaches, phishing attacks, improper employee access of confidential data, and inadvertent employee disclosure of confidential data.
If users reduce the degree to which they use our platform for these purchases or subscriptions for any reason, and instead increase the degree to which they pay for services directly with content publishers or by other means for which we do not receive attribution, our business may be harmed.
If users reduce the degree to which they use our platform for these purchases or subscriptions for any reason, and instead increase the degree to which they pay for services directly with content partners or by other means for which we do not receive attribution, our business may be harmed.
Users may decide to opt out or restrict our ability to collect viewing data or to provide them with more relevant advertisements. Content publishers may also refuse to allow us to collect data regarding user engagement or refuse to implement mechanisms we request to ensure compliance with our legal obligations or technical requirements.
Users may decide to opt out or restrict our ability to collect viewing data or to provide them with more relevant advertisements. Content partners may also refuse to allow us to collect data regarding user engagement or refuse to implement mechanisms we request to ensure compliance with our legal obligations or technical requirements.
In addition, if service operators, including traditional TV providers, refuse to grant our users access to stream certain channels or only make content available on devices they prefer, our ability to offer a broad selection of popular streaming channels or content may be limited.
In addition, if service operators, including traditional TV providers, refuse to grant our users access to stream certain apps or only make content available on devices they prefer, our ability to offer a broad selection of popular streaming apps or content may be limited.
Our systems regularly experience directed attacks that are intended to interrupt our operations; interrupt our users’, content publishers’, and advertisers’ ability to access our platform; extract money from us; or view or obtain our data (including without limitation user or employee personal information or proprietary information) or intellectual property.
Our systems regularly experience directed attacks that are intended to interrupt our operations; interrupt our users’, content partners’, and advertisers’ ability to access our platform; extract money from us; or view or obtain our data (including without limitation user or employee personal information or proprietary information) or intellectual property.
In addition, regardless of any legal protections that may limit our liability for the actions of third parties, we may be adversely impacted if copyright holders assert claims, or commence litigation, alleging copyright infringement against the developers of channels that are distributed on our platform.
In addition, regardless of any legal protections that may limit our liability for the actions of third parties, we may be adversely impacted if copyright holders assert claims, or commence litigation, alleging copyright infringement against the developers of apps that are distributed on our platform.
In addition, we could become subject to investigations by the SEC, The Nasdaq Global Select Market, or other regulatory authorities, which could require additional financial and management resources. Our financial results may be adversely affected by changes in accounting principles applicable to us. U.S.
In addition, we could become subject to investigations by the SEC, The Nasdaq Global Select Market, or other regulatory authorities, which could require additional financial and management resources. Our financial results may be adversely affected by changes in accounting principles applicable to us.
Although traditional TV advertisers have shown growing interest in OTT advertising, we cannot be certain that their interest will continue to increase or that they will not revert to traditional TV advertising or shift their advertising spending to social media and other digital platforms (rather than to us).
Although traditional TV advertisers have shown growing interest in streaming TV advertising, we cannot be certain that their interest will continue to increase or that they will not revert to traditional TV advertising or shift their advertising spending to social media and other digital platforms (rather than to us).
If, for any reason, we cease distributing channels that have historically streamed a large percentage of the aggregate streaming hours on our platform, our streaming hours, our active accounts, or Roku streaming device sales may be adversely affected, and our business may be harmed.
If, for any reason, we cease distributing apps that have historically streamed a large percentage of the aggregate Streaming Hours on our platform, our Streaming Hours, our Active Accounts, or Roku streaming device sales may be adversely affected, and our business may be harmed.
Although we generally enter into service level agreements with these parties, we exercise no control over their operations, which makes us vulnerable to any errors, interruptions, or delays that they may experience. In the future, we may transition additional features of our services from our managed hosting systems to cloud computing services, which may require significant expenditures and engineering resources.
Although we generally enter into service level agreements with these parties, we exercise no control over their operations, which makes us vulnerable to any errors, interruptions, or delays that they may experience. 36 Table of Contents In the future, we may transition additional features of our services from our managed hosting systems to cloud computing services, which may require significant expenditures and engineering resources.
Risks Related to Operating and Growing Our Business We have incurred operating losses in the past, and although we have achieved profitability in certain prior quarters, we expect to incur operating losses in the future and may not be able to achieve profitability again in the near term or at all.
Risks Related to Operating and Growing Our Business We have incurred operating losses in the past, and although we have achieved profitability in certain prior quarters, we may continue to incur operating losses in the future and may not be able to achieve profitability again in the near term or at all.
If our content publishers do not participate in new features that we may introduce from time to time, our business may be harmed. As our streaming platform and products evolve, we will continue to introduce new features, which may or may not be attractive to our content publishers or meet their requirements.
If our content partners do not participate in new features that we may introduce from time to time, our business may be harmed. As our streaming platform and products evolve, we will continue to introduce new features, which may or may not be attractive to our content partners or meet their requirements.
We depend on a small number of content publishers for a majority of our streaming hours, and if we fail to maintain these relationships, our business could be harmed. Historically, a small number of content publishers have accounted for a significant portion of the hours streamed on our platform.
We depend on a small number of content partners for a majority of our Streaming Hours, and if we fail to maintain these relationships, our business could be harmed. Historically, a small number of content partners have accounted for a significant portion of the hours streamed on our platform.
Three core areas of focus define our business model: first, we grow scale by increasing our active accounts; second, we grow engagement by increasing the hours of content streamed through our platform; and, third, we grow monetization of the activities that consumers engage in through our platform.
Three core areas of focus define our business model: first, we grow scale by increasing our Active Accounts; second, we grow engagement by increasing the hours of content streamed through our platform; and, third, we grow monetization of the activities that users engage in through our platform.
The U.S. federal government, U.S. states, and foreign governments have enacted (or are considering) laws and regulations that could significantly restrict industry participants’ ability to collect, use, and share personal information, such as by regulating the level of consumer notice and consent required before a company can place cookies or other tracking technologies.
The U.S. federal government, U.S. states, and foreign governments have enacted (or are considering) laws and regulations that could significantly restrict industry participants’ ability to collect, use, and share personal information, such as by regulating the level of consumer notice and consent required before a company can place cookies or other tracking technologies or collect categories of personal information deemed sensitive.
Our business is dependent on consumer discretionary spending and advertising spending, both of which are susceptible to changes in macroeconomic conditions, such as growing inflation, rising interest rates, recessionary fears, and economic uncertainty.
For example, our business is dependent on consumer discretionary spending and advertising spending, both of which are susceptible to changes in macroeconomic conditions, such as growing inflation, rising interest rates, recessionary fears, and economic uncertainty.
Our use of data to deliver relevant advertising and other services on our platform places us and our content publishers at risk for claims under various unsettled laws, including the Video Privacy Protection Act (“VPPA”).
Our use of data to deliver relevant advertising and other services on our platform places us and our content partners at risk for claims under various unsettled laws, including the Video Privacy Protection Act (“VPPA”).
We have in the past, and may in the future, incur significant expenses defending these partners if they are sued for patent infringement based on allegations related to our technology. If a partner were to lose a lawsuit and in turn seek indemnification from us, we also could be subject to significant monetary liabilities.
We have in the past, and may in the future, incur significant expenses defending these partners if they are sued for patent or other property infringement based on allegations related to our technology. If a partner were to lose a lawsuit and in turn seek indemnification from us, we also could be subject to significant monetary liabilities.
We earn revenue by acquiring subscribers for certain of our content publishers activated on or through our platform, including Premium Subscriptions on The Roku Channel, which allow our users to pay for content from various content publishers.
We earn revenue by acquiring subscribers for certain of our content partners activated on or through our platform, including Premium Subscriptions on The Roku Channel, which allow our users to pay for content from various content partners.
These companies have greater financial resources than we do and can subsidize the cost of their streaming devices or licensing arrangements in order to promote their other products and services, which could make it harder for us to acquire new users, retain existing users, and increase streaming hours.
These companies have greater financial resources than we do and can subsidize the cost of their streaming devices or licensing arrangements in order to promote their other products and services, which could make it harder for us to acquire new users, retain existing users, increase Streaming Hours, and monetize our streaming platform.
If consumers of TV streaming content prefer alternative products to Roku streaming devices, we may not be able to achieve our expected growth in active accounts, streaming hours, revenue, gross profit or ARPU. We also compete for streaming hours with mobile streaming applications on smartphones and tablets, and users may prefer to view streaming content on such applications.
