Vizio Holding Corp. [VZIO] Filings

10-Q 1 vzio-20240630.htm 10-Q vzio-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_____________________________________

FORM 10-Q

_____________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number: 001-40271

VIZIO HOLDING CORP.

(Exact Name of Registrant as Specified in its Charter)

_____________________________________


Delaware	3651	85-4185335
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)
39 Tesla Irvine, California	(949) 428-2525	92618
(Address of principal executive offices)	(Registrants telephone number, including area code)	(Zip Code)

_____________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Class A common stock, par value $0.0001 per share

VZIO

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of August 2, 2024, there were 125,646,983 shares of the registrant’s Class A common stock outstanding, 75,275,674 shares of the registrant’s Class B common stock outstanding, and no shares of the registrant’s Class C common stock outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of June 30 , 2024 and December 31, 2023	1
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30 , 2024 and June 30 , 2023	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30 , 2024 and June 30 , 2023	3
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30 , 2024 and June 30 , 2023	4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30 , 2024 and June 30 , 2023	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	33
PART II.	OTHER INFORMATION	34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76
Item 3.	Defaults Upon Senior Securities	76
Item 4.	Mine Safety Disclosures	76
Item 5.	Other Information	76
Item 6.	Exhibits	77
	Signatures	78

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include all statements that are not historical facts. In some cases, you can identify forward-looking statements by terminology such as “anticipates,” “believes,” “continue,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” “could,” “would,” “will” or the negative of these terms or other comparable terminology. In particular, statements regarding our plans, strategies, prospects and expectations regarding our business are forward-looking statements. These forward-looking statements include, but are not limited to, statements concerning the following:

•our pending merger with Walmart Inc., including our expectations around the timing and completion thereof;

•our ability to keep pace with technological advances in our industry and successfully compete in highly competitive markets;

•our expectations regarding future financial and operating performance, including with respect to our Device business and the growth of our Platform+ business;

•our ability to continue to sell our Smart TVs;

•our ability to attract and maintain SmartCast Active Accounts;

•our ability to increase SmartCast Hours, including to attract and maintain popular content on our platform;

•our ability to attract and maintain relationships with advertisers;

•our ability to adapt to changing market conditions and technological developments, including with respect to our platform’s compatibility with applications developed by content providers;

•the impact of geopolitical events and volatile market conditions, including those that may affect manufacturing, supply chain and logistics;

•the impact of macroeconomic conditions, including uncertainty in the global banking and financial services sectors, recessionary fears and high interest rates that may reduce consumer discretionary spending;

•our anticipated capital expenditures and our estimates regarding our capital requirements;

•our anticipated investments into our technologies and capabilities;

•our ability to plan and execute our sales strategy during seasonal fluctuations in supply and demand;

•the size of our addressable markets, market share, category positions and market trends;

•our ability to identify, recruit and retain skilled personnel, including key members of senior management;

•our ability to promote our brand and maintain our reputation;

•our ability to maintain, protect and enhance our intellectual property rights;

•our ability to introduce new devices and offerings and enhance existing devices and offerings;

•our ability to successfully defend litigation brought against us;

•our ability to comply with existing, modified or new laws and regulations applying to our business, including with respect to data privacy, environmental requirements, taxation and security laws;

•our ability to implement, maintain and improve effective internal controls; and

•our ability to maintain the security and functionality of our IT Systems or to defend against or otherwise prevent a cybersecurity attack or breach and to prevent system failures.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

iii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

VIZIO HOLDING CORP.

Condensed Consolidated Balance Sheets

(Unaudited, in millions except par values)


	June 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	202.1	$	221.6
Short-term investments	132.0		129.9
Accounts receivable, net	321.6		381.2
Inventories	27.6		6.8
Income tax receivable	21.4		9.0
Prepaid and other current assets	53.8		45.9
Total current assets	758.5		794.4
Property, equipment and software, net	18.5		19.7
Goodwill	44.8		44.8
Deferred income taxes	49.6		49.6
Other assets	71.8		52.2
Total assets	$	943.2	$	960.7

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable due to related parties	$	65.9	$	109.1
Accounts payable	189.6		157.8
Accrued expenses	153.0		178.6
Accrued royalties	43.4		40.7
Other current liabilities	5.3		5.8
Total current liabilities	457.2		492.0
Other long-term liabilities	19.1		19.4
Total liabilities	476.3		511.4
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 100.0 shares authorized and no shares issued and outstanding as of June 30, 2024 and December 31, 2023	—		—
Common stock, $0.0001 par value; 1,350.0 shares authorized as of June 30, 2024 and December 31, 2023 •Class A, 125.7 and 125.3 shares issued and 125.7 and 121.5 shares outstanding as of June 30, 2024 and December 31, 2023, respectively •Class B, 75.3 and 76.2 shares issued and 75.3 and 76.2 shares outstanding as of June 30, 2024 and December 31, 2023, respectively •Class C, no shares issued and outstanding as of June 30, 2024 and December 31, 2023	—		—
Additional paid-in capital	443.9		414.3
Accumulated other comprehensive loss	(0.4)		(0.3)
Retained earnings	23.4		35.3
Total stockholders’ equity	466.9		449.3
Total liabilities and stockholders’ equity	$	943.2	$	960.7

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

VIZIO HOLDING CORP.

Condensed Consolidated Statements of Operations

(Unaudited, in millions except per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net revenue:
Device	$	267.9	$	252.1	$	462.2	$	483.4
Platform+	169.4		142.3		328.9		267.8
Total net revenue	437.3		394.4		791.1		751.2
Cost of goods sold:
Device	267.0		251.8		468.5		481.4
Platform+	70.8		56.5		142.0		108.1
Total cost of goods sold	337.8		308.3		610.5		589.5
Gross profit:
Device	0.9		0.3		(6.3)		2.0
Platform+	98.6		85.8		186.9		159.7
Total gross profit	99.5		86.1		180.6		161.7
Operating expenses:
Selling, general and administrative	79.8		58.6		155.9		116.8
Marketing	9.8		10.0		18.3		17.7
Research and development	15.7		10.0		30.7		21.9
Depreciation and amortization	1.2		1.2		2.4		2.2
Total operating expenses	106.5		79.8		207.3		158.6
(Loss) income from operations	(7.0)		6.3		(26.7)		3.1
Interest income, net	3.2		3.1		7.1		5.4
Other income, net	2.6		0.3		3.2		0.3
Total non-operating income, net	5.8		3.4		10.3		5.7
(Loss) income before income taxes	(1.2)		9.7		(16.4)		8.8
(Benefit from) provision for income taxes	(1.4)		7.8		(4.5)		7.6
Net income (loss)	$	0.2	$	1.9	$	(11.9)	$	1.2

Net income (loss) per share attributable to Class A and Class B stockholders:
Basic	$	0.00	$	0.01	$	(0.06)	$	0.01
Diluted	$	0.00	$	0.01	$	(0.06)	$	0.01
Weighted-average Class A and Class B common shares outstanding:
Basic	199.3		195.9		198.6		195.6
Diluted	210.0		200.7		198.6		201.0

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

VIZIO HOLDING CORP.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited, in millions)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income (loss)	$	0.2	$	1.9	$	(11.9)	$	1.2
Other comprehensive loss:
Foreign currency translation adjustments	—		(0.1)		(0.1)		—
Comprehensive income (loss)	$	0.2	$	1.8	$	(12.0)	$	1.2

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

VIZIO HOLDING CORP.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited, in millions)


	Six Months Ended June 30, 2024
	Preferred Stock(1)			Common Stock(1)(2)(3)		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
	Shares	Amount		Class A	Class B
Balance at December 31, 2023	—	$	—	121.5	76.2	$	414.3	$	(0.3)	$	35.3	$	449.3
Share-based compensation expense	—	—		—	—	13.1		—		—		13.1
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes)	—	—		0.7	—	0.5		—		—		0.5
Foreign currency translation	—	—		—	—	—		(0.1)		—		(0.1)
Net loss	—	—		—	—	—		—		(12.1)		(12.1)
Balance at March 31, 2024	—	$	—	122.1	76.2	$	427.9	$	(0.4)	$	23.2	$	450.7
Share-based compensation expense	—	—		—	—	12.7		—		—		12.7
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes)	—	—		2.6	—	3.3		—		—		3.3
Conversion of Class B shares into Class A shares	—	—		0.9	(0.9)	—		—		—		—
Net income	—	—		—	—	—		—		0.2		0.2
Balance at June 30, 2024	—	$	—	125.7	75.3	$	443.9	$	(0.4)	$	23.4	$	466.9



	Six Months Ended June 30, 2023
	Preferred Stock(1)			Common Stock(1)(2)		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings(3)		Total(3)
	Shares	Amount		Class A	Class B
Balance at December 31, 2022	—	$	—	118.1	76.8	$	366.9	$	(0.3)	$	7.1	$	373.7
Share-based compensation expense	—	—		—	—	8.0		—		—		8.0
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes)	—	—		0.6	—	1.7		—		—		1.7
Net loss	—	—		—	—	—		—		(0.7)		(0.7)
Balance at March 31, 2023	—	$	—	118.7	76.8	$	376.6	$	(0.3)	$	6.5	$	382.8
Share-based compensation expense	—	—		—	—	9.7		—		—		9.7
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes)	—	—		0.8	—	1.1		—		—		1.1
Foreign currency translation	—	—		—	—	—		(0.1)		—		(0.1)
Net income	—	—		—	—	—		—		1.9		1.9
Balance at June 30, 2023	—	$	—	119.5	76.8	$	387.4	$	(0.4)	$	8.4	$	395.4

(1) There were no shares of Preferred Stock or Class C common stock issued or outstanding as of June 30, 2024 and 2023.

(2) As of both June 30, 2024 and 2023, the par value on common stock outstanding was $20 thousand.

