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We caution you that the foregoing may not encompass all of the forward-looking statements made in this Annual Report. •our financial performance, including our revenue, cost of revenue, operating expenses, and our ability to •our ability to attract and retain users and increase •our ability to attract and retain advertisers; •our ability to attract and retain •our ability to produce or acquire rights to distribute popular content on our platform on favorable terms, or at all, including the renewals of our existing agreements with content publishers; •changes in consumer viewing habits •the growth of our relevant markets, including the growth in advertising spend on TV streaming platforms, and our ability to successfully grow our business in those markets; •our ability to adapt to changing market conditions and technological •our ability to develop and launch new •our ability to compete effectively with existing competitors and new market entrants; •our ability to successfully manage domestic and international expansion; •our ability to attract and retain qualified employees and key personnel; •our ability to address potential and actual security breaches and system •our ability to maintain, protect, and enhance our intellectual property; and •our ability to comply with laws and regulations that currently apply or may become applicable to our business both in the United States and internationally, including compliance with various U.S. and international jurisdictions. You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Oneview ad platform. Advertisers on our platform also can Growth dedicate significant resources to this area. Our focus on delivering a large preparation for the fourth quarter holiday season, we recognize significant discounts in the average selling prices of our player sales through retailers in an effort to grow our active accounts, which typically reduce our player gross margin in the fourth quarter. Additionally, these kinds of regulations may make operating in certain jurisdictions more expensive or restrictive. business, see Item 1A, Risk Factors, elsewhere in this Annual Report. We make available, free of charge through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Sections 13(a) or Section 15(d) of the You should not interpret our disclosure of any of the following risks to imply that such risks have not already materialized. stockholders. their other products and services, we do. growth of our streaming hours, harm our competitive position, and otherwise harm our business. services. whenever a Since the first quarter of 2020, all Roku 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. 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 users, channel partners, and advertisers. Some of our leading channel partners, including Netflix, also have 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 financial performance. Roku streaming players and expanding our licensing program with TV brand partners. 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. If the advertising and revenue from advertising. If our users sign up for offerings and services outside of our platform or stores and limited promotional budgets, and online retailers have limited prime website product placement space. Competition is intense for these resources, and a competitor with more extensive product lines, We are subject to payment-related risks and, if our advertisers or advertising agencies do not pay or dispute their invoices, our business may be harmed. Our safeguards intended to prevent or mitigate certain threats may not be sufficient to protect our information technology systems and data due to the developing sophistication and means of attack in the threat landscape as well as the impact that third-party vendors and third-party products may have on our cybersecurity. Recent developments in the threat landscape include an increased number of cyber extortion and ransomware attacks, with increases in the amount of ransom demands and the sophistication and variety of ransomware techniques and methodology. Ransomware or other cybersecurity attacks affecting our third-party vendors also may impact our ability to operate our business, such as when our information technology or human resources vendors experience an outage of their systems, which renders services to downstream customers unavailable. Additionally, our third-party vendors or business partners’ information technology systems, or hardware/software provided by such third parties for use in our information technology systems, may be vulnerable to similar threats and our business could be affected by those or similar third-party relationships. Open source software, which may be incorporated into our systems or products, inherently presents a large attack surface and may contain vulnerabilities of which we are not aware and which we cannot control or fully mitigate. For example, the Apache Log4j vulnerability discovered in December 2021 can be exploited by remote code execution, which can allow a bad actor to steal data or take over our systems. We have taken steps to patch this vulnerability by updating our relevant Apache software, but we, and the many other affected organizations, remain vulnerable in light of the widespread use of the Apache Log4i library and difficulty in identifying all instances of this library across an entire enterprise. us by advocacy groups or others, and could cause third parties, including current and potential partners, to lose trust in us (including existing or potential users’ perceiving our platform, system, or networks as less desirable) or we could be subject to claims by third parties that we have breached our privacy- or confidentiality-related obligations, which could materially and adversely affect our business and prospects. There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages. Moreover, data security incidents and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above. While we have implemented security measures intended to protect our information technology systems and infrastructure, as well as the personal and proprietary information that we possess or control, there can be no assurance that such measures will successfully prevent service interruptions or further security incidents. Data protection laws around the world often 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. For example, certain European Union (“EU”) laws and regulations prohibit access to or storage of information on a user’s device (such as cookies and similar technologies that we use for advertising) that is not “strictly necessary” to provide a user-requested service or used for the “sole purpose” of a transmission unless the user has provided consent, and users may choose not to provide this consent to collection of information which is used for advertising purposes. Additionally, certain device manufacturers or operating system providers may restrict the deployment of cookies and similar technologies, or otherwise restrict the collection of personal information through these or other tools, via our applications. Any restrictions on our As a result of intellectual property infringement claims, or to avoid potential claims, we may choose or be required to seek licenses from third parties. These licenses may not be available on commercially reasonable terms, or at all. Even if we are able to obtain a license, the license would likely obligate us to pay license fees or royalties or both, and the rights granted to us might be nonexclusive, with the potential for our competitors to gain access to the same intellectual property. In addition, the rights that we secure under intellectual property licenses may not include rights to all of the intellectual property owned or controlled by the licensor, and the scope of the licenses granted to us may not include rights covering all of the products and services provided by us and our licensees. Furthermore, an adverse outcome of a dispute may require us We have filed and will in the future file patent applications on inventions that we deem to be innovative. There is no guarantee that our patent applications will issue as granted patents, that the scope of the protection gained will be sufficient or that an issued patent may subsequently be deemed invalid or unenforceable. jurisdiction in which we conduct business. In particular, our actions to monitor and enforce our trademarks against third parties may not prevent counterfeit versions of our products or products bearing confusingly similar trademarks to ours from entering the marketplace, which could divert sales from us, tarnish our reputation, or reduce the demand for our products. 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. While our platform policies prohibit streaming content on our platform without distribution rights from the copyright holder, and we maintain processes and systems for the reporting and removal of infringing content, in certain instances our platform has been misused by unaffiliated third parties to unlawfully distribute copyrighted content. If we fail to comply with the laws and regulations relating to the business. •actual or anticipated fluctuations in our financial condition and operating results; •changes in projected operational and financial results; •our loss •changes in laws or regulations applicable to our devices 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 •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 concerns. Future sales of shares by existing stockholders could cause our stock price to decline. We do not intend to pay dividends in the foreseeable future. •establishing a classified Board of Directors so that not all members of our Board of Directors are elected at one time; •permitting the Board of Directors to establish the number of directors and fill any vacancies and newly created directorships; •providing that directors may only be removed for cause; •prohibiting cumulative voting for directors; •requiring super-majority voting to amend some provisions in our certificate of incorporation and bylaws; •authorizing the issuance of “blank check” preferred stock that our Board of Directors could use to implement a stockholder rights plan; •eliminating the ability of stockholders to call special meetings of stockholders; •prohibiting stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; and •reflecting our two classes of common stock as described above. 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. Company name / Index 9/28/2017 9/30/2017 12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018 Roku, Inc. $100.00 $189.57 $369.86 $222.15 $304.42 $521.64 $218.84 Nasdaq Composite Index $100.00 $100.66 $107.25 $110.03 $117.30 $126.00 $104.21 Peer Group $100.00 $101.01 $107.39 $106.80 $123.54 $118.94 $98.33 Plan Category Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuances under Equity Compensation Plans (excluding securities in column (a)) (a) (b) (c) (in thousands, except per share amount) Equity compensation plans approved by security holders (1) 20,057 $ 8.59 13,239 Equity compensation plans not approved by security holders — — — Total 20,057 $ 8.59 13,239 Years Ended December 31, Year Ended December 26, 2018 2017 2016 2015 (in thousands, except per share data) Consolidated Statements of Operations Data: Net revenue: Platform $ 416,863 $ 225,356 $ 104,720 $ 49,880 Player 325,643 287,407 293,929 269,977 Total net revenue 742,506 512,763 398,649 319,857 Cost of revenue: Platform (1) 120,543 54,826 27,783 8,663 Player (1) 289,815 258,104 249,821 221,416 Total cost of revenue 410,358 312,930 277,604 230,079 Gross profit: Platform 296,320 170,530 76,937 41,217 Player 35,828 29,303 44,108 48,561 Total gross profit 332,148 199,833 121,045 89,778 Operating expenses: Research and development (1) 170,692 107,945 76,177 50,469 Sales and marketing (1) 102,780 64,069 52,888 45,153 General and administrative (1) 71,972 47,435 35,341 31,708 Total operating expenses 345,444 219,449 164,406 127,330 Loss from operations (13,296 ) (19,616 ) (43,361 ) (37,552 ) Other income (expense), net: Interest expense (346 ) (1,612 ) 146 (696 ) Loss on extinguishment of debt — (2,338 ) — — Change in fair value of preferred stock warrant liability — (40,333 ) 888 (1,768 ) Other income (expense), net 4,309 705 (220 ) (448 ) Loss before income taxes (9,333 ) (63,194 ) (42,547 ) (40,464 ) Income tax (benefit) expense (476 ) 315 211 147 Net loss attributable to common stockholders $ (8,857 ) $ (63,509 ) $ (42,758 ) $ (40,611 ) Net loss per share attributable to common stockholders— basic and diluted (2) $ (0.08 ) $ (2.24 ) $ (9.01 ) $ (10.08 ) Weighted-average shares used in computing net loss per share attributable to common stockholders—basic and diluted 104,618 28,308 4,746 4,030 Years Ended December 31, Year Ended 2018 2017 2016 December 26, 2015 (in thousands) Cost of platform revenue $ 97 $ 81 $ 224 $ 54 Cost of player revenue 469 145 136 90 Research and development 18,538 4,714 2,766 1,685 Sales and marketing 10,459 2,817 2,292 1,678 General and administrative 8,111 3,196 2,788 1,777 Total stock-based compensation $ 37,674 $ 10,953 $ 8,206 $ 5,284 As of December 31, As of December 26, 2018 2017 2016 2015 (in thousands) Consolidated Balance Sheet Data: Cash and cash equivalents $ 155,564 $ 177,250 $ 34,562 $ 75,748 Total assets 464,997 371,897 179,078 176,511 Preferred stock warrant liability — — 9,990 10,878 Long-term debt, including current portion — — 15,000 15,000 Total liabilities 220,346 219,618 159,722 123,067 Convertible preferred stock — — 213,180 213,180 Total stockholders’ equity (deficit) 244,651 152,279 (193,824 ) (159,736 ) The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes included Substantially all of our gross profit is generated from our platform segment. 2020, respectively, reflecting an increase of 74%. 2020, respectively reflecting an increase of 17%. are not estimated and therefore revised 2017 YoY growth rates are not available. 2020. the United States. wireless subwoofers. acquired developed technology. business internationally. infrastructure. Years Ended December 31, 2018 2017 2016 Net Revenue: Platform 56 % 44 % 26 % Player 44 % 56 % 74 % Total net revenue 100 % 100 % 100 % Cost of Revenue: Platform 16 % 11 % 7 % Player 39 % 50 % 63 % Total cost of revenue 55 % 61 % 70 % Gross Profit: Platform 40 % 33 % 19 % Player 5 % 6 % 11 % Total gross profit 45 % 39 % 30 % Operating Expenses: Research and development 23 % 21 % 19 % Sales and marketing 14 % 13 % 13 % General and administrative 10 % 9 % 9 % Total operating expenses 47 % 43 % 41 % Loss from Operations (2 )% (4 )% (11 )% Other Income (Expense), Net: Interest expense — % — % — % Loss on extinguishment of debt — % (1 )% — % Change in fair value of preferred stock warrant liability — % (8 )% — % Other income (expense), net 1 % — % — % Total other income (expense), net 1 % (9 )% — % Loss before income taxes (1 )% (13 )% (11 )% Income tax (benefit) expense — % — % — % Net loss attributable to common stockholders (1 )% (13 )% (11 )% 2020 Years Ended December 31, 2018 2017 Change $ Change % (in thousands, except percentages) Platform $ 416,863 $ 225,356 $ 191,507 85 % Player 325,643 287,407 38,236 13 % Total Net Revenue $ 742,506 $ 512,763 $ 229,743 45 % our OneView ad platform. Years Ended December 31, 2018 2017 Change $ Change % (in thousands, except percentages) Cost of revenue: Platform $ 120,543 $ 54,826 $ 65,717 120 % Player 289,815 258,104 31,711 12 % Total Cost of Revenue $ 410,358 $ 312,930 $ 97,428 31 % Gross profit: Platform $ 296,320 $ 170,530 $ 125,790 74 % Player 35,828 29,303 6,525 22 % Total Gross Profit $ 332,148 $ 199,833 $ 132,315 66 % Years Ended December 31, 2018 2017 Change $ Change % (in thousands, except percentages) Research and development $ 170,692 $ 107,945 $ 62,747 58 % Sales and marketing 102,780 64,069 38,711 60 % General and administrative 71,972 47,435 24,537 52 % Total Operating Expenses $ 345,444 $ 219,449 $ 125,995 57 % $17.4 million. office spaces. Years Ended December 31, 2018 2017 Change $ Change % (in thousands, except percentages) Interest expense $ (346 ) $ (1,612 ) $ 1,266 (79 )% Loss on extinguishment of debt — (2,338 ) 2,338 (100 )% Change in fair value of convertible preferred stock warrants — (40,333 ) 40,333 (100 )% Other income (expense), net 4,309 705 3,604 511 % Total Other Income (Expense), Net $ 3,963 $ (43,578 ) $ 47,541 (109 )% Years Ended December 31, 2018 2017 Change $ Change % (in thousands, except percentages) Income Tax (Benefit) Expense $ (476 ) $ 315 $ (791 ) (251 )% Years Ended December 31, 2017 2016 Change $ Change % (in thousands, except percentages) Platform $ 225,356 $ 104,720 $ 120,636 115 % Player 287,407 293,929 (6,522 ) (2 )% Total Net Revenue $ 512,763 $ 398,649 $ 114,114 29 % Years Ended December 31, 2017 2016 Change $ Change % (in thousands, except percentages) Cost of revenue: Platform $ 54,826 $ 27,783 $ 27,043 97 % Player 258,104 249,821 8,283 3 % Total Cost of Revenue $ 312,930 $ 277,604 $ 35,326 13 % Gross profit: Platform $ 170,530 $ 76,937 $ 93,593 122 % Player 29,303 44,108 (14,805 ) (34 )% Total Gross Profit $ 199,833 $ 121,045 $ 78,788 65 % Years Ended December 31, 2017 2016 Change $ Change % (in thousands, except percentages) Research and development $ 107,945 $ 76,177 $ 31,768 42 % Sales and marketing 64,069 52,888 11,181 21 % General and administrative 47,435 35,341 12,094 34 % Total Operating Expenses $ 219,449 $ 164,406 $ 55,043 33 % Years Ended December 31, 2017 2016 Change $ (in thousands, except percentages) Interest expense $ (1,612 ) $ 146 $ (1,758 ) Loss on extinguishment of debt (2,338 ) — (2,338 ) Change in fair value of convertible preferred stock warrants (40,333 ) 888 (41,221 ) Other income, net 705 (220 ) 925 Total Other Income (Expense), Net $ (43,578 ) $ 814 $ (44,392 ) Years Ended December 31, 2017 2016 Change $ Change % (in thousands, except percentages) Income Tax Expense $ 315 $ 211 $ 104 49 % Liquidity and Capital Resources limited to, those detailed in Part I, Item 1A, Risk Factors in this Annual Report and the effects of the COVID-19 pandemic. While the pandemic 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. 2021 and 2020, respectively, against the Revolving Credit Facility. Years Ended December 31, 2018 2017 2016 Consolidated Statements of Cash Flows Data: Cash flows provided by (used in) operating activities $ 13,922 $ 37,292 $ (32,463 ) Cash flows used in investing activities (60,133 ) (12,268 ) (8,567 ) Cash flows provided by (used in) financing activities 24,525 117,664 (156 ) vendors. improvements. Payments Due by Period Total Less Than 1 Year 1 – 3 Years 3 – 5 Years More Than 5 Years Purchase commitments (1) $ 40,584 $ 40,584 $ — $ — $ — Operating lease obligations (2) 367,705 16,817 61,158 66,258 223,472 Other obligations (3) 4,706 3,732 974 Total $ 412,995 $ 61,133 $ 62,132 $ 66,258 $ 223,472 inventory to satisfy 2021. other observable inputs. amortization and amortize the remaining carrying value over the new shorter useful life. Provision for Income Taxes allowance is provided when it is more likely than not that the deferred tax assets will not be realized. We have established a full valuation allowance to offset In order to assess the likelihood that we will recover our deferred tax assets against future sources of taxable income, we review the level of positive and negative evidence of future taxable income which is a critical estimate. expense would increase or decrease, respectively, by an additional $0.9 million. As of December 31, 2018 2017 Assets Current Assets: Cash and cash equivalents $ 155,564 $ 177,250 Short-term investments 42,146 — Accounts receivable, net of allowances of $21,897 and $17,739 as of 183,078 120,553 December 31, 2018 and 2017, respectively Inventories 35,585 32,740 Prepaid expenses and other current assets 15,374 11,367 Deferred cost of revenue, current portion 1,188 3,007 Total current assets 432,935 344,917 Property and equipment, net 25,264 14,736 Deferred cost of revenue, non-current portion — 5,403 Intangible assets, net 1,477 2,030 Goodwill 1,382 1,382 Other non-current assets 3,939 3,429 Total Assets $ 464,997 $ 371,897 Liabilities and Stockholders’ Equity Current Liabilities: Accounts payable $ 56,576 $ 56,413 Accrued liabilities 91,986 72,344 Deferred revenue, current portion 45,442 34,501 Total current liabilities 194,004 163,258 Deferred revenue, non-current portion 19,594 48,511 Other long-term liabilities 6,748 7,849 Total Liabilities 220,346 219,618 Commitments and contingencies (Note 10) Stockholders’ Equity: Preferred stock, $0.0001 par value; — — 10,000 shares authorized as of December 31, 2018 and 2017; no shares issued and outstanding as of December 31, 2018 and 2017 Common stock, $0.0001 par value; 11 10 1,150,000 (Class A - 1,000,000 and Class B - 150,000) shares authorized as of December 31, 2018 and 2017; 109,770 (Class A - 77,820 and Class B - 31,950) shares and 99,157 (Class A - 19,325 and Class B - 79,832) shares issued and outstanding as of December 31, 2018 and 2017, respectively Additional paid-in capital 498,553 435,607 Accumulated other comprehensive loss (17 ) — Accumulated deficit (253,896 ) (283,338 ) Total stockholders’ equity 244,651 152,279 Total Liabilities and Stockholders’ Equity $ 464,997 $ 371,897 Years Ended December 31, 2018 2017 2016 Net Revenue: Platform $ 416,863 $ 225,356 $ 104,720 Player 325,643 287,407 293,929 Total net revenue (Note 3) 742,506 512,763 398,649 Cost of Revenue: Platform 120,543 54,826 27,783 Player 289,815 258,104 249,821 Total cost of revenue 410,358 312,930 277,604 Gross Profit: Platform 296,320 170,530 76,937 Player 35,828 29,303 44,108 Total gross profit 332,148 199,833 121,045 Operating Expenses: Research and development 170,692 107,945 76,177 Sales and marketing 102,780 64,069 52,888 General and administrative 71,972 47,435 35,341 Total operating expenses 345,444 219,449 164,406 Loss from Operations (13,296 ) (19,616 ) (43,361 ) Other Income (Expense), Net: Interest expense (346 ) (1,612 ) 146 Loss on extinguishment of debt — (2,338 ) — Change in fair value of preferred stock warrant liability — (40,333 ) 888 Other income (expense), net 4,309 705 (220 ) Total other income (expense), net 3,963 (43,578 ) 814 Loss Before Income Taxes (9,333 ) (63,194 ) (42,547 ) Income tax (benefit) expense (476 ) 315 211 Net Loss Attributable to Common Stockholders $ (8,857 ) $ (63,509 ) $ (42,758 ) Net loss per share attributable to common stockholders—basic and diluted $ (0.08 ) $ (2.24 ) $ (9.01 ) Weighted-average shares used in computing net loss per share attributable to common stockholders—basic and diluted 104,618 28,308 4,746 INCOME (LOSS) Years Ended December 31, 2018 2017 2016 Net Loss Attributable to Common Stockholders $ (8,857 ) $ (63,509 ) $ (42,758 ) Other comprehensive loss, net of tax: Unrealized loss on short-term investments, net of tax (17 ) — — Comprehensive Net Loss $ (8,874 ) $ (63,509 ) $ (42,758 ) Convertible Preferred Stock Common Stock Additional Paid-in Treasury Accumulated Other Comprehensive Accumulated Total Stockholders’ Shares Amount Shares Amount Capital Stock Loss Deficit Equity (Deficit) Balance—December 26, 2015 80,844 $ 213,180 4,531 $ — $ 17,335 $ — $ — $ (177,071 ) $ (159,736 ) Issuance of common stock upon exercise of warrants — — 162 — — — — — — Issuance of common stock upon exercise of stock options — — 126 — 438 — — — 438 Vesting of early exercised stock options — — — — 26 — — — 26 Stock-based compensation expense — — — — 8,206 — — — 8,206 Net loss — — — — — — — (42,758 ) (42,758 ) Balance—December 31, 2016 80,844 213,180 4,819 — 26,005 — — (219,829 ) (193,824 ) Issuance of common stock upon exercise of stock options — — 963 1 2,086 — — — 2,087 Share repurchases — — (92 ) — — (671 ) — — (671 ) Vesting of early exercised stock options — — — — 62 — — — 62 Stock-based compensation expense — — — — 10,953 — — — 10,953 Issuance of common stock pursuant to an acquisition — — 108 — — — — — — Issuance of common stock upon exercise of common and preferred warrants — — 2,165 — — — — — — Issuance of common stock pursuant to an initial public offering, net of issuance costs of $3.1 million — — 10,350 1 131,645 — — — 131,646 Conversion of preferred stock into common stock pursuant to an initial public offering (80,844 ) (213,180 ) 80,844 8 213,172 — — — 213,180 Reclassification of preferred stock warrants liability to additional paid-in-capital upon conversion to common stock warrants — — — — 52,355 — — — 52,355 Net loss — — — — — — — (63,509 ) (63,509 ) Balance—December 31, 2017 — — 99,157 10 436,278 (671 ) — (283,338 ) 152,279 Vesting of early exercised stock options 239 — — 239 Issuance of common stock pursuant to equity incentive plans, net of taxes — — 10,481 1 25,033 — — — 25,034 Issuance of common stock pursuant to exercise of common stock warrants, net — — 141 — — — — — — Stock-based compensation expense — — — — 37,674 — — — 37,674 Share repurchases (9 ) Adoption of ASU 2016-16 (Note 2) — — — — — — — (40 ) (40 ) Adoption of ASU 2014-09 (Note 3) — — — — — — — 38,339 38,339 Unrealized loss on short-term investments — — — — — — (17 ) (17 ) Net loss — — — — — — — (8,857 ) (8,857 ) Balance—December 31, 2018 — $ — 109,770 $ 11 $ 499,224 $ (671 ) $ (17 ) $ (253,896 ) $ 244,651 Years Ended December 31, 2018 2017 2016 Cash flows from operating activities: Net loss $ (8,857 ) $ (63,509 ) $ (42,758 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 8,389 5,336 5,302 Stock-based compensation expense 37,674 10,953 8,206 Provision for doubtful accounts 876 104 336 Change in fair value of preferred stock warrant liability — 40,333 (888 ) Noncash interest expense 342 784 115 Loss from exit of facilities 1,120 525 3,804 Loss on disposals of property and equipment 8 54 29 Loss from extinguishment of debt — 2,338 — Write-off of deferred initial public offering costs — — 594 Impairment of long-lived assets 352 — 320 Amortization of premiums on short-term investments (357 ) — — Changes in operating assets and liabilities: Accounts receivable (50,673 ) (41,184 ) (26,354 ) Inventories (2,953 ) 10,828 (13,256 ) Prepaid expenses and other current assets (306 ) (6,514 ) (544 ) Deferred cost of revenue 2,261 (1,959 ) (2,885 ) Other noncurrent assets (732 ) (2,794 ) 448 Accounts payable (98 ) 24,315 (2,808 ) Accrued liabilities 17,914 24,127 17,796 Other long-term liabilities (1,101 ) 3,579 294 Deferred revenue 10,063 29,976 19,786 Net cash provided by (used in) operating activities 13,922 37,292 (32,463 ) Cash flows from investing activities: Purchase of property and equipment (18,327 ) (9,229 ) (8,596 ) Purchase of business, net of cash acquired — (2,959 ) — Purchases of short-term investments (53,806 ) — — Sales/maturities of short-term investments 12,000 — — Change in deposits — (80 ) 29 Net cash used in investing activities (60,133 ) (12,268 ) (8,567 ) Cash flows from financing activities: Payments of costs related to initial public offering — — (594 ) Proceeds from borrowings, net — 24,691 15,000 Repayments of borrowings — (40,446 ) (15,000 ) Holdback payment for a prior business acquisition (500 ) — — Proceeds from equity issued under incentive plans, net of repurchases 25,025 1,773 438 Proceeds from issuance of common stock pursuant to an initial public offering, net of issuance costs of $3.1 million — 131,646 — Net cash provided by financing activities 24,525 117,664 (156 ) Net (Decrease) Increase in Cash (21,686 ) 142,688 (41,186 ) Cash and cash equivalents—Beginning of period 177,250 34,562 75,748 Cash and cash equivalents—End of period $ 155,564 $ 177,250 $ 34,562 Supplemental disclosures of cash flow information: Cash paid for interest $ 493 $ 1,149 $ 236 Cash paid for income taxes $ 564 $ 222 $ 121 Supplemental disclosures of noncash investing and financing activities: Unpaid portion of property and equipment purchases $ 1,617 $ 1,250 $ 306 Fair value of preferred stock warrants reclassified to additional paid in capital $ — $ 52,355 $ — Issuance of convertible preferred stock warrants in connection with debt $ — $ 2,032 $ — audio products. AND BASIS OF PRESENTATION presentation. Income (Loss) foreign currency translation adjustments. Income taxes on the unrealized gains are not material. Years Ended December 31, 2018 2017 2016 Customer A * * 13 % Customer B * 10 % 12 % Customer C 18 % 20 % 24 % Customer E * 10 % * losses and doubtful accounts. The Company considers the asset or asset group are no longer appropriate. The Company assesses these asset or asset groups for impairment based on their estimated undiscounted future cash flows. If the carrying value of the asset or asset group exceeds the estimated future undiscounted cash flows, the Company recognizes an impairment lease is not readily determinable, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future lease payments. The Company takes into consideration its credit rating and the length of the lease when calculating the incremental borrowing rate. The Company considers the options to extend or terminate the lease in determining the lease term, when it is reasonably certain to exercise one of the options. The Company combines lease and non-lease components into a single lease component for its real estate and equipment leases. years ended December 31, Capitalized costs are amortized using the straight-line method over publishers where performance obligations are not yet fulfilled. Deferred a non-current liability. As of Adjustment on As of Balance Sheet line items impacted December 31, 2017 adoption of new revenue standard January 1, 2018 Assets: Accounts receivables, net $ 120,553 $ 12,728 $ 133,281 Inventories 32,740 (108 ) 32,632 Prepaid expenses and other current assets 11,367 4,113 15,480 Deferred cost of revenue, current portion 3,007 (1,076 ) 1,931 Deferred cost of revenue, non-current portion 5,403 (3,885 ) 1,518 Other non-current assets 3,429 (222 ) 3,207 Liabilities: Accounts payable and accrued liabilities 128,757 1,250 130,007 Deferred revenue, current portion 34,501 8,449 42,950 Deferred revenue, non-current portion 48,511 (36,488 ) 12,023 Equity: Accumulated deficit $ (283,338 ) $ 38,339 $ (244,999 ) The Company’s disaggregated As of As of adoption December 31, 2018 January 1, 2018 Accounts receivable, net $ 183,078 $ 133,281 Contract assets, current portion 753 4,113 Deferred revenue, current portion 45,442 42,950 Deferred revenue, non-current portion 19,594 12,023 Revenue recognized during the year ended December 31, As of December 31, 2018 Impact on balance sheet line items As Reported Balances without adoption of the new revenue standard Impact of adoption Higher / (Lower) Assets: Accounts receivable, net $ 183,078 $ 162,712 $ 20,366 Prepaid expenses and other current assets 15,374 14,728 646 Deferred cost of revenue, current portion 1,188 3,615 (2,427 ) Deferred cost of revenue, non-current portion — 5,260 (5,260 ) Liabilities: Accrued liabilities 91,986 89,646 2,340 Deferred revenue, current portion 45,442 51,352 (5,910 ) Deferred revenue, non-current portion 19,594 49,559 (29,965 ) Equity: Accumulated Deficit $ (253,896 ) $ (300,756 ) $ 46,860 Year Ended December 31, 2018 Impact on statements of operations line items As Reported Balances without adoption of the new revenue standard Impact of adoption Higher / (Lower) Net Revenue: Platform $ 416,863 $ 391,677 $ 25,186 Player 325,643 325,417 226 Total net revenue 742,506 717,094 25,412 Cost of Revenue: Platform 120,543 105,423 15,120 Player 289,815 289,891 (76 ) Total cost of revenue 410,358 395,314 15,044 Gross Profit: Platform 296,320 286,254 10,066 Player 35,828 35,526 302 Total gross profit 332,148 321,780 10,368 Operating Expenses: Research and development 170,692 170,692 — Sales and marketing 102,780 100,933 1,847 General and administrative 71,972 71,972 — Total operating expenses 345,444 343,597 1,847 Loss from Operations (13,296 ) (21,817 ) 8,521 Net loss $ (8,857 ) $ (17,378 ) $ 8,521 results beginning on the date of acquisition. The Company recorded As of December 31, 2018 2017 Gross accounts receivable $ 204,975 $ 138,292 Allowance for sales returns (7,335 ) (6,907 ) Allowance for sales incentives (13,750 ) (10,442 ) Other allowances (812 ) (390 ) Total allowances (21,897 ) (17,739 ) Total Accounts Receivable—net of allowances $ 183,078 $ 120,553 As of December 31, 2018 2017 Beginning balance $ (6,907 ) $ (6,916 ) Charged to revenue (17,396 ) (19,089 ) Utilization of sales return reserve 16,968 19,098 Ending balance $ (7,335 ) $ (6,907 ) As of December 31, 2018 2017 Beginning balance $ (10,442 ) $ (8,503 ) Charged to revenue (50,958 ) (44,264 ) Utilization of sales incentive reserve 47,650 42,325 Ending balance $ (13,750 ) $ (10,442 ) Property and Equipment, net: Property and equipment, net consisted of the following (in thousands): As of December 31, 2018 2017 Computers and equipment $ 16,056 $ 11,631 Leasehold improvements 18,396 8,437 Website and internal-use software 6,423 5,461 Office equipment and furniture 4,069 1,987 Total property and equipment 44,944 27,516 Accumulated depreciation and amortization (19,680 ) (12,780 ) Property and Equipment, net $ 25,264 $ 14,736 As of December 31, 2018 2017 Accrued royalty expense $ 7,939 $ 17,165 Accrued inventory 6,008 2,382 Accrued payroll and related expenses 12,217 8,699 Accrued cost of revenue 22,830 12,210 Accrued payments to content publishers 32,463 24,037 Taxes and related liabilities 1,314 1,463 Customer prepayments 3,124 545 Other accrued expenses 6,091 5,843 Total Accrued Liabilities $ 91,986 $ 72,344 As of December 31, 2018 2017 Platform, current $ 28,569 $ 19,022 Player, current 16,873 15,479 Total deferred revenue, current 45,442 34,501 Platform, non-current 12,783 42,674 Player, non-current 6,811 5,837 Total deferred revenue, non-current 19,594 48,511 Total Deferred Revenue (See Note 3) $ 65,036 $ 83,012 As of December 31, 2018 Amortized Cost Gross Unrealized Gains Gross Unrealized Loss Fair Value Corporate bonds and commercial paper $ 37,168 $ — $ (17 ) $ 37,151 U.S. government securities 4,995 — 4,995 Total Short-Term Investments $ 42,163 $ — $ (17 ) $ 42,146 as an asset acquisition. As discussed in Note 4, the Company also acquired content assets as part of the This Old House acquisition. The increase of $215.8 million in As of December 31, 2018 Amortized Cost Fair Value Less than 1 year $ 42,163 $ 42,146 Due in 1-3 years — — Total Short-Term Investments $ 42,163 $ 42,146 As of December 31, 2018 Fair Value Level 1 �� Level 2 Level 3 Assets: Cash and cash equivalents: Cash $ 147,221 $ 147,221 $ — $ — Money market funds 8,343 8,343 — — Short-term investments: Corporate bonds and commercial paper 37,151 — 37,151 — U.S. government securities 4,995 — 4,995 — Total assets measured and recorded at fair value $ 197,710 $ 155,564 $ 42,146 $ — instruments as of December 31, 2021 and 2020. Years Ended December 31, 2017 Convertible preferred stock warrant liability — beginning balance $ 9,990 Fair value of new warrants issued 2,032 Change in fair value of preferred stock warrant liability* 40,333 Reclassification to additional paid in capital upon conversion to common warrants (52,355 ) Convertible preferred stock warrant liability — ending balance $ — Assets and liabilities that are measured at fair value on a non-recurring basis Credit Agreement. Holders of Class A common stock are entitled to stock at an average selling price of $126.01 per share, for aggregate gross proceeds of $504.0 million and incurred issuance costs of $6.8 million. Common stock awards granted under equity incentive plans Common stock awards available for Common stock awards available for issuance under the 2017 Equity Incentive Plan Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Weighted Average Grant Date Fair Value Per Share Aggregate Intrinsic Value Balance, December 31, 2017 26,336 $ 4.59 6.4 — Granted 1,040 52.32 — $ 22.96 Exercised (10,315 ) 2.90 — — Forfeited and expired (690 ) 6.79 — — Balance, December 31, 2018 - outstanding 16,371 $ 8.59 6.8 — $ 384,383 Options exercisable at December 31, 2018 8,849 $ 4.72 5.6 — $ 230,254 2021, the Company had $67.5 million of unrecognized stock-based compensation expense related to unvested stock options that is expected to be recognized over a weighted-average period of approximately 2.0 years. Restricted stock units generally vest over 4 years. For the years ended December 31, 2021, 2020, and 2019, the amount of stock-based compensation capitalized as part of internal-use software was not material. Years Ended December 31, 2018 2017 2016 Cost of platform revenue $ 97 $ 81 $ 224 Cost of player revenue 469 145 136 Research and development 18,538 4,714 2,766 Sales and marketing 10,459 2,817 2,292 General and administrative 8,111 3,196 2,788 Total stock-based compensation $ 37,674 $ 10,953 $ 8,206 The assumptions used to value Years Ended December 31, 2018 2017 2016 Dividend rate — — — Expected term (in years) 5.3 - 6.8 5.3 - 6.5 5.3 - 6.5 Risk-free interest rate 2.32 - 2.88% 1.87 - 2.25% 1.33 - 1.95% Expected volatility 38 - 40% 39 - 44% 44 - 46% Fair value of common stock — $2.56 - $18.46 $5.64 - $6.60 Number of Shares Weighted Average Grant Date Fair Value Per Share Balance, December 31, 2017 272 $ 43.55 Awarded 3,827 48.26 Released (267 ) 42.95 Forfeited (146 ) 43.14 Balance, December 31, 2018 - outstanding 3,686 $ 48.50 Years Ended December 31, 2017 2016 Dividend rate — — Expected term (in years) 3.0 - 9.7 3.2 - 3.9 Risk-free interest rate 1.5 - 2.3% 0.7 - 1.6% Expected volatility 44 - 51% 46 - 48% Year Ending December 31, Operating Leases 2019 $ 16,817 2020 29,124 2021 32,034 2022 32,844 2023 33,414 Thereafter 223,472 Less: Sublease rental income (3,711 ) Total $ 363,994 Manufacturing Purchase Commitments Company enters into agreements with manufacturers and suppliers to procure inventory based upon certain criteria and timing. Some of these commitments are inventory. Years Ended December 31, 2018 2017 2016 Beginning balance $ 779 $ 2,085 $ — Change in estimated loss from exit 1,120 525 3,804 Non-cash adjustment — — 1,120 Amortization of liability (1,052 ) (1,831 ) (2,839 ) Ending balance $ 847 $ 779 $ 2,085 through 2030. During the year ended December 31, 2021 the Company recorded expenses of $4.8 million in Cost of revenue, player, $1.8 million in Cost of revenue, platform, and $3.4 million in General and administrative expenses for claims related to patent infringement. During the year ended December 31, 2020 the Company did not have any loss contingencies that were material. During the year ended December 31, 2019, the Company recorded expenses of $9.9 million, in Cost of revenue, player for various claims related to patent infringements. Years Ended December 31, 2018 2017 2016 United States $ (11,128 ) $ (63,831 ) $ (42,977 ) Foreign 1,795 637 430 Net loss before income taxes $ (9,333 ) $ (63,194 ) $ (42,547 ) Years Ended December 31, 2018 2017 2016 Current: State $ 114 $ 89 $ 50 Foreign 184 674 160 298 763 210 Deferred: Foreign (774 ) (448 ) 1 Total $ (476 ) $ 315 $ 211 The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate: Years Ended December 31, 2018 2017 2016 U.S. federal income tax at statutory rate 21.0 % 34.0 % 34.0 % U.S. state and local income taxes (1.3 ) (0.2 ) (0.1 ) Change in valuation allowance (1,039.4 ) 19.0 (36.9 ) Federal research and development tax credit 166.2 5.2 4.8 Convertible preferred stock warrants - (21.7 ) 0.7 Stock-based compensation 859.4 1.2 (2.5 ) Meals and Entertainment (6.6 ) (1.1 ) (0.2 ) Permanent items (1.1 ) — — Foreign rate differential (1.5 ) 0.2 — Tax rate change 2.4 (36.4 ) — Provision to return trueup 5.9 — — Other 0.1 (0.7 ) (0.2 ) Effective tax rate 5.1 % (0.5 )% (0.4 )% As of December 31, 2018 2017 Deferred tax assets: Net operating loss carryforwards $ 128,829 $ 34,843 Reserves and accruals 7,840 13,577 Research and development credits 39,344 15,475 Depreciation and amortization — 288 Stock-based compensation 7,529 4,098 Total deferred tax assets 183,542 68,281 Deferred tax liabilities: Depreciation and amortization (343 ) — Total deferred tax liabilities (343 ) — Valuation allowance (182,360 ) (68,219 ) Net deferred tax assets $ 839 $ 62 amortizable assets. As of December 31, 2028 and 2035, respectively. for section 382 purposes. As such, tax attributes generated by dataxu through the ownership change dates are subject to the limitation. As of December 31, 2018 2017 Unrecognized tax benefits at beginning of year $ 5,843 $ 4,368 Gross increase for tax positions of current years 7,053 1,475 Gross increase for tax positions of prior year 1,645 — Unrecognized tax benefits balance at end of year $ 14,541 $ 5,843 The Company will continue to indefinitely reinvest earnings from 2019. The following table presents the calculation of basic and diluted net Years Ended December 31, 2018 2017 2016 Numerator: Net loss allocable to common stockholders $ (8,857 ) $ (63,509 ) $ (42,758 ) Denominator: Weighted-average shares used in computing net loss per share, basic and diluted 104,618 28,308 4,746 Net loss per share, basic and diluted $ (0.08 ) $ (2.24 ) $ (9.01 ) Years Ended December 31, 2018 2017 2016 Equity awards to purchase common stock 20,057 26,608 22,335 Unvested shares of common stock issued upon early exercise of stock options and business acquisition 70 57 3 Warrants to purchase common stock — 184 375 Warrants to purchase convertible preferred stock — — 1,817 Convertible preferred stock — — 80,844 Total 20,127 26,849 105,374 The Company does not allocate property and equipment or any other assets or capital expenditures to reportable segments. website. Years Ended December 31, 2018 2017 2016 Platform segment revenue Customer B * * 15 % Customer E * 13 % 10 % Player segment revenue Customer A 15 % 15 % 18 % Customer B 15 % 12 % 11 % Customer C 38 % 34 % 32 % Three Months Ended Dec 31, 2018 Sep 30, 2018 Jun 30, 2018 Mar 31, 2018 Total Revenue $ 275,739 $ 173,381 $ 156,810 $ 136,576 Gross Profit 112,291 78,993 77,752 63,112 Net income (loss) attributable to common stockholders 6,778 (9,527 ) 526 (6,634 ) Basic net income (loss) per share attributable to common stockholders 0.06 (0.09 ) 0.01 (0.07 ) Diluted net income (loss) per share attributable to common stockholders 0.05 (0.09 ) 0.00 (0.07 ) Three Months Ended Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Total Revenue $ 188,261 $ 124,782 $ 99,627 $ 100,093 Gross Profit 73,461 49,895 37,637 38,840 Net income (loss) attributable to common stockholders 6,941 (46,235 ) (15,513 ) (8,702 ) Basic net income (loss) per share attributable to common stockholders 0.07 (8.79 ) (3.18 ) (1.79 ) Diluted net income (loss) per share attributable to common stockholders 0.06 (8.79 ) (3.18 ) (1.79 ) Item 9. Changes in and Disagreements 2021. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM COSO. internal controls over financial reporting for the This Old House and Nielsen AVA businesses. S-1 333-220318 10.28 9/1/2017 10.19 + S-1/A 333-220318 10.30 9/18/2017 10.20 S-1 333-220318 10.14 9/1/2017 10.21 S-1 333-220318 10.15 9/1/2017 10.22 S-1 333-220318 10.16 9/1/2017 10.23 S-1 333-220318 10.17 9/1/2017 10.24 Forms of Option Agreement and Option Grant Notice under 2017 Equity Incentive Plan. 10-Q 001-38211 10.24 8/10/2018 10.25 10-Q 001-38211 10.25 8/10/2018 10.26 10-Q 001-38211 10.26 8/10/2018 10.27 10-Q 001-38211 10.27 8/10/2018 10.28 8-K 001-38211 10.1 12/7/2018 10.29 8-K 001-38211 10.2 12/7/2018 10.30 X 10.31 X 10.32 X 21.1 10-K 001-38211 21.1 3/1/2018 23.1 X 24.1 X 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 32.1 X 32.2 X 101.INS XBRL Instance Document. X 101.SCH XBRL Taxonomy Extension Schema Document. X 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. X 101.DEF XBRL Taxonomy Extension Definition. X 101.LAB XBRL Taxonomy Extension Label Linkbase X 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. X President, (Principal Executive Officer) Chief Financial Officer (Principal Financial and Accounting Officer)or the (“Securities Act,Act”), and Section 21E of the Securities Exchange Act of 1934, as amended or the (“Exchange Act,Act”), about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this report,Annual Report, including statements regarding our future results of operations and financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. For example, statements in this Annual Report regarding the potential future impact of the COVID-19 pandemic on our business and results of operations are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “anticipate,” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “project,” “should,” “will”“will,” “would,” “target,” or the negative of these terms or other similar expressions.Form 10-K,Annual Report, regarding, among other things:attainmaintain and sustaingrow our profitability;hours streamed;additional TV brands and service operators to license and deploy our technology;orand the growth of TV streaming;developments, including developing integrations with our platform partners;streaming products and provide ancillary services and support;failures;the EU General Data Protection Regulation.We caution you that the foregoing list may not contain all of the forward-looking statements madeprivacy and data protection regulations in this Annual Report on Form 10-K.reportAnnual Report may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.reportAnnual Report or to conform these statements to actual results or to changes in our expectations. You should read this Annual Report, on Form 10-K and the documents that we referencereferenced in this Annual Report on Form 10-K and have filed as exhibits to this reportAnnual Report, with the understanding that our actual future results, levels of activity, performance, and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.(ir.roku.com/investor-relations)(roku.com/investor), SECU.S. Securities and Exchange Commission (“SEC”) filings, webcasts, press releases, and conference calls. We use these mediums including our website, to communicate with investors and the general public about our company, our products and services, and other issues. It is possible that the information that we make available may be deemed to be material information. We therefore encourage investors, the media, and others interested in our company to review the information that we make availablepost on our investor relations website.
