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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, 2023
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  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 November 3, 2023, there were 121,016,127 shares of the registrant’s Class A common stock outstanding, 76,180,453 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 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;
•our expectations regarding potential partnerships with other TV original equipment manufacturers (“OEMs”) to adopt our operating system;
•geopolitical events and volatile market conditions, that may affect manufacturing, supply chain and logistics;
•macroeconomic conditions, including uncertainty in the global banking and financial services sectors, rising inflation, recessionary fears and high interest rates, which may reduce consumer discretionary spending and advertising 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-
ii

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 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,
2023		December 31,
2022
Assets
Current assets:
Cash and cash equivalents$215.5 $288.7 
Short-term investments119.4 58.9 
Accounts receivable, net345.6 357.9 
Other receivables due from related parties— 2.2 
Inventories17.6 15.5 
Income tax receivable— 1.7 
Prepaid and other current assets54.4 53.5 
Total current assets752.5 778.4 
Property, equipment and software, net19.9 19.9 
Goodwill44.8 44.8 
Deferred income taxes51.2 51.2 
Other assets38.4 21.4 
Total assets$906.8 $915.7 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable due to related parties$104.5 $148.2 
Accounts payable137.3 117.2 
Accrued expenses175.8 204.9 
Accrued royalties40.8 47.4 
Income taxes payable1.0 — 
Other current liabilities6.7 5.5 
Total current liabilities466.1 523.2 
Other long-term liabilities19.2 18.8 
Total liabilities485.3 542.0 
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, 2023 and December 31, 2022
— — 
Common stock, $0.0001 par value; 1,350.0 shares authorized as of September 30, 2023 and December 31, 2022
•Class A, 124.8 and 121.9 shares issued and 121.0 and 118.1 shares outstanding as of September 30, 2023 and December 31, 2022, respectively;
•Class B, 76.2 and 76.8 shares issued and 76.2 and 76.8 shares outstanding as of September 30, 2023 and December 31, 2022, respectively, and
•Class C, no shares issued and outstanding as of September 30, 2023 and December 31, 2022.
— — 
Additional paid-in capital399.8 366.9 
Accumulated other comprehensive loss(0.4)(0.3)
Retained earnings22.1 7.1 
Total stockholders’ equity421.5 373.7 
Total liabilities and stockholders’ equity$906.8 $915.7 
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,
2023202220232022
Net revenue:
Device$270.0 $307.0 $753.4 $987.9 
Platform+156.2 128.0 423.9 341.4 
Total net revenue426.2 435.0 1,177.3 1,329.3 
Cost of goods sold:
Device273.3 305.8 754.7 974.8 
Platform+56.4 49.1 164.5 127.7 
Total cost of goods sold329.7 354.9 919.2 1,102.5 
Gross profit:
Device(3.3)1.2 (1.3)13.1 
Platform+99.8 78.9 259.4 213.7 
Total gross profit96.5 80.1 258.1 226.8 
Operating expenses:
Selling, general and administrative63.6 54.8 180.4 167.5 
Marketing9.2 8.8 26.9 31.3 
Research and development9.8 10.8 31.7 29.4 
Depreciation and amortization1.2 1.0 3.3 2.8 
Total operating expenses83.8 75.4 242.3 231.0 
Income (loss) from operations12.7 4.7 15.8 (4.2)
Interest income, net3.5 0.4 9.0 0.4 
Other (expense) income, net(0.1)0.1 0.1 (0.6)
Total non-operating income (expense), net3.4 0.5 9.1 (0.2)
Income (loss) before income taxes16.1 5.2 24.9 (4.4)
Provision for income taxes2.3 3.2 9.9 2.3 
Net income (loss)$13.8 $2.0 $15.0 $(6.7)
Net income (loss) per share attributable to Class A and Class B stockholders:
Basic $0.07 $0.01 $0.08 $(0.03)
Diluted$0.07 $0.01 $0.08 $(0.03)
Weighted-average Class A and Class B common shares outstanding:
Basic196.7 193.8 196.0 192.6 
Diluted199.9 200.2 200.2 192.6 
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,
2023202220232022
Net income (loss)$13.8 $2.0 $15.0 $(6.7)
Other comprehensive loss:
Foreign currency translation adjustments— (0.1)(0.1)(0.1)
Comprehensive income (loss)$13.8 $1.9 $14.9 $(6.8)
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)
Nine Months Ended September 30, 2023
Preferred Stock(1)
Common Stock(1)(2)
Additional
Paid-In Capital		Accumulated Other Comprehensive LossRetained EarningsTotal
SharesAmountClass AClass 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 
Foreign currency translation— — — — — — — — 
Net loss— — — — — — (0.7)(0.7)
Balance at March 31, 2023— $— 118.7 76.8 $376.6 $(0.3)$6.4 $382.7 
Share-based compensation expense— — — — 9.7 — — 9.7 
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes)— — 0.9 — 1.1 — — 1.1 
Foreign currency translation— — — — — (0.1)— (0.1)
Net income— — — — — — 1.9 1.9 
Balance at June 30, 2023— $— 119.6 76.8 $387.4 $(0.4)$8.3 $395.3 
Share-based compensation expense— — — — 12.1 — — 12.1 
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes)— — 0.8 — 0.3 — — 0.3 
Foreign currency translation— — — — — — — — 
Conversion of class B shares into class A shares— — 0.6 (0.6)— — — — 
Net income— — — — — — 13.8 13.8 
Balance at September 30, 2023— $— 121.0 76.2 $399.8 $(0.4)$22.1 $421.5 
Nine 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 December 31, 2021— $— 113.2 76.8 $323.3 $(0.2)$7.5 $330.6 
Share-based compensation expense— — — — 16.5 — — 16.5 
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes)— — 2.6 — (6.7)— — (6.7)
Net loss— — — — — — (11.0)(11.0)
Balance at March 31, 2022— $— 115.8 76.8 $333.1 $(0.2)$(3.5)$329.4 
Share-based compensation expense— — — — 6.4 — — 6.4 
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes)— — 0.8 — 3.3 — — 3.3 
Net income— — — — — — 2.3 2.3 
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 (net of shares in lieu of taxes)— — 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 
(1) There were no shares of Preferred Stock or Class C common stock issued or outstanding as of September 30, 2023 and September 30, 2022.
(2) As of both September 30, 2023 and December 31, 2022, the par value on common stock outstanding was $20 thousand.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

VIZIO HOLDING CORP.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in millions)
Nine Months Ended
September 30,
20232022
Cash flows from operating activities:
Net income (loss)$15.0 $(6.7)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization5.6 2.8 
Amortization of premium and discount on investments(3.3)(0.3)
Change in fair value of investment securities— 0.7 
Deferred income taxes— (0.2)
Share-based compensation expense30.4 34.0 
Change in allowance for doubtful accounts0.9 (0.1)
Changes in operating assets and liabilities:
Accounts receivable11.4 35.5 
Other receivables due from related parties2.2 4.3 
Inventories(2.1)(22.2)
Income taxes receivable1.7 (2.9)
Prepaid and other current assets(3.7)29.0 
Other assets(15.5)(4.3)
Accounts payable due to related parties(43.7)(58.5)
Accounts payable19.4 (3.5)
Accrued expenses(29.4)6.8 
Accrued royalties(6.6)(13.1)
Income taxes payable1.0 — 
Other current liabilities1.2 0.3 
Other long-term liabilities0.4 6.2 
Net cash (used in) provided by operating activities(15.1)7.8 
Cash flows from investing activities:
Purchase of property and equipment(2.0)(11.7)
Purchase of investments(164.5)(60.5)
Maturity of investments105.9 — 
Net cash used in investing activities(60.6)(72.2)
Cash flows from financing activities:
Proceeds from the exercise of stock options1.9 10.7 
Withholding taxes paid on behalf of employees on net settled share-based awards(0.6)(12.0)
Proceeds from sale of stock under ESPP1.2 — 
Net cash provided by (used in) financing activities2.5 (1.3)
Effects of exchange rate changes on cash and cash equivalents— — 
Net decrease in cash and cash equivalents(73.2)(65.7)
Cash and cash equivalents at beginning of period288.7 331.6 
Cash and cash equivalents at end of period$215.5 $265.9 
Supplemental disclosure of cash flow information:
Cash paid for income taxes$5.1 $4.2 
Cash paid for interest$0.1 $0.2 
Cash paid for amounts included in the measurement of operating lease liabilities$3.3 $2.5 
Supplemental disclosure of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities$1.8 $6.1 
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.
5
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 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 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, 2022 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, 2022 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, 2023.
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, 2022.
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, in an amount that reflects the consideration
6

to which it expects to be entitled in exchange for those goods or services. The Company sells its products to certain retailers under terms that allow the retailer 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 September 30, 2023 and December 31, 2022, the Company recorded $26.1 million and $22.0 million of contract assets, respectively. As of September 30, 2023, $24.3 million and $1.8 million of contract assets were recorded in other current assets and other assets, respectively, in the accompanying condensed consolidated balance sheets. As of December 31, 2022, all contract assets were recorded in other current assets in the accompanying condensed consolidated balance sheets. As of September 30, 2023 the Company recorded $2.7 million of contract liabilities, which are recorded in other current liabilities in the accompanying condensed consolidated balance sheets. There were no material contract liabilities as of December 31, 2022. 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 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
September 30,		Nine Months Ended
September 30,
2023202220232022
Net revenue:
Customer A37 %36 %35 %38 %
Customer B7 10 10 12 
Customer C7 8 8 10 
Customer D3 10 3 8 
Customer A and Customer B are affiliates under common control with one another. Collectively, they comprised 44% and 45% of the Company’s net revenue for the three and nine months ended September 30, 2023, and 46% and 50% of the Company’s net revenue for the three and nine months ended September 30, 2022, respectively.
Note 4. Investments
The Company’s investments consist of U.S. Treasury bills 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, 2023, 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, 2023 and September 30, 2022, the Company did not recognize any impairment losses related to these securities.
7

The following tables summarize the Company’s Short-term investments:
September 30, 2023
Maturity Amortized CostsGross Unrealized Gains Gross Unrealized LossesEstimated Fair Value
(In millions)
U.S. Treasury bills
1 year or less
$119.4 $— $(0.2)$119.2 
Total $119.4 $— $(0.2)$119.2 
December 31, 2022
Maturity Amortized CostsGross Unrealized Gains Gross Unrealized LossesEstimated Fair Value
(In millions)
U.S. Treasury bills
1 year or less
$58.9 $— $(0.2)$58.7 
Total $58.9 $— $(0.2)$58.7 
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.
Note 5. Accounts Receivable
Accounts receivable consists of the following:
September 30,
2023		December 31,
2022
(In millions)
Accounts receivable$346.7 $358.1 
Allowance for doubtful accounts(1.1)(0.2)
Total accounts receivable, net of allowance$345.6 $357.9 
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, 2023, the Company recorded bad debt expense of $0.2 million and $0.9 million, respectively. During the three and nine months ended September 30, 2022, the Company recorded a reduction of bad debt expense of $2.8 million and $0.1 million, respectively, due to a recovery.
The following customers account for more than 10% of accounts receivable:
September 30,
2023		December 31,
2022
Net receivables:
Customer A37 %38 %
Customer B5 12 
Customer A and Customer B are affiliates under common control with one another. Their collective accounts receivable balance as of September 30, 2023 and December 31, 2022 was 42% and 50% of our total net receivables, respectively.
Note 6. Inventories
Inventories consist of the following:
September 30,
2023		December 31,
2022
(In millions)
Inventory on hand$12.0 $12.6 
Inventory in transit - outbound4.4 2.9 
Inventory in transit - inbound1.2 — 
Total inventory$17.6 $15.5 
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
September 30,		Nine Months Ended
September 30,
2023202220232022
Inventory purchases:
Supplier A — related party34 %43 %35 %46 %
Supplier B 19 25 20 23 
Supplier C 36 12 31 13 
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 $0.7 million and $3.0 million due from these manufacturers as of September 30, 2023 and December 31, 2022, 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 $2.3 million and $4.5 million for the three and nine months ended September 30, 2023 and $2.2 million and $3.7 million for the three and nine months ended September 30, 2022. 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:
September 30,
2023		December 31,
2022
(In millions)
Building$10.2 $10.1 
Machinery and equipment1.2 2.0 
Leasehold improvements8.0 4.2 
Furniture and fixtures4.9 4.7 
Computer and software16.2 17.7 
Construction in progress0.9 4.8 
Total property, equipment and software41.4 43.5 
Less accumulated depreciation and amortization(21.5)(23.6)
Total property, equipment and software, net$19.9 $19.9 
Depreciation and amortization expense was $1.9 million and $5.6 million for the three and nine months ended September 30, 2023 and $1.0 million and $2.5 million for the three and nine months ended September 30, 2022, respectively.
9

Disposal of fully depreciated assets reduced property, equipment and software and accumulated depreciation and amortization by $7.7 million with no impact to the income statement for the three and nine months ended September 30, 2023. There were no material disposals for the year ended December 31, 2022.
Note 8. Accrued Expenses
The Company’s accrued expenses consist of the following:
September 30,
2023		December 31,
2022
(In millions)
Accrued price protection$34.2 $51.3 
Accrued other customer related expenses58.6 55.8 
Accrued supplier/partner related expenses42.9 54.0 
Accrued payroll expenses37.0 36.1 
Accrued other expenses3.1 7.7 
Total accrued expenses$175.8 $204.9 
Note 9. 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 September 30, 2023 is as follows:
September 30,
2023
(In millions)
2023 (remaining)$3.7 
202420.3 
202511.4 
20266.5 
20276.0 
2028 and thereafter1.5 
Total$49.4 
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 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 2028. 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):
ClassificationSeptember 30,
2023		December 31,
2022
Assets:
Right-of-use assetOther assets$12.6$14.0
Liabilities:
Current portion of lease liabilitiesOther current liabilities$3.9$3.5
Long term portion of lease liabilitiesOther long-term liabilities$9.6$11.5
Weighted-average remaining lease term3.64.1
Weighted-average discount rate5.5 %4.9 %
10

Operating lease costs were $1.5 million and $4.3 million for the three and nine months ended September 30, 2023, respectively. Operating lease costs were $1.2 million and $4.1 million for the three and nine months ended September 30, 2022, 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 September 30, 2023:
September 30,
2023
(In millions)
2023 (remainder)$1.3 
20244.5 
20253.9 
20263.3 
20271.7 
2028 and thereafter0.4 
Total minimum lease payments15.1 
Less imputed interest(1.6)
Total lease liabilities$13.5 
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, 2023, no liabilities were recorded related to this supply commitment.
Revolving Credit Facility
The Company is party to a credit agreement with Bank of America, N.A. (as amended, the “Credit Agreement”), which provides 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 is collateralized by substantially all of the Company’s assets.
On April 13, 2021, the Company entered into an amendment to the Credit Agreement, which (i) extended the maturity date to April 13, 2024, (ii) provided an update for use of a London Interbank Offering Rate (“LIBOR”) successor rate and (iii) provided a change in the definition of Availability Reserve and Borrowing Base. In connection with the amendment, the Company paid a fee of $75,000 in the second quarter of 2021.
On April 25, 2023, the Company entered into another amendment to the Credit Agreement which replaced the reference of LIBOR to Secured Overnight Financing Rate (“SOFR”).
Fees related to this unused line of credit were not material in any of the periods presented. For the three and nine months ended September 30, 2023 and 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.) (the “Maxell CD Cal Complaint”).
Additionally, on September 15, 2022, Maxell filed a complaint with the International Trade Commission (the “ITC”) against the Company alleging the Company’s TVs infringe several of its patents related to various television-related technologies and on October 18, 2022, the ITC instituted an investigation based on Maxell’s complaint. See In the Matter of Certain Smart Televisions, Inv. No. 337-TA-1338 (collectively with the Maxell CD Cal Complaint, the “Maxell Matters”).
On August 24, 2023, the Company and Maxell executed a definitive settlement agreement regarding the Maxell Matters.
11

On October 24, 2022, DivX, LLC filed a complaint with the ITC against Amazon.com, Inc. and the Company alleging certain Amazon.com, Inc.’s products and the Company's TVs infringe several of its patents related to certain streaming media-related technologies. See In the Matter of Certain Video Processing Devices and Components Thereof, Inv. No. 337-TA-1343 (ITC). On October 24, 2022, DivX, LLC also filed a companion complaint in United States District Court for the Central District of California against the Company alleging the Company's TVs infringe the same patents. See DivX, LLC v. VIZIO, Inc., Case No. 8:22-cv-01955 (C.D. Cal.). The parties executed a definitive settlement agreement, effective August 11, 2023, regarding these legal proceedings.
The settlements for these matters did not have a material impact to the condensed consolidated statements of operations.
Note 12. Stockholders’ Equity
Preferred Stock
As of September 30, 2023, 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.
On July 1, 2023, 634,185 shares of Class B common stock were converted into 634,185 fully paid and nonassessable shares of Class A common stock. Subsequently, on September 26, 2023 the Company's Board of Directors approved the retirement of such shares of Class B common stock, at which time they resumed the status of authorized and unissued.
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 Options
A summary of the Company’s stock option activity under the Plans as of September 30, 2023, 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, 202214.4 $3.88 7.0$54.1 
Granted1.3 6.73 
Exercised(0.6)3.92 
Forfeited and expired(0.9)11.17 
Outstanding at September 30, 202314.2 $7.71 6.73$10.9 
Options vested and exercisable at September 30, 20238.7 $6.33 5.58$10.9 
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, 2023 and September 30, 2022 (shares in millions):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Number of options granted0.1 0.2 1.3 4.9 
Volatility45.9 %59.7 %45.9 %45.7 %
Expected term (years)6.25 years6.25 years6.25 years6.25 years
Dividend yield0.0 %0.4 %0.0 %0.8 %
Risk-free interest rate4.3 %3.3 %3.8 %2.8 %
Fair value of common stock $6.42 $10.79 $6.73 $8.97 
Grant date fair value per share determined using a Black-Scholes-Merton option pricing model for purposes of determining compensation expense$3.26 $6.13 $3.37 $3.98 
As of September 30, 2023, the Company had $20.4 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 2.2 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 September 30, 2023 is presented below:
Number of SharesWeighted Average Grant Date Fair Value
(In millions)
Outstanding at December 31, 20226.3 $12.16 
Granted7.8 7.03 
Vested(1.7)13.37 
Forfeited(1.0)11.94 
Outstanding at September 30, 202311.4 $9.20 
As of September 30, 2023, the Company had $94.2 million of unrecognized share-based compensation expense related to RSUs, which the Company expects to recognize over a weighted average vesting period of approximately 3.0 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.
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A summary of the Company’s activity related to PSUs as of September 30, 2023 is presented below:
Number of SharesWeighted Average Grant Date Fair Value
(In millions)
Outstanding at December 31, 2022— $— 
Granted1.7 6.72 
Outstanding at September 30, 20231.7 $6.72 
The weighted-average input assumptions used by the Company were as follows (shares in millions):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Number of PSUs granted— — 1.7 — 
Volatility— %— %61.3 %— %
Expected term (years)— — 4 years— 
Dividend yield— %— %0.0 %— %
Risk-free interest rate— %— %5.0 %— %
Fair value of common stock$— $— $6.49 $— 
Grant date fair value per PSU determined using a Monte-Carlo simulation model for purposes of determining compensation expense$— $— $6.72 $— 
As of September 30, 2023, the Company had $9.3 million of unrecognized share-based compensation expense related to PSUs, which the Company expects to recognize over a weighted average vesting period of approximately 3.8 years.
Share-based Compensation Expense
Total share-based compensation expense was $12.3 million and $30.4 million for the three and nine months ended September 30, 2023, respectively. Total share-based compensation expense was $11.0 million and $34.0 million for the three and nine months ended September 30, 2022, respectively. For the three and nine months ended September 30, 2023, $0.9 million and $2.1 million is included in Cost of goods sold, respectively, and $1.7 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 nine months ended September 30, 2022, $0.0 million and $0.6 million is included in Cost of goods sold, respectively, and $0.2 million and $1.0 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 13. Income Taxes
The Company recorded a tax expense of $2.3 million, resulting in an effective tax rate of 14%, and $3.2 million, resulting in an effective tax rate of 61%, for the three months ended September 30, 2023 and September 30, 2022, respectively. The Company recorded a tax expense of $9.9 million, resulting in an effective tax rate of 40%, and a tax expense of $2.3 million, resulting in an effective tax rate of (51)%, for the nine months ended September 30, 2023 and September 30, 2022, respectively. For the three and nine months ended September 30, 2023, the effective tax rate differs from the statutory tax rate of 21% primarily due to the approximately $1.3 million and $8.4 million, federal and state combined, respectively, in permanent book-to-tax difference for the share-based compensation expense deduction limitation on certain executive officers as a publicly held corporation. The tax provision for the nine months ended September 30, 2023 includes a net income tax provision of $1.0 million for discrete items primarily due to excess tax expense relating to share-based compensation.
Note 14. 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
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potential common shares, if dilutive. For the three and nine months ended September 30, 2023 and the three months ended September 30, 2022, the potential dilutive shares relating to outstanding stock options were included in the computation of diluted earnings. For the nine months ended September 30, 2022, 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.
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
September 30,
20232022
Class AClass BClass AClass B
Numerator:(In millions, except per share amounts)
Net income attributable to common stockholders - basic and diluted$8.5 $5.3 $1.2 $0.8 
Denominator:
Weighted-average common shares outstanding - basic120.5 76.2 117.0 76.8 
Weighted-average effect of dilutive securities3.2 — 6.4 — 
Weighted-average common shares outstanding - diluted123.7 76.2 123.4 76.8 
Net income per share attributable to Class A and Class B common stockholders:
Basic$0.07 $0.07 $0.01 $0.01 
Diluted$0.07 $0.07 $0.01 $0.01 
Anti-dilutive equity awards under share-based award plans excluded from the determination of diluted EPS14.7 4.0 
Nine Months Ended
September 30,
20232022
Class AClass BClass AClass B
Numerator:(In millions, except per share amounts)
Net income (loss) attributable to common stockholders - basic and diluted$9.1 $5.9 $(4.0)$(2.7)
Denominator:
Weighted-average common shares outstanding - basic119.4 76.6 115.8 76.8 
Weighted-average effect of dilutive securities4.2 — — — 
Weighted-average common shares outstanding - diluted123.6 76.6 115.8 76.8 
Net income (loss) per share attributable to Class A and Class B common stockholders:
Basic$0.08 $0.08 $(0.03)$(0.03)
Diluted$0.08 $0.08 $(0.03)$(0.03)
Anti-dilutive equity awards under share-based award plans excluded from the determination of diluted EPS13.3 21.1 
As of September 30, 2023, the PSUs granted in 2023 had an expected achievement level of 13%. No similar awards were outstanding as of September 30, 2022. Refer to Note 12 for additional information related to the PSUs.


