UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~

2023

☐
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38211

~~Roku, Inc.~~

ROKU, INC.

(Exact name of registrant as specified in its charter)

~~Delaware~~		~~26-2087865~~


Delaware						26-2087865
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

~~150 Winchester Circle~~

~~Los Gatos,~~

1155 Coleman Avenue

San Jose, California ~~95032~~

95110

(Address of principal executive offices including zip code)

Registrant’s telephone number, including area code: (408) 556-9040

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class:	Trading Symbol(s):	Name of Exchange on Which Registered:
Class A Common Stock, $0.0001 par value	ROKU	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐☒ No ☒

☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

~~Large accelerated filer~~

☐

~~Accelerated filer~~

☐

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

☒ ~~(Do not check if a smaller reporting company)~~

Smaller reporting company

☐

Emerging growth company

☐

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November 3, 2017,~~June 30, 2023, the registrant had ~~18,106,218~~124,089,380 shares of Class A common stock, $0.0001 par value per share, and ~~79,718,676~~17,418,411 shares of Class B common stock, $0.0001 par value per share, outstanding.

Table of Contents

	~~Page~~
		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of ~~Convertible Preferred Stock and Stockholders’ Deficit~~Comprehensive Income (Loss)	3
	Condensed Consolidated Statements of Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	4 5
	Notes to ~~Unaudited~~ Condensed Consolidated Financial Statements	5 7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19 22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32 30
Item 4.	Controls and Procedures	32 31
PART II.	OTHER INFORMATION	33 32
Item 1.	Legal Proceedings	33 32
Item 1A.	Risk Factors	33 32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56 67
Item 3.	Defaults Upon Senior Securities	56 67
Item 4.	Mine Safety Disclosures	56 68
Item 5.	Other Information	56 68
Item 6.	Exhibits	57 69
Signatures		58 70

Table of Contents~~Note Regarding Forward-Looking Statements~~

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ~~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,~~Quarterly Report, including statements regarding our future results of operations and financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. 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.

We caution you that the foregoing may not encompass all of the forward-looking statements made in this Quarterly Report.

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently ~~available to our management.~~available. These forward-looking statements are subject to a number of known and unknown risks, uncertainties, and assumptions, including risks described in the section titled “Risk Factors” and elsewhere in this ~~Form 10-Q,~~Quarterly Report, regarding, among other things:

•our financial performance, including our revenue, cost of revenue, operating expenses, and profitability;

•the impact of supply chain disruptions, inflationary pressures, recessionary fears, labor disputes, bank failures, the COVID-19 pandemic, and geopolitical conflicts on our ~~ability to attain~~business, operations, and ~~sustain profitability;~~

the markets and communities in which we and our advertisers, content providers, licensed Roku TV partners, other device licensees, manufacturers, suppliers, retailers, and users operate;

•our ability to attract and retain users and increase ~~hours streamed;~~

streaming hours;

•our ability to attract and retain advertisers;

•our ability to attract and retain ~~additional~~ TV brands, manufacturing partners, and service operators to license and deploy our ~~platform;~~

technology;

•our ability to ~~license~~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 orand the growth of TV streaming;

•the growth of our relevant markets, including the growth in advertising spend on TV streaming platforms, and our ability to successfully grow our business in those markets;

•our ability to adapt to changing market conditions and technological ~~developments, including with respect to developing integrations with our platform partners;~~

developments;

•our ability to develop and launch new ~~streaming devices~~products and provide ancillary services and support;

•our ability to integrate acquired businesses, products, and technologies;

•our ability to expand our products and services into adjacent markets such as the smart home market, scale our operations in these markets, and do so profitably over time;

•our ability to compete effectively with existing competitors and new market entrants;

•our ability to successfully manage domestic and international expansion;

•our ability to attract and retain qualified employees and key personnel;

•our ability to address potential and actual security breaches and system ~~failures;~~

failures involving our products, systems and operations;

•our ability to maintain, protect, and enhance our intellectual property; ~~and~~

•our ability to ~~stay in compliance~~obtain financing on favorable terms, including our ability to enter into new credit agreements; 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.~~

~~We caution you that the foregoing list may not contain all of the forward-looking statements made~~internationally, including compliance with privacy and data protection regulations in ~~this Quarterly Report on Form 10-Q.~~

various U.S. and international jurisdictions.

Other sections of this ~~report~~Quarterly Report may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.

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 ~~report~~Quarterly Report or to conform these statements to actual results or to changes in our expectations. You should read this Quarterly Report, ~~on Form 10-Q~~ and the documents ~~that we reference~~referenced in and filed as exhibits to this Quarterly Report, ~~on Form 10-Q and have filed as~~

~~exhibits to this 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.

Table of Contents

Investors and others should note that we may announce material business and financial information to our investors using our ~~invest~~orinvestor relations website ~~(ir.roku.com/investor-relations)~~(roku.com/investor), ~~SEC~~U.S. Securities and Exchange Commission (“SEC”) filings, webcasts, press releases, and conference calls. We use these mediums ~~including our website,~~ to communicate with ~~our members~~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 available~~post on our investor relations website.

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

iii

Table of Contents

PART I—~~FINANCI~~ALFINANCIAL INFORMATION

Item 1. Financial ~~Statements.~~

Statements

ROKU, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in ~~thousands)~~

thousands, except par value data)

(unaudited)

September 30,
2017

December 31,
2016

Assets

Current Assets:

Cash

$
66,918

$
34,562

Accounts receivable, net of allowances

84,840

79,325

Receivable from related parties

153

148

Inventories

35,450

43,568

Prepaid expenses and other current assets

7,702

4,981

Deferred cost of revenue

2,448

2,636

Total current assets

197,511

165,220

Property and equipment, net

12,807

9,528

Deferred cost of revenue, noncurrent portion

4,975

3,815

Intangible assets

2,215

—

Goodwill

1,554

—

Other noncurrent assets

6,440

515

Total Assets

$
225,502

$
179,078

Liabilities, Convertible Preferred Stock and Stockholders’ Deficit

Current Liabilities:

Accounts payable

$
49,171

$
31,397

Accrued liabilities

65,498

46,156

Current portion of long-term debt

—

15,000

Deferred revenue, current portion

30,822

23,952

Total current liabilities

145,491

116,505

Long-term debt, less current portion

23,043

—

Preferred stock warrant liability

52,355

9,990

Noncurrent deferred revenue

38,802

29,084

Other long-term liabilities

8,604

4,143

Total Liabilities

268,295

159,722

Commitments and Contingencies (Note 7)

Convertible Preferred Stock:

Convertible preferred stock

213,180

213,180

Stockholders’ Deficit:

Common stock

1

—

Additional paid-in capital

34,305

26,005

Accumulated deficit

(290,279
)

(219,829
)
Total stockholders’ deficit

(255,973
)

(193,824
)
Total Liabilities, Convertible Preferred Stock and Stockholders’ Deficit

$
225,502

$
179,078


	As of
	June 30, 2023		December 31, 2022
Assets
Current Assets:
Cash and cash equivalents	$	1,755,261	$	1,961,956
Restricted cash	40,713		—
Accounts receivable, net of allowances of $31,515 and $40,191 as of	707,684		760,793
June 30, 2023 and December 31, 2022, respectively
Inventories	93,214		106,747
Prepaid expenses and other current assets	104,622		135,383
Total current assets	2,701,494		2,964,879
Property and equipment, net	357,603		335,031
Operating lease right-of-use assets	499,308		521,695
Content assets, net	300,419		292,766
Intangible assets, net	50,068		58,881
Goodwill	161,519		161,519
Other non-current assets	86,341		77,830
Total Assets	$	4,156,752	$	4,412,601
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	212,915	$	164,800
Accrued liabilities	638,480		750,810
Current portion of long-term debt	—		79,985
Deferred revenue, current portion	104,109		87,678
Total current liabilities	955,504		1,083,273
Deferred revenue, non-current portion	23,065		28,210
Operating lease liability, non-current portion	589,476		584,651
Other long-term liabilities	55,432		69,911
Total Liabilities	1,623,477		1,766,045
Commitments and contingencies (Note 12)
Stockholders’ Equity:
Common stock, $0.0001 par value	14		14
Additional paid-in capital	3,422,415		3,234,860
Accumulated other comprehensive income (loss)	71		(292)
Accumulated deficit	(889,225)		(588,026)
Total stockholders’ equity	2,533,275		2,646,556
Total Liabilities and Stockholders’ Equity	$	4,156,752	$	4,412,601

See accompanying notes to condensed consolidated financial statements.

Table of Contents

ROKU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except ~~share and~~ per share data)

(unaudited)

Three Months Ended

Nine Months Ended

September 30,
2017

October 1,
2016

September 30,
2017

October 1,
2016

Net Revenue:

Player

$
67,254

$
64,789

$
184,583

$
183,905

Platform

57,528

24,264

139,919

67,404

Total net revenue

124,782

89,053

324,502

251,309

Cost of Revenue:

Player

61,925

56,156

165,047

155,531

Platform

12,962

6,847

33,083

19,396

Total cost of revenue

74,887

63,003

198,130

174,927

Gross Profit:

Player

5,329

8,633

19,536

28,374

Platform

44,566

17,417

106,836

48,008

Total gross profit

49,895

26,050

126,372

76,382

Operating Expenses:

Research and development

28,532

18,229

76,650

56,700

Sales and marketing

16,216

12,844

44,938

39,089

General and administrative

13,039

9,078

33,894

27,333

Total operating expenses

57,787

40,151

155,482

123,122

Loss from Operations

(7,892
)

(14,101
)

(29,110
)

(46,740
)
Other Income (Expense), Net:

Interest expense

(815
)

(32
)

(1,286
)

(163
)
Change in fair value of preferred stock warrant liability

(37,682
)

1,481

(40,333
)

1,087

Other income (expense), net

212

(41
)

423

(66
)
Total other income (expense), net

(38,285
)

1,408

(41,196
)

858

Loss before income taxes

(46,177
)

(12,693
)

(70,306
)

(45,882
)
Income tax expense

58

50

144

103

Net loss attributable to common stockholders

$
(46,235
)

$
(12,743
)

$
(70,450
)

$
(45,985
)
Net loss per share attributable to common stockholders—basic
and diluted

$
(8.79
)

$
(2.66
)

$
(14.09
)

$
(9.73
)
Weighted-average shares used in computing net loss per
share attributable to common stockholders—basic and diluted

5,259,796

4,784,170

4,998,727

4,724,767


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Net Revenue:
Platform	$	743,835	$	669,256	$	1,378,453	$	1,312,963
Devices	103,351		95,150		209,723		185,142
Total net revenue	847,186		764,406		1,588,176		1,498,105
Cost of Revenue:
Platform	348,010		295,058		648,597		560,846
Devices	120,905		114,199		223,711		217,303
Total cost of revenue	468,915		409,257		872,308		778,149
Gross Profit (Loss):
Platform	395,825		374,198		729,856		752,117
Devices	(17,554)		(19,049)		(13,988)		(32,161)
Total gross profit	378,271		355,149		715,868		719,956
Operating Expenses:
Research and development	192,387		196,637		412,472		360,635
Sales and marketing	227,192		184,971		461,111		331,493
General and administrative	84,652		84,054		180,705		161,831
Total operating expenses	504,231		465,662		1,054,288		853,959
Loss from Operations	(125,960)		(110,513)		(338,420)		(134,003)
Other Income (Expense), Net:
Interest expense	(4)		(1,059)		(685)		(2,116)
Other income, net	19,999		1,829		43,100		2,238
Total other income, net	19,995		770		42,415		122
Loss Before Income Taxes	(105,965)		(109,743)		(296,005)		(133,881)
Income tax expense	1,630		2,578		5,194		4,746
Net Loss	$	(107,595)	$	(112,321)	$	(301,199)	$	(138,627)

Net loss per share — basic and diluted	$	(0.76)	$	(0.82)	$	(2.14)	$	(1.02)


Weighted-average common shares outstanding — basic and diluted	141,033		136,849		140,685		136,198

See accompanying notes to condensed consolidated financial statements.

Table of Contents

ROKU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~CONVERTIBLE PREFERRED STOCK AND~~

~~STOCKHOLDERS’ DEFICIT~~

COMPREHENSIVE INCOME (LOSS)

(in ~~thousands, except share data)~~

thousands)

(unaudited)

Convertible
Preferred Stock

Common Stock

Additional
Paid-in

Treasury

Accumulated

Total
Stockholders’

Shares

Amount

Shares

Amount

Capital

Stock

Deficit

Deficit

Balance—December 31, 2016

80,844,138

$
213,180

4,818,812

$
-

$
26,005

$
-

$
(219,829
)

$
(193,824
)
Issuance of common stock upon
exercise of stock options

—

—

445,995

1

1,442

—

—

1,443

Share repurchases

—

—

(92,637
)

—

—

(671
)

—

(671
)
Vesting of early exercised stock
options

—

—

—

—

12

—

—

12

Issuance of common stock pursuant to acquisition

—

—

108,332

—

—

-

Issuance of common stock upon expiration of warrants

—

—

357,283

—

—

-

Stock-based compensation expense

—

—

—

—

7,517

—

—

7,517

Net loss

—

—

—

—

—

—

(70,450
)

(70,450
)
Balance—September 30, 2017

80,844,138

$
213,180

5,637,785

$
1

$
34,976

$
(671
)

$
(290,279
)

$
(255,973
)


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Net Loss	$	(107,595)	$	(112,321)	$	(301,199)	$	(138,627)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	36		(330)		363		(412)
Comprehensive Loss	$	(107,559)	$	(112,651)	$	(300,836)	$	(139,039)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

ROKU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~

STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

Nine Months Ended

September 30,
2017

October 1,
2016

Cash flows from operating activities:

Net loss

$
(70,450
)

$
(45,985
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

3,883

4,201

Impairment of assets

-

320

Stock-based compensation expense

7,517

6,016

Provision for doubtful accounts

17

278

Change in fair value of preferred stock warrant liability

40,333

(1,087
)
Noncash interest expense

668

89

Loss on disposals of property and equipment

54

29

Loss from exit of facilities

232

3,804

Write-off of deferred initial public offering costs

-

594

Changes in operating assets and liabilities:

Due from related parties

(5
)

165

Accounts receivable

(5,532
)

(4,058
)
Inventories

8,118

(19,738
)
Prepaid expenses and other current assets

(2,867
)

385

Deferred cost of revenue

(972
)

(1,759
)
Other noncurrent assets

(5,870
)

445

Accounts payable

17,406

13,137

Accrued liabilities

17,662

20,193

Other long-term liabilities

4,410

959

Deferred revenue

16,588

9,102

Net cash provided by (used in) operating activities

31,192

(12,910
)
Cash flows from investing activities:

Purchase of property and equipment

(6,671
)

(7,380
)
Purchase of business, net of cash acquired

(2,959
)

-

Restricted cash

31

29

Net cash used in investing activities

(9,599
)

(7,351
)
Cash flows from financing activities:

Payments of costs related to initial public offering

-

(594
)
Proceeds from borrowings, net

24,691

-

Repayments of borrowings

(15,000
)

(15,000
)
Proceeds from exercise of stock options, net of repurchases

1,072

366

Net cash provided by (used in) financing activities

10,763

(15,228
)
Net Increase (Decrease) In Cash

32,356

(35,489
)
Cash—Beginning of period

34,562

75,748

Cash—End of period

$
66,918

$
40,259

Supplemental disclosures of cash flow information:

Cash paid for interest

$
583

$
149

Cash paid for income taxes

$
162

$
132

Supplemental disclosures of noncash investing and financing activities:

Purchases of property and equipment recorded in accounts payable
and accrued liabilities

$
836

$
671

Issuance of convertible preferred stock warrants in connection with debt

$
2,032

$
-

Unpaid initial public offering costs

$
2,992

$
-


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
Three Months Ended June 30, 2023	Shares	Amount
Balance—March 31, 2023	140,785	$	14	$	3,332,222	$	35	$	(781,630)	$	2,550,641
Issuance of common stock pursuant to equity incentive plans	723	—		614		—		—		614
Stock-based compensation expense	—	—		89,579		—		—		89,579
Foreign currency translation adjustment	—	—		—		36		—		36
Net loss	—	—		—		—		(107,595)		(107,595)
Balance-June 30, 2023	141,508	$	14	$	3,422,415	$	71	$	(889,225)	$	2,533,275

Six Months Ended June 30, 2023
Balance-December 31, 2022	140,027	$	14	$	3,234,860	$	(292)	$	(588,026)	$	2,646,556
Issuance of common stock pursuant to equity incentive plans	1,481	—		1,504		—		—		1,504
Stock-based compensation expense	—	—		186,051		—		—		186,051
Foreign currency translation adjustment	—	—		—		363		—		363
Net loss	—	—		—		—		(301,199)		(301,199)
Balance-June 30, 2023	141,508	$	14	$	3,422,415	$	71	$	(889,225)	$	2,533,275

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
Three Months Ended June 30, 2022	Shares	Amount
Balance—March 31, 2022	135,971	$	14	$	2,929,519	$	(41)	$	(116,327)	$	2,813,165
Issuance of common stock pursuant to equity incentive plans	1,958	—		8,341		—		—		8,341
Stock-based compensation expense	—	—		87,037		—		—		87,037
Foreign currency translation adjustment	—	—		—		(330)		—		(330)
Net loss	—	—		—		—		(112,321)		(112,321)
Balance-June 30, 2022	137,929	$	14	$	3,024,897	$	(371)	$	(228,648)	$	2,795,892

Six Months Ended June 30, 2022
Balance-December 31, 2021	135,137	$	14	$	2,856,572	$	41	$	(90,021)	$	2,766,606
Issuance of common stock pursuant to equity incentive plans	2,792	—		11,693		—		—		11,693
Stock-based compensation expense	—	—		156,632		—		—		156,632
Foreign currency translation adjustment	—	—		—		(412)		—		(412)
Net loss	—	—		—		—		(138,627)		(138,627)
Balance-June 30, 2022	137,929	$	14	$	3,024,897	$	(371)	$	(228,648)	$	2,795,892

See accompanying notes to condensed consolidated financial statements.

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ROKU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Six Months Ended
	June 30, 2023		June 30, 2022
Cash flows from operating activities:
Net Loss	$	(301,199)	$	(138,627)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization	34,181		22,902
Stock-based compensation expense	186,051		156,604
Amortization of right-of-use assets	30,532		25,235
Amortization of content assets	102,314		100,497
Foreign currency remeasurement (gains) losses	1,760		—
Change in fair value of the Strategic Investment	(3,090)		—
Impairment of assets	4,338		—
Provision for doubtful accounts	2,962		467
Other items, net	(224)		(335)
Changes in operating assets and liabilities:
Accounts receivable	50,430		37,320
Inventories	13,533		(25,801)
Prepaid expenses and other current assets	3,736		(11,146)
Content assets and liabilities, net	(120,522)		(150,513)
Other non-current assets	4,379		(1,830)
Accounts payable	72,291		(11,871)
Accrued liabilities	(92,289)		(479)
Operating lease liabilities	(5,754)		(16,125)
Other long-term liabilities	(1,074)		148
Deferred revenue	11,286		3,607
Net cash used in operating activities	(6,359)		(9,947)
Cash flows from investing activities:
Purchases of property and equipment	(72,316)		(52,209)
Purchase of Strategic Investment	(10,000)		(40,000)
Net cash used in investing activities	(82,316)		(92,209)
Cash flows from financing activities:
Repayments of borrowings	(80,000)		(5,000)
Proceeds from equity issued under incentive plans	1,504		11,693
Net cash provided by (used in) financing activities	(78,496)		6,693
Net decrease in cash, cash equivalents and restricted cash	(167,171)		(95,463)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	1,189		(67)
Cash, cash equivalents and restricted cash —beginning of period	1,961,956		2,147,670
Cash, cash equivalents and restricted cash —end of period	$	1,795,974	$	2,052,140

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	Six Months Ended
	June 30, 2023		June 30, 2022
Cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents	$	1,755,261	$	2,050,412
Restricted cash, current	40,713		—
Restricted cash, non-current	—		1,728
Cash, cash equivalents and restricted cash —end of period	$	1,795,974	$	2,052,140
Supplemental disclosures of cash flow information:
Cash paid for interest	$	871	$	1,444
Cash paid for income taxes	$	3,955	$	4,752
Supplemental disclosures of non-cash investing and financing activities:
Unpaid portion of property and equipment purchases	$	4,094	$	3,551

See accompanying notes to condensed consolidated financial statements.

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ROKU, INC.

NOTES TO ~~UNAUDITED~~ CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. THE COMPANY

Organization and Description of Business

Roku, Inc. (the “Company” or “Roku”), was formed in October 2002 as Roku LLC under the laws of the State of Delaware. On February 1, 2008, Roku LLC was converted into Roku, Inc., a Delaware corporation. The ~~Company’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 two reportable segments and generates platform revenue ~~through~~from the sale of digital advertising (including media and entertainment promotional spending, the demand-side platform, and related services) and content distribution services (including subscription and transaction revenue shares, the sale of Premium Subscriptions, and the sale of branded channel buttons on remote controls). The Company generates devices revenue from the sale of streaming players, ~~advertising, subscription~~Roku-branded TVs, smart home products and ~~transaction revenue sharing,~~services, audio products, and related accessories as well as ~~through~~revenue from licensing arrangements with ~~TV brands and cable, satellite, and telecommunication~~ service operators ~~(“service operators”).~~

~~Initial Public Offering~~

On October 2, 2017, the Company completed its initial public offering (IPO) of Class A common stock, in which it sold 10,350,000 shares, including 1,350,000 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 $134,757,000, after deducting underwriting discounts and commissions of $10,143,000. Additionally, offering costs incurred by the Company are expected to total approximately $4,000,000. Upon the closing of the Company’s IPO, all outstanding shares of its convertible preferred stock automatically converted into 80,844,138 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.

licensed Roku TV partners.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation ~~and Use of Estimates~~

The condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in ~~our final prospectus~~the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed ~~pursuant to Rule 424(b) under the Securities Act of 1933, as amended,~~ with the SEC on ~~September 28, 2017~~February 16, 2023 (the ~~“Prospectus”~~“Annual Report”). ~~There have~~

The condensed consolidated balance sheet as of December 31, 2022 has been ~~no material changes~~derived from the audited consolidated financial statements as of that date but does not include all of the information and footnotes included in the Company’s ~~significant accounting policies from those~~Annual Report. The interim financial information is unaudited, but reflects all normal recurring adjustments that ~~were disclosed~~are, in the ~~Prospectus, except as noted below.~~

opinion of management, necessary to fairly present the information set forth herein. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the operating results to be expected for the full year or any future periods.

Certain prior period amounts reported in our condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period presentation.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in accordance with U.S. GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets, ~~and~~ liabilities, ~~and the related disclosures at the date of the financial statements, as well as the reported amounts of~~net revenue, and ~~expenses during the periods presented.~~expenses. Significant items subject to such estimates ~~include~~and assumptions include:

•revenue recognition: determining the nature and timing of satisfaction of performance obligations, variable consideration, determining the stand-alone selling prices of performance obligations, gross versus net revenue recognition, and evaluation of customer versus vendor relationships;

•the impairment of intangible assets;

•amortization of content assets;

•valuation of assets acquired and liabilities assumed in connection with business combinations;

•valuation of the Strategic Investment;

•useful lives of tangible and intangible assets;

•allowances for ~~multiple element arrangements, determination of revenue reporting as net versus gross,~~ sales ~~return reserves, customer incentive programs, inventory valuation,~~ returns and sales incentives; and

•the valuation of deferred income tax assets, the recognition and disclosure of contingent liabilities, the fair value of assets and liabilities acquired in business combinations and the fair value of the Company’s preferred stock and common stock. assets.

The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results may differ from the Company’s ~~estimates. To the extent that there are material differences between these~~ estimates and ~~actual results, the Company’s financial condition or operating results will be affected.~~

assumptions.

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Principles of Consolidation

The condensed consolidated financial statements, which include the accounts of Roku, Inc. and its wholly-owned subsidiaries, have been prepared in ~~accordance~~conformity with U.S. ~~GAAP and includes the accounts of the Company and its wholly-owned subsidiaries.~~GAAP. All intercompany ~~transactions~~accounts and ~~balances~~transactions have been eliminated in consolidation.

Cash and Cash Equivalents and Restricted Cash

~~Comprehensive Loss~~

~~Comprehensive loss~~

The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents. The Company’s restricted cash balance is ~~equal~~used to secure the ~~net loss for all periods presented. Therefore,~~outstanding letters of credit after the ~~consolidated statements~~Credit Facility (defined in Note 10) matured and was repaid in February 2023.

The Company maintains its cash, cash equivalent and restricted cash balances with financial institutions which often exceed regulated insured limits. The table below reflects the percentage of ~~comprehensive loss have been omitted from the condensed consolidated~~cash, cash equivalent and restricted cash balances at financial ~~statements.~~

~~Concentrations~~

~~Customers accounting for~~institutions that individually held greater than 10% ~~or more~~ of the Company’s total cash, cash equivalent and restricted cash balance at each period reported.


	As of
Institutions	June 30, 2023	December 31, 2022
Institution A (1)	16%	26%
Institution B (1)	18%	—%
Institution D	*	21%

(1) Institutions designated as global systemically important banks (G-SIBs) by the Financial Stability Board, in consultation with the Basel Committee on Banking Supervision (BCBS) and national authorities.

* Less than 10%

Accounts Receivable, net

Accounts receivable are typically unsecured and are derived from revenue earned from customers. They are stated at invoice value less estimated allowances for sales returns, sales incentives, doubtful accounts, and other miscellaneous allowances. The Company performs ongoing credit evaluations of its customers to determine allowances for potential credit losses and doubtful accounts. The Company considers historical experience, ongoing promotional activities, historical claim rates, and other factors to determine the allowances for sales returns and sales incentives.

Allowance for Sales Returns: Allowance for sales returns consists of the following activities (in thousands):


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Beginning balance	$	5,845	$	4,099	$	7,417	$	6,015
Add: Charged to revenue	5,275		5,289		8,164		8,810
Less: Utilization of sales return reserve	(3,728)		(4,718)		(8,189)		(10,155)
Ending balance	$	7,392	$	4,670	$	7,392	$	4,670

Allowance for Sales Incentives: Allowance for sales incentives consists of the following activities (in thousands):


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Beginning balance	$	11,672	$	27,888	$	28,903	$	48,411
Add: Charged to revenue	16,993		13,938		27,550		31,550
Less: Utilization of sales incentive reserve	(11,237)		(16,933)		(39,025)		(55,068)
Ending balance	$	17,428	$	24,893	$	17,428	$	24,893

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Allowance for Doubtful Accounts: Allowance for doubtful accounts consists of the following activities (in thousands):


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Beginning balance	$	4,506	$	3,171	$	3,498	$	2,158
Provision for (recoveries of) doubtful accounts	1,072		(546)		2,962		467
Adjustments for write-off	—		(347)		(882)		(347)
Ending balance	$	5,578	$	2,278	$	5,578	$	2,278

The Company did not have any customer that accounted for more than 10% of its accounts receivable, net balance as of June 30, 2023 and December 31, 2022.

3. REVENUE

The Company’s disaggregated revenue is represented by the two reportable segments discussed in Note 15.

The contract balances include the following (in thousands):


	As of
	June 30, 2023		December 31, 2022
Accounts receivable, net	$	707,684	$	760,793
Contract assets (included in Prepaid expenses and other current assets)	41,873		42,617

Deferred revenue, current portion	$	104,109	$	87,678
Deferred revenue, non-current portion	23,065		28,210
Total deferred revenue	$	127,174	$	115,888

Accounts receivable are recorded at the amount invoiced, net of allowances for sales returns, sales incentives, and doubtful accounts. Payment terms can vary by customer and contract.

The timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets are created when invoicing occurs subsequent to revenue recognition. Contract assets are transferred to accounts receivable when the right to invoice becomes unconditional. The Company’s contract assets are current in nature and are included in Prepaid expenses and other current assets. Contract assets decreased by $0.7 million during the six months ended June 30, 2023 due to the timing of billing to customers.

Deferred revenue reflects consideration invoiced prior to the satisfaction of performance obligations and revenue recognition. Deferred revenue increased $11.3 million during the six months ended June 30, 2023 primarily due to the timing of fulfillment of performance obligations and increases in subscription arrangements.

Revenue recognized during the three and six months ended June 30, 2023, from amounts included in total deferred revenue as of December 31, 2022, was $11.4 million and $66.9 million, respectively. Revenue recognized during the three and six months ended June 30, 2022, from amounts included in total deferred revenue as of December 31, 2021, was $11.3 million and $33.7 million, respectively.

Revenue allocated to remaining performance obligations represents estimated contracted revenue that has not yet been recognized which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods. Estimated contracted revenue for these remaining performance obligations was $1,131.2 million as of June 30, 2023 of which the Company expects to recognize approximately 48% over the next 12 months and the remainder thereafter.

The Company recognized revenue of $17.6 million and $32.6 million during the three and six months ended June 30, 2023, respectively from performance obligations that were ~~as follows:~~

satisfied in previous periods due to changes in the estimated transaction price of its revenue contracts. The Company reversed revenue of $9.8 million and recognized revenue of $3.4 million during the three and six months ended June 30, 2022, respectively, from performance obligations that were satisfied in previous periods due to changes in the estimated transaction price of its revenue contracts.

Three Months Ended

Nine Months Ended

September 30,
2017

October 1,
2016

September 30,
2017

October 1,
2016

Customer A

10
%

16
%

*

14
%
Customer B

*

11

*

12

Customer C

18

25

19

25

Customer D

11

*

11

*

~~Customers accounting~~

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Customer I accounted for ~~10% or more~~11% and 12% of the Company’s ~~accounts receivable were as follows:~~

September 30,
2017

December 31,
2016

Customer A

11
%

12
%
Customer B

*

11

Customer C

14

17

Customer D

19

17

*	~~Less than 10%~~

~~Business Combinations~~

total net revenue during the three and six months ended June 30, 2023, respectively. The Company ~~accounts~~did not have any customer that accounted for more than 10% of its ~~acquisitions using~~total net revenue during the ~~acquisition method.~~ three and six months ended June 30, 2022.

4. GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill ~~is measured at the acquisition date as~~represents the excess of ~~the~~ purchase ~~price~~consideration in a business combination over the fair value of ~~the~~tangible and intangible assets acquired ~~and~~net of the liabilities assumed. ~~Significant estimates~~All goodwill relates to the Company’s platform segment.

Intangible Assets

The following table is the summary of the Company’s intangible assets (in thousands, except years):


	As of June 30, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted-Average Useful Lives (in years)
Developed technology	$	73,367	$	(43,183)	$	30,184	5.9
Customer relationships	14,100		(12,683)		1,417		4.0
Tradename	20,400		(4,966)		15,434		9.8
Patents	4,076		(1,043)		3,033		14.0
Total intangible assets	$	111,943	$	(61,875)	$	50,068	6.7


	As of December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted-Average Useful Lives (in years)
Developed technology	$	73,367	$	(37,278)	$	36,089	5.9
Customer relationships	14,100		(10,920)		3,180		4.0
Tradename	20,400		(3,966)		16,434		9.8
Patents	4,076		(898)		3,178		14.0
Total intangible assets	$	111,943	$	(53,062)	$	58,881	6.7

The Company recorded expenses of $4.4 million and ~~assumptions are made by management to value such~~$4.5 million for amortization of intangible assets during the three months ended June 30, 2023 and ~~liabilities. Although~~2022, respectively. The Company recorded expenses of $8.8 million and $9.0 million for amortization of intangible assets during the six months ended June 30, 2023 and 2022, respectively. During the three and six months ended June 30, 2023 and 2022, the Company ~~believes~~recorded amortization of developed technology in Cost of revenue, platform and Research and development expenses. The Company recorded amortization of customer relationships and tradename in Sales and marketing expenses, and recorded amortization of patents in General and administrative expenses in the condensed consolidated statements of operations.

As of June 30, 2023, the estimated future amortization expense for intangible assets for the next five years and thereafter is as follows (in thousands):


Year Ending December 31,
2023 (remaining 6 months)	$	8,253
2024	14,275
2025	12,571
2026	4,074
2027	2,737
Thereafter	8,158
Total	$	50,068

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5. BALANCE SHEET COMPONENTS

Accounts Receivable, net: Accounts receivable, net consisted of the following (in thousands):


	As of
	June 30, 2023		December 31, 2022
Accounts receivable, gross	$	739,199	$	800,984
Less: Allowances
Allowance for sales returns	7,392		7,417
Allowance for sales incentives	17,428		28,903
Allowance for doubtful accounts	5,578		3,498
Other allowances	1,117		373
Total allowances	31,515		40,191
Accounts receivable, net	$	707,684	$	760,793

Property and Equipment, net: Property and equipment, net consisted of the following (in thousands):


	As of
	June 30, 2023		December 31, 2022
Computers and equipment	$	53,351	$	45,989
Leasehold improvements	376,701		353,245
Internal-use software	7,274		7,274
Office equipment and furniture	45,703		28,614
Property and equipment, gross	483,029		435,122
Less: Accumulated depreciation and amortization	(125,426)		(100,091)
Property and equipment, net	$	357,603	$	335,031

Depreciation and amortization expense, for property and equipment assets, for the three months ended June 30, 2023 and 2022 was $14.1 million and $7.0 million, respectively. Depreciation and amortization expense, for property and equipment assets, for the six months ended June 30, 2023 and 2022 was $25.4 million and $14.0 million, respectively.

Accrued Liabilities: Accrued liabilities consisted of the following (in thousands):


	As of
	June 30, 2023		December 31, 2022
Payments due to content publishers	$	198,040	$	201,054
Accrued cost of revenue	130,360		105,347
Marketing, retail, and merchandising costs	82,710		163,367
Operating lease liability, current	59,266		54,689
Content liability, current	64,142		88,717
Other accrued expenses	103,962		137,636
Total accrued liabilities	$	638,480	$	750,810

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Deferred Revenue: Deferred revenue consisted of the following (in thousands):


	As of
	June 30, 2023		December 31, 2022
Platform, current	$	68,466	$	59,276
Devices, current	35,643		28,402
Total deferred revenue, current	104,109		87,678
Platform, non-current	858		969
Devices, non-current	22,207		27,241
Total deferred revenue, non-current	23,065		28,210
Total deferred revenue	$	127,174	$	115,888

Other Long-term Liabilities: Other Long-term liabilities consisted of the following (in thousands):


	As of
	June 30, 2023		December 31, 2022
Content liability, non-current	$	28,067	$	39,587
Other long-term liabilities	27,365		30,324
Total other long-term liabilities	$	55,432	$	69,911

6. CONTENT ASSETS

Content assets, net consisted of the following (in thousands):


	As of
	June 30, 2023		December 31, 2022
Licensed content, net and advances	$	195,337	$	243,226
Produced content:
Released, less amortization	60,083		42,605
Completed, not released	35,904		3,537
In production	23,061		42,904
Total produced content, net	119,048		89,046
Total content assets, net and advances	$	314,385	$	332,272

Current portion (included in Prepaid expenses and other current assets)	$	13,966	$	39,506
Non-current portion	$	300,419	$	292,766

Amortization of content assets is included in Cost of revenue, platform in the condensed consolidated statements of operations and is reflected in the table below (in thousands):


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Licensed content	$	44,648	$	53,166	$	87,236	$	94,790
Produced content	8,264		2,879		15,078		5,707
Total amortization costs	$	52,912	$	56,045	$	102,314	$	100,497

7. STRATEGIC INVESTMENT

In June 2022, the Company agreed to provide financing of up to $60.0 million in the aggregate to a counterparty with whom the Company has a commercial relationship. The advances are in the form of convertible promissory notes (the “Strategic Investment”) and are recognized as Other non-current assets on the condensed consolidated balance sheets. The Strategic Investment accrues interest at 5% per annum. The convertible promissory notes have maturity dates as reflected in the table below, or are due upon a redemption event or in the event of a default.

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The convertible promissory notes and their date of investment and maturity are as follows (in thousands):

As of June 30, 2023

Date of Investment

Amount of Investment

Date of Maturity

June 15, 2022

$40,000

June 15, 2025

March 23, 2023

$5,000

March 23, 2026

May 23, 2023

$5,000

May 23, 2026

The Strategic Investment contains certain redemption features that ~~those estimates~~meet the definition of embedded derivatives and ~~assumptions are reasonable and appropriate, they are inherently uncertain and subject~~require bifurcation. The Company elected to ~~refinement. Additional information related to~~apply the ~~acquisition date~~ fair value ~~of acquired assets~~option and ~~assumed liabilities obtained during~~account for the ~~measurement period, not to exceed one year, may result in changes to~~hybrid instrument containing the ~~recorded values of such assets~~host contract and ~~liabilities, resulting in an offsetting adjustment to any goodwill associated with~~ the business acquired. Uncertain tax positions and tax-related valuation allowances are initially established in connection with a business combination as of the acquisition date. The Company will continue to collect information and reevaluate these estimates and assumptions quarterly.

