EX-99.1 2 roku-ex991_6.htm EX-99.1 roku-ex991_6.htm

Exhibit 99.1

 

February 21, 2019

Fellow Shareholders,

2018 was an excellent year for Roku, with record results and solid progress towards our long-term vision of powering every TV in the world. As more than 3 million U.S. households cut the cord, Roku added nearly 8 million active accounts in 2018, increasing our total active accounts to more than 27 million at year end. We estimate that nearly 1 in 5 U.S. TV households now use the Roku platform to stream at least a portion of their TV viewing. While our growth has been impressive, we believe we are still only beginning to capitalize on the large opportunity streaming presents. We expect to reach $1 billion in revenue in 2019, by focusing on these key areas: increasing monetization per user and scaling the number of households using the Roku platform. With our fundamental strategic advantages and continued strong execution, we believe we are well positioned to deliver another excellent year.

A few 2018 highlights for the full year:

Total net revenue grew 45% YoY to $742.5 million;

Platform revenue increased 85% YoY to $416.9 million;

Gross profit was up 66% YoY to $332.1 million;

Roku added 7.8 million incremental active accounts in 2018 to reach 27.1 million at year end;

Streaming hours increased by 9.2 billion hours to 24.0 billion;

Average Revenue Per User (ARPU) increased $4.17 to $17.95 (trailing 12-month basis);

Roku monetized video ad impressions more than doubled in 2018;

Roku Q4 2018 Shareholder Letter

1

 


 

 

 

Key Operating Metrics

Q4 17

 

 

Q1 18

 

 

Q2 18

 

 

Q3 18

 

 

Q4 18

 

 

YoY %

 

Active Accounts (millions)

 

19.3

 

 

 

20.8

 

 

 

22.0

 

 

 

23.8

 

 

 

27.1

 

 

 

40

%

Streaming Hours (billions)

 

4.3

 

 

 

5.1

 

 

 

5.5

 

 

 

6.2

 

 

 

7.3

 

 

 

69

%

ARPU ($)

$

13.78

 

 

$

15.07

 

 

$

16.60

 

 

$

17.34

 

 

$

17.95

 

 

 

30

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Summary Financials ($ in millions)

Q4 17

 

 

Q1 18

 

 

Q2 18

 

 

Q3 18

 

 

Q4 18

 

 

YoY %

 

Platform revenue

$

85.4

 

 

$

75.1

 

 

$

90.3

 

 

$

100.1

 

 

$

151.4

 

 

 

77

%

Player revenue

 

102.8

 

 

 

61.5

 

 

 

66.5

 

 

 

73.3

 

 

 

124.3

 

 

 

21

%

Total net revenue

 

188.3

 

 

 

136.6

 

 

 

156.8

 

 

 

173.4

 

 

 

275.7

 

 

 

46

%

Platform gross profit

 

63.7

 

 

 

53.4

 

 

 

63.0

 

 

 

70.5

 

 

 

109.4

 

 

 

72

%

Player gross profit

 

9.8

 

 

 

9.7

 

 

 

14.7

 

 

 

8.4

 

 

 

2.9

 

 

 

-70

%

Total gross profit

 

73.5

 

 

 

63.1

 

 

 

77.8

 

 

 

79.0

 

 

 

112.3

 

 

 

53

%

Platform gross margin %

 

74.6

%

 

 

71.1

%

 

 

69.8

%

 

 

70.5

%

 

 

72.2

%

 

 

-230

bps

Player gross margin %

 

9.5

%

 

 

15.8

%

 

 

22.2

%

 

 

11.5

%

 

 

2.4

%

 

 

-710

bps

Total gross margin %

 

39.0

%

 

 

46.2

%

 

 

49.6

%

 

 

45.6

%

 

 

40.7

%

 

 

170

bps

Research and development

 

31.3

 

 

 

34.1

 

 

 

40.2

 

 

 

45.4

 

 

 

51.0

 

 

 

63

%

Sales and marketing

 

19.1

 

 

 

20.3

 

 

 

22.3

 

 

 

25.6

 

 

 

34.6

 

