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 June 30, 2023

OR

☐ 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.

Large Accelerated Filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

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

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

As of June 30, 2023, the registrant had 124,089,380 shares of Class A common stock, $0.0001 par value per share, and 17,418,411 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 Comprehensive Income (Loss)	3
	Condensed Consolidated Statements of Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	31
PART II.	OTHER INFORMATION	32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 3.	Defaults Upon Senior Securities	67
Item 4.	Mine Safety Disclosures	68
Item 5.	Other Information	68
Item 6.	Exhibits	69
Signatures		70

i

NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available. 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, regarding, among other things:

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

•the impact of supply chain disruptions, inflationary pressures, recessionary fears, labor disputes, bank failures, the COVID-19 pandemic, and geopolitical conflicts on our business, operations, and the markets and communities in which we and our advertisers, content providers, licensed Roku TV partners, other device licensees, manufacturers, suppliers, retailers, and users operate;

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

•our ability to attract and retain advertisers;

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

•our ability to produce or acquire rights to distribute popular content on our platform on favorable terms, or at all, including the renewals of our existing agreements with content publishers;

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

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

•our ability to successfully manage domestic and international expansion;

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

•our ability to address potential and actual security breaches and system failures involving our products, systems and operations;

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

•our ability to obtain financing on favorable terms, including our ability to enter into new credit agreements; and

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

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

You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report or to conform these statements to actual results or to changes in our expectations. You should read this Quarterly Report, and the documents referenced in and filed as exhibits to this Quarterly 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.

ii

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

See accompanying notes to condensed consolidated financial statements.

1

ROKU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Net Revenue:
Platform	$	743,835	$	669,256	$	1,378,453	$	1,312,963
Devices	103,351		95,150		209,723		185,142
Total net revenue	847,186		764,406		1,588,176		1,498,105
Cost of Revenue:
Platform	348,010		295,058		648,597		560,846
Devices	120,905		114,199		223,711		217,303
Total cost of revenue	468,915		409,257		872,308		778,149
Gross Profit (Loss):
Platform	395,825		374,198		729,856		752,117
Devices	(17,554)		(19,049)		(13,988)		(32,161)
Total gross profit	378,271		355,149		715,868		719,956
Operating Expenses:
Research and development	192,387		196,637		412,472		360,635
Sales and marketing	227,192		184,971		461,111		331,493
General and administrative	84,652		84,054		180,705		161,831
Total operating expenses	504,231		465,662		1,054,288		853,959
Loss from Operations	(125,960)		(110,513)		(338,420)		(134,003)
Other Income (Expense), Net:
Interest expense	(4)		(1,059)		(685)		(2,116)
Other income, net	19,999		1,829		43,100		2,238
Total other income, net	19,995		770		42,415		122
Loss Before Income Taxes	(105,965)		(109,743)		(296,005)		(133,881)
Income tax expense	1,630		2,578		5,194		4,746
Net Loss	$	(107,595)	$	(112,321)	$	(301,199)	$	(138,627)
Net loss per share — basic and diluted	$	(0.76)	$	(0.82)	$	(2.14)	$	(1.02)
Weighted-average common shares outstanding — basic and diluted	141,033		136,849		140,685		136,198

See accompanying notes to condensed consolidated financial statements.

2

ROKU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

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

See accompanying notes to condensed consolidated financial statements.

