Roku Inc.
02/13/2026 | Press release | Distributed by Public on 02/13/2026 15:15
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes included in Item 8 of this Annual Report. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs, and expectations, and involve risks and uncertainties. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report, particularly in the section titled Item 1A. Risk Factors and the Note Regarding Forward-Looking Statements.
This section of this Annual Report generally discusses fiscal years 2025and 2024 and year-to-year comparisons between those years. Discussions of fiscal year 2023 and year-to-year comparisons between fiscal years 2024 and 2023 that are not included in this Annual Report can be found in Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our Annual Report for the fiscal year ended December 31, 2024 filed with the SEC on February 14, 2025.
Overview
Our two reportable segments are the Platform segment and the Devices segment. Platform revenue is generated from the sale of digital advertising (including direct and programmatic video advertising, ads integrated into our user
interface ("UI"), and related services) and streaming services distribution (including subscription and transaction revenue shares, the sale of Premium Subscriptions, the sale of owned and operated subscription services, and the sale of branded app buttons on remote controls).
Devices revenue is generated from the sale of streaming players, Roku-made TVs, smart home products and services, audio products, and related accessories. We expect to continue to manage the average selling prices of Roku streaming devices in an effort to sell more devices, which we believe will increase our Streaming Households. We expect that this trade off from Devices gross profit or loss to grow Streaming Households should result in increased Platform revenue and Platform gross profit over time.
Business Conditions and Macroeconomic Factors
Our business is subject to risks related to the evolving macroeconomic environment, including the effects of increased volatility in financial markets, higher inflation and interest rates, potential economic slowdown or recession, geopolitical developments, changes in economic or government policies, including the unknown impact of tariffs, changing global regulations, and the overall uncertainty surrounding international trade relations. While we intend to remain vigilant in monitoring the impacts of these circumstances on our business and adapt accordingly, the effects of these macroeconomic factors on our business, results of operations, and financial condition remain largely uncertain. See Item 1A, Risk Factors, and the Note Regarding Forward Looking Statements elsewhere in this Annual Report for additional details.
Key Performance Metrics and Non-GAAP Measures
Since our IPO in 2017, the streaming TV industry has evolved meaningfully, with Americans now spending significantly more TV time streaming than watching traditional TV. Our business has also grown and evolved, and we are now primarily focused on growing Platform revenue and profitability. As a result, and as previously disclosed, starting in the first quarter of 2025, we have updated our Key Performance Metrics ("KPMs") to better align with these priorities.
The key performance metrics we use to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions are Streaming Hours, Platform revenue, Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA"), and Free Cash Flow.
Streaming Hours
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. We define Streaming Hours as the aggregate amount of time Roku streaming devices stream content on our platform in a given period. Hours streamed from The Roku Channel on non-Roku platforms are not included in this metric. Additionally, smart home products do not contribute to our Streaming Hours.
Additionally, we believe that over time, increasing user engagement on our streaming platform increases our platform monetization because we earn Platform revenue from various forms of user engagement, including advertising, as well as revenue shares from subscriptions and transactional video on-demand. However, our revenue from content partners is not tied to the hours streamed on their streaming apps, and the number of Streaming Hours does not correlate to revenue earned from such content partners or ARPU on a period-by-period basis. Moreover, Streaming Hours on our platform are measured whenever a Roku streaming device 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 app may continue to play content for a period of time determined by the streaming app. We believe that this also occurs across a wide variety of non-Roku streaming devices and other set-top boxes.
Since 2020, all of our Roku streaming devices include a Roku TV OS feature that is designed to identify when content has been continuously streaming on an app for an extended period of time without user interaction. This feature, which we refer to as "Are you still watching," periodically prompts the user to confirm that they are still watching the selected app and closes the app if the user does not respond affirmatively. We believe that the implementation of this feature across the Roku platform benefits us, our customers, content partners, and advertisers. Some of our leading content partners, including Netflix, also have implemented similar features within their apps. This Roku TV OS feature supplements these app features. This feature has not had and is not expected to have a material impact on our financial performance.