~~Any contingent consideration payable is recognized~~embedded derivatives at fair value ~~at the acquisition date. Liability-classified contingent consideration is remeasured each reporting period~~as a single instrument, with any subsequent changes in fair value ~~recognized~~included in ~~earnings until~~Other income (expense), net in the ~~contingent consideration is settled.~~

~~Acquisition related costs incurred in connection with a business combination, other than those associated with the issuance~~condensed consolidated statements of ~~debt or equity securities, are expensed as incurred.~~

~~Goodwill, Purchased Intangible Assets and Impairment Assessment~~

~~Goodwill represents the excess of the purchase price over~~operations. See Note 8 for additional details on the fair value of the Strategic Investment.

8. FAIR VALUE DISCLOSURE

The Company’s financial assets acquired and liabilities assumed, if any, in a business combination. The Company reviews its goodwill for impairment annually, as of the beginning of the fourth quarter, and whenever events or changes in circumstances indicate that impairment may exist.

~~Purchased intangible assets consist of identifiable intangible assets, which consisted primarily of developed technology. Purchased intangible assets are recorded~~measured at fair value on ~~the date of acquisition and amortized over their estimated useful lives~~a recurring basis are as follows (in thousands):


	As of June 30, 2023						As of December 31, 2022
	Fair Value		Level 1		Level 3		Fair Value		Level 1		Level 3
Assets:
Cash and cash equivalents:
Cash	$	627,274	$	627,274	$	—	$	1,353,547	$	1,353,547	$	—
Money market funds	1,127,987		1,127,987		—		608,409		608,409		—
Restricted cash, current	40,713		40,713		—		—		—		—
Other non-current assets:
Strategic Investment	52,558		—		52,558		39,468		—		39,468
Total assets measured and recorded at fair value	$	1,848,532	$	1,795,974	$	52,558	$	2,001,424	$	1,961,956	$	39,468

The following table reflects the pattern in which the economic benefits of the assets will be consumed, generally straight-line. 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.~~

~~Streaming Content~~

The Company licenses certain content for users to access through The Roku Channel. The content licenses 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. At September 30, 2017, $506,000 of content met these requirements and is recorded in “Prepaid expenses and other current assets”. ~~The Company amortizes the content assets in “Cost of Revenue, Platform” over the contractual window of availability.~~

~~Recently Issued Accounting Pronouncements Not Yet Adopted~~

In July 2017, the Financial Accounting Standards Board (“FASB”) issued new guidance to address the complexity of the accounting for certain financial instruments with down round features that result in the strike price being reduced on the basis of the pricing of future equity offerings. Under this guidance, when determining the classification of certain financial instruments as liability or equity, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is evaluating the impact of this new guidance on the consolidated financial statements and the related disclosures.

In January 2017, the FASB issued new guidance which eliminates Step 2 from the goodwill impairment test which measures a goodwill impairment loss 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~~Company’s Level 3 financial assets (in thousands):


	Three Months Ended		Six Months Ended
	June 30, 2023		June 30, 2023
Beginning balance	$	47,678	$	39,468
Purchase of Strategic Investment	5,000		10,000
Change in estimated fair value of the Strategic Investment	(120)		3,090
Ending balance	$	52,558	$	52,558

Fair value is defined as the price that would be received to sell an ~~impairment loss~~asset or paid to transfer a liability in the principal market (or most advantageous market, in the absence of a principal market) 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 should be applied prospectively. The Company is evaluating the impact of this new guidance on the consolidated financial statements and the related disclosures.

In January 2017, the FASB issued new guidance which changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities should be accounted for as an acquisition of a business or group of assets. The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2017, with early adoption permitted. The guidance should be applied prospectively to any transactions occurring on or after the adoption date. The Company is evaluating the impact of this new guidance on the consolidated financial statements and the related disclosures.

In August 2016, the FASB issued new guidance which addresses classification of certain cash receipts and cash payments related to the statement of cash flows. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company is evaluating the impact of this new guidance on the consolidated financial statements and the related disclosures.

In February 2016, the FASB issued new guidance related to new accounting and reporting guidelines for leasing arrangements. The guidance requires organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, with early adoption permitted. The new standard is to be applied using a modified retrospective approach. The Company is evaluating the impact of this new guidance on the consolidated financial statements and the related disclosures.

In January 2016, the FASB issued new guidance related to the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is evaluating the impact of this new guidance on the consolidated financial statements and the related disclosures.

In May 2014, the FASB issued new guidance related to the recognition and reporting of revenue that establishes a comprehensive new revenue recognition model designed to depict the transfer of goods or services to a customerliability in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In August 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017. In 2016 the FASB issued amendments on this guidance with the same effective date and transition guidance. The Company plans to adopt the new revenue standard in its first quarter of 2018 using the modified retrospective approach, which requires the cumulative impact of initially applying the guidance to be recognized as

~~an adjustment to the Company’s accumulated deficit as of January 1, 2018, the date of adoption. Prior periods will not be retroactively adjusted.~~

To date, the Company has established an implementation team and is in the process of evaluating the impact of the new standard on its accounting policies, processes, and system requirements. Furthermore, the Company has made and will continue to make investments in systems to enable timely and accurate reporting under the new standard.

The Company is continuing to evaluate the potential impact that the implementation of this standard will have on its condensed consolidated financial statements, but has not yet determined whether the effect will be material. However, the Company believes this new standard will impact its accounting for revenue arrangements as follows:

Revenue from the licensing of the Company’s technology and proprietary operating system to service operators and TV brands, will be recognized earlier and could result in greater variability in revenue recognition;

Estimation of variable consideration for content publisher arrangements with revenue share from user subscriptions and media purchases through its platform and the sale of branded channel buttons on its remote controls; and

~~Expanded disclosures.~~

~~The Company expects revenue recognition related to players to remain relatively unchanged under the new guidance and is in the process of evaluating the impact on its player arrangements.~~

~~Fair Value Measurements~~

~~Level 1—Quoted prices (unadjusted) in active markets that are accessible~~orderly transaction between market participants at the measurement ~~date~~date. Further, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs in measuring fair value, and utilizes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of inputs used to measure fair value are as follows:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Financial assets and liabilities measured using Level 1 inputs include cash, cash equivalents, restricted cash, accounts receivable, prepaid expenses, accounts payable and accrued liabilities.

The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents. The Company measured money market funds of $1,128.0 million and $608.4 million as cash equivalents as of June 30, 2023 and December 31, 2022, respectively, using Level 1 inputs.

Table of Contents

Level 2—Observable inputs other than quoted prices included within Level 1, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs other than quoted prices that are observable or are derived principally from, or corroborated by, observable market data by correlation or other means.

The Company did not have Level 2 instruments as of June 30, 2023 and December 31, 2022.

Level 3—Unobservable inputs that are ~~used when~~supported by little or no market ~~data is available. The fair value hierarchy gives the lowest priority~~activity, are significant to ~~Level 3 inputs.~~

Level 1 liabilities consist of accounts payable, accrued expenses and long-term debt. The carrying amounts of accounts receivable, prepaid expenses, accounts payable and accrued liabilities approximate fair value due to the short-term nature of these items. Based on the borrowing rates currently available to the Company for debt with similar terms, the carrying value of the line of credit and term debt approximate fair value as well.

~~The tables below summarize the Company’s financial instruments’ classification within the fair value hierarchy as follows (in thousands):~~

September 30, 2017

Level 1

Level 2

Level 3

Total

Financial liabilities—convertible preferred stock warrant
liability

$
—

$
—

$
52,355

$
52,355

Total financial liabilities

$
—

$
—

$
52,355

$
52,355

December 31, 2016

Level 1

Level 2

Level 3

Total

Financial liabilities—convertible preferred stock warrant
liability

$
—

$
—

$
9,990

$
9,990

Total financial liabilities

$
—

$
—

$
9,990

$
9,990

Level 3 instruments consist solely of the Company’s preferred stock warrant liability in which the fair value was measured upon issuance and at each reporting date. Inputs used to determine the estimated fair value of the warrant liability as of the valuation date included remaining contractual term of the warrants, the risk-free interest rate, the volatility of comparable public companies over the remaining term, and the fair value of underlying shares. The significant unobservable inputs used in the fair value measurement of the

~~preferred stock warrant liability were~~ the fair value of the ~~underlying stock at~~assets or liabilities and reflect the ~~valuation date for periods prior to~~Company’s own assumptions about the ~~IPO and~~assumptions market participants would use in pricing the ~~estimated term~~asset or liability developed based on the best information available in the circumstances.

As of June 30, 2023, the ~~warrants. Generally, increases (decreases) in~~Company measured the Strategic Investment using Level 3 inputs. The fair value of the ~~underlying stock~~Strategic Investment on the date of purchase was determined to be equal to its principal amount. The Company recorded an unrealized loss of $0.1 million and ~~estimated term would result~~an unrealized gain of $3.1 million in ~~a directionally similar impact to the fair value measurement.~~

~~The following table represents the activity of the fair value of Level 3 instruments (in thousands):~~

September 30,
2017

December 31,
2016

Beginning balance

$
9,990

$
10,878

Fair value of warrants issued during the period

2,032

—

Change in fair value of preferred stock warrant liability

40,333

(888
)
Ending balance

$
52,355

$
9,990

~~3. BUSINESS COMBINATIONS~~

On 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 $3,500,000. In addition, the Company issued 108,332 shares of its 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 $350,000 of costsOther income (expense), net related to the ~~acquisition.~~

The preliminary purchase price allocation includes $1,554,000 of goodwill and $2,215,000 of identifiable intangible assets, which primarily consist of developed technology, with an expected useful life of approximately four years. Goodwill represents the excess of the purchase price over theadjustment to fair value of the ~~net tangible~~Strategic Investment for the three and six months ended June 30, 2023, respectively.

The Company classified the Strategic Investment as Level 3 due to the lack of relevant observable market data over fair value inputs. The fair value of the Strategic Investment was estimated using a scenario-based probability weighted discounted cash flow model. Significant assumptions include the discount rate, and the timing and probability weighting of the various redemption scenarios that impact the settlement of the Strategic Investment.

Assets and liabilities that are measured at fair value on a non-recurring basis

Non-financial assets such as goodwill, intangible assets, ~~acquired,~~property and equipment, operating lease right-of-use assets, and content assets are evaluated for impairment and adjusted to fair value using Level 3 inputs, only when impairment is recognized. The Company recognized an impairment of $4.3 million primarily related to operating lease right-of-use assets as part of its restructuring charges during the six months ended June 30, 2023.

9. LEASES

The Company's operating leases are primarily for office facilities. The leases have remaining terms ranging from one to ten years and may include options to extend or terminate the lease. The depreciable life of right-of-use assets is limited by the expected lease term.

The components of lease expense are as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Operating lease cost	$	21,671	$	19,377	$	43,146	$	34,734
Variable lease cost	6,080		4,906		12,372		9,131
Total operating lease cost	$	27,751	$	24,283	$	55,518	$	43,865

Supplemental cash flow information related to leases is as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	18,327	$	13,083	$	35,320	$	26,741
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	9,352	$	157,630	$	11,909	$	224,320

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Supplemental balance sheet information related to leases is as follows (in thousands, except lease term and discount rate):


	As of
	June 30, 2023			December 31, 2022
Operating lease right-of-use assets	$	499,308		$	521,695

Operating lease liability, current (included in Accrued liabilities)	$	59,266		$	54,689
Operating lease liability, non-current	589,476			584,651
Total operating lease liability	$	648,742		$	639,340

Weighted-average remaining term for operating leases (in years)	8.26			8.62
Weighted-average discount rate for operating leases	3.79		%	3.80		%

Future lease payments under operating leases as of June 30, 2023 are as follows (in thousands):


Year Ending December 31,	Operating Leases
2023 (remaining 6 months)	$	37,011
2024	86,829
2025	95,425
2026	96,035
2027	95,410
Thereafter	356,996
Total future lease payments	767,706
Less: imputed interest	(111,372)
Less: expected tenant improvement allowance	(7,592)
Total	$	648,742

As of June 30, 2023, the Company’s commitment relating to operating leases that have not ~~expected to be deductible for income tax purposes.~~ yet commenced was $30.8 million. These operating leaseswillcommence in fiscal year 2023 with lease terms of approximately 10 years.

10. DEBT

The ~~goodwill in this transaction is primarily attributable to the acquired workforce and expected operating synergies.~~

~~The results~~Company does not have any outstanding debt as of ~~operations of the acquired company are included in the results of~~June 30, 2023. In February 2023, the Company ~~beginning on~~repaid the ~~date~~debt balance in full and satisfied all outstanding debt obligations under the ~~acquisition~~Credit Facility (as defined below) when it matured.

The Company’s outstanding debt as of December 31, 2022 was ~~completed. Actual and pro forma results~~as follows (in thousands, except interest rate):


	As of
	December 31, 2022
	Amount		Effective Interest Rate
Term Loan A Facility	$	80,000	4.4%
Less: Debt issuance costs	(15)
Net carrying amount of debt	$	79,985

The carrying amount of ~~operations have not been presented~~debt as of December 31, 2022 approximated its fair value due to variable interest rates. There was no interest expense associated with the ~~total amounts of revenue and net income are not material to~~Credit Facility for the ~~Company's consolidated results for all periods presented.~~

~~4. CONSOLIDATED Balance sheet components~~

~~Accounts Receivable, Net—Accounts receivable, net, consisted of the following (in thousands):~~

September 30,
2017

December 31,
2016

Gross accounts receivable

$
100,059

$
95,538

Allowance for sales returns

(4,377
)

(6,916
)
Allowance for sales incentives

(10,499
)

(8,503
)
Other allowances

(343
)

(794
)
Total allowances

(15,219
)

(16,213
)
Total accounts receivable—net

$
84,840

$
79,325

~~Allowance for Sales Returns—Allowance for sales returns consisted of the following activities (in thousands):~~

September 30,
2017

December 31,
2016

Beginning balance

$
(6,916
)

$
(9,514
)
Charged to revenue

(12,495
)

(20,810
)
Utilization of sales return reserve

15,034

23,408

Ending balance

$
(4,377
)

$
(6,916
)

~~Allowance for Sales Incentives—Allowance for sales incentives consisted of the following activities (in thousands):~~

September 30,
2017

December 31,
2016

Beginning balance

$
(8,503
)

$
(7,642
)
Charged to revenue

(28,048
)

(36,626
)
Utilization of sales incentive reserve

26,052

35,765

Ending balance

$
(10,499
)

$
(8,503
)

~~Property and Equipment, Net—Property and equipment, net consisted of the following (in thousands):~~

September 30,
2017

December 31,
2016

Computers and equipment

$
10,982

$
8,787

Leasehold improvements

7,134

4,201

Website and internal-use software

4,384

2,902

Office equipment and furniture

1,824

1,452

Total property and equipment

24,324

17,342

Accumulated depreciation and amortization

(11,517
)

(7,814
)
Property and equipment, net

$
12,807

$
9,528

~~Depreciation and amortization~~three months ended June 30, 2023. The interest expense for the three months ended ~~September~~June 30, ~~2017 and October 1, 2016,~~2022 was ~~$1,303,000 and $1,351,000, respectively. Depreciation and amortization~~$0.8 million. The interest expense for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~October 1, 2016,~~2022 was ~~$3,883,000~~$0.6 million and ~~$4,201,000,~~$1.7 million, respectively.

~~Accrued Liabilities—Accrued liabilities consisted~~

Table of ~~the following (in thousands):~~

Contents

September 30,
2017

December 31,
2016

Accrued royalty expense

$
14,549

$
14,940

Accrued inventory

11,325

4,274

Accrued payroll and related expenses

4,352

5,342

Accrued cost of revenue

9,004

7,264

Accrued payments to content publishers

17,651

8,554

Other accrued expenses

8,617

5,782

Total accrued liabilities

$
65,498

$
46,156

~~Deferred Revenue—Deferred revenue consisted of the following (in thousands):~~

September 30,
2017

December 31,
2016

Player, current

$
14,359

$
13,611

Platform, current

16,463

10,341

Total deferred revenue, current

30,822

23,952

Player, non-current

4,767

5,215

Platform, non-current

34,035

23,869

Total deferred revenue, non-current

38,802

29,084

Total deferred revenue

$
69,624

$
53,036

~~5. DEBT~~

~~Debt obligations consisted of the following (in thousands):~~

September 30,
2017

December 31,
2016

Term Loan

$
25,000

$
—

Line of Credit

—

15,000

Total debt obligations

25,000

15,000

Compounding interest due at maturity

255

—

Less unamortized debt discount and issuance costs

(2,212
)

—

Balance

23,043

15,000

Current portion of long-term debt

—

(15,000
)
Long-term debt less current portion

$
23,043

$
—

Senior Secured Term Loan A and ~~Security Agreements~~

~~In May 2015,~~Revolving Credit Facilities

On February 19, 2019, the Company entered into a Credit Agreement with Morgan Stanley Senior Funding, Inc. (as amended ~~its Restated 2014 loan and security agreement (“Restated LSA”) with Silicon Valley Bank (“Bank’~~on May 3, 2019, the “Credit Agreement”), ~~extending~~which provided for (i) a four-year revolving credit facility in the ~~agreement to June 30, 2017. The amended Restated LSA provides advances under a revolving line~~aggregate principal amount of ~~credit~~ up to ~~$30,000,000 and provides for letters~~$100.0 million (the “Revolving Credit Facility”), (ii) a four-year delayed draw term loan A facility in the aggregate principal amount of ~~credit to be issued~~ up to $100.0 million (the “Term Loan A Facility”) and (iii) an uncommitted incremental facility subject to certain conditions (together with the ~~lessor of~~Revolving Credit Facility and the ~~available line of credit, reduced by outstanding advances and drawn but unreimbursed letters of credit, or $5,000,000. The advances under~~Term Loan A Facility, collectively, the ~~first amendment~~“Credit Facility”). See Note 11 to the ~~Restated LSA carry a floating per annum~~consolidated financial statements in our Annual Report for additional details regarding the Credit Facility.

On November 18, 2019, the Company borrowed an aggregate principal amount of $100.0 million from the Term Loan A Facility. The Company elected an interest rate equal to the ~~prime rate or the prime~~adjusted one-month LIBOR rate plus 2.5% depending on certain ratios and requires the Company to maintain a current ratio (calculated as current assets, divided by current liabilities less deferred revenue), greater than or equal to 1.1. The interest ratean applicable margin of 1.75% based on the ~~line of credit~~Company’s secured leverage ratio.

The Credit Facility matured on February 19, 2023 and the outstanding Term Loan A Facility was ~~3.75% as of December 31, 2016.~~ repaid in full.

As of December 31, ~~2016, $15,000,000 under~~2022, the ~~line of credit was~~Company had outstanding ~~and~~ letters of credit inagainst the ~~amount~~Revolving Credit Facility of ~~$868,000 were outstanding. As of December 31, 2016, the Company was in compliance with all~~$37.7 million. Upon maturity of the ~~covenants in~~Credit Facility on February 19, 2023, the ~~amended Restated 2014 LSA.~~

In June 2017, the Company entered into a second amendment to the Restated LSA. The advances under the second amendment carry a floating per annum interest rate equal to, at the Company’s option, (1) the prime rate or (2) LIBOR plus 2.75%, or the prime rate plus 1% depending on certain ratios. The extension further changed the financial covenant to maintain a current ratio (calculated as current assets, divided by current liabilities less deferred revenue) greater than or equal to 1.25. The revolving line of credit terminates on June 30, 2019 at which time the principal amount of all outstanding ~~advances becomes due and payable. As of September 30, 2017, no borrowings under the revolving line~~letters of credit were secured by the Company’s existing cash balance, a portion of which is restricted for that purpose. As of June 30, 2023, the Company had outstanding ~~and~~ letters of credit inof $37.8 million, which are secured by restricted cash of $40.7 million.

11. STOCKHOLDERS’ EQUITY

Preferred Stock

The Company has 10 million shares of undesignated preferred stock authorized but not issued with rights and preferences determined by the ~~amount~~Company’s Board of ~~$1,472,000 were outstanding.~~Directors at the time of issuance of such shares. As of ~~September~~June 30, ~~2017, the Company was in compliance with all~~2023 and December 31, 2022, there were no shares of ~~the covenants in the amended Restated LSA.~~

In June 2017, the Company entered into a subordinated loan agreement (“2017 Agreement”) with the Bank. The 2017 Agreement provides for a term loan borrowing of $40,000,000 with a minimum of $25,000,000 to be initially drawn at the close of the agreementpreferred stock issued and the remaining amount available for a 24 month period, to be drawn in no less than $5,000,000 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. outstanding.

Common Stock

The Company ~~is also obligated to pay final payment fees ranging from 1% to 4% depending on the timing~~has two classes of ~~the payment. The 2017 Agreement terminates on October 9, 2020. On October 31, 2017 the Company repaid the entire amount outstanding,~~authorized common stock, Class A common stock and ~~subsequently terminated the 2017 Agreement.~~

In connection with the 2017 Agreement the Company issued 408,648 warrants to purchase 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, the Company cancelled 114,933 warrants to purchase Class B common stock. Holders of Class A common stock ~~that were contingent~~are entitled to one vote for each share of Class A common stock held on ~~future borrowings.~~

~~6. STOCKHOLDERS’ DEFICIT~~

~~Convertible Preferred Stock— As~~all matters submitted to a vote of ~~September 30, 2017~~stockholders and ~~December 31, 2016 convertible preferred stock consisted of the following (in thousands, except share and per share data):~~

September 30, 2017 and December 31,2016

Series

Price

Shares
Authorized

Shares
Outstanding

Liquidation
Preference

A

$
0.36312

23,020,000

23,019,997

$
8,359

B

0.93808

6,396,071

6,396,068

6,000

C-1

0.54109

9,240,560

9,240,558

5,000

C-2

0.64931

8,950,467

7,700,466

5,000

D

2.37840

4,685,755

4,204,505

10,000

E

4.35679

11,160,733

11,074,655

48,250

F

5.43396

11,041,671

11,041,667

60,000

G

7.79730

3,206,239

3,206,234

25,000

H

9.17340

6,666,667

4,959,988

45,500

Total

84,368,163

80,844,138

$
213,109

~~Upon the closing of the Company’s IPO, all outstanding shares of its convertible preferred stock automatically converted into 80,844,138 shares~~holders of Class B common stock are entitled to ten votes for each share of Class B common stock held on all matters submitted to a ~~one-to-one basis. (Note 12)~~

~~Common Stock~~ ~~— At September 30, 2017 there were 1,000,000,000~~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 ~~150,000,000~~are generally automatically converted into shares of ~~Class B common stock, par value $0.0001, authorized. There were no shares of~~the Company's Class A common stock ~~and 5,637,785~~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 BA common stock.

Common Stock Reserved for Future Issuance

As of June 30, 2023, the Company’s common stock ~~issued and outstanding at September 30, 2017. At December 31, 2016 there were 122,000,000 shares of common stock, par $0.0001, authorized and 4,818,812 shares issued and outstanding.~~

~~The Company had reserved shares of common stock for issuance as follows:~~

September 30,
2017

December 31,
2016

Conversion of:

Series A convertible preferred stock

23,019,997

23,019,997

Series B convertible preferred stock

6,396,068

6,396,068

Series C-1 convertible preferred stock

9,240,558

9,240,558

Series C-2 convertible preferred stock

7,700,466

7,700,466

Series C-2 convertible preferred stock warrants

1,250,000

1,250,000

Series D convertible preferred stock

4,204,505

4,204,505

Series D convertible preferred stock warrants

481,246

481,246

Series E convertible preferred stock

11,074,655

11,074,655

Series E convertible preferred stock warrants

86,072

86,072

Series F convertible preferred stock

11,041,667

11,041,667

Series G convertible preferred stock

3,206,234

3,206,234

Series H convertible preferred stock

4,959,988

4,959,988

Series H convertible preferred stock warrants

408,648

—

Conversion of common stock warrants

—

375,000

Common stock options issued under stock option plan

27,326,277

22,334,508

Common stock options available for grant under stock
option plan

1,221,824

409,582

Total

111,618,205

105,780,546

~~Stock Option Plan—As of September 30, 2017 and December 31, 2016 the Company had~~ reserved for issuance ~~28,548,101 and 22,744,090~~in the future is as follows (in thousands):


			As of June 30, 2023
Common stock awards granted under equity incentive plans			13,656
Common stock awards available for issuance under the 2017 Employee Stock Purchase Plan (1)			5,089
Common stock awards available for issuance under the 2017 Equity Incentive Plan			30,203
Total reserved shares of common stock			48,948

(1) The Company has not issued any common stock ~~respectively, under~~pursuant to the ~~Company’s~~2017 Employee Stock Purchase Plan.

Equity Incentive Plans

The Company has two equity incentive plans, the 2008 Equity Incentive Plan (the “2008 Plan”) and the 2017 Equity Incentive Plan (the “2017 Plan”). ~~Options~~The 2017 Plan became effective in September 2017 in connection with the Company’s initial public offering (“IPO”). No additional equity grants have been made pursuant to the 2008 Plan subsequent to the IPO. The 2017 Plan provides for the grant of incentive stock options to the Company’s employees and for the grant of non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards, and other forms of equity compensation to the Company’s employees, directors and consultants.

Table of Contents

Restricted stock units granted under the ~~2008~~2017 Plan ~~must be~~are subject to continuous service. Stock options granted under the 2017 Plan generally are granted at a price per share equivalent to the fair market value on the date of grant. Recipients of option grants ~~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 ~~must be~~are at a price per share no less than 110% of the fair market value aton the date of grant.

Restricted Stock Units

Restricted stock unit activity for the six months ended June 30, 2023 is as follows (in thousands, except per share data):


	Number of Shares	Weighted-Average Grant Date Fair Value per Share
Balance as of December 31, 2022	8,577	$	120.82
Awarded	1,464	58.74
Released	(1,234)	120.01
Forfeited	(760)	130.02
Balance as of June 30, 2023	8,047	$	108.79

As of June 30, 2023, the Company had $725.7 million of unrecognized stock-based compensation expense related to unvested restricted stock units that is expected to be recognized over a weighted-average period of approximately 2.7 years.

Stock Options

The following table summarizes the Company’s stock option activities under the 2008 Plan ~~generally vest over four~~and 2017 Plan for the six months ended June 30, 2023 (in thousands, except 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”). (Note 12). No further shares would be issued under the 2008 Plan at the time the 2017 Plan became effective.

per share data):


	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Balance as of December 31, 2022	5,807	$	72.79	7.1
Granted	126	59.48		—
Exercised	(246)	6.11		—
Forfeited and expired	(78)	160.84		—
Balance as of June 30, 2023	5,609	$	74.22	6.8	$	95,593

Options exercisable as of June 30, 2023	3,253	$	50.66	5.4	$	83,493

~~Activity under the Company’s equity incentive plans is as follows:~~

Shares
Available
for Grant

Number of
Shares

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Life (Years)

Weighted
Average
Grant Date
Fair Value
Per Share

Balance, December 31, 2016

409,582

22,334,508

3.66

6.6

—

Increase authorization

6,250,000

—

—

—

Granted

(6,013,312
)

6,013,312

7.47

—

$
3.48

Exercised

—

(445,995
)

3.91

—

—

Forfeited and expired

575,554

(575,554
)

5.49

—

—

Balance, September 30, 2017

1,221,824

27,326,271

4.46

6.7

—

~~The aggregate intrinsic value of the shares vested and exercisable at September 30, 2017 was $354,849,000.~~

~~Stock-Based Compensation~~—The fair value of options granted under the 2008 Plan is estimated on the grant date using the Black-Scholes option-valuation model. 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 stock options 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.

~~Expected Term~~—The 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 Volatility—The Company’s volatility factor is estimated using several comparable public company volatilities for similar option terms.~~

~~Expected Dividends—The 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 Rate~~—The 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.

~~Fair Value of Common Stock~~—Given the absence of a public trading market at the date of the grant, the Company’s board of directors consider numerous objective and subjective factors to determine the fair value of the common stock at each grant date. These factors include, but are not limited to (i) independent contemporaneous third-party valuations of the common stock; (ii) the prices for the preferred stock sold to outside investors; (iii) the rights and preferences of convertible preferred stock relative to the common stock; (iv) the lack of marketability of the common stock; (v) developments in the business; and (vi) the likelihood of achieving a liquidity event, such as an IPO or sale of the Company, given prevailing market conditions.

~~The Company uses the straight-line method for expense recognition.~~

~~The assumptions used to value stock-based awards granted are as follows:~~

Three Months Ended

Nine Months Ended

September 30,
2017

October 1,
2016

September 30,
2017

October 1,
2016

Dividend rate

$
—

—

—

—

Expected term (in years)

5.3 - 6.5

—

5.3 - 6.5

5.3 - 6.5

Risk-free interest rate

1.84 - 2.03%

—

1.84% - 2.25%

1.32% - 1.50%

Expected volatility

39%  - 43%

—

39%  - 44%

44%  - 46%

Fair value of common stock

$
8.82

—

$5.70 - $8.82

$
6.60

~~The total intrinsic value of options exercised during the nine months ended September 30, 2017 and October 1, 2016, was $1,510,000 and $350,000, respectively.~~ As of ~~September~~June 30, ~~2017,~~2023, the Company had ~~$33,750,000~~$80.2 million of unrecognized ~~stock~~stock-based compensation expense related to unvested stock options that is expected to be recognized over a weighted-average period of approximately ~~2.8~~2.3 years.

~~As a result~~

Stock-Based Compensation

The Company measures the cost of employee services received in exchange for an equity award based on the Company’s Black-Scholes option-valuation fair value calculations and the Company’s use of the straight-line vesting attribution method, the Company recognized employee stock-based compensation expense as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30,
2017

October 1,
2016

September 30,
2017

October 1,
2016

Cost of player revenue

$
25

$
30

$
99

$
88

Cost of platform revenue

18

63

58

165

Research and development

1,197

651

3,078

1,924

Sales and marketing

808

580

2,099

1,737

General and administrative

876

687

2,183

2,102

Total

$
2,924

$
2,011

$
7,517

$
6,016

~~Common Stock Warrants~~—In July 2017 the Company issued 357,283 shares of common stock upon expiration of 375,000 common stock warrants issued in 2009. There were no common stock warrants outstanding at September 30, 2017.

~~Preferred Stock Warrants~~—

~~Outstanding preferred stock warrants were as follows:~~

Series

Number
Outstanding
September 30,
2017

Number
Outstanding
December 31,
2016

Issuance Date

Exercise
Price

Original
Term
C-2

1,250,000

1,250,000

July 13, 2011

$
0.64931

10 years
D

249,999

249,999

October 17, 2011

2.37840

10 years
D

168,180

168,180

March 12, 2012

2.37840

10 years
D

63,067

63,067

April 27, 2012

2.37840

10 years
E

86,072

86,072

April 27, 2012

3.48546

10 years
H

408,648

—

June 9, 2017

9.17340

10 years
Total

2,225,966

1,817,318

~~Upon the closing of the Company’s IPO, all outstanding convertible preferred stock warrants automatically converted to Class B common stock warrants. (Note 12)~~

~~The~~grant date fair value of the ~~preferred~~award. Stock options granted to employees generally vest over one to four years and have a term of ten years. Restricted stock ~~warrants has been recorded as a liability as~~units generally vest over one to four years.

Table of ~~September 30, 2017 and December 31, 2016.~~ Contents

The ~~fair value of~~following table shows the preferred stock warrants is remeasured as of each balance sheet date using the Black-Scholes option-pricing model. Changes in the fair value of the preferred stock warrants during the year are recognized in the consolidated statements of operations.

~~The assumptions used to value the preferred stock warrants using the Black-Scholes model are as follows:~~

	~~September 30,~~ ~~2017~~		~~December 31,~~ ~~2016~~
~~Dividends~~	$	—	$	—
~~Expected term (in years)~~	~~3.0-9.7~~		~~3.2-3.9~~
~~Risk-free interest rate~~	~~1.5%—2.3%~~		~~0.7%—1.6%~~
~~Volatility~~	~~43.5%—50.7%~~		~~46.2%—47.8%~~

~~7. COMMITMENTS AND CONTINGENCIES~~

~~Commitments~~—The Company has operating lease agreements for office, research and development and sales and marketing space in the United States, the United Kingdom (“UK”), and China, with expiration dates from May 2017 to September 2024. Renttotal stock-based compensation expense for the three and six months ended ~~September~~June 30, ~~2017~~2023 and October 1, 2016 was $1,716,000 and $1,122,000 respectively. Rent expense for the nine months ended September 30, 2017 and October 1, 2016 was $4,805,000 and $3,505,000 (excluding amounts related to the loss from the exit of the former headquarters facilities), respectively.

2022 (in thousands):


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Cost of revenue, platform	$	349	$	366	$	688	$	602
Cost of revenue, devices	812		435		1,616		1,004
Research and development	34,824		38,229		73,487		66,619
Sales and marketing	31,225		27,917		65,364		51,828
General and administrative	22,369		20,077		44,896		36,551
Total stock-based compensation	$	89,579	$	87,024	$	186,051	$	156,604

12. COMMITMENTS AND CONTINGENCIES

Manufacturing Purchase Commitments—

The Company has various manufacturing contracts with vendors in the conduct of the normal course of its business. ~~One major vendor has a contract that is noncancelable. As of September 30, 2017 the Company had $87,151,000 $ purchase commitments for inventory issued~~In order to ~~this vendor.~~

~~The Company records a liability for noncancelable purchase commitments in excess of its~~manage future demand ~~forecasts. The Company recorded $1,366,000 and $2,040,000~~ for ~~these purchase commitments in “Accrued liabilities” at September 30, 2017 and December 31, 2016.~~

~~Content License Purchase Commitments—The Company licenses certain content for users to access through The Roku Channel. An obligation for licensing of content is incurred at the time~~its products, the Company enters into ~~an agreement~~agreements with manufacturers and suppliers to ~~obtain future titles~~procure inventory based upon certain criteria and timing. Some of these commitments are non-cancelable. As of June 30, 2023, the ~~cost~~Company had $180.2 million of non-cancelable purchase commitments for inventory.

Content Commitments

The Company enters into contracts with content publishers to license and produce content for streaming. When a title becomes available, the Company records a content ~~is known.~~asset and liability on the condensed consolidated balance sheets. Certain licensing agreements, such as film output deals, include the obligation to license rights for unknown future titles for which the ultimate quantity and/or fees ~~for which~~ are not ~~yet~~ determinable as of the reporting date. ~~At September~~The Company does not include any estimated obligation for these future titles beyond the known minimum amount. The unknown obligations could be material. The Company also licenses content under arrangements where the payments are variable and based on the revenue earned by the Company. Since those amounts cannot be determined, they are not included in the obligations below.

As of June 30, ~~2017,~~2023, the Company's total obligation for content was $344.9 million, of which the Company ~~had $506,000 of obligations~~ recorded $64.5 million in ~~“Accrued liabilities” for license purchase commitments~~Current liabilities and ~~$1,611,000 of obligations that are~~$28.1 million in Other long-term liabilities in the condensed consolidated balance sheets. The remaining $252.3 million is not ~~reflected~~yet recognized on the ~~financial statements~~condensed consolidated balance sheets as ~~they do~~the content does not ~~yet~~ meet the criteria for asset recognition. ~~There were no~~

The expected timing of payments for these content ~~license agreements at December 31, 2016.~~

~~Letter~~obligations are as follows (in thousands):


Year Ending December 31,
2023 (remaining 6 months)	$	135,451
2024	117,740
2025	60,432
2026	20,756
2027	7,663
Thereafter	2,887
Total content obligations	$	344,929

Letters of Credit—

As of ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016~~2022, the Company had irrevocable letters of credit outstanding in the amount of ~~$1,472,000~~$37.8 million and ~~$868,000 for the benefit of a landlord~~$37.7 million, respectively related to ~~noncancelable facilities~~operating leases. The letters of credit have various expiration dates ~~from January 2018 to August 2018.~~

through 2030.

Contingencies—

The Company ~~may~~accrues for loss contingencies, including liabilities for intellectual property licensing claims, when it believes such losses are probable and reasonably estimable.These contingencies are reviewed at least quarterly and

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adjusted to reflect the 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, ~~involved in disputes or litigation matters that arise~~however, inherently unpredictable and subject to significant uncertainties.