 

 

81

%

General and administrative

 

13.5

 

 

 

15.6

 

 

 

15.4

 

 

 

19.8

 

 

 

21.2

 

 

 

57

%

Total operating expenses

 

64.0

 

 

 

70.0

 

 

 

77.9

 

 

 

90.7

 

 

 

106.8

 

 

 

67

%

Income (loss) from operations

 

9.5

 

 

 

(6.9

)

 

 

(0.1

)

 

 

(11.7

)

 

 

5.5

 

 

 

42

%

Adjusted EBITDA 1

 

14.4

 

 

 

(0.8

)

 

 

7.1

 

 

 

2.0

 

 

 

24.5

 

 

 

70

%

Adjusted EBITDA margin %

 

7.6

%

 

 

-0.6

%

 

 

4.5

%

 

 

1.1

%

 

 

8.9

%

 

 

120

bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outlook ($ in millions)

Q1 2019E

 

 

 

Full Year 2019E

 

Total net revenue

$185-$190

 

 

 

$1,000-$1,025

 

Total gross profit

$86-$90

 

 

 

$445-$460

 

Net income (loss)

($32)-($28)

 

 

 

($90)-($80)

 

Adjusted EBITDA 2, 3

($12)-($8)

 

 

 

($5)-$5

 

1 Refer to the reconciliation of net loss to adjusted EBITDA in the non-GAAP information in an appendix to this letter.

 

2 Full Year 2019E reconciling items between net loss and non-GAAP adjusted EBITDA consist of stock-based compensation of approximately $73 million, depreciation and amortization and other net adjustments of approximately $12 million.

 

3 Q1 2019E reconciling items between net loss and non-GAAP adjusted EBITDA consist of stock-based compensation of approximately $17 million, depreciation and amortization and other net adjustments of approximately $3 million.

 

Roku Q4 2018 Shareholder Letter

2

 


 

 

 

Q4 highlights

Q4 results exceeded our outlook for revenue, gross profit and adjusted EBITDA driven by strong operational execution and robust active account growth. We added 3.3 million incremental active accounts in the fourth quarter and ended 2018 with 27.1 million active accounts, thanks to great retail execution and strong holiday sales for both players and TVs. Player units were up 30% year-over-year with the highest growth coming from the sub-$50 category which drove an 8% decrease in average sales price (ASP). Our U.S. smart TV market share also continued to grow as “home grown” TV operating systems continue to become increasingly uncompetitive. We ended the year with Roku TV holding a significant lead among licensed TV OS solutions in the U.S.

Engagement on our platform continued to grow as Roku users streamed 7.3 billion hours in the quarter, up 69% year-over-year. In just the last 18 months Roku users streamed more than they did in the prior nine years of the company’s history. Finally, platform monetization was particularly strong as we continued to grow video advertising impressions across the platform, including on The Roku Channel. For the full year of 2018, Roku monetized video advertising impressions across the platform more than doubled year-over-year.

Expanding Monetization

We believe that in the medium-term the most significant factor driving Roku’s financial performance will be increasing monetization of our growing installed base. In addition to growing active accounts and increasing engagement, we are executing on our strategy to increase the economics we generate from the Roku platform.

With the launch of The Roku Channel in late 2017, we began a fundamental transition to increase video advertising inventory under our control and to create better ways of connecting content owners with viewers.  The Roku Channel has grown from providing customers with free access to 1,000 movies and TV episodes to roughly 10,000 today, plus free live channels like ABC News and TMZ, and paid access to Premium Subscriptions from SHOWTIME, EPIX, STARZ and many more.

Over time, as The Roku Channel offers viewers an increasingly compelling experience and as we integrate it more closely into our platform, we believe it can become a significant destination for our viewers’ streaming. Likewise, even though The Roku Channel already represents a significant part of our advertising inventory, we expect it  to become a larger source of advertising inventory as viewership grows.