(3) Totals may not sum due to rounding.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

VIZIO HOLDING CORP.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in millions)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net (loss) income	$	(11.9)	$	1.2
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization	5.7		3.7
Realized gain on investments	(0.4)		—
Amortization of premium and discount on investments	(3.2)		(1.8)
Change in fair value of investment securities	—		(0.2)
Unrealized gain on conversion of convertible equity investments	(3.8)		—
Share-based compensation expense	26.1		18.1
Change in allowance for doubtful accounts	(0.5)		0.7
Changes in operating assets and liabilities:
Accounts receivable	60.1		50.9
Other receivables due from related parties	—		2.2
Inventories	(20.8)		7.9
Income taxes receivable	(12.4)		1.7
Prepaid and other current assets	(7.9)		(6.2)
Other assets	(18.2)		(5.7)
Accounts payable due to related parties	(43.2)		(59.5)
Accounts payable	31.8		5.9
Accrued expenses	(25.6)		(45.4)
Accrued royalties	2.7		(0.1)
Income taxes payable	—		1.9
Other current liabilities	(0.5)		(0.3)
Other long-term liabilities	(0.3)		(2.6)
Net cash used in operating activities	(22.3)		(27.6)
Cash flows from investing activities:
Purchase of property and equipment	(2.3)		(1.5)
Purchase of investments	(67.4)		(114.6)
Sale of investments	0.6		—
Maturity of investments	68.6		45.1
Net cash used in investing activities	(0.5)		(71.0)
Cash flows from financing activities:
Proceeds from the exercise of stock options	2.2		1.9
Withholding taxes paid on behalf of employees on net settled share-based awards	—		(0.6)
Proceeds from sale of stock under employee stock purchase plan	1.2		1.2
Net cash provided by financing activities	3.4		2.5
Effects of exchange rate changes on cash and cash equivalents	(0.1)		—
Net decrease in cash and cash equivalents	(19.5)		(96.1)
Cash and cash equivalents at beginning of period	221.6		288.7
Cash and cash equivalents at end of period	$	202.1	$	192.6
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	7.4	$	4.6
Cash paid for interest	$	0.1	$	0.1
Cash paid for amounts included in the measurement of operating lease liabilities	$	2.3	$	2.1
Supplemental disclosure of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1.8	$	0.5
Additions to property and equipment financed by accounts payable	$	—	$	0.7

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

VIZIO HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

Note 1. Organization and Nature of Business

Founded and headquartered in Orange County, California, the mission of VIZIO Holding Corp. (NYSE: VZIO) (the “Company”) is to deliver immersive entertainment and compelling lifestyle enhancements that make its products the center of the connected home. The Company is driving the future of televisions through its integrated platform of cutting-edge Smart TVs and powerful operating system. The Company also offers a portfolio of innovative sound bars that deliver consumers an elevated audio experience. The Company’s platform gives content providers more ways to distribute their content and advertisers more tools to connect with the right audience. “VIZIO,” “we,” “us,” “our,” and the “Company” refer collectively to VIZIO Holding Corp. and its subsidiaries unless expressly indicated or the context otherwise requires.

In 2020, the Company launched Platform+, which is comprised of SmartCast, the Company’s award-winning Smart TV operating system, which enables a fully integrated entertainment solution, and Inscape, which powers its data intelligence and services. SmartCast delivers content and applications through an easy-to-use interface. It supports leading streaming apps and hosts the Company’s own free ad-supported video app, WatchFree+.

The Company purchases all of its products from manufacturers headquartered in Asia. Since 2012, the Company has purchased a portion of its televisions from three manufacturers who are affiliates of an investor who holds a noncontrolling interest in the Company through its ownership of Class A common stock. These manufacturers do not have any significant voting privileges, nor sufficient seats on the Board of Directors that would enable them to significantly influence any of the Company’s strategic or operating decisions. All transactions executed with the aforementioned manufacturers are presented as related party transactions.

Note 2. Summary of Significant Accounting Policies

Basis of Consolidation

The Company has prepared these accompanying unaudited condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). These unaudited condensed consolidated financial statements include the accounts of the Company and all subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company considers the U.S. dollar as its reporting currency. The functional currency of most of the foreign subsidiaries is the U.S. dollar. Translation adjustments for subsidiaries where the functional currency is its local currency are included in other comprehensive loss. Foreign currency transaction gains (losses) resulting from exchange rate fluctuation on transactions denominated in a currency other than the functional currency are reported in the condensed consolidated statements of operations.

The condensed consolidated balance sheet as of December 31, 2023 included herein was derived from the audited financial statements as of the same date. The Company has condensed or omitted certain information and notes normally included in complete financial statements prepared in accordance with GAAP. As such, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K. In the Company’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods, but they are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2024.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ from those estimates and assumptions.

Significant Accounting Policies

There have been no material changes to the Company's significant accounting policies from its Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Note 3. Net Revenue

The Company disaggregates net revenue by (i) Device net revenue, and (ii) Platform+ net revenue, as it believes it best depicts how the nature, timing and uncertainty of revenue and cash flows are affected by economic factors.

The Company derives Device net revenue primarily from the sale of televisions and sound bars. Revenue is recognized when control of the promised goods or services is transferred to the Company’s retailers and distributors, in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. The Company sells its products to

certain customers under terms that allow them to receive price protection on future price reductions and may provide for limited rights of return and discounts.

The Company generates Platform+ net revenue through sales of advertising and other services, such as content distribution, subscription and transaction revenue shares, promotions, sales of branded channel buttons on remote controls and data licensing arrangements. The Company’s digital advertising inventory consists of streaming inventory on WatchFree+ and third-party applications as well as banner placements on its SmartCast homescreen. The Company’s advertising revenue is recognized on a cost-per-thousand impressions delivered (“CPM”) basis.

The Company applies a five-step approach as defined in Financial Accounting Standards Board (“FASB”) ASC 606, Revenue from Contracts with Customers (Topic 606), in determining the amount and timing of revenue to be recognized: (1) identifying the contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations in the contract; and (5) recognizing revenue when the corresponding performance obligation is satisfied.

As of June 30, 2024 and December 31, 2023, the Company recorded $23.3 million and $24.2 million of contract assets, respectively. As of June 30, 2024, $19.8 million and $3.5 million of contract assets were recorded in prepaid and other current assets and other assets, respectively, in the accompanying condensed consolidated balance sheets. As of December 31, 2023, $20.3 million and $3.9 million of contract assets were recorded in prepaid and other current assets and other assets, respectively, in the accompanying condensed consolidated balance sheets. As of June 30, 2024 and December 31, 2023, the Company recorded $1.0 million and $2.1 million of contract liabilities, respectively, which are recorded in other current liabilities in the accompanying condensed consolidated balance sheets. Contract assets primarily represent revenue earnings over time for which the Company does not presently have an unconditional right to payment (generally not yet billable) based on the terms of the contracts. Contract liabilities consist of fees invoiced or paid by the Company's customers for which the associated performance obligations have not been satisfied and revenue has not been recognized based on the Company's revenue recognition criteria described above. Additionally, no costs associated with obtaining contracts with customers were capitalized, nor were any costs associated with fulfilling its contracts. All costs to obtain contracts were expensed as incurred as a practical expedient.

Significant Customers

The Company is a wholesale distributor of televisions and other home entertainment products, which are sold to leading retailers and wholesale clubs in the United States. The Company’s sales can be impacted by consumer spending and the cyclical nature of the retail industry.

The following customers account for more than 10% of net revenue:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net revenue:
Customer A	36	%	35	%	32	%	34	%
Customer B	10		12		10		12

Customer A and Customer B are affiliates under common control with one another. Collectively, they comprised 46% and 42% of the Company’s net revenue for the three and six months ended June 30, 2024, respectively, and 47% and 46% of the Company’s net revenue for the three and six months ended June 30, 2023, respectively.

Note 4. Investments

Short-term investments:

The Company purchases U.S. Treasury bills, which are recorded in short-term investments in the accompanying condensed consolidated balance sheets. The Company is classifying these securities as held-to-maturity as management has the intent and ability to hold to maturity and as such, are carried at amortized cost. As of June 30, 2024 and 2023, the maturity dates of all U.S. Treasury bills were within 12 months. The Company reviews these securities for other-than-temporary impairment at least quarterly or when there are changes in credit risk or other potential valuation concerns. When evaluating an investment for its current expected credit losses, the Company reviews factors such as historical experience with defaults, losses, credit ratings, term, market sector and macroeconomic trends, including current conditions. During the three and six months ended June 30, 2024 and 2023, the Company did not recognize any impairment losses related to these securities.

The following table summarizes the Company’s short-term investments:


	June 30, 2024		December 31, 2023
U.S. Treasury Bills:	(In millions)
Maturity	1 year or less		1 year or less

Amortized cost	$	132.0	$	129.9
Gross unrealized gains	—		0.2
Gross unrealized losses	(0.1)		—
Estimated fair value	$	131.9	$	130.1

Equity investments:

The Company has investments in equity securities, which are recorded in other assets in the accompanying condensed consolidated balance sheets amounting to $9.6 million and $6.2 million as of June 30, 2024 and December 31, 2023, respectively.

The Company records its investments in equity securities at historical cost if they do not have a readily determinable fair value. As of June 30, 2024 and December 31, 2023, the Company had $4.8 million and $6.0 million of investments in equity securities that were recorded at historical cost, respectively.

The remaining balance of investments were measured at fair value, and are considered Level 1 investments as the shares are publicly traded and have a readily determinable fair value. As of June 30, 2024 and December 31, 2023, the Company had $4.8 million and $0.2 million of investments in equity securities that are recorded at fair value, respectively. The increase in this amount was due to a conversion of a preferred stock investment to a common stock investment on June 25, 2024. As a result of the conversion, the investment went from being recorded at historical cost to being measured at fair value. The conversion resulted in a $3.8 million unrealized gain, which is recorded in other income, net in the accompanying condensed consolidated statements of operations.

The Company periodically reviews the investments for possible impairment. There was no impairment or observable price changes on the investments during the three months ended June 30, 2024 and 2023.