From time to time, the Company is subject to legal proceedings, claims, and investigations in the ordinary course of ~~business. Management~~business, including claims relating to employee relations, business practices and patent infringement. The Company is involved in litigation matters not ~~aware~~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 ~~dispute~~matters that it ~~believes would~~is currently involved in are reasonably likely to have a material adverse effect on its business, ~~operating~~financial condition, or results ~~cash flows or financial condition.~~

~~Indemnification—Many~~of operations. During the three and six months ended June 30, 2023 and 2022, the Company did not have any loss contingencies that were material.

Indemnification

In the ordinary course of business, the Company has entered into contractual arrangements which provide indemnification provisions of varying scope and terms to business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements ~~include certain provisions for indemnifying content publishers, licensees, contract manufacturers~~ and ~~suppliers if the Company’s products or services infringe a third party’s~~out 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.

It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each agreement. To date, the Company has not incurred any material costs as a result of such obligations and ~~have~~has not accrued any liabilities related to such obligations in the condensed consolidated financial statements.

~~Player Warranties—Upon issuance of a standard player warranty, the Company recognizes a liability~~

13. INCOME TAXES

Income tax expense was $1.6 million and $2.6 million for the ~~obligation it assumes under the warranty. As of September~~three months ended June 30, ~~2017~~2023 and ~~December 31, 2016~~2022, respectively. Income tax expense was $5.2 million and ~~the accrued warranty reserve was immaterial.~~

~~The Company’s standard player warranty period ranges from 12 to 24 months from the date of player activation. Upon shipment of player to its customers, the Company estimates expenses~~$4.7 million for the ~~cost~~six months ended June 30, 2023 and 2022, respectively. The income tax expense is primarily attributable to ~~replace products~~income taxes in certain foreign jurisdictions where we conduct business and income taxes in the United States.

A valuation allowance is provided when it is more likely than not that ~~may~~some portion of the deferred tax assets will not be ~~returned under warranty and accrues~~realized through future operations. As a ~~liability in cost of player revenue for this amount. The determination~~result of the Company’s ~~warranty requirements is based on historical experience. The Company estimates and adjusts these accruals at each balance sheet date for changes in these factors.~~

~~8. INCOME TAXES~~

The Company is subject to income tax in the U.S. as well as other tax jurisdictions in which it conducts business. Earnings from non-U.S. activities are subject to local country income tax. The Company does not provide for federal income taxes on the undistributed earningsanalysis of ~~its foreign subsidiaries as such earnings are expected to be reinvested indefinitely.~~

The Company recorded an income tax expense of $144,000 and $103,000 for the nine months ended September 30, 2017 and October 1, 2016, respectively, related to foreign income taxes and state minimum taxes. Based on theall available objective evidence, ~~during the nine months ended September~~both positive and negative, as of June 30, ~~2017, the Company~~2023, management believes it is more likely than not that ~~the~~some deferred tax ~~benefits of the U.S. losses incurred during the nine months ended September 30, 2017 may~~assets will not be ~~realized.~~fully realizable. Accordingly, the Company ~~recorded~~has provided a full valuation allowance against its U.S. and certain foreigndeferred tax assets.

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted in the United States. The IRA introduces a 15% alternative minimum tax ~~benefits~~based on the financial statement income of certain large corporations, effective for tax years beginning after December 31, 2022. The IRA also includes a 1% excise tax on the ~~U.S. losses incurred during~~net fair market value of stock repurchases made after December 31, 2022. The Company considered the ~~nine~~applicable tax law changes, and concluded that there was no impact to the Company’s tax provision for the three and six months ended ~~September~~June 30, ~~2017. The primary difference between the effective tax rate and the local statutory tax rate relates to the valuation allowance on the Company’s U.S. losses.~~

~~9. RELATED-PARTY TRANSACTIONS~~

2023. The Company ~~has agreements with one~~will continue to evaluate the impact of the Company’s strategic investors. In the three months ended September 30, 2017 and October 1, 2016, the Company recorded $153,000 and $121,000 of revenue from sales to this investor. In the nine months ended September 30, 2017 and October 1, 2016, the Company recorded $243,000 and $627,000 of revenue from sales to this investor. The Company had receivable balances of $153,000 and $148,000 related to these ~~sales at September 30, 2017 and December 31, 2016, respectively.~~

~~10.~~tax law changes on future periods.

14. NET LOSS PER SHARE

The Company calculates its basic and diluted net loss per share allocable to common stockholders in conformity with the two-class method required for companies with participating securities. In computing diluted net loss allocable to common stockholders, undistributed earnings are re-allocated to reflect the potential impact of dilutive securities.

The Company’s basic net loss per share ~~allocable to common stockholders~~ is calculated by dividing the net loss ~~allocable to common stockholders~~ by the weighted-average number of shares of common stock outstanding for the period. The Company uses the two-class method to calculate net 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 loss per share are the same for both classes.

For purposes of the calculation of diluted net loss per share, ~~allocable to common stockholders, convertible preferred stock, unvested shares of common stock issued upon the early exercise of stock options, convertible preferred stock warrants,~~ options to purchase common stock and ~~common~~restricted stock ~~warrants~~units are considered common stock ~~equivalents but have been~~equivalents. 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 ~~allocable to common stockholders~~in the period of net loss, as their effect is antidilutive.

~~Basic and diluted net loss per share~~

Table of common stock allocable to common stockholders is calculated by dividing the net loss allocable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase, and excludes any dilutive effects of employee stock-based awards and warrants. Because the Company has reported a net loss for the nine months ended September 30, 2017 and October 1, 2016 and the three months ended September 30, 2017 and October 1, 2016, diluted net loss per common share is the same as the basic net loss per share for those years.

Contents

The Company considers all series of its convertible preferred stock to be participating securities as they are entitled to receive noncumulative dividends prior and in preference to any dividends on shares of common stock. Due to the Company’s net losses, there is no impact on the loss per share calculation in applying the two-class method since the participating securities have no legal obligation to share in any losses.

~~The~~following table presents the calculation of basic and diluted net loss per share ~~as follows~~ (in thousands, except ~~share and~~ per share data):

Three Months Ended

Nine Months Ended

September 30, 2017

October 1,
2016

September 30, 2017

October 1,
2016

Numerator:

Net loss allocable to common stockholders

$
(46,235
)

$
(12,743
)

$
(70,450
)

$
(45,985
)
Denominator:

Weighted-average shares used in computing net
loss per share, basic and diluted

5,259,796

4,784,170

4,998,727

4,724,767

Net loss per share, basic and diluted

$
(8.79
)

$
(2.66
)

$
(14.09
)

$
(9.73
)


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Numerator:
Net Loss	$	(107,595)	$	(112,321)	$	(301,199)	$	(138,627)
Denominator:

Weighted-average common shares outstanding — basic and diluted	141,033		136,849		140,685		136,198
Net loss per share — basic and diluted	$	(0.76)	$	(0.82)	$	(2.14)	$	(1.02)

~~The potential~~

For the three and six months ended June 30, 2023, outstanding equity awards of 13.7 million shares of common ~~shares that were~~stock are excluded from the calculation of diluted net loss per share because of their ~~effect would have been antidilutive for~~anti-dilutive effect.

For the ~~periods presented~~three and six months ended June 30, 2022, outstanding equity awards of 10.9 million shares of common stock are ~~as follows:~~

excluded from the calculation of diluted net loss per share because of their anti-dilutive effect.

September 30, 2017

October 1,
2016

Options to purchase common stock

27,326,277

20,628,248

Unvested shares of common stock issued upon early
exercise of stock options

51,686

4,566

Warrants to purchase common stock

-

375,000

Warrants to purchase convertible preferred stock

2,225,966

1,817,320

Convertible preferred stock

80,844,138

80,844,138

Total

110,448,067

103,669,272

~~11.~~

15. SEGMENT INFORMATION

An operating segment is defined as a component of an entity for which discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) for purposes of allocating resources and evaluating financial performance. 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:

~~Player—Consists primarily~~

Platform

The platform segment generates revenue from the sale of ~~net sales~~digital advertising (including media and entertainment promotional spending, the demand-side platform, and related services) and content distribution services (including subscription and transaction revenue shares, the sale of Premium Subscriptions, and the sale of branded channel buttons on remote controls).

Devices

The devices segment generates revenue from the sale of streaming ~~media~~ players, Roku-branded TVs, smart home products and services, audio products, and related accessories that are sold through retailers and distributors, as well as directly to customers through the Company’s website.

~~Platform—Consists primarily of fees received from advertisers and content publishers, and~~ In addition, revenue from licensing arrangements with service operators and licensed Roku TV partners is included in the Company’s technology and proprietary operating system with TV brands and service operators. Platform revenue primarily includes 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 remote controls.

The accounting policies for the segments are the same as those described in our Prospectus. The Company does not allocate property and equipment or any other assets or capital expenditures to reportable segments. Operating expenses are not managed at the segment level.

The Company evaluates the performance of its reportable segments based on the 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.

devices segment.

Customers accounting for 10% or more of ~~player~~ segment revenue, net, were as follows:

	Three Months Ended						Nine Months Ended
	September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016				Three Months Ended				Six Months Ended
Customer A		19	%		22	%		15	%		19	%
														June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Platform segment revenue:													Platform segment revenue:
Customer I													Customer I	13	%	*		13	%	*

Devices segment revenue:													Devices segment revenue:
Customer B	*			10			10			11			Customer B	17	%	22	%	14	%	21	%
Customer C	32			33			32			33			Customer C	45	%	32	%	41	%	34	%

* Less than 10%

~~Customers accounting for 10% or more of platform segment revenue were as follows:~~

Three Months Ended

Nine Months Ended

September 30,
2017

October 1,
2016

September 30,
2017

October 1,
2016

Customer 1

*%

14
%

*%

17
%
Customer 3

14

12

13

*

*	~~Less than 10%~~

~~Substantially all Company assets were held in the United States and were attributable to the operations in the United States as of September 30, 2017 and December 31, 2016.~~ Revenue in international markets was less than 10% in each of the periods presented.

~~12. SUBSEQUENT EVENTS~~

~~IPO~~ — ~~On October 2, 2017,~~

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Long-lived assets, net

The following table presents long-lived assets, net, which consist primarily of property and equipment and operating lease right-of-use assets, by geographic area (in thousands):


	As of
	June 30, 2023		December 31, 2022
United States	$	695,649	$	686,902
United Kingdom	119,715		127,538
Other countries	41,547		42,286
Total	$	856,911	$	856,726

16. RESTRUCTURING

In November 2022, the Company ~~completed~~approved a plan to reduce its ~~IPO~~operating expense growth rate due to economic conditions. The Company eliminated employee positions in the United States and internationally, and also abandoned future development for certain technology assets. Accordingly, the Company recorded employee termination expenses consisting primarily of ~~Class A common stock, in which it sold 10,350,000 shares, including 1,350,000 shares pursuant~~severance payments, notice pay (where applicable), employee benefits contributions, payroll taxes and related costs, and an impairment charge related to the ~~underwriters’ over-allotment option.~~ abandoned technology assets during the year ended December 31, 2022.

The ~~shares were sold at an IPO price~~Company continued to explore additional measures to curtail its operating expenses during the first quarter of ~~$14.00 per share for net proceeds of $134,757,000, after deducting underwriting discounts and commissions of $10,143,000. Additionally, offering costs incurred by~~this fiscal year. As a result, in March 2023, the Company ~~totaledapproximately $4,000,000.~~

~~Upon~~approved the ~~closing~~elimination of additional employee positions in the United States and internationally, and committed to exit and sublease, or cease use, of certain office facilities that the Company did not currently occupy. The Company recorded employee termination expenses, exits costs and assets impairment charges related to the exit and abandonment of leased office facilities.

The restructuring charges for three and six months ended June 30, 2023, are recorded as follows (in thousands):


	Three Months Ended June 30, 2023				Six Months Ended June 30, 2023
	Employee Terminations		Facilities Exit Costs		Total		Employee Terminations		Assets Impairment Charges		Facilities Exit Costs		Total
Research and development	$	(547)	$	—	$	(547)	$	13,303	$	—	$	—	$	13,303
Sales and marketing	610		—		610		7,287		—		—		7,287
General and administrative	73		(90)		(17)		4,785		4,338		1,603		10,726
Total restructuring charges	$	136	$	(90)	$	46	$	25,375	$	4,338	$	1,603	$	31,316

A reconciliation of the ~~Company’s IPO, all outstanding shares~~beginning and ending balance of ~~its convertible preferred stock automatically converted into 80,844,138 shares~~employee termination restructuring charges and facility exit costs, which are included in Accrued liabilities in the condensed consolidated balance sheets, is as follows (in thousands):


	Three Months Ended June 30, 2023						Six Months Ended June 30, 2023
	Employee Terminations		Facilities Exit Costs		Total		Employee Terminations		Facilities Exit Costs		Total
Beginning balance	$	25,199	$	1,295	$	26,494	$	22,093	$	—	$	22,093
Charges incurred (adjusted)	136		(90)		46		25,375		1,603		26,978
Payments made	(24,913)		(385)		(25,298)		(47,046)		(783)		(47,829)
Ending balance	$	422	$	820	$	1,242	$	422	$	820	$	1,242

Table of ~~Class B common stock and all outstanding convertible preferred stock warrants automatically converted to Class B common stock warrants on a one-to-one basis.~~

In connection with the IPO, the Company amended and restated its Certificate of Incorporation to change the authorized capital stock to 1,000,000,000 shares of Class A common stock, 150,000,000 shares of Class B common stock, and 10,000,000 shares of preferred stock, all with a par value of $0.0001 per share. The Consolidated Financial Statements as of September 30, 2017, including share and per share amounts, do not give effect to the IPO, conversion of the convertible preferred stock, or conversion of the preferred stock warrants as the IPO and such conversions were completed subsequent to September 30, 2017.

~~Debt Extinguishment~~ — In October 2017, the Company repaid all outstanding advances, accrued interest and associated fees due under the 2017 Agreement with the Bank and terminated the agreement. The repayment was treated as a debt extinguishment and, as a result, the Company will record a loss on extinguishment of debt of $2,338,000. In connection with the repayment, the Company cancelled 114,933 warrants to purchase Class B common stock that were contingent on future borrowings.

~~Class B Common Stock Warrants~~ — In October 2017, the Company issued 956,511 shares of Class B common stock upon net exercise of 1,043,009 Class B common stock warrants issued in connection with various debt agreements entered into from 2011 to 2017. These common stock warrants had converted from convertible preferred stock warrants at the close of the IPO.

Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations.~~

Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this ~~in this~~ Quarterly Report ~~on Form 10-Q~~ and with our audited consolidated financial statements included in our ~~prospectus dated September 27, 2017 as~~Annual Report for the year ended December 31, 2022, filed on February 16, 2023, with the ~~Securities~~SEC.

Overview

Our two reportable segments are the platform segment and ~~Exchange Commission pursuant to Rule 424(b) under~~ the ~~Securities Act 1933, as amended, or the Securities Act (File No. 333-220318).~~

~~Overview~~

Roku pioneered streaming to the TV. 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. We do this at scale today. As of September 30, 2017, we had 16.7 million active accounts. Our users streamed more than 10.5 billion hours on the Roku platform in the nine months ended September 30, 2017, 60% growthdevices segment. Platform revenue is generated from the ~~nine months ended September 30, 2016. Roku is capitalizing on large economic opportunity from TV streaming’s disruptive~~sale of digital advertising (including media and entertainment promotional spending, the demand-side platform, and related services) and content distribution ~~model as a leading TV streaming platform for users, content publishers and advertisers.~~

The Roku platform delivers a significant expansion in consumer choice in TV streaming. From our home screen, users can easily search, discover and access movies and TV episodes, as well as live sports, music, news and more. In the US, users can also search for and compare the price of content from various channels available on our platform and choose from ad-supported,services (including subscription and ~~transactional video on-demand content. Consumers can personalize their content selection with cable TV replacement offerings~~transaction revenue shares, the sale of Premium Subscriptions, and ~~other streaming services that suit their budgets and needs.~~

~~Advertising.~~ ~~Our advertising products enable advertisers to serve relevant ads to our users and measure return on investment. Our primary advertising products include:~~

~~Video ads~~. Our ad-supported content publishers use video ads to monetize our audiences and we also use video ads to monetize our platform. Video ads are sold as 15-second or 30-second spots inserted before a program starts, or during a program break, within channels on the ~~Roku platform where we have video inventory access. One~~sale of the ways we secure video ad insertion rights from content publishers is via our distribution deals with those publishers. In addition, many publishers also authorize us to fill their own unsold inventory. For many small and medium publishers on our platform, Roku sells all or a majority of the ads on their channels.

~~Interactive video ads.~~ We offer advertisers the ability to make their TV advertising interactive with customized clickable overlays that invite viewers to engage more intimately with brands, by watching additional videos, obtaining offer details, getting a coupon code via text or finding the nearest retailer to buy a product.

~~Audience development promotions.~~ ~~We utilize a variety of ad placements, particularly native display ads, on the Roku home screen and screen saver, to promote content publishers and their services to our users. We help them to drive~~branded channel ~~downloads and traffic to their channels, and to drive subscriptions or movie and TV show consumption.. We also sell branded~~ buttons on ~~our~~ remote controls which are reserved for content publishers who are in more prominent placement on the remote to drive incremental usage and reduce friction by allowing the user to launch straight to the channel.

controls).

~~Brand sponsorships.~~ We support a variety of promotional opportunities for advertisers, such as sponsored themes to take over our home screen and content sponsorships to give users the opportunity to experience a free movie or show (e.g. “Family movie night brought to you by…”).

~~Roku TVs.~~ Roku TVs are manufactured and sold by our TV brand licensees, integrate our Roku Operating System, or Roku OS, and leverage our smart TV hardware reference design. Current licensee brands include Element, Hisense, Hitachi, Insignia, RCA, Sharp and TCL. Roku TVs are available in sizes ranging from 24” to 65” at leading retailers in the United States and Canada. By the end of 2017, we expect over 150 models to be available to consumers in North America, up from approximately 100 in 2016, featuring a wide range of prices as well as picture and display capabilities.

~~Streaming Players.~~ We offer a popular, industry-leading line of streaming players for sale under the Roku brand in the United States, Canada, the United Kingdom, France, the Republic of Ireland and several Latin American countries, that allow users to access our TV streaming platform. All players run on the Roku OS and stream content via built-in Ethernet or Wi-Fi capability, depending on the model.

~~We have achieved significant growth. In the nine months ended September 30, 2017, we~~Devices revenue is generated ~~revenue of $324.5 million, up 29% from $251.3 million in the nine months ended October 1, 2016. We generate player revenue~~ from the sale of streaming players, Roku-branded TVs (beginning in 2023), smart home products and ~~platform~~services, audio products, and related accessories as well as revenue from ~~advertising, content distribution, billing~~licensing arrangements with service operators and ~~licensing activities on our platform. We earn revenue as users engage on our platform and we intend to continue to grow platform revenue by further monetizing our~~licensed Roku TV streaming platform. In the nine months ended September 30, 2017, player revenue represented 57% of total revenue and was unchanged, and platform revenue represented 43% of total revenue and grew 108% from the nine months ended October 1, 2016.

In the nine months ended September 30, 2017, we generated gross profit of $126.4 million, up 65% from $76.4 million in the nine months ended October 1, 2016. In the nine months ended September 30, 2017, player gross profit represented 15% of total gross profit and declined 31%, and platform gross profit represented 85% of total gross profit and grew 123%. We are strategically decreasing our streaming player average selling prices, or ASP, to expand our active accounts, which will also reduce our player gross margin. 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.

partners. We expect to continue to ~~make tradeoffs away~~manage the average selling prices of Roku streaming devices to increase our active accounts. We expect that the trade off from ~~player~~devices gross profit ~~in favor of platform gross profit~~or loss to grow active accounts ~~more rapidly~~will result in increased platform revenue and ~~increase monetization.~~platform gross profit.

Business Conditions and Macroeconomic Factors

Macroeconomic factors, such as increased inflation and interest rates, recessionary fears, financial and credit market fluctuations, changes in economic policy, bank failures, labor disputes, the COVID-19 pandemic, global supply chain constraints, and geopolitical developments (such as the war in Ukraine), have had, and we believe will continue to have, an impact on our business and results of operations. For example, in 2022, some of our licensed Roku TV partners faced inventory challenges that negatively impacted their unit sales. In addition, we believe advertising budgets in a variety of industries have been pressured by factors such as inflation, rising interest rates, and related market uncertainty, which has led to reduced advertiser spending and has adversely affected our platform revenue. We believe rising inflation and recessionary fears also have led to a reduction in consumer discretionary spending, which has negatively impacted the ~~nine months ended September 30, 2017~~demand for our ~~net loss was $(70.5) million~~products and ~~our Adjusted EBITDA was $(17.7) million. In~~services. The ongoing effects of macroeconomic conditions remain difficult to predict due to numerous uncertainties. We believe that the ~~nine months ended October 1, 2016 our net loss was $(46.0) million~~direct and ~~our Adjusted EBITDA was $(36.5) million.~~indirect impacts of these business conditions and macroeconomic factors are difficult to isolate or quantify. See Item 1A, Risk Factors, and the ~~section titled “Non-GAAP Financial Measures”~~Note Regarding Forward Looking Statements elsewhere in this Quarterly Report for a reconciliation between Adjusted EBITDA and net loss, the most directly comparable generally accepted accounting principle, or GAAP, financial measure and a discussion about the limitations of Adjusted EBITDA.

additional details.

Key Performance Metrics

~~We use the following~~

The key performance metrics we use to evaluate our business, measure our performance, develop financial forecasts and make strategic ~~decisions. Our key performance metrics~~decisions are gross profit, active accounts, streaming hours, ~~streamed,~~ and average revenue per user (“ARPU”).

Three Months Ended

Nine Months Ended

September 30,

October 1,

Change

September 30,

October 1,

Change

2017

2016

%

2017

2016

%

Hours Streamed (in millions)

3,780

2,396

58
%

10,523

6,568

60
%
Active Accounts (in thousands)

16,728

11,278

48

16,728

11,278

48

ARPU for the preceding four fiscal quarters (in dollars)

$
12.68

$
9.26

37
%

$
12.68

$
9.26

37
%

Gross Profit

We ~~measure the performance of our business using~~use gross profit ~~and we are focused on increasing gross profit. We currently generate positive gross profit on player revenue, however, the majority of our gross profit is generated from platform revenue. We believe gross profit is~~as the primary metric to measure the performance of our business because we have two revenue segments ~~with~~that have different margin profiles, and we aim to maximize our ~~high~~higher margin platform revenue from our active accounts as they stream content on our platform.

All of our gross profit is generated from our platform segment.

Our gross profit was $715.9 million and $720.0 million for the six months ended June 30, 2023 and 2022, respectively, reflecting a decrease of 1%.

Active Accounts

We believe that the number of active accounts is a relevant measure to gauge the size of our user base. We define active accounts as the number of distinct user accounts that have streamed content on our platform inwithin the last 30 days of the period. Users who streamed content from The Roku Channel only on non-Roku platforms are not included in this metric. Additionally, users who only register an account for use of our smart home products are not included in our reported number of active accounts. 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 ~~use~~be used on multiple streaming devices.

We had 73.5 million and 63.1 million active accounts as of June 30, 2023 and 2022, respectively, reflecting an increase of 16%.

Table of Contents

Streaming Hours

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.~~

~~Hours Streamed~~

~~We define~~streaming hours ~~streamed as the aggregate amount of time users streamed content~~ on ~~our platform in a given period. We report hours streamed on a calendar basis. We believe the usage of~~ our platform is an effective measure of user engagement and that the growth in the number of hours of content streamed across our platform reflects our success in addressing the growing user demand for TV

streaming. We define streaming hours as the aggregate amount of time streaming devices stream content on our platform in a given period. Hours streamed from The Roku Channel on non-Roku platforms are not included in this metric. Additionally, smart home products do not contribute to our streaming hours. We report streaming hours on a calendar basis.

~~streaming.~~Additionally, we believe that over time, increasing user engagement on our streaming platform increases our platform monetization because we earn platform revenue from various forms of user engagement, including advertising, as well as revenue shares from subscriptions and transactional video on-demand. However, our ~~revenues~~revenue from content ~~providers are~~publishers 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 ~~providers~~publishers or ARPU on a period-by-period basis. ~~Additionally, increasing user engagement~~Moreover, streaming hours on our platform are measured whenever a streaming ~~platform increases~~device is streaming content, whether a viewer is actively watching or not. For example, if a Roku player is connected to a TV, and the viewer turns off the TV, steps away, or falls asleep and does not stop or pause the player, then the particular streaming channel may continue to play content for a period of time determined by the streaming channel. We believe that this also occurs across a wide variety of non-Roku streaming devices and other set-top boxes.

Since the first quarter of 2020, all of our ~~gross profit because~~Roku streaming devices include a Roku OS feature that is designed to identify when content has been continuously streaming on a channel for an extended period of time without user interaction. This feature, which we ~~earn platform revenue by delivering advertising~~refer to as ~~well as generating revenue shares from subscription~~“Are you still watching,” periodically prompts the user to confirm that they are still watching the selected channel and ~~transactional video on-demand as users engage with~~closes the channel if the user does not respond affirmatively. We believe that the implementation of this feature across the Roku ~~platform.~~

platform benefits us, our customers, channel partners, and advertisers. Some of our leading channel partners, including Netflix, also have implemented similar features within their channels. This Roku OS feature supplements these channel features. This feature has not had and is not expected to have a material impact on our future financial performance.

We streamed 25.1 billion and 20.7 billion hours during the three months ended June 30, 2023 and 2022, respectively, reflecting an increase of 21%.

Average Revenue per User

We measure our platform monetization progress with ARPU, which we believe represents the inherent value of our business. We define ARPU as our platform revenue ~~during~~for the ~~preceding~~trailing four ~~fiscal~~ quarters divided by the average of the number of active accounts at the end of ~~that~~the current period and the end of the corresponding period in the prior ~~four fiscal quarters. We measure progress in our platform business using~~year. ARPU ~~because it helps us understand~~measures the rate at which we are monetizing our active account ~~base.~~

base and the progress of our platform business.

ARPU was $40.67 as of June 30, 2023 as compared to $43.81 as of June 30, 2022, reflecting a decrease of 7%. This decrease was due to active account growth outpacing platform revenue growth.

Components of Results of Operations

~~Player~~

Revenue

We generate player revenue from the sale of streaming players through consumer retail distribution channels, including major brick and mortar retailers, such as Best Buy and Walmart, and online retailers, primarily Amazon.com. In our international markets, we sell our players through wholesale distributors which, in turn, sell to retailers. We currently distribute our players in Canada, the United Kingdom, France, the Republic of Ireland and several Latin American countries. We generate most of our player revenue in the United States.

Platform Revenue

We generate platform revenue from sale of digital advertising ~~sales,~~(including media and entertainment promotional spending, the demand-side platform, and related services) and content distribution services (including subscription and transaction revenue ~~share, sales~~shares, the sale of Premium Subscriptions, and the sale of branded channel buttons on remote ~~controls and licensing arrangements with TV brands and service operators. We generate most~~controls). Our digital advertising revenue is generated from the sale of ~~our platform revenue in the United States. Our first-party~~ad inventory, which includes video ad inventory ~~includes~~from AVOD content in The Roku Channel, native display ads on our home screen and screen saver, as well as ad inventory ~~made available to us~~we obtain through our content ~~publisher agreements.~~distribution agreements with publishers. To ~~satisfy existing demand,~~supplement supply, we ~~can sell~~re-sell video ~~advertising~~ad inventory that we purchase from content publishers ~~to supplement our first-party video ad inventory,~~ and, to a lesser extent,
directly sell third-party ~~video advertising~~ad inventory on a revenue share ~~basis~~basis. To date, we have generated most of our platform revenue in the United States.

Devices Revenue

We generate devices revenue from ~~content publishers~~the sale of streaming players, Roku-branded TVs, smart home products and services, audio products, and related accessories through consumer retail distribution channels and online retailers. Our devices revenue also includes revenue from licensing arrangements with service operators and licensed Roku TV partners. We generate most of our devices revenue in the United States. In our ~~Roku Direct Publisher program.~~

international markets, we primarily sell our devices through wholesale distributors which, in turn, re-sell to retailers.

Table of Contents

Cost of Revenue

Cost of ~~Player~~ Revenue,

Platform

Cost of ~~player~~ revenue, platform primarily consists of costs associated with acquiring advertising inventory and amortization costs of content, both licensed and produced, and revenue share with content publishers. Cost of revenue, platform 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 services and salaries, benefits, and stock-based compensation for our customer support and platform operations personnel, and amortization of acquired developed technology.

Cost of Revenue, Devices

Cost of revenue, devices is comprised mostly of ~~player~~ manufacturing costs payable to ~~third-party contract~~third party manufacturers for devices we sell which include streaming players, audio products, Roku-branded TVs and smart home products. Cost of revenue, devices also includes technology licenses or royalty fees on devices we sell or license, inbound and outbound freight, duty and logistics costs, third-party packaging, inventory provisions, cost of smart home services, and ~~assembly costs, warranty costs, write-downs for excess and obsolete inventory,~~ allocated overhead costs related to facilities, ~~and~~ customer support, and ~~salary, benefit and stock-based compensation costs for operations personnel.~~

~~Cost of Platform Revenue~~

~~Cost of platform revenue consists of advertising inventory acquisition costs, payment processing fees, third-party cloud service fees and allocated personnel-related costs, including~~ salaries, benefits, and stock-based compensation for ~~Roku personnel that support platform services, including advertising and billing~~ operations ~~customer service, and our TV brands and our service operator licensees. We anticipate that cost of platform revenue will increase in absolute dollars.~~

personnel.

Operating and Other Expenses

Research and Development

Research and development expenses consist primarily of personnel-related costs, including employee salaries, benefits and stock-based compensation for our engineers and other employees engaged in the development of our products including new technologies and features and functionality. 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 for the foreseeable future.

~~Sales and Marketing~~

Sales and marketing expenses consist primarily of personnel-related costs, including salaries, benefits, commissions and
stock-based compensation expense for our employees engaged in sales and sales support, 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 and public relations, channel merchandising, including point of purchase and in-store displays, trade shows and other events, professional services, travel and allocated facilities and other overhead. We expect our sales and marketing expenses to increase as we continue to grow our business.

~~General and Administrative~~

~~General and administrative~~ expenses consist primarily of personnel-related costs, including salaries, benefits, and stock-based compensation for our ~~executive,~~development teams as well as outsourced development fees. In addition, research and development expenses include allocated facilities and overhead costs. We expect research and development expenses to increase in absolute dollars as we continue to invest in the development of our platform and devices products and services.

Sales and Marketing

Sales and marketing expenses consist primarily of personnel-related costs, including salaries, benefits, commissions, and stock-based compensation for our employees engaged in sales and sales support, marketing, communications, data science and analytics, business development, product management, and partner support functions. Sales and marketing expenses also include marketing, retail and merchandising costs, and allocated facilities and overhead expenses. We expect sales and marketing expenses to increase in absolute dollars in future periods as we focus on growing active accounts, platform and devices revenue, and expanding our business internationally.

General and Administrative

General and administrative expenses consist primarily of salaries, benefits, and stock-based compensation for our finance, legal, information technology, human resources, and other administrative personnel. General and administrative expenses also include outside legal, accounting, and other professional service fees as well as allocated facility and overhead expenses. We expect our general and administrative expenses to increase in absolute dollars due to the ~~anticipated growth~~expansion of our business and related ~~infrastructure as well as accounting, legal, insurance, investor relations and other costs associated with being a public company.~~

infrastructure.

Other Income (Expense), Net

~~Our~~

For the three and six months ended June 30, 2023, and 2022, other income (expense), net consists ~~primarily~~ of ~~changes in~~interest income on cash and cash equivalents, income recognized related to non-cash consideration associated with the ~~fair value~~delivery of ~~our convertible preferred stock warrant liability, interest expense on our debt, and~~services as part of a strategic commercial arrangement, foreign currency re-measurement, and transaction gains and ~~losses. As~~losses, and interest expense related to our debt. For the ~~underlying shares of our convertible preferred stock warrants are contingently redeemable, we account for these warrants as a liability at fair value~~three and ~~re-measure~~six months ended June 30, 2023, other income (expense), net also includes the ~~value at each balance sheet date. Any~~ change in the fair value ~~is recognized as other income (expense), net in our consolidated statement of operations. Upon the completion~~ of the IPO in October 2017, these warrants automatically converted into warrants to purchase shares of our common stock. At that time, the convertible preferred stock warrant liability was reclassified to stockholders’ equity.

Strategic Investment.

Income Tax Expense

Our income tax expense consists primarily of income taxes in certain foreign jurisdictions where we conduct business and ~~state minimum~~ income taxes in the United States. We have a full valuation allowance for deferred tax assets, including net operating ~~loss carryforwards~~losses primarily for the U.S. and ~~tax credits related primarily~~any jurisdiction where we do not expect to ~~research and development.~~realize their benefits in the future. We expect to maintain this valuation allowance for the foreseeable future.

Table of Contents

Results of Operations

The following table sets forth ~~our results~~selected condensed consolidated statements of operations ~~for the periods presented.~~

Three Months Ended

Nine Months Ended

September 30,

October 1,

September 30,

October 1,

2017

2016

2017

2016

(in thousands, except share and per share data)

Consolidated Statements of Operations Data:

Net revenue:

Player

$
67,254

$
64,789

$
184,583

$
183,905

Platform

57,528

24,264

139,919

67,404

Total net revenue

124,782

89,053

324,502

251,309

Cost of revenue:

Player⁽¹⁾

61,925

56,156

165,047

155,531

Platform⁽¹⁾

12,962

6,847

33,083

19,396

Total cost of revenue

74,887

63,003

198,130

174,927

Gross profit:

Player

5,329

8,633

19,536

28,374

Platform

44,566

17,417

106,836

48,008

Total gross profit

49,895

26,050

126,372

76,382

Operating expenses:

Research and development⁽¹⁾

28,532

18,229

76,650

56,700

Sales and marketing⁽¹⁾

16,216

12,844

44,938

39,089

General and administrative⁽¹⁾

13,039

9,078

33,894

27,333

Total operating expenses

57,787

40,151

155,482

123,122

Loss from operations

(7,892
)

(14,101
)

(29,110
)

(46,740
)
Other income (expense), net:

Interest expense

(815
)

(32
)

(1,286
)

(163
)
Change in fair value of preferred stock warrant liability

(37,682
)

1,481

(40,333
)

1,087

Other income (expense), net

212

(41
)

423

(66
)
Net loss before income taxes

(46,177
)

(12,693
)

(70,306
)

(45,882
)
Income tax expense

58

50

144

103

Net loss attributable to common stockholders

$
(46,235
)

$
(12,743
)

$
(70,450
)

$
(45,985
)

~~(1)~~

~~Includes stock-based compensation as follows:~~

Three Months Ended

Nine Months Ended

September 30,

October 1,

September 30,

October 1,

2017

2016

2017

2016

(in thousands)

Cost of player revenue

$
25

$
30

$
99

$
88

Cost of platform revenue

18

63

58

165

Research and development

1,197

651

3,078

1,924

Sales and marketing

808

580

2,099

1,737

General and administrative

876

687

2,183

2,102

Total stock-based compensation

$
2,924

$
2,011

$
7,517

$
6,016

~~The following table sets forth our results of operations~~data as a percentage of ~~net revenue:~~

total revenue for each of the periods indicated.

