Silicon Valley streaming giant Roku is rewinding some of its pandemic-era growth by offloading some real estate and laying off more of its global workforce.
The San Jose, California-based company estimates that it will pay up to $35 million to terminate leases or sublease office space it doesn't occupy, Roku said in a Securities and Exchange Commission filing. The estimated impairment charges also include severance for 200 workers or about 6% of its headcount related to the restructuring effort.
The moves are part of the tech company's plan to cut operating expenses and prioritize its focus and future investments on projects expected to elicit higher returns. Roku reported last month that its net loss more than doubled by the end of last year compared to full-year 2021, widening to nearly $500 million even though its revenue climbed 13% to about $3.1 billion.
"We have been adjusting our operations and operating expense profile to better manage through the challenging macro environment," Roku founder and CEO Anthony Wood wrote in a shareholder letter last month, adding that the economic uncertainty plaguing companies around the world is expected to persist through 2023. He went on to say the company is expecting to return to profitability this year "given our ongoing work to carefully manage expenditures."
In the face of declining sales and advertising revenue — compounded with significant competition from other streaming companies — Roku is the latest Silicon Valley tech company to aggressively curb expenses, an effort in which real estate is often one of the first items on the chopping block.
Along with others including Apple, Amazon, Google and Meta, Roku signed a string of high-profile leases in the first few years of the pandemic to accommodate growth for its streaming service at a time when many people were staying at home and spending most of their time in front of screens. However, with people returning to a more normalized schedule, the company failed to account for the dropoff, and like other tech giants, found themselves overextended and overhired.
Last year alone, the company signed leases for hundreds of thousands of square feet in New York City, Austin, Texas, and Chicago. It more than doubled its office space in Santa Monica, California, in late 2021, and its tenancy at Coleman Highline for its San Jose headquarters helped developer Hunter Properties land a $275 million price tag for its 2020 deal with Blackstone for the 362,386-square-foot office complex.
Roku did not disclose which offices it planned to sublease or exit entirely, and the company did not immediately respond to CoStar News' requests to comment. It is trying to land a subtenant for at least two of the eight floors it leased at New York City's Five Times Square last year, according to CBRE marketing materials,
The company leases about 1.3 million square feet of office space across 14 locations in the United States, according to CoStar data.
The streaming service laid off about 200 workers late last year, and the latest round will bring its total to about 400 employees. Roku's headcount was roughly 3,600 people as of Dec. 31, 2022, according to SEC filings.
In addition to the challenges prompting its restructuring effort, the company was also affected by the Silicon Valley Bank failure earlier this month when it had about $487 million, or about 26% of its cash and cash equivalents, in deposits with the regional bank when it was closed down by California banking regulators.