We streamed 145.6 billion and 127.1 billion hours during the years ended December 31, 2025 and 2024, respectively, reflecting an increase of 15%.
Platform Revenue
We use Platform revenue as a primary metric to measure the performance of our business because it represents our ability to successfully monetize our platform. Platform revenue growth is one of our strategic priorities. Platform revenue was $4.1 billionand $3.5 billion for years ended December 31, 2025 and 2024, respectively.
Adjusted EBITDA (Non-GAAP Measure)
We use Adjusted EBITDA as a primary metric to measure the performance of our business because it represents our ability to successfully manage profitability. Our goal is to grow Adjusted EBITDA over time, driving continued growth in stockholder value.
Adjusted EBITDA is a non-GAAP financial measure. The Adjusted EBITDA reconciliation excludes total other income, net, stock-based compensation expense, depreciation and amortization, restructuring charges, and income tax expense (benefit) from the net income (loss) of the period. We believe Adjusted EBITDA is useful as a supplement in evaluating our ongoing operational performance and enhancing an overall understanding of our past financial performance. However, this non-GAAP financial measure has limitations, and should not be considered in isolation or as a substitute for our GAAP financial information, such as GAAP net income (loss). In addition, Adjusted EBITDA may not be comparable to similarly titled metrics of other companies due to differences in methods of calculation.
The following table presents a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure for each of the periods indicated (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Net income (loss) | $ | 88,361 | $ | (129,386) | $ | (709,561) | |||||||||||
| Total other income, net | (99,522) | (98,209) | (92,947) | ||||||||||||||
| Stock-based compensation | 354,169 | 384,662 | 370,130 | ||||||||||||||
| Depreciation and amortization | 68,904 | 62,714 | 70,447 | ||||||||||||||
|
Restructuring charges(1)
|
3,064 | 30,999 | 356,094 | ||||||||||||||
| Income tax expense | 5,537 | 9,428 | 10,131 | ||||||||||||||
| Adjusted EBITDA | $ | 420,513 | $ | 260,208 | $ | 4,294 | |||||||||||
(1)Restructuring charges for the year ended December 31, 2025 primarily include asset impairment charges of $2.9 million. Restructuring charges for the year ended December 31, 2024 primarily include asset impairment charges of $29.1 million. Restructuring charges for the year ended December 31, 2023 include operating lease right-of-use assets impairment charges of $131.6 million, property and equipment impairment charges of $72.3 million, content asset impairment charges of $65.5 million, employee severance and related charges of $83.2 million, and facilities exit costs of $3.5 million.
Free Cash Flow (Non-GAAP Measure)
We use Free Cash Flow as a primary metric to measure the performance of our business because we believe maximizing Free Cash Flow helps indicate the financial strength of our business, as well as provide an indication of cash generated or (used) by the business. Our goal is to continuously increase Free Cash Flow over time. We define Free Cash Flow as our trailing 12-month ("TTM") cash flows from operating activities excluding purchases of property and equipment and the effects of exchange rates on cash.
Our Free Cash Flow was $483.6 million and $203.2 million for the TTM periods ended December 31, 2025 and 2024, respectively.
Free Cash Flow is a non-GAAP financial measure. The Free Cash Flow reconciliation excludes purchases of property and equipment and effects of exchange rates on cash from the cash flows from operating activities, in each case where applicable. We believe Free Cash Flow is useful as a supplement in evaluating our ongoing operational performance and enhancing an overall understanding of our past financial performance. However, this non-GAAP financial measure has limitations, and should not be considered in isolation or as a substitute for our GAAP financial information, such as GAAP cash flows from operating activities. For additional information about cash flows from operating activities, see "Liquidity and Capital Resources" below. In addition, Free Cash Flow may not be comparable to similarly titled metrics of other companies due to differences in methods of calculation.
