The condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 26, 2021 (the “Annual Report”).

The condensed consolidated balance sheet as of December 31, 2020 has been derived from the audited consolidated financial statements as of that date but does not include all of the information and footnotes included in the Company’s Annual Report. The interim financial information is unaudited, but reflects all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the operating results to be expected for the full year or any future periods.

The preparation of the Company’s consolidated financial statements in accordance with U.S. GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, net revenue and expenses. Significant items subject to such estimates and assumptions include: for revenue recognition, determining the nature and timing of satisfaction of performance obligations, variable consideration, determining the stand-alone selling prices of performance obligations, gross versus net revenue recognition, evaluation of customer versus vendor relationships, and other obligations such as sales return reserves and sales incentive programs; the impairment of goodwill and intangible assets; useful lives of tangible and intangible assets; allowances for doubtful accounts; the valuation of deferred income tax assets; and stock-based compensation. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results may differ from the Company’s estimates and assumptions.

The 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.

Certain prior period amounts within cash flow from operations in the statement of cash flows, have been reclassified to conform to current period presentation. These reclassifications had no effect on net cash provided by operating activities for any period reported.

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of March 31, 2021, two financial institutions managed 61% and 21%, respectively, of the Company’s cash and cash equivalents balance. As of December 31, 2020, two financial institutions managed 46% and 26%, respectively, of the Company’s cash and cash equivalents balance.

Accounts receivable 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 and doubtful accounts. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses and doubtful accounts. The Company considers historical experience, ongoing promotional activities, historical claim rate and other factors to determine the allowances for sales returns and sales incentives.

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

	Three Months Ended
	March 31, 2021			March 31, 2020
Beginning balance	$	(5,912	)	$	(6,550	)
Charged to revenue		(2,526	)		(2,727	)
Utilization of sales return reserve		4,670			4,609
Ending balance	$	(3,768	)	$	(4,668	)

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

	Three Months Ended
	March 31, 2021			March 31, 2020
Beginning balance	$	(30,838	)	$	(19,476	)
Charged to revenue		(12,618	)		(9,409	)
Utilization of sales incentive reserve		23,320			19,612
Ending balance	$	(20,136	)	$	(9,273	)

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

	Three Months Ended
	March 31, 2021			March 31, 2020
Balance, beginning of period	$	(4,181	)	$	(1,140	)
Impact of adoption of ASU 2016-13		—			(1,066	)
Adjusted balance, beginning of period		(4,181	)		(2,206	)
Provision for doubtful accounts		54			(3,788	)
Adjustments for recovery and write-off		—			1,035
Balance, end of period	$	(4,127	)	$	(4,959	)

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

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

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance provides optional expedients and exceptions for applying U.S. GAAP to contract modifications, hedging relationships, and other transactions

that reference London Interbank Offered Rate (“LIBOR”) that is expected to be discontinued, subject to meeting certain criteria. The guidance is effective as of March 12, 2020 through December 31, 2022. The Company made a policy election in the second quarter of 2020 to elect a different reference rate for the Credit Agreement (as defined below) when LIBOR is discontinued.