Roku(ROKU) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited financial statements for Q2 2025 show a shift to profitability with a net income of $10.5 million, compared to a $34.0 million net loss in the prior year Condensed Consolidated Balance Sheets Total assets slightly decreased to $4.28 billion as of June 30, 2025, with significant increases in goodwill and intangible assets due to the Frndly acquisition Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $2,253,276 | $2,160,236 | | Accounts receivable, net | $628,475 | $812,510 | | Goodwill | $309,406 | $161,519 | | Intangible assets, net | $64,496 | $27,501 | | Total Assets | $4,281,955 | $4,303,933 | | Liabilities & Equity | | | | Total current liabilities | $1,108,188 | $1,232,502 | | Total Liabilities | $1,691,403 | $1,811,196 | | Total stockholders' equity | $2,590,552 | $2,492,737 | Condensed Consolidated Statements of Operations For Q2 2025, Roku reported a net income of $10.5 million, a significant improvement from a $34.0 million net loss in the prior-year period, with total net revenue growing 15% YoY to $1.11 billion Q2 2025 vs Q2 2024 Performance (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total net revenue | $1,111,038 | $968,179 | | Platform revenue | $975,471 | $824,333 | | Devices revenue | $135,567 | $143,846 | | Total gross profit | $497,658 | $424,700 | | Loss from operations | ($23,333) | ($71,243) | | Net income (loss) | $10,503 | ($33,953) | | Net income (loss) per share | $0.07 | ($0.24) | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly increased to $248.5 million for the six months ended June 30, 2025, primarily offset by cash used in investing activities for the Frndly acquisition Six Months Ended June 30 Cash Flow Summary (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $248,465 | $70,089 | | Net cash used in investing activities | ($95,143) | ($1,547) | | Net cash used in financing activities | ($68,562) | ($32,944) | | Net increase in cash | $84,760 | $35,598 | Notes to Condensed Consolidated Financial Statements The notes detail the May 2025 acquisition of Frndly TV for $169.8 million, increasing goodwill and intangible assets, and outline future purchase commitments and restructuring charges - On May 9, 2025, the Company acquired Frndly TV, Inc. for a total purchase consideration of $169.8 million, including $103.6 million in cash and $65.8 million in contingent consideration, aimed at growing Platform revenue and Roku-billed subscriptions[65] - Goodwill increased from $161.5 million to $309.4 million, with the $147.9 million increase attributed to the Frndly acquisition[70] - As of June 30, 2025, the company had total future purchase commitments of $505.8 million, with the largest commitments for content ($188.5 million) and manufacturing ($170.4 million)[110] - The company recorded restructuring charges of $3.1 million for the six months ended June 30, 2025, primarily related to asset impairment from ceasing use of certain office facilities[130] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 15% YoY revenue growth in Q2 2025 to an 18% increase in Platform revenue, driven by advertising and streaming services, and updated key performance metrics to focus on profitability - Starting in Q1 2025, the company updated its Key Performance Metrics to Streaming Hours, Platform Revenue, Adjusted EBITDA, and Free Cash Flow to better align with its focus on growing Platform revenue and profitability[139] Key Performance Metrics (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Streaming Hours (billions) | 35.4 | 30.1 | +17% | | Platform Revenue (millions) | $975.5 | $824.3 | +18% | | Adjusted EBITDA (millions) | $78.2 | $43.6 | +79% | - The company expects full-year 2025 devices revenue and gross margin to be slightly down, primarily due to the impact of tariffs[138][332] - The 18% increase in Platform revenue for Q2 2025 was driven by higher advertising revenue and streaming services distribution, with the acquisition of Frndly contributing approximately 1.8 percentage points of this growth[167] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate fluctuations affecting its $2.25 billion cash balance and foreign currency exchange rates impacting operating expenses - A 100 basis point change in interest rates would affect interest income by approximately $22.5 million due to the company's cash and cash equivalents balance[207] - Foreign currency risk is primarily related to operating expenses denominated in British pounds and Euros, as most revenue is generated in the United States[208] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level[210] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[212] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is subject to various legal proceedings but does not anticipate any material adverse effect on its business or financial condition from current matters - The company states that it does not believe the final outcome of any current legal matters will have a material adverse effect on its business, financial condition, or results of operations[112][214] Item 1A. Risk Factors The company faces significant risks including intense competition, reliance on advertising revenue and key content partners, supply chain dependencies, cybersecurity threats, and concentrated voting power from its dual-class stock structure - The company faces intense competition from large, well-resourced companies like Amazon, Apple, and Google, which offer competing streaming devices and operating systems[222] - A small number of content partners account for a significant portion of streaming hours; for the three months ended June 30, 2025, the top three streaming services (excluding The Roku Channel) represented nearly half of all hours streamed[247] - The business depends on sole-source suppliers for key components like SoCs and Wi-Fi modules, creating significant supply chain risk[278] - The dual-class stock structure concentrates significant voting control with the founder and CEO, Anthony Wood, who controls a majority of the combined voting power as of June 30, 2025[402][404] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period - None[424] Item 5. Other Information No officers or directors adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025 - No officers or directors adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement in the second quarter of 2025[429] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate documents and CEO/CFO certifications