The following table presents a reconciliation of Free Cash Flow to the most directly comparable GAAP financial measure for each of the periods indicated (in thousands):
| Trailing Twelve Months Ended | |||||||||||
| December 31, 2025 | December 31, 2024 | ||||||||||
| Net cash provided by operating activities | $ | 483,718 | $ | 218,045 | |||||||
| Less: Purchases of property and equipment | (5,280) | (5,061) | |||||||||
| Add/(Less): Effect of exchange rate changes on cash, cash equivalents and restricted cash | 5,179 | (9,746) | |||||||||
| Free cash flow (TTM) | $ | 483,617 | $ | 203,238 | |||||||
Components of Results of Operations
Revenue
Platform Revenue
We generate Platform revenue from the sale of digital advertising (including direct and programmatic video advertising, ads integrated into our UI, and related services), as well as streaming services distribution (including subscription and transaction revenue shares, the sale of Premium Subscriptions, the sale of owned and operated subscription services, and the sale of branded app buttons on remote controls). Our ad inventory primarily includes video ad inventory from AVOD content in The Roku Channel, native ads throughout the Roku Experience, as well as ad inventory we obtain as consideration from our streaming services distribution agreements with our content partners. To date, we have generated most of our Platform revenue in the United States.
Devices Revenue
We generate Devices revenue from the sale of streaming players, Roku-made TVs, smart home products and services, audio products, and related accessories. We generate most of our Devices revenue in the United States. In our international markets, we primarily sell our devices through wholesale distributors which, in turn, sell to retailers.
Cost of Revenue
Cost of Revenue, Platform
Cost of revenue, platform primarily consists of costs associated with acquiring advertising inventory, content amortization costs for both licensed and produced content, costs for licensed premium subscriptions, and revenue share payments on licensed content. Cost of revenue, platform also includes other costs such as payment processing fees, allocated expenses associated with the delivery of our services that primarily include costs of third-party cloud services and salaries, benefits, and stock-based compensation for our platform operations personnel, and amortization of acquired developed technology.
Cost of Revenue, Devices
Cost of revenue, devices is comprised mostly of manufacturing costs payable to third-party manufacturers for devices we sell which include streaming players, Roku-made TVs, audio products and smart home products. Cost of revenue, devices also includes technology licenses or royalty fees on devices we sell, inbound and outbound freight, duty and logistics costs, third-party packaging, inventory provisions, and allocated overhead costs related to facilities, third-party cloud services, and salaries, benefits, and stock-based compensation for operations personnel.
Operating and Other Expenses
Research and Development
Research and development expenses consist primarily of salaries, benefits, and stock-based compensation for our development teams as well as outsourced development expenses. In addition, research and development expenses include allocated facilities and overhead expenses.
Sales and Marketing
Sales and marketing expenses consist primarily of salaries, benefits, commissions, and stock-based compensation for our employees engaged in sales and sales support, marketing, communications, data science and analytics, business development, product management, and partner support functions. Sales and marketing expenses also include marketing, retail and merchandising expenses, consulting and outside services, and allocated facilities and overhead expenses.
General and Administrative
General and administrative expenses consist primarily of salaries, benefits, and stock-based compensation for our finance, legal, information technology, human resources, and other administrative personnel. General and administrative expenses also include outside legal, accounting, and other professional service fees as well as allocated facilities and overhead expenses.
Other Income, Net
Other income, net primarily consists of interest income on cash and cash equivalents and short-term investments, foreign currency remeasurement, transaction gains and losses, and net change in the fair value of our strategic investments.
Income Tax Expense
Our income tax expense consists primarily of income tax expense in certain foreign jurisdictions where we conduct business and income tax expense (benefit) in the United States. We have a full valuation allowance against net deferred tax assets in the United States as of December 31, 2025. Given our current and anticipated future earnings, we believe
that there is a reasonable possibility that the valuation allowance against these net deferred tax assets may be reversed within the next twelve to eighteen months.
