Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Equities  >  Nasdaq  >  Roku, Inc.    ROKU

ROKU, INC.

(ROKU)
  Report  
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
News SummaryMost relevantAll newsPress ReleasesOfficial PublicationsSector newsMarketScreener StrategiesAnalyst Recommendations

ROKU : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

share with twitter share with LinkedIn share with facebook
share via e-mail
0
11/08/2019 | 05:18pm EST
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes included elsewhere in this Quarterly
Report on Form 10-Q and with our audited consolidated financial statements
included in our Annual Report on Form 10-K for the year ended December 31, 2018,
filed on March 1, 2019, with the SEC.

Overview

Roku pioneered streaming to the TV, and we are capitalizing on this large economic opportunity as a leading TV streaming platform for users, content publishers and advertisers. Roku connects users to the streaming content they love, enables content publishers to build and monetize large audiences, and provides advertisers with unique capabilities to engage consumers.


Our business model is to increase the number of households that use our platform
to watch TV, which is measured by active accounts, increase engagement by those
users, which is measured by streaming hours, and then monetize our platform. We
measure our platform monetization progress through average revenue per user
("ARPU") and growth in gross profit.

We generate platform revenue primarily from advertising, content distribution
and billing services on our platform and player revenue primarily from the sale
of streaming players. During the three and nine months ended September 30, 2019,
we generated revenue of $260.9 million and $717.7 million, respectively, which
is up 50% and 54%, respectively, from the three and nine months ended
September 30, 2018.

We continue to manage the average selling prices ("ASP") of our streaming
players to grow the number of players sold and active accounts. As a result,
player revenue and player gross profit may fluctuate and may decline. We expect
that tradeoffs from player revenue and player gross profit to grow the number of
players sold and grow active accounts, and to result in increased platform
monetization and growth in aggregate gross profit.

Key Performance Metrics


We use the following key performance metrics to evaluate our business, measure
our performance, develop financial forecasts and make strategic decisions. Our
key performance metrics are gross profit, active accounts, hours streamed, and
ARPU.

Gross Profit

We measure the performance of our business using gross profit. The majority of
our gross profit is generated from platform revenue. We believe gross profit is
the primary metric to measure the performance of our business because we have
two revenue segments with different margin profiles, and we aim to maximize our
high margin platform revenue from our active accounts as they stream content on
our platform. During the three and nine months ended September 30, 2019, we
generated gross profit of $118.5 million and $333.6 million, respectively, which
is up 50% and 52%, respectively, from the three and nine months ended
September 30, 2018.

Active Accounts


We define active accounts as the number of distinct user accounts that have
streamed content on our platform within the last 30 days of the period. Users
that streamed content from The Roku Channel only on non-Roku platforms are not
included in this metric. The number of active accounts also does not correspond
to the number of unique individuals who actively utilize our platform, or the
number of devices associated with an account. For example, a single account may
be used by more than one individual, such as a family, and one account may be
used on multiple devices. We believe that the number of active accounts is a
relevant measure to gauge the size of our user base. We grow new accounts by
selling streaming devices; by partnering with TV brands that manufacture and
sell Roku TV models under licenses from us; and through licensing relationships
with service operators. As of September 30, 2019, we had 32.3 million active
accounts, a net increase of 1.7 million active accounts from June 30, 2019.

Hours Streamed


We define hours streamed as the aggregate amount of time our streaming devices
stream content on our platform in a given period. Streaming hours on non-Roku
platforms are not included in this metric. We report hours streamed on a
calendar basis. We believe the number of streaming hours on our platform is an
effective measure of user engagement and that the growth in the number of hours
of content streamed across our platform reflects our success in addressing the
growing user demand for TV streaming.

                                       20

--------------------------------------------------------------------------------
Additionally, we believe that over time increasing user engagement on our
streaming platform increases our platform monetization because we earn platform
revenue from advertising as well as from revenue shares from subscription and
transactional video on-demand. However, our revenue from content providers is
not tied to the hours streamed on their streaming channels, and the number of
hours streamed does not correlate to revenue earned from such content providers
or ARPU on a period-by-period basis. Moreover, streaming hours on our platform
are measured whenever a Roku player or a Roku TV is streaming content, whether a
viewer is actively watching or not. For example, if a Roku player is connected
to a TV, and the viewer turns off the TV, steps away or falls asleep and does
not stop or pause the player then the particular streaming channel may auto-play
subsequent content for a period of time determined by the streaming channel. We
believe that this also occurs across a wide variety of non-Roku streaming
devices and other set-top boxes.

