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Business Combination | 12 Months Ended
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Dec. 31, 2019
Business Combinations [Abstract] |
Business Combination | 4. business combination On November 8, 2019, the Company acquired all outstanding shares of dataxu, Inc., (“dataxu”) according to the terms and conditions of the Agreement and Plan of Merger, dated as of October 22, 2019 (the “Merger Agreement”). dataxu is a demand-side platform (“DSP”) that enables marketers to plan and buy video ad campaigns. The acquisition of dataxu’s platform complements the Company’s OTT advertising platform and enables marketers to access a single, data-driven software solution to plan, buy, and optimize their ad spend across TV and OTT providers. The total purchase consideration for dataxu was $148.4 million, which consisted of $78.7 million in cash and $69.7 million for the fair value of the Company’s 571,459 shares of common stock. Pursuant to the Merger Agreement, the Company deposited $18.8 million into an escrow account to secure certain indemnifications and other potential obligations. Of this $18.8 million, $17.5 million is included in the purchase consideration. The remaining amount is not considered part of the purchase consideration as it is utilized for post combination related activities by the Company and are recorded in general and administrative expenses in the consolidated statement of operations. The total purchase consideration includes $1.8 million contingent consideration, carrying value of which approximates its fair value due to its short-term nature. This contingent consideration is included in the escrow amount and may be transferred to dataxu shareholders if certain conditions set forth in the Merger Agreement are met. The Company incurred $3.9 million in acquisition related expenses and has recorded them in general and administrative expenses in the consolidated statement of operations. Purchase Price Allocation 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):
Assets acquired |  |  |  |
Current assets |  | $ | 50,829 |
Restricted cash |  |  | 1,303 |
Property and equipment, net |  |  | 4,503 |
Intangible assets |  |  | 70,200 |
Goodwill |  |  | 72,733 |
Operating lease right-of-use assets |  |  | 24,658 |
Other long-term assets |  |  | 235 |
Total assets acquired |  |  | 224,461 |
Liabilities assumed |  |  |  |
Current liabilities |  |  | (51,428 | )
Operating lease liabilities |  |  | (24,658 | )
Total liabilities assumed |  |  | (76,086 | )
Total preliminary purchase consideration |  | $ | 148,375 |
The preliminary fair value estimates of the net assets acquired are based upon preliminary calculations and valuations, and those estimates and assumptions regarding 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 (up to one year from the acquisition date). 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 and cross-selling opportunities. Identifiable Intangible Assets The identifiable intangible assets acquired consisted of developed technology, customer relationships and tradename with estimated useful lives of 6 months to 6 years. The Company amortizes the fair value of these intangible assets on a straight-line basis over their respective useful lives. The fair value of the intangible assets has been estimated using the income approach in which the after-tax cash flows are discounted to present value. The key valuation assumptions include the Company's estimates of revenue growth projections and discount rates. The valuation of the intangible assets acquired from dataxu along with their estimated useful lives, is as follows (in thousands):
|  | Estimated Fair Value |  |  | Estimated Useful Lives (in years)
Developed technology |  | $ | 56,400 |  |  | 6.0
Customer relationships |  |  | 13,400 |  |  | 4.0
Tradename |  |  | 400 |  |  | 0.5
Estimated fair value of acquired intangible assets |  | $ | 70,200 |  |  |
Taxes The goodwill recorded is not deductible for tax purposes. In connection with the acquisition, a deferred tax liability is established for the book/tax differences related to non-goodwill intangible assets. The deferred tax liability is not reflected as the Company also acquired deferred tax assets, including significant net operating losses, that offset the deferred tax liability. Additionally, both companies have full valuation allowances recorded against their respective deferred tax assets, resulting in a net zero adjustment to deferred taxes on the consolidated balance sheet. Unaudited Pro Forma Results The unaudited pro forma financial information in the table below summarizes the combined results of operations for Roku and dataxu, as if the companies were combined as of the beginning of fiscal 2018. The unaudited pro forma financial information for all periods presented included the business combination accounting effects resulting from this acquisition, mainly including adjustments to reflect the adoption of ASC 842 and ASC 606, additional amortization expense from acquired intangible assets, additional stock-based compensation expense, elimination of historical interest expense associated with dataxu’s historical convertible notes and indebtedness and the related tax effects as though dataxu was combined as of the beginning of fiscal 2018. The unaudited pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of fiscal 2018. The unaudited pro forma financial information for fiscal 2019 combines the Company’s financial results for fiscal 2019 and the historical results of dataxu for fiscal 2019 up to the date it was acquired by the Company. The unaudited pro forma financial information for fiscal 2018 combines the historical results of the Company and dataxu for their respective year ended December 31, 2018. Both years include the effects of the pro forma adjustments listed above. The unaudited pro forma financial information was as follows (in thousands):
|  | For the Year Ended December 31, |
|  | 2019 |  |  | 2018 |
Total Revenues |  | $ | 1,218,403 |  |  | $ | 884,286 |
Pretax loss |  |  | (87,654 | ) |  |  | (39,919 | )
Net loss |  |  | (86,791 | ) |  |  | (39,670 | )
The Company recorded $16.8 million in revenue, $10.2 million in cost of revenue and $6.6 in gross profit in the Company’s consolidated statement of operations from the acquisition date of November 8, 2019 to December 31, 2019.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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