Note 5. Accounts Receivable

Accounts receivable consists of the following:


	June 30, 2024		December 31, 2023
	(In millions)
Accounts receivable	$	324.3	$	383.4
Allowance for doubtful accounts	(2.7)		(2.2)
Total accounts receivable, net of allowance	$	321.6	$	381.2

The Company maintains credit insurance on certain accounts receivable balances to mitigate collection risk for these customers. The Company evaluates all accounts receivable for the allowance for doubtful accounts. During the three and six months ended June 30, 2024, the Company recorded bad debt reductions of $0.3 million and $0.5 million, respectively. During the three and six months ended June 30, 2023, the Company recorded bad debt (reduction)/expense of $(0.1) million and $0.7 million, respectively.

The following customers account for a significant portion of accounts receivable:


	June 30, 2024		December 31, 2023
Net receivables:
Customer A	29	%	30	%
Customer B	10		9

Customer A and Customer B are affiliates under common control with one another. Collectively, they comprised 39% and 39% of the Company’s total accounts receivable as of June 30, 2024 and December 31, 2023, respectively.

Note 6. Inventories

Inventories consist of the following:


	June 30, 2024		December 31, 2023
	(In millions)
Inventory on hand	$	8.7	$	3.0
Inventory in transit - outbound	2.2		3.3
Inventory in transit - inbound	16.7		0.5
Total inventory	$	27.6	$	6.8

Significant Manufacturers

The Company purchases a significant amount of its product inventory from certain manufacturers. The inventory is purchased under standard product supply agreements that outline the terms of the product delivery. Once all aspects of the product are agreed upon, in most instances the manufacturers are then responsible for transporting the product to their warehouses located in the United States. In most instances, the manufacturers are considered the importers of record and are required to insure the product as it is shipped to the warehouses. In these instances, the title and risk of loss of the product passes to the Company upon shipment from the manufacturer’s warehouse in the United States to the customer. The product supply agreements stipulate that the manufacturer will (i) generally reimburse the Company for at least a portion of the price protection or sales concessions negotiated between the Company and customers on product purchased, and (ii) indemnify the Company against all liability resulting from valid and enforceable patent infringement with regard to product purchased under the agreement except if such infringement arises out of the Company’s modification or misuse of the product.

The Company has the following significant concentrations related to suppliers:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Inventory purchases:
Supplier A — related party	25	%	36	%	32	%	36	%
Supplier B	18		21		17		20
Supplier C	39		28		38		28

The Company currently obtains the majority of its products from these manufacturers. Although the Company can obtain products from other sources, the loss of a significant manufacturer could have a material impact on the Company’s financial condition and results of operations as the products that are being purchased may not be available on the same terms from another manufacturer.

The Company has also recorded other receivables of $0.2 million and $0.8 million due from these manufacturers as of June 30, 2024 and December 31, 2023, respectively. The other receivable balances are attributable to price protection and customer allowances as well as accrued royalties due in connection with the settlement of certain patent infringement cases for units shipped, which are indemnified by the Company’s manufacturers and are recognized at the time the aforementioned liabilities are incurred. The net effect is recorded in the condensed consolidated statements of operations as a reduction to cost of goods sold.

Recycling costs

The Company incurs recycling costs in order to comply with electronic waste recycling programs within certain states. These fees are assessed by the states using current market share and actual costs incurred on administration of such programs and are expensed as incurred. Recycling costs were $0.9 million and $2.5 million for the three and six months ended June 30, 2024, respectively. Recycling costs were $0.1 million and $2.1 million for the three and six months ended June 30, 2023, respectively. These amounts are recorded in cost of goods sold in the accompanying condensed consolidated statements of operations.

Note 7. Property, Equipment and Software, Net

Property, equipment and software, net consist of the following:


	June 30, 2024		December 31, 2023
	(In millions)
Land	$	2.6	$	2.6
Building	7.6		7.6
Machinery and equipment	1.1		1.1
Leasehold improvements	9.3		9.3
Furniture and fixtures	5.1		5.1
Computer and software	18.7		16.9
Construction in progress	0.8		0.4
Total property, equipment and software	45.2		43.0
Less accumulated depreciation and amortization	(26.7)		(23.3)
Total property, equipment and software, net	$	18.5	$	19.7

Depreciation and amortization expense was $1.7 million and $3.5 million for the three and six months ended June 30, 2024, respectively, and $1.9 million and $3.7 million for the three and six months ended June 30, 2023, respectively.

Disposals of fully depreciated assets reduced property, equipment and software and accumulated depreciation and amortization by $0.1 million and $7.7 million as of June 30, 2024 and December 31, 2023, respectively. There was no impact to the statements of operations for the three and six months ended June 30, 2024 or 2023.

Note 8. Capitalized Software

The Company’s capitalized software consist of the following:


	June 30, 2024		December 31, 2023
	(In millions)
Capitalized software	$	21.8	$	21.8
Accumulated amortization	(2.2)		—
Capitalized software, net	$	19.6	$	21.8

The Company’s capitalized software is recorded in other assets in the accompanying condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023. Amortization expense was $1.1 million and $2.2 million for the three and six months ended June 30, 2024, respectively. There was no amortization expense for both the three and six months ended June 30, 2023.

Note 9. Accrued Expenses

The Company’s accrued expenses consist of the following:


	June 30, 2024		December 31, 2023
	(In millions)
Accrued price protection	$	25.2	$	33.4
Accrued other customer related expenses	47.4		55.8
Accrued supplier/partner related expenses	47.1		46.1
Accrued payroll expenses	30.7		40.8
Accrued other expenses	2.6		2.5
Total accrued expenses	$	153.0	$	178.6

Note 10. Accrued Royalties

A summary of future commitments on royalty obligations (including amounts currently accrued for under existing royalty agreements yet to be paid, as well as amounts that will become due in future periods relating to these existing arrangements) as of June 30, 2024 is as follows:


	June 30, 2024
	(In millions)
2024 (remaining)	$	9.0
2025	12.7
2026	6.5
2027	6.0
2028	1.5
2029 and thereafter	—
Total	$	35.7

For potential future settlements related to historical sales, a reserve has been recorded in accrued royalties in the condensed consolidated balance sheets. Any patent infringement lawsuit in which the Company is not indemnified is expensed when management determines that it is probable that a liability has been incurred and the amount is estimable.

In the ordinary course of business, the Company is currently party to, and management anticipates the Company will continue to be party to, various claims and suits including disputes arising over intellectual property rights and other matters. The Company intends to vigorously defend against such claims and suits; however, the ultimate outcome of such claims may remain unknown for some time. Based on all of the information available to date, management does not believe that there are any claims or suits that would have a material adverse effect on the Company’s financial condition, results of operations, or liquidity.

Note 11. Leases

The Company has various non-cancelable operating leases for its corporate and satellite offices primarily in the United States. These leases expire at various times through 2029. The table below presents supplemental balance sheet information related to the Company’s operating leases as follows (in millions, except lease term and discount rate):


	Classification	June 30, 2024			December 31, 2023
Assets:
Right-of-use asset	Other assets	$	13.5		$	13.8
Liabilities:
Current portion of lease liabilities	Other current liabilities	$	4.3		$	3.5
Long-term portion of lease liabilities	Other long-term liabilities	$	10.1		$	11.0
Weighted-average remaining lease term		3.3			3.8
Weighted-average discount rate		6.7		%	6.3		%

Operating lease costs were $1.7 million and $3.4 million for the three and six months ended June 30, 2024, respectively. Operating lease costs were $1.4 million and $2.8 million for the three and six months ended June 30, 2023, respectively.

The table below reconciles the undiscounted cash flows of the operating leases for each of the first five years, and total of the remaining years, to the operating lease liabilities recorded on the condensed consolidated balance sheets as of June 30, 2024:


	June 30, 2024
	(In millions)
2024 (remainder)	$	2.6
2025	5.2
2026	4.8
2027	2.7
2028	0.7
2029 and thereafter	0.2
Total minimum lease payments	16.2
Less imputed interest	(1.8)
Total lease liabilities	$	14.4

Note 12. Commitments and Contingencies

Volume Commitments

Certain product supply agreements include a volume supply commitment on up to 13 weeks of inventory forecasted by the Company. Management provides periodic forecasts to manufacturers at which time they consider the first 13 weeks of supply to be committed. As of June 30, 2024, no liabilities were recorded related to this supply commitment.

Data Support Spend Commitments

The Company has agreements with outside companies to provide data support services, which include future spend commitments to continue to use the services provided. The committed future spend is as follows:


	June 30, 2024
	(In millions)
2024 (remainder)	$	18.7
2025	39.7
2026	35.4
Total	$	93.8

Revolving Credit Facility

The Company was party to a credit agreement with Bank of America, N.A. (as amended, the “Credit Agreement”), which provided for a revolving credit line of up to $50.0 million maturing April 13, 2024. The Company’s indebtedness to Bank of America, N.A. under the Credit Agreement was collateralized by substantially all of the Company’s assets.

On April 13, 2024, the Company’s Credit Agreement was terminated in accordance with its terms. In connection therewith, the Company paid all required fees and expenses thereunder and released all existing liens granted to the lenders. The Company had no outstanding borrowings under the Credit Agreement at the time of termination.

Fees related to the unused line of credit were not material in any of the periods presented. For the three and six months ended June 30, 2024 and June 30, 2023, there were no draws on the line of credit and the Company was in compliance with all debt covenants.

Legal Matters

The Company currently, and in the future may continue to be, subject to litigation, claims and assertions incidental to the business, including patent infringement litigation and product liability claims, as well as other litigation of a non-material nature in the ordinary course of business. The Company believes that the outcome of any existing litigation, either individually or in the aggregate, will not have a material impact on the business, financial condition, results of operations or cash flows. The results of any future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.

Note 13. Stockholders’ Equity

Preferred Stock

As of June 30, 2024, the Company had 100.0 million shares of undesignated preferred stock authorized but not issued with rights and preferences determined by the Company’s Board of Directors at the time of issuance of such shares.

Common Stock

The Company has three classes of authorized common stock, Class A common stock, Class B common stock and Class C common stock.

Equity Incentive Plans

The Company has two equity incentive plans, the 2017 Incentive Award Plan (as amended, the “2017 Plan”) and the 2007 Incentive Award Plan (the “2007 Plan,” and together with the 2017 Plan, collectively, the “Plans”). The 2017 Plan replaced the 2007 Plan. Under the 2017 Plan, the Company is permitted to grant stock options, restricted stock units (“RSUs”) and restricted stock. The primary purpose of the 2017 Plan is to enhance the Company’s ability to attract, motivate, and retain the services of qualified employees, officers, and directors.