During the third quarter of 2019, we began rolling out a new Roku OS feature
that is designed to identify when content has been continuously streaming on a
channel for an extended period of time without user interaction. This feature
periodically prompts the user to confirm that they are still watching the
selected channel and closes the channel if the user does not respond
affirmatively. We believe that implementing this new feature across the Roku
platform will benefit us, our customers, channel partners and advertisers. Some
of our leading channel partners, including Netflix, have already implemented
similar features within their channels. This new Roku OS feature supplements
these channel features. We are currently rolling this feature out to our entire
installed base. While we expect continued robust growth in our aggregate
streaming hours as we grow active accounts and user engagement with our
streaming platform increases, we believe our year-over-year growth rates of
streaming hours reported in 2020 are likely to be lower than the year-over-year
growth rates we reported in 2019. We do not expect the rollout of this feature
to have a material impact on our future financial performance. In the three
months ended September 30, 2019 our users streamed 10.3 billion hours, an
increase of 0.9 billion hours from the three months ended June 30, 2019.

Average Revenue per User


We measure platform monetization progress with ARPU. We define ARPU as our
platform revenue for the trailing four quarters divided by the average of the
number of active accounts at the end of the current period and the end of the
corresponding period in the prior year. ARPU measures the rate at which we are
monetizing our active account base and the progress of our platform business. At
September 30, 2019, our ARPU was $22.58, a 30% increase from September 30,
2018.

Components of Results of Operations

Revenue

Platform Revenue


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

Player Revenue


We generate player revenue primarily from the sale of streaming players through
consumer retail distribution channels, including major brick and mortar
retailers, such as Best Buy and Walmart, and online retailers, primarily Amazon.
We generate most of our player revenue in the United States. In our
international markets, we sell our players through wholesale distributors which,
in turn, re-sell to retailers. We currently distribute our players in Canada,
the United Kingdom, France, the Republic of Ireland, Mexico and several other
Latin American countries.

To enhance user experience, we introduced wireless speakers in 2018 that work
with Roku TV models and introduced the Roku Smart Soundbar and Roku Wireless
Subwoofer in September 2019.

Cost of Revenue

Cost of Platform Revenue

Cost of platform revenue consists of advertising inventory acquisition costs,
payment processing fees, third-party cloud service fees, content licensing fees
and allocated personnel-related costs, including salaries, benefits and
stock-based compensation for Roku personnel who support platform services.

                                       21

--------------------------------------------------------------------------------

Cost of Player Revenue


Cost of player revenue is comprised of player manufacturing costs payable to our
third-party contract manufacturers, technology licenses or royalty fees, inbound
and outbound freight, duty and logistics costs, third-party packaging and
assembly costs, provision for excess or obsolete inventory, allocated overhead
costs related to facilities and customer support, and salary, benefit and
stock-based compensation costs for operations personnel.

Operating Expenses

Research and Development


Research and development expenses consist primarily of personnel-related costs,
including employee salaries, benefits and stock-based compensation for our
engineers and other employees engaged in the development of our products
including new technologies, features and functionality and fees for outsourced
consulting services. In addition, research and development expenses include
allocated facilities and overhead costs. We believe continued investment is
important to attaining our strategic objectives and expect research and
development expenses to increase in absolute dollars for the foreseeable future.

Sales and Marketing


Sales and marketing expenses consist primarily of personnel-related costs,
including salaries, benefits, commissions and stock-based compensation expense
for our employees engaged in sales and sales support, marketing, communications,
data science and analytics, business development, product management and partner
and customer support functions. Sales and marketing expenses also include
marketing, retail and merchandising costs, as well as events, public relations
and other professional services and allocated facilities and overhead. We expect
our sales and marketing expenses to increase as we continue to grow our
business.