If viewers of TV streaming content prefer alternative products to Roku streaming devices, we may not be able to achieve our expected growth in Active Accounts, Streaming Hours, platform revenue, gross profit or ARPU. We also compete for Streaming Hours with mobile streaming applications on smartphones and tablets, and users may prefer to view streaming content on such applications.
While we have policies that prohibit the publication of content that is unlawful, incites illegal activities, or violates third-party rights, among other things, we may distribute channels that include controversial content.
While we have policies that prohibit the publication of content that is unlawful, incites illegal activities, or violates third-party rights, among other things, we may distribute apps that include controversial content.
If content publishers do not certify new products on a timely basis or require us to make changes in order to obtain certifications, our product release plans may be adversely impacted, we may not be able to offer certain products to all licensed Roku TV partners or we may not continue to offer certain channels.
If our content partners do not certify new products on a timely basis or require us to make changes in order to obtain certifications, our product release plans may be adversely impacted, we may not be able to offer certain products to all licensed Roku TV partners or we may not continue to offer certain apps.
If a court were to find either exclusive forum provision in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving such action in other jurisdictions, all of which could harm our business.
If a court were to find either exclusive forum provision in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving such action in other jurisdictions, all of which could harm our business. 48 Table of Contents
The market price of our Class A common stock has been and may continue to be subject to wide fluctuations in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our financial condition and operating results; • changes in projected operational and financial results; • our loss of key content publishers; • changes in laws or regulations applicable to our products or platform; • the commencement or conclusion of legal proceedings that involve us; • actual or anticipated changes in our growth rate relative to our competitors; • announcements of new products or services by us or our competitors; • announcements by us or our competitors of significant acquisitions, strategic partnerships, or joint ventures; • capital-raising activities or commitments; • additions or departures of key personnel; • issuance of new or updated research or reports by securities analysts; • the use by investors or analysts of third-party data regarding our business that may not reflect our financial performance; • fluctuations in the valuation of companies perceived by investors to be comparable to us; • sales of our Class A common stock, including short selling of our Class A common stock; • share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; • general economic and market conditions; and • other events or factors, including those resulting from civil unrest, war, foreign invasions, terrorism, or public health crises, or responses to such events.
The market price of our Class A common stock has been and may continue to be subject to wide fluctuations in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our financial condition and operating results; • changes in projected operational and financial results; • our loss of key content partners; • changes in laws or regulations applicable to our products or platform; • the commencement or conclusion of legal proceedings that involve us; • actual or anticipated changes in our growth rate relative to our competitors; • announcements of new products or services by us or our competitors; • announcements by us or our competitors of significant acquisitions, strategic partnerships, or joint ventures; • capital-raising activities or commitments; • additions or departures of key personnel; • issuance of new or updated research or reports by securities analysts; • the use by investors or analysts of third-party data regarding our business that may not reflect our financial performance; • fluctuations in the valuation of companies perceived by investors to be comparable to us; • the perception that our environmental, social, and corporate governance performance is inadequate compared to that of our competitors; • sales of our Class A common stock, including short selling of our Class A common stock; • share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; • general economic and market conditions; and • other events or factors, including those resulting from civil unrest, war, foreign invasions, terrorism, or public health crises, or responses to such events.
If our products do not operate effectively with various offerings, technologies, and systems from content publishers and other third parties that we do not control, our business may be harmed. The Roku OS is designed to perform using relatively low-cost hardware, which enables us to drive user growth via Roku streaming devices offered at a low cost to consumers.
If our products do not operate effectively with various offerings, technologies, and systems from content partners and other third parties that we do not control, our business may be harmed. The Roku OS is designed to perform using relatively low-cost hardware, which enables us to drive user growth via Roku streaming devices offered at a low cost to users.
The regulatory environment for the collection and use of personal information by device manufacturers, online service providers, content distributors, advertisers, and publishers is evolving in the United States and internationally. Privacy and consumer rights groups and government bodies (including the U.S.
The regulatory environment for the collection and use of personal information by device manufacturers, online service providers, content distributors, advertisers, and publishers is evolving in the United States and internationally. 34 Table of Contents Privacy and consumer rights groups and government bodies (including the U.S.
If we fail to help our content publishers maintain and expand their audiences on our platform or their channels are not available on our platform, our business may be harmed.
If we fail to help our content publishers maintain and expand their audiences on our platform or their apps are not available on our platform, our business may be harmed.
If advertisers, or their agency relationships, do not perceive meaningful benefits of OTT advertising, the market may develop more slowly than we expect, which could adversely impact our operating results and our ability to grow our business.
If advertisers, or their agency relationships, do not perceive meaningful benefits of streaming TV advertising, the market may develop more slowly than we expect, which could adversely impact our operating results and our ability to grow our business.
We may fail to attract content publishers that generate a sufficient quantity or quality of ad-supported content hours on our streaming platform or fail to obtain access to a sufficient quantity and quality of ad inventory from the publishers of such content. Our access to video ad inventory in ad-supported streaming channels on our platform varies greatly among channels.
We may fail to attract content partners that generate a sufficient quantity or quality of ad-supported content hours on our streaming platform or fail to obtain access to a sufficient quantity and quality of ad inventory from the publishers of such content. Our access to video ad inventory in ad-supported streaming apps on our platform varies greatly among apps.
For example, we are not able to fully utilize program level viewing data from many of our most popular channels to improve the relevancy of advertisements provided to our users. 17 Table o f Contents Other channels available on our platform, such as Amazon Prime Video, Apple TV+, Hulu, and YouTube, are focused on increasing user engagement and time spent within their channels by allowing users to purchase additional content and streaming services within their channels; when users purchase these additional services within these channels, we may earn less revenue than when the services are purchased directly from us.
For example, we are not able to fully utilize program level viewing data from many of our most popular apps to improve the relevancy of advertisements provided to our users. 16 Table of Contents Other apps available on our platform, such as Amazon Prime Video, Apple TV+, Hulu, and YouTube, are focused on increasing user engagement and time spent within their apps by allowing users to purchase additional content and streaming services within their apps; when users purchase these additional services within these apps, we may earn less revenue than when the services are purchased directly from us.
If we are unable to maintain an adequate supply of quality video ad inventory on our platform or effectively sell our available video ad inventory, our business may be harmed. Our business model depends on our ability to grow video ad inventory on our streaming platform and sell it to advertisers.
If we are unable to maintain an adequate supply of quality video ad inventory on our platform or generate sufficient demand to effectively sell our available video ad inventory, our business may be harmed. Our business model depends on our ability to grow video ad inventory on our streaming platform and sell it to advertisers.
To continue to increase our active accounts, we must maintain and expand retail sales channels for our products and for the Roku products sold by our partners or licensees.
To continue to grow our Active Accounts, we must maintain and expand retail sales channels for our products and for the Roku products sold by our partners or licensees.
Therefore, we could be subject to similar suits by parties claiming ownership of what we believe to be open source software or our noncompliance with the open source software license terms. 40 Table o f Contents Although we have processes and procedures designed to help monitor our use of open source software, these processes and procedures may not be followed appropriately or may fail to identify risks.
Therefore, we could be subject to similar suits by parties claiming ownership of what we believe to be open-source software or our noncompliance with the open-source software license terms. 39 Table of Contents Although we have processes and procedures designed to help monitor our use of open-source software, these processes and procedures may not be followed appropriately or may fail to identify risks.
The extent to which macroeconomic uncertainties may continue to impact our operational and financial performance remains uncertain and will depend on many factors outside our control. These direct and indirect impacts may negatively affect our business and operating results. Natural disasters, geopolitical conflicts, or other natural or man-made catastrophic events could disrupt and impact our business.
The extent to which macroeconomic uncertainties may continue to impact our operational and financial performance remains uncertain and will depend on many factors outside our control. These direct and indirect impacts may negatively affect our business and operating results. 40 Table of Contents Natural disasters, geopolitical conflicts, or other natural or man-made catastrophic events could disrupt and impact our business.
Future regulations or changes in laws and regulations (or their existing interpretations or applications) could also hinder our operational flexibility, raise compliance costs, and result in additional liabilities for us, which may harm our business. If we are found liable for content that is distributed through or advertising that is served through our platform, our business could be harmed.
Future regulations or changes in laws and regulations (or their existing interpretations or applications) could also hinder our operational flexibility, raise compliance costs, and result in additional liabilities for us, which may harm our business. 43 Table of Contents If we are found liable for content that is distributed through or advertising that is served through our platform, our business could be harmed.
Any party with whom we have executed such an agreement could potentially breach that agreement and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches.