There is another trend that contributes to our confidence in the significant growth opportunity for advertising on the Roku platform. In the mobile market, viewers shifted to mobile devices from desktop well ahead of advertisers. It took a few years, but advertiser spend on mobile eventually caught up with mobile viewer share. In the TV streaming world, viewer share is well ahead of TV ad budget share, but the rapid growth of our Platform revenue suggests advertisers are starting to respond. This anticipated spending pattern shift, combined with substantial growth in our ad inventory and audience reach, should drive sustained, rapid advertising growth.

Our Long-Term Account Growth Strategy

Over the long-term, we believe active account growth will be the biggest driver of our P&L. We more than doubled our active account base between 2016 and 2018. Over the last three years, we increased active accounts by roughly 4 million, 6 million and nearly 8 million per year, respectively, to just over 27 million as of the end of 2018. During the same period, we quadrupled the size of our Platform revenue (from just over $100 million in 2016 to over $400 million in 2018). In the U.S. alone, our active account base would make the Roku platform equivalent to the No. 2 traditional pay TV/cable company.

Roku Q4 2018 Shareholder Letter

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While we continue to see a lot of headroom to grow active accounts in the U.S., we are increasing our investment internationally. These are still early days for us on the international front, and thus international distribution is unlikely to be a major driver of 2019 account growth. We expect to start seeing greater benefits of these investments show up in international account growth in 2020 and beyond. Broadly speaking, we expect international platform revenue to lag user growth, as it normally does, since scale is the first step (followed by monetization).

Where are we investing in 2019?

We plan to continue to invest incremental gross profit in 2019 into multiple high-ROI areas. Here is a short list of the areas with the largest increases:

 

Advertising – As one of the largest opportunities on our platform, we support growth with improved products, technology, innovation and platform integration. We also plan to keep improving strategically important areas – such as our marketplace, programmatic and self-serve capabilities which we believe can increase scalability.

 

The Roku Channel – We intend to continue to add features and content as well as expand reach to make The Roku Channel even more compelling for viewers, content partners, and advertisers.

 

Roku TV Just as happened with mobile phones, TVs are in the process of switching from proprietary software stacks to a licensed OS. We have the world’s only purpose-built-for-TV licensed OS. We will focus on increasing consumer choice, helping OEM partners grow, and continuing to gain market share.

 

International – Around the globe TV viewing will continue to transition to streaming. We are building the foundation to capitalize on the international opportunity – including key hires and projects – to enable us to be successful on a global scale over the long-term.  

Outlook

In 2019, we expect to reach $1 billion in revenues, or roughly 36% year-over-year growth, with Platform revenue representing roughly two-thirds of total revenue. We estimate total gross profit should grow at roughly the same rate as revenues, or 36% year-over-year at the midpoint, to just over $450 million.

The majority of our operating expenses are headcount related. We ended the year with over 1,100 full-time employees, up 36% year-over-year and our plan is to continue to hire at a similar pace in 2019. As we have stated for several quarters, our goal for 2019 is to manage the business to roughly break-even on a full year adjusted EBITDA basis. Implied in our outlook is roughly $535 million of GAAP operating expenses in 2019 which includes stock-based compensation of roughly $73 million and an estimated $12 million of depreciation and amortization.

Turning to our first quarter outlook, we remind you that Q1 is our seasonally softest quarter from a revenue perspective, with revenue that is roughly one third lower sequentially than our seasonally strong fourth quarter. Our Q1 outlook calls for normal seasonality with the midpoint of total revenues down 32% quarter-over-quarter to $188 million. Gross profit of roughly $88 million at the midpoint is expected to be more than offset by higher operating expenses, resulting in an adjusted EBITDA loss of roughly $10 million.

Conclusion

Powering the world’s TVs is a big opportunity and we believe that we are still in the early days of our growth. We are making investments now in our business that we expect will continue to build our momentum. At the same time, we are strengthening our long-term position of influence in the TV streaming industry. We believe our competitive strengths – namely our large and engaged user base, purpose-built OS for TV, powerful data and analytics, neutral position, and exceptionally talented team will continue to propel our business for years to come.  

Roku Q4 2018 Shareholder Letter

4

 


 

 

 

Thanks for your continued support and Happy Streaming!