General and Administrative


General and administrative expenses consist primarily of personnel-related
costs, including salaries, benefits and stock-based compensation for our
executive, finance, legal, information technology, human resources and other
administrative personnel. We expect our general and administrative expenses to
increase due to the anticipated growth of our business and related
infrastructure, compliance with global laws and regulations, as well as
accounting, legal, insurance, investor relations and other costs associated with
being a public company.

Other Income (Expense), Net


Our other income (expense), net, for the three and nine months ended
September 30, 2019 consists of interest income on short-term investments and
cash balances, interest expense that primarily includes amortization of deferred
debt costs and foreign currency re-measurement and transaction gains and losses.
Other income (expense), net for three and nine months ended September 30, 2019
consists of interest income and foreign currency re-measurement and transaction
gains and losses.

Income Tax Expense

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

                                       22

--------------------------------------------------------------------------------

Results of Operations


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



                                             Three Months Ended                             Nine Months Ended
                                   September 30,            September 30,         September 30,           September 30,
                                       2019                     2018                  2019                    2018
Net Revenue:
Platform                                       69 %                      58 %                 67 %                    57 %
Player                                         31 %                      42 %                 33 %                    43 %
Total net revenue                             100 %                     100 %                100 %                   100 %
Cost of Revenue:
Platform                                       26 %                      17 %                 23 %                    17 %
Player                                         29 %                      37 %                 30 %                    36 %
Total cost of revenue                          55 %                      54 %                 53 %                    53 %
Gross Profit:
Platform                                       43 %                      41 %                 44 %                    40 %
Player                                          2 %                       5 %                  3 %                     7 %
Total gross profit                             45 %                      46 %                 47 %                    47 %
Operating Expenses:
Research and development                       26 %                      26 %                 26 %                    26 %
Sales and marketing                            18 %                      15 %                 16 %                    15 %
General and administrative                     11 %                      11 %                 11 %                    11 %
Total operating expenses                       55 %                      52 %                 53 %                    52 %
Loss from Operations                          (10 )%                     (6 )%                (6 )%                   (5 )%
Other Income, Net:
Interest expense                                - %                       - %                 (1 )%                    - %
Other income, net                               1 %                       1 %                  1 %                     1 %
Total other income, net                         1 %                       1 %                  - %                     1 %
Loss before income taxes                       (9 )%                     (5 )%                (6 )%                   (4 )%
Net loss attributable to common
stockholders                                   (9 )%                     (5 )%                (6 )%                   (4 )%




Comparison of Three and Nine Months Ended September 30, 2019 and September 30,
2018

Net Revenue



                                       Three Months Ended                                                    Nine Months Ended
                                September 30,       September 30,                                    September 30,       September 30,
                                    2019                2018           Change $      Change %            2019                2018           Change $      Change %
(in thousands, except
percentages)
Platform                       $       179,322$       100,050$  79,272        79%         $       481,157$       265,468$ 215,689        81%
Player                                  81,606              73,331         8,275        11%                 236,534             201,299        35,235        18%
Total Net Revenue              $       260,928$       173,381$  87,547        50%         $       717,691$       466,767$ 250,924        54%


Platform

Platform revenue increased by $79.3 million, or 79%, during the three months
ended September 30, 2019 compared to the three months ended September 30, 2018.
In addition to an increase in content revenue, the majority of the increase is
from higher advertising revenue.

Platform revenue increased by $215.7 million, or 81%, during the nine months
ended September 30, 2019 as compared to the nine months ended September 30,
2018. In addition to an increase in content revenue, the majority of the
increase is from higher advertising revenue. The increase was partially offset
by a decrease of $10.6 million in licensing revenue resulting from delivery of
intellectual property that were lower in 2019 as compared to 2018.

Player


Player revenue increased by $8.3 million, or 11%, during the three months ended
September 30, 2019 as compared to the three months ended September 30, 2018, as
the volume of player units sold increased 21% as compared to the three months
ended

                                       23

--------------------------------------------------------------------------------

September 30, 2018 offset by a 9% decrease in the average selling price of players. Revenue generated from the sale of audio products is included in player revenue and is not significant.


