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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 September 30, 2022
OR
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)
_____________________________________
Delaware365185-4185335
( 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 shareVZIONew 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  ☒    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
¨
Accelerated filer
¨
Non-accelerated filer
x
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  ☒
As of November 4, 2022, there were 117,635,809 shares of the registrant’s Class A common stock outstanding, 76,814,638 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

i


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 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 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 macroeconomic and geopolitical conditions, including the effects of the COVID-19 pandemic and the conflict in Ukraine, supply chain issues and labor shortages, rising interest rates, foreign currency fluctuations, and lower consumer 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 information 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.
ii


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 potentially available 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)
September 30,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents$265.9 $331.6 
Short-term investments59.1  
Accounts receivable, net339.6 375.1 
Other receivables due from related parties0.8 5.1 
Inventories34.1 11.9 
Income tax receivable29.1 26.2 
Prepaid and other current assets55.6 84.8 
Total current assets784.2 834.7 
Property, equipment and software, net19.5 10.3 
Goodwill44.8 44.8 
Deferred income taxes30.5 30.4 
Other assets21.1 15.6 
Total assets$900.1 $935.8 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable due to related parties$166.3 $224.8 
Accounts payable115.4 118.9 
Accrued expenses192.6 185.8 
Accrued royalties43.7 56.8 
Other current liabilities5.2 4.8 
Total current liabilities523.2 591.1 
Other long-term liabilities20.4 14.1 
Total liabilities543.6 605.2 
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 100.0 shares authorized and no shares issued and outstanding as of September 30, 2022 and December 31, 2021.
  
Common stock, $0.0001 par value; 1,350.0 shares authorized as of September 30, 2022 and December 31, 2021, with the following issued and outstanding by class:
Class A, 121.3 and 116.4 shares issued and 117.5 and 113.2 outstanding as of September 30, 2022 and December 31, 2021, respectively;
Class B, 76.8 shares issued and outstanding as of September 30, 2022 and December 31, 2021, and
Class C, no shares issued and outstanding as of September 30, 2022 and December 31, 2021.
  
Additional paid-in capital356.0 323.3 
Accumulated other comprehensive loss(0.3)(0.2)
Retained earnings0.8 7.5 
Total stockholders’ equity356.5 330.6 
Total liabilities and stockholders' equity900.1 935.8 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1


VIZIO HOLDING CORP.
Condensed Consolidated Statements of Operations
(Unaudited, in millions except per share amounts)


Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Net revenue:
Device$307.0 $502.5 $987.9 $1,291.6 
Platform+128.0 85.8 341.4 203.5 
Total net revenue435.0 588.3 1,329.3 1,495.1 
Cost of goods sold:
Device305.8 476.9 974.8 1,185.7 
Platform+49.1 28.5 127.7 60.3 
Total cost of goods sold354.9 505.4 1,102.5 1,246.0 
Gross profit:
Device1.2 25.6 13.1 105.9 
Platform+78.9 57.3 213.7 143.2 
Total gross profit80.1 82.9 226.8 249.1 
Operating expenses:
Selling, general and administrative54.8 79.9 167.5 208.4 
Marketing8.8 8.1 31.3 22.4 
Research and development10.8 8.8 29.4 25.9 
Depreciation and amortization1.0 0.7 2.8 2.0 
Total operating expenses75.4 97.5 231.0 258.7 
Income (loss) from operations4.7 (14.6)(4.2)(9.6)
Interest income, net0.4 0.1 0.4 0.2 
Other income (expense), net0.1  (0.6)(0.2)
Total non-operating income (expense)0.5 0.1 (0.2) 
Income (loss) before income taxes5.2 (14.5)(4.4)(9.6)
Provision for income taxes3.2 4.1 2.3 19.6 
Net income (loss)$2.0 $(18.6)$(6.7)$(29.2)
Net income (loss) attributable to Class A and Class B stockholders:
Basic $0.01 $(0.10)$(0.03)$(0.17)
Diluted$0.01 $(0.10)$(0.03)$(0.17)
Weighted-average Class A and Class B common shares outstanding:
Basic193.8 182.8 192.6 171.1 
Diluted200.2 182.8 192.6 171.1 