Three Months Ended

Nine Months Ended

September 30,

October 1

September 30,

October 1

2017

2016

2017

2016

Net revenue:

Player

54
%

73
%

57
%

73
%
Platform

46

27

43

27

Total net revenue

100

100

100

100

Cost of revenue:

Player

50

63

51

62

Platform

10

8

10

8

Total cost of revenue

60

71

61

70

Gross profit:

Player

4

10

6

11

Platform

36

19

33

19

Total gross profit

40

29

39

30

Operating expenses:

Research and development

23

21

24

23

Sales and marketing

13

14

14

15

General and administrative

10

10

11

11

Total operating expenses

46

45

49

49

Loss from operations

(6
)

(16
)

(10
)

(19
)
Other income (expense), net:

Interest expense

(1
)

—

—

—

Change in fair value of convertible preferred
stock warrants

(30
)

2

(12
)

1

Other income (expense), net

—

—

—

—

Net loss before income taxes

(37
)

(14
)

(22
)

(18
)
Income tax expense

—

—

—

—

Net loss attributable to common stockholders

(37
)%

(14
)%

(22
)%

(18
)%


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Net Revenue:
Platform	88	%	88	%	87	%	88	%
Devices	12	%	12	%	13	%	12	%
Total net revenue	100	%	100	%	100	%	100	%
Cost of Revenue:
Platform	41	%	39	%	41	%	37	%
Devices	14	%	15	%	14	%	15	%
Total cost of revenue	55	%	54	%	55	%	52	%
Gross Profit (Loss):
Platform	47	%	49	%	46	%	51	%
Devices	(2)	%	(3)	%	(1)	%	(3)	%
Total gross profit	45	%	46	%	45	%	48	%
Operating Expenses:
Research and development	23	%	25	%	26	%	24	%
Sales and marketing	27	%	24	%	29	%	22	%
General and administrative	10	%	11	%	11	%	11	%
Total operating expenses	60	%	60	%	66	%	57	%
Loss from Operations	(15)	%	(14)	%	(21)	%	(9)	%
Other Income (Expense), Net:
Interest expense	—	%	—	%	—	%	—	%
Other income, net	2	%	—	%	2	%	—	%
Total other income, net	2	%	—	%	2	%	—	%
Loss Before Income Taxes	(13)	%	(14)	%	(19)	%	(9)	%
Income tax expense	—	%	—	%	—	%	—	%
Net Loss	(13)	%	(14)	%	(19)	%	(9)	%

Comparison of Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2023 and ~~October 1, 2016~~

June 30, 2022

Net Revenue

	Three Months Ended									Nine Months Ended
	September 30,		October 1,		Change					September 30,		October 1,		Change						Three Months Ended								Six Months Ended
	2017		2016		$		%			2017		2016		$		%				June 30, 2023		June 30, 2022		Change $		Change %		June 30, 2023		June 30, 2022		Change $		Change %
	(dollars in thousands)
Player	$	67,254	$	64,789	$	2,465		4	%	$	184,583	$	183,905	$	678	—%
(in thousands, except percentages)																			(in thousands, except percentages)
Platform		57,528		24,264		33,264		137			139,919		67,404		72,515		108		Platform	$	743,835	$	669,256	$	74,579	11	%	$	1,378,453	$	1,312,963	$	65,490	5	%
Devices																			Devices	103,351		95,150		8,201		9	%	209,723		185,142		24,581		13	%
Total net revenue	$	124,782	$	89,053	$	35,729		40	%	$	324,502	$	251,309	$	73,193		29	%	Total net revenue	$	847,186	$	764,406	$	82,780	11	%	$	1,588,176	$	1,498,105	$	90,071	6	%

~~Player~~

Platform

Platform revenue increased by ~~$2.5~~$74.6 million, or 4%11%, during the three months ended ~~September~~June 30, ~~2017~~2023 as compared to the three months ended ~~October 1, 2016. A 35%~~June 30, 2022. The increase ~~in the volume of players sold~~ was ~~offset by a 23% decrease in average selling prices, driven primarily by sales of our lower priced Roku Express which was introduced in the third quarter of 2016.~~

~~Player revenue increased by $0.7 million during the nine months ended September 30, 2017 compared~~mainly due to the nine months ended October 1, 2016. A 37% increase in the volume of players sold was offset by a 27% decrease in average selling prices, driven primarily by sales of our lower priced Roku Express which was introduced in the third quarter of 2016, and by an increase in ~~sales incentives.~~

revenue from content distribution services, such as revenue share on content subscriptions and Premium Subscriptions through The Roku Channel, in addition to moderately higher revenue from advertising.

Table of Contents~~Platform~~

Platform revenue increased by ~~$33.3~~$65.5 million or ~~137%~~5% during the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. The increase was mainly due to an increase in revenue from content distribution services, such as revenue share on content subscriptions and Premium Subscriptions through The Roku Channel, which was offset by lower revenue from advertising as a result of increased pressure from macroeconomic factors that strained spending in certain advertising verticals, including media and promotional spending, during the six months ended June 30, 2023.

Devices

Devices revenue increased by $8.2 million, or 9%, during the three months ended ~~September~~June 30, ~~2017~~2023 as compared to the three months ended ~~October 1, 2016.~~June 30, 2022. The increase in revenue was ~~primarily~~mainly due to the sale of smart home products (introduced in October 2022) and Roku-branded TVs (introduced in February 2023) offset by lower revenue from sales of streaming players, audio products and accessories. During the three months ended June 30, 2023, the volume of streaming players sold decreased by 3% and the average selling price of streaming players decreased by 7% as compared to the three months ended June 30, 2022.

Devices revenue increased by $24.6 million, or 13%, during the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. $10.0 million of the increase was due to a change in estimated transaction price for a licensing arrangement with a service operator for which performance obligations were satisfied in prior periods and was recognized as revenue during the three months ended March 31, 2023. The remaining increase was due to higher ~~advertising~~revenue from Roku-branded TVs, smart home products and ~~subscription~~accessories offset by lower revenue from sales of streaming players and ~~transaction revenue share~~audio products. The volume of ~~$32.6 million, as we expanded our advertising sales operations~~streaming players sold decreased by 9% and ~~increased our advertising inventory, and from an increase~~the average selling price of streaming players decreased by 4% in the ~~number of paid subscriptions. In addition, fees earned from license arrangements with TV brands increased by $0.7 million.~~

~~Platform revenue increased by $72.5 million, or 108%, during the nine~~six months ended ~~September~~June 30, ~~2017~~2023 as compared to the ~~nine~~six months ended ~~October 1, 2016.~~ June 30, 2022.

Cost of Revenue and Gross Profit


	Three Months Ended								Six Months Ended
	June 30, 2023		June 30, 2022		Change $		Change %		June 30, 2023		June 30, 2022		Change $		Change %
(in thousands, except percentages)
Cost of Revenue:
Platform	$	348,010	$	295,058	$	52,952	18	%	$	648,597	$	560,846	$	87,751	16	%
Devices	120,905		114,199		6,706		6	%	223,711		217,303		6,408		3	%
Total cost of revenue	$	468,915	$	409,257	$	59,658	15	%	$	872,308	$	778,149	$	94,159	12	%
Gross Profit (Loss):
Platform	$	395,825	$	374,198	$	21,627	6	%	$	729,856	$	752,117	$	(22,261)	(3)	%
Devices	(17,554)		(19,049)		1,495		(8)	%	(13,988)		(32,161)		18,173		(57)	%
Total gross profit	$	378,271	$	355,149	$	23,122	7	%	$	715,868	$	719,956	$	(4,088)	(1)	%

Platform

The ~~increase was primarily due to higher advertising and subscription and transaction~~cost of revenue, share of $71.0 million, as we expanded our advertising sales operations and increased our advertising inventory, and from an increase in the number of paid subscriptions to third party channels from which we get a revenue share. In addition, fees earned from license arrangements with TV brandsplatform increased by ~~$2.2 million while fees earned from arrangements with service operators decreased by $0.7 million.~~

~~Cost of Revenue~~

Three Months Ended

Nine Months Ended

September 30,

October 1,

Change

September 30,

October 1,

Change

2017

2016

$

%

2017

2016

$

%

(dollars in thousands)

Cost of revenue :

Player

$
61,925

$
56,156

$
5,769

10
%

$
165,047

$
155,531

$
9,516

6
%
Platform

12,962

6,847

6,115

89

33,083

19,396

13,687

71

Total cost of revenue

$
74,887

$
63,003

$
11,884

19
%

$
198,130

$
174,927

$
23,203

13
%
Gross profit:

Player

$
5,329

$
8,633

$
(3,304
)

(38
)%

$
19,536

$
28,374

$
(8,838
)

(31
)%
Platform

44,566

17,417

$
27,149

156

106,836

48,008

$
58,828

123

Gross Profit

$
49,895

$
26,050

$
23,845

92
%

$
126,372

$
76,382

$
49,990

65
%

~~Player~~

~~Cost of player revenue increased by $5.8~~$53.0 million, or ~~10%~~18%, during the three months ended ~~September~~June 30, ~~2017~~2023 as compared to the three months ended ~~October 1, 2016. Cost of player revenue increased on an absolute dollar basis primarily due to a 35%~~June 30, 2022. The increase in the ~~number of players sold. The increase in~~ cost of ~~player revenue~~acquiring advertising inventory along with higher Premium Subscription costs, higher programming cost, and higher credit card processing fees was ~~partially~~ offset by a ~~reduction~~decrease in ~~direct manufacturing costs for most~~amortization of ~~our players.~~

~~Gross profit on player sales decreased~~content assets all totaling to $55.7 million. The allocation of overhead expenses was lower by ~~$3.3~~$2.5 million ~~or 38%~~ during the three months ended ~~September~~June 30, ~~2017~~2023 as compared to the three months ended ~~October 1, 2016.~~ June 30, 2022.

The ~~decrease~~cost of revenue, platform increased by $87.8 million, or 16%, during the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. The increase was ~~primarily~~mainly due to higher ~~sales volumes~~cost of ~~lower priced players.~~

~~Cost~~acquiring advertising inventory along with higher Premium Subscription costs, higher programming cost, higher content amortization and higher credit card processing fees.

Devices

The cost of ~~player~~ revenue, devices increased by ~~$9.5~~$6.7 million, or 6%, during the ~~nine~~three months ended ~~September~~June 30, ~~2017~~2023 as compared to the ~~nine~~three months ended ~~October 1, 2016. Cost~~June 30, 2022. The increase was driven by higher manufacturing and freight costs of ~~player revenue increased on an absolute dollar basis primarily due to a 37% increase in the number~~$7.8 million, other related costs such as royalties, product warranties, and overhead expense allocation of ~~players sold. In addition, we incurred a charge~~$3.8 million, offset by lower inventory provisions of ~~$0.9~~$5.1 million for the write-down of inventory on hand due to the ban on the importation and sale of Roku devices in Mexico resulting from a court order targeting entities that are alleged to sell unlicensed content to consumers using our platform among other means.during this period. The increase in manufacturing and freight costs was driven by the cost of ~~player~~Roku-branded TVs and smart home products that were sold during this period.

Table of Contents

The cost of revenue, ~~was partially offset~~devices increased by ~~a reduction in direct manufacturing costs for most of our players.~~

~~Gross profit on player sales decreased by $8.8~~$6.4 million, or ~~31%~~3%, during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 as compared to the ~~nine~~six months ended ~~October 1, 2016.~~June 30, 2022. The ~~decrease~~increase was ~~primarily due to~~driven by higher ~~sales volumes~~manufacturing and freight costs of ~~lower priced players,~~$7.5 million, other related costs such as ~~the Roku Express,~~royalties, product warranties, and overhead expense allocation of $6.5 million, offset by anlower inventory provisions of $7.6 million during this period. The increase in ~~sales incentives.~~

~~Platform~~

~~Cost~~manufacturing and freight costs was driven by the cost of ~~platform revenue increased~~Roku-branded TVs and smart home products that were sold during this period.

Operating Expenses


	Three Months Ended								Six Months Ended
	June 30, 2023		June 30, 2022		Change $		Change %		June 30, 2023		June 30, 2022		Change $		Change %
(in thousands, except percentages)
Research and development	$	192,387	$	196,637	$	(4,250)	(2)	%	$	412,472	$	360,635	$	51,837	14	%
Sales and marketing	227,192		184,971		42,221		23	%	461,111		331,493		129,618		39	%
General and administrative	84,652		84,054		598		1	%	180,705		161,831		18,874		12	%
Total operating expenses	$	504,231	$	465,662	$	38,569	8	%	$	1,054,288	$	853,959	$	200,329	23	%

Research and development

Research and development expenses decreased by ~~$6.1~~$4.3 million, or ~~89%~~2%, during the three months ended ~~September~~June 30, ~~2017~~2023 as compared to the three months ended ~~October 1, 2016. This~~June 30, 2022. The decrease was due to lower personnel-related expenses of $3.2 million and lower consulting expenses of $3.4 million offset by an increase in office facilities and IT infrastructure expenses of $2.5 million. The decrease in expenses was a result of restructuring efforts that were implemented at the end of the last fiscal year and continued into the first quarter of this fiscal year.

Research and development expenses increased by $51.8 million, or 14%, during the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. The increase was ~~driven by~~due to higher ~~inventory acquisition costs, ad serving costs,~~personnel-related expenses of $30.9 million, as a result of higher engineering headcount and ~~credit card processing fees totaling $4.3~~related stock-based compensation, higher restructuring charges of $13.3 million, and ~~a $0.6 million increase in allocated overhead primarily in advertising operations~~higher expenses related to expanded office facilities and ~~TV brand support driven by the growth~~IT infrastructure of ~~our platform business.~~

~~Gross profit on platform revenue~~$6.3 million.

Sales and marketing

Sales and marketing expenses increased by ~~$27.1~~$42.2 million, or ~~156%~~23%, during the three months ended ~~September~~June 30, ~~2017~~2023 as compared to the three months ended ~~October 1, 2016, primarily driven by strong growth in advertising demand.~~

~~Cost~~June 30, 2022. The increase was mainly due to higher marketing, retail and merchandising expenses of ~~platform revenue~~$37.0 million, along with higher personnel-related costs of $3.6 million and higher expenses related to expanded office facilities and IT infrastructure of $2.0 million.

Sales and marketing expenses increased by ~~$13.7~~$129.6 million, or ~~71%~~39%, during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 as compared to the ~~nine~~six months ended ~~October 1, 2016. This~~June 30, 2022. The increase was ~~driven by~~due to higher ~~inventory acquisition~~marketing, retail and merchandising expenses of $85.0 million, higher personnel-related costs ~~ad serving costs,~~of $29.4 million as a result of higher headcount and ~~credit card processing fees totaling $9.5 million~~related stock-based compensation in sales and ~~a $2.7 million increase in allocated overhead primarily in advertising operations~~sales support, product management, marketing, and ~~service operator support driven by the growth of our platform business.~~

~~Gross profit on platform revenue increased by $58.8 million, or 123% during the nine months ended September 30, 2017~~business analytics as compared to the ~~nine~~six months ended ~~October 1, 2016, primarily driven by strong growth in advertising demand.~~

~~Operating Expenses~~

Three Months Ended

Nine Months Ended

September 30,

October 1,

Change

September 30,

October 1,

Change

2017

2016

$

%

2017

2016

$

%

(dollars in thousands)

Research and development

$
28,532

$
18,229

$
10,303

57
%

$
76,650

$
56,700

$
19,950

35
%
Sales and marketing

16,216

12,844

3,372

26

44,938

39,089

5,849

15

General and administrative

13,039

9,078

3,961

44

33,894

27,333

6,561

24

Total operating expenses

$
57,787

$
40,151

$
17,636

44
%

$
155,482

$
123,122

$
32,360

26
%

~~Research~~June 30, 2022, higher restructuring charges of $7.3 million, and ~~Development~~

~~Research~~higher expenses related to expanded office facilities and ~~development~~IT infrastructure of $7.8 million.

General and administrative

General and administrative expenses increased by ~~$10.3~~$0.6 million, or ~~57%~~1%, during the three months ended ~~September~~June 30, ~~2017~~2023 as compared to the three months ended ~~October 1, 2016.~~June 30, 2022. The increase was ~~primarily~~ due to higher personnel-related ~~costs of $8.2 million as a result of increased engineering headcount and higher consulting~~ expenses of ~~$1.1~~$1.7 million, ~~for platform~~higher general and ~~new product development.~~

~~Research~~administrative expenses such as travel and ~~development~~bad debt expenses of $2.0 million, offset by a reduction of $3.4 million in legal, consulting and professional services expenses.

General and administrative expenses increased by ~~$20.0~~$18.9 million, or ~~35%,~~12% during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 as compared to the ~~nine~~six months ended ~~October 1, 2016.~~June 30, 2022. The increase was ~~primarily~~ due to higher personnel-related expenses of $11.6 million, higher restructuring charges of $10.7 million that include employee terminations, assets impairment charges and facilities exit costs, higher general and administrative expenses such as travel and bad debt expenses of ~~$19.0~~$3.6 million, ~~as a result of increased engineering headcount. The increase in personnel-related costs was partially~~ offset by ~~lower facilities expenses~~a reduction of ~~$1.6 million. In the nine months ended October 1, 2016, we incurred $2.7~~$8.4 million in ~~allocated lease exit costs associated with the move~~legal, consulting and professional services expenses.

Table of ~~our corporate headquarters.~~

~~Sales and Marketing~~

~~Sales and marketing expenses~~Contents

Other Income, Net


	Three Months Ended								Six Months Ended
	June 30, 2023		June 30, 2022		Change $		Change %		June 30, 2023		June 30, 2022		Change $		Change %
(in thousands, except percentages)
Interest expense	$	(4)	$	(1,059)	$	1,055	(100)	%	$	(685)	$	(2,116)	$	1,431	(68)	%
Other income (expense), net	19,999		1,829		18,170		nm		43,100		2,238		40,862		nm
Total other income, net	$	19,995	$	770	$	19,225	nm		$	42,415	$	122	$	42,293	nm

Total other income, net, increased ~~by $3.4~~$19.2 million ~~or 26%,~~ during the three months ended ~~September~~June 30, ~~2017~~2023 as compared to the three months ended ~~October 1, 2016.~~June 30, 2022. The increase was primarily ~~due to~~driven by an increase in interest income of $15.3 million from higher ~~personnel-related costs of $3.0 million related to increased headcount within~~interest rates on our ~~advertising sales organization and data science team.~~

~~Sales and marketing expenses increased by $5.8 million, or 15%,~~cash balances during the ~~nine~~period, as well as an increase in other income of $2.0 million and a reduction in interest expense of $1.1 million as the Credit Facility was fully repaid in February 2023.

Total other income, net, increased $42.3 million during the six months ended ~~September~~June 30, ~~2017~~2023 as compared to the ~~nine~~six months ended ~~October 1, 2016.~~June 30, 2022. The increase was primarily ~~due to~~driven by an increase in interest income of $35.1 million from higher ~~personnel-related costs~~interest rates on our cash balances during the period, an unrealized gain of ~~$6.9~~$3.1 million ~~related to increased headcount within our advertising sales organization~~from the change in fair value of the Strategic Investment and ~~data science team. The increase~~a reduction in interest expense of $1.4 million as the Credit Facility was ~~partially offset~~fully repaid in February 2023.

Income Tax Expense


	Three Months Ended								Six Months Ended
	June 30, 2023		June 30, 2022		Change $		Change %		June 30, 2023		June 30, 2022		Change $		Change %
(in thousands, except percentages)
Income tax expense	$	1,630	$	2,578	$	(948)	(37)	%	$	5,194	$	4,746	$	448	9	%

Income tax expense decreased by ~~lower retail marketing costs of $1.0 million resulting from decreased spending on in-store displays and merchandising.~~

~~General and Administrative~~

~~General and administrative expenses increased by $4.0~~$0.9 million, or ~~44%,~~37% during the three months ended ~~September~~June 30, ~~2017~~2023 as compared to the three months ended ~~October 1, 2016. The increase~~June 30, 2022 and was primarily ~~due to higher personnel-related costs of $1.7 million as a result of increased headcount~~driven by decreased taxable income in ~~finance, billing operations, information technology~~U.S. resulting in lower federal and ~~human resources and other professional service expenses of $1.6 million related to increased accounting and legal services and other IPO related expenses.~~

~~General and administrative expenses~~state tax liabilities.

Income tax expense increased by ~~$6.6~~$0.4 million, or ~~24%,~~9% during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 as compared to the ~~nine~~six months ended ~~October 1, 2016. The increase~~June 30, 2022 and was primarily ~~due to higher personnel-related costs of $3.4 million as a result of~~driven by increased headcount in finance, billing operations, information technology and human resources and other professional service expenses of $2.3 million to support overall business growth and IPO related expenses.

~~Other Income (Expense), Net~~

Three Months Ended

Nine Months Ended

September 30,

October 1,

Change

September 30,

October 1,

Change

2017

2016

$

2017

2016

$

(dollars in thousands)

Interest expense

$
(815
)

$
(32
)

$
(783
)

$
(1,286
)

$
(163
)

$
(1,123
)
Change in fair value of convertible preferred stock
warrants

(37,682
)

1,481

(39,163
)

(40,333
)

1,087

(41,420
)
Other income (expense), net

212

(41
)

253

423

(66
)

489

Total other income (expense), net

$
(38,285
)

$
1,408

$
(39,693
)

$
(41,196
)

$
858

$
(42,054
)

~~Other income (expense), net, decreased from $1.4 million net other~~ income in foreign jurisdictions.

On August 16, 2022, the ~~three months ended October 1, 2016 to $38.3 million in net other expense in the three months ended September 30, 2017. The change~~Inflation Reduction Act of 2022 (the “IRA”) was ~~primarily due to an increase in the fair value of warrants to purchase convertible preferred stock.~~

Other income (expense), net, decreased from $0.9 million net other income in the nine months ended October 1, 2016 to $41.2 million in net other expense in the nine months ended September 30, 2017. The change was primarily due to an increase in the fair value of warrants to purchase convertible preferred stock and increased interest on borrowings.

~~Income Tax Expense~~

Three Months Ended

Nine Months Ended

September 30,

October 1,

Change

September 30,

October 1,

Change

2017

2016

$

2017

2016

$

(dollars in thousands)

Income Tax Expense

$
58

$
50

$
8

$
144

$
103

$
41

~~Income tax expense is comprised of foreign income taxes and state minimum income taxes~~enacted in the United States.

~~Non-GAAP Financial Measures~~

~~Adjusted EBITDA~~

~~To supplement~~ The IRA introduces a 15% alternative minimum tax based on the financial statement income of certain large corporations, effective for tax years beginning after December 31, 2022. The IRA also includes a 1% excise tax on the net fair market value of stock repurchases made after December 31, 2022. We considered the applicable tax law changes, and there is no impact to our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. We have included Adjusted EBITDA in this Form 10-Q because it is a key measure we use to evaluate our operating performance, generate future operating plans and make strategic decisionstax provision for the ~~allocation of capital. Accordingly, we believe that Adjusted EBITDA provides useful information~~three and six months ended June 30, 2023. We will continue to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. While we believe that this non-GAAP financial measure is useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute for the related financial information prepared in accordance with GAAP.

~~Some limitations of Adjusted EBITDA are:~~

~~Adjusted EBITDA does not include other (income) expense, net, which primarily includes changes in the fair value of warrants to purchase convertible preferred stock and interest expense;~~

~~Adjusted EBITDA does not include~~evaluate the impact of ~~stock-based compensation;~~

these tax law changes on future periods.

Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash used for capital expenditures for such replacements or for new capital expenditures;

~~Adjusted EBITDA does not reflect income tax payments that may represent a reduction in cash available to us; and~~

~~Other companies, including companies in our industry, may calculate Adjusted EBITDA differently or not at all, which reduces its usefulness as a comparative measure.~~

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net loss and our financial results presented in accordance with GAAP. The following table presents a reconciliation of net loss to Adjusted EBITDA for each of the periods indicated:

Three Months Ended

Nine Months Ended

September 30,

October 1,

September 30,

October 1,

2017

2016

2017

2016

(in thousands)

Reconciliation of Net Loss to Adjusted EBITDA:

Net loss

$
(46,235
)

$
(12,743
)

$
(70,450
)

$
(45,985
)
Other (income) expense, net

38,285

(1,408
)

41,196

(858
)
Stock-based compensation

2,924

2,011

7,517

6,016

Depreciation and amortization

1,303

1,351

3,883

4,201

Income tax expense

58

50

144

103

Adjusted EBITDA

$
(3,665
)

$
(10,739
)

$
(17,710
)

$
(36,523
)

~~Pro Forma Basic and Diluted Net Loss Per Share Attributable to Common Stockholders, or Pro Forma Basic and Diluted Net Loss Per Share~~

Pro forma basic and diluted net loss per share adjusts for certain items and, therefore, has not been calculated in accordance with GAAP. We believe the adjustment of these items assists in providing a more complete understanding of our underlying operations results and trends and allows for comparability with our peer company index and industry and to be more consistent with our expected capital structure on a going forward basis. Pro forma basic and diluted net loss per share gives effect to the conversion of outstanding convertible preferred stock using the as-if converted method into common shares as though the conversion had occurred as of the beginning of the period. Also, the numerator has been adjusted to reverse the fair value adjustments related to the convertible preferred stock warrants as they became warrants to purchase common stock at the time of our IPO, and at such time no longer required periodic revaluation. .Pro forma basic and diluted net loss per share is a non-GAAP financial measure and should not be considered in isolation or as a substitute for financial information provided in accordance with GAAP. This non-GAAP financial measure may not be computed in the same manner as similarly titled measures used by other companies.

The following table reconciles net loss per share attributable to common stockholders on a basic and diluted basis, the most directly comparable GAAP measure, to pro forma net loss per share, basic and diluted:

Three Months Ended

Nine Months Ended

September 30, 2017

October 1,
2016

September 30, 2017

October 1,
2016

Pro forma basic and diluted loss per share

Numerator:

Net loss, basic and diluted

$
(46,235
)

$
(12,743
)

$
(70,450
)

$
(45,985
)
Add: Change in fair value of convertible preferred stock
   warrant liability

37,682

(1,481
)

40,333

(1,087
)
Net loss used in computing pro forma basic and diluted
   net loss per share

$
(8,553
)

$
(14,224
)

$
(30,117
)

$
(47,072
)

Denominator:

Weighted-average shares used in computing net
   loss per share, basic and diluted

5,259,796

4,784,170

4,998,727

4,724,767

Add: Pro forma adjustment to reflect assumed
   conversion of convertible preferred stock

80,844,138

80,844,138

80,844,138

80,844,138

Weighted-average shares used in computing pro forma
   basic and diluted net loss per share

86,103,934

85,628,308

85,842,865

85,568,905

Pro forma basic and diluted net loss per share

$
(0.10
)

$
(0.17
)

$
(0.35
)

$
(0.55
)

Liquidity and Capital Resources

As of ~~September~~June 30, ~~2017,~~2023, we had cash and cash equivalents of ~~$66.9~~$1,755.3 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. We may contemplate and engage in additional merger and acquisition activity that could materially impact our liquidity and capital resource position. We believe that our existing cash balance together with proceeds from our IPO and amounts available under our credit facilities will be sufficient to fund our working capital and meet our anticipated cash needs for at least the next twelve months. 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 players, advertising platform and other platform services, headcount, the timing and extent of spending to support development efforts, the introduction of new players and platform features, the expansion of sales and marketing activities, as well as overall economic conditions.

~~As of September 30, 2017, less than 1%~~Approximately 4% of our cash was held outside the United ~~States. These amounts were primarily~~States in accounts held ~~in Europe and are utilized to fund our foreign operations. The amount of unremitted earnings related to~~by our foreign subsidiaries, ~~is not material.~~

~~Silicon Valley Bank Loan~~which are used to fund foreign operations. In February 2023, we fully repaid the outstanding balance and ~~Security Agreements~~

~~In May 2015, we entered into a first amendment to our Restated 2014 Loan Agreement extending~~satisfied all debt obligations under the ~~revolving line to June 30, 2017. The Restated LSA provides advances under a revolving line of credit up to $30,000,000 and provides for letters of credit to be issued up~~Credit Facility (see Note 10 to the ~~lessor~~condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report for additional information).

Our primary sources of cash are receipts from platform and devices revenue. The primary uses of cash are costs of revenue including costs to acquire advertising inventory, costs to license and produce content, third-party manufacturing costs for our products, as well as operating expenses including payroll-related expenses, consulting and professional service fees, facility expenses, and marketing expenses. Other uses of cash include purchases of property and equipment and mergers and acquisitions.

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We expect to continue to incur expenses for facility and building related costs for our office locations in the United States and internationally. In addition, we expect to continue our investments in purchases of computer systems and other property and equipment. We have pursued merger and acquisition activities in the past, and we may pursue additional merger and acquisition activities in the future, including the acquisition of rights to programming and content assets. These activities can materially impact our liquidity and capital resources.

We believe our existing cash and cash equivalents balance will be sufficient to meet our working capital, capital expenditures, and material cash requirements from known contractual obligations for the next twelve months and beyond. Our future capital requirements, the adequacy of available funds, and cash flows from operations could be affected by various risks and uncertainties, including, but not limited to, those detailed in Part II, Item 1A, Risk Factors in this Quarterly Report and the effects of the ~~available line~~current macroeconomic environment. While the current macroeconomic environment has not severely impacted our liquidity and capital resources to date, it has contributed to disruption and volatility in local economies and in capital and credit markets, which could adversely affect our liquidity and capital resources in the future.

We may attempt to raise additional capital through the sale of ~~credit, reduced~~equity securities or other financing arrangements. If we raise additional funds by ~~outstanding advances~~issuing equity, the ownership of our existing stockholders will be diluted. If we raise additional financing by the incurrence of indebtedness, we may be subject to fixed payment obligations and ~~drawn but unreimbursed letters of credit, or $5,000,000. Advances under the first amendment carry a floating per annum interest rate equal~~also to restrictive covenants. Additionally, due to the prime rate or the prime rate plus 2.5% if the adjusted quick ratio (calculated as the sum of cash maintained with Silicon Valley Bank or its affiliates and net billed account receivable balances, divided by current ~~liabilities plus all outstanding obligations to Silicon Valley Bank under the revolving line, less deferred revenue) is less than or equal to 1.0.~~

~~In June 2017,~~macroeconomic environment, we entered into a second amendment to the 2014 Loan Agreement extending its termination date to June 30, 2019. Advances carry a floating per annum interest rate equal to, at our option, (1) the prime rate or (2) LIBOR plus 2.75%, or the prime rate plus 1% depending on certain ratios. The extension further changed the financial covenant to maintain a current ratio (calculated as current assets, divided by current liabilities less deferred revenue), greater than or equal to 1.25.

As of September 30, 2017, there were no borrowings under the line of credit and letters of credit in the amount of $1.5 million were outstanding. The interest rate on the line of credit was 4.25% as of September 30, 2017.

In June 2017, we entered into a subordinated loan and security agreement, or the 2017 Agreement, with Silicon Valley Bank. The 2017 Agreement provides for a term loan borrowing of up to $40.0 million with a minimum of $25.0 million to be initially drawn. The remaining amount of the debt is available for 24 months from the date of the 2017 Agreement and can 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 our 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 our election, during the term or at maturity. We~~unable to obtain debt financing on terms that are ~~also obligated~~acceptable to pay final payment fees ranging from 1% to 4% of the borrowings depending on the timing of the payment. The maturity date of the 2017 Agreement is October 9, 2020. The 2017 Agreement provides for a lien on all of our assets, including intellectual property. As of September 30, 2017, $23.0 million under the 2017 Agreement was outstanding. On October 31, 2017, we repaid the entire amount outstanding, and subsequently terminated the 2017 Agreement.

In connection with the 2017 Agreement we issued 408,648 warrants to purchase shares of Series H convertible preferred stock, which automatically converted to common stock warrants upon the closing of the Company’s IPO. The warrants have an exercise price of $9.17340, the price per share in our Series H financing in November 2015. A portion of these warrants vested at the time we borrowed money under the 2017 Agreement, and the warrants were 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 114,933 warrants to purchase Class B common stock that were contingent on future borrowings.

Our credit facilities contain customary representations and warranties and customary affirmative and negative covenants applicable to us and our subsidiaries, including, among other things, restrictions on changes in business, management, ownership or business locations, indebtedness, encumbrances, investments, mergers or acquisitions, dispositions, maintenance of collateral accounts, prepayment of other indebtedness, distributions and transactions with affiliates. The credit facilities contain customary

us.

events of default subject in certain cases to grace periods and notice requirements, including (a) failure to pay principal, interest and other obligations when due, (b) material misrepresentations, (c) breach of covenants, conditions or agreements in the credit facilities, (d) default under material indebtedness, (e) certain bankruptcy events, (f) failure to pay judgments for the payment of money in an aggregate amount in excess of $0.5 million, (g) a material adverse change; (h) attachment, levy or restraint on business, (i) default with respect to subordinated debt, (j) cross default under our credit facilities, and (k) governments approvals being revoked.

~~We were in compliance with all covenants under the loan and security agreements as of December 31, 2016 and September 30, 2017.~~

Cash Flows

The following table summarizes our cash flows for the periods ~~presented:~~

presented (in thousands):

Nine Months Ended

September 30,

October 1,

2017

2016

(in thousands)

Consolidated Statements of Cash Flows Data:

Cash flows provided by (used in) operating activities

$
31,192

$
(12,910
)
Cash flows (used in) investing activities

(9,599
)

(7,351
)
Cash flows provided by (used in) financing activities

10,763

(15,228
)


	Six Months Ended
	June 30, 2023		June 30, 2022
Condensed Consolidated Statements of Cash Flows Data:
Cash flows used in operating activities	$	(6,359)	$	(9,947)
Cash flows used in investing activities	$	(82,316)	$	(92,209)
Cash flows provided by (used in) financing activities	$	(78,496)	$	6,693

Cash Flows from Operating Activities

~~During~~

Our operating activities used cash of $6.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017, operating activities provided $31.2 million in cash as a result of a~~2023. Our net loss of ~~$70.5~~$301.2 million for the six months ended June 30, 2023 was adjusted by non-cash charges of ~~$52.7~~$358.8 million ~~and an increase of $48.9 million from our net operating assets and liabilities. The non-cash charges of $52.7 million were primarily~~ comprised ~~of a $40.3 million fair value measurement charge related to preferred stock warrant liability, $7.5 million~~mainly of stock-based compensation, ~~expense, and $3.9 million~~amortization of content assets, depreciation and amortization ~~expense.~~of property and equipment and intangible assets, amortization of operating right-of-use assets, impairment of assets as part of restructuring charges, and change in fair value of the Strategic Investment. The ~~increase from~~changes in our ~~net~~ operating assets and liabilities ~~was primarily the result~~used cash of ~~a $35.1~~$64.0 million ~~increase in~~mainly from payments made to acquire content, payments for accrued liabilities related to marketing, retail and merchandising costs, payroll and related expenses, and inventory costs, offset by inflows from higher accounts payable balances, higher collections of accounts receivable, reduced inventory balances, and ~~accrued liabilities due to the timing of payments, a $16.6 million~~an increase in deferred ~~revenue driven by a $9.8 million pre-payment~~revenue.

Cash Flows from ~~a service operator and~~Investing Activities

Our investing activities for the growth in our business, an $8.1 million decrease in inventories and a $4.4 million increase in other long-term liabilities, primarily the result of entering into a multi-year licensing agreement. The increase in our net operating assets and liabilities was partially offset by a $5.5 million increase in accounts receivable due to increased revenue and a $8.7 million increase in prepaid expenses and other current assets and other noncurrent assets, primarily the result of capitalized IPO costs that will be charged to equity at the completion of the IPO and from entering into a multi-year license agreement.

~~During the nine~~six months ended ~~October 1, 2016, operating activities used $12.9~~June 30, 2023 included cash outflows of $82.3 million ~~in cash as a result~~consisting of ~~a net loss~~purchases of $46.0 million, adjusted by non-cash charges of $14.2 million and an increase of $18.8 million from our net operating assets and liabilities. The non-cash charges of $14.2 million were primarily comprised of a $3.8 million loss provision related to the exit from our prior headquarters facilities, $6.0 million of stock-based compensation expenses and $4.2 million of depreciation and amortization expense. The increase from our net operating assets and liabilities was primarily the result of a $9.1 million increase in deferred revenue as a result of the growth in our business and a $33.3 million increase in accounts payable and accrued liabilities due to the timing of payments. The increase in our net operating assets and liabilities was partially offset by a $19.7 million increase in inventory for the anticipated sales of players, a $3.9 million increase in accounts receivable and a $1.8 million increase in deferred cost of revenue.

~~Investing Activities~~

~~During the nine months ended September 30, 2017 and October 1, 2016, investing activities used $9.6 million and $7.4 million in cash, respectively, primarily on capital expenditures to purchase~~ property and equipment and ~~leasehold improvements~~expenditures related to ~~expanding~~expansion of our ~~facilities. In 2017,~~office facilities of $72.3 million and the ~~Company also used $3.0M in cash for a business acquisition.~~

purchase of the Strategic Investment of $10.0 million.

Cash Flows from Financing Activities

During the nine months ended September 30, 2017, financing activities provided $10.8 million in cash, driven primarily from $24.7 million in net proceeds on term debt, offset by a $15.0 million paydown on the line of credit. During the nine months ended October 1, 2016,

Our financing activities used ~~$15.2~~cash of $78.5 million for the six months ended June 30, 2023. The cash outflow related primarily to the repayment of $80.0 million of our Credit Facility that became due in ~~cash, driven primarily~~February 2023 offset by ~~a $15.0~~$1.5 million ~~paydown on~~received from proceeds from the ~~line~~exercise of ~~credit.~~

employee stock options.