Results of Operations
The following table sets forth selected consolidated statements of operations data as a percentage of total revenue for each of the periods indicated.
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Net revenue: | |||||||||||||||||
| Platform | 87 | % | 86 | % | 86 | % | |||||||||||
| Devices | 13 | % | 14 | % | 14 | % | |||||||||||
| Total net revenue | 100 | % | 100 | % | 100 | % | |||||||||||
| Cost of revenue: | |||||||||||||||||
| Platform | 42 | % | 40 | % | 41 | % | |||||||||||
| Devices | 14 | % | 16 | % | 15 | % | |||||||||||
| Total cost of revenue | 56 | % | 56 | % | 56 | % | |||||||||||
| Gross profit (loss): | |||||||||||||||||
| Platform | 46 | % | 46 | % | 45 | % | |||||||||||
| Devices | (2) | % | (2) | % | (1) | % | |||||||||||
| Total gross profit | 44 | % | 44 | % | 44 | % | |||||||||||
| Operating expenses: | |||||||||||||||||
| Research and development | 15 | % | 18 | % | 25 | % | |||||||||||
| Sales and marketing | 20 | % | 23 | % | 30 | % | |||||||||||
| General and administrative | 9 | % | 8 | % | 12 | % | |||||||||||
| Total operating expenses | 44 | % | 49 | % | 67 | % | |||||||||||
| Loss from operations | - | % | (5) | % | (23) | % | |||||||||||
| Other income, net: | |||||||||||||||||
| Interest expense | - | % | - | % | - | % | |||||||||||
| Other income, net | 2 | % | 2 | % | 3 | % | |||||||||||
| Total other income, net | 2 | % | 2 | % | 3 | % | |||||||||||
| Income (loss) before income taxes | 2 | % | (3) | % | (20) | % | |||||||||||
| Income tax expense | - | % | - | % | - | % | |||||||||||
| Net income (loss) | 2 | % | (3) | % | (20) | % | |||||||||||
Comparison of Years Ended December 31, 2025 and 2024
Net Revenue
| Years Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | Change $ | Change % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Platform | $ | 4,144,886 | $ | 3,522,776 | $ | 622,110 | 18 | % | |||||||||||||||
| Devices | 592,365 | 590,122 | 2,243 | - | % | ||||||||||||||||||
| Total net revenue | $ | 4,737,251 | $ | 4,112,898 | $ | 624,353 | 15 | % | |||||||||||||||
Platform
Platform revenue increased by $622.1 million, or 18%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024, primarily due to higher revenue from streaming services distribution, specifically higher Premium Subscription revenue and higher subscription revenue from both third-party and our owned and
operated subscription services. In addition, advertising revenue increased due to improved monetization from video ads, including Roku Ads Manager, our self-service ad platform, offset by weakness in the media and entertainment vertical.
Devices
Devices revenue remained relatively flat during the year ended December 31, 2025 as compared to the year ended December 31, 2024. The increase in revenue is due to higher sales of Roku-made TVs, partially offset by lower sales of streaming players. During the year ended December 31, 2025, the average selling price of all devices shipped increased by 6% and the volume of all devices shipped decreased by 3% as compared to the year ended December 31, 2024. The increase in average selling price is due to increased sales of Roku-made TVs, which generally sell at higher prices compared to streaming players. The decrease in the volume of devices shipped was mainly due to lower sales of streaming players.