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


2


VIZIO HOLDING CORP.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited, in millions)


Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Other comprehensive income (loss)
Net income (loss)$2.0 $(18.6)$(6.7)$(29.2)
Foreign currency translation adjustments(0.1)0.1 (0.1)(0.9)
Comprehensive income (loss)$1.9 $(18.5)$(6.8)$(30.1)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


VIZIO HOLDING CORP.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited, in millions)
Three Months Ended September 30, 2022
Preferred Stock(1)
Common Stock(1)(2)
Additional
Paid-In Capital
Accumulated Other Comprehensive LossRetained Earnings (Accumulated Deficit)Total
SharesAmountClass AClass B
Balance at June 30, 2022 $ 116.6 76.8 $342.8 $(0.2)$(1.2)$341.4 
Share-based compensation expense— — — — 11.0 — — $11.0 
Shares issued pursuant to incentive award plans— — 0.9 — 2.2 — — $2.2 
Foreign currency translation— — — — — (0.1)— $(0.1)
Net income— — — — — — 2.0 $2.0 
Balance at September 30, 2022 $ 117.5 76.8 $356.0 $(0.3)$0.8 $356.5 
Nine Months Ended September 30, 2022
Preferred Stock(1)
Common Stock(1)(2)
Additional
Paid-In Capital
Accumulated Other Comprehensive LossRetained EarningsTotal
SharesAmountClass AClass B
Balance at December 31, 2021 $ 113.2 76.8 $323.3 $(0.2)$7.5 $330.6 
Share-based compensation expense— — — 34.0 — — $34.0 
Shares issued pursuant to incentive award plans, net of withholding taxes— — 4.3 — (1.3)— — $(1.3)
Foreign currency translation— — — — — (0.1)— $(0.1)
Net loss— — — — — — (6.7)$(6.7)
Balance at September 30, 2022 $ 117.5 76.8 $356.0 $(0.3)$0.8 $356.5 

4



VIZIO HOLDING CORP.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited, in millions)
Three Months Ended September 30, 2021
Preferred Stock(1)
Common Stock(1)(2)
Additional
Paid-In Capital
Accumulated Other Comprehensive IncomeRetained EarningsTotal
SharesAmountClass AClass B
Balance at June 30, 2021 $ 86.6 98.3 $267.1 $(0.1)$36.2 $303.2 
Share-based compensation expense— — — — 37.0 — — 37.0 
Shares issued pursuant to incentive award plans, net of withholding taxes— — 2.4 — (12.0)— — (12.0)
Adjustment to IPO costs— — — — (0.1)— — (0.1)
Foreign currency translation— — — — — 0.1 — 0.1 
Net loss— — — — — — (18.6)(18.6)
Balance at September 30, 2021 $ 89.0 98.3 $292.0 $ $17.6 $309.6 
Nine Months Ended September 30, 2021
Preferred Stock(1)
Common Stock(1)(2)
Additional
Paid-In Capital
Accumulated Other Comprehensive IncomeRetained EarningsTotal
SharesAmountClass AClass B
Balance at December 31, 20200.1 $2.6 150.8  $98.9 $0.9 $46.9 $149.3 
Share-based compensation expense— — — — 97.5— — 97.5 
Shares issued pursuant to incentive award plans, net of withholding taxes— — 3.6 — (51.4)— — (51.4)
Accretion of preferred stock dividends— — — — — — (0.1)(0.1)
Payment of accumulated preferred stock dividends— (0.6)— — — —  (0.6)
Conversion of Series A preferred stock upon IPO(0.1)(2.0)30.3 — 2.0 — —  
Exchange of Class A shares for Class B— — (98.3)98.3 — — — — 
Sale of common stock in IPO, net of $13.7 of underwriting fees and other offering costs
— — 7.6 — 145.0 — — 145.0 
Forfeiture of RSA awards upon IPO— — (5.0)— — — — — 
Foreign currency translation— — — — — (0.9)— (0.9)
Net loss— — — — — — (29.2)(29.2)
Balance at September 30, 2021 $ 89.0 98.3 $292.0 $ $17.6 $309.6 
(1) There were no shares of Preferred Stock or Class C common stock issued or outstanding as of September 30, 2022 and December 31, 2021.
(2) As of September 30, 2022 and December 31, 2021, the par value on common stock outstanding was $19 thousand and $19 thousand, respectively, and are not shown in the table above.