Player revenue increased by $35.2 million, or 18%, during the nine months ended
September 30, 2019 as compared to the nine months ended September 30, 2018.
During the nine months ended September 30, 2019, the volume of players sold
increased 26% as compared to the nine months ended September 30, 2018 offset by
a 7% decrease in the average selling price of players. Revenue generated from
the sale of audio products is included in player revenue and is not significant.

Cost of Revenue and Gross Profit



                                              Three Months Ended                                                      Nine Months Ended
                                      September 30,        September 30,                                      September 30,       September 30,
                                           2019                2018            Change $       Change %            2019                2018           Change $       Change %
(in thousands, except percentages)
Cost of revenue:
Platform                             $         67,075     $        29,504$   37,571        127%         $       165,419$        78,498$  86,921        111%
Player                                         75,376              64,884         10,492        16%                  218,695             168,412        50,283        30%
Total Cost of Revenue                $        142,451$        94,388$   48,063        51%          $       384,114$       246,910$ 137,204        56%
Gross profit:
Platform                             $        112,247$        70,546$   41,701        59%          $       315,738$       186,970$ 128,768        69%
Player                                          6,230               8,447         (2,217 )     (26)%                  17,839              32,887       (15,048 )     (46)%
Total Gross Profit                   $        118,477$        78,993$   39,484        50%          $       333,577$       219,857$ 113,720        52%


Platform

Cost of platform revenue increased by $37.6 million, or 127%, during the three
months ended September 30, 2019 as compared to the three months ended
September 30, 2018. This increase is a result of higher advertising inventory
acquisition costs, ad serving costs, content licensing fees and credit card
processing fees totaling $35.2 million and a $2.1 million increase in allocated
overhead primarily in advertising and platform support.

Cost of platform revenue increased by $86.9 million, or 111%, during the nine
months ended September 30, 2019 as compared to the nine months ended September
30, 2018. This increase is a result of higher advertising inventory acquisition
costs, ad serving costs, content licensing fees and credit card processing fees
totaling $82.2 million and a $4.1 million increase in allocated overhead
primarily in advertising operations and content distribution operations driven
by the growth of the platform business.

Gross profit on platform revenue increased by $41.7 million, or 59%, during the
three months ended September 30, 2019 as compared to the three months ended
September 30, 2018, driven by an 79% increase in platform revenue offset by a
127% increase in platform costs.

Gross profit on platform revenue increased by $128.8 million, or 69%, during the
nine months ended September 30, 2019 as compared to the nine months ended
September 30, 2018, driven by an 81% increase in platform revenue offset by a
111% increase in platform costs.

Player


Cost of player revenue increased by $10.5 million, or 16%, during the three
months ended September 30, 2019 as compared to the three months ended
September 30, 2018. The cost of player revenue increased approximately $3.6
million due to an increase in manufacturing costs to support a higher volume of
players sold. In addition, royalty expenses increased $2.5 million driven by an
increased volume of sales and approximately $1.7 million of royalty accrued for
intellectual property claims and increased freight costs of $1.5 million.

Cost of player revenue increased by $50.3 million, or 30%, during the nine
months ended September 30, 2019 as compared to the nine months ended September
30, 2018. The cost of player revenue increased approximately $27.2 million due
to an increase in manufacturing costs to support a higher volume of players
sold. In addition, royalty expenses increased $14.6 million driven by increased
volume of sales, approximately $3.7 million of royalty accrued for intellectual
property claims, and offset by release of accrual of $8.9 million in the second
quarter of 2018 pursuant to a potential intellectual property liability that did
not materialize. The freight costs increased by $3.2 million to support higher
volume.

Gross profit on player sales decreased by $2.2 million, or 26%, during the three
months ended September 30, 2019 as compared to the three months ended
September 30, 2018 primarily due to the impact of royalty accruals and the
decrease in the average selling prices of players and increases in manufacturing
and logistics costs.

                                       24
--------------------------------------------------------------------------------
Gross profit on player sales decreased by $15.0 million, or 46%, during the nine
months ended September 30, 2019 as compared to the nine months ended September
30, 2018, primarily due to the impact of royalty accruals and releases as noted
above, and the decrease in the average selling prices of players and increases
in manufacturing and logistics costs.