3

ROKU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
Three Months Ended June 30, 2023	Shares	Amount
Balance—March 31, 2023	140,785	$	14	$	3,332,222	$	35	$	(781,630)	$	2,550,641
Issuance of common stock pursuant to equity incentive plans	723	—		614		—		—		614
Stock-based compensation expense	—	—		89,579		—		—		89,579
Foreign currency translation adjustment	—	—		—		36		—		36
Net loss	—	—		—		—		(107,595)		(107,595)
Balance-June 30, 2023	141,508	$	14	$	3,422,415	$	71	$	(889,225)	$	2,533,275
Six Months Ended June 30, 2023
Balance-December 31, 2022	140,027	$	14	$	3,234,860	$	(292)	$	(588,026)	$	2,646,556
Issuance of common stock pursuant to equity incentive plans	1,481	—		1,504		—		—		1,504
Stock-based compensation expense	—	—		186,051		—		—		186,051
Foreign currency translation adjustment	—	—		—		363		—		363
Net loss	—	—		—		—		(301,199)		(301,199)
Balance-June 30, 2023	141,508	$	14	$	3,422,415	$	71	$	(889,225)	$	2,533,275
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
Three Months Ended June 30, 2022	Shares	Amount
Balance—March 31, 2022	135,971	$	14	$	2,929,519	$	(41)	$	(116,327)	$	2,813,165
Issuance of common stock pursuant to equity incentive plans	1,958	—		8,341		—		—		8,341
Stock-based compensation expense	—	—		87,037		—		—		87,037
Foreign currency translation adjustment	—	—		—		(330)		—		(330)
Net loss	—	—		—		—		(112,321)		(112,321)
Balance-June 30, 2022	137,929	$	14	$	3,024,897	$	(371)	$	(228,648)	$	2,795,892
Six Months Ended June 30, 2022
Balance-December 31, 2021	135,137	$	14	$	2,856,572	$	41	$	(90,021)	$	2,766,606
Issuance of common stock pursuant to equity incentive plans	2,792	—		11,693		—		—		11,693
Stock-based compensation expense	—	—		156,632		—		—		156,632
Foreign currency translation adjustment	—	—		—		(412)		—		(412)
Net loss	—	—		—		—		(138,627)		(138,627)
Balance-June 30, 2022	137,929	$	14	$	3,024,897	$	(371)	$	(228,648)	$	2,795,892

See accompanying notes to condensed consolidated financial statements.

4

ROKU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

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

5

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

See accompanying notes to condensed consolidated financial statements.

6

ROKU, INC.

NOTES TO 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 operates in two reportable segments and generates platform revenue from the sale of digital advertising (including media and entertainment promotional spending, the demand-side platform, and related services) and content distribution services (including subscription and transaction revenue shares, the sale of Premium Subscriptions, and the sale of branded channel buttons on remote controls). The Company generates devices revenue from the sale of streaming players, Roku-branded TVs, smart home products and services, audio products, and related accessories as well as revenue from licensing arrangements with service operators and licensed Roku TV partners.

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, 2022, filed with the SEC on February 16, 2023 (the “Annual Report”).

The condensed consolidated balance sheet as of December 31, 2022 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 six months ended June 30, 2023 are not necessarily indicative of the operating results to be expected for the full year or any future periods.

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

Use of Estimates

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

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

•the impairment of intangible assets;

•amortization of content assets;

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

•valuation of the Strategic Investment;

•useful lives of tangible and intangible assets;

•allowances for sales returns and sales incentives; and

•the valuation of deferred income tax assets.

The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results may differ from the Company’s estimates and assumptions.

7

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 and Restricted Cash

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

The Company maintains its cash, cash equivalent and restricted cash balances with financial institutions which often exceed regulated insured limits. The table below reflects the percentage of cash, cash equivalent and restricted cash balances at financial institutions that individually held greater than 10% of the Company’s total cash, cash equivalent and restricted cash balance at each period reported.

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

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

* Less than 10%

Accounts Receivable, net

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

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

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

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

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

8

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

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

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

3. REVENUE

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

The contract balances include the following (in thousands):

	As of
	June 30, 2023		December 31, 2022
Accounts receivable, net	$	707,684	$	760,793
Contract assets (included in Prepaid expenses and other current assets)	41,873		42,617
Deferred revenue, current portion	$	104,109	$	87,678
Deferred revenue, non-current portion	23,065		28,210
Total deferred revenue	$	127,174	$	115,888

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

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

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

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

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

The Company recognized revenue of $17.6 million and $32.6 million during the three and six months ended June 30, 2023, respectively from performance obligations that were satisfied in previous periods due to changes in the estimated transaction price of its revenue contracts. The Company reversed revenue of $9.8 million and recognized revenue of $3.4 million during the three and six months ended June 30, 2022, respectively, from performance obligations that were satisfied in previous periods due to changes in the estimated transaction price of its revenue contracts.

