ROKU, INC - Quarter Report: 2021 September (Form 10-Q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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 30, 2021

☐	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.

(Exact name of registrant as specified in its charter)

Delaware

26-2087865

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

1155 Coleman Avenue

San Jose, California 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 every Interactive Data File required to be submitted 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 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.

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 October 31, 2021, the registrant had 117,707,415 of Class A common stock, $0.0001 par value per share, and 16,655,344 shares of Class B common stock, $0.0001 par value per share, outstanding.

Table of Contents

		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 Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II.	OTHER INFORMATION	34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72
Item 3.	Defaults Upon Senior Securities	72
Item 4.	Mine Safety Disclosures	72
Item 5.	Other Information	72
Item 6.	Exhibits	73
Signatures		74

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. For example, statements in this Form 10-Q regarding the potential future impact of the COVID-19 pandemic on the Company’s business and results of operations are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “anticipate,” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “project,” “should,” “will” or the negative of these terms or other similar expressions. We caution you that the foregoing list does not encompass all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently 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 Quarterly Report on Form 10-Q, regarding, among other things:

•

our financial performance, including our revenue, cost of revenue, operating expenses and our ability to maintain and grow our profitability;

•

the impact of the COVID-19 pandemic and supply chain disruptions on our business, operations, and the markets and communities in which we and our advertisers, partners, manufacturers, suppliers and users operate;

•

our ability to attract and retain users and increase streaming hours;

•

our ability to attract and retain advertisers;

•

our ability to attract and retain TV brands and service operators to license and deploy our technology;

•

our ability to 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 and 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;

•

our ability to develop and launch new products and provide ancillary services and support;

•

our ability to integrate acquired businesses, products and technologies;

•

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 involving our products, systems and operations;

•

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

•

our ability to comply with laws and regulations that currently apply or may become applicable to our business both in the United States and internationally, including compliance with privacy and data protection regulations in various U.S. and international jurisdictions.

Other sections of this Quarterly Report on Form 10-Q 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 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 in 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.

Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (roku.com/investor), SEC filings, webcasts, press releases, and conference calls. We use these mediums to communicate with investors and the general public about our company, our products and services, and other issues. It is possible that the information that we make available may be deemed to be material information. We therefore encourage investors, the media and others interested in our company to review the information that we 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

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

ROKU, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value data)

(unaudited)

	As of
	September 30, 2021			December 31, 2020
Assets
Current Assets:
Cash and cash equivalents	$	2,179,745		$	1,092,815
Accounts receivable, net of allowances of $25,631 and $41,236 as of		595,911			523,852
September 30, 2021 and December 31, 2020, respectively
Inventories		75,945			53,895
Prepaid expenses and other current assets		110,180			27,078
Total current assets		2,961,781			1,697,640
Property and equipment, net		170,606			155,197
Operating lease right-of-use assets		346,691			266,197
Intangible assets, net		92,534			62,181
Goodwill		146,784			73,058
Other non-current assets		193,907			16,269
Total Assets	$	3,912,303		$	2,270,542
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	131,818		$	112,314
Accrued liabilities		482,057			347,668
Current portion of long-term debt		8,630			4,874
Deferred revenue, current portion		45,559			55,465
Total current liabilities		668,064			520,321
Long-term debt, non-current portion		82,457			89,868
Deferred revenue, non-current portion		23,420			21,283
Operating lease liability, non-current portion		394,515			307,936
Other long-term liabilities		60,216			3,119
Total Liabilities		1,228,672			942,527
Commitments and contingencies (Note 12)
Stockholders’ Equity:
Common stock, $0.0001 par value		13			13
Additional paid-in capital		2,797,297			1,660,379
Accumulated other comprehensive income		29			29
Accumulated deficit		(113,708	)		(332,406	)
Total Stockholders’ Equity		2,683,631			1,328,015
Total Liabilities and Stockholders’ Equity	$	3,912,303		$	2,270,542

See accompanying notes to condensed consolidated financial statements.

ROKU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Net Revenue:
Platform	$	582,514		$	319,231		$	1,581,343		$	796,565
Player		97,439			132,432			317,912			331,937
Total net revenue		679,953			451,663			1,899,255			1,128,502
Cost of Revenue:
Platform		203,989			124,568			545,907			332,828
Player		112,045			112,271			324,392			292,913
Total cost of revenue		316,034			236,839			870,299			625,741
Gross Profit (Loss):
Platform		378,525			194,663			1,035,436			463,737
Player		(14,606	)		20,161			(6,480	)		39,024
Total gross profit		363,919			214,824			1,028,956			502,761
Operating Expenses:
Research and development		120,307			88,388			335,164			261,053
Sales and marketing		109,700			70,956			292,251			203,368
General and administrative		65,066			43,510			187,805			123,744
Total operating expenses		295,073			202,854			815,220			588,165
Income (Loss) from Operations		68,846			11,970			213,736			(85,404	)
Other Income (Expense), Net:
Interest expense		(743	)		(773	)		(2,231	)		(2,670	)
Other income (expense), net		500			1,202			2,461			3,020
Total other income (expense), net		(243	)		429			230			350
Income (Loss) Before Income Taxes		68,603			12,399			213,966			(85,054	)
Income tax benefit		(332	)		(548	)		(4,732	)		(241	)
Net Income (Loss)	$	68,935		$	12,947		$	218,698		$	(84,813	)

Net income (loss) per share — basic	$	0.52		$	0.10		$	1.66		$	(0.69	)
Net income (loss) per share — diluted	$	0.48		$	0.09		$	1.54		$	(0.69	)

Weighted-average common shares outstanding — basic		133,685			125,687			132,036			122,837
Weighted-average common shares outstanding — diluted		142,286			136,669			141,593			122,837

See accompanying notes to condensed consolidated financial statements.

ROKU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

					Additional		Accumulated					Total
	Common Stock				Paid-in		Other Comprehensive		Accumulated			Stockholders’
	Shares		Amount		Capital		Income		Deficit			Equity
Three and Nine Months Ended September 30, 2021

Balance—June 30, 2021		133,299	$	13	$	2,743,629	$	29	$	(182,643	)	$	2,561,028
Issuance of common stock pursuant to equity incentive plans		857		—		3,148		—		—			3,148
Stock-based compensation expense		—		—		50,520		—		—			50,520
Net income (loss)		—		—		—		—		68,935			68,935
Balance—September 30, 2021		134,156	$	13	$	2,797,297	$	29	$	(113,708	)	$	2,683,631

Balance—December 31, 2020		128,004	$	13	$	1,660,379	$	29	$	(332,406	)	$	1,328,015
Vesting of early exercised stock options		—		—		4		—		—			4
Issuance of common stock pursuant to equity incentive plans		3,515		—		13,433		—		—			13,433
Issuance of common stock in connection with at-the-market offering, net of issuance costs of $10,400		2,637		—		989,615		—		—			989,615
Stock-based compensation expense		—		—		133,866		—		—			133,866
Net income (loss)		—		—		—		—		218,698			218,698
Balance—September 30, 2021		134,156	$	13	$	2,797,297	$	29	$	(113,708	)	$	2,683,631

					Additional		Accumulated					Total
	Common Stock				Paid-in		Other Comprehensive		Accumulated			Stockholders’
	Shares		Amount		Capital		Income		Deficit			Equity
Three and Nine Months Ended September 30, 2020

Balance—June 30, 2020		124,584	$	12	$	1,428,171	$	29	$	(412,659	)	$	1,015,553
Vesting of early exercised stock options		—		—		6		—		—			6
Issuance of common stock pursuant to equity incentive plans		1,304		1		5,328		—		—			5,329
Issuance of common stock in connection with at-the-market offering, net of issuance costs of $2,000		996		—		147,633		—		—			147,633
Stock-based compensation expense		—		—		34,907		—		—			34,907
Net income (loss)		—		—		—		—		12,947			12,947
Balance—September 30, 2020		126,884	$	13	$	1,616,045	$	29	$	(399,712	)	$	1,216,375

Balance—December 31, 2019		119,897	$	12	$	1,012,218	$	29	$	(313,833	)	$	698,426
Vesting of early exercised stock options		—		—		32		—		—			32
Issuance of common stock pursuant to equity incentive plans		2,987		1		11,205		—		—			11,206
Issuance of common stock in connection with at-the-market offering, net of issuance costs of $6,800		4,000		—		497,242		—		—			497,242
Stock-based compensation expense		—		—		95,348		—		—			95,348
Adoption of ASU 2016-13		—		—		—		—		(1,066	)		(1,066	)
Net income (loss)		—		—		—		—		(84,813	)		(84,813	)
Balance—September 30, 2020		126,884	$	13	$	1,616,045	$	29	$	(399,712	)	$	1,216,375

See accompanying notes to condensed consolidated financial statements.

ROKU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended
	September 30, 2021			September 30, 2020
Cash flows from operating activities:
Net income (loss)	$	218,698		$	(84,813	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		31,304			26,567
Stock-based compensation expense		133,479			95,348
Amortization of right-of-use assets		21,588			22,422
Amortization of content assets		56,580			17,131
Provision for (recoveries of) doubtful accounts		(1,480	)		3,097
Other items, net		(298	)		345
Changes in operating assets and liabilities:
Accounts receivable		(64,710	)		(62,767	)
Inventories		(22,050	)		(12,895	)
Prepaid expenses and other current assets		(63,402	)		(3,595	)
Other non-current assets		(78,549	)		842
Accounts payable		15,139			15,996
Accrued liabilities		34,204			55,279
Operating lease liabilities		(14,465	)		18,116
Other long-term liabilities		201			(833	)
Deferred revenue		(12,731	)		10,907
Net cash provided by operating activities		253,508			101,147
Cash flows from investing activities:
Purchases of property and equipment		(28,020	)		(76,012	)
Acquisitions of businesses, net of cash acquired		(136,778	)		—
Proceeds from escrows associated with acquisition		—			1,058
Net cash used in investing activities		(164,798	)		(74,954	)
Cash flows from financing activities:
Proceeds from equity issued under at-the-market offerings, net of issuance costs		989,615			497,242
Proceeds from borrowings, net of issuance costs		—			69,325
Repayments of borrowings		(3,750	)		(73,075	)
Proceeds from equity issued under incentive plans		13,433			11,206
Net cash provided by financing activities		999,298			504,698
Net increase in cash, cash equivalents and restricted cash		1,088,008			530,891
Cash, cash equivalents and restricted cash —beginning of period		1,093,249			517,333
Cash, cash equivalents and restricted cash —end of period	$	2,181,257		$	1,048,224
Cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents		2,179,745			1,047,478
Restricted cash, current		—			746
Restricted cash, non-current		1,512			—
Cash, cash equivalents and restricted cash —end of period	$	2,181,257		$	1,048,224

Supplemental disclosures of cash flow information:
Cash paid for interest	$	1,932	$	2,798
Cash paid for income taxes	$	956	$	624
Supplemental disclosures of noncash investing and financing activities:
Non-cash consideration for business combination	$	15,200	$	—
Services to be received as part of a business combination	$	6,300	$	—
Unpaid portion of property and equipment purchases	$	3,310	$	4,966
Unpaid portion of acquisition-related expenses	$	43	$	—
Unpaid portion of at-the-market issuance costs	$	—	$	11

See accompanying notes to condensed consolidated financial statements.

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 from advertising, content distribution, media and entertainment promotional spending and billing services, and player revenue from the sale of streaming players and audio products.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 26, 2021 (the “Annual Report”).

The condensed consolidated balance sheet as of December 31, 2020 has been 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 Annual Report. The interim financial information is unaudited, but reflects all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the operating results to be expected for the full year or any future periods.

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, liabilities, net revenue and expenses. Significant items subject to such estimates and assumptions include: for 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, evaluation of customer versus vendor relationships, and other obligations such as sales return reserves and sales incentive programs; the impairment of goodwill and intangible assets; valuation of assets acquired and liabilities assumed in connection with business combinations; useful lives of tangible and intangible assets; allowances for doubtful accounts; the valuation of deferred income tax assets; and stock-based compensation. 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 and assumptions.

Principles of Consolidation

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

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of September 30, 2021, two financial institutions managed 33% and 28%, respectively, of the Company’s cash and cash equivalents balance. As of December 31, 2020, two financial institutions managed 46% and 26%, respectively, of the Company’s cash and cash equivalents balance.

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 rate 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						Nine Months Ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Beginning balance	$	(4,515	)	$	(5,412	)	$	(5,912	)	$	(6,550	)
Charged to revenue		(3,082	)		(2,313	)		(10,133	)		(8,998	)
Utilization of sales return reserve		3,554			3,402			12,002			11,225
Ending balance	$	(4,043	)	$	(4,323	)	$	(4,043	)	$	(4,323	)

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

	Three Months Ended						Nine Months Ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Beginning balance	$	(16,640	)	$	(8,962	)	$	(30,838	)	$	(19,476	)
Charged to revenue		(17,379	)		(10,470	)		(44,953	)		(28,127	)
Utilization of sales incentive reserve		14,184			11,366			55,956			39,537
Ending balance	$	(19,835	)	$	(8,066	)	$	(19,835	)	$	(8,066	)

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

	Three Months Ended						Nine Months Ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Beginning balance	$	(3,082	)	$	(4,403	)	$	(4,181	)	$	(1,140	)
Impact of adoption of ASU 2016-13		—			—			—			(1,066	)
Adjusted beginning balance		(3,082	)		(4,403	)		(4,181	)		(2,206	)
Provision for (recoveries of) doubtful accounts		381			(131	)		1,480			(3,097	)
Adjustments for recovery and write-off		1,119			10			1,119			779
Ending balance	$	(1,582	)	$	(4,524	)	$	(1,582	)	$	(4,524	)

The Company did not have any customer that accounted for more than 10% of its accounts receivable, net balance as of September 30, 2021. Customer H accounted for 11% of the accounts receivable, net balance as of December 31, 2020.

Recently Adopted Accounting Standards

On January 1, 2021, the Company adopted the guidance issued in Accounting Standards Updates (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles and also simplifies areas such as franchise taxes, step-up in tax basis of goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate changes. The adoption did not have a material impact on the Company’s condensed consolidated financial statements.

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance provides optional expedients and exceptions for applying U.S. GAAP to contract modifications, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) that is expected to be discontinued, subject to meeting certain criteria. The guidance is effective as of March 12, 2020 through December 31, 2022. The Company made a policy election in the second quarter of 2020 to elect a different reference rate for the Credit Agreement (as defined below) when LIBOR is discontinued.

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
	September 30, 2021		December 31, 2020
Accounts receivable, net	$	595,911	$	523,852
Contract assets (included in Prepaid expenses and other current assets)		47,673		7,431

Deferred revenue, current portion	$	45,559	$	55,465
Deferred revenue, non-current portion		23,420		21,283
Total deferred revenue	$	68,979	$	76,748

Accounts receivable are recorded at the amount invoiced, net of an allowance for doubtful accounts, sales returns, and sales incentives. 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 generally current in nature. Contract assets increased by approximately $40.2 million during the nine months ended September 30, 2021 primarily due to an increase in the growth of overall platform revenue combined with the timing of billing which falls into a subsequent period.

Contract liabilities are included in deferred revenue and reflect consideration invoiced prior to the completion of performance obligations and revenue recognition. Deferred revenue decreased by approximately $7.8 million during the nine months ended September 30, 2021 due to the timing of fulfillment of performance obligations related to platform revenue contracts.

Revenue recognized during the three and nine months ended September 30, 2021, from amounts included in deferred revenue as of December 31, 2020, was $9.3 million and $49.0 million, respectively. Revenue recognized during the three and nine months ended September 30, 2020, from amounts included in deferred revenue as of December 31, 2019, was $7.9 million and $36.6 million, respectively.

Revenue allocated to remaining performance obligations represents estimated contracted revenue that has not yet been recognized which includes both deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Estimated contracted revenue for these remaining performance obligations was $1,218.2 million as of September 30, 2021 of which we expect to recognize approximately 38% over the next 12 months and the remainder thereafter.

The Company recognized revenue of $4.5 million and $29.3 million during the three and nine months ended September 30, 2021, respectively, and revenue of $13.6 million and $11.5 million during the three and nine months ended September 30, 2020, respectively, from performance obligations that were satisfied in previous periods due to changes in the estimated transaction price of its revenue contracts.

Customers accounting for 10% or more of the Company’s net revenue were as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2021	September 30, 2020			September 30, 2021	September 30, 2020
Customer C	*		11	%	*		12	%
Customer H	*		11	%	*		10	%

* Less than 10%.

4. business combinationS

Nielsen’s Advanced Video Advertising Business

On February 28, 2021, the Company entered into an Asset and Stock Purchase Agreement (the “ASPA”) to purchase the Advanced Video Advertising (“AVA”) business from Nielsen Holdings PLC (“Nielsen”). The AVA business consists primarily of video automatic content recognition and dynamic ad insertion (“DAI”) technologies. On April 15, 2021, the Company closed the transaction, acquiring from Nielsen the AVA business, consisting of certain assets and liabilities and all of the equity interests in a subsidiary associated with the AVA business (the “Acquisition”). In conjunction with the Acquisition, Roku and Nielsen entered into a strategic commercial arrangement under which the parties will provide certain advertising measurement solutions to each other. The Company acquired Nielsen’s AVA business to accelerate its launch of an end-to-end DAI solution for traditional TV and to further integrate Nielsen’s ad and content measurement products into the Company’s platform.

The total preliminary purchase consideration for Nielsen’s AVA business was $47.4 million, which consisted of (i) $38.5 million paid in cash and (ii) $15.2 million of noncash consideration related to obligations to deliver services to Nielsen, offset by (iii) $6.3 million of services to be received from Nielsen. The obligations to deliver services to Nielsen were recorded at fair value using the incremental cash flow method. The services to be delivered to Nielsen are recognized within Other income (expense), net in the condensed consolidated statements of operations over the six year service period. The services to be received from Nielsen represent contract terms that the Company entered into for future goods and services that were recorded at fair value using the incremental cash flow method. These services are recognized as Cost of revenue, platform in the condensed consolidated statements of operations over the six year service period.

In addition, there are earn-out conditions in the ASPA which may trigger an additional payment to Nielsen. As of September 30, 2021, no contingent consideration conditions have been triggered. The Company incurred $3.9 million in acquisition-related expenses and has recorded them in General and administrative expenses in the condensed consolidated statements of operations.

The Company is still in the process of finalizing the fair value of the assets acquired and liabilities assumed. The purchase price allocation below is preliminary in nature. The estimates and assumptions regarding the fair value of certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, income taxes, and goodwill are subject to change as the Company obtains additional information during the measurement period, which usually lasts for up to one year from the Acquisition date.

The preliminary allocation of the purchase consideration to tangible and intangible assets acquired and liabilities assumed is based on estimated fair values and is as follows (in thousands):

	Fair Values
Assets acquired
Cash and cash equivalents	$	3,057
Prepaid expenses and other current assets		85
Property and equipment, net		584
Intangible assets:
Developed technology		14,200
IPR&D technology		8,500
Goodwill		22,055
Operating lease right-of-use assets		1,235
Other non-current assets		1,927
Total assets acquired		51,643
Liabilities assumed
Accounts payable and accrued liabilities		(1,168	)
Operating lease liabilities		(830	)
Other long-term liabilities		(2,254	)
Total liabilities assumed		(4,252	)
Total purchase consideration	$	47,391

The excess of the total consideration over the tangible assets, intangible assets, and assumed liabilities is recorded as goodwill. Goodwill is primarily attributable to expected synergies in our advertising offerings and cross-selling opportunities. The majority of the goodwill recorded is deductible for tax purposes.