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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).
Total Device Shipments: The number of Smart TV units, soundbars, remotes and accessories shipped to retailers or direct to consumers in a given period.
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.
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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 September 30, 2023 as compared to the corresponding period of last year included:
•Net revenue of $426.2 million, compared to $435.0 million
•Platform+ net revenue of $156.2 million, up 22%
•Gross profit of $96.5 million, up 20%
•Platform+ gross profit of $99.8 million, up 26%
•Net income of $13.8 million, up 590.0%
•Adjusted EBITDA of $26.9 million, up 61%
•SmartCast Active Accounts of 17.9 million, up 8%
•SmartCast Hours of 5.2 billion, up 21%
•SmartCast Average Revenue Per User (“ARPU”) of $31.55, up 14%
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
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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.
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. 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 we ship the product to a retailer. We believe that our asset-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 team works 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 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.
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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 the majority 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 September 30, 2023, our Smart TV Shipments totaled 1.1 million, an 8% year-over-year decrease. 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 September 30, 2023, SmartCast Active Accounts were 17.9 million, representing an 8% year-over-year increase. This metric excludes approximately 3.0 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 useful to understanding our total potential monetization opportunities. For the three months ended September 30, 2023, Total VIZIO Hours were 8.9 billion, representing a 10% 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 September 30, 2023, SmartCast Hours were 5.2 billion, representing a 21% 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 September 30, 2023 was $31.55, representing an 14% year-over-year increase.
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The following table presents a comparison of these key operational metrics for the three months ended September 30, 2023 and the three months ended September 30, 2022:
Three Months Ended
September 30,
20232022
(In millions, except SmartCast ARPU)
Smart TV Shipments1.1 1.2 
SmartCast Active Accounts (as of)
17.9 16.6 
Total VIZIO Hours8,913 8,129 
SmartCast Hours5,153 4,243 
SmartCast ARPU$31.55 $27.69 
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 (expense), net, provision for 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 September 30, 2023, our net income increased to $13.8 million from a net income of $2.0 million for the same period in the prior year, and Adjusted EBITDA increased $10.2 million, or 61%, year-over-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
September 30,		Nine Months Ended
September 30,
2023202220232022
(Unaudited, in millions)
Net income (loss)$13.8 $2.0 $15.0 $(6.7)
Adjusted to exclude the following:
Interest income, net(3.5)(0.4)(9.0)(0.4)
Other (expense) income, net0.1 (0.1)(0.1)0.6 
Provision for income taxes2.3 3.2 9.9 2.3 
Depreciation and amortization1.9 1.0 5.6 2.8 
Share-based compensation12.3 11.0 30.4 34.0 
Adjusted EBITDA$26.9 $16.7 $51.8 $32.6 
Macroeconomic and Geopolitical Conditions
We are subject to risks and uncertainties arising from macroeconomic and geopolitical conditions, including, but not limited to, rising 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. In order to manage our cost structure, we have begun seeking
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opportunities to reduce the growth of our expenses, primarily through slower hiring. 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, consumer demand, competitor pricing and relationships with retailers.
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 users 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.
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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 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.
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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 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 and expect to continue to incur 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 expense 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 cover declines in value of fixed assets such as buildings, leasehold improvements, and equipment. Amortization expenses primarily relate to declines in the value of our capitalized software costs.
Non-operating income (expense), net
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Non-operating income (expense), net consists of interest income, net including interest earned on our financial institution deposits and interest expense on our credit facility and other income, net relating to activities not related to recurring operations.
Provision for income taxes
Our provision for 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 provision for 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
September 30,		Nine Months Ended
September 30,
2023202220232022
(Unaudited, in millions)
Net revenue:
Device$270.0 $307.0 $753.4 $987.9 
Platform+156.2 128.0 423.9 341.4 
Total net revenue426.2 435.0 1,177.3 1,329.3 
Cost of goods sold:
Device273.3 305.8 754.7 974.8 
Platform+56.4 49.1 164.5 127.7 
Total cost of goods sold329.7 354.9 919.2 1,102.5 
Gross profit:
Device(3.3)1.2 (1.3)13.1 
Platform+99.8 78.9 259.4 213.7 
Total gross profit96.5 80.1 258.1 226.8 
Operating expenses:
Selling, general and administrative63.6 54.8 180.4 167.5 
Marketing9.2 8.8 26.9 31.3 
Research and development9.8 10.8 31.7 29.4 
Depreciation and amortization1.2 1.0 3.3 2.8 
Total operating expenses83.8 75.4 242.3 231.0 
Income (loss) from operations12.7 4.7 15.8 (4.2)
Interest income, net3.5 0.4 9.0 0.4 
Other (expense) income, net(0.1)0.1 0.1 (0.6)
Total non-operating income (expense), net3.4 0.5 9.1 (0.2)
Income (loss) before income taxes16.1 5.2 24.9 (4.4)
Provision for income taxes2.3 3.2 9.9 2.3 
Net income (loss)$13.8 $2.0 $15.0 $(6.7)
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Comparison of the Three and Nine Months Ended September 30, 2023 and September 30, 2022
Net revenue
Three Months Ended
September 30,		Nine Months Ended
September 30,
20232022$ Change% Change20232022$ Change% Change
(Unaudited, in millions except percentages)
Net revenue:
Device$270.0 $307.0 $(37.0)(12)%$753.4 $987.9 $(234.5)(24)%
Platform+156.2 128.0 28.2 22 %423.9 341.4 82.5 24 %
Total net revenue$426.2 $435.0 $(8.8)(2)%$1,177.3 $1,329.3 $(152.0)(11)%
Device net revenue
Device net revenue decreased $37.0 million, or 12%, for the three months ended September 30, 2023 as compared to the same period in 2022. The decrease in Device net revenue was primarily due to lower Smart TV Shipments and lower average unit price, partially offset by a higher volume of sound bars shipments and higher average unit price. Shipments and average units price for Smart TVs decreased compared to the same period in 2022 primarily due to aggressive pricing from certain competitors and challenging consumer demand. The volume of shipments and average unit price of sound bars increased compared to the same period in 2022 primarily due to more demand for premium sound bars.
Device net revenue decreased $234.5 million, or 24%, for the nine months ended September 30, 2023 as compared to the same period in 2022. The decrease in Device net revenue was primarily due to a 17% decrease in Total Device Shipments and an 8% decrease in our total Device average unit price. Shipments and average units price for Smart TVs decreased compared to the same period in 2022 primarily due to aggressive pricing from certain competitors and challenging consumer demand. Shipments for sounds bars decreased compared to the same period in 2022 primarily due to challenging consumer demand.
Platform+ net revenue
Platform+ net revenue increased $28.2 million, or 22%, for the three months ended September 30, 2023, as compared to the same period in 2022. The increase in Platform+ net revenue was primarily due to an increase in advertising revenue of $25.8 million, or 27%, from $97.1 million, and an increase in non-advertising revenue of $2.4 million, or 8%, from $30.9 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 data licensing and content distribution.
Platform+ net revenue increased $82.5 million, or 24%, for the nine months ended September 30, 2023, as compared to the same period in 2022. The increase in Platform+ net revenue was due to an increase in advertising revenue of $72.1 million, or 28%, from $253.8 million, and an increase in non-advertising revenue of $10.5 million, or 12% from $87.6 million. The increase in advertising revenue was driven in part by an increase in SmartCast Active Accounts and SmartCast Hours as well as expansion in Direct Advertising Relationships. The increase in non-advertising revenue was due to increased revenue generated from data licensing and content distribution.
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Cost of goods sold, gross profit and gross margin
Three Months Ended
September 30,		Nine Months Ended
September 30,
20232022$ Change% Change20232022$ Change% Change
(Unaudited, in millions except percentages)
Cost of goods sold:
Device$273.3 $305.8$(32.5)(11)%$754.7 $974.8$(220.1)(23)%
Platform+56.4 49.17.3 15 %164.5 127.736.8 29 %
Total cost of goods sold$329.7 $354.9$(25.2)(7)%$919.2 $1,102.5$(183.3)(17)%
Gross profit:
Device$(3.3)$1.2$(4.5)NM$(1.3)$13.1$(14.4)NM
Platform+99.8 78.920.9 26 %259.4 213.745.7 21 %
Total gross profit$96.5 $80.1$16.4 20 %$258.1 $226.8$31.3 14 %
Gross margin:
Device gross margin(1.2)%0.4 %(0.2)%1.3 %
Platform+ gross margin63.9 %61.6 %61.2 %62.6 %
Total gross margin22.6 %18.4 %21.9 %17.1 %
_________________________
NM-Not meaningful
Device cost of goods sold, Device gross profit, and Device gross margin
Device cost of goods sold decreased $32.5 million, or 11%, for the three months ended September 30, 2023, as compared to the same period in 2022, primarily due to lower Smart TV shipments and average cost per unit. Device gross margin decreased to (1.2)% for the three months ended September 30, 2023, as compared to 0.4% in the same period in 2022, due to more competitive pricing for Smart TVs.
Device cost of goods sold decreased $220.1 million, or 23%, for the nine months ended September 30, 2023, as compared to the same period in 2022, primarily due to a 17% decrease in Total Device Shipments. Device gross margin decreased to (0.2)% for the nine months ended September 30, 2023, as compared to 1.3% in the same period in 2022, due to more competitive pricing for Smart TVs.
Platform+ cost of goods sold, Platform+ gross profit, and Platform+ gross margin
Platform+ cost of goods sold increased $7.3 million, or 15%, for the three months ended September 30, 2023, as compared to the same period in 2022. The increase in Platform+ cost of goods sold was primarily due to increases in advertising inventory costs of $6.6 million and third-party cloud services of $3.2 million. Platform+ gross margin increased to 63.9% for the three months ended September 30, 2023, as compared to 61.6% in the same period in 2022 due to an increase in capitalization of enhancements to our operating system development costs.
Platform+ cost of goods sold increased $36.8 million, or 29%, for the nine months ended September 30, 2023, as compared to the same period in 2022. The increase in Platform+ cost of goods sold was primarily due to increases in advertising inventory costs of $28.5 million and third-party cloud services of $9.5 million. Platform+ gross margin decreased to 61.2% for the nine months ended September 30, 2023, as compared to 62.6% in the same period in 2022 due to a greater proportion of video revenue in which a share is paid to our content partners.
Operating expenses
Three Months Ended
September 30,		Nine Months Ended
September 30,
20232022$ Change% Change20232022$ Change% Change
(Unaudited, in millions except percentages)
Selling, general and administrative$63.6 54.8 $8.8 16 %$180.4 167.5 $12.9 8 %
Marketing9.2 8.8 0.4 5 %26.9 31.3 (4.4)(14)%
Research and development9.8 10.8 (1.0)(9)%31.7 29.4 2.3 8 %
Depreciation and amortization1.2 1.0 0.2 20 %3.3 2.8 0.5 18 %
Total operating expenses$83.8 $75.4 $8.4 11 %242.3 231.0 $11.3 5 %
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Selling, general and administrative
Selling, general and administrative expenses increased $8.8 million, or 16%, for the three months ended September 30, 2023, as compared to the same period in 2022. The increase was primarily due to higher personnel cost due to continued growth and investment in our Platform+ business, and higher bad debt partially offset by lower share-based compensation expense.
Selling, general and administrative expenses increased $12.9 million, or 8%, for the nine months ended September 30, 2023, as compared to the same period in 2022. The increase was primarily due to higher personnel costs due to continued growth and investment in our Platform+ business partially offset by lower share-based compensation expense.
Marketing
Marketing expenses increased $0.4 million, or 5%, for the three months ended September 30, 2023, as compared to the same period in 2022.
Marketing expenses decreased $4.4 million, or 14%, for the nine months ended September 30, 2023, as compared to the same period in 2022, primarily due to lower merchandising costs for our Smart TVs and sound bars.
Research and development
Research and development expenses decreased $1.0 million, or 9% for the three months ended September 30, 2023, as compared to the same period in 2022, primarily due to capitalization of operating system redesign costs.
Research and development expenses increased $2.3 million, or 8% for the nine months ended September 30, 2023, as compared to the same period in 2022, primarily due to increased personnel costs as we continue to invest in the development of Platform+.
Depreciation and amortization
Depreciation and amortization expense increased $0.2 million, or 20%, for the three months ended September 30, 2023, as compared to the same period in 2022, due to leasehold improvements at our corporate headquarters.
Depreciation and amortization expense increased $0.5 million, or 18%, for the nine months ended September 30, 2023, as compared to the same period in 2022, due to leasehold improvements at our corporate headquarters.
Non-operating income (expense), net
Three Months Ended
September 30,		Nine Months Ended
September 30,
20232022$ Change% Change20232022$ Change% Change
(Unaudited, in millions except percentages)
Interest income, net$3.5 $0.4 $3.1 NM$9.0 $0.4 $8.6 NM
Other (expense) income, net$(0.1)$0.1 $(0.2)NM0.1 (0.6)0.7 NM
Total non-operating income (expense), net$3.4 $0.5 $2.9 NM$9.1 $(0.2)$9.3 NM
_________________________
NM-Not meaningful
Interest income, net increased $3.1 million for the three months ended September 30, 2023 as compared to the same period in 2022, and increased $8.6 million for the nine months ended September 30, 2023 as compared to the same period in 2022, primarily due to higher interest rates earned on our cash and cash equivalents and short-term investments.
Other income (expense), net decreased $0.2 million for the three months ended September 30, 2023 as compared to the same period in 2022, primarily due to an unrealized loss on an equity investment. Other income (expense), net increased $0.7 million for the nine months ended September 30, 2023 as compared to the same period in 2022, primarily due to an unrealized gain on an equity investment.
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Provision for income taxes
Three Months Ended
September 30,		Nine Months Ended
September 30,
20232022$ Change% Change20232022$ Change% Change
(Unaudited, in millions except percentages)
Provision for income taxes$2.3 $3.2 $(0.9)(28)%$9.9 $2.3 $7.6 330 %
Effective tax rate14 %61 %40 %(51)%
We recorded a tax expense of $2.3 million, resulting in an effective tax rate of 14%, and $3.2 million, resulting in an effective tax rate of 61%, for the three months ended September 30, 2023 and September 30, 2022, respectively. The Company recorded a tax expense of $9.9 million, resulting in an effective tax rate of 40%, and a tax expense of $2.3 million, resulting in an effective tax rate of (51)%, for the nine months ended September 30, 2023 and September 30, 2022, respectively. For the three and nine months ended September 30, 2023, the effective tax rate differs from the statutory tax rate of 21% primarily due to the approximately $1.3 million and $8.4 million, federal and state combined, respectively, in permanent book-to-tax difference for the share-based compensation expense deduction limitation on certain executive officers as a publicly held corporation. The tax provision for the nine months ended September 30, 2023 includes a net income tax provision of $1.0 million for discrete items primarily due to excess tax expense relating to share-based compensation.
Backlog
We do not believe that our backlog of orders is meaningful as of any particular date or indicative of future sales, as our retailers can change or cancel orders with little or no penalty and limited advance notice prior to shipment.
Liquidity and Capital Resources
To date, our primary cash needs have been for working capital purposes and to a lesser extent, capital expenditures, acquisitions and cash dividends. We have historically funded our business through cash flows generated from operations, the issuance of common stock and our revolving credit facility, as described below. As we continue to grow our business and invest in the development of our Platform+ business, we may need higher levels of working capital.
As of September 30, 2023 and December 31, 2022, we had cash and cash equivalents and short-term investments of $334.9 million and $347.6 million, respectively. We believe our existing cash and cash equivalents and cash from operations will be sufficient to meet our projected operating requirements for at least the next 12 months from the date of this Quarterly Report on Form 10-Q. Our future capital requirements may vary materially from our current expectations and will depend on many factors, including the growth of our business, the timing and extent of spending on various business initiatives, including investment in our Platform+ offerings, the timing of new product introductions, market acceptance of our products and overall macroeconomic and geopolitical conditions. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. In the event additional financing is required from outside sources, we may not be able to obtain such financing on terms acceptable to us or at all. To the extent that we issue equity or convertible debt securities in the future, there will be further dilution to our investors. Further, any debt financing obtained by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.
We are party to a credit agreement with Bank of America, N.A., which currently provides for a revolving credit line of up to $50.0 million. Any indebtedness under this credit agreement is collateralized by substantially all of our assets and bears interest at a variable rate based on SOFR, the federal funds rate or the prime rate. The credit agreement contains customary affirmative and negative covenants and matures in April 2024. For the three and nine months ended September 30, 2023, there were no borrowings from or amounts outstanding under this credit facility and we were in compliance with all debt covenants.
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The following table sets forth the major components of our condensed consolidated statements of cash flows data for the periods presented:
Nine Months Ended
September 30,
20232022
(Unaudited, in millions)
Net cash (used in) provided by operating activities$(15.1)$7.8 
Net cash used in investing activities(60.6)(72.2)
Net cash provided by (used in) financing activities2.5 (1.3)
Net decrease in cash and cash equivalents$(73.2)$(65.7)
Cash flows from operating activities
Cash flows from operating activities consist of net income (loss) adjusted for certain non-cash items, including depreciation and amortization, share-based compensation expense, change in allowance for doubtful accounts, and other non-cash related items as well as the effect of changes in working capital and other activities.
For the nine months ended September 30, 2023, net cash used in operating activities was $15.1 million, consisting of net income of $15.0 million adjusted for non-cash expenses of $33.6 million. Changes in operating assets and liabilities represented a $63.7 million use of cash, primarily driven by changes in working capital, including decreases in accounts payable due to related parties and accrued expenses, and increases in other assets partially offset by increase in accounts payable and decrease in accounts receivable.
For the nine months ended September 30, 2022, net cash provided by operating activities was $7.8 million, consisting of net loss of $6.7 million adjusted for non-cash expenses of $36.9 million. Changes in operating assets and liabilities represented a $22.4 million use of cash, primarily driven by changes in working capital, including decreases in accounts payable due to related parties and an increase in inventory, partially offset by decreases in accounts receivable and prepaid and other current assets.
Cash flows from investing activities
For the nine months ended September 30, 2023, our net cash used in investing activities was $60.6 million, primarily due to the purchase of short-term investments in treasury bills. For the nine months ended September 30, 2022, our net cash used in investing activities was $72.2 million, and was primarily due to the purchase of short-term investments in treasury bills and the purchase of property and equipment to support our growing organization.
We expect that we will make capital expenditures and investments in the future, primarily on leasehold improvements and internally developed software, potential build-out of our corporate offices, as well as additional IT infrastructure, all of which will be done to support our future growth.
Cash flows from financing activities
For the nine months ended September 30, 2023, our net cash provided by financing activities was $2.5 million, and was primarily related to cash proceeds received from the exercise of employee stock options.
For the nine months ended September 30, 2022, our net cash used in financing activities was $1.3 million, and was primarily related to cash used to pay withholding taxes on behalf of employees, offset by proceeds received from the exercise of employee stock options.
Contractual Obligations
Royalties
We are engaged in, and in certain cases have settled, various claims and suits alleging the infringement of patents related to certain television technology that were initiated by television manufacturers and other nonmanufacturers. In connection with the disposition of some of these claims and suits, we entered into, or may enter into, license arrangements, which may include royalty payments to be made for historical and/or prospective sales of our products. Certain of these settlements have included cross-licenses, covenants not to sue, and litigation holds.
In connection with these existing license agreements as well as existing or potential settlement arrangements, we recorded an aggregate accrual of $40.8 million for all historical product sales as of September 30, 2023. To the extent that we are indemnified under product supply agreements with manufacturers, we have offset intellectual property expenses and recorded amounts as other receivable balances included in other current assets. Historically, we have been contractually indemnified and reimbursed by our manufacturers for most intellectual property royalty obligations and commitments. We will make future payments for the licensed technologies with funding received from the manufacturers, either through direct reimbursement from
29

the manufacturers or payment of the net purchase price, as these royalty payments become due. In certain circumstances, we have the contractual ability to renegotiate the annual license fee in future years if certain unit sales volumes are not met in a given year. As of September 30, 2023, we expect our future payments to total $49.4 million, which we expect to pay over a period of one to six years.
Operating Lease Agreements
We have various non-cancelable operating leases for our corporate and satellite offices primarily in the United States. These leases expire at various times through 2028 and have total annual payments of less than $5.0 million per year.
Off Balance Sheet Arrangements
We do not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets, or any obligation arising out of a material variable interest in an unconsolidated entity. We do not have any majority-owned subsidiaries that are not included in our condensed consolidated financial statements. Additionally, we do not have an interest in, or relationships with, any special-purpose entities.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates, assumptions and judgments that can significantly impact the amounts we report as assets, liabilities, net sales, costs and expenses and the related disclosures. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. Our actual results could differ significantly from these estimates under different assumptions and conditions. We believe that the accounting policies discussed in Index to the Consolidated Financial Statements—Summary of Significant Accounting Policies” in our Annual Report on Form 10-K are critical to understanding our historical and future performance as these policies involve a greater degree of judgment and complexity.
There have been no significant changes to these policies in 2023.
Recent Accounting Pronouncements
There have been no further developments to recently issued accounting standards, including the expected dates of adoption and estimated effects on our condensed consolidated financial statements and footnote disclosures, from those disclosed in the audited consolidated financial statements included in our Annual Report on Form 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's quantitative and qualitative disclosures about market risk are discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K. There have been no significant changes to our risks during the nine months ended September 30, 2023.
Item 4. Controls and Procedures
Management’s Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosure.
As of the end of the period covered by this Quarterly Report on Form 10-Q, our management, under the supervision and with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) and 15d-15(e). Based on such evaluation, as a result of the material weakness in internal control over financial reporting identified in our Annual Report on Form 10-K for the year ended December 31, 2022 that is described below, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at a reasonable assurance level as of September 30, 2023.