Sincerely,

 

Anthony Wood, Founder and CEO

Steve Louden, CFO

 

Conference Call Webcast – 2 p.m. PST February 21, 2019

The Company will host a webcast of its conference call to discuss the Q4 2018 results at 2 p.m. Pacific Time / 5 p.m. Eastern Time. Participants may access the live webcast in listen-only mode on the Roku investor relations website at ir.roku.com. An archived webcast of the conference call will also be available at ir.roku.com following the call.

About Roku, Inc.

Roku pioneered streaming to the TV. We connect users to the streaming content they love, enable content publishers to build and monetize large audiences, and provide advertisers with unique capabilities to engage consumers. Roku streaming players and Roku TVTM models are available around the world through direct retail sales and licensing arrangements with TV OEMs and service operators. Roku is headquartered in Los Gatos, Calif. U.S.A.

 

Investor Relations

James Samford

ir@roku.com

Press

Eric Savitz

esavitz@roku.com

Use of Non-GAAP Measures

In addition to financial information prepared in accordance with generally accepted accounting principles in the United States (GAAP), this shareholder letter includes certain non-GAAP financial measures. These non-GAAP measures include Adjusted EBITDA and pro forma basic and diluted net loss per share. In order for Roku’s investors to be better able to compare its current results with those of previous periods, Roku has included a reconciliation of GAAP to non-GAAP financial measures as an appendix to this letter. The Adjusted EBITDA reconciliation adjusts the related GAAP financial measures to exclude other income (expense), net, stock-based compensation expense, depreciation and amortization, and income tax expense where applicable. The pro forma basic and diluted net income (loss) per share reconciliation gives effect to the conversion of outstanding convertible preferred stock using the as-if converted method into common shares as though the conversion had occurred as of the beginning of the period. Also, the numerator has been adjusted to reverse the fair value adjustments related to the convertible preferred stock warrants as they became warrants to purchase common stock at the time of our initial public offering and at such time no longer required periodic revaluation. We believe these non-GAAP financial measures are useful as a supplement in evaluating our ongoing operational performance and enhancing an overall understanding of our past financial performance. However, these non-GAAP financial measures have limitations, and you should not consider them in isolation or as a substitute for our GAAP financial information.

Roku Q4 2018 Shareholder Letter

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Forward-Looking​ ​Statements

This shareholder letter contains “forward-looking” statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “could,” “seek,” “estimate,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or similar expressions and the negatives of those terms.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements represent our beliefs and assumptions only as of the date of this letter. These statements include our financial outlook for the first quarter of 2019 and for the full fiscal year, the growth in ARPU and active accounts, the growth and evolution of TV streaming, our capitalization of streaming, our market opportunity in other countries, the decline in cable video subscribers and the shift of advertising to OTT, the amount, uses and impact of our research and development investments, the importance of The Roku Channel as a source of ad impressions and in monetizing our platform, the reach and popularity of The Roku Channel, the opportunities for the evolution and expansion of the scope of The Roku Channel, the role of our operating system in the transition of TV viewing and TV advertising to streaming, our ability to hire employees, and our overall business trajectory. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. Further information on factors that could cause actual results to differ materially from the results anticipated by our forward-looking statements is included in the reports we have filed with the Securities and Exchange Commission, including our Quarterly Report on Form 10-Q for the quarter ended September 30, 2018.

 

 

 

 

 

 

Roku Q4 2018 Shareholder Letter

6

 


 

 

 

ROKU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)

(unaudited)

 

 

Three Months Ended

 

 

Year Ended

 

 

 

December 31,

2018

 

 

December 31,

2017

 

 

December 31,

2018

 

 

December 31,

2017

 

Net Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Platform

 

$

151,395

 

 

$

85,437

 

 

$

416,863

 

 

$

225,356

 

Player

 

 

124,344

 

 

 

102,824

 

 

 

325,643

 

 

 

287,407

 

Total net revenue

 

 

275,739

 

 

 

188,261

 

 

 

742,506

 

 

 

512,763

 

Cost of Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Platform (1)

 

 

42,045

 

 

 

21,743

 

 

 