The fair value of the developed technology has been estimated using the relief-from-royalty method. The key valuation assumptions include the Company's estimates of expected future earnings and royalty rate. The Company amortizes the fair value of the developed technology on a straight-line basis over its useful life. The fair value of the in-process research and development (“IPR&D”) technology has been estimated using the multi-period-excess-earnings method. The key valuation assumptions include the Company's estimates of expected future revenue and margin. Once the project reaches technological feasibility, the Company will amortize the fair value of the IPR&D technology on a straight-line basis over its useful life.

The preliminary valuation of the intangible assets acquired from Nielsen’s AVA business along with their estimated useful lives, is as follows (in thousands, except years):

	Estimated Fair Value		Estimated Weighted-Average Useful Lives (in years)
Developed technology	$	14,200	5.9
IPR&D technology		8,500		—
Estimated fair value of acquired intangible assets	$	22,700	5.9

The operations of Nielsen’s AVA business are included in the Company’s operating results beginning on the date of acquisition. The revenue, cost of revenue and gross profit recorded by the Company in its condensed consolidated statement of operations from the acquisition date to September 30, 2021 are not material.

This Old House

On March 19, 2021, the Company acquired all outstanding shares of TOH Intermediate Holdings, LLC (“This Old House”), a home improvement media business, according to the terms and conditions of the Equity Purchase Agreement. The Company acquired the This Old House business because the Company believes the content aligns with The Roku Channel’s ad-supported growth strategy.

The total purchase consideration for This Old House was $97.8 million, paid entirely in cash. The Company incurred $2.4 million in acquisition-related expenses and has recorded them in General and administrative expenses in the condensed consolidated statements of operations.

The preliminary allocation of the purchase consideration to tangible and intangible assets acquired and liabilities assumed, reflecting measurement period adjustments through September 30, 2021, is based on estimated fair values and is as follows (in thousands):

	Fair Values
Assets acquired
Cash and cash equivalents	$	7
Accounts receivable		5,830
Prepaid expenses and other current assets		7,310
Property and equipment, net		307
Intangible assets:
Tradename		20,000
Customer relationships		700
Goodwill		46,671
Operating lease right-of-use assets		5,498
Other non-current assets		23,487
Total assets acquired		109,810
Liabilities assumed
Accounts payable and accrued liabilities		(2,747	)
Deferred revenue, current portion		(4,146	)
Operating lease liabilities		(4,262	)
Deferred revenue, non-current portion		(816	)
Other long-term liabilities		(28	)
Total liabilities assumed		(11,999	)
Total purchase consideration	$	97,811

Other non-current assets include $22.5 million of content assets acquired. The fair value of the content assets has been estimated using the income approach. Amortization expense related to the content assets is recorded on an accelerated basis according to the pattern of monetization.

The excess of the total consideration over the tangible assets, identifiable intangible assets, and assumed liabilities is recorded as goodwill. Goodwill is primarily attributable to expected synergies in our advertising offerings as we bring more free ad-supported content to our users. The goodwill recorded is deductible for tax purposes.

The fair value of the tradename has been estimated using the relief-from-royalty method. The key valuation assumptions include the Company's estimates of expected future revenue and royalty rate. The Company amortizes the fair value of the tradename on a straight-line basis over its useful life.

The valuation of the intangible assets acquired from This Old House along with their estimated useful lives, is as follows (in thousands, except years):

	Estimated Fair Value		Estimated Weighted-Average Useful Lives (in years)
Tradename	$	20,000	10.0
Customer relationships		700	4.0
Estimated fair value of acquired intangible assets	$	20,700	9.8

The operations of This Old House were included in the Company’s operating results beginning on the date of acquisition. The Company recorded revenue of $13.5 million, cost of revenue, platform, of $7.3 million and gross profit of $6.2 million in its condensed consolidated statement of operations from the acquisition date to September 30, 2021.

5. GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of purchase consideration in a business combination over the fair value of tangible and intangible assets acquired net of the liabilities assumed. All goodwill relates to the Company’s platform segment.

The following table reflects the carrying value of goodwill (in thousands):

	Carrying Value
Balance as of December 31, 2020	$	73,058
Additions:
This Old House acquisition		46,671
Nielsen AVA business acquisition		22,055
Other immaterial acquisitions		5,000
Balance as of September 30, 2021	$	146,784

Intangible Assets

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

	As of September 30, 2021
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted-Average Useful Lives (in years)
Developed technology	$	76,567	$	(22,596	)	$	53,971		5.9
IPR&D technology		8,500		—			8,500		—
Customer relationships		14,100		(6,514	)		7,586		4.0
Tradename		20,400		(1,466	)		18,934		9.8
Patents		4,076		(533	)		3,543		14.0
Intangible assets	$	123,643	$	(31,109	)	$	92,534		6.7

	As of December 31, 2020
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted-Average Useful Lives (in years)
Developed technology	$	62,367	$	(13,439	)	$	48,928		5.9
Customer relationships		13,400		(3,908	)		9,492		4.0
Tradename		400		(400	)		—		0.5
Patents		4,076		(315	)		3,761		14.0
Intangible assets	$	80,243	$	(18,062	)	$	62,181		6.0

The Company recorded expenses of $4.7 million and $3.6 million for amortization of intangible assets during the three months ended September 30, 2021 and 2020, respectively. The Company recorded expenses of $13.0 million and $10.9 million for amortization of intangible assets during the nine months ended September 30, 2021 and 2020, respectively. During the three and nine months ended September 30, 2021 and 2020, the Company recorded amortization of developed technology in Cost of revenue, platform, Cost of revenue, player and Research and development expenses. The Company recorded amortization of customer relationships and tradenames in Sales and marketing expenses, and recorded amortization of patents in General and administrative expenses in the condensed consolidated statements of operations.

As of September 30, 2021, the estimated future amortization expense for intangible assets for the next five years and thereafter is as follows (in thousands):

Year Ending December 31,
2021 (remaining 3 months)	$	4,588
2022		18,302
2023		17,600
2024		14,808
2025		13,104
Thereafter		15,632
Total	$	84,034

6. Balance sheet components

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

	As of
	September 30, 2021			December 31, 2020
Gross accounts receivable	$	621,542		$	565,088
Allowance for sales returns		(4,043	)		(5,912	)
Allowance for sales incentives		(19,835	)		(30,838	)
Allowance for doubtful accounts		(1,582	)		(4,181	)
Other allowances		(171	)		(305	)
Total allowances		(25,631	)		(41,236	)
Total accounts receivable, net of allowances	$	595,911		$	523,852

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

	As of
	September 30, 2021			December 31, 2020
Computers and equipment	$	36,825		$	30,859
Leasehold improvements		170,771			144,013
Website and internal-use software		7,274			6,744
Office equipment and furniture		19,886			19,661
Total property and equipment		234,756			201,277
Accumulated depreciation and amortization		(64,150	)		(46,080	)
Property and equipment, net	$	170,606		$	155,197

Depreciation and amortization expense, for property and equipment assets, for the three months ended September 30, 2021 and 2020 was $6.2 million and $5.8 million, respectively. Depreciation and amortization expense, for property and equipment assets, for the nine months ended September 30, 2021 and 2020 was $18.3 million and $15.6 million, respectively.

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

	As of
	September 30, 2021		December 31, 2020
Payments due to content publishers	$	155,175	$	106,576
Accrued cost of revenue		101,952		98,285
Marketing, retail and merchandising costs		32,681		43,645
Operating lease liability, current		34,723		35,647
Content liability, current		52,536		6,165
Accrued payroll and related expenses		32,523		15,675
Other accrued expenses		72,467		41,675
Total accrued liabilities	$	482,057	$	347,668

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

	As of
	September 30, 2021		December 31, 2020
Platform, current	$	22,140	$	27,587
Player, current		23,419		27,878
Total deferred revenue, current		45,559		55,465
Platform, non-current		10,175		9,909
Player, non-current		13,245		11,374
Total deferred revenue, non-current		23,420		21,283
Total deferred revenue	$	68,979	$	76,748

7. Content Assets

The Company classifies its content assets as Other non-current assets. The Company records amortization expense for licensed content based on the pattern of monetization of such content which is primarily straight-line. The Company amortizes produced content over the applicable content life cycle based upon the ratio of current period revenue to the estimated total gross revenue to be earned. Licensed and produced content assets are primarily monetized together as a unit, referred to as a film group. The film group is evaluated for impairment whenever an event occurs or circumstances change indicating the fair value is less than the carrying value. The Company reviews various qualitative factors and indicators to assess whether the group asset is impaired.

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

	As of
	September 30, 2021		December 31, 2020
Licensed content, net	$	145,021	$	7,907

Produced content, net
Released, less amortization		19,963		—
Completed, not released		2,422		—
In production		1,890		—
		24,275		—

Total licensed and produced content, net	$	169,296	$	7,907

On January 8, 2021, the Company entered into an agreement with the mobile-first video distribution service known as Quibi to acquire certain content rights. The transaction was accounted for as an asset acquisition. As discussed in Note 4, the Company also acquired content assets as part of the This Old House acquisition. The increase of $161.4 million in content assets during the nine months ended September 30, 2021 includes content assets acquired from Quibi and This Old House as well as licensed programming content from various other content providers.

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

	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Licensed content	$	23,454	$	4,949	$	48,925	$	17,131
Produced content		5,034		—		7,655		—
Total amortization costs	$	28,488	$	4,949	$	56,580	$	17,131

8. FAIR VALUE

The Company’s financial assets measured at fair value are as follows (in thousands):

	As of September 30, 2021				As of December 31, 2020
	Fair Value		Level 1		Fair Value		Level 1
Assets:
Cash and cash equivalents:
Cash	$	1,736,948	$	1,736,948	$	1,021,022	$	1,021,022
Money market funds		442,797		442,797		71,793		71,793
Restricted cash, current		—		—		434		434
Restricted cash, non-current		1,512		1,512		—		—
Total assets measured and recorded at fair value	$	2,181,257	$	2,181,257	$	1,093,249	$	1,093,249

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal market (or most advantageous market, in the absence of a principal market) for the asset or liability in an orderly transaction between market participants at the measurement 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 equivalents including 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 $442.8 million and $71.8 million as cash equivalents as of September 30, 2021 and December 31, 2020, respectively, using Level 1 inputs.

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 on September 30, 2021 and December 31, 2020.

Level 3—Unobservable inputs that are supported by little or no market activity, are significant to the fair value of the assets or liabilities and reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The Company did not have Level 3 instruments on September 30, 2021 and December 31, 2020.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

Non-financial assets such as goodwill, intangible assets, property, plant, and equipment, operating lease right-of-use (“ROU”) assets and content assets are evaluated for impairment and adjusted to fair value using Level 3 inputs, only when impairment is recognized. Impairment charges for the three and nine months ended September 30, 2021 and for the year ended December 31, 2020 were not material.

9. LEASES

The Company has entered into operating leases primarily for office real estate. 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 ROU assets is limited by the expected lease term.

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

	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Operating lease cost⁽¹⁾	$	11,291	$	10,126	$	32,938	$	32,034
Variable lease cost		3,555		2,904		11,048		8,433
Net operating lease cost	$	14,846	$	13,030	$	43,986	$	40,467

⁽¹⁾ Operating lease cost is presented net of sublease income. Sublease income for the three and nine months ended September 30, 2021 and September 30, 2020, respectively, was not material.

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

	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	11,663	$	6,320	$	39,642	$	21,504
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	55,350	$	3,690	$	101,886	$	6,461

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

	As of
	September 30, 2021			December 31, 2020
Operating lease right-of-use assets	$	346,691		$	266,197

Operating lease liability, current (included in accrued liabilities)	$	34,723		$	35,647
Operating lease liability, non-current		394,515			307,936
Total operating lease liability	$	429,238		$	343,583

Weighted-average remaining lease term:
Operating leases (in years)	8.68			9.05
Weighted-average discount rate:
Operating leases		4.04	%		4.60	%

Future lease payments under operating leases as of September 30, 2021 are as follows (in thousands):

Year Ending December 31,	Operating Leases
2021 (remaining 3 months)	$	12,072
2022		50,364
2023		61,421
2024		60,168
2025		59,897
Thereafter		278,027
Total future lease payments		521,949
Less: imputed interest		(83,069	)
Less: expected tenant improvement allowance		(9,642	)
Total	$	429,238

As of September 30, 2021, the Company’s commitment relating to operating leases that have not yet commenced was $14.6 million. These operating leases will commence in fiscal years 2021 and 2022 with lease terms of approximately two to five years.

10. DEBT

The Company’s outstanding debt as of September 30, 2021 and December 31, 2020 is as follows (in thousands, except interest rates):

	As of
	September 30, 2021						December 31, 2020
	Amount			Effective Interest Rate			Amount			Effective Interest Rate
Term Loan A Facility	$	91,250			2.02	%	$	95,000			2.03	%
Less: Debt issuance costs		(163	)					(258	)
Net carrying amount of debt	$	91,087					$	94,742

The carrying amount of debt approximates fair value due to its variable interest rates.

Interest expense, associated with the Term Loan A Facility (as defined below), for the three months ended September 30, 2021 and 2020 was $0.5 million and $0.6 million, respectively, and for the nine months ended September 30, 2021 and 2020 was $1.6 million and $2.0 million, respectively.

Senior Secured Term Loan A and Revolving Credit Facilities

On February 19, 2019, the Company entered into a Credit Agreement with Morgan Stanley Senior Funding, Inc. (as amended on May 3, 2019, the “Credit Agreement”), which provides for (i) a four-year revolving credit facility in the aggregate principal amount of up to $100.0 million (the “Revolving Credit Facility”), (ii) a four-year delayed draw term loan A facility in the aggregate principal amount of up to $100.0 million (the “Term Loan A Facility”) and (iii) an uncommitted incremental facility subject to certain conditions. See Note 10 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020 for additional details regarding the Credit Agreement.

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 adjusted one-month LIBOR rate plus an applicable margin of 1.75% based on the Company’s secured leverage ratio.

The Company had outstanding letters of credit against the Revolving Credit Facility of $30.8 million as of September 30, 2021 and December 31, 2020.

As of September 30, 2021, the Company was in compliance with all of the covenants of the Credit Agreement.

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 Company’s Board of Directors at the time of issuance of such shares. As of September 30, 2021 and December 31, 2020, there were no shares of preferred stock issued and outstanding.

Common Stock

The Company has two classes of authorized common stock, Class A common stock and Class B common stock. Holders of Class A common stock are entitled to one vote for each share of Class A common stock held on all matters submitted to a vote of stockholders and holders of Class B common stock are entitled to ten votes for each share of Class B common stock held on all matters submitted to a vote of stockholders. Except with respect to voting, the rights of the holders of Class A and Class B common stock are identical. Shares of Class B common stock are voluntarily convertible into shares of Class A common stock at the option of the holder and are generally automatically converted into shares of the Company's Class A common stock upon sale or transfer. Shares issued in connection with exercises of stock options, vesting of restricted stock units, or shares purchased under the employee stock purchase plan are generally automatically converted into shares of the Company’s Class A common stock.

At-the-Market Offering

On March 2, 2021, the Company entered into an Equity Distribution Agreement with Morgan Stanley & Co. LLC, Citigroup Global Markets Inc. and Evercore Group L.L.C., as its sales agents, pursuant to which the Company could offer and sell from time-to-time shares of its Class A common stock for aggregate gross proceeds of up to $1,000.0 million. In March 2021, the Company sold approximately 2.6 million shares of Class A common stock at an average selling price of $379.26 per share, for aggregate gross proceeds of $1,000.0 million and incurred issuance costs of $10.4 million.

Common Stock Reserved for Future Issuance

As of September 30, 2021, the Company had reserved shares of common stock for issuance as follows (in thousands):

	As of September 30, 2021
Common stock awards granted under equity incentive plans		10,397
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		27,056
Total reserved shares of common stock		42,542

⁽¹⁾ The Company has not issued any common stock pursuant to the 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”). The 2017 Plan became effective 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.

Restricted stock units granted under the 2017 Plan 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 who possess more than 10% of the combined voting power of the Company are subject to certain limitations, and incentive stock options granted to such recipients are at a price per share no less than 110% of the fair market value on the date of grant.

Restricted Stock Units

The following table summarizes the Company’s restricted stock unit activities for the nine months ended September 30, 2021 (in thousands, except per share data):

	Number of Shares			Weighted-Average Grant Date Fair Value per Share
Balance as of December 31, 2020		4,355		$	92.91
Awarded		790			365.21
Released		(1,243	)		78.20
Forfeited		(278	)		120.84
Balance as of September 30, 2021		3,624		$	155.14

As of September 30, 2021, the Company had $476.7 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 2.12 years.

Stock Options

The following table summarizes the Company’s stock option activities for the nine months ended September 30, 2021 (in thousands, except years and per share data):

	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Balance as of December 31, 2020		8,733		$	26.19		5.7
Granted		318			356.94		—
Exercised		(2,272	)		5.91		—
Forfeited and expired		(6	)		16.86		—
Balance as of September 30, 2021		6,773		$	48.54		5.8	$	1,807,297

Options exercisable as of September 30, 2021		4,950		$	12.36		4.9	$	1,490,537

As of September 30, 2021, the Company had $75.9 million of unrecognized stock-based compensation expense related to unvested stock options that is expected to be recognized over a weighted-average period of approximately 2.10 years.

Stock-Based Compensation

The Company measures the cost of employee services received in exchange for an equity award based on the grant date fair value of the award. Generally, stock options granted to employees under the 2008 Plan vest 25% after one year and then 1/48th monthly thereafter and have a term of ten years. Stock options granted to employees under the 2017 Plan generally vest over one to four years and have a term of ten years. Restricted stock units generally vest over 4 years. For the three and nine months ended September 30, 2021 and 2020, the amount of stock-based compensation capitalized as part of internal-use software was not material.

The following table shows the total stock-based compensation expense for the three and nine months ended September 30, 2021 and 2020 (in thousands):

	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Cost of platform revenue	$	199	$	206	$	564	$	649
Cost of player revenue		618		362		1,348		1,010
Research and development		20,893		14,873		56,024		41,476
Sales and marketing		16,591		11,572		44,229		31,244
General and administrative		12,095		7,894		31,314		20,969
Total stock-based compensation	$	50,396	$	34,907	$	133,479	$	95,348

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. In order to manage future demand for its products, the Company enters into agreements with manufacturers and suppliers to procure inventory based upon certain criteria and timing. Some of these commitments are non-cancelable. As of September 30, 2021, the Company had $292.2 million of purchase commitments for inventory.

Licensed Content Commitments

The Company enters into contracts with content publishers to acquire content or to buy ad inventory in the future. As of September 30, 2021, the Company had $233.9 million in commitments with content publishers that are non-cancelable. These commitments include both content that is available for streaming and is recognized as liabilities as well as content that is not yet available for streaming or ad inventories not yet purchased. As of September 30, 2021, of the $233.9 million, $43.9 million was included in Accrued liabilities and $40.5 million was included in Other long-term liabilities in the condensed consolidated balance sheet.

In connection with the acquisition of certain content rights during the quarter ended March 31, 2021, the Company assumed liabilities related to certain costs of the development and use of certain assets that had been incurred but not paid at the time assumed. Escrow arrangements were put in place such that selling shareholders will cover such costs. Accordingly, the Company recognized both an indemnification asset and liability of $81.4 million, respectively, as of March 31, 2021. As of September 30, 2021, $69.5 million of both the indemnification asset and liability were released related to payments made for a portion of the liabilities assumed. The remaining indemnification balance as of September 30, 2021 is $11.9 million, with the indemnification asset recorded as part of Prepaid expenses and other current assets and the indemnification liability recorded as part of Accrued liabilities in the condensed consolidated balance sheet.

Letters of Credit

As of September 30, 2021 and December 31, 2020, the Company had irrevocable letters of credit outstanding in the amount of $30.8 million and $30.9 million, respectively, related to facilities leases. The letters of credit have various expiration dates through 2030.