Any party with whom we have executed such an agreement could potentially breach that agreement and disclose our proprietary information, including our trade secrets, and we may not be able to discover such breaches, and if we do, we may not be able to obtain adequate remedies for such breaches.
Factors that may contribute to the variability of our operating results and cause the market price of our Class A common stock to fluctuate include: • the entrance of new competitors or competitive products or services, whether by established or new companies; • our ability to retain and grow our active account base, increase engagement among new and existing users, and monetize our streaming platform; • our ability to maintain effective pricing practices in response to the competitive markets in which we operate or other macroeconomic factors, such as increased taxes or inflationary pressures, such as those the market is currently experiencing, and our ability to control costs, including our operating expenses; • our revenue mix, which drives gross profit; • supply of advertising inventory on our advertising platform and advertiser demand for advertising inventory; • seasonal, cyclical, or other shifts in revenue from advertising or product sales; • the timing of the launch of new or updated products, channels, or features; • the addition or loss of popular content or channels; • the expense and availability of content to license or produce for The Roku Channel; • the ability of retailers to anticipate consumer demand; • an increase in the manufacturing or component costs of our products or partner-branded products; • delays in delivery of our products or partner-branded products, or disruptions in our or our partners’ supply or distribution chains; and • an increase in costs associated with protecting our intellectual property, defending against third-party intellectual property infringement allegations, or procuring rights to third-party intellectual property.
Factors that may contribute to the variability of our operating results and cause the market price of our Class A common stock to fluctuate include: 26 Table of Contents • the entrance of new competitors or competitive products or services, whether by established or new companies; • our ability to retain and grow our Active Accounts, increase engagement among new and existing users, and monetize our streaming platform; • our ability to maintain effective pricing practices in response to the competitive markets in which we operate or other macroeconomic factors, such as increased taxes or inflationary pressures, such as those the market is currently experiencing, and our ability to control costs, including our operating expenses; • our revenue mix, which drives gross profit; • supply of advertising inventory on our advertising platform and advertiser demand for advertising inventory on our advertising platform; • seasonal, cyclical, or other shifts in revenue from advertising or product sales; • the timing of the launch of new or updated products, apps, or features; • the addition or removal of content or apps from our platform; • the expense and availability of content to license or produce for The Roku Channel; • the ability of retailers to anticipate consumer demand; • an increase in the manufacturing or component costs of our products or partner-branded products; • delays in delivery of our products or partner-branded products, or disruptions in our or our partners’ supply or distribution chains; and • an increase in legal costs, including costs associated with protecting our intellectual property, defending against third-party intellectual property infringement allegations, or procuring rights to third-party intellectual property.
As a result of such fluctuations, you may not realize any return on your investment in us and may lose some or all of your investment. In addition, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation or derivative litigation.
As a result of such fluctuations, you may not realize any return on your investment in us and may lose some or all of your investment. In addition, we and other companies that have experienced volatility in the market price of their stock have been, and may in the future be, subject to securities class action litigation or derivative litigation.
If our users sign up for offerings and services outside of our platform or through other channels on our platform, our business may be harmed.
If our users sign up for offerings and services outside of our platform or through other apps on our platform, our business may be harmed.
Our historical growth has placed, and expected future growth will continue to place, significant demands on our management, as well as our financial and operational resources, to: • manage a larger organization; • hire more employees, including engineers with relevant skills and experience; 28 Table o f Contents • expand internationally; • increase our sales and marketing efforts; • expand the capacity to manufacture and distribute our products; • broaden our customer support capabilities; • expand our product offerings; • support our licensed Roku TV partners and service operators; • expand and improve the content offering on our platform; • implement appropriate operational and financial systems; and • maintain effective financial disclosure controls and procedures.
Our historical growth has placed, and any future growth will continue to place, significant demands on our management, as well as our financial and operational resources, to: • manage a larger organization; • hire more employees, including engineers with relevant skills and experience; • expand internationally; 27 Table of Contents • increase our sales and marketing efforts; • expand the capacity to manufacture and distribute our products; • broaden our customer support capabilities; • expand our product offerings; • support our licensed Roku TV partners and service operators; • expand and improve the content offering on our platform; • implement appropriate operational and financial systems; and • maintain effective financial disclosure controls and procedures.
Any of these consequences could cause our users, advertisers, or publishers to lose trust in us, which could harm our business. Furthermore, any failure on our part to comply with these laws may subject us to liability and reputational harm.
Any of these consequences could cause our users, advertisers, or content partners to lose trust in us, which could harm our business. Furthermore, any failure on our part to comply with these laws may subject us to liability and reputational harm.
To continue to grow our active accounts and user engagement, we will need to prioritize development of Roku streaming devices to work better with new offerings, technologies, and systems, including our recently announced smart home products.
To continue to grow our Active Accounts and user engagement, we will need to prioritize development of Roku streaming devices to work better with new offerings, technologies, and systems, including our smart home products and services.
For example, some content publishers have elected not to participate in our new home screen menu features or have imposed limits on our data gathering for usage within their channels. In addition, our streaming platform utilizes our proprietary Brightscript scripting language in order to allow our content publishers to develop and create channels on our streaming platform.
For example, some content partners have elected not to participate in our new home screen menu features or have imposed limits on our data gathering for usage within their apps. In addition, our streaming platform utilizes our proprietary Brightscript scripting language in order to allow our content partners to develop and create apps on our streaming platform.
If we are not successful in helping our content publishers launch and maintain streaming channels and streaming channel features that attract and retain a significant number of users on our streaming platform or if we are not able to do so in a cost-effective manner, our business will be harmed.
If we are not successful in helping our content publishers launch and maintain streaming apps and streaming app features that attract and retain a significant number of users on our streaming platform or if we are not able to do so in a cost-effective manner, our business will be harmed.
Our ability to successfully help content publishers maintain and expand their channel offerings on a cost-effective basis largely depends on our ability to: • effectively promote and market new and existing streaming channels; • minimize launch delays of new and updated streaming channels; and • minimize streaming platform downtime and other technical difficulties.
Our ability to successfully help content publishers maintain and expand their app offerings on a cost-effective basis largely depends on our ability to: • effectively promote and market new and existing streaming apps; • minimize launch delays of new and updated streaming apps; and • minimize streaming platform downtime and other technical difficulties.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe stockholder return shown on the graph below is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns. 50 Table o f Contents Company / Index Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Roku, Inc. $100 $59 $259 $641 $441 $79 Nasdaq Composite Index $100 $97 $133 $192 $235 $159 Current Peer Group $100 $93 $126 $172 $229 $120 Previous Peer Group $100 $92 $125 $174 $243 $128 Source: Prepared by Zacks Investment Research, Inc.
Biggest changeThe stockholder return shown on the graph below is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns. 51 Table of Contents Company / Index Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 Roku, Inc. $100 $437 $1,084 $745 $133 $299 Nasdaq Composite Index $100 $137 $198 $242 $163 $236 Peer Group $100 $136 $186 $247 $129 $227 Source: Prepared by Zacks Investment Research, Inc.
The actual number of stockholders of our Class A common stock is greater than the number of record holders and includes stockholders who are beneficial owners but whose shares of common stock are held in street name by banks, brokers, and other nominees.
The actual number of stockholders of our Class A common stock is greater than the number of record holders and includes stockholders who are beneficial owners but whose shares of Class A common stock are held in street name by banks, brokers, and other nominees.
Our Current Peer Group consists of Alphabet, Inc., Fox Corp, fuboTV, Inc., Interpublic Group of Companies, Inc., LiveRamp Holdings, Inc., Magnite, Inc., Meta Platforms, Inc., Netflix, Inc., Paramount Global, Pinterest, Inc., Pubmatic, Inc., Snap, Inc., Tradedesk Financial Corp, Vizio Holding Corp, Walt Disney Co., and Warner Bros. Discovery, Inc.
Our Peer Group consists of Alphabet, Inc., Fox Corp, fuboTV, Inc., Interpublic Group of Companies, Inc., LiveRamp Holdings, Inc., Magnite, Inc., Meta Platforms, Inc., Netflix, Inc., Paramount Global, Pinterest, Inc., Pubmatic, Inc., Snap, Inc., Tradedesk Financial Corp, Vizio Holding Corp, Walt Disney Co., and Warner Bros. Discovery, Inc.
Stock Performance Graphs and Cumulative Total Return The following graph shows the cumulative total stockholder return of an investment of $100 in cash from December 31, 2017 through December 31, 2022, for (i) our Class A common stock, (ii) the Nasdaq Composite Index, and (iii) the Current Peer Group of companies described below.