120,543

 

 

 

54,826

 

Player (1)

 

 

121,403

 

 

 

93,057

 

 

 

289,815

 

 

 

258,104

 

Total cost of revenue

 

 

163,448

 

 

 

114,800

 

 

 

410,358

 

 

 

312,930

 

Gross Profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Platform

 

 

109,350

 

 

 

63,694

 

 

 

296,320

 

 

 

170,530

 

Player

 

 

2,941

 

 

 

9,767

 

 

 

35,828

 

 

 

29,303

 

Total gross profit

 

 

112,291

 

 

 

73,461

 

 

 

332,148

 

 

 

199,833

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development (1)

 

 

51,000

 

 

 

31,295

 

 

 

170,692

 

 

 

107,945

 

Sales and marketing (1)

 

 

34,600

 

 

 

19,131

 

 

 

102,780

 

 

 

64,069

 

General and administrative (1)

 

 

21,204

 

 

 

13,541

 

 

 

71,972

 

 

 

47,435

 

Total operating expenses

 

 

106,804

 

 

 

63,967

 

 

 

345,444

 

 

 

219,449

 

Income (Loss) from Operations

 

 

5,487

 

 

 

9,494

 

 

 

(13,296

)

 

 

(19,616

)

Other Income (Expense), Net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(126

)

 

 

(326

)

 

 

(346

)

 

 

(1,612

)

Loss on extinguishment of debt

 

 

 

 

 

(2,338

)

 

 

 

 

 

(2,338

)

Change in fair value of preferred stock warrant

   liability

 

 

 

 

 

 

 

 

 

 

 

(40,333

)

Other income (expense), net

 

 

1,338

 

 

 

282

 

 

 

4,309

 

 

 

705

 

Total other income (expense), net

 

 

1,212

 

 

 

(2,382

)

 

 

3,963

 

 

 

(43,578

)

Income (Loss) Before Income Taxes

 

 

6,699

 

 

 

7,112

 

 

 

(9,333

)

 

 

(63,194

)

Income tax (benefit) expense

 

 

(79

)

 

 

171

 

 

 

(476

)

 

 

315

 

Net Income (Loss) Attributable to Common Stockholders

 

$

6,778

 

 

$

6,941

 

 

$

(8,857

)

 

$

(63,509

)

Net Income (Loss) per share attributable to

    common stockholders—basic

 

$

0.06

 

 

$

0.07

 

 

$

(0.08

)

 

$

(2.24

)

Net Income (Loss) per share attributable to

    common stockholders—diluted

 

$

0.05

 

 

$

0.06

 

 

$

(0.08

)

 

$

(2.24

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used in computing net income

   (loss) per share attributable to common stockholders—basic

 

 

109,322

 

 

 

96,492

 

 

 

104,618

 

 

 

28,308

 

Weighted-average shares used in computing net income

   (loss) per share attributable to common stockholders—diluted

 

 

123,237

 

 

 

119,140

 

 

 

104,618

 

 

 

28,308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)  Stock-based compensation was allocated as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of platform revenue

 

$

30

 

 

$

23

 

 

$

97

 

 

$

81

 

Cost of player revenue

 

 

222

 

 

 

46

 

 

 

469

 

 

 

145

 

Research and development

 

 

7,880

 

 

 

1,636

 

 

 

18,538

 

 

 

4,714

 

Sales and marketing

 

 

4,786

 

 

 

718

 

 

 

10,459

 

 

 

2,817

 

General and administrative

 

 

3,519

 

 

 

1,013

 

 

 

8,111

 

 

 

3,196

 

Total stock-based compensation

 

$

16,437

 

 

$

3,436

 

 

$

37,674

 

 

$

10,953

 

 

Roku Q4 2018 Shareholder Letter

7

 


 

 

 

ROKU, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data)

(unaudited)

 

 

As of

 

 

 

December 31,

2018

 

 

December 31,

2017

 

Assets

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

155,564

 

 

$

177,250

 

Short-term investments

 

 

42,146

 

 

 

 

Accounts receivable, net of allowances of $21,897 and $17,739 as of

 