Contingencies

The Company 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 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, 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, including claims relating to employee relations, business practices and patent infringement. The Company is involved in litigation matters not listed herein. Although the results of these proceedings, claims, and investigations cannot be predicted with certainty, the Company does not believe that the final outcome of any matters that it is currently involved in are reasonably likely to have a material adverse effect on its business, financial condition, or results of operations.

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 and out of intellectual property 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 has not accrued any liabilities related to such obligations in the condensed consolidated financial statements.

13. INCOME TAXES

Income tax benefit was $0.3 million and $4.7 million for the three and nine months ended September 30, 2021, respectively, and was $0.5 million and $0.2 million for the three and nine months ended September 30, 2020, respectively. The income tax benefit for the three and nine months ended September 30, 2021 and 2020, were primarily attributable to non-U.S. tax benefits associated with the Company's non-U.S. operations.

A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized through future operations. As a result of the Company’s analysis of all available objective evidence, both positive and negative, as of September 30, 2021, management believes it is more likely than not that the deferred tax assets will not be fully realizable. Accordingly, the Company has provided a full valuation allowance against its deferred tax assets with the exception of deferred tax assets related to foreign entities.

14. NET INCOME (LOSS) PER SHARE

The Company’s basic net income (loss) per share is calculated by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding for the period. The Company uses the two-class method to calculate net income (loss) per share. Except with respect to certain voting, conversion and transfer rights and as otherwise expressly provided in the Company’s amended and restated certificate of incorporation or required by applicable law, shares of the Company’s Class A common stock and Class B common stock have the same rights and privileges and rank equally, share ratably and are identical in all respects as to all matters. Accordingly, basic and diluted net income (loss) per share are the same for both classes. For purposes of the calculation of diluted net income (loss) per share, options to purchase common stock, restricted stock units and unvested shares of common stock issued upon the early exercise of stock options are considered common stock 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 in the period of net loss, as their effect is antidilutive.

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

	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Numerator:
Net income (loss)	$	68,935	$	12,947	$	218,698	$	(84,813	)
Denominator:
Weighted-average common shares outstanding — basic		133,685		125,687		132,036		122,837
Net income (loss) per share — basic	$	0.52	$	0.10	$	1.66	$	(0.69	)

Weighted-average common shares outstanding — basic		133,685		125,687		132,036		122,837
Common stock equivalents		8,601		10,982		9,557		—
Weighted-average common shares outstanding — diluted		142,286		136,669		141,593		122,837
Net income (loss) per share — diluted	$	0.48	$	0.09	$	1.54	$	(0.69	)

Common stock equivalents excluded from the calculation of diluted net income per share or excluded from the calculation of diluted net loss per share because of their anti-dilutive effect are as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Restricted stock units and stock options		465		688		465		14,229
Unvested shares of common stock issued upon early exercise of stock options		—		—		—		2
Total		465		688		465		14,231

15. SEGMENT INFORMATION

The Company is organized into two reportable segments as follows:

Platform

Consists of revenue generated from sale of digital advertising, content distribution services, subscription and transaction revenue share including Premium Subscriptions, sale of branded buttons on remote controls and licensing arrangements with service operators and TV brands.

Player

Consists of revenue generated from sale of streaming players, audio products and accessories through retailers and distributors, as well as directly to customers through the Company’s website.

Customers accounting for 10% or more of segment revenue are as follows:

	Three Months Ended						Nine Months Ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Platform segment revenue:
Customer H		10	%		16	%		11	%		15	%

Player segment revenue:
Customer A		11	%		11	%		10	%		11	%
Customer B		21	%		16	%		21	%		16	%
Customer C		33	%		39	%		36	%		41	%

Revenue in international markets was less than 10% in each of the periods presented above. Substantially all of the Company’s assets were held in the United States as of September 30, 2021 and December 31, 2020.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of 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 Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, filed on February 26, 2021, with the SEC (the “Annual Report”).

Overview

We operate in two revenue segments: the platform segment and the player segment. Platform revenue is generated from the sale of digital advertising and related services, subscription and transaction revenue shares, Premium Subscriptions, sale of branded channel buttons on remote controls and licensing arrangements with service operators and TV brands.

Player revenue is generated primarily from the sale of streaming players. We expect to continue to manage the average selling prices (“ASP”) of our streaming players to increase our active accounts. As a result, player revenue may not increase as they have historically. We expect that the tradeoff from player gross profit to grow active accounts will result in increased platform monetization and gross profit.

COVID-19 Update

The widespread global impact from the outbreak and spread of the novel strain of coronavirus referred to as COVID-19, which was declared a pandemic by the World Health Organization in March 2020, continued through the third quarter of 2021. Precautionary measures to slow down the spread of the virus that were put in place by governmental authorities have eased in many locations but continue in other geographies. We continue to have the majority of our workforce work from home to protect the health and safety of our employees, and business travel continues to be curtailed. The COVID-19 pandemic, and the resulting precautionary measures, have caused, and are expected to continue to cause, economic uncertainty both in the United States and globally as well as significant volatility in, and disruption to, financial markets and supply chains. Global supply chain disruptions have resulted in shipping delays and component shortages.

The COVID-19 pandemic has accelerated the shift of TV viewing away from traditional TV to streaming TV. During the three months ended September 30, 2021, we continued to see an increase in the number of active accounts, but the growth rate was slower than in the prior year period, primarily due to global supply chain disruptions that caused an increase in TV prices and a decrease in TV sales. Active accounts increased to 56.4 million as of September 30, 2021, growing 23% year-over-year. Streaming hours increased to $18.0 billion, growing 21% year-over-year and 4% sequentially from the second quarter of 2021.

Our platform revenue continued to perform well, increasing to $582.5 million for the three months ended September 30, 2021, reflecting year-over-year growth of 82%. Our Average Revenue per User (“ARPU”) grew to $40.10, up 49% year-over-year. We believe advertising budgets will continue to shift from traditional TV to streaming TV and that we will benefit from this shift due to our advanced advertising capabilities. Major content publishers have continued to reorganize around streaming and as a result, our content distribution business has benefited as our active accounts growth was accompanied by continued consumer demand for ad-supported viewing, and subscription services. While we have experienced an increase in TV streaming during the COVID-19 pandemic and our business generally has benefited, there can be no assurance that these patterns will continue throughout the remainder of 2021 and into 2022. With our exceptional performance during the second half of 2020, some of our year-over-year comparisons in 2021 have been and may continue to be volatile.

We have largely been able to maintain an inventory of our players, audio products and accessories in stock at retailers and online stores throughout the COVID-19 pandemic. Player unit sales were down year-over-year in the third quarter of 2021, due to what we believe was a demand spike in the third quarter of 2020 due to the COVID-19 pandemic. However, like many manufacturers, we have been negatively affected by the constraints in the global supply chain, which have resulted in shortages of certain components as well as shipping constraints. It is difficult to predict the duration and magnitude of these factors on the player segment moving forward.

In 2020, we closely monitored and decreased our operating expenses to mitigate the uncertainties caused by the COVID-19 pandemic. We now are making, and expect to continue to make, sequential increases in operating expenses to support our growth and extend our competitive advantages. This is expected to have an impact on our results of operations.

Key Performance Metrics

The key performance metrics we use to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions are gross profit, active accounts, streaming hours, and ARPU.

Gross Profit

We use gross profit as the primary metric to measure the performance of our business because we have two revenue segments that have different margin profiles, and we aim to maximize our higher margin platform revenue from our active accounts as they stream content on our platform. Substantially all of our gross profit is generated from our platform segment.

Our gross profit was $363.9 million and $1,029.0 million for the three and nine months ended September 30, 2021, respectively, and $214.8 million and $502.8 million for the three and nine months ended September 30, 2020, respectively.

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 within 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. 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 be used on multiple streaming devices.

We had 56.4 million and 46.0 million active accounts as of September 30, 2021 and 2020, respectively.

Hours Streamed

We believe the number of streaming hours on 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. We report streaming hours on a calendar basis.

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, revenue shares from subscriptions and transactional video on-demand. However, our revenue from content publishers is not tied to the hours streamed on their streaming channels, and the number of streaming hours does not correlate to revenue earned from such content publishers or ARPU on a period-by-period basis. Moreover, streaming hours on our platform are measured whenever a Roku player or a Roku TV is streaming content, whether a viewer is actively watching or not. For example, if a Roku player is connected to a TV, and the viewer turns off the TV, steps away or falls asleep and does not stop or pause the player, then the particular streaming channel may 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 devices include a Roku OS feature that is designed to identify when content has been continuously streaming on a channel for an extended period of time without user interaction. This feature, which we refer to as “Are you still watching,” periodically prompts the user to confirm that they are still watching the selected channel and closes the channel if the user does not respond affirmatively. We believe that the implementation of this feature across the Roku platform benefits us, our 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 18.0 billion and 14.8 billion hours during the three months ended September 30, 2021 and 2020, respectively.

Note About Our Streaming Hours Adjustments

To calculate and report our streaming hours, we utilize data from event logs generated by the firmware running on the Roku devices that are recorded in a central database. The event information (play, pause, stop, time counts, etc.) is generated by the firmware running on the Roku streaming devices, and event data is transmitted to our central database at regular intervals when a device is connected to the internet. Pause time is not intended to be included in streaming hours.

During the second quarter of 2020 we discovered that some pause time was inadvertently included in the streaming hours information recorded in our central database. Upon discovering these errors in the log data, we promptly reviewed and analyzed the issue utilizing our firmware, data engineering and core analytics teams. We concluded that certain past Roku OS releases inadvertently caused the logging errors. The error rates varied over time and across different types of devices and firmware versions. As a result, we reported higher streaming hours and streaming hours growth rates for the affected periods than we would have if all pause time had been excluded from streaming hours as we had intended. Neither these logging errors, nor the resulting adjustments that we made to our streaming hours calculations, has had any impact on our financial results, and do not require us to revise any of our previously reported key operating metrics other than streaming hours.

The affected log data was for the periods from February 2016 to August 2020. After adjusting for logging errors, we estimate that our streaming hours were, on average, approximately 0.5% lower than previously reported for the period January 2017 through September 2018, and approximately 5.8% lower for the period October 2018 through March 2020.

By the end of August 2020, we fully deployed a software update that addressed the root cause of the pause time logging errors and prevented them from continuing.

The roll out of the “Are you still watching” feature had no impact on the adjustments we made to our streaming hours calculations. While our revenue from content publishers is not based on the hours streamed on their streaming channels, and the number of streaming hours does not directly correlate to revenue earned from such content publishers or ARPU on a period-by-period basis, we believe 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. After adjusting our streaming hours as discussed above, our estimated year-over-year streaming hour growth rates for fiscal year 2018 versus fiscal year 2017, fiscal year 2019 versus fiscal year 2018 and the first quarter of 2020 versus the first quarter of 2019 were 60.5%, 59.3% and 46.8%, respectively. The estimated year-over-year streaming hour growth rate for the second quarter of 2020 versus the second quarter of 2019 was 65%.

The following table presents the estimated impacts on streaming hours (in billions) for periods from January 1, 2017 through March 31, 2020 and streaming hours growth rates on a year-over-year (“YoY”) basis by quarter for periods from January 1, 2018 through March 31, 2020 and annually for fiscal year 2018 and 2019. Revised streaming hours for 2016 are not estimated and therefore revised 2017 YoY growth rates are not available.




Quarter	Published SHs	Revised SHs	SHs % Delta	Published YoY	Revised YoY
2017 Q1	3.3B	3.2B	-0.5%	63.4%	NA
2017 Q2	3.5B	3.5B	-0.4%	60.0%	NA
2017 Q3	3.8B	3.8B	-0.4%	57.8%	NA
2017 Q4	4.3B	4.3B	-0.2%	55.3%	NA
2018 Q1	5.1B	5.1B	-0.5%	56.0%	56.1%
2018 Q2	5.5B	5.4B	-0.5%	57.2%	57.0%
2018 Q3	6.2B	6.1B	-0.7%	62.7%	62.1%
2018 Q4	7.3B	7.1B	-2.2%	68.6%	65.2%
2019 Q1	8.9B	8.4B	-5.4%	74.1%	65.5%
2019 Q2	9.4B	8.8B	-6.0%	72.1%	62.6%
2019 Q3	10.3B	9.6B	-6.5%	67.6%	57.9%
2019 Q4	11.7B	10.9B	-6.3%	60.2%	53.7%
2020 Q1	13.2B	12.3B	-7.0%	49.3%	46.8%

Year	Published SHs	Revised SHs	SHs % Delta	Published YoY	Revised YoY
2017	14.8B	14.8B	-0.4%	58.8%	NA
2018	24.0B	23.7B	-1.1%	61.7%	60.5%
2019	40.3B	37.8B	-6.1%	67.8%	59.3%

Average Revenue per User

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 for the trailing four quarters divided by the average of the number of active accounts at the end of the current period and the end of the corresponding period in the prior year. ARPU measures the rate at which we are monetizing our active account base and the progress of our platform business.

ARPU was $40.10 as of September 30, 2021 as compared to $27.00 as of September 30, 2020.

Components of Results of Operations

Revenue

Platform Revenue

We generate platform revenue from digital advertising sales and related services, subscription and transaction revenue sharing arrangements with partners, the sale of Premium Subscription services, sales of branded channel buttons on remote controls and licensing arrangements with service operators. Our ad inventory includes The Roku Channel, native display ads on our home screen and screen saver as well as ad inventory we obtain through our content distribution agreements with publishers. To supplement supply, we re-sell video inventory that we purchase from content publishers and, to a lesser extent, directly sell third-party inventory on a revenue share basis. To date, we have generated most of our platform revenue in the United States.

Player Revenue

We generate player revenue primarily 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, including Amazon. We generate most of our player revenue in the United States. In our international markets, we primarily sell our players through wholesale distributors which, in turn, re-sell to retailers. We currently distribute our players in various countries in North America, South America and Europe.

Player revenue also includes the sale of our audio products, including wireless speakers, smart soundbars and wireless subwoofers.

Cost of Revenue

Cost of Platform Revenue

Cost of platform revenue primarily consists of costs associated with acquiring advertising inventory and content acquisition costs, both licensed and produced. Cost of platform revenue also includes other costs such as payment processing fees, allocated expenses associated with the delivery of our services including, salaries, benefits and stock-based compensation for our partner and customer support teams, third-party cloud services and amortization of acquired developed technology.

Cost of Player Revenue

Cost of player revenue is comprised mostly of player manufacturing costs payable to our third-party contract manufacturers and technology licenses or royalty fees. Cost of player revenue also includes inbound and outbound freight, duty and logistics costs, third-party packaging and allocated overhead costs related to facilities and customer support, and salaries, benefits and stock-based compensation for operations personnel.

Operating and Other Expenses

Research and Development

Research and development expenses consist primarily of personnel-related costs, including salaries, benefits and stock-based compensation for our development teams as well as outsourced development fees. In addition, research and development expenses include allocated facilities and overhead costs. We expect research and development expenses to increase in absolute dollars as we continue to invest in the development of our platform, player and TV products, advertising products and other platform 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 and customer 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 player revenue, and expanding our business internationally.

General and Administrative

General and administrative expenses consist primarily of salaries, benefits and stock-based compensation for our executive, finance, legal, information technology, human resources and other administrative personnel. General and administrative expenses also include outside legal, accounting and other professional service fees as well as allocated facility expenses. We expect our general and administrative expenses to increase due to the expansion of our business and related infrastructure.

Other Income (Expense), Net

For the three and nine months ended September 30, 2021 and 2020, other income (expense), net consists of interest income on cash and cash equivalents, income recognized related to noncash consideration associated with the delivery of services as part of a strategic commercial arrangement, interest expense that includes interest on our debt and amortization of deferred debt costs, foreign currency re-measurement and transaction gains and losses.

Income Tax (Benefit) Expense

Our income tax (benefit) expense consists primarily of income taxes in certain foreign jurisdictions where we conduct business and state income taxes in the United States. We have a valuation allowance for U.S. deferred tax assets, including net operating loss carryforwards and tax credits related primarily to research and development. We expect to maintain this valuation allowance for the foreseeable future.

Results of Operations

The following table sets forth our results of operations as a percentage of net revenue.

	Three Months Ended						Nine Months Ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Net Revenue:
Platform		86	%		71	%		83	%		71	%
Player		14	%		29	%		17	%		29	%
Total net revenue		100	%		100	%		100	%		100	%
Cost of Revenue:
Platform		30	%		28	%		29	%		29	%
Player		16	%		24	%		17	%		25	%
Total cost of revenue		46	%		52	%		46	%		55	%
Gross Profit (Loss):
Platform		56	%		43	%		54	%		41	%
Player		(2	)%		5	%		(—	)%		3	%
Total gross profit		54	%		48	%		54	%		45	%
Operating Expenses:
Research and development		18	%		20	%		18	%		23	%
Sales and marketing		16	%		16	%		14	%		18	%
General and administrative		10	%		10	%		10	%		11	%
Total operating expenses		44	%		46	%		42	%		52	%
Income (Loss) from Operations		10	%		2	%		12	%		(7	)%
Other Income (Expense), Net:
Interest expense		—	%		—	%		—	%		(1	)%
Other income (expense), net		—	%		—	%		—	%		—	%
Total other income (expense), net		—	%		—	%		—	%		(1	)%
Income (Loss) Before Income Taxes		10	%		2	%		12	%		(8	)%
Income tax (benefit) expense		—	%		—	%		—	%		—	%
Net Income (Loss)		10	%		2	%		12	%		(8	)%

Comparison of Three and Nine Months Ended September 30, 2021 and September 30, 2020

Net Revenue

	Three Months Ended										Nine Months Ended
	September 30, 2021		September 30, 2020		Change $			Change %			September 30, 2021		September 30, 2020		Change $			Change %
(in thousands, except percentages)
Platform	$	582,514	$	319,231	$	263,283			82	%	$	1,581,343	$	796,565	$	784,778			99	%
Player		97,439		132,432		(34,993	)		(26	)%		317,912		331,937		(14,025	)		(4	)%
Total net revenue	$	679,953	$	451,663	$	228,290			51	%	$	1,899,255	$	1,128,502	$	770,753			68	%

Platform

Platform revenue increased by $263.3 million, or 82%, and $784.8 million, or 99%, during the three and nine months ended September 30, 2021 as compared to the three and nine months ended September 30, 2020, respectively. The increases are primarily attributable to higher advertising revenue and higher content distribution and related transactional revenue, including from Premium Subscriptions.

Player

Player revenue decreased by $35.0 million, or 26%, during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020, primarily due to a decrease in the volume of streaming players sold offset by increased revenue from the sale of audio products and accessories. During the three months ended September 30, 2021, the volume of streaming players sold decreased 26% and the average selling price of players decreased 7% as compared to the three months ended September 30, 2020. The decrease in the volume of players sold is due to the slowdown in growth in the three months ended September 30, 2021 as compared to the three months ended September 30, 2020 when the growth was aided by the COVID-19 pandemic. The decrease in the average selling price is due to higher promotions during the period as compared to three months ended September 30, 2020 where the volume was aided by the COVID-19 pandemic and required fewer promotions.

Player revenue decreased by $14.0 million, or 4%, during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020, primarily due to a decrease in the volume of streaming players sold offset by increased revenue from the sale of audio products and accessories. During the nine months ended September 30, 2021, the volume of streaming players sold decreased 7% and the average selling price of players decreased 4% as compared to the nine months ended September 30, 2020. The decrease in volume as well as average selling price is due to the slowdown in growth in the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020 when the growth was aided by the COVID-19 pandemic.