Previously Disclosed Material Weakness
We disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022 that we identified a material weakness in internal control over financial reporting exists related to ineffectively designed controls that address the completeness, accuracy and reliability of information used in our controls over the accrual of price protection incentives. The material weakness remains unremediated as of September 30, 2023.
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Status of Management’s Remediation Efforts
In order to remediate the material weakness, our management is in the process of implementing its remediation plan, which includes steps to revise existing controls or design and implement new controls, where appropriate, to address the completeness, accuracy and reliability of the price protection program and quantity information used as the basis for price protection accruals. The material weakness cannot be considered remediated until the applicable controls operate for a sufficient period of time, and management has concluded, through testing, that the controls are operating effectively.
Changes in Internal Control over Financial Reporting
Except with respect to the changes to our internal control over financial reporting to remediate the material weakness described herein, there were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives as specified above. Our management, including our principal executive officer and principal financial officer, does not expect, however, that our disclosure controls and procedures will prevent or detect all errors and fraud. Any control system, no matter how well designed and operated, is based on certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met and must reflect the fact that there are resource constraints, and benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to errors or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
We are currently, and in the future may continue to be, subject to litigation, claims and assertions incidental to our 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. We believe that the outcome of any existing litigation, either individually or in the aggregate, will not have a material impact on our business, financial condition, results of operations or cash flows. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. For information regarding legal proceedings in which we are involved, see “Legal Matters” in Note 11 of the accompanying notes to our consolidated financial statements, which is incorporated herein by reference.
Item 1A. Risk Factors
RISK FACTORS
An investment in our Class A common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our condensed consolidated financial statements and related notes before making a decision to invest in our Class A common stock. Many of the risks and uncertainties described below may be exacerbated by the macroeconomic and geopolitical conditions that may impact the global business and economic environment, including recessionary fears, uncertainty in the global banking and financial services sectors, rising inflation, high interest rates, geopolitical conflicts in and around Ukraine, Israel and other areas of the world, and tensions in the region surrounding the Taiwan strait. Our business, financial condition, results of operations or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material. If any of the following risks actually occur, our business, financial condition or results of operations may be harmed and you may lose all or part of your investment.
Risk Factor Summary
Our business operations are subject to numerous risks, factors and uncertainties, including those outside of our control, that could cause our actual results to be harmed, including risks regarding the following:
Risks Relating to Our Industry and Business
•Decreases in average selling prices of our Smart TVs and other devices may reduce our total net revenue, gross profit and results of operations, particularly if we are not able to reduce our expenses commensurately.
•We depend on sales of our Smart TVs for a substantial portion of our total net revenue, and if the volume of these sales declines or is otherwise less than our expectations, we could lose market share or our Device net revenue may not perform to the rate we expect and our business, financial condition and results of operations may suffer.
•If we fail to keep pace with technological advances in our industry, or if we pursue technologies that do not become commercially accepted, consumers may not buy our devices, TV OEMs may not adopt our technologies, and our revenue and profitability may decline.
•We compete in rapidly evolving and highly competitive markets, and we expect intense competition to continue, which could result in a loss of our market share and a decrease in our revenue and profitability and may harm our growth prospects.
•If we are unable to provide a competitive entertainment offering through SmartCast, our ability to attract and retain consumers would be harmed, as they increasingly look for new ways to access, discover and view digital content.
•Platform+ has experienced recent rapid growth, and our future success depends in part on our ability to continue to grow Platform+.
•Our net revenue and results of operations vary significantly from quarter to quarter due to a number of factors, including changes in demand for the devices we sell, including seasonal fluctuations reflecting traditional retailer and consumer purchasing patterns, which may lead to volatility in our stock price.
•An economic downturn, or economic uncertainty has and could continue to have adverse effects on consumer discretionary and advertising spending, which has and could continue to have adverse effects on demand for our products and our results of operations.
•A breach of the confidentiality or security of information we hold or of the security of the computer systems used in and for our business could be detrimental to our business, financial condition and results of operations.
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Risks Relating to Our Supply Chain, Content Providers and Other Third Parties
•A small number of retailers account for a substantial majority of our Device net revenue, and if our relationships with any of these retailers are harmed or terminated, or the level of business with them is significantly reduced, our results of operations may be harmed.
•If we do not effectively maintain and further develop our Device sales channels, including developing and supporting our retail sales channels, or if any of our retailers experience financial difficulties or fail to promote our devices, our business may be harmed.
•We depend on a limited number of manufacturers and suppliers for our devices and their components. If we experience any delay or disruption, or quality control problems with our manufacturers in their operations or availability or price fluctuations of key components from suppliers, we may be unable to keep up with retailer and consumer demand for our devices, we could lose market share and revenue, and our reputation, brand and business would be harmed.
Risks Relating to Legal and Regulatory Matters
•We and our third-party service providers collect, store, use, disclose and otherwise process information collected from or about consumers of our devices. The collection and use of personal information subjects us to legislative and regulatory burdens, and contractual obligations, and may expose us to liability.
Risks Relating to Financial and Accounting Matters
•We have identified a material weakness in our internal control over financial reporting. If we are unable to remediate this material weakness, or if we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately or timely report our financial results, in which case our business may be harmed, investors may lose confidence in the accuracy and completeness of our financial reports, and our stock price could be adversely affected.
Risks Relating to Intellectual Property
•Third parties may claim we are infringing, misappropriating or otherwise violating their intellectual property rights and we could be prevented from selling our devices, or suffer significant litigation expense, even if these claims have no merit.
Risks Relating to Ownership of Our Class A Common Stock
•The multi-class structure of our common stock has the effect of concentrating voting power with our Founder, Chairman and Chief Executive Officer, William Wang, and his affiliates, which will limit your ability to influence or direct the outcome of key corporate actions and transactions, including a change of control.
•We are a “controlled company” within the meaning of the New York Stock Exchange rules. As a result, we qualify for, and rely on, exemptions from certain corporate governance requirements that provide protection to stockholders of other companies.
Risks Relating to Our Industry and Business
Decreases in average selling prices of our Smart TVs and other devices may reduce our total net revenue, gross profit and results of operations, particularly if we are not able to reduce our expenses commensurately.
The selling prices of televisions, sound bars and other media entertainment devices typically decline over time for a variety of reasons, including increased price competition, excess manufacturing capacity and the introduction of new devices and technology. If we are unable to anticipate and counter declining selling prices during the lifecycle of our devices, our total net revenue, gross profit and results of operations may be harmed.
We sell the vast majority of our devices to various retailers that in turn sell our devices to the end consumer. In most situations, these retailers offer several brands of similar devices. The consumer’s decision on which brand to purchase can be impacted by a host of factors including price, and retailers will not purchase our devices from us if they are unable to sell them to consumers at a profit. In 2022 and the first nine months of 2023, we experienced pressure as certain of our competitors lowered prices on their devices significantly, which had an adverse impact on our Device gross profit. As a result, if we are unable to offer devices to retailers at competitive prices, our business, financial condition and results of operations may be harmed.
Companies that sell media entertainment devices, including us, are vulnerable to cyclical market conditions that can cause a decrease in device prices. Intense competition and expectations of growth in demand across the industry may cause media entertainment device companies or their suppliers to make additional investments in manufacturing capacity on similar schedules, resulting in a surge in production capacity. During these surges in capacity, retailers can exert strong downward pricing pressure, resulting in sharp declines in prices and significant fluctuations in Device gross margin. Furthermore, we may
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provide our retailers with price protection credits in the form of rebates for devices that decrease in price during the device’s life cycle. While, in certain instances, we seek to pass through the costs associated with price protection rebates to our manufacturers, we may not be able to do so in full or in part, which may harm our Device gross margin.
In order to sell devices that have a declining purchase price while maintaining our Device gross margin, we need to continually reduce device and sourcing costs. To manage sourcing costs, we collaborate with our third-party manufacturers to attempt to engineer cost-effective designs for our devices. In addition, we rely on our third-party manufacturers to manage the prices paid for components used in our devices, especially key components such as LCD panels. We must also manage our logistics and other costs to reduce overall device costs. Our cost reduction efforts may not allow us to keep pace with competitive pricing pressures or declining prices. We cannot guarantee that we will be able to achieve any or sufficient cost reductions to enable us to reduce the price of our devices to remain competitive without margin declines, which could be significant. In addition, macroeconomic effects such as inflation, foreign currency fluctuations and geopolitical events in Asia have contributed to global supply chain challenges and could result in future inventory shortages or cost increases. In particular, our business would likely be impacted by disruptions to our supply chain that could result from escalating tensions or potential conflicts in the region surrounding the Taiwan Strait. If such conditions impact our suppliers, contract manufacturers, logistics providers and distributors, they could lead to increases in cost of materials and higher shipping and transportation rates, which could adversely affect our overall device costs and Device gross margin.
We also need to continually introduce new devices, in particular Smart TVs, with higher gross margins in order to maintain our Device gross margin. Although we may be able to take advantage of the higher selling prices typically associated with new devices and technologies when they are first introduced in the market, such prices decline over time, and in certain cases very rapidly, as a result of market competition or otherwise. We may not be successful in improving or designing new devices, or delivering our new or improved devices to market in a timely manner.
If we are unable to effectively anticipate and counter declining prices during the lifecycle of our devices, or if the prices of our devices decrease faster than the speed at which we are able to reduce our manufacturing costs, our total net revenue, gross profit and results of operations may be harmed.
We depend on sales of our Smart TVs for a substantial portion of our total net revenue, and if the volume of these sales declines or is otherwise less than our expectations, we could lose market share or our Device net revenue may not perform to the rate we expect and our business, financial condition and results of operations may suffer.
A substantial portion of our total net revenue has been derived from the sale of Smart TVs. A decline in the volume of sales, whether due to macroeconomic conditions including inflation, changes in consumer demand, changes in technology or consumer preferences, competition or otherwise would harm our business and results of operations more significantly than if our devices were more diversified across a greater variety of products and services. Sales declines may also result in the loss of market share or require us to reduce the prices of our Smart TVs, which may harm our results of operations.
Demand for our Smart TVs is affected by numerous factors, including the general demand for televisions, price competition and the introduction of new technological innovations. For example, demand is, in part, affected by the rate of upgrade of new televisions. We derived a significant percentage of our past total net revenue as a result of consumers purchasing Smart TVs to replace their existing televisions, upgrading standard-definition televisions to high-definition and 4K televisions and other upgrades to newer technologies. We cannot guarantee that current or future technological upgrades, such as Quantum Dot or OLED televisions and televisions with greater color spectrum or operating system capabilities will result in similar adoption rates, or that content providers will provide the content necessary for such technological upgrades to fulfill their full potential for consumers. For example, there was a significant amount of time between when high-definition televisions were available and high-definition content for such televisions was prevalent, and there has been minimal content available and provided for 3D televisions. Currently, the broadcast technology ATSC 3.0 (also referred to as “NextGen TV”) is being considered and implemented by broadcasters across U.S. designated market areas. Whether we enable ATSC 3.0 and other future technologies on our devices and the rate of adoption of those technologies may have an impact on whether or not consumers choose to buy and continue to use our Smart TVs. Furthermore, the rate of replacement with new televisions of older televisions may be affected by macroeconomic factors such as continuing uncertainty in the global economy, or a change in the prices of televisions. If consumers do not purchase new televisions, or purchase substitute or replacement televisions at a lower rate than during prior replacement cycles, this may harm our business, financial condition and results of operations.
While we are evaluating other devices and services to add to and diversify our offerings, we may not be successful in identifying or executing on such opportunities, and we expect sales of televisions to continue to represent most of our total net revenue for the foreseeable future. In addition, certain of our other new device offerings in the past, including sound bars, have been complementary to Smart TV purchases, and sales of such devices are correlated with Smart TV purchases. As a result, our future growth and financial performance will depend heavily on our ability to develop and sell our Smart TVs.
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If we fail to keep pace with technological advances in our industry, or if we pursue technologies that do not become commercially accepted, consumers may not buy our devices, TV OEMs may not adopt our technologies, and our revenue and profitability may decline.
The markets for the media entertainment devices that we offer are characterized by rapidly changing technology, evolving technical standards, changes in consumer preferences, low margins, significant competition and the frequent introduction of new devices and software. The development and commercialization of new technologies, and the introduction of new devices and software, will often quickly make existing devices and software obsolete, unprofitable or unmarketable. We derive a substantial portion of our total net revenue from sales of new Smart TVs, and we expect a significant percentage of our future growth to depend in part on the continued development and monetization of our SmartCast operating system, including opportunities for potential partnerships with TV OEMs to adopt our operating system. Smart TV functionality is rapidly changing, and many potential future use cases for Smart TVs are untested and may prove unsuccessful. Similarly, our ability to establish partnerships with TV OEMs who might adopt our operating system is untested and may prove unsuccessful. Our failure to adequately anticipate changes in the industry and the market, and to develop attractive new devices, software or services, may reduce our future growth and profitability. Moreover, the development process can be lengthy and costly, and requires us to collaborate with our third-party manufacturers, software developers and their suppliers as well as our retailers well in advance of sales. We also depend on the availability of cloud infrastructure from third-parties and outages or disruptions to these services may adversely impact our ability to develop and deliver software or services. Technology and standards may change while we are in the development stage, rendering our devices obsolete or uncompetitive before their introduction. Our devices, which typically contain both hardware and software, may contain undetected bugs, errors or other defects or deficiencies that may not be discovered until after their introduction and shipment. We have in the past experienced bugs, errors or other defects or deficiencies in new devices and device updates and delays in releasing new devices, deployment options and device enhancements, and may have similar experiences in the future. In addition, we may encounter difficulties incorporating technologies and software into our devices in accordance with our retailers’ and consumers’ expectations, which in turn may negatively affect our retailer and consumer relationships, and our reputation, brand and revenue. For example, at the launch of Disney+, the Disney+ application was not available for installation on our Smart TVs, which led to consumer dissatisfaction and complaints, and some other applications that may be desirable to consumers are not currently available on our Smart TVs.
If we fail to keep pace with rapid technological changes and changes in consumers’ or potential partners’ needs or preferences, or to predict future consumer or partner preferences, and to offer new devices, software or software updates to new or existing devices in response to such changes, our business, financial condition and results of operations may be harmed.
We compete in rapidly evolving and highly competitive markets, and we expect intense competition to continue, which could result in a loss of our market share and a decrease in our revenue and profitability and may harm our growth prospects.
We compete in rapidly evolving and highly competitive markets, and with existing competitors whose size and resources may allow them to compete more effectively than we can. We expect intense competition to continue as existing competitors introduce new and more competitive offerings alongside their existing devices and services, and as new market entrants introduce new devices and services into our markets. Many of our competitors have greater financial, distribution, marketing and other resources, longer operating histories, better brand recognition among some categories of consumers and greater economies of scale. In addition, some of these competitors have long-term relationships with many of our retailers.
We compete primarily with established, well-known television manufacturers and established media entertainment device companies, as well as more recent entrants to the branded television market. In addition, one of our significant retailers, Walmart, sells its own brand of televisions and has chosen and may continue to choose to promote their own devices over ours or could ultimately cease selling or promoting our devices entirely. Our principal competitors include: Samsung, LG, TCL, and Hisense. We face sound bar competition from large consumer electronics brands such as Samsung, Sony, LG, Bose, Sonos and Onn. Any reduction in our ability to place and promote our devices, or increased competition for available or desirable shelf or website placement, especially during peak retail periods, such as the holiday shopping season, would require us to increase our marketing expenditures and to seek other distribution channels to promote our devices.
Our Platform+ offerings compete both to be the entertainment hub of consumers’ homes and for 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, such as Samsung and LG, as well as other connected devices or operating systems such as Roku, Amazon Fire TV Stick and Apple TV and traditional cable operators, which may provide their own streaming services and compete for Connected TV advertising. We compete for advertising spend with these competitors as well as with OTT streaming services and content providers, such as Hulu, YouTube TV and Max, 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. Additionally, Netflix and Disney+ have launched ad supported tiers, which has further increased competition. We compete with these devices and services in part on the basis of user experience and content availability, and if our competitors are able to develop features that enhance the user
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experience, offer applications that are not available on our Smart TVs, or secure rights or partnerships to content, including exclusive content, consumers may prefer their offerings to ours and our business may be harmed. In addition, we compete to attract and retain advertisers, and our competitors may offer more attractive alternatives to advertisers, such as larger audiences or better ad formats. Further, to the extent consumers who purchase our Smart TVs do not engage with our SmartCast operating system and instead use our Smart TV with one of our competitors’ solutions or for other purposes, our ability to generate Platform+ net revenue may be harmed.
Many of our existing and potential competitors enjoy substantial competitive advantages, such as:
•access to greater resources in connection with research and development, including regarding development of advertising solutions;
•the ability to more easily undertake extensive marketing campaigns;
•the capacity to leverage their sales efforts and marketing expenditures across a broader portfolio of devices and services;
•the ability to implement and sustain aggressive pricing policies;
•the ability to obtain favorable pricing or allocations of key components from manufacturers or suppliers, including LCD panels, which are supplied for our devices to a significant extent by affiliates of our competitors;
•the ability to exert significant influence on sales channels;
•better access to prime shelf space at our retailers’ retail locations;
•broader distribution, including by selling devices internationally, and more established relationships with retailers;
•access to larger established retailer and consumer bases;
•access to greater resources to make acquisitions;
•the ability to rapidly develop and commercialize new technologies and services;
•the ability to bundle competitive offerings with other devices and services;
•the ability to cross-subsidize low-margin operations from their other higher-margin operations; and
•the ability to secure rights or partnerships to content, including exclusive content, that consumers may prefer over our content.
We would be at a competitive disadvantage if our competitors bring their next generation devices and services to market earlier than we do, if their devices or services have lower prices, better features, more content (or more preferable content) or are more technologically advanced than ours, or if any of our competitors’ devices or services were to become preferred by retailers or consumers. To the extent we are unable to effectively compete against our competitors for any of these reasons or otherwise, our business, financial condition and results of operations may be harmed.
If we are unable to provide a competitive entertainment offering through SmartCast, our ability to attract and retain consumers would be harmed, as they increasingly look for new ways to access, discover and view digital content.
Our Smart TVs connect consumers with a user interface capable of facilitating discovery and engagement with a wide variety of content from traditional content providers, such as cable operators, and streaming content providers, including Amazon Prime Video, Apple TV+, Disney+, Max, Hulu, Max, Netflix, Paramount+, Peacock and YouTube TV. We face increased competition from a growing number of platforms, devices and content providers including Roku, AppleTV, Amazon and Google that provide broadband delivered digital content directly to a consumer’s television or mobile phone, including through casting technology or connected devices such as Amazon’s Fire TV Stick or Google’s Chromecast. Use of these technologies or devices with our Smart TVs, or a consumer’s choice to watch content on their phone instead of television, limits our ability to monetize our SmartCast platform. In addition, we face competition from traditional cable providers and other television brands with Smart TV offerings, such as Samsung and from other forms of content and entertainment, such as social media platforms including TikTok and Instagram that consumers are more likely to engage with on their mobile phones, decreasing the time they spend watching television. To compete effectively, we must be able to provide premium, high-definition content at comparable speeds and quality. We must also maintain arrangements with a competitive assortment of content providers. For example, at the launch of Disney+, the Disney+ application was not available for installation on our Smart TVs, which led to consumer dissatisfaction and complaints. In addition, it takes time to bring new content to our platform, as it can take time for third party content providers to design their applications in a way that is compatible with our platform, and delays or failures to reach agreement with popular content providers will harm our business. Furthermore, our arrangements with our current content
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providers typically do not involve long-term commitments, and we cannot guarantee we will be able to continue our relationships with our current content providers in the future.
If we are unable to provide a competitive entertainment offering through SmartCast, we may not maintain or increase SmartCast Active Accounts, SmartCast Hours and SmartCast ARPU as defined in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and our business, financial condition and results of operations may be harmed.
Platform+ has experienced recent rapid growth, and our future success depends in part on our ability to continue to grow Platform+.
Platform+ is at an early stage and has experienced recent rapid growth, which may not be indicative of future growth. Platform+ net revenue was $423.9 million and $341.4 million for the nine months ended September 30, 2023 and 2022, respectively. You should not rely on our growth in any prior period as an indication of our future performance, as we may not be able to sustain our current growth rate in the future. For example, although we experienced significant growth of in Platform+ net revenue of 55% from fiscal year 2021 to 2022, this was not as high as the growth rate of Platform+ net revenue of 110% from fiscal year 2020 to 2021, and our growth rate may decrease again in the future. Even if our Platform+ net revenue continues to increase, we expect that our Platform+ net revenue growth rate may continue to decline in the future as a result of a variety of factors, including the saturation of our markets.
The success of our Platform+ business will depend on many factors, including our ability to increase the number of SmartCast Active Accounts, increase SmartCast Hours and hours spent on WatchFree+, and increase SmartCast ARPU. To do so, we must enhance our SmartCast operating system, develop innovative advertising products, maintain relationships with advertising purchasers and develop new offerings that add additional features and capabilities. In addition, any failure to grow our data licensing revenue through Inscape may harm our Platform+ business and results of operations. We have made significant investments in our Platform+ offerings and the technological capabilities of our Smart TVs, and we may not achieve positive returns on these investments.
In addition, inflationary pressure, recessionary fears and reduced consumer confidence in our current economic climate have caused and may continue to cause advertisers in a variety of industries to be cautious in their spending and to either pause or slow their campaigns. Further, a reduction in the supply of original entertainment content, including as a result of macroeconomic factors or labor disputes (such as the ongoing strike called by SAG-AFTRA and the recently ended strike by the Writers Guild of America), could reduce the demand for advertising and media and entertainment promotional spending campaigns and negatively impact user engagement with our platform. These factors may have a negative impact on our Platform+ net revenue. The extent of the ongoing impact of these macroeconomic factors on the growth of our Platform+ business and on global economic activity more generally is uncertain and may adversely affect our business, operations and financial results.
We intend to continue to expend substantial financial and other resources to develop our SmartCast operating system and the features and functionalities of our Smart TVs, and we may fail to allocate our resources in a manner that results in increased revenue or other growth in our business. If we are unable to maintain or increase our Platform+ net revenue at a rate sufficient to offset the expected increase in our costs, our business, financial condition and results of operations may be harmed. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays and other unknown factors that may result in losses in future periods. If Platform+ growth does not meet our expectations in future periods, our business, financial condition and results of operations may be harmed.