Stock Option Awards

A summary of the Company’s stock option activity under the Plans as of June 30, 2024, is presented below:


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
	(In millions, except years and per share amounts)
Outstanding at December 31, 2023	14.2	$	7.72	6.5	$	25.2
Granted	0.0	9.53
Exercised	(0.6)	3.38
Forfeited and expired	(0.2)	9.35
Outstanding at June 30, 2024	13.4	$	7.91	6.2	$	53.6
Options vested and exercisable at June 30, 2024	10.0	$	7.32	5.5	$	45.7

The grant date fair values of stock options are estimated using the Black-Scholes-Merton option pricing model.

The following provides information on the weighted-average assumptions used for stock options granted during the three and six months ended June 30, 2024 and 2023 (shares in millions):


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Number of options granted	—			1.1			—			1.2
Volatility	—		%	46.0		%	46.1		%	45.9		%
Expected term (years)	—			6.25 years			6.25 years			6.25 years
Dividend yield	—		%	0.0		%	0.0		%	0.0		%
Risk-free interest rate	—		%	3.8		%	4.3		%	3.8		%
Fair value of common stock	$	—		$	6.49		$	9.53		$	6.75
Grant date fair value per share determined using a Black-Scholes-Merton option pricing model for purposes of determining compensation expense	$	—		$	3.24		$	4.85		$	3.37

As of June 30, 2024, the Company had $12.6 million of unrecognized share-based compensation expense related to stock options, which the Company expects to recognize over a weighted average vesting period of approximately 1.7 years.

Restricted Stock Units

The grant date fair values of the Company's RSUs are determined based on the fair value of the Company's common stock on the date of grant.

A summary of the Company’s activity related to RSUs as of June 30, 2024 is presented below:


	Number of Shares	Weighted Average Grant Date Fair Value
	(In millions)
Outstanding at December 31, 2023	12.2	$	8.89
Granted	1.2	9.27
Vested	(1.8)	9.62
Forfeited	(0.4)	9.26
Outstanding at June 30, 2024	11.2	$	8.80

As of June 30, 2024, the Company had $80.7 million of unrecognized share-based compensation expense related to RSUs, which the Company expects to recognize over a weighted average vesting period of approximately 2.6 years.

Performance Stock Units

The Company has granted performance stock units (“PSUs”) to select executive employees that vest over an approximately four-year service period based on a performance metric tied to the Company’s total shareholder return relative to the total shareholder return of a peer group over a one-year performance period. The grant date fair value for such PSUs was estimated using a Monte-Carlo simulation model covering the one-year performance period. Between 0% and 200% of the PSUs will become eligible to vest (“eligible PSUs”) based on achievement of the performance goal, and any eligible PSUs will vest in increments over a period of approximately four years. The PSUs are subject to both time-based and market-based vesting conditions.

During the period ended June 30, 2024, the performance period for PSUs granted in 2023 ended with an achievement level of 164%, which resulted in approximately 1.0 million PSUs in excess of the target number of PSUs becoming eligible to vest according to the service-based vesting schedule. No similar awards were outstanding as of June 30, 2023.

A summary of the Company’s activity related to PSUs as of June 30, 2024 is presented below:


	Number of Shares	Weighted Average Grant Date Fair Value
	(In millions)
Outstanding at December 31, 2023(1)	1.7	$	6.72
Adjustment based on performance achievement (2)	1.0	6.72
Vested	(0.7)	6.72
Outstanding at June 30, 2024	2.0	$	6.72

_________________________

(1) Represents the number of PSUs at target level of achievement of the market-based vesting condition, which equals 100% of the target number of PSUs.

(2) Represents the incremental number of PSUs eligible to vest, which equals an additional 64% of the target number of PSUs.

As of June 30, 2024, the Company had $5.2 million of unrecognized share-based compensation expense related to PSUs, which the Company expects to recognize over a weighted average vesting period of approximately 3.0 years.

Share-based Compensation Expense

Total share-based compensation expense was $12.7 million and $26.1 million for the three and six months ended June 30, 2024, respectively. Total share-based compensation expense was $9.9 million and $18.1 million for the three and six months ended June 30, 2023, respectively. For the three and six months ended June 30, 2024, $1.0 million and $2.1 million is included in cost of goods sold, respectively, and $2.1 million and $4.1 million is included in research and development expense, respectively, with the remaining amount included in selling, general and administrative expense in the condensed consolidated statements of operations. For the three and six months ended June 30, 2023, $0.6 million and $1.2 million is included in cost of goods sold, respectively, and $1.2 million and $2.3 million is included in research and development expense, respectively, with the remaining amount included in selling, general and administrative expense in the condensed consolidated statements of operations.

Note 14. Cash Incentive Awards

On February 19, 2024, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Walmart Inc. In connection with the Merger Agreement, the Company stopped granting equity awards under its equity incentive plans (as described above) to its employees, with the exception of annual grants of RSUs to its Board of Directors. In lieu of granting

equity awards to its employees, the Company began issuing cash incentive awards as part of its long-term incentive program. These cash incentive awards vest over four years and are paid in cash upon vesting. The Company may convert unvested cash incentive awards to RSUs in the future.

A summary of the Company’s activity related to cash incentive awards as of June 30, 2024 is presented below:


			Award Value
			(In millions)
Outstanding at December 31, 2023			—
Granted			38.6
Vested			—
Forfeited			(0.4)
Outstanding at June 30, 2024			38.2

As of June 30, 2024, the Company had $37.7 million of unrecognized compensation expense related to cash incentive awards, which the Company expects to recognize over a weighted average vesting period of approximately 2.4 years.

For both the three and six months ended June 30, 2024, the amount of cash incentive expense was $0.5 million. For both the three and six months ended June 30, 2024, an immaterial amount was included in cost of goods sold, and $0.1 million was included in research and development expense in the condensed consolidated statements of operations. The remaining $0.4 million was included in selling, general and administrative expense in the condensed consolidated statements of operations. There were no such awards for the three and six months ended June 30, 2023. As of June 30, 2024, $0.5 million of accrued cash incentive liability is recorded in accrued expenses in the accompanying condensed consolidated balance sheets. There was no such liability as of June 30, 2023.

Note 15. Income Taxes

The Company recorded a tax benefit of $1.4 million, resulting in an effective tax rate of 119%, and a tax expense of $7.8 million, resulting in an effective tax rate of 80%, for the three months ended June 30, 2024 and June 30, 2023, respectively. The Company recorded a tax benefit of $4.5 million resulting in an effective tax rate of 27%, and a tax expense of $7.6 million, resulting in an effective tax rate of 86% for the six months ended June 30, 2024 and June 30, 2023, respectively. The tax provision for the three months ended June 30, 2024 and June 30, 2023 includes a net income tax benefit of $0.9 million and a net income tax expense of $0.3 million, respectively, for discrete items primarily due to excess tax expense relating to share-based compensation. The tax provision for the six months ended June 30, 2024 and June 30, 2023 includes a net income tax benefit of $1.0 million and a net income tax expense of $0.5 million, respectively, for discrete items primarily due to excess tax expense relating to share-based compensation.

Note 16. Net Income (Loss) Per Share

The Company computes earnings per share (“EPS”) of Class A and Class B common shares using the two-class method for participating securities.

Basic earnings per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of shares of Class A and Class B common shares outstanding during the period. Participating securities are excluded from basic weighted-average common shares outstanding.

Diluted earnings per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of Class A and Class B common shares outstanding during the period, inclusive of the effect of potential common shares, if dilutive. For the six months ended June 30, 2024, the potential dilutive shares were not included in the computation of diluted loss per common share as the effect of including these shares in the calculation would have been anti-dilutive. For the three months ended June 30, 2024 and the three and six months ended June 30, 2023, the potential dilutive shares relating to outstanding stock options were included in the computation of diluted earnings.

Basic and diluted income (loss) per share and the weighted-average shares outstanding have been computed for all periods as shown below:


	Three Months Ended June 30,
	2024				2023
	Class A		Class B		Class A		Class B
Numerator:	(In millions, except per share amounts)
Net income attributable to common stockholders - basic and diluted	$	0.1	$	0.1	$	1.2	$	0.7

Denominator:
Weighted-average common shares outstanding - basic	123.4		75.9		119.1		76.8
Weighted-average effect of dilutive securities	10.7		—		4.8		—
Weighted-average common shares outstanding - diluted	134.1		75.9		123.9		76.8

Net income per share attributable to Class A and Class B common stockholders:
Basic	$	0.00	$	0.00	$	0.01	$	0.01
Diluted	$	0.00	$	0.00	$	0.01	$	0.01
Anti-dilutive equity awards under share-based award plans excluded from the determination of diluted EPS	3.2				13.9


	Six Months Ended June 30,
	2024				2023
	Class A		Class B		Class A		Class B
Numerator:	(In millions, except per share amounts)
Net (loss) income attributable to common stockholders - basic and diluted	$	(7.3)	$	(4.6)	$	0.7	$	0.5

Denominator:
Weighted-average common shares outstanding - basic	122.6		76.0		118.8		76.8
Weighted-average effect of dilutive securities	—		—		5.4		—
Weighted-average common shares outstanding - diluted	122.6		76.0		124.2		76.8

Net (loss) income per share attributable to Class A and Class B common stockholders:
Basic	$	(0.06)	$	(0.06)	$	0.01	$	0.01
Diluted	$	(0.06)	$	(0.06)	$	0.01	$	0.01
Anti-dilutive equity awards under share-based award plans excluded from the determination of diluted EPS	6.9				12.8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors including those set forth in Part II, Item 1A “Risk Factors” and “Special Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q. The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included in this Quarterly Report on Form 10-Q and our audited financial statements and notes thereto included in our Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to the following terms have the respective meaning as defined below:

Ad-supported Video on Demand (“AVOD”): Over-the-Top video services supported by serving ads. These include free platforms like YouTube TV, Pluto TV or our WatchFree+ as well as those, like Hulu, that charge a subscription fee in addition to serving ads.