Cost of Revenue and Gross Profit

	Three Months Ended											Nine Months Ended
	September 30, 2021			September 30, 2020		Change $			Change %			September 30, 2021			September 30, 2020		Change $			Change %
(in thousands, except percentages)
Cost of revenue:
Platform	$	203,989		$	124,568	$	79,421			64	%	$	545,907		$	332,828	$	213,079			64	%
Player		112,045			112,271		(226	)		(0	)%		324,392			292,913		31,479			11	%
Total cost of revenue	$	316,034		$	236,839	$	79,195			33	%	$	870,299		$	625,741	$	244,558			39	%
Gross profit (loss):
Platform	$	378,525		$	194,663	$	183,862			94	%	$	1,035,436		$	463,737	$	571,699			123	%
Player		(14,606	)		20,161		(34,767	)		(172	)%		(6,480	)		39,024		(45,504	)		(117	)%
Total gross profit	$	363,919		$	214,824	$	149,095			69	%	$	1,028,956		$	502,761	$	526,195			105	%

Platform

The cost of platform revenue increased by $79.4 million, or 64%, during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020. This increase is primarily driven by higher advertising inventory costs, higher content acquisition costs, including Premium Subscription costs, and credit card processing fees totaling $74.0 million, and an increase in operational overhead costs of $4.8 million mainly driven by higher cloud services costs for supporting the platform and higher personnel costs.

The cost of platform revenue increased by $213.1 million, or 64%, during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. This increase is primarily driven by higher advertising inventory costs, higher content acquisition costs, including Premium Subscription costs, and credit card processing fees totaling $204.4 million, and an increase in operational overhead costs of $8.4 million mainly driven by higher cloud services costs for supporting the platform and higher personnel costs.

Gross profit for platform revenue increased by $183.9 million, or 94%, and $571.7 million, or 123%, during the three and nine months ended September 30, 2021 as compared to the three and nine months ended September 30, 2020, respectively, primarily driven by the overall growth in our platform revenue.

Player

The cost of player revenue decreased by $0.2 million, or 0.2%, during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020. The decrease is primarily due to lower product costs of $9.8 million due to lower volume of players sold, offset by an increase in inventory reserves of $4.6 million, an increase in freight costs of $3.4 million and an increase in overhead costs like cloud services, outsourced consulting services and personnel costs totaling to $2.7 million.

The cost of player revenue increased by $31.5 million, or 11%, during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. The increase is primarily due to higher product costs of $12.1 million, an increase in inventory reserves of $11.7 million, an increase overhead costs like cloud services, outsourced consulting services and personnel costs totaling to $6.5 million, an increase in freight costs of $3.4 million, and higher royalty expenses of $1.7 million offset by a reduction in other manufacturing related costs of $3.2 million.

Gross profit for player revenue decreased by $34.8 million, or 172%, and $45.5 million, or 117%, during the three and nine months ended September 30, 2021 as compared to the three and nine months ended September 30, 2020, respectively, driven primarily by higher direct manufacturing costs for player products and accessories as a result of disruptions in the global supply chain combined with reduced player revenue in 2021 as compared to 2020.

Operating Expenses

	Three Months Ended									Nine Months Ended
	September 30, 2021		September 30, 2020		Change $		Change %			September 30, 2021		September 30, 2020		Change $		Change %
(in thousands, except percentages)
Research and development	$	120,307	$	88,388	$	31,919		36	%	$	335,164	$	261,053	$	74,111		28	%
Sales and marketing		109,700		70,956		38,744		55	%		292,251		203,368		88,883		44	%
General and administrative		65,066		43,510		21,556		50	%		187,805		123,744		64,061		52	%
Total operating expenses	$	295,073	$	202,854	$	92,219		45	%	$	815,220	$	588,165	$	227,055		39	%

Research and Development

Research and development expenses increased by $31.9 million, or 36%, during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020. The increase is primarily due to increases in personnel-related costs of $26.3 million as a result of increased engineering headcount and related stock-based compensation and higher professional service and consulting fees of $10.8 million offset by lower overhead costs, primarily consisting of cloud services and outsourced services of $6.2 million.

Research and development expenses increased by $74.1 million, or 28%, during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. The increase is primarily due to increases in personnel-related costs of $60.5 million as a result of increased engineering headcount and related stock-based compensation and higher professional service and consulting fees of $25.3 million offset by lower overhead costs, primarily consisting of cloud services and outsourced services costs of $11.6 million.

Sales and Marketing

Sales and marketing expenses increased by $38.7 million, or 55%, during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020. The increase is primarily due to increases in personnel-related costs of $23.8 million related to increased headcount and related stock-based compensation in sales and sales support, product management, marketing and business analytics to support efforts to grow our business. Sales and marketing expenses also include an increase of $8.7 million mainly due to increases in marketing, retail and merchandising costs, an increase in facilities costs of $2.5 million due to expansion of office spaces and an increase of $2.5 million in professional service and consulting fees.

Sales and marketing expenses increased by $88.9 million, or 44%, during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. The increase is primarily due to increases in personnel-related costs of $56.9 million related to increased headcount and related stock-based compensation in sales and sales support, product management, marketing and business analytics to support efforts to grow our business. Sales and marketing expenses also include an increase of $23.2 million mainly due to increases in marketing, retail and merchandising costs, an increase in facilities costs of $4.6 million due to expansion of office spaces and an increase of $4.2 million in professional service and consulting fees.

General and Administrative

General and administrative expenses increased by $21.6 million, or 50%, during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020. The increase is primarily due to increases in personnel-related costs of $12.8 million related to increased headcount and related stock-based compensation and an increase of $6.8 million related to higher legal, consulting and professional service fees.

General and administrative expenses increased by $64.1 million, or 52%, during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. The increase is primarily due to increases in personnel-related costs of $37.0 million related to increased headcount and related stock-based compensation and an increase of $25.6 million related to higher legal, consulting and professional service fees.

Other Income (Expense), Net

	Three Months Ended												Nine Months Ended
	September 30, 2021			September 30, 2020			Change $			Change %			September 30, 2021			September 30, 2020			Change $			Change %
(in thousands, except percentages)
Interest expense	$	(743	)	$	(773	)	$	30			(4	)%	$	(2,231	)	$	(2,670	)	$	439			(16	)%
Other income (expense), net		500			1,202			(702	)		(58	)%		2,461			3,020			(559	)		(19	)%
Total other income (expense), net	$	(243	)	$	429		$	(672	)		(157	)%	$	230		$	350		$	(120	)		(34	)%

Total other income (expense), net, decreased by $0.7 million during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020. The decrease was primarily driven by foreign exchange losses of $1.4 million offset by an increase in other income recognized related to noncash consideration associated with the delivery of services for a strategic commercial arrangement of $0.4 million and an increase in interest income of $0.3 million.

Total other income (expense), net, decreased by $0.1 million during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. The decrease was primarily driven by lower interest income of $1.7 million from a significant drop in interest rates, which impacted our investment yields. This was offset by $0.7 million of other income recognized related to noncash consideration associated with the delivery of services for a strategic commercial arrangement, and decreased interest expense of $0.4 million.

Income Tax (Benefit) Expense

	Three Months Ended											Nine Months Ended
	September 30, 2021			September 30, 2020			Change $		Change %			September 30, 2021			September 30, 2020			Change $			Change %
(in thousands, except percentages)
Income tax benefit	$	(332	)	$	(548	)	$	216		(39	)%	$	(4,732	)	$	(241	)	$	(4,491	)		1863	%

Income tax benefit decreased by $0.2 million and increased by $4.5 million during the three and nine months ended September 30, 2021 as compared to the three and nine months ended September 30, 2020, respectively, and was driven primarily by stock-based compensation excess tax benefits, increased losses in a foreign jurisdiction with no valuation allowance, and a tax rate change in a foreign jurisdiction.

Liquidity and Capital Resources

As of September 30, 2021, we had cash and cash equivalents of $2,179.7 million. Approximately 1% of our cash was held outside the United States in accounts held by our foreign subsidiaries which are used to fund foreign operations.

Our primary sources of cash are receipts from platform and player revenue and proceeds from equity sales including equity issued pursuant to our employee stock option plans. The primary uses of cash are costs of revenue including third party manufacturing costs, costs to acquire advertising inventory, and costs to license and produce content as well as operating expenses including payroll-related expenses, consulting and professional service fees, and facility and marketing expenses. Other uses of cash include purchases of property and equipment and mergers and acquisitions.

We have multi-year lease agreements for office space and have incurred material facility and building expenses. We expect to continue to incur expenses for facility and building related costs at our office locations in the United States and internationally. As our business and workforce continue to expand, we expect additional ongoing purchases of computer systems and other investments in property and equipment. In addition, we have pursued merger and acquisition activities, such as the acquisition of the Nielsen AVA business, the This Old House business and content rights from Quibi, and we may pursue additional merger and acquisition activities in the future, including the acquisition of rights to programming and content assets, that could materially impact our liquidity and capital resources.

We believe our existing cash and cash equivalents, cash flow from operations, and our undrawn available balance under our Credit Agreement will be sufficient to meet our working capital requirements for at least the next twelve months. 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 and the effects of the COVID-19 pandemic. While the pandemic has not severely impacted our liquidity and capital resources to date, it has contributed to disruption and volatility in local economies and in capital and credit markets which could adversely affect our liquidity and capital resources in the future.

We may attempt to raise additional capital through the sale of equity securities or other financing arrangements. If we raise additional funds by issuing equity, the ownership of our existing stockholders will be diluted. Our Credit Agreement expires in February 2023. If we raise additional financing by the incurrence of additional indebtedness, we may be subject to fixed payment obligations and also to restrictive covenants.

At-the-Market Offering

On March 2, 2021, we entered into an Equity Distribution Agreement with Morgan Stanley & Co. LLC, Citigroup Global Markets Inc. and Evercore Group L.L.C., as our sales agents, pursuant to which we could offer and sell from time-to-time shares of our Class A common stock for aggregate gross proceeds of up to $1,000.0 million. In March 2021, we sold approximately 2.6 million shares of Class A common stock at an average selling price of $379.26 per share, for aggregate gross proceeds of $1,000.0 million and incurred issuance costs of $10.4 million.

Senior Secured Term Loan A and Revolving Credit Facilities

On February 19, 2019, we entered into a Credit Agreement with Morgan Stanley Senior Funding, Inc. (as amended on May 3, 2019, the “Credit Agreement”), which provides for (i) a four-year revolving credit facility in the aggregate principal amount of up to $100.0 million (the “Revolving Credit Facility”), (ii) a four-year delayed draw term loan A facility in the aggregate principal amount of up to $100.0 million (the “Term Loan A Facility”) and (iii) an uncommitted incremental facility subject to certain conditions.

For our current borrowings, we have elected a Eurodollar borrowing with interest at a rate equal to the adjusted one-month LIBOR rate plus an applicable margin of 1.75% based on our secured leverage ratio. The borrowings under the facility mature or have to repaid in full by February 2023. Our obligations under the Credit Agreement are secured by substantially all of our assets. The Credit Agreement contains customary representations and warranties, customary affirmative and negative covenants, a financial covenant that is tested quarterly and requires us to maintain a certain adjusted quick ratio of at least 1.00 to 1.00, and customary events of default. As of September 30, 2021, we were in compliance with all of the covenants of the Credit Agreement. See Note 10 to the condensed consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q and Note 10 to the consolidated financial statements in our Annual Report for additional details regarding the Credit Agreement.

We had outstanding letters of credit of $30.8 million as of September 30, 2021 and December 31, 2020 against the Revolving Credit Facility.

Cash Flows

The following table summarizes our cash flows for the periods presented (in thousands):

	Nine Months Ended
	September 30, 2021			September 30, 2020
Consolidated Statements of Cash Flows Data:
Cash flows provided by operating activities	$	253,508		$	101,147
Cash flows used in investing activities		(164,798	)		(74,954	)
Cash flows provided by financing activities		999,298			504,698

Operating Activities

Our operating activities provided cash of $253.5 million for the nine months ended September 30, 2021. Our net income of $218.7 million for the nine months ended September 30, 2021 was adjusted by noncash charges of $241.2 million comprised mainly of stock-based compensation, amortization of content assets, depreciation and amortization on property and equipment and intangible assets, and amortization of right-of-use assets. The changes in our operating assets and liabilities used cash of $206.4 million mainly from an increase in content assets, an increase in contract assets from revenue recognized from customers, an increase in inventory balances, a decrease in operating lease liabilities, and a decrease in deferred revenue offset by inflows from an increase in accounts payable and accrued liabilities. These changes are mainly due to an overall growth in the business combined with the timing of receipts from customers and payments to vendors.

Investing Activities

Our investing activities for the nine months ended September 30, 2021 included cash outflows of $164.8 million comprised of $136.8 million for the acquisition of businesses, mainly the Nielsen AVA business and This Old House, and $28.0 million for purchases of property and equipment and expenditures on leasehold improvements.

Financing Activities

Our financing activities provided cash of $999.3 million for the nine months ended September 30, 2021. The cash was received mainly from proceeds from an at-the-market offering of $989.6 million, net of issuance costs and proceeds from the exercise of employee stock options of $13.4 million. These inflows were offset by $3.8 million of repayments made on borrowings.

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.

Contractual Obligations

Our future minimum payments under our noncancelable contractual obligations are as follows as of September 30, 2021 (in thousands):

	Payments Due by Period
	Total		Less Than 1 Year		1 – 3 Years		3 – 5 Years		More Than 5 Years
Term Loan A Facility⁽¹⁾	$	91,250	$	8,750	$	82,500	$	—	$	—
Purchase commitments⁽²⁾		292,181		292,181		—		—		—
Operating lease obligations⁽³⁾		521,949		49,543		119,594		119,393		233,419
Other obligations⁽⁴⁾		233,944		131,515		70,282		26,481		5,666
Total	$	1,139,324	$	481,989	$	272,376	$	145,874	$	239,085

⁽¹⁾	Represents the principal amount of the Term Loan A Facility. For additional information regarding the terms of the debt and interest payable, see Note 10 to the condensed consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q.

⁽²⁾	Represents commitments to purchase finished goods from our contract manufacturers and other inventory-related items.

⁽³⁾	Represents future minimum lease payments under operating leases.

⁽⁴⁾	Represents contractual commitments with content publishers to acquire content or buy ad inventory.

We rely on outsourced suppliers to manufacture, assemble and test our players and audio devices. Consistent with industry practices, we enter into firm, noncancelable, and unconditional purchase commitments to acquire products through a combination of purchase orders, supplier contracts, and open orders based on projected demand information. Our contract manufacturers source components and build our products based on these demand forecasts. Changes to projected demand or in the subsequent sales mix of our products, may result in us being committed to purchase excess inventory to satisfy these commitments.

The contractual commitment amounts in the table 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.

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 affected by management’s application of accounting policies, as well as uncertainty in the current economic environment due to the continuing COVID-19 pandemic. We evaluate our estimates and assumptions on an ongoing basis. There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our Annual Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Fluctuation Risk

Our exposure to interest rate risk relates to the interest income generated by cash and cash equivalents, and interest expense on the Credit Agreement. The primary objective of our investment policy 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. As of September 30, 2021, borrowings under the Term Loan A Facility totaled $91.3 million with an effective interest rate of 2.02%. If the amount outstanding under our Term Loan A Facility remains at this level for an entire year and interest rates increased or decreased by 100 basis points, our annual interest expense would increase or decrease, respectively, by an additional $0.9 million.

Foreign Currency Exchange Rate Risk

During the nine months ended September 30, 2021 there were no material changes to our foreign currency exchange rate risk disclosures as set forth under the heading “Item 7A – Quantitative and Qualitative Disclosures About Market Risk,” in Part II of our Annual Report.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. 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 disclosure controls and procedures were, in design and operation, effective at a reasonable assurance level.

Our management, including our Chief Executive Officer 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.

Changes in Internal Control Over Financial Reporting

There was no 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 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

We are currently involved in, 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 platform 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 expensive attorney fees or unfavorable preliminary and interim rulings.

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 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 on Form 10-K, filed with the SEC on February 26, 2021, 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

•

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

•

our ability to monetize our streaming platform;

•

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

•

our ability to develop relationships with TV brands 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;

•

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, marketing campaigns or other promotional advertising on our platform;

•

our ability to attract users to and generate revenue from 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;

•

changes in consumer viewing habits;

•

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

•

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

•

advertiser and/or advertising agency delayed payment or failure to pay;

•

maintaining adequate customer support levels;

•

our ability to manage streaming device and other product introductions and transitions;

•

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

•

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

•

decreased availability or increased costs for materials and components used in the manufacturing of our players and Roku TV models;

•

our ability to obtain key components from sole source suppliers;

•

interoperability of our streaming devices with content publishers’ offerings, technologies and systems;

•

detecting hardware errors or software bugs in our products before they are released to users;

•

component manufacturing, design or other defects that render our devices permanently inoperable;

•

our ability to obtain necessary or desirable third-party technology licenses;

Risks Related to Operating and Growing Our Business

•

our history of operating losses;

•

volatility of our quarterly operating results that could cause our stock price to decline;

•

our ability to manage our growth;

•

our ability to successfully expand our international operations;

•

seasonality of our business and its impact on our revenue and gross profit;

•

attracting and retaining key personnel and managing succession;

•

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

•

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

•

our ability to comply with the terms of our outstanding credit facility;

•

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

Risks Related to Cybersecurity, Reliability and Data Privacy

•

significant disruptions of information technology systems or data security breaches;

•

legal obligations and potential liability related to our users’ personal information;

•

our actual or perceived failure to adequately protect personal and confidential information;

•

disruptions in computer systems or other services that result in a degradation of our platform;

•

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

Risks Related to Intellectual Property

•

litigation resulting in 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 current and future impact of the COVID-19 pandemic and supply chain distributions on our business;

•

natural disasters or other catastrophic events;

Legal and Regulatory Risks

•

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

•

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

•

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

•

changes to current or future laws, regulations or government actions that impact our partners;

•

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

•

our ability to maintain effective internal controls over financial reporting;

•

the impact of changes in accounting principles;

•

compliance with laws and regulations related to the collection of indirect taxes and payment of income tax;

•

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 Class A common stock;

•

the volatility in the trading price of our Class A common stock;

•

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

•

a decline in our stock prices caused by future sales by existing stockholders;

•

dependency on favorable securities and industry analyst reports;

•

the significant legal, accounting and other expenses associated with being a publicly-traded company;

•

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

•

anti-takeover provisions in our charter; and

•

the limitations resulting from our selection of the Delaware Court of Chancery and the federal district courts of the United States as the exclusive forums for substantially all disputes between us and our stockholders.

Risks Related to Our Business and Industry

TV streaming 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.*

TV streaming is highly competitive and global. Our success depends in part on attracting users to and retaining users on, and the effective monetization of, our streaming platform. To attract and retain users, we need to be able to respond efficiently to changes in consumer tastes and preferences and to offer our users access to the content 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 effectively support popular sources of streaming content that are available on our platform, such as Amazon Prime Video, Disney+, Discovery+, HBO Max, Hulu, Paramount+, Peacock, Netflix and YouTube. And we must respond rapidly to actual and anticipated market trends in the TV streaming industry.

Companies such as Amazon, Apple and Google offer TV streaming devices that compete with our streaming players. 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 sells Amazon-branded smart TVs. These companies have greater financial resources than we do and can subsidize the cost of their streaming devices in order to promote their other products and services, which could make it harder for us to acquire new users, retain existing users and increase streaming hours. These companies could also implement standards or technology that are not compatible with our products or that provide a better streaming experience. These companies also promote their brands through traditional forms of advertising, such as TV commercials, as well as digital advertising or website product placement, and have greater resources to devote to such efforts than we do.

In addition, many TV brands offer their own TV streaming solutions within their TVs. Other devices, such as game consoles, also incorporate TV streaming functionality.