Roku, the Roku logo, and other trade names, trademarks, or service marks of Roku appearing in this report are the property of Roku. Trade names, trademarks, and service marks of other companies appearing in this report are the property of their respective holders.PARTweall TV advertising will be streamed. The shift of the TV ecosystem to streaming is continuing and is creating more options for consumers, content publishers, advertisers, and other industry participants. TV streaming is now mainstream and consumers are capitalizing on this large economic opportunity asspending more time watching TV streaming services, with many ‘cutting the cord’ from legacy TV services entirely. Over the past several years, nearly every major media company has entered TV streaming and launched a leadingstreaming service. Similarly, advertisers looking to reach and engage with streaming audiences are increasingly taking advantage of the benefits inherent to the digital advertising capabilities of TV streaming platforms and are re-allocating their budgets accordingly.for users,that connects and benefits the entire TV ecosystem of consumers, content publishers, and advertisers. Roku connects usersThrough our TV streaming platform, we are focused on connecting consumers to the streaming contententertainment they love, enablesenabling content publishers to build and monetize large audiences, and providesproviding advertisers with unique capabilities to engage consumers. AsCentral to our platform is the Roku operating system (the “Roku OS”). The Roku OS is purpose built for TV and designed to run on low-cost hardware which allows us to manufacture and sell streaming players that are affordable. The Roku OS also powers Roku TV models that are manufactured and sold by our TV brand partners who license the Roku OS and leverage our smart TV hardware reference designs. Roku TV models and Roku streaming players enable consumers to access a wide selection of December 31, 2018, we had 27.1content by connecting their Roku device to our streaming platform via a home broadband network.during 2018utilize our users streamed 24.0 billion hours onbilling services and data insight tools, advertisers can serve targeted and measurable ads to the TV viewers that they want to reach, Roku TV brand partners can build market share by offering high performance smart TVs in a range of sizes and price points, and retailers can offer customers Roku’s highly-rated streaming devices online and in stores. We continue to invest 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 streaming decade continues.TV streaming’s disruptive content distribution model is shifting billions of dollars of economic value.OurAnd third, we monetize the activities that consumers engage in through our platform. Furthermore, our business model is designed to grow gross profit by increasingfulfill the needs of the participants in the TV streaming ecosystem: consumers, content publishers, advertisers, TV brand partners, other device licensees, and retailers.relatedto provide a better audio experience, we also offer our Roku Streambars with a streaming player built in that enables the soundbar to connect to our streaming platform, Roku wireless speakers that connect to Roku TV models and Roku Streambars, and our Roku Wireless Subwoofers. Furthermore, we offer customer choice with The Roku TV Ready program, which in partnership with audio companies, we enable their audio products to work seamlessly with Roku TV models. We launch new devices and provide updates via the Roku OS periodically to ensure they offer the highest performance at an affordable price.and growing revenueon our platform have grown from 58.7 billion hours in 2020 to 73.2 billion hours in 2021, as our active accounts have grown through the distribution of Roku streaming players and our partners’ Roku TV models.streaming platform. We measure our platform monetization progress throughby calculating the average revenue per user or ARPU,(“ARPU”), which we believe represents the inherent value of our business model. model, and growth in gross profit. In 2021, ARPU (which we measure on a trailing twelve-month basis) increased from $28.76 as of December 31, 2020 to $41.03 as of December 31, 2021 and gross profit for the full year grew from $808.2 million as of December 31, 2020 to $1,408.6 million as of December 31, 2021.grow new accountsmake it easy for content publishers to distribute and monetize their streaming content through three primary channels:business models: transaction video on demand (“TVOD”) that includes channels that offer a la carte movie purchases or rentals, subscription video on demand that includes subscriptions to individual video on demand channels and so-called virtual multichannel video programming distribution services, and ad-supported, which includes 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 selldefine as free, ad-supported linear streaming players;TV. Through Roku Pay, our platform billing solution, we partnerare also able to assist content partners with billing services, including billing users for in-channel purchases like movie rentals, managing subscriptions, and customer invoices. We believe Roku Pay is a key platform capability that simplifies user subscription signups and drives purchase and retention for our content publishers.brands through ourshow consumption. We also derive revenue from the sale of branded channel buttons on streaming player and Roku TV licensing program; remote controls that are intended to increase incremental usage of the channel by allowing users to launch straight into the channel from the home screen. Our analytics and reporting assist content publishers with analyzing viewership trends and metrics for specific titles. Using machine learning, we have licensing relationshipsalso can help content publishers target new audiences that are more likely to subscribe to their services. service operators. The fastest growing source of new accounts comes from our licensing relationships with TV brands and service operators which accounted for 50% of new accounts in 2018, up from 48% in 2017. We believe we have a significant opportunity to grow platform revenue as we further monetize users’ engagement with our TV streaming platform through the insertion of targeted video advertising in ad supported channels, our participation in revenues generated through sales of subscriptions and other transactions on our platform, and the placement of audience development and brand sponsorship promotions across our user interface. ARPU was $17.95 during the year ended December 31, 2018 up by 30% as compared to $13.78 for the year ended December 31, 2017.Our Products and ServicesAdvertising, Content Distribution and Audience DevelopmentWe generate advertising revenues primarily by serving video ads to our users and measuring the return on investment of these adsour platform. Advertisers are able to advertisers. We collect a variety of information on the Roku platform, including user registration dataleverage our direct relationship with our users, as well as anonymized information like audience engagement, frequencyour advertising capabilities and content-related useuser data and insights, to serve relevant, targeted advertisements. Roku’s first-party data is a result of features,our direct relationship with users and interactions with advertisements. Withis exclusively available in our co-branded smart TVs, or Roku TVs, we give users the ability to opt-in to use automatic content recognition and other technology to collect information about what users watch via antenna and devices connected to Roku TVs, and we collect data about the use of the Roku TV’s home screen and antenna programming guide.reach our overmeasure both the top, or OTT, audience witheffectiveness of the ads that are more relevant, interactiveserved and measurable than advertising deliveredtheir return on traditional linear TV. Our advertisers include brand marketers and content publishers who use our advertising services to attract and develop their target audiences and promote their content on our streaming platform. As traditional TV audiences shrink, OTT audiences have become increasingly important to advertisers who must continue to reach large audiences. Our growth in active accounts and hours streamed has attracted more advertisers and content publishers to our TV streaming platform creating a better user experience.In addition, we continue to refine and advance measurement capabilities on our advertising platform. Through our Measurement Partner Program, we use tools and partners to provide advertisers the capability to measure audience demographics, validate ad effectiveness, and quantify sales lift from advertising on the Roku platform.investment. We offer engagement analytics such as ad impressions served, click-through rates, and video completion rates. We also work with a wide variety of third-party measurement companies to measure the branding impact of the ads we serve.served and audience demographics, validate ad effectiveness, and quantify sales lift from advertising on our platform. Furthermore, we have relationships with third-party providers that focus on transactional or point of sale data, which enables our advertisers to compare the effectiveness of Roku ads served on our platform to traditional linear television advertising.Our primary advertising products include:•Video ads. Our ad-supported content publishers use video ads to monetize our users and we also use video ads to monetize our platform. Video ads are sold within channels on the Roku platform as 15-We utilize a variety of ad placements, particularly native display ads,free movie or show and sponsored themes on the Rokuour home screen and screen saver to help content publishers drive channel downloads and traffic to their channels in order to drive subscriptions or movie and TV show consumption.screen. We also sell branded channel buttons on player andcontent rows within The Roku Channel.remote controls. The branded buttons provide easy access and drive incremental usage by allowing usersstreaming. Advertisers use OneView to launch straight into the channel.We provide our content publishers with access to the most engaged OTT audience, as measured by average hours streamed. We negotiate revenue share agreements with content publishers for distribution on the Roku platform. Our platform enables content publishers to distribute streaming content through three primary business models, transaction video on demand, or TVOD, that includes channels that offer a la carte movie purchases or rentals, subscription video on demand, or SVOD, that includes subscriptions to individual video on demand channels and so-called virtual multichannel video programming distribution services, and advertising supported video on demand, AVOD, that includes channels that do not charge a subscription fee to users. We generate revenue from TVOD and SVOD channels from various forms of revenue sharing arrangements. Our revenue sharing arrangements generally apply to new subscriptions for accounts that signset up, for new services and at the time of a movie rental or purchase for TVOD. Revenue from the distribution of AVOD channels is generated through the sale of advertising within the channel.AVOD is our fastest growing distribution model, and we are increasing the monetization of these hours by expanding our advertising capabilities both on and off the Roku platform. We intend to continue to leverage our data and analytics to deliver relevant advertising and improve the ability of our advertisers to optimize their campaignsmake changes, and measure ad campaigns entirely on their results. We also planown. In a world where all TV ads will be automated and streamed, our software and machine learning provide the best way to continue to expand our direct sales teams to increasereach a Roku user wherever they are -- Roku, other TV streaming devices, desktop, mobile, and more. Advertisers choose OneView because it is the number of advertisers who use our services.In late 2017, we launchedonly ad buying platform with Roku data, with ad space from The Roku Channel, which offers ad-supported free access for users to a collection of films, television series and other content, and atwith new Roku ad experiences that go beyond the same time we began a fundamental transition to increase video advertising inventory under our control and to create another way of connecting content publishers with users. The Roku Channel has grown from providing customers with free access to 1,000 movies andlegacy TV episodes to roughly 10,000 today and is rapidly becoming one of our leading sources of advertising inventory. In January 2019, we launched Premium Subscriptions within The Roku Channel, through which we resell ad-free premium content subscription services from providers such as Showtime, Starz and Epix directly to our users.Roku TVs and Streaming PlayersWe acquire users by offering low cost streaming players and through Roku TVs that are manufactured and sold by TV brands that enter into licensing arrangements with us.
Business GrowthRoku TVs integrate our Roku Operating System, or Roku OS, and leverage our smart TV hardware reference design. We work with our TV brand licensees to assistall phases of the development of Roku TVs, including development, planning, manufacturing and marketing. Roku TV brand licensees include TCL, Element, Hisense, Hitachi, JVC, RCA, Philips, Sanyo, Sharp, and Magnavox. They are available in sizes ranging from 24” to 75” at leading retailers in the United States, Canada and Mexico. In 2018, more than one in four smart TVs sold in the United States were Roku TVs.We offer streaming players for sale under the Roku brand in the United States, Canada, the United Kingdom, France, the Republic of Ireland, Mexico and several other Latin American countries. We also license our Roku OS and streaming player designs, and provide ongoing technology and support services, to certain service operators that distribute Roku Powered players to their subscribers. All players run on the Roku OS, and stream content via built-in Ethernet or Wi-Fi capability, depending on the model. Our current streaming player line for the U.S. market includes several models at a range of manufacturers’ suggested retail prices to meet the needs of different users starting at $29.99.Technologycore technology supportingsuccess of the Roku OS is a critical competitive advantageinvestments in our business that we have made, and therefore wewill continue to make, substantial investments in our research and development efforts to enhance our platformimprove the value for users, content publishers, and advertisers.advertisers on our platform. We have invested in delivering broad searchmust regularly update and discovery capabilitiesenrich our platform to meet evolving consumer behavior and deliver a superior experience for our users, content publishers, and advertisers. Further, it is important that we remain a platform for content delivery and invest to provide content publishers with best-in-class publishing tools and actionable audience insights. We must continueorder to organizeour advertising capabilities and manage the vast amounts of contenttechnology so that we attract and pricing informationencourage incremental advertising spend on our platform. Our cloud-based searchAccordingly, we plan to continue investing in our business to enhance our competitive differentiation and discoveryseed future growth. In particular, these investments will include research and development initiatives to bring new features and technology to our platform; sales and marketing efforts to drive increased scale and engagement of our user base; continuing to invest in both licensed and original content to drive incremental usage of The Roku Channel; and building out our general and administrative infrastructure to support a global scale business.users are powered by state-of-the-art serversSMBs to access the OneView ad platform. In 2021, we announced a new tool that will allow Shopify merchants to easily build, buy, and databases that are purpose-built and support large scale audiences. We have also introduced user experience technology such as private listening and voice search for certainmeasure TV streaming devices.For content publishers, we offer our open Channel Developer Program to create streaming channels. The Channel Developer Program is basedadvertising campaigns on our Software Development Kit, or SDK, and proprietary implementation of the Brightscript scripting language, which is optimized to provide robust performance and a consistent user experience on any device with the Roku platform. Channel Developers may also take advantage ofAlso, in 2021, we acquired Nielsen’s video automatic content recognition and dynamic ad insertion technologies. Roku can now enable TV programmers to replace legacy TV ads with targeted ads in real-time. This means marketers can improve the consumer experience by no longer running the same ad too many times to the same linear TV viewer and content owners can increase ad revenue by bringing Roku data and attribution into legacy TV advertising.feed-based Roku Direct Publisher program, which does not requirebusiness delivers to consumers, content publishers, to write a single line of code to publish a channel onadvertisers, TV brand partners, other device licensees, and retailers is as compelling in international markets as it is in the United States. Today our platform.For advertisers,products are available in 20+ countries while the Roku Ad Framework, or RAF, technologyOS is integratedavailable in six countries. We are now the #1 TV streaming platform in the United States, Mexico, and Canada by hours streamed. We continue to build our foundation for international expansion by establishing teams and offices around the world and investing in systems and processes that will support international expansion going forward. In 2021, we expanded into Germany with our player business and launched new Roku TV models in the Roku OS. RAF providesUnited Kingdom, Brazil, Mexico, Chile, and Peru. In international territories, we will continue to focus on building scale first, increasing customer engagement, and ultimately driving monetization.criticalsales and advanced advertising capabilities, including IAB VAST ad processing, interactive rich media features, demographic measurement, device IDs, user privacy controlsmarketing activities to continuously drive active account growth, engagement, and compatibility with all major video ad servers, SSPsmonetization and DSPs.proprietary systems leverage our feature extraction, information retrievalsales and matching systems to provide the most relevant ads. The Roku OS also includes our core data platform that managesmarketing activities are primarily focused on building and analyzes billions of technical and user events and terabytes of uncompressed data that is processed through our platform each day. We use leading big data analytic technologies to identify rich insights to improve user, content publisher and advertiser value from the Roku platform.Sales and MarketingWe drive growth in our platform by buildingexpanding relationships with content publishers, advertisers, TV brands, retailers, and service operators. operators, and driving sales of our streaming players and audio products and Roku TV models to consumers through retail distribution channels.platform.platform among content publishers, advertisers, TV brands, and service operators. 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. We enter into distribution agreements with our content publishers and license their content through our dedicated content relationship management team. We sell advertising with two direct sales teams, one focused on content publishers, the other focused on traditional advertisers. Our relationship with content publishers is typically client-direct. We secure direct access to publishers’ video ad inventory as part of our distribution agreements and through access to programmatic ad exchanges in OneView to serve as an additional channel for content publishers to monetize their audience. These sales efforts are differentiated and complementary to that of our content publishers. Whereas our publishers typically sell on a cross-platform basis and feature their brand and content in their sale, weOTTstreaming audience across many channels at once. once using our own data. We sell advertising to a wide range of advertisers helping them reach their goals across numerous key performance indicators. Our sales teams and products are organized into six 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.the major ad agencies and holding companies including Dentsu, Havas, Horizon, IPG, Publicis and WPP. We also offer smaller content publishers a self-serve platform to buy promotions and are increasingly incorporating programmatic capabilities into our advertising sales. We work withRoku TV brandsbrand partners to assist in all phases of the development of Roku TVs,TV models, including development, planning, manufacturing, and marketing, and similarlymarketing. Similarly, we work with service operators on the planning and development of their Roku Poweredco-branded players.We grow our users by providing consumers with low cost, widely available players and TVs and we promote them using a wide range of marketing techniques. Our players and TVs are available at over 16,000 retail locations inCanada, the United Kingdom, France, the Republic of Ireland, Mexico and several other Latin American countries. The majority of our streaming players, audio products and Roku TVsTV models are sold in the United States through traditional brick and mortar retailers, such as Best Buy, Target, and Walmart, including their online sales platforms, and online retailers such as Amazon. We also sell players in the United States directly throughAmazon, and to a lesser extent our website. In addition, in some cases, we sell our streaming players to service operators or channel partners who bundle such players with services that they sell to their customers. We also sell products internationally through distributors and to retailers such as Currys in the United Kingdom and Amazon in France. In 2018 and 2017,retailers. Amazon, Best Buy, and Walmart each accounted for more than 10% of our player revenue. These three retailers collectively accounted for 68% and 61%69% of our player revenue for both20182021 and 2017. These retailers also sell products offered by our competitors.2020. We support retailers with an experienced sales management team and work closely with these retailers to assist with in-store marketing and product mix forecasting, leading usforecasting. We intend to becontinue to invest significant resources in our sales and marketing efforts.category captainhigh percentage of the total net revenue for such fiscal year due to higher consumer purchases and increased advertising during holiday seasons. Furthermore, in many major retail locations.uponon 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, features, and functionality. We work closely with content publishers, advertisers, TV brands, 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.expandenhance our platform and capabilities. located in the People’s Republic of China.China, Southeast Asia, and Brazil. Our contracts do not obligate them to supply products to us in any specific quantity or at any specific price. Our contract manufacturers procure components and assemble our products to demand forecastsforecast we establish based upon historical trends and analysis from our sales, operations, and product management functions. The contract manufacturers ship our products to our third-party warehouses in California, the United Kingdom, Germany, and EnglandBrazil where theywe ship playersour products directly to retailers, wholesale distributors and to end users.domesticU.S. federal, U.S. state, and foreign laws and regulations covering a wide variety of subject matters. These laws and regulations include general business regulations and laws, as well as regulations and laws specific to providers of Internet-deliveredinternet-delivered streaming services and internet-connected devices. New lawsregulations in these areas may have an adverse effect on our business. The costs of compliance with these laws and regulations are high and are likely to increase inabroad, the future. If we fail to comply with these laws, we may be subject to significant liabilities and other penalties.In particular, our business is subject to foreign and domestic laws and regulations applicable to companies conducting business using the Internet. Both domestic and international jurisdictions vary widely as to how, or whether, existing laws governing areas such as personalregulatory framework for privacy and data security issues is rapidly evolving. U.S. federal and state consumer protection payment processingregulators generally exercise oversight of consumer privacy protections and the security of online services. And an increasing number of states have passed, or sales and other taxes and intellectual property applyare considering legislation to the Internet and e-commerce, and these lawsare continually evolving. Moreover, the laws governing these areas, as well as those governing electronic contracts and Internet content and access restrictions, among other areas, are rapidly evolving. The laws in these areas are unsettled and future developments are unpredictable. Laws that lead to more stringent regulation of companies engaging in businesses using the Internet may have a negative impact on our business.We are also subject to both general and e-commerce specific privacy laws and regulations that may require us to provide users with our policies on sharing information with third parties and advance notice of any changes to these policies. Related laws may govern the mannerconsumer privacy. Likewise, foreign jurisdictions in which we store or transfer sensitive information or impose obligations on us in the event of a security breach or inadvertent disclosure of such information. International jurisdictionsoperate impose different, and sometimes more stringent, consumer and privacy protections, includingcompared to the European Union’s newly enacted General Data Protection Regulation. Such consumerUnited States. Consumer privacy laws are constantly changing and may become more diverse and restrictive over time, challenging our ability to fully complyincreasing the challenges and costs associated with complying with these laws in all jurisdictions. Privacy laws also may limit the ability of advertisers to fully utilize our platform, which could have a negative impact on our business.Tax regulations in domestic and international jurisdictions where we do not currently collect state or local taxes may subject us to the obligation to collect and remit such taxes, to additional taxes or to requirements intended to assist jurisdictions with their tax collection efforts. New legislation or regulation, the application of laws from jurisdictions whose laws do not currently apply to our business or the application of existing laws and regulations to the Internet and e-commerce generally could result in significant additional taxes on our business. Further, we could be subject to fines or other payments for any past failures to comply with these requirements. The continued growth and demand for e-commerce is likely to result in more laws and regulations that impose additional compliance burdens on e-commerce companies, and any such developments could harm our business.Internetinternet is a vital component of our business and also is subject to a variety of laws and regulations in jurisdictions throughout the world. We expect to relyhistorically have relied on the historical openness and accessibility of the Internetinternet to conduct our business, and government regulations that impede or fail to preservethe preservation of the open Internetinternet could harm our business. Regulators in the United States and abroad continue to evaluate policy changes that could affect the openness of the internet. To the extent regulatory agencies adopt rules thatregulators allow network operators to restrict the flow of content over the Internet,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.Ourpublishers also arebusiness is subject to a wide range of government regulations that may vary by jurisdiction. Some nations highly regulate media, including TV streaming. Others have (or may consider) regulations that mandateInternet,internet, increased regulation of our content publishersTV streaming or changes in laws or regulations governing Internet retransmissioninternet transmission of third-party content could increase our expenses and adversely affect our business and the attractiveness of our platform.WeTo establish and protect our proprietary rights, we rely on a combination of intellectual property rights, including patents, trademarks, copyrights, trade secrets, copyrights, trademarks, patentssecret laws, license agreements, confidentiality procedures, employee disclosure and domain names to protect our intellectual property. Our trademarks, including “Roku”invention assignment agreements, and the Roku logo and design, are an important part of our branding and the value of our business. other contractual rights.2018,2021, we owned 70had approximately 750 issued U.S. patents (of which 16 are design patents) and 9 issued European Community design patents.The claims for which we have sought patent protection apply to both our devices and software. Our patent and patent600 pending applications generally apply to the features and functions of our Roku OS and the applications associated with our platform.We also incorporate generally available third-party software, including open source software, in our Roku OS and our platform, pursuant to licenses with such third parties. The termination of these software licenses would require redesign of parts of the Roku OS and our platform, which could delay or impair our ability to offer our devices and platform.We enter into confidentiality agreements with employees, consultants and business partners, and generally control access and use of our proprietary and other confidential information through the use of internal and external controls. These steps may not be adequate, however, and may not be effective to protect our intellectual property in the United States and foreign countries. We also license technology from third parties when we believe it will facilitate our product offerings or other international markets in which we do business. Third parties may infringe or misappropriate ourFor information about the intellectual property rights or may challengerisks applicable to our issued patents. If we fail to adequately protect our intellectual property rights, our competitors could offer similar products and services which would harm our business. market for streaming media is continuing to grow and evolve. We face substantial competition from large technology and consumer electronics companies including Amazon, Google and Apple. These competitors have helped to increase consumer awareness of TV streaming industry is highly competitive and, have contributedas it continues to the growth and evolutionevolve, we will continue to face strong competition in every aspect of the overall streaming media marketplace. However, theirour business. We compete with much larger companies which have resources and brand recognition that pose significant competitive challenges. In the face of this competition, we believe our success in capitalizing on the expanding opportunities in the streaming market will dependdepends on our ability to acquire users by delivering high quality streaming devices at competitive prices, partnering with Roku TV brands to bring co-branded smart TVs to market, and developing and monetizing engaged audiencesour streaming platform with compelling content, promotional services, and advertising.Employees2018,2021, we had 1,111employed approximately 3,000 full-time employees of which 624 werelocated in research and development, 304 were13 countries. Only our employees in sales and marketing, and 183 were in general and administrative and operations. None of our employeesBrazil are represented by a labor union with respect to his or hertheir employment. The majority of our employees currently are working from home as a result of the COVID-19 pandemic but we expect that most employees will adopt a hybrid work schedule (consisting of both in-person work and working from home) in 2022.have not experienced any work stoppages and we consider our relations withwant our employees to be good.Information about Segmentproud to work at Roku. Our entrepreneurial, execution-focused culture emphasizes recruiting talented individuals, encouraging teamwork, and Geographic AreasThe segmentexpecting our employees to perform at a high level. Across Roku, teams are expected to communicate clearly, in real time. Because our employees are trusted and geographic information required hereinencouraged 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.contained in Note 15 to the Consolidated Financial Statements in Item 8, which is incorporated herein by reference.Corporate InformationWe originally formed in October 2002 asensure that Roku LLC under the lawscontinues to be a great place to work and thrive. In 2021, we launched our first company-wide employee engagement survey to better understand employee sentiment regarding our strategy, culture, compensation and benefits, leadership, and other dimensions of the Stateemployee experience.Delaware. On February 1, 2008,Global Talent Management and Inclusion leads a growing team that is focusing on priorities in four key areas: Inclusive Employee Experiences, Inclusive Recruiting, Inclusive Communities & Social Impact, and Inclusive Customer Advocacy.LLC was converted intoin volunteerism, charitable activities, and youth engagement.Inc.platform that highlight and celebrate diverse stories from various content providers.Delaware corporation.comprehensive New Hire Onboarding experience covering our culture, business, and the resources employees need to increase their speed to productivity. In addition to mandatory training covering Anti-Harassment, Anti-Discrimination, and Privacy, we offer employees a highly encouraged suite of training offerings such as High-Performance Feedback, Effective Meetings, and Communication and Presentation Skills. Managers are provided with development on Expectations for Managers, Interviewing and Hiring, and Performance Management to support new and newly promoted leaders in managing and leading effectively. In addition, all employees have access to on-demand technical and non-technical skill developmentcompletedintend to continue to review, refresh, purchase, and custom-build additional training materials to support our initial publicglobal employees’ performance and development needs.IPO,highest level regardless of possible bonus payouts or awards.October 2017their professional and our Class A common stock is listed on The Nasdaq Global Select Market underpersonal lives. In support of this, we offer a variety of benefits and wellness offerings to employees around the symbol of “ROKU”. world.Information contained on or accessible through our website is not a part of this report and the inclusion of our website address in this report is an inactive textual reference only. Roku, the Roku logo and other trade names, trademarks or service marks of Roku appearing in this report are the property of Roku. Trade names, trademarks and service marks of other companies appearing in this report are the property of their respective holders.Securities Exchange Act, of 1934, as amended, as soon as reasonably practicable after they have been electronically filed with, or furnished to, the Securities Exchange Commission, or SEC. (http://www.sec.gov)(www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Our website address is www.roku.com. thesethe websites listed above is not incorporated by reference nor otherwise included in this report,Annual Report, and any references to these websites are intended to be inactive textual references only. on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes. If any of the following risks actually occurs, our business, reputation, financial condition, results of operations, revenue, and future prospects could be seriously harmed. In addition, you should consider the interrelationship and compounding effects of two or more risks occurring simultaneously. Unless otherwise indicated, references to our business being harmed in these risk factors will include harm to our business, reputation, financial condition, results of operations, revenue, and future prospects. In that event, the market price of our Class A common stock could decline, and you could lose part or all of your investment.We have incurred operating lossespast, expectmanufacturing of our players and Roku TV models;incurobtain key components from sole source suppliers;losses in the future and may never achieve or maintain profitability.We began operations in 2002 and we have experienced net losses and negative cash flows from operations in each year since inception. Aslosses;December 31, 2018, we had an accumulated deficit of $253.9 million and for the year ended December 31, 2018, we experienced a net loss of $8.9 million. We expect our quarterly operating expensesresults that could cause our stock price to increase in the future as wedecline;operations. Ifinternational operations;profit do not grow atprofit;greater rate thandegradation of our operating expenses, we will not be ableplatform;achieve and maintain profitability. We expect to incur significant lossesIntellectual Propertynumberdecline in our stock price caused by future sales or issuance of reasons, including without limitation our capital stock or rights to purchase capital stock;other risks and uncertainties described herein. Additionally, we may encounter unforeseen operating orsignificant legal, expenses, difficulties, complications, delaysaccounting, and other factors that may resultexpenses associated with being a publicly traded company;losses in future periods. If our expenses exceedcharter and bylaws; andrevenue, we may never achieve or maintain profitabilityselection 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 business may be harmed.increasinglyhighly competitive and global. Our success depends in part on attracting users to and retaining users on, and the effective monetization of, our TV streaming platform. To attract and retain users, we need to be able to respond efficiently to changes in consumer tastes and preferences and continue to increaseoffer our users access to the type and number of content offerings.they love on terms that they accept. Effective monetization requires us to continue to update the features and functionality of our streaming platform for users, content publishers, and advertisers. We also must also effectively support the most popular sources of streaming content that are available on our platform, such as Netflix, Amazon Prime Video, Disney+, Discovery+, HBO Max, Hulu, Paramount+, Peacock, Netflix, and YouTube andYouTube. And we must respond rapidly to actual and anticipated market trends in the U.S. TV streaming industry.players and Roku TV.players. In addition, Google licenses its Android operating system software for integration into smart TVs and service provider set topset-top boxes, and Amazon licenses its operating system software for integration into smart TVs and sells Amazon-branded smart TVs. These companies have thegreater financial resources tothan we do and can subsidize the cost of their streaming devices or licensing arrangements in order to promotemakingwhich could make it harder for us to acquire new users, retain existing users, and increase hours streamed.streaming hours. These companies could also implement standards or technology that are not compatible with our products or that provide a better streaming experience on competitive products.experience. These companies also have greater resources to promote their brands through traditional forms of advertising such as TV commercials, as well as internet advertising or website product placement, and have greater resources than us to devote to such efforts. such as LG, Samsung Electronics Co., Ltd. and VIZIO, Inc., offer their own TV streaming solutions within their TVs. Other devices, such as Microsoft’s Xbox and Sony’s PlayStation game consoles, and many DVD and Blu-ray players, also incorporate TV streaming functionality. Similarly, some service operators, such as Comcast, and Altice, offer TV streaming applications and devices as part of their cable service plans and can leverage their existing consumer bases, installation networks, broadband delivery networks, and name recognition to gain traction in the TV streaming market. If consumers of TV streaming content prefer these alternative products to Rokuour streaming players and our partners’ Roku TVs,TV models, we may not be able to achieve our expected growth in playeractive accounts, streaming hours, revenue, gross profit or gross profit.In July 2018, we launched our new RokuARPU.Wireless Speaker product line, designed specifically for use with Roku TVs. As a result, we may face additional competition from makers of TV audio speakers and soundbars, as well as makers of other TV peripheral devices. While our wireless speaker products have not generated significant revenue, if our wireless speaker products do not operate as designed, do not achieve marketplace acceptance, or do not enhance or produce the benefits to the Roku TV viewing experience as we intend, our users’ overall viewing experience may be diminished, and this maystreaming could adversely impact the overall demand for Roku TVs or other Roku products.andmodels, or our platform to gain or maintain broad market acceptance. To remain competitive and maintain our position as a leading TV streaming providerplatform, we need to continuously invest in our platform, product development, marketing, service and support, and device distribution infrastructure. In addition, evolving TV standards such as 4K, 8K HDR and unknown future developments may require further investments in the development of our players, Roku TV models, and our platform. 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. As a result, they may be able to respond more quickly to market demand, devote greater resources to the development, promotion, sales, and salesdistribution of their products or the distribution of their content, and influence market acceptance of their products better than we can. These competitors may also be able to adapt more quickly to new or emerging technologies or standards and may be able to deliver products and services at a lower cost. Increased competition could reduce our market share,sales volume, revenue, and operating margins, increase our operating costs, harm our competitive position, and otherwise harm our business.alsooperate in a highly competitive advertising industry and compete for video viewing hoursrevenue from advertising with mobileother streaming platforms (phones and tablets)services, including digital and social media platforms, as well as traditional media, such as radio, broadcast, cable and satellite TV, and satellite and internet radio. These competitors offer content and other advertising mediums that may be more attractive to advertisers than our streaming platform. These competitors are often very large and have more advertising experience and financial resources than we do, which may adversely affect our ability to compete for advertisers and may result in lower revenue and gross profit from advertising. If we are unable to increase our revenue from advertising by, among other things, continuing to improve our platform’s capabilities to further optimize and measure advertisers’ campaigns, increasing our advertising inventory, and expanding our advertising sales team and programmatic capabilities, our business and our growth prospects may be harmed. We may not be able to compete effectively or adapt to any such changes or trends, which would harm our ability to grow our advertising revenue and would harm our business.userssocial media 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 prefer to view streaming content on such devices. Increased usebe limited. If advertisers, or their agency relationships, do not perceive meaningful benefits of mobile platforms for video streamingOTT advertising, the market may develop more slowly than we expect, which could adversely impact the growthour operating results and our ability to grow our business.streaming hours, harm our competitive position and otherwise harm our business.videosale of digital advertising and audience development campaigns that run across our platform and from our content partners on a transactional basis when new subscriptions are purchased and content transactions occur on our platform.distribution services. As such, we are seeking to expand our user basethe number of active accounts and increase the number of hours that are streamed across our platform in an effort to create additional platform revenue opportunities. The total number of hours streamed, however, does not correlate with platform revenue on a period-by-period basis, because we do not monetize every hour streamed on our platform. As our user base grows and as we increase the amount of content offered and streamed across our platform, we must effectively monetize our expanding user base and streaming activity. The total number of streaming hours, however, does not correlate with platform revenue on a period-by-period basis, primarily because we do not monetize every hour streamed or every user on our platform. Moreover, streaming hours on our platform are measured Roku player or a Roku TV 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 auto-play subsequentcontinue to play content for a period of time determined by the streaming channel. We believe that this also occurs across a wide variety of non-Roku streaming devices and other set-top boxes.channelchannels by allowing themusers to purchase additional content and streaming services within their channels. In addition,channels, for which we do not currently monetize content providedmay earn less revenue than activations on non-certified channels onor through our platform. 