Automatic Content Recognition (“ACR”): Technology that tracks viewing data on Connected TVs. Advertisers and content providers use this data, among other things, to measure viewership reach and ad effectiveness.

Connected Home: Home electronics configuration in which appliances (such as an air conditioner or refrigerator) and devices (such as a home security system) can be controlled remotely using a mobile or other device connected to the internet.

Connected TV: A television that is connected to the internet through built-in capabilities (i.e., a Smart TV) or through another device such as a game console or set-top box (e.g., Apple TV, Google Chromecast or Roku).

Direct Advertising Relationships: Consists of the number of advertisers that purchased advertising inventory directly from VIZIO in a given period.

Dynamic Ad Insertion (“DAI”): Technology that seamlessly replaces TV ads with targeted ads from the Smart TV in real time, across multiple inputs.

Linear TV: Live, scheduled television programming distributed through cable, satellite or broadcast (antennae).

Multichannel Video Programming Distributor (“MVPD”): A service provider that delivers multiple television channels over cable, satellite, or wireline or wireless networks (e.g., Comcast’s Xfinity cable TV and DISH satellite TV).

Over-the-Top (“OTT”): Any app or website that bypasses MVPD distribution and provides streaming video content directly to viewers, over the internet (e.g., Disney+, Hulu, Netflix and YouTube TV).

Premium Video on Demand (“PVOD”): Similar to TVOD, but lets consumers access premium on-demand content at a higher price point. Examples include feature films made available alongside, or in place of, a traditional movie theater release.

SmartCast: VIZIO’s proprietary Smart TV operating system. The software platform where consumers can access VIZIO’s WatchFree+ as well as a wide array of third-party OTT apps (e.g. Amazon Prime Video, Apple TV+, Disney+, Hulu, Netflix, Paramount+, Peacock and YouTube TV).

Smart TV: A television with built-in internet capability. Often includes an operating system.

Subscription Video on Demand (“SVOD”): OTT services that generate revenue through selling subscriptions to consumers (e.g., Disney+ and Netflix).

Transactional Video on Demand (“TVOD”): Distribution method by which consumers purchase video-on-demand content to own or on a rental basis (e.g., Amazon Prime Video rentals and Fandango Now).

Virtual Multichannel Video Programming Distributor (“vMVPD”): An MVPD that is delivered over the internet; interchangeable with “linear OTT” (e.g., Sling TV and YouTube TV).

VIZIO Account: A payment and subscription management solution, which provides a seamless way for VIZIO Smart TV users to subscribe to, track payments for and manage streaming services and take advantage of special offers.

WatchFree+: VIZIO’s ad-supported OTT app which offers access free of charge to viewers on VIZIO Smart TVs, to news, sports, movies and general entertainment TV shows on demand and in a format similar to Linear TV through programmed channels.

Overview

Founded and headquartered in Orange County, California, our mission is to deliver immersive entertainment and compelling lifestyle enhancements that make our products the center of the Connected Home. We are driving the future of televisions through our integrated platform of cutting-edge Smart TVs and powerful operating system. We also offer a portfolio of innovative sound bars that deliver consumers an elevated audio experience. Our platform gives content providers more ways to distribute their content and advertisers more tools to connect with the right audience.

We currently offer:

•a broad range of high-performance Smart TVs that encompass a variety of price points, technologies, features and screen sizes, each designed to address specific consumer preferences;

•a portfolio of innovative sound bars that deliver immersive audio experiences; and

•a proprietary Smart TV operating system, SmartCast, which enhances the functionality and monetization opportunities of our devices.

Financial and operating results for the three months ended June 30, 2024 as compared to the corresponding period of last year included:

•Net revenue of $437.3 million, up 11%

•Platform+ net revenue of $169.4 million, up 19%

•Gross profit of $99.5 million, up 16%

•Platform+ gross profit of $98.6 million, up 15%

•Net income of $0.2 million, compared to $1.9 million

•Adjusted EBITDA of $8.6 million, compared to $18.1 million

•Adjusted EBITDA includes acquisition-related costs of $8.4 million and cash incentive awards in lieu of equity awards of $0.5 million in connection with our long-term incentive plan

•SmartCast Active Accounts of 18.8 million, up 7%

•SmartCast Hours of 5.6 billion, up 13%

•SmartCast Average Revenue Per User (“ARPU”) of $35.39, up 16%

Our Business Model

We generate revenue primarily from (1) selling our Smart TVs, sound bars and other accessories through our Device business and (2) monetizing our digital platform, Platform+. While, currently, the majority of our total net revenue is generated from the sales of our devices, our Platform+ business, including our advertising services, is growing at a rapid pace. Given the growing number of use cases for Smart TVs, we expect to increase our revenue from Connected TV advertising, SVOD services and other monetizable transactions made on our platform that extend beyond traditional entertainment content.

Device

We offer a range of high-performance Smart TVs designed to address specific consumer preferences, as well as a portfolio of sound bars that deliver immersive audio experiences. We generate revenue from the shipment of these devices to retailers and distributors across the United States, as well as directly to consumers through our website, VIZIO.com.

Platform+

Platform+ is comprised of SmartCast, our award-winning Smart TV operating system, that enables our fully integrated entertainment solution, and Inscape, which powers our data intelligence and services.

SmartCast delivers a compelling array of content and applications through an elegant and easy-to-use interface. It supports many of the leading streaming apps, such as Amazon Prime Video, Apple TV+, Disney+, Hulu, Max, Netflix, Paramount+, Peacock, and YouTube TV, and hosts our own free, ad-supported app, WatchFree+. SmartCast also supports Apple AirPlay 2 and Chromecast functionalities to allow users to stream additional content from their other devices to our Smart TVs. It provides broad support for third-party voice platforms, including Amazon Alexa, Apple HomeKit and Google Voice Assistant, as well as second screen viewing to offer additional interactive features and experiences.

Inscape is our ACR technology which is able to identify the content displayed on the screen of our Smart TVs, tracking viewing data, regardless of input source. We aggregate this data to increase transparency and enhance targeting abilities for our

advertisers, while adhering to our strict consumer privacy policies. The data we collect allows us to monetize our own ad inventory and provides the potential for a better user experience through more relevant advertisements and content recommendations. We also license a portion of this data to measurement companies, advertising agencies and other media and ad-tech companies.

We monetize these capabilities through:

Advertising

•Video advertising: We offer ad inventory on services such as WatchFree+ and certain third-party AVOD streaming services. In exchange for distributing third party content, we gain a portion of the advertising inventory to sell ourselves, or in some cases we sell all of the ad inventory and share a portion of the revenue with the content providers.

•Home screen: We offer ad placements on our SmartCast home screen to streaming services, studios and other consumer brands.

•Partner marketing: We offer branding opportunities through our large, in-store presence where our Smart TV cartons provide a highly-visible, physical space to showcase our partners’ content images and streaming service logos.

Data Licensing

•Inscape: We generate fees from measurement services, ad tech firms, ad agencies and networks through licensing data generated from our Inscape technology to measure viewership trends and advertising performance.

Content Distribution, Transactions and Promotion

•Branded buttons on remote controls: We offer partners who want the opportunity to place a button for their service on our VIZIO remote controls so that consumers can have quick access to their services.

•SVOD and vMVPD: We share revenue with SVOD and vMVPD services generated from new user subscriptions for their services that are activated or reactivated through VIZIO Account or referrals from our platform.

•PVOD and TVOD: We share revenue with PVOD and TVOD services for purchases of their services that are initiated on our platform.

Pending Merger with Walmart

On February 19, 2024, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Walmart Inc., a Delaware corporation (“Walmart”), and Vista Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Walmart (“Merger Sub”). The Merger Agreement provides that, subject to the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into VIZIO (the “Merger”), with VIZIO continuing as the surviving corporation of the Merger and a wholly owned subsidiary of Walmart. At the effective time of the Merger, each share of our Class A common stock and Class B common stock issued and outstanding (subject to certain customary exceptions specified in the Merger Agreement) will automatically be converted into the right to receive $11.50 in cash, without interest and subject to applicable withholding taxes. On February 19, 2024, following the execution of the Merger Agreement, stockholders holding approximately 89% of the voting power of our outstanding common stock adopted the Merger Agreement and approved the transactions contemplated thereby, including the Merger, by written consent. No other approval of our stockholders is required to complete the transaction.

The Merger Agreement generally requires us to operate our business in the ordinary course and in compliance with applicable laws, and subjects us to customary interim operating covenants that restrict us from taking certain specified actions without Walmart’s approval, in each case, until the Merger is completed or the Merger Agreement is terminated in accordance with its terms and subject to certain exceptions including as may be required by applicable laws.

The Merger Agreement may be terminated by mutual written consent of VIZIO and Walmart. In addition, either we or Walmart may terminate the Merger Agreement in certain circumstances, including if: (1) the Merger is not completed by February 19, 2025 (which may be extended to August 19, 2025 under certain circumstances) (the “End Date”); (2) a governmental authority of competent jurisdiction has issued a final and non-appealable order preventing the consummation of the Merger, or (3) the other party breaches its representations, warranties or covenants in the Merger Agreement, such that the applicable conditions to closing set forth in the Merger Agreement would not be satisfied, subject in certain cases, to the right of the breaching party to cure the breach. We may terminate the Merger Agreement in certain additional circumstances, including if after February 19, 2025, the Merger has not been completed because certain governmental authorities have commenced or overtly asserted an intent to commence certain specified investigations. Upon termination of the Merger Agreement in certain circumstances, we are obligated to pay Walmart a termination fee of $78.0 million. Specifically, this termination fee is payable by us to Walmart if (1) the Merger Agreement is terminated for the failure to consummate the Merger by the End Date, (2) at the time of the

termination of the Merger Agreement, a Specified Circumstance (as defined in the Merger Agreement) does not exist, (3) prior to the termination of the Merger Agreement an alternative acquisition proposal has been made or publicly announced and (4) within 12 months following the termination of the Merger Agreement, we enter into and subsequently consummate an Acquisition Transaction (as defined in the Merger Agreement).

