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Item 7. Management’s Discussion and Analysis

2026-02-13 compared with 2025-02-14 · 104 added, 85 removed, 225 unchanged (46% of the section changed)

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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 UI, and related services) and streaming services distribution (including subscription and transaction revenue shares, the sale of Premium Subscriptions, and the sale of branded app buttons on remote controls).

Devices revenue is generated from the sale of streaming players, Roku-branded TVs, smart home products and services, audio products, and related accessories.

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.

Key Performance Metrics and Non-GAAP Measure

The key performance metrics we use to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions are Streaming Households, Streaming Hours, ARPU, and Free Cash Flow.

Beginning with our results for the first quarter of 2025, we will no longer report quarterly updates on Streaming Households, and by extension, ARPU.

Since we first reported our key performance metrics in connection with our initial public offering in 2017, our business and the streaming industry have evolved significantly.

Now, we are primarily focused on the growth of revenue of our platform segment and Adjusted earnings before interest, tax, depreciation and amortization (Adjusted EBITDA).

As a result, effective as of the first quarter of 2025, our key performance metrics will be Streaming Hours, Platform Revenue, Adjusted EBITDA, and Free Cash Flow.

Streaming Households

We believe that the number of Streaming Households is a relevant measure to gauge the size of our user base.

We define Streaming Households as the number of distinct user accounts that have streamed content on our platform within the last 30 days of the period.

We refer to such accounts as “Streaming Households” because a given user account does not necessarily represent a single viewer or a single Roku streaming device.

Rather, a single account may be used by multiple viewers and linked to multiple devices.

As a result, we may identify more than one Streaming Household within a single dwelling, and more than one dwelling may constitute a Streaming Household.

Users who streamed content from The Roku Channel only on non-Roku platforms are not included in this metric.

Additionally, users who only register an account for use of one of our smart home products are not included in our reported number of Streaming Households.

We had 89.8 million and 80.0 million Streaming Households as of December 31, 2024 and 2023 , respectively, reflecting an increase of 12%.

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

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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.

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This feature has not had and is not expected to have a material impact on our financial performance.

We streamed 127.1 billion and 106.0 billion h ours during the years ended December 31, 2024 and 2023, respectively, reflecting an increase of 20%.

Average Revenue per User

We measure our 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 Streaming Households 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 Streaming Households base and the progress of our platform business.

ARPU was $41.49 as of December 31, 2024 as compared to $39.92 as of December 31, 2023, reflecting an increase of 4% .

The increase in ARPU was driven by platform revenue growth in the United States, partially offset by an increasing share of Streaming Households in international markets where we are currently focused more on scale and engagement than monetization.

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 billion and $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)

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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, and the sale of branded app buttons on remote controls).

Our ad inventory includes video ad inventory from AVOD content in The Roku Channel, native display ads throughout the Roku Experience, as well as ad inventory we obtain through our streaming services distribution

agreements with our content partners.

To supplement supply, we purchase advertising inventory from our content partners, on an as needed basis.

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-branded TVs, smart home products and services, audio products, and related accessories.

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.

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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-branded TVs, audio products and smart home products.

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.

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Other Income, Net

Other income, net primarily consists of interest income on cash and cash equivalents, foreign currency re-measurement, transaction gains and losses, and net change in the fair value of our strategic investments.

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 taxes in certain foreign jurisdictions where we conduct business and income taxes in the United States.

We have a full valuation allowance against net deferred tax assets in the United States.

We expect to maintain this valuation allowance for the foreseeable future.

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

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Total other income, net 2 % 2 % 3 %

Loss before income taxes (3) % (20) % (16) %

Income (loss) before income taxes 2 % (3) % (20) %

Income tax expense — % — % — %

Net loss (3) % (20) % (16) %

Net income (loss) 2 % (3) % (20) %

Comparison of Years Ended December 31, 2025 and 2024

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Total net revenue $ 4,737,251 $ 4,112,898 $ 624,353 15 %

Platform revenue increased by $528.7 million, or 18%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to higher revenue from streaming services distribution, such as revenue share on content subscriptions and Premium Subscriptions through The Roku Channel, in addition to higher advertising revenue, despite continued weakness in the media and entertainment vertical.

Devices revenue increased by $99.6 million, or 20%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The increase was primarily due to higher revenue from Roku-branded TVs.

This was partially offset by lower revenue from streaming players, audio and smart home products.

During the year ended December 31, 2024, the average selling price of all devices shipped increased by 18% and the volume of all devices shipped increased by 5% as compared to the year ended December 31, 2023.

The increase in average selling price is due to increased sales of Roku-branded TVs, which generally sell at higher prices compared to streaming players.

The increase in the volume of devices shipped was mainly due to higher sales of Roku-branded TVs.

Cost of Revenue and Gross Profit

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 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,

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Total gross profit $ 2,074,424 $ 1,805,645 $ 268,779 15 %

The cost of revenue, platform increased by $209.3 million, or 15%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The increase was primarily driven by higher costs of acquiring content and higher credit card processing fees.