Table of Contents~~Off-Balance Sheet Arrangements~~

~~During the periods presented, we did not have any off-balance sheet arrangements, as defined by applicable SEC rules and regulations.~~

Material Cash Requirements from Known Contractual Obligations

Our ~~future minimum payments under our non-cancelable~~material cash requirements from known contractual obligations ~~were as follows~~ as of ~~December 31, 2016:~~

Payments Due by Period

Total

Less Than
1 Year

1 – 3
Years

3 – 5
Years

More Than
5 Years

(in thousands)

Purchase commitments⁽¹⁾

$
64,347

$
64,347

$
—

$
—

$
—

Operating lease obligations⁽²⁾

35,824

8,138

27,664

22

—

Debt⁽³⁾

15,000

15,000

—

—

—

Total

$
115,171

$
87,485

$
27,664

$
22

$
—

~~(1)~~

~~Represents commitments to purchase finished good inventory from third-party contract manufacturers.~~

June 30, 2023 consisted of:

~~(2)~~

~~Represents future minimum lease payments under non-cancelable operating leases.~~

~~(3)~~

~~Represents future principal payments under our loan and security agreements.~~

~~We utilize one outsourcing supplier~~•Commitments to ~~manufacture, assemble~~purchase finished goods from our contract manufacturers and ~~test our products. This outsourcing supplier acquires components and build product based on demand information supplied by us.~~other inventory related items. Consistent with industry ~~practice,~~practices, we enter into firm, non-cancelable, and unconditional purchase commitments with our contract manufacturers to acquire ~~product~~products through a combination of purchase orders, supplier contracts, and open orders based on projected demand information. ~~If there are unexpected changes to anticipated demand for~~Our contract manufacturers source components and build our products based on these demand forecasts. Changes to projected demand or in the subsequent sales mix of our products ~~some of the firm, non-cancelable, and unconditional purchase commitments~~ may result in ~~our~~us being committed to purchase excess ~~inventory. As of September 30, 2017, we had~~inventory to satisfy these commitments. For additional information regarding manufacturing purchase ~~obligations~~commitments, see Note 12 to the condensed consolidated financial statements in Part I, Item 1 of ~~$87.2 million.~~

this Quarterly Report.

•Commitments to license content from content publishers and produce content under contractual arrangements. For additional information regarding content commitments, see Note 12 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report.

•Operating lease liabilities that are included in our condensed consolidated balance sheets and liabilities related to the lease arrangements that have not yet commenced. For additional information regarding our lease liabilities, see Note 9 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report.

The contractual ~~commitment amounts in the table~~commitments discussed above are associated with agreements that are enforceable and legally binding. Obligations under contracts that we can cancel without a significant penalty are not included ~~in the table~~ above.

~~Quantitative and Qualitative Disclosure About Market Risk~~

~~Interest Rate Fluctuation Risk~~

Our exposure to interest rate risk primarily relates to the interest income generated by cash held at Silicon Valley Bank, which is relatively insensitive to interest rate changes. The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. We do not believe that an increase or decrease in interest rates of 100 basis points would have a material effect on our operating results or financial condition.

Our borrowings under our credit facility with Silicon Valley Bank are at variable interest rates. However, a hypothetical 100-basis point change in interest rates would not have a material impact on our borrowings or results of operations.

~~Foreign Currency Exchange Rate Risk~~

Most of our sales are currently 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. The volatility of exchange rates depends on many factors that we cannot accurately forecast. In the future, if our international sales increase or more of our expenses are denominated in currencies other than the U.S. dollar, our operating results may be more greatly affected by fluctuations in the exchange rates of the currencies in which we do business. At this time we do not, but we may in the future, enter into derivatives or other financial instruments in an attempt to hedge our foreign currency exchange risk. It is difficult to predict the impact hedging activities could have on our results of operations.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. These estimates and assumptions are based on historical experience, current trends and other factors that we believe to be reasonable at the time our condensed consolidated financial statements are prepared.We evaluate our estimates and assumptions on an ongoing basis. ~~Our estimates~~

~~are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.~~

There have been no material changes into our critical accounting policies ~~during the nine months ended September 30, 2017,~~and estimates as compared to ~~those disclosed~~the critical accounting policies and estimates described in ~~the~~ ~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates”~~ ~~in the Prospectus and section 1 of this document.~~

our Annual Report.

Item 3. Quantitative and Qualitative Disclosures About Market ~~Risk.~~

~~Management believes there~~Risk

Interest Rate Fluctuation Risk

Our exposure to interest rate risk relates to the interest income generated by cash and cash equivalents. The primary objective of our investment policy is to preserve principal while maximizing income without significantly increasing risk. We believe that an increase or decrease in interest rates of 100 basis points would impact our interest income by an additional $18.0 million.

Foreign Currency Exchange Rate Risk

Most of our revenue is generated within the United States and as such we have ~~been no material changes~~minimal foreign currency risk related to our ~~quantitative~~revenue. Our foreign currency risk primarily relates to operating expenses, cash balances, and ~~qualitative disclosures about market risks during the three months ended September 30, 2017, compared~~lease liabilities denominated in currencies other than U.S. dollars, primarily British pounds and Euros. Our results of current and future operations and cash flows are, therefore, subject to ~~those discussed~~fluctuations due to changes in foreign currency exchange rates.

We have experienced and will continue to experience fluctuations in our ~~Prospectus.~~

net income as a result of transaction gains or losses related to revaluing monetary asset and liability balances that are denominated in currencies other than the functional currency of the entities in which they are recorded. We have not entered into any derivatives or other financial instruments in an attempt to hedge our foreign currency exchange risk, but we may do so in the future.

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Item 4. Controls and ~~Procedures.~~

Procedures

Evaluation of ~~disclosure controls~~Disclosure Controls and ~~procedures~~.

Procedures

Our management, with the participation of our ~~President and~~ Chief Executive Officer and our Chief Financial Officer, ~~our principal financial officer, have~~has evaluated the effectiveness ~~of the design and operation~~ of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the ~~Exchange Act prior to~~end of the ~~filing~~period covered by this Quarterly Report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this ~~quarterly report. Our~~Quarterly Report, our disclosure controls and procedures ~~are designed to ensure that information required to be disclosed~~were, in ~~the reports we file or submit under the Exchange Act is recorded, processed, summarized~~design and ~~reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our~~operation, effective at a reasonable assurance level.

Our management, including ~~the President and~~our Chief Executive Officer ~~to allow timely decisions regarding required disclosures.~~and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our President and Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this quarterly report, our disclosure controls and procedures were, in design and operation, effective at a reasonable assurance level.

Changes in ~~internal control over financial reporting.~~

Internal Control Over Financial Reporting

There ~~were~~was no ~~changes~~change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended ~~September~~June 30, ~~2017~~2023 that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

~~We are currently involved~~

Information with respect to this item may be found in Note 12 to the condensed consolidated financial statements, Part I, Item 1 of this Quarterly Report and may in the future be involved in, legal proceedings, claims, and investigations in the ordinary course of our business, including claims for infringing patents, copyrights or other intellectual property rights related to our platform and products, or the content distributed through our platformis incorporated herein by us or third-party channel developers. Although the results of these proceedings, claims, and investigations cannot be predicted with certainty, we do not believe that the final outcome of any matters that we are currently involved in are reasonably likely to have a material adverse effect on our business, financial condition, or results of operations. Regardless of final outcomes, however, any such proceedings, claims, and investigations may nonetheless impose a significant burden on management and employees and may come with costly defense costs or unfavorable preliminary and interim rulings.

reference.

Item 1A. Risk Factors

Our business involves significant risks, some of which are described below. You should carefully consider the risks and uncertainties described below, together with all the other information in this Quarterly Report, ~~on Form 10-Q,~~ including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the condensed 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 ~~seriously~~ 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.

You should not interpret our disclosure of any of the following risks to imply that such risks have not already materialized. The risks facing our business have not changed substantively from those discussed in our Annual Report, filed with the SEC on February 16, 2023, except for those risks marked with an asterisk (*).

Risk Factors Summary

Below is a summary of the principal factors that make an investment in our Class A common stock speculative or risky:

Risks Related to Our Business and Industry

~~We have incurred operating losses~~

•the highly competitive nature of the TV streaming industry that is rapidly evolving;

•the acceptance and growth of over-the-top advertising and advertising platforms;

•our ability to further monetize our streaming platform;

•our ability to attract advertisers and advertising agencies to our demand-side advertising platform;

•our ability to develop, maintain, and expand relationships with licensed Roku TV partners, manufacturing partners, and service operators;

•our ability to establish and maintain relationships with important content publishers;

•popular or new content publishers not publishing their content on our streaming platform;

•the non-renewal or early termination of our agreements with content publishers;

•maintaining an adequate supply of quality video ad inventory on our platform and selling the available supply;

•content publishers electing not to participate in platform features that we develop;

•irrelevant or unengaging advertising or media and entertainment promotional spending campaigns on our platform;

•our operation of The Roku Channel;

•users signing up for offerings and services outside of our platform;

•the evolution of our industry and the impact of many factors that are outside of our control;

•our and our licensed Roku TV partners’ reliance on retail sales channels to sell products;

•our ability to build a strong brand and maintain customer satisfaction and loyalty;

•advertiser or advertising agency delayed payment or failure to pay;

•maintaining adequate customer support levels;

•our introduction of new products and services;

•our and our licensed Roku TV partners’ reliance on contract manufacturers and limited manufacturing capabilities;

•our reliance on licensed Roku TV partners’ operations for the supply of Roku TV models;

•our ability to forecast manufacturing requirements and manage our supply chain and inventory levels;

•decreased availability or increased costs for materials and components used in the ~~past, expect~~manufacturing of our products and our licensed Roku TV partners’ products;

•our ability to ~~incur operating losses~~obtain key components from sole source suppliers;

•interoperability of our products with content publishers’ and other third parties’ offerings, technologies, and systems;

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•detecting hardware defects and software errors in ~~the future and~~our products before they are released to end users;

•component manufacturing, design, or other defects that may ~~never achieve~~render our products permanently inoperable;

•our ability to obtain or maintain ~~profitability.~~

~~We began operations in 2002~~necessary or desirable third-party technology licenses;

Risks Related to Operating and ~~for all~~Growing Our Business

•our history of operating losses;

•volatility of our history we have experienced net losses and negative cash flows from operations. As of September 30, 2017, we had an accumulated deficit of $290.3 million and for the nine months ended September 30, 2017, we experienced a net loss of $70.5 million. We expectquarterly operating results that could cause our ~~operating expenses~~stock price to ~~increase in the future as we~~decline;

•our ability to manage our growth;

•our ability to successfully expand our ~~operations. If~~international operations;

•seasonality of our business and its impact on our revenue and gross ~~profit do not grow at~~profit;

•attracting and retaining key personnel and managing succession;

•maintaining systems that can support our growth, business arrangements, and financial rules;

•our ability to successfully complete acquisitions and investments and integrate acquired businesses;

•our ability to secure funds to meet our financial obligations and support our planned business growth;

•adverse developments affecting financial institutions, including bank failures;

Risks Related to Cybersecurity, Reliability, and Data Privacy

•significant disruptions of information technology systems or data security incidents;

•legal obligations and potential liability or reputational harm related to the protection of personal and confidential information;

•disruptions in computer systems or other services that result in a ~~greater rate than~~degradation of our ~~operating expenses, we will not be able~~platform;

•changes in how network operators manage data that travel across their networks;

Risks Related to ~~achieve~~Intellectual Property

•intellectual property infringement claims and litigation resulting in significant costs or the loss of important intellectual property rights;

•failure or inability to protect or enforce our intellectual property or proprietary rights;

•our use of open source software;

•our agreements to indemnify certain of our partners if our technology is alleged to infringe on third parties’ intellectual property rights;

Risks Related to Macroeconomic Conditions

•the impact of supply chain disruptions, inflationary pressures, recessionary fears, labor disputes, the COVID-19 pandemic, natural disasters, geopolitical conflicts, or other natural or man-made catastrophic events on our business;

Legal and Regulatory Risks

•enactment of or changes to government regulation or laws related to our business;

•changes in U.S. or foreign trade policies, geopolitical conditions, and general economic conditions that impact our business;

•U.S. or international rules (or the absence of rules) that permit internet access network operators to degrade users’ internet service speeds or limit internet data consumption by users;

•liability for content that is distributed through or advertising that is served through our platform;

•our ability to maintain ~~profitability. We expect~~effective internal controls over financial reporting;

•the impact of changes in accounting principles;

•compliance with laws and regulations related to ~~incur significant losses~~the payment of income taxes and collection of indirect taxes;

•changes to U.S. or foreign taxation laws or regulations;

•regulatory inquiries, investigations, and proceedings;

Risks Related to Ownership of Our Class A Common Stock

•the dual class structure of our common stock;

•volatility in the market price of our Class A common stock;

Table of Contents

•potential dilution or a decline in our stock price caused by future ~~for~~ sales or issuance of our capital stock or rights to purchase capital stock;

•a ~~number of reasons, including without limitation~~ decline in our stock price caused by future sales by existing stockholders;

•dependency on favorable securities and industry analyst reports;

•the ~~other risks and uncertainties described herein. Additionally, we may encounter unforeseen operating or~~significant legal, ~~expenses, difficulties, complications, delays~~accounting, and other ~~factors that may result~~expenses associated with being a publicly traded company;

•the absence of dividends on our Class A or Class B common stock;

•anti-takeover provisions in ~~losses in future periods. If~~ our ~~expenses exceed~~charter and bylaws; and

•the limitations resulting from our ~~revenue, we may never achieve or maintain profitability~~selection of the Delaware Court of Chancery and the U.S. federal district courts as the exclusive forums for substantially all disputes between us and our ~~business may be harmed.~~

stockholders.

Risks Related to Our Business and Industry

The TV streaming industry is highly competitive and many companies, including large technology companies, content owners and aggregators, TV brands, and service operators, are actively focusing on this industry. If we fail to differentiate ourselves and compete successfully with these companies, it will be difficult for us to attract and retain users and our business will be harmed.

The TV streaming industry is ~~increasingly~~highly 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 ~~increase~~offer 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 Amazon Prime Video, Disney+, Netflix, ~~Amazon.com, Inc.~~ and ~~Hulu, including rapid responses~~YouTube. And we must respond rapidly to actual and anticipated market trends in the ~~U.S.~~ TV streaming industry.

~~Companies~~

Large technology companies such as ~~Amazon.com,~~Amazon, Apple, ~~Inc.~~ and Google ~~Inc.~~ offer TV streaming ~~products~~devices that compete with ~~our~~Roku streaming ~~players. Amazon.com has also recently launched a co-branded TV that natively runs its TV streaming platform that competes with Roku TV.~~devices. In addition, Google licenses its Android operating system software for integration into smart TVs and service provider set-top boxes, and Amazon licenses its operating system software for integration into smart TVs and ~~service provider set top boxes.~~sells Amazon-branded smart TVs. These companies have ~~the~~greater financial resources tothan we do and can subsidize the cost of their streaming devices or licensing arrangements in order to promote their other products and services, ~~making~~which 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.~~

we do.

In addition, many TV brands ~~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 Cablevision,~~ 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 ~~users~~consumers of TV streaming content prefer ~~these~~ alternative products to Roku streaming ~~players and Roku TVs,~~devices, we may not be able to achieve our expected growth in ~~player~~active accounts, streaming hours, revenue, gross profit or ~~gross profit.~~

ARPU.

We also compete for streaming hours with mobile streaming applications on smartphones and tablets, and users may prefer to view streaming content on such applications. Increased use of mobile or other platforms for TV streaming could adversely impact the growth of our streaming hours, harm our competitive position, and otherwise harm our business.

We expect competition in TV streaming from the large technology companies and service operators described above, as well as new and growing companies, to increase in the future. This increased competition could result in pricing pressure, lower revenue and gross profit, or the failure of ~~our players,~~ Roku ~~TV and~~streaming devices, our platform or our other products to gain or maintain broad market acceptance. To remain competitive and maintain our position as a leading TV streaming ~~provider~~platform, we need to continuously invest in our platform, product development, marketing, service and support, and device distribution infrastructure. In addition, evolving TV standards and unknown future developments may require further investments in the development of Roku streaming devices, our platform and our other products. 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 ~~sales~~distribution 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.

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To enhance our users’ experience, we also offer audio products, including Roku Streambars, Roku wireless speakers, and Roku wireless subwoofers, and Roku smart home products and services, including indoor and outdoor cameras, video doorbells, smart lighting, smart plugs, and home monitoring products. As a result, we may face additional competition from makers of TV audio speakers and soundbars and other TV peripheral devices, as well as makers of other smart home products. If these products do not operate as designed or do not enhance the TVs powered by Roku OS or other viewing experiences as we intend, our users’ overall viewing experience may be diminished, and this may impact the overall demand for our products and our partners’ Roku TV models.

Our future growth depends on the acceptance and growth of over-the-top (“OTT”) advertising and OTT advertising platforms.*

We operate in a highly competitive advertising industry and compete for revenue from advertising with other streaming platforms and services, including social media and other digital 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. For example, Netflix and Disney+ have launched ad-supported tiers in their streaming services, which may further increase competition for streaming advertising revenue. 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.

Many advertisers continue to devote a substantial portion of their advertising budgets to traditional advertising, such as traditional TV, radio, and print, and to advertising through social media and other digital platforms. The future growth of our business depends on the growth of OTT advertising and on advertisers increasing their spending on advertising on our platform. Although traditional TV advertisers have shown growing interest in OTT advertising, we cannot be certain that their interest will continue to increase or that they will not revert to traditional TV advertising or shift their advertising spending to social media and other digital platforms (rather than to us). In addition, if we are unable to compete with social media and other digital platforms to win business from advertisers and agencies who have traditionally advertised on these platforms, such as direct-to-consumer and small or medium-sized businesses, our ability to grow our business may be limited. If advertisers, or their agency relationships, do not perceive meaningful benefits of OTT advertising, the market may develop more slowly than we expect, which could adversely impact our operating results and our ability to grow our business.

Finally, there is political pressure in some countries to limit OTT advertising (including limiting the advertising that may be shown to viewers of children’s content) or impose local content requirements on OTT services, which could pose a threat to our services.

We may not be successful in our efforts to further monetize our streaming platform, which may harm our business.

~~In addition to generating player revenue, our~~*

Our business model depends on our ability to generate platform revenue from advertisers and content ~~publishers and advertisers.~~publishers. We generate platform revenue primarily from the sale of digital advertising ~~campaigns~~(including media and ~~on a transactional basis from new subscription purchases~~entertainment promotional spending, the demand-side platform, and related services) and content ~~transactions that occur~~distribution services (including subscription and transaction revenue shares, the sale of Premium Subscriptions, and the sale of branded channel buttons on ~~our platform.~~remote controls). As such, we are seeking to expand ~~our user base~~the 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 and grow our ARPU. The total number of hours streamed, however, does not correlate with platform revenue or ARPUT on a period-by-period basis, because we do not monetize every hour streamed on our platform.opportunities. 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 whenever a Roku streaming device is streaming content, whether a viewer is actively watching or not. For example, if a player is connected to a TV, and the viewer turns off the TV, steps away, or falls asleep and does not stop or pause the player, then the particular streaming channel may continue to play content for a period of time determined by the streaming channel. We believe that this also occurs across a wide variety of non-Roku streaming devices and other set-top boxes. Since the first quarter of 2020, all 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 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. Some of our leading channel partners, including Netflix, also have similar features within their channels.

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Our ability to deliver more relevant advertisements to our users and to increase our platform’s value to advertisers and content publishers depends on the collection of user engagement data, which may be restricted or prevented by a number of factors. Users may decide to opt out or restrict our ability to collect ~~personal~~ viewing data or to provide them with more relevant advertisements. Content publishers may also refuse to allow us to collect data regarding user engagement or refuse to implement mechanisms we request to ensure compliance with our legal obligations or technical requirements. For example, we are not able to fully utilize program level viewing data from many of our most popular channels to improve the relevancy of advertisements provided to our users.

Other channels available on our platform, such as Amazon Prime Video, Apple TV+, Hulu, and YouTube, are focused on increasing user engagement and time spent within their ~~channel~~channels by allowing ~~them~~users to purchase additional content and streaming services within their ~~channels. In addition,~~channels; when users purchase these additional services within these channels, we ~~do not currently monetize content provided on non-certified channels on our platform.~~may earn less revenue than when the services are purchased directly from us. 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. Additionally, our distribution agreements with our most popular channels are renegotiated periodically; thus, even if we are currently able to monetize streaming hours within a channel, we may not be able to do so in the future. 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 efforts to monetize our streaming platform through ad-supported content are still developing and may not continue to grow as we expect, and our platform ~~have consisted~~revenue growth has been, and may continue to be, lower than expected due to advertisers significantly curtailing or pausing advertising spending due to inflationary pressures, recessionary fears or other reasons that are out of ~~subscription video on demand content; however,~~our control. In addition, advertisers’ spending commitments, such as those we obtain in connection with annual TV Upfront presentations, are typically not fully binding, and the revenue we receive from such commitments may be less than the initially committed amount. This means that in order to materially increase the monetization of our streaming platform through the sale of ~~advertising-supported~~ video advertising, we will need to attract significantly more advertising dollars to our streaming platform as well as deliver ad-supported content that results in our users ~~to stream~~streaming significantly more ad-supported content. ~~Furthermore, our efforts to monetize our platform through ad-supported content is still developing, and may not grow as we expect.~~ Accordingly, there can be no assurance that we will be successful in monetizing our streaming platform through the distribution of ad-supported content.

If we are unable to attract advertisers or advertising agencies to our OneView ad platform or if we are not successful in running a demand-side advertising platform, our business may be harmed.

Through our OneView ad platform, advertisers and advertising agencies can programmatically purchase and manage their OTT, desktop and mobile advertising campaigns. OneView leverages the demand-side platform developed by dataxu, which we acquired in November 2019, and integrates the reach, inventory, and capabilities of our proprietary advertising products and services. The market for programmatic OTT ad buying is an emerging market, and our current and potential advertisers and advertising agencies may not shift to programmatic ad buying from other buying methods as quickly as we expect or at all. If the market for programmatic OTT ad buying deteriorates or develops more slowly than we expect, advertisers and advertising agencies may not use OneView or we may not attract prospective advertisers or advertising agencies to OneView, and our business could be harmed. In addition, if OneView does not have the functionality or services expected by advertisers or advertising agencies, we may not be able to attract their advertising spend to OneView, or our existing customers may not maintain or increase their spend on OneView. Moreover, our ownership of OneView may negatively impact the ability of OneView to purchase advertising on non-Roku platforms. If we fail to adapt to our rapidly changing industry or to our customers’ evolving needs, advertisers and advertising agencies will not adopt OneView, and our business may be harmed. We also may not be able to compete effectively with more established demand-side platforms or be able to adapt to changes or trends in programmatic OTT advertising, which would harm our ability to grow our advertising revenue and harm our business.

Our growth depends in part on our ability to develop, maintain, and expand relationships with our licensed Roku TV partners and manufacturing partners in the United States and international markets and, to a lesser extent, service operators.*

We have developed, and intend to continue to develop and expand, relationships with TV brand and manufacturing partners. We continue to invest in the growth and expansion of our Roku TV program both in the United States and international markets. In the past few years, the sale of ~~advertising-supported video.~~

Roku TV models by our licensed Roku TV partners has materially contributed to our active account growth, streaming hours, and platform monetization efforts. This growth has primarily been driven by North America; however, our Roku TV licensing program has been expanded to certain international markets and represents a growing share of new active accounts. We license the Roku OS and our smart TV reference designs to certain licensed Roku TV partners to manufacture Roku TV models. We do not typically receive, nor do we typically expect to receive, license revenue from these arrangements, but we expect to incur expenses in connection with these commercial agreements.

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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, increasing streaming hours, and generating content distribution and advertising-related revenue on our platform. If these arrangements do not continue to result in increased active accounts and streaming hours, and if that growth does not in turn lead to successfully monetizing that increased user activity, our business may be harmed.

While we recently launched a new line of Roku-branded TVs (the Roku Select and Roku Plus Series TVs) that are designed, made, and sold by us, the loss of a relationship with a licensed Roku TV partner in the near future could harm our results of operations, damage our reputation, increase pricing and promotional pressures from other partners and distribution channels, increase our marketing costs, and result in the loss of revenue. 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 these relationships, our ability to grow or maintain our business could be adversely impacted.

We have also developed licensing relationships with certain service operators, primarily in international markets; however, this program has been decreasing in scale in recent years, as we have shifted the focus of our international growth to the sale of Roku streaming devices and expanding our Roku OS licensing program with licensed Roku TV partners. Based on the decreasing scale of our licensing program for service operators, including termination of these relationships, we expect that the number of active accounts generated from this program will continue to decline, which may impact the overall growth rate of our active accounts in international markets.

Our licensing arrangements are complex and time-consuming to negotiate and complete. Our current and potential partners include TV brands, cable and satellite companies, and telecommunication providers. Under these license arrangements, we generally have limited or no control over the amount and timing of resources these entities dedicate to the relationship. In the past, our licensed Roku TV partners have failed to meet their forecasts and anticipated market launch dates for distributing Roku TV models, and they may fail to meet their forecasts or such launches in the future. If our licensed Roku TV partners or service operator partners fail to meet their forecasts or such launches for distributing licensed streaming devices or choose to deploy competing streaming solutions within their product lines, our business may be harmed.

We depend on a small number of content publishers for a majority of our streaming hours, and if we fail to ~~monetize~~maintain these relationships, ~~directly or indirectly,~~ our business could be harmed.

Historically, a small number of content publishers have accounted for a significant portion of the ~~content~~hours streamed ~~across~~on our ~~platform and~~platform. In the ~~terms and conditions of our relationships with content publishers vary. For both fiscal 2016 and the nine~~three months ended ~~September~~June 30, ~~2017, content streamed from our~~2023, the top ~~five~~three streaming ~~channels accounted for approximately 70% of the total hours of content streamed across our platform, with Netflix alone accounting for approximately one-third~~services represented over 50% of all hours streamed in ~~each~~the period. ~~However, although Netflix is the largest provider of content across our platform, revenue generated from Netflix was not material to~~

~~our overall revenue during the nine months ended September 30, 2017, and~~If, for any reason, we ~~do not expect revenue from Netflix to be material to our operating results for the foreseeable future. In addition, our agreements with content publishers generally~~cease distributing channels that have historically streamed a ~~term of one to three years and can be terminated before the end~~large percentage 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 publisher’s security requirements. Further, we receive no revenue from YouTube, the most viewed ad-supported channel byaggregate streaming hours ~~streamed~~ on our platform, ~~for fiscal 2016 and the nine months ended September 30, 2017. If we fail to maintain~~ our ~~relationships with the content publishers that account for a significant amount of the content streamed by~~streaming hours, our ~~users~~active accounts, or ~~if these content publishers face problems in delivering their content across our platform, we~~Roku streaming device sales may ~~lose users~~be adversely affected, and our business may be harmed.

~~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 relatively~~popular or 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 TV 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.

~~If we are unable to maintain an adequate supply of video ad inventory on our platform, our business may be harmed.~~

We may fail to attract content publishers that generate sufficient ad-supported content hours on our platform and continue to grow our video ad inventory. Our business model depends on our ability to grow video ad inventory on our platform and sell it to advertisers. We grow ad inventory by adding and retaining content publishers on our platform with ad-supported channels that we can monetize. In addition, we do not have access to all video ad inventory on our platform, and we may not secure access in the future. The amount, quality and cost of inventory available to us can change at any time. If we are unable to grow and maintain a sufficient supply of quality video advertising 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. If 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 that we do not control. If Roku devices do not operate effectively with those offerings, technologies and systems, our business may be harmed.

Our Roku OS is designed for performance using relatively low cost hardware, which enables us to drive user growth with our players 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 don’t provide our users with a high quality experience on those offerings on a cost effective basis or if changes are made to those offerings that are not compatible with our players, 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 time to optimize such products to function well with these offerings, technologies and systems. In addition, many of our largest content publishers have the right to test and certify our new products before we can publish their channels on new products. These certification processes can be time consuming and introduce third party dependencies into our product release cycles. If content publishers do not ~~certify new products~~publish content 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 development 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 may 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 strengthen 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,~~platform, 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 streaming channels, streaming channel features, and content. In order to remain competitive, we must consistently meet user demand for popular streaming channels, streaming channel features, and ~~content;~~content, particularly as we launch new ~~players~~streaming devices, introduce new TVs powered by Roku OS, or enter new markets, including international markets. If we are not successful in helping our content publishers launch and maintain streaming channels and streaming channel features that attract and retain a significant number of users on our streaming platform or if we are not able to do so in a cost-effective manner, our business will be harmed. Our ability to successfully help content publishers maintain and expand their channel offerings on a cost-effective basis largely depends on our ability to:

•effectively promote and market new ~~streaming channels~~ and ~~enhancements to our~~ existing streaming channels;

•minimize launch delays of new and updated streaming channels; and

•minimize streaming platform downtime and other technical difficulties.

In addition, if service operators, including traditional TV providers, refuse to grant our users access to stream certain channels or only make content available on devices they prefer, our ability to offer a broad selection of popular streaming channels or content may be limited. If we fail to help our content publishers maintain and expand their ~~channel offerings our business may be harmed.~~

~~If the advertisements~~audiences on our platform or their channels are not ~~relevant or not engaging to our users, our growth in active accounts and hours streamed may be adversely impacted.~~

We have made, and are continuing to make, investments to enable advertisers to deliver relevant advertising content to users on our platform. Existing and prospective Roku advertisers may not be successful in serving ads that lead to and maintain user engagement. Those ads may seem irrelevant, repetitive or overly targeted and intrusive. We are continuously seeking to balance the objectives of our users and advertisers 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 and advertisers. If we do not introduce relevant advertisements or such advertisements are overly intrusive and impede the use of our TV streaming platform, our users may stop using our platform which will harm our business.

~~The Roku Channel may not generate sufficient advertising revenues.~~

In September 2017, we launched “The Roku Channel,” an ad-supported streaming channel on the Roku platform that gives our users free access to a collection of films and other content. We will not receive subscriptions or other fees from users that access content on The Roku Channel. We have incurred, and will continue to incur, costs and expenses in connection with the launch and operation of The Roku Channel, which we plan to monetize through advertising. If our users do not stream the content we make available ~~on The~~

Roku Channel, we will not have the opportunity to monetize The Roku Channel through advertising. Furthermore, if the advertisements on The Roku Channel are not relevant to our users or such advertisements are overly intrusive and impede our users’ enjoyment of the content we make available, our users may not stream content and view advertisements on The Roku Channel, and The Roku Channel may not generate sufficient advertising revenues to be cost effective for us to operate.

~~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 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, hours streamed or we are unable to increase the revenue under these arrangements, 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 TV brands and, to a lesser extent, service operators, 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.

~~If our users sign up for offerings and services outside of our platform or though other channels~~ on our platform, our business may be harmed.

~~We earn revenue by acquiring subscribers for certain~~

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The non-renewal or early termination of agreements with our content publishers activated on or through our platform. If users do not use our platform for these purchases or subscriptions for any reason, and instead pay for services directly with content publishers or by other means that we do not receive attribution for, our business may be harmed. In addition, certain channels available on our platform allow users to purchase additional streaming services from within their channels. The revenues we earn from these transactions are generally not equivalent to the revenues we earn from activations on or through our platform that we receive full attribution credit for. Accordingly, if users activate their subscriptions for content or services 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 depends in a large 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 at 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 after our initial public offering, which may reduce their motivation to continue to work for us. Moreover, the IPO 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~~channels or channel features from our streaming platform and may harm our active account growth and engagement.

We enter into agreements with all our content publishers, which have varying terms and conditions, including expiration ~~dates; typically over~~dates and rights to terminate under certain circumstances. Our agreements with content publishers generally have terms of one to three ~~years.~~ years and can be terminated before the end of the term by the content publisher under certain circumstances, including 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 ~~these agreements~~them in order to continue providing ~~offerings~~content from these content publishers on our streaming platform. ~~For example, since 2008, we~~We have ~~offered Netflix on our platform pursuant to a series of multi-year contracts. We are~~ in the ~~final year of our current application distribution agreement with Netflix~~past been unable, and ~~we anticipate that this contract will be extended or renewed prior to its expiration. We~~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, or if a content publisher terminates an agreement with us prior to its expiration, we may be required to temporarily or permanently remove certain ~~content~~channels or channel features from our streaming platform.

The loss of such ~~content~~channels or channel features from our streaming platform for any period of time may harm our business.

More broadly, if we fail to maintain our relationships with the content publishers on terms favorable to us, or at all, or if these content publishers face problems in delivering their content across our platform, we may lose channel partners or users and our business may be harmed.

If we are unable to maintain an adequate supply of quality video ad inventory on our platform or effectively sell our available video ad inventory, our business may be harmed.

Our business model depends on our ability to grow video ad inventory on our streaming platform and sell it to advertisers. While The Roku Channel has historically served as a valuable source of video ad inventory for 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 advertisers, 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 or fail to obtain access to a sufficient quantity and quality of ad inventory from the publishers of such content. Our access to video ad inventory in ad-supported streaming channels on our platform varies greatly among channels. Accordingly, we may not have access to a significant portion of the video ad inventory on our platform. For certain channels, including YouTube’s ad-supported channel, we have no access to video ad inventory at this time, and we may not secure access in the future. Moreover, when existing SVOD services introduce new ad-supported tiers to their streaming services, we have in the past and in the future may not be able to reach agreement on access to video ad inventory on these tiers on mutually agreeable terms, or at all. 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 ad inventory at reasonable costs to keep up with demand, our business may be harmed.

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 streaming platform and products evolve, we will continue to introduce new features, which may or may not be attractive to our content publishers or meet their requirements. For example, some content publishers have elected not to participate in our ~~cross-channel search feature, our integrated advertising framework, known as RAF,~~new home screen menu features or have imposed limits on our data gathering for usage within their channels. In addition, our streaming platform utilizes our proprietary Brightscript scripting language in order to allow our content publishers to develop and create channels on our streaming platform. If we introduce new features or utilize a new scripting language in the future, such a change may not comply with ~~our~~certain content ~~publisher’s~~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 key content publishers do not find 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 features of our platform do not meet their certification requirements, our business may be harmed.

~~Our quarterly operating results~~

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If the advertising and media and entertainment promotional spending campaigns on our platform decrease or are not relevant or not engaging to our users, our growth in active accounts and streaming hours and our business may be ~~volatile~~adversely impacted.*

We have made, and are ~~difficult~~continuing to ~~predict,~~make, investments to engage with more advertisers and content publishers, and enable them to deliver more relevant advertising and media and entertainment promotional spending campaigns to our users. In addition, a small number of content publishers historically have accounted for a significant portion of the media and entertainment promotional spending campaigns on our platform.

Existing and prospective advertisers and content publishers may not be successful in serving ads and media 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 advertisers and content 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 content publishers.

If the advertising and media and entertainment promotional spending campaigns on our streaming platform decrease, which has happened in the past and may happen in the future, are not relevant, overly intrusive or too frequent and impede the use of our platform, our users may stop using our platform, which will harm our business, financial condition and operating results.

We are subject to various risks in connection with our operation of The Roku Channel.

We operate The Roku Channel, which offers ad-supported free access for users to a collection of films, television series, live linear television, and other content. We have incurred, and will continue to incur, costs and expenses in connection with the development, expansion, and operation of The Roku Channel, which we monetize primarily through advertising. For example, we previously acquired content rights, including rights to certain projects in development, from the mobile-first video distribution service known as Quibi, and made The Roku Channel 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. We also commission original content that we own and distribute on The Roku Channel.

If our users do not continue to stream the ad-supported content we make available on The Roku Channel, we will not have the opportunity to monetize The Roku Channel through revenue generated from 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 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 is ultimately not appealing to our users and advertisers, usage of The Roku Channel may decline, and our ~~stock price~~business may ~~decline if~~be harmed.

In addition, following the Quibi and This Old House transactions and the launch of our advertising brand studio, we ~~fail to meet the expectations of securities analysts or investors.~~

~~Our revenue, gross profit~~are producing content for distribution on The Roku Channel and other ~~operating results could vary significantly~~platforms. We have limited experience producing content, and we may not be successful in doing so in a cost-effective manner that is appealing to our users and advertisers and furthers the growth of The Roku Channel. We also take on risks associated with content production, such as completion and key talent risk. Furthermore, if the advertisements on The Roku Channel are not relevant to our users or such advertisements are overly intrusive and impede our users’ enjoyment of the available content, our users may not stream content and view advertisements on The Roku Channel, and The Roku Channel may not generate sufficient revenue from ~~quarter-to-quarter~~advertising to be cost effective for us to operate. In addition, we distribute The Roku Channel on platforms other than our own streaming platform, and ~~year-to-year~~there can be no assurance that we will be successful in attracting a large number of users or generating significant revenue from advertising through the distribution of The Roku Channel on such other streaming platforms.