Stock Performance Graphs and Cumulative Total Return The following graph shows the cumulative total stockholder return of an investment of $100 in cash from December 31, 2018 through December 31, 2023, for (i) our Class A common stock, (ii) the Nasdaq Composite Index, and (iii) the Peer Group of companies described below.
Holders of Record As of December 31, 2022, there were approximately 64 stockholders of record of our Class A common stock and 15 stockholders of record of our Class B common stock.
Holders of Record As of December 31, 2023, there were approximately 70 stockholders of record of our Class A common stock and 15 stockholders of record of our Class B common stock.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
Sale of Unregistered Securities and Use of Proceeds None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
Both previous and current peer groups are reflected in this year of transition. Pursuant to applicable SEC rules, all values assume reinvestment of the full amount of all dividends, however no dividends have been declared on our Class A common stock or Class B common stock to date.
Pursuant to applicable SEC rules, all values assume reinvestment of the full amount of all dividends, however no dividends have been declared on our Class A common stock or Class B common stock to date.
Because no published index of comparable companies is currently available, we have used the Peer Group of companies for the purposes of this graph in accordance with the requirements of the SEC. We adjusted our Peer Group for fiscal 2022 to align with the changes in our business and comparability of metrics.
Because no published index of comparable companies is currently available, we have used the Peer Group of companies for the purposes of this graph in accordance with the requirements of the SEC.
Removed
The terms of our Credit Agreement also restrict our ability to pay dividends, and we may also enter into credit agreements or other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends on our capital stock. Sale of Unregistered Securities and Use of Proceeds None.
Removed
Our Previous Peer Group consisted of Alphabet, Inc., Logitech International S.A., Meta Platforms, Inc., Netflix, Inc., Snap, Inc., Twitter, Inc., Yelp, Inc., and Zillow Group, Inc.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

73 edited+28 added−43 removed15 unchanged
Biggest changeYears Ended December 31, 2022 2021 2020 Net Revenue: Platform 87 % 82 % 70 % Devices 13 % 18 % 30 % Total net revenue 100 % 100 % 100 % Cost of Revenue: Platform 38 % 30 % 28 % Devices 16 % 19 % 27 % Total cost of revenue 54 % 49 % 55 % Gross Profit (Loss): Platform 49 % 52 % 42 % Devices (3) % (1) % 3 % Total gross profit 46 % 51 % 45 % Operating Expenses: Research and development 25 % 17 % 20 % Sales and marketing 27 % 16 % 17 % General and administrative 11 % 9 % 10 % Total operating expenses 63 % 42 % 47 % Income (Loss) from Operations (17) % 9 % (2) % Other Income (Expense), Net: Interest expense — % — % — % Other income (expense), net 1 % — % — % Total other income (expense), net 1 % — % — % Income (Loss) Before Income Taxes (16) % 9 % (2) % Income tax expense (benefit) — % — % — % Net Income (Loss) (16) % 9 % (2) % 55 Table o f Contents Comparison of Years Ended December 31, 2022 and 2021 Net Revenue Years Ended December 31, 2022 2021 Change $ Change % (in thousands, except percentages) Platform $ 2,711,441 $ 2,264,920 $ 446,521 20 % Devices 415,093 499,664 (84,571) (17) % Total net revenue $ 3,126,534 $ 2,764,584 $ 361,950 13 % Platform Platform revenue increased by $446.5 million, or 20%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily attributable to higher advertising revenue which includes revenue from our demand-side ad platform as well as higher content distribution services, including higher revenue from media and entertainment promotional spending and Premium Subscriptions.
Biggest changeYears Ended December 31, 2023 2022 2021 Net Revenue: Platform 86 % 87 % 82 % Devices 14 % 13 % 18 % Total net revenue 100 % 100 % 100 % Cost of Revenue: Platform 41 % 38 % 30 % Devices 15 % 16 % 19 % Total cost of revenue 56 % 54 % 49 % Gross Profit (Loss): Platform 45 % 49 % 52 % Devices (1) % (3) % (1) % Total gross profit 44 % 46 % 51 % Operating Expenses: Research and development 25 % 25 % 17 % Sales and marketing 30 % 27 % 16 % General and administrative 12 % 11 % 9 % Total operating expenses 67 % 63 % 42 % Income (Loss) from Operations (23) % (17) % 9 % Other Income, Net: Interest expense — % — % — % Other income, net 3 % 1 % — % Total other income, net 3 % 1 % — % Income (Loss) Before Income Taxes (20) % (16) % 9 % Income tax expense (benefit) — % — % — % Net Income (Loss) (20) % (16) % 9 % Comparison of Years Ended December 31, 2023 and 2022 Net Revenue Years Ended December 31, 2023 2022 Change $ Change % (in thousands, except percentages) Platform $ 2,994,105 $ 2,711,441 $ 282,664 10 % Devices 490,514 415,093 75,421 18 % Total net revenue $ 3,484,619 $ 3,126,534 $ 358,085 11 % Platform Platform revenue increased by $282.7 million, or 10%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to an increase in revenue from streaming services distribution, such as revenue share on content subscriptions and Premium Subscriptions through The Roku Channel, which was offset by slightly lower revenue from advertising driven primarily by weakness in media and entertainment promotional spending. 57 Table of Contents Devices Devices revenue increased by $75.4 million, or 18%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022. $10.0 million of the increase was due to a change in estimated transaction price for a licensing arrangement with a service operator for which performance obligations were satisfied in prior periods and was recognized as revenue during the three months ended March 31, 2023.
We define streaming hours as the aggregate amount of time streaming devices stream content on our platform in a given period. Hours streamed from The Roku Channel on non-Roku platforms are not included in this metric. Additionally, smart home products do not contribute to our streaming hours. We report streaming hours on a calendar basis.
We define Streaming Hours as the aggregate amount of time Roku streaming devices stream content on our platform in a given period. Hours streamed from The Roku Channel on non-Roku platforms are not included in this metric. Additionally, smart home products do not contribute to our Streaming Hours. We report Streaming Hours on a calendar basis.
Consistent with industry practices, we enter into firm, non-cancelable, and unconditional purchase commitments with our manufacturers to acquire products through a combination of purchase orders, supplier contracts, and open orders based on projected demand information. Our manufacturers source components and build our products based on these demand forecasts.
Consistent with industry practices, we enter into firm, non-cancelable, and unconditional purchase commitments with our contract manufacturers to acquire products through a combination of purchase orders, supplier contracts, and open orders based on projected demand information. Our contract manufacturers source components and build our products based on these demand forecasts.
We define ARPU as our platform revenue for the trailing four quarters divided by the average of the number of active accounts at the end of the current period and the end of the corresponding period in the prior year. ARPU measures the rate at which we are monetizing our active account base and the progress of our platform business.
We define ARPU as our platform revenue for the trailing four quarters divided by the average of the number of Active Accounts at the end of the current period and the end of the corresponding period in the prior year. ARPU measures the rate at which we are monetizing our Active Accounts base and the progress of our platform business.
We believe that this also occurs across a wide variety of non-Roku streaming devices and other set-top boxes. Since the first quarter of 2020, all of our Roku streaming devices include a Roku OS feature that is designed to identify when content has been continuously streaming on a channel for an extended period of time without user interaction.
We believe that this also occurs across a wide variety of non-Roku streaming devices and other set-top boxes. Since the first quarter of 2020, all of our Roku streaming devices include a Roku OS feature that is designed to identify when content has been continuously streaming on an app for an extended period of time without user interaction.
(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 (together with the Revolving Credit Facility and the Term Loan A Facility, collectively, the “Credit Facility”).
(as amended on May 3, 2019, the “Credit Agreement”), which provided 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 (together with the Revolving Credit Facility and the Term Loan A Facility, collectively, the “Credit Facility”).
Our future capital requirements, the adequacy of available funds, and cash flows from operations could be affected by various risks and uncertainties, including, but not limited to, those detailed in Part I, Item 1A, Risk Factors in this Annual Report and the effects of the current macroeconomic environment.
Our future capital requirements, the adequacy of available funds, and cash flows from operations could be affected by various risks, uncertainties, including, but not limited to, those detailed in Item 1A, Risk Factors in this Annual Report and the effects of the current macroeconomic environment.
Moreover, streaming hours on our platform are measured whenever a streaming device is streaming content, whether a viewer is actively watching or not.
Moreover, Streaming Hours on our platform are measured whenever a Roku streaming device is streaming content, whether a viewer is actively watching or not.