Cost of Revenue and Gross Profit (Loss)
| Years Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | Change $ | Change % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Cost of Revenue: | |||||||||||||||||||||||
| Platform | $ | 1,988,442 | $ | 1,636,816 | $ | 351,626 | 21 | % | |||||||||||||||
| Devices | 674,385 | 670,437 | 3,948 | 1 | % | ||||||||||||||||||
| Total cost of revenue | $ | 2,662,827 | $ | 2,307,253 | $ | 355,574 | 15 | % | |||||||||||||||
| Gross Profit (Loss): | |||||||||||||||||||||||
| Platform | $ | 2,156,444 | $ | 1,885,960 | $ | 270,484 | 14 | % | |||||||||||||||
| Devices | (82,020) | (80,315) | (1,705) | 2 | % | ||||||||||||||||||
| Total gross profit | $ | 2,074,424 | $ | 1,805,645 | $ | 268,779 | 15 | % | |||||||||||||||
Platform
Cost of revenue, platform increased by $351.6 million, or 21%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024. The increase was primarily driven by higher licensing costs for Premium Subscriptions and higher costs of acquiring content.
Gross profit for the platform segment increased by $270.5 million, or 14%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024, primarily driven by the overall growth in our Platform revenue.
Devices
Cost of revenue, devices increased by $3.9 million, or 1%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024. The increase was primarily driven by higher manufacturing costs of $17.8 million, and higher freight costs of $9.5 million. These increases were partially offset by lower inventory reserves of $15.4 million and lower royalty costs of $3.8 million.
Gross loss for the Devices segment increased by $1.7 million, or 2%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024. The increase in gross loss was driven by higher manufacturing and freight costs. We manage the average selling prices of our products to grow our Streaming Households, which we expect to result in increased Platform revenue and Platform gross profit over time.
Operating Expenses
| Years Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | Change $ | Change % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Research and development | $ | 729,477 | $ | 720,145 | $ | 9,332 | 1 | % | |||||||||||||||
| Sales and marketing | 964,355 | 932,712 | 31,643 | 3 | % | ||||||||||||||||||
| General and administrative | 386,216 | 370,955 | 15,261 | 4 | % | ||||||||||||||||||
| Total operating expenses | $ | 2,080,048 | $ | 2,023,812 | $ | 56,236 | 3 | % | |||||||||||||||
Research and development
Research and development expenses increased by $9.3 million, or 1%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024. The increase was primarily driven by higher cloud hosting and consulting expenses of $22.6 million offset by lower personnel-related expenses of $12.4 million and lower facilities and IT expenses of $3.3 million.
Sales and marketing
Sales and marketing expenses increased by $31.6 million, or 3%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024. The increase was primarily driven by higher advertising expenses of $37.3 million, higher amortization expense of $11.6 million, and higher consulting expenses of $3.4 million. These increases were partially offset by lower personnel-related expenses of $23.3 million.
General and administrative
General and administrative expenses increased by $15.3 million, or 4%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024. The increase was primarily driven by higher legal and consulting expenses of $26.7 million. The increase was partially offset by lower facilities expense of $5.3 million, lower restructuring charges of $4.5 million, and lower personnel-related expenses of $1.0 million.
Other Income, Net
| Years Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | Change $ | Change % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Interest expense | $ | (1,906) | $ | (411) | $ | (1,495) | 364 | % | |||||||||||||||
| Other income, net | 101,428 | 98,620 | 2,808 | 3 | % | ||||||||||||||||||
| Total other income, net | $ | 99,522 | $ | 98,209 | $ | 1,313 | 1 | % | |||||||||||||||
Total other income, net, increased by $1.3 million, or 1%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024. The increase was primarily driven by lower foreign currency remeasurement losses of $5.3 million and higher fair value remeasurement gains on our strategic investment in convertible promissory notes of $1.5 million. The increase was partially offset by lower interest income on our cash, cash equivalents, and short- term investments of $3.5 million and higher interest expense related to our credit agreement of $1.5 million.
Income Tax Expense
| Years Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | Change $ | Change % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Income tax expense | $ | 5,537 | $ | 9,428 | $ | (3,891) | (41) | % | |||||||||||||||
Income tax expense decreased by $3.9 million, or 41%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The decrease is due to a reduction in U.S. federal and certain state taxes due to the 2025 enactment of the One Big Beautiful Bill Act and a tax benefit related to our acquisition of Frndly TV, partially offset by a one-time release of valuation allowance on certain foreign deferred tax assets in 2024.