If our users sign up for offerings and services outside of our platform or through other channels on our platform, our business may ~~fail~~be harmed.

We earn revenue by acquiring subscribers for certain of our content publishers activated on or through our platform, including Premium Subscriptions on The Roku Channel, which allow our users to ~~match~~pay for content from various content publishers. If users reduce the degree to which they use our ~~past performance due~~platform for these purchases or subscriptions for any reason, and instead increase the degree to which they pay for services directly with content publishers or by other means for which we do not receive attribution, our business may be harmed.

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In addition, certain channels available on our platform allow users to purchase additional streaming services from within their channels. The revenue we earn from these transactions is not always equivalent to the revenue we earn from sales of such additional services on a ~~variety~~stand-alone basis through our platform. If users increase their spending on such in-channel transactions at the expense of ~~factors, including~~stand-alone purchases through our platform, our business may be harmed.

We operate in a rapidly evolving industry that will be impacted by many factors that are outside of our ~~control. Factors that may contribute~~control, which makes it difficult to ~~the variability of our operating results and cause the market price of our Class A common stock to fluctuate include:~~

~~the entrance of new competitors or competitive products in our market, whether by established or new companies;~~

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~~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; and~~

an increase in costs associated with protecting our intellectual property, defending against third-party intellectual property infringement allegations or procuring rights to third-party intellectual property.

Our gross profit margins vary across our devices and platform offerings. Player revenue has a lower gross margin compared to platform revenue derived through our arrangements with advertising, 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 result of a shift in device, geographic or sales channel mix, component cost increases, price competition, or the introduction of new players, 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 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 andevaluate our business ~~will be harmed. If~~and prospects.

TV streaming is a ~~reduction in gross margin does not result in an increase in our active accounts and gross profit, our financial results may suffer and~~rapidly evolving industry, making our business ~~may be harmed.~~

~~Our revenue~~ and ~~gross profit~~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 ~~seasonality~~a high degree of uncertainty. We believe that the continued growth of streaming as an entertainment alternative will depend on the availability and ifgrowth 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 delivery speed of different content traveling on their networks, the quality and reliability of new devices and technology, the cost for users relative to other sources of content, the quality and breadth of content that is delivered across streaming platforms, and other macroeconomic conditions. Accordingly, our ~~sales during~~growth and 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~~future evolution of each fiscal year due to higher consumer purchases and increased advertising during holiday periods. Fourth quarter revenue comprised 40% and 37% of our fiscal 2015 and 2016 total net revenue, respectively, and fourth quarter gross profit comprised 39% and 37% of our fiscal 2015 and 2016 gross profit, respectively. Furthermore, a significant percentage of our player sales through retailers in the fourth quarter are pursuant to committed sales agreements with retailers forTV streaming as an industry, 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 in the effectiveness~~impact our success, is dependent on many factors 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 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, and our business would be harmed.

control.

We and our licensed Roku TV ~~brand~~ partners depend on ~~our~~ retail sales channels to effectively market and sell our ~~players and Roku TVs,~~respective products, and if we or our partners fail to maintain and expand effective retail sales channels, we or our partners could experience lower ~~player or Roku TV~~product sales.

To continue to ~~acquire new~~increase our active accounts, we must maintain and expand ~~our~~ retail sales ~~channels.~~channels for our products and for the Roku products sold by our partners or licensees. The majority of our ~~players~~products and our licensed Roku ~~TVs~~TV partners’ products are sold through traditional brick and mortar retailers, such as Best Buy, ~~Costco,~~ Target, and Walmart, including their online sales platforms, and online retailers such as ~~Amazon.com. To a lesser extent, we~~Amazon.

We also sell ~~players~~certain products directly through our website and internationally through ~~distributors. In 2015~~distributors and ~~2016, Amazon.com, Best Buy~~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 retailers for those markets as compared to our sales channels in the United States or our competitors in international markets. Amazon and Walmart ~~each~~in total accounted for ~~more than 10%~~62% and 54% of our ~~player~~devices revenue for the three months ended June 30, 2023 and ~~are expected to each account for more than 10% of our player revenue in fiscal 2017. These three retailers collectively accounted for 57% and 61 % of our player revenue in fiscal 2015 and 2016,~~June 30, 2022, respectively. ~~These~~

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~~products or our licensed Roku ~~TVs, or~~TV partners’ products, choose not to prominently display those devices in their stores or on their websites, or close or severely limit access to their brick and mortar locations, the volume of our products or our licensed Roku ~~devices~~TV partners’ products sold could decrease, which would harm our business. If any of our existing licensed Roku TV partners choose to work exclusively with, or divert a significant portion of their business with us to, other operating system developers, this may adversely impact our ability to continue to license the Roku OS and our smart TV reference design to TV brands and our ability to continue to grow active accounts and monetize the Roku OS. Traditional retailers have limited shelf and end cap space in their 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, ~~and~~ stronger brand identity and greater marketing resources, such as ~~Apple~~Amazon or Google, possesses greater bargaining power with retailers. In addition, one of our online retailers, ~~Amazon.com,~~Amazon, sells its own competitive TV streaming ~~products~~devices, smart TVs, and smart home devices, is able to market and promote these products more prominently on its website, and could refuse to offer or promote our ~~devices.~~products on its website. Any reduction in our ability to place and promote our ~~devices,~~products, or increased competition for available shelf or website placement, ~~would~~could require us to increase our marketing or other expenditures ~~simply~~ to maintain our product visibility or could 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~~products during these periods, our business would be harmed.

If our efforts to build a strong brand and maintain customer satisfaction and loyalty are not successful, we may not be able to attract or retain users, and our business may be harmed.

Building and maintaining a strong brand is important to attract and retain users, as potential users have a number of TV streaming choices. Successfully building a brand is a ~~time consuming~~time-consuming and comprehensive endeavor and can be positively and negatively impacted by any number of factors. ~~Some of these~~Certain factors, such as the quality or pricing of our ~~players~~products or our customer service, are within our control. Other factors, such as the quality and reliability of the Roku ~~TVs~~TV models made by our licensed Roku TV partners 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

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brand awareness and market share more quickly and effectively than we can. Many of our competitors are larger companies and ~~promote~~may 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 Internet~~digital 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.

~~We must successfully manage device introductions~~

Our streaming platform allows our users to choose from a wide variety of channels, representing a variety of content from a wide range of content publishers. Our users can choose and ~~transitions in order~~control which channels they download and watch, and they can use certain settings to ~~remain competitive.~~

We must continually develop new and improved devices that meet changing consumer demands. Moreover, the introduction of a new device is a complex task, involving significant expenditures in research and development, promotion and sales channel development, and management of existing inventoriesprevent channels from being downloaded to ~~reduce the cost associated with returns and slow moving inventory. As new devices are introduced,~~Roku streaming devices. While we have policies that prohibit the publication of content that is unlawful, incites illegal activities, or violates third-party rights, among other things, we may distribute channels that include controversial content. Controversies related to ~~monitor closely~~ the ~~inventory at our contract manufacturers,~~content included on certain channels that we distribute have resulted in, and ~~phase out the manufacture of prior versions in a controlled manner. For example, in 2017 we participated~~could in the introduction of dozens of new models of Roku TVs with TCL that incorporate new high-dynamic range technologies and high-end Roku TVs with Hisense that feature new 4K technologies and larger screen sizes and we updated our entire streaming player product line for higher performance and new features. Whether users will broadly adopt new devices is not certain. Our future ~~success will depend on our ability to develop new and competitively priced devices and add new desirable content and features~~result in, negative publicity, cause harm to our ~~platform. Moreover, we must introduce new devices in a timely~~reputation and cost-effective manner, and we must secure production orders for those devices from our contract manufacturers and component suppliers. The development of new devices 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 devices 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~~brand, or ~~acquisition of new technologies;~~

~~our timely completion of new designs and development;~~

~~the ability of our contract manufacturers to cost-effectively manufacture our new devices;~~

~~the availability of materials and key components used in the manufacture of our new devices; and~~

~~our 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 devices in a timely or cost-effective manner, and our business may be harmed.~~

~~We do not have manufacturing capabilities and primarily depend upon a single contract manufacturer, and our operations could be disrupted if we encounter problems with these contract manufacturers.~~

We do not have any internal manufacturing capabilities and primarily rely upon one contract manufacturer, Hon Hai Precision Industry Co. Ltd., or Foxconn, to build our devices. Foxconn and our other contract manufacturers are 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 device or feature, is limited. In addition, we have limited control over Foxconn’s quality systems and controls, and therefore must rely on Foxconn to manufacture our devices to our quality and performance standards and specifications. Delays, component shortages and other manufacturing and supply problems could impair the retail distribution of our devices and ultimately our brand. Furthermore, any adverse change in our contract manufacturers’ financial or business condition could disrupt our ability to supply devices to our retailers and distributors.

Our contract with Foxconn does not obligate them to supply our devices in any specific quantity or at any specific price. In the event Foxconn is 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 Foxconn would requiresubject us to ~~reduce our supply of devices to our retailers~~claims and distributors, which in turn would reduce our revenue. In addition, the Foxconn 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 Roku TVs or players, could harm our business.

If Foxconn fails for any reason to continue manufacturing our devices 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 Foxconn would require us to reduce our supply of devices to our retailers and distributors, which in turn would reduce our revenue and user growth.

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 arrangement with Foxconn. Lead times for the materials and components that Foxconn 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 devices are currently lengthy, requiring our contract manufacturers to order materials and components several 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 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 manufacturers 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 requirements, our contract manufacturers may have inadequate component inventory, which could interrupt the manufacturing of our players 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 devices via air freight, which is more expensive than ocean freight, and adversely affected our device 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 manufacturers are 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, WiFi silicon products and WiFi 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. Neither we nor our contract manufacturers have long-term supply agreements with these suppliers. Instead, our contract manufacturers typically purchase the components required to manufacture our devices on a purchase order basis. As a result, most of these suppliers can stop selling to us at any time, requiring us to find another source, or can raise their prices, which could impact our gross margins. 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; and~~

~~delays 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. For example, our research and development expenses increased from $56.7 million for the nine months ended October 1, 2016 to $76.7 million for the nine months ended September 30, 2017. In addition, in January 2016, we moved our corporate headquarters and had commenced activities to sublet our old office space. We have secured sublessors for a substantial portion of our old office space, but continue to incur rent expense on the remaining space. If we are unable to find sublessors for all or a substantial portion of this remaining space, our quarterly financial performance will be impacted as a result of this additional expense through 2020. 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;~~

~~increase our sales and marketing efforts;~~

~~broaden our customer support capabilities;~~

~~support a larger number of TV brand and service operators;~~

~~implement appropriate operational and financial systems;~~

~~expand internationally; and~~

~~maintain effective financial disclosure controls and procedures.~~

~~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 almost all 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 and France and have recently commenced sales in 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 devices 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, 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 tax laws, trade laws, labor regulations, tariffs, export quotas, custom duties or other trade restrictions;~~

~~greater difficulty supporting and localizing our devices 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;~~

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~~restrictions on the repatriation of earnings; and~~

~~working capital constraints.~~

~~If ongoing litigation in Mexico continues to prevent our products from entering the marketplace, our international expansion plans will be impacted and our operating results may suffer.~~

We are involved in litigation in Mexico that was commenced by a large Mexican pay TV and Internet access provider. Roku was not named as a defendant in this case, and the case principally targeted entities that are alleged to sell unlicensed content to consumers using our platform, among other means. At the commencement of this case, however, a court issued a temporary ban on the importation and sale of Roku devices in Mexico, which remains in effect. In response to this ban, the Company commenced a separate proceeding in a federal District Court in Mexico City challenging the constitutionality of the ban, which proceeding is ongoing. Involvement in these legal proceedings has been complicated and has drawn management time and company resources. In addition to reducing revenue for products sold in Mexico, our involvement in this litigation has caused us to incur legal expenses and other costs, and to the extent these legal and other expenses grow, our involvement in this litigation, or similar legal matters in the future, could be disruptive to our business.

~~If we experience higher device returns than we expect and are unable to resell such returned devices as refurbished devices our business could be harmed.~~

We offer customers who purchase devices through our website 30 days to return such devices. We also generally honor the return policies of our retail and distribution partners, who typically allow customers to return devices, even with open packaging within certain time periods that may exceed 30 days. We generally resell any returned devices as refurbished devices. In the event we decide to permanently reduce the retail prices of our devices, we provide price protection to certain distribution partners for the devices 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 devices as refurbished devices or are required to provide price protection in amounts greater than we expect, our business could be harmed.

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.

Many of our contracts with advertising agencies provide that if the advertiser does not pay the agency, the agency is not liable to us, and we must seek payment solely from the advertiser, a type of arrangement called sequential liability. Contracting with these agencies, which in some cases have or may develop higher-risk credit profiles, may subject us to greater credit risk than if we were to contract directly with advertisers.

This credit risk may vary depending on the nature of an advertising agency’s aggregated advertiser base. In addition, typically, we are contractually required to pay advertising inventory data suppliers within a negotiated period of time, regardless of whether our advertisers or advertising agencies pay us on time, or at all. In addition, we typically experience slow payment cycles by advertising agencies as is common in the advertising industry. While we attempt to balance payment periods with our suppliers and advertisers and advertising agencies, we are not always successful. As a result, we can often face a timing issue with our accounts payable on shorter cycles than our accounts receivables, requiring us to remit payments from our own funds, and accept the risk of credit losses.

We may also be involved in disputes with agencies and their advertisers over the operation of our streaming platform, or the terms of our ~~agreements.~~agreements or our billings for purchases made by them through our streaming platform or through our demand-side platform. 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, advertisers, content partners, and licensed Roku TV partners, which could harm our business.

Our users depend on our customer support organization to resolve issues relating to our products and our streaming platform. A high level of support is critical for the success of our business. We currently outsource the majority of our customer support operation to a third-party customer support organization which provides support to end users. In addition, we train our licensed Roku TV partners and service operator licensees to provide first-level customer support to users of Roku TV models. If we do not effectively train, update, and manage our third-party customer support organization to assist our users and licensees, and if that support organization does not succeed in helping them quickly resolve issues or provide effective ongoing support, it could adversely affect our ability to monetize our streaming platform, to sell our products to consumers and could harm our reputation with potential new customers and our licensees.

We must continue to innovate and develop new and existing products and services to remain competitive, and new products and services expose our business to new risks.*

We must continually innovate and improve our products and services and develop new products and services to meet changing consumer demands. In particular, we recently introduced Roku Select and Roku Plus Series TVs (a new line of Roku-branded TVs that are designed, made, and sold by us) and Roku smart home products (including indoor and outdoor cameras, video doorbells, smart lighting, smart plugs, and home monitoring products) and related services. The introduction of a new product or service is a complex task, involving significant expenditures in research and development, promotion, and sales channel development, and can expose our business to new risks. The introduction of new products and services or changes to our existing products and services may result in new or enhanced governmental or regulatory scrutiny, new litigation or claims, or other complications that could adversely affect our business, reputation, or financial results. For example, we have faced and may continue to face new intellectual property infringement claims related to new products and services we have introduced. In addition, our entrance into entirely new lines of business beyond our

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historical core business of TV streaming and advertising, such as our launch of Roku smart home products (including home monitoring products) and shoppable ads that allow users to purchase advertised products and services directly from their Roku devices, may change our risk profile and subject us to risks that differ from the risks we face as a result of our TV streaming business. In particular, the provision of home monitoring services is a highly regulated industry where various licensing requirements may apply in each jurisdiction where such services are offered.

Whether users will broadly adopt our new products or services is not certain. Our future success will depend on our ability to develop new and competitively priced products and services and add new desirable content and features to our streaming platform. Moreover, we must introduce new products and services in a timely and cost-effective manner, and we must secure production orders for new products from our contract manufacturers. The development of new products and services 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 and services depends on a number of factors, including:

•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;

•our timely completion of new designs and development;

•our ability to timely and adequately redesign or resolve design or manufacturing or security issues;

•our ability to identify and contract with an appropriate manufacturer;

•the ability of our contract manufacturers to cost-effectively manufacture our new products;

•the availability of materials and key components used in manufacturing;

•tariffs, trade, sanctions, and export restrictions by the U.S. or foreign governments, which could impact the pricing, timing and availability of new products and depress consumer demand, limit the ability of our contract manufacturers to obtain key parts, components, software, and technologies, and lead to shortages;

•the ability of our contract manufacturers to produce quality products and minimize defects, manufacturing mishaps, and shipping delays;

•our ability to obtain required licenses and comply with other regulatory requirements; and

•our ability to attract and retain world-class research and development personnel.

If any of these or other factors materializes, we may not be able to develop and introduce new products or services in a timely or cost-effective manner, and our business may be harmed.

We do not have our own manufacturing capabilities and primarily depend upon a limited number of contract manufacturers, and our operations could be disrupted if we encounter problems with our contract manufacturers.

We do not have any internal manufacturing capabilities and rely on a limited number of contract manufacturers to build our players, smart home products, and Roku-branded TVs. Our contract manufacturers are vulnerable to, among other issues:

•capacity constraints;

•reduced component availability;

•production, supply chain, or shipping disruptions or delays, including from labor disputes, strikes, mechanical issues, quality control issues, natural disasters, geopolitical conflicts, and public health crises; and

•the impact of U.S. or foreign tariffs, trade, or sanctions restrictions on components, finished goods, software, other products, or data transfers.

As a result, we have limited control over delivery schedules, manufacturing yields, and costs, particularly when components are in short supply or when we introduce new products.

We also have limited control over our contract manufacturers’ quality systems and controls, and therefore must rely on them to manufacture our products to our quality and performance standards and specifications. Delays, component shortages, quality issues, and other manufacturing and supply problems have impaired, and could in the future impair, the retail distribution of our products and ultimately our brand. Furthermore, any adverse change in our contract manufacturers’ financial or business condition could disrupt our ability to supply our products to our retailers and distributors.

We also rely upon our contract manufacturers and other contractors to perform some of the development work on our products. The contract manufacturers or other contractors may be unwilling or unable to successfully complete desired

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development or fix defects or errors in a timely manner. Delays in development work by contract manufacturers or contractors could delay launch of new or improved products.

Our contracts with our contract manufacturers generally may not contain terms that protect us against development, manufacturing, and supply disruptions or risks. For example, such contracts may not obligate our contract manufacturers to supply our products in any specific quantity or at any specific price. If our contract manufacturers are unable to fulfill our production requirements in a timely manner, if their costs increase because of inflationary pressures, U.S. or international tariffs, sanctions, export or import restrictions, or if they decide to terminate their relationship with us, our order fulfillment may be delayed or terminated, and we would have to attempt 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, to our quality and performance standards on a 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 products to our retailers and distributors, which in turn would reduce our revenue, or incur higher freight costs than anticipated, which would negatively impact our devices gross margin.

In addition, our contract manufacturers’ facilities, and the facilities of our contract manufacturers’ suppliers, are located in various geographic areas that may be subject to political, economic, labor, trade, public health, social, and legal uncertainties, including Taiwan, Vietnam, China, and Brazil, and such uncertainties may harm or disrupt our relationships with these parties or their ability to perform. For example, if the current tensions between Taiwan and China escalate and impact the operations of our contract manufacturers and their Taiwanese suppliers, our supply chain and our business could be adversely affected. We believe that the international location of these facilities increases supply risk, including the risk of supply interruptions, tariffs, and trade restrictions on exports or imports.

The supply of Roku TV models to the market could be disrupted if our licensed Roku TV partners encounter problems with their internal operations or with their contract manufacturers, assemblers, or component suppliers.

Some of our licensed Roku TV partners have internal manufacturing capabilities, while others rely primarily or exclusively upon contract manufacturers to build the Roku TV models that our licensed Roku TV partners sell to retailers. Regardless of whether their manufacturing capabilities are internal or contracted, our licensed Roku TV partners’ manufacturers may be vulnerable to capacity constraints and reduced component availability; increases in tariffs on imports of Roku TV models; future possible changes in regulations on exports: restrictions, by the United States or otherwise, on dealings with certain countries, companies, or imported inputs; tariffs on parts or components for Roku TV models; and supply chain disruptions and shipping delays.

Our licensed Roku TV partners’ control over delivery schedules, manufacturing yields, and costs, particularly when components are in short supply, may be limited. For those licensed Roku TV partners with contract manufacturers or suppliers, the problems are exacerbated because the contract manufacturer is a third party, and the licensed Roku TV partner does not have direct visibility into or control over the operations. Delays, component shortages, and other manufacturing and supply problems could impair the manufacture or distribution of Roku TV models. Interruptions in the supply of Roku TV models to retailers and distributors or increases in the pricing of Roku TV models at times have negatively affected, and could adversely affect in the future, the volume of Roku TV models sold at retail, resulting in slower active account and streaming hour growth.

Furthermore, any manufacturing, design, or other issues affecting the quality or performance of Roku TV models could harm our brand and our business.

If we fail to accurately forecast our manufacturing requirements for our products and manage our inventory with our contract manufacturers, we could incur additional costs, experience manufacturing delays, and lose revenue.

We bear risks of excess and insufficient inventories under our contract manufacturing arrangements. For example, our contract manufacturers order materials and components in advance in an effort to meet our projected needs for our products. Lead times for the materials and components that our contract manufacturers order on our behalf through different component suppliers may vary significantly and depend on numerous factors outside of our control, including the specific supplier, contract terms, shipping and 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 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 our decision to discontinue a certain model or the use of particular components. If we incur costs to cover excess supply commitments, our business may be harmed.

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Conversely, if we underestimate our product requirements, our contract manufacturers may have inadequate material or component inventory, which could interrupt the manufacturing of our products, result in insufficient quantities available to meet demand, 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 our products via air freight, which is more expensive than ocean freight, and adversely affected our devices 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 products incorporate key components from sole source suppliers, and if our contract manufacturers are unable to obtain sufficient quantities of these components on a timely basis, we will not be able to deliver our products to our retailers and distributors.

We depend on sole source suppliers for key components in our products. For example, each of our streaming players and TVs powered by Roku OS may utilize 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 finished products that are used in final assembly of their components (or on the finished products themselves), or shortages of key components.

There is also a risk that the strategic supplier may stop producing such components, cease operations, be acquired by or enter into exclusive arrangements with our competitors or other companies, put contract manufacturers on allocation because of semiconductor shortages, or become subject to U.S. or foreign sanctions or export control restrictions or penalties. Such suppliers have experienced, and may in the future experience, production, shipping, or logistical constraints arising from macroeconomic conditions or other circumstances, such as inflationary pressures, geopolitical conflict, and supply chain disruptions. Such interruptions and delays have in the past and may in the future force us to seek similar components from alternative sources, which may not always be available, and which may cause us to delay product introductions and incur air freight expense. Switching from a sole-source supplier may require that we adapt our software, and redesign our products to accommodate new chips and components, and may require us to re-qualify our products with regulatory bodies, such as the U.S. Federal Communications Commission (“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, including increases related to inflationary pressures;

•timely delivery;

•component quality; and

•delays 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 products could adversely affect our ability to meet scheduled product deliveries to our retailers and distributors, result in lost sales and higher expenses, and harm our business.

If our products do not operate effectively with various offerings, technologies, and systems from content publishers and other third parties that we do not control, our business may be harmed.*

The Roku OS is designed to perform using relatively low-cost hardware, which enables us to drive user growth via Roku streaming devices offered at a low cost to consumers. However, this hardware must be interoperable with all channels and other offerings, technologies, and systems from our content publishers, including virtual multi-channel video programming distributors, and other third parties. We have no control over these offerings, technologies, and systems beyond our channel certification requirements, and if Roku streaming devices do not provide our users with a high-quality experience on those offerings on a cost-effective basis or if changes are made to those offerings that are not compatible with Roku streaming devices, we may be unable to increase active account growth and user engagement or may be required to increase our hardware costs, and our business will be harmed.

We plan to continue to introduce new products regularly, including, for example, our recently launched Roku-branded TVs, and we have experienced that it takes time to optimize such products to function well with these offerings, technologies and systems. In addition, many of our largest content publishers have the right to test and certify our new products before we can publish their channels. The certification processes can be time consuming and introduce third-party

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dependencies into our product release cycles. If content publishers do not certify new products on a timely basis or require us to make changes in order to obtain certifications, our product release plans may be adversely impacted, we may not be able to offer certain products to all licensed Roku TV partners or we may not continue to offer certain channels. To continue to grow our active accounts and user engagement, we will need to prioritize development of Roku streaming devices to work better with new offerings, technologies, and systems, including our recently launched smart home products and services. If we are unable to maintain consistent operability of Roku streaming 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 Roku streaming devices. We may not successfully develop Roku streaming devices 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.

Our products are complex and may contain hardware defects and software errors, which could manifest themselves in ways that could harm our reputation and our business.

Our products and the products of our licensed Roku TV partners are complex and have contained and may in the future contain hardware defects or software errors. These defects and errors can manifest themselves in any number of ways in our products or our streaming platform, including through diminished performance, security vulnerabilities, data loss or poor quality, device malfunctions, or even permanently disabled products. Some errors may only be discovered after a product 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 software errors in the process of any such update.

The introduction of a serious software error could result in products becoming permanently disabled. We offer a limited warranty for our products, in accordance with applicable law, however, providing software updates, product support, and other activities could cause us to be responsible for issues with products for an extended period of time. Any defects discovered in our products 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 contracts with our end 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.

Components used in our products may fail as a result of manufacturing, design, or other defects that were unknown to us or over which we have no control and may render our products permanently inoperable.

We rely on third-party component suppliers to provide certain functionalities needed for the operation and use of our products. Any errors or defects in such third-party technology could result in errors or defects in our products that could harm our business. If these components have a manufacturing, design, or other defect, they could cause our products to fail and could render them permanently inoperable. For example, the typical means by which our users connect their home networks to our players is by way of a Wi-Fi access point in the home network router. If the Wi-Fi receiver or transmitter in a player fails and cannot detect a home network’s Wi-Fi access point, the player will not be able to display or deliver any content to the TV screen. As a result, we may have to recall and replace defective products, which could be at a considerable cost and expense. Should we have a widespread problem of this kind, our reputation in the market could also be adversely affected.

If we are unable to obtain or maintain necessary or desirable third-party technology licenses, our ability to develop new products or streaming platform enhancements may be impaired.

We utilize or enable certain industry standard and other commercially available technology in our products and streaming platform that is licensed by third parties. As we continue to introduce new features or improvements to our products and on our streaming 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 or maintain 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 products, streaming platform, and our business.

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Risks Related to Operating and Growing Our Business

We have incurred operating losses in the past, and although we have achieved profitability in certain prior quarters, we expect to incur operating losses in the future and may not be able to achieve profitability again in the near term or at all.*

We have incurred operating losses in the past, and we may incur operating losses in the future. Although we achieved profitability in certain prior quarters, we may not be able to achieve profitability again in the near term or at all. As of June 30, 2023, we had an accumulated deficit of $889.2 million. We generally expect our operating expenses to increase in the future as we continue to expand our operations and invest in growth and new areas, although we expect operating expense year-over-year growth to significantly decline over the course of 2023.

If our revenue and gross profit do not grow at a greater rate than our operating expenses, we may not be able to achieve profitability again. We expect our profitability to fluctuate in the future for a number of reasons, including without limitation the other risks and uncertainties described herein. Additionally, we may encounter unforeseen operating or legal expenses, difficulties, complications, delays, and other factors that may result in losses in future periods.

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, including many 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:

•the entrance of new competitors or competitive products or services, whether by established or new companies;

•our ability to retain and grow our active account base, increase engagement among new and existing users, and monetize our streaming platform;

•our ability to maintain effective pricing practices in response to the competitive markets in which we operate or other macroeconomic factors, such as increased taxes or inflationary pressures, such as those the market is currently experiencing, and our ability to control costs, including our operating expenses;

•our revenue mix, which drives gross profit;

•supply of advertising inventory on our advertising platform and advertiser demand for advertising inventory;

•seasonal, cyclical, or other shifts in revenue from advertising or product sales;

•the timing of the launch of new or updated products, channels, or features;

•the addition or loss of popular content or channels;

•the expense and availability of content to license or produce for The Roku Channel;

•the ability of retailers to anticipate consumer demand;

•an increase in the manufacturing or component costs of our products or partner-branded products;

•delays in delivery of our products or partner-branded products, or disruptions in our or our partners’ supply or distribution chains; and

•an increase in costs associated with protecting our intellectual property, defending against third-party intellectual property infringement allegations, or procuring rights to third-party intellectual property.

Our gross margins vary across our devices and platform offerings. Our devices segment (which generates revenue from the sale of streaming players, Roku-branded TVs, smart home products and services, audio products, and related accessories, as well as revenue from licensing arrangements with service operators and licensed Roku TV brand partners) has lower gross margins compared to our platform segment (which generates revenue from the sale of digital advertising (including media and entertainment promotional spending, the demand-side platform, and related services) and content distribution services (including subscription and transaction revenue shares, the sale of Premium Subscriptions, and the sale of branded channel buttons on remote controls)). Gross margins on our streaming players, audio products, and smart home products vary across models and can change over time as a result of product transitions, pricing and configuration changes, component costs, device 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 sales channel mix, component cost increases, price competition, or the introduction of new products, including those that have higher cost structures with flat or reduced pricing. We have in the past and may in the future strategically reduce our devices gross margin in an effort to increase the number of active accounts and grow our gross profit. As a result, our devices revenue may not increase as rapidly as it has historically, or at all, and, unless we are able to continue to increase our platform revenue and grow the number of active accounts, we may be unable to grow gross profit and our business will be harmed. For example, in the past, global supply chain disruptions

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have resulted in shipping delays, increased shipping costs, component shortages, and increases in component prices, which negatively affected our devices gross margin. If a reduction in gross margin does not result in an increase in our active accounts or an increase in our platform revenue and gross profit, our financial results may suffer, and our business may be harmed. In addition, our platform segment has experienced in the past, and may experience in the future, lower gross margins than we anticipate. If our platform gross margins are lower than we anticipate, our financial results may suffer, and our business may be harmed.

If we have difficulty managing our growth in operating expenses, our business could be harmed.*

We have experienced significant growth in our research and development, sales and marketing, support services, operations, and general and administrative functions 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 internationally;

•increase our sales and marketing efforts;

•expand the capacity to manufacture and distribute our products;

•broaden our customer support capabilities;

•expand our product offerings;

•support our licensed Roku TV partners and service operators;

•expand and improve the content offering on our platform;

•implement appropriate operational and financial systems; and

•maintain effective financial disclosure controls and procedures.

If we fail to manage our growth effectively, including if we grow our business too rapidly, we may not be able to execute our business strategies, which could harm our business and adversely affect our financial condition, results of operations, or cash flows.

We have previously undertaken restructuring plans to adjust our investment priorities and manage our operating expenses, and we may do so again in the future. For example, in March 2023, we approved a restructuring plan to lower our year-over-year operating expense growth rate and prioritize projects that we believe will have a higher return on investment, which resulted in workforce reduction and the commitment to exit and sublease, or cease use, of certain office facilities that we did not occupy. We have incurred, and may in the future incur, material costs and charges in connection with restructuring plans and initiatives, and there can be no assurance that any restructuring plans and initiatives will be successful. Any restructuring plans may adversely affect our internal programs and our ability to recruit and retain skilled and motivated personnel, may result in a loss of continuity, loss of accumulated knowledge, or inefficiency during transitional periods, may require a significant amount of employees’ time and focus, and may be distracting to employees, which may divert attention from operating and growing our business. For more information, see Note 16 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report.

If we fail to achieve some or all of the expected benefits of any restructuring plans or are unable to manage our growth and expansion plans effectively, which may be impacted by factors outside of our control, our business, operating results, and financial condition could be adversely affected.

We may be unable to successfully expand our international operations, and 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, licensing, and supporting our products and running or monetizing our streaming platform outside the United States. In addition, we have limited experience managing the administrative aspects of a global organization. While we intend to continue to explore opportunities to expand our business in international markets in which we see compelling opportunities, we may not be able to create or maintain international market demand for our products and streaming platform services. Moreover, we face intense competition in international markets, especially because some of our competitors have already successfully introduced their products into new markets we are entering and have greater experience managing a global organization.

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In the course of expanding our international operations, we are subject to a variety of risks that could adversely affect our business, including:

•differing legal and regulatory requirements in foreign jurisdictions, including country-specific laws and regulations pertaining to data privacy and data security, consumer protection, tax, telecommunications, trade (including tariffs, quotas, and sanctions), labor, environmental protection, censorship and other content restrictions, use of artificial intelligence and machine learning technologies, and local content and advertising requirements, among others;

•exposure to increased corruption risk and compliance with laws such as the Foreign Corrupt Practices Act, UK Bribery Act, and other anti-corruption laws, U.S. or foreign export controls and sanctions, and local laws prohibiting improper payments to government officials and requiring the maintenance of accurate books and records and a system of sufficient internal controls;

•slower consumer adoption and acceptance of streaming devices and services in other countries;

•different or unique competitive pressures as a result of, among other things, competition with other devices that consumers may use to stream TV or existing local traditional TV services and products, including those provided by incumbent TV service providers and local consumer electronics companies;

•greater difficulty supporting and localizing Roku streaming devices and our streaming platform, including delivering support and training documentation in languages other than English;

•our ability to deliver or provide access to popular streaming channels or content to users in certain international markets;

•availability of reliable broadband connectivity in areas targeted for expansion;

•challenges and costs associated with staffing and managing foreign operations;

•differing legal and court systems, including limited or unfavorable intellectual property protection;

•unstable political and economic conditions, social unrest, or economic instability, whatever the cause, including due to pandemics, natural disasters, wars, terrorist activity, foreign invasions (such as the Russian invasion of Ukraine), tariffs, trade disputes, local or global recessions, diplomatic or economic tensions (such as the tension between China and Taiwan), long-term environmental risks, or climate change;

•adverse tax consequences, such as those related to changes in tax laws (including increased tax rates, the imposition of digital services taxes, and the adoption of global corporate minimum taxes and anti-base-erosion rules), changes in the interpretation of existing tax laws, and the heightened scrutiny by tax administrators of companies that have cross-border business activities;

•the imposition of customs duties on cross-border data flows for streaming services, in the event that the World Trade Organization fails to extend the current moratorium on such duties;

•any pandemics or epidemics, which could result in decreased economic activity in certain markets, changes in the use of our products or platform, or decreased ability to import, export, ship, or sell our products to supply such services to existing or new customers in international markets;

•inflationary pressures, such as those the global market is currently experiencing, which may increase costs for materials, supplies, and services;

•fluctuations in currency exchange rates, which could impact the revenue and expenses of our international operations and expose us to foreign currency exchange rate risk (see the section titled “Foreign Currency Exchange Rate Risk” in Part I, Item 3 of this Quarterly Report for additional information);

•restrictions on the repatriation of earnings from certain jurisdictions; and

•working capital constraints.

In addition, we may face challenges in successfully deploying our business model in international markets. Three core areas of focus define our business model: first, we grow scale by increasing our active accounts; second, we grow engagement by increasing the hours of content streamed through our platform; and, third, we grow monetization of the activities that consumers engage in through our platform. Even if we are able to increase our active accounts in international markets, we may be unable to effectively grow our streaming hours or monetize user activity in those markets. Further, our ARPU may be lower in international markets than 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.

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Our revenue and gross profit are subject to seasonality, and if our sales during the holiday seasons fall below our expectations, our business may be harmed.*

Seasonal consumer shopping patterns significantly affect our business. Specifically, our revenue and gross profit are traditionally strongest in the fourth quarter of each fiscal year and represent a high percentage of the total net revenue for such fiscal year due to higher consumer purchases and increased advertising during holiday seasons. Furthermore, in preparation for the fourth quarter holiday season, we recognize significant discounts in the average selling prices of our products through retailers in an effort to grow our active accounts, which typically reduce our devices gross margin in the fourth quarter.

Given the seasonal nature of advertising and our product 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 a decline in the effectiveness of our promotional activities, actions by our competitors, reductions in consumer discretionary spending, curtailed advertising spending, disruptions in our supply or distribution chains, tariffs or other restrictions on trade, shipping or air freight delays, or for any other reason, would cause our full year results of operations to suffer significantly. For example, recent macroeconomic uncertainties and inflationary pressures negatively affected consumer electronics sales during the holiday season in 2022. In addition, delays or disruptions at U.S. ports of entry have in the past, and may in the future, adversely affect our or our licensed Roku TV partners’ ability to timely deliver products to retailers during holiday seasons.