For example, if a Roku player is connected to a TV, and the viewer turns off the TV, steps away, or falls asleep and does not stop or pause the player, then the particular streaming channel may continue to play content for a period of time determined by the streaming channel.
For example, if a Roku player is connected to a TV, and the viewer turns off the TV, steps away, or falls asleep and does not stop or pause the player, then the particular streaming app may continue to play content for a period of time determined by the streaming app.
For additional information regarding content commitments, see Note 13 to the consolidated financial statements in Item 8 of this Annual Report. • Operating lease liabilities that are included in our consolidated balance sheets and liabilities related to the lease arrangements that have not yet commenced.
For additional information regarding content commitments, see Note 12 to the consolidated financial statements in Item 8 of this Annual Report. • Operating lease liabilities that are included in our consolidated balance sheets and liabilities related to the lease arrangements that have not yet commenced.
Cost of revenue, devices also includes technology licenses or royalty fees on devices we sell or license, inbound and outbound freight, duty and logistics costs, third-party packaging, inventory provisions, and allocated overhead costs related to facilities, customer support, and salaries, benefits, and stock-based compensation for operations personnel.
Cost of revenue, devices also includes technology licenses or royalty fees on devices we sell, inbound and outbound freight, duty and logistics costs, third-party packaging, inventory provisions, and allocated overhead costs related to facilities, third-party cloud services, customer support, and salaries, benefits, and stock-based compensation for operations personnel.
This feature, which we refer to as “Are you still watching,” periodically prompts the user to confirm that they are still watching the selected channel and closes the channel if the user does not respond affirmatively. We believe that the implementation of this feature across the Roku platform benefits us, our customers, channel partners, and advertisers.
This feature, which we refer to as “Are you still watching,” periodically prompts the user to confirm that they are still watching the selected app and closes the app if the user does not respond affirmatively. We believe that the implementation of this feature across the Roku platform benefits us, our customers, content partners, and advertisers.
In our international markets, we primarily sell our devices through wholesale distributors which, in turn, re-sell to retailers. Cost of Revenue Cost of Revenue, Platform Cost of revenue, platform primarily consists of costs associated with acquiring advertising inventory and amortization costs of content, both licensed and produced, and revenue share with content publishers.
In our international markets, we primarily sell our devices through wholesale distributors which, in turn, sell to retailers. Cost of Revenue Cost of Revenue, Platform Cost of revenue, platform primarily consists of costs associated with acquiring advertising inventory and amortization costs of content, both licensed and produced, and revenue share with content partners .
See Item 1A, Risk Factors, and the Note Regarding Forward Looking Statements elsewhere in this Annual Report for additional details. 52 Table o f Contents Key Performance Metrics The key performance metrics we use to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions are gross profit, active accounts, streaming hours, and ARPU.
See Item 1A, Risk Factors, and the Note Regarding Forward Looking Statements elsewhere in this Annual Report for additional details. 53 Table of Contents Key Performance Metrics The key performance metrics we use to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions are gross profit, Active Accounts, Streaming Hours, and ARPU.
Cost of Revenue, Devices Cost of revenue, devices is comprised mostly of manufacturing costs payable to third party manufacturers for devices we sell which include streaming players, audio products and smart home products.
Cost of Revenue, Devices Cost of revenue, devices is comprised mostly of manufacturing costs payable to third party manufacturers for devices we sell which include streaming players, Roku-branded TVs, audio products and smart home products.
These activities can materially impact our liquidity and capital resources. We believe our existing cash and cash equivalents balance and cash flow from operations will be sufficient to meet our working capital, capital expenditures, and material cash requirements from known contractual obligations for the next twelve months and beyond.
These activities may materially impact our liquidity and capital resources. We believe our existing cash and cash equivalents balance will be sufficient to meet our working capital, capital expenditures, and material cash requirements from known contractual obligations for the next twelve months and beyond.
Although we believe we have adequately provided for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be materially different. Critical Accounting Policies and Estimates Our financial statements are prepared in accordance with generally accepted accounting principles in the United States.
Although we believe we have adequately provided for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be materially different. 61 Table of Contents Critical Accounting Estimates Our financial statements are prepared in accordance with generally accepted accounting principles in the United States.
This section of this Annual Report generally discusses fiscal years 2022 and 2021 and year-to-year comparisons between those years.
This section of this Annual Report generally discusses fiscal years 2023 and 2022 and year-to-year comparisons between those years.
For additional information regarding manufacturing purchase commitments, see Note 13 to the consolidated financial statements in Item 8 of this Annual Report. • Commitments to license content from content publishers and produce content under contractual arrangements.
For additional information regarding manufacturing purchase commitments, see Note 12 to the consolidated financial statements in Item 8 of this Annual Report. • Commitments to license content from content partners and produce content under contractual arrangements.
Our gross profit was $1,441.1 million and $1,408.6 million for the years ended December 31, 2022 and 2021, respectively, reflecting an increase of 2%. Active Accounts We believe that the number of active accounts is a relevant measure to gauge the size of our user base.
Our gross profit was $1,522.6 million and $1,441.1 million for the years ended December 31, 2023 and 2022, respectively, reflecting an increase of 6%. Active Accounts We believe that the number of Active Accounts is a relevant measure to gauge the size of our user base.
Discussions of fiscal year 2020 and year-to-year comparisons between fiscal years 2021 and 2020 that are not included in this Annual Report can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our Annual Report for the fiscal year ended December 31, 2021 filed with the SEC on February 18, 2022.
Discussions of fiscal year 2021 and year-to-year comparisons between fiscal years 2022 and 2021 that are not included in this Annual Report can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our Annual Report for the fiscal year ended December 31, 2022 filed with the SEC on February 16, 2023.
Devices revenue is generated from the sale of streaming players, audio products, smart home products, and, beginning in 2023, Roku-branded TVs, and related accessories as well as from licensing arrangements with service operators and licensed Roku TV partners. We expect to continue to manage the average selling prices (“ASP”) of Roku streaming devices to increase our active accounts.
Devices revenue is generated from the sale of streaming players, Roku-branded TVs (beginning in March 2023), smart home products and services, audio products, and related accessories as well as revenue from licensing arrangements with service operators. We expect to continue to manage the average selling prices of Roku streaming devices to increase our Active Accounts.
However, our revenue from content publishers is not tied to the hours streamed on their streaming channels, and the number of streaming hours does not correlate to revenue earned from such content publishers or ARPU on a period-by-period basis.
However, our revenue from content partners is not tied to the hours streamed on their streaming apps, and the number of Streaming Hours does not correlate to revenue earned from such content partners or ARPU on a period-by-period basis.
Some of our leading channel partners, including Netflix, also have implemented similar features within their channels. This Roku OS feature supplements these channel features. This feature has not had and is not expected to have a material impact on our future financial performance.
Some of our leading content partners, including Netflix, also have implemented similar features within their apps. This Roku OS feature supplements these app features. This feature has not had and is not expected to have a material impact on our future financial performance.
Operating and Other Expenses Research and Development Research and development expenses consist primarily of personnel-related costs, including salaries, benefits, and stock-based compensation for our development teams as well as outsourced development fees. In addition, research and development expenses include allocated facilities and overhead costs.
Operating and Other Expenses Research and Development Research and development expenses consist primarily of salaries, benefits, and stock-based compensation for our development teams as well as outsourced development expenses. In addition, research and development expenses include allocated facilities and overhead expenses.
Business Conditions and Macroeconomic Factors Macroeconomic factors, such as increased inflation and interest rates, recessionary fears, financial and credit market fluctuations, changes in economic policy, the prolonged COVID-19 pandemic, global supply chain constraints, and geopolitical developments (such as the war in Ukraine), have had, and we believe will continue to have, an impact on our business and results of operations.
Business Conditions and Macroeconomic Factors Macroeconomic factors, such as increased inflation and interest rates, recessionary fears, financial and credit market fluctuations, changes in economic policy, global supply chain constraints, and geopolitical developments (such as the war in Ukraine and the unrest in the Middle East), have had, and we believe may continue to have, an impact on our business and results of operations.
We streamed 87.4 billion and 73.2 billion h ours during the years ended December 31, 2022 and 2021, respectively reflecting an increase of 19%. Average Revenue per User We measure our platform monetization progress with ARPU, which we believe represents the inherent value of our business.
We streamed 106.0 billion and 87.4 billion h ours during the years ended December 31, 2023 and 2022, respectively, reflecting an increase of 21%. 54 Table of Contents Average Revenue per User We measure our platform monetization progress with ARPU, which we believe represents the inherent value of our business.