We depend in part on the continued sales of our Smart TVs for the growth of our Platform+ business, and if we fail to deliver devices that our retailers and consumers want, our business, financial condition and results of operations may be harmed.
The growth of our Platform+ business depends in part on the continued sales of our Smart TVs in order to generate additional consumers who could become SmartCast Active Accounts. Because our SmartCast operating system is only available on our Smart TVs, the growth of Platform+ depends in part on the number of new Smart TVs we sell and our ability to convert those purchasers into SmartCast Active Accounts. To the extent retailers and consumers do not continue to purchase our Smart TVs, we may not be able to grow our SmartCast Active Accounts, SmartCast Hours or Platform+ net revenue, and these metrics may decline if existing consumers decide to purchase from another brand when they purchase a new television. If we fail to deliver upgraded and new Smart TVs that our retailers and consumers want, we may not be able to continue to grow our Platform+ business, and our business, financial condition and results of operations may be harmed.
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We may not be successful in our efforts to expand our monetization of our SmartCast operating system, which may harm our business, financial condition and results of operations.
Our future growth depends in part on our ability to expand the capabilities of our SmartCast operating system and to monetize those capabilities. SmartCast currently generates revenue from ad inventory on our home screen, WatchFree+ and certain other services on our operating system and, on a transactional basis, from certain subscription purchases and content transactions that occur on our operating system, including those made through our payment and subscription management solution, VIZIO Account. To continue to grow our business, we intend to invest in interactive features for our Smart TVs such as personal communications, including our recently launched photo-sharing feature VIZIOgram, commerce and fitness and wellness. We may be unable to successfully develop these features and even when we do, consumers may not choose to engage with them. The failure to develop new features and functionalities for our SmartCast operating system that effectively engage consumers may harm our number of SmartCast Active Accounts, and the failure to monetize such innovations may harm our SmartCast ARPU. In addition, while we are beginning to explore partnerships with other TV OEMs that may adopt our technologies, we may not be able to enter into any partnerships. If we are unable to generate revenue from new features of our Smart TVs or partner with other TV OEMs, our business, financial condition and results of operations may be harmed.
We expect our quarterly financial results to fluctuate, which may lead to volatility in our stock price.
Our net revenue and results of operations vary significantly from quarter to quarter due to a number of factors, including:
•changes in demand for the devices we sell, including seasonal fluctuations reflecting traditional retailer and consumer purchasing patterns;
•changes in the mix of devices we sell;
•the impact of new device introductions, including the impact of customary reset periods, or retailers and consumers choosing to forego purchases of current devices in anticipation of new devices;
•the introduction of new technologies, devices or service offerings by competitors;
•our ability to manage our device mix and consider allowances, including for price protection;
•our ability to reduce our fixed costs to compensate for any reduced net revenue or decrease in average selling prices;
•changes in demand for advertising we sell or data we license;
•our ability to grow SmartCast Active Accounts and continue to develop our Platform+ offerings;
•changes in advertising and other marketing costs;
•aggressive pricing, marketing campaigns or other initiatives by our competitors;
•increases in the cost of the devices we sell due to the rising costs of key components such as LCD panels, chipsets and raw materials, particularly in Vietnam, China, Taiwan, Thailand and Mexico;
•costs of expanding or enhancing our supply base;
•changes and uncertainty in the legislative, regulatory and industry environment, including changes in tax laws, for us, our customers, our retailers or our manufacturers;
•the macroeconomic effects of inflation, recessionary fears, and geopolitical events, including supply chain issues and labor shortages, rising interest rates, foreign currency fluctuations and lower consumer spending;
•investments in new device or service offerings, including the level of investment in our Platform+ offerings;
•changes in our capital expenditures as we acquire the hardware, equipment, technologies and other assets required to operate and scale our business; and
•costs related to acquisitions of other businesses or technologies.
As a result of the variability of these and other factors, our results of operations in future quarters may be below the expectations of stock analysts and investors, which could cause our stock price to fall.
Our Device business is seasonal, and if our device sales during the holiday season fall below our forecasts, our business, financial condition and results of operations may be harmed.
Our Device business is subject to seasonal fluctuations in demand due to changes in buying patterns by our retailers. Historically, we have experienced the highest levels of our sales in the fourth quarter of the year, coinciding with the holiday shopping season in the United States, including the Black Friday and Cyber Monday sales events, and, to a more limited extent, the third quarter due to pre-holiday inventory build-up and back-to-school promotions. Moreover, we often introduce our
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newest generation of device offerings just prior to this peak season, which may further concentrate sales in the fourth quarter. Additionally, there are other seasonal events, such as Superbowl Sunday in the first quarter, as well as retailer reset periods in the spring and fall of each year, which impact our sales volume. During device reset periods, our retailers, including Best Buy, Costco, Sam’s Club, Target and Walmart, update their device assortments, driving sales of new device introductions, while simultaneously driving down prices for pre-existing devices, as retailers seek to move older devices off of their shelves to make room for new devices.
Depending on how well we plan and execute our sales strategy during seasonal fluctuations in demand, our device sell-through and/or margins may be harmed, particularly as we provide price protection for devices in inventory at our retailers. Further, given the strong seasonal nature of our device sales, appropriate forecasting is critical to our operations. We anticipate that this seasonal impact on our results will continue, and any shortfall in seasonal sales would cause our results of operations to suffer. Achieving sales targets in the fourth quarter is particularly important, as a failure to achieve sales targets during the holiday season cannot be recovered in subsequent periods of a given year.
In contrast to total net revenue, a substantial portion of our expenses are personnel-related and include salaries, bonuses, benefits and share-based compensation, which are not seasonal in nature. Accordingly, in the event of revenue shortfalls, we are generally unable to mitigate the negative impact on margins in the short term.
Our success depends on our ability to continue to establish, promote and strengthen the VIZIO brand.
Maintaining awareness of the VIZIO brand name in existing markets and developing and maintaining the VIZIO brand name are critical to achieving and maintaining widespread awareness of our Smart TV and other device and service offerings. The VIZIO name and brand image are integral to the growth of our business. Maintaining, protecting, promoting and positioning our brand will largely depend on the success of our marketing efforts and our ability to consistently provide high quality devices that continue to meet the needs of our retailers and consumers at competitive prices, our ability to maintain our retailers’ and consumers’ trust, and our ability to successfully differentiate our devices from competitive products. If we fail to achieve these objectives or if our public image or reputation were to be tarnished by negative publicity or perception, our brand, business, financial condition and results of operations may be harmed. We also believe that brand recognition will continue to be a key factor in maintaining and expanding our retailer base and market position, strengthening our bargaining power with retailers, manufacturers and third-party service providers and growing our Platform+ offerings. Maintaining and enhancing our brand requires us to make substantial investments, and these investments may not achieve the desired goals. If we are unable to continue to promote, protect and strengthen the VIZIO brand, or if our brand fails to continue to be viewed favorably by our retailers or by consumers, we may not be successful in retaining existing retailers or consumers, or in attracting and acquiring new retailers and consumers, which may harm our business, financial condition and results of operations. Additionally, we compete for retailers and consumers, as well as for favorable device selections and cooperative advertising support from our retailers. Our retailers are often the first points of contact with consumers. Moreover, these retailers provide a significant amount of device advertising, which supplements our marketing spend or may decrease the amount that we are otherwise required to spend on marketing. If these retailers reduce or cease advertising our devices, we may need to increase our own sales and marketing expenses to create and maintain the same level of brand awareness among potential consumers.
We must successfully manage frequent device introductions and transitions.
We believe that we must continually develop and introduce new devices, enhance our existing devices and effectively stimulate retailer and consumer demand for new devices. Any failure to complete device transitions effectively could harm our brand, business, financial condition and results of operations.
The success of new device introductions depends on a number of factors including, but not limited to, timely and successful development, market and consumer acceptance, the effective forecasting and management of device demand, management of purchase commitments and inventory levels, the management of manufacturing and supply costs, and the risk that new devices may have quality or other defects in the early stages of introduction. If we do not successfully manage device transitions, especially during the holiday shopping season, our Device net revenue and business may be harmed and we may not be able to grow our business.
The introduction of new devices or device enhancements may shorten the life cycle of our existing devices, or replace sales of some of our current devices, thereby offsetting the benefit of a successful device introduction. Additionally, the prices of our existing models tend to decline when new models become available. Although we attempt to pass such price declines to our manufacturers, we may need to offer our retailers price protection or other benefits in order to complete the sell-through of older models of our devices to consumers. New device offerings may also cause retailers or consumers to defer purchasing our existing devices in anticipation of the new devices and potentially lead to challenges in managing inventory of existing devices. If we fail to effectively manage new device introductions, our Device net revenue and Device gross profit may be harmed.
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If we fail to effectively manage our growth, our business, financial condition and results of operations may be harmed.
Our ability to manage our growth and business operations effectively and to integrate new employees, technologies and acquisitions into our existing business will require us to continue to expand our operational and financial infrastructure and to continue to retain, attract, train, motivate and manage employees. Continued growth could strain our ability to develop and improve our operational, financial and management controls, enhance our reporting systems and procedures, recruit, train and retain highly skilled personnel and maintain consumer satisfaction. Additionally, if we do not effectively manage the growth of our business and operations, the quality of our offerings could suffer, which could negatively affect our reputation, brand, business, financial condition and results of operations.
Further, as we have grown, our business has become increasingly complex. To effectively manage and capitalize on our growth, we must continue to expand our sales and marketing infrastructure, engineering, focus on innovative device development and upgrade our management information systems and other processes. Our continued growth could strain our existing resources, and we could experience ongoing operating difficulties in managing our business across numerous jurisdictions, including difficulties in hiring, training and managing a diffuse and growing employee base. Failure to scale and preserve our company culture with growth could harm our future success, including our ability to retain and recruit personnel and to effectively focus on and pursue our corporate objectives. If we do not adapt to meet these evolving challenges, or if our management team does not effectively scale with our growth, we may experience erosion to our brand and the quality of our devices may suffer.
Our Smart TVs must operate with various offerings, technologies and systems from third party content providers that we do not control. If our Smart TVs do not operate effectively with those offerings, technologies and systems, our business may be harmed.
The success of our SmartCast operating system depends in part on its interoperability with the applications of content providers in order to provide the channels and content that consumers want. We have no control over the development priorities of these third-party content providers and cannot be assured they will design their applications for our platform. If content providers do not develop or maintain applications for our SmartCast operating system, our business, financial condition and results of operations may be harmed. Additionally, we must continually certify our hardware and operating systems with applications from key content providers, including Netflix, YouTube, Amazon, Google and Apple. These certification standards may limit our ability to design our products and services in the way we believe is optimal, and failure to meet these certification standards would result in loss of availability of the relevant application on our Smart TVs, which could negatively impact our business.
Our success also depends on the reliability of these offerings. If the applications on our Smart TVs experience performance issues or service interruptions, consumers may become dissatisfied with our platform. In addition, we plan to continue to develop our SmartCast operating system and innovate new features. These developments and features, however, may require content providers to update or modify their applications. To continue to grow our SmartCast Active Accounts and consumer engagement, we will need to prioritize development of our Smart TVs to work with additional offerings, technologies and systems. If we are unable to maintain consistent operability of our devices compared to other platforms, our business may be harmed. In addition, any future changes to offerings, technologies and systems from content providers may impact the accessibility, speed, functionality, and other performance aspects of our Smart TVs. We may not successfully develop Smart TVs that operate effectively with these offerings, technologies or systems. If it becomes more difficult for our consumers to access and use these offerings, technologies or systems, consumers may seek to use alternative offerings and our business, financial condition and results of operations may be harmed.
If the advertising and audience development campaigns and other promotional advertising on our platform are not relevant or not engaging to our consumers, our growth in SmartCast Active Accounts and consumer engagement may be harmed.
We have made, and are continuing to make, investments to enable advertisers and content providers to deliver relevant advertisements, audience development campaigns and other promotional advertising to our consumers. Existing and prospective advertisers and content providers may not be successful in serving ads and audience development campaigns and sponsoring other promotional advertising that lead to and maintain user engagement. Those ads and campaigns may seem irrelevant, repetitive or overly targeted and intrusive. We are continuously seeking to balance the objectives of our advertisers and content providers with our desire to provide an optimal user experience, but we may not be successful in achieving a balance that continues to attract and retain consumers, advertisers and content providers. We have invested and expect to continue to invest in developing innovative advertising technology, and those investments may not lead to capable or commercially successful technology. If we do not introduce relevant advertisements, audience development campaigns and other promotional advertising or such advertisements, audience development campaigns and other promotional advertising are overly intrusive and impede the use of our streaming platform, our consumers may reduce using, or stop using, our platform, and advertisers or content providers may reduce or discontinue their relationships with us, any of which may harm our business.
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If we are unable to maintain an adequate supply of quality video ad inventory or effectively sell our available video ad inventory, we may not be successful in further monetizing our Platform+ business and as a result, our business, financial condition and results of operations may be harmed.
We are dependent in part on our ability to monetize video ad inventory on WatchFree+ that we obtain from the publishers of ad-supported channels, and through our inventory share with certain AVOD services. We generate advertising revenue by selling ad inventory on our own services and through certain third-party AVOD services. We may fail to attract content providers for these services that generate a sufficient quantity or quality of ad-supported content hours on our streaming platform and continue to grow supply of quality video ad inventory. Our access to video ad inventory on our platform, including on WatchFree+ varies greatly. The amount, quality and cost of video ad inventory available to us can change at any time and we have recently observed slowed advertising spending in a variety of industries due to market conditions. Additionally, consolidations among content providers and changes in their advertising strategy may result in decreased advertising spend and inventory. If we are unable to grow and maintain a sufficient supply of quality video advertising inventory at reasonable costs to keep up with demand, we may not be able to increase our SmartCast ARPU and our business may be harmed.
Our ability to deliver more relevant advertisements to our consumers and to increase SmartCast’s value to advertisers depends in part on the collection of user engagement data, which may be restricted or prevented by a number of factors, including our ability to keep SmartCast Active Accounts engaged on ad-supported content instead of harder to monetize content, contractual restrictions on our ability to use data from certain streaming services, and consumers’ willingness to opt into the collection of their data. Our ability to grow SmartCast ARPU depends in part on our ability to shift SmartCast Hours towards services that we are better able to monetize.
Further, we operate in a highly competitive advertising industry and we compete for revenue from advertising with OTT platforms and services, as well as traditional media, such as radio, broadcast, cable and satellite TV. These competitors offer content and other advertising mediums that may be more attractive to advertisers than our streaming platform. These competitors are often very large and have more advertising experience and financial resources than we do, which may adversely affect our ability to compete for advertisers and may result in lower revenue and gross profit from advertising. We also seek to grow our advertising sales by seeking early commitments from advertisers related to their expected advertising spend (“Upfront Commitments”), which in some cases offer more competitive pricing in exchange for Upfront Commitments. However, Upfront Commitments are indications of expected advertising spending that are typically not fully binding, so the amount of money these advertisers spend with us may be more or less than what was originally committed. If advertisers spend significantly less than they indicated in their Upfront Commitments, our ability to continue to grow our advertising revenue may be negatively impacted. If we are unable to increase our revenue from advertising by, among other things, maintaining or growing the market share for our Smart TVs, continuing to improve our platform’s capabilities to further optimize and measure advertisers’ campaigns, increase our advertising inventory and expand our advertising sales team and programmatic capabilities, our business and our growth prospects may be harmed. This competition may also be intensified by negative conditions in the global economy, which have caused advertisers to slow advertising spending. We may not be able to compete effectively or adapt to any such changes or trends, which would harm our ability to grow our advertising revenue and harm our business, financial condition and results of operations.
An economic downturn, or economic uncertainty has and could continue to have adverse effects on consumer discretionary and advertising spending, which has and could continue to have adverse effects on demand for our products and our results of operations.
Our Smart TVs and sound bars are consumer discretionary items, and our Platform+ business is dependent on advertising spending. As such, our results of operations tend to be sensitive to changes in macroeconomic conditions, consumer confidence, employment levels, interest rates, inflation, tax rates, the availability and cost of credit, debt levels and fuel and energy costs.
Negative conditions in the global economy, including heightened inflation, rising interest rates and resulting credit constraints, foreign currency fluctuations, and reduced consumer confidence, impacts from geopolitical conflicts in and around Ukraine, Israel and other areas of the world, among other macroeconomic effects, have and may continue to depress consumer spending on discretionary items as well as advertising spending, which has and may continue to have an adverse impact on Smart TV Shipments, SmartCast Active Accounts, and gross profit. Such factors also have and may continue to cause advertisers in a variety of industries to reduce advertising spending and to either pause or slow campaigns which in turn creates increased competition for remaining advertising inventory, adversely affecting Platform+ gross profit. A sustained or worsened economic downturn or continued economic uncertainty may adversely affect demand for our Device and Platform+ products, and our business, financial condition and results of operations may be harmed. Changes in economic policy, trade uncertainty, including changes in tariffs, sanctions, international treaties and other trade restrictions, the occurrence of a natural disaster or another global public health crisis, armed conflicts, or changes in diplomatic relations could further exacerbate macroeconomic conditions, depress consumer and advertising spending, and adversely affect our results of operations. The sensitivity of our
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Device and Platform+ businesses to macroeconomic events, economic cycles, and any related fluctuation in consumer confidence may harm our business, financial condition and results of operations if the current economic downturn and uncertainty persists.
Changes in consumer viewing habits could harm our business.
The manner in which consumers access streaming content is changing rapidly. As the technological infrastructure for internet access continues to improve and evolve, consumers will be presented with more opportunities to access video, music and games on-demand with interactive capabilities. Time spent on mobile devices is growing rapidly, in particular by young adults streaming content, including user-generated content on social media platforms such as TikTok and Instagram, as well as content from cable or satellite providers available live or on-demand on mobile devices. In addition, personal computers, streaming platforms, DVD players, Blu-ray players, gaming consoles and cable set-top boxes allow consumers to access streaming content. If other streaming or technology providers are able to respond and take advantage of changes in consumer viewing habits and technologies better than us, our business, financial condition and results of operations may be harmed.
New entrants may enter the TV streaming market with unique service offerings or approaches to providing content. In addition, our competitors may enter into business combinations or alliances that strengthen their competitive positions. If new technologies render the TV streaming market obsolete or we are unable to successfully compete with current and new competitors and technologies, our business may be harmed.
The use of Automatic Content Recognition (“ACR”) technology to collect viewing behavior data is a developing industry and we may not compete in it successfully.
The utilization of viewing behavior data collected using ACR technology through Smart TVs to inform digital advertising and content delivery is a developing industry, and the technologies relating to and uses for this type of data that may be prevalent in the future remain uncertain. If the market for the use of this data does not develop in the way or at the level we expect, or if we are unable to successfully develop and monetize our Platform+ offerings or the viewing behavior data we collect, our growth prospects may be harmed.
Many factors may adversely affect the acceptance and growth of Platform+, including:
•changes in consumer preferences and attitudes toward data collection, use, disclosure and other processing;
•changes in or the introduction of new laws, rules, regulations or industry standards or increased enforcement of international laws, rules, regulations or industry standards impacting the collection, use, privacy, security, sharing or other processing of data or otherwise;
•changes in device functionality and settings, and other changes in technologies, including those that make it easier for consumers to prevent the placement monitoring technology and impact our ability to reach them online or collect and use exposure data, and decisions by consumers to opt out of being monitored or to use such technology;
•developing and maintaining relationships and technology integrations with brand advertisers, advertising and media agencies, broadcast, cable and local television networks, digital publishers and streaming companies, data analytics firms and marketing technology firms;
•decisions by advertisers, media content providers, digital publishers or marketing technology companies to, or changes in their technology or rights that, restrict our ability to collect data or their refusal to implement mechanisms we request to ensure compliance with our legal obligations or technical requirements;
•changes in the economic prospects of advertisers, advertising and media agencies, broadcast, cable and local television networks, digital publishers and streaming companies, data analytics firms, advertising technology firms, or the industries or verticals we expect to primarily serve with our Inscape data services;
•the failure to add, or the loss of, brand advertisers, advertising and media agencies, broadcast, cable and local television networks, digital publishers and streaming companies, data analytics firms and advertising technology firms running advertising campaigns using our services;
•the timing and amount of sales and marketing expenses incurred to attract new brand advertisers, advertising and media agencies, broadcast, cable and local television networks, digital publishers and streaming companies, data analytics firms and advertising technology firms to our services; and
•changes in the demand for viewing behavior data.
Further, we currently do not collect, and might not in the future collect, viewing behavior data regarding content streamed through SmartCast or content viewed on Smart TVs located outside of the United States. Additionally, some of our agreements with third party content providers, including Netflix and Disney+, restrict us from using viewing data from consumers engaging
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with that third party’s content. These potential limitations may impair our ability to monetize Platform+. Moreover, our Smart TV viewers must initially opt-in to data collection and can opt out of data collection at any time. Consumer attitudes toward data collection, use, disclosure and other processing may change over time, and may result in more of our Smart TV viewers opting out of data collection.
If we are unable to adequately address these factors, we may not be able to successfully develop our Platform+ offerings and our anticipated future growth may be harmed.
Our future growth depends in part on the growth and integration of the digital and television advertising industries.
Many advertisers continue to devote a substantial portion of their advertising budgets to traditional, offline advertising, such as offline television, radio and print. The future growth of our business and, in particular, our Platform+ offerings, will depend on the continued integration of television and digital advertising, and on advertisers increasing their spend on television and digital advertising, and we cannot be certain that they will do so. We have invested to improve digital advertising, such as through our ACR and DAI technologies, but these technologies are relatively new and our efforts may not achieve long-term commercial success. If advertisers do not perceive meaningful benefits from the integration of television and digital advertising, and in particular the benefit of viewing behavior data, including in terms of cost effectiveness, then the digital advertising market and our Platform+ offerings may develop more slowly than we expect, which may harm our business, financial condition and results of operations.
Changing consumer preferences towards data collection, privacy and security could cause consumers not to opt-in to or to opt-out of our data collection practices, which could harm our Platform+ business.