The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5


VIZIO HOLDING CORP.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in millions)
Nine Months Ended
September 30,
20222021
Cash flows from operating activities:
Net loss$(6.7)$(29.2)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization2.8 2.0 
Amortization of premium and discount on investments(0.3) 
Change in fair value of investment securities0.7  
Deferred income taxes(0.2)1.2 
Share-based compensation expense34.0 97.9 
Change in allowance for doubtful accounts(0.1)0.2 
Changes in operating assets and liabilities:
Accounts receivable35.5 48.7 
Other receivables due from related parties4.3 (0.1)
Inventories(22.2)(13.1)
Income taxes receivable(2.9)(12.8)
Prepaid and other current assets29.0 (27.0)
Other assets(4.3)1.3 
Accounts payable due to related parties(58.5)57.0 
Accounts payable(3.5)(37.3)
Accrued expenses6.8 3.6 
Accrued royalties(13.1)(15.2)
Other current liabilities0.3 (0.6)
Other long-term liabilities6.2 (0.9)
Net cash provided by operating activities7.8 75.7 
Cash flows from investing activities:
Purchase of property and equipment(11.7)(3.6)
Purchase of investments(60.5)(0.2)
Net cash used in investing activities(72.2)(3.8)
Cash flows from financing activities:
Proceeds from the exercise of stock options10.7 6.7 
Payment of dividends on Series A convertible preferred stock (0.6)
Proceeds from IPO, net of $10.7 in direct offering costs
 148.0 
Payments of other offering costs (2.9)
Withholding taxes paid on behalf of employees on net settled share-based awards(12.0)(53.9)
Net cash (used in) provided by financing activities(1.3)97.3 
Effects of exchange rate changes on cash and cash equivalents (1.0)
Net (decrease) increase in cash and cash equivalents(65.7)168.2 
Cash and cash equivalents at beginning of period331.6 207.7 
Cash and cash equivalents at end of period$265.9 $375.9 
Supplemental disclosure of cash flow information:
Cash paid for income taxes$4.2 $29.7 
Cash paid for interest$0.2 $0.2 
Supplemental disclosure of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities$6.1 $ 
Cash paid for amounts included in the measurement of operating lease liabilities$2.5 $0.7 
Payment to taxing authority in connection with shares directly withheld from
employees not yet made
$ $4.0 
IPO costs not yet paid$ $0.3 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

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. Our products are sold to retailers and through online channels throughout the United States. 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 provides broad support for third-party voice platforms and second screen experiences to offer additional interactive features and experiences.
The Company purchases all of its products from manufacturers based in Asia. Since inception, the Company had purchased a portion of its televisions from one manufacturer who holds a noncontrolling interest in the Company through its ownership of Class A common stock; however, recently the Company has not made any material purchases from this manufacturer. 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.
Impact of COVID-19
Since the first quarter of 2020, the Coronavirus Disease 2019 (“COVID-19”) pandemic, and the responses to it have impacted the Company. During much of 2020 and early 2021, the Company experienced increased demand for its products due to the combined impact of stay at home orders and fiscal stimulus. Due to the surge in demand and supply chain and logistical partners operating at limited capacity, the Company encountered reduced channel inventory levels at several retailers during 2021. While the Company has replenished its channel inventory, new COVID-19 variants and potential lockdown measures in China, could lead to future supply chain and logistics challenges.
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 VIZIO 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 income (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, 2021 and 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, 2021 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 income (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, 2022.
7