During the year ended December 31, 2022, the volume of streaming players sold decreased by 14% and the average selling price of streaming players decreased by 5% as compared to the year ended December 31, 2021.
The volume of streaming players sold decreased by 8% and the average selling price of streaming players increased by 1% during the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Sales and Marketing Sales and marketing expenses consist primarily of personnel-related costs, including salaries, benefits, commissions, and stock-based compensation for our employees engaged in sales and sales support, marketing, communications, data science and analytics, business development, product management, and partner support functions. Sales and marketing expenses also include marketing, retail and merchandising costs, and allocated facilities and overhead expenses.
Sales and Marketing Sales and marketing expenses consist primarily of salaries, benefits, commissions, and stock-based compensation for our employees engaged in sales and sales support, marketing, communications, data science and analytics, business development, product management, and partner support functions.
Platform revenue is generated from the sale of digital advertising and related services including the demand-side platform and 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.
Platform revenue is generated from the sale of digital advertising (including direct and programmatic video advertising, media and entertainment promotional spending, and related services) and streaming services distribution (including subscription and transaction revenue shares, the sale of Premium Subscriptions, and the sale of branded app buttons on remote controls). Streaming services distribution was previously referred to as content distribution services.
The primary uses of cash are costs of revenue including costs to acquire advertising inventory, costs to license and produce content, third-party manufacturing costs for our products, as well as operating expenses including payroll-related expenses, consulting and professional service fees, and facility and marketing expenses. Other uses of cash include purchases of property and equipment and mergers and acquisitions.
The primary uses of cash are costs of revenue including costs to acquire advertising inventory, costs to license and produce content, third-party manufacturing costs for our products, as well as operating expenses such as personnel-related expenses including employee termination payments, consulting and professional service expenses, facility expenses, and marketing expenses.
Our ad inventory includes video ad inventory from AVOD content in The Roku Channel, native display ads on our home screen and screen saver, as well as ad inventory we obtain through our content distribution agreements with publishers.
Our ad inventory includes video ad inventory from AVOD content in The Roku Channel, native display ads on our home screen and screen saver, as well as ad inventory we obtain through our streaming services distribution agreements with our content partners. To supplement supply, we purchase advertising inventory from our content partners, on an as needed basis.
We have established a full valuation allowance to offset the U.S. and Netherlands net deferred tax assets due to the uncertainty of realizing future tax benefits from our net operating loss carry-forwards and other deferred tax assets.
A valuation allowance is established when it is more likely than not that the deferred tax assets will not be realized. We have established a full valuation allowance for our U.S. and Netherlands net deferred tax assets due to the uncertainty of realizing future tax benefits from our net operating loss carry-forwards and other deferred tax assets.
We perform an ongoing analysis of various factors including our historical experience, promotional programs, claims to date, and other business factors to determine the allowances for sales returns and sales incentives.
Allowances for Sales Returns and Sales Incentives Our accounts receivable is stated at invoice value less estimated allowances that include allowance for sales returns and sales incentives. We perform an ongoing analysis of various factors including our historical experience, promotional programs, claims to date, and other business factors to determine the allowances for sales returns and sales incentives.
For example, a single account may be used by more than one individual, such as a family, and one account may be used on multiple streaming devices. We had 70.0 million and 60.1 million active accounts as of December 31, 2022 and 2021, respectively reflecting an increase of 16%.
For example, an Active Account may include more than one individual, such as a family, and one Active Account may include use of multiple Roku streaming devices. We had 80.0 million and 70.0 million Active Accounts as of December 31, 2023 and 2022, respectively, reflecting an increase of 14%.
The ongoing effects of the pandemic and associated economic conditions remain difficult to predict due to numerous uncertainties. We believe that the direct and indirect impacts of these business conditions and macroeconomic factors are difficult to isolate or quantify.
We believe that the direct and indirect impacts of these business conditions and macroeconomic factors are difficult to isolate or quantify.
Less than 2% of our cash was held outside the United States in accounts held by our foreign subsidiaries, which are used to fund foreign operations. Our primary sources of cash are receipts from platform and devices revenue and proceeds from equity sales, including equity issued pursuant to our employee equity incentive plans.
Approximately 4% of our cash was held outside the United States in accounts held by our foreign subsidiaries, which are used to fund foreign operations. Our primary sources of cash are receipts from platform and devices revenue.
We have a full valuation allowance for deferred tax assets, including net operating losses primarily for the U.S. and any jurisdiction where we do not expect to realize their benefits in the future. We expect to maintain this valuation allowance for the foreseeable future.
Income Tax Expense Our income tax expense consists primarily of income taxes in certain foreign jurisdictions where we conduct business and income taxes in the United States. We have a full valuation allowance for deferred tax assets, including net operating losses primarily for the U.S. and any jurisdiction where we do not expect to realize their benefits in the future.
Results of Operations The following table sets forth selected consolidated statements of operations data as a percentage of total revenue for each of the periods indicated.
We expect to maintain this valuation allowance for the foreseeable future. 56 Table of Contents Results of Operations The following table sets forth selected consolidated statements of operations data as a percentage of total revenue for each of the periods indicated.
For additional information regarding our lease liabilities, see Note 10 to the consolidated financial statements in Item 8 of this Annual Report. The contractual commitments discussed above are associated with agreements that are enforceable and legally binding. Obligations under contracts that we can cancel without a significant penalty are not included above.
For additional information regarding our lease liabilities, see Note 9 to the consolidated financial statements in Item 8 of this Annual Report. Our restructuring efforts to consolidate office space did not materially change our operating lease obligations. The contractual commitments discussed above are associated with agreements that are enforceable and legally binding.
The estimate of the variable consideration is based on the assessment of historical, current, and forecasted performance noted and expected from the performance obligation. For the sale of third-party goods and services, we evaluate whether we are the principal, and report revenue on a gross basis, or an agent, and report revenue on a net basis.
For the sale of third-party goods and services, we evaluate whether we are the principal, and report revenue on a gross basis, or an agent, and report revenue on a net basis.
If such facts and circumstances indicate an asset group’s carrying amount may not be recoverable, we assess the recoverability of purchased-intangible assets by comparing the projected undiscounted net cash flows associated with the asset group against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of these asset groups.
If such facts and circumstances indicate an asset or asset group’s carrying amount may not be recoverable, we assess its recoverability by comparing the projected undiscounted net cash flows directly associated with the use and eventual disposition of the asset or asset group against their respective carrying amounts.
While the current macroeconomic environment has not severely impacted our liquidity and capital resources to date, it has contributed to disruption and volatility in local economies and in capital and credit markets, which could adversely affect our liquidity and capital resources in the future. 58 Table o f Contents We may attempt to raise additional capital through the sale of equity securities or other financing arrangements.
While the current macroeconomic environment has not severely impacted our liquidity and capital resources to date, it has contributed to disruption and volatility in local economies and in capital and credit markets, which could adversely affect our liquidity and capital resources in the future.
For those performance obligations that are not routinely sold separately, we determine SSP using information that may include market conditions and other observable inputs.
For those performance obligations that are not routinely sold separately, we determine SSP using information that may include market conditions and other observable inputs. When arrangements have variable consideration, we utilize the expected value method to estimate the amount expected to be received.
We expect our general and administrative expenses to increase in absolute dollars due to the expansion of our business and related infrastructure. 54 Table o f Contents Other Income (Expense), Net For the years ended December 31, 2022 and 2021, other income (expense), net consists of interest income on cash and cash equivalents, income recognized related to non-cash consideration associated with the delivery of services as part of a strategic commercial arrangement, i nter est expense that includes interest on our debt and amortization of deferred debt costs, foreign currency re-measurement, and transaction gains and losses.
Other Income, Net For the years ended December 31, 2023 and 2022, other income, net consists of interest income on cash and cash equivalents, income recognized related to non-cash consideration associated with the delivery of services as part of a strategic commercial arrangement, i nter est expense that includes interest on our debt and amortization of deferred debt costs, foreign currency re-measurement, transaction gains and losses, and net change in the fair value of the Strategic Investment (as defined in Note 7 to the consolidated financial statements in Item 8 of this Annual Report).
Gross profit for the platform segment increased by $85.4 million, or 6%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily driven by the overall growth in our platform revenue. 56 Table o f Contents Devices The cost of revenue, devices decreased by $31.7 million, or 6%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Gross profit for the platform segment increased by $34.8 million, or 2%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily driven by the overall growth in our platform revenue.
If our estimates regarding accounts receivable allowances differ from the actual results, the losses or gains could be material. 61 Table o f Contents Provision for Income Taxes We account for income taxes in accordance with authoritative guidance, which requires the use of the asset and liability method.