A substantial portion of our expenses are personnel-related (including salaries, stock-based compensation, and benefits) and facilities-related, none of which are seasonal in nature. Accordingly, in the event of a revenue shortfall, we would be unable to mitigate the negative impact on gross profit and operating margins, at least in the short term, and our business would be harmed.

If we fail to attract and retain key personnel, effectively manage succession, or hire, develop, and motivate our employees, we may not be able to execute our business strategy or continue to grow our business.*

Our success depends in large part on our ability to attract and retain key personnel on our senior management team and in our engineering, research and development, sales and marketing, operations, and other organizations. 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 products and streaming platform, our culture, and our strategic direction. We do not have long-term employment or non-competition agreements with any of our key personnel. The loss of one or more of our executive officers or the inability to promptly identify a suitable successor to a key role could have an adverse effect on our business.

Our ability to compete and grow depends in large part on the efforts and talents of our employees. Labor is subject to external factors that are beyond our control, including our industry’s highly competitive market for skilled workers and leaders, cost inflation, workforce participation rates, and unstable political conditions. Our employees, particularly engineers and other product developers, are in demand, and we devote significant resources to identifying, hiring, training, successfully integrating, and retaining these employees. Because we face significant competition to attract top talent, we have had to offer, and believe we will need to continue to offer, competitive compensation packages before we can validate the productivity of those employees. In addition, many companies now offer a remote or hybrid work environment, which may increase the competition for employees from employers outside of our traditional office locations. To retain employees, we have in the past and may in the future need to increase our employee compensation levels or other benefits in response to competition and other business and macroeconomic factors. The loss of employees or the inability to hire additional skilled employees necessary to support our growth could result in significant disruptions to our business, and the integration of replacement personnel could be time-consuming and expensive and cause disruptions.

We believe a critical component to our success and our ability to retain our best people is our culture. As we continue to grow, we may find it difficult to maintain our entrepreneurial, execution-focused culture. In addition, past or any additional workforce reductions could harm employee morale and negatively impact employee recruiting and retention. In addition, 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.

We need to maintain operational and financial systems that can support our expected growth, increasingly complex business arrangements, and rules governing revenue and expense recognition, and any inability or failure to do so could adversely affect our financial reporting, billing, and payment services.

We have a complex business that is growing in size and complexity both in the United States and in international jurisdictions. To manage our growth and our increasingly complex business operations, especially as we move into new markets internationally or acquire new businesses, we will need to maintain and may need to upgrade our operational and financial systems and procedures, which requires management time and may result in significant additional expense. Our

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business arrangements with our content partners, advertisers, licensed Roku TV partners, and other 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 must maintain 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 financial reporting, billing, and payment services. 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, advertisers, advertisement agencies, licensed Roku TV partners, or other licensees; cause harm to our reputation and brand; and result in errors in our financial and other reporting.

We may pursue acquisitions, which involve a number of risks, and if we are unable to address and resolve these risks successfully, such acquisitions could harm our business.

We have in the past and 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 any anticipated benefits from an acquisition may never materialize.

Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results, may cause unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims, and may not generate sufficient financial returns to offset additional costs and expenses related to the acquisitions.

In addition, the process of integrating acquired businesses, products, or technologies may create unforeseen operating difficulties and expenditures, in particular when the acquired businesses, products, or technologies involve areas of operation in which we have limited or no prior experience. Acquisitions of businesses, products, or technologies 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 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 products and enhance our streaming platform, continue to expand the content on our 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 products and streaming platform, along with the timing and effort related to the introduction of new platform features, products, the hiring of experienced personnel, the expansion of sales and marketing activities, as well as overall economic conditions.

We may need to engage in equity 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 suffer significant 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 previously entered into a credit agreement, dated February 19, 2019 (as amended on May 3, 2019, the “Credit Agreement”) with Morgan Stanley Senior Funding, Inc., which provided for a four-year revolving credit facility in the aggregate principal amount of up to $100.0 million, a four-year delayed draw term loan A facility in the aggregate principal amount of up to $100.0 million, and an uncommitted incremental facility subject to certain conditions. In February 2023, our Credit Agreement matured and we repaid the entire debt balance in full and satisfied all outstanding debt obligations under the Credit Agreement. While we may enter into a new credit agreement in the future, we currently have no other committed sources of financing, and we may not be able to obtain additional financing on terms favorable to us, if at all. Any future credit agreements we may enter into could require a lien on our assets or contain financial covenants and other

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restrictions on our actions that may limit our operational flexibility or otherwise adversely affect our financial condition. 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.

We maintain cash deposits in excess of federally insured limits. Adverse developments affecting financial institutions, including bank failures, could adversely affect our liquidity and financial performance.*

We maintain domestic cash deposits in Federal Deposit Insurance Corporation (“FDIC”) insured banks that exceed the FDIC insurance limits. We also maintain cash deposits in foreign banks where we operate, some of which are not insured or are only partially insured by the FDIC or similar agencies. Bank failures, events involving limited liquidity, defaults, non-performance, or other adverse developments that affect financial institutions, or concerns or rumors about such events, may lead to liquidity constraints. For example, on March 10, 2023, Silicon Valley Bank failed and was taken into receivership by the FDIC. The failure of a bank, or other adverse conditions in the financial or credit markets impacting financial institutions at which we maintain balances, could adversely impact our liquidity and financial performance. There can be no assurance that our deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S. or applicable foreign government, or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, government institutions, or by acquisition in the event of a failure or liquidity crisis.

Risks Related to Cybersecurity, Reliability, and Data Privacy

Significant disruptions of our information technology systems or data security incidents could harm our reputation, cause us to modify our business practices, and otherwise adversely affect our business and subject us to liability.

We are 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, user video and audio recordings, 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 obligations 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 to regulators, our business partners, our users, and other relevant stakeholders and impact the attractiveness of our services to existing and potential users.

We have 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 information (such as payment card information and user video and audio recordings), 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 networks) or to our confidential 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, are 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 vulnerable to unintentional or malicious, internal, and external threats 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.

For example, despite our efforts to secure our information technology systems and the data contained in those systems, including our efforts to educate or train our employees, we and our third-party vendors have experienced, and remain vulnerable to, data security incidents, including data breaches, phishing attacks, and improper employee access of confidential data. 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, but not limited to, industrial espionage) and expertise, including organized criminal groups, “hacktivists,” nation states, and others. The Russian invasion of Ukraine and resulting geopolitical conflict also have increased the risk of malicious attacks on information technology operations globally, including for companies headquartered in the United States.

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Most of our employees now have a hybrid work schedule (consisting of both in-person work and working from home). Although we have implemented work from home protocols and offer work-issued devices to employees, the actions of our employees while working from home may have a greater effect on the security of our systems and the data we process, including by increasing the risk of compromise to our systems, intellectual property, or data arising from employees’ combined use of personal and private devices, accessing our systems or data using wireless networks that we do not control, or the ability to transmit or store company-controlled data outside of our secured network.

In addition to the threat of unauthorized access or acquisition of sensitive or personal information or 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 regularly experience directed attacks that are intended to interrupt our operations; interrupt our users’, content publishers’, and advertisers’ ability to access our platform; extract money from us; or view or obtain our data (including without limitation user or employee personal information or proprietary information) or intellectual property. We cannot be certain that threat actors will not have a material impact on our systems or services in the future. 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 Log4j library and difficulty in identifying all instances of this library across an entire enterprise. We cannot assure you that we will not be impacted by this or other similar vulnerabilities in the future.

We maintain insurance policies to cover certain losses relating to our information technology systems. However, there may be exceptions to our insurance coverage such that security incidents may not be covered by our insurance policies, and not all aspects of a security incident may be covered even where coverage exists. 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 other 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 threat actors. Any attempts by threat actors to disrupt our platform, streaming devices, smart home products, website, computer systems, or mobile apps, if successful, could harm our business, subject us to liability, be expensive to remedy, cause harm to our systems and operations, and damage our reputation. Efforts to prevent threat actors from entering our computer systems or exploiting vulnerabilities in our products are expensive to implement and may not be effective in detecting or preventing intrusion or vulnerabilities.

Such unauthorized access to our data could damage our reputation and our business and could expose us to the risk of 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.

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Significant disruptions of our third-party vendors’ or commercial partners’ information technology systems or other similar data security incidents could adversely affect our business operations or result in the loss, misappropriation, 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 telecommunications and electrical failures, could result in a material disruption of our product development and our business operations.

There is no way of knowing with certainty whether we have experienced any data security incidents that have not been discovered. While we have no reason to believe that we have experienced a data security incident that we have not discovered, attackers have become very sophisticated in the way they conceal their unauthorized access to systems, and many companies that have been attacked are not aware that they have been attacked. Any event that leads to unauthorized access, use, or disclosure of personal information, including but not limited to personal information regarding our users, could disrupt our business, harm our reputation, compel us to comply with applicable federal 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 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.

In addition, any actual or perceived failure by us, 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 could include personal information), may result in governmental investigations, enforcement actions, regulatory fines, litigation, or public statements against 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 require “reasonable,” “appropriate,” or “adequate” technical and organizational security measures, and 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 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.

We and our service providers and partners collect, process, transmit, and store personal and confidential information, which creates legal obligations and exposes us to potential liability.*

We collect, process, transmit, and store personal or confidential information about our users (and their devices), other consumers, employees, job applicants and partners, and we rely on third-party service providers to collect, process, transmit, and store personal or confidential information (including our users’ payment card data and video and audio recordings). We collect such information from individuals located both in the United States and abroad and may store or process such information outside the country in which it was collected. Further, we, our service providers and our business partners use tracking technologies, including cookies, device identifiers, and related technologies, to help us manage and track our users’ interactions with our platform, devices, website, and partners’ content and deliver relevant advertising and personalized content for ourselves and on behalf of our partners on our products.

We collect information about the interaction of users with our platform, devices, website, advertisements, and content publishers’ streaming channels. To deliver relevant advertisements effectively, we must successfully leverage this

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data, as well as data provided by third parties. Our ability to collect and use such data could be restricted by a number of factors, including users having the ability to refuse consent to or opt out from our, our service providers’, or our advertising partners’ collection and use of this data, restrictions imposed by advertisers, content publishers, licensors, and service providers, changes in technology, and developments in laws, regulations, and industry standards. 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 ability to collect or use data could harm our ability to grow our revenue, particularly our platform revenue which depends on engaging the relevant recipients of advertising campaigns.

Various federal, state, and foreign laws and regulations as well as industry standards and contractual obligations govern the collection, use, retention, protection, disclosure, cross-border transfer, localization, sharing, and security of the data we receive from and about our users, employees, and other individuals. The regulatory environment for the collection and use of personal information by device manufacturers, online service providers, content distributors, advertisers, and publishers is evolving in the United States and internationally.

Privacy and consumer rights groups and government bodies (including the U.S. Federal Trade Commission (“FTC”), state attorneys general, the European Commission, European and UK data protection authorities, and the Brazilian national data protection authority), have increasingly scrutinized privacy issues with respect to devices that identify or are identifiable to a person (or household or device) and personal information collected through the internet, and we expect such scrutiny to continue to increase. The U.S. federal government, U.S. states, and foreign governments have enacted (or are considering) laws and regulations that could significantly restrict industry participants’ ability to collect, use, and share personal information, such as by regulating the level of consumer notice and consent required before a company can place cookies or other tracking technologies. For example, the EU General Data Protection Regulation (“GDPR”) imposes detailed requirements related to the collection, storage, and use of personal information related to people located in the EU (or which is processed in the context of EU operations) and places new data protection obligations and restrictions on organizations, and may require us to make further changes to our policies and procedures in the future beyond what we have already done. In addition, in the wake of the United Kingdom’s withdrawal from the EU (“Brexit”), the United Kingdom has adopted a framework similar to the GDPR. The EU has recently confirmed that the UK data protection framework as being “adequate” to receive EU personal data. We are monitoring recent developments regarding amendments to the UK data protection framework and the impact this may have on our business.

We will continue to monitor the implementation and evolution of data protection regulations, but if we are not compliant with data protection laws or regulations if and when implemented, we may be subject to significant fines and penalties (such as restrictions on personal information processing) and our business may be harmed. For example, under the GDPR, fines of up to 4% of the annual global revenue of a noncompliant company, as well as data processing restrictions, could be imposed for violation of certain of the GDPR’s requirements.

Data protection laws continue to proliferate throughout the world and such laws likely apply to our business. For example, Brazil’s General Data Protection Law (“LGPD”) came into effect in August 2020. The LGPD bears many substantive similarities to the GDPR such as extra-territorial reach, enhanced privacy rights for individuals, data transfer restrictions, and mandatory breach notification obligations. It carries penalties of up to 2% of a company’s annual revenue in Brazil.

The U.S. data protection legal landscape also continues to evolve, with various states having enacted broad-based data privacy and protection legislation and with states and the federal government continuing to consider additional data privacy and protection legislation. The potential effects of this legislation are far-reaching and may require us to modify our data processing practices and policies and incur substantial costs and expenses in an effort to comply.

For example, effective October 2019, Nevada amended its existing Security of Personal Information Law (“SPI Law”) to require, among other things, that certain businesses provide a designated request address to intake requests from consumers to opt out of the sale of their personal data. Effective January 2020, the California Consumer Privacy Act (“CCPA”) gives California residents certain rights with respect to their personal information, such as rights to access, and require deletion of, their personal information, opt out of the sale of their personal information, 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. The California Privacy Rights Act (“CPRA”), which becomes effective on January 1, 2023 (with a “look-back” to January 1, 2022), builds on the CCPA and among other things, requires the establishment of a dedicated agency to regulate consumer privacy issues. In recent years,

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states including Colorado, Connecticut, Virginia, Iowa, Indiana, Montana, Tennessee, Texas, and Utah have adopted laws introducing new privacy obligations for which we may need to take additional steps to comply.

Furthermore, several national and local governments have proposed or enacted measures related to the use of artificial intelligence (“AI”) and machine learning in products and services. For example, in Europe, there is a proposed regulation related to AI that, if adopted, could impose new and substantial obligations related to the use of AI-related systems. In the U.S., there similarly is growing interest among policymakers with respect to potential legislation, regulation and/or guidance to address perceived concerns with the rapid uptake of AI technologies. The rules and regulations adopted by policymakers over time may require us to make changes to our business practices.

We are continuing to assess the impact of new and proposed data privacy and protection laws and proposed amendments to existing laws on our business. Among other things, such restrictions are likely to increase the number of users to whom we cannot serve targeted advertising, and are likely to restrict our ability to collect and process certain types of information deemed sensitive under these new laws. The Canadian province of Quebec has also recently enacted a data protection law, known as Bill 64, that may similarly restrict our data processing activities.

In addition, each U.S. state and most U.S. territories, each EU member state, and the United Kingdom, as well as many other foreign nations, have passed laws requiring notification to regulatory authorities, affected users, or others within a specific timeframe when there has been a security breach involving, or other unauthorized access to or acquisition or disclosure of, certain personal information and impose additional obligations on companies. Additionally, our agreements with certain users or partners may require us to notify them in the event of a security breach. Such statutory and contractual disclosures are costly, could lead to negative publicity, may cause our users to lose confidence in the effectiveness of our security measures, and may require us to expend significant capital and other resources to respond to or alleviate problems caused by the actual or perceived security breach. Compliance with these obligations could delay or impede the development of new products and may cause reputational harm.

As part of our data protection compliance program, we have implemented data transfer mechanisms to provide for the transfer of personal information from the European Economic Area (the “EEA”) or the United Kingdom to the United States. After a period of uncertainty concerning certain mechanisms for data transfers to the United States, on July 10, 2023, the European Commission adopted an adequacy decision concerning a new framework for data transfers from the EEA to the United States, known as the EU-U.S. Data Privacy Framework (“EU-U.S. DPF”). That decision recognizes that the United States ensures an adequate level of protection for personal data transferred from the EEA to organizations participating in the EU-U.S. DPF. Additional steps will need to be taken to formally implement this framework, however, and we are not yet able to predict the precise obligations that will be associated with use of this mechanism for our data transfers between the two jurisdictions. Model Clauses also serve as a mechanism for data transfer between the U.S. and EEA, and in 2021, the European Commission published updated versions of the Model Clauses. The United Kingdom published final versions of its own Model Clauses in February 2022. Updating agreements to incorporate these new Model Clauses for the EEA and United Kingdom has required, and may in the future require, significant time and resources to implement, including through adjusting our operations, conducting requisite data transfer assessments, and revising our contracts. In addition, cloud service providers upon which our services depend are experiencing heightened scrutiny from EU regulators, which may lead to significant shifts or unavailability of cloud services to transfer personal information outside the EU, which may significantly impact our costs or ability to operate.

We continue to assess the available regulatory guidance, determinations, and enforcement actions from EU Data Protection Authorities and the U.S. Department of Commerce on international data transfer compliance for companies, including guidance on specific supplementary measures in addition to the Model Clauses as well as specific data sharing that may be deemed a cross-border transfer for which appropriate safeguards must be implemented. Our ability to continue to transfer personal information outside of the EU may become significantly more costly and may subject us to increased scrutiny and liability under the GDPR or other legal frameworks, and we may experience operating disruptions if we are unable to conduct these transfers in the future.

We will continue to review our business practices and may find it necessary or desirable to make changes to our personal information processing to cause our transfer and receipt of EEA residents’ personal information to conform to 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.

In addition, some countries are considering or have enacted “data localization” laws requiring that user data regarding users in their respective countries be maintained, stored, or processed in their respective countries. Maintaining local data centers in individual countries could increase our operating costs significantly. We expect that, in addition to the “business as usual” costs of compliance, the evolving regulatory interpretation and enforcement of laws such as the GDPR and CPRA, as well as other domestic and foreign data protection laws, will lead to increased operational and compliance

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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 indemnities, or public statements against us by consumer advocacy groups or others. In addition to potential liability, these events could harm our business.

We publish privacy policies, notices, and other documentation regarding our collection, processing, use, and disclosure of personal information, credit card information, and other confidential information. Although we endeavor to comply with our published policies, certifications, and documentation, we may at times fail to do so or may be perceived to have failed to do so.

Moreover, despite our efforts, we may not be successful in achieving compliance if our employees, representatives, agents, vendors, or other third parties fail to comply with our published policies, certifications, and documentation. Such failures can subject us to potential international, local, state, and federal action if they are found to be deceptive, unfair, or misrepresentative of our actual practices.

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.

Any significant disruption in our computer systems or those of third parties we utilize in our operations could result in a loss or degradation of service on our platform and could harm our business.

We rely on the expertise of our engineering and software development teams as well as the teams of our service providers and partners for the performance and operation of ~~our~~the Roku OS, streaming platform, smart home products, and computer systems. For example, our smart home product line is reliant on (among other things) the engineering and software development teams and information technology systems of the service providers we use to assist in the design, manufacture, and maintenance of those products. Service interruptions, errors in our software, or the unavailability of computer systems used in our operations could diminish the overall attractiveness of our ~~devices~~products and streaming platform to existing and potential ~~users.~~users or otherwise disrupt our business. We utilize computer systems located either in our facilities or those of third-party server hosting providers and third-party ~~Internet-based~~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 the future, we may transition additional features of our services from our managed hosting systems to cloud computing services, which may require significant expenditures and engineering resources. If we are unable to manage such a transition effectively, we may experience a loss or degradation in services, operational delays, ~~and~~or inefficiencies until the transition is complete. Upon the expiration or termination of any of our agreements with third-party vendors, we may not be able to replace their services in a timely manner or on terms and conditions, including service levels and cost, that are favorable to us, and a transition from one vendor to another vendor could subject us to operational delays and inefficiencies until the transition is complete. In addition, fires, floods, earthquakes, wars, foreign invasions, terrorist activity, 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 operations, products, or services, could result in liabilities to our customers or third parties, and could adversely affect our business. Our property insurance and cyber liability insurance may not be sufficient to fully cover our losses or may not cover a particular event at all. Any disruption in the services provided by these vendors could have adverse impacts on our business reputation, customer relations, and operating results.

Our servers and those of the third parties we use in our operations may be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to interruptions and delays in platform availability and operations, as well as the loss, misuse or theft of personal and identifying information of our users. We also rely on third-party contractors to collect, process, transmit and store personal information of our users, including our users’ credit card data. While we have implemented administrative, physical and electronic security measures to protect against reasonably foreseeable loss, misuse and alteration of personal 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

We maintain limited insurance policies to cover losses relating to our systems. 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 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. In October 2017, individuals identified and publicized certain vulnerabilities that affect the Wi-Fi Protected Access and the Wi-Fi Protected Access II security protocols. ~~These protocol-level vulnerabilities affected companies providing infrastructure devices and wireless clients, which follow the WPA and WPA2 specifications~~, for which we took steps to release a security patch. Any attempts by hackers to disrupt our platform, our devices, website, computer systems or our mobile apps, if successful, could harm our business, be expensive to remedy and damage our reputation. Efforts to prevent hackers 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’ data could damage our reputation and our business and could expose us of the risk to contractual damages, litigation and regulatory fines and penalties that could harm our business.

If any aspect of our computer systems or those of third parties we utilize in our operations fails, it may lead to downtime or slow processing time, either of which may harm the experience of our users. We have experienced, and may in the future experience, service disruptions, outages, and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, and capacity constraints. We expect to continue to ~~make significant investments~~invest in our technology infrastructure to maintain and improve the user experience and platform performance. To the extent that we or our third-party service hosting providers do not effectively address capacity constraints, upgrade ~~our~~or patch systems as needed, 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.

Changes in how network operators manage data that travel across their networks could harm our business.

Our business relies upon the ability of ~~consumers~~our users to access high-quality streaming content through the ~~Internet.~~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,~~internet at reasonable cost, which relies in part on ~~the~~internet service network operators’ continuing willingness to upgrade and maintain

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their equipment as needed to sustain a robust ~~Internet~~internet infrastructure as well as their continued willingness to preserve the open and interconnected nature of the ~~Internet.~~internet. We exercise no control over network operators, which makes us vulnerable to any errors, ~~interruptions~~disruptions, 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~~internet services could harm our business.

To the extent that the number of ~~Internet~~internet users continues to increase, network congestion could adversely affect the reliability of our streaming platform. We may also face increased costs of doing business, or decreased demand for our services, if network operators engage in discriminatory practices with respect to streamed video content in an effort to monetize access to their networks or customers by data providers.

Certain laws intended to prevent network operators from engaging in discriminatory practices with respect to streaming video content have been implemented in many countries, including in the EU. In other countries, laws in this area may be nascent or non-existent. Furthermore, favorable laws may change. Given the ~~past, ISPs have attempted to~~uncertainty 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, zero rating of competing services by ISPs, 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 prohibit~~throttling, 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 and~~cause us to incur additional expense, or otherwise impair our ability to attract and retain ~~customers could be impaired, each~~users, all of which ~~would~~could harm our business.

In addition, most network operators that provide consumers with access to the ~~Internet~~internet also ~~provide these~~offer 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.

~~We could become subject~~Risks Related to ~~litigation~~Intellectual Property

Litigation and claims regarding intellectual property rights ~~that~~ could ~~be costly,~~ result in the loss of rights important to our ~~devices~~products and streaming platform, cause us to incur significant legal costs, or otherwise harm our business.

Some ~~Internet,~~internet, technology, and media companies, including some of our competitors, own large numbers of patents, copyrights, and trademarks, which they may use to assert claims against us. Third parties have asserted, and may in the future assert, that we have infringed, misappropriated, or otherwise violated their intellectual property rights. As we grow and face increasing competition, the possibility of intellectual property rights claims against us will grow. Plaintiffs who have no relevant product revenue may not be deterred by our own issued patents and pending patent applications in bringing intellectual property rights claims against us. The cost of patent litigation or other proceedings, even if resolved in our favor, ~~could~~has been and is expected to be substantial. Some of our competitors may be better able to sustain the costs of such litigation or proceedings because of their substantially greater financial resources. Patent litigation and other proceedings may also require significant management time and divert ~~management~~management’s attention from our ~~business.~~other business concerns. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could impair our ability to compete in the marketplace. The occurrence of any of the foregoing could harm our business.

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 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~~

Table of our content publishers, licensees, 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, 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. In addition, if a partner were to lose a lawsuit and in turn seek indemnification from us, we 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.

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If we fail to, or are unable to, protect or enforce our intellectual property or proprietary rights, our business and operating results could be harmed.

We regard the protection of our patents, trade secrets, copyrights, trademarks, trade dress, domain names, and other intellectual property or proprietary rights as critical to our success. We strive to protect our intellectual property rights by relying on federal, state, and common law rights, as well as contractual restrictions. We seek to protect our confidential proprietary information, in part, by entering into confidentiality agreements and invention assignment agreements with all of our employees, consultants, contractors, advisors, and any third parties who have access to our proprietary know-how, information, or technology.

However, we cannot be certain that we have executed such agreements with all parties who may have helped to develop our intellectual property or who had access to our proprietary information, nor can we be certain that our agreements will not be breached. Any party with whom we have executed such an agreement could potentially breach that agreement and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. We cannot guarantee that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Detecting the disclosure or misappropriation of a trade secret and enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, time-consuming, and could result in substantial costs, and the outcome of such a claim is unpredictable.

Further, the laws of certain foreign countries do not ~~protect proprietary rights to~~provide the same ~~extent or in the same manner~~level 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 ~~both~~abroad. 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 States~~intellectual property that we develop, which could have a material adverse effect on our business, financial condition, and ~~abroad. If~~results 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.

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. ~~Patent~~U.S. patent laws, and the scope of coverage afforded by them, have recently been subject to significant changes, such as the change to “first-to-file” from “first-to-invent” resulting from the Leahy-Smith America Invents Act. This change in the determination of inventorship may result in inventors and companies having to file patent applications more frequently to preserve rights in their inventions, which may favor larger competitors that have the resources to file more patent applications. Another change to the patent laws may incentivize third parties to challenge any issued patent in the United States Patent and Trademark Office ~~or 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~~products and platform and could harm our business.

The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment, and other provisions to maintain patent applications and issued patents. We may fail to take the necessary actions and 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.

We pursue the registration of our domain names, trademarks, and service marks in the United States and in certain locations outside the United States. We are seeking to protect our trademarks, patents, and domain names in an increasing number of jurisdictions, a process that is expensive and time-consuming and may not be successful or which we may not pursue in every ~~location.~~

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.

Litigation may be necessary to enforce our intellectual property or proprietary rights, protect our trade secrets, or determine the validity and scope of proprietary rights claimed by others. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs, adverse publicity, or diversion of management and technical resources,

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any of which could adversely affect our business and operating results. If we fail to maintain, protect, and enhance our intellectual property or proprietary rights, our business may be harmed.

~~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.

Our ability to collect and use such data could be restricted by a number of factors, including consumers choosing to opt out from our collection of this data 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 restrictions~~open source software could impose limitations on our ability to ~~collect data~~commercialize our products and our streaming platform or could result in public disclosure of competitively sensitive trade secrets.

We incorporate open source software in our proprietary software. From time to time, companies that have incorporated open source software into their products and services have faced claims challenging the ownership of certain open source software or compliance with open source software license terms. Therefore, we could be subject to similar suits by parties claiming ownership of what we believe to be open source software or our noncompliance with the open source software license terms.

Although we have processes and procedures designed to help monitor our use of open source software, these processes and procedures may not be followed appropriately or may fail to identify risks. Additionally, 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 our products or technology or impose unanticipated obligations that could require the disclosure of trade secrets. In such event, we could be required to make portions of our proprietary software generally available under similar open source software license terms to third parties, including competitors, at no cost, to seek licenses from third parties in order to continue offering our products, to re-engineer our products, or to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis or at all, any of which could harm our ~~ability~~business.

Under our agreements with many of our content publishers, licensees, distributors, retailers, contract manufacturers, and suppliers, we are required to ~~grow~~provide indemnification in the event our ~~revenue, particularly~~technology is alleged to infringe upon the intellectual property rights of third parties.

In certain of our ~~advertising revenue which depends~~agreements we indemnify our content publishers, licensees, distributors, retailers, manufacturing partners, and suppliers. We have in the past, and may in the future, incur significant expenses defending these partners if they are sued for patent infringement based on ~~engaging~~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 ~~relevant recipients of advertising campaigns.~~

~~Various federal~~devices sold by our licensing partners and ~~state laws and regulations govern~~licensed Roku TV partners often involve the ~~collection, use, retention, sharing and security of the data we receive from and about our users. The regulatory environment for the collection and~~ use of ~~consumer data by~~third-party technology, this increases our exposure to litigation in circumstances where there is a claim of infringement asserted against the streaming device ~~manufacturers, online service providers, content distributors, advertisers and publishers is very unsettled~~in question, even if the claim does not pertain to our technology. Liability under our indemnification commitments may not be contractually limited.

Risks Related to Macroeconomic Conditions

Macroeconomic uncertainties have in the ~~United States~~past and internationally. Privacy groups and government bodies, including the Federal Trade 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 tomay continue to ~~increase. The United States~~adversely impact our business, results of operations, and ~~foreign governments~~financial condition.*

Global economic and business activities continue to face widespread macroeconomic uncertainties, including increased inflation and interest rates, recessionary fears, financial and credit market fluctuations, changes in economic policy, bank failures, labor disputes, the COVID-19 pandemic, and global supply chain constraints. Such macroeconomic uncertainties may continue for an extended period. Some of these factors have ~~enacted~~adversely impacted, and may continue to adversely impact, many aspects of our business. For example, in 2022, global supply chain disruptions resulted in shipping delays, increased shipping costs, component shortages, and increases in component prices, and some of our licensed Roku TV partners faced inventory challenges that negatively impacted their unit sales.

Our business is dependent on consumer discretionary spending and advertising spending, both of which are ~~considering regulations that could significantly restrict industry participants’ ability~~susceptible to ~~collect, use and share personal information and pseudonymous data,~~changes in macroeconomic conditions, such as ~~by regulating the level of consumer notice~~growing inflation, rising interest rates, recessionary fears, and ~~consent required before a company can place cookies~~economic uncertainty. Sustained or ~~other tracking technologies. Any failure~~worsening inflation or ~~perceived failure to comply with privacy-related legal obligations, or any compromise of security of user data,~~an economic downturn may result in ~~governmental enforcement actions, litigation, contractual indemnity~~fewer consumer purchases of our products or ~~public statements against us~~the products of our licensed Roku TV partners (which could impact our active account growth) and reduced advertising spending (which could impact our monetization efforts). We believe advertising budgets in a variety of industries have been pressured by factors such as inflation, rising interest rates, and related market uncertainty, which has led to reduced advertiser spending, which has adversely affected our platform revenue. Any continued pullback in consumer ~~advocacy groups~~discretionary spending or ~~others.~~ advertising spending could adversely affect our future operating results.

In addition, ~~to potential liability, these events~~a significant reduction in the supply of original entertainment content, including as a result of macroeconomic factors or labor disputes (such as the recent strikes called by the Writers Guild of America and SAG-AFTRA), could ~~harm our business.~~

~~We have incurred,~~in turn reduce the demand for advertising and ~~will continue to incur, expenses to comply with privacy~~media and security standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use and distribution 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~~entertainment promotional spending campaigns on our platform, and have a material adverse effect on our growth in active accounts and streaming hours or negatively impact our results of operations.

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The extent to which macroeconomic uncertainties may continue to impact our operational and financial performance remains uncertain and will depend on many factors outside our control. These direct and indirect impacts may negatively affect our business and operating results.

Natural disasters, geopolitical conflicts, or other natural or man-made catastrophic events could disrupt and impact our business.*

Occurrence of any catastrophic event, including an earthquake, flood, tsunami, or other weather event, power loss, internet failure, software or hardware malfunctions, cyber attack, war or foreign invasion (such as the Russian invasion of Ukraine), terrorist attack, medical epidemic or pandemic (such as the COVID-19 pandemic), other man-made disasters, or other catastrophic events could disrupt our, our business partners’ and customers’ business operations. Any of these business disruptions could require substantial expenditures and recovery time in order to fully resume operations.

In particular, our principal offices are located in California, and our contract manufacturers and some of our suppliers are located in Asia, both of which are regions known for seismic activity, making our operations in these areas vulnerable to natural disasters or other business disruptions in these areas. Our insurance coverage may not compensate us for losses that may occur in the event of an earthquake or other significant natural disaster.

In addition, our offices and facilities, and those of our contract manufacturers, suppliers, and licensed Roku TV partners, could be ~~harmed.~~

~~Certain service operators,~~vulnerable to the effects of climate change (such as sea level rise, drought, flooding, wildfires, and increased storm severity) that could disrupt our business operations. For example, in California, increasing intensity of drought and annual periods of wildfire danger increase the probability of planned power outages. Further, acts of terrorism could cause disruptions to the internet or the economy as a whole.

If our streaming platform was to fail or be negatively impacted as a result of a natural disaster or other event, our ability to deliver streaming content, including ~~pay TV providers, have from time~~advertising, to ~~time refused to grant~~ our users ~~access to streaming content through “TV Everywhere” channels~~would be impaired. Disruptions in the operations of our contract manufacturers, suppliers, or licensed Roku TV partners as a result of a disaster or other catastrophic event could delay the manufacture and ~~have made that content available only on certain devices favored by such service operators, including devices offered by that service operator~~shipment of our products or ~~its partners. If major service operators do not authenticate popular~~the products of our licensed Roku TV ~~Everywhere channels on~~partners, which could impact 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.~~business. If we are unable to develop adequate plans to ensure that our business functions continue to ~~provide access to popular streaming channels on our platform, our business may be harmed.~~

~~United States~~operate during and after a disaster 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 non-harmful, lawful legal information on the Internet. The FCC’s Open Internet Order prohibits 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 prohibits 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.

On June 14, 2016, the U.S. Court of Appeals for the District of Columbia Circuit upheld the Open Internet Order against a challenge by twelve parties, including AT&T Inc., the United States Telecom Association and the National Cable & Telecommunications Association. On May 1, 2017, the U.S. Court of Appeals for the District of Columbia Circuit denied rehearing en banc. Multiple parties subsequently petitioned for certiorari asking the Supreme Court of the United States to further review the Open Internet Order. In the interim, the FCC issued a notice of proposed rulemaking on May 18, 2017 that proposes to limit or reverse some of the provisions of the Open Internet Order, including its prohibitions against blocking, throttling and paid prioritization. It is not clear whetherother catastrophic event and to what extent the Supreme Court will grant certiorari in light of the proposed rulemaking. To the extent the Supreme Court or the FCC do not uphold or adopt sufficient safeguards to protect against discriminatory conduct orexecute successfully on those plans in the event ~~that any existing~~of a disaster or future rules fail to offer protections against such 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, andcatastrophic event, our business ~~could~~would be harmed.

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

Legal 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 changes in current or future laws or regulations that negatively impact our content publishers could harm our business.~~

The FCC exercises jurisdiction over many broadband Internet providers in the United States. The FCC could promulgate new regulations or interpret existing regulations in a manner that would cause us or our content publishers to incur significant compliance costs or force us to alter or eliminate certain features or functionality of our products or services which may harm our business. Future FCC regulation affecting providers of broadband Internet access services could impede the penetration of broadband Internet access into certain markets or affect the prices they may charge in such markets. As part of its February 26, 2015 network neutrality order, the FCC changed the regulatory classification of broadband Internet service from a lightly regulated “information service” to a common carrier “telecommunication service.” It also extended regulation to Internet traffic exchange and interconnection arrangements. On May 18, 2017, the FCC issued a notice of proposed rulemaking proposing to reinstate the classification of broadband Internet service as an “information service” that would not be subject to common carrier regulation, however, continued classification as a telecommunications service could subject broadband Internet access to significant new regulation, including rate

Regulatory Risks

regulation, although the FCC has decided to forbear at this time from applying many common carrier requirements, including price regulation; market entry and exit regulation; the obligation to contribute to the federal universal service fund; and telephone-specific interconnection and unbundling requirements. Furthermore, many broadband Internet providers provide traditional telecommunications services that are subject to FCC and state rate regulation of interstate 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 adversely 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. 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.

If government regulations or laws relating to the ~~Internet,~~internet, video, advertising, or other areas of our business change, we may need to alter the manner in which we conduct our business, or our business could be harmed.

We are subject to or affected by general business regulations and laws, as well as regulations and laws specific to the ~~Internet, which may include~~internet and online services, including laws and regulations related to data privacy ~~data collection~~ and ~~protection,~~security, consumer protection, data localization, law enforcement access to data, encryption, telecommunications, social media, payment processing, taxation, trade, intellectual property, competition, electronic contracts, ~~Internet~~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~~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. Moreover, as ~~Internet~~internet commerce and advertising ~~continues~~continue to evolve, increasing regulation by federal, state, and foreign regulatory authorities becomes more likely.