Reclassifications
The Company has reclassified Research and development costs from Selling, general and administrative amounts for the three and nine months ended September 30, 2021, to conform to the current year presentation.
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 items subject to such estimates and assumptions include the allowances for doubtful accounts and sales returns, reserves for excess and obsolete inventory, accrued price protection and rebates, accrued royalties, share-based compensation, valuation of deferred tax assets and other contingencies. Supplier and customer concentrations also increase the degree of uncertainty inherent in these estimates and assumptions.
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, 2021.
Note 3. Net Revenue
The Company derives revenue primarily from the sale of televisions and sound bars, advertising and data services. Revenue is recognized when control of the promised goods or services is transferred to the Company’s retailers, in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. 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. 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 sells products to certain retailers under terms that allow them to receive price protection on future sell-through price reductions and may provide for limited rights of return, discounts and advertising credits.
The revenue recognized from the contract liabilities consists of the Company satisfying performance obligations during the normal course of business. The Company has recorded $18.8 million of contract assets, which are recorded in Prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets as of September 30, 2022. There were no material contract assets as of December 31, 2021. Contract assets represent differences in the timing of billing compared to revenue recognized. Additionally, no costs associated with obtaining contracts with customers were capitalized, nor 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 North America, primarily 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
September 30,
Nine Months Ended
September 30,
2022202120222021
Net revenue:
Customer A36 %39 %38 %39 %
Customer B10 13 8 13 
Customer C10 14 12 13 
Customer D8 10 10 10 
8


Note 4. Investments
The Company purchased U.S. Treasury bills within the current reporting period which are recorded in Short-term investments in the accompanying condensed consolidated balance sheets. We are 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 September 30, 2022, the maturity dates of all U.S Treasury bills were within 12 months. We review these securities for other-than-temporary impairment at least quarterly or when there are changes in credit risk or other potential valuation concerns. During the three and nine months ended September 30, 2022, the Company did not recognize any impairment losses related to these securities. There were no such securities as of December 31, 2021.
The following table summarizes the Company’s short-term investments:

September 30, 2022
Maturity Amortized CostsGross Unrealized Gains Gross Unrealized LossesEstimated fair value
(In millions)
U.S. Treasury bills
1 year or less
$59.1 $ $(0.2)$58.9 
Total $59.1 $ $(0.2)$58.9 
Note 5. Accounts Receivable
Accounts receivable consists of the following:
September 30,
2022
December 31,
2021
(In millions)
Accounts receivable$339.6 $375.2 
Allowance for doubtful accounts (0.1)
Total accounts receivable, net of allowances$339.6 $375.1 
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 nine months ended September 30, 2022, the Company recorded a reduction in bad debt expense of $2.8 million and $0.1 million, respectively, due to a recovery. During the three months ended September 30, 2021, the Company recorded a reduction in bad debt expense of $0.5 million due to a recovery. During the nine months ended September 30, 2021, the Company recorded bad debt expense of $0.2 million.
The following customers account for more than 10% of accounts receivable:
September 30,
2022
December 31,
2021
Net receivables:
Customer A39 %44 %
Customer B9 10 
Customer C10 10 
Customer A and Customer C, and certain other customers not separately identified in the table above, are affiliates under common control with one another. Collectively, they comprised 46% and 50% of the Company’s net revenue for the three and nine months ended September 30, 2022, respectively, and 53% and 52% of the Company’s net revenue for the three and nine months ended September 30, 2021, respectively. Their collective accounts receivable balance as of September 30, 2022 and December 31, 2021 was 49% and 54% of our total net receivables, respectively.
9


Note 6. Inventories
Inventories consist of the following:
September 30,
2022
December 31,
2021
(In millions)
Inventory on hand
$23.8 $5.3 
Inventory in transit10.3 6.6 
Total inventory$34.1 $11.9 
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, the manufacturers are then responsible for transporting the product to their warehouses located in the United States. The manufacturers are considered the importers of record and are required to insure the product as it is shipped to the warehouses. 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 agreement stipulates 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
September 30,
Nine Months Ended
September 30,
2022202120222021
Inventory purchases:
Supplier A — related party43 %37 %46 %40 %
Supplier B 25 25 23 29 
Supplier C 12 6 13 9 
Supplier D — related party13 23 9 12 
The Company is currently reliant upon these manufacturers for products. 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 $1.9 million and $5.6 million due from the manufacturers as of September 30, 2022 and December 31, 2021, 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 $2.2 million and $3.7 million for the three and nine months ended September 30, 2022, respectively, and $1.8 million and $5.8 million for the three and nine months ended September 30, 2021, respectively, and are recorded in cost of goods sold in the accompanying condensed consolidated statements of operations.
10