Liquidity and Capital Resources
As of December 31, 2025, we had cash and cash equivalents of $1,587.1 million and short-term investments of $730.2 million. Approximately 9% of our cash was held outside the United States in accounts held by our foreign subsidiaries, which are used to fund foreign operations, and all short-term investments were held in the United States.
Our primary sources of cash are receipts from Platform and Devices revenue. The primary uses of cash are costs of revenue including costs to acquire advertising inventory, costs to license and produce content, third-party manufacturing costs for our products, as well as operating expenses such as personnel-related expenses, consulting and professional service expenses, facility expenses, and marketing expenses. Other uses of cash include purchases of property and equipment, mergers and acquisitions, and share repurchases.
We have pursued merger and acquisition activities, such as the acquisition of Frndly TV, and we may pursue additional merger and acquisition activities in the future, including the acquisition of rights to programming and content assets. Though we do not expect to incur expenses for facilities and building related costs at the same level as we have in the last few fiscal years, we will continue to incur expenses on the maintenance of our facilities and purchases of computer systems, and other property and equipment, in order to support future growth in our business. These activities may materially impact our liquidity and capital resources.
We believe our existing cash and cash equivalents balance, and our undrawn available balance under our Credit Agreement (as discussed below), will be sufficient to meet our working capital, capital expenditures, and material cash requirements from known contractual obligations for the next twelve months and beyond. Our future capital requirements, the adequacy of available funds, and cash flows from operations could be affected by various risks, uncertainties, including, but not limited to, those detailed in Item 1A, Risk Factors in this Annual Report and the effects of the current macroeconomic environment. While the current macroeconomic environment has not severely impacted our liquidity and capital resources to date, it has contributed to disruption and volatility in local economies and in capital and credit markets, which could adversely affect our liquidity and capital resources in the future.
We may attempt to raise additional capital through the sale of equity securities or other financing arrangements. If we raise additional funds by issuing equity, the ownership of our existing stockholders will be diluted. If we raise additional financing by the incurrence of indebtedness, we may be subject to fixed payment obligations and also to restrictive covenants. Additionally, we may be unable to obtain debt or equity financing on terms that are acceptable to us.
Credit Agreement
On September 16, 2024, we entered into a Credit Agreement, by and among the Company, as borrower, certain of our subsidiaries, as guarantors, the lenders and issuing banks party thereto, and with Citibank N.A., as administrative agent (the "Credit Agreement"), which provides for (i) a five-year revolving credit facility in an aggregate principal amount of up to $300.0 million, and (ii) an uncommitted increase option of up to an additional $300.0 million exercisable upon the satisfaction of certain customary conditions. The Credit Agreement provides for a $100.0 million sub-facility for the issuance of letters of credit, and certain existing letters of credit were deemed outstanding under this facility. The Credit Agreement will mature on September 16, 2029. Proceeds from the Credit Agreement may be used for general corporate purposes, including to finance working capital requirements.
Our obligations under the Credit Agreement are secured by substantially all the assets of the Company and our subsidiaries that are guarantors under the Credit Agreement. We may prepay, and in certain circumstances, would be required to prepay, loans under the Credit Agreement without payment of a premium. The Credit Agreement also contains customary representations and warranties, customary affirmative and negative covenants, financial covenants requiring the maintenance of a minimum interest coverage ratio and a maximum total net leverage ratio, as well as customary events of default, the occurrence of which could result in amounts borrowed under the Credit Agreement becoming due and payable and remaining commitments terminated prior to its scheduled September 16, 2029 termination date.
We had outstanding letters of credit secured by the Credit Agreement of $39.5 million as of December 31, 2025. As of December 31, 2025, we had not borrowed against the Credit Agreement, and we were in compliance with all of the covenants of the Credit Agreement. See Note 11 to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report for additional details.