Similarly, some service operators, such as Comcast, offer TV streaming applications and devices as part of their cable service plans and can leverage their existing consumer bases, installation networks, broadband delivery networks and name recognition to gain traction in the TV streaming market. If consumers of TV streaming content prefer alternative products to our streaming players and our partners' Roku TV models, we may not be able to achieve our expected growth in active accounts, streaming hours, revenue, gross profit or ARPU.

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 models or our platform to gain or maintain broad market acceptance. To remain competitive and maintain our position as a leading TV streaming platform, we need to continuously invest in our platform, product development, marketing, service and support and device distribution infrastructure. In addition, evolving TV standards such as 8K, HDR and unknown future developments may require further investments in the development of our players, Roku TV models, and our platform. We may not have sufficient resources to continue to make the investments needed to maintain our competitive position. In addition, most of our competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical, sales, marketing and other resources than us, which provide them with advantages in developing, marketing or servicing new products and offerings. As a result, they may be able to respond more quickly to market demand, devote greater resources to the development, promotion, sales and distribution of their products or 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 sales volume, revenue and operating margins, increase our operating costs, harm our competitive position and otherwise harm our business.

In July 2018, we introduced our Roku TV Wireless Speakers, designed specifically for use with Roku TV models, in September 2019, we launched our Roku Smart Soundbar and Roku Wireless Subwoofer and in September 2020, we launched our Roku Streambar. As a result of these developments, we may face additional competition from makers of TV audio

speakers and soundbars, as well as makers of other TV peripheral devices. While our audio products have not generated material amounts of revenue, if these products do not operate as designed or do not enhance the Roku TV or other viewing experience as we intend, our users’ overall viewing experience may be diminished, and this may impact the overall demand for Roku TV models or our other products.

We also compete for video viewing hours with mobile platforms (phones and tablets), and users may prefer to view streaming content on such devices. 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.

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 digital and social media platforms, as well as traditional media, such as radio, broadcast, cable and satellite TV, and satellite and internet radio. These competitors offer content and other advertising mediums that may be more attractive to advertisers than our streaming platform. These competitors are often very large and have more advertising experience and financial resources than we do, which may adversely affect our ability to compete for advertisers and may result in lower revenue and gross profit from advertising. If we are unable to increase our revenue from advertising by, among other things, continuing to improve our platform’s capabilities to further optimize and measure advertisers’ campaigns, increasing our advertising inventory and expanding our advertising sales team and programmatic capabilities, our business and our growth prospects may be harmed. We may not be able to compete effectively or adapt to any such changes or trends, which would harm our ability to grow our advertising revenue and would harm our business.

Many advertisers continue to devote a substantial portion of their advertising budgets to traditional advertising, such as linear TV, radio and print, and to advertising through digital and social media platforms. The future growth of our business depends on the growth of OTT advertising and on advertisers increasing their spend 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, especially if our users no longer stream TV or significantly reduce the amount of TV they stream either as a result of the COVID-19 pandemic coming to an end or for other reasons. In addition, if we are unable to compete with digital and social media platforms to win business from advertisers and agencies who have traditionally advertised on these platforms, such as direct-to-consumer and small or medium-sized businesses, our ability to grow our business may 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 or impose local content requirements on OTT services. This pressure has been driven by owners of traditional broadcast television services and 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.*

Our business model depends on our ability to generate platform revenue from advertisers and content publishers. We generate platform revenue primarily from advertising and media and entertainment promotional spending campaigns that run across our streaming platform and from content distribution services. As such, we are seeking to expand 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. 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 on our platform. Moreover, streaming hours on our platform are measured whenever a player or a Roku TV 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, which we refer to as “Are you still watching,” periodically prompts the user to confirm that they are still watching the selected channel and closes the channel if the user does not respond affirmatively. We believe that the implementation of this feature across the Roku platform benefits us, our customers, channel partners and advertisers. Some of our leading channel partners, including Netflix, also have similar features within

their channels. This Roku OS feature supplements these channel features. This feature has not had and is not expected to have a material impact on our financial performance.

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 by allowing users to purchase additional content and streaming services within their channels. In addition, we do not currently monetize content provided on non-certified channels, which are not displayed in our channel store and must be added manually by the user, on our streaming platform. If our users spend most of their time within particular channels where we have limited or no ability to place advertisements or leverage user information, or our users opt out from our ability to collect data for use in providing more relevant advertisements, we may not be able to achieve our expected growth in platform revenue or gross profit. If we are unable to further monetize our streaming platform, our business may be harmed.

In order to materially increase the monetization of our streaming platform through the sale of video advertising, we will need our users to stream significantly more ad-supported content. Our efforts to monetize our streaming platform through ad-supported content (including through advertising-supported video on demand (“AVOD”)) are still developing and may not continue to grow as we expect. This means of monetization will require us to continue to attract advertising dollars to our streaming platform as well as deliver AVOD content that appeals to users. Accordingly, there can be no assurance that we will be successful in monetizing our streaming platform through the distribution of ad-supported content.

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.

In 2020, we announced the rebranding of the OneView Ad Platform, a demand-side platform through which advertisers and advertising agencies can programmatically purchase and manage their OTT, desktop and mobile advertising campaigns. OneView leverages the demand-side platform (“DSP”) 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, we have limited experience running a DSP, and 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. 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 DSPs 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 will depend in part on our ability to develop and expand our relationships with TV brand 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 partners and, to a lesser extent, service operators in both the United States and international markets. Our licensing arrangements are complex and time-consuming to negotiate and complete. Our current and potential partners include TV brands, cable and satellite companies and telecommunication providers. We continue to invest in the growth and expansion of our Roku TV program both in the United States and international markets. Our licensing program for service operators has historically been primarily focused on international markets and has been decreasing in scale in recent years, as we have shifted the focus of our international growth to the sale of Roku streaming players and Roku TV models.

In the past few years, the sale of Roku TV models by our TV brand partners has materially contributed to our active account growth, to our streaming hours, and to our platform monetization efforts. This growth has primarily been in the United States; however, our Roku TV licensing program has been expanded to certain international markets. We license the Roku OS and our smart TV reference designs to certain TV brand partners to manufacture co-branded smart TVs. We have not received, nor do we expect to receive, license revenue from these arrangements, but we expect to incur expenses in

connection with these commercial agreements. 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 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.

The loss of a relationship with a TV brand or service operator could harm our results of operations, damage our reputation, increase pricing and promotional pressures from other partners and distribution channels, or increase our marketing costs. If we are not successful in maintaining existing and creating new relationships with any of these third parties, or if we encounter technological, content licensing or other impediments to our development of these relationships, our ability to grow our business could be adversely impacted.

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 streaming devices or chose 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 maintain these relationships, our business could be harmed.*

Historically, a small number of content publishers have accounted for a significant portion of the hours streamed on our platform. In the quarter ended September 30, 2021, the top three streaming services represented over 50% of all hours streamed in the period. If, for any reason, we cease distributing channels that have historically streamed a large percentage of the aggregate streaming hours on our platform, our streaming hours, active accounts, or streaming device sales may be adversely affected, and our business may be harmed.

If popular or new content publishers do not publish content on our platform, we may fail to retain existing users and attract new users.

We must continuously maintain existing relationships and identify and establish new relationships with content publishers to provide popular streaming channels and popular content. In order to remain competitive, we must consistently meet user demand for popular streaming channels and content, particularly as we launch new players, introduce new Roku TV models, or enter new markets, including international markets. If we are not successful in helping our content publishers launch and maintain streaming channels that attract and retain a significant number of users on our 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:

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effectively promote and market new and existing streaming channels;

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minimize launch delays of new and updated streaming channels; and

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minimize streaming platform downtime and other technical difficulties.

In addition, if service operators, including pay 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 audiences on the Roku platform or their channels are not available on our platform, our business may be harmed.

Most of our agreements with content publishers are not long term and can be terminated by the content publishers under certain circumstances. Any disruption in the renewal of such agreements may result in the removal of certain channels 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. Our agreements with content publishers generally have terms of one to three years and can be terminated before the end of the term by the content publisher under certain circumstances, such as if we materially breach the agreement, become insolvent, enter bankruptcy, commit fraud or fail to adhere to the content publishers’ security or other platform certification requirements. Upon expiration of these agreements, we are required to re-negotiate and renew them in order to continue providing content from these content publishers on our streaming platform. We have in the past been unable, and in the future may not be able, to reach a satisfactory agreement with certain content publishers before our existing agreements have expired. If we are unable to renew such agreements on a timely basis on mutually agreeable terms, we may be required to temporarily or permanently remove certain channels from our streaming platform.

The loss of such channels 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 serves as a valuable source of video ad inventory for us to sell, 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 do not have access to all 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. 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 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 or our integrated advertising framework or have imposed limits on our data gathering for usage within their channels. In addition, our streaming platform utilizes our proprietary Brightscript scripting language in order to allow our content publishers to develop and create channels on our streaming platform. If we introduce new features or utilize a new scripting language in the future, such a change may not comply with our content publishers' certification requirements. In addition, our content publishers may find other languages, such as HTML5, more attractive to develop for and shift their resources to developing their channels on other platforms. If content publishers do not find our 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.

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

We have made, and are continuing to make, investments to enable advertisers and content publishers to deliver relevant advertising and media and entertainment promotional spending campaigns and other promotional advertising to our users. Existing and prospective advertisers and content publishers may not be successful in serving ads and media and entertainment promotional spending campaigns and sponsoring other promotional advertising 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 and other promotional advertising on our streaming platform are not relevant or are overly intrusive and impede the use of our platform, our users may stop using our platform, which will harm our business.

The Roku Channel may not continue to attract a large number of users and/or generate significant revenue from advertising, and our users may not purchase Premium Subscriptions.*

We operate The Roku Channel, which offers both ad-supported free access for users to a collection of films, television series and other content, as well as Premium Subscriptions, which allow our users to pay for ad-free content from various content publishers, all on one streaming channel. 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, in the first quarter of 2021, we acquired content rights, including rights to certain projects in development, from the mobile-first video distribution service known as Quibi, and announced that The Roku Channel would become the home of such content. In addition, we acquired the entities comprising the “This Old House” business, which

own and produce the “This Old House” and “Ask This Old House” TV programs and operate related business lines, to further the growth strategy and ad-supported content offerings in The Roku Channel.

If our users do not continue to stream the free, 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, including for example the content that we acquired through the Quibi and This Old House transactions described above, is ultimately not appealing to our users and advertisers, usage of The Roku Channel may decline, and our business may be harmed.

In addition, following the Quibi and This Old House transactions and the launch of our advertising brand studio, we are producing content for distribution on The Roku Channel and other 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. 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 advertising to be cost effective for us to operate, regardless of our ability to sell Premium Subscriptions. In addition, we distribute The Roku Channel on platforms other than our own streaming platform, and there can be no assurance that we will be successful in attracting a large number of users and/or generating significant revenue from advertising 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 be harmed.

We earn revenue by acquiring subscribers for certain of 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 revenue we earn from these transactions is generally not equivalent to the revenue we earn from activations on or through our platform that we receive full attribution credit for. Furthermore, for Premium Subscriptions, we only earn revenue for subscription video on demand (“SVOD”) channels, including subscriptions to these services through The Roku Channel. Accordingly, if users activate subscriptions for SVOD channels, including channels available as Premium Subscriptions, other than on 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, which makes it difficult to evaluate our business and prospects.

TV streaming is a rapidly evolving industry, making our business and prospects difficult to evaluate. The growth and profitability of this industry and the level of demand and market acceptance for our products and streaming platform are subject to a high degree of uncertainty. We believe that the continued growth of streaming as an entertainment alternative will depend on the availability and growth of cost-effective broadband internet access (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, as well as the quality and breadth of content that is delivered across streaming platforms. Accordingly, the future evolution of TV streaming as an industry, which is likely to impact our success, is dependent on many of the factors that are outside of our control.

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 content 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 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.

We and our Roku TV brand partners depend on our retail sales channels to effectively market and sell our players and Roku TV models, and if we or our partners fail to maintain and expand effective retail sales channels, we could experience lower player or Roku TV model sales.*

To continue to increase our active accounts, we must maintain and expand our retail sales channels. The majority of our players and our TV brand partners' Roku TV models are sold through traditional brick and mortar retailers, such as Best Buy, Target and Walmart, including their online sales platforms, and online retailers such as Amazon. To a lesser extent, we sell players directly through our website and internationally through distributors. For the three and nine months ended September 30, 2021, Amazon, Best Buy and Walmart in total accounted for 65% and 67%, respectively, of our player segment revenue. These three retailers collectively accounted for 69% and 72% of our player revenue for the years ended December 31, 2020 and 2019, respectively. These retailers and our international distributors also sell products offered by our competitors. We have no minimum purchase commitments or long-term contracts with any of these retailers or distributors. If one or several retailers or distributors were to discontinue selling our players or our TV brand partners' Roku TV models, choose not to prominently display those devices in their stores or on their websites, or close or severely limit access to their brick and mortar locations due to COVID-19 restrictions or other concerns, the volume of our streaming devices sold could decrease, which would harm our business. If any of our existing TV brands choose to work exclusively with, or divert a significant portion of their business with us to other operating system developers, this may impact our ability to license the Roku OS and our smart TV reference design to TV brands and our ability to continue to grow active accounts. 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, such as Amazon or Google, possesses greater bargaining power with retailers. In addition, one of our online retailers, Amazon, sells its own competitive streaming devices and smart TVs, is able to market and promote these products more prominently on its website, and could refuse to offer or promote our devices on its website. Any reduction in our ability to place and promote our devices, or increased competition for available shelf or website placement, could require us to increase our marketing expenditures to maintain our product visibility or result in reduced visibility for our products, which may harm our business. In particular, the availability of product placement during peak retail periods, such as the holiday season, is critical to our revenue growth, and if we are unable to effectively sell our devices during these periods, our business would be harmed.

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 and comprehensive endeavor and can be positively and negatively impacted by any number of factors. Certain factors, such as the quality or pricing of our players or our customer service, are within our control. Other factors, such as the quality and reliability of Roku TV models and the quality of the content that our content publishers provide, may be out of our control, yet users may nonetheless attribute those factors to us. Our competitors may be able to achieve and maintain brand awareness and market share more quickly and effectively than we can. Many of our competitors are larger companies and may have greater resources to devote to the promotion of their brands through traditional advertising, digital advertising or website product 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.

Our streaming platform allows our users to choose from thousands of channels, representing a variety of content from a wide range of content publishers. Our users can choose and control which channels they download and watch, and they can use certain settings to prevent channels from being downloaded to our 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 the content included on certain channels that we distribute have resulted in, and could in the future result in, negative publicity, cause harm to our reputation and brand, or subject us to claims and may harm our business.

We 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, the terms of our agreements or our billings for purchases made by them through our streaming platform or through our DSP. If we are unable to collect or make adjustments to bills, we could incur 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 to our users and licensees, and if we fail to provide adequate levels of customer support, we could lose users and licensees, which would harm our business.

Our users and licensees depend on our customer support organization to resolve any issues relating to our 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 to assist our users, and if that support organization does not succeed in helping them quickly resolve issues or provide effective ongoing support, it could adversely affect our ability to sell our devices to users and harm our reputation with potential new users and our licensees.

We must successfully manage streaming device and other product introductions and transitions to remain competitive.

We must continually develop new and improved streaming devices and other products that meet changing consumer demands. Moreover, the introduction of a new streaming device or other product is a complex task, involving significant expenditures in research and development, promotion and sales channel development. For example, in 2018, we introduced our Roku TV Wireless Speakers, designed specifically for use with Roku TV models; in 2019, we introduced our Roku Smart Soundbar and Roku Wireless Subwoofer; and in 2020, we launched our Roku Streambar. Whether users will broadly adopt new streaming devices or other products is not certain. Our future success will depend on our ability to develop new and competitively priced streaming devices and other products and add new desirable content and features to our streaming platform. Moreover, we must introduce new streaming devices and other products in a timely and cost-effective manner, and we must secure production orders for those products from our contract manufacturers. The development of new streaming devices and other products is a highly complex process, and while our research and development efforts are aimed at solving increasingly complex problems, we do not expect that all of our projects will be successful. The successful development and introduction of new streaming devices and products depends on a number of factors, including:

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the accuracy of our forecasts for market requirements beyond near-term visibility;

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our ability to anticipate and react to new technologies and evolving consumer trends;

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our development, licensing or acquisition of new technologies;

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our timely completion of new designs and development;

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

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the availability of materials and key components used in manufacturing;

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

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

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

We do not have 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 soundbars, wireless subwoofers and our wireless speakers. Our contract manufacturers are vulnerable to:

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capacity constraints;

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reduced component availability;

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production, supply chain, or shipping disruptions or delays, including from strikes, mechanical issues, quality control issues, natural disasters, and public health crises, such as the ongoing COVID-19 pandemic; and

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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 streaming devices or other products. For example, during the three months ended September 30, 2021, global supply chain disruptions led to increased component costs and shipping costs for our products, which negatively affected our player gross margin.

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

Our contracts with our contract manufacturers generally do not obligate them to supply our players or other products in any specific quantity or at any specific price. In the event our contract manufacturers are unable to fulfill our production requirements in a timely manner, their costs increase because of U.S. or international tariffs, sanctions, export or import restrictions, or they 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, 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 players or other 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 player gross margin. In addition, our contract manufacturers’ facilities are located in Southeast Asia, the People’s Republic of China and Brazil and may be subject to political, economic, labor, trade, public health, social and legal uncertainties that may harm or disrupt our relationships with these parties or their ability to perform. We believe that the international location of these facilities increases supply risk, including the risk of supply interruptions, tariffs, and trade restrictions on exports or imports. Furthermore, any manufacturing issues affecting the quality of our products, including players and audio products, could harm our business.

If our contract manufacturers fail for any reason to continue manufacturing our players or other products in required volumes and at high quality levels, or at all, we would have to identify, select and qualify acceptable alternative contract manufacturers. Alternative contract manufacturers may not be available to us when needed, or at all, or may not be in a position to satisfy our production requirements at commercially reasonable prices, to our quality and performance standards, or at all. Any significant interruption in manufacturing at a contract manufacturer could require us to reduce our supply of players or other products to our retailers and distributors, which in turn would reduce our revenue, active account growth or streaming hour growth.

Certain Roku TV brands do not have manufacturing capabilities and primarily depend upon contract manufacturers, and the supply of Roku TV models to the market could be disrupted if they encounter problems with their contract manufacturers or suppliers.*

Certain Roku TV brands do not have internal manufacturing capabilities and primarily rely upon contract manufacturers to build the Roku TV models that they sell to retailers. Their contract manufacturers may be vulnerable to capacity constraints and reduced component availability; increases in U.S. tariffs on imports of Roku TV models; future possible changes in U.S. regulations on exports of U.S. technologies; U.S. restrictions on dealings with certain countries,

parties, regions, or imported inputs; foreign tariffs on U.S. parts or components for Roku TV models that are assembled outside of the United States; and supply chain disruptions and shipping delays. Their control over delivery schedules, manufacturing yields and costs, particularly when components are in short supply, may be limited. Delays, component shortages, and other manufacturing and supply problems (whether due to the ongoing COVID-19 pandemic, the current high demand for consumer electronics and information technology products, or other reasons) could impair the retail distribution of their Roku TV models. Interruptions in the supply of Roku TV models to retailers and distributors at times have affected, and could adversely affect in the future, our active accounts and streaming hours. For example, during the three months ended September 30, 2021, some of our Roku TV brand partners have faced supply chain and inventory challenges that have negatively impacted their unit sales, which we believe affected our streaming hours and active account growth.