9

Customer I accounted for 11% and 12% of the Company’s total net revenue during the three and six months ended June 30, 2023, respectively. The Company did not have any customer that accounted for more than 10% of its total net revenue during the three and six months ended June 30, 2022.

4. 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.

Intangible Assets

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

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

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

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

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

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

10

5. BALANCE SHEET COMPONENTS

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

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

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

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

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

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

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

11

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

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

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

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

6. CONTENT ASSETS

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

	As of
	June 30, 2023		December 31, 2022
Licensed content, net and advances	$	195,337	$	243,226
Produced content:
Released, less amortization	60,083		42,605
Completed, not released	35,904		3,537
In production	23,061		42,904
Total produced content, net	119,048		89,046
Total content assets, net and advances	$	314,385	$	332,272
Current portion (included in Prepaid expenses and other current assets)	$	13,966	$	39,506
Non-current portion	$	300,419	$	292,766

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

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

7. STRATEGIC INVESTMENT

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

12

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

As of June 30, 2023
Date of Investment	Amount of Investment	Date of Maturity
June 15, 2022	$40,000	June 15, 2025
March 23, 2023	$5,000	March 23, 2026
May 23, 2023	$5,000	May 23, 2026

The Strategic Investment contains certain redemption features that meet the definition of embedded derivatives and require bifurcation. The Company elected to apply the fair value option and account for the hybrid instrument containing the host contract and the embedded derivatives at fair value as a single instrument, with any subsequent changes in fair value included in Other income (expense), net in the condensed consolidated statements of operations. See Note 8 for additional details on the fair value of the Strategic Investment.

8. FAIR VALUE DISCLOSURE

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

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

The following table reflects the changes in the fair value of the Company’s Level 3 financial assets (in thousands):

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

Fair value is defined as the price that would be received to sell an 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, cash equivalents, restricted cash, accounts receivable, prepaid expenses, accounts payable and accrued liabilities.

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

13

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

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

Level 3—Unobservable inputs that are 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.

As of June 30, 2023, the Company measured the Strategic Investment using Level 3 inputs. The fair value of the Strategic Investment on the date of purchase was determined to be equal to its principal amount. The Company recorded an unrealized loss of $0.1 million and an unrealized gain of $3.1 million in Other income (expense), net related to the adjustment to fair value of the Strategic Investment for the three and six months ended June 30, 2023, respectively.

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

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

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

9. LEASES

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

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

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

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

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

14

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

	As of
	June 30, 2023			December 31, 2022
Operating lease right-of-use assets	$	499,308		$	521,695
Operating lease liability, current (included in Accrued liabilities)	$	59,266		$	54,689
Operating lease liability, non-current	589,476			584,651
Total operating lease liability	$	648,742		$	639,340
Weighted-average remaining term for operating leases (in years)	8.26			8.62
Weighted-average discount rate for operating leases	3.79		%	3.80		%

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

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

As of June 30, 2023, the Company’s commitment relating to operating leases that have not yet commenced was $30.8 million. These operating leases will commence in fiscal year 2023 with lease terms of approximately 10 years.

10. DEBT

The Company does not have any outstanding debt as of June 30, 2023. In February 2023, the Company repaid the debt balance in full and satisfied all outstanding debt obligations under the Credit Facility (as defined below) when it matured.

The Company’s outstanding debt as of December 31, 2022 was as follows (in thousands, except interest rate):

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

The carrying amount of debt as of December 31, 2022 approximated its fair value due to variable interest rates. There was no interest expense associated with the Credit Facility for the three months ended June 30, 2023. The interest expense for the three months ended June 30, 2022 was $0.8 million. The interest expense for the six months ended June 30, 2023 and 2022 was $0.6 million and $1.7 million, respectively.