Operating Expenses



                                       Three Months Ended                                                        Nine Months Ended
                               September 30,        September 30,                                        September 30,       September 30,
                                    2019                2018            Change $        Change %             2019                2018           Change $        Change %
(in thousands, except
percentages)
Research and development      $         68,487     $        45,370$   23,117         51%           $       186,219$       119,692$  66,527         56%
Sales and marketing                     46,666              25,603         21,063         82%                   117,041              68,180        48,861         72%
General and administrative              29,873              19,769         10,104         51%                    77,992              50,768        27,224         54%
Total Operating Expenses      $        145,026$        90,742$   54,284         60%           $       381,252$       238,640$ 142,612         60%




Research and Development

Research and development expenses increased by $23.1 million, or 51%, during the
three months ended September 30, 2019 as compared to the three months ended
September 30, 2018. The increase was primarily due to higher personnel-related
costs of $16.6 million, as a result of increased engineering headcount and the
value of stock-based compensation, higher facilities costs of $4.3 million, and
higher platform and product development costs of $2.2 million that includes
expenses such as consulting and outside services, travel and equipment partially
offset by allocation of overhead to player and platform costs.

Research and development expenses increased by $66.5 million, or 56%, during the
nine months ended September 30, 2019 as compared to the nine months ended
September 30, 2018. The increase was primarily due to higher personnel-related
costs of $50.9 million as a result of increased engineering headcount and the
value of stock-based compensation, higher facilities costs of $8.4 million and
higher platform and product development costs of $7.2 million that includes
expenses such as consulting and outside services, travel and equipment partially
offset by allocation of overhead to player and platform costs.

Sales and Marketing


Sales and marketing expenses increased by $21.1 million, or 82%, during the
three months ended September 30, 2019 as compared to the three months ended
September 30, 2018. The increase was primarily due to higher personnel-related
costs of $8.5 million related to increased headcount to support our growth in
platform revenue, mainly in advertising and content distribution, and the value
of stock-based compensation, an increase of $7.5 million in marketing, retail
and merchandising costs and an increase in other expenses of $5.0 million that
includes facilities costs, consulting services and travel.

Sales and marketing expenses increased by $48.9 million, or 72%, during the nine
months ended September 30, 2019 as compared to the nine months ended September
30, 2018. The increase was primarily due to higher personnel-related costs of
$27.9 million related to increased headcount to support our growth in platform
revenue, mainly in advertising and content distribution, and the value of
stock-based compensation, an increase of $11.4 million in marketing, retail and
merchandising costs and an increase in other expenses of $9.6 million that
includes facilities costs, consulting services and travel.

General and Administrative


General and administrative expenses increased by $10.1 million, or 51%, during
the three months ended September 30, 2019 as compared to the three months ended
September 30, 2018. The increase was primarily due to higher personnel-related
costs of $5.4 million as a result of increased headcount in general and
administrative functions and the value of stock-based compensation and
$4.6 million primarily related to increased legal and other outside consulting
and professional service fees.

General and administrative expenses increased by $27.2 million, or 54%, during
the nine months ended September 30, 2019 as compared to the nine months ended
September 30, 2018. The increase was primarily due to higher personnel-related
costs of $16.8 million as a result of increased headcount in general and
administrative functions and the value of stock-based compensation and $10.8
million primarily related to increased legal and other outside consulting and
professional service fees.

                                       25

--------------------------------------------------------------------------------

Other Income, Net



                                              Three Months Ended                                                       Nine Months Ended
                                      September 30,        September 30,                                       September 30,        September 30,
                                          2019                 2018            Change $       Change %              2019                2018           Change $       Change %
(in thousands, except percentages)
Interest expense                     $          (767 )    $          (112 )   $     (655 )      585%          $         (1,436 )   $          (220 )   $  (1,216 )      553%
Other income, net                              2,065                2,162            (97 )      (4)%                     4,272               2,971         1,301         44%
Total Other Income, Net              $         1,298      $         2,050     $     (752 )      (37)%         $          2,836     $         2,751     $      85         3%


Other income, net, decreased by $0.8 million during the three months ended
September 30, 2019 as compared to the three months ended September 30, 2018
primarily due to an increase in interest expense relating to amortization of
deferred debt costs and decrease in interest income from short-term investments
and a higher level of cash balances.

