On February 28, 2021, the Company entered into an Asset and Stock Purchase Agreement (the “ASPA”) to purchase the Advanced Video Advertising (“AVA”) business from Nielsen Holdings PLC (“Nielsen”). The AVA business consists primarily of video automatic content recognition and dynamic ad insertion (“DAI”) technologies. On April 15, 2021, the Company closed the transaction, acquiring from Nielsen the AVA business, consisting of certain assets and liabilities and all of the equity interests in a subsidiary associated with the AVA business (the “Acquisition”). In conjunction with the Acquisition, Roku and Nielsen entered into a strategic commercial arrangement under which the parties will provide certain advertising measurement solutions to each other. The Company acquired Nielsen’s AVA business to accelerate its launch of an end-to-end DAI solution for traditional TV and to further integrate Nielsen’s ad and content measurement products into the Company’s platform.

The total preliminary purchase consideration for Nielsen’s AVA business was $47.4 million, which consisted of (i) $38.5 million paid in cash and (ii) $15.2 million of noncash consideration related to obligations to deliver services to Nielsen, offset by (iii) $6.3 million of services to be received from Nielsen. The obligations to deliver services to Nielsen were recorded at fair value using the incremental cash flow method. The services to be delivered to Nielsen are recognized within Other income (expense), net in the condensed consolidated statements of operations over the six year service period. The services to be received from Nielsen represent contract terms that the Company entered into for future goods and services that were recorded at fair value using the incremental cash flow method. These services are recognized as Cost of revenue, platform in the condensed consolidated statements of operations over the six year service period.

In addition, there are earn-out conditions in the ASPA which may trigger an additional payment to Nielsen. As of September 30, 2021, no contingent consideration conditions have been triggered. The Company incurred $3.9 million in acquisition-related expenses and has recorded them in General and administrative expenses in the condensed consolidated statements of operations.

The Company is still in the process of finalizing the fair value of the assets acquired and liabilities assumed. 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):

	Fair Values
Assets acquired
Cash and cash equivalents	$	3,057
Prepaid expenses and other current assets		85
Property and equipment, net		584
Intangible assets:
Developed technology		14,200
IPR&D technology		8,500
Goodwill		22,055
Operating lease right-of-use assets		1,235
Other non-current assets		1,927
Total assets acquired		51,643
Liabilities assumed
Accounts payable and accrued liabilities		(1,168	)
Operating lease liabilities		(830	)
Other long-term liabilities		(2,254	)
Total liabilities assumed		(4,252	)
Total purchase consideration	$	47,391

The excess of the total consideration over the tangible assets, intangible assets, and assumed liabilities is recorded as goodwill. Goodwill is primarily attributable to expected synergies in our advertising offerings and cross-selling opportunities. The majority of the goodwill recorded is deductible for tax purposes.

The fair value of the developed technology has been estimated using the relief-from-royalty method. The key valuation assumptions include the Company's estimates of expected future earnings and royalty rate. The Company amortizes the fair value of the developed technology on a straight-line basis over its useful life. The fair value of the in-process research and development (“IPR&D”) technology has been estimated using the multi-period-excess-earnings method. The key valuation assumptions include the Company's estimates of expected future revenue and margin. Once the project reaches technological feasibility, the Company will amortize the fair value of the IPR&D technology on a straight-line basis over its useful life.

The preliminary valuation of the intangible assets acquired from Nielsen’s AVA business along with their estimated useful lives, is as follows (in thousands, except years):

	Estimated Fair Value		Estimated Weighted-Average Useful Lives (in years)
Developed technology	$	14,200	5.9
IPR&D technology		8,500		—
Estimated fair value of acquired intangible assets	$	22,700	5.9

The operations of Nielsen’s AVA business are included in the Company’s operating results beginning on the date of acquisition. The revenue, cost of revenue and gross profit recorded by the Company in its condensed consolidated statement of operations from the acquisition date to September 30, 2021 are not material.

On March 19, 2021, the Company acquired all outstanding shares of TOH Intermediate Holdings, LLC (“This Old House”), a home improvement media business, according to the terms and conditions of the Equity Purchase Agreement. The Company acquired the This Old House business because 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 $2.4 million in acquisition-related expenses and has recorded them in General and administrative expenses in the condensed consolidated statements of operations.

The preliminary allocation of the purchase consideration to tangible and intangible assets acquired and liabilities assumed, reflecting measurement period adjustments through September 30, 2021, is based on estimated fair values and is as follows (in thousands):

	Fair Values
Assets acquired
Cash and cash equivalents	$	7
Accounts receivable		5,830
Prepaid expenses and other current assets		7,310
Property and equipment, net		307
Intangible assets:
Tradename		20,000
Customer relationships		700
Goodwill		46,671
Operating lease right-of-use assets		5,498
Other non-current assets		23,487
Total assets acquired		109,810
Liabilities assumed
Accounts payable and accrued liabilities		(2,747	)
Deferred revenue, current portion		(4,146	)
Operating lease liabilities		(4,262	)
Deferred revenue, non-current portion		(816	)
Other long-term liabilities		(28	)
Total liabilities assumed		(11,999	)
Total purchase consideration	$	97,811

Other non-current 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 the content assets is recorded on an accelerated basis according to the pattern of monetization.

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 to 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, except years):

	Estimated Fair Value		Estimated Weighted-Average Useful Lives (in years)
Tradename	$	20,000	10.0
Customer relationships		700	4.0
Estimated fair value of acquired intangible assets	$	20,700	9.8

The operations of This Old House were included in the Company’s operating results beginning on the date of acquisition. The Company recorded revenue of $13.5 million, cost of revenue, platform, of $7.3 million and gross profit of $6.2 million in its condensed consolidated statement of operations from the acquisition date to September 30, 2021.