Roku Cash On Hand, Operating And Free Cash Flow Statistics

Investment. Pixabay image.

This article discusses Roku, Inc.’s (NASDAQ: ROKU) cash on hand and cash flow.

Cash is the lifeline of a business.

It is no exception for Roku, Inc., a leading TV streaming service provider that has transformed how people access their favorite TV shows.

This article will examine several cash-related statistics, such as total cash, cash-to-current assets ratio, operating and free cash flow, cash margins, and cash flow from financing activities.

Investors interested in Roku’s cash position and cash generation may find this article informative.

Let’s look at more details, starting with the table of contents below.

Cash On Hand

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Roku’s cash on hand consists of cash and cash equivalents, short-term investments, and restricted cash, if there is any.

As of 2Q 2023, Roku’s total cash reached US$1.8 billion, down 14% from the same quarter a year ago.

Of the $1.8 billion cash, only $41 million was restricted cash, and there was no short-term investment.

Therefore, Roku’s available cash consists mainly of cash and cash equivalents.

A noteworthy trend is that Roku’s cash on hand has significantly risen since 2017, notably by over 10X.

Another noteworthy trend is that debt is the primary driver behind the ongoing increase in Roku’s cash position.

We will look at this under the net cash from financing activities discussion.

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Cash On Hand To Current Assets Ratio

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As of 2Q 2023, Roku’s cash on hand accounted for 66.5% of its current assets, down slightly from the 69.2% measured a year ago.

This ratio has significantly increased since 2017, illustrating the soaring cash balance of the company.

At a ratio of over 60%, Roku’s current assets are comprised primarily of cash.

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Net Cash From Operations

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Roku generates a modest amount of net cash from operations.

The cash flow steadily increased from 2017 to 2021, reaching a record $300 million in fiscal year 2021 on a TTM basis.

However, Roku may have peaked in generating net cash from operations in fiscal 2021 and has since seen a decline.

In the past several quarters, Roku’s net cash from operating activities had been less optimistic and even produced negative cash flow in some quarters.

Due to the unfavorable net cash from operations in recent quarters, Roku’s cash on hand had significantly declined, as seen in prior discussions.

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Free Cash Flow

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Free cash flow equals net cash from operating activities minus capital expenditures, i.e., purchases of property and equipment in Roku’s cash flow statements.

Roku’s free cash flow was much worse than net cash from operations after considering capital expenditures.

In most cases, Roku’s cash flow was negative, indicating insufficient cash for other spending after property and equipment purchases.

In addition, Roku burned hundreds of millions of dollars in free cash flow in recent quarters, highlighting weak post-pandemic cash flow generation.

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Operating Cash Flow Margin

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The operating cash flow margin measures Roku’s efficiency in converting revenue to net cash from operating activities.

Roku’s operating cash flow margin peaked at 10% during fiscal 2021 when net cash from operations totaled a record figure of $300 million on a TTM basis.

This figure has deteriorated in recent quarters, highlighting the firm’s weak cash flow generation in post-pandemic periods.

A noteworthy trend is that Roku’s peak operating cash flow margin of 10% was quite decent, considering that the company could convert 10% of revenue to operating cash flow.

However, this notable result lasted only a few quarters, and the results in most quarters were low single-digits, indicating Roku’s low effectiveness at converting revenue to operating cash flow.

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Free Cash Flow Margin

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The free cash flow margin measures Roku’s efficiency in converting revenue to free cash flow.

In most cases, Roku’s free cash flow margins were negative and in low single digits, illustrating the low efficiency of the company in converting revenue to free cash flow.

However, the company achieved a free cash flow margin of 10% during fiscal 2021, but it lasted only a single quarter.

In addition, since fiscal 2022, Roku’s free cash flow margins have gravely deteriorated and were much worse than the results measured before the pandemic.

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Net Cash From Financing Activities

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The net cash from financing activities depicts whether cash is paid for debt repayment (negative numbers) or is added from borrowings (positive numbers).

Roku generates positive net cash from financing activities during most quarters, indicating increased borrowing.

As Roku’s cash flow from operations is nowhere near billions of dollars, the rise in the company’s cash must come from borrowings.

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Conclusion

Roku’s cash on hand soared beyond US$2 billion in fiscal 2022, illustrating the record cash position of the company.

However, Roku generates only a modest amount of operating cash flow, sometimes producing negative operating cash flow.

Furthermore, the company has negative free cash flow in most cases after considering capital expenditures.

In addition, we saw that the company’s net cash from financing activities is primarily positive, implying ongoing borrowings.

Therefore, the rise in Roku’s record cash balance, which soared beyond $2 billion in 2022 and was still valued at $1.8 billion as of 2Q 2023, should come from debt borrowings.

Additionally, Roku has been unsuccessful in efficiently converting its revenue into cash.

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Credits and References

1. All financial figures presented in this article were obtained and referenced from Roku, Inc.’s SEC filings, earnings reports, financial statements, news releases, shareholder letters, etc, which are available in Roku Financial Results.

2. Pixabay images.

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Disclosure

References and examples such as tables, charts, and diagrams are constantly reviewed to avoid errors, but we cannot warrant the total correctness of all content.

The content in this article is for informational purposes only and is neither a recommendation nor a piece of financial advice to purchase a stock.

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