Other income, net, increased by $0.09 million during the nine months ended
September 30, 2019 as compared to the nine months ended September 30, 2018
primarily due to an increase in interest income as a result of a higher level of
cash balances.

Income Tax Benefit



                                              Three Months Ended                                                           Nine Months Ended
                                      September 30,         September 30,                                         September 30,          September 30,
                                          2019                  2018            Change $         Change %              2019                  2018            Change $        Change %
(in thousands, except percentages)
Income Tax Benefit                   $           (96 )     $          (172 )   $        76        (44)%          $           (619 )     $          

(397 ) $ (222 ) 56%

Income tax benefit arises from foreign income taxes and state minimum income taxes in the United States.

Liquidity and Capital Resources


As of September 30, 2019, we had cash, cash equivalents and short-term
investments of $387.5 million. Our primary source of liquidity is cash generated
through operating and financing activities, including sales of our securities.
Our primary uses of cash include operating expenses such as personnel-related
expenses and capital spending. Our future capital requirements may vary
materially from those currently planned and will depend on many factors
including our growth rate and the continuing market acceptance of our
advertising platform, operating system and technology and players along with the
timing and effort related to the introduction of new platform features, players,
hiring of experienced personnel, the expansion of sales and marketing
activities, as well as overall economic conditions. We entered into lease
agreements for new corporate headquarters, as well as other office locations. We
have incurred, and will continue to incur, material expenses in 2019 and expect
to continue to incur material expenses in future years for facility and related
building costs. We may also contemplate and engage in merger and acquisition
activity that could materially impact our liquidity and capital resource
position. For example, on November 8, 2019 we acquired dataxu, Inc. for
aggregate consideration of $75.0 million in cash and 571,516 shares of our
Class A common stock. However, we believe that our existing cash balances and
cash flow from operations, together with amounts available under our Credit
Agreement and Revolving Credit Facility, will be sufficient to fund our working
capital and meet our anticipated cash needs for the foreseeable future.

As of September 30, 2019, approximately 1% of our cash was held outside the
United States. These amounts were primarily held in Europe and are utilized to
fund our foreign operations. The amount of unremitted earnings related to our
foreign subsidiaries is not material.

At-the-Market Offerings


On March 12, 2019, we entered into an Equity Distribution Agreement with
Citigroup Global Markets Inc., as our sales agent (the "Citi Equity Distribution
Agreement"), pursuant to which we could issue and sell from time-to-time shares
of our Class A common stock for aggregate gross proceeds of up to $100.0
million. In March 2019, we sold approximately 1.4 million shares of Class A
common stock at an average selling price of $72.00 per share, constituting all
available shares for sale under the Citi Equity Distribution Agreement, for
aggregate gross proceeds of $100.0 million and incurred issuance costs of $2.0
million.

On May 16, 2019, we entered into an Equity Distribution Agreement with Morgan
Stanley & Co. LLC, as our sales agent (the "MS Equity Distribution Agreement"),
pursuant to which we could issue and sell up to 1.0 million shares of our Class
A common stock. In May 2019, we sold all 1.0 million available shares for sale
under the MS Equity Distribution Agreement at an average selling price of $82.90
per share, for aggregate gross proceeds of $82.9 million and incurred issuance
costs of $1.6 million.

Senior Secured Term Loan A and Revolving Credit Facilities

                                       26

--------------------------------------------------------------------------------
On February 19, 2019 (the "Original Closing Date"), we entered into a Credit
Agreement (the "Existing Credit Agreement") with Morgan Stanley Senior Funding,
Inc. ("MSSF"). On May 3, 2019, (the "Closing Date"), the Existing Credit
Agreement was amended pursuant to an Incremental Assumption and Amendment No. 1
(the "Amendment" and the Existing Credit Agreement as amended by the Amendment,
the "Credit Agreement"). The Amendment increased the level of new term loan
commitments and new revolving commitments under the Credit Agreement by an
aggregate amount of $50.0 million.