Note 7. Property, Equipment and Software, Net
Property, equipment and software, net consist of the following:
September 30,
2022
December 31,
2021
(In millions)
Building$10.1 $10.1 
Machinery and equipment2.0 1.6 
Leasehold improvements4.2 3.6 
Furniture and fixtures4.7 3.2 
Computer and software17.6 22.7 
Construction in progress3.4  
Total property, equipment and software42.0 41.2 
Less accumulated depreciation and amortization(22.5)(30.9)
Total property, equipment and software, net$19.5 $10.3 
Depreciation and amortization expense was $1.0 million and $2.5 million for the three and nine months ended September 30, 2022, respectively. Depreciation and amortization expense was $0.5 million and $1.5 million for the three and nine months ended September 30, 2021, respectively.
During the three and nine months ended September 30, 2022, the Company capitalized software development costs of $0.8 million and $5.3 million, respectively. During the three and nine months ended September 30, 2021, the Company capitalized software development costs of $0.3 million and $1.6 million, respectively.
During the three and nine months ended September 30, 2022, amortization of capitalized software development costs was $0.7 million and $2.1 million, respectively. During the three and nine months ended September 30, 2021, amortization of capitalized software development costs was $0.7 million and $2.1 million, respectively, and are recorded in costs of goods sold in the accompanying condensed consolidated statements of operations. The Company’s long lived assets are primarily located within the United States.
During the three months ended September 30, 2022, we wrote off fully depreciated assets in the amount of $10.8 million from Computer and software.
Note 8. Accrued Expenses
The Company’s accrued expenses consisted of the following:
September 30,
2022
December 31,
2021
(In millions)
Accrued price protection$51.6 $67.2 
Accrued other customer related expenses46.0 48.4 
Accrued supplier/partner related expenses49.8 39.2 
Accrued payroll expenses35.4 21.6 
Accrued other expenses9.8 9.4 
Total accrued expenses$192.6 $185.8 
The Company periodically grants certain sales discounts and incentives to customers, such as rebates and price protection, which are treated as variable consideration for purposes of determining the transaction price. In certain instances, the Company will, in turn, negotiate with its manufacturers for reimbursement of a portion of the incentives so that the manufacturers are responsible for absorbing some of the rebates and price protection. The Company’s procedures for estimating customer allowances recorded as a reduction of revenue are based upon historical experience, as adjusted for the current environment, and management judgment. Customer allowances are accrued for when the related product sale is recognized. The accrued customer allowances are presented on the condensed consolidated balance sheets in Accrued expenses and recorded in the condensed consolidated statements of operations as a reduction of Net revenue.
11


Note 9. Accrued Royalties
A summary of future commitments on royalty obligations as of September 30, 2022 is as follows:
September 30, 2022
(In millions)
2022 (remaining)$2.2 
20238.4 
20245.2 
20253.0 
2026 and thereafter0.5 
Total$19.3 
For potential future settlements related to historical sales for which the Company does not expect to be reimbursed, a reserve of $22.7 million and $32.5 million has been recorded as of September 30, 2022 and December 31, 2021, respectively, as part of 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.
Refundable deposits from suppliers of $21.0 million and $24.3 million have been recorded as of September 30, 2022 and December 31, 2021, respectively, which are presented within Accrued royalties in the condensed consolidated balance sheets.
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 10. 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 2027. The table below presents supplemental balance sheet information related to the Company’s operating leases as follows:
ClassificationSeptember 30,
2022
December 31,
2021
Assets:(In millions)
Right-of-use assetOther assets$13.7$8.9
Liabilities:
Current portion of lease liabilitiesOther current liabilities$3.2$2.4
Long term portion of lease liabilitiesOther long-term liabilities$11.5$6.5
Weighted-average remaining lease term (years)4.44.2
Weighted-average discount rate (percentage)4.7 %3.7 %
Operating lease costs were $1.2 million and $4.1 million for the three and nine months ended September 30, 2022, respectively. Operating lease costs were $1.0 million and $2.8 million for the three and nine months ended September 30, 2021, respectively.
12