Certain of our data policies require consumers to opt-in to the collection, use, and disclosure of their data, including viewing data. Data collection, privacy and security have become the subject of increasing public concern and changing consumer preferences towards data collection, privacy and security could adversely affect consumer willingness to opt-in to our collection of their data. For example, prior to collection of information from a television about the content viewed on that television, we must prominently disclose to the consumer, separate and apart from any privacy policy, the types of data that will be collected, used and shared with third parties, including the identity or specific categories of such third parties, and the purposes for sharing of such information, and then obtain the consumer’s affirmative express consent. Consumers may be reluctant or unwilling to opt-in to the collection of viewing data, and consumers that have opted-in to the collection of viewing data may opt-out of the collection of viewing data through the Smart TV user settings at any time.
In particular, the success of our Inscape data services and ad sales revenue objectives depends in part on our ability to lawfully obtain information about the content viewed on a device through the use of ACR and other technologies from devices whose users choose to opt-in to the data collection and to pair that information with demographic, usage, and other activities associated with users and their devices. Furthermore, some consumers may be reluctant or unwilling to opt into our collection of their data or connect to the internet through our Smart TVs for a variety of reasons, including because they have concerns regarding the risks associated with data privacy and security. Consumers may not opt-in to having their viewing history, and other behavioral data paired with their email address or telephone number. If consumers choose not to opt-in to the collection and use of their data in support of Inscape data services and ad sales on our platform as a result of these concerns, this could negatively impact the growth potential for our Platform+ business.
A breach of the confidentiality or security of information we hold or of the security of the computer systems used in and for our business could be detrimental to our business, financial condition and results of operations.
We rely on others to operate complex computer systems that store and otherwise process sensitive corporate, personal and other information, including intellectual property, proprietary business information, payment card information and other consumer data and confidential information, which they are contractually required to maintain on a confidential basis. The information we collect through our Inscape data services does not include consumers’ names, addresses, phone numbers, social security numbers, credit card information or other contact information, but it does include device or other persistent identifiers, IP addresses, viewing behavior data and other personal information. Additionally, we collect personal information including names, e-mail addresses, zip codes and payment card information from consumers who use our VIZIO Account subscription management service. We also maintain a separate database of personal information in connection with consumers who register our devices for warranty purposes or otherwise contact us, such as for consumer service assistance. More generally, in the ordinary course of our business, we collect, store, transmit and otherwise process large amounts of sensitive corporate, personal and other information, including intellectual property, proprietary business information, payment card information and other consumer data and confidential information. It is critical that we work to maintain the confidentiality, integrity and availability of such information.
Like all services that connect with the internet, our Inscape data services, and our website, as well as our information technology systems and infrastructure and those of our third-party service providers, and our databases and data centers provided by third-party service providers have in the past and may in the future be subject to security breaches, intrusions,
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incidents, attacks, malware and ransomware attacks, social engineering attacks, phishing attempts, attempts to overload our servers with denial-of-service, employee and contractor theft and other malfeasance, unauthorized access by third parties or internal actors, or other attacks and disruptions, any of which could lead to interruptions, delays, or shutdowns of our services, or the inadvertent or unauthorized access, destruction, modification, acquisition, release, transfer, loss, disclosure or use of information about consumers or their devices or other sensitive, personal or confidential information. Attacks of this nature are increasing in frequency, levels of persistence, sophistication and intensity, and evolving in nature, and are conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise, including organized criminal groups, “hacktivists,” terrorists, nation states and others. Threats to and vulnerabilities in our computer systems and those of our service providers have resulted and may result from human error, fraud or malice on the part of our employees, third-party service providers and business partners or by malicious third parties, including state-sponsored organizations with significant financial and technological resources, or from accidental technological failure. Additionally, geopolitical events and resulting government activity could also lead to information security threats and attacks by affected jurisdictions and their sympathizers. For example, despite our efforts to secure our information technology systems and the data contained in those systems, including efforts to educate and train our employees, we remain vulnerable to phishing and other types of attacks and breaches. In the past, employees have been victims of spearphishing and other phishing attacks, and we anticipate these attacks continuing, which may result in our employees and contractors being victims of these attacks in the future. The security risks we face have been heightened by a shift toward remote work by our employees and service providers. In addition, due to political uncertainty and military actions associated with the geopolitical conflicts in and around Ukraine, Israel and other areas of the world, we and our service providers are vulnerable to heightened risks of information security threats and attacks from or affiliated with nation-state actors, including attacks that could materially disrupt our systems and operations, supply chain and ability to produce, sell and distribute our devices and services.
We cannot, however, be certain that current or future criminal capabilities, discovery of existing or new vulnerabilities in our and our service providers’ systems and attempts to exploit those vulnerabilities, physical systems or facility break-ins and data thefts or other developments will not compromise or breach the technology protecting the systems and information possessed by us and our service providers, or that this has not already occurred. Given the unpredictability of the timing, nature and scope of cybersecurity attacks and other security-related incidents, our technology may fail to adequately secure our systems and the information we maintain, and we may be unable to anticipate or prevent techniques used to obtain unauthorized access or to sabotage systems, react in a timely manner, or implement adequate preventative measures. In the event that our or our service providers’ protection efforts are unsuccessful and there is unauthorized access to, or unauthorized destruction, modification, acquisition, release, transfer, loss, disclosure or use of information or the breach of the security of information, we could suffer substantial harm. A breach of our or our service providers’ network security or systems could have serious negative consequences for our business and future prospects, including costs to comply with applicable breach notification laws, disruption to our business, litigation, disputes, regulatory investigation and oversight, mandatory corrective action, fines, penalties, damages, indemnity obligations, damages for contract breach, reduced consumer demand for our devices and harm to our reputation and brand. We may face difficulties or delays in identifying, mitigating or otherwise responding to any security breach or incident.
Further, a portion of our technology infrastructure is operated by third parties such as Amazon Web Services, among other providers, over which we have no direct control, and some of these third parties in turn subcontract with other third-party service providers. We are reliant in part on their security measures to protect our sensitive corporate, personal and other information, including intellectual property, proprietary business information, payment card information, consumer data and other confidential information. Our ability to monitor our service providers’ security measures is limited, and, in any event, third parties may be able to circumvent those security measures, resulting in the unauthorized access to, misuse, disclosure, loss or destruction of our and our customers’ information, including sensitive and personal information. Third parties that we work with have in the past experienced security incidents and phishing attacks and may have similar experiences in the future. If those third parties do not adequately protect our information, it could result in decreased revenue and our reputation and brand could suffer irreparable harm, causing consumers to reject our devices in the future, our data providers not to share data with us, or advertisers or other downstream users or licensees of our viewing behavior data not to do business with us. For example, we use third-party payment processors to collect payment information for purchases on our website, through our Smart TVs and through VIZIO Account. If these third parties suffer a data breach involving our consumers’ payment card data, we may be subject to substantial penalties and related enforcement for failure to adhere to the technical or operational security requirements of the Payment Card Industry (“PCI”) Data Security Standard (“DSS”) imposed by the PCI Council to protect cardholder data. Penalties arising from PCI DSS enforcement are uncertain as penalties may be imposed by entities within the payment card processing chain without regard to any statutory or universally mandated framework. Such enforcement could threaten our relationship with our banks, card brands we do business with and our third-party payment processors. Further, we could be forced to expend significant financial and operational resources in response to any actual or perceived security breach or security incident, including in repairing system damage, increasing cybersecurity protection costs by deploying additional personnel and modifying or enhancing our protection technologies, investigating and remediating any information security
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vulnerabilities, notifying affected individuals and providing them with identity-protection services, and litigating and resolving governmental investigations and other proceedings and legal claims and litigation, all of which could divert resources and the attention of our management and key personnel.
We incur significant costs to detect and prevent security breaches and other security-related incidents. Nevertheless, our efforts may not be successful. The inability to implement and maintain adequate safeguards may harm our business, financial condition and results of operations. For example, we do not yet have a formally documented data retention policy and have recently developed a business continuity and disaster recovery plan. If we are not able to detect and identify activity on our systems that might be nefarious in nature, determine the scope of or contain the nefarious activity, or design processes or systems to reduce the impact of similar activity at a third-party provider, our business could suffer harm. In such cases, we could face exposure to legal claims, particularly if the retailer or consumer suffered actual harm. We cannot ensure that any limitations of liability provisions in our agreements with consumers or retailers, contracts with service providers and other contracts for a security lapse or breach or other security-related matter would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim. In any event, an unauthorized disclosure of information or a breach of the security of our systems or data, media reports about such an incident, whether accurate or not, or our failure to make adequate or timely disclosures to the public, regulators, or law enforcement agencies following any such event, whether due to delayed discovery or a failure to follow existing protocols, may harm our reputation, brand, business, financial condition and results of operations.
Security compromises experienced by others in our industry, our retailers or us may lead to public disclosures and widespread negative publicity. Any security compromise in our industry, whether actual or perceived, could erode consumer confidence in the effectiveness of our security measures, negatively impact our ability to attract new consumers, cause existing consumers to elect not to use our devices or subject us to third-party lawsuits, regulatory fines or other actions or liabilities, which may harm our business, financial condition and results of operations.
Additionally, we cannot be certain that our insurance coverage will be adequate for data security liabilities actually incurred, will cover any indemnification claims against us relating to any incident, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, may harm our reputation, brand, business, financial condition and results of operations.
Significant system disruptions, loss of data center capacity or interruption of telecommunication links may harm our business, financial condition and results of operations.
Our business is heavily dependent upon highly complex data processing capability. Protection of our data centers and the third-party data centers at which we collect and maintain data against damage or interruption from fire, flood, earthquakes, tornadoes, other natural disasters, acts of war (including related to geopolitical conflicts in and around Ukraine, Israel and other areas of the world) or terrorism, cybersecurity attacks, ransomware, power loss, telecommunications or equipment failure, infrastructure changes, human or software errors, viruses, denial of service attacks, fraud or other disasters and events beyond our control is critical to our continued success. We also rely on bandwidth providers, internet service providers and mobile networks to deliver data to us from Smart TVs and the online content available through our Smart TVs is dependent on links to telecommunication providers. Any damage to, failure of, or outages of the systems of the data centers that we utilize or the systems of our third-party providers could result in interruptions to the availability or functionality of our Inscape data services or our Smart TVs. If for any reason our arrangements with our third-party providers, including providers of our third-party data centers, are terminated, we could experience additional expense in arranging for new technology, services and support. In addition, the failure of the data centers that we utilize or any third-party providers to meet our capacity requirements could result in interruptions in the availability or functionality of our devices or impede our ability to scale our operations.
We believe we and the third parties on which we rely have taken reasonable precautions to protect necessary data centers and telecommunication links from events that could interrupt our operations. Such third parties, however, are responsible for maintaining their own network security, disaster recovery and system management procedures. Any damage to the data centers that we utilize or any failure of our telecommunications links that causes loss of data center capacity or otherwise causes interruptions in our operations, however, may materially adversely affect our ability to quickly and effectively respond to our retailers’ requirements, which could result in loss of their confidence, adversely impact our ability to attract new retailers and force us to expend significant resources to repair the damage. Such events may harm our business, financial condition and results of operations.
Any material disruption of our information systems may harm our business, financial condition and results of operations.
We are increasingly dependent on information systems to process transactions, respond to retailer inquiries, provide technical support to consumers, manage our supply chain and inventory, ship goods on a timely basis and maintain cost-efficient
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operations, in particular for our Inscape data services. There have been and may continue to be significant supply chain attacks (such as the attacks resulting from vulnerabilities in SolarWinds Orion, Accellion FTA, Microsoft Exchange, and other widely-used software and technology infrastructure) and there may be a rise in the threat, frequency and/or sophistication of cyber- attacks due to current geopolitical tensions, so we cannot guarantee that our or our third-party providers’ systems and networks have not been breached or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our systems and networks or the systems and networks of third parties that support us and our services. Any material disruption, outage, failure or slowdown of our systems or those of our service providers, including a disruption or slowdown caused by our failure to successfully upgrade our systems, system failures, viruses, computer “hackers,” cybersecurity attacks, denial of service attacks, ransomware or other causes, as well as fire, flood, earthquakes, tornadoes, power loss, telecommunications or equipment failure, infrastructure changes, human or software errors, fraud or other disasters and events beyond our control, could cause delays in our supply chain or cause information, including data related to retailer orders, to be lost, corrupted, altered or delayed, which could result in delays in the delivery of merchandise to retailers or lost sales, especially if the disruption or slowdown occurs during the holiday season. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. Any of these events could reduce demand for our devices or impair our ability to complete sales through our ecommerce channels and cause our revenue to decline. If our information systems are inadequate to handle our growth, we could lose retailers or our business, financial condition and results of operations may be harmed.
As we expand our operations, we expect to utilize additional systems and service providers that may also be essential to managing our business, in particular for our Inscape data services. Although the systems and services that we require are typically available from a number of providers, it is time consuming and costly to qualify and implement these relationships. Therefore, our ability to manage our business would suffer if one or more of our providers suffers an interruption in their business, or experiences delays, disruptions or quality control problems in their operations, or we have to change or add systems and services. Furthermore, we may not be able to control the quality of the systems and services we receive from third-party service providers, which could impair our ability to implement appropriate internal controls over financial reporting.
If our devices contain defects or errors, we could incur significant unexpected expenses, experience device returns and lost sales, suffer damage to our reputation and brand, and be subject to product liability or other claims.
Our devices are complex and may contain defects, bugs, or vulnerabilities, or be subject to errors or failures, particularly when first introduced or when new models are released. Our devices have a one-, two- or three-year limited warranty against manufacturing defects and workmanship. While our warranty is limited to repairs and returns, warranty claims may result in significant costs and litigation, the occurrence of which may harm our business, financial condition and results of operations. If our devices contain defects or errors, we could experience decreased sales and increased device returns, and loss of our retailers, consumers and market share. If defects are not discovered until after retailers or consumers purchase our devices, our retailers and consumers could lose confidence in the quality of our devices and our reputation and brand may be harmed. If significant bugs or vulnerabilities are not discovered and patched in a timely manner, unauthorized parties could gain access to such devices. Any negative publicity related to the perceived quality of our devices could affect our brand image, decrease retailer and consumer demand, and may harm our business, financial condition and results of operations. In addition, although substantially all of our device warranty expenses are reimbursed by our manufacturers under our standard device supply agreements, if our manufacturers fail to honor these obligations, or if the indemnities in our device supply agreements are insufficient or do not cover our losses, we could incur significant service, warranty and insurance costs to correct any defects, warranty claims or other problems, including costs related to device recalls.
We may undertake acquisitions to expand our business, which may pose risks to our business, dilute the ownership of our stockholders or restrict our operations.
As part of our business and growth strategy, we have in the past acquired and made significant investments in, and may in the future acquire or make significant investments in, businesses, assets, technologies or services that we believe complement our business, although we have no present commitments or agreements to enter into any such acquisitions or investments. We have limited experience acquiring and integrating businesses, and may not be successful in doing so. Acquisitions involve numerous risks, any of which could harm our business and negatively affect our business, financial condition and results of operations, including:
•intense competition for suitable acquisition targets, which could increase acquisition costs and adversely affect our ability to consummate deals on favorable or acceptable terms;
•failure or material delay in closing a transaction;
•transaction-related lawsuits or claims;
•difficulties in integrating the technologies, operations, existing contracts and personnel of an acquired company;
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•difficulties in retaining key employees or business partners of an acquired company;
•diversion of financial and management resources from existing operations or alternative acquisition opportunities;
•failure to realize the anticipated benefits or synergies of a transaction;
•failure to identify the problems, liabilities or other shortcomings or challenges of an acquired company or technology, including issues related to intellectual property, regulatory compliance practices, litigation, revenue recognition or other accounting practices, privacy, data protection and data security practices, or employee or user issues;
•risks that regulatory bodies may enact new laws or promulgate new regulations that are adverse to an acquired company or business;
•risks that we may be required to comply with additional laws and regulations, or to engage in substantial remediation efforts to cause the acquired company to comply with applicable laws or regulations;
•costs and potential difficulties associated with the requirement to test and assimilate the internal control processes of the acquired business;
•theft of our trade secrets or confidential information that we share with potential acquisition candidates;
•risk that an acquired company or investment in new offerings cannibalizes a portion of our existing business; and
•adverse market reaction to an acquisition.
If we fail to address the foregoing risks or other problems encountered in connection with past or future acquisitions of businesses, new technologies, services and other assets and strategic investments, or if we fail to successfully integrate such acquisitions or investments, our business, financial condition and results of operations may be harmed. Acquisitions by us could also result in large write-offs or assumptions of debt and contingent liabilities, any of which could substantially harm our business, financial condition and results of operations. In addition, to finance any acquisitions, it may be necessary for us to raise additional funds through equity, equity-linked or debt financings. Additional funds may not be available on terms that are favorable to us, and in the case of equity or equity-linked financings, could result in dilution to our stockholders. Furthermore, funds obtained through debt financing could contain covenants that restrict how we operate our business or obtain other financing in the future.
We are subject to international business risks and uncertainties.
Our supply chain and manufacturing partners are based in, or have operations in countries outside of the United States including Vietnam, China, Taiwan, Thailand and Mexico. Further, we may expand our marketing operations internationally, which may lead to operations across many additional countries. For example, we have established sales channels through which we sold our devices in Canada and Mexico, though we have currently suspended sales in these countries. Operating in foreign countries requires significant resources and management attention, and we have limited experience entering new geographic markets. We cannot guarantee that our international efforts will be successful.
Some of our manufacturers of key components, including LCD panels, reside in China. The Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement, the level of development, the growth rate, the control of foreign exchange and the allocation of resources. The Chinese government exercises significant control over China’s economic growth through the allocation of resources, control of the incurrence and payment of foreign currency-denominated obligations, setting of monetary policy and provision of preferential treatment to particular industries or companies. Changes in any of these policies, laws and regulations could adversely affect the overall economy in China or our Chinese manufacturers, which could harm our business through higher device costs, reduced availability or both.
We may also experience negative impacts on our business resulting from local regulations imposed in international jurisdictions where our supply chain and manufacturing partners operate or to U.S. regulations that impact our ability to conduct our business with our current international partners. For example, tensions in the relationship between the United States and China, where some of our products and product-components are manufactured, have and could continue to result in U.S. federal and state regulations imposing restrictions on the importation of products and components manufactured in China, which may impact the cost of or our ability to import our devices.
Furthermore, the global nature of our business creates various domestic and local regulatory challenges and subjects us to risks associated with our international operations. We are subject to the U.S. Foreign Corrupt Practices Act (the “FCPA”) and similar anti-bribery and anti-corruption laws in other jurisdictions in which we conduct activities, such as China. These laws generally prohibit companies, their employees, agents, representatives, business partners and third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments to government officials or others in the private sector for the purpose of influencing official actions, obtaining or retaining business, directing business to another or securing an advantage.
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Our ability to maintain current relationships with our manufacturers and vendors, to conduct operations with our existing international partners and to grow our business internationally is subject to risks associated with international operations, such as:
•inability to localize our devices, including to adapt for local practices and translate into foreign languages;
•difficulties in staffing and managing foreign operations;
•burdens of complying with a wide variety of laws and regulations, including those relating to the collection, use and other processing of consumer data;
•more stringent or differing regulations relating to privacy, data protection and data security, particularly in Canada and the European Union;
•unexpected changes in regulatory requirements;
•adverse tax effects and foreign exchange controls making it difficult to repatriate earnings and cash, or reinvest earnings from operations in one country to fund the capital needs of our operations in other countries;
•exposure to political or economic instability and general economic fluctuations in specific countries or markets;
•risks resulting from changes in currency exchange rates;
•changes in diplomatic and trade relationships, including with respect to the relationship between China and Taiwan as well as ongoing trade disputes between the United States and China;
•terrorist activities, natural disasters and pandemics, including the regional or local impacts of any such activity;
•political, economic and social instability, war (including ongoing geopolitical conflicts in and around Ukraine, Israel and other areas of the world, resulting sanctions imposed by the United States and other countries, and retaliatory actions taken in response to such sanctions) or armed conflict;
•trade restrictions;
•differing employment practices and laws and labor disruptions, including strikes and other work stoppages, strains on the available labor pool, labor unrest, changes in labor costs and other employment dynamics;
•the imposition of government controls;
•lesser degrees of intellectual property protection;
•tariffs and customs duties, or other barriers to some international markets, and the classifications of our goods by applicable governmental bodies;
•a legal system subject to undue influence or corruption; and
•a business culture in which illegal sales practices may be prevalent.
The occurrence of any of these risks could negatively affect our operations or international business expansion and consequently our business, financial condition and results of operations may be harmed.
Our Inscape data services currently focus on data generated from television content consumption in the United States. In order to expand these services internationally, we would be required to expend significant time and resources to be able to ensure that we can collect consumer and content data in other countries, and that we do so in compliance with laws in such countries. We cannot guarantee that we would be able to do so in a cost-effective manner, if at all.
We intend to run our operations in compliance with local regulations, such as tax, civil, environmental and other laws in each country where we may have presence or operations. However, there are inherent legal, financial and operational risks involved in conducting international operations, and we cannot be certain that these risks will not prevent us from being able to successfully develop and expand our international operations.
As we increase our international sales and business, we may engage with third-party intermediaries to market our devices and to obtain necessary permits, licenses and other regulatory approvals. In addition, we or our employees, agents, representatives, business partners and third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of our employees, agents, representatives, business partners and third-party intermediaries, even if we do not explicitly authorize such activities. In addition, U.S. public companies are required to maintain records that accurately and fairly represent their transactions and have an adequate system of internal accounting controls. We cannot assure you that our employees, agents,
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representatives, business partners and third-party intermediaries will not take actions in violation of applicable law, for which we may be ultimately held responsible.
Detecting, investigating and resolving actual or alleged violations of anti-corruption laws can require a significant diversion of time, resources and attention from senior management, as well as significant defense costs and other professional service fees. In addition, noncompliance with anti-corruption and anti-bribery laws can subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, enforcement actions, fines, damages, other civil and/or criminal penalties and injunctions against us, our officers or our employees, disgorgement of profits, suspension or debarment from contracting with the U.S. government or other persons, reputational harm, adverse media coverage and other collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal proceeding, our reputation, brand, business, financial condition and results of operations may be harmed.
We are highly dependent on our Chief Executive Officer and senior management team, and we may fail to attract, retain, motivate or integrate highly skilled personnel, which may harm our business, financial condition and results of operations.