 

183,078

 

 

 

120,553

 

Inventories

 

 

35,585

 

 

 

32,740

 

Prepaid expenses and other current assets

 

 

15,374

 

 

 

11,367

 

Deferred cost of revenue, current portion

 

 

1,188

 

 

 

3,007

 

Total current assets

 

 

432,935

 

 

 

344,917

 

Property and equipment, net

 

 

25,264

 

 

 

14,736

 

Deferred cost of revenue, non-current portion

 

 

 

 

 

5,403

 

Intangible assets, net

 

 

1,477

 

 

 

2,030

 

Goodwill

 

 

1,382

 

 

 

1,382

 

Other non-current assets

 

 

3,939

 

 

 

3,429

 

Total Assets

 

$

464,997

 

 

$

371,897

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

56,576

 

 

$

56,413

 

Accrued liabilities

 

 

91,986

 

 

 

72,344

 

Deferred revenue, current portion

 

 

45,442

 

 

 

34,501

 

Total current liabilities

 

 

194,004

 

 

 

163,258

 

Deferred revenue, non-current portion

 

 

19,594

 

 

 

48,511

 

Other long-term liabilities

 

 

6,748

 

 

 

7,849

 

Total Liabilities

 

 

220,346

 

 

 

219,618

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value;

 

 

 

 

 

 

Common stock, $0.0001 par value;

 

 

11

 

 

 

10

 

Additional paid-in capital

 

 

498,553

 

 

 

435,607

 

Accumulated other comprehensive loss

 

 

(17

)

 

 

 

Accumulated deficit

 

 

(253,896

)

 

 

(283,338

)

Total stockholders’ equity

 

 

244,651

 

 

 

152,279

 

Total Liabilities and Stockholders’ Equity

 

$

464,997

 

 

$

371,897

 

Roku Q4 2018 Shareholder Letter

8

 


 

 

 

ROKU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

(unaudited)

 

 

Years Ended December 31,

 

 

 

2018

 

 

2017

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(8,857

)

 

$

(63,509

)

Adjustments to reconcile net loss to net cash provided by (used in) operating

   activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

8,389

 

 

 

5,336

 

Stock-based compensation expense

 

 

37,674

 

 

 

10,953

 

Provision for doubtful accounts

 

 

876

 

 

 

104

 

Change in fair value of preferred stock warrant liability

 

 

 

 

 

40,333

 

Noncash interest expense

 

 

342

 

 

 

784

 

Loss from exit of facilities

 

 

1,120

 

 

 

525

 

Loss on disposals of property and equipment

 

 

8

 

 

 

54

 

Loss from extinguishment of debt

 

 

 

 

 

2,338

 

Impairment of long-lived assets

 

 

352

 

 

 

 

Amortization of premiums on short-term investments

 

 

(357

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(50,673

)

 

 

(41,184

)

Inventories

 

 

(2,953

)

 

 

10,828

 

Prepaid expenses and other current assets

 

 

(306

)

 

 

(6,514

)

Deferred cost of revenue

 

 

2,261

 

 

 

(1,959

)

Other noncurrent assets

 

 

(732

)

 

 

(2,794

)

Accounts payable

 

 

(98

)

 

 

24,315

 

Accrued liabilities

 

 

17,914

 

 

 

24,127

 

Other long-term liabilities

 

 

(1,101

)

 

 

3,579

 

Deferred revenue

 

 

10,063

 

 

 

29,976

 

Net cash provided by (used in) operating activities

 

 

13,922

 

 

 

37,292

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(18,327

)

 

 

(9,229

)

Purchase of business, net of cash acquired

 

 

 

 

 

(2,959

)

Purchases of short-term investments

 

 

(53,806

)

 

 

 

Sales/maturities of short-term investments

 

 

12,000

 

 

 

 

Change in deposits

 

 

 

 

 

(80

)

Net cash used in investing activities

 

 

(60,133

)

 

 

(12,268

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from borrowings, net

 

 

 

 

 

24,691

 

Repayments of borrowings

 

 

 

 

 

(40,446

)