We are subject to customary “no-shop” restrictions prohibiting us and our representatives from, among other things, soliciting alternative acquisition proposals, providing confidential information to third parties in connection with an alternative acquisition proposal, and engaging in discussions or negotiations with third parties with respect to alternative acquisition proposals.

Completion of the Merger is subject to certain closing conditions set forth in the Merger Agreement (which conditions may also be waived by the party to which they apply), including: (1) the adoption of the Merger Agreement by our stockholders (which has occurred); (2) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and the absence of any voluntary agreement to delay the Merger; (3) the absence of an order or law preventing the consummation of the Merger; (4) the accuracy of representations and warranties of the parties, subject to applicable materiality qualifiers; (5) the performance of each party’s covenants in all material respects; (6) the absence of specified governmental litigation relating to the Merger that is pending or overtly asserted; and (7) no Material Adverse Effect (as defined in the Merger Agreement) having occurred with respect to VIZIO and its subsidiaries since the date of the Merger Agreement that is continuing.

On March 25, 2024, following informal discussions with the Department of Justice (the “DOJ”) and the Federal Trade Commission (the “FTC” and together with the DOJ, the “Antitrust Agencies”), Walmart notified the Antitrust Agencies that Walmart would voluntarily withdraw and refile the Hart-Scott-Rodino (“HSR”) notification and report form for the Merger in order to give the Antitrust Agencies additional time to review the Merger. Walmart refiled the HSR notification and report form for the Merger on March 29, 2024. On April 29, 2024, VIZIO and Walmart each received a request for additional information and documentary material (the “Second Request”) from the FTC in connection with the FTC’s review of the Merger. The issuance of the Second Request extends the waiting period under the HSR Act until 30 days after both VIZIO and Walmart have substantially complied with the Second Request, unless the waiting period is terminated earlier by the FTC or extended by agreement of VIZIO and Walmart. VIZIO and Walmart expect to promptly respond to the Second Request and to continue working cooperatively with the FTC as it conducts its review of the Merger.

The exact timing of the completion of the Merger, if it occurs at all, cannot be predicted because the Merger is subject to the satisfaction of the closing conditions, including the expiration or termination of the waiting period under the HSR Act and the absence of any voluntary agreement to delay the Merger.

The foregoing summary of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, which was filed as Exhibit 2.1 to our Current Report on Form 8-K filed on February 20, 2024. For further discussion about the Merger and the terms of the Merger Agreement, refer to the section titled “Pending Merger with Walmart” in Part II, Item 7 and the section titled “Pending Merger with Walmart” in Note 20 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K.

Overview of Our Supply Chain

We design our products in-house in California, and we work closely with our Original Design Manufacturers (“ODMs”), panel suppliers and chipset suppliers for product design and technical specifications. Through this collaborative process, we leverage the manufacturing scale of these partners, as well as their research and development functions in the development of new product introductions. Many of our ODM partners provide shipping and logistics support to move finished products from their manufacturing facilities to the United States. The title of the finished goods typically transfer from the ODM to us once the product is shipped to the retailer. We believe that our inventory-light business model fosters efficient operations with a low fixed-cost structure; coupled with careful management of marketing, selling, general and administrative expenses, which has enabled us to manage our working capital effectively and improve operating leverage. We believe that through these efficiencies, we are able to offer consumers high quality products at affordable prices.

Our Sales and Marketing Approach

Retailers

We have maintained long-standing relationships with many leading retailers, including Amazon, Best Buy, Costco, Sam’s Club, Target and Walmart. Our sales and marketing teams work closely with these retailers to develop marketing and promotion plans, manage inventory, deploy go-to-market strategies, educate their salesforce and optimize the effectiveness of retail space for our devices.

Consumers

Our marketing team is focused on building our brand reputation and awareness to drive consumer demand for our products. Our marketing approach is to emphasize value, which is to deliver quality products with leading technology at affordable prices, which enhance the entertainment experience. Our products and value proposition have earned numerous awards and accolades from popular press.

Advertisers

We offer an attractive value proposition for advertisers to reach consumers who are increasingly “cutting the cord”. We continue to build out our Platform+ advertising sales force, and we intend to continue to increase our presence and recognition among advertising agencies, advertisers and content providers through the television advertising ecosystem. In addition, we expect our audience size and data capabilities to continue to resonate with ad buyers looking to increase their Connected TV ad spend.

Key Business Metrics

We review a number of operational and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.

Smart TV Shipments

We define Smart TV Shipments as the number of Smart TV units shipped to retailers or direct to consumers in a given period. Smart TV Shipments drive a significant portion of our net revenue and provide the foundation for increased adoption of our SmartCast operating system and the growth of our Platform+ net revenue. The growth rate between Smart TV Shipments and Device net revenue is not directly correlated because our Device net revenue can be impacted by other variables, such as the series and sizes of Smart TVs sold during the period, the introduction of new products as well as the number of sound bars shipped. For the three months ended June 30, 2024, our Smart TV Shipments totaled 1.2 million, a 15% year-over-year increase. We expect Smart TV Shipments will fluctuate over time as consumer demand fluctuates, however, because the majority of our Smart TVs are not sold directly to consumers, changes in consumer demand or overall sales of Smart TVs in a given period may not directly correlate to Smart TV Shipments or our Device net revenue for that period. We may also experience changes in demand from the retailers that sell our products due to factors other than consumer demand, such as levels of retailer inventory.

SmartCast Active Accounts

We define SmartCast Active Accounts as the number of VIZIO Smart TVs where a user has activated the SmartCast operating system through an internet connection at least once in the past 30 days. We believe that the number of SmartCast Active Accounts is an important metric to measure the size of our engaged user base, the attractiveness and usability of our operating system, and subsequent monetization opportunities to increase our Platform+ net revenue. At June 30, 2024, SmartCast Active Accounts were 18.8 million, representing a 7% year-over-year increase. This metric excludes approximately 2.6 million televisions connected to the internet through our legacy operating system, VIZIO V.I.A. Plus, which we no longer ship. As we continue to improve and market our SmartCast service combined with the secular shift to OTT, we expect the number of SmartCast Active Accounts will grow as our platform becomes the place where consumers access all of the features of their Smart TV rather than connecting a cable box, satellite or other external device, though we expect the rate of growth will continue to decline over time.

Total VIZIO Hours

We define Total VIZIO Hours as the aggregate amount of time users spend utilizing our Smart TVs in any capacity. We believe this usage metric is critical to understanding our total potential monetization opportunities. For the three months ended June 30, 2024, Total VIZIO Hours were 9.3 billion, representing a 5% year-over-year increase.

SmartCast Hours

We define SmartCast Hours as the aggregate amount of time viewers engage with our SmartCast platform to stream content or access other applications. This metric reflects the size of the audience engaged with our operating system and indicates the growth and awareness of our platform. It is also a measure of the success of our offerings in addressing increased user demand for OTT streaming. Greater user engagement translates into increased revenue opportunities as we earn a significant portion of our Platform+ net revenue through advertising, which is influenced by the amount of time users spend on our platform. For the three months ended June 30, 2024, SmartCast Hours were 5.6 billion, representing a 13% year-over-year increase.

SmartCast ARPU

We define SmartCast ARPU as total Platform+ net revenue, less revenue attributable to legacy VIZIO V.I.A. Plus units, during the preceding four quarters divided by the average of (i) the number of SmartCast Active Accounts at the end of the current

period; and (ii) the number of SmartCast Active Accounts at the end of the corresponding prior year period. SmartCast ARPU indicates the level at which we are monetizing our SmartCast Active Account user base. Growth in SmartCast ARPU is driven significantly by our ability to add users to our platform and our ability to monetize those users. SmartCast ARPU at June 30, 2024 was $35.39, representing a 16% year-over-year increase.

The following table presents a comparison of these key operational metrics for the three months ended June 30, 2024 and the three months ended June 30, 2023:


	Three Months Ended June 30,
	2024		2023
	(In millions, except SmartCast ARPU)
Smart TV Shipments	1.2		1.0
SmartCast Active Accounts (as of)	18.8		17.6
Total VIZIO Hours	9,314		8,852
SmartCast Hours	5,612		4,952
SmartCast ARPU	$	35.39	$	30.55

Non-GAAP Financial Measure

In addition to our results determined in accordance with U.S. generally accepted accounting principles (“GAAP”) we believe that Adjusted EBITDA, a non-GAAP financial measure, is useful in evaluating our business.

Adjusted EBITDA

We define Adjusted EBITDA as total net income (loss) before interest income, net, other income, net, benefit from income taxes, depreciation and amortization and share-based compensation. We consider Adjusted EBITDA to be an important metric to assess our operating performance and to help us to manage our working capital needs. Utilizing Adjusted EBITDA, we can identify and evaluate trends in our business as well as provide investors with consistency and comparability to facilitate period-to-period comparisons of our business. We expect Adjusted EBITDA to fluctuate in absolute dollars and as a percentage of net revenue in the near term and increase in the long term as we scale our business and realize greater operating leverage.

For the three months ended June 30, 2024, our net income was $0.2 million compared to a net income of $1.9 million for the same period in the prior year, and Adjusted EBITDA was $8.6 million, compared to $18.1 million, for the same period in the prior year.

We use Adjusted EBITDA in conjunction with net income (loss) as part of our overall assessment of our operating performance and the management of our working capital needs. Our definition of Adjusted EBITDA may differ from the definition used by other companies and therefore comparability may be limited. In addition, other companies may not publish Adjusted EBITDA or similar metrics. Furthermore, Adjusted EBITDA has certain limitations in that it does not include the impact of certain expenses that are reflected in our condensed consolidated statement of operations that are necessary to run our business. Thus, Adjusted EBITDA should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP, including net income (loss). We compensate for these limitations by providing a reconciliation of Adjusted EBITDA to net income (loss). We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view Adjusted EBITDA in conjunction with net income (loss).