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

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

We bear supply risk under our contract manufacturing arrangements. Lead times for the materials and components that our contract manufacturers order on our behalf through different component suppliers vary significantly and depend on numerous factors, including the specific supplier, contract terms, shipping and air freight, and market demand for a component at a given time. Lead times for certain key materials and components incorporated into our players or other products 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 products 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 of player or the use of particular components. If we incur costs to cover excess supply commitments, this would harm our business.

Conversely, if we underestimate our player or other product requirements, our contract manufacturers may have inadequate component inventory, which could interrupt the manufacturing of our players or other products and result in delays or cancellation of orders from retailers and distributors. In addition, from time to time we have experienced unanticipated increases in demand that resulted in the need to ship players via air freight, which is more expensive than ocean freight, and adversely affected our player gross margin during such periods of high demand, for example, during end-of-year holidays. During the nine months ended September 30, 2021, the COVID-19 pandemic, supply chain disruptions, shipping delays, and sustained high demand for consumer electronics and information technology products created tight component supply conditions and logistical delays for our products and key components. 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) Wi-Fi silicon products and Wi-Fi front-end modules from various manufacturers, depending on the player, for which we do not have a second source. Although this approach allows us to maximize player performance on lower cost hardware, reduce engineering qualification costs and develop stronger relationships with our strategic suppliers, this also creates supply chain risk. These sole-source suppliers could be constrained by fabrication capacity issues or material supply issues, such as U.S. or foreign tariffs, other export or import restrictions on parts or components for finished players that are used in final assembly of their components (or on the finished players themselves), or shortages of key components. There is also the 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 the ongoing global semiconductor shortage, or become subject to U.S. or foreign sanctions or export control restrictions or penalties. Such suppliers also have experienced, and may continue to experience, production, shipping, or logistical constraints arising from the COVID-19 pandemic. Such interruptions and delays have forced us to seek similar components from alternative sources, which have not always been available, and have caused 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 players to accommodate new chips and components, and may require us to re-qualify our players with regulatory bodies, such as the 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:

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supplier capacity constraints;

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price increases;

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timely delivery;

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component quality; and

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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.

Our players and Roku TV models must operate with various offerings, technologies and systems from our content publishers that we do not control. If our streaming devices do not operate effectively with those offerings, technologies and systems, our business may be harmed.

The Roku OS is designed for performance using relatively low-cost hardware, which enables us to drive user growth with our players and Roku TV models 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. We have no control over these offerings, technologies and systems beyond our channel certification requirements, and if our players and Roku TV models 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 our players or Roku TV models, 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, 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 these devices. The certification processes can be time consuming and introduce third-party 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, 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 our streaming devices to work better with new offerings, technologies and systems. If we are unable to maintain consistent operability of our 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 streaming devices. We may not successfully develop 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 streaming devices are technically complex and may contain undetected hardware errors or software bugs, which could manifest themselves in ways that could harm our reputation and our business.

Our streaming devices and those of our licensees are technically complex 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 streaming platform, including through diminished performance, security vulnerabilities, data quality in logs or interpretation of data, malfunctions or even permanently disabled devices. Some errors in our devices may only be discovered after a device has been shipped and used by users and may in some cases only be detected under certain circumstances or after extended use. We also update the Roku OS and our software on a regular basis, and, despite our quality assurance processes, we could introduce bugs in the process of any such update. The introduction of a serious software bug could result in devices becoming permanently disabled. We offer a limited one-year warranty in the United States, 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, or other violations of laws or regulations. In addition, our contracts with users contain provisions relating to warranty disclaimers and liability limitations, which may not be upheld. Defending a lawsuit, regardless of its merit, is costly and may divert management’s attention and adversely affect the market’s perception of Roku and our products. In addition, if our insurance coverage proves inadequate or future coverage is unavailable on acceptable terms or at all, our business could be harmed.

Components used in our products 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 products. Any errors or defects in such third-party technology could result in errors in our products that could harm our

business. If these components have a manufacturing, design or other defect, they can cause our products to fail and 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 in our player fails, then our player cannot detect a home network’s Wi-Fi access point, and our player will not be able to display or deliver any content to the TV screen. As a result, we may have to replace these players 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 players would harm our business.

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

We utilize commercially available off-the-shelf technology in the development of our players and streaming platform. As we continue to introduce new features or improvements to our players and 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 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 players, streaming platform and our business.

Risks Related to Operating and Growing Our Business

We have incurred operating losses in the past, and although we have achieved profitability in recent quarters, we may not be able to maintain or grow our profitability.*

We have incurred operating losses in the past, and we may incur operating losses in the future. Although we have achieved profitability in recent quarters, we may not be able to maintain or grow our profitability. As of September 30, 2021, we still have an accumulated deficit of $113.7 million. We expect our operating expenses to increase in the future as we continue to expand our operations and invest in growth and new areas. If our revenue and gross profit do not grow at a greater rate than our operating expenses, we may not be able to maintain and grow our profitability. 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:

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

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

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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 rising inflation and our ability to control costs, including our operating expenses;

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our revenue mix, which drives gross profit;

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

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

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

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the addition or loss of popular content or channels;

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

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the ability of retailers to anticipate consumer demand;

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an increase in the manufacturing or component costs of our players or the manufacturing or component costs of our TV brand licensees for Roku TV models;

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delays in delivery of our players or our partners’ Roku TV models, or disruptions in our or our licensees’ supply or distribution chains, including any disruptions caused by the COVID-19 pandemic, tariffs, or other trade restrictions or disruptions; and

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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 player segment revenue has a lower gross margin compared to our platform segment 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 streaming devices, including those that have higher cost structures with flat or reduced pricing. We have in the past and may in the future strategically reduce our player gross margin in an effort to increase the number of active accounts and grow our gross profit. As a result, our player segment revenue may not increase as rapidly as it has historically, or at all, and, unless we are able to continue to increase our platform revenue and grow the number of active accounts, we may be unable to grow gross profit and our business will be harmed. If a reduction in gross margin does not result in an increase in our active accounts or increase our platform revenue and gross profit, 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:

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manage a larger organization;

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hire more employees, including engineers with relevant skills and experience;

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expand internationally;

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increase our sales and marketing efforts;

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expand the capacity to manufacture and distribute our players;

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broaden our customer support capabilities;

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support a larger number of TV brand and service operators;

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expand and improve the content offering on our platform;

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implement appropriate operational and financial systems; and

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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 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 devices 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 devices and streaming platform.

In the course of expanding our international operations and operating overseas, in addition to the risks we face in the United States, we will be subject to a variety of risks that could adversely affect our business, including:

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differing regulatory requirements, including country-specific data privacy and data security laws and regulations, consumer protection laws and regulations, tax laws, telecommunications laws, trade laws, labor regulations, tariffs, export quotas, U.S. and foreign sanctions, custom duties on cross-border movements of goods or data flows, extension of limits on TV advertising minutes to OTT advertising, local content requirements, data or data processing localization requirements, or other trade restrictions;

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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 corrupt payments to government officials;

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compliance with various privacy, data transfer, data protection, accessibility, consumer protection and child protection laws in the European Union (“EU”) and other international markets that we operate in;

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

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competition with other devices that consumers may use to stream TV or existing local traditional pay TV services and products, including those provided by incumbent pay TV service providers;

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

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

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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;

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availability of reliable broadband connectivity and wide area networks in areas targeted for expansion;

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challenges inherent in efficiently staffing and managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, compensation and benefits, and compliance programs;

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difficulties in understanding and complying with local laws, regulations and customs in foreign jurisdictions;

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

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unstable political and economic conditions whatever the cause, including pandemics, impacts from the United Kingdom’s withdrawal from the EU (commonly referred to as “Brexit”), tariffs, trade wars, local or global recessions, or long-term environmental risks;

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international political or social unrest or economic instability, including U.S.-China tensions, and other political, security, or economic tensions between countries in which we do business or which serve as sources for our and our Roku TV brand partners’ products and components;

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adverse tax consequences, such as those related to changes in tax laws, or tax rates or their interpretations could impact our judgment in determining our tax provision and effective tax rate;

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the imposition of customs duties on cross-border data flows for streaming services, which are currently prohibited under the WTO’s e-commerce moratorium, but could be permitted if certain WTO Members continue to oppose extension of the moratorium when it is considered at the WTO’s MC-12 Ministerial Meeting, which is scheduled to take place in late 2021;

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digital services taxes, which have been imposed or are under consideration by several European and other countries, which would lead to taxes on certain digital services even though the providers would not be subject to tax under existing international tax rules and treaties;

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the COVID-19 pandemic or any other pandemics or epidemics could result in decreased economic activity in certain markets, decreased use of our products or platform, or in our decreased ability to import, export, ship, or sell our products to supply such services to existing or new customers in international markets;

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fluctuations in currency exchange rates could impact our revenue and expenses of our international operations and expose us to foreign currency exchange rate risk;

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restrictions on the repatriation of earnings from certain jurisdictions;

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future possible changes in U.S. regulations on exports of U.S. technologies, dealings with certain countries or parties, or the ability of our suppliers or licensees to continue to source certain imported products, inputs, or components, because of expanding U.S. export controls, sanctions, and import restrictions on China and Hong Kong;

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future possible restrictions on imports, installation or procurement of products and services from certain countries, including China, that are associated with securing the U.S. supply chain (including the information and communication technology and services supply chain) from potential threats involving certain high-risk jurisdictions; and

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working capital constraints.

If we invest substantial time and resources to expand our international operations and are unable to do so successfully and in a timely manner, our business and financial condition may be harmed.

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

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, a significant percentage of our player sales through retailers in the fourth quarter are pursuant to committed sales agreements with retailers for 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 advertising and our device 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, 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, delays or disruptions at U.S. ports of entry could adversely affect our or our distributors’ ability to timely deliver players and co-branded Roku TV models to retailers during the upcoming holiday season. 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 devices 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. 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. Because we face significant competition for personnel, particularly in the San Francisco Bay Area where our headquarters is located, 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, the recent move by companies to offer a remote or hybrid work environment may increase the competition for such employees from employers outside of our traditional office locations. To retain employees, we also may need to increase our employee compensation levels in response to competition. 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, many of our employees may be able to receive significant proceeds from sales of our equity in the public markets, which may reduce their motivation to continue to work for us. Moreover, the equity ownership of many of our employees could create disparities in wealth among our employees, which may harm our culture and relations among employees and our business.

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 business arrangements with our content partners, advertisers, Roku TV brand 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, Roku TV brand partners, or other licensees; cause harm to our reputation and brand; and could also 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 have outstanding debt and our credit facility provides our lender with a first-priority lien against substantially all of our assets and contains financial covenants and other restrictions on our actions that may limit our operational flexibility or otherwise adversely affect our financial condition.*

We entered into a credit agreement, dated February 9, 2019 (as amended on May 3, 2019, the “Credit Agreement”) among us, as borrower, certain of our subsidiaries from time to time party thereto, as guarantors, the lenders and issuing banks from time to time party thereto, and Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent (the “Agent”), providing for (i) a four-year revolving credit facility in the aggregate principal amount of up to $100.0 million (the “Revolving Credit Facility”), (ii) a four-year delayed draw term loan A facility in the aggregate principal amount of up to $100.0 million (the “Term Loan A Facility”) and (iii) an uncommitted incremental facility subject to certain conditions. The Credit Agreement contains a number of affirmative and negative covenants, which may restrict our current and future operations, particularly our ability to respond to certain changes in our business or industry or take future actions. The Credit Agreement also contains a financial covenant requiring us to maintain a minimum adjusted quick ratio of at least 1.00 to 1.00, tested as of the last day of any fiscal quarter on the basis of the prior period of our four consecutive fiscal quarters. Pursuant to the Credit Agreement, we granted the Agent a security interest in substantially all of our and our subsidiary guarantors’ assets. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Senior Secured Term Loan A and Revolving Credit Facilities.”

In November 2019, we borrowed an aggregate principal amount of $100.0 million from the Term Loan A Facility. In March 2020, we borrowed an aggregate principal amount of $69.3 million of revolving loans pursuant to the Revolving Credit Facility, which we repaid in May 2020. We also have outstanding letters of credit as of September 30, 2021, totaling $30.8 million against the Revolving Credit Facility.

As of September 30, 2021, we were in compliance with all of the covenants of the Credit Agreement. However, if we fail to comply with the covenants, make payments as specified in the Credit Agreement, or undergo any other event of default contained in the Credit Agreement, the Agent could declare an event of default, which would give it the right to terminate the commitments to provide additional loans and declare any borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable. In addition, the Agent would have the right to proceed against the assets we provided as collateral pursuant to the Credit Agreement. If the outstanding debt under the Credit Agreement is accelerated, we may not have sufficient cash or be able to sell sufficient assets to repay it, which would harm our business and financial condition.

When we borrowed pursuant to the Term Loan A Facility, we chose a variable interest rate based on the one-month U.S. dollar London Interbank Offered Rate (“LIBOR”) as the benchmark for establishing the applicable interest rate. If we borrow pursuant to the Revolving Credit Facility, we are permitted to choose LIBOR as the benchmark for establishing the applicable interest rate as well. LIBOR is currently calculated and published for various currencies and periods by the benchmark’s administrator, ICE Benchmark Administration Limited (“IBA”), which is regulated for such purposes by the United Kingdom’s Financial Conduct Authority. On March 5, 2021, the IBA confirmed that it would cease the publication of the one-week and two-month U.S. dollar LIBOR settings immediately following the LIBOR publication on December 31, 2021, and all other U.S. dollar LIBOR settings (including the one-month setting) immediately following the LIBOR publication on June 30, 2023. Accordingly, in the near future LIBOR will cease being a widely used benchmark interest rate. The current and any future reforms and other pressures may cause LIBOR to be replaced with a new benchmark or to

perform differently than in the past, including during the transition period. Although our Credit Agreement will expire in February 2023 (before the cessation of the publication of the one-month U.S. dollar LIBOR setting), the consequences of the LIBOR developments cannot be entirely predicted and could have an adverse impact on the value of our LIBOR-linked financial obligations, such as an increase in the cost of our Credit Agreement indebtedness.

We may require additional capital to meet our financial obligations and support planned business growth, and this capital might not be available on acceptable terms or at all.

We intend to continue to make significant investments to support planned business growth and may require additional funds to respond to business challenges, including the need to develop new devices and enhance 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 streaming platform, the Roku OS and players along with the timing and effort related to the introduction of new platform features, players, hiring of experienced personnel, the expansion of sales and marketing activities, as well as overall economic conditions.

We 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 may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be harmed.

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 increasingly dependent on information technology systems and infrastructure to operate our business. In the ordinary course of our business, we collect, store, process and transmit large amounts of sensitive corporate, personal and other information, including intellectual property, proprietary business information, user payment card information, other user information 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 and/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 also impact the attractiveness of our subscription service 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 as a result, we manage a number of third-party vendors 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 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 have experienced, and remain vulnerable to, data security incidents, including 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.

Although we have implemented remote working protocols and offer work-issued devices to employees, the actions of our employees while working remotely 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 personal and private use of 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. These risks have been heightened by the dramatic increase in the numbers of our employees who have been and are continuing to work from home as a result of government guidelines and internal policies adopted in response to the COVID-19 pandemic.

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 (“DoS”) 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 experience directed attacks on at least a periodic basis that are intended to interrupt our operations; interrupt our users’, content publishers’ and advertisers’ ability to access our platform; extract money from us; and/or view or obtain our data (including without limitation user or employee personal information or proprietary information) or intellectual property. Although we have implemented certain systems, processes, and safeguards intended to protect our information technology systems and data from such threats and mitigate risks to our systems and data, 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. 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. 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.

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 our insurance policies may not cover some or all aspects of a 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. 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. Any attempts by threat actors to disrupt our platform, our streaming devices, website, computer systems or our mobile apps, if successful, could harm our business, subject us to liability, be expensive to remedy, cause harm to our systems and operations and damage our reputation. Efforts to prevent threat actors from entering our computer systems or exploiting vulnerabilities in our devices are expensive to implement and may not be effective in detecting or preventing intrusion or vulnerabilities. Such unauthorized access to 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.

Significant disruptions of our third-party vendors’ and/or commercial partners’ information technology systems or other similar data security incidents could adversely affect our business operations and/or result in the loss, misappropriation,

and/or unauthorized access, use or disclosure of, or the prevention of access to, sensitive or personal information, which could harm our business. In addition, information technology system disruptions, whether from attacks on our technology environment or from computer viruses, natural disasters, terrorism, war 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 and/or state breach notification laws and foreign law equivalents, subject us to time consuming, distracting and expensive litigation, regulatory investigation and oversight, mandatory corrective action, require us to verify the correctness of database contents, or otherwise subject us to liability under laws, regulations and contractual obligations, including those that protect the privacy and security of personal information. This could result in increased costs to us and result in significant legal and financial exposure and/or reputational harm. For example, in the wake of a data breach involving payment card data, we may be subject to substantial penalties and related enforcement for failure to adhere to the technical or operational security requirements of the Payment Card Industry (“PCI”) Data Security Standards (“DSS”) imposed by the PCI Council to protect cardholder data. Penalties arising from PCI DSS enforcement are inherently uncertain as penalties may be imposed by various entities within the payment card processing chain without regard to any statutory or universally mandated framework. Such enforcement could threaten our relationship with our banks, card brands we do business with, and our third-party payment processors.

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, and/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 for years to come.

We and our service providers 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 a variety of individuals including our users and their devices, and rely on third party service providers to collect, process, transmit and store personal information of our users, including our users’ payment card data. Further, we and our service providers as well as business partners use tracking technologies, including cookies, device identifiers and related technologies, to help us manage and track our users’ interactions with our platform, devices, website and partners’ content to deliver relevant advertising and personalized content for ourselves and on behalf of our partners on our devices.

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 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 and service providers, changes in technology, and developments in laws, regulations and industry standards. For example, certain 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 unambiguous, affirmative 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, 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 Federal Trade Commission (“FTC”), state attorneys general, the European Commission and European and UK data protection authorities), 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 United States, U.S. states, and foreign governments have enacted and 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 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 made changes to our data protection compliance program to prepare for the GDPR and will continue to monitor the implementation and evolution of data protection regulations, but if we are not compliant with GDPR or other 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 EUR 20 million or 4% of the annual global revenue of a noncompliant company, whichever is greater, 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 Brazilian revenue.

The U.S. data protection legal landscape also continues to evolve, with states such as California and Nevada 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 to incur substantial costs and expenses in an effort to comply. 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. In November 2020, the California Privacy Rights Act (“CPRA”) was passed into law and goes into effect on January 1, 2023 (with a ‘look-back’ to January 1, 2022). The CPRA builds on the CCPA and among other things, requires the establishment of a dedicated agency to regulate consumer privacy issues. In 2021, Virginia and Colorado adopted laws introducing new privacy obligations for which we may need to take additional steps to comply.

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. Such restrictions could, for example, limit our ability to supply targeted advertising and thus negatively impact our business.

Applicable data privacy and security laws may also obligate us to employ security measures that are appropriate to the nature of the data we collect and process and, among other factors, the risks attendant to our data processing activities in order to protect personal information from unauthorized access or disclosure, or accidental or unlawful destruction, loss, or alteration. We have implemented security measures that we believe are appropriate, but a regulator could deem our security measures not to be appropriate given the lack of prescriptive measures in certain data protection laws. Given the evolving nature of security threats and evolving safeguards, we cannot be sure that our chosen safeguards will protect against security threats to our business including the personal information that we process. However, even security measures that are appropriate, reasonable, and/or in accordance with applicable legal requirements may not be able to fully protect our information technology systems and the data contained in those systems, or our data that is contained in third parties’ systems. Moreover, certain data protection laws impose on us responsibility for our employees and third parties that assist with aspects of our data processing. Our employees’ or third parties’ intentional, unintentional, or inadvertent actions may increase our vulnerability or expose us to security threats, such as phishing attacks, and we may remain responsible for successful access, acquisition or other disclosure of our data despite the quality and legal sufficiency of our security measures.

