Roku, the leading TV streaming hardware and software company, has revealed plans to undergo workforce layoffs that will affect more than 300 employees. In a recent Securities and Exchange Commission (SEC) filing, Roku stated the decision to reduce its workforce by approximately 10% is aimed at streamlining operations and reducing expenses, following a period of rapid growth.
Key Takeaway
Roku announces the reduction of its workforce by 10%, affecting over 300 employees. The company aims to optimize operations and decrease expenses following recent growth. Roku will also consolidate office spaces, review its content portfolio, and impose hiring limitations. The company’s revenue largely relies on advertising, with its streaming service, The Roku Channel, playing a significant role. Despite revenue growth, Roku reported a net loss and does not anticipate immediate profitability.
Strategic Measures to Reduce Costs
As part of its cost-cutting measures, Roku will not only lay off employees but also consolidate its office spaces, conduct a strategic review of its content portfolio, and decrease expenditure on external services. Additionally, the company will impose limitations on future hiring, as it endeavors to align expenses with its current business goals.
Roku anticipates spending between $45 million and $65 million in the current quarter on severance and benefits expenses due to the layoffs. Moreover, the company expects to incur impairment charges ranging from $55 million to $65 million resulting from adjustments in the content portfolio and the cessation of specific office facilities.
Primarily Driven by Advertising Revenue
Roku’s revenue primarily stems from its platform, which includes its streaming service, The Roku Channel. This service offers a combination of ad-supported content, live ad-supported TV channels, and third-party premium streaming services such as Paramount+ and AMC+.
Advertising plays a crucial role in Roku’s revenue stream. In the second quarter of 2023, the company reported that platform revenue accounted for the majority of its total revenue, totaling $744 million out of $847 million. This platform revenue is generated from digital ad sales and content distribution revenue shares, pitting Roku against industry giants like Google and Meta.
Profitability Prospects and Financial Outlook
Despite Roku’s revenue growth, the company recorded a net loss of $108 million in Q2 2023. Regrettably, Roku does not foresee reaching profitability in the near future. In its report, the company stated that excluding restructuring and impairment charges, total net revenue for the third quarter of fiscal 2023 is expected to range from $835 million to $875 million, with an adjusted EBITDA projected between negative $40 million and negative $20 million.