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 September 30, 2022.
September 30, 2022
(In millions)
2022 (remainder)$1.0 
20234.0 
20243.7 
20253.4 
20263.0 
2027 and thereafter1.4 
Total minimum lease payments16.5 
Less imputed interest(1.8)
Total lease liabilities$14.7 
Note 11. 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 September 30, 2022, no liabilities were recorded related to this supply commitment.
Revolving Credit Facility
On April 13, 2016, the Company entered into a Loan and Security Agreement with Bank of America, N.A. and on April 13, 2021 the agreement was amended (“Credit Agreement”) to extend the maturity date to April 13, 2024. Under the Credit Agreement, Bank of America, N.A. agreed to provide the Company with a revolving credit line of up to $50.0 million for the purposes of repurchasing certain outstanding shares of common stock held by a related party supplier and other general business requirements, including working capital. The Company’s indebtedness to Bank of America, N.A. under the credit agreement is collateralized by substantially all of the Company’s assets. The Credit Agreement also included (i) an update to provide for use of a LIBOR successor rate, (ii) a change in the definition of Availability Reserve and Borrowing Base, and (iii) an extension of the termination date to April 13, 2024. For both the three and nine months ended September 30, 2022, there were no draws on the line of credit and the Company was in compliance with all debt covenants.
Legal Matters
On August 20, 2021, Maxell, Ltd. and Maxell Holdings, Ltd. (collectively, “Maxell”) filed a complaint in United States District Court for the Central District of California against the Company alleging the Company's TVs infringe several of their patents related to various television-related technologies. See Maxell, Ltd., et al. v. VIZIO, Inc., Case No. 2:21-cv-6758 (C.D. Cal.). This case is in the pleadings stage. The Company disputes the claims and intends to defend the lawsuit vigorously.
Additionally, on September 15, 2022, Maxell filed a complaint with the International Trade Commission against the Company alleging the Company's TVs infringe several of its patents related to various television-related technologies. On October 18, 2022, the International Trade Commission instituted an investigation based on Maxell’s complaint. See In the Matter of Certain Smart Televisions, Inv. No. 337-TA-1338. This investigation is in the initial stage. The Company disputes the claims and intends to defend the investigation vigorously.
Note 12. Stockholders’ Equity
Preferred Stock
As of September 30, 2022, 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.
13


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 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 September 30, 2022, is presented below:
Number of
Shares
Weighted Average Exercise PriceWeighted Average Remaining Contractual Term (Years)Aggregate Intrinsic Value
(In millions, except years and per share amounts)
Outstanding at December 31, 202114.4 $6.80 6.8$181.4 
Granted4.9 8.97 
Exercised(2.9)3.32 
Forfeited and expired(1.2)10.97 
Cancelled(0.5)$8.60 
Outstanding at September 30, 202214.7 $7.79 7.2$41.1 
Options vested and exercisable at September 30, 20227.6 $5.19 5.6$35.6 
The following presents the weighted-average grant date fair value for stock option awards granted during the nine months ended September 30, 2022 and September 30, 2021.
September 30, 2022September 30, 2021
Weighted average grant date fair value of stock options granted during the period$3.98 $9.22 
The grant date fair values of stock options are estimated using the Black-Scholes-Merton option pricing model.
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The following provides information on the weighted-average assumptions used for stock options granted during the three and nine months ended September 30, 2022 and September 30, 2021 (shares in millions):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Number of options granted0.2 0.1 4.9 2.8 
Volatility59.7 %44.0 %45.7 %43.0 %
Expected term (years)6.256.256.25