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. However, there are certain unsettled legal issues regarding the adequacy of data transfers to the United States, the resolution of which may adversely affect our ability to transfer personal information from the EEA to the United States. On July 16, 2020, the European Court of Justice (the highest EU Court) ruled the EU-U.S. Privacy Shield to be an invalid data transfer mechanism, confirmed that the Model Clauses remain valid, and left unaddressed some issues regarding supplementary measures that may need to be taken to support transfers. We are currently assessing the available regulatory guidance from EU Data Protection Authorities and the U.S. Department of Commerce on the impact of this ruling on broader international data transfer compliance for companies, including finalized guidance on specific supplementary measures that all companies would be required to implement in addition to the Model Clauses. In June 2021, the European Commission published updated versions of the Model Clauses, which must be incorporated into new and existing agreements within prescribed timeframes in order to continue to lawfully transfer personal information outside of the EEA. The United Kingdom is expected to publish final versions of its own Model Clauses during 2021. Updating agreements to incorporate these new Model Clauses for the EEA and United Kingdom may require significant time and resources to implement, including through adjusting our operations, conducting requisite data transfer assessments, and revising our contracts. 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, and we may experience operating disruptions if we are unable to conduct these transfers in the future. 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 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 country be maintained, stored, and/or processed in their country. 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 CCPA, as well as other domestic and foreign data protection laws, will lead to increased operational and compliance costs and will require us to continually monitor and, where necessary, make changes to our operations, policies, and procedures. Any failure or perceived failure to comply with privacy-related legal obligations, or any compromise of security of user data, may result in governmental enforcement actions, litigation, contractual indemnity or public statements against us by consumer advocacy groups or others. In addition to potential liability, these events could harm our business.

We publish privacy policies, notices and other documentation regarding our collection, processing, use and disclosure of personal information, credit card information and/or 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 or vendors 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.

Our actual or perceived failure to adequately protect personal information and confidential information that we (or our service providers or business partners) collect, store or process could trigger contractual and legal obligations, harm our reputation, subject us to liability and otherwise adversely affect our business including our financial results.

In the ordinary course of our business, we collect, store and process personal information (including payment card information) and/or other confidential information of our employees, our partners, and our users. We use third-party service providers and subprocessors to help us deliver our services. These vendors may store or process personal information, payment card information and/or other confidential information of our employees, our partners, or our users. 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.

A variety of state, national, and foreign laws and regulations apply to the collection, use, retention, protection, disclosure, security, transfer, cross-border transfer, localization, and other processing of personal information. These privacy and data protection-related laws and regulations are evolving, with new or modified laws and regulations proposed and implemented frequently and existing laws and regulations subject to new or different interpretations. In addition, each state and the District of Columbia, Guam, Puerto Rico, the U.S. Virgin Islands, EU member states, and the United Kingdom, as well as some other foreign nations, have passed laws requiring notification to regulatory authorities, to affected users, and/or others within a specific timeframe when there has been a security breach involving certain personal information as well as impose additional obligations for 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 require us to expend significant capital and other resources to respond to and/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.

Litigation resulting from security breaches may adversely affect our business. Unauthorized access to our platform, systems, networks, or physical facilities could result in litigation with our users or other relevant stakeholders. These proceedings could force us to spend money in defense or settlement, divert management’s time and attention, increase our costs of doing business, and/or adversely affect our reputation. We could be required to fundamentally change our business activities and practices or modify our products and/or platform capabilities in response to such litigation, which could have an adverse effect on our business. Any actual or perceived inability to adequately protect the privacy of individuals’ information in our possession, custody or control may render our products or services less desirable and could harm our reputation and business. Any costs incurred as a result of this potential liability could harm our business.

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 for the performance and operation of the Roku OS, streaming platform and computer systems. Service interruptions, errors in our software or the unavailability of computer systems used in our operations could diminish the overall attractiveness of our devices and streaming platform to existing and potential users. We utilize computer systems located either in our facilities or those of third-party server hosting providers and third-party internet-based or cloud computing services. Although we generally enter into service level agreements with these parties, we exercise no control over their operations, which makes us vulnerable to any errors, interruptions or delays that they may experience. In 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 operational delays and 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, 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 and could adversely affect our business. Any disruption in the services provided by these vendors could have adverse impacts on our business reputation, customer relations and operating results.

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 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 provider do not effectively address capacity constraints, upgrade or patch systems as needed and continually develop 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 our users to access high-quality streaming content through the internet. As a result, the growth of our business depends on our users’ ability to obtain and maintain low-cost, high-speed access to the internet, which relies in part on the network operators’ continuing willingness to upgrade and maintain their equipment as needed to sustain a robust internet infrastructure as well as their continued willingness to preserve the open and interconnected nature of the internet. We exercise no control over network operators, which makes us vulnerable to any errors, interruptions or delays in their operations, as well as their decision to prioritize the delivery of certain network traffic at the expense of other traffic. Any material disruption or degradation in internet services could harm our business.

To the extent that the number of 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 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. In the past, internet service providers have attempted to implement usage-based pricing, bandwidth caps and traffic “shaping” or throttling. To the extent network operators were to create tiers of internet access service and either charge us for access to these tiers or prohibit our content offerings from being available on some or all of these tiers, our quality of service could decline, our operating expenses could increase and our ability to attract and retain users could be impaired, each of which would harm our business.

In addition, most network operators that provide consumers with access to the internet also provide these consumers with multichannel video programming, and some network operators also own streaming services. These network operators have an incentive to use their network infrastructure in a manner adverse to the continued growth and success of other companies seeking to distribute similar video programming. 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.

Risks Related to Intellectual Property

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

Some 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, has been or could 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 from our business. 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 to: 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 products; enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies, content or materials; and 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.

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 provide the same 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 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 intellectual property that we develop, which could have a material adverse effect on our business, financial condition and 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 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 (“USPTO”), as opposed to having to bring such an action in U.S. federal court. Any invalidation of a patent claim could have a significant impact on our ability to protect the innovations contained within our devices and platform and could harm our business.

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 jurisdiction in which we conduct business.

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, 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.

Our use of open source software could impose limitations on our ability to commercialize our devices and our streaming platform.

We incorporate open source software in our streaming platform. From time to time, companies that incorporate open source software into their products and services have faced claims challenging the ownership of open source software and/or compliance with open source license terms. Therefore, we could be subject to suits by parties claiming ownership of what we believe to be open source software or noncompliance with open source licensing terms. Although we monitor our use of open source software, the terms of many open source software licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on the sale of our devices. In such event, we could be required to make our proprietary software generally available to third parties, including competitors, at no cost, to seek licenses from third parties in order to continue offering our devices, to re-engineer our devices or to discontinue the sale of our devices in the event re-engineering cannot be accomplished on a timely basis or at all, any of which could harm our business.

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

In certain of our agreements we indemnify our content publishers, licensees, distributors, retailers, manufacturing partners and suppliers. We have in the past, and may in the future, incur significant expenses defending these partners if they are sued for patent infringement based on allegations related to our technology. If a partner were to lose a lawsuit and in turn seek indemnification from us, we also could be subject to significant monetary liabilities. In addition, because the devices sold by our licensing partners and Roku 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 streaming device in question, even if the claim does not pertain to our technology.

Risks Related to Macroeconomic Conditions

The ongoing COVID-19 pandemic has impacted our business, and we are unable to predict the extent to which the pandemic and related effects will continue to impact our business.*

Beginning in the first quarter of 2020 and continuing into 2021, there has been widespread global impact from the COVID-19 pandemic, and our business has been, and is expected to continue to be, impacted by the pandemic and resulting economic consequences. The spread of COVID-19 has caused us to take precautionary measures intended to help minimize the risk of the virus to our employees, including work-from-home policies, suspending non-essential business travel and limiting physical participation in meetings, events and conferences. We may take further actions as required by government authorities or that we determine are in the best interests of our employees, TV brand partners, content publishers, advertisers, retail and distribution partners, contract manufacturers, services vendors and supply chain. There is no certainty that such measures will be sufficient to mitigate the risks posed by the COVID-19 pandemic, and a further continuation of the extended period of remote work arrangements and travel restrictions by some governments could disrupt our business, introduce business and operational risks, including cybersecurity risks, and could make it more difficult for us to effectively manage our business.

The COVID-19 pandemic continued to have a mixed impact on our business during the nine months ended September 30, 2021. When staying-at-home restrictions were first issued in the first quarter of 2020, we saw an acceleration in both streaming hours and account activations, which have both since moderated as restrictions have lifted and we believe consumers have increasingly pursued out-of-home entertainment activities. Although we believe the COVID-19 pandemic has accelerated the shift of advertising from traditional TV to streaming TV, certain advertisers with businesses affected by

the current global supply chain disruptions have reduced and may continue to reduce their spending on advertising. We also have encountered supply chain disruptions related to our players that have resulted in an increase in component prices and elevated air freight costs to replenish inventory and meet increased demand, and some of our TV brand partners have faced inventory challenges that have negatively impacted their unit sales, which we believe has affected and could continue to affect our streaming hours and active account growth. Further, our management team has continued to focus on addressing the impacts of the COVID-19 pandemic on our business, which has required, and will continue to require, a significant investment of their time and resources and has diverted their attention away from other aspects of our business.

The extent to which the COVID-19 pandemic ultimately impacts our business will depend on future developments, which are uncertain and cannot be predicted, including, but not limited to: the duration and spread of the outbreak; its severity; the actions taken by governmental authorities to contain the virus or treat its impacts; the development, availability and acceptance of effective vaccines, including booster vaccines; possible variants of the virus that render vaccines ineffective or decrease their efficacy; breakthrough infections among the fully vaccinated population; and how quickly and to what extent economic and operating conditions normalize, including ongoing supply chain disruptions. While vaccines have been developed and administered, and the spread of COVID-19 may eventually be contained or mitigated, we cannot predict the timing of the vaccine roll-out globally, vaccine acceptance, or the efficacy of such vaccines, including booster vaccines, and we do not know how consumers, advertisers, or our partners will operate in a post-COVID-19 environment. If consumers spend less time streaming TV, our streaming hours and the growth rate of our active accounts will decline. These changes may impact our platform revenue if we experience a decrease in sales of advertising or transactional revenue shares from content publishers, which could also cause a reduction in our ARPU. In addition, the ongoing impact of the COVID-19 pandemic on the global supply chain and shipping is expected to continue into 2022, and it may continue to result in increased costs and less availability of materials and components that are needed to manufacture our streaming players, which could negatively affect player gross margin, and our TV brand partners’ Roku TV models, as well as increased costs and less availability of freight, shipping and warehousing services that are used in our distribution channels, each of which could negatively affect our streaming hours and active account growth. Additionally, at times during the pandemic some of our retail partners have had to close or severely limit access to their brick-and-mortar locations, resulting in reduced sale of devices in these locations. Inflation or economic uncertainty also may result in the purchase of fewer streaming devices which could lead to a reduction in account activations and streaming hours, and also could negatively impact our revenue. An economic downturn or continued economic uncertainty could also impact the overall financial condition of our TV brand partners, content publishers, advertisers, retailers, contract manufacturers, services vendors and supply chain, all of whom we depend on in order to operate our business. We also may incur significant operating costs and be exposed to increased liability risks when employees begin to return to our offices, such as the cost of collecting additional information (including health and medical information) about our employees, contractors and visitors at our facilities and testing supplies and personal protective equipment for on-site staff. In addition, with the increase in remote working during the COVID-19 pandemic and the possible continuation of a hybrid-work environment when our employees return to our offices, we may not be able to maintain the same level of control over the security of our systems or the personal information that we collect, store and process, particularly as cyber attackers appear to increasingly attempt to compromise systems and data in an effort to exploit the pandemic. As a result, the current level of uncertainty over the economic and operational impacts of the COVID-19 pandemic means the impact on our business cannot be reasonably estimated at this time.

Natural disasters or other 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, terrorist attack, medical epidemic or pandemic (such as the COVID-19 pandemic), other man-made disasters or other catastrophic events could disrupt our 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 and suppliers, could be 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 advertising, to our users would be impaired. Disruptions in the operations of our contract manufacturers as a result of a disaster or other catastrophic event could delay the manufacture and shipment of our players or other products, which could impact our business. If we are unable to develop adequate plans to ensure that our business functions continue to

operate during and after a disaster or other catastrophic event and to execute successfully on those plans in the event of a disaster or catastrophic event, our business would be harmed.

Legal and Regulatory Risks

If government regulations or laws relating to the 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 general business regulations and laws, as well as regulations and laws specific to the internet and online services, which may include laws and regulations related to data privacy and security, consumer protection, data localization, law enforcement access to data, encryption, telecommunications, social media, payment processing, taxation, intellectual property, competition, electronic contracts, internet access, net neutrality, advertising, calling and texting, content restrictions, protection of children and accessibility, among others. We cannot guarantee that we have been or will be fully compliant in every jurisdiction. Litigation and regulatory proceedings are inherently uncertain, and the laws and regulations governing issues such as data privacy and security, payment processing, taxation, net neutrality, video, telecommunications, e-commerce tariffs and consumer protection related to the internet continue to develop. For example, laws relating to the liability of providers of online services for activities of their users and other third parties have been tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement, and other theories based on the nature and content of the materials searched, the advertisements posted, actions taken or not taken by providers in response to user activity or the content provided by users. The U.S. Congress has also enacted legislation related to liability of providers of online services and may continue to legislate in this area. The CCPA and Nevada SPI Law also apply to entities that do business in California and Nevada, respectively, and impose a number of requirements on internet and online services. Moreover, as internet commerce and advertising 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 streaming platform, we may also be subject to new laws and regulations specific to such technologies. For example, in developing our Roku TV reference design, we were required to understand, address and comply with an evolving regulatory framework for developing, manufacturing, marketing and selling TVs. If we fail to adequately address or comply with such regulations regarding the manufacture and sale of TVs, we may be subject to fines or sanctions, and our licensees may be unable to sell Roku TV models at all, which would harm our business and our ability to grow our user base.

Laws relating to data privacy and security, data localization, law enforcement access to data, encryption, and similar activities continue to proliferate, often with little harmonization between jurisdictions and 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. The CCPA also imposes requirements on certain tracking activity. The EU already has existing laws, which are due for update in 2021, requiring advertisers or companies like ours to, for example, obtain unambiguous, affirmative consent from users for the placement of cookies or other tracking technologies and the delivery of relevant advertisements. 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 (“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 in recent years revised its rules implementing the Children’s Online Privacy Protection Act (“COPPA Rules”) broadening the applicability of the COPPA Rules, including the types of information that are subject to these regulations, and it is currently examining whether additional changes are appropriate. Such actions 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 in relation to certain channel partner content. The CCPA also imposes certain opt in and opt out requirements for certain information about minors. We and our content publishers and advertisers could be at risk for violation or alleged violation of these and other privacy, advertising, or similar laws.

Changes in general economic conditions, geopolitical conditions, U.S. or foreign trade policies and other factors beyond our control may adversely impact our business and operating results.*

Our business is subject to risks generally associated with doing business abroad, such as U.S. and foreign governmental regulation in the countries in which our contract manufacturers and component suppliers are located. Our operations and performance depend significantly on global, regional and U.S. economic and geopolitical conditions. For example, there continues to be potential for significant changes to U.S. trade policies, legislation, treaties and tariffs. In November 2018, for example, the United States, Mexico, and Canada signed the United States-Mexico-Canada Agreement (“USMCA”), which superseded the North American Free Trade Agreement. The USMCA entered into force on July 1, 2020, although there are some remaining implementation issues with respect to ensuring that Mexico’s and Canada’s laws and regulations are fully in compliance with the USMCA obligations and commitments, and there may be further changes to interim regulations regarding customs procedures, rules of origin, and other provisions that could affect products sourced from Mexico or Canada, and their eligibility for duty-free entry into the U.S., Mexican, and Canadian markets. In addition, there is a potential risk of Mexican or Canadian restrictions on OTT advertising and/or local content requirements. While the Office of the U.S. Trade Representative (“USTR”) has cited Mexico’s proposed restrictions as potential USMCA violations, these issues remain unresolved and could lead to further Mexican restrictions, retaliatory trade actions, or a protracted USMCA dispute settlement proceeding, creating uncertainties for our business in both markets.

The previous U.S. Administration imposed tougher trade terms with China, the EU, and other countries, including the imposition of substantially higher tariffs under Section 301 of the Trade Act of 1974 (“Section 301”) on roughly $320 billion of imports from China. In response, China imposed higher Chinese tariffs on a large amount of U.S. exports to China, which could affect the prices of U.S. origin parts or components of our products assembled in China. In January 2020, the United States and China signed a “Phase One” trade deal pursuant to which, among other things, the United States will modify its Section 301 tariff actions. As part of the Phase One agreement, the United States canceled additional Section 301 duties that were originally scheduled to go into effect in December 2019 on certain imported products, including certain of our products, and reduced the duties on certain other imported products, including televisions assembled in China by Roku TV brand partners, from 15% ad valorem to 7.5%. The United States Trade Representative recently announced the results of the Biden Administration’s detailed review of U.S. trade policies toward China. However, the review did not provide much clarity on the future course of U.S.-China trade relations, and the prior administration’s tariffs remain in effect. At this point, it is unclear whether the Biden Administration will pursue further negotiations to resolve U.S. concerns or will resort to additional Section 301 tariffs or other restrictive trade actions, export controls or sanctions to address trade, human rights and security concerns. At this point, there are no signs the U.S. tariffs on imported TVs from China will be removed in the foreseeable future, and it is difficult to predict what additional U.S. or Chinese actions could be coming.

At this time, it is unknown whether the previous U.S. Administration’s Phase One deal will last or whether there will be further negotiations that could lead to reductions in U.S.-China trade tensions, whether additional Section 301 tariffs will be imposed on Roku products imported from China if the Biden Administration concludes that China has not complied with its commitments under the Phase One agreement, and, if so, how long U.S. tariffs on Chinese goods will remain in effect or whether even higher tariffs will be imposed, or new regulatory proposals to restrict trade will be adopted. U.S. concerns with China’s actions have already resulted in the imposition of sanctions and withhold release orders (“WROs”) on certain imports from China and export controls and entity listings restricting certain U.S. exports. Additional sanctions, tariffs, export controls, entity listings and WROs remain a serious risk and would invite additional retaliatory actions by China. The Biden Administration has imposed new sanctions for China’s actions in Hong Kong and Xinjiang Province, which could lead to additional U.S. and Chinese sanctions or trade restrictions, or a resumption of trade hostilities, exposing us and our suppliers to increased tariffs or restrictions in the U.S. and Chinese markets. In addition, the U.S. Administration has restricted imports of products from Xinjiang Province because the goods are produced with forced labor by workers from Xinjiang or contain inputs or raw materials from there. The U.S. Congress is considering legislation to further tighten the U.S. restrictions. Given the general deterioration in U.S.-China relations and ongoing tensions on trade, security, and human rights, additional U.S. sanctions, tariffs, WROs, export or import restrictions, and Chinese sanctions or retaliatory measures remain a serious risk.

Further, there are questions regarding whether international trade agreements will be negotiated or existing free trade agreements re-negotiated; 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 and/or regulations are implemented, or if existing trade agreements are renegotiated or terminated, or if tariffs are imposed on foreign-sourced or U.S. goods, it may be inefficient and expensive for us to alter our business operations in order to adapt to or comply with such changes, 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.