Our future success depends in significant part on the continued service of William Wang, our Founder, Chairman and Chief Executive Officer, and our senior management team. Mr. Wang is critical to the strategic direction and overall management of our company as well as our research and development process. Mr. Wang and each member of our management team is an at-will employee. We do not carry key person life insurance on Mr. Wang or any other member of our senior management team. If we lose the services of any member of our senior management team, we may not be able to find a suitable replacement or integrate a replacement in a timely manner or at all, which would seriously harm our business, financial condition and results of operations.
In addition, our continuing growth will, to a large extent, depend on the attention of Mr. Wang to our daily affairs. Our future success also depends, in part, on our ability to continue to attract and retain highly skilled personnel. Competition for these personnel in the Orange County area of California, where our headquarters is located, and in other locations where we maintain offices, is intense, and the industry in which we operate is generally characterized by significant competition for skilled personnel as well as high employee attrition. We may not be successful in attracting, retaining, training or motivating qualified personnel to fulfill our current or future needs. Additionally, the former employers of our new employees may attempt to assert that our new employees or we have breached their legal obligations, which may be time-consuming, distracting to management and may divert our resources. Current and potential personnel also often consider the value of equity awards they receive in connection with their employment, and to the extent the perceived value of our equity awards declines, our ability to attract and retain highly skilled personnel may be negatively impacted. If we fail to attract and integrate new personnel or retain and motivate our current personnel, our business, financial condition and results of operations may be harmed.
The quality of our consumer support is important to our consumers, and if we fail to provide adequate levels of consumer support, we could lose consumers, which would harm our business.
Our consumers depend on our consumer support organization to resolve any issues relating to our devices and SmartCast operating system. A high level of support is critical for the successful marketing and sale of our devices. We currently outsource our consumer support operation to three third-party consumer support providers. We also use artificial intelligence tools to assist these providers in responding to our consumers and to respond to consumers directly. If we do not effectively train, update and manage our third-party consumer support providers to assist our consumers, and if those support providers do not succeed in helping them quickly resolve issues or provide effective ongoing support, including by properly deploying artificial intelligence tools, it could adversely affect our ability to sell our devices to consumers and harm our reputation with potential new consumers.
Our success will depend in part on our continued ability to offer devices utilizing a display technology that has broad market appeal.
Most of our total net revenue is currently derived from the sale of devices utilizing LCD display technology, which is currently the most common flat panel display technology, and OLED display technology. We do not design or manufacture either LCD or OLED display technology. Our ability to adopt or incorporate the latest LCD and OLED display technologies into our Smart TVs depends on continued advancement in the design and manufacture of LCD and OLED display technologies by others. Furthermore, technologies other than LCD and OLED technologies are also currently available or may become available. These new display technologies, which are at various stages of development and production, may gain wider market acceptance than LCD or OLED technology for use in televisions. We currently do not offer Smart TVs using displays incorporating these alternative display technologies. If consumers prefer devices manufactured by our competitors utilizing display technologies that we have not adopted, this may harm our business, financial condition and results of operations.
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We have and may continue to discontinue support for older versions of our devices, resulting in consumer dissatisfaction that could negatively affect our business, financial condition and results of operations.
We have historically maintained, and we believe our consumers may expect, extensive backward compatibility for our older products and the software that supports them, allowing older products to continue to benefit from new software updates. We expect that in the near term, this backward compatibility will no longer be practical or cost-effective, and we may decrease or discontinue service for our older products. Further, certain older products may continue to work but may no longer receive software updates (other than critical patches) and/or we may still continue to offer updates to the user interface and applications available on the platform without providing support for updating all functions of our older products. To the extent we no longer provide extensive backward compatibility for our products, we may damage our relationship with our existing consumers, as well as our reputation, brand loyalty and ability to attract new consumers.
For these reasons, any decision to decrease or discontinue backward compatibility may decrease sales, generate legal claims and may harm our business, financial condition and results of operations.
Changes in how network operators manage data that travel across their networks could harm our business.
Our business relies upon the ability of our consumers to access high-quality streaming content through the internet. As a result, the growth of our business depends on our consumers’ ability to obtain and maintain low-cost, high-speed access to the internet, which relies in part on the network operators’ continuing willingness to upgrade and maintain their equipment as needed to sustain a robust internet infrastructure as well as their continued willingness to preserve the open and interconnected nature of the internet. We exercise no control over network operators, which makes us vulnerable to any errors, interruptions or delays in their operations. Any material disruption or degradation in internet services may harm our business.
To the extent that the number of internet users continues to increase, network congestion could adversely affect the reliability of our OTT services. We may also face increased costs of doing business if network operators engage in discriminatory practices with respect to streamed video content in an effort to monetize access to their networks by data providers. In the past, internet service providers have attempted to implement usage-based pricing, bandwidth caps and traffic “shaping” or throttling. To the extent network operators were to create tiers of internet access service and either charge us or our content providers for access to these tiers or prohibit us or our content providers from having our services available on some or all of these tiers, our quality of service could decline, our operating expenses could increase and our ability to attract and retain consumers could be impaired, each of which may harm our business.
In addition, most network operators that provide consumers with access to the internet also provide these consumers with multichannel video programming. These network operators have an incentive to use their network infrastructure in a manner adverse to the continued growth and success of other companies seeking to distribute similar video programming. To the extent that network operators are able to provide preferential treatment to their own data and content, as opposed to ours, our business may be harmed.
Our financial and operating performance may be adversely affected by epidemics, adverse weather conditions, climate change, natural disasters and other catastrophes, public health crises and political instability.
Our headquarters is located in the Orange County area of California, an area susceptible to earthquakes. A major earthquake or other natural disaster, fire, act of terrorism or other catastrophic event, or the effects of climate change (such as sea level rise, drought, flooding, wildfires and increased storm severity), in California or elsewhere that results in the destruction or disruption of any of our critical business operations or information technology systems could severely affect our ability to conduct normal business operations and, as a result, our future results of operations may be harmed.
Our key manufacturing, supply, assembly and distribution partners have global operations, including in Vietnam, China, Taiwan, Mexico and Thailand as well as the United States. Political instability or crises, civil unrest, the effects of climate change, adverse weather conditions, natural disasters and other catastrophes, epidemics or outbreaks of disease in any of those countries, public health crises, political crises, such as terrorist attacks, war and other political instability, such as the ongoing geopolitical tensions related to conflicts in and around Ukraine, Israel and other areas of the world, resulting sanctions imposed by the United States and other countries, and retaliatory actions in response to such sanctions, may harm our business, financial condition and results of operations. Any prolonged occurrence of these or other events or conditions in any of these locations may interrupt the business operations of our manufacturers as well as the manufacturers of key components, including LCD panels, which may harm our business and results of operations. For instance, health or other government regulations adopted in response to a natural disaster, epidemic, outbreak, or a severe disruption or increase in the pricing of basic food stuffs, may require closure of our manufacturers’ facilities and/or our retailers’ facilities, leading to reduced production, delayed or cancelled orders and decrease in demand for our devices. These regulations also could result in severe travel restrictions and closures that would restrict our ability to ship our devices.
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We may require additional capital, which may not be available on terms acceptable to us, or at all.
Historically, we have funded our operations and capital expenditures primarily through equity issuances and cash generated from our operations. To support our growing business, we must have sufficient capital to continue to make significant investments in our devices and platform. If we raise additional funds through the issuance of equity, equity-linked, or debt securities, those securities may have rights, preferences, or privileges senior to those of our Class A common stock, and our existing stockholders may experience dilution. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities.
Our ability to obtain financing will depend on, among other things, our business plans, operating performance, and the condition of the capital markets at the time we seek financing, including disruptions caused by geopolitical or macroeconomic events. We cannot be certain that additional financing will be available to us on favorable terms, or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly limited, and our business, financial condition and results of operations may be harmed.
Risks Relating to Our Supply Chain, Content Providers and Other Third Parties
A small number of retailers account for a substantial majority of our Device net revenue, and if our relationships with any of these retailers is harmed or terminated, or the level of business with them is significantly reduced, our results of operations may be harmed.
We depend on a small number of retailers for a substantial majority of our Device business and believe that in the future we will continue to generate a substantial majority of our Device net revenue from a small number of retailers. Certain entities purchasing from us are affiliates under common control. While they have historically submitted orders to us through separate purchasing departments, their affiliation enhances the risk of our retailer concentration as, among other things, their purchasing departments could become centralized in the future.
We do not typically enter into binding long-term contracts with our retailers. We generally sell our devices on the basis of purchase orders, and our retailers may cancel or defer orders with little or no notice and without significant or any penalties. Our ability to maintain close and satisfactory relationships with our retailers is important to the ongoing success and profitability of our business. If any of our significant retailers reduces, delays or cancels its orders, or the financial condition of our key retailers deteriorates, our business may be seriously harmed. In addition, our retailers may become competitors. For example, one of our significant retailers, Walmart, sells its own brand of televisions, Onn, and has chosen and may continue to choose to promote their own devices over ours or could ultimately cease selling or promoting our devices entirely. If we were to lose one of our major retailers, or if a major retailer were to significantly reduce its volume of business with us or provide more or better shelf space to devices of our competitors, our Device net revenue and Device gross profit could be materially reduced, which could have a significant adverse impact on our business, financial condition and results of operations.
If we do not effectively maintain and further develop our Device sales channels, including developing and supporting our retail sales channels, or if any of our retailers experience financial difficulties or fails to promote our devices, our business may be harmed.
We depend upon effective sales channels to reach the consumers who are the ultimate purchasers of our devices. We primarily sell our devices directly through a mix of retail channels, including big box retailers, wholesale clubs, online marketplaces and, to a much smaller extent, independent regional retailers. We depend on these retailers to provide adequate and attractive space for our devices in their stores, which will become more challenging to the extent average television sizes increase. Many of our retailers limit the shelf space they provide to any single brand, which makes future market share gains by us more difficult. We further depend on our retailers to employ, educate and motivate their sales personnel to effectively sell our media entertainment devices, and in online channels, we must ensure we and our retailers have adequate resources to educate and attract consumers to our devices. If our retailers do not adequately display our devices, choose to promote competitors’ devices over ours (including through more prominent or higher-impact store displays or through in-store recommendations to consumers from their sales personnel), or do not effectively explain to consumers the advantages of our devices, our revenue could decrease and our business may be harmed. Similarly, our Device business could be adversely affected if any of our large retailers were to experience financial difficulties, or change the focus of their businesses in a way that de-emphasized the sale of our devices. We continue to invest in our sales channels with in-store device displays, online campaigns and retail-associate training, and there can be no assurance that this investment will lead to increased sales.
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We depend on a limited number of manufacturers and suppliers for our devices and their components. If we experience any delay or disruption, or quality control problems with our manufacturers in their operations or availability or price fluctuations of key components from suppliers, we may be unable to keep up with retailer and consumer demand for our devices, we could lose market share and revenue and our reputation, brand and business would be harmed.
We do not have internal manufacturing or testing facilities or capabilities, and all of our devices are manufactured, assembled, tested and packaged by third-party manufacturers, who are original design manufacturers (“ODMs”). Our manufacturers are, in turn, responsible for procuring or manufacturing the components used in the manufacturing of our devices from a limited number of suppliers.
Our reliance on our manufacturers, and indirectly, on their limited number of suppliers, involves a number of risks, including risks related to the following:
•our manufacturers and their suppliers may encounter financial or other business difficulties, change their strategic objectives, or perceive us to no longer be an attractive retailer;
•we have no long-term contracts with our manufacturers and as a result, our manufacturers could cease to provide devices to us with little or no notice;
•our manufacturers, or their suppliers, may experience disruptions in their manufacturing operations due to equipment breakdowns, cybersecurity attacks or security breaches or incidents, labor disputes or shortages, component or material shortages, cost increases or other similar problems;
•production capacity constraints;
•increases in manufacturing costs and lead times;
•untimely delivery and failures to meet production deadlines;
•errors in complying with device specifications;
•device and component quality and reliability issues;
•vessel delays and port congestion, which disrupt shipping operations;
•failure of a key manufacturer, or a key supplier to a manufacturer, to remain in business and adjust to market conditions;
•failure of our manufacturers and their suppliers to obtain timely domestic or foreign regulatory approvals or certificates for our devices;
•increases in pricing as a result of increases in tariffs and customs duties;
•our ODMs could become our competitors by selling directly to retailers, including our retailers, and discontinuing manufacturing or supplying us with their devices;
•our inability to pass price declines in the sales of our devices or price protection rebates we provide to our retailers through to our manufacturers;
•failure of manufacturers to honor indemnities in their agreements with us;
•disagreements or disputes between us and our manufacturers relating to our supply agreements or otherwise;
•delays in, or the inability to execute on, a supplier roadmap for components and technologies;
•geopolitical uncertainty and instability, such as the ongoing geopolitical tensions related to conflicts in and around Ukraine, Israel and other areas of the world, or potential conflicts in the region surrounding the Taiwan Strait, may lead to changes in U.S. or foreign trade policies and general economic conditions that impact our business; and
•natural disasters, fires, pandemics, climate change, acts of terrorism or other catastrophic events which disrupt manufacturing operations or shipping routes.
We rely on our manufacturers to procure components of our devices, particularly LCD panels and chipsets. There are a limited number of suppliers of LCD panels and chipsets, and we do not expect the number of suppliers to meaningfully increase. In addition, some of our manufacturers’ suppliers are affiliates of certain of our competitors, which creates the risk that these suppliers may favor their affiliated companies over us or our manufacturers in allocating or pricing supplies, or may refuse to supply to our manufacturers at acceptable prices, or at all, components for use in our devices. We run the risk that these or other suppliers may choose to withhold LCD panels from our manufacturers, and they may not cooperate with us (or our manufacturers), for competitive reasons in the future.
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If component shortages or delays continue to occur, the price of certain components may increase, and we may be exposed to quality issues or the components may not be available at all. As a result, we could lose time-sensitive sales, incur additional freight costs or be unable to pass on price increases to our retailers. If we, or our manufacturers, cannot adequately address supply issues, we might have to re-design some devices, which could result in further costs and delays.
In addition, if we experience a significant increase in demand for our devices, our manufacturers might not have the capacity to, or might elect not to, meet our needs as they allocate production capacity to their other retailers. Identifying a suitable manufacturer is an involved process that requires us to become satisfied with the manufacturer’s quality control, responsiveness and service, financial stability and labor and other ethical practices, and if we seek to source materials from new manufacturers there can be no assurance that we could do so in a manner that does not disrupt the manufacture and sale of our devices.
If we fail to manage our relationship with our manufacturers effectively, or if they experience operational difficulties, our ability to ship devices to our retailers could be impaired and our reputation, brand, business, financial condition and results of operations may be harmed.
If we are unable to accurately predict our future retailer demand and provide our manufacturers with an accurate forecast of our device requirements, we may experience delays in the manufacturing of the devices we sell and the costs of our devices may increase, which may harm our results of operations.
To ensure adequate inventory supply and meet the demands of our retailers, we must forecast inventory needs and place orders with our manufacturers based on our estimates of future demand for particular devices. Our ability to accurately forecast demand for our devices could be affected by a multitude of factors, including the timing of device introductions by competitors, unanticipated changes in general market demand, macroeconomic conditions or consumer confidence. We provide our manufacturers with a rolling forecast of demand, which they use to determine material and component requirements. Lead times for ordering materials and components, especially key components such as LCD panels, vary significantly and depend on various factors, such as the specific component manufacturer, contract terms and demand and supply for a component at any given time. We rely on our manufacturers and their suppliers to manage these lead times. If our forecasts are less than our actual requirements, our manufacturers and their suppliers may be unable to manufacture our devices or their components in sufficient quantity or in a timely manner, and we may be unable to meet retailer demand for our devices, or may be required to incur higher costs to secure the necessary production capacity and components. We experienced each of these effects in 2020 and 2021, due to an unexpected increase in consumer demand due to the COVID-19 pandemic. We could also overestimate future sales of our devices and risk causing our manufacturers to carry excess device and component inventory, which could result in our providing increased price protection or other sales incentives, which may harm our Device net revenue and Device gross profit. The cost of the components used in our devices also tends to drop rapidly as volumes increase and technologies mature. Therefore, if our manufacturers or their suppliers are unable to promptly use the components purchased in anticipation of our forecasts, the cost of the devices we sell may be higher than our competitors due to an over-supply of higher priced components.
Furthermore, a failure to deliver sufficient quantities of devices to meet the demands of our retailers may cause us to lose retailers. At certain times in the past, including in 2021, we have been unable to supply the number of Smart TVs demanded by certain of our retailers. If this were to occur more frequently, our relationship with these retailers may be materially affected, and they may decide to seek other sources of supply or cease doing business with us altogether.
We rely upon third parties for technology that is critical to our devices and services, and if we are unable to continue to use this technology and future technology, our ability to sell competitive and technologically advanced devices would be limited.
We do not develop certain of the technologies incorporated into and necessary for the operation and functionality of our devices. We rely on non-exclusive license rights from third parties for these technologies. We also license technology on a non-exclusive basis that is necessary to comply with various data compression, broadcast and wireless standards. Because the intellectual property we license is available to our competitors from third parties, barriers to entry for our competitors are lower than if we owned exclusive rights to the technology we license and use or if we had separately developed patented technology. In some cases, the owners of the intellectual property that we license routinely license the same or similar intellectual property to our competitors, such as Dolby, and AVC/H.264 patents licensed through Via Licensing Alliance. If a competitor enters into an exclusive arrangement with any of our third-party technology providers, or we are unable to continue to license or replace technologies we use following the expiration or termination of a license, our ability to develop and sell devices or services containing that technology could be severely limited. Our ability to continue licensing technology from a licensor after the expiration or termination of a license could also become more limited in the future for a variety of reasons, such as the licensor being acquired by one of our competitors. Even if such licenses are available, we may be required to pay the licensor substantial royalties based on sales of our devices. Our success will also depend in part on our continued ability to access these technologies on commercially reasonable terms. Upon expiration of these agreements, we are required to re-negotiate and renew them in order to continue to access these technologies. We have in the past been, and may in the future be, unable to reach a satisfactory agreement before our existing license agreements have expired. In some instances, we may be required by
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third parties to maintain licenses to certain third-party technologies, and failure to do so may cause us to lose business relationships or revenue. If we are unable to enter into or renew the necessary licenses on acceptable terms or at all, if any necessary licenses are subsequently terminated, our business, financial condition and results of operations may be harmed. Defense of any lawsuit or failure to obtain any of these licenses on favorable terms could prevent us from commercializing our devices, which may harm our business, financial condition and results of operations.
We rely primarily on third parties for the research and development behind the technologies underlying our devices.
We rely primarily on third-parties for the research and development of the technologies underlying our devices. The success of our devices is dependent on the research and development performed by these third parties. If our relationships with our third-party manufacturers and licensors is harmed or ends, we may need to incur additional research and development costs in order to remain competitive with our devices. In addition, our research and development providers may experience delays that are out of our control, and we cannot control the amount or type of research and development done by our third-party providers. If they choose to invest less in research and development, or to invest in less relevant areas so that they fail to keep pace with the technological changes in our industries, our devices could be less competitive, and our business, financial condition and results of operations may be harmed.
Limited availability of raw materials, components and manufacturing equipment for our devices, or increases in the cost of these items, may harm our Device business, financial condition and results of operations.
We depend on our manufacturers obtaining adequate supplies of quality raw materials and components on a timely basis, and we have no long-term agreements with our manufacturers with fixed prices or quantities. As a result, it is important for them to control raw material and component costs and reduce the effects of fluctuations in price and availability. We do not have ultimate control over how or from whom our manufacturers, or their suppliers, source the raw materials or key components, such as glass substrates, liquid crystal material, driver integrated circuits, polarizers and color filters, used in our devices and key components. Our manufacturers, or their suppliers, may establish a working relationship with a single materials supplier if they believe it is advantageous to do so due to performance, quality, support, delivery, capacity, price or other considerations. Our manufacturers and their suppliers have experienced and may in the future experience a shortage of, or a delay in receiving, certain components as a result of strong demand; capacity constraints, including constraints due to, financial weakness of the manufacturer or their suppliers; inability of manufacturers or their suppliers to borrow funds in the credit markets; disputes with other manufacturers or suppliers (some of whom are also competitors) or disruptions in the operations of component suppliers; or problems faced during the transition to a new component supplier. These effects have been, and may continue to be exacerbated by certain macroeconomic conditions, including the conflicts in and around Ukraine, Israel and other areas of the world, inflationary pressure, rising interest rates, labor shortages and lingering supply chain issues. Our results of operations would be adversely affected if our manufacturers, or their suppliers, were unable to obtain adequate supplies of high-quality raw materials or components in a timely manner or make alternative arrangements for such supplies in a timely manner.
Furthermore, we may be limited in our ability to pass on increases in the cost of raw materials and components to our retailers. Our contracts with our retailers provide that price and quantity terms are contained in purchase orders, which are generally agreed upon two weeks in advance of delivery. Except under certain special circumstances, the price terms in the purchase orders are not subject to change. If we become subject to any significant increase in the price our manufacturers charge us due to increases in the price of raw materials or components that were not anticipated, we may be unable to pass on such cost increases to our retailers, particularly when we offer price protection, where we offer rebates to our retailers so that they can decrease the retail price of devices during the devices’ life cycles to move such devices off their shelves.
In addition, certain manufacturing equipment used by our manufacturers, and their suppliers, is only available from a limited number of vendors. From time to time, increased demand for such equipment may cause lead times to extend beyond those normally required. The unavailability of such equipment could hinder the manufacturing capacity of our manufacturers, which could in turn impair our ability to meet our retailer orders. This could result in a loss of revenue, and our business, financial condition and results of operations may be harmed.
We do not control our manufacturers and actions that they might take could harm our reputation, brand and sales.
While we require our suppliers to comply with a code of conduct, we do not control their labor, environmental or other practices. A violation of labor, environmental or other laws by our manufacturers or their suppliers, or a failure of these parties to comply with our code of conduct or to follow ethical business practices, could lead to negative publicity and harm our reputation and brand. In addition, we may choose to seek alternative manufacturers if these violations or failures were to occur. Identifying and qualifying new manufacturers can be time consuming and we might not be able to substitute suitable alternatives in a timely manner or at an acceptable cost. In the past, other consumer device companies have faced significant criticism for the actions of their manufacturers and suppliers, and we could face such criticism ourselves. Any of these events could adversely affect our brand, harm our reputation, reduce demand for our devices and harm our ability to meet demand if we need to identify alternative manufacturers.