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, then we may not be able to achieve our expected growth in platform revenue or gross profit. If we are unable to further monetize our streaming platform, our business may be harmed.To date, the majority of the hours streamed on our platform have consisted of subscription video on demand content; however, inisare still developing and may not grow as we expect. Further, while we have experienced, and expect to continue to experience, growth in our advertising revenue as we have expanded our user base and streaming hours, our efforts to monetize our platform through the sale of advertising video on demand content are still developing and our revenue from advertising video on demand offerings may not grow as we expect. This means of monetization will require us to continue to attract advertising dollars to our streaming platform as well as deliver advertising video on demandad-supported content that appeals to users. Accordingly, there can be no assurance that we will be successful in monetizing our streaming platform through the distribution of ad-supported content.advertising-supported video.harmed, even though the revenues received, directly or indirectly, from streaming on certain of these channels has not been significant to our overall revenue.contenthours streamed acrosson our platform and the terms and conditions of our relationships with content publishers vary.platform. In the year ended December 31, 2018, and December 31, 2017, Netflix and YouTube accounted for a majority2021, the top three streaming services represented over 50% of all hours streamed in eachthe period. However, although YouTube’s free ad-supported channel isIf, for any reason, we cease distributing channels that have historically streamed a large percentage of the most viewed ad-supported channel and the second most viewed channel overall byaggregate streaming hours streamed on our platform, for the year ended December 31, 2018 weour streaming hours, active accounts, or streaming device sales may be adversely affected, and our business may be harmed.receive material revenue from it. publish content on our platform, we may fail to retain existing users and attract new users.a termterms of one to three years and can be terminated before the end of the term by the content publisher under certain circumstances, such as if we materially breach the agreement, become insolvent, enter bankruptcy, commit fraud, or fail to adhere to the content publishers’ security or other platform certification requirements. Upon expiration of these agreements, we are required to re-negotiate and renew them in order to continue providing content from these content publishers on our streaming platform. We have in the past been unable, and in the future may not be able, to reach a satisfactory agreement with certain content publishers before our existing agreements have expired. If we are unable to renew such agreements on a timely basis on mutually agreeable terms, we may be required to temporarily or permanently remove certain channels from our streaming platform.We operate in an evolving industry, which makes it difficult to evaluate our business and prospects. If TV streaming develops more slowly than we expect, our operating results and growth prospects could be harmed. In addition, our future growth depends on the growth of TV streaming advertising.TV streaming is a relatively new and rapidly evolving industry, making our business and prospects difficult to evaluate. The growth and profitability of this industry and the level of demand and market acceptance for our products and streaming platform are subject to a high degree of uncertainty. We believe that the continued growth of streaming as an entertainment alternative will depend on the availability and growth of cost-effective broadband internet access, the quality of broadband content delivery, the quality and reliability of new devices and technology, the cost for users relative to other sources of content, as well as the quality and breadth of content that is delivered across streaming platforms. These technologies, products and content offerings continue to emerge and evolve. Users, content publishers or advertisers may find TV streaming platforms to be less attractive than traditional TV, which would harm our business. In addition, many advertisers continue to devote a substantial portion of their advertising budgets to traditional advertising, such as TV, radio and print. The future growth of our business depends on the growth of TV streaming advertising, and on advertisers increasing spend on such advertising. We cannot be certain that they will do so. If advertisers do not perceive meaningful benefits of TV streaming advertising, then this 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 sufficient quantity or quality of ad-supported content hours on our platform and continue to grow supply of quality video ad inventory. We growWhile The Roku Channel has historically served as a valuable source of video ad inventory by addingfor us to sell, there is no guarantee that it will continue to do so in the future. If The Roku Channel is unable to secure content that is appealing to our users and retainingadvertisers, or is unable to do so on terms that provide a sufficient supply of ad inventory at reasonable cost, our supply of video ad inventory will be negatively impacted. We are also dependent on our ability to monetize video ad inventory within other ad-supported channels on our streaming platform. We seek to obtain the ability to sell such inventory from the content publishers of such channels. We may fail to attract content publishers that generate a sufficient quantity or quality of ad-supported content hours on our streaming platform with ad-supported channels that we can monetize. In addition, ouror 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, accordingly,channels. Accordingly, we do not have access to alla significant portion of the video ad inventory on our platform. For certain channels, including YouTube’s ad supportedad-supported channel, we have no access to video ad inventory at this time, and we may not secure access in the future. The amount, quality, and cost of video ad inventory available to us can change at any time. If we are unable to grow and maintain a sufficient supply of quality video advertisingad inventory at reasonable costs to keep up with demand, our business may be harmed.We operate in a highly competitive industry and we compete for advertising revenue with other internet streaming platforms and services, as well as traditional media, such as radio, broadcast, cable and satellite TV and satellite and internet radio. These competitors offer content and other advertising mediums that may be more attractive to advertisers than our TV streaming platform. These competitors are often very large and have more advertising experience and financial resources than we do, which may adversely affect our ability to compete for advertisers and may result in lower revenue and gross profit from advertising. we are unable to increase our advertising revenue by, among other things, continuing to improve our platform’s data capabilities to further optimize and measure advertisers’ campaigns, increase our advertising inventory and expand our advertising sales team and programmatic capabilities, our business and our growth prospects may be harmed. We may not be able to compete effectively or adapt to any such changes or trends, which would harm our ability to grow our advertising revenue and harm our business.Our players and Roku TVs must operate with various offerings, technologies and systems from our content publishers do not participate in new features that we do not control. If Roku devices do not operate effectively with those offerings, technologies and systems,may introduce from time to time, our business may be harmed.Our Roku OS is designed for performance using relatively low-cost hardware, which enables us to drive user growth withplayersstreaming platform and Roku TVs offered at a low cost to consumers. However, our hardware must be interoperable with all channels and other offerings, technologies and systems from our content publishers, including virtual multi-channel video programming distributors such as Sling TV. We have no control over these offerings, technologies and systems beyond our channel certification requirements, and if our players 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 offeringsthat are not compatible with our players,products evolve, we may be unable to increase user growth and content hours streamed, we may be required to increase our hardware costs and our business will be harmed. We plan to continue to introduce new products regularly and we have experienced that it takes timefeatures, which may or may not be attractive to optimize such products to function well with these offerings, technologies and systems. In addition, many of our largestcontent publishers or meet their requirements. For example, some content publishers have elected not to participate in our integrated advertising framework 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. If we introduce new features or utilize a new scripting language in the rightfuture, such a change may not comply with certain content publishers’ certification requirements. In addition, our content publishers may find other languages, such as HTML5, more attractive to testdevelop for and certify our new products before we can publishshift their resources to developing their channels on new products. These certification processes can be time consuming and introduce third party dependencies into our product release cycles.other platforms. If key content publishers do not certifyfind our streaming platform simple and attractive to develop channels for, do not value and participate in all of the features and functionality that our streaming platform offers, or determine that our software developer kit or 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. To continue to grow our active accounts and user engagement, we will need to prioritize developmentfeatures of our products to work better with new offerings, technologies and systems. If we are unable to maintain consistent operability of Roku devices that is on parity with or better than other platforms, our business could be harmed. In addition, any future changes to offerings, technologies and systems from our content publishers such as virtual service operators may impact the accessibility, speed, functionality, and other performance aspects of our products, which issues are likely to occur in the future from time to time. We mayplatform do not successfully develop products that operate effectively with these offerings, technologies or systems. If it becomes more difficult for our users to access and use these offerings, technologies or systems, our business could be harmed.Changes in consumer viewing habits could harm our business.The manner in which consumers access streaming content is changing rapidly. As the technological infrastructure for internet access continues to improve and evolve, consumers will be presented with more opportunities to access video, music and games on-demand with interactive capabilities. Time spent on mobile devices is growing rapidly, in particular by young adults streaming video content, including popular streaming channels like Netflix and YouTube, as well as content from cable or satellite providers available live or on-demand on mobile devices. In addition, personal computers, smart TVs, DVD players, Blu-ray players, gaming consoles and cable set top boxes allow users to access streaming entertainment content. If other streaming or technology providers are able to respond and take advantage of changes in consumer viewing habits and technologies better than us, our business could be harmed.New entrants may enter the TV streaming market with unique service offerings or approaches to providing video. In addition, our competitors may enter into business combinations or alliances that strengthenmeet their competitive positions. If new technologies render the TV streaming market obsolete or we are unable to successfully compete with current and new competitors and technologies, our business will be harmed, and we may not be able to increase or maintain our market share and revenue.If we fail to obtain or maintain popular content, we may fail to retain existing users and attract new users.We have invested a significant amount of time to cultivate relationships with our content publishers; however, such relationships may not continue to grow or yield further financial results. We must continuously maintain existing relationships and identify and establish new relationships with content publishers to provide popular content. In order to remain competitive, we must consistently meet user demand for popular streaming channels and content; particularly as we launch new players or enter new markets, including international markets. If we are not successful in helping our content publishers launch and maintain streaming channels that attract and retain a significant number of users on our 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 market new streaming channels and enhancements to our existing streaming channels;minimize launch delays of new and updated streaming channels; andminimize platform downtime and other technical difficulties.If we fail to help our content publishers maintain and expand their channel offeringscertification requirements, our business may be harmed.audience developmentmedia and entertainment promotional spending campaigns on our platform are not relevant or not engaging to our users, our growth in active accounts and streaming hours streamed may be adversely impacted.providerspublishers to deliver relevant advertisementsadvertising and audience developmentmedia and entertainment promotional spending campaigns to users on our platform.users. Existing and prospectiveproviderspublishers may not be successful in serving ads and audience developmentmedia and entertainment promotional spending campaigns that lead to and maintain user engagement. Those ads and campaigns may seem irrelevant, repetitive, or overly targeted and intrusive. We are continuously seeking to balance the objectives of our usersadvertisers and advertiserscontent publishers with our desire to provide an optimal user experience, but we may not be successful in achieving a balance that continues to attract and retain users, advertisers, and advertisers.content publishers. If we dothe advertising and media and entertainment promotional spending campaigns on our streaming platform are not introduce relevant advertisements and audience development campaigns or such advertisements and audience development campaigns are overly intrusive and impede the use of our TV streaming platform, our users may stop using our platform, which will harm our business.and/or generate significant advertising revenues, and our users may not purchase Premium Subscriptions.“TheThe Roku Channel,” which offers both ad-supported free access for users to a collection of films, television series, live linear television, and other content as well as “Premium Subscriptions,” which we launched in January 2019, allowing our users to pay for ad-free content from various content providers, all on one streaming channel. Although the Roku Channel was a top five channel on our platform based on the number of active accounts that accessed the channel at least once in the quarter ended December 31, 2018 other than through our Premium Subscriptions feature, we do not receive subscriptions or other fees from users that access content on The Roku Channel.content. We have incurred, and will continue to incur, costs and expenses in connection with the launch, development, expansion, and operation of The Roku Channel, which we monetize primarily through advertisingadvertising. For example, in 2021, we acquired content rights, including rights to certain projects in development, from the mobile-first video distribution service known as Quibi, and selling Premium Subscriptions. announced that The Roku Channel would become the home of such content. In addition, we acquired the entities comprising the This Old House business, which own and produce the “This Old House” and “Ask This Old House” TV programs and operate related business lines, to further the growth strategy and ad-supported content offerings in The Roku Channel.free, ad-supported content we make available on The Roku Channel, or purchase Premium Subscriptions, we will not have the opportunity to monetize The Roku Channel through revenue generated from advertising as well as Premium Subscriptions.advertising. In order to attract users to the ad-supported content on The Roku Channel and drive streaming of ad-supported video on The Roku Channel, we must secure rights to stream content that is appealing to our users and advertisers. In part, we do this by directly licensing certain content from content owners, such as television and movie studios. The agreements that we enter into with these content owners have varying terms and provide us with rights to make specific content available through The Roku Channel during certain periods of time. Upon expiration of these agreements, we are required to re-negotiate and renew these agreements with the content owners, or enter into new agreements with other content owners, in order to obtain rights to distribute additional titles or to extend the duration of the rights previously granted. If for any period of time, we are unable to enter into content license agreements on acceptable terms to access content that enables us to attract and retain users of the ad-supported content on The Roku Channel, or if the content we do secure rights to stream (including, for example, the content that we acquired through the Quibi and This Old House transactions) is ultimately not appealing to our users and advertisers, usage of The Roku Channel may decline, and our business may be harmed. we make available, our users may not stream content and view advertisements on The Roku Channel, and The Roku Channel may not generate sufficient revenue from advertising revenues to be cost effective for us to operate, regardless of our ability to sell Premium Subscriptions.operate. In addition, we recently began distributingdistribute The Roku Channel on platforms other than our own streaming platform, and there can be no assurance that we will be successful in attracting a large number of users and/or generating significant revenue from advertising revenues through the distribution of The Roku Channel on such other streaming platforms.Our growth will depend in part upon our ability to develop relationships with TV brands and, to a lesser extent, service operators.We developed, and intend to continue to develop, relationships with TV brands and service operators in both the United States and international markets. Our licensing arrangements are complex and time-consuming to negotiate and complete. Our current and potential partners include TV brands, cable and satellite companies and telecommunication providers. Under these license arrangements, we generally have limited control over the amount and timing of resources these entities dedicate to the relationship. If our TV brand or service operator partners fail to meet their forecasts for distributing licensed devices, our business may be harmed.We license our Roku OS to certain TV brands to manufacture co-branded smart TVs, or Roku TVs. The primary economic benefits that we derive from these license arrangements have been and will likely continue to be indirect, primarily from growing our active accounts and increasing hours streamed. We have not received, nor do we expect to receive significant license revenue from these arrangements in the near term, but we expect to incur expenses in connection with these commercial agreements. If these arrangements do not result in increased users and hours streamed, our business may be harmed. The loss of a relationship with a TV brand or service operator could harm our results of operations, damage our reputation, increase pricing and promotional pressures from other partners and distribution channels or increase our marketing costs. If we are not successful in maintaining existing and creating new relationships with any of these third parties, or if we encounter technological, content licensing or other impediments to our development of these relationships, our ability to grow our business could be adversely impacted.thoughthrough other channels on our platform, our business may be harmed.platform.platform, including Premium Subscriptions on The Roku Channel, which allow our users to pay for content from various content publishers. If users do notreduce 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 thatfor which we do not receive attribution, for, our business may be harmed.revenuesrevenue we earn from these transactions are generallyis not always equivalent to the revenuesrevenue we earn from activationssales of such additional services on ora stand-alone basis through our platform that we receive full attribution credit for. Accordingly, ifplatform. If users activateincrease their subscriptions for content or servicesspending on such in-channel transactions at the expense of stand-alone purchases through other channels on our platform, our business may be harmed.If we were to lose the services of our Chief Executive Officer or other members of our senior management team, we may not be able to execute our business strategy.Our success dependslarge part upon the continued service of key members of our senior management team. In particular, our founder, President and Chief Executive Officer, Anthony Wood, is critical to our overall management, as well as the continued development of our devices and the Roku platform, our culture and our strategic direction. All of our executive officers are atrapidly evolving industry that will employees, and we do not maintain any key person life insurance policies. The loss of any member of our senior management team could harm our business.If we are unable to attract and retain highly qualified employees, we may not be able to continue to grow our business.Our ability to compete and grow depends in large part on the efforts and talents of our employees. Our employees, particularly engineers and other product developers, are in high demand, and we devote significant resources to identifying, hiring, training, successfully integrating and retaining these employees. As competition with other companies increases, we may incur significant expenses in attracting and retaining high quality engineers and other employees. The loss of employees or the inability to hire additional skilled employees as necessary to support the rapid growth of our business and the scale of our operations could result in significant disruptions to our business, and the integration of replacement personnel could be time-consuming and expensive and cause additional disruptions to our business.We believe a critical component to our success and our ability to retain our best people is our culture. As we continue to grow and develop a public company infrastructure, we may find it difficult to maintain our entrepreneurial, execution-focused culture. In addition, many of our employees, may be able to receive significant proceeds from sales of our equity in the public markets, which may reduce their motivation to continue to work for us. Moreover, the equity ownership of many of our employees could create disparities in wealth among our employees, which may harm our culture and relations among employees and our business.Most of our agreements with content publishers are not long term. Any disruption in the renewal of such agreements may result in the removal of certain content from our platform and may harm our active account growth and engagement.We enter into agreements with all our content publishers, which have varying expiration dates; typically over one to three years. Upon expiration of these agreements, we are required to re-negotiate and renew these agreements in order to continue providing offerings from these content publishers on our platform. We may not be able to reach a satisfactory agreement before our existing agreements have expired. If we are unable to renew such agreements on a timely basis, we may be required to temporarily or permanently remove certain content from our platform. The loss of such content from our platform for any period of time may harm our business.If our content publishers do not continue to develop channels for our platform and participate in new features that we may introduce from time to time, our business may be harmed.As our 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. For example, some content publishers have elected not to participate in our cross-channel search feature, our integrated advertising framework, known as RAF, or have imposed limits on our data gathering for usage within their channels. In addition, our platform utilizes our proprietary Brightscript scripting language in order to allow our content publishers to develop and create channels on our platform. If we introduce new features or utilize a new scripting language in the future, such a change may not comply with our content publishers' certification requirements. In addition, our content publishers may find other languages, such as HTML5, more attractive to develop for and shift their resources to developing their channels on other platforms. If content publishers do not find our platform simple and attractive to develop channels for, do not value and participate in all of the features and functionality that our platform offers, or determine that our software developer kit or new features of our platform do not meet their certification requirements, our business may be harmed.Our quarterly operating results may be volatile and are difficult to predict, and our stock price may decline if we fail to meet the expectations of securities analysts or investors.Our revenue, gross profit and other operating results could vary significantly from quarter-to-quarter and year-to-year and may fail to match our past performance due to a variety of factors, includingimpacted by many factors that are outside of our control. Factorscontrol, which makes it difficult to evaluate our business and prospects.may contributethe continued growth of streaming as an entertainment alternative will depend on the availability and growth of cost-effective broadband internet access (including mobile broadband internet access), the quality and reliability of broadband content delivery, broadband service providers’ ability to control the variabilitydelivery speed of our operating resultsdifferent content traveling on their networks, the quality and cause the market price of our Class A common stock to fluctuate include:the entrancereliability of new competitors or competitive products in our market, whether by established or new companies;our ability to retain and grow our active account base and increase engagement among new and existing users;our ability to maintain effective pricing practices, in response to the competitive markets in which we operate or other macroeconomic factors, such as inflation or increased product taxes;our revenue mix, which drives gross profit;seasonal or other shifts in advertising revenue or player sales;the timing of the launch of new or updated products, streaming channels or features;the addition or loss of popular content;the ability of retailers to anticipate consumer demand;an increase in the manufacturing or component costs of our players or the manufacturing or component costs of our TV brand licensees for Roku TVs; andan 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.Our gross margins vary across our devices and platform offerings. Player revenue has a lower gross margin comparedtechnology, the cost for users relative to platform revenue derived through our arrangements with advertising,other sources of content, distribution, billing and licensing activities. Gross margins on our players vary across player models and can change over time as a result of product transitions, pricing and configuration changes, component costs, player returns and other cost fluctuations. In addition, our gross margin and operating margin percentages, as well as overall profitability, may be adversely impacted as a resultthe quality and breadth of a shift in device, geographic or sales channel mix, component cost increases, price competition, or the introduction of new players, including thosecontent that have higher cost structures with flat or reduced pricing. We have in the past and may inis delivered across streaming platforms. Accordingly, the future strategically reduce our player gross margin inevolution of TV streaming as an effort to increase our active accounts and grow our gross profit. As a result, our player revenue may not increase as rapidly as it has historically, or at all, and, unless we are able to adequately increase our platform revenue and grow our active accounts, we may be unable to grow gross profit and our business will be harmed. If a reduction in gross margin does not result in an increase in our active accounts and gross profit, our financial results may suffer, and our business 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.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 periods. Furthermore, a significant percentage of our player sales through retailers in the fourth quarter are pursuant to committed sales agreements with retailers forindustry, which we recognize significant discounts in the average selling prices in the third quarter in an effort to grow our active accounts, which will reduce our player gross margin.Given the seasonal nature of our player sales, accurate forecasting is critical to our operations. We anticipate that this seasonal impact on revenue and gross profit is likely to continue and any shortfall in expected fourth quarter revenue, due to macroeconomic conditions, a decline inimpact our success, is dependent on many of the effectivenessfactors that are outside of our promotional activities, actions by our competitors or disruptions in our supply or distribution chain, or for any other reason, would cause our full year results of operations to suffer significantly. For example, delays or disruptions at U.S. ports of entry could adversely affect our or our licensees’ ability to timely deliver players and co-branded Roku TVs to retailers during the holiday season. A substantial portion of our expenses are personnel related and include salaries, stock-based compensation and benefits that are not seasonal in nature. Accordingly, in the event of a revenue shortfall, we would be unable to mitigate the negative impact on margins, at least in the short term,control.business would be harmed.We and ourRoku TV brand partners depend on our retail sales channels to effectively market and sell our players and Roku TVs,TV models, and if we or our partners fail to maintain and expand effective retail sales channels, we could experience lower player or Roku TV model sales.acquire newincrease our active accounts, we must maintain and expand our retail sales channels. The majority of our players and our TV brand partners’ Roku TVsTV models are sold through traditional brick and mortar retailers, such as Best Buy, Target, and Walmart, including their online sales platforms, and online retailers such as Amazon. To a lesser extent, weWe also sell players directly through our website and internationally through distributors. For the year ended December 31, 2018,distributors and retailers such as Coppel in Mexico, Magazine Luiza in Brazil, and MediaMarkt in Germany. As we have only recently expanded to certain international markets, we may not have established a strong reputation or relationships with global retailers as compared to our domestic operations or our competitors in international markets. Amazon, Best Buy, and Walmart in total accounted for 68% of our player revenue and are expected to each account for more than 10% of our player revenue in fiscal 2019. These three retailers collectively accounted for 61%69% of our player revenue for both of the years ended December 31, 20172021 and 2016. These2020. Our retailers and our international distributors also sell products offered by our competitors. We have no minimum purchase commitments or long-term contracts with any of these retailers or distributors. If one or several retailers or distributors were to discontinue selling our players or our TV brand partners’ Roku TVs orTV models, 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 due to COVID-19 restrictions or other concerns, the volume of our streaming devices or our TV brand partners’ Roku devicesTV models sold could decrease, which would harm our business. For example, in April 2018, Amazon and Best Buy announced a partnership whereby two Best Buy controlled smart TV brands will exclusively utilize Amazon’s operating system, and such TVs will be sold by Best Buy and Amazon. Although this arrangement is not expected to limit our TV brand partners’ ability to sell on either Amazon or at Best Buy, ifIf any of our existing TV brandsbrand partners choose to work exclusively with, or divert a significant portion of their business with us to other operating system developers, this may impact our ability to license the Roku OS and our smart TV programreference design to TV brands and our ability to continue to grow active accounts. Traditional retailers have limited shelf and end cap space in theirand stronger brand identity and greater marketing resources, such as AppleAmazon or Google, possesses greater bargaining power with retailers. In addition, one of our online retailers, Amazon, sells its own competitive TV streaming productsdevices and smart TVs, is able to market and promote these products more prominently on its website, and could refuse to offer or promote our devices.devices on its website. Any reduction in our ability to place and promote our devices, or increased competition for available shelf or website placement, wouldcould require us to increase our marketing expenditures simply to maintain our product visibility or result in reduced visibility for our products, which may harm our business. In particular, the availability of product placement during peak retail periods, such as the holiday season, is critical to our revenue growth, and if we are unable to effectively sell our devices during these periods, our business would be harmed.time consumingtime-consuming and comprehensive endeavor and can be positively and negatively impacted by any number of factors. Some of theseCertain factors, such as the quality or pricing of our players or our customer service, are within our control. Other factors, such as the quality and reliability of Roku TVsTV models and the quality of the content that our content publishers provide, may be out of our control, yet users may nonetheless attribute those factors to us. Our competitors may be able to achieve and maintain brand awareness and market share more quickly and effectively than we can. Many of our competitors are larger companies and promotemay have greater resources to devote to the promotion of their brands through traditional forms of advertising, such as print media and TV commercials, and have substantial resources to devote to such efforts. Our competitors may also have greater resources to utilize internetdigital advertising or website product placement more effectively than we can.placement. If we are unable to execute on building a strong brand, it may be difficult to differentiate our business and streaming platform from our competitors in the marketplace, therefore our ability to attract and retain users may be adversely affected and our business may be harmed.customersusers to choose from thousands of channels, representing a variety of content from a wide range of content publishers. Our customersusers can choose and control which channels they download and watch, and they can use parental controlcertain settings to prevent channels from being downloaded to our streaming devices. While we have policiesof the channels that we distribute have resulted in, and could in the future result in, negative publicity, cause harm to our reputation and brand, or subject us to claims and may harm our business.We must successfully manage streaming device and other product introductions and transitions in order to remain competitive.We must continually develop new and improved streaming devices and other products that meet changing consumer demands. Moreover, the introduction of a new streaming device or other product is a complex task, involving significant expenditures in research and development, promotion and sales channel development. For example, in 2018, we introduced our new Roku TV Wireless Speaker, designed specifically for use with Roku TVs. Whether users will broadly adopt new products is not certain. Our future success will depend on our ability to develop new and competitively priced streaming devices and other products and add new desirable content and features to our platform. Moreover, we must introduce new streaming devices and other products in a timely and cost-effective manner, and we must secure production orders for those products from our contract manufacturers. The development of new products is a highly complex process, and while our research and development efforts are aimed at solving increasingly complex problems, we do not expect that all of our projects will be successful. The successful development and introduction of new products depends on a number of factors, including the following:the accuracy of our forecasts for market requirements beyond near term visibility;our ability to anticipate and react to new technologies and evolving consumer trends;our development, licensing or acquisition of new technologies;the ability of our contract manufacturer to cost-effectively manufacture our new products;the availability of materials and key components used in manufacturing; andour ability to attract and retain world-class research and development personnel.If any of these or other factors becomes problematic, we may not be able to develop and introduce new products in a timely or cost-effective manner, and our business may be harmed.We do not have manufacturing capabilities and primarily depend upon few contract manufacturers, and our operations could be disrupted if we encounter problems with the contract manufacturers.We do not have any internal manufacturing capabilities and primarily rely upon one contract manufacturer, Foxconn Industrial Internet Co. Ltd., or Foxconn, to build our players. We similarly rely on one contract manufacturer, Tonly Electronics Holdings Ltd., or Tonly, to manufacture our wireless speakers. Our contract manufacturers may be vulnerable to capacity constraints and reduced component availability, and our control over delivery schedules, manufacturing yields and costs, particularly when components are in short supply or when we introduce a new player or other product or feature, is limited. In addition, we have limited control over Foxconn’s or Tonly’s quality systems and controls, and therefore must rely on them to manufacture our players and other products to our quality and performance standards and specifications. Delays, component shortages and other manufacturing and supply problems could impair the retail distribution of our players and other products and ultimately our brand. Furthermore, any adverse change in our contract manufacturers’ financial or business condition could disrupt our ability to supply players to our retailers and distributors.Our contracts with our contract manufacturers generally do not obligate them to supply our players or other products in any specific quantity or at any specific price. In the event our contracts manufacturers are unable to fulfill our production requirements in a timely manner or decide to terminate their relationship with us, our order fulfillment may be delayed, and we would have to identify, select and qualify acceptable alternative contract manufacturers. Alternative contract manufacturers may not be available to us when needed or may not be in a position to satisfy our production requirements at commercially reasonable prices or to our quality and performance standards. Any significant interruption in manufacturing at one of our contract manufacturers would require us to reduce our supply of players or other products to our retailers and distributors, which in turn would reduce our revenue. In addition, the Foxconn and Tonly facilities are located in the People’s Republic of China and may be subject to political, economic, social and legal uncertainties that may harm our relationships with these parties. We believe that the international location of these facilities increases supply risk, including the risk of supply interruptions. Furthermore, any manufacturing issues affecting the quality of our products, including wireless speakers, players, could harm our business.If either of our contract manufacturers fail for any reason to continue manufacturing our players or other products in required volumes and at high quality levels, or at all, we would have to identify, select and qualify acceptable alternative contract manufacturers. Alternative contract manufacturers may not be available to us when needed or may not be in a position to satisfy our production requirements at commercially reasonable prices or to our quality and performance standards. Any significant interruption in manufacturing at a contract manufacturer could require us to reduce our supply of players or other products to our retailers and distributors, which in turn would reduce our revenue and user growth.Certain of our Roku TV brand partners do not have manufacturing capabilities and primarily depend upon contract manufacturers, and the supply of Roku TVs to the market could be disrupted if they encounter problems with their contract manufacturers or suppliers.Certain of our Roku TV brand partners do not have internal manufacturing capabilities and primarily rely upon contract manufacturers to build the Roku TVs that they sell to retailers. Their contract manufacturers may be vulnerable to capacity constraints and reduced component availability, and their control over delivery schedules, manufacturing yields and costs, particularly when components are in short supply may be limited. Delays,component shortages and other manufacturing and supply problems could impair the retail distribution of their Roku TVs. A significant interruption in the supply of Roku TVs to retailers and distributors could, in turn, reduce our user growth.Furthermore, any manufacturing issues affecting the quality of our Roku TV brand partners’ Roku TVs, could harm our brand and our business.Changes in general economic conditions, geopolitical conditions, U.S. trade policies and other factors beyond our control may adversely impact our business and operating results.Our businesses are subject to risks generally associated with doing business abroad, such as foreign governmental regulation in the countries in which our manufacturing sources are located. Our operations and performance depend significantly on global, regional and U.S. economic and geopolitical conditions. For example, there has been discussion and dialogue regarding potential significant changes to U.S. trade policies, legislation, treaties and tariffs, including the North American Free Trade Agreement, or NAFTA. On November 30, 2018 the United States, Mexico, and Canada signed a replacement trade deal for NAFTA, known as the United States-Mexico-Canada Agreement, or USMCA, which still needs to be ratified by the respective government of each of the three countries. The USMCA could undergo changes that lead to further modifications of certain USMCA provisions before being passed into law. Furthermore, the current administration has threatened tougher trade terms with China and other countries, leading to the imposition of substantially higher U.S. Section 301 tariffs on $250 billion of imports from China so far and higher Chinese tariffs on a large amount of U.S. exports to China. In addition, the administration has threatened to impose Section 301 tariffs on an additional $267 billion of imports from China. At this time, it is unknown whether and to what extent new USMCA legislation will be passed into law, whether or how long U.S. tariffs on Chinese goods will remain in effect or whether additional tariffs imposed, or new regulatory proposals will be adopted, whether international trade agreements will be negotiated or existing free trade agreements re-negotiated, or the effect that any such action would have, either positively or negatively, on our industry or our business or licensees. If any new legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or terminated, or if tariffs are imposed on foreign-sourced or U.S. goods, it may be inefficient and expensive for us to alter our business operations in order to adapt to or comply with such changes. Such operational changes could have a material adverse effect on our business, financial condition, results of operations or cash flows.Also, various countries, in addition to the United States, regulate the import and export of certain technology, including import and export licensing requirements, and have enacted laws that could limit our ability to distribute our products or could limit our commercial and/or strategic partners ability to implement our products in those countries. Changes in our products or future changes in export and import regulations may create delays in the introduction of our products in international markets, prevent our commercial and/or strategic partners with international operations from deploying our products globally or, in some cases, prevent the export or import of our products to certain countries, governments, or persons altogether. Any change in export or import regulations, the imposition of customs duties on intangible goods such as cross-border data flows which are currently duty-free under the WTO’s temporary e-commerce moratorium, economic sanctions or related legislation, increased export and import controls stemming governmental policies, or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or new customers in international markets. Any decreased use of our products or limitation on our ability to export or sell our products would harm our business.If we fail to accurately forecast our manufacturing requirements and manage our inventory with our contract manufacturers, we could incur additional costs, experience manufacturing delays and lose revenue.We bear supply risk under our contract manufacturing arrangements with Foxconn and Tonly. Lead times for the materials and components that our contract manufacturers orders on our behalf through different component suppliers vary significantly and depend on numerous factors, including the specific supplier, contract terms and market demand for a component at a given time. Lead times for certain key materials and components incorporated into our players are currently lengthy, requiring our contract manufacturer to order materials and components several months in advance. If we overestimate our production requirements, our contract manufacturer maypurchase excess components and build excess inventory. If our contract manufacturer, at our request, purchase excess components that are unique to our players or build excess players, we could be required to pay for these excess components or players. In the past, we have agreed to reimburse our contract manufacturer for purchased components that were not used as a result of our decision to discontinue players or the use of particular components. If we incur costs to cover excess supply commitments, this would harm our business.Conversely, if we underestimate our player or other product requirements, our contract manufacturers may have inadequate component inventory, which could interrupt the manufacturing of our players or other products and result in delays or cancellation of orders from retailers and distributors. In addition, from time to time we have experienced unanticipated increases in demand that resulted in the need to ship players via air freight, which is more expensive than ocean freight, and adversely affected our player gross margin during such periods of high demand, for example, during end-of-year holidays. If we fail to accurately forecast our manufacturing requirements, our business may be harmed.Our players incorporate key components from sole source suppliers and if our contract manufacturer is unable to source these components on a timely basis, due to fabrication capacity issues or other material supply constraints, we will not be able to deliver our players to our retailers and distributors.We depend on sole source suppliers for key components in our players. Our players utilize specific system on chip, or SoC, Wi-Fi silicon products and Wi-Fi front-end modules from various manufacturers, depending on the player, for which we do not have a second source. Although this approach allows us to maximize player performance on lower cost hardware, reduce engineering qualification costs and develop stronger relationships with our strategic suppliers, this also creates supply chain risk. These sole source suppliers could be constrained by fabrication capacity issues or material supply issues, stop producing such components, cease operations or be acquired by, or enter into exclusive arrangements with, our competitors or other companies. Any such interruption or delay may force us to seek similar components from alternative sources, which may not be available. Switching from a sole source supplier would require that we redesign our players to accommodate new components and would require us to re-qualify our players with regulatory bodies, such as the Federal Communications Commission, or FCC, which would be costly and time-consuming.Our reliance on sole source suppliers involves a number of additional risks, including risks related to:supplier capacity constraints;price increases;timely delivery;component quality; anddelays in, or the inability to execute on, a supplier roadmap for components and technologies.Any interruption in the supply of sole source components for our players could adversely affect our ability to meet scheduled player deliveries to our retailers and distributors, result in lost sales and higher expenses and harm our business.If we have difficulty managing our growth in operating expenses, our business could be harmed.We have experienced significant growth in research and development, sales and marketing, support services and operations in recent years and expect to continue to expand these activities. 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;expand our manufacturing and distribution capacity;broaden our customer support capabilities;support a larger number of TV brand and service operators;implement appropriate operational and financial systems;expand internationally; andmaintain effective financial disclosure controls and procedures.In addition, due to the continued growth in our headcount, we have recently entered into lease agreements for a new corporate headquarters, and we will start to incur material expenses in future years, beginning in 2019.If we fail to manage our growth effectively, we may not be able to execute our business strategies and our business will be harmed.We may be unable to successfully expand our international operations, including our recent expansion into Latin America. In addition, our international expansion plans, if implemented, will subject us to a variety of risks that may harm our business.We currently generate the vast majority of our revenue in the United States and have limited experience marketing, selling and supporting our players and monetizing our platform outside the United States. In addition, we have limited experience managing the administrative aspects of a global organization. We currently sell our players in Canada, the United Kingdom, the Republic of Ireland, France and several Latin American countries. While we intend to continue to explore opportunities to expand our business in international markets in which we see compelling opportunities to build relationships with users, advertisers and retail distributors, TV brands and service operators, we may not be able to create or maintain international market demand for our players and TV streaming platform. In addition, as we expand our operations internationally, our support organization will face additional challenges, including those associated with delivering support, training and documentation in languages other than English. We may also be subject to new statutory restrictions and risks. For example, we have been subject to the EU General Data Protection Regulation, or GDPR, since May 2018. The GDPR includes detailed requirements related to the collection, storage and use of data related to people resident in the EU and places new data protection obligations and restrictions on organizations and may requires us to make further change our policies and procedures in the future beyond what we have already done. Further, following a referendum in June 2016 in which voters in the United Kingdom approved an exit from the European Union, the United Kingdom government has initiated a process to leave the European Union, known as Brexit. Brexit has created uncertainty with regard to the regulation of data protection in the United Kingdom. In particular, although the United Kingdom enacted a Data Protection Act in May 2018 that is designed to be consistent with the GDPR, uncertainty remains regarding how data transfers to and from the United Kingdom will be regulated. We made changes to our data protection compliance program to prepare for the GDPR and will continue to monitor the implementation and evolution of global data protection regulations, but if we are not compliant with GDPR requirements, we may be subject to significant fines and our business may be harmed. In addition, there may be no foreign equivalents to the Digital Millennium Copyright Act to shield us from liability in connection with infringing materials that content publishers may make available on our platform. In addition, we may be required in international jurisdictions to offer longer warranty periods than we currently offer in the United States. 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.In the course of expanding our international operations and operating overseas, we will be subject to a variety of risks, including:differing regulatory requirements, including country-specific data privacy and security laws and regulations, consumer protection laws and regulations, tax laws, trade laws, labor regulations, tariffs, export quotas, custom duties on cross-border movements of goods or data flows, or other trade restrictions;the slower adoption and acceptance of streaming products in other countries;competition with existing local traditional pay TV services and products;greater difficulty supporting and localizing our players and platform;our ability to deliver or provide access to popular streaming channels to users in certain international markets;different or unique competitive pressures as a result of, among other things, the presence of local consumer electronics companies and the greater availability of free content on over-the-air channels in certain countries;challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, compensation and benefits and compliance programs;differing legal and court systems, including limited or unfavorable intellectual property protection;risk of change in international political or economic conditions;restrictions on the repatriation of earnings; andworking capital constraints.If we experience higher player returns than we expect and are unable to resell such returned players as refurbished players, our business could be harmed.We offer customers who purchase players through our website 30 days to return such players. We also generally honor the return policies of our retail and distribution partners, who typically allow customers to return players, even with open packaging within certain time periods that may exceed 30 days. We generally resell any returned players as refurbished players. In the event we decide to permanently reduce the retail prices of our players, we provide price protection to certain distribution partners for the players they hold in inventory at the time of the price drop. To the extent we experience a greater number of returns than we expect, are unable to resell returned players as refurbished players or are required to provide price protection in amounts greater than we expect, our business could be harmed. or the terms of our agreements.agreements or our billings for purchases made by them through our streaming platform or through our DSP. If we are unable to collect or make adjustments to bills, we could incur write-offs for bad debt,credit losses, which could have a material adverse effect on our results of operations for the periods in which the write-offs occur. In the future, bad debt may exceed reserves for such contingencies, and our bad debt exposure may increase over time. Any increase in write-offs for bad debt could have a materially negative effect on our business, financial condition and operating results. If we are not paid by our advertisers or advertising agencies on time or at all, our business may be harmed.