Our business could also be affected by trade tensions with Vietnam. For example, on January 15, 2021, the USTR found that Vietnam’s currency practices violate Section 301 but deferred any decision whether to take any specific actions in connection with its findings, leaving the decision whether to impose higher U.S. tariffs or other trade restrictions to the Biden Administration. On July 28, 2021, the USTR announced, based on an agreement reached between the U.S. Department of the Treasury and the State Bank of Vietnam regarding Vietnam’s currency practices, that is had determined that no action under the Section 301 investigation was warranted at this time because Vietnam’s agreement with the Department of the Treasury provides a satisfactory resolution of the matter. The USTR and the Department of the Treasury will continue to monitor Vietnam’s implementation of its commitments under the agreement and associated measures. The USTR’s Section 301 investigations of Vietnam could lead to retaliatory tariffs on U.S. imports from Vietnam if the U.S. concerns cannot be resolved through negotiations. Such tariffs may not be limited to products directly involved in the acts, policies, and practices found to violate Section 301 and thus could affect other, unrelated products, including those sourced by us or our suppliers and licensees.

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 our commercial and/or strategic partners’ ability to implement our products in those countries. Changes in our products or future changes in export and import regulations may create delays in the introduction of our products in international markets, disrupt supply chains, prevent our commercial and/or strategic partners with international operations from deploying our products globally or, in some cases, prevent the export or import of our products to certain countries, governments, or persons altogether. In particular, the U.S. government continues to expand export control and sanctions restrictions on China and Hong Kong, which may limit our ability to collaborate with and transfer technology to partners in the region. Cross-border data transmissions are currently exempt from customs duties under the WTO’s temporary e-commerce moratorium on customs duties on electronic transmissions, but the moratorium faces serious opposition from certain WTO Members when it comes up for renewal at the WTO Ministerial Meeting, which is scheduled to take place in late 2021, at which time a decision will be made by WTO Members whether to continue the moratorium. Other potential barriers include the further proliferation of digital services taxes in Europe and elsewhere, which potentially could expose certain digital services to new taxes, as well as continued risks of U.S. or foreign sanctions or related sanctions legislation, increased export and import restrictions stemming from governmental policies or U.S.-China “de-coupling,” or changes in the countries, governments, persons, businesses, products or technologies targeted by U.S. or foreign regulations, restrictions, and sanctions. Any change 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 and/or components, would harm our business.

Further, following the result of a referendum in 2016, the United Kingdom formally left the EU on January 31, 2020. The effects of Brexit 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. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which EU laws to replace or replicate. While the EU and United Kingdom have reached EU-UK Trade and Cooperation Agreement on their post-Brexit economic relationship, which 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.

The supply chains of our contract manufacturers and many of our TV brand partners may source products, parts or components from China and other countries in the Asia-Pacific region. There are many uncertainties around the COVID-19 pandemic, including scientific and health issues, the pace of worldwide vaccinations, the unknown duration and extent of economic disruption, and the impact on the Chinese, U.S., EU, Asian and global economies. As a result, the COVID-19 pandemic may result in further supply shortages of products for us or our TV brand partners, delays in shipping and transportation services that negatively impact our ability or our TV brand partners’ ability to import, export, ship, or sell products to customers in U.S. and international markets, and our ability to market and sell our streaming services internationally. Any decrease, limitations or delays on our or our TV brand partners ability to produce, import, export, ship, or sell our products would harm our business, as would negative impacts on our international sales.

United States or international rules (or the absence of rules) that permit ISPs 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.*

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.

In February 2015, the FCC adopted open internet rules intended to protect the ability of consumers and content producers to send and receive non-harmful, lawful information on the internet, known as the Open Internet Order. The Open Internet Order prohibited broadband internet access service providers from: (i) blocking access to legal content, applications, services or non-harmful devices; (ii) throttling, impairing or degrading performance based on content, applications, services or non-harmful devices; and (iii) charging more for favorable delivery of content or favoring self-provisioned content over third-party content (collectively, the “prohibited activities”). The Open Internet Order also prohibited broadband internet access service providers from unreasonably interfering with consumers’ ability to select, access and use the lawful content, applications, services or devices of their choosing as well as edge providers’ ability to make lawful content, applications, services or devices available to consumers.

In January 2018, the FCC released a new order, known as the Restoring Internet Freedom Order (the “Order”), that repealed most of the blocking, throttling, and paid prioritization restrictions adopted in the Open Internet Order. The Order reclassified broadband internet access service as a non-common carrier “information service” and repealed rules that had prohibited broadband internet access service providers from conducting the “prohibited activities” but continued to require broadband internet access service providers to be transparent about their policies and network management practices, and subjected discriminatory practices to case-by-case assessment under antitrust and consumer protection laws. Most portions of the Order went into effect in April 2018 and the remainder went into effect in June 2018. Numerous judicial challenges to the Order were filed, and in October 2019, the Court of Appeals for the District of Columbia Circuit upheld nearly all of the Order, but reversed the FCC’s decision to prohibit all state and local regulation targeted at broadband internet access service, requiring case by case determinations as to whether state and local regulation conflicts with the FCC’s rules. The court also required the FCC to reexamine three issues from the Order where it found insufficient analysis but allowed the Order to remain in effect pending the FCC’s review. The original parties were denied a rehearing by the full U.S. Court of Appeals for the D.C. Circuit in February 2020 and the period to seek review by the Supreme Court has ended. On remand, the FCC reaffirmed its existing approach in October 2020; however, four petitioners sought reconsideration of the FCC’s decision in February 2021, and the FCC subsequently filed a motion requesting that the D.C. Circuit hold the case in abeyance, which the court granted. The FCC, now newly organized following the inauguration of President Joe Biden, has yet to issue a decision in response to these petitions. On July 9, 2021, President Biden signed an Executive Order encouraging the FCC to restore net neutrality at the federal level. As an independent agency, the FCC is not required to follow the Executive Order but is expected to adopt net neutrality safeguards similar to those in the Open Internet Order once President Biden nominates additional commissioners to the FCC and Congress approves them. In the meantime, to the extent the courts, the agencies or the states do not uphold or adopt sufficient safeguards to protect against discriminatory conduct, network operators may seek to extract fees from us or our content publishers to deliver our traffic or otherwise engage in blocking, throttling or other discriminatory practices, and our business could be harmed.

Several states have adopted or are considering network neutrality legislation or regulation. For example, California’s legislation (SB822) codifies portions of the FCC’s rescinded Open Internet Order. The U.S. Department of Justice filed suit in September 2018 to block implementation of the California law, and the California Attorney General agreed to delay implementation of the state law until the litigation is resolved. While the Department of Justice withdrew its challenge of the California net neutrality law in February 2021, the status of state net neutrality legislation remains uncertain because several broadband service provider trade associations also have sued California to invalidate the state’s net neutrality law on grounds that the law is preempted by the Order, among other claims. In February 2021, the federal judge denied the trade associations’ request for a preliminary injunction, allowing California to enforce its net neutrality law while the litigation proceeded. Oral argument was held in September 2021. As of October 2021, the case remains pending.

Several states in addition to California have enacted net neutrality legislation (e.g., Colorado, Maine, New Jersey, Oregon, Vermont, Washington), and several governors have signed executive orders requiring broadband internet access service providers contracting with state agencies to adhere to network neutrality principles (e.g., Hawaii, Montana, New York, Rhode Island). The regulatory framework for network neutrality thus remains unsettled and is subject to ongoing federal litigation as well as federal and state legislative and regulatory activity.

As we expand internationally, government regulation protecting the non-discriminatory provision of internet access may be nascent or non-existent. In those markets where regulatory safeguards against unreasonable discrimination are nascent or non-existent and where local network operators possess substantial market power, we could experience anti-competitive practices that could impede our growth, cause us to incur additional expenses or otherwise harm our business. Future regulations or changes in laws and regulations or their existing interpretations or applications could also hinder our operational flexibility, raise compliance costs and result in additional liabilities for us, which may harm our business.

Broadband internet providers are subject to government regulation and enforcement actions, and changes in current or future laws, regulations or enforcement actions that negatively impact our distributors or content publishers could harm our business.*

Upon the effective date of the FCC’s Restoring Internet Freedom Order, the FTC became the federal agency primarily responsible for regulating broadband privacy and data security in the United States. The FTC follows an enforcement-focused approach to regulating broadband privacy and security. Future FTC enforcement actions could cause us or our content publishers to alter advertising claims or alter or eliminate certain features or functionalities of our products or services which may harm our business. At the FCC, many broadband internet access service providers provide traditional telecommunications services that are subject to FCC and state rate regulation of intrastate telecommunications services and are recipients of federal universal service fund payments, which are intended to subsidize telecommunications services in areas that are expensive to serve. Changes in rate regulations or in universal service funding rules, either at the federal or state level, could affect these broadband internet access service providers’ revenue and capital spending plans. In addition, various international regulatory bodies have jurisdiction over non-United States broadband internet access service providers. The Nevada SPI Law and the CCPA also apply to broadband internet access service providers that do business in Nevada and California, respectively. To the extent these broadband internet access service providers are adversely affected by laws or regulations regarding their business, products or service offerings, our business could be harmed.

If we are found liable for content that is distributed through or advertising that is served through our 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 Digital Millennium Copyright Act (the “DMCA”) is intended, in part, to limit the liability of eligible service providers for caching, hosting or linking to, user content that includes materials that infringe copyrights or other rights. We rely on the protections provided by the DMCA in conducting our business. Similarly, Section 230 of the Communications Decency Act (“Section 230”) protects online distribution platforms, such as ours, from actions taken under various laws that might otherwise impose liability on the platform provider for what content creators develop or the actions they take or inspire.

However, the DMCA, Section 230, and similar statutes and doctrines that we rely on or may rely on in the future, in the United States or international jurisdictions where we may operate, are subject to uncertain judicial interpretation and regulatory and legislative amendments. Regulatory or legislative changes, whether in the United States or in international jurisdictions where we may operate, may ultimately require us to take a different approach towards content moderation on our platform, which could diminish the depth, breadth, and variety of content we offer and, in so doing, reduce our advertising revenue or user base.

Moreover, the DMCA and Section 230 provide protections primarily in the United States. 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 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. If content owners or distributors are influenced by the existence of types of claims or proceedings and are deterred from working with us as a consequence, this could impair our ability to maintain or expand our business, including through international expansion plans.

Our involvement in any such legal matters now or in the future could cause us to incur significant legal expenses and other costs and be disruptive to our business.

If we fail to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A common stock may be adversely affected.

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. This assessment must include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. Our independent registered public accounting firm also attests to the effectiveness of our internal control over financial reporting. If we have a material weakness in our internal control over financial reporting in the future, we may not detect errors on a timely basis, and our financial statements may be materially misstated. 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, or other regulatory authorities, which could require additional financial and management resources.

Our financial results may be adversely affected by changes in accounting principles applicable to us.

U.S. GAAP are subject to interpretation by the FASB, the SEC, and other various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported results of operations and may even affect the reporting of transactions completed before the announcement or effectiveness of a change. It is difficult to predict the impact of future changes to accounting principles or our accounting policies, any of which could harm our business.

If we fail to comply with the laws and regulations relating to the collection of indirect taxes and payment of income taxes in the various jurisdictions in which we do business, we could be exposed to unexpected costs, expenses, penalties and fees as a result of our noncompliance, which could harm our business.

We are subject to requirements to collect indirect taxes from our sales in various jurisdictions, and the payment of income taxes on revenue generated from activities in those jurisdictions. The laws and regulations governing the collection of indirect taxes for sales on our website and payment of income taxes are numerous, complex, and vary by jurisdiction. A successful assertion by one or more jurisdictions that we were required to collect indirect taxes or to pay income 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.*

Reforming the taxation of international businesses has been a priority for U.S. politicians, and key members of the legislative and executive branches, and a wide variety of changes has been proposed or enacted. Certain changes to U.S. tax laws could affect the tax treatment of our foreign earnings, as well as cash and cash equivalent balances we maintain outside the United States. Additionally, any changes in the U.S. or foreign taxation of such activities may increase our worldwide effective tax rate and the amount of taxes we pay and harm our business.

Legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act (“TCJA”), as modified by legislation enacted on March 27, 2020, entitled the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), significantly reformed the Internal Revenue Code of 1986, as amended. The TCJA, as modified by the CARES Act, alters U.S. federal tax rates, imposes additional limitations on the deductibility of interest, allows for the expensing of certain capital expenditures, and puts into effect the migration from a “worldwide” system of taxation to a territorial system. Additionally, the TCJA, as modified by the CARES Act, has both positive and negative changes to the utilization of future net operating loss (“NOL”) carryforwards. For example, U.S. federal NOLs incurred in taxable years beginning after December 31, 2017, can be carried forward indefinitely, but the deductibility of such U.S. federal NOLs in taxable years beginning after December 31, 2020 is limited to 80% of taxable income. The U.S. Department of Treasury has broad authority to issue regulations and interpretative guidance that may significantly impact how we will apply the law, which could affect our financial position and result of operations. It is uncertain if and to what extent various states will conform to the TCJA and the CARES Act.

In addition, an increasing number of jurisdictions are considering or have adopted laws or administrative practices that impose new tax measures, including revenue-based taxes targeting online commerce, digital services, streaming services and the remote selling of goods and services. These include new obligations to collect sales, consumption, value added, or other taxes on online marketplaces and remote sellers, or other requirements that may result in liability for third-party obligations. For example, Maryland recently passed legislation establishing a tax on certain advertising activities, and in Europe, certain EU member states and other countries have adopted or proposed taxes on digital advertising and marketplace service revenue. In addition, on October 8, 2021, as part of the OECD/G20 negotiations on an “Inclusive Framework on Base Erosion and Profit Shifting,” the OECD announced that 136 countries had finalized a statement on a two-pillar plan to reform international taxation and remove existing digital sales taxes, which was subsequently endorsed by the G20 at the G20 Leaders Summit in late October 2021. The proposals aim to ensure a fairer distribution of profits among countries and to impose a floor on tax competition through the introduction of a global minimum tax. Significant uncertainties remain around whether the various proposals will ultimately be enacted and, if enacted, the extent of their impact. According to the OECD, countries are aiming to sign a multilateral convention during 2022 setting out agreed rules, with effective implementation in 2023. Moreover, despite the OECD’s agreement on a standstill and withdrawal provision for digital services taxes, the European Commission has proposed a “digital levy,” which appears to similarly target certain U.S. digital services providers. Our results of operations and cash flows could be adversely affected by additional taxes of this nature imposed on us or on digital services generally, whether prospectively or retroactively, or additional taxes or penalties resulting from the failure to comply with any collection obligations. The United States has threatened to impose retaliatory duties under Section 301 on imports from countries that adopt digital services taxes, which could result in increased trade tensions and potential retaliation by foreign governments against U.S. digital services or technologies, which could disrupt our U.S. or international businesses.

We continue to examine the impact these and other tax reforms may have on our business. The impact of these and other tax reforms is uncertain, and one or more of these or similar measures could seriously harm our business.

We have been, are currently, and may in the future be subject to regulatory inquiries, investigations and proceedings, which could cause us to incur substantial costs or require us to change our business practices in a way that could seriously harm our business.

We have been, are currently, and may in the future be subject to investigations and inquiries from government entities. These investigations and inquiries, and our compliance with any associated regulatory orders or consent decrees, may require us to change our policies or practices, subject us to substantial monetary fines or other 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 which could seriously harm our business. For example, in the past, we responded to requests for information made by staff from the SEC.

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 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 ability 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 and controls the vote of a significant number of 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% 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 all outstanding shares of our Class A and Class B common stock. This concentrated control will limit your ability 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 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. As a result of such transfers, as of September 30, 2021, Mr. Wood controls a majority of the combined voting power of our Class A and Class B common stock even though he only owns 12.4% of the outstanding Class A and Class B common stock. As a board member, Mr. Wood owes a fiduciary duty to our stockholders and must act in good faith in a manner he reasonably believes to be in the best interests of our stockholders. As a stockholder, even a controlling stockholder, Mr. Wood is entitled to vote his shares in his own interests, which may not always be in the interests of our stockholders generally. This concentrated control could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of our assets that our other stockholders support, or conversely this concentrated control could result in the consummation of such a transaction that our other stockholders do not support. This concentrated control could also discourage a potential investor from acquiring our Class A common stock, which has limited voting power relative to the Class B common stock and might harm the trading price of our Class A common stock.

We have not elected to take advantage of the “controlled company” exemption to the corporate governance rules for companies listed on The Nasdaq Global Select Market.

The trading price of our Class A common stock 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 of which are beyond our control, including:

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actual or anticipated fluctuations in our financial condition and operating results;

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changes in projected operational and financial results;

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loss by us of key content publishers;

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changes in laws or regulations applicable to our devices or platform;

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the commencement or conclusion of legal proceedings that involve us;

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actual or anticipated changes in our growth rate relative to our competitors;

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announcements of new products or services by us or our competitors;

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announcements by us or our competitors of significant acquisitions, strategic partnerships, or joint ventures;

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capital-raising activities or commitments;

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additions or departures of key personnel;

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issuance of new or updated research or reports by securities analysts;

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the use by investors or analysts of third-party data regarding our business that may not reflect our financial performance;

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fluctuations in the valuation of companies perceived by investors to be comparable to us;

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sales of our Class A common stock, including short selling of our Class A common stock;

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share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; and

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general economic and market conditions.

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. As a result of such fluctuations, you may not realize any return on your investment in us and may lose some or all of your investment. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future, which could result in substantial costs and divert our management’s attention from other business 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.

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 trading 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 the such quarter and (ii) with respect to the fourth quarter of each year, at the end of the trading day on the Wednesday before Thanksgiving. 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 would be dilutive to existing stockholders and the trading 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.

A limited number of equity research analysts provide research coverage of our Class A common stock, and we cannot assure you that 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. 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 price of our Class A common stock could 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 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 incur significant 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 Nasdaq Global Select Market, 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, on committees of our Board of Directors or as members of senior management.

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 Credit Agreement contains prohibitions on the payment of cash dividends on our capital stock. 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 in 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 to acquire, or attempt to acquire, control of Roku, 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:

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establishing a classified Board of Directors so that not all members of our Board of Directors are elected at one time;

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permitting the Board of Directors to establish the number of directors and fill any vacancies and newly created directorships;

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providing that directors may only be removed for cause;

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prohibiting cumulative voting for directors;

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requiring super-majority voting to amend some provisions in our certificate of incorporation and bylaws;

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authorizing the issuance of “blank check” preferred stock that our Board of Directors could use to implement a stockholder rights plan;

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eliminating the ability of stockholders to call special meetings of stockholders;

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prohibiting stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; and

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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 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 provides that the Court of Chancery of the State of Delaware and the 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 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:

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any derivative action or proceeding brought on our behalf;

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any action asserting a breach of fiduciary duty;

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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; and

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any action asserting a claim against us that is governed by the internal affairs doctrine.

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 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 amended and restated certificate of incorporation provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. In December 2018, the Delaware Chancery Court issued a ruling invalidating such provision, which we appealed to the Supreme Court of the State of Delaware. In March 2020, the Supreme Court of the State of Delaware reversed the ruling of the Delaware Chancery Court and held that the federal forum provision in our amended and restated certificate of incorporation is facially valid.

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 amended and restated 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 lawsuits against us and our directors, officers and other employees. If a court were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving such action in other jurisdictions, all of which could harm our business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

		Incorporation by reference
Exhibit Number	Description	Form	SEC File No.	Exhibit	Filing Date

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
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*	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, has been formatted in Inline XBRL.

# Indicates management contract or compensatory plan, contract or agreement.

* Filed herewith.

** These exhibits are furnished with this Quarterly Report on Form 10-Q 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.

SIGNATURES

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

	Roku, Inc.

Date: November 4, 2021	By:	/s/ Anthony Wood
		Anthony Wood
		President and Chief Executive Officer (Principal Executive Officer)

Date: November 4, 2021	By:	/s/ Steve Louden
		Steve Louden
		Chief Financial Officer (Principal Financial and Accounting Officer)