The Credit Agreement now provides for (i) a four-year revolving credit facility
in the aggregate principal amount of up to $100.0 million (the "Revolving Credit
Facility"), (ii) a four-year delayed draw term loan A facility in the aggregate
principal amount of up to $100.0 million (the "Term Loan A Facility") and (iii)
an uncommitted incremental facility, subject to the satisfaction of certain
financial and other conditions, in the amount of up to (v) $50.0 million, plus
(w) 1.0x of our consolidated EBITDA for the most recently completed four fiscal
quarter period, plus (x) an additional amount at our discretion, so long as, on
a pro forma basis at the time of incurrence, our secured leverage ratio does not
exceed 1.50 to 1.00, plus (y) voluntary prepayments of the Revolving Credit
Facility and Term Loan A Facility to the extent accompanied by concurrent
reductions to the applicable Credit Facility, plus (z) for up to 90 days after
the Original Closing Date, $25.0 million (together with the Revolving Credit
Facility and the Term Loan A Facility, collectively, the "Credit Facility").
Borrowings under the Term Loan A Facility may be made by us up to nine months
immediately following the Original Closing Date (the "Term Loan A Availability
Period"). Each lender's obligation to fund future loans or issue future letters
of credit under the Credit Facility is subject to the satisfaction of certain
conditions set forth in the Credit Agreement.

Loans under the Credit Facility bear interest at a rate equal to, at our
election (i) an alternate base rate, based upon the highest of (x) the prime
rate published by the Wall Street Journal, (y) the federal funds effective date
plus ½ of 1% and (z) the one-month LIBO rate plus 1.00%, in each case plus an
applicable margin of up to 1.00% per annum, with step-downs based on our secured
leverage ratio or (ii) an adjusted one-, two-, three-, or six month LIBO rate,
at our election, plus an applicable margin of up to 2.00% per annum, with
step-downs based on our secured leverage ratio.

Loans under the Term Loan A Facility will amortize in equal quarterly
installments beginning on the last day of the fiscal quarter ending after the
date of the initial borrowing under the Term Loan A Facility, in an aggregate
annual amount equal to (i) on or prior to December 31, 2021, 1.25% of the drawn
principal amount of the Term Loan Facility and (ii) thereafter, 2.50% of the
drawn principal amount of the Term Loan Facility, with any remaining balance
payable on the maturity date of the Term Loan A Facility.

The Credit Agreement contains customary representations and warranties and
customary affirmative and negative covenants, including, among other things,
restrictions on indebtedness, liens, limitations on restrictive agreements,
fundamental changes and business activities, investments, mergers, dispositions,
transactions with affiliates, prepayment of other indebtedness and dividends and
other distributions. The Credit Agreement also contains a financial covenant
requiring us to maintain a minimum adjusted quick ratio of at least 1.00 to
1.00, tested as of the last day of any fiscal quarter.

As of September 30, 2019, we were in compliance with all the covenants of the Credit Agreement and there were no outstanding borrowings.

© Edgar Online, source Glimpses

share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news on ROKU, INC.
12/09ROKU : Tops Off Year of Entertainment with Unlocked Premium Content for Second A..
BU
12/02WALL STREET STOCK EXCHANGE : U.S. stocks retreat on economy and trade jitters
RE
11/22ROKU : Hisense Roku TV Models – Now Available in UK
BU
11/21ROKU : Hisense Roku TV Models - Now Available in UK
PU
11/19ROKU, INC : Entry into a Material Definitive Agreement, Financial Statements and..
AQ
11/18ROKU : Completion of Acquisition or Disposition of Assets, Unregistered Sale of ..
AQ
11/14ROKU, INC : Completion of Acquisition or Disposition of Assets, Unregistered Sal..
AQ
11/14ROKU : Announces Limited Edition onn.™ • Roku TV and Limited Edition ..
BU
11/08ROKU : Management's Discussion and Analysis of Financial Condition and Results o..
AQ
11/08ROKU : Completes dataxu Acquisition
BU
More news