The quality of our customer support is important, and if we fail to provide adequate levels of customer support, we could lose users and TV brand partners or other licensees, which would harm our business.Anydisruptionexpenditures in research and development, promotion, and sales channel development. For example, in recent years, we introduced Roku Streambars, Roku wireless speakers, and Roku wireless subwoofers, among other products. Whether users will broadly adopt new streaming devices or other new products is not certain. Our future success will depend on our computer systems or those of third partiesability to develop new and competitively priced streaming devices and other new products and add new desirable content and features to our streaming platform. Moreover, we utilize in our operations could resultmust introduce new streaming devices and other new products in a loss or degradationtimely and cost-effective manner, and we must secure production orders for those products from our contract manufacturers. The development of service onnew streaming devices and other new products is a highly complex process, and while our platformresearch and could harm our business.We rely on the expertisedevelopment efforts are aimed at solving increasingly complex problems, we do not expect that all of our engineeringprojects will be successful. The successful development and software development teams for introduction of new streaming devices and other new products depends on a number of factors, including:performance and operationaccuracy of our platformforecasts for market requirements beyond near-term visibility;computer systems. Service interruptions, errors in react to new technologies and evolving consumer trends;softwaredevelopment, licensing, or acquisition of new technologies;unavailabilityability of computer systemsour contract manufacturers to cost-effectively manufacture our new products;our operationsmanufacturing;diminishimpact the overall attractivenesspricing, timing and availability of such devices and depress consumer demand, limit the ability of our devicescontract manufacturers to obtain key parts, components, software, and platformtechnologies, and lead to existing and potential users. We utilize computer systems located either in our facilities or those of third-party server hosting providers and third-party internet-based or cloud computing services. 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 shortages;future, we may transition additional featuresability of our services from contract manufacturers to produce quality products and minimize defects, manufacturing mishaps, and shipping delays; andmanaged hosting systemsability to cloud computing services, which may require significant expendituresattract and engineering resources. If we are unable to manage a transition effectively, we may experience operational delaysretain world-class research and inefficiencies until the transition is complete. Upon the expiration or termination ofdevelopment personnel.our agreements with third-party vendors,these or other factors materializes, we may not be able to replace their servicesdevelop and introduce new products in a timely or cost-effective manner, and our business may be harmed.termsa timely basis, or at all. Any significant interruption in manufacturing at our contract manufacturers for any reason could require us to reduce our supply of players or other products to our retailers and conditions,distributors, which in turn would reduce our revenue, or incur higher freight costs than anticipated, which would negatively impact our player gross margin. In addition, our contract manufacturers’ facilities are located in Southeast Asia, the People’s Republic of China, and Brazil and may be subject to political, economic, labor, trade, public health, social, and legal uncertainties that may harm or disrupt our relationships with these parties or their ability to perform. We believe that the international location of these facilities increases supply risk, including service levelsthe risk of supply interruptions, tariffs, and cost,trade restrictions on exports or imports.favorableassembled outside of the United States; and supply chain disruptions and shipping delays. Their control over delivery schedules, manufacturing yields, and costs, particularly when components are in short supply, may be limited. For those Roku TV brand partners with contract manufacturers or suppliers, the problems are exacerbated because the contract manufacturer is a third party, and the Roku TV brand partner does not have direct visibility into or control over the operations. Delays, component shortages, and other manufacturing and supply problems (whether due to us,the ongoing COVID-19 pandemic, the current high demand for consumer electronics and a transition from one vendorinformation technology products, or other reasons) could impair the retail distribution of their Roku TV models. Interruptions in the supply of Roku TV models to another vendor could subject us to operational delaysretailers and inefficiencies until the transition is complete. In addition, fires, floods, earthquakes, power losses, telecommunications failures, break-ins and similar events could damage these systems and hardware or cause them to fail completely. As we do not maintain entirely redundant systems, a disrupting event could result in prolonged downtime of our operationsdistributors at times have affected, and could adversely affect our business. Any disruption in the services provided by these vendorsfuture, our active accounts and streaming hours. For example, in 2021, some of our Roku TV brand partners faced supply chain and inventory challenges that negatively impacted their unit sales, which we believe affected our streaming hours and active account growth.have adverse impactsharm our brand and our business.business reputation, customer relationsbehalf through different component suppliers may vary significantly and operating results.If any aspectdepend on numerous factors outside of our computer systemscontrol, including the specific supplier, contract terms, shipping and air freight, market demand for a component at a given time, and trade and government relations. Lead times for certain key materials and components incorporated into our players or thoseother products are currently lengthy and may require our contract manufacturers to order materials and components many months in advance. If we overestimate our production requirements, our contract manufacturers may purchase excess components and build excess inventory. If our contract manufacturers, at our request, purchase excess components or build excess products, we could be required to pay for these excess components or products. In the past, we have agreed to reimburse our contract manufacturers for purchased components that were not used as a result of third partiesour decision to discontinue a certain model of player or the use of particular components. If we utilizeincur costs to cover excess supply commitments, this would harm our business.operations fails, itplayers and other products. For example, each of our players may lead to downtime or slow processing time, eitherutilize a specific system on chip (or SoC), Wi-Fi silicon product, and Wi-Fi front-end module, each of which may be available from only a single manufacturer and for which we do not have a second source. Although this approach allows us to maximize product performance on lower cost hardware, reduce engineering development and qualification costs, and develop stronger relationships with our strategic suppliers, this also creates supply chain risk. These sole-source suppliers could be constrained by fabrication capacity issues or material supply issues, such as U.S. or foreign tariffs, war or other government or trade relations issues, other export or import restrictions on parts or components for finishedthe experience of users.our business.experience,contain undetected software bugs or hardware errors. These bugs and errors can manifest themselves in any number of ways in our devices or our streaming platform, including through diminished performance, security vulnerabilities, data quality in logs or interpretation of data, malfunctions, or even permanently disabled devices. Some errors in our devices may only be discovered after a device has been shipped and used by users and may in some cases only be detected under certain circumstances or after extended use. We also update the Roku OS and our software on a regular basis, and, despite our quality assurance processes, we could introduce bugs in the process of any such update. The introduction of a serious software bug could result in devices becoming permanently disabled. We offer a limited one-year warranty in the United States, although applicable law or our software updates could cause us to be responsible for issuesdisruptions, outagescosts, any of which could harm our business, operating results, and financial condition. We could also face claims for product or information liability, tort or breach of warranty, or other violations of laws or regulations. In addition, our contracts with users contain provisions relating to warranty disclaimers and liability limitations, which may not be upheld. Defending a lawsuit, regardless of its merit, is costly and may divert management’s attention and adversely affect the market’s perception of Roku and our products. In addition, if our insurance coverage proves inadequate or future coverage is unavailable on acceptable terms or at all, our business could be harmed. problems due to a variety of factors, including infrastructuremany factors that are outside of our control. 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:humancomponent costs, player returns, and other cost fluctuations. 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 softwaresales channel mix, component cost increases, price competition, or the introduction of new streaming devices, including those that have higher cost structures with flat or reduced pricing. We have in the past and may in the future strategically reduce our player gross margin in an effort to increase the number of active accounts and grow our gross profit. As a result, our player 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. For the year ended December 31, 2021, our player gross margin was negative due to rising component and shipping costs. Though we do not believe that the increased component and shipping costs are permanent, they may continue to impact us in the near future and are expected to cause player gross margin to be negative until such conditions normalize. If a reduction in gross margin does not result in an increase in our active accounts or an increase our platform revenue and gross profit, our financial results may suffer, and our business may be harmed.capacity constraints. other reporting.technology infrastructurethen existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to maintainthose of holders of our Class A common stock. Any debt financing we secure could involve additional restrictive covenants relating to our capital raising activities and improveother financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we were to violate such restrictive covenants, we could incur penalties, increased expenses, and an acceleration of the user experiencepayment terms of our outstanding debt, which could in turn harm our business.platform performance. To the extent that we do not effectively address capacity constraints, upgrade our systems as neededto respond to business challenges could be significantly impaired, and continually develop our technology and network architecture to accommodate increasingly complex services and functions, increasing numbers of users, and actual and anticipated changes in technology, our business may be harmed. increasingly dependent on information technology systems and infrastructure to operate our business. In the ordinary course of our business, we collect, store, process, and transmit large amounts of sensitive corporate, personal, and other information, including intellectual property, proprietary business information, user payment card information, other user information, employee information, and other confidential information. It is critical that we do so in a secure manner to maintain the confidentiality, integrity, and availability of such information. Our ability to maintainobligations under applicable laws, regulations, contracts, industry standards, self-certifications, and other documentation may include maintaining the confidentiality, integrity, and availability of personal information in our possession or control, maintaining reasonable and appropriate security safeguards as part of an information security program, and limits on the use or cross-border transfer of such personal information. These obligations create potential legal liability both fromto regulators, as well as from affected consumers,our business partners, our users, and also impactsother relevant stakeholders and impact the attractiveness of our subscription service to existing and potential members. users.also outsourced certain elements of our operations (including elements of our information technology infrastructure) to third parties, or may have incorporated technology into our platform, that collects, processes, transmits, and stores our users’ or others’ personal and creditinformation (such as payment card information,information), and as a result, we manage a number of third-party vendors and other partners who may or could have access to our information technology systems (including our computer networksnetworks) or to our confidential information that moves across our platform.information. In addition, many of those third parties in turn subcontract or outsource some of their responsibilities to third parties. As a result, our information technology systems, including the functions of third parties that are involved in or have access to those systems, isare very large and complex. While all information technology operations are inherently vulnerable to inadvertent or intentional security breaches, incidents, attacks, and exposures, the size, complexity, accessibility, and distributed nature of our information technology systems, and the large amounts of sensitive or personal information stored on those systems, make such systems potentially vulnerable to unintentional or malicious, internal, and external attacksthreats on our technology environment. Vulnerabilities can be exploited from inadvertent or intentional actions of our employees, third-party vendors, business partners, or by malicious third parties. AttacksFor 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 this natureconfidential data. Malicious attacks are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives(including, (including, but not limited to, industrial espionage) and expertise, including organized criminal groups, “hacktivists,” nation states, and others.extractionthreat of unauthorized access or acquisition of sensitive or personal information such attacks couldor intellectual property, other threats include the deployment of harmful malware, ransomware attacks, denial-of-service attacks, social engineering, and other means to affect service reliability and threaten the confidentiality, integrity, and availability of information. Some of these external threats may be amplified by the nature of our third-party web hosting, cloud computing, or network-dependent streaming services or suppliers. Our systems likelyregularly experience directed attacks on at least a periodic basis that are intended to interrupt our operations,operations; interrupt our customers’users’, content publishers’, and advertisers’ ability to access our services,platform; extract money from our company, and/us; or view or obtain our data (including without limitation customeruser or employee personal information or proprietary information). Although we have implemented certain systems, processes, and safeguards intended to thwart attackers and mitigate risks to our systems and data, we or intellectual property. We cannot be certain that threat actors will not have a material impact on our systems or services in the future. limited insurance policies to cover certain losses relating to our information technology systems. However, there may be exceptions to our insurance coverage such that our insurance policies may not cover some or all aspects of a security incident. Insurance policies will also not protect against the reputational harms caused by a major security incident. Even where an incident is covered by our insurance, the insurance limits may not cover the costs of complete remediation and redress that we may be faced with in the wake of a security incident. The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), could have an adverse effect on our business. In addition, we cannot be sure that our existing insurance coverage and coverage for errors and omissions will continue to be available on acceptable terms or that our insurers will not deny coverage as to any future claim. Though it is difficult to determine what harm may directly result from any specific interruption or breach, any failure to maintain performance, reliability, security, and availability of our network infrastructure to the satisfaction of our users, business partners, regulators, or regulatorsother relevant stakeholders may harm our reputation and our ability to retain existing users and attract new users. Because of our prominence in the TV streaming industry, we believe we may be a particularly attractive target for hackers. Our platform also incorporates licensed software from third-parties, including open source software, and we may also be vulnerable to attacks that focus on such third-party software.threat actors. Any attempts by hackersthreat actors to disrupt our platform, our streaming devices, website, computer systems, or our 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. Efforts to prevent hackersthreat actors from entering our computer systems or exploiting vulnerabilities in our devices are expensive to implement and may not be effective in detecting or preventing intrusion or vulnerabilities. Such unauthorized access to users’our data could damage our reputation and our business and could expose us ofto the risk toof contractual damages, litigation, and regulatory fines and penalties that could harm our business. The risk of harm to our business caused by security incidents may also increase as we expand our product and service offerings and as we enter into new markets. Implementing, maintaining, and updating security safeguards requires substantial resources now and will likely be an increasing and substantial cost in the future.and/or commercial partners’ information technology systems or other similar data security incidents could adversely affect our business operations and/or result in the loss, misappropriation, and/or unauthorized access, use or disclosure of, or the prevention of access to, sensitive or personal information, which could harm our business. In addition, information technology system disruptions, whether from attacks on our technology environment or from computer viruses, natural disasters, terrorism, war, foreign invasions, and telecommunicationtelecommunications and electrical failures, could result in a material disruption of our product development and our business operations.this to be the case,that we have experienced a data security incident that we have notcustomers,users, could disrupt our business, harm our reputation, compel us to comply with applicable federal and/or state breach notification laws and foreign law equivalents, subject us to time consuming, distracting, and expensive litigation, regulatory investigation and oversight, mandatory corrective action, require us to verify the correctness of database contents, or otherwise subject us to liability under laws, regulations, and contractual obligations, including those that protect the privacy and security of personal information. This could result in increased costs to us and result in significant legal and financial exposure and/or reputational harm. For example, in the wake of a data breach involving payment card data, we may be subject to substantial penalties and related enforcement for failure to adhere to the technical or operational security requirements of the Payment Card Industry (“PCI”) Data Security Standards (“DSS”) imposed by the PCI Council to protect cardholder data. Penalties arising from PCI DSS enforcement are inherently uncertain as penalties may be imposed by various entities within the payment card processing chain without regard to any statutory or universally mandated framework. Such enforcement could threaten our relationship with our banks, card brands we do business with, and our third-party payment processors.failureactual or perceived failure by us, or our vendors, or our business partners to comply with our privacy, confidentiality, or data security-related legal or other obligations to third parties, or any further security incidents or other unauthorized access events that result in the unauthorized access, release, or transfer of sensitive information which(which could include personally identifiable information,personal information), may result in governmental investigations, enforcement actions, regulatory fines, litigation, or public statements againsttake a principled, risk-based approach to information security and require “reasonable”, "appropriate"“reasonable,” “appropriate,” or “adequate” technical and organizational security measures, meaning thatand the interpretation and application of those laws are often uncertain and evolving, and there can be no assurance that our security measures will be deemed adequate, appropriate, or reasonable by a regulator or court. Moreover, even security measures that are deemed appropriate, reasonable, or in all instances.accordance with applicable legal requirements may not be able to protect the information we maintain. In addition to potential fines, we could be subject to mandatory corrective action due to a data security incident, which could adversely affect our business operations and result in substantial costs and reputational harm.yearsourselves and on behalf of our partners on our devices.come.consumersour users to access high-quality streaming content through the internet. As a result, the growth of our business depends on our users’ ability to obtain low-cost,and maintain high-speed access to the internet at reasonable cost, which relies in part on theinternet service network operators’ continuing willingness to upgrade and maintain their equipment as needed to sustain a robust internet infrastructure as well as their continued willingness to preserve the open and interconnected nature of the internet. We exercise no control over network operators, which makes us vulnerable to any errors, interruptionsdisruptions, or delays in their operations.operations, as well as any decision they may make to prioritize the delivery of certain network traffic at the expense of other traffic. Any material disruption or degradation in internet services could harm our business.past, ISPs have attempted touncertainty around these laws and the rules that implement them, including changing interpretations, amendments, or repeal, coupled with potentially significant political and economic power of network operators, we could experience discriminatory or anti-competitive practices, such as usage-based pricing, bandwidth caps, and traffic “shaping” or throttling. To the extent network operators were to create tiers of internet access service and either charge us for access to these tiers or prohibitthrottling, that could impede our content offerings from being available on some or all of these tiers,growth, result in a decline in our quality of service, could decline, our operating expenses could increase andcause us to incur additional expense, or otherwise impair our ability to attract and retain customers could be impaired, eachusers, all of which wouldcould harm our business.provide theseoffer consumers with multichannel video programming.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. To the extent that network operators are able to provide preferential treatment to their own data and content, as opposed to ours, our business could be harmed.litigationIntellectual Propertythat could be costly, result in the loss of rights important to our devices and streaming platform, cause us to incur significant legal costs, or otherwise harm our business.toto: pay damages, potentially including treble damages and attorneys’ fees, if we are found to have willfully infringed a party’s intellectual property; cease making, licensing, or using technologies that are alleged to infringe or misappropriate the intellectual property of others; expend additional development resources to redesign our solutions;products; enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies, content, or materials; and to indemnify our partners and other third parties. For example, we have in the past elected to develop and implement specific design changes to address potential risks that certain products could otherwise become subject to exclusion or cease and desist orders arising from patent infringement and other intellectual property claims brought in the U.S. International Trade Commission. In addition, any lawsuits regarding intellectual property rights, regardless of their success, could be expensive to resolve and would divert the time and attention of our management and technical personnel.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. We could 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. In addition, because the devices sold by our licensing partners and TV brands often involve the use of third-party technology, this increases our exposure to litigation in circumstances where there is a claim of infringement asserted against the player in question, even if the claim does not pertain to our technology.protect proprietary rights toprovide the same extent or in the same mannerlevel of protection of corporate proprietary information and assets such as intellectual property, trademarks, trade secrets, know-how, and records as the laws of the United States. For instance, the legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection. As a result, we may encounter significant problems in protecting and defending our intellectual property or proprietary rights bothabroad. Additionally, we may also be exposed to material risks of theft or unauthorized reverse engineering of our proprietary information and other intellectual property, including technical data, manufacturing processes, data sets, or other sensitive information. Our efforts to enforce our intellectual property rights in such foreign countries may be inadequate to obtain a significant commercial advantage from the United Statesintellectual property that we develop, which could have a material adverse effect on our business, financial condition, and abroad. Ifresults of operations. Moreover, if we are unable to prevent the disclosure of our trade secrets to third parties, or if our competitors independently develop any of our trade secrets, we may not be able to establish or maintain a competitive advantage in our market, which could harm our business.PatentU.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. This change in the determination of inventorship may resultor USPTO,(“USPTO”), as opposed to having to bring such an action in U.S. federal court. Any invalidation of a patent claim could have a significant impact on our ability to protect the innovations contained within our devices and platform and could harm our business. to pay the applicable fees to obtain or maintain our patents. Noncompliance with these requirements can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to use our technologies and enter the market earlier than would otherwise have been the case.location.We and our third-party contractors collect, process, transmit and store the personal information of our users, which creates legal obligations and exposes us to potential liability.We collect, process, transmit and store information about our users’ device usage patterns, and rely on third-party contractors to collect, process, transmit and store personal information of our users, including our users’ credit card data. Further, we and third parties 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 streaming channels and deliver relevant advertising for ourselves and on behalf of our partners on our devices.We collect information about the interaction of users with our devices, our advertisements, and our partners’ streaming channels. To deliver relevant advertisements effectively, we must successfully leverage this data as well as data provided by third parties. ability to collect and use such data could be restricted by a number of factors, including consumers having the ability to opt out from our collection and use of this data for advertising purposes or the ability of our advertisers to use such data to provide more relevant advertisements, restrictions imposed by advertisers, content publishers and service providers, changes in technology, and new developments in laws, regulations and industry standards. For example, our privacy policy outlines the type of data we collect and discloses to users how to disable or restrict such data collection and the use of such data in providing more relevant advertisements. Any restrictionsopen source software could impose limitations on our ability to collectcommercialize our devices and our streaming platform or use data could harmresult in public disclosure of competitively sensitive trade secrets.abilitystreaming platform. From time to grow our revenue, particularly our advertising revenue which depends on engagingtime, companies that incorporate open source software into their products and services have faced claims challenging the relevant recipientsownership of advertising campaigns.Various federal, state, and foreign laws and regulations govern the collection, use, retention, sharing and security of the dataopen source software or compliance with open source license terms. Therefore, we receive from and about our users. The regulatory environment for the collection and use of consumer data by device manufacturers, online service providers, content distributors, advertisers and publishers is very unsettled in the United States and internationally. Privacy groups and government bodies, including the FederalTrade Commission, or FTC, state attorneys general, and the European Commission, have increasingly scrutinized privacy issues with respect to devices that link personal identities or user and device data, with data collected through the internet, and we expect such scrutiny to continue to increase. The United States and foreign governments have enacted and are considering regulations that could significantly restrict industry participants’ ability to collect, use and share personal information and pseudonymous data, such as by regulating the level of consumer notice and consent required before a company can place cookies or other tracking technologies. For example, we have been subject to GDPR since May 2018. The GDPR includes detailed requirements related to the collection, storage and use of data related to people resident in the EU and places new data protection obligations and restrictions on organizations and may requires us to make further change our policies and procedures in the future beyond what we have already done. Further, following a referendum in June 2016 in which voters in the United Kingdom approved an exit from the European Union, the United Kingdom government has initiated a process to leave the European Union, known as Brexit. Brexit has created uncertainty with regard to the regulation of data protection in the United Kingdom. In particular, although the United Kingdom enacted a Data Protection Act in May 2018 that is designed to be consistent with the GDPR, uncertainty remains regarding how data transfers to and from the United Kingdom will be regulated. We made changes to our data protection compliance program to prepare for the GDPR and will continue to monitor the implementation and evolution of global data protection regulations, but if we are not compliant with GDPR requirements, we may be subject to significant finessuits by parties claiming ownership of what we believe to be open source software or noncompliance with open source licensing terms. Although we have processes and procedures designed to help monitor our businessuse of open source software, these processes and procedures may not be harmed. In addition,followed by all of our employees or may fail to identify risks. Additionally, the California Consumer Privacy Act,terms of many open source software licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or CCPA, goes into effect in January 2020, with a lookback to January 2019, and places additional requirementsrestrictions on the handlingsale of personal data. The CCPA was recently amended, and it is possibleour devices or impose unanticipated obligations that it willrequire disclosure of trade secrets. In such event, we could be amended again before it goes into effect. The potential effects of this legislation are far-reaching and may require usrequired to modifymake our data processing practices and policies andproprietary software generally available to incur substantial costs and expenses in an effortthird parties, including competitors, at no cost, to comply. For example, the CCPA gives California residents expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used. The CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches that may increase data breach litigation. We are continuing to assess the impact of the CCPA and proposed amendments to the law on our business.Applicable data privacy and security laws also obligate us to employ reasonable security measures that are appropriate to the nature of the data we collect and process and the risks attendant to our data processing activities, among other factors,seek licenses from third parties in order to protect personal information from unauthorized accesscontinue offering our devices, to re-engineer our devices, or disclosure, or accidental or unlawful destruction, loss, or alteration. We have implemented security measures that we believe are appropriate, but weto discontinue the sale of our devices in the event re-engineering cannot be sureaccomplished on a regulator would deem our security measures to be appropriate given the lack of prescriptive measures in certain data protection laws. Without more specific guidance, we cannot know whether our chosen security safeguards are adequate according to each applicable data protection law. Given the evolving nature of security threats and evolving safeguards, we cannot be sure that our chosen safeguards will protect against security threats to our business. Moreover, data protection laws impose on us responsibility for our employees and third parties that assist with aspects of our data processing. In addition, some countries are consideringtimely basis or have enacted 'data localization' laws requiring that user data regarding users in their country be maintained in their country. Maintaining local data centers in individual countries could increase our operating costs significantly. In addition, we expect that, in addition to the business as usual costs of compliance, the evolving regulatory interpretation and enforcement of new laws such as the GDPR and CCPA will lead to increased operational and compliance costs and will require us to continually monitor and, where necessary, make changes to our operations, policies, and procedures. Any failure or perceived failure to comply with privacy-related legal obligations, or any compromise of security of user data, may result in governmental enforcement actions, litigation, contractual indemnity or public statements against us by consumer advocacy groups or others. In addition to potential liability, these events could harm our business. We have incurred, and will continue to incur, expenses to comply with privacy and security standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use and security practices, including self-regulation and industry standards, changes in existing laws, enactment of new laws, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.If service operators refuse to authenticate streaming channels on our platform, our users may be restricted from accessing certain content on our platform and our business may be harmed.Certain service operators, including pay TV providers, have from time to time refused to grant our users access to streaming content through “TV Everywhere” channels and have made that content available only on certain devices favored by such service operators, including devices offered by that service operator or its partners. If major service operators do not authenticate popular TV Everywhere channels on our platform, we may be unable to offer a broad selection of popular streaming channels and consumers may not purchase or use our streaming players. If we are unable to continue to provide access to popular streaming channels on our platform, our business may be harmed.United States or international rules that permit ISPs to limit internet data consumption by users, including unreasonable discrimination in the provision of broadband internet access services, could harm our business.Laws, regulations or court rulings that adversely affect the popularity or growth in use of the internet, including decisions that undermine open and neutrally administered internet access, could decrease customer demand for our service offerings, may impose additional burdens on us or could cause us to incur additional expenses or alter our business model.On February 26, 2015, the FCC adopted open internet rules intended to protect the ability of consumers and content producers to send and receive non-harmful, lawful information on the internet, known as the Open Internet Order. The FCC’s Open Internet Order prohibited broadband internet access service providers from: (i) blocking access to legal content, applications, services or non-harmful devices; (ii) throttling, impairing or degrading performance based on content, applications, services or non-harmful devices; and (iii) charging more for favorable delivery of content or favoring self-provisioned content over third-party content. The Open Internet Order also prohibited broadband internet access service providers from unreasonably interfering with consumers’ ability to select, access and use the lawful content, applications, services or devices of their choosing as well as edge providers’ ability to make lawful content, applications, services or devices available to consumers.In January 2018, the FCC released a new order, known as the Restoring Internet Freedom Order, that repealed most of the blocking, throttling, and paid prioritization restrictions adopted in the Open Internet Order. The Restoring Internet Freedom Order reclassified broadband internet access service as a non-common carrier “information service” and repealed rules that had prohibited broadband internet access service providers from: (i) blocking access to legal content, applications, services or non-harmful devices; (ii) throttling, impairing or degrading performance based on content, applications, services or non-harmful devices; and (iii) charging more for favorable delivery of content or favoring self-provisioned content over third-party content. The Restoring Internet Freedom Order continued to require internet service providers to be transparent about their policies and network management practices, and subjected discriminatory practices to case-by-case assessment under antitrust and consumer protection laws. Most portions of the Restoring Internet Freedom Order went into effect on April 23, 2018 and the remainder went into effect on June 11, 2018. Numerous parties have filed judicial challenges to the Restoring Internet Freedom Order, and the litigation has been consolidated in the U.S. Court of Appeals for the District of Columbia Circuit. To the extent the courts or the agencies do not uphold or adopt sufficient safeguards to protect against discriminatory conduct, network operators may seek to extract fees from us or our content publishers to deliver our traffic or otherwise engage in blocking, throttling or other discriminatory practices, and our business could be harmed.Several states are considering network neutrality legislation or regulation as well. On September 30, 2018, California Governor Jerry Brown signed open internet legislation into law, effective January 1, 2019. The California legislation codifies portions of the FCC’s rescinded Open Internet Order. The U.S. Department of Justice filed suit on September 30, 2018 to block implementation of the California law, and the broadband service provider trade associations CTIA, the National Cable & Telecommunications Association, the United States Telecom Association and the American Cable Association, have also sued California to invalidate the state’s net neutrality law on grounds that the law is contrary to the supremacy clause of the United States Constitution, among other claims. California has agreed to delay implementation of the law until the litigation is resolved. Meanwhile, at least three additional states (Oregon, Vermont and Washington) have enacted net neutrality legislation, and governors in at least six other states (Hawaii, Montana, New Jersey, New York, Rhode Island and Vermont) have signed executive orders requiring service providers contracting with state agencies to adhere to network neutrality principles. The regulatory framework for network neutrality thus remains unsettled and is subject to ongoing legislative and judicial review.As we expand internationally, government regulation protecting the non-discriminatory provision of internet access may be nascent or non-existent. In those markets where regulatory safeguards against unreasonable discrimination are nascent or non-existent and where local network operators possess substantial market power, we could experience anti-competitive practices that could impede our growth, cause us to incur additional expenses or otherwise harm 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.Broadband internet providers are subject to government regulation and enforcement actions, and changes in current or future laws, regulations or enforcement actions that negatively impact our distributors or content publishers could harm our business.Upon the effective date of the FCC’s Restoring Internet Freedom Order, the FTC became primarily responsible for regulating broadband privacy and data security in the United States. The FTC follows an enforcement-focused approach to regulating broadband privacy and security. Future FTC enforcement actions could cause us or our content publishers to alter advertising claims or alter or eliminate certain features or functionalities of our products or services which may harm our business. At the FCC, many broadband internet providers provide traditional telecommunications services that are subject to FCC and state rate regulation of intrastate telecommunications services, and are recipients of federal universal service fund payments, which are intended to subsidize telecommunications services in areas that are expensive to serve. Changes in rate regulations or in universal service funding rules, either at the federal or state level, could affect these broadband internet providers’ revenue and capital spending plans. In addition, various international regulatory bodies have jurisdiction over non-United States broadband internet providers. The CCPA also applies to broadband internet providers that do business in California. To the extent these broadband internet providers are adversely affected by laws or regulations regarding their business, products or service offerings, our business could be harmed.Our financial results may be adversely affected by changes in accounting principles applicable to us.Generally accepted accounting principles in the United States, or U.S. GAAP, are subject to interpretation by the Financial Accounting Standards Board, the FASB, the SEC, and other various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported results of operations and may even affect the reporting of transactions completed before the announcement or effectiveness of a change. For example, we recently adopted Accounting Standards Codification, Revenue from Contracts with Customers (Topic 606), using the modified retrospective method. We applied the new revenue standard to all, contracts that were not completed as of January 1, 2018. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those prior periods. It is difficult to predict the impact of future changes to accounting principles or our accounting policies, any of which could harm our business.
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.which may includeincluding laws and regulations related to data privacy and security, consumer protection, data localization, law enforcement access to data, encryption, telecommunications, social media, payment processing, taxation, trade, intellectual property, competition, electronic contracts, internet access, net neutrality, advertising, calling and texting, content restrictions, protection of children, and accessibility, among others. We cannot guarantee that we have been or will be fully compliant in every jurisdiction. Litigation and regulatory proceedings are inherently uncertain, and the federal, state, and foreign laws and regulations governing issues such as data privacy and security, payment processing, taxation, net neutrality, liability of providers of online services, video, telecommunications, e-commerce tariffs, and consumer protection related to the internet continue to develop. For example, laws relating to the liability of providers of online services for activities of their users and other third parties have been tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement, and other theories based on the nature and content of the materials searched, the advertisements posted, actions taken or not taken by providers in response to user activity or the content provided by users. Congress has also recently enacted legislation related to liability of providers of online services and may continue to legislate in this area. The recently enacted CCPA also applies to entities that do business in California and imposes a number of new requirements on internet and online services. Moreover, as internet commerce and advertising continuescontinue to evolve, increasing regulation by federal, state, and foreign regulatory authorities becomes more likely. TV streaming platform, we may also be subject to new laws and regulations specific to such technologies. For example, in developing our Roku TV reference design, 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 our licenseesTV brand partners may be unable to sell Roku TVsTV models at all, which wouldcould harm our business and our ability to grow our user base.littlelimited guidance. A number of existing bills are pending in the U.S. Congress and other government bodies that contain provisions that would regulate, for example, how companies can use cookies and other tracking technologies to collect, use, and share user information. The CCPA also imposes requirements on certain tracking activity, and we are continuing to assess the impact of the CCPA and proposed amendments to the law on our business.activity. The European UnionEU has already enacted laws requiring advertisers or companies like ours to, for example, obtain informed, and in some casesunambiguous, affirmative or explicit, consent from users for the placement of cookies or other tracking technologies and the delivery of relevant advertisements. In addition, EU institutions continue to negotiate the draft of the proposed Digital Services Act, legislation intended to update the liability and safety rules for digital platforms, products, and services. If we or the third parties that we work with, such as contract payment processing services, content publishers, vendors, or developers, violate or are alleged to violate applicable privacy or security laws, industry standards, our contractual obligations, or our policies, such violations and alleged violations may also put our users’ information at risk and could in turn harm our business and reputation and subject us to potential liability. 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.or VPPA.(“VPPA”). Some of our content publishers have been engaged in litigation over alleged violations of the VPPA relating to activities on our platform in connection with advertising provided by unrelated third parties. The Federal Trade CommissionIn addition, the FTC has also revisedinitiated a review of its rules implementing the Children’s Online Privacy Protection Act or COPPA Rules,(“COPPA”), which limits the collection by operators of online services of personal information from children under the age of 13. The review could result in broadening the applicability of the COPPA, Rules, including the types of information that are subject to these regulations, andregulations. Changes to the COPPA rules could limit the information that we or our content publishers and advertisers may collect and use through certain content publishers,and the content of advertisements and in relation to certain channel partner content. The CCPA also imposes certain opt in and opt out requirements forbefore certain information about minors.minors can be collected. We and our content publishers and advertisers could be at risk for violation or alleged violation of these and other privacy, advertising, 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.actualbusiness is subject to risks generally associated with doing business abroad, such as U.S. and foreign governmental regulation in the countries in which we operate and the countries in which our contract manufacturers, component suppliers, and other business partners are located. Our operations and performance depend significantly on global, regional, and U.S. economic and geopolitical conditions.perceived failureentities, as well as other business restrictions. These and other trade disputes can disrupt supply chains and increase the cost of our products and the components required to adequately protect personalmanufacture our products, as well as costs for our Roku TV brand partners. Thisconfidential informationsupply chain and limit our ability to offer our products and services as intended. These kinds of restrictions could be adopted with little to no advanced notice, and we may not be able to effectively mitigate the adverse impacts from such measures. Political uncertainty surrounding trade or other international disputes also could have a negative impact on consumer confidence and willingness to spend money, which could impair our future growth. In particular, given the general deterioration in U.S.-China relations and ongoing tensions on trade, security. and human rights, additional U.S. sanctions, tariffs. and export or import restrictions, as well as Chinese sanctions or retaliatory measures, remain a serious risk.A variety Although we attempt to ensure that we, our retailers, and partners comply with the applicable import, export, and sanctions laws, we cannot guarantee full compliance by all. Actions of state, national, foreign,our retailers and partners are not within our complete control, and our devices could be re-exported to sanctioned persons or countries, or provided by our retailers to third persons in contravention of our requirements or instructions or the laws. Any such potential violation could have negative consequences, including government investigations or penalties, and our reputation, brand, and revenue may be harmed.applyas the United Kingdom determines which EU laws to replace or replicate. Although the collection, use, retention, protection, disclosure, security, transferEU-UK Trade and other processing of personal data. These privacy and data protection-related laws and regulations are evolving, with new or modified laws and regulations proposed and implemented frequently and existing laws and regulations subject to new or different interpretations. In addition, each state andCooperation Agreement on the District of Columbia, as well as some foreign nations, have passed laws requiring notification to regulatory authorities and/or to affected users within a specific timeframe when there has been a security breach involving personal data as well as impose additional obligations for companies. For example, the CCPA was signed into law on June 28, 2018 and largely takesEU-UK post-Brexit economic relationship took effect on January 1, 2020 (and enforcement2021, it is incomplete, and the full effects of someBrexit are uncertain. Given these possibilities and others we may not anticipate, as well as the lack of comparable precedent, the full extent to which our business, results of operations, and financial condition could be adversely affected by Brexit is uncertain.provisions will notinternet, including decisions that undermine open and neutrally administered internet access, or that disincentivize internet access network operators’ willingness to invest in upgrades and maintenance of their equipment, could decrease customer demand for our service offerings, may impose additional burdens on us, or could cause us to incur additional expenses or alter our business model. Some jurisdictions have adopted regulations governing the provision of internet access service. Substantial uncertainty exists in the United States and elsewhere regarding such provisions. For example, in 2015, the FCC adopted open internet rules to prevent internet access network operators from unreasonably restricting, blocking, degrading, or charging for access to certain products and services offered by us and our content partners. In 2018, the FCC repealed most of those rules. More recently, the Biden Administration signed an executive order encouraging the FCC to readopt comprehensive open internet rules. The FCC therefore could consider adopting additional or modified rules to prevent internet access network operators from unreasonably restricting, blocking, degrading, or charging for data and services. If network operators were to engage in restricting, blocking, degrading, or charging for access, it could impede our growth, result in a decline in our quality of service, cause us to incur additional expense, or otherwise impair our ability to attract and retain users, any of which could harm our business. Several states and foreign countries in which we operate also have adopted or are considering rules governing the provision of internet access.immediately active). It imposesnascent or non-existent. In those markets where regulatory safeguards against unreasonable discrimination are nascent or non-existent and where local network operators possess substantial market power, we could experience anti-competitive practices that could impede our growth, cause us to incur additional obligations on companies that process certain information about California residents. Compliance with theseexpenses, or otherwise harm our business. Future regulations or changes in laws and regulations can be costly(or their existing interpretations or applications) could also hinder our operational flexibility, raise compliance costs, and could delay or impede the development of new products.As part of our data protection compliance program, we ensure that we have approved data transfer mechanismsresult in place to provide adequacyadditional liabilities for the transfer of personal data from the European Economic Area to the United States.We will continue to review our business practices and may find it necessary or desirable to make changes to our personal data handling to cause our transfer and receipt of EEA residents’ personal data to be legitimized under applicable European law. The regulation of data privacy in the EU continues to evolve, and it is not possible to predict the ultimate effect of evolving data protection regulation and implementation over time. Member states also have some flexibility to supplement the GDPR with their own laws and regulations and may apply stricter requirements for certain data processing activities.While we have implemented administrative, physical and electronic security measures to protect against reasonably foreseeable loss, misuse and alteration of Gopersonal data and confidential information (e.g., protected content or intellectual property), cyberattacks on companies have increased in frequency and potential impact in recent years and, if successful against us, may harm our reputation and business and subject us to potential liability despite reasonable precautions. As discussed above, we cannot be certain that our chosen security measures will be deemed adequate or reasonable by regulators in all instances.If we are not able to comply with these laws or regulations or if we become liable under new laws or regulations, we could be directly harmed, and we may be forced to implement new measures to reduce our exposure to this liability. This may require us to expend substantial resources or to suspend or discontinue certain products or services, which may harm our business. In addition, the increased attention focused upon liability issues as a result of lawsuits and legislative proposals could harm our business. Any actual or perceived inability to adequately protect our users’ privacy may render our products or services less desirable and could harm our reputation and business. Any costs incurred as a result of this potential liability could harm our business.we distributeis distributed through or advertising that is served through our platform, our business could be harmed.TheWe rely on the statutory safe harbors, as set forth in the Digital Millennium Copyright Act or(the “DMCA”) and Section 230 of the DMCA, is intended,Communications Decency Act in part, to limit the United States, and the E-Commerce Directive in Europe, for protection against liability of eligible service providers for various caching, hosting, orand linking to, user content that includes materials that infringe copyrights or other rights. We rely on the protections provided by theactivities. The DMCA, in conducting our business. However, the DMCASection 230, and similar statutes and doctrines thaton which we rely or may rely on in the future isare subject to uncertain judicial interpretation and regulatory and legislative amendments. Any legislation or court rulings that limit the applicability of these safe harbors could require us to take a different approach toward content moderation on our platform, which could diminish the depth, breadth, and variety of content that we offer, inhibit our ability to generate advertising, or otherwise adversely affect our business.the DMCA only provides protection primarily in the United States. Ifif the rules around these statutes and doctrines change, if international jurisdictions refuse to apply similar protections, or if a court were to disagree with our application of those rules to our business, we could incur liabilityliabilities and our business could be harmed. If we become liable for these types of claims as a result of the content that is streamed over or the advertisements that are served through our platform, then our business may suffer. Litigation to defend these claims could be costly and the expenses and damages arising from any liability could harm our business. Our insurance may not be adequate to cover these types of claims or any liability that may be imposed on us.For example, we are involved in litigation in Mexico that was commenced in May 2017 by a large Mexican pay TV and internet access provider. We were not named as a defendant in this case, as the case principally targeted entities that are alleged to sell unlicensed content to consumers using our platform, among other means. Involvement in these legal proceedings has been complicated and has drawn management time and company resources. At the commencement of this case, however, a court issued a temporary ban on the importation and sale of Roku devices in Mexico. In October 2018, the ban on sales was lifted by a Federal Court in Mexico; however, the underlying litigation may continue. Our involvement in this litigation caused us to incur legal expenses and other costs and has drawn management time and other company resources away from other matters. Our continuing involvement in this litigation, or similar legal matters in the future, could be disruptive to our business. If content partnersowners or distributors in Latin America or in any other country are influenced by these proceedings and are deterred from working with us to sell players or other products or to maintain their channels or sell advertising on our platform, thisas a consequence, it could impair our ability to implementmaintain or expand our business, including through international expansion plans.Our involvement in any such legal matters now or in the future, could cause us to incur significant legal expenses and other costs, and be disruptive to our business.Our devices are highly technical and may contain undetected hardware errors or software bugs, which could manifest themselves in ways that could harm our reputation and our business.Our devices and those of our licensees are highly technical and have contained and may in the future contain undetected software bugs or hardware errors. These bugs and errors can manifest themselves in any number of ways in our devices or our platform, including through diminished performance, security vulnerabilities, data quality in logs or interpretation of data, malfunctions or even permanently disabled devices. Some errors in our devices may only be discovered after a device has been shipped and used by users and may in some cases only be detected under certain circumstances or after extended use. We update our software on a regular basis and, despite our quality assurance processes, we could introduce bugs in the process of updating our software. The introduction of a serious software bug could result in devices becoming permanently disabled. We offer a limited one year warranty in the United States and any such defects discovered in our players after commercial release could result in loss of revenue or delay in revenue recognition, loss of customer goodwill and users and increased service costs, any of which could harm our business, operating results and financial condition. We could also face claims for product or information liability, tort or breach of warranty, or other violations of laws or regulations. In addition, our player contracts with users contain provisions relating to warranty disclaimers and liability limitations, which may not be upheld. Defending a lawsuit, regardless of its merit, is costly and may divert management’s attention and adversely affect the market’s perception of Roku and our devices. In addition, if our business liability insurance coverage proves inadequate or future coverage is unavailable on acceptable terms or at all, our business could be harmed.Components used in our devices may fail as a result of manufacturing, design or other defects over which we have no control and render our devices permanently inoperable.We rely on third-party component suppliers to provide certain functionalities needed for the operation and use of our devices. Any errors or defects in such third-party technology could result in errors in our devices that could harm our business. these components have a manufacturing, design or other defect, they can cause our devices to fail and render them permanently inoperable. For example, the typical means by which our users connect their home networks to our devices is by way of a Wi-Fi access point in the home network router. If the Wi-Fi receiver in our device fails, then our device cannot detect a home network’s Wi-Fi access point, and our device will not be able to display or deliver any content to the TV screen. As a result, we may have to replace these devices at our sole cost and expense. Should we have a widespread problem of this kind, our reputation in the market could be adversely affected and our replacement of these devices would harm our business.If we are unable to obtain necessary or desirable third-party technology licenses, our ability to develop new devices or platform enhancements may be impaired.We utilize commercially available off-the-shelf technology in the development of our devices and platform. As we continue to introduce new features or improvements to our devices and the Roku platform, we may be required to license additional technologies from third parties. These third-party licenses may be unavailable to us on commercially reasonable terms, if at all. If we are unable to obtain necessary third-party licenses, we may be required to obtain substitute technologies with lower quality or performance standards, or at a greater cost, any of which could harm the competitiveness of our devices, platform and our business.Our use of open source software could impose limitations on our ability to commercialize our devices and our TV streaming platform.We incorporate open source software in our TV streaming platform. From time to time, companies that incorporate open source software into their products have faced claims challenging the ownership of open source software and/or compliance with open source license terms. Therefore, we could be subject to suits by parties claiming ownership of what we believe to be open source software or noncompliance with open source licensing terms. Although we monitor our use of open source software, the terms of many open source software licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on the sale of our devices. In such event, we could be required to make our proprietary software generally available to third parties, including competitors, at no cost, to seek licenses from third parties in order to continue offering our devices, to re-engineer our devices or to discontinue the sale of our devices in the event re-engineering cannot be accomplished on a timely basis or at all, any of which could harm our business.The quality of our customer support is important to our users and licensees, and if we fail to provide adequate levels of customer support we could lose users and licensees, which would harm our business.Our users and licensees depend on our customer support organization to resolve any issues relating to devices. A high level of support is critical for the successful marketing and sale of devices. We currently outsource our customer support operation to a third-party customer support organization. If we do not effectively train, update and manage our third-party customer support organization to assist our users, 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 sell our devices to users and harm our reputation with potential new users and our licensees.We will need to improve our operational and financial systems to support our expected growth, increasingly complex business arrangements, and rules governing revenue and expense recognition and any inability to do so could adversely affect our billing services and financial reporting.We have increasingly complex business arrangements with our content publishers and licensees, and the rules that govern revenue and expense recognition in our business are increasingly complex. To manage the expected growth of our operations and increasing complexity, we will need to improve our operational and financial systems, procedures and controls and continue to increase systems automation to reduce reliance on manual operations. An inability to do so will negatively affect our billing services and financial reporting. Our current and planned systems, procedures and controls may not be adequate to support our complex arrangements and the rules governing revenue and expense recognition for our future operations and expected growth. 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 or licensees; cause harm to our reputation and brand; and could also result in errors in our financial and other reporting.If we are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A common stock may be adversely affected.or (“Section 404,404”) requires that we furnish a report byreporting beginning with the year ending December 31, 2018.reporting. This assessment will need tomust include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. Our independent registered public accounting firm also needs to attestattests to the effectiveness of our internal control over financial reporting. If we have a material weakness in our internal control over financial reporting in the future, we may not detect errors on a timely basis, and our financial statements may be materially misstated. We are in the process of designing and implementing the internal control over financial reporting required to comply with this obligation, which process will be time-consuming, costly and complicated. If we identify material weaknesses in our internal control over financial reporting, are unable to continue to comply with the requirements of Section 404 in a timely manner, are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, and the market price of our Class A common stock could be adversely affected. In addition, we could become subject to investigations by the stock exchange on which our Class A common stock is listed, the Securities and Exchange Commission, or SEC, The Nasdaq Global Select Market, or other regulatory authorities, which could require additional financial and management resources.Wepursue acquisitions,be adversely affected by changes in accounting principles applicable to us. involve a number of risks, and if we are unable to address and resolve these risks successfully, such acquisitions could harm our business.We may in the future acquire businesses, products or technologies to expand our offerings and capabilities, user base and business. We have evaluated, and expect to continue to evaluate, a wide array of potential strategic transactions; however, we have limited experience completing or integrating acquisitions. Any acquisition could be material to our financial condition and results of operations and could require us to raise capital in the equity markets or issue additional equity and any anticipated benefits from an acquisition may never materialize. In addition, the process of integrating acquired businesses, products or technologies may create unforeseen operating difficulties and expenditures. Acquisitions in international markets would involve additional risks, including those related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries. We may not be able to address these risks successfully, or at all, without incurring significant costs, delays or other operational problems and if we were unable to address such risks successfully our business could be harmed.We have a credit facility that provides our lender with a first-priority lien against substantially all of our assets and contains financial covenants and other restrictions on our actions that may limit our operational flexibility or otherwise adversely affect our financial condition.We entered into a credit agreement among us, as borrower, the lenders and issuing banks from time to time party thereto, and Morgan Stanley Senior Funding, Inc., or the Agent providing for a (i) a four-year revolving credit facility in the aggregate principal amount of up to $75.0 million, or the Revolving Credit Facility, (ii) a four-year delayed draw term loan A facility in the aggregate principal amount of up to $75.0 million, the Term Loan A Facility and (iii) an uncommitted incremental facility subject to certain conditions, collectively, the Credit Agreement. On the Closing Date of the Credit Agreement, we terminated our loan and security agreement with Silicon Valley Bank, except for certain letters of credit, which were cash collateralized by approximately $26.3 million. The Credit Agreement contains a number of affirmative and negative covenants, which may restrict our current and future operations, particularly our ability to respond to certain changes in our business or industry or take future actions. The Credit Agreement also contains a financial covenant requiring us to maintain a minimum adjusted quick ratio of 1.00 to 1.00, tested as of the last day of any fiscal quarter on the basis of the prior period of our four consecutive fiscal quarters. Pursuant to the Credit Agreement, we granted the Agent a security interest in substantially all of our assets. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Silicon Valley Bank Loan and Security Agreement.”If we fail to comply with the covenants, make payments as specified in the Credit Agreement, or undergo any other event of default contained in the Credit Agreement, the Agent could declare an event of default, which would give it the right to terminate the commitments to provide additional loans and declare any borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable. In addition, the Agent would have the right to proceed against the assets we provided as collateral pursuant to the Credit Agreement. If the debt under this credit facility was accelerated, we may not have sufficient cash or be able to sell sufficient assets to repay this debt, which would harm our business and financial condition.collection of sales tax and payment of income taxes inand the various states in which we do business,collection of indirect taxes, we could be exposed to unexpected costs, expenses, penalties, and fees as a result of our noncompliance, which could harm our business.By engaging in business activities in the United States, we becomevarious state laws and regulations, including requirements to collect sales tax from our sales within those states, and the payment ofdeduct or withhold income taxes on revenue generatedsourced in various jurisdictions, pay income taxes on profits earned by any permanent establishment (or similar enterprise) of ours that carries on business in various jurisdictions, and collect indirect taxes from activitiesour sales in those states.various jurisdictions. The laws and regulations governing the collection of sales tax for sales on our websitewithholding and payment of income taxes and the collection of indirect taxes are numerous, complex, and vary from state to state.by jurisdiction. A successful assertion by one or more statesjurisdictions that we were required to collect saleswithhold or otherpay income taxes or to pay incomecollect indirect taxes where we did not could result in substantial tax liabilities, fees, and expenses, including substantial interest and penalty charges, which could harm our business.Reformingtaxation of international businesses has been a priority forUnited States and numerous foreign jurisdictions. Current economic and political conditions make tax laws and regulations, or their interpretation and application, in any jurisdiction subject to significant change.politicians, and key members of the legislative and executive branches have proposed a wide variety of potential changes. Certain changes to U.S.foreign tax laws could affectsignificantly impact how U.S. multinational corporations are taxed on foreign earnings and could increase the U.S. corporate tax treatmentrate. Although we cannot predict whether or in what form these proposals will pass, several of the proposals under consideration, if enacted into law, could have an adverse impact on our effective tax rate, income tax expense, and cash flows.earnings,jurisdictions in which we operate) has resulted in proposed new tax measures specifically targeting online commerce, digital services, streaming services, and the remote sale of goods and services. Some of these measures (such as a global corporate minimum tax) require adoption of local legislation consistent with the agreed to multilateral framework. Other measures (such as digital services taxes) have already been implemented but may terminate upon the adoption of multilateral tax rules.cashthe likelihood of joint and cash equivalent balancessimultaneous tax audits of companies such as ours who have cross-border business activities in which the tax administrations may have a common or complementary interest. The results of any such audits or related disputes could have an adverse effect on our financial results for the period or periods for which the applicable final determinations are made. For example, we maintain outsideand our subsidiaries are engaged in intercompany transactions across multiple tax jurisdictions. Although we believe we have clearly reflected the United States. Additionally, anyeconomics of these transactions and that the proper local transfer pricing is in place, tax authorities may propose and sustain adjustments that could result in changes that may impact our mix of earnings in countries with differing statutory tax rates.U.S. or foreign taxation of such activities may increase our worldwide effective tax ratefuture be subject to regulatory inquiries, investigations, and the amount of taxes we pay and harm our business.For example, the Tax Cut and Jobs Act, or TCJA, was enacted on December 22, 2017 and significantly reforms the Internal Revenue Code of 1986. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes additional limitations on the deductibility of interest, has both positive and negative changes to the utilization of future net operating loss carryforwards, allows for the expensing of certain capital expenditures, and puts into effect the migration from a “worldwide” system of taxation to a territorial system. The U.S. Department of Treasury has broad authority to issue regulations and interpretative guidance that may significantly impact how we will apply the law,proceedings, which could affect our financial position and result of operations.We may require additional capital to meet our financial obligations and support planned business growth, and this capital might not be available on acceptable terms or at all.We intend to continue to make significant investments to support planned business growth and may require additional funds to respond to business challenges, including the need to develop new devices and enhance the Roku platform, maintain adequate levels of inventory to support our retail partners’ demand requirements, improve our operating infrastructure or acquire complementary businesses, personnel and technologies. Our primary uses of cash include operating costs such as personnel-related expenses and capital spending. Our future capital requirements may vary materially from those currently planned and will depend on many factors including our growth rate and the continuing market acceptance of our advertising platform, operating system and technology and players along with the timing and effort related to the introduction of new platform features, players, hiring of experienced personnel, the expansion of sales and marketing activities, as well as overall economic conditions. We recently entered into lease agreements for a corporate headquarters, and we will startcause us to incur material expenses in future years, beginning in 2019.We may need to engage in equitysubstantial costs or debt financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our then existing stockholders could suffersignificant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our Class A common stock. Any debt financing we secure could involve additional restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we were to violate such restrictive covenants, we could incur penalties, increased expenses and an acceleration of the payment terms of our outstanding debt, which could in turn harm our business.We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be harmed.Our facilities are located near known earthquake fault zones, and the occurrence of an earthquake or other natural disaster could cause damage to our facilities and computer systems, which could require us to curtail or cease operations.Our principal officeschange our business practices in a way that could seriously harm our business.a network operations center are locatedmay in the San Francisco Bay Area, an area known for earthquakes,future be subject to investigations and are thus vulnerableinquiries from government entities. These investigations and inquiries, and our compliance with any associated regulatory orders or consent decrees, may require us to damage. We are also vulnerablechange our policies or practices, subject us to damage fromsubstantial monetary fines or other typespenalties or sanctions, result in increased operating costs, divert management’s attention, harm our reputation, and require us to incur significant legal and other expenses, any of disasters, including power loss, fire, floods, communications failures and similar events. If any disaster were to occur,which could seriously harm our ability to operate our business at our facilities could be impaired.as contained in our amended and restated certificate of incorporation has the effect of concentratingconcentrates voting control with those stockholders who held our stock prior to our IPO,initial public offering, including our executive officers, employees, and directors and their affiliates, and limiting yourlimits the ability of holders of our Class A common stock to influence corporate matters.50%a majority of the outstanding shares of our common stock. Because of the 10-to-1 voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our common stock even when the shares of Class B common stock represent as little as 10% of the combined voting power of all outstanding shares of our Class A and Class B common stock. This concentrated control will limit yourthe ability of holders of our Class A common stock to influence corporate matters for the foreseeable future, and, as a result, the market price of our Class A common stock could be adversely affected.If, for example,As a result of such transfers, as of December 31, 2021, Mr. Wood retains a significant portion of his holdings of Class B common stock for an extended period of time, he could, in the future, controlcontrols a majority of the combined voting power of our Class A and Class B common stock even though he only owns 12.0% of the outstanding Class A and Class B common stock. As a board member, Mr. Wood owes a fiduciary duty to our stockholders and must act in good faith in a manner he reasonably believes to be in the best interests of our stockholders. As a stockholder, even a controlling stockholder, Mr. Wood is entitled to vote his shares in his own interests, which may not always be in the interests of our stockholders generally. This concentrated control could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of our assets that our other stockholders support, or conversely this concentrated control could result in the consummation of such a transaction that our other stockholders do not support. This concentrated control could also discourage a potential investor from acquiring our Class A common stock, which has limited voting power relative to the Class B common stock and might harm the trading price of our Class A common stock.