As we develop new services and devices and improve our TV streaming platform, we may also be subject to new laws and regulations specific to such technologies. For example, in developing ~~our~~the reference design of TVs powered by Roku ~~TV reference design,~~OS, we were required to understand, address, and comply with an evolving regulatory framework for developing, manufacturing, marketing, and selling TVs. If we fail to adequately address or comply with such regulations regarding the manufacture and sale of TVs, we may be subject to fines or sanctions, and we or our ~~licensees~~licensed Roku TV partners may be unable to sell TVs powered by Roku ~~TVs~~OS at all, which ~~would~~could harm our business and our ability to grow our user base.

Laws relating to data privacy and ~~data collection and protection,~~security, data localization, law enforcement access to data, encryption, consumer protection, children’s online protection, and similar activities continue to proliferate, often with little harmonization between jurisdictions and ~~little~~limited 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. Certain state laws, such as the CCPA, the CPRA, and the Virginia Consumer Data Protection Act, also impose requirements on certain tracking activity. The ~~European Union~~EU has ~~already enacted~~ laws requiring advertisers or companies like ours to, for example, obtain ~~informed~~unambiguous, affirmative consent from users for the placement of cookies or other tracking technologies and the delivery of relevant advertisements. In addition, the EU has adopted the Digital Services Act, which is legislation that updates the liability and safety rules for digital platforms, products, and

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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.

Our use of data to deliver relevant advertising and other services on our platform places us and our content publishers at risk for claims under various unsettled laws, including the Video Privacy Protection Act ~~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 Commission has also revised~~

In addition, in 2019, the FTC initiated 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 has not been concluded and could result in broadening the applicability of ~~the~~ COPPA, ~~Rules,~~ including the types of information that are subject to these ~~regulations,~~regulations. There have also been proposals in the U.S. Congress to amend and expand COPPA. Changes to the COPPA legislation or 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 CPRA and certain other state privacy laws also impose certain opt in and opt out requirements before certain information about minors can be collected. California also has adopted a new law known as the Age Appropriate Design Code Act, which will go into effect on July 1, 2024 and has a stated purpose of protecting “the wellbeing, data, and privacy of children using online platforms.”Since adoption of that law, similar legislation has been introduced for consideration in at least ten states in the United States. The EU and many of its member states, among other jurisdictions, also have rules that limit processing of personal data, including children’s data, and that impose specific requirements intended to protect children online. We and our content publishers and advertisers could be at risk for violation or alleged violation of these and other privacy, advertising, children’s online protection, or similar laws.

Changes in U.S. or foreign trade policies, geopolitical conditions, general economic conditions, and other factors beyond our control may adversely impact our business and operating results.

Our ~~actual~~business 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.

For example, tensions between the United States and China have led to the United States’ imposition of a series of tariffs, sanctions, and other restrictions on imports from China and sourcing from certain Chinese persons or ~~perceived failure~~entities, as well as other business restrictions. Additionally, following Russia’s invasion of Ukraine, the United States and other countries imposed economic sanctions and severe export control restrictions against Russia and Belarus, and the United States and other countries could impose wider sanctions and export restrictions and take other actions should the conflict further escalate. These and other geopolitical tensions and trade disputes can disrupt supply chains and increase the cost of our products and the components required to ~~adequately protect personal~~manufacture our products, as well as costs for our licensed Roku TV partners. This could cause our products and those of our licensed Roku TV partners to be more expensive for consumers, which could reduce the demand for or attractiveness of such products. In addition, a geopolitical conflict in a region where we operate could disrupt our ability to conduct business operations in that region. Beyond tariffs and sanctions, countries also could adopt other measures, such as controls on imports or exports of goods, technology, or data, which could adversely affect our operations and ~~confidential information~~supply 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.

We cannot predict whether new international trade agreements will be negotiated or existing trade agreements renegotiated; whether new trade or tariff actions will be announced by the Biden Administration with other U.S. trading partners; 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 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, and higher prices could depress consumer demand. Such operational changes could have a material adverse effect on our business, financial condition, results of operations, or cash flows.

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Also, various countries, in addition to the United States, regulate the import and export of certain products, commodities, software, and technology, including through import and export licensing requirements, and have enacted laws that could limit our ability to distribute our products or collaborate on technology with our commercial or strategic partners, or could limit the ability of our commercial or strategic partners 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, disrupt supply chains, prevent our commercial 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 changes in U.S. or foreign export or import regulations, customs duties, or other restrictions on intangible goods (such as cross-border data flows) could result in decreased use of our products by, or in our decreased ability to export or sell our products and services to, existing or new customers in U.S. or international markets or hamper our ability to source products, components, and parts from certain suppliers or lead to potential supply chain disruptions and business or reputational harms. Any decreased use of our products or limitation on our ability to export, import, or sell our products or services, or source parts or components, could harm our business.

~~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,~~our retailers and partners are not within our complete control, and our products 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. In addition, there are inherent limitations to the effectiveness of any policies, procedures and internal controls relating to such compliance, and there can be no assurance that such procedures or internal controls will work effectively at all times or protect us against liability under anti-corruption, sanctions or other laws for actions taken by us, our retailers or partners. Any such potential violation could have negative consequences, including government investigations or penalties, and our reputation, brand, and revenue may be harmed.

In addition, the effects of the United Kingdom’s departure from the EU have been and are expected to continue to be far-reaching. Brexit and the perceptions as to its impact may adversely affect business activity and economic conditions. Brexit could also have the effect of disrupting the free movement of goods, services, and people between the United Kingdom and the EU, and some disruptions have already occurred. Brexit could also lead to legal uncertainty and potentially divergent national ~~foreign, and international~~ laws and regulations ~~apply~~as the United Kingdom determines which EU laws to replace or replicate.

Although the ~~collection,~~EU-UK Trade and Cooperation Agreement on the EU-UK post-Brexit economic relationship took effect on January 1, 2021, it is incomplete, and the full effects of Brexit 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.

U.S. or international rules (or the absence of rules) that permit internet access network operators to degrade users’ internet speeds or limit internet data consumption by users, including unreasonable discrimination in the provision of broadband internet access services, could harm our business.*

Our products and services depend on the ability of our users to access the internet. Laws, regulations, or court rulings that adversely affect the popularity or growth in use ~~retention, protection, disclosure, transfer~~of the internet, including decisions that undermine open and ~~other processing~~neutrally administered internet access, or that disincentivize internet access network operators’ willingness to invest in upgrades and maintenance of ~~personal data. These privacy~~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 ~~data protection-related~~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.

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.

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 ~~are evolving, with new~~(or their existing interpretations or ~~modified laws~~applications) could also hinder our operational flexibility, raise compliance costs, and ~~regulations proposed and implemented frequently and existing laws and regulations subject to new or~~

~~different interpretations. Compliance with these laws and regulations can be costly and can delay or impede the development of new products.~~

We historically have relied upon adherence to the U.S. Department of Commerce’s Safe Harbor Privacy Principles and compliance with the U.S.-EU Safe Harbor Framework under Directive 95/46/EC, commonly referred to as the Data Protection Directive, agreed to by the U.S. Department of Commerce and the EU. The U.S.-EU Safe Harbor Framework, which established means for legitimizing the transfer of personal data by U.S. companies from the European Economic Area, or EEA, to the United States, recently was invalidated by a decision of the European Court of Justice, or the ECJ.

On July 12, 2016, the European Commission adopted the EU-U.S. Privacy Shield, which provides a framework for the transfer of personal data of EU data subjects, and on May 4, 2016, the EU General Data Protection Regulation, or GDPR, which will replace Directive 95/46/EC, was formally published. The GDPR will go into effect on May 25, 2018 and as a regulation as opposed to a directive will be directly applicable in EU member states. Among other things, the GDPR applies to data controllers and processors outside of the EU whose processing activities relate to the offering of goods or services to, or monitoring the behavior within the EU of, EU data subjects.

In light of these developments, we are reviewing 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.Our actual or alleged failure to comply with applicable laws and regulations or to protect personal data, could result in ~~enforcement actions and significant penalties against~~additional liabilities for us, which ~~could result in negative publicity, increase our operating costs, subject us to claims or other remedies and~~ may harm our business.

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If we are found liable for content that ~~we distribute~~is distributed through or advertising that is served through our ~~players,~~platform, our business could be harmed.

As a distributor of content, we face potential liability for negligence, copyright, patent, or trademark infringement, public performance royalties or other claims based on the nature and content of materials that we distribute. ~~The~~We rely on the statutory safe harbors, as set forth in the Digital Millennium Copyright Act or(the “DMCA”), Section 230 of the ~~DMCA, is intended,~~Communications Decency Act (“Section 230”) 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 the~~activities. The DMCA, ~~in conducting our business. However, the DMCA~~Section 230, and similar statutes and doctrines ~~that~~on 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.

Moreover, ~~the DMCA only provides protection primarily in the United States. If~~if 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 ~~liability~~liabilities 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.

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. ~~For example, we~~If content owners or distributors are ~~involved in litigation in Mexico that was commenced by a large Mexican pay TV and Internet access provider. The Company was not named~~deterred from working with us as a defendant in this case, and 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.

~~Our involvement in any such legal matters now or in the future,~~consequence, it 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 devices 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. In addition, our device 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. If 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,~~impair our ability to ~~develop new devices~~maintain or ~~platform enhancements may be impaired.~~

~~We utilize commercially available off-the-shelf technology in the development of~~expand 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 our ability to sell our devices. In such event, we could be required to make our proprietary software generally available to third parties,business, 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~~through international expansion plans.

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 our 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 who assists our users in using our devices, and if that support organization does not succeed in helping them quickly resolve any 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. Any 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~~our stock price ~~of our Class A common stock~~ may be adversely affected.

We are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”) requires that we furnish a report by management on, among other things, the effectiveness of our internal control over financial ~~reporting beginning with the fiscal year ending December 31, 2018.~~reporting. This assessment ~~will need to~~must include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. Our independent registered public accounting firm ~~will not be required to attest~~also attests to the effectiveness of our internal control over financial reporting until our first annual report required to be filed with the Securities and Exchange Commission, or SEC, following the later of the date we are deemed to be an “accelerated filer” or a “large accelerated filer,” each as defined in the Securities Exchange Act of 1934, as amended, or the date we are no longer an “emerging growth company,” as defined in the JOBS Act.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~~ SEC, The Nasdaq Global Select Market, or other regulatory authorities, which could require additional financial and management resources.

Our financial results may ~~pursue acquisitions,~~be adversely affected by changes in accounting principles applicable to us.

U.S. GAAP are subject to interpretation by the Financial Accounting Standards Board, the SEC, and other 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. It is difficult to predict the impact of future changes to accounting principles or our accounting policies, any of which ~~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 no experience completing or integrating acquisitions. Any acquisition could be material to our financial condition and results of operations 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 an amended and restated loan and security agreement with Silicon Valley Bank in November 2014, which was amended in May 2015 and June 2017, providing for a $30.0 million revolving line of credit. Our loan agreements with Silicon Valley Bank contain a number of restrictive covenants, and the terms may restrict our current and future operations, particularly our ability to respond to certain changes in our business or industry, or take future actions. Pursuant to this agreement, we granted Silicon Valley Bank 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 Agreements.”

If we fail to comply with the covenants or payments specified in our credit facility, Silicon Valley Bank could declare an event of default, which would give it the right to terminate its commitment to provide additional loans and declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable. In addition, Silicon Valley Bank would have the right to proceed against the assets we provided as collateral pursuant to the credit facility. 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.

If we fail to comply with the laws and regulations relating to the ~~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 become~~

We are subject to requirements to deduct or withhold income taxes on revenue sourced in various ~~state~~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 our sales in various jurisdictions. The laws and regulations ~~including requirements to collect sales tax from our sales within those states,~~governing

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the withholding and ~~the~~ payment of income taxes ~~on revenue generated from activities in those states. The laws~~ and ~~regulations governing~~ the collection of ~~sales tax for sales on our website and payment of income~~indirect taxes are numerous, complex, and vary ~~from state to state.~~by jurisdiction. A successful assertion by one or more ~~states~~jurisdictions that we were required to ~~collect sales~~withhold or ~~other~~pay income taxes or ~~to pay income~~collect 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.

New legislation that would change U.S. or foreign taxation of international business activities or other tax-reform policies could harm our business.

We earn a portion of our income in foreign countries and, as such, we are subject to tax laws in the United 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.

Proposals to reform U.S. and foreign tax laws could significantly impact how U.S. multinational corporations are taxed on foreign earnings and could increase the U.S. corporate tax rate. 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.

In addition, both tax policy and tax administration are becoming multilateral. This multilateralism and collaboration among taxing authorities (including the U.S. and many foreign 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 ~~require additional capital to meet~~terminate upon the adoption of multilateral tax rules.

The rapid growth of multilateralism in tax administration means greater sharing of tax information among taxing authorities as well as the likelihood of joint and simultaneous 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 ~~obligations~~results for the period or periods for which the applicable final determinations are made. For example, we and ~~support planned business growth,~~our subsidiaries are engaged in intercompany transactions across multiple tax jurisdictions. Although we believe we have clearly reflected the economics of these transactions and ~~this capital might not be available on acceptable terms or at all.~~

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.

We ~~intend to continue to make significant investments to support planned business growth~~have been, are currently, and may ~~require additional funds~~in the future be subject to ~~respond to business challenges, including the need to develop new devices~~regulatory inquiries, investigations, 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. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our then existing stockholdersproceedings, which could suffer significant 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 restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult forcause us to ~~obtain additional capital and to pursue business opportunities, including potential acquisitions. If we were to violate the 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~~substantial costs 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 offices~~change our business practices in a way that could seriously harm our business.

We have been, are currently, and ~~a network operations center are located~~may in the ~~San Francisco Bay Area, an area known for earthquakes,~~future be subject to investigations and ~~are thus vulnerable~~inquiries 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 vulnerable~~change our policies or practices, subject us to ~~damage from~~substantial monetary fines or other ~~types~~penalties 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.~~

business.

Risks Related to Ownership of Our Class A Common Stock

The dual class structure of our common stock ~~as contained in our amended and restated certificate of incorporation has the effect of concentrating~~concentrates voting control with those stockholders who held our stock prior to our initial public offering, including our executive officers, employees, and directors and their affiliates, and ~~limiting your~~limits the ability of holders of our Class A common stock to influence corporate matters.

Our Class B common stock has 10 votes per share, and our Class A common stock has one vote per share. Our President and Chief Executive Officer, Anthony Wood, holds ~~approximately 27.3%~~and controls the vote of ~~our outstanding common stock, but controls approximately 32.1%~~a significant number of ~~the voting power~~shares of our outstanding common stock, and therefore Mr. Wood will have significant influence over our management and affairs and over all matters requiring stockholder approval, including election of directors and significant corporate transactions, such as a merger or other sale of Roku or our assets, for the foreseeable future. If Mr. Wood’s employment with us is terminated, he will continue to have the same influence over matters requiring stockholder approval.

In addition, the holders of Class B common stock collectively will continue to be able to control all matters submitted to our stockholders for approval even if their stock holdings represent less than ~~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 ~~your~~the 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.

Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, which ~~will have~~has the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their

shares in the long term. ~~If, for example,~~As a result of such transfers, as of June 30, 2023, Mr. Wood ~~retains~~controls a ~~significant portion~~

Table of ~~his holdings of Class B common stock for an extended period of time, he could, in the future, control a~~ Contents

majority of the combined voting power of our Class A and Class B common stock even though he only owns 12.3% of the outstanding Class A and Class B common stock. As a ~~board~~ member of our Board of Directors (our “Board”), 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.

~~Our stock price may be volatile, and~~ 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 ~~value~~consummation of ~~your~~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, ~~may decline.~~

which has limited voting power relative to the Class B common stock, and might harm the market 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.

The market price of our Class A common stock ~~could~~has been, and may continue to be, volatile, and the value of our Class A common stock may decline.*

The market price of our Class A common stock has been and may continue to be subject to wide fluctuations in response to numerous factors, many ~~risk factors listed in this section, and others~~of which are beyond our control, including:

•actual or anticipated fluctuations in our financial condition and operating results;

•changes in projected operational and financial results;

•our loss ~~by us~~ of key content publishers;

•changes in laws or regulations applicable to our ~~devices~~products or platform;

•the commencement or conclusion of legal proceedings that involve us;

•actual or anticipated changes in our growth rate relative to our competitors;

•announcements of new products or services by us or our competitors;

•announcements by us or our competitors of significant acquisitions, strategic partnerships, or joint ~~ventures or~~ ventures;

•capital-raising activities or commitments;

•additions or departures of key personnel;

•issuance of new or updated research or reports by securities analysts;

•the use by investors or analysts of third-party data regarding our business that may not reflect our financial performance;

•fluctuations in the valuation of companies perceived by investors to be comparable to us;

•sales of our Class A common stock, including short selling of our Class A common stock;

•share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

~~the expiration of contractual lock-up agreements; and~~

•general economic and market ~~conditions.~~

conditions; and

•other events or factors, including those resulting from civil unrest, war, foreign invasions, terrorism, or public health crises, or responses to such events.

Furthermore, the stock markets frequently experience extreme price and volume fluctuations that affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political, and market conditions such as recessions, elections, interest rate changes, or international currency fluctuations, may negatively impact the market price of our Class A common stock. ~~If the market price~~As a result of ~~our Class A common stock does not exceed the IPO price,~~such fluctuations, you may not realize any return on your investment in us and may lose some or all of your investment. In ~~the past,~~addition, we and other companies that have experienced volatility in the market price of their stock have been, and may in the future be, subject to securities class action litigation or derivative litigation. ~~We may be the target of this type of~~Such litigation ~~in the future. Securities litigation against us~~ could result in substantial costs and divert our management’s attention from other business ~~concerns, which could harm our business.~~

~~We will have broad discretion in the use of proceeds from the IPO and may invest or spend the proceeds in ways with which you do not agree and in ways that may not yield a return.~~

We will have broad discretion over the use of proceeds from the IPO. Investors may not agree with our decisions, and our use of the proceeds may not yield any return on your investment. Our failure to apply the net proceeds of the IPO effectively could impair our ability to pursue our growth strategy or could require us to raise additional capital.

concerns.

Future sales and issuances of our capital stock or rights to purchase capital stock could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to decline.

We may issue additional securities in the future and from time to time. Future sales and issuances of our capital stock or rights to purchase our capital stock could result in substantial dilution to our existing stockholders. We may sell or issue Class A common stock, convertible securities, and other equity securities in one or more transactions at prices and in a manner as we may determine from time to time. If we sell any such securities in subsequent transactions, investors may be materially diluted. New investors in such subsequent transactions could gain rights, preferences, and privileges senior to those of holders of our Class A common stock.

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Future sales of shares by existing stockholders could cause our stock price to decline.

If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our Class A common stock in the public market, the market price of our Class A common stock could decline. All of our outstanding Class A shares are eligible for sale in the public market, other than shares and stock options exercisable held by directors, executive officers, and other affiliates that are subject to volume limitations under Rule 144 of the Securities Act. In addition, we have reserved shares for future issuance under our equity incentive plan. Our directors, employees, and certain contingent workers are subject to our quarterly trading window, which generally opens at the start of the second full trading day after the public dissemination of our annual or quarterly financial results and closes (i) with respect to the first, second, and third quarter of each year, at the end of the fifteenth day of the last month of such quarter and (ii) with respect to the fourth quarter of each year, at the end of the trading day on the Wednesday before Thanksgiving. These directors, employees, and contingent workers may also sell shares during a closed window period 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 is dilutive to existing stockholders and the market price of our Class A common stock could decline.

If securities or industry analysts do not publish research or publish unfavorable research about our business or if they downgrade our stock, our stock price and trading volume could decline.

~~Equity~~

A limited number of equity research analysts ~~do not currently~~ provide research coverage of our Class A common stock, and we cannot assure you that ~~any~~such equity research analysts will adequately provide research coverage of our Class A common stock. A lack of adequate research coverage may adversely affect the liquidity and market price of our Class A common stock. To

If 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.

We ~~will~~ incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies in the United States, which may harm our business.

As a public company listed in the United States, we ~~will~~ incur significant ~~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 ~~the~~The Nasdaq Global Select Market ~~or Nasdaq,~~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.

Failure to comply with these rules might also make it more difficult for us to obtain certain types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our ~~board of directors,~~Board, on committees of our ~~board of directors~~Board, or as members of senior management.

We are an “emerging growth company,” and we intend to comply only with reduced disclosure requirements applicable to emerging growth companies. As a result, our Class A common stock could be less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of the IPO, (b) in which we have total annual gross revenue of over $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We cannot predict if investors will find our Class A common stock less attractive if we choose to rely on these exemptions. If some investors find our Class A common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our Class A common stock and our stock price may be more volatile.

We do not intend to pay dividends in the foreseeable future.

We have never declared or paid any cash dividends on our Class A or Class B common stock and do not intend to pay any cash dividends in the foreseeable future. We anticipate that we will retain all of our future earnings to grow our business and for general

corporate purposes. Moreover, ~~our outstanding loan and security agreements~~any future credit agreement we enter into could contain 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.

Provisions 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.

There are provisions in our certificate of incorporation and bylaws that may make it difficult for a ~~third-party~~third party to acquire, or attempt to acquire, control of ~~Roku,~~our company, even if a change in control was considered favorable by our stockholders.

Our charter documents also contain other provisions that could have an anti-takeover effect, such as:

•establishing a classified ~~board of directors~~Board so that not all ~~members of our board of~~ directors are elected at one time;

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•permitting ~~the board of directors~~our Board 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~~Board 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.

Moreover, because we are incorporated in Delaware, we are governed by ~~the provisions of~~ Section 203 of the Delaware General Corporation Law, which ~~prohibit~~prohibits 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.

Our ~~amended and restated~~ certificate of incorporation ~~will provide~~provides that the Delaware Court of Chancery ofand the ~~State of Delaware and the~~U.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.

Our ~~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:

•any derivative action or proceeding brought on our behalf;

•any action asserting a breach of fiduciary duty;

•any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our ~~amended and restated~~ certificate of incorporation, or our bylaws; or and

•any action asserting a claim against us that is governed by the internal affairs doctrine. ~~Our amended~~

This provision would not apply to suits brought to enforce a duty or liability created by 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 ~~restated~~state courts over all Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims.

To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our certificate of incorporation ~~further~~ provides that the U.S. 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. ~~These~~

While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for certain disputes with us or our directors, officers, or other employees, which may discourage ~~such~~ lawsuits against us and our directors, officers, and other employees. If a court were to find either ~~choice of~~exclusive forum provision ~~contained~~ 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.

Item 2. Unregistered Sales of ~~Equi~~tyEquity Securities and Use of ~~Proceeds.~~

~~Sales of Unregistered Securities~~

The following sets forth information regarding all unregistered securities sold since July 1, 2017 (share and per share amounts give effect to a 1-for-6 reverse stock split of our common stock and preferred stock effected on September 15, 2017):

~~(1)~~

From July 1, 2017 to September 27, 2017, we granted stock options to purchase an aggregate of 3,219,857 shares of Class B common stock at an exercise prices of $8.82 per share to a total of 209 employees, consultants and directors under our 2008 Equity Incentive Plan;

Proceeds

~~(2)~~

From July 1, 2017 to September 27, 2017, we issued and sold an aggregate of 267,813 shares of Class B common stock upon the exercise of options under our 2008 Plan at exercise prices ranging from $0.16 to $6.12, per share, for an aggregate exercise price of $868,055;

None.

~~(3)~~

~~In July 2017, we issued 357,283 shares of our Class B common stock upon the automatic net exercise of a warrant to purchase 375,000 shares of our Class B common stock;~~

~~(4)~~

~~108,332 shares of Class B common stock issued in September 2017 in connection with an acquisition;~~

The offers, sales and issuances of the securities described in paragraphs (1) through (4) above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act or Regulation D promulgated thereunder or Rule 701 promulgated under the Securities Act as transactions by an issuer not involving a public offering or under benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited or sophisticated person and had adequate access, through employment, business or other relationships, to information about us.

~~Use of Proceeds from our Initial Public Offering of Class A Common Stock~~

On September 27, 2017, our registration statement on Form S-1 (No. 333-220318) was declared effective by the SEC for our initial public offering of Class A common stock, or the IPO, pursuant to which, we issued and sold 9,000,000 shares of our Class A common stock on October 2, 2017, and on the same day we issued and sold an aggregate of 1,350,000 shares of our Class A common stock pursuant to the underwriters’ exercise of their option to purchase additional shares, in each case at a public offering price of $14.00 per share. Morgan Stanley & Co. LLC and Citigroup Global Markets Inc. acted as joint book-running managers for the offering and Allen & Company LLC, RBC Capital Markets, Needham & Company, Oppenheimer & Co. and William Blair acted as co-managers for the offering. Following the sale of the shares in connection with the closing of the IPO, the offering terminated. As a result of the offering, we received total net proceeds of approximately $130.8 million, after deducting total expenses of $14.1 million, consisting of underwriting discounts and commissions of $10.1 million and offering-related expenses of approximately $4.0 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.

~~There has been no material change in the planned use of proceeds from our IPO from that described in the Prospectus.~~

Item 3. Defaults Upon Senior ~~Securities.~~

Securities

None.

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Item 4. Mine Safety ~~Disclosures.~~

Disclosures

Not ~~applicable.~~

applicable.

Item 5. Other ~~Information.~~

~~None.~~

Information

Insider Trading Arrangements

During the three months ended June 30, 2023, each of the following officers (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item ~~6. Exhibits.~~

Incorporation By Reference

Exhibit
Number

Description

Form

SEC File No.

Exhibit

3.1

Amended and Restated Certificate of Incorporation of Roku, Inc.

8-K

001-38211

3.1

3.2

Amended and Restated Bylaws of Roku, Inc.

S-1

333-220318

3.4

4.1

Reference is made to Exhibits 3.1 through 3.2.

4.2

Form of Class A common stock certificate.

S-1/A

333-220318

4.1

31.1*

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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408(a) of Regulation S-K.

~~Filed herewith.~~

Name

Action

Date

Trading Arrangement

Total Shares of Class A Common Stock to be Sold

Expiration Date

Rule 10b5-1*

Non-Rule 10b5-1**

Charles Collier

(President, Roku Media)

Adopt

June 5, 2023

117,359

June 17, 2024

Gidon Katz

(President, Consumer Experience)

Adopt

June 15, 2023

15,027

June 14, 2024

Matt Banks

(Vice President, Corporate Controller and Chief Accounting Officer)

Adopt

May 17, 2023

18,373

June 14, 2024

___________________

* Contract, instruction or written plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act

** “Non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K under the Exchange Act

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Item 6. Exhibits

Incorporation by reference

Exhibit

Number

Description

Form

SEC File No.

Exhibit

Filing Date

Filed Herewith

3.1

Amended and Restated Certificate of Incorporation of Roku, Inc.

8-K

001-38211

3.1

10/03/2017

3.2

Amended and Restated Bylaws of Roku, Inc.

S-1/A

333-220318

3.4

9/18/2017

4.1

Reference is made to Exhibits 3.1 through 3.2.

4.2

Form of Class A common stock certificate

S-1/A

333-220318

4.1

9/18/2017

10.1

Offer Letter, by and between Roku, Inc. and Dan Jedda, dated February 11, 2023

31.1

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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* These exhibits are furnished with this Quarterly Report 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 and 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.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this ~~report~~Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized.

~~Roku, Inc.~~

Roku, Inc.

Date: ~~November 9, 2017~~

July 28, 2023

By:

/s/ Anthony Wood

Anthony Wood

~~President and~~

Chief Executive Officer

and President

(Principal Executive Officer)

Date: ~~November 9, 2017~~

July 28, 2023

By:

/s/ ~~Steve Louden~~

Dan Jedda

~~Steve Louden~~

Dan Jedda

Chief Financial Officer

(Principal Financial Officer)

Date: July 28, 2023

By:

/s/ Matthew Banks

Matthew Banks

Vice President, Corporate Controller and Chief Accounting Officer

(Principal Accounting Officer)

	September 30, 2017			December 31, 2016
Assets
Current Assets:
Cash	$	66,918		$	34,562
Accounts receivable, net of allowances		84,840			79,325
Receivable from related parties		153			148
Inventories		35,450			43,568
Prepaid expenses and other current assets		7,702			4,981
Deferred cost of revenue		2,448			2,636
Total current assets		197,511			165,220
Property and equipment, net		12,807			9,528
Deferred cost of revenue, noncurrent portion		4,975			3,815
Intangible assets		2,215		—
Goodwill		1,554			—
Other noncurrent assets		6,440			515
Total Assets	$	225,502		$	179,078
Liabilities, Convertible Preferred Stock and Stockholders’ Deficit
Current Liabilities:
Accounts payable	$	49,171		$	31,397
Accrued liabilities		65,498			46,156
Current portion of long-term debt	—				15,000
Deferred revenue, current portion		30,822			23,952
Total current liabilities		145,491			116,505
Long-term debt, less current portion		23,043			—
Preferred stock warrant liability		52,355			9,990
Noncurrent deferred revenue		38,802			29,084
Other long-term liabilities		8,604			4,143
Total Liabilities		268,295			159,722
Commitments and Contingencies (Note 7)
Convertible Preferred Stock:
Convertible preferred stock		213,180			213,180
Stockholders’ Deficit:
Common stock		1			—
Additional paid-in capital		34,305			26,005
Accumulated deficit		(290,279	)		(219,829	)
Total stockholders’ deficit		(255,973	)		(193,824	)
Total Liabilities, Convertible Preferred Stock and Stockholders’ Deficit	$	225,502		$	179,078

	Convertible Preferred Stock				Common Stock					Additional Paid-in		Treasury			Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Stock			Deficit			Deficit
Balance—December 31, 2016		80,844,138	$	213,180		4,818,812		$	-	$	26,005	$	-		$	(219,829	)	$	(193,824	)
Issuance of common stock upon exercise of stock options		—		—		445,995			1		1,442		—			—			1,443
Share repurchases		—		—		(92,637	)		—		—		(671	)		—			(671	)
Vesting of early exercised stock options		—		—		—			—		12		—			—			12
Issuance of common stock pursuant to acquisition		—		—		108,332			—		—								-
Issuance of common stock upon expiration of warrants		—		—		357,283			—		—								-
Stock-based compensation expense		—		—		—			—		7,517		—			—			7,517
Net loss		—		—		—			—		—		—			(70,450	)		(70,450	)
Balance—September 30, 2017		80,844,138	$	213,180		5,637,785		$	1	$	34,976	$	(671	)	$	(290,279	)	$	(255,973	)

	September 30, 2017
	Level 1		Level 2		Level 3		Total
Financial liabilities—convertible preferred stock warrant liability	$	—	$	—	$	52,355	$	52,355
Total financial liabilities	$	—	$	—	$	52,355	$	52,355

	December 31, 2016
	Level 1		Level 2		Level 3		Total
Financial liabilities—convertible preferred stock warrant liability	$	—	$	—	$	9,990	$	9,990
Total financial liabilities	$	—	$	—	$	9,990	$	9,990

	September 30, 2017			December 31, 2016
Gross accounts receivable	$	100,059		$	95,538
Allowance for sales returns		(4,377	)		(6,916	)
Allowance for sales incentives		(10,499	)		(8,503	)
Other allowances		(343	)		(794	)
Total allowances		(15,219	)		(16,213	)
Total accounts receivable—net	$	84,840		$	79,325

	September 30, 2017		December 31, 2016
Accrued royalty expense	$	14,549	$	14,940
Accrued inventory		11,325		4,274
Accrued payroll and related expenses		4,352		5,342
Accrued cost of revenue		9,004		7,264
Accrued payments to content publishers		17,651		8,554
Other accrued expenses		8,617		5,782
Total accrued liabilities	$	65,498	$	46,156

	September 30, 2017		December 31, 2016
Player, current	$	14,359	$	13,611
Platform, current		16,463		10,341
Total deferred revenue, current		30,822		23,952
Player, non-current		4,767		5,215
Platform, non-current		34,035		23,869
Total deferred revenue, non-current		38,802		29,084
Total deferred revenue	$	69,624	$	53,036

	September 30, 2017			December 31, 2016
Term Loan	$	25,000		$	—
Line of Credit		—			15,000
Total debt obligations		25,000			15,000
Compounding interest due at maturity	255				—
Less unamortized debt discount and issuance costs		(2,212	)		—
Balance		23,043			15,000
Current portion of long-term debt		—			(15,000	)
Long-term debt less current portion	$	23,043		$	—

	September 30, 2017 and December 31,2016
Series	Price		Shares Authorized		Shares Outstanding		Liquidation Preference
A	$	0.36312		23,020,000		23,019,997	$	8,359
B		0.93808		6,396,071		6,396,068		6,000
C-1		0.54109		9,240,560		9,240,558		5,000
C-2		0.64931		8,950,467		7,700,466		5,000
D		2.37840		4,685,755		4,204,505		10,000
E		4.35679		11,160,733		11,074,655		48,250
F		5.43396		11,041,671		11,041,667		60,000
G		7.79730		3,206,239		3,206,234		25,000
H		9.17340		6,666,667		4,959,988		45,500
Total				84,368,163		80,844,138	$	213,109

	September 30, 2017		December 31, 2016
Conversion of:
Series A convertible preferred stock		23,019,997		23,019,997
Series B convertible preferred stock		6,396,068		6,396,068
Series C-1 convertible preferred stock		9,240,558		9,240,558
Series C-2 convertible preferred stock		7,700,466		7,700,466
Series C-2 convertible preferred stock warrants		1,250,000		1,250,000
Series D convertible preferred stock		4,204,505		4,204,505
Series D convertible preferred stock warrants		481,246		481,246
Series E convertible preferred stock		11,074,655		11,074,655
Series E convertible preferred stock warrants		86,072		86,072
Series F convertible preferred stock		11,041,667		11,041,667
Series G convertible preferred stock		3,206,234		3,206,234
Series H convertible preferred stock		4,959,988		4,959,988
Series H convertible preferred stock warrants		408,648		—
Conversion of common stock warrants		—		375,000
Common stock options issued under stock option plan		27,326,277		22,334,508
Common stock options available for grant under stock option plan		1,221,824		409,582
Total		111,618,205		105,780,546

	Shares Available for Grant			Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Weighted Average Grant Date Fair Value Per Share
Balance, December 31, 2016		409,582			22,334,508			3.66		6.6		—
Increase authorization		6,250,000			—					—		—
Granted		(6,013,312	)		6,013,312			7.47		—	$	3.48
Exercised		—			(445,995	)		3.91		—		—
Forfeited and expired		575,554			(575,554	)		5.49		—		—
Balance, September 30, 2017		1,221,824			27,326,271			4.46		6.7		—

Series	Number Outstanding September 30, 2017		Number Outstanding December 31, 2016		Issuance Date	Exercise Price		Original Term
C-2		1,250,000		1,250,000	July 13, 2011	$	0.64931	10 years
D		249,999		249,999	October 17, 2011		2.37840	10 years
D		168,180		168,180	March 12, 2012		2.37840	10 years
D		63,067		63,067	April 27, 2012		2.37840	10 years
E		86,072		86,072	April 27, 2012		3.48546	10 years
H		408,648		—	June 9, 2017		9.17340	10 years
Total		2,225,966		1,817,318


	September 30, 2017		October 1, 2016
Options to purchase common stock		27,326,277		20,628,248
Unvested shares of common stock issued upon early exercise of stock options		51,686		4,566
Warrants to purchase common stock		-		375,000
Warrants to purchase convertible preferred stock		2,225,966		1,817,320
Convertible preferred stock		80,844,138		80,844,138
Total		110,448,067		103,669,272

	Payments Due by Period
	Total		Less Than 1 Year		1 – 3 Years		3 – 5 Years		More Than 5 Years
	(in thousands)
Purchase commitments⁽¹⁾	$	64,347	$	64,347	$	—	$	—	$	—
Operating lease obligations⁽²⁾		35,824		8,138		27,664		22		—
Debt⁽³⁾		15,000		15,000		—		—		—
Total	$	115,171	$	87,485	$	27,664	$	22	$	—

		Incorporation By Reference
Exhibit Number	Description	Form	SEC File No.	Exhibit

3.1	Amended and Restated Certificate of Incorporation of Roku, Inc.	8-K	001-38211	3.1
3.2	Amended and Restated Bylaws of Roku, Inc.	S-1	333-220318	3.4
4.1	Reference is made to Exhibits 3.1 through 3.2.
4.2	Form of Class A common stock certificate.	S-1/A	333-220318	4.1
31.1*	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document