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We are dependent on logistics services provided by our third-party logistics providers, and failure to properly manage these relationships, or the failure of our logistics providers to perform as expected, may harm our results of operations.
We currently rely primarily on only one third-party logistics provider for our warehousing needs and one for our transportation needs that are not already handled by our manufacturers. We have no assurance that business interruptions will not occur as a result of the failure by these providers to perform as expected or that either of these logistics providers will meet the needs of our Device business. Further, if we are unable to properly manage our relationships with our logistics providers, including by accurately forecasting our requirements, our net revenue, results of operations and gross profit may be harmed. We cannot ensure that our logistics providers will continue to perform services to our satisfaction, in a manner satisfactory to our retailers, manufacturers and their suppliers, or on commercially reasonable terms. Our manufacturers could become dissatisfied with our logistics providers or their cost levels and refuse to utilize either of these logistics providers. Our retailers could become dissatisfied and cancel their orders, impose charges on us or decline to make future purchases from us if a logistics provider fails to deliver devices on a timely basis and in compliance with retailers’ shipping and packaging requirements, thereby increasing our costs and/or potentially causing our reputation and brand to suffer. If one of our logistics providers is not able to provide the agreed services at the level of quality we require or becomes unable to handle our existing or higher volumes, we may not be able to replace such logistics provider on short notice, which may harm our business.
Our logistics providers may also fail to perform as expected for reasons outside their control. For example, the conflicts in and around Ukraine (which has caused rising fuel prices, inflation and foreign currency fluctuations) Israel and other areas of the world, geopolitical events in Asia and economic uncertainty are cause for continued concern regarding global supply chain and logistics challenges and cost increases. If such conditions impact our suppliers, contract manufacturers, logistics providers and distributors, they could lead to increases in cost of materials, higher shipping and transportation rates, which could lead to new and persisting inventory shortages. Such failure by our logistics providers to perform as expected could harm our reputation, business, financial condition and results of operations.
In addition, because we currently rely on a limited number of third-party logistics providers for our warehousing and transportation needs, if we encounter problems with any of these logistics providers, we may not be able to quickly shift to a new provider of these services, or shift the allocation of services between our existing providers, and our ability to meet retailer expectations, manage inventory, complete sales and achieve objectives for operating efficiencies may be harmed.
Most of our agreements with content providers are not long-term and can be terminated by the content providers under certain circumstances. Any disruption in the renewal of such agreements may result in the removal of certain content from our streaming platform and may harm our SmartCast Active Account growth and engagement.
We enter into agreements with all our content providers, which have varying terms and conditions, including expiration dates. Our agreements with content providers generally have terms of one to three years and can be terminated before the end of the term by the content provider under certain circumstances, such as if we materially breach the agreement, or occasionally without cause. Upon expiration of these agreements, we are required to re-negotiate and renew them in order to continue providing content from these content providers on our streaming platform. We have in the past been unable and in the future may not be able to reach a satisfactory agreement before our existing agreements have expired. If we are unable to renew such agreements on a timely basis on mutually agreeable terms, we may be required to temporarily or permanently remove certain content from our streaming platform. The loss of any content from our streaming platform for any period of time may harm our business. More broadly, if we fail to maintain our relationships with the content providers on terms favorable to us, or at all, if these content providers face problems in delivering their content across our platform, or if these content providers do not prioritize development applications for our platforms, then we may lose advertisers or consumers and our business may be harmed.
A small number of content providers represent a disproportionate amount of content consumed on our Smart TVs, and if we fail to monetize these relationships, directly or indirectly, our business, financial condition and results of operations may be harmed.
Historically, a small number of content providers have accounted for a significant portion of the content streamed across our connected entertainment platform, and the terms and conditions of our relationships with content providers vary. Additionally, we have observed consolidation among content providers, which, if it continues in the future, may result in even fewer providers responsible for a significant amount of content streamed. If we fail to maintain our relationships with the content providers that account for a significant amount of the content streamed by our consumers or if these content providers face problems in delivering their content across our platform, our ability to attract and retain consumers would be harmed.
Additionally, some of our agreements with third party content providers, including Netflix and Disney+, restrict us from using viewing data from consumers engaging with that third party’s content. Accordingly, our contractual arrangements with third party content providers may limit our ability to monetize our relationships with them, and as a result, our business, financial condition and results of operations may be harmed.
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The success of Platform+ depends in part on developing and maintaining relationships and technology integrations with a variety of third parties.
The success of Platform+ depends in part on developing and maintaining relationships and technology integrations with brand advertisers, advertising and media agencies, broadcast, cable and local television networks, digital publishers and streaming companies, data analytics firms and advertising technology firms. The television and digital advertising industries continue to evolve and we cannot ensure that we will be able to maintain and expand our existing relationships as well as develop relationships with additional constituents as they emerge. We also depend in part on marketing technology companies to collect and make data useful to advertisers. If these marketing technology companies fail to properly and securely collect user data from our devices, or if we fail to maintain and expand our relationships with these marketing technology companies, our business may be harmed.
Additionally, television content providers, digital publishers and marketing technology companies may begin to develop products supplementing their current product offerings to compete with our Platform+ offerings. For example, certain cable operators are vertically integrated with content providers and may choose to invest in alternate platforms. If we cannot maintain or expand our relationships with these constituents, our business, financial condition and results of operations may be harmed.
Risks Relating to Legal and Regulatory Matters
We are subject to a variety of federal, state and foreign laws and regulatory regimes. Failure to comply with governmental laws and regulations could subject us to, among other things, mandatory device recalls, penalties and legal expenses that may harm our business.
Our business is subject to regulation by various federal and state governmental agencies. Such regulation includes the radio frequency emission regulatory activities and disabled accessibility regulatory activities of the Federal Communications Commission, the anti-trust regulatory activities of the Federal Trade Commission and Department of Justice, the consumer protection laws of the Federal Trade Commission, the import/export regulatory activities of the Department of Commerce, the product safety regulatory activities of the Consumer Products Safety Commission, the regulatory activities of the Occupational Safety and Health Administration and the International Trade Commission, the environmental regulatory activities of the Environmental Protection Agency, the labor regulatory activities of the Equal Employment Opportunity Commission, laws related to privacy, data protection and security, and tax and other regulations by a variety of regulatory authorities in each of the areas in which we conduct business. We are also subject to regulation in other countries where we conduct business. In certain jurisdictions, such regulatory requirements may be more stringent than in the United States. In addition, we are subject to a variety of federal and state employment and labor laws and regulations, including the Americans with Disabilities Act, the Federal Fair Labor Standards Act, the WARN Act and other regulations related to working conditions, wage-hour pay, over-time pay, employee benefits, anti-discrimination, and termination of employment. Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, mandatory device recalls, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties, or injunctions.
We are subject to governmental export and import controls and economic sanctions laws that could subject us to liability and impair our ability to compete in international markets if we or our partners violate these laws or the laws are amended to restrict our ability to do business internationally. The United States and various foreign governments have imposed controls, license requirements and restrictions on the import or export of some technologies, including devices and services. Our devices are subject to U.S. export controls, including the Commerce Department’s Export Administration Regulations and our business activities are subject to various economic and trade sanctions regulations established by the Treasury Department’s Office of Foreign Assets Controls. These laws and regulations have in the past impacted, and we expect in the future will impact, our business, and any future changes in laws, regulations, policies or trade relations could harm our business. Exports and other transfers of our devices, technologies and services must be made in compliance with these laws. Furthermore, U.S. export control laws and economic sanctions prohibit the provision of devices and services to countries, governments and persons subject to U.S. sanctions. Even though we attempt to ensure that we, our retailers and partners comply with the applicable export, sanctions and import laws, including preventing our devices from being provided to sanctioned persons or sanctioned countries, we cannot guarantee full compliance by all. Actions of our retailers and partners are not within our complete control, and our devices could be re-exported to those sanctioned persons or countries, or provided by our retailers to third persons in contravention of our requirements or instructions or the laws. Any such potential violation could have negative consequences, including government investigations and/or penalties, and our reputation, brand and revenue may be harmed.
Further, any government enforcement action may harm our business, financial condition and results of operations. If we are subject to any sanctions, penalties or restrictions by governmental agencies, or if we do not prevail in any possible governmental civil or criminal litigation matter in the future, our business, financial condition and results of operations may be harmed. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional service fees, and our reputation and brand may be harmed.
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We and our third-party service providers collect, store, use, disclose and otherwise process information collected from or about consumers of our devices. The collection and use of personal information subjects us to legislative and regulatory burdens, and contractual obligations, and may expose us to liability.
We collect, store, use, disclose and otherwise process personal information (including data that can be used to identify or contact a person) and other data supplied by consumers when, for example, consumers register our devices for warranty purposes, as well as personal information of our employees and third parties, and share this data with certain third parties. We also disclose viewing data to third parties when consumers opt-in to the collection, use and disclosure of viewing data. A wide variety of local, state, national and international laws and regulations, and industry standards and contractual obligations, apply to the collection, use, retention, protection, security, sharing, disclosure, transfer and other processing of personal information and data collected from or about individuals, including consumers and devices, and the regulatory frameworks and industry standards for privacy and security issues are evolving worldwide. In many cases, these laws and regulations apply not only to third-party transactions, but also to transfers of information between or among us, our subsidiaries and other parties with which we have commercial relationships.
For example, the European Union (“EU”) General Data Protection Regulation (“GDPR”) imposes stringent operational requirements for entities processing personal information and significant penalties for non-compliance. In particular, under the GDPR, fines of up to 20 million euros or up to 4% of the annual global revenue of the noncompliant company, whichever is greater, could be imposed for violations of certain of the GDPR’s requirements. Such penalties are in addition to any civil litigation claims by data subjects. Numerous legislative proposals also have been introduced to the U.S. Congress, various state legislative bodies and foreign governments concerning content regulation and data privacy and protection that could affect us. We expect that there will continue to be new proposed and adopted laws, regulations and industry standards concerning privacy, data protection and security in the United States and other jurisdictions in which we operate.
In the United States, we are subject to the supervisory and enforcement authority of the Federal Trade Commission with regard to the collection, use, sharing, and disclosure of certain data collected from or about consumers or their devices. Additionally, many states in which we operate have laws that protect the privacy and security of personal information. Certain state laws may be more stringent, broader in scope, or offer greater individual rights, with respect to personal information than federal, international or other state laws, and such laws may differ from each other, which may complicate compliance efforts. For example, California adopted the California Consumer Privacy Act (“CCPA”), which introduced new data privacy rights for California residents and new operational requirements for covered companies. The CCPA provides that covered companies must provide disclosures to California residents and afford such residents data privacy rights that include the right to request a copy from a covered company of the personal information collected about them, the right to request deletion of such personal information, and the right to request to opt-out of certain sales of such personal information. The CCPA became operative in January 2020, and its implementing regulations took effect in August 2020. The CCPA provides for a private right of action for certain data breaches that has increased data breach litigation. Further, the California Privacy Rights Act (“CPRA”), went into effect on January 1, 2023. The CPRA significantly modifies the CCPA, including by imposing additional obligations on covered companies and expanding residents’ rights, including with respect to certain sensitive personal information, and places limitations on data uses, creates new audit requirements for significant risk processing activities, and provides residents opt outs for certain disclosures of personal information. The CPRA also creates a new state agency with authority to implement and enforce the CCPA and the CPRA, including seeking an injunction and civil penalties for violations. Aspects of the CCPA, the CPRA, and other laws and regulations relating to data protection, privacy, and information security, as well as their enforcement, remain unclear, and we have been, and may in the future be, required to modify our practices in an effort to comply with them. The CCPA marked the beginning of a trend toward more stringent privacy legislation in the United States and prompted a number of new state privacy legislation to be considered and enacted, many of which have similarities to the CCPA and CPRA. For example, Connecticut, Virginia, and Colorado have enacted legislation similar to the CCPA and CPRA that has taken effect in 2023; Utah has enacted such legislation that will take effect on December 31, 2023; Florida, Montana, Oregon, and Texas have enacted similar legislation that takes effect in 2024; Tennessee and Iowa have enacted similar legislation that will take effect in 2025; and Indiana has enacted similar legislation that will take effect in 2026. In addition, Delaware has passed legislation that is awaiting signature by its state governor and that would go into effect in 2025. These comprehensive privacy statutes that share similarities with the CCPA, CPRA, and legislation now in other states, including by introducing new data privacy rights for residents and new operational requirements for covered companies. The U.S. federal government also is contemplating federal privacy legislation. New and evolving state privacy laws have required and will require us to incur additional costs and expenses in an effort to comply with them. These new state privacy laws, and any other state or federal legislation that is passed, could increase our potential liability, add layers of complexity to compliance in the U.S. market, increase our compliance costs and adversely affect our business. In addition, all 50 states have laws including obligations to provide notification of security breaches of computer databases that contain personal information to affected individuals, state officers and others.
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While we strive to publish and prominently display privacy policies that are accurate, comprehensive, compliant with applicable laws, orders and settlements, regulations and industry standards, and fully implemented, we cannot assure you that our privacy policies and other statements regarding our practices will be sufficient to protect us from claims, proceedings, liability or adverse publicity relating to the privacy and security of information about consumers or their devices. Although we endeavor to comply with our privacy policies, we may at times fail to do so or be alleged to have failed to do so. The publication of our privacy policies and other documentation that provide promises and assurances about privacy and security can subject us to potential state and federal action if they are found to be deceptive, unfair, or misrepresentative of our actual practices, which may harm our business, financial condition and results of operations. Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to consumers or other third parties, including retailers, advertisers, service providers or developers, or any other legal or regulatory obligations, standards, orders or contractual or other obligations relating to privacy, data protection, data security, or consumer protection, or any compromise of security that results in unauthorized access to, or unauthorized loss, destruction, use, modification, acquisition, disclosure, release or transfer of personal information or other consumer data, has in the past resulted, and in the future may result, in the expenditure of substantial costs, time and other resources, proceedings or actions against us, legal liability, governmental investigations, enforcement actions and other proceedings, and claims, fines, judgments, awards, penalties and costly litigation (including class actions). Such proceedings or actions could hurt our reputation, force us to spend significant amounts in defense of and responses to such actions and proceedings, distract our management and technical personnel, increase our costs of doing business, adversely affect the demand for our devices, and ultimately result in the imposition of liability. Furthermore, any public statements against us by consumer advocacy groups or others, could cause our consumers to lose trust in us and otherwise harm our reputation, brand and market position, which may harm our business, financial condition and results of operations.
We use information collected from or about consumers of our devices, and from the devices themselves, for analysis and licensing purposes, including to inform advertising or analyze viewing behaviors. If laws or government regulations relating to digital advertising, the use of location or behavioral data, or collection and use of internet user data and unique identifiers change, we may need to alter our business, or our business may be harmed.
Our business currently relies in part upon users opting-in to allow their Smart TV to detect viewing data. We license certain of this viewing data to authorized data partners, including analytics companies, media companies and advertisers. We may use viewing data for a number of purposes, including to provide, maintain, monitor and analyze usage, to improve services, to personalize our services and to deliver recommendations, advertisements, content and features that match viewer interests. Our data partners may use viewing data for summary analytics and reports, audience measurement, and to deliver tailored advertisements. Data about content viewed on a device is sometimes enhanced with household demographic data and data about digital actions (e.g., digital purchases and other consumer behavior taken by the Smart TV or other devices associated with the IP address we collect). This data also enables authorized data partners to deliver interest-based advertising both on the Smart TV and other devices, for example, devices sharing the same IP address.
U.S. federal and state governments, and foreign governments, have enacted or are considering legislation related to digital advertising, consumer privacy, and the collection, use, disclosure and other processing of data relating to individuals, including the GDPR, the CCPA, and other comprehensive U.S. state privacy statutes, and regulators, including the U.S. Federal Trade Commission and many state Attorneys General, are interpreting consumer protection laws as imposing standards relating to these topics. We also expect to see an increase in legislation and regulation related to digital advertising, the use of location or behavioral data, the collection and use of internet user data and unique device identifiers, such as IP address, and other privacy and data protection legislation and regulation. Such laws and regulations could affect our costs of doing business, and may adversely affect the demand for, or effectiveness and value of, our Inscape data services and our other devices and services. It is also possible that existing laws and regulations may be interpreted in new ways that would affect our business, including with respect to definitions of “personal data” or similar concepts, or the classification of IP addresses, machine, device or other persistent identifiers, location data, behavioral data and other similar information. Such laws and regulations may be inconsistent between countries and jurisdictions or conflict with other laws, regulations or other obligations to which we are or may become subject. Such new laws and regulations, or new interpretations of laws and regulations, may hamper our ability to expand our offerings into the EU or other jurisdictions outside of the United States, may prove inconsistent with our current or future business practices or the functionality of our Smart TVs, Inscape data services or other devices or services, and may diminish the volume or quality of our data by restricting our information collection methods or decreasing the amount and utility of the information that we would be permitted to collect, share and license.
The costs of compliance with, and the other burdens imposed by, these and other laws, regulations, standards, practices, contractual obligations or other obligations may be costly and onerous, which in turn may prevent us from offering or selling our devices or existing or planned features, products, or services, or may increase the costs of doing so, and may affect our ability to invest in or jointly develop devices or services. Such new laws and regulations, or new interpretations of laws and regulations, also may cause us to find it necessary or appropriate to change our business practices. We may be unable to change
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our business practices in a timely or cost-effective manner or at all, and doing so may harm our financial performance. Some of our competitors may have more access to lobbyists or governmental officials and may use such access to effect statutory or regulatory changes in a manner to commercially harm us while favoring their solutions. In addition, a determination by a court or government agency that any of our practices, or those of our agents, do not meet applicable standards could result in liability, or negative publicity, and may harm our business, financial condition and results of operations.
Our consumers may also object to or opt-out of the collection and use of data about the content viewed on a VIZIO device, which may harm our business. Other businesses have been criticized by privacy groups and governmental bodies for attempts to link personal identities and other information to data collected on the internet regarding users’ browsing and other habits. We are aware of several lawsuits filed against companies in the electronics or digital advertising industries alleging various violations of consumer protection and computer crime laws, asserting privacy-related theories, and regulatory authorities in the United States and other jurisdictions have pursued investigations of and enforcement actions against companies relating to their use and other processing of data relating to individuals. Any such claims, proceedings or investigations brought against us could hurt our reputation, brand and market position, force us to spend significant amounts to defend ourselves and otherwise respond to the action or other proceeding, distract our management and technical personnel, increase our costs of doing business, lower demand for our services and ultimately result in the imposition of monetary liability or restrict our ability to conduct our Inscape data services.
We have been subject to regulatory proceedings and orders related to the collection, use, and sharing of information from or about consumers and their devices, and continued compliance with regulators and regulatory orders will require additional costs and expenses.
In February 2017, we stipulated to the entry of a judgment in federal district court with, and paid certain penalties to, the Federal Trade Commission, the New Jersey Attorney General, and Director of the New Jersey Division of Consumer Affairs to settle alleged violations of Section 5 of the Federal Trade Commission Act and New Jersey Consumer Fraud Act (the “Order”). The Order requires us to provide additional notices (separate and apart from our privacy policies) to consumers when our devices are collecting viewing data under the Order. VIZIO devices connected to the internet may only collect viewing data from devices whose users have expressly consented to this practice, after receiving notice of the collection, use and sharing of viewing data, and we must provide instructions on how consumers may revoke such consent for our devices.
The Order also required us to delete certain viewing data we collected, prohibits us from misrepresenting our practices with respect to the privacy, security or confidentiality of consumer information we collect, use or maintain and requires us to maintain a privacy program with biennial assessments of that program and maintain certain records regarding our collection and use of consumer information. The obligations under the Order remain in effect until 2037. Violation of existing or future regulatory orders, settlements or consent decrees could subject us to substantial monetary fines and other penalties that could negatively affect our business, financial condition and results of operations.
While we have incurred, and will continue to incur, expenses to maintain privacy and security standards and protocols imposed by the Order, as well as applicable laws, regulations, judgments, settlements, industry standards and contractual obligations, increased regulation of data collection, use and security practices, including self-regulation and industry standards, changes in existing laws, enactment of new laws, increased enforcement activity, and changes in interpretation of laws, could increase our costs of compliance and operations, limit our ability to grow our business or otherwise harm our business.
Our actual or perceived failure to adequately protect information from or about consumers of our devices could harm our reputation, brand and business.
California law requires manufacturers that sell or offer to sell connected devices in California to equip each device with reasonable security features that are appropriate to the nature of the device, appropriate to the information it may collect, contain or transmit, and designed to protect the device and information on the device from unauthorized access, destruction, use, modification or disclosure. In addition, we are subject to other laws and regulations that obligate us to employ reasonable security measures.
We also are subject to certain contractual obligations to indemnify and hold harmless third parties, including advertisers, digital publishers, marketing technology companies and other users or buyers of our data from and against the costs or consequences of our noncompliance with laws, regulations, self-regulatory requirements or other legal obligations relating to privacy, data protection or data security, or inadvertent or unauthorized use or disclosure of these third parties’ data that we process in connection with providing our devices.
We have implemented security measures in an effort to comply with applicable laws, regulations and other obligations, but given the evolving nature of security threats and evolving safeguards and the lack of prescriptive measures in many applicable laws, regulations, and other obligations, we cannot be sure that our chosen safeguards will protect against security threats to our business, including the personal information that we process, or that a regulator or other third party may not consider our security measures to be appropriate, reasonable and/or in accordance with applicable legal requirements. Even security
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measures that are appropriate, reasonable and/or in accordance with applicable legal requirements may not be able to fully protect our information technology systems and the data contained in those systems, or our data that is contained in third parties’ systems. Moreover, certain data protection laws impose on us responsibility for our employees and third parties that assist with aspects of our data processing. Our employees’ or third parties’ intentional, unintentional or inadvertent actions may increase our vulnerability or expose us to security threats, such as phishing or spearphishing attacks or the introduction of ransomware or malware, and we may remain responsible for access to, loss or alteration of, or unauthorized disclosure or other processing of our data despite our security measures. Any actual or perceived failure to adequately protect information may subject us to legal, regulatory and contractual actions and may harm our reputation, brand, business, financial condition and results of operations.
From time to time, we have been and may be subject to legal proceedings, regulatory disputes, and governmental inquiries that could cause us to incur significant expenses, divert our management’s attention, and may harm our business, financial condition and results of operations.