We have not elected to take advantage of the “controlled company” exemption to the corporate governance rules for companies listed on The Nasdaq Global Select Market.various factors, including many risk factors listed in this section, and others. Since shares of our Class A common stock were sold in our initial public offering in September 2017 at a price of $14.00 per share, the reported high and low intraday prices of our Class A common stock have ranged from $77.57 to $15.75 through February 15, 2019. The market price of our Class A common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: by us of key content publishers;ventures or andconditions.We may be the targetFor example, a stockholder has filed a derivative lawsuit, purportedly on our behalf, against certain members of this typeour Board of litigationDirectors and management in the future. SecuritiesDelaware Court of Chancery. Such litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could harm our business.other service providers, and directorscertain 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 fiscal 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 fiscal year, at the end of the trading day on the Wednesday before Thanksgiving. These directors, employees, service providers and directorscontingent workers may also sell shares during a closed window periodsperiod pursuant to trading plans that comply with the requirements of Rule 10b5-1(c)(1) under the Exchange Act. When these shares are issued and subsequently sold, it would beis dilutive to existing stockholders and the trading price of our Class A common stock could decline.ToIf securities or industry analysts cover our company and one or more of these analysts downgrades our stock or issues other unfavorable commentary or research, the extent we obtain equity research analyst coverage, we will not have any control of the analysts or the content and opinions included in their reports. The price of our Class A common stock could decline if one or more equity research analysts downgrade our stock or issue other unfavorable commentary or research.decline. If one or more equity research analysts cease coverage of our company, or fail to publish reports on us regularly, demand for our stock could decrease, which in turn could cause our stock price or trading volume to decline. additional legal, accounting, and other expenses. In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC and theThe Nasdaq Global Select Market regulations, may increase legal and financial compliance costs and make some activities more time consuming. These laws, regulations, and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations, and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If, notwithstanding our efforts, we fail to comply with new laws, regulations, and standards, regulatory authorities may initiate legal proceedings against us, and our business may be harmed.loan and security agreements containCredit Agreement contains prohibitions on the payment of cash dividends on our capital stock. Any determination to pay dividends in the future will be at the discretion of our Board of Directors. Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.inof our corporate charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to change our management or hinder efforts to acquire a controlling interest in us, and the market price of our Class A common stock may be lower as a result.third-partythird party to acquire, or attempt to acquire, control of Roku, even if a change in control was considered favorable by our stockholders.the provisions of Section 203 of the Delaware General Corporation Law, which prohibitprohibits a person who owns 15% or more of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. Any provision in our certificate of incorporation or our bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our Class A common stock and could also affect the price that some investors are willing to pay for our Class A common stock. amended and restated certificate of incorporation provides that the Delaware Court of Chancery ofand the State of Delaware and theU.S. federal district courts of the United States of America will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees. amended and restated certificate of incorporation provides that the Delaware Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:amended and restated certificate of incorporation, or our bylaws; or andexclusive-forum provision if permittedwould not apply to suits brought to enforce a duty or liability created by applicable law,the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims.this exclusive-forumeither exclusive forum provision in our amended and restated 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.Our amended and restated certificate of incorporation further provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. Recently, the Delaware Chancery Court issued an opinion invalidating such provision, which is currently on appeal. In light of that recent decision, we will not attempt to enforce this provision of our certificate of incorporation to the extent it is not permitted by applicable law. As a result, we may incur additional costs associated with resolving disputes that would otherwise be restricted by that provision in other jurisdictions, which could harm our business.Los Gatos,San Jose, California under a lease that expires in 2020.September 2030. We use this space for sales, research and development, and administrative purposes. In July 2018 and November 2018, we entered into lease agreements to acquire office space in San Jose, California to house our new headquarters. The lease includes multiple buildings and has a term of 140 months from the date we commence occupancy in the first building which is expected to be in 2019. In addition, we maintain offices in Austin, Texas; Cambridge,lease various office and shared work spaces throughout the United Kingdom; Santa Monica, California; Chicago, Illinois; Shanghai, China; Tilst, DenmarkStates and New York, New York.internationally. We believe that our facilities are suitable to meet our current needs.We also lease commercial office space in Saratoga, California through 2020. We have sublet a portion of this space and we are working to sublet the remainder prior to lease expiration.1012 to the Consolidated Financial Statementsconsolidated financial statements in Item 8 of this Annual Report, which is incorporated herein by reference.None
None.OurRegistrant’s Common Stock,Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities2019,2022, there were 4861 stockholders of record of our Class A common stock. This figure does not include a substantially greater number ofThere were significantly more beneficial holdersowners of our Class A common stock whose shares are held of record by banks, brokers and other financial institutions.stock. As of January 31, 2019,2022, there were approximately 4816 stockholders of record of our Class B common stock.(a)Unregistered SaleNone.None.(b)Use of ProceedsOn September 27, 2017, our registration statement on Form S-1 (No. 333-220318) was declared effective by the SEC for our IPO of Class A common stock. On October 2, 2017, we closed our IPO, in which we issuedIssuer and sold 10.4 million shares of our Class A common stock at a public offering price of $14.00 per share, for net proceeds of approximately $134.8 million, after deducting underwriting discounts and commissions of $10.1 million. We incurred offering cost of $3.1 million. No payments for such expenses were made directly or indirectly to (i) any of our officers or directors or their associates, (ii) any persons owning 10% or more of any class of our equity securities, or (iii) any of our affiliates. The offer and sale of all of the shares in the IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (No. 333-220318), which was declared effective by the SEC on September 27, 2018. Following the sale of the shares in connection with the closings of the IPO, the offering terminated.There has been no material change in the planned use of proceeds from our IPO from that described in our prospectus dated September 28, 2018, filed with the SEC pursuant to Rule 424(b) under the Securities Act.
None.This performance graph shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or incorporated by reference into any filing of Roku, Inc., under the Securities Act.the Nasdaq)The Nasdaq Global Select Market) through December 31, 2018,2021, for (i) our Class A common stock, (ii) the Nasdaq Composite Index, and (iii) the Peer Group of companies. Because no published index of comparable player and platform 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. The Peer Group is made up of Facebook, Inc., Alphabet, Inc., Logitech International S.A., Meta Platforms, Inc., Netflix, Inc., Snap, Inc., Twitter, Inc., Yelp, Inc., and Zillow Group, Inc. Not all of the companies included in the Peer Group participate in all the lines of business in which we are engaged, and some of the companies are engaged in lines of business in which we do not participate. Additionally, the market capitalization of some of the companies included in the Peer Group are different from ours.
Company / Index Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Roku, Inc. $370 $219 $956 $2,371 $1,630 Nasdaq Composite Index $107 $104 $142 $206 $252 Peer Group $107 $98 $134 $193 $270 2018. All outstanding awards relate to our2021.Plan Category Number of securities to be
issued upon exercise of
outstanding options and awardsWeighted-average
exercise price of
outstanding
options (1)Number of securities
remaining available
for future issuances
under equity compensation
plans (excluding securities
in column (a))(a) (b) (c) (in thousands, except per share amount) Equity compensation plans approved by security holders (2) 9,460 $ 51.87 32,100 Equity compensation plans not approved by security holders — — — Total 9,460 $ 51.87 32,100 stock.stock available for issuance under our 2017 Equity Incentive Plan (the “2017 Plan”) and 5,089 shares of Class A common stock available for issuance under our 2017 Employee Stock Purchase Plan. The number of shares authorized for issuance under the 2017 Plan is subject to an annual increase.(1)The number of securities remaining available for future issuance in column (c) includes 13,239 shares of Class A common stock authorized and available for issuance under our 2017 Equity Incentive Plan, or 2017 Plan. The number of shares authorized for issuance under the 2017 Plan are subject to an annual increase. Restricted stock units have been excluded for purposes of computing weighted average exercise prices in column (b).Selected Consolidated Financial DataThe selected consolidated financial data below should be read in conjunction with the [Reserved]7, “Management’s7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.The consolidated statements of operations data for the years ended December 31, 2018, 2017 and 2016, and the consolidated balance sheet data as of December 31, 2018 and 2017 are derived from our audited financial statements appearing in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K. The consolidated statement of operations data for the year ended December 26, 2015 and the consolidated balance sheet data as of December 31, 2016 and December 26, 2015 are derived from audited financial statements not included in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected in any future period.In 2017, the Company changed the fiscal year-end to match the calendar year-end. Prior to 2017, the Company’s fiscal year was the 52- or 53-week period that ended on the last Saturday of December. Fiscal year 2016 ended on December 31, 2016 and spanned 53 weeks.Operations
(1)Stock-based compensation was allocated as follows:(2)See Note 14 to the Consolidated Financial Statements in Item 8 for an explanation of the calculations of basic and diluted net loss per common share.Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operationselsewhere in Item 8 of this document. ThisAnnual Report. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs, and expectations, and involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to suchthese differences include but are not limited to, those identifieddiscussed below and those discussed aboveelsewhere in this Annual Report, particularly in the section entitled “Risk Factors.”Prior to 2017, ourtitled Item 1A. Risk Factors and the Note Regarding Forward-Looking Statements.was2019 and year-to-year comparisons between fiscal years 2020 and 2019 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 52- or 53-week period that ended on the last Saturday of December. Our fiscal year 2016 ended on December 31, 2016. Fiscal year 2016 spanned 53 weeks. In 2017, we changed our fiscal year-end to match the calendar year-end.OverviewRoku pioneered streaming to the TV and we are capitalizing on this economic opportunity as a leading TV streaming platform for users, content publishers and advertisers. Roku connects users to the streaming content they love, enables content publishers to build and monetize large audiences, and provides advertisers with unique capabilities to engage consumers. As of December 31, 2018, we had 27.1 million active accounts, an increase of 40% from the prior year. During the year ended December 31, 2018,2020 filed with the SEC on February 26, 2021.users streamed 24.0 billion hours, an increaseOneView ad platform, content distribution services (such as subscription and transaction revenue shares, media and entertainment promotional spending, the sale of 62% over hours streamed duringPremium Subscriptions, and the year ended December 31, 2017.Our business model is to grow gross profit by increasing the numbersale of active accountsbranded channel buttons on remote controls), and increasing our platform monetization by growing hours streamed and our monetization capabilities. We measure our platform monetization progress through average revenue per user, or ARPU, which we believe represents the inherent value of our business. We grow new accounts through three primary ways: we sell streaming players, we partner with TV brands through our Roku TV licensing program, and we have licensing relationshipsarrangements with service operators. The fastest growing source of new accounts comes from our licensing partner relationships operators and service operators which accounted for 50% of new accounts in 2018, up from 48% in 2017. We believe we have a significant opportunity to continue to grow platformTV brands.and as we further monetize streaming hours we will increase ARPU. ARPU was $17.95 for the year ended December 31, 2018 as compared to $13.78, an increase of 30% for the year ended December 31, 2017.We generate platform revenue from advertising, content distribution, audience development, billing services and licensing activities on our platform and player revenueis generated primarily from the sale of streaming players.players and audio products. We generated revenue of $742.5 million during the year ended December 31, 2018, up by 45% as comparedexpect to the year ended December 31, 2017. During the year ended December 31, 2018, we generated a gross profit of $332.1 million, which is up 66% from the year ended December 31, 2017. During the year ended December 31, 2018, our cost of player revenue was lower by $8.9 million due to the release of accruals of IP licensing obligations that we now believe will not materialize. Excluding this benefit, the gross profit was up 62% for the year ended December 31, 2018 as compared to the year ended December 31, 2017.We continue to manage the average selling prices or ASP,(“ASP”) of our streaming players to expandincrease our active accounts. As a result, player revenue and gross profit may not increase as rapidly as they have historically or at all. We expect that tradeoffsthe trade off from player gross profit or loss to grow active accounts will result in increased platform monetizationrevenue and platform gross profit.We use the followingdecisions. Our key performance metricsdecisions are gross profit, active accounts, streaming hours, streamed, and ARPU.measure the performance of our business usinguse gross profit and we are focused on increasing gross profit. The majority of our gross profit is generated from platform revenue. We believe gross profit isas the primary metric to measure the performance of our business because we have two revenue segments withthat have different margin profiles, and we aim to maximize our highhigher margin platform revenue from our active accounts as they stream content on our platform.$332.1 million, $199.8$1,408.6 million and $121.0$808.2 million for the years ended December 31, 2018, 20172021 and 2016, respectively.thatwho streamed content from The Roku Channel only on non-Roku platforms are not included in this metric. The number of active accounts also does not correspond to the number of unique individuals who actively utilize our platform, or the number of devices associated with an account. For example, a single account may be used by more than one individual, such as a family, and one account may usebe used on multiple streaming devices. We believe that the number of active accounts is a relevant measure to gauge the size of our user base and the opportunity to increase our platform revenue and gross profit.27.1 million, 19.360.1 million and 13.451.2 million active accounts at the endas of December 31, 2018, 20172021 and 2016, respectively.We define hours streamed as the aggregate amount of time our streaming devices stream content on our platform in a given period. Streaming hours on non-Roku platforms are not included in this metric. We report hours streamed on a calendar basis. gross profitplatform monetization because we earn platform revenue from various forms of user engagement, including advertising, as well as from revenue shares from subscriptionsubscriptions and transactional video on-demand. However, our revenuesrevenue from content providers arepublishers is not tied to the hours streamed on their streaming channels, and the number of streaming hours streamed does not correlate to revenue earned from such content providerspublishers or ARPU on a period-by-period basis. Moreover, streaming hours on our platform are measured whenever a Roku player or a Roku TV 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 auto-play subsequentcontinue to play content for a period of time determined by the streaming channel. We believe that this also occurs across a wide variety of non-Roku streaming devices and other set-top boxes.24.0 billion, 14.873.2 billion and 9.458.7 billion hourshours during the years ended December 31, 2021 and 2020, respectively reflecting an increase of 25%.respectively.Quarter Published SHs Revised SHs SHs % Delta Published YoY Revised YoY 2017 Q1 3.3B 3.2B (0.5)% 63.4% NA 2017 Q2 3.5B 3.5B (0.4)% 60.0% NA 2017 Q3 3.8B 3.8B (0.4)% 57.8% NA 2017 Q4 4.3B 4.3B (0.2)% 55.3% NA 2018 Q1 5.1B 5.1B (0.5)% 56.0% 56.1% 2018 Q2 5.5B 5.4B (0.5)% 57.2% 57.0% 2018 Q3 6.2B 6.1B (0.7)% 62.7% 62.1% 2018 Q4 7.3B 7.1B (2.2)% 68.6% 65.2% 2019 Q1 8.9B 8.4B (5.4)% 74.1% 65.5% 2019 Q2 9.4B 8.8B (6.0)% 72.1% 62.6% 2019 Q3 10.3B 9.6B (6.5)% 67.6% 57.9% 2019 Q4 11.7B 10.9B (6.3)% 60.2% 53.7% 2020 Q1 13.2B 12.3B (7.0)% 49.3% 46.8% Year Published SHs Revised SHs SHs % Delta Published YoY Revised YoY 2017 14.8B 14.8B (0.4)% 58.8% NA 2018 24.0B 23.7B (1.1)% 61.7% 60.5% 2019 40.3B 37.8B (6.1)% 67.8% 59.3% average revenue per user, or ARPU.ARPU, which we believe represents the inherent value of our business. We define ARPU as our platform revenue duringfor the precedingtrailing 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 four quarters. We measure progress in our platform business usingyear. ARPU because it helps us understandmeasures the rate at which we are monetizing our active account base.Our average revenue per userbase and the progress of our platform business.$17.95, $13.78 and $9.28 at the end$41.03 as of December 31, 2018, 2017 and 2016, respectively.Factors Affecting Our PerformanceRate2021 as TV streaming and advertising shift to OTTConsumers have significantly shifted their TV viewing behavior, and we believe all TV content will be available through streaming. Therefore, we also believe this presents a large market opportunity for streaming TV advertising. This is a critical component of our business model because our platform and player revenue, as well as our overall expense structure, is dependent on this shift. In addition, the number of hours streamed on our platform is a critical element of our business because hours determine our advertising inventory and sell through.User acquisition strategyWe acquire users through three primary ways: we sell streaming players, we partner with TV brands through our Roku TV licensing program, and we have licensing relationships with service operators. We monetize our user base through platform revenue. Player revenue and player gross profit may decrease over time as we strategically aim to acquire new users through the sale of lower priced streaming players.Ability to monetize users and streaming hoursOur business model is to grow gross profit by increasing the number of active accounts and related streaming hours, and growing revenue through the monetization of our streaming platform. We believe we have a significant opportunity to grow platform revenue as we further monetize users’ engagement Our platform enables content publishers to distribute streaming content through three primary business models, transaction video on demand, or TVOD, that includes channels that offer a la carte movie purchases or rentals, subscription video on demand, or SVOD, that includes subscriptions to individual video on demand channels and so-called virtual multichannel video programming distribution services, and advertising supported video on demand, AVOD, that includes channels that do not charge a subscription fee to users. We generate revenue from TVOD and SVOD channels from various forms of revenue sharing arrangements. Our revenue sharing arrangements generally apply to new subscriptions for accounts that sign up for new services and at the time of a movie rental or purchase for TVOD.Revenue from the distribution of AVOD channels is generated through the sale of advertising within the channel. AVOD is our fastest growing segment, and we are increasing the monetization of these hours by expanding our advertising capabilities both on and off the Roku platform. We intend to continue to leverage our data and analytics to deliver relevant advertising and improve the ability of our advertisers to optimize their campaigns and measure their results. We also plan to continue to expand our direct sales teams to increase the number of advertisers who use our services.In late 2017, we launched The Roku Channel, which offers ad-supported free access for users to a collection of films, television series and other content, and at the same time we began a fundamental transition to increase video advertising inventory under our control and to create another way of connecting content publishers with users. The Roku Channel has grown from providing customers with free access to 1,000 movies and TV episodes to roughly 10,000 today and is rapidly becoming one of our leading sources of advertising inventory. In January 2019, we launched Premium Subscriptions within The Roku Channel, through which we resell ad-free premium content subscription services from providers such as Showtime, Starz and Epix directly to our users.Continued investment in growthWe believe that our future performance will depend on the success of the investments we have made, and will continue to make, to improve the value for users, content publishers and advertisers on our platform. We must regularly update and enrich the Roku platform to meet evolving consumer behavior and deliver a superior user experience. Further, it is important that we remain a frictionless platform for content delivery and invest to 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 generate significantly higher levels of revenue and gross profit, for both player and platform revenue, in the fourth quarter of the year. Fourth quarter revenue comprised 37% of our total net revenue for the years ended December 31, 2018 and 2017, and fourth quarter gross profit comprised 34% and 37% of our total gross profit for the years ended December 31, 2018 and 2017, respectively.share, salessharing arrangements,media and entertainment promotional spending, the sale of Premium Subscriptions, and the sale of branded channel buttons on remote controlscontrols), and licensing arrangements with service operators and TV brands and service operators. We generate most of our platform revenue in the United States.brands. Our first-partyad inventory includes video ad inventory includesfrom 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 publisher agreements.distribution agreements with publishers. To satisfy existing demand,supplement supply, we can sellre-sell video advertisinginventory that we purchase from content publishers to supplement our first-party video ad inventory, and, to a lesser extent, directly sell third-party video advertisinginventory on a revenue share basis from content publishersbasis. To date, we have generated most of our platform revenue in our Roku Direct Publisher program. Revenue generated from non-Roku platforms is included in platform revenue.primarilyincluding Amazon. We generate most of our player revenue in the United States. In our international markets, we primarily sell our players through wholesale distributors which, in turn, sellre-sell to retailers. We currently distribute our players in Canada,various countries in North America, South America, and Europe.United Kingdom, France, the Republicsale of Ireland, Mexicoour audio products, including wireless speakers, smart soundbars and several other Latin American countries.Cost of Revenueacquisitionand amortization costs of content, both licensed and produced. Cost of platform revenue also includes other costs such as payment processing fees, allocated expenses associated with the delivery of our services that primarily include costs of third-party cloud service fees, content licensing feesservices and allocated personnel-related costs, including salaries, benefits, and stock-based compensation for Rokuour platform operations personnel, who support platform services, such as advertising and billing operations, customer service, and teams supporting our TV brands and service operator licensees. We anticipate that the costamortization of platform revenue will increase in absolute dollars. player manufacturing costs for streaming players and audio products payable to our third-party contract manufacturers and technology licenses or royalty fees,fees. Cost of player revenue also includes inbound and outbound freight, duty and logistics costs, third-party packaging, inventory reserves, and assembly costs, provision for excess or obsolete inventory, allocated overhead costs related to facilities and customer support, and salary, benefitsalaries, benefits, and stock-based compensation costs for operations personnel.employee salaries, benefits, and stock-based compensation for our engineers and other employees engaged in the development of our products including new technologies, features and functionality.teams as well as outsourced development fees. In addition, research and development expenses include allocated facilities and overhead costs. We believe continued investment is important to attaining our strategic objectives and expect research and development expenses to increase in absolute dollars foras we continue to invest in the foreseeable future.development of our platform and player products and services.expense for our employees engaged in sales and sales support, marketing, communications, data science and analytics, business development, product management, marketing, communications, and partner and customer support functions. Sales and marketing expenses also include costs for marketing, retail and public relations, channel merchandising including point of purchase and in-store displays, trade shows and other events, professional services,costs, and allocated facilities and other overhead.overhead expenses. We expect our sales and marketing expenses to increase in absolute dollars in future periods as we continue to growfocus on growing active accounts, platform and player revenue, and expanding our business.personnel-related costs, including salaries, benefits, and stock-based compensation for our executive, finance, legal, information technology, human resources, and other administrative personnel. General and administrative expenses also include outside legal, accounting, and other professional service fees as well as allocated facility expenses. We expect our general and administrative expenses to increase due to the anticipated growthexpansion of our business and related infrastructure, compliance with global laws and regulations, as well as accounting, legal, insurance, investor relations and other costs associated with being a public company.Ourfor the year ended December 31, 2018, consists of interest income on short-term investmentscash and cash equivalents, income recognized related to non-cash consideration associated with the delivery of services as part of a strategic commercial arrangement, interest expense that includes interest on our debt and amortization of deferred debt costs, foreign currency re-measurement, and transaction gains and losses. Other income (expense), net, for the years ended December 31, 2017 and 2016 consisted of changes in the fair value of our convertible preferred stock warrant liability, interest expense on our debt, and foreign currency re-measurement and transaction gains and losses. Prior to our IPO, the underlying shares of our convertible preferred stock warrants were contingently redeemable, and we accounted for these warrants as a liability at fair value and re-measured the fair value at each balance sheet date. Pursuant to our IPO, the convertible preferred stock warrant liability was reclassified to stockholders’ equity and re-measurement was no longer required.minimum income taxes in the United States. We have a valuation allowance for U.S. and Netherlands deferred tax assets, including net operating loss carryforwards andcarryforwards. U.S. deferred tax assets include tax credits related primarily to research and development. We expect to maintain this valuation allowance for the foreseeable future. Years Ended December 31, 2021 2020 2019 Net Revenue: Platform 83 % 71 % 66 % Player 17 % 29 % 34 % Total net revenue 100 % 100 % 100 % Cost of Revenue: Platform 30 % 28 % 23 % Player 19 % 27 % 33 % Total cost of revenue 49 % 55 % 56 % Gross Profit (Loss): Platform 53 % 43 % 43 % Player (2) % 2 % 1 % Total gross profit 51 % 45 % 44 % Operating Expenses: Research and development 17 % 20 % 24 % Sales and marketing 16 % 17 % 16 % General and administrative 9 % 10 % 10 % Total operating expenses 42 % 47 % 50 % Income (Loss) from Operations 9 % (2) % (6) % Other Income (Expense), Net: Interest expense — % — % — % Other income (expense), net — % — % 1 % Total other income (expense), net — % — % 1 % Income (Loss) Before Income Taxes 9 % (2) % (5) % Income tax benefit — % — % — % Net Income (Loss) 9 % (2) % (5) % 20182021 and 2017Years Ended December 31, 2021 2020 Change $ Change % (in thousands, except percentages) Platform $ 2,284,925 $ 1,267,744 $ 1,017,181 80 % Player 479,659 510,644 (30,985) (6) % Total net revenue Total net revenue $ 2,764,584 $ 1,778,388 $ 986,196 55 % $191.5$1,017.2 million, or 85% for80%, during the year ended December 31, 20182021 as compared to the year ended December 31, 20172020, primarily attributable to higher content distribution services, including higher revenue from media and is inclusive of $25.2 million recognizedentertainment promotional spending and Premium Subscriptions, we well as a result of the adoption of the newhigher advertising revenue standard. The increasewhich includes $170.6 millionrevenue from increases in advertising, subscription and transaction revenue share and the number of paid subscriptions. The revenues from licensing arrangements with service operators and TV brands increased by $21.2 million mainly driven by the delivery of intellectual property to a licensing partner during the first quarter of 2018.increaseddecreased by $38.2$31.0 million, or 13% for6%, during the year ended December 31, 20182021 as compared to the year ended December 31, 2017. The increase2020, primarily due to a decrease in player revenue was mainly a result of an increase inboth the volume of streaming players sold mitigatedand average selling prices, offset by a reductionslight increase in revenue from the sale of audio products and accessories. During the year ended December 31, 2021, the volume of streaming players sold decreased by 4% and the average selling price of the players. An increase of 19% in the volume of players sold, consisting mainly of our lower priced players, resulted in a 6% decrease in the average selling price of the players. Audio products launched towards the end of the year are included in player revenues and contributed insignificant revenues.Cost of RevenuePlatformThe cost of platform revenue increaseddecreased by $65.7 million or 120% for the year ended December 31, 20187% as compared to the year ended December 31, 2017. Advertising inventory acquisition costs, ad serving costs, content acquisition fees and credit card processing fees increased by $55.2 million and allocated overhead increased by $9.4 million during2020. The decrease in the volume of players sold is due to the slowdown in growth in the year ended December 31, 2018. The increase is driven by the growth of our platform business which attracts additional advertisements and monetization opportunities.Gross profit for platform revenue increased by $125.8 million or 74% for the year ended December 31, 20182021 as compared to the year ended December 31, 2017, primarily driven2020 when the growth was aided by growththe COVID-19 pandemic. The decrease in our platform revenues. The increase includes $10.1 million recognized as a result of the adoption of the new revenue standard.PlayerThe cost of player revenue increased by $31.7 million or 12% foraverage selling price is due to higher promotions during the year ended December 31, 20182021 as compared to the year ended December 31, 2017. 2020 where the volume was aided by the COVID-19 pandemic and required fewer promotions.Years Ended December 31, 2021 2020 Change $ Change % (in thousands, except percentages) Cost of Revenue: Platform $ 823,924 $ 503,177 $ 320,747 64 % Player 532,060 466,992 65,068 14 % Total cost of revenue $ 1,355,984 $ 970,169 $ 385,815 40 % Gross Profit (Loss): Platform $ 1,461,001 $ 764,567 $ 696,434 91 % Player (52,401) 43,652 (96,053) (220) % Total gross profit $ 1,408,600 $ 808,219 $ 600,381 74 % increase in cost of playerplatform revenue was primarily the result of approximately $44.0increased by $320.7 million, in increased manufacturing and related costs to support the increased volume of players sold, offset by the release of accruals related to IP licensing obligations that did not materialize and management now believes will not materialize in the amount of approximately $8.9 million and a reduction in freight costs of $4.6 million. The reduction in freight cost is due to higher costs incurred inor 64%, during the year ended December 31, 2017 to expedite inbound supply to minimize the effect of supply disruption, which did not reoccur in the year ended December 31, 2018.Gross profit for player revenue increased by $6.5 million or 22% for the year ended December 31, 20182021 as compared to the year ended December 31, 2017 2020. This increase is primarily driven by higher advertising inventory costs, higher content amortization costs, Premium Subscription costs, and credit card processing fees totaling $303.1 million. Platform costs increased an additional $15.3 million due to increases in cloud services costs for supporting the release of accruals related to unrealized IP licensing obligations during the second quarter of 2018platform and reduced freight costs.Operating ExpensesResearch and developmentResearch and development expensesGross profit for platform revenue increased by $62.7$696.4 million, or 58% for91%, during the year ended December 31, 20182021 as compared to the year ended December 31, 2017. 2020, primarily driven by the overall growth in our platform revenue.wasis primarily due to higher product costs of $35.6 million, an increase in freight costs of $15.0 million, an increase in overhead costs such as cloud services, outsourced consulting services, and personnel costs totaling to $9.4 million, higher royalty expenses of $5.7 million, and an increase in inventory reserves of $2.8 million offset by a reduction in other manufacturing related costs of $3.3 million.Years Ended December 31, 2021 2020 Change $ Change % (in thousands, except percentages) Research and development $ 461,602 $ 355,784 $ 105,818 30 % Sales and marketing 455,601 299,457 156,144 52 % General and administrative 256,297 173,231 83,066 48 % Total operating expenses $ 1,173,500 $ 828,472 $ 345,028 42 % $51.1$84.3 million, as a result of increased engineering headcount of 36%,and related stock-based compensation, and higher facilitiesconsulting, professional services, and cloud services costs of $4.1 million and higher platform and product development costs of $7.6 million that includes expenses such as consulting and outside services, travel and equipment, offset by allocation of overheads.$38.7$156.1 million, or 60% for52%, during the year ended December 31, 20182021 as compared to the year ended December 31, 2017. 2020. The increase wasis primarily due to higherincreases in personnel-related costs of $29.8$91.4 million related to increased headcount and related stock-based compensation in sales and sales support, product management, marketing, and business analytics to support efforts to grow our business. Sales and marketing expenses also include an increase of 43%, higher$44.7 million mainly due to increases in advertising expenses to promote the Roku brand, marketing, retail and merchandising costs, and general sales promotions, an increase of $9.5 million in professional services and consulting fees, and an increase in facilities costs of $3.3$8.3 million increases in consulting expensesdue to expansion of $2.2 million and higher travel and entertainment expenses of $1.3 million.$24.5$83.1 million, or 52% for48%, during the year ended December 31, 20182021 as compared to the year ended December 31, 2017. 2020. The increase wasis primarily due to higherincreases in personnel-related costs of $14.6 million as a result of increased headcount in general and administrative functions of 26%, an increase in consulting and professional service fees of $9.7$50.0 million related to increased accountingheadcount and legal services andrelated stock-based compensation, an increase of $2.1$28.3 million in facilities costs.related to higher legal expenses, consulting, and professional services fees, and a net increase of $4.8 million related to higher general overhead, business taxes, and similar costs offset by recoveries of credit losses.(Expenses)(Expense), NetYears Ended December 31, 2021 2020 Change $ Change % (in thousands, except percentages) Interest expense $ (2,980) $ (3,432) $ 452 (13) % Other income (expense), net 4,467 5,233 (766) (15) % Total other income (expense), net Total other income (expense), net $ 1,487 $ 1,801 $ (314) (17) % Other income (expenses), net changed$47.5$0.3 million, or 17%, during the year ended December 31, 20182021 as compared to the year ended December 31, 20172020. The decrease was primarily due todriven by foreign exchange losses of $2.5 million and lower interest income of $1.4 million from a chargedecline in interest rates, which impacted our investment yields. This was offset by $3.1 million of $40.3 million that was recorded during the year ended December 31, 2017other income recognized related to non-cash consideration associated with the change in the fair valuedelivery of warrants to purchase convertible preferred stock. No such charge was required during the year ended December 31, 2018 as warrants to purchase convertible preferred stock were converted into warrants to purchase common stock upon our IPO. Other income (expense), net,services for a strategic commercial arrangement and decreased interest expense of $0.5 million.Years Ended December 31, 2021 2020 Change $ Change % (in thousands, except percentages) Income tax benefit $ (5,798) $ (945) $ (4,853) 514 % $3.6$4.9 million during the year ended December 31, 20182021 as compared to the year ended December 31, 2017 due to an increase2020, driven primarily by stock-based compensation excess tax benefits, increased losses in interest income from a higher cash balance, short-term investments earned in the second half of the yearforeign jurisdiction with no valuation allowance, and a one-time cancellation and restocking fee of $1.4 million fromtax rate change in a customer. Interest expense for the year ended December 31, 2017 was higher by $1.3 million due to outstanding debt during that period. No such debt was outstanding in 2018.Income Tax (Benefit) ExpenseIncome tax (benefit) expenseIncome tax (benefit) expense is comprised of foreign income tax and state minimum income taxes in the United States.Comparison of years ended December 31, 2017 and 2016Net RevenuePlatform revenue increased by $120.6 million or 115% for the year ended December 31, 2017 as compared to the year ended December 31, 2016. The majority of the increase was driven by our advertising and content and distribution services including subscription and transaction revenue totaling $119.3 million. This was achieved through expansion of our advertising inventory and an increase in number of paid subscriptions. In addition, there was a $1.3 million increase in revenues from licensing arrangements.PlayerPlayer revenue decreased by $6.5 million or 2% for the year ended December 31, 2017 as compared to the year ended December 31, 2016. The decrease was a result of a 22% decrease in the average selling prices while the volume of players sold increased by 25%. The increase in the volume of players and the reduction of average selling prices was mainly driven by the sale of our lower priced Roku Express which was introduced in the fall of 2016 and saw a full year of market share in 2017. An increase in various sales incentives also contributed to the lower average selling prices in the year ended December 31, 2017.Cost of RevenuePlatformThe cost of platform revenue increased by $27.0 million or 97% for the year ended December 31, 2017 as compared to the year ended December 31, 2016. The increase was due to higher inventory acquisition costs, advertisement serving costs and credit card processing fees totaling $18.5 million, an increase in allocated overhead of $3.5 million and an increase in licensing costs of $0.4 million due to growth in installed base.Gross profit for platform revenue increased by $93.6 million or 122% for the year ended December 31, 2017 as compared to the year ended December 31, 2016 due to significant growth in advertising demand and lower associated costs.PlayerThe cost of player revenue increased by $8.3 million or 3% for the year ended December 31, 2017 as compared to the year ended December 31, 2016. The increase was mainly due to an increase of 25% in the volume of players sold partially offset by a reduction in direct manufacturing costs and an increase of $7.9 million in mostly air freight costs incurred to expedite inbound supply to minimize the effect of component supply disruptions.Gross profit for player revenue decreased by $14.8 million or 34% for the year ended December 31, 2017 as compared to the year ended December 31, 2016. The decrease is due to lower average selling prices resulting from a combination of the increase in the sales mix of lower priced Roku Express and increases in sales incentives during the year. Gross profit also decreased due to the increase of inbound air freight incurred to expedite inventory supply.Research and developmentResearch and development expenses increased by $31.8 million or 42% for the year ended December 31, 2017 as compared to the year ended December 31, 2016. We incurred higher personnel costs of $28.0 million as a result of a 42% increase in headcount, higher cost of consulting and outside services of $3.2 million offset by a decrease in facilities expenses of $0.5 million.Sales and marketingSales and marketing expenses increased by $11.2 million or 21% for the year ended December 31, 2017 as compared to the year ended December 31, 2016. The increase is due to higher personnel cost of $11.6 million as a result of a 54% increase in headcount, higher travel and entertainment expenses of $0.9 million offset by decrease in allocated overhead by $2.1 million.General and administrativeGeneral and administrative expenses increased by $12.1 million or 34% for the year ended December 31, 2017 as compared to the year ended December 31, 2016. The increase is due to higher personnel cost of $5.3 million as a result of a 33% increase in headcount, higher cost of consulting and outside services of $4.0 million and higher travel and entertainment expenses of $2.9 million.Other Income (Expenses), NetOther income (expenses), net changed for the year ended December 31, 2017 as compared to the year ended December 31, 2016 mainly due to the increase in the fair value of preferred stock warrants of $41.2 million. During the year ended December 31, 2017, interest expense increased by $1.8 million due to a higher amount of debt that was outstanding during the year and $2.3 million of loss on extinguishment and early payment of debt.Income Tax ExpenseIncome tax expense is comprised of foreign income tax and state minimum income taxes in the United States.2018,2021, we had cash and cash equivalents and short-term investments of $197.7$2,146.0 million. In October 2017, as a result of our IPO, we received cash proceeds of $134.8 million net of underwriting discounts and commissions but before deducting other offering expenses. Our primary source of liquidity is cash generated through operating and financing activities. Our primary uses of cash include operating costs such as personnel-related expenses and capital spending. Our future capital requirements may vary materially from those currently planned and will depend on many factors including our growth rate and the continuing market acceptance of our advertising platform, operating system and technology and players along with the timing and effort related to the introduction of new platform features, players, hiring of experienced personnel, the expansion of sales and marketing activities, as well as overall economic conditions. We recently entered into lease agreements for a corporate headquarters, and we will start to incur material expenses in future years, beginning in 2019. We may also contemplate and engage in additional merger and acquisition activity that could materially impact our liquidity and capital resource position. However, we believe that our existing cash balance and short-term investments together with amounts available under our credit facility will be sufficient to fund our working capital and meet our anticipated cash needs for the next twelve months.As of December 31, 2018, approximately 2%Less than 1% of our cash was held outside the United States. These amounts were primarilyStates in accounts held in Europe and are utilized to fund our foreign subsidiaries. The amount of unremitted earnings related toby our foreign subsidiaries, iswhich are used to fund foreign operations.material.(the “Closing Date”), we entered into a credit agreement, by and among us, as borrower, the lenders, or Lenders, and issuing banks from time to time party thereto andCredit Agreement with Morgan Stanley Senior Funding, Inc. (as amended on May 3, 2019, the “Credit Agreement”), as administrative agent (the “Administrative Agent”) and collateral agent (the “Credit Agreement”). The Credit Agreementwhich provides for (i) a four-year revolving credit facility in the aggregate principal amount of up to $75,000,000$100.0 million (the “Revolving“Revolving Credit Facility”), (ii) a four-year delayed draw term loan A facility in the aggregate principal amount of up to $75,000,000$100.0 million (the “Term“Term Loan A Facility”), and (iii) an uncommitted incremental facility subject to the satisfaction of certain financial and other conditions in the amount of up to (v) $50,000,000, plus (w) 1.0x of our consolidated EBITDA for the most recently completed four fiscal quarter period, plus (x) an additional amount at our discretion, so long as, on a pro forma basis at the time of incurrence, our secured leverage ratio does not exceed 1.50 to 1.00, plus (y) voluntary prepayments of the Revolving Credit Facility and Term Loan A Facility to the extent accompanied by concurrent reductions to the applicable Credit Facility, plus (z) for up to 90 days after the Closing Date, $75,000,000 (together with the Revolving Credit Facility and the Term Loan A Facility, collectively, the “Credit“Credit Facility”). Borrowings under the Term Loan A Facility may be made by us up to 9 months immediately following the Closing Date (the “Term Loan A Availability Period”). We did not make anyunder the Credit Agreement on the Closing Date. Each Lender’s obligation to fund future loans or issue future letters of credit under the Credit Facility is subject to the satisfaction of certain conditions set forth in the Credit Agreement.On or around the Closing Date, except for certain letters of credit, which were cash collateralized by approximately $26.3 million, we also repaid all outstanding obligations under our Amended and Restated Loan and Security Agreement, entered intohave elected a Eurodollar borrowing with Silicon Valley Bank on November 18, 2014 (as amended prior to the date hereof, the “SVB Loan Agreement”), and the SVB Loan Agreement was terminated.Loans under the Credit Facility bear interest at a rate equal to at our election (i) an alternate basethe adjusted one-month LIBOR rate based upon the highest of (x) the prime rate published by the Wall Street Journal, (y) the federal funds effective date plus ½ of 1% and (z) the one-month LIBO rate plus 1.00%, in each case plus an applicable margin of up to 1.00% per annum, with step-downs1.75% based on our secured leverage ratio or (ii) an adjusted one-, two-, three-, or six month LIBO rate, at our election, plus an applicable margin of up to 2.00% per annum, with step-downs based on our secured leverage ratio.Loans The borrowings under the Term Loan A Facility will amortizefacility mature or have to be repaid in equal quarterly installments beginning on the last day of the fiscal quarter ending after the date of the initial borrowingfull by February 2023. Our obligations under the Term Loan A Facility, in an aggregate annual amount equal to (i) on or prior to December 31, 2021, 1.25% of the drawn principal amount of the Term Loan Facility and (ii) thereafter, 2.50% of the drawn principal amount of the Term Loan Facility, with any remaining balance payable on the maturity date of the Term Loan A Facility.Among other restrictive covenants, the Credit Agreement alsoare secured by substantially all of our assets. The Credit Agreement contains customary representations and warranties, customary affirmative and negative covenants, a financial covenant requiringthat is tested quarterly and requires us to maintain a minimumcertain adjusted quick ratio of at least 1.00 to 1.00, tested asand customary events of default. As of December 31, 2021, we were in compliance with all of the last day of any fiscal quarter on the basiscovenants of the prior periodCredit Agreement. See Note 10 to the consolidated financial statements in Item 8 of our four consecutive fiscal quarters.In June 2017, we entered into a subordinated loan agreement, or 2017 Agreement, with Silicon Valley Bank. On October 31, 2017, we repaidthis Annual Report for additional details regarding the entire amountCredit Agreement.subsequently terminated the 2017 Agreement. In connection with the 2017 Agreement we issued warrants to purchase 0.4$30.8 million shares of Series H convertible preferred stock, with an exercise price of $9.17340. The warrants are exercisable up to ten years from the date of issuance. Upon the repayment of the amounts borrowed and the subsequent termination of the 2017 Agreement, we cancelled warrants to purchase 0.1 million shares of Class B common stock that were contingent on future borrowings. The remaining warrants were exercised during the year ended December 31, 2017 and during the three months ended March 31, 2018. There were no warrants outstanding as of December 31, 2018.Years Ended December 31, 2021 2020 Consolidated Statements of Cash Flows Data: Cash flows provided by operating activities Cash flows provided by operating activities $ 228,081 $ 148,192 Cash flows used in investing activities $ (176,819) $ (81,324) Cash flows provided by financing activities Cash flows provided by financing activities $ 1,003,147 $ 509,048 generated $13.9 million inprovided cash for the year ended December 31, 2018. Our net loss of $8.9$228.1 million for the year ended December 31, 20182021. Our net income of $242.4 million for the year ended December 31, 2021 was adjusted by non-cash charges of $48.4$355.7 million comprisingcomprised mainly of $8.4 millionstock-based compensation, amortization of content assets, depreciation and amortization $37.7 millionon property and equipment and intangible assets, and amortization of stock-based compensation, $1.1 million relating to loss incurred on exiting facilities and $0.9 million of provision related to doubtful accounts.operating right-of-use assets. The changes in our operating assets and liabilities used cash of $25.6$370.0 million comprising of outflows of $50.7 millionmainly from an increase in accounts receivable due to increased seasonal revenues in the fourth quarter, $3.0 million from increasing inventory levels and $1.1 million from decrease in other long-term liabilities. These outflows were offsetprimarily driven by cash inflows of $17.9 million froman increase in accruedrevenue, an increase in content assets, an increase in contract assets from revenue recognized from customers, payments made for operating lease liabilities, $10.1 million from increaseand a decrease in deferred revenue and $2.3 millionoffset by inflows from decrease in deferred cost of revenue.During the year ended December 31, 2017, operating activities generated $37.3 million in cash as a result of net loss of $63.5 million, adjusted by non-cash charges of $60.4 million and increase of $39.5 million in our net operating assets and liabilities. The non-cash charges comprise mainly of $40.3 million of change in fair value of preferred stock warrants, $11.0 million of stock-based compensation, $5.3 million of depreciation and amortization, $2.3 million of loss from extinguishment of debt and $0.5 million of loss relating to exit from our prior headquarter facilities. The increase in operating assets and liabilities was the result ofan increase in accounts payable and accrued liabilities of $48.4 millionand a decrease in inventory balances. These changes are mainly due to both theoverall growth in the business andcombined with the timing of receipts from customers and payments increase in deferred revenue balances of $30.0 million, decrease in inventories of $10.8 million, and increase in other long-term liabilities by $3.6 million. These increases were offset by increases in accounts receivable of $41.2 million as a result of growth in our business, an increase in prepaid and other current assets of $6.5 million and an increase in other non-current assets of $2.8 million.During the year ended December 31, 2016, operating activities used $32.5 million in cash as a result of a net loss of $42.8 million, adjusted by non-cash charges of $17.8 million and a decrease of $7.5 million in our net operating assets and liabilities. The non-cash charges of $17.8 million were primarily comprised of $8.2 million of stock-based compensation expenses, $5.3 million of depreciation and amortization expense and a $3.8 million loss provision related to the exit from our prior headquarter facilities. The decrease from our net operating assets and liabilities was primarily the result of a $13.3 million increase in inventory for anticipated sales of players, a $26.4 million increase in accounts receivable as a result of increases in sales of our players and platform arrangements and a $2.9 million increase in deferred cost of revenue. The decrease in our net operating assets and liabilities was partially offset by a $15.0 million increase in accounts payable and accrued liabilities due to the timing of payments and a $19.8 million increase in deferred revenue as a result of the growth in our business.FlowFlows from Investing Activities20182021 included cash outflowoutflows of $18.3$176.8 million spent on purchasecomprised of $136.8 million for the acquisition of businesses, mainly the Nielsen AVA business and This Old House, and $40.0 million for purchases of property and equipment including expenditureand expenditures on leasehold improvements related to expanding our facilities and other capital investments and $53.8 million spent on the purchase of short-term investments, partially offset by $12.0 million received from sales/maturities of short-term investments.During the year ended December 31, 2017, investing activities used $12.3 million in cash mainly on capital expenditures related to purchase of property, equipment and leasehold improvements of $9.2 million and acquisition of a business of $3.0 million.During the year ended December 31, 2016, investing activities used $8.6 million primarily on capital expenditures to purchase property and equipment and leasehold improvements related to expanding our facilities.FlowFlows from Financing Activities$24.5$1,003.1 million for the year ended December 31, 2018.2021. The cash was generatedreceived mainly from proceeds from an at-the-market offering of $989.6 million, net of issuance costs, and proceeds from the exercise of employee stock options amounting to $25.0 million partiallyof $18.5 million. These inflows were offset by a payment$5.0 million of $0.5 million in connection with a previous business acquisition.During the year ended December 31, 2017, financing activities provided $117.7 million inrepayments made on borrowings.primarilyrequirements from the sale of shares in our IPO net of issuance cost of $131.6 million, proceeds from exercise of stock options of $1.8 million offset by net repayment of debt of $15.8 million.During the year ended December 31, 2016, financing activities used $0.2 million in cash from $0.4 million in proceeds from stock option exercises, less $0.6 million in IPO costs paid during the period.Off-Balance Sheet ArrangementsWe did not have any off-balance sheet arrangements during the years ended December 31, 2018, 2017 and 2016.Contractual ObligationsOur future minimum payments under our non-cancelableknown contractual obligations were as follows as of December 31, 2018 (in thousands):
•Principal payments related to our Term Loan A Facility that are included in our consolidated balance sheets and the related periodic interest payments. For additional information regarding the terms of the debt and interest payable, see Note 10 to the consolidated financial statements in Item 8 of this Annual Report.(1)Represents commitments•Commitments to purchase finished goods from our contract manufacturers and other inventory related items.(2)Represents future minimum lease payments under non-cancelable operating leases.(3)Represents commitments included in other non-cancelable arrangements such as ad buys and other platform services.We currently rely on contract manufacturers to produce, assemble and test our products. Consistent with industry practices, we enter into firm, non-cancelable, and unconditional purchase commitments with our contract manufacturers to acquire productproducts through a combination of purchase orders, supplier contracts, and open orders based on projected demand information. ContractOur contract manufacturers acquiresource components and build our products based on projectedthese demand forecasts. If there are unexpected changesChanges to anticipatedprojected demand for our products or in the subsequent sales mix of our products some of the firm, non-cancelable, and unconditional purchase commitments may result in ourus being committed to purchase excess inventory.commitment amounts in the tablecommitments 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 in the table above.Asliabilities related to unrecognizedliabilities. These income tax benefits net, the table doesare not include $14.5 million of such non-current liabilities includedrecognized in other liabilities on our consolidated balance sheetsheets as of December 31, 2018. Our estimates are based on historical experience, current trends and other factors that we believe to be reasonable at the time our consolidated financial statements are prepared. Our actual results could differ from these estimates.We derive revenue primarily from platform services and sales of our players. We adopted ASU 2014-09, Revenue from ContractsCustomers (Topic 606), (the “new revenue standard”) on January 1, 2018, using the modified retrospective method. The new revenue standard was appliedcustomers often include promises to all contracts that were not completed as of January 1, 2018. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. The comparative information is not restated and continues to be reported under the accounting standards in effect for those prior periods.We enter into contracts that may include various combinations oftransfer multiple products and services whichto a customer. Determining whether products and services are generally capable of beingconsidered distinct and are accounted for as separate performance obligations.Revenue is recognized when control of promised products or services is transferred to customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services. We consider the following approach to recognize revenue.Identification of the contract, or contracts, with a customerIdentification of the performance obligations inrequires significant judgment. contractDetermination of the transaction priceAllocation of the transaction price to the performance obligations in the contractRecognition of revenue when, or as, performance obligations are satisfied.Shipping charges billed to customers are included in revenue and the related shipping costs are included in cost of revenue. We record revenue net of taxes collected or accrued. Sales taxes are recorded as current liabilities until remitted to the relevant government authority. We do not have any capitalized costs associated with contract acquisition because most direct contract acquisition costs relate to contracts that are recognized over a period of one year or less.Our contracts contain multiple distinct performance obligations. The computed transaction price of each contract is allocated to each performance obligation based on a relative stand-alone selling price or SSP.(“SSP”) for each distinct performance obligation. For performance obligations routinely sold separately, the SSP is determined by evaluating such stand-alone sales. For those performance obligations that are not routinely sold separately, we determine SSP based on a market assessment approach, or on an expected cost-plus margin approach.Our revenue is generated from the following two segments:Platform segment:Our platform segment generates revenue from advertising sales and content distribution and audience development activities like revenue shares from subscription and transaction based content, sale of branded channel buttons on remote controls and licensing arrangements with TV brands and service operators.Our advertising revenue is mostly generated through video and display advertising delivered through advertising impressions. We enter into advertising arrangements directly with the advertiser or with their agency which purchases advertising on their behalf. Advertising is typically sold on a cost-per-thousand basis as evidenced by an Insertion Order, or IO,using information that specifies the terms of the arrangement including the type of ad product, pricing, insertion dates, and the number of impressions over a stated period. Revenue is recognized as the number of impressions are delivered. IOs may include multiple performance obligations as they contain distinct advertising products or services. For such arrangements, we allocate revenue to each performance obligation based on their relative SSPs. In addition, advertising revenue is also recognized from distinct performance obligations included in distribution arrangements with content publishers.Within content distributionmarket conditions and audience development, we earn revenue shares from content publishers based on user subscriptions activated or billed through our platform and from purchases or rental of publishers’ media. Our revenue share is generally equal to a fixed percentage of the price charged by the content publisher or a contractual flat fee.We sell a branded channel buttons on player and TV remote controls that provide one-touch access to a publishers’ content. The Company typically receives a fixed fee per button for each player or TV unit sold over a defined distribution period.We license our technology and proprietary operating system to TV brands and service operators. Arrangements with TV brands commonly include a license to the Company’s technology and proprietary operating system over a specified term including updates and upgrades. Licensing revenues from TV brands are generated on a flat fee basis or from per unit licensing fees. Arrangements may also include marketing development funds paid to TV brands. Marketing development funds are reflected as a reduction to the estimated transaction price.arrangement,arrangements, revenue recognition of each performance obligation in the estimated transaction price of a contract is based on the expected value for which a significant reversal of revenue is not expected to occur. The estimate of the variable consideration is based on the assessment of historical, current, and forecasted performance noted and expected from the performance obligation.Player segment:We sell majorityour players through retail distribution channels, including brickthird-party goods and mortarservices, we evaluate whether we are the principal, and online retailers,report revenue on a gross basis, or an agent, and through our website. report revenue on a net basis. In this assessment, we consider if we obtain control of the specified goods or services before they are transferred to the customer, as well as other indicators such as the party primarily responsible for fulfillment, inventory risk, and discretion in establishing price.Our player segment has two performance obligations. The hardware and embedded software are considered as one performance obligation and we recognize revenue at a point in time when control has transferred to the customer, which is based on the contractual terms. Our We provide unspecified upgrades or enhancements are availableand updates to customers on a when-and-if available basis.our player end users. We record the allocated value of the unspecified upgradesthese as deferred revenue and recognize it as player revenue ratably on a time elapsed basis by day, over the estimated economic life of the associated players.The adoption of the new revenue standard results in contract balances such as accounts receivable, contract assets and contract liabilities or deferred revenues. Contract assets are created when the timing of revenue recognition differs from the timing of invoicing Shipping charges billed to a customer. Contract assets primarily relate to our conditional right to consideration for work completed but not billed. Contract assets are transferred to accounts receivable when the rights become unconditional and the customer is invoiced. Our contract assets are current in nature andcustomers are included in “Prepaid expenses and other current assets”. Contract liabilities are recorded as deferred revenue and primarily relatethe related shipping costs are included in cost of revenue.advance consideration received from customers.Valuation of InventoryWe value inventorytangible and identifiable intangible assets acquired and liabilities assumed at the loweracquisition date as well as the useful lives of costthose acquired intangible assets. Examples of critical estimates in valuing certain of the intangible assets and goodwill we have acquired include, but are not limited to, future expected cash inflows and outflows, expected technology life cycle, attritionmarket with cost determined on a first-in, first-out basis. We base write-downsvalidity of inventories upon current factssuch assumptions, estimates or actual results.circumstances. We perform a detailed assessmentassumptions as part of excessthe purchase price allocation process to accurately value assets and obsolete inventory at each balance sheetliabilities acquired, these estimates are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, which includes a review of, among other factors, demand requirements and market conditions. Based on this analysis, we record adjustments whento consideration transferred, and the assets and liabilities acquired, with the corresponding offset to goodwill to the extent we identify adjustments to the preliminary purchase price allocation. Upon the conclusion of the measurement period or final determination of the values of consideration transferred, and assets and liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations.reflect inventorywhich it relates may not be recoverable. If such facts and circumstances indicate an asset group’s carrying amount may not be recoverable, we assess the recoverability of finished products, materials on hand and purchase commitments at lower of cost or market whichpurchased-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 net realizable value. We establish a reserve for players or materials which are not forecasted to be consumed. Although we try to ensure the accuracyexcess of our forecasts of player demand and pricing assumptions, any significant unanticipated changes in demand, pricing or technological developments could significantly impact the carrying amount over the fair value of our inventory and our reported operating results.these asset groups. If we find that our supply estimates exceed our inventory demands, our inventory is written-down and charged to cost of revenue at the time of such determination. Conversely, if assumptions or circumstances beyond our control change and we subsequently sell players that have previously been written-down, our gross margin in the period of sale will be favorably impacted. The inventory provisions recorded are netuseful life of the reversalsasset is shorter than originally estimated, we accelerate the rate of provisions for sales of previously written-down inventory for each period presented. and Doubtful Accountscustomer incentives and doubtful accounts. To determine the allowances for returns, sales incentives and doubtful accounts, weincentives. We perform an ongoing analysis of various factors including our historical experience, recent write-offspromotional programs, claims to date, and specific analysis of significant receivables that are past due.other business factors to determine the allowances for sales returns and sales incentives. If our estimates regarding accounts receivable allowances differ from the actual results, the losses or gains could be material.Stock-Based CompensationStock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, which is generally the vesting period of the respective award. Determining the fair value of stock-based awards at the grant date requires judgment.We use the Black-Scholes option-pricing model to determine the fair value of stock options. The determination of the grant date fair value of options using an option-pricing model is affected by our estimated common stock fair value as well as assumptions regarding a number of other complex and subjective variables. These variables include our expected stock price volatility over the expected term of the options, stock option exercise and cancellation behaviors, risk-free interest rates and expected dividends, which are estimated as follows:and considered numerous objective and subjective factors to determine the fair value of our common stock at each grant date, including but not limited to the prices, rights, preferences and privileges of our preferred stock relative to the common stock, our operating and financial performance, current business conditions and projections, our stage of development, likelihood of achieving a liquidity event for the shares of common stock underlying these stock options, such as an IPO or sale of our company, given prevailing market conditions, any adjustment necessary to recognize a lack of marketability of the common stock underlying the granted options, the market performance of comparable publicly-traded companies, the U.S. and global capital market conditions.Subsequent to our IPO, we use the market closing price for our Class A common stock as reported on The Nasdaq Global Select Market on the date of grant.Expected Term. The expected term of employee stock options represents the weighted-average period that the stock options are expected to remain outstanding. To determine the expected term, we generally apply the simplified approach in which the expected term of an award is presumed to be the mid-point between the vesting date and the expiration date of the award as we do not have sufficient historical exercise data to provide a reasonable basis for an estimate of expected term.Volatility. As we do not have sufficient trading history for our Class A common stock, the expected volatility for our Class A common stock is estimated by taking the average historic price volatility for industry peers based on daily price observations over a period equivalent to the expected term of the stock option awards. Industry peers consist of several public companies in our industry which are either similar in size, stage of life cycle or financial leverage. We intend to consistently apply this process until a sufficient amount of historical information regarding the volatility of our own Class A common stock share price becomes available or unless circumstances change such that the identified peer companies are no longer similar to us, in which case, more suitable companies whose share prices are available would be utilized in the calculation.Risk-free Rate. The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term for each of our option awards.Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero.In addition to the assumptions used in the Black-Scholes option pricing model, we also estimated a forfeiture rate to calculate the stock-based compensation expense for our awards prior to January 1, 2017. Beginning January 1, 2017, we recognize forfeitures as they occur.If any of the assumptions used in the Black-Scholes model changes significantly, stock-based compensation for future awards may differ materially compared with the awards granted previously.We account for the fair value of the restricted stock units using the closing market price of our Class A common stock on the date of the grant.We will continue to use judgement in evaluating assumptions related to our stock-based compensation cost. As we continue to accumulate additional data related to our common stock and our business evolves, we may have refinements to our assumptions and estimates which could impact our future stock-based compensation cost.domesticU.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. Our valuation allowance is attributable to the uncertainty of realizing future tax benefits from U.S. and Netherlands net operating losses and other deferred tax assets.On January 1, 2018,Companyyear ended December 31, 2021 and those not yet adopted guidanceare discussed and included in ASU 2014-09, Revenue from Contracts with Customers (Topic 606), or new revenue standard, using the modified retrospective method. The Company applied the new revenue standard to all contracts that were not completed as of January 1, 2018. The Company recognized the cumulative effect of initially applying the new revenue standard as an adjustmentNote 2 to the opening balance of retained earnings. Comparative information for prior periods has not been restated and continues to be reported under the accounting standards in effect for those periods. Refer to Note 3consolidated financial statements in Item 8 of this report for the detail on the impact of adoption.On January 1, 2018, the Company adopted guidance in ASU 2016-16, Income taxes: Intra-Entity Transfers of Assets Other Than Inventory (Topic 740), using the modified retrospective method. The new guidance allows a reporting entity to recognize the tax expense from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transactionAnnual Report. They are eliminated in consolidation. The adoption of this guidance resulted in a decrease in prepaid expense and other current assets and an increase to the accumulated deficit in amounts that were not material.In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), related to new accounting and reporting guidelines for leasing arrangements. The guidance requires recognition of right-to-use lease assets and lease liabilities for all leases (with the exception of short-term leases) on the balance sheet of lessees. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company will adopt this guidance on January 1, 2019 using the optional transition method and will not restate comparative periods. The Company expects adoption of the standard will result in the recognition of lease liabilities for operating leases of approximately $40-$50 million and right-of-use assets of approximately $35-$45 million at January 1, 2019, with no material impact to its consolidated statements of operations.In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment, which eliminates Step 2 from the goodwill impairment test which measures a goodwill impairment lossincorporated herein by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under this guidance, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount and should recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the loss not exceeding the total amount of goodwill allocated to that reporting unit. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2019, with early adoption permitted. The guidance is to be applied prospectively. The Company does not believe the adoption of ASU 2018-15 will have a material impact on the consolidated financial statements.In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Topic 350), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which requires hosting arrangements that are service contracts to follow the guidance for internal-use software to determine which implementation costs can be capitalized. The guidance is effective either prospectively or retrospectively for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The Company is evaluating the impact of this new guidance on the consolidated financial statements and the related disclosures.In August 2018, the FASB issued ASU 2018-13, Fair Value Measurements (Topic 820), Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This standard removes, modifies, and adds certain disclosure requirements for fair value measurements. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company is currently in the process of evaluating the effects of the new guidance but does not expect the impact from this standard to be material.QualitativeQualitative Disclosures About Market Riskinvestment objective isexposure to conserve capital and maintain liquidity to support our operations. Our short-term investments include commercial paper, U.S. government securities, and corporate bonds. Such instruments carry a certain degree of interest rate risk. However, duerisk relates to the short-term natureinterest income generated by cash, cash equivalents, and interest expense on the Credit Facility. The primary objective of our investment portfolio, wepolicy is to preserve principal while maximizing immediate 10% increase or decrease in interest rates of 100 basis points would have a material effect on the fair market value of our portfolio. Therefore, we do not expect our operating results or cash flows to be materially affectedfinancial condition. As of December 31, 2021, borrowings under the Term Loan A Facility totaled $90.0 million with an effective interest rate of 2.0%. 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 a sudden change in100 basis points, our annual interest rates.sales are currentlyrevenue is generated within the United States and we have minimal foreign currency risk related to our revenue. In addition, most of our operating expenses are denominated in the U.S. dollar, resulting in minimal foreign currency risks. In the future, if our international sales increaserevenue increases or more of our expenses are denominated in currencies other than the U.S. dollar, our exposure to foreign currency risk will likely be more significant. For any of the periods presented, we did not enter into any foreign exchange contracts. However, in the future, we may enter into derivatives or other financial instruments in an attempt to hedge our foreign currency exchange risk.StatementsStatements and Supplementary DataPagePage 71727374757677REGISTEREDREGISTERED PUBLIC ACCOUNTING FIRM20182021 and 2017,2020, the related consolidated statements of operations, comprehensive loss, convertible preferred stock andincome (loss), stockholders' equity, (deficit), and cash flows for each of the three years in the period ended December 31, 2018,2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20182021 and 2017,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2021, in conformity with accounting principles generally accepted in the United States of America.2018,2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2019,February 18, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.Change in Accounting PrincipleAs discussed in Note 3 to the financial statements, effective January 1, 2018, the Company has changed its method of accounting for revenue due to adoption of Accounting Standards Codification Topic 606 (ASU No. 2014-09), Revenue from Contracts with Customers, and all subsequent amendments (collectively, “ASC 606”). The Company adopted ASC 606 using the modified retrospective approach.Company'sCompany’s management. Our responsibility is to express an opinion on the Company'sCompany’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.March 1, 2019 As of December 31, 2021 2020 Assets Current Assets: Cash and cash equivalents $ 2,146,043 $ 1,092,815 Accounts receivable, net of allowances of $56,827 and $41,236 as of 752,393 523,852 December 31, 2021 and 2020, respectively Inventories 50,276 53,895 Prepaid expenses and other current assets 105,795 27,078 Total current assets 3,054,507 1,697,640 Property and equipment, net 177,567 155,197 Operating lease right-of-use assets 345,660 266,197 Intangible assets, net 84,126 62,181 Goodwill 161,519 73,058 Other non-current assets 258,766 16,269 Total Assets $ 4,082,145 $ 2,270,542 Liabilities and Stockholders’ Equity Current Liabilities: Accounts payable $ 124,921 $ 112,314 Accrued liabilities 549,055 347,668 Current portion of long-term debt 9,883 4,874 Deferred revenue, current portion 45,760 55,465 Total current liabilities 729,619 520,321 Long-term debt, non-current portion 79,985 89,868 Deferred revenue, non-current portion 28,726 21,283 Operating lease liability, non-current portion 394,724 307,936 Other long-term liabilities 82,485 3,119 Total Liabilities 1,315,539 942,527 Commitments and contingencies (Note 12) 0 0 Stockholders’ Equity: Common stock, $0.0001 par value; 14 13 1,150,000 (Class A - 1,000,000 and Class B - 150,000) shares authorized as of December 31, 2021 and 2020; 135,137 (Class A - 118,767 and Class B - 16,370) shares and 128,004 (Class A - 110,645 and Class B - 17,359) shares issued and outstanding as of December 31, 2021 and 2020, respectively Additional paid-in capital 2,856,572 1,660,379 Accumulated other comprehensive income 41 29 Accumulated deficit (90,021) (332,406) Total stockholders’ equity 2,766,606 1,328,015 Total Liabilities and Stockholders’ Equity $ 4,082,145 $ 2,270,542 Years Ended December 31, 2021 2020 2019 Net Revenue: Platform $ 2,284,925 $ 1,267,744 $ 740,776 Player 479,659 510,644 388,145 Total net revenue 2,764,584 1,778,388 1,128,921 Cost of Revenue: Platform 823,924 503,177 262,655 Player 532,060 466,992 371,042 Total cost of revenue 1,355,984 970,169 633,697 Gross Profit (Loss): Platform 1,461,001 764,567 478,121 Player (52,401) 43,652 17,103 Total gross profit 1,408,600 808,219 495,224 Operating Expenses: Research and development 461,602 355,784 265,011 Sales and marketing 455,601 299,457 178,855 General and administrative 256,297 173,231 116,417 Total operating expenses 1,173,500 828,472 560,283 Income (Loss) from Operations 235,100 (20,253) (65,059) Other Income (Expense), Net: Interest expense (2,980) (3,432) (2,366) Other income (expense), net 4,467 5,233 6,506 Total other income (expense), net 1,487 1,801 4,140 Income (Loss) Before Income Taxes 236,587 (18,452) (60,919) Income tax benefit (5,798) (945) (982) Net Income (Loss) $ 242,385 $ (17,507) $ (59,937) Net income (loss) per share — basic $ 1.83 $ (0.14) $ (0.52) Net income (loss) per share — diluted $ 1.71 $ (0.14) $ (0.52) Weighted-average common shares outstanding — basic 132,710 123,978 115,218 Weighted-average common shares outstanding — diluted 141,668 123,978 115,218 , INC.LOSS Years Ended December 31, 2021 2020 2019 Net Income (Loss) $ 242,385 $ (17,507) $ (59,937) Other comprehensive gain, net of tax: Unrealized gain on short-term investments, net of tax — — 17 Foreign currency translation adjustment 12 — 29 Other comprehensive gain, net of tax 12 — 46 Comprehensive Net Income (Loss) $ 242,397 $ (17,507) $ (59,891) CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)(in(in thousands)Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity Shares Amount Balance-December 31, 2018 109,770 $ 11 $ 498,553 $ (17) $ (253,896) $ 244,651 Vesting of early exercised stock options — — 86 — — 86 Share repurchases (2) — — — — — Issuance of common stock pursuant to equity incentive plans 6,169 1 28,181 — — 28,182 Issuance of common stock in connection with at-the-market offerings, net of issuance costs of $6,400 3,389 — 330,539 — — 330,539 Issuance of common stock in connection with acquisition 571 — 69,684 — — 69,684 Stock-based compensation expense — — 85,175 — — 85,175 Unrealized gain on short-term investments — — — 17 — 17 Foreign currency translation adjustment — — — 29 — 29 Net loss — — — — (59,937) (59,937) Balance-December 31, 2019 119,897 12 1,012,218 29 (313,833) 698,426 Vesting of early exercised stock options — — 38 — — 38 Issuance of common stock pursuant to equity incentive plans 4,107 1 16,805 — — 16,806 Issuance of common stock in connection with at-the-market offering, net of issuance costs of $6,800 4,000 — 497,242 — — 497,242 Stock-based compensation expense — — 134,076 — — 134,076 Adoption of ASU 2016-13 — — — — (1,066) (1,066) Net loss — — — — (17,507) (17,507) Balance-December 31, 2020 128,004 13 1,660,379 29 (332,406) 1,328,015 Vesting of early exercised stock options — — 4 — — 4 Issuance of common stock pursuant to equity incentive plans 4,496 1 18,531 — — 18,532 Issuance of common stock in connection with at-the-market offering, net of issuance costs of $10,400 2,637 — 989,615 — — 989,615 Stock-based compensation expense — — 188,043 — — 188,043 Foreign currency translation adjustment — — — 12 — 12 Net income — — — — 242,385 242,385 Balance-December 31, 2021 135,137 $ 14 $ 2,856,572 $ 41 $ (90,021) $ 2,766,606 Years Ended December 31, 2021 2020 2019 Cash flows from operating activities: Net income (loss) $ 242,385 $ (17,507) $ (59,937) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 42,621 36,206 15,669 Stock-based compensation expense 187,532 134,076 85,175 Amortization of right-of-use assets 31,024 28,743 22,328 Amortization of content assets 95,570 22,392 2,914 Provision for (recoveries of) doubtful accounts (904) 3,801 704 Other items, net (101) 524 1,101 Changes in operating assets and liabilities: Accounts receivable (221,768) (196,046) (110,225) Inventories 3,619 (4,181) (14,129) Prepaid expenses and other current assets (67,240) (3,450) (9,934) Deferred cost of revenue — — 1,143 Other non-current assets (102,957) (1,128) (3,060) Accounts payable 8,428 6,410 9,409 Accrued liabilities 38,279 103,218 74,512 Operating lease liabilities (20,083) 12,999 11,658 Other long-term liabilities (1,100) 618 (3,024) Deferred revenue (7,224) 21,517 (10,597) Net cash provided by operating activities 228,081 148,192 13,707 Cash flows from investing activities: Purchase of property and equipment (40,041) (82,382) (77,180) Purchase of business, net of cash acquired (136,778) — (68,132) Proceeds from escrows associated with acquisition — 1,058 — Purchase of intangible assets — — (7,428) Purchases of short-term investments — — (12,365) Sales/maturities of short-term investments — — 54,810 Net cash used in investing activities (176,819) (81,324) (110,295) Cash flows from financing activities: Proceeds from borrowings, net of issuance costs — 69,325 99,608 Repayments of borrowings (5,000) (74,325) — Proceeds from equity issued under incentive plans 18,532 16,806 28,181 Proceeds from equity issued under at-the-market offerings, net of offering costs 989,615 497,242 330,539 Net cash provided by financing activities 1,003,147 509,048 458,328 Net increase in cash, cash equivalents and restricted cash 1,054,409 575,916 361,740 Effect of exchange rate changes on cash, cash equivalents and restricted cash 12 — 29 Cash, cash equivalents and restricted cash —Beginning of period 1,093,249 517,333 155,564 Cash, cash equivalents and restricted cash —End of period $ 2,147,670 $ 1,093,249 $ 517,333 Cash, cash equivalents and restricted cash at end of period: Cash and cash equivalents 2,146,043 1,092,815 515,479 Restricted cash, current — 434 1,854 Restricted cash, non-current 1,627 — — Cash, cash equivalents and restricted cash —End of period $ 2,147,670 $ 1,093,249 $ 517,333 Years Ended December 31, 2021 2020 2019 Supplemental disclosures of cash flow information: Cash paid for interest $ 2,578 $ 3,470 $ 3,095 Cash paid for income taxes $ 1,363 $ 1,014 $ 759 Supplemental disclosures of non-cash investing and financing activities: Non-cash consideration for business combination $ 21,400 $ — $ — Services to be received as part of a business combination $ 6,500 $ — $ — Issuance of common stock for business combinations $ — $ — $ 69,684 Unpaid portion of property and equipment purchases $ 3,073 $ 1,242 $ 10,762 Unpaid portion of acquisition related expenses $ — $ — $ 2,190 Unpaid portion of purchased intangibles $ — $ — $ 400 Unpaid portion of at-the-market offering costs $ — $ — $ 144 Company’s TV streaming platform allows users to easily discover and access a wide variety of movies and TV episodes, as well as live sports, music, news and more. The Company operates in two2 reportable segments and generates platform revenue throughfrom the sale of digital advertising and related services including the OneView ad platform, content distribution services (such as subscription and transaction revenue shares, media and entertainment promotional spending, the sale of Premium Subscriptions, and the sale of branded channel buttons on remote controls), and licensing arrangements with service operators and TV brands and player revenue from the sale of streaming players advertising, subscription and transaction revenue sharing, as well as through licensing arrangements with TV brands and cable, satellite, and telecommunication service operators, or service operators.Initial Public OfferingOn October 2, 2017, the Company completed its initial public offering, or IPO, of Class A common stock, in which it sold 10.4 million shares, including 1.4 million shares pursuant to the underwriters’ over-allotment option. The shares were sold at an IPO price of $14.00 per share for net proceeds of $134.8 million, after deducting underwriting discounts and commissions of $10.1 million. Additionally, offering costs incurred by the Company were $3.1 million. Upon the closing of the Company’s IPO, all outstanding shares of its convertible preferred stock automatically converted into 80.8 million shares of Class B common stock and all outstanding convertible preferred stock warrants automatically converted to Class B common stock warrants on a one-for-one basis. Following the IPO, we have two classes of authorized common stock – Class A common stock and Class B common stock. Class A common stock entitles holders to one vote per share, and Class B common stock entitles holders to 10 votes per share. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESor (“U.S. GAAP.GAAP”). All intercompany accounts and transactions have been eliminated in consolidation.FiscalIn 2017, PresentationCompany changed the fiscal year-endconsolidated balance sheets and notes to match the calendar year-end. Priorconsolidated financial statements have been reclassified to 2017, the Company’s fiscal year was the 52- or 53-weekconform to current period that ended on the last Saturday of December. Fiscal year 2016 ended on December 31, 2016 and spanned 53 weeks.and liabilities, and related disclosures at the date of the financial statements, as well as the reported amounts ofnet revenue, and expenses during the periods presented.expenses. Significant items subject to such estimates include and assumptions include:recognition for multiple element arrangements, determinationrecognition: determining the nature and timing of satisfaction of performance obligations, variable consideration, determining the stand-alone selling prices of performance obligations, gross versus net revenue reporting,recognition, and evaluation of customer versus vendor relationship,relationships;return reserves, customer incentive programs, inventory valuation, returns and sales incentives; andassets, the recognition and disclosure of contingent liabilities and stock-based compensation. assets.estimates.estimates and assumptions.loss includes unrealized losses on the Company’s short-term investmentsincome for the year ended December 31, 2018. Income taxes on the unrealized2021 includes foreign currency translation adjustments. Comprehensive loss are not material for the year ended December 31, 2018. The Company had no short-term investments during the years ended December 31, 2017 and 2016. As a result, comprehensive loss wasis equal to the net loss for the yearsyear ended December 31, 20172020. Comprehensive loss for the year ended December 31, 2019 includes unrealized gains on the Company’s short-term investments and 2016.the Company’sits foreign subsidiaries is the U.S. dollar.subsidiaries. Monetary assets and liabilities of these subsidiaries are remeasured into U.S. dollars from the local currency at rates in effect at period-end and nonmonetarynon-monetary assets and liabilities are remeasured at historical rates. RevenuesRevenue and expenses are remeasured at average exchange rates in effect during each period. Foreign currency gains or losses from re-measurement and transaction gains or losses are recorded as otherOther income (expense), net in the consolidated statements of operations. During the year ended December 31, 2018, theThe Company recorded a foreign currency loss of $0.5 million. During$1.2 million, gain of $1.3 million, and loss of $0.2 million during the yearyears ended December 31, 2017,2021, 2020, and 2019, respectively.recordedrecords translation of their assets and liabilities into U.S. dollars at the balance sheet dates as translation adjustments and includes them as a foreign currency gaincomponent of $0.1 million. DuringAccumulated other comprehensive income (loss).year ended December 31, 2016, the Company recorded a foreign currency lossdate of $0.4 million.ConcentrationsFinancial instruments, which potentially subject the Companypurchase to concentrations of credit risk, consist principallybe cash equivalents. NaN financial institutions managed 30% and 27% of cash and cash equivalents short-term investments and accounts receivable. Asas of December 31, 20182021 and 2017, 97%46% and 95%26% as of the Company’s cash, cash equivalents balances were managed by one financial institution. December 31, 2020.customersales incentives, doubtful accounts, and doubtful accounts.other miscellaneous allowances. The Company performs ongoing credit evaluations of its customers and maintainsto determine allowances for potential credit losses.Customers accounting for 10% or more of the Company’s net revenue were as follows:Customers accounting for 10% or more of the Company’s accounts receivable were as follows:Short-Term Investmentsinvestments in highly liquid instruments purchased with an original maturity of 90 days or lesshistorical experience, ongoing promotional activities, historical claim rates, and other factors to be cash equivalents. The Company’s short-term investmentsdetermine the allowances for sales returns and sales incentives.corporate bonds, commercial paper and U.S. Government agency securities. These investments are held in the custodyfollowing activities (in thousands): Years Ended December 31, 2021 2020 2019 Beginning balance $ 5,912 $ 6,550 $ 7,335 Add: Charged to revenue 16,181 14,594 15,541 Less: Utilization of sales return reserve (16,078) (15,232) (16,326) Ending balance $ 6,015 $ 5,912 $ 6,550 one major financial institution. Asthe following activities (in thousands): Years Ended December 31, 2021 2020 2019 Beginning balance $ 30,838 $ 19,476 $ 13,750 Add: Charged to revenue 90,530 68,315 65,676 Less: Utilization of sales incentive reserve (72,957) (56,953) (59,950) Ending balance $ 48,411 $ 30,838 $ 19,476 Years Ended December 31, 2021 2020 2019 Beginning balance $ 4,181 $ 1,140 $ 686 Impact of adoption of ASU 2016-13 — 1,066 — Adjusted beginning balance $ 4,181 $ 2,206 $ 686 Provision for (recoveries of) doubtful accounts (904) 3,801 704 Adjustments for recovery and write-off (1,119) (1,826) (250) Ending balance $ 2,158 $ 4,181 $ 1,140 2018,2021. Customer H accounted for 11% of the short-term investments wereaccounts receivable, net balance as of December 31, 2020.available-for-sale and werea liability is recognized at fair value as of the acquisition date with subsequent fair value adjustments recorded in the consolidated balance sheetstatements of operations.net unrealized gainsfinite lives for impairment when events or losses reported as a separate componentchanges in business circumstances indicate that the carrying amount of accumulated other comprehensive income (loss), netthe asset or asset group may not be fully recoverable or that the useful lives of tax.charge if a decline in the fair value of its investments is considered to be other-than-temporary. The Company has determined that gross unrealized lossesloss based on short-term investments at December 31, 2018 were temporary in nature because each investment meets the Company’s credit quality requirements and the Company has the ability and intent to hold these investments until they recover their unrealized losses.Goodwill, Purchased Intangible Assets and Impairment AssessmentGoodwill represents the excess of the purchase pricecarrying amount over the fair value of the asset group.acquiredin any periods reported. The impairments of operating right-of-use assets during the years ended December 31, 2021, 2020, and liabilities assumed, if any, in2019 were not material.business combination.unit, referred to as a film group. The film group is evaluated for impairment whenever an event occurs, or circumstances change, indicating the fair value is lessits goodwill for impairment annually, as ofvarious qualitative factors and indicators to assess whether the beginning of the fourth quarter, and whenever events or changes in circumstances indicate that impairment may exist.film group is impaired. The Company did not recognize any impairment of goodwillcontent assets in any periods reported.years ended December 31, 2018consolidated statements of operations. The as-invoiced practical expedient is applied when the amount of consideration the Company has a right to invoice corresponds directly with the value to the customer of the entity’s performance completed to date.2017.Purchased intangible assets consistServicesdeveloped technology. Purchased intangible assetsdiscretion in establishing pricing. Advertising arrangements comprised of multiple performance obligations are recordedrecognized either at a point in time or over time depending on the nature of the distinct performance obligation.datecontractual arrangement and recognizes that in Cost of acquisitionrevenue, platform.amortizedupgrades, to TV brands and service operators. The licensing revenue is recognized at a point in time, when the Company makes the intellectual property available and the control transfers to the customer. The revenue allocated to unspecified upgrades and updates is recognized on a time elapsed basis, by day, over their estimated useful lives following the patternservice period. Professional services revenue is recognized as services are provided or accepted. Hosting fees are recognized on a time elapsed basis, by day, over the service period.which the economic benefitsU.S. including brick and mortar and online retailers, as well as through the Company’s website. Player revenue primarily consists of the assets will be consumed, generally straight-line.hardware, embedded software, and unspecified upgrades and updates on a when and if-available basis. The carrying amounts of our purchased intangible assets are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than originally estimated.Impairment of Long-Lived AssetsThe Company’s long-lived assets include propertyhardware and equipment and other noncurrent assets and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recovered. Recoverability of assets is measured first by comparing their carrying amounts to their future undiscounted net cash flows. If such assetsembedded software are considered as one performance obligation and revenue is recognized at a point in time when the control transfers to be impaired, the impairmentcustomer. Unspecified upgrades and updates are available to be recognized equalscustomers on a when-and-if available basis. The Company records the amount by which the carryingallocated value of the asset exceeds its fair market value. unspecified upgrades and updates as deferred revenue and recognizes it as player revenue ratably on a time elapsed basis over the estimated economic life of the associated players products.recorded $0.4 milliondetermines if an arrangement contains a lease at its inception. Operating leases are included in impairment duringoperating lease right-of-use (“ROU”) assets, accrued liabilities, and operating lease liability in our consolidated balance sheets. ROU assets represent the year ended December 31, 2018 relatingCompany’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets thatand liabilities are no longerrecognized at commencement date based on the present value of lease payments over the lease term. As the rate implicit in use. No impairment was recorded during the year ended December 31, 2017.statements on a recurring basis.statements. The carrying amounts reported in the consolidated financial statements for cash and cash equivalents, short-term investments, accounts receivable, accounts payable, and accrued liabilities approximate their fair values due to their short-term nature.The carrying amount of debt approximates fair value due to its variable interest rates.marketnet realizable value with cost determined on a first-in, first-out basis and market based on net realizable value. Ifbasis. Provisions are made if the cost of the inventories exceeds their net realizable value, provisions are made currently for the difference between the cost and the market value. The Company evaluates inventory levels and purchase commitments for excess and obsolete products, based on management’s assessment of future demand and market conditions.is generally range from five to ten years.Website and Internal-Use Softwarewebsite and internal-use software. The Company expenses all costsCosts that relate to the planning and post-implementation phases of development are expensed as incurred. The Company capitalizes subsequent costsCosts are capitalized when preliminary efforts are successfully completed, management has authorized and committed to funding the project, funding, and it is probable that the project will be completed and will be used as intended. Costs incurred for enhancements that are expected to result in additional material functionality are capitalized. During the2018, 20172021, 2020, and 2016,2019, the Company capitalized website and internal-use software development costs of $1.0$0.5 million, $2.6$2.2 million, and $1.8$0.1 million, respectively.anthe estimated useful life of the asset, which is generally two to three years, beginning when the asset is ready for its intended use. During the years ended December 31, 2018, 20172021, 2020, and 2016,2019, the Company amortized expenses of $2.0$1.0 million, $1.1$0.5 million, and $0.7$1.6 million, respectively.Content Licensing FeesThe Company licenses content for viewing on The Roku Channel. The licensing arrangements can be for a fixed fee and/or advertising revenue share with specific windows of content availability. The Company capitalizes the content fees and records a corresponding liability at the gross amount of the liability when the license period begins, the cost of the content is known, and the content is accepted and available for streaming. The Company amortizes licensed content assets into “Cost of Revenue, Platform” over the contractual window of availability.As of December 31, 2018 and 2017, content related expenses that met these requirements were not material. and Deferred Cost of Revenuereflectreflects fees received from licensing and service arrangements, including advertising,in advance that will be recognized as revenue over time or as services are rendered. Deferred revenue balances consist of the amount of player salesrevenue allocated to unspecified upgrades or enhancementsand updates on a when-and-if available basis, licensing and services fees received from service operators and TV brands, and advance payments from advertisers and content publishers. cost of revenue consists mainly of personnel related costs associated with related deferred revenues and is recognized as cost of revenue in the same manner as its respective deferred revenue.Deferred revenue and the associated deferred cost of revenue expected to be realized within one year areis classified as a current liabilities and current assets, respectively,liability and the remaining areis recorded as noncurrent liabilities and noncurrent assets, respectively.salesSales and marketing expense in the consolidated statements of operations. The Company incurred advertising costs of $3.0$35.2 million, $3.4$7.1 million, and $3.9$7.3 million for the years December 31, 2018, 20172021, 2020, and 2016,2019, respectively.stock options and restricted stock units and stock options granted to employees, based on the estimated fair value of the award on the date of grant. For restricted stock units, the grant date fair value is based on the closing market price of the Company’s Class A common stock on the date of grant. The fair value of each stock option granted is estimated using the Black-Scholes option-pricingoption pricing model. The Company accounts for forfeitures as they occur. Stock-based compensation is recognized on a straight-line basis over the requisite vesting period. Foryear ended December 31, 2016, stock-based compensation was recorded netfollowing assumptions:estimated forfeitures using a forfeiture rate based on an analysis of the Company’s actual historical forfeitures.Our Common Stock. The Company adopted new guidance effective January 1, 2017 to recognize forfeitures as they occur.The Company accounts for restricted stock units issued to employees based on the grant date fair value which is determined based onuses the closing market price of theits Class A common stock as reported on The Nasdaq Global Select Market on the date of grant.expenseexpected term of employee stock options represents the weighted-average period that the stock options are expected to remain outstanding. The Company uses the simplified calculation of the expected term, which reflects weighted-average time to vest and the contractual life of the stock options granted, in absence of its own historical exercise data.recognizedderived from an average of the historical volatilities of several peer companies which are similar in size and operational and economic activities.Company’s consolidated statementyields of operationsU.S. Treasury securities with maturities similar to the expected term for each of our stock options.a straight-line basis over the requisite vesting period.its common stock.Net Loss per ShareSince the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of all potential common shares outstanding and potentially dilutive securities would have been anti-dilutive.Adoption of New2018,2021, the Company adopted the guidance issued in Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles and also simplifies areas such as franchise taxes, step-up in tax basis of goodwill, separate entity financial statements, and interim recognition of enactment of tax laws or rate changes. The adoption did not have a material impact on the Company’s consolidated financial statements.2014-09, 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, using the modified retrospective adoption method and recorded a cumulative-effect adjustment to the beginning balance of accumulated deficit of approximately $1.1 million. The measurement of credit losses for newly recognized financial assets and subsequent changes in the allowance for credit losses are recorded in the statements of operations. This impact mainly relates to credit losses recognized on the Company’s doubtful accounts. As the Company did not have any available-for-sale debt securities as of the adoption date, there was no additional impact to accumulated deficit., or new revenue standard, using the modified retrospective method. The Company applied the new revenue standard to all contracts that were not completed as of January 1, 2018. The Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. Comparative information for prior periods has not been restated and continues to be reported under the accounting standards in effect for those periods. Refer to Note 3 for the detail on the impact of adoption.On January 1, 2018, the Company adopted guidance in ASU 2016-16, Income taxes: Intra-Entity Transfers of Assets Other Than Inventory (Topic 740), using the modified retrospective method. The new guidance allows a reporting entity to recognize the tax expenseand measure contract assets and contract liabilities from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. The adoption of this guidance resultedcontracts with customers acquired in a decrease in prepaid expense and other current assets and an increase to the accumulated deficit in amounts that were not material.Recently Issued Accounting Pronouncements Not Yet AdoptedIn February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), related to new accounting and reporting guidelines for leasing arrangements. The guidance requires recognition of right-to-use lease assets and lease liabilities for all leases (with the exception of short-term leases) on the balance sheet of lessees.business combination. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company will adopt this guidance on January 1, 2019 using the optional transition method and will not restate comparative periods. The Company expects adoption of the standard will result in the recognition of lease liabilities for operating leases of approximately $40-$50 million and right-of-use assets of approximately $35-$45 million at January 1, 2019, with no material impacts to its consolidated statements of operations.In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Topic 350), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which requires hosting arrangements that are service contracts to follow the guidance for internal-use software to determine which implementation costs can be capitalized. The guidance is effective either prospectively or retrospectively for fiscal years beginning after December 15, 2019, and2022, including interim reporting periods within those fiscal years, with early adoption permitted. The Company is evaluatingexpects to adopt ASU 2021-08 in the impactfirst quarter of this new guidance on the consolidated financial statements and the related disclosures.In August 2018, the FASB issued ASU 2018-13, Fair Value Measurements (Topic 820), Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This standard removes, modifies, and adds certain disclosure requirements for fair value measurements. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted.2022. The Company is currently in the process of evaluating the effects of the new guidance but does not expect the impact from this standard to be material.On January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (the “new revenue standard”) using the modified retrospective method. The Company applied the new revenue standard to all contractsbelieves that were not completed as of January 1, 2018. The Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those prior periods.Application of practical expedients and exemptionsThe Company reflected the aggregate effect of all modifications that occurred prior to the date of adoption.The Company expensed commissions related to advertising and player sales when incurred because the amortization period is less than one year. Sales commissions are included in “Sales and marketing” expenses in the condensed consolidated statements of operations.Impact on beginning balancesThe cumulative effect of the changes made to the consolidated January 1, 2018 balance sheet for the adoption of the new revenue standard were as follows (in thousands):Revenue recognitionThe Company enters into contracts that may include various combinations of products and services, which are generally both capable of being distinct and distinct in the context of each contract and therefore are accounted for as separate performance obligations.Revenue is recognized when control of promised products or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services. This is achieved by applying the following five-step approach:Identification of the contract, or contracts, with a customerIdentification of the performance obligations in the contractDetermination of the transaction priceAllocation of the transaction price to the performance obligations in the contractRecognition of revenue when, or as, performance obligations are satisfied.Shipping charges billed to customers are included in revenue and the related shipping costs are included in cost of revenue. Revenue is recorded net of taxes collected or accrued. Sales taxes are recorded as current liabilities until remitted to the relevant government authority.The Company doesthis guidance will not have any capitalized costs associated with contract acquisition because most direct contract acquisition costs relate to contracts that are recognized over a period of one year or less.Arrangements with multiple performance obligationsThe Company’s contracts may contain multiple distinct performance obligations. The computed transaction price of each contract is allocated to each performance obligation basedmaterial impact on a relative stand-alone selling price, or SSP. For performance obligations routinely sold separately, the SSP is determined by evaluating such stand-alone sales. For those performance obligations that are not routinely sold separately, the Company maximizes the use of observable inputs and determines SSP based on a market assessment approach, or on an expected cost-plus margin approach.Nature of products and servicesPlatform segment:The Company’s platform segment generates revenue from advertising sales, and content distribution and audience development activities like subscription and transaction based revenue shares, sale of branded channel buttons on remote controls and licensing arrangements with TV brands and service operators.The Company’s advertising revenue is mostly generated through video and display advertising delivered through advertising impressions. The Company enters into advertising arrangements directly with the advertiser or with their agency which purchases advertising on their behalf. Advertising is typically sold on a cost-per-thousand basis as evidenced by an Insertion Order, or IO, that specifies the terms of the arrangement including the type of ad product, pricing, insertion dates, and the number of impressions over a stated period. Revenue is recognized as the number of impressions are delivered. IOs may include multiple performance obligations as they contain distinct advertising products or services. For such arrangements, the Company allocates revenue to each performance obligation based on their relative SSPs. In addition, advertising revenue is also recognized from distinct performance obligations included in distribution arrangements with content publishers.The Company earns revenue shares from content publishers based on user subscriptions activated or billed through the Company’s platform and from purchases or rental of publishers’ media. The Company’s revenue share is generally equal to a fixed percentage of the price charged by the content publisher or a contractual flat fee.The Company sells branded channel buttons on player and TV remote controls that provide one-touch access to a publishers’ content. The Company typically receives a fixed fee per button for each player or TV unit sold over a defined distribution period.The Company licenses its technology and proprietary operating system to TV brands and service operators. Arrangements with TV brands commonly include a license to the Company’s technology and proprietary operating system over a specified term including updates and upgrades. Licensing revenues from TV brands are generated on a flat fee basis or from per unit licensing fees. Arrangements may also include marketing development funds paid to TV brands. Marketing development funds are reflected as a reduction to the estimated transaction price.
financial statements.Arrangements with service operators generally include performance obligations comprised of a license to the technology and proprietary operating system, unspecified upgrades or enhancements, hosting of a branded channel store, and engineering and support services. The Company has determined that the license for the technology and the operating system is one performance obligation. Licensing fees from service operators are mostly generated from unit activations or flat fees and from ongoing maintenance.Nature of performance obligationsRevenue recognitionDigital advertisingDigital advertising is comprised of performance obligations that are recognized either at a point in time or over time depending on the nature of the advertising product.Content distribution servicesThe revenue share from the content publishers included in the estimated transaction price is based on the expected value for which a significant reversal of revenue is not expected to occur. The estimate of the variable consideration is based on the assessment of historical, current, and forecasted performance of the publishers’ content applications. Revenue is recognized on a time elapsed basis, by day, as they are delivered over the contractual distribution term.Branded channel buttonsThe button fees included in the estimated transaction price are based on the expected value for which a significant reversal of revenue is not expected to occur. The estimate of the variable consideration is based on the Company’s assessment of historical, current, and forecasted player and Roku TV volumes. Revenue is recognized on a time elapsed basis, by day, over the distribution term.License of technology and operating systemThe revenue for licensing of technology and operating system is recognized at a point in time, when the control has transferred to the customer, which usually occurs when the Company makes the IP available to the customer.Unspecified upgrades to the IPThe revenue allocated to unspecified upgrades is recognized on a time elapsed basis, by day, over the service period.Hosting servicesHosting fees are recognized on a time elapsed basis, by day, over the service period.Professional servicesProfessional services revenue is recognized as services are provided or accepted.Player segment:The Company sells the majority of its players through retail distribution channels, including brick and mortar and online retailers, and through the Company’s website. The Company’s player revenue includes allowances for returns and sales incentives in the estimated transaction price. These estimates are based on historical experience and anticipated performance.The Company’s player revenue includes two performance obligations:hardware, which includes embedded software, andunspecified upgrades or enhancements on a when-and-if available basis.
3. REVENUEThe Company has determined that its hardware and embedded software be considered as one performance obligation because the customer cannot benefit from the hardware or the embedded software either on its own or together with other resources that are readily available to the customer.Nature of performance obligationsRevenue recognitionPlayersRevenue recognition occurs at a point in time when control has transferred to the customer, which is based on the contractual terms.Unspecified upgrades to the software embedded in the hardwareThe Company initially records the allocated value of the unspecified upgrades as deferred revenue and recognizes it into player revenue ratably on a time elapsed basis, by day, over the estimated economic life of the associated players.Revenue disaggregationrevenues arerevenue is represented by the two2 reportable segments discussed in Note 15. 17.disaggregation is based on the evaluations that are regularly performed by the chief operating decision maker, or CODM, for purposes of allocating resources and evaluating financial performance. The Company’s CODM is its Chief Executive Officer.Transaction price allocated to future performance obligationsAs of December 31, 2018, the Company had $117.0 million of estimated future revenue related to outstanding performance obligations. The Company expects to recognize approximately 76% of this future revenue over the next twelve months and the remainder thereafter through 2024. This estimated future revenue excludes contracts with original durations of one year or less, amounts relating to invoicing practical expedient and variable consideration amounts attributable to royalties related to sales and usage-based revenues. The amount of revenue recognized for the three months ended December 31, 2018 from performance obligations satisfied, or partially satisfied in previous periods is $7.2 million, which mainly relates to platform revenues.Contract balancesContractcontract balances include accounts receivable, contract assets and contract liabilities or deferred revenues. the following (in thousands): As of December 31, 2021 2020 2019 Accounts receivable, net $ 752,393 $ 523,852 $ 332,673 Contract assets (included in Prepaid expenses and other current assets) 46,952 7,431 3,588 Deferred revenue, current portion 45,760 55,465 39,861 Deferred revenue, non-current portion 28,726 21,283 15,370 Total deferred revenue $ 74,486 $ 76,748 $ 55,231 The paymentPayment terms with customerscan vary by customer and contract. Contract assets are created when thediffersmay differ from the timing of invoicing to a customer.customers. Contract asset isassets are created when billinginvoicing occurs subsequent to revenue recognition. Contract assets are transferred to accounts receivable when the rightsright to billinvoice becomes unconditional. The Company’s contract assets are current in nature and are included in “Prepaid expenses and other current assets. Contract assets”. The Company did not have any impairments relating increased by $39.5 million during the year ended December 31, 2021 and by $3.8 million during the year ended December 31, 2020 primarily due to contract assets.Contract liabilities are recorded asan increase in the growth of platform revenue combined with the timing of billing which falls into a subsequent period.primarily relatean increase in the deferral period of player revenue for its unspecified upgrades. Deferred revenue increased by approximately $21.5 million during the year ended December 31, 2020 due to the advance consideration received from customers. Revenue is recognized whenincrease in estimated values of content publisher and licensing partner arrangements and change in the timing of fulfillment of performance obligation is completedobligations of approximately $12.4 million, and delivered or transferhigher growth in the player segment, resulting in a net increase in deferred revenue related to unspecified upgrades and updates of control occurs.The table below reflects the contract balances of the Company (in thousands):20182021 from amounts included in the total deferred revenue at January 1, 2018 was $38.5 million. For the year ended December 31, 2018, $12.4 million related to the delivery of intellectual property that occurred during the quarter ended March 31, 2018 and also resulted in a decrease to contract assets of $2.8 million as of December 31, 2018.Impact of adoption for the year ended December 31, 2018The most significant aspects of adopting the new revenue standard related to the Company’s platform revenues. The removal of vendor-specific objective evidence requirement and the application of variable consideration in the content publisher arrangements resulted in earlier recognition of revenues as compared to periods before adoption.The impact of adoption of the new revenue standard on the condensed consolidated balance sheet as of December 31, 2018 and statements of operations for the year ended December 31, 2018 is reflected in the table below (in thousands):4. business combinationOn September 6, 2017, the Company acquired all of the outstanding shares of a privately held technology company located in Denmark to enhance the Company’s player product offering, for an aggregate purchase price of $3.52020 was $56.2 million. The Company paid $3.0 million of the aggregate purchase price at the time of acquisition and $0.5 millionRevenue recognized during the year ended December 31, 2018. In addition, the Company issued 0.1 million shares of its Class B common stock to two of the founders as part of a continuing services arrangement. The shares are subject to a right of repurchase which lapses over a three year period at varying prices per share. In addition, the Company incurred approximately $0.4 million of costs related to the acquisition which is2020 from amounts included in the generaltotal deferred revenue as of December 31, 2019 was $42.9 million.forin the year ended December 31, 2017.Theconsolidated statements of operations.price allocation includes $1.4consideration, $4.2 million of goodwill and $2.2 million of identifiabledecrease to intangible assets which primarily consist of developed technology, with an expected useful life of approximately four years. Goodwill represents the excessacquired, $4.5 million increase to other long-term liabilities, and $14.7 million increase to goodwill.price over the fair value of the netconsideration to tangible and intangible assets acquired and liabilities assumed, reflecting measurement period adjustments through December 31, 2021, is not expected to be deductible for income tax purposes. based on estimated fair values and is as follows (in thousands):Fair Values Assets acquired Cash and cash equivalents $ 3,057 Prepaid expenses and other current assets 85 Property and equipment, net 584 Intangible assets: Developed technology 11,000 IPR&D technology 7,500 Goodwill 36,790 Operating lease right-of-use assets 1,235 Other non-current assets 1,905 Total assets acquired 62,156 Liabilities assumed Accounts payable and accrued liabilities (1,168) Operating lease liabilities, non-current portion (830) Other long-term liabilities (6,767) Total liabilities assumed (8,765) Total purchase consideration $ 53,391 goodwill in this transactionexcess of the total consideration over the tangible assets, intangible assets, and liabilities assumed is recorded as goodwill. Goodwill is primarily attributable to expected synergies in advertising offerings and cross-selling opportunities. The majority of the goodwill recorded is deductible for tax purposes.workforcefrom Nielsen’s AVA business along with their estimated useful lives, is as follows (in thousands, except years):Estimated Fair Value Estimated Weighted-Average Useful Lives
(in years)Developed technology $ 11,000 5.9 IPR&D technology 7,500 0 Estimated fair value of acquired intangible assets $ 18,500 5.9 Fair Values Assets acquired Cash and cash equivalents $ 7 Accounts receivable 5,830 Prepaid expenses and other current assets 7,310 Property and equipment, net 307 Intangible assets: Tradename 20,000 Customer relationships 700 Goodwill 46,671 Operating lease right-of-use assets 5,498 Other non-current assets 23,487 Total assets acquired 109,810 Liabilities assumed Accounts payable and accrued liabilities (2,747) Deferred revenue, current portion (4,146) Operating lease liabilities, non-current portion (4,262) Deferred revenue, non-current portion (816) Other long-term liabilities (28) Total liabilities assumed (11,999) Total purchase consideration $ 97,811 Estimated Fair Value Estimated Weighted-Average Useful Lives
(in years)Tradename $ 20,000 10.0 Customer relationships 700 4.0 Estimated fair value of acquired intangible assets $ 20,700 9.8 synergies.an expenseplatform revenue of $0.6$18.7 million, cost of revenue, platform, of $11.8 million and $0.2gross profit of $6.9 million in its consolidated statements of operations from the acquisition date to December 31, 2021.Carrying Value Balance as of December 31, 2019 $ 74,116 Adjustments: Dataxu working capital adjustment (1,058) Balance as of December 31, 2020 $ 73,058 Additions: This Old House acquisition 46,671 Nielsen AVA business acquisition 36,790 Other immaterial acquisition 5,000 Balance as of December 31, 2021 $ 161,519 amortization of intangible assetimpairment annually. No impairment was recognized during the years ended December 31, 20182021, 2020, and 2017,2019.As of December 31, 2021 Gross
Carrying
AmountNet
Carrying
AmountWeighted-Average Useful Lives
(in years)Developed technology $ 73,367 $ (25,350) $ 48,017 5.9 Customer relationships 14,100 (7,395) 6,705 4.0 Tradename 20,400 (1,966) 18,434 9.8 Patents 4,076 (606) 3,470 14.0 Intangible assets subject to amortization $ 111,943 $ (35,317) $ 76,626 6.7 IPR&D technology 7,500 — 7,500 Total Intangible assets $ 119,443 $ (35,317) $ 84,126 As of December 31, 2020 Developed technology $ 62,367 $ (13,439) $ 48,928 5.9 Customer relationships 13,400 (3,908) 9,492 4.0 Tradename 400 (400) — 0.5 Patents 4,076 (315) 3,761 14.0 Total Intangible assets $ 80,243 $ (18,062) $ 62,181 6.0 expensesexpense for intangible asset is $0.6 million, $0.5 million and $0.3 millionassets for the next five years ending in December 31, 2019, 2020 and 2021, respectively.thereafter is as follows (in thousands):Year Ending December 31, 2022 $ 17,745 2023 17,066 2024 14,275 2025 12,571 2026 4,074 Thereafter 10,895 Total $ 76,626 Balance sheet components consisted of the following: As of December 31, 2021 2020 Accounts receivable, gross Accounts receivable, gross $ 809,220 $ 565,088 Less: Allowances Less: Allowances Allowance for sales returns 6,015 5,912 Allowance for sales incentives 48,411 30,838 Allowance for doubtful accounts Allowance for doubtful accounts 2,158 4,181 Other allowances 243 305 Total allowances 56,827 41,236 Accounts Receivable, net Accounts Receivable, net $ 752,393 $ 523,852 Allowance for Sales Returns: Allowance for sales returns consist of the following activities (in thousands):Allowance for Sales Incentive: Allowance for sales incentive consisted of the following activities (in thousands): As of December 31, 2021 2020 Computers and equipment $ 38,473 $ 30,859 Leasehold improvements 182,229 144,013 Internal-use software Internal-use software 7,274 6,744 Office equipment and furniture 20,829 19,661 Property and equipment, gross Property and equipment, gross 248,805 201,277 Accumulated depreciation and amortization (71,238) (46,080) Property and Equipment, net $ 177,567 $ 155,197 2018, 20172021, 2020, and 2016 and2019 was $7.8$25.4 million, $5.2$21.7 million, and $5.3$12.8 million, respectively. As of December 31, 2021 2020 Payments due to content publishers $ 165,894 $ 106,576 Accrued cost of revenue 142,014 98,285 Marketing, retail and merchandising costs 47,428 43,645 Operating lease liability, current 37,116 35,647 Content liability, current 70,462 6,165 Other accrued expenses 86,141 57,350 Total Accrued Liabilities $ 549,055 $ 347,668 As of December 31, 2021 2020 Platform, current $ 22,240 $ 27,587 Player, current 23,520 27,878 Total deferred revenue, current 45,760 55,465 Platform, non-current 9,324 9,909 Player, non-current 19,402 11,374 Total deferred revenue, non-current 28,726 21,283 Total Deferred Revenue Total Deferred Revenue $ 74,486 $ 76,748 6. SHORT-TERM INVESTMENTSThe following is a summaryCompany’s short-term investmentsfollowing (in thousands):As of December 31, 2021 2020 Content liability, non-current $ 51,211 $ 1,380 Other long-term liabilities 31,274 1,739 Total Other long-term liabilities $ 82,485 $ 3,119 Tax amounts relatedAs of December 31, 2021 2020 Licensed content, net $ 199,290 $ 7,907 Produced content: Released, less amortization 20,030 — Completed, not released 881 — In production 3,512 — Total produced content, net 24,423 $ — Total Content Assets, net $ 223,713 $ 7,907 unrealized losses are not materialacquire certain content rights. The transaction was accounted for all periods presented.Years Ended December 31, 2021 2020 Licensed content $ 84,133 $ 22,392 Produced content 11,437 — Total amortization costs $ 95,570 $ 22,392 summarizesreflects the maturities ofamortization expense for the Company’s short-term investments by contractual maturitynext three years for content assets, net (in thousands):Year Ending December 31, Licensed content Produced content Total 2022 $ 86,584 $ 4,055 $ 90,639 2023 38,861 4,202 43,063 2024 23,293 3,951 27,244 Total $ 148,738 $ 12,208 $ 160,946 The Company did not have any short-term investments at December 31, 2017.7. As of December 31, 2021 As of December 31, 2020 Fair Value Level 1 Fair Value Level 1 Assets: Cash and cash equivalents: Cash $ 1,130,172 $ 1,130,172 $ 1,021,022 $ 1,021,022 Money market funds 1,015,871 1,015,871 71,793 71,793 Restricted cash, current Restricted cash, current — — 434 434 Restricted cash, non-current Restricted cash, non-current 1,627 1,627 — — Total assets measured and recorded at fair value $ 2,147,670 $ 2,147,670 $ 1,093,249 $ 1,093,249 The Company did not have any cash equivalents or short-term investments at December 31, 2017.minimizeminimizes the use of unobservable inputs in measuring fair value, and to utilizeutilizes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of inputs used to measure fair value are as follows:90 daysthree months or less at the date of purchase to be cash equivalents. The Company measured money market funds of $8.3$1,015.9 million and $71.8 million as cash equivalents as of December 31, 20182021 and 2020, respectively, using Level 1 inputs. The Company did not have any cash equivalents as of December 31, 2017.measured its short-term investments usingdid not have any Level 2 inputs.atas of December 31, 20182021 and 2017. During the years ended December 31, 2017 and 2016, Level 3 instruments consisted of the Company’s convertible preferred stock warrant liability. Pursuant to the Company’s IPO in October 2017, all convertible preferred stock warrants were converted into Class B common stock warrants, which did not require further re-measurements as they were deemed permanent equity. For periods prior to the IPO, the Company’s convertible preferred stock warrant liability was measured at fair value upon issuance and at each reporting date prior to the IPO. The inputs that were used to determine the estimated fair value of the convertible preferred stock warrant liability included the remaining contractual term of the warrants, the risk-free interest rate, the volatility of comparable public companies over the2020.remaining term, and the fair value of underlying shares. The significant unobservable inputs used in the fair value measurement of the convertible preferred stock warrant liability were the fair value of the underlying stock at the valuation date and the estimated term of the warrants.The following table represents the activity of Level 3 instruments (in thousands):*Recognized in the consolidated statements of operations within other income (expense), net.and property plant, and equipment, operating lease right-of-use assets, and content assets are evaluated for impairment and adjusted to fair value using Level 3 inputs, only when impairment is recognized. There were no indicatorsimpairment that required a fair value analysis duringROU assets is limited by the expected lease term. Years Ended December 31, 2021 2020 2019 Operating lease cost (1) $ 46,410 $ 42,127 $ 27,596 Variable lease cost 15,080 12,116 4,928 Net operating lease cost $ 61,490 $ 54,243 $ 32,524 2017. The Company recorded an impairment2021, 2020, and 2019 was not material. Years Ended December 31, 2021 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 51,657 $ 30,664 $ 17,721 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 110,845 $ 12,031 $ 267,048 As of December 31, 2021 2020 Operating lease right-of-use assets $ 345,660 $ 266,197 Included in accounts payable and accrued liabilities: Operating lease liability, current 37,116 35,647 Operating lease liability, non-current 394,724 307,936 Total operating lease liability $ 431,840 $ 343,583 Weighted-average remaining lease term: Operating leases (in years) 8.38 9.05 Weighted-average discount rate: Operating leases 3.98 % 4.60 % $0.4 million for long-lived assets that were no longer in use during the year ended December 31, 2018.8.2021 are as follows (in thousands):Year Ending December 31, Operating Leases 2022 $ 52,636 2023 63,548 2024 62,162 2025 61,649 2026 60,044 Thereafter 218,954 Total future lease payments 518,993 Less: imputed interest (79,073) Less: expected tenant improvement allowance (8,080) Total $ 431,840 Company did not have anyCompany’s outstanding debt as of December 31, 20182021 and 2017. 2020 is as follows (in thousands): As of December 31, 2021 2020 Amount Amount Term Loan A Facility $ 90,000 2.0 % $ 95,000 2.0 % Less: Debt issuance costs (132) (258) Net carrying amount of debt $ 89,868 $ 94,742 Company entered into a new Credit Facility in February 2019. Refercarrying amount of debt approximates fair value due to Note 15, Subsequent Eventits variable interest rates. The interest expense for the details ofyears ended December 31, 2021 and 2020 relating to the new Credit Facility.Line of creditThe Company first entered into a loan and security agreement (the “LSA”) with Silicon Valley Bank, or Bank, in July 2011. The LSA was amended and restated in subsequent periods. The amended and restated loan and security agreement (the “Restated 2014 LSA”) entered into in November 2014 provides advances under a revolving line of credit up to $30.0Agreement is $2.2 million and provides for letters of credit to be issued up to $5.0 million.In June 2017,$2.6 million, respectively.second amendmentCredit Agreement with Morgan Stanley Senior Funding, Inc. (as amended on May 3, 2019, the “Credit Agreement”), which provides for (i) a four-year revolving credit facility in the aggregate principal amount of up to $100.0 million (the “Revolving Credit Facility”), (ii) a four-year delayed draw term loan A facility in the aggregate principal amount of up to $100.0 million (the “Term Loan A Facility”), and (iii) an uncommitted incremental facility, subject to the Restated 2014 LSA. Advances undersatisfaction of certain financial and other conditions, in the second amendment carryamount of up to (v) $50.0 million, plus (w) 1.0x of the Company’s EBITDA for the most recently completed four fiscal quarter period, plus (x) an additional amount at the Company’s discretion, so long as, on a floating per annumpro forma basis at the time of incurrence, the Company’s secured leverage ratio does not exceed 1.50 to 1.00, plus (y) voluntary prepayments of the Revolving Credit Facility and Term Loan A Facility to the extent accompanied by concurrent reductions to the applicable Credit Facility (together with the Revolving Credit Facility and the Term Loan A Facility, collectively, the “Credit Facility”).atthe adjusted one-month LIBOR rate plus an applicable margin of 1.75% based on the Company’s option, (1)secured leverage ratio. In May 2020, the prime rate or (2) LIBOR plus 2.75%, orCompany repaid the prime rate plus 1% dependingoutstanding balance on certain ratios. The amendment further changed the financial covenant to maintain a current ratio (calculated as current assets, divided by current liabilities less deferred revenue) greater than orRevolving Credit Facility.1.25.