Roku to cut 10% of workforce to curb costs, ups Q3 revenue outlook

Roku in regulatory filings revealed plans to slash 10% of its workforce and take other measures as it looks to curb rising operating costs. At the same time the company upped its financial outlook for the third quarter, with the streaming TV player’s stock rising more than 10% in early trading Wednesday after the disclosure.

In an 8-K filed with the SEC dated September 5, Roku said it would take more measures to reduce its year-over-year operating expense growth rate, including reducing employee headcount and limiting new hires. The job cuts will impact 10% or more than 300 employees. As of December 31, 2022, Roku had approximately 3,600 employees across 14 countries, according to a company filing with the SEC. This isn’t the first round of layoffs for Roku, which slashed 200 jobs in November 2022, again as part of a plan to reduce rising costs, and then an additional 200 in March 2023.

In addition to cutting jobs as part of the cost reduction effort, Roku also plans to consolidate office space, reduce outside service expenses and perform a strategic review of its content portfolio, which involves removing certain existing licensed and produced content from its streaming TV platform.

As a result of job cuts Roku expects to incur restructuring charges related to severance and benefits costs between $45 million to $65 million, the majority of which will be felt in Q3. It expects the layoffs to be substantially complete by the end of the fourth quarter of 2023. 

As it stops using certain office facilities Roku expects an impairment charge estimated between $160 million and $200 million. On the content side it appears certain programming might no longer be available on the company’s free ad-supported streaming TV (FAST) The Roku Channel or other areas as the filing cites pulling content from “Company-operated services” – which is expected to result in an impairment charge in the range of $55 million to $65 million. It doesn’t expect any material cash expenditures in connection with the charge related to content.

While Roku’s headcount will be lighter, the company is now also guiding for better Q3 revenue and adjusted EBITDA results than previously expected. The company now expects total Q3 net revenue between $835 million to $875 million (up from the roughly $815 million it disclosed during Q2 results), and adjusted EBITDA in the range of negative $40 million to $20 million (improved from the forecast given during Q2 of negative $50 million).

The move comes after Roku appeared to have some success in reducing rises in year over year expenses in Q2, where total operating expenses were up 8% year over year to $504.2 million on 11% yoy revenue growth. That followed Q1 where operating expenses of $550 million rose 42% year over year, and the fourth quarter of 2022 when operating costs ballooned 71% yoy to $614.3 million.

In Q2 2022, a year prior to its most recent financial report, operating costs were up 73% yoy to $465.7 million.