15

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 provided for (i) a four-year revolving credit facility in the aggregate principal amount of up to $100.0 million (the “Revolving Credit Facility”), (ii) a four-year delayed draw term loan A facility in the aggregate principal amount of up to $100.0 million (the “Term Loan A Facility”) and (iii) an uncommitted incremental facility subject to certain conditions (together with the Revolving Credit Facility and the Term Loan A Facility, collectively, the “Credit Facility”). See Note 11 to the consolidated financial statements in our Annual Report for additional details regarding the Credit Facility.

On November 18, 2019, the Company borrowed an aggregate principal amount of $100.0 million from the Term Loan A Facility. The Company elected an interest rate equal to the adjusted one-month LIBOR rate plus an applicable margin of 1.75% based on the Company’s secured leverage ratio.

The Credit Facility matured on February 19, 2023 and the outstanding Term Loan A Facility was repaid in full.

As of December 31, 2022, the Company had outstanding letters of credit against the Revolving Credit Facility of $37.7 million. Upon maturity of the Credit Facility on February 19, 2023, the outstanding letters of credit were secured by the Company’s existing cash balance, a portion of which is restricted for that purpose. As of June 30, 2023, the Company had outstanding letters of credit of $37.8 million, which are secured by restricted cash of $40.7 million.

11. STOCKHOLDERS’ EQUITY

Preferred Stock

The Company has 10 million shares of undesignated preferred stock authorized but not issued with rights and preferences determined by the Company’s Board of Directors at the time of issuance of such shares. As of June 30, 2023 and December 31, 2022, 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.

Common Stock Reserved for Future Issuance

As of June 30, 2023, the Company’s common stock reserved for issuance in the future is as follows (in thousands):

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

(1) The Company has not issued any common stock 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 in September 2017 in connection with the Company’s initial public offering (“IPO”). No additional equity grants have been made pursuant to the 2008 Plan subsequent to the IPO. The 2017 Plan provides for the grant of incentive stock options to the Company’s employees and for the grant of non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards, and other forms of equity compensation to the Company’s employees, directors and consultants.

16

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

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

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

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

Stock Options

The following table summarizes the Company’s stock option activities under the 2008 Plan and 2017 Plan for the six months ended June 30, 2023 (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, 2022	5,807	$	72.79	7.1
Granted	126	59.48		—
Exercised	(246)	6.11		—
Forfeited and expired	(78)	160.84		—
Balance as of June 30, 2023	5,609	$	74.22	6.8	$	95,593
Options exercisable as of June 30, 2023	3,253	$	50.66	5.4	$	83,493

As of June 30, 2023, the Company had $80.2 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 2.3 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. Stock options granted to employees generally vest over one to four years and have a term of ten years. Restricted stock units generally vest over one to four years.

17

The following table shows the total stock-based compensation expense for the three and six months ended June 30, 2023 and 2022 (in thousands):

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

12. COMMITMENTS AND CONTINGENCIES

Manufacturing Purchase Commitments

The Company has various manufacturing contracts with vendors in the conduct of the normal course of its business. 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 June 30, 2023, the Company had $180.2 million of non-cancelable purchase commitments for inventory.

Content Commitments

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

As of June 30, 2023, the Company's total obligation for content was $344.9 million, of which the Company recorded $64.5 million in Current liabilities and $28.1 million in Other long-term liabilities in the condensed consolidated balance sheets. The remaining $252.3 million is not yet recognized on the condensed consolidated balance sheets as the content does not meet the criteria for asset recognition.

The expected timing of payments for these content obligations are as follows (in thousands):

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

Letters of Credit

As of June 30, 2023 and December 31, 2022, the Company had irrevocable letters of credit outstanding in the amount of $37.8 million and $37.7 million, respectively related to operating 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

18

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. During the three and six months ended June 30, 2023 and 2022, the Company did not have any loss contingencies that were material.