(i) on or prior to December 31, 2021, 1.25% of the drawn principal amount of the Term Loan Facility or $1.25 million and (ii) thereafter, 2.50% of the drawn principal amount of the Term Loan Facility or $2.5 million, with the remaining balance payable on the maturity date of the Term Loan A Facility in February 2023. The revolving linecredit terminates on June 30, 2019the Closing Date in February 2023, at which time all outstanding advances becomesbalances of the Revolving Credit Facility are due to be repaid.payable. $30.8 million as of December 31, 2021 and 2020, respectively.2018 and 2017,2021, the Company was in compliance with all of the covenants inof the amended Restated 2014 LSA.On July 18, 2018, the Company entered into a third amendment to the Restated 2014 LSA. The amendment increased the amount by which the Company can utilize its line of credit to support the issuances of letters of credits from $5.0 million to $30.0 million.did not have any borrowings outstanding on the revolving line of credit as of December 31, 2018 and 2017. The Company had $26.4 million and $1.5 million outstanding in letters of credit as of December 31, 2018 and 2017, respectively. The interest rate on the line of credit was 5.25% and 4.31% as of December 31, 2018 and 2017, respectively.In June 2017, the Company entered into a subordinated loan agreement, or 2017 Agreement, with the Bank. The 2017 Agreement provided for a term loan borrowing of $40.0 million, with a minimum of $25.0 million to be initially drawn at the close of the agreement with the remaining amount available for a 24 month period, to be drawn in no less than $5.0 million increments. Advances under the term loan incur a facility fee equal to 1% of the drawn borrowings, in addition to interest payments at an interest rate equal to, at the Company’s option, (1) the prime rate plus 3.5% or (2) LIBOR plus 6.5%, subject to a 1% LIBOR floor. Additionally, the borrowings incur payment in kind interest fees equal to 2.5%, accruing to the unpaid borrowings balance, compounded monthly. Payment in kind interest may be settled in cash, at the Company’s election, during the term or at maturity. The Company is also obligated to pay final payment fees ranging from 1% to 4% depending on the timing of the payment. On October 31, 2017 the Company repaid the entire amount outstanding, and subsequently terminated the 2017 Agreement. In connection with the repayment, the Company recorded a loss of $2.3 million on extinguishment of debt in the year ended December 31, 2017.In connection with the 2017 Agreement the Company issued 0.4 million warrants to purchase shares of Series H convertible preferred stock, with an exercise price of $9.17340. The warrants were exercisable up to ten years from the date of issuance. Upon repayment of the amounts borrowed and the subsequent termination of the 2017 Agreement, the Company cancelled 0.1 million warrants that were contingent on future borrowings. The warrant holders exercised 0.1 million warrants during the year ended December 31, 2017 and the remaining 0.2 million warrants during the three months ended March 31, 2018. There were no outstanding warrants as of December 31, 2018.9. STOCKHOLDERS’ EQUITY (DEFICIT)Convertible Preferred StockUpon the closing of the Company’s IPO in 2017, all outstanding shares of its convertible preferred stock automatically converted into 80.8 million shares of Class B common stock on a one-to-one basis.On October 2, 2017, the Company filed an Amended and Restated Certificate of Incorporation, which authorized the issuancehas 10 million shares of undesignated preferred stock authorized but not issued with rights and preferences determined by the Company’s Board of Directors at the time of issuance of such shares. As of December 31, 20182021 and 2017,2020, there were no shares of preferred stock issued and outstanding.Company’s Amended and Restated Certificate of Incorporation filed on OctoberCompany has 2 2017, established two classes of authorized common stock, Class A common stock and Class B common stock. All shares of common stock outstanding immediately prior to the IPO, including shares of common stock issued upon the conversion of the convertible preferred stock, were converted into an equivalent number of shares of Class B common stock.one1 vote for each share of Class A common stock held on all matters submitted to a vote of stockholders and holders of Class B common stock are entitled to ten10 votes for each share of Class B common stock held on all matters submitted to a vote of stockholders. Except with respect to voting, the rights of the holders of Class A and Class B common stock are identical. Shares of Class B common stock are voluntarily convertible into shares of Class A common stock at the option of the holder and are generally automatically converted into shares of the Company'sCompany’s Class A common stock upon sale or transfer. Shares issued in connection with exercises of stock options, vesting of restricted stock units, or shares purchased under the employee stock purchase plan are generally automatically converted into shares of the Company’s Class A common stock. Shares issued in connectionan exerciseMorgan Stanley & Co. LLC, Citigroup Global Markets Inc., and Evercore Group L.L.C., as its sales agents, pursuant to which the Company could offer and sell from time-to-time shares of theits Class A common stock warrants are convertedfor aggregate gross proceeds of up to $1,000.0 million. In March 2021, the Company sold approximately 2.6 million shares of Class A common stock at an average selling price of $379.26 per share, for aggregate gross proceeds of $1,000.0 million and incurred issuance costs of $10.4 million.BA common stock.2018,2021, the Company had reserved shares ofCompany’s common stock reserved for issuance in the future is as follows (in thousands):As of December 31, 20182021 20,0579,460 grantissuance under equity incentive plan13,2395,089 27,011 Total reserved shares of common stock 33,29641,560 became effective in February 2008. The 2008 Plan allowed for the grant of incentive stock options to our employees and any of our subsidiary corporations’ employees and for the grant of non-statutory stock options and restricted stock awards to our employees, officers, directors and consultants. Options granted under the 2008 Plan were granted at a price per share equivalent to the fair market value on the date of grant. Recipients of option grants under the 2008 Plan who possess more than 10% of the combined voting power of the Company (a “10% Shareholder”) are subject to certain limitations, and incentive stock options granted to such recipients were at a price no less than 110% of the fair market value at the date of grant. Options under the 2008 Plan generally vest over four years and have a term of 10 years.Upon the closing of the Company’s IPO, the Company’s Board of Directors adopted the 2017 Equity Incentive Plan (the “2017 Plan”). No further shares would be issued under the 2008 Plan at the time the 2017 Plan became effective. The 2017 Plan became effective September 2017 in September 2017.connection with the Company’s initial public offering (“IPO”). No additional equity grants have been made pursuant to the 2008 Plan subsequent to the IPO. The 2017 Plan provides for the grant of incentive stock options to ourthe Company’s employees and for the grant of non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards, and other forms of equity compensation to ourthe Company’s employees, directors, and consultants. Optionsvestare granted at a price per share equivalent to the fair market value on the date of grant. Recipients of option grants who possess more than 10% of the combined voting power of the Company are subject to certain limitations, and incentive stock options granted to such recipients are at a price no less than 110% of the fair market value at the date of grant. Balance, December 31, 2020 4,355 $ 92.91 Awarded 983 348.62 Released (1,655) 81.95 Forfeited (397) 135.44 Balance, December 31, 2021 - Outstanding 3,286 $ 169.76 four years and have a termweighted-average period of 10approximately 2.08 years. Weighted-Average Remaining Contractual Life (Years) Balance, December 31, 2020 Balance, December 31, 2020 8,733 $ 26.19 5.7 — Granted 320 356.55 — $ 139.76 Exercised (2,841) 6.51 — — Forfeited and expired (38) 104.47 — — Balance, December 31, 2021 - Outstanding Balance, December 31, 2021 - Outstanding 6,174 $ 51.87 5.8 — $ 1,129,748 Balance, December 31, 2021- Exercisable Balance, December 31, 2021- Exercisable 4,548 $ 14.73 4.9 — $ 973,186 weighted average grant-dateweighted-average grant date fair value of options granted during the years ended December 31, 2018, 20172021, 2020, and 20162019 was $22.96, $3.73$139.76, $54.39, and $2.71,$39.23, respectively. total intrinsic value offor stock options exercised in the years ended December 31, 2018, 20172021, 2020, and 20162019 was $445.9$997.6 million $20.4$470.8 million, and $0.4$474.2 million, respectively, andrespectively. Intrinsic value represents the difference between the fair valuevalues of the Company’s common stock at the dates of exercise and the stock options’ exercise price on the date of the options.Early Exercise of Stock OptionsThe 2008 Plan allows employees to exercise options granted prior to vesting, if approved by the Company’s Board of Directors. The unvested shares are subject to the Company’s repurchase right at the original purchase price. The proceeds from the early exercise of stock options are initially recorded as an accrued liability and reclassified to stockholders’ equity as the Company’s repurchase right lapses. The number of unvested shares subject to repurchase that were outstanding asgrant.2018 and 2017 were not material.award of equity instrumentsaward based on the grant date fair value of the award. Generally, stock options granted to employees under the 2008 Plan vest 25% after one year and then 1/48th48th monthly thereafter, and restricted stock units issued generally vest 25% after one year and then 1/16th quarterly thereafter and have a term of ten years.included in the accompanying Consolidated Statements of Operations for the years ended December 31, 2018, 20172021, 2020, and 20162019 (in thousands): Years Ended December 31, 2021 2020 2019 Cost of revenue, platform Cost of revenue, platform $ 827 $ 847 $ 342 Cost of revenue, player Cost of revenue, player 2,035 1,407 1,072 Research and development 77,770 58,412 40,036 Sales and marketing 63,503 42,846 24,179 General and administrative 43,397 30,564 19,546 Total stock-based compensation $ 187,532 $ 134,076 $ 85,175 This valuation model for stock-based compensation expense requires the Company to make certain assumptions and judgments about the variables used in the calculation, including the expected term, the expected volatility of the Company’s common stock, an assumed risk-free interest rate, and expected dividends. In addition to these assumptions, the Company also estimated a forfeiture rate of unvested stockoptions to calculate the stock-based compensation expense prior to January 1, 2017. Beginning January 1, 2017, the Company began recognizing forfeitures as they occur with the adoption of the new guidance related to accounting for stock-based payment award transactions. The impact of the change was not material to the financial statements.Fair Value of Common StockPrior to our IPO, the fair value of the common stock underlying our stock options was determined by our Board of Directors. The valuations of our common stock were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Our Board of Directors, with input from management, exercised significant judgment and considered numerous objective and subjective factors to determine the fair value of our common stock at each grant date, including but not limited to the prices, rights, preferences and privileges of our preferred stock relative to the common stock, our operating and financial performance, current business conditions and projections, our stage of development, likelihood of achieving a liquidity event for the shares of common stock underlying these stock options, such as an IPO or sale of our company, given prevailing market conditions, any adjustment necessary to recognize a lack of marketability of the common stock underlying the granted options, the market performance of comparable publicly-traded companies, the U.S. and global capital market conditions.Subsequent to our IPO, we use the market closing price for our Class A common stock as reported on The Nasdaq Global Select Market on the date of grant. The Company uses the straight-line method for expense recognition.Expected TermThe Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding and is determined based on the simplified method as described in ASC Topic 718-10-S99-1, SEC Materials SAB Topic 14, Share-Based Payment.Expected VolatilityThe Company’s volatility factor is estimated using several comparable public company volatilities for similar option terms.Expected DividendsThe Company has never paid cash dividends and has no present intention to pay cash dividends in the future, and as a result, the expected dividends are $0.Risk-Free Interest RateThe Company bases the risk-free interest rate on the implied yield currently available on U.S. Treasury zero coupon issues with a remaining term equivalent to the estimated life of the stock-based awards. Where the expected term of the Company’s stock-based awards does not correspond with the term for which an interest rate is quoted, the Company performs a straight-line interpolation to determine the rate from the available term maturities.stock-based awardsstock options granted during the years ended December 31, 2018, 20172021, 2020, and 20162019 are as follows: Years Ended December 31, 2021 2020 2019 Expected term (in years) 5.0 - 6.8 5.0 - 6.7 5.0 - 6.7 Risk-free interest rate 0.36 - 1.20% 0.22 - 1.67% 1.35 - 2.56% Expected volatility 38 - 39% 36 - 39% 35 - 36% Dividend rate Dividend rate — — — As of December 31, 2018, the Company had $38.5 million of unrecognized stock compensation expense related to unvested stock options that is expected to be recognized over a weighted-average period of approximately 2.11 years.Stock Option RepricingIn November 2016, the Company’s Board of Directors approved a common stock option repricing program whereby previously granted and unexercised options held by current employees with exercise prices above $5.64 per share were repriced on a one-for-one basis to $5.64 per share which represented the fair value of the Company’s common stock as of the date of the repricing. There was no other modification to the vesting schedule of the previously issued option. As a result, 5.1 million unexercised options originally granted to purchase common stock at prices ranging from $5.70 to $7.02 per share were repriced under this program.We treated the repricing as a modification of the original awards and calculated additional compensation costs for the difference between the fair value of the modified award and the fair value of the original award on the modification date. The repricing resulted in incremental stock-based compensation of $1.0 million. Expense related to vested shares of $0.1 million was expensed on the repricing date and the remaining $0.9 million related to unvested shares is being amortized over the remaining vesting period of such options.Restricted Stock UnitsPursuant to the 2017 Plan, the Company issued restricted stock units to employees. Restricted stock unit activity for the year ended December 31, 2018 is as follows (in thousands, except per share data):The grant-date fair value of restricted stock units granted during the year ended December 31, 2018 was $184.7 million. Total unrecognized compensation cost related to restricted stock units awarded to employees was $167.5 million, which the Company expects to recognize over 3.29 years.Common Stock WarrantsIn July 2017 the Company issued 0.4 million shares of Class B common stock upon exercise of 0.4 million Class B common stock warrants issued in 2009.Convertible Preferred Stock WarrantsImmediately prior to the Company’s IPO, warrants to purchase 2.2 million shares of convertible preferred stock were outstanding. The warrants were automatically converted into warrants to purchase 2.2 million shares of Class B common stock upon the closing of the IPO.Prior to the IPO, the fair value of the convertible preferred stock warrants was recorded as a liability and was remeasured at the end of each balance sheet date using the Black-Scholes option pricing model. The Company revalued the convertible preferred stock warrants as of the completion of the IPO and reclassified the outstanding preferred stock warrant liability balance to additional paid-in capital with no further re-measurement required asClass B common stock warrants are considered permanent equity. Changes in the fair value of the convertible preferred stock warrants were recognized in the consolidated statements of operations. The Company valued the convertible preferred stock warrants using the following assumptions:After conversion into warrants to purchase shares of Class B common stock, 1.9 million warrants were exercised and 0.1 million shares were cancelled during the year ended December 31, 2017. The warrant agreements allowed for net settlement for Class B common stock. As a result, the Company issued 1.8 million shares of Class B common stock upon exercise.As of December 31, 2017, warrants to purchase 0.2 million shares of Class B common stock were outstanding, which were exercised during the year ended December 31, 2018. As of December 31, 2018, no warrants to purchase shares of Class B common stock remained outstanding.10.12. COMMITMENTS AND CONTINGENCIESCommitmentsThe Company has operating lease arrangements for office, research and development and sales and marketing space in the United States, the United Kingdom, or U.K., Denmark, and China, with various expiration dates up to 2030. In the second half of 2018, the Company entered into lease arrangements to acquire office space to house the Company’s new headquarters in San Jose, California. The lease commitments for the new headquarters are a significant portion of the future minimum lease payments as of December 31, 2018.Future minimum lease payments under all operating leases as of December 31, 2018, are as follows (in thousands):In connection with its leased facilities the Company recognized a liability for asset retirement obligations in 2015 representing the present value of estimated costs to be incurred at lease expiration. The liability for asset retirement obligations was $0.6 million and $0.5 million as of December 31, 2018 and 2017, respectively.Rent expense for the years ended December 31, 2018, 2017 and 2016 was $9.7 million, $6.9 million and $4.6 million, respectively.ourits products, and to ensure adequate component supply, thecon-cancellable.non-cancelable. As of December 31, 2018 and 2017,2021, the Company had $40.6$195.2 million and $75.2 millionof non-cancelable purchase commitments for inventory, respectively.noncancelablenon-cancelable purchase commitments in excess of its futureprojected demand forecasts. The Company recorded $0.1$0.2 million and $0.6$1.2 million for these purchase commitments in “Accrued liabilities” atAccrued liabilities as of December 31, 20182021 and 2017,2020, respectively.License Purchase Commitments Company licenses certain content for users to access through The Roku Channel. An obligation for licensing of content is incurred at the time the Company enters into an agreement to obtain future titles and the cost of thecontracts with content is known. Certain agreements include the obligationpublishers to license rightscontent for unknown future titles,streaming. When a title becomes available, the ultimate quantity and/or fees for which are not yet determinable as ofCompany records an asset and a liability on the reporting date. At December 31, 2018, the amount recorded as obligations in “Accrued liabilities” for license purchase commitments were not material. consolidated balance sheets.2018,2021, the Company’s total obligation for licensed content is $421.0 million, of which the Company didrecorded $92.1 million in Current liabilities and $51.2 million in Other long-term liabilities in the consolidated balance sheets. The remaining $277.7 million is not have any remaining performance obligations that are not reflectedyet recognized on the financial statementsconsolidated balance sheets as they dothe content does not yet meet the criteria for asset recognition.Year Ending December 31, 2022 $ 212,355 2023 99,848 2024 59,544 2025 36,731 2026 8,715 Thereafter 3,815 Total content liabilities $ 421,008 recognition.Loss from Exit of FacilitiesIn January 2016,$81.4 million, respectively, as of March 31, 2021. As of December 31, 2021, $77.5 million of both the Company moved its headquarters facilitiesindemnification asset and liability were released related to Los Gatos, California from Saratoga, California. The Company has entered into subleasespayments made for a portion of the former headquarters and expects to sublease theliabilities assumed. The remaining portion for the remainderindemnification balance as of the lease period. In connectionDecember 31, 2021 is $3.9 million, with the move,indemnification asset recorded as part of Prepaid expenses and other current assets and the Company recognized a facility exit charge for the estimated loss on the sublease in its “Operating Expenses”. The estimated loss is comprisedindemnification liability recorded as part of the remaining fair value of lease obligations and related expenses for exited locations, as determined at the cease-use dates of those facilities, net of estimated sublease income that could be reasonably obtainedAccrued liabilities in the future and will be paid out over the remaining lease terms, which end in the year ending December 31, 2020. Projected sublease income is based on management’s estimates, which are subject to change.A summary of the Company’s exit liability activity for the years ended December 31, 2018, 2017 and 2016, is as follows (in thousands):The Company recorded $0.6 million and $0.7 million of the above lease liability in “Accrued liabilities” and the remaining $0.2 million and $0.1 million in “Other long-term liabilities” at December 31, 2018 and 2017, respectively.20182021 and 2020, the Company had irrevocable letters of credit outstanding in the amount of $26.4$38.0 million for the benefit of landlordsand $30.9 million, respectively, related to noncancelable facilities leases. The letters of credit expire onhave various expiration dates in 2019.DuringThese contingencies are reviewed at least quarterly and adjusted to reflect the three months ended June 30, 2018,impact of negotiations, estimated settlements, legal rulings, advice of legal counsel, and other information and events. The resolution of these contingencies and of other legal proceedings can be, however, inherently unpredictable and subject to significant uncertainties.changed its estimate of certain liabilities previously recorded for intellectual property licensing andreleased $8.9 million as a result of its assessment that the likelihood of payment is now remote. The reversal of $8.9 million is recorded within cost of player revenue during the year ended December 31, 2018, in the consolidated statements of operations.The Company is currently involved in, and may in the future be involved in,subject to legal proceedings, claims, and investigations in the ordinary course of business, including claims for infringing patents, copyrights or other intellectual property rights relatedrelating to its platformemployee relations, business practices, and products, or the content distributed through its platform by thepatent infringement. The Company or third-party channel developers.is involved in litigation matters not listed herein. Although the results of these proceedings, claims, and investigations cannot be predicted with certainty, the Company does not believe that the final outcome of any matters that it is currently involved in are reasonably likely to have a material adverse effect on its business, financial condition, or results of operations.Manyinclude certain provisions for indemnifying content publishers, licensees, contract manufacturer and suppliers if the Company’s products or services infringe a third party’sout of intellectual property rights. infringement claims made by third parties. The Company’s obligations under these agreements may be limited in terms of time or amount, and in some instances, the Company may have recourse against third parties for certain payments. In addition, the Company has entered into indemnification agreements with its directors and certain of its officers that will require it, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers.11.lossincome (loss) before income taxes consist of the following (in thousands): Years Ended December 31, 2021 2020 2019 United States $ 240,560 $ (21,107) $ (63,453) Foreign (3,973) 2,655 2,534 Net income (loss) before income taxes Net income (loss) before income taxes $ 236,587 $ (18,452) $ (60,919) Years Ended December 31, 2021 2020 2019 Current: Federal Federal $ — $ (219) $ (47) State 589 620 244 Foreign 490 743 108 1,079 1,144 305 Deferred: Federal Federal 193 — — State State 256 — — Foreign (7,326) (2,089) (1,287) (6,877) (2,089) (1,287) Total $ (5,798) $ (945) $ (982) Years Ended December 31, 2021 2020 2019 U.S. federal income tax at statutory rate 21.0 % 21.0 % 21.0 % U.S. state and local income taxes 0.2 (3.2) (0.4) Change in valuation allowance 140.0 (698.4) (213.4) Federal research and development tax credit (30.7) 102.9 30.8 Stock-based compensation (114.3) 577.8 158.0 Discrete tax benefit due to IP transfer Discrete tax benefit due to IP transfer (19.1) — — Meals and entertainment Meals and entertainment 0.1 (1.6) (1.4) Foreign rate differential 0.1 — (0.6) Acquisition costs Acquisition costs — — (1.3) Section 162(m) limitation Section 162(m) limitation 1.1 (7.2) (1.4) State apportionment change State apportionment change — 4.4 1.3 Tax rate change (0.7) — (0.4) Provision to return true-up Provision to return true-up (0.1) 9.4 9.9 Other (0.1) 0.1 (0.5) Effective tax rate (2.5) % 5.2 % 1.6 % As of December 31, 2021 2020 Deferred tax assets: Net operating loss carryforwards $ 563,173 $ 379,613 Reserves and accruals 20,969 14,131 Research and development credits 166,940 104,110 Operating lease liabilities Operating lease liabilities 107,228 91,373 Stock-based compensation Stock-based compensation 36,350 28,318 Depreciation and amortization 40,583 — Total deferred tax assets 935,243 617,545 Deferred tax liabilities: Operating lease right-of-use assets Operating lease right-of-use assets (85,713) (70,755) Depreciation and amortization — (11,707) Total deferred tax liabilities (85,713) (82,462) Valuation allowance (838,949) (530,887) Net deferred tax assets $ 10,581 $ 4,196 2018,2021, management believes it is more likely than not that the U.S. and Netherlands deferred tax assets will not be fully realizable. Accordingly, the Company has provided a full valuation allowance against its U.S. and Netherlands deferred tax assets.with the exception of deferred tax assetsthat are not realizable, related to the IP transfer completed during 2021, giving rise to foreign entities in the U.K., China and Denmark.$495.9$2,169.9 million and $408.3$1,824.3 million are available to reduce future taxable income, if any. These net operating loss carryforwards will begin to expire in 2028 for federal and certain state income tax purposes.net operating losses have expired in 2021. The federal net operating loss generated in the current yearsubsequent to 2017 can be carried forward indefinitely.carryforwardcarryforwards of $3.0$2.8 million, is$2.8 million, $6.1 million, and $33.9 million, respectively, are available to reduce the future taxable income, if any. Thisany, in those countries. Brazil, Denmark, and U.K. net operating losslosses can be carried forward indefinitely. Netherlands net operating losses can be carried back one year and carried forward indefinitely. The Company also has U.K. research and development tax credit carryforwards of $0.1 million. The credit$0.5 million, which can be carried forward indefinitely.2018,2021, the Company has research and development tax credit carryforwards of $33.9$133.8 million and $23.2$97.4 million for federal and state income tax purposes, respectively. If not utilized, the federal and state carryforwards will begin to expire in 2028. The state tax credits can be carried forward indefinitely. Thehas determined that there were no additionalacquired in November 2019, covering the period from inception beginning May 1, 2008 through the acquisition date of November 8, 2019. Based on the study, the Company identified 4 ownership changes after December 18, 2009.20182021 is $14.5$66.2 million, of which $48.7 million is fully composed of research and development credits.credits and $17.5 million is related to international activities. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands): As of December 31, 2021 2020 Unrecognized tax benefits at beginning of year $ 29,175 $ 19,487 Gross increase for tax positions of current year Gross increase for tax positions of current year 36,198 9,959 Gross decrease due to statute expiration Gross decrease due to statute expiration (330) (75) Gross increase (decrease) for tax positions of prior years Gross increase (decrease) for tax positions of prior years 1,107 (196) Unrecognized tax benefits balance at end of year $ 66,150 $ 29,175 2018, there were no2021, the Company recorded $0.4 million of accrued interest and penalties related to uncertain tax positions.None ofbenefit,benefits, if recognized,any, would affecthave an immaterial impact on its effective tax rate. The Company does not believe that the amount ofexpect its gross unrecognized tax benefits willto change significantly inwithin the next 12 months.InThe Company is currently under examination by the normal course of business, the Company isTexas Comptroller for calendar tax years 2015, 2016, and 2017. All tax years remain subject to examination by taxingfederal and state authorities. These audits include questioning the timing and amount of deductions; the nexus of income among various tax jurisdictions; and compliance with federal, state, and local tax laws. The Company is not currently under audit by the Internal Revenue Service or other similar state and local authorities. All tax years remain open to examination by major taxing jurisdictions to which the Company is subject.On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act reduces the US federal corporate tax rate from 35% to 21%, imposes a one-time repatriation tax, and numerous other provisions transitioning to a territorial system, including Global Intangible Low Taxed Income, or GILTI, tax and the base erosion anti-abuse tax, or BEAT. Under U.S. GAAP, the Company is allowed to make an accounting policy choice of either (i) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (ii) factoring such amounts into a company’s measurement of its deferred taxes (the “deferred method”).In December 2018, we completed our accounting for the effect of the 2017 Tax Act within the measurement period under the SEC guidance, and this resulted in no material change to the provisional amount recorded. The Company has adopted the approach of recording the consequences of the GILTI provision of the 2017 Tax act as a period cost when incurred. Based on the Company's analysis, since Roku's average annual gross receipts is less than $500 million for the three tax-year periods ending with the preceding tax year, the Company is not subject to BEAT.The Tax Act enacted on December 22, 2017 modifies Section 162(m) by (1) expanding which employees are considered covered employees by including the chief financial officer, (2) providing that if an individual is acovered employee for a taxable year beginning after December 31, 2016, the individual remains a covered employee for all future years, and (3) removing the exceptions for commissions and performance-based compensation. The IRC Section 162(m) limits the Company’s ability to deduct compensation for the CEO, CFO and the three highest paid officers over $1 million. Roku will reevaluate its 162(m) limitation calculation upon release of additional IRS guidance on the 2017 Tax Act’s transition rule.the rest of ourits foreign subsidiaries, which are not significant. While federal income tax expense has been recognized as a result of the Tax Cuts and Jobs Act of 2017, the Company has not provided any additional deferred taxes with respect to items such as foreign withholding taxes, state income tax or foreign exchange gain or loss. It is not practicable for the Company to determine the amount of unrecognized tax expense on these reinvested international earnings.12.has agreements with one of the Company’s strategic investors. Indid not engage in any material related party transactions for the years ended December 31, 2018, 20172021 and 2016, the Company recorded $4.1 million, $0.6 million and $0.7 million of revenue, respectively, related to this investor. The Company had an accounts receivable balance of $2.4 million and $0.5 million as of December 31, 2018 and 2017, respectively, related to sales to this investor. The Company incurred expenses of $1.3 million with this investor for2020.2018. The2019, the Company had an accounts payable balanceengaged in transactions with one of $1.5 million payableits strategic investors. With respect to this investor, as of December 31, 2018.In May 2018, a member of the executive staff for one of the Company’s business partners joined the Company’s Board of Directors. The Company recorded revenuesrevenue of $5.6$8.5 million and expenses of $1.3 million for the year ended December 31, 20182019. During the years ended December 31, 2021 and 2020, the Company did not consider this investor to be a related party, as this investor did not meet the defined criteria.business partner. Thecompany, the Company had an accounts receivable balanceincurred expenses of $1.0$1.2 million with this business partner as offor the year ended December 31, 2018.13.2019. 2018, 20172021, 2020, and 2016.$0.4$1.3 million, $0.3$0.7 million, and $0.2$0.5 million to the plan for the years ended December 31, 2018, 20172021, 2020, and 2016,2019, respectively.14.LOSSINCOME (LOSS) PER SHARElossincome (loss) per share is calculated by dividing the net lossincome (loss) by the weighted-average number of shares of common stock outstanding for the period. The Company uses the two-class method to calculate net income (loss) per share. Except with respect to certain voting, conversion, and transfer rights and as otherwise expressly provided in the Company’s amended and restated certificate of incorporation or required by applicable law, shares of the Company’s Class A common stock and Class B common stock have the same rights and privileges and rank equally, share ratably, and are identical in all respects as to all matters. Accordingly, basic and diluted net income (loss) per share are the same for both classes.lossincome (loss) per share, options to purchase common stock, restricted stock units, and unvested shares of common stock issued upon the early exercise of stock options convertible preferred stock and warrants to purchase common stock and convertible preferred stock are considered common stock equivalents but have beenequivalents. Dilutive shares of common stock are determined by applying the treasury stock method. The dilutive shares are excluded from the calculation of diluted net loss per share in the period of net loss, as their effect is antidilutive. Because the Company has reported a net loss for the years ended December 31, 2018, 2017 and 2016, diluted net loss per common share is the same as the basic net loss per share for those years.lossincome (loss) per share as follows (in thousands, except per share data):Years Ended December 31, 2021 2020 2019 Numerator: Net income (loss) $ 242,385 $ (17,507) $ (59,937) Denominator: Basic net income (loss) per share: Weighted-average common shares outstanding — basic 132,710 123,978 115,218 Net income (loss) per share — basic $ 1.83 $ (0.14) $ (0.52) Diluted net income (loss) per share: Weighted-average common shares outstanding — basic 132,710 123,978 115,218 Effect of potentially dilutive securities: Restricted stock units 2,744 — — Stock options 6,214 — — Weighted-average common shares outstanding — diluted 141,668 123,978 115,218 Net income (loss) per share — diluted $ 1.71 $ (0.14) $ (0.52) The potential common shares that werelossincome (loss) per share because of their anti-dilutive effect would have been antidilutive for the periods presented are as follows (in thousands): Years Ended December 31, 2021 2020 2019 Equity awards to purchase common stock 1,128 13,088 15,668 Unvested shares of common stock issued upon early exercise of stock options and business acquisition — 1 31 Total 1,128 13,089 15,699 15.or CODM,(“CODM”) for purposes of allocating resources and evaluating financial performance. The Company’s CODM is its Chief Executive Officer, and the CODM evaluates performance and makes decisions about allocating resources to its operating segments based on financial information presented on a consolidated basis and on revenue and gross profit for each operating segment. The Company uses the management approach to determine the segment financial information that should be disaggregated and presented separately in the Company’s notes to its consolidated financial statements. The management approach is based on the manner by which management has organized the segments within the Company for making operating decisions, allocating resources, and assessing performance.The Company’s CODM is its Chief Executive Officer, and the CODM evaluates performance and makes decisions about allocating resources to its operating segments based on financial information presented on a consolidated basis and on revenue and gross profit for each operating segment. In the second quarter of 2017 the Company changed the operating segments to combine one of the previous operating segments with two existing segments to reflect how the CODM evaluates performance and allocates resources. This change did not result in a change to the reportable segments.The Company is organized into two reportable segments as follows:PlatformConsists primarily of fees received from advertisers and content publishers, and from licensing the Company’s technology and proprietary operating system with TV brands and service operators. Platform revenue primarilyincludes fees earned from the sale of digital advertising and revenue share from new or recurring user subscriptions activated through the Company’s platform and revenue share from user purchases of content publishers’ media through its platform. The Company also earns revenue from the sale of branded channel buttons on player and TV remote controls.PlayerConsists primarily of net sales of streaming media players and accessories through retailers and distributors, as well as directly to customers through the Company’s website. Operating expenses are not managed at the segment level.evaluates the performance of itsis organized into 2 reportable segments basedas follows:financial measures, including segment gross profit, which are regularly reviewed by the CODM and provide insight into the individual segments and their ability to contribute to Company’s operating results. Years Ended December 31, 2021 2020 2019 Platform segment revenue Customer H 10 % 13 % * Player segment revenue Customer A * 10 % 16 % Customer B 23 % 18 % 17 % Customer C 37 % 40 % 39 % 20182021 and 2017.2020.16. QUARTERLY FINANCIAL DATA (Unaudited)The following table summarizes the Company’s information on total revenue, gross profit, net income (loss) and earnings per share by quarter for the years ended December 31, 2018 and 2017. This data was derived from the Company’s unaudited consolidated financial statements (in thousands, except per share data):17. SUBSEQUENT EVENTOn February 19, 2019 (the “Closing Date”), the Company entered into a Credit Agreement (the “Credit Agreement”) with Morgan Stanley Senior Funding, Inc. The Credit Agreement provides for (i) a four-year revolving credit facility in the aggregate principal amount of up to $75.0 million (the “Revolving Credit Facility”), (ii) a four-year delayed draw term loan A facility in the aggregate principal amount of up to $75.0 million (the “Term Loan A Facility”) and (iii) an uncommitted incremental facility, subject to the satisfaction of certain financial and other conditions, in the amount of up to (v) $50.0 million, plus (w) 1.0x of our consolidated EBITDA for the most recently completed four fiscal quarter period, plus (x) an additional amount at our discretion, so long as, on a pro forma basis at the time of incurrence, our secured leverage ratio does not exceed 1.50 to 1.00, plus (y) voluntary prepayments of the Revolving Credit Facility and Term Loan A Facility to the extent accompanied by concurrent reductions to the applicable Credit Facility, plus (z) for up to 90 days after the Closing Date, $75.0 million (together with the Revolving Credit Facility and the Term Loan A Facility, collectively, the “Credit Facility”). Borrowings under the Term Loan A Facility may be made by the Company up to 9 months immediately following the Closing Date. The Company did not make any borrowings under the Credit Agreement on the Closing Date. On or around the Closing Date, except for certain letters of credit, which were cash collateralized by approximately $26.3 million, the Company also repaid all outstanding obligations under its Amended and Restated Loan and Security Agreement, entered into with Silicon Valley Bank on November 18, 2014 (as amended prior to the date hereof, the “SVB Loan Agreement”), and the SVB Loan Agreement was terminated.Loans under the Credit Facility bear interest at a rate equal to, at the Company’s election (i) an alternate base rate, based upon the highest of (x) the prime rate, (y) the federal funds effective date plus ½ of 1% and (z) the one-month LIBOR plus 1%, in each case plus an applicable margin of up to 1% per annum, with step-downs based on its secured leverage ratio or (2) an adjusted one-, two-, three-, or six month LIBOR, at its election, plus an applicable margin of up to 2% per annum, with step-downs based on its secured leverage ratio.The Company’s obligations under the Credit Agreement are secured by substantially all of its assets. In the future, certain of its direct and indirect subsidiaries may be required to guarantee the Credit Agreement. The Company may prepay, and in circumstances are required to prepay, loans under the Credit Agreement without payment of a premium. The Credit Agreement contains customary representations and warranties, customary affirmative and negative covenants, a financial covenant that is tested quarterly and requires the Company to maintain a certain adjusted quick ratio, and customary events of default.Loans under the Term Loan A Facility will amortize in equal quarterly installments beginning on the last day of the fiscal quarter ending after the date of the initial borrowing under the Term Loan A Facility, in an aggregate annual amount equal to (i) on or prior to December 31, 2021, 1.25% of the drawn principal amount of the Term Loan Facility and (ii) thereafter, 2.50% of the drawn principal amount of the Term Loan Facility, with any remaining balance payable on the maturity date of the Term Loan A Facility.With Accountantswith Accountants on Accounting and Financial DisclosureReport on Form 10-K.Report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the on Form 10-K, our disclosure controls and procedures were, in design and operation, effective at the reasonable assurance level.20182021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.2018.20182021 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in its report which is included below.2018,2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.2018,2021, of the Company and our report dated March 1, 2019,February 18, 2022, expressed an unqualified opinion on those financial statements.included an explanatory paragraph related to0.7% of total revenue of the Company’s change in methodconsolidated financial statement amounts as of accountingand for revenue in fiscalthe year 2018 due toended December 31, 2021.Accordingly, our audit did not include the adoptionassessment of ASC 606.March 1, 2019
February 18, 202220192022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our year ended December 31, 2018.20192022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our year ended December 31, 2018.20192022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our year ended December 31, 2018.20192022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our year ended December 31, 2018.20192022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our year ended December 31, 2018.2021. Incorporated by Reference Number Exhibit Title Form File No. Exhibit 2.1 8-K 001-38211 2.1 11/14/2019 3.1 8-K 001-38211 3.1 10/3/2017 3.2 S-1/A 333-220318 3.4 9/18/2017 4.1 4.2 S-1/A 333-220318 4.1 9/18/2017 4.3 10-K 001-38211 4.3 3/2/2020 10.1 + S-1 333-220318 10.3 9/1/2017 10.2 + S-1 333-220318 10.4 9/1/2017 10.3 + S-1/A 333-220318 10.5 9/18/2017 10.4 + X 10.5 + X 10.6 + 8-K 001-38211 10.1 10/1/2021 10.7 + S-1/A 333-220318 10.8 9/18/2017 10.8 + S-1A 333-220318 10.9 9/18/2017 10.9 + S-1 333-220318 10.9 9/1/2017 10.10 + S-1 333-220318 10.11 9/1/2017 10.11 + S-1 333-220318 10.13 9/1/2017 10.12 + 10-K 001-38211 10.18 3/2/2020 10.13 + 8-K 001-38211 99.1 7/16/2019 10.14 10-Q 001-38211 10.26 8/10/2018 10.15 10-Q 001-38211 10.27 8/10/2018 10.16 10-K 001-38211 10.30 3/1/2019 10.17 10-K 001-38211 10.31 3/1/2019 10.18 10-K 001-38211 10.32 3/1/2019 10.19 10-Q 001-38211 10.1 8/9/2019 10.20 10-Q 001-38211 10.2 8/9/2019 10.21 10-Q 001-38211 10.3 8/9/2019 10.22 10-Q 001-38211 10.4 8/9/2019 21.1 X 23.1 X 24.1 X 31.1 X 31.2 X 32.1 * X 32.2 * X 101.INS Inline XBRL Instance Document X 101.SCH Inline XBRL Taxonomy Extension Schema Document X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) on Form 10-K and are not deemed filed with the Securities and Exchange Commission and are not incorporated by reference in any filing of Roku, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filings.1st18th day of March 2019.February 2022. Roku, Inc. By: /s/ Anthony Wood Anthony Wood President and Chief Executive Officer (Principal Executive Officer) By: /s/ Steve Louden Steve Louden Chief Financial Officer (Principal Financial and Accounting Officer) Name Title Date Roku, Inc.By:ANTHONY WOOD Anthony Wood and Chief Executive OfficerFebruary 18, 2022 Anthony Wood STEVE LOUDEN Steve LoudenFebruary 18, 2022 Steve Louden /s/ RAVI AHUJA Director February 18, 2022 Ravi Ahuja /s/ MAI FYFIELD Director February 18, 2022 Mai Fyfield /s/ JEFFREY HASTINGS Director February 18, 2022 Jeffrey Hastings /s/ LAURIE SIMON HODRICK Director February 18, 2022 Laurie Simon Hodrick /s/ NEIL HUNT Director February 18, 2022 Neil Hunt /s/ GINA LUNA Director February 18, 2022 Gina Luna /s/ RAY ROTHROCK Director February 18, 2022 Ray Rothrock 112