Business Combination |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combination |
4. business combination On March 19, 2021, the Company acquired all outstanding shares of TOH Intermediate Holdings, LLC (“This Old House”) according to the terms and conditions of the Equity Purchase Agreement. The Company acquired the This Old House business, as the Company believes the content aligns with The Roku Channel’s ad-supported growth strategy. The total purchase consideration for This Old House was $97.8 million, paid entirely in cash. The Company incurred $2.2 million in acquisition related expenses and has recorded them in General and administrative expenses in the condensed consolidated statement of operations. The Company is still in the process of finalizing the fair value of the assets and liabilities acquired. The purchase price allocation below is preliminary in nature. The estimates and assumptions regarding the fair value of certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, income taxes, and goodwill are subject to change as the Company obtains additional information during the measurement period, which usually lasts for up to one year from the acquisition date. The preliminary allocation of the purchase consideration to tangible and intangible assets acquired and liabilities assumed is based on estimated fair values and is as follows (in thousands):
Other long-term assets include $22.5 million of content assets acquired. The fair value of the content assets has been estimated using the income approach. Amortization expense related to this content will be recorded on an accelerated basis according to the pattern of monetization. From the date of acquisition to March 31, 2021, amortization expense is not material and is recorded in Cost of revenue, platform. The excess of the total consideration over the tangible assets, identifiable intangible assets, and assumed liabilities is recorded as goodwill. Goodwill is primarily attributable to expected synergies in our advertising offerings as we bring more free ad-supported content for our users. The goodwill recorded is deductible for tax purposes. The fair value of the tradename has been estimated using the relief-from-royalty method. The key valuation assumptions include the Company's estimates of expected future revenue and royalty rate. The Company amortizes the fair value of the tradename on a straight-line basis over its useful life. The valuation of the intangible assets acquired from This Old House along with their estimated useful lives, is as follows (in thousands):
The revenue, cost of revenue and gross profit recorded by the Company in its condensed consolidated statement of operations from the acquisition date of March 19, 2021 to March 31, 2021 are not material. |