Holdback payment for a prior business acquisition

 

 

(500

)

 

 

 

Proceeds from equity issued under incentive plans, net of repurchases

 

 

25,025

 

 

 

1,773

 

Proceeds from issuance of common stock pursuant to an initial public offering, net of issuance costs of $3.1 million

 

 

 

 

 

131,646

 

Net cash provided by financing activities

 

 

24,525

 

 

 

117,664

 

Net (Decrease) Increase in Cash

 

 

(21,686

)

 

 

142,688

 

Cash and cash equivalents—Beginning of period

 

 

177,250

 

 

 

34,562

 

Cash and cash equivalents—End of period

 

$

155,564

 

 

$

177,250

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

493

 

 

$

1,149

 

Cash paid for income taxes

 

$

564

 

 

$

222

 

Supplemental disclosures of noncash investing and financing

   activities:

 

 

 

 

 

 

 

 

Unpaid portion of property and equipment purchases

 

$

1,617

 

 

$

1,250

 

Fair value of preferred stock warrants reclassified to additional paid in capital

 

$

 

 

$

52,355

 

Issuance of convertible preferred stock warrants in connection

   with debt

 

$

 

 

$

2,032

 

 

Roku Q4 2018 Shareholder Letter

9

 


 

 

 

ROKU, INC.

NON-GAAP INFORMATION (in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended

 

 

Year Ended

 

 

 

December 31,

2018

 

 

December 31,

2017

 

 

December 31,

2018

 

 

December 31,

2017

 

Reconciliation of Net Loss to Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

6,778

 

 

$

6,941

 

 

$

(8,857

)

 

$

(63,509

)

Other (income) expense, net

 

 

(1,212

)

 

 

2,382

 

 

 

(3,963

)

 

 

43,578

 

Stock-based compensation

 

 

16,437

 

 

 

3,436

 

 

 

37,674

 

 

 

10,953

 

Depreciation and amortization

 

 

2,565

 

 

 

1,453

 

 

 

8,389

 

 

 

5,336

 

Income tax expense (benefit)

 

 

(79

)

 

 

171

 

 

 

(476

)

 

 

315

 

Adjusted EBITDA

 

$

24,489

 

 

$

14,383

 

 

$

32,767

 

 

$

(3,327

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma basic and diluted net loss per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common stock holders

 

$

6,778

 

 

$

6,941

 

 

$

(8,857

)

 

$

(63,509

)

Add: Change in fair value of convertible preferred stock

   warrant liability

 

 

 

 

 

 

 

 

 

 

 

40,333

 

Net income (loss) attributable to common stockholders used

  in computing pro forma basic net loss per share

 

$

6,778

 

 

$

6,941

 

 

$

(8,857

)

 

$

(23,176

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used in computing net income (loss)

  per share attributable to common stockholders—basic

 

 

109,322

 

 

 

96,492

 

 

 

104,618

 

 

 

28,308

 

Add: Pro forma adjustments

 

 

 

 

 

1,738

 

 

 

 

 

 

60,688

 

Weighted-average shares used in computing pro forma net

   income (loss) per share attributable to common

   stockholders—basic

 

 

109,322

 

 

 

98,230

 

 

 

104,618

 

 

 

88,996

 

Pro forma net income (loss) per share—basic

 

$

0.06

 

 

$

0.07

 

 

$

(0.08

)

 

$

(0.26

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used in computing net income (loss)

   per share attributable to common stockholders—diluted

 

 

123,237

 

 

 

119,140

 

 

 

104,618

 

 

 

28,308

 

Add: Pro forma adjustments

 

 

 

 

 

1,738

 

 

 

 

 

 

60,688

 

Weighted-average shares used in computing pro forma net

   income (loss) per share attributable to common

   stockholders—diluted

 

 

123,237

 

 

 

120,878

 

 

 

104,618

 

 

 

88,996

 

Pro forma net income (loss) per share—diluted

 

$

0.05

 

 

$

0.06

 

 

$

(0.08

)

 

$

(0.26

)

 

Roku Q4 2018 Shareholder Letter

10