If our estimates regarding accounts receivable allowances differ from the actual results, the losses or gains could be material. Provision for Income Taxes We are subject to income taxes in the U.S. and foreign jurisdictions. We account for income taxes using the asset and liability method.
Devices Revenue We generate devices revenue from the sale of streaming players and other devices such as audio products, smart home products and accessories through consumer retail distribution channels and online retailers. Our devices revenue also includes licensing arrangements with service operators and licensed Roku TV partners. We generate most of our devices revenue in the United States.
To date, we have generated most of our platform revenue in the United States. Devices Revenue We generate devices revenue from the sale of streaming players, Roku-branded TVs, smart home products and services, audio products, and related accessories. Our devices revenue also includes licensing arrangements with service operators. We generate most of our devices revenue in the United States.
Cash Flows The following table summarizes our cash flows for the periods presented (in thousands): Years Ended December 31, 2022 2021 Consolidated Statements of Cash Flows Data: Cash flows provided by operating activities $ 11,795 $ 228,081 Cash flows used in investing activities $ (201,696) $ (176,819) Cash flows provided by financing activities $ 8,357 $ 1,003,147 Cash Flows from Operating Activities Our operating activities provided cash of $11.8 million for the year ended December 31, 2022.
See Note 10 to the consolidated financial statements in Item 8 of this Annual Report for additional details. 60 Table of Contents Cash Flows The following table summarizes our cash flows for the periods presented (in thousands): Years Ended December 31, 2023 2022 Consolidated Statements of Cash Flows Data: Cash flows provided by operating activities $ 255,856 $ 11,795 Cash flows used in investing activities $ (92,619) $ (201,696) Cash flows (used in) provided by financing activities $ (61,243) $ 8,357 Cash Flows from Operating Activities Our operating activities provided cash of $255.9 million for the year ended December 31, 2023.
Our net loss of $498.0 million for the year ended December 31, 2022 was adjusted by non-cash charges of $700.1 million comprised mainly of stock-based compensation, amortization of content assets, depreciation and amortization on property and equipment and intangible assets, amortization of operating right-of-use assets, and impairment of certain intangible technology assets adjusted by net gains on remeasurement of foreign currency denominated assets and liabilities.
Our net loss of $709.6 million for the year ended December 31, 2023 was adjusted by non-cash charges of $972.7 million comprised mainly of stock-based compensation, amortization of content assets, depreciation and amortization of property and equipment and intangible assets, amortization of operating right-of-use assets, impairment of assets as part of restructuring charges, and change in fair value of the Strategic Investment.
In addition, we have $6.1 million of uncertain tax positions as of December 31, 2022. We adjust these positions when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. We are unable to accurately predict when these amounts will be realized or released.
Obligations under contracts that we can cancel without a significant penalty are not included above. In addition, we have $6.2 million of uncertain tax positions as of December 31, 2023. We adjust these positions when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate.
We review purchased-intangible assets whenever events or changes in circumstances indicate that the useful life is shorter than we had originally estimated, or that the carrying amount of the asset group to which it relates may not be recoverable.
Impairment of Long-Lived Assets We review long-lived assets, including property and equipment, right-of-use assets, and intangible assets with finite lives whenever events or changes in circumstances indicate the carrying amount of the asset or asset group to which it relates may not be recoverable.
Senior Secured Term Loan A and Revolving Credit Facilities On February 19, 2019, we entered into a Credit Agreement with Morgan Stanley Senior Funding, Inc.
Additionally, due to the current macroeconomic environment, we may be unable to obtain debt or equity financing on terms that are acceptable to us. Senior Secured Term Loan A and Revolving Credit Facilities On February 19, 2019, we entered into a Credit Agreement with Morgan Stanley Senior Funding, Inc.
The changes in our operating assets and liabilities used cash totaling $190.3 million mainly from an increase in content assets acquired and paid during the period, an increase in inventory on hand, an increase in prepaid expenses and accounts receivable balances offset by inflows from an increase in accounts payable and accrued liabilities and an increase in deferred revenue balances.
The changes in our operating assets and liabilities used cash totaling $7.3 million mainly due to payments made to acquire content, payments made for operating leases liabilities, and an increase in the accounts receivable balance at the end of the year due to higher revenue, offset by an increase in accounts payable and accrued liabilities due to timing of payments, an increase in deferred revenue, a decrease in prepaid expenses, and a decrease in inventory balances at the end of fiscal 2023.
Gross loss for the devices segment increased by $52.8 million, or 140%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Devices The cost of revenue, devices increased by $28.7 million, or 6%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022.
We have pursued merger and acquisition activities in the past, such as the acquisition of the Nielsen AVA business, the This Old House business, and content rights from Quibi in fiscal 2021, and we may pursue additional merger and acquisition activities in the future, including the acquisition of rights to programming and content assets.
Other uses of cash include purchases of property and equipment and mergers and acquisitions. We have pursued merger and acquisition activities in the past, and we may pursue additional merger and acquisition activities in the future, including the acquisition of rights to programming and content assets.
These changes are mainly due to overall growth in the business combined with the timing of receipts from customers and payments to vendors. 59 Table o f Contents Cash Flows from Investing Activities Our investing activities for the year ended December 31, 2022 included cash outflows of $201.7 million consisting of purchases of property and equipment and expenditures related to the expansion of our office facilities of $161.7 million and the purchase of a strategic investment of $40.0 million.
Cash Flows from Investing Activities Our investing activities for the year ended December 31, 2023 included cash outflows of $92.6 million consisting of purchases of property and equipment and expenditures related to the expansion of our office facilities of $82.6 million and an additional investment in the Strategic Investment of $10.0 million.
For our current borrowings, we have elected a Eurodollar borrowing with interest at a rate equal to the adjusted one-month LIBOR rate plus an applicable margin of 1.75% based on our secured leverage ratio. The borrowings under the facility will be repaid in full in February 2023.
On November 18, 2019, we borrowed an aggregate principal amount of $100.0 million from the Term Loan A Facility. We elected an interest rate equal to the adjusted one-month LIBOR rate plus an applicable margin of 1.75% based on our secured leverage ratio.
Cost of Revenue Years Ended December 31, 2022 2021 Change $ Change % (in thousands, except percentages) Cost of Revenue: Platform $ 1,179,675 $ 818,506 $ 361,169 44 % Devices 505,737 537,478 (31,741) (6) % Total cost of revenue $ 1,685,412 $ 1,355,984 $ 329,428 24 % Gross Profit (Loss): Platform $ 1,531,766 $ 1,446,414 $ 85,352 6 % Devices (90,644) (37,814) (52,830) 140 % Total gross profit $ 1,441,122 $ 1,408,600 $ 32,522 2 % Platform The cost of revenue, platform increased by $361.2 million, or 44%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Cost of Revenue and Gross Profit Years Ended December 31, 2023 2022 Change $ Change % (in thousands, except percentages) Cost of Revenue: Platform $ 1,427,546 $ 1,179,675 $ 247,871 21 % Devices 534,458 505,737 28,721 6 % Total cost of revenue $ 1,962,004 $ 1,685,412 $ 276,592 16 % Gross Profit (Loss): Platform $ 1,566,559 $ 1,531,766 $ 34,793 2 % Devices (43,944) (90,644) 46,700 (52) % Total gross profit $ 1,522,615 $ 1,441,122 $ 81,493 6 % Platform The cost of revenue, platform increased by $247.9 million, or 21%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Cash Flows from Financing Activities Our financing activities provided cash of $8.4 million for the year ended December 31, 2022. We received cash proceeds of $18.4 million from the exercise of employee stock options. These inflows were offset by $10.0 million of repayments made on borrowings.
Cash Flows from Financing Activities Our financing activities used cash of $61.2 million for the year ended December 31, 2023. The cash outflow related primarily to the repayment of $80.0 million of our Credit Facility that became due in February 2023 offset by $18.8 million received from proceeds from the exercise of employee stock options.
ARPU was $41.68 as of December 31, 2022 as compared to $40.67 as of December 31, 2021, reflecting an increase of 2%. 53 Table o f Contents Components of Results of Operations Revenue Platform Revenue We generate platform revenue from digital advertising sales and related services including our demand-side ad platform and content distribution services such as subscription and transaction revenue sharing arrangements, media and entertainment promotional spending, the sale of Premium Subscriptions, and the sale of branded channel buttons on remote controls.