The following table provides a reconciliation of net income (loss) to Adjusted EBITDA:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(Unaudited, in millions)
Net income (loss)	$	0.2	$	1.9	$	(11.9)	$	1.2
Adjusted to exclude the following:
Interest income, net	(3.2)		(3.1)		(7.1)		(5.4)
Other income, net	(2.6)		(0.3)		(3.2)		(0.3)
(Benefit from) provision for income taxes	(1.4)		7.8		(4.5)		7.6
Depreciation and amortization	2.8		1.9		5.7		3.7
Share-based compensation	12.7		9.9		26.1		18.1
Adjusted EBITDA1,2	$	8.6	$	18.1	$	5.1	$	24.9

_________________________

1 For the three months ended June 30, 2024, Adjusted EBITDA includes acquisition-related costs of $8.4 million and cash incentive awards in lieu of equity awards of $0.5 million in connection with our long-term incentive plan. For the six months ended June 30, 2024, Adjusted EBITDA includes acquisition-related costs of $14.1 million and cash incentive awards in lieu of equity awards of $0.5 million in connection with our long-term incentive plan.

2 Totals may not sum due to rounding.

Macroeconomic and Geopolitical Conditions

We are subject to risks and uncertainties arising from macroeconomic and geopolitical conditions, including, but not limited to, heightened inflation, high interest rates, uncertainty and instability in the banking and financial services sectors, foreign currency fluctuations, lower consumer spending, geopolitical conflicts in and around Ukraine, Israel and other areas of the world, and tensions in the region surrounding the Taiwan Strait. These macroeconomic and geopolitical conditions have affected our business by, for example, causing our retail partners and consumers to purchase fewer Smart TVs or sound bars from us and have caused advertisers to be more cautious about spending. We continuously monitor the direct and indirect impacts of these macroeconomic and geopolitical events and trends on our business and financial results.

The full extent to which these macroeconomic and geopolitical conditions impact our business is difficult to predict. Such impacts include, but are not limited to, supply chain and logistical challenges, reduced consumer demand for our devices, less engagement on our platform, and an industry-wide slowdown in advertising spending. The risks related to our business are further described in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Factors Affecting Performance

Device

Ability to Sell More Devices

Selling more devices is integral to our strategy of growing SmartCast Active Accounts, increasing engagement, and expanding advertising monetization opportunities, all of which we believe will ultimately lead to higher SmartCast ARPU. There are a variety of factors that drive the sales of our devices, including our sales and marketing efforts, the quality of our products, new product introductions, effective supply chain management and relationships with retailers. For example:

•We expect that introducing products that both stimulate demand and resonate with consumers will drive our sales growth and expand our market share.

•We actively diversify our supply chain in order to mitigate potential risks.

•With respect to our relationships with retailers, our ability to anticipate and quickly respond to consumer preferences has influenced retailers’ willingness to market and promote our products over those of our competitors. Historically, we have cultivated strong relationships with our retailers, including Amazon, Best Buy, Costco, Sam’s Club, Target and Walmart.

Seasonality

Historically, we have experienced the highest levels of our sales in the fourth quarter of the calendar year, coinciding with the holiday shopping season in the United States. Given the significant seasonality of our revenue, timely and effective product introductions and forecasting are critical to our operations, and fourth quarter sales are critical to our annual results.

Product Mix

Our Device business encompasses a variety of Smart TVs and sound bars with different price points and features. Changes to our product mix may cause fluctuations in our gross profit as they reflect a range of margin profiles.

Platform+

Ability to Grow SmartCast Active Accounts

The more SmartCast Active Accounts we have, the more attractive our SmartCast platform will be to third-party content providers and advertisers looking to reach this audience. Our ability to monetize our platform may suffer if we fail to secure popular apps and related content on SmartCast, which may lead consumers to purchase a television from a competitor.

Ability to Increase Engagement and Monetize SmartCast Active Accounts

Our business is dependent on our continued ability to grow and sustain user engagement on SmartCast and, specifically, WatchFree+. User engagement on our platform is an essential revenue driver since it directly influences our attractiveness to advertisers, the largest near-term monetization opportunity. Therefore, our ability to attract compelling content viewers want to consume on WatchFree+ is critical to our monetization. Increasing engagement on our platform can result in greater attractiveness to advertisers and other monetization opportunities. The more time consumers spend on our platform, the more data we can collect, enabling us to create a more personalized and dynamic experience for users, while also allowing us to provide more targeted reach for advertisers.

Seasonality

Historically, we have experienced the highest levels of our sales in the fourth quarter of the calendar year, coinciding with the holiday season in the United States, as advertisers tend to increase spending during the holidays. Given the seasonality of our revenue, fourth quarter sales are critical to our annual results.

Demand for a More Connected Home

The proliferation of the Connected Home ecosystem will power the long-term growth of our business. A Smart TV-centered Connected Home will drive user engagement and expand our monetization opportunities into new domains. In addition to boosting demand for our hardware products, a Connected Home will require new interactive features that we are well-positioned to help deliver, such as personal communications, commerce, gaming, fitness and wellness, and dynamic entertainment experiences. Coupled with our passion for innovation and technical expertise, we can offer differentiated experiences for consumers. As we believe our Smart TVs will evolve to have a more pivotal role in the Connected Home, we must continue to find ways to monetize the use cases enabled on our platform.

Other

Ability to Continue to Invest

The future performance of our business will be affected by our investments in both our Device and Platform+ businesses. We intend to continue to invest in the capabilities of our products and services to deliver better value for our consumers and partners and address new market opportunities.

Competition

We believe the principal competitive factors impacting the market for our devices are brand, price, features, quality, design, consumer service, time-to-market and availability. We believe that we compete favorably in these areas. The consumer electronics market in which we operate is highly competitive and includes large, well-established companies. Many of our competitors have greater financial, distribution, marketing and other resources, longer operating histories, better brand recognition and greater economies of scale.

Our Platform+ business competes both to be the entertainment hub of consumers’ homes and to attract advertising spend. We expect advertising spend to continue to shift from Linear TV to Connected TV, and as such we expect new competition to continue to intensify for viewership and for advertising spend. In this respect, we compete against other television brands with Smart TV offerings, connected devices and traditional cable operators seeking to integrate streaming media into their existing offerings. We also compete with OTT streaming services, as such services are able to monetize across a variety of devices and consumers may engage with their content through devices other than our Smart TVs. We compete with these devices and services in part on the basis of user experience and content availability, including the availability of free content. In addition, we compete to attract advertising spending on the basis of the size of our audience and our ability to effectively target advertising.

Components of Our Results of Operations and Financial Condition

Net revenue

Device net revenue

We generate Device net revenue primarily through sales of our Smart TVs and sound bars to retailers in the United States, including wholesale clubs, as well as directly to consumers through our website. We recognize Device net revenue when title of

the goods is transferred to retailers or distributors, or upon the date the goods are delivered to consumers from a sale through our website. Our reported revenue is net of reserves for price protection, rebates, sales returns and other retailer allowances including some cooperative advertising arrangements. The prices charged for our Smart TVs and other devices are determined through negotiation with our retailers and are fixed or determinable upon shipment.

Platform+ net revenue

We generate Platform+ net revenue through sales of advertising and related services, data licensing, sales of branded buttons on our remote controls and content distribution. Platform+ net revenue is driven in large part by the number of SmartCast Active Accounts and the amount of SmartCast Hours spent on our Smart TVs. Our digital ad inventory consists of inventory on WatchFree+ and our home screen along with ad inventory we obtain through agreements with content providers and other third-party application agreements. We also re-sell video inventory that we purchase from content providers and directly sell third-party inventory on a revenue share.

Cost of goods sold

Device cost of goods sold

Device cost of goods sold primarily represents the prices for finished goods that we negotiate and pay to manufacturers and logistics providers for Smart TVs and other devices. The costs for finished goods paid to manufacturers include raw materials, manufacturing, overhead and labor costs, third-party logistics costs, shipping costs, customs and duties, license fees and royalties paid to third parties, recycling fees, insurance and other costs. Device cost of goods sold will vary with volume and is based on the cost of underlying product components and negotiated prices with the manufacturers. Shipping costs fluctuate with volume as well as with the method of shipping chosen in order to meet consumer demand, inflation and geopolitical events. We expect these costs to continue to fluctuate in the future.

Device cost of goods sold may be partially offset by payments we receive under certain manufacturer reimbursement and incentive arrangements in accordance with product supply agreements. These arrangements can be conditioned on the purchase of devices but are typically not a part of minimum purchase commitments with manufacturers. Accordingly, we treat these arrangements and related payments as reductions to the prices we pay to manufacturers for devices.

Platform+ cost of goods sold

Platform+ cost of goods sold includes advertising inventory costs, including revenue share as well as targeting and measurement services, third-party cloud services, allocated engineering costs and other technology expenses, content or programming licensing fees, and amortization of internally developed technology.

Gross profit

We bifurcate gross profit by business activity due to the differing margin profiles of the Device and Platform+ businesses. In addition, we manage each business, from a financial reporting perspective separately down to the gross profit level. We expect Platform+ to drive most of our gross profit growth in the future.

Device gross profit

We define Device gross profit as Device net revenue less Device cost of goods sold, and Device gross margin is Device gross profit expressed as a percentage of Device net revenue. Device gross profit is directly influenced by consumer demand, device offerings, and our ability to maintain a cost-efficient supply chain. Our Device gross profit may fluctuate from period to period as Device net revenue fluctuates and has been and will continue to be influenced by several factors including supplier prices, competitor pricing, retailer margin and Device product mix. We expect Device gross margin to fluctuate over time based on our ability to manage these factors.

Platform+ gross profit

Our Platform+ gross profit represents Platform+ net revenue less Platform+ cost of goods sold, and Platform+ gross margin is Platform+ gross profit expressed as a percentage of Platform+ net revenue. As we continue to grow and scale our business, we expect Platform+ gross profit to increase over the long term. Our Platform+ gross profit has been and will continue to be affected by mix of advertising revenue, costs and availability of advertising inventory, costs of data services associated with delivering advertising campaigns, costs to acquire content from content providers and the timing of our third-party cloud services and other technology expenses, and we expect our Platform+ gross margins to fluctuate from period to period depending on the factors discussed above.