Indemnification

In the ordinary course of business, the Company has entered into contractual arrangements which provide indemnification provisions of varying scope and terms to business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements 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 expense was $1.6 million and $2.6 million for the three months ended June 30, 2023 and 2022, respectively. Income tax expense was $5.2 million and $4.7 million for the six months ended June 30, 2023 and 2022, respectively. The income tax expense is primarily attributable to income taxes in certain foreign jurisdictions where we conduct business and income taxes in the United States.

A valuation allowance is provided when it is more likely than not that 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 June 30, 2023, management believes it is more likely than not that some deferred tax assets will not be fully realizable. Accordingly, the Company has provided a full valuation allowance against its U.S. and certain foreign deferred tax assets.

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted in the United States. The IRA introduces a 15% alternative minimum tax based on the financial statement income of certain large corporations, effective for tax years beginning after December 31, 2022. The IRA also includes a 1% excise tax on the net fair market value of stock repurchases made after December 31, 2022. The Company considered the applicable tax law changes, and concluded that there was no impact to the Company’s tax provision for the three and six months ended June 30, 2023. The Company will continue to evaluate the impact of these tax law changes on future periods.

14. NET LOSS PER SHARE

The Company’s basic net loss per share is calculated by dividing the net 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 loss per share. Except with respect to certain voting, conversion, and transfer rights and as otherwise expressly provided in the Company’s amended and restated certificate of incorporation or required by applicable law, shares of the Company’s Class A common stock and Class B common stock have the same rights and privileges and rank equally, share ratably, and are identical in all respects as to all matters. Accordingly, basic and diluted net loss per share are the same for both classes.

For purposes of the calculation of diluted net loss per share, options to purchase common stock and restricted stock units 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.

19

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

	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Numerator:
Net Loss	$	(107,595)	$	(112,321)	$	(301,199)	$	(138,627)
Denominator:
Weighted-average common shares outstanding — basic and diluted	141,033		136,849		140,685		136,198
Net loss per share — basic and diluted	$	(0.76)	$	(0.82)	$	(2.14)	$	(1.02)

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

For the three and six months ended June 30, 2022, outstanding equity awards of 10.9 million shares of common stock are excluded from the calculation of diluted net loss per share because of their anti-dilutive effect.

15. SEGMENT INFORMATION

The Company is organized into two reportable segments as follows:

Platform

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

Devices

The devices segment generates revenue from the sale of streaming players, Roku-branded TVs, smart home products and services, audio products, and related accessories that are sold through retailers and distributors, as well as directly to customers through the Company’s website. In addition, revenue from licensing arrangements with service operators and licensed Roku TV partners is included in the devices segment.

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

	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Platform segment revenue:
Customer I	13	%	*		13	%	*
Devices segment revenue:
Customer B	17	%	22	%	14	%	21	%
Customer C	45	%	32	%	41	%	34	%

* Less than 10%

Revenue in international markets was less than 10% in each of the periods presented.

20

Long-lived assets, net

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

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

16. RESTRUCTURING

In November 2022, the Company approved a plan to reduce its operating expense growth rate due to economic conditions. The Company eliminated employee positions in the United States and internationally, and also abandoned future development for certain technology assets. Accordingly, the Company recorded employee termination expenses consisting primarily of severance payments, notice pay (where applicable), employee benefits contributions, payroll taxes and related costs, and an impairment charge related to the abandoned technology assets during the year ended December 31, 2022.

The Company continued to explore additional measures to curtail its operating expenses during the first quarter of this fiscal year. As a result, in March 2023, the Company approved the elimination of additional employee positions in the United States and internationally, and committed to exit and sublease, or cease use, of certain office facilities that the Company did not currently occupy. The Company recorded employee termination expenses, exits costs and assets impairment charges related to the exit and abandonment of leased office facilities.

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

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

A reconciliation of the beginning and ending balance of employee termination restructuring charges and facility exit costs, which are included in Accrued liabilities in the condensed consolidated balance sheets, is as follows (in thousands):

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