Share Repurchases
During the year ended December 31, 2025, we repurchased 1.5 million shares of our Class A common stock through our stock repurchase program. All share repurchases were made using cash resources. As of December 31, 2025, $250.0 million remained of our $400 million stock repurchase program. See Note 12 to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report for additional details.
Cash Flows
The following table summarizes our cash flows for the periods presented (in thousands):
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Consolidated Statements of Cash Flows Data: | |||||||||||
| Cash flows provided by operating activities | $ | 483,718 | $ | 218,045 | |||||||
| Cash flows used in investing activities | $ | (782,370) | $ | (25,061) | |||||||
| Cash flows used in financing activities | $ | (280,098) | $ | (89,203) | |||||||
Cash Flows from Operating Activities
Cash provided by operating activities increased in 2025 compared to 2024 primarily due to net income of $88.4 million in the current year, compared to a net loss of $129.4 million in the prior year, partially offset by lower non-cash adjustments to cash flows due mainly to lower impairment and stock-based compensation in the current year as compared to prior year.
Cash Flows from Investing Activities
Net cash used in investing activities increased during 2025 compared to 2024 due primarily to purchases of short-term investments of $725.0 million and our acquisition of Frndly TV for $95.1 million, partially offset by repayments of $50.0 million received from our strategic investment in convertible promissory notes, which were fully repaid in 2025.
Cash Flows from Financing Activities
Net cash used in financing activities increased during 2025 compared to 2024 primarily due to tax payments of $164.9 million to net settle equity awards vested during the period and $150.0 million in repurchases of our common stock, partially offset by proceeds from the exercise of employee stock options of $34.7 million.
Material Cash Requirements from Known Contractual Obligations
For a description of our purchase obligations and operating lease obligations, refer to Note 13 and Note 10 to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report, respectively.
In addition, we have $5.2 million of uncertain tax positions as of December 31, 2025. We adjust these positions when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. We are unable to accurately predict when these amounts will be realized or released. Although we believe we have adequately provided for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be materially different.
Critical Accounting Estimates
Our financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. These estimates and assumptions are based on historical experience, current trends and other factors that we believe to be reasonable at the time our consolidated financial statements are prepared. We evaluate our estimates and assumptions on an ongoing basis.Our actual results could differ from these estimates.
The critical accounting policies requiring estimates, assumptions, and judgments that we believe have the most significant impact on our financial statements are described below.
Revenue Recognition
Our contracts with customers often include promises to transfer multiple products and services to a customer. Judgment may be required in determining whether products contain multiple distinct performance obligations and whether each should be accounted for separately or as one combined performance obligation.
For arrangements with multiple performance obligations, we allocate revenue to each distinct performance obligation based on its relative stand-alone selling price ("SSP"). Our process for determining SSP requires judgment. For performance obligations routinely sold separately, we consider multiple factors that may vary over time depending upon the unique facts and circumstances related to each performance obligation. We determine SSP based on prices charged to customers for individual products, taking into consideration other factors, which may include (i) historical and expected discounting practices, (ii) the size, and volume of transactions, (iii) the geographic areas in which our products are sold, and (iv) our overall go-to-market strategy. For those performance obligations that are not routinely sold separately, we determine SSP using information that may include market conditions and other observable inputs.
When arrangements have variable consideration, we utilize the expected value method to estimate the amount expected to be received. The amount of variable consideration that is included in the transaction price is constrained to the extent that it is probable a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. The estimate of the variable consideration is based on the assessment of historical, current, and forecasted performance noted and expected from the performance obligation.
The transaction price in some of our arrangements include non-cash consideration. We determine the fair value of non-cash consideration at contract inception by using historical internal and current observable third-party data.
For the sale of third-party goods and services, we evaluate whether we are the principal, and report revenue on a gross basis, or an agent, and report revenue on a net basis. In this assessment, we consider if we obtain control of the specified goods or services before they are transferred to the customer, as well as other indicators such as the party primarily responsible for fulfillment, inventory risk, and discretion in establishing price.