Components of Results of Operations Revenue Platform Revenue We generate platform revenue from the sale of digital advertising (including direct and programmatic video advertising, media and entertainment promotional spending, and related services) and streaming services distribution (including subscription and transaction revenue shares, the sale of Premium Subscriptions, and the sale of branded app buttons on remote controls).
Sales and marketing Sales and marketing expenses increased by $382.8 million, or 84%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Sales and marketing Sales and marketing expenses increased by $194.9 million, or 23%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022. The increase was primarily driven by higher restructuring charges of $102.8 million comprised of asset impairments, facilities exit costs, and employee severance.
As of December 31, 2022, we were in compliance with all of the covenants of the Credit Agreement. See Note 11 to the consolidated financial statements in Item 8 of this Annual Report for additional details regarding the Credit Agreement.
We recorded a total restructuring charge of $356.1 million during the fiscal year ended December 31, 2023 as a result of these actions. See Note 17 to the consolidated financial statements in Item 8 of this Annual Report for additional details.
We expect sales and marketing expenses to increase in absolute dollars in future periods as we focus on growing active accounts, platform and devices revenue, and expanding our business internationally. General and Administrative General and administrative expenses consist primarily of salaries, benefits, and stock-based compensation for our finance, legal, information technology, human resources, and other administrative personnel.
Sales and marketing expenses also include marketing, retail and merchandising expenses, and allocated facilities and overhead expenses. 55 Table of Contents General and Administrative General and administrative expenses consist primarily of salaries, benefits, and stock-based compensation for our finance, legal, information technology, human resources, and other administrative personnel.
We expect to continue to incur expenses for facility and building related costs for our office locations in the United States and internationally. In addition, we expect to continue our investments in purchases of computer systems and other property and equipment.
Though we do not expect to incur expenses for facilities and building related costs at the same level as the last few fiscal years, we will continue to incur expenses on the maintenance of our facilities and purchases of computer systems, and other property and equipment, in order to support future growth in our business.
We had outstanding letters of credit of $37.7 million and $38.0 million as of December 31, 2022 and 2021, respectively, against the Revolving Credit Facility. Upon maturity of the Credit Facility, we expect to roll over the outstanding letters of credit into a new, cash secured, bilateral facility.
The Credit Facility matured on February 19, 2023 and the outstanding Term Loan A Facility was repaid in full. As of December 31, 2022, we had outstanding letters of credit against the Revolving Credit Facility of $37.7 million.
General and administrative General and administrative expenses increased by $88.4 million, or 34%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021.
General and administrative General and administrative expenses increased by $58.5 million, or 17%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022. The increase was primarily driven by higher restructuring charges of $53.9 million comprised of asset impairments, facilities exit costs, and employee severance.
Operating Expenses Years Ended December 31, 2022 2021 Change $ Change % (in thousands, except percentages) Research and development $ 788,913 $ 461,602 $ 327,311 71 % Sales and marketing 838,419 455,601 382,818 84 % General and administrative 344,678 256,297 88,381 34 % Total operating expenses $ 1,972,010 $ 1,173,500 $ 798,510 68 % Research and development Research and development expenses increased by $327.3 million, or 71%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021.
We manage the average selling prices of our products to increase our Active Accounts. 58 Table of Contents Operating Expenses Years Ended December 31, 2023 2022 Change $ Change % (in thousands, except percentages) Research and development $ 878,474 $ 788,913 $ 89,561 11 % Sales and marketing 1,033,359 838,419 194,940 23 % General and administrative 403,159 344,678 58,481 17 % Total operating expenses $ 2,314,992 $ 1,972,010 $ 342,982 17 % Research and development Research and development expenses increased by $89.6 million, or 11%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022.
If we raise additional financing by the incurrence of additional indebtedness, we may be subject to fixed payment obligations and also to restrictive covenants. Additionally, due to the current macroeconomic environment, we may be unable to obtain debt financing on terms that are acceptable to us.
We may attempt to raise additional capital through the sale of equity securities or other financing arrangements. If we raise additional funds by issuing equity, the ownership of our existing stockholders will be diluted. If we raise additional financing by the incurrence of indebtedness, we may be subject to fixed payment obligations and also to restrictive covenants.
This increase is primarily driven by higher advertising inventory costs, higher content amortization costs, Premium Subscription costs, and credit card processing fees all totaling $293.4 million. Platform costs increased an additional $67.3 million due to higher personnel costs and increases in cloud services costs for supporting the platform.
The increase of $182.4 million was primarily driven by higher costs of acquiring content, higher costs of Premium Subscriptions, and higher credit card processing fees, partially offset by lower content asset amortization and lower cost of advertising inventory.
Material Cash Requirements from Known Contractual Obligations Our material cash requirements from known contractual obligations as of December 31, 2022 consisted of: • Principal payments related to our Term Loan A Facility that are included in our consolidated balance sheets and the related periodic interest payments.
Material Cash Requirements from Known Contractual Obligations Our material cash requirements from known contractual obligations as of December 31, 2023 consisted of: • Commitments to purchase finished goods from our contract manufacturers and other inventory related items.
Recent Accounting Pronouncements The recent accounting pronouncements adopted during the year ended December 31, 2022 and those not yet adopted are discussed and included in Note 2 to the consolidated financial statements in Item 8 of this Annual Report. They are incorporated herein by reference.
Release of the valuation allowance would result in the recognition of U.S. federal and state deferred tax assets and a corresponding decrease to income tax expense in the period the release is recorded. Recent Accounting Pronouncements The recent accounting pronouncements are discussed and included in Note 2 to the consolidated financial statements in Item 8 of this Annual Report.
Devices Devices revenue decreased by $84.6 million, or 17%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to a decrease in both the volume of streaming players sold and average selling prices.
Gross loss for the devices segment decreased by $46.7 million, or 52%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022. The gross loss was driven by a higher cost of manufacturing of products in the devices segment as compared to the revenue generated from them.
Removed
Overview Effective as of the fourth quarter of fiscal 2022, we reorganized our reportable segments to better align with management’s reporting of information reviewed by the Chief Operating Decision Maker (“CODM”) for each segment.
Added
Overview Our two reportable segments are the platform segment and the devices segment.
Removed
We renamed our “player” segment to “devices” which now includes our licensing arrangements with service operators and licensed Roku TV partners in addition to sales of our streaming players, audio products, smart home products and Roku-branded TVs that will be designed, made, and sold by us in 2023.
Added
During the fiscal year ended December 31, 2023, as part of our continuing evaluation of our operations, we determined to implement additional measures to continue to bring down our year-over-year operating expense growth rate by consolidating our office space utilization, performing a strategic review of our content portfolio, reducing outside services expenses, and slowing our year-over-year headcount expense growth rate through a series of workforce reductions and limiting new hires, among other measures.
Removed
Our historical segment information is recast to conform to our new presentation in our financial statements and accompanying notes included in Item 8 of this Annual Report. Our two reportable segments are the platform segment and the devices segment.
Added
We believe that advertisers in a variety of industries reduce their overall advertising spend when they are impacted by these factors, which in turn adversely affects our platform revenue. Higher inflation and economic uncertainty also lead to a reduction in consumer discretionary spending, which impacts our devices revenue.
Removed
For example, in 2022, some of our licensed Roku TV partners faced inventory challenges that negatively impacted their unit sales.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+1 added−2 removed3 unchanged
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Fluctuation Risk Our exposure to interest rate risk relates to the interest income generated by cash, cash equivalents, and interest expense on the Credit Facility. The primary objective of our investment policy is to preserve principal while maximizing income without significantly increasing risk.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Fluctuation Risk Our exposure to interest rate risk relates to the interest income generated by cash and cash equivalents. The primary objective of our investment policy is to preserve principal while maximizing income without significantly increasing risk.
We have not entered into any derivatives or other financial instruments in an attempt to hedge our foreign currency exchange risk, but we may do so in the future. 62 Table o f Contents
We have not entered into any derivatives or other financial instruments in an attempt to hedge our foreign currency exchange risk, but we may do so in the future. 63 Table of Contents
Removed
We do not believe that an increase or decrease in interest rates of 100 basis points would have a material effect on our operating results or financial condition. As of December 31, 2022, borrowings under the Term Loan A Facility totaled $80.0 million with an effective interest rate of 4.4%.
Added
We believe that an increase or decrease in interest rates of 100 basis points on our cash and cash equivalents balance would impact our interest income by an additional increase or decrease of $20.7 million.
Removed
If the amount outstanding under our Term Loan A Facility remains at this level for an entire year and interest rates increased or decreased by 100 basis points, our annual interest expense would increase or decrease, respectively, by an additional $0.8 million.

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