Operating expenses

We classify our operating expenses into four categories:

Selling, general and administrative

Selling, general and administrative expenses consist primarily of personnel costs for employees, including salaries, bonuses, benefits and share-based compensation, as well as consulting expenses, fees for professional services, facilities and information technology. We expect selling, general and administrative expenses to increase in absolute dollars as our business grows. We have incurred additional expenses as a result of costs associated with being a public company, including expenses related to compliance with the rules and regulations of the SEC and the listing standards of the New York Stock Exchange, and increased expenses for insurance, investor relations, and fees for professional services. We expect selling, general and administrative expenses to fluctuate as a percentage of net revenue from period to period in the near term as we continue to invest in growing our business, but decline over the long term as we achieve greater scale over time.

Marketing

Marketing expenses consist primarily of advertising and marketing promotions of our brand and products, including media advertisement costs, merchandising and display costs, trade show and event costs, and sponsorship costs. Over the long term we expect our marketing expenses to increase in absolute dollars as we continue to promote our products and brand but fluctuate quarter to quarter depending on timing of our marketing initiatives.

Research and development

Research and development expenses consist primarily of employee-related costs, including salaries and bonuses, share-based compensation expense, and employee benefits costs, third-party contractor costs, and related allocated overhead costs. In certain cases, costs are incurred to purchase materials and equipment for future use in research and development efforts. These costs are capitalized and expensed. We expect research and development expenses to continue to increase as we expand our Platform+ service.

Depreciation and amortization

Depreciation expenses distribute the cost of fixed assets, which includes buildings, leasehold improvements, and equipment over the useful life. Amortization expenses distribute the cost over the useful life of our capitalized software costs.

Non-operating income, net

Non-operating income, net consists of interest income, net including interest earned on our financial institution deposits and interest expense on our credit facility (which was terminated in April 2024) and other income, net relating to activities not related to recurring operations.

(Benefit from) provision for income taxes

Our benefit from income taxes consists of income taxes in the United States and related state jurisdictions in which we do business. Our effective tax rate will generally approximate the U.S. statutory income tax rate plus the apportionment of state income taxes based on the portion of taxable income allocable to each state and permanent book-to-tax differences. We regularly assess the likelihood of adverse outcomes resulting from the examination of our tax returns by the U.S. Internal Revenue Service and other tax authorities to determine the adequacy of our income tax reserves and expense.

Should actual events or results differ from our current expectations, charges or credits to our benefit from income taxes may become necessary.

Results of Operations

The following table sets forth the components of our condensed consolidated statements of operations for each of the periods presented:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(Unaudited, in millions)
Net revenue:
Device	$	267.9	$	252.1	$	462.2	$	483.4
Platform+	169.4		142.3		328.9		267.8
Total net revenue	437.3		394.4		791.1		751.2
Cost of goods sold:
Device	267.0		251.8		468.5		481.4
Platform+	70.8		56.5		142.0		108.1
Total cost of goods sold	337.8		308.3		610.5		589.5
Gross profit:
Device	0.9		0.3		(6.3)		2.0
Platform+	98.6		85.8		186.9		159.7
Total gross profit	99.5		86.1		180.6		161.7
Operating expenses:
Selling, general and administrative	79.8		58.6		155.9		116.8
Marketing	9.8		10.0		18.3		17.7
Research and development	15.7		10.0		30.7		21.9
Depreciation and amortization	1.2		1.2		2.4		2.2
Total operating expenses	106.5		79.8		207.3		158.6
(Loss) income from operations	(7.0)		6.3		(26.7)		3.1
Interest income, net	3.2		3.1		7.1		5.4
Other income, net	2.6		0.3		3.2		0.3
Total non-operating income, net	5.8		3.4		10.3		5.7
(Loss) income before income taxes	(1.2)		9.7		(16.4)		8.8
(Benefit from) provision for income taxes	(1.4)		7.8		(4.5)		7.6
Net income (loss)	$	0.2	$	1.9	$	(11.9)	$	1.2

Comparison of the Three and Six Months Ended June 30, 2024 and June 30, 2023

Net revenue


	Three Months Ended June 30,								Six Months Ended June 30,
	2024		2023		$ Change		% Change		2024		2023		$ Change		% Change
	(Unaudited, in millions except percentages)
Net revenue:
Device	$	267.9	$	252.1	$	15.8	6	%	$	462.2	$	483.4	$	(21.2)	(4)	%
Platform+	169.4		142.3		27.1		19	%	328.9		267.8		61.1		23	%
Total net revenue	$	437.3	$	394.4	$	42.9	11	%	$	791.1	$	751.2	$	39.9	5	%

Device net revenue

Device net revenue increased $15.8 million, or 6%, for the three months ended June 30, 2024 as compared to the same period in 2023. The increase in Device net revenue was primarily due to higher Smart TV shipments, partially offset by lower sound bar shipments as well as lower average unit price for both Smart TVs and sound bars. Smart TV shipments increased compared to the same period in 2023 primarily due to timing of shipments for our new TV models. Average unit price for Smart TVs and sound bars decreased compared to the same period in 2023 primarily due to aggressive pricing from certain competitors.

Device net revenue decreased $21.2 million, or 4%, for the six months ended June 30, 2024 as compared to the same period in 2023. The decrease in Device net revenue was primarily due to lower sound bar shipments and lower average unit price for both Smart TVs and sound bars.

Platform+ net revenue

Platform+ net revenue increased $27.1 million, or 19%, for the three months ended June 30, 2024, as compared to the same period in 2023. The increase in Platform+ net revenue was primarily due to an increase in advertising revenue of $24.0 million, or 22%, from $109.2 million and an increase in non-advertising revenue of $3.1 million, or 9%, from $33.1 million. The increase in advertising revenue was driven in part by an increase in SmartCast Active Accounts and SmartCast Hours as well as expansion in Direct Advertising Relationships. The increase in non-advertising revenue was due to increased revenue generated from content distribution.

Platform+ net revenue increased $61.1 million, or 23%, for the six months ended June 30, 2024, as compared to the same period in 2023. The increase in Platform+ net revenue was primarily due to an increase in advertising revenue of $57.2 million, or 28%, from $203.0 million and an increase in non-advertising revenue of $3.9 million, or 6%, from $64.8 million. The increase in advertising revenue was driven in part by an increase in SmartCast Active Accounts and SmartCast Hours as well as expansion in Direct Advertising Relationships. The increase in non-advertising revenue was due to increased revenue generated from content distribution and data licensing.

Cost of goods sold, gross profit and gross margin


	Three Months Ended June 30,										Six Months Ended June 30,
	2024			2023			$ Change		% Change		2024			2023			$ Change		% Change
	(Unaudited, in millions except percentages)
Cost of goods sold:
Device	$	267.0		$	251.8		$	15.2	6	%	$	468.5		$	481.4		$	(12.9)	(3)	%
Platform+	70.8			56.5			14.3		25	%	142.0			108.1			33.9		31	%
Total cost of goods sold	$	337.8		$	308.3		$	29.5	10	%	$	610.5		$	589.5		$	21.0	4	%
Gross profit:
Device	$	0.9		$	0.3		$	0.6	200	%	$	(6.3)		$	2.0		$	(8.3)	NM
Platform+	98.6			85.8			12.8		15	%	186.9			159.7			27.2		17	%
Total gross profit	$	99.5		$	86.1		$	13.4	16	%	$	180.6		$	161.7		$	18.9	12	%
Gross margin:
Device gross margin	0.3		%	0.1		%					(1.4)		%	0.4		%
Platform+ gross margin	58.2		%	60.3		%					56.8		%	59.6		%
Total gross margin	22.8		%	21.8		%					22.8		%	21.5		%

_________________________

NM-Not meaningful

Device cost of goods sold, Device gross profit, and Device gross margin

Device cost of goods sold increased $15.2 million, or 6%, for the three months ended June 30, 2024, as compared to the same period in 2023, primarily due to higher TV shipments, partially offset by lower sound bar shipments as well as lower average cost per unit for both sound bars and Smart TVs. Device gross margin slightly increased to 0.3% for the three months ended June 30, 2024, as compared to 0.1% in the same period in 2023 due to increases in gross margins for both sound bars and Smart TVs due to average cost per unit decreases faster than average unit price decreases.

Device cost of goods sold decreased $12.9 million, or 3%, for the six months ended June 30, 2024, as compared to the same period in 2023, primarily due to lower sound bar shipments as well as lower sound bar average cost per unit. Device gross margin decreased to (1.4)% for the six months ended June 30, 2024, as compared to 0.4% in the same period in 2023, primarily due to lower Smart TV gross margin.

Platform+ cost of goods sold, Platform+ gross profit, and Platform+ gross margin

Platform+ cost of goods sold increased $14.3 million, or 25%, for the three months ended June 30, 2024, as compared to the same period in 2023. The increase in Platform+ cost of goods sold was primarily due to increases in advertising and engineering costs. Platform+ gross margin decreased to 58.2% for the three months ended June 30, 2024, as compared to 60.3% in the same period in 2023 due to a greater mix of video revenue in which a share of revenue is paid to our inventory and content partners.

Platform+ cost of goods sold increased $33.9 million, or 31%, for the six months ended June 30, 2024, as compared to the same period in 2023. The increase in Platform+ cost of goods sold was primarily due to increases in advertising and engineering costs. Platform+ gross margin decreased to 56.8% for the six months ended June 30, 2024, as compared to 59.6% in the same period in 2023 due to a greater mix of video revenue in which a share of revenue is paid to our inventory and content partners.

Operating expenses


	Three Months Ended June 30,						Six Months Ended June 30,
	2024		2023		$ Change	% Change	2024	2023	$ Change	% Change
	(Unaudited, in millions except percentages)
Selling, general and administrative	$	79.8	$	58.6

Vizio Holding Corp. [VZIO] Filings
10-Q	[2024-08-07]
10-Q	[2024-05-08]
10-K	[2024-02-28]
10-Q	[2023-11-09]
10-Q	[2023-08-08]
10-Q	[2023-05-09]
10-K	[2023-03-01]
10-Q	[2022-11-09]
10-Q	[2022-08-10]
10-Q	[2022-05-12]
10-K	[2022-03-10]
10-Q	[2021-11-10]
10-Q	[2021-08-05]
10-Q	[2021-05-12]
S-1	[2021-03-01]