During the year ended December 31, 2023, cost of revenue, platform also included restructuring charges of $67.0 million of which $65.5 million consisted of impairment charges related to removing selected content assets from The Roku Channel.

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.

The cost of revenue, devices increased by $136.0 million, or 25%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The increase was primarily driven by higher manufacturing costs of $115.0 million, driven by the higher cost of manufacturing Roku-branded TVs, and higher freight costs of $31.8 million.

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 gross loss was driven by a higher cost of manufacturing of products in the devices segment as compared to the revenue generated from them.

We manage the average selling prices of our products to grow our Streaming Households.

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

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Research and development

Research and development expenses decreased by $158.3 million, or 18%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The decrease was primarily driven by lower restructuring

charges of $110.6 million, lower personnel-related expenses of $25.2 million, lower office facilities and IT infrastructure expenses of $17.5 million, and lower consulting expenses of $3.3 million.

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 decreased by $100.6 million, or 10%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The decrease was primarily driven by lower restructuring charges of $87.7 million, lower office facilities and IT infrastructure expenses of $13.8 million, and lower personnel-related expenses of $12.1 million, partially offset by higher consulting expenses of $6.1 million and higher marketing, retail, and merchandising expenses of $5.9 million.

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 decreased by $32.2 million, or 8%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The decrease was primarily driven by lower restructuring charges of $56.5 million, partially offset by higher legal, consulting, and professional services of $17.6 million and higher personnel-related expenses of $5.6 million.

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

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Total other income, net $ 99,522 $ 98,209 $ 1,313 1 %

Other income, net

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 an increase in interest income of $11.9 million from higher cash balances, partially offset by higher foreign exchange losses of $5.0 million due to exchange rate fluctuations and a decrease in other income of $1.9 million mainly from lower unrealized gains related to the change in the fair value of strategic investments .

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

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Income tax expense $ 5,537 $ 9,428 $ (3,891) (41) %

Income tax expense

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 was primarily due to a tax benefit from the release of a valuation allowance on certain foreign deferred tax assets, partially offset by increases in U.S.

and foreign current taxes due to the increase of taxable earnings.

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, 2024, we had cash and cash equivalents of $2,160.2 million.

Approximately 5% of our cash was held outside the United States in accounts held by our foreign subsidiaries, which are used to fund foreign operations.

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 and mergers and acquisitions.

We have pursued merger and acquisition activities in the past, 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 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.

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.

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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.

The following table summarizes our cash flows for the periods presented (in thousands):

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Cash Flows from Operating Activities

Our operating activities provided cash of $218.0 million for the year ended December 31, 2024.

Our net loss of $129.4 million for the year ended December 31, 2024 was adjusted by non-cash charges of $756.2 million comprised mainly of stock-based compensation, amortization and write-off of content assets, depreciation and amortization of property and equipment and intangible assets, amortization of operating right-of-use assets, impairment of assets as part of restructuring charges, foreign currency remeasurement losses, and fair value changes of strategic investments.

The negative impact from changes in operating assets and liabilities of $408.8 million was primarily due to payments made to acquire content, a decrease in accounts payable, payments made for operating leases liabilities, an increase in inventory, an increase in other long-term assets, and an increase in prepaid expenses and other current assets, partially offset by an increase in accrued liabilities due to timing of payments and an increase in deferred revenue.

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 of $25.1 million for the year ended December 31, 2024 included purchases of property and equipment and expenditures related to the expansion of our office facilities of $5.1 million and an additional strategic investment of $20.0 million.

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 of $89.2 million for the year ended December 31, 2024 was primarily due to tax payments of $96.4 million to net settle equity awards vested during the period and the payment of $2.2 million in issuance costs related to our Credit Agreement, offset by $9.4 million received from proceeds from the exercise of employee stock options.

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

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Our Devices revenue includes allowances for returns and sales incentives in the estimated transaction price.

Amortization of Content Assets

The amortization expense for content assets (licensed and produced) is based on projected usage of such content which results in accelerated or straight-lined patterns depending on the nature of the content.

Judgment is required to determine the amortization patterns of our content assets which are monetized as a group.

Critical judgments include:

the predominant monetization strategy of content, (ii) the grouping of content with similar characteristics, and (iii) the application of historical viewership model and projected decay.

These judgments and underlying analysis are reviewed regularly and adjusted as needed on a prospective basis.

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 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.

There were no impairments of property and equipment or operating lease right-of-use assets during the year ended December 31, 2022.

See Note 18 to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report.

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Allowances for Sales Returns and Sales Incentives

Our accounts receivable is stated at invoice value less estimated allowances that include allowance 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.

If our estimates regarding accounts receivable allowances differ from the actual results, the losses or gains could be material.

The actual results could differ from our estimates.

Provision for Income Taxes

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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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis