Around half a billion dollars, or about one-fourth of Roku’s cash and equivalents, were stored in Silicon Valley Bank (SVB), which has been closed down by financial authorities on Friday after it crashed. And the provider of streaming platforms acknowledged that it’s uncertain how much funds it will be capable of recovering.
The California Department of Financial Protection and Innovation forced SVB to shut down after it had a run on its deposits and had no way to obtain funds to compensate for the shortfall. The FDIC was then named as the entity’s collector of assets. SVB, which had holdings of $209 billion by the end of 2022, was already searching for a sale but ultimately failed.
According to details provided by Roku in a Filing with the sec, SVB is home to $487 million, or nearly 26%, of the firm’s $1.9 billion in cash and cash equivalents as of March 10. The remaining $1.4 billion is “distributed across multiple large financial institutions,” Roku said in the filing.
“The company’s deposits with SVB are largely uninsured. At this time, the company does not know to what extent the company will be able to recover its cash on deposit at SVB,” Roku said.
The FDIC will pay uninsured depositors an “advance dividend within the next week,” according to the filing. Account holders who are uninsured will be given a receivership certification for the balance of their uninsured cash. Future dividend payments to uninsured depositors may be provided as the FDIC sells the holdings of SVB.
Roku said it “continues to believe” that its current cash and equivalents balance — as well as cash flow from operations — “will be sufficient to meet its working capital, capital expenditures and material cash requirements from known contractual obligations” for the next 12 months “and beyond.”
Roku’s sales growth slowed considerably down during the second half of the previous year, and the firm estimates a 5 per cent decrease in its total sales in the first quarter of 2023. Roku’s operational expenses have increased, 71 per cent in the fourth quarter against macroeconomic headwinds. Roku disclosed in November that it was dismissing 200 U.S. workers or around 5 per cent of its whole staff.
In addition to producing and marketing its own streaming gadgets, Roku just introduced a range of linked TVs that will only be marketed through Best Buy. Besides that, the firm licences its operating system to TV producers under the trademarks TCL, Hisense, Sanyo, JVC, Philips, and Sharp.
However, advertising sales and content collaborations make up the majority of Roku’s earnings. 87 per cent of the firm’s total revenue for the year 2022, or $2.7 billion, came from its Platforms sector, which generated $1.5 billion in net income (56% gross margin). In contrast, Roku’s hardware division used to have a -22 per cent negative gross margin in 2016.