Our Devices revenue includes allowances for returns and sales incentives in the estimated transaction price.
Impairment of Long-Lived Assets
We review long-lived assets, including property and equipment, right-of-use assets, and intangible assets with finite lives whenever events or changes in circumstances indicate the carrying amount of the asset or asset group to which it relates may not be recoverable. If such facts and circumstances indicate an asset or asset group's carrying amount may not be recoverable, we assess its recoverability by comparing the projected undiscounted net cash flows
directly associated with the use and eventual disposition of the asset or asset group against their respective carrying amounts. If the asset or asset group is not recoverable, an impairment loss is recognized based on the excess of the carrying amount over the fair value of the asset or asset group.
During the year ended December 31, 2025, we recognized an impairment charge of $2.9 million for operating lease right-of-use assets. During the year ended December 31, 2024, we recognized an impairment charge of $22.6 million for operating lease right-of-use assets and an impairment charge of $7.0 million for property and equipment related to a decision to cease the use of certain office facilities and related property and equipment. During the year ended December 31, 2023, we recognized an impairment charge of $131.6 million for operating lease right-of-use assets and an impairment charge of $72.3 million for property and equipment related to a decision to sub-lease and cease the use of certain office facilities and related property and equipment. See Note 18 to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report.
Significant judgments and estimates included in the determination of the fair value of the assets were identification of events or changes in circumstances necessitating an impairment assessment, the expected downtime prior to the commencement of future subleases, projected sublease income over the remaining lease periods, and discount rates that reflect the level of risk associated with the expected future cash flows.
Allowances for Sales Returns and Sales Incentives
Our accounts receivable are stated at invoice value less estimated allowances that include allowance for sales returns and sales incentives. We perform an ongoing analysis of various factors including our historical experience, promotional programs, claims to date, and other business factors to determine the allowances for sales returns and sales incentives. The actual results could differ from our estimates.
Provision for Income Taxes
We are subject to income taxes in the U.S. and foreign jurisdictions. We account for income taxes using the asset and liability method. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year. In addition, deferred tax assets and liabilities are determined based on the differences between financial reporting and tax bases of assets and liabilities using the enacted tax rates. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance when it is more likely than not they will not be realized. In determining the need for a valuation allowance, we assess all available positive and negative evidence, including cumulative historic losses and forecasted earnings.
We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. We have established reserves to address potential exposures related to tax positions that could be challenged by tax authorities. While we believe we have adequately reserved for our uncertain tax positions, including interest and penalties, we provide no assurance that the final tax outcome of these matters will not be materially different.
We make assumptions, judgments and estimates while taking into account current tax laws to determine the current income tax provision (benefit), deferred tax asset and liabilities, and valuation allowance recorded against a deferred tax asset. Changes in tax law, their interpretation, and resolution of tax audits could significantly impact the income taxes provided in our consolidated financial statements. Assumptions, judgments and estimates relative to the amount of deferred income taxes take into account future taxable income. Any of the assumptions, judgments and estimates mentioned above could cause the actual income tax obligations to differ from our estimates.
Business Combinations
We recognize, separately from goodwill, identifiable assets and liabilities acquired in a business combination at fair value on the date of acquisition. We use our best estimates and assumptions to determine the fair value of contingent consideration, and tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date. Critical estimates in valuing contingent consideration include the probability of achieving certain performance metrics and milestones, and the discount rate. Critical estimates in valuing intangible assets include, but are not limited to, the amount and timing of projected cash flows, customer attrition rates, royalty rates, and discount rates. We estimate the useful lives of intangible assets based on the expected period over which we anticipate generating economic benefit from the asset. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates, or actual results.
Recent Accounting Pronouncements
The recent accounting pronouncements are discussed and included in Note 2 to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report. They are incorporated herein by reference.
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