From time to time, we have been and may be subject to claims, lawsuits, government investigations and other proceedings involving products liability, competition and antitrust, intellectual property, privacy, consumer protection, securities, tax, labor and employment, environmental, commercial disputes and other matters that may harm our business, financial condition and results of operations. As we have grown, we have seen a rise in the number and significance of these disputes and inquiries. Litigation and regulatory proceedings may be protracted and expensive, and the results are difficult to predict. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages and include claims for injunctive relief. Additionally, our litigation costs could be significant. Adverse outcomes with respect to litigation or any of these legal proceedings may result in significant settlement costs or judgments, penalties and fines, or require us to modify our products or services, make content unavailable, or require us to stop offering certain features, all of which may harm our business, financial condition and results of operations.
The results of litigation, investigations, claims, and regulatory proceedings cannot be predicted with certainty, and determining reserves for pending litigation and other legal and regulatory matters requires significant judgment. There can be no assurance that our expectations will prove correct, and even if these matters are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, may harm our business, financial condition and results of operations.
Regulations related to conflict minerals or other social and environmental issues may cause us to incur additional expenses and could limit the supply and increase the costs of certain metals used in the manufacturing of our devices.
As a public company, we are subject to the requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) that require us to diligence, disclose and report whether or not our devices contain conflict minerals and we are also a member of the Responsible Business Alliance (“RBA”). We work to monitor our supply chain in compliance with both Dodd-Frank Act and RBA Code of Conduct, and our compliance to these requirements could adversely affect the sourcing, availability and pricing of the materials used in the manufacture of components used in our devices. In addition, we incur additional costs to comply with the disclosure requirements and RBA Code of Conduct, including costs related to conducting diligence procedures to determine the sources of conflict minerals that may be used or necessary to the production of our devices and the labor and environmental practices of our suppliers, and, if applicable, potential changes to devices, processes or sources of supply as a consequence of such verification activities. We also rely on information provided by third parties to ensure compliance with these rules and standards, which may not be accurate, and it is possible that we may face reputational harm if we determine that certain of our devices were sourced or manufactured in a way that do not meet these standards.
Compliance or the failure to comply with current and future environmental, device stewardship and producer responsibility laws or regulations could result in significant expense to us.
As a seller of consumer electronic devices, we are subject to a variety of national, state, local and foreign environmental, device stewardship and manufacturer responsibility laws and regulations, primarily relating to the collection, reuse and recycling of electronic waste, including the Smart TVs we sell, as well as regulations regarding the consumption of electricity and the hazardous material contents of electronic devices, device components and device packaging.
The cost of complying with recycling programs varies based on differing laws across jurisdictions and factors such as market-share and state-wide collection goals, which can be difficult for us to accurately predict. Most of the states with television recycling programs assess fees based upon weight of the units recycled, by market share or a combination of the two. Some states also impose a charge on us for the cost of recycling televisions and other consumer electronic products manufactured by other companies, usually based upon our current television market share. This includes orphaned televisions, which are predominately based on older, heavier CRT technology. We expect our expenses for compliance with recycling programs to be between approximately $5 million and $10 million each year, and if our sales or market share increases, the future cost of
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complying with the existing recycling programs could increase. Changes to laws regulating electronics recycling programs could increase our operational costs for funding these programs and result in increased regulatory oversight and a larger administrative burden. If more states adopt similar recycling plans, our costs of compliance and associated administrative burden will grow. Currently, we do not pass these costs on to our manufacturers and we may have a limited ability to pass these costs along to our retailers. If states offer consumer incentives for the return of televisions to recycling facilities, which has occurred in the past, our costs could increase unexpectedly. If the costs of compliance with these recycling programs increase beyond our estimates, our margins would be reduced and our business, financial condition and results of operations would be harmed. We believe that we are currently in compliance, and will be able to continue to comply, with such existing and emerging requirements; however we have in the past and may in the future experience disputes with such state or local authorities, and if we are found to not be in compliance with any present and future regulations, we could become subject to additional fines and liabilities or prohibitions on sales of our Smart TVs, or could otherwise jeopardize our ability to conduct business in the jurisdiction in which we are not compliant, which in turn may harm our business, financial condition and results of operations.
Our devices are subject to laws in some jurisdictions which ban the use of certain hazardous materials such as lead, mercury and cadmium in the manufacture of electrical equipment. Similar laws and regulations have been passed, are pending, or may be enacted in China and other regions, and we are, or may in the future be, subject to these laws and regulations. Also, changes to regulations relating to certain chemicals and flame retardants used in our devices have been enacted in some states and additional regulations have been proposed or are being considered by federal and state regulators. If these measures are implemented, we could face significant increased costs from suppliers who may be using such chemicals in component parts and would be required to remove them. Although we generally seek contractual provisions requiring our manufacturers to comply with device content requirements, we cannot guarantee that our manufacturers will consistently comply with these requirements. In addition, if there are changes to these or other laws (or their interpretation) or if new similar laws are passed in other jurisdictions, we may be required to re-engineer our devices to use components compatible with these regulations. This re-engineering and component substitution could result in additional costs to us or disrupt our operations or logistics.
Issues related to climate change may result in regulatory requirements that would have an adverse impact on the financial condition of our business. At the federal and state levels, we may face new or changing requirements to reduce greenhouse gases on our operations, including manufacturing, transportation and distribution, resulting in increased costs. Recently proposed changes to laws at the state and local levels targeting reductions in greenhouse gases would also result in increased administrative costs to our business.
From time to time new environmental, device stewardship and producer responsibility regulations related to both products and product packaging are enacted, or existing requirements are changed, and it is difficult to anticipate how such regulations and changes will be implemented and enforced. We continue to evaluate the necessary steps for compliance with regulations as they are enacted and are actively looking to alternative methods of compliance in the event certain proposed changes in law may materially impact our operations. We also expect that our devices will be affected by new environmental laws and regulations on an ongoing basis, including content of device components. Although we cannot predict the future impact of such laws or regulations, they will likely result in additional costs and may increase penalties associated with violations or require us to change the content of our devices and packaging or how these are manufactured. As a result, we may experience negative consequences from these emerging requirements including, but not limited to, supply shortages or delays, increased raw material and component costs, accelerated obsolescence of certain raw materials used in our components and devices, and the need to modify or create new designs for our existing and future devices, all of which may harm our business, financial condition and results of operations.
We are subject to taxation-related risks in multiple jurisdictions, and the adoption and interpretation of new tax legislation, tax regulations, tax rulings, or exposure to additional tax liabilities could materially affect our business, financial condition and results of operations.
We are a U.S.-based multinational company subject to income and other taxes in the United States and other foreign jurisdictions in which we do business. As a result, our provision for income taxes is derived from a combination of applicable tax rates in the various jurisdictions in which we operate. Significant judgment is required in determining our global provision for income taxes, value added and other similar taxes, deferred tax assets or liabilities and in evaluating our tax positions on a worldwide basis. It is possible that our tax positions may be challenged by tax authorities, which may have a significant impact on our global provision for income taxes. If such a challenge were to be resolved in a manner adverse to us, it could have a material adverse effect on our business, financial condition and results of operations.
Tax laws are regularly re-examined and evaluated globally. New laws and interpretations of the law are taken into account for financial statement purposes in the quarter or year that they become applicable. Tax authorities are increasingly scrutinizing the tax positions of multinational companies. If U.S. or other foreign tax authorities change applicable tax laws, or if there is a
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change in interpretation of existing law, our overall liability could increase, and our business, financial condition and results of operations may be harmed.
In December 2017, the legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was enacted, which contains significant changes to U.S. tax law, including a reduction in the U.S. corporate tax rate and a transition to a new partial territorial system of taxation. The primary impact of the Tax Act on our provision for income taxes was a reduction of the future tax benefits of our deferred tax assets as a result of the reduction in the corporate income tax rate. In addition, as of January 1, 2022, the Tax Act requires research and experimental expenditures attributable to research conducted within the United States to be capitalized and amortized ratably over a five-year period. Any such expenditures attributable to research conducted outside the United States must be capitalized and amortized over a 15-year period. This tax capitalization of research and experimental expenditures was included in our tax return filed for the year ended December 31, 2022. Since this deduction disallowance is temporary, there is no impact on our tax expense; however, it increases our current cash flow liabilities and deferred tax assets. Further, the Inflation Reduction Act of 2022 (the “IRA”) became effective beginning on January 1, 2023, which imposes a 15% alternative minimum income tax on certain corporations’ global adjustment financial statement income and a 1% non-deductible excise tax on certain stock buybacks. We do not currently expect that the IRA will have a material impact on our income tax liability. In addition, the Organisation for Economic Co-operation and Development, the European Union, as well as a number of other countries and organizations, have recently enacted new laws, and proposed or recommended changes to existing tax laws that may increase our tax obligations in many countries where we do business or require us to change the manner in which we operate our business. As we expand the scale of our business activities, any changes in U.S. or foreign tax laws that apply to such activities may increase our worldwide effective tax rate and harm our business, financial condition and results of operations.
Risks Relating to Financial and Accounting Matters
Our management team has limited experience managing a public company.
Most members of our management team have limited experience managing a publicly-traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently attend to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These obligations and constituents require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which may harm our business, financial condition and results of operations.
We are exposed to increased regulatory oversight and incur increased costs as a result of being a public company.
As a public company, we incur substantial legal, accounting and other expenses that we did not incur as a private company. For example, we are subject to the reporting requirements of the Exchange Act, the applicable requirements of the Sarbanes-Oxley Act of 2002 (the “SOX Act”), the rules and regulations of the Securities and Exchange Commission (the “SEC”), and the listing requirements and rules of the New York Stock Exchange. As a result, we incur significant legal, accounting and other expenses, including additional directors’ and officers’ liability insurance. We have incurred costs in connection with hiring additional legal, accounting, financial and compliance staff with appropriate public company experience and technical accounting knowledge. These rules and regulations have increased, and will continue to increase, our legal and financial compliance costs, and have made, and will continue to make, certain activities more time consuming and costly. Furthermore, as issues in complying with those requirements are identified, such as the material weakness described in our Annual Report on Form 10-K, we could incur additional costs rectifying those or new issues, and the existence of these issues could adversely affect our reputation or investor perceptions of it and could make it more expensive to obtain director and officer liability insurance. Any of these expenses may harm our business, financial condition and results of operations.
We have identified a material weakness in our internal control over financial reporting as of December 31, 2022. If we are unable to remediate this material weakness, or if we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately or timely report our financial results, in which case our business may be harmed, investors may lose confidence in the accuracy and completeness of our financial reports, and our stock price could be adversely affected.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for evaluating and reporting on the effectiveness of our system of internal control. As a public company, we are required by Section 404 of the SOX Act to evaluate the effectiveness of our internal control over financial reporting. We must also include a report issued by our independent registered public accounting firm based on their audit of our internal controls over financial reporting. In connection with our year-end assessment of internal control over financial reporting, we determined that, as of December 31, 2022, we did not maintain effective internal control over financial reporting because of a material weakness associated with controls related to our price protection program and quantity information used as the basis for their accruals.
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For further discussion of the material weakness identified and our remedial efforts, see “Item 9A, Controls and Procedures” of our Annual Report on Form 10-K and Part I, Item 4 “Controls and Procedures” of this Quarterly Report.
We are committed to undertaking efforts to remediate the material weakness as promptly as possible, and management is in the process of implementing a remediation plan; however, there can be no assurance as to when the material weakness will be remediated or that additional material weaknesses will not arise in the future. Further, remediation efforts place a significant burden on management and add increased pressure to our financial and IT resources and processes. As a result, we may not be successful in making the improvements necessary to remediate the material weakness identified by management, be able to do so in a timely manner, or be able to identify and remediate additional control deficiencies, including material weaknesses, in the future.
If we are unable to further implement and maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information timely and accurately, and to prepare financial statements within required time periods could be adversely affected, which could subject us to litigation or investigations, require management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and adversely impact our stock price. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our Class A common stock could be adversely affected and we could become subject to litigation or investigations by New York Stock Exchange, the SEC or other regulatory authorities, which could require additional financial and management resources.
We rely on assumptions and estimates to calculate certain of our key metrics, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.
We calculate certain of our key metrics, including Smart TV Shipments, SmartCast Active Accounts, SmartCast ARPU, SmartCast Hours and Total VIZIO Hours using internal company data that has not been independently verified. While these numbers are based on what we believe to be reasonable calculations for the applicable period of measurement, there are inherent challenges in measuring our key metrics. We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy. Our measures of our key metrics may differ from estimates published by third parties or from similarly-titled metrics of our competitors due to differences in methodology. If advertisers, content or platform partners or investors do not perceive our key metrics to be accurate representations of our Smart TV Shipments, SmartCast Active Accounts, SmartCast ARPU, SmartCast Hours and Total VIZIO Hours, or if we discover material inaccuracies in our key metrics, our reputation may be harmed and content partners, advertisers and partners may be less willing to allocate their budgets or resources to our devices and services, which could negatively affect our business, financial condition and results of operations. Further, as our business develops, we may revise or cease reporting certain metrics if we determine that such metrics are no longer accurate or appropriate measures of our performance. If investors, analysts, consumers or retailers do not believe our reported measures, such as Smart TV Shipments, SmartCast Active Accounts, SmartCast ARPU, SmartCast Hours and Total VIZIO Hours, are sufficient or accurately reflect our business, we may receive negative publicity and our operating results may be adversely impacted.
We need to maintain operational and financial systems that can support our expected growth, increasingly complex business arrangements, and rules governing revenue and expense recognition and any inability or failure to do so could adversely affect our financial reporting, billing and payment services.
We have a complex business that is growing in size and complexity. To manage our growth and our increasingly complex business operations, especially as we move into new markets internationally or acquire new businesses, we will need to maintain and may need to upgrade our operational and financial systems and procedures, which requires management time and may result in significant additional expense. Our business arrangements with our content providers and advertisers, and the rules that govern revenue and expense recognition in our data services business are increasingly complex. To manage the expected growth of our operations and increasing complexity, we must maintain operational and financial systems, procedures and controls and continue to increase systems automation to reduce reliance on manual operations. An inability to do so will negatively affect our financial reporting, billing and payment services. Our current and planned systems, procedures and controls may not be adequate to support our complex arrangements and the rules governing revenue and expense recognition for our future operations and expected growth. Delays or problems associated with any improvement or expansion of our operational and financial systems and controls could adversely affect our relationships with our consumers and partners, cause harm to our reputation and brand and could also result in errors in our financial and other reporting.
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If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations may be harmed.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in our stock price. Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, sales incentives, accounts receivable and allowance for doubtful accounts, share-based compensation expense, excess and obsolete inventory write-downs, warranty reserves, long-lived assets and accounting for income taxes including deferred tax assets and liabilities.
Our results of operations may be adversely affected by changes in accounting principles applicable to us.
Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board (“FASB”), the SEC, and other various bodies formed to promulgate and interpret appropriate accounting principles. Changes in accounting principles applicable to us, or varying interpretations of current accounting principles, in particular, with respect to revenue recognition, could have a significant effect on our reported results of operations. Further, any difficulties in the implementation of changes in accounting principles, including the ability to modify our accounting systems, could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.
Risks Relating to Intellectual Property
Third parties may claim we are infringing, misappropriating or otherwise violating their intellectual property rights and we could be prevented from selling our devices, or suffer significant litigation expense, even if these claims have no merit.
The media entertainment devices industry, and especially the television industry, is characterized by the existence of a large number of patents and frequent claims and litigation regarding patent, trade secret and other intellectual property rights. There is no easy mechanism through which we can ascertain a list of all patent applications that have been filed in the United States or elsewhere and whether, if any applications are granted, such patents would harm our business. Furthermore, the rapid technological changes that characterize our industry require that we quickly implement new processes and components with respect to our devices. Often with respect to recently developed processes and components, a degree of uncertainty exists as to who may rightfully claim ownership rights in such processes and components. Uncertainty of this type increases the risk that claims alleging that such components or processes infringe, misappropriate or otherwise violate third-party rights may be brought against us. We may also be unaware of intellectual property rights of others that may cover some of our devices.
Leading companies in the television industry, some of which are our competitors, have extensive patent portfolios with respect to television technology. From time to time, third parties, including these leading companies, have asserted and currently are asserting patent, copyright, trademark and/or other intellectual property related claims against us and demand license or royalty payments or payment for damages, seek injunctive relief and pursue other remedies including, but not limited to, an order barring the import of our devices. We expect to continue to receive such communications and be subject to such claims, and we review the merits of each claim as they are received.
The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Claims of intellectual property infringement, misappropriation or other violation against us or our manufacturers have required and might in the future require us to redesign our devices, rebrand our services, enter into costly settlement or license agreements, pay costly damage awards, potentially including treble damages and attorneys’ fees, if we are found to have willfully infringed a party’s intellectual property, or require us to face a temporary or permanent injunction prohibiting us from marketing or selling our devices or services. As a result of patent infringement claims, or to avoid potential claims, we have in the past and may in the future choose or be required to seek licenses from third parties. These licenses may not be available on acceptable terms, or at all. Even if we are able to obtain a license, the license would likely obligate us to pay license fees or royalties or both, which may be substantial, and the rights granted to us might be nonexclusive, which could result in our competitors gaining access to the same intellectual property rights.
Litigation against us, even if without merit, can be time consuming, could divert management attention and resources, require us or our manufacturers to incur significant legal expense, prevent us from using or selling the challenged technology, damage our reputation and brand, require us or our manufacturers to design around the challenged technology and cause the price of our stock to decline. In addition, these third-party claimants, some of which are potential competitors, may initiate litigation against
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the manufacturers of our devices or key components, including LCD and OLED panels, or our retailers, alleging infringement, misappropriation or other violation of their proprietary rights with respect to existing or future devices. Also, third parties may make infringement claims against us that relate to technology developed and owned by one of our manufacturers for which our manufacturers may or may not indemnify us. Even if we are indemnified against such costs, the indemnifying party may be unable to uphold its contractual obligations and determining the scope of these obligations could require additional litigation. Moreover, our agreements with our retailers generally contain intellectual property indemnification obligations, and we may be responsible for indemnifying our retailers against certain intellectual property claims or liability they may face relating to our devices or offerings. Additionally, our retailers may not purchase our offerings if they are concerned that they may infringe, misappropriate or otherwise violate third-party intellectual property rights.
The complexity of the technology involved and inherent uncertainty and cost of intellectual property litigation increases our risks. In the event of a meritorious or successful claim of infringement, and our failure or inability to license or independently develop or acquire access to alternative technology on a timely basis and on commercially reasonable terms, or substitute similar intellectual property from another source, we may be required to:
•discontinue making, using, selling or importing substantially all or some of our devices as currently engineered;
•offer less competitive devices with reduced or limited functionality;
•pay substantial monetary damages for the prior use of third-party intellectual property;
•change how our devices are manufactured or the design of our devices;
•shift significant liabilities to our manufacturers who may not be financially able to absorb them;
•enter into licensing arrangements with third parties on economically unfavorable or impractical terms and conditions; and/or
•pay higher prices for the devices we sell.
As a result of the occurrence of any of the foregoing, we may be unable to offer competitive devices, suffer a material decrease or interruption in sales and our business, financial condition and results of operations may be harmed.
If we become subject to liability for content that we distribute through our devices, our business, financial condition and results of operations may be harmed.
As a distributor of content, we face potential liability for negligence, copyright, patent or trademark infringement, public performance royalties or other claims based on the nature and content of materials that we distribute. The Digital Millennium Copyright Act (“DMCA”) is intended, in part, to limit the liability of eligible service providers for caching, hosting, or linking to, user content that include materials that infringe copyrights or other rights of others. We rely on the protections provided by the DMCA in conducting our business, and may be adversely impacted by future legislation and future judicial decisions altering these safe harbors or if international jurisdictions refuse to apply similar protections. If we become liable for these types of claims as a result of the content that is streamed through our technology, then our business may suffer. Litigation to defend these claims could be costly and the expenses and damages arising from any liability could harm our business, financial condition and results of operations. We cannot assure that we are insured or indemnified to cover claims of these types or liability that may be imposed on us.
Some of our consumer devices contain “open source” software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.
Some of our devices contain, or may be distributed with, software licensed by its authors or other third parties under so-called “open source” licenses, including, for example, the GNU General Public License, GNU Lesser General Public License, the Mozilla Public License, the BSD License and the Apache License.
Some of those licenses may require, as a condition of the license, that:
•we release the source code including modifications or derivative works we create based upon, incorporating, or using the open source software,
•we provide notices with our devices, and/or
•we license the modifications or derivative works we create based upon, incorporating or using the open source software under the terms of a particular open source license or other license granting third parties certain rights of further use, including that the licensee publicly release all or part of the source code to such software and/or make available any derivative works of the open source code on unfavorable terms or at no cost.
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From time to time, companies that incorporate open source software into their devices have faced claims challenging the ownership of open source software and/or compliance with open source license terms. Additionally, the terms of certain open source licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide the open source software subject to those licenses. Accordingly, we have and may in the future be subject to suits and liability for copyright infringement claims and breach of contract by parties claiming ownership of, or demanding release of, what we believe to be open source software or noncompliance with open source licensing terms. While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose the source code or that would otherwise breach the terms of an open source agreement, such use could nevertheless occur, or could be claimed to have occurred, and we may be required to release our proprietary source code, pay damages for breach of contract, purchase a costly license, re-engineer our applications, discontinue sales in the event re-engineering cannot be accomplished on a timely basis or take other remedial action that may divert resources away from our development efforts, any of which may harm our business, financial condition and results of operations. This reengineering process could require us to expend significant additional research and development resources, and we may not be able to complete the re-engineering process successfully. In addition to risks related to license requirements, use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of software. When an author or other third-party alleges that we had not complied with the conditions of one or more of those open source licenses, we are and may in the future be required to incur legal expenses in defending against such allegations, and if our defenses are not successful we could be enjoined from distribution of the devices that contained the open source software and be required to either make the source code for the open source software available, to grant third parties certain rights of further use of our software, or to remove the open source software from our devices, which could disrupt our distribution and sale of some of our devices, or help third parties, including our competitors, develop products and services that are similar to or better than ours, any of which may harm our business, financial condition and results of operations.
We rely upon trade secrets and other intellectual property rights, including unpatented proprietary know-how and expertise to maintain our competitive position in the television industry. Our intellectual proprietary rights may be difficult to establish, maintain, enforce and protect, which could enable others to copy or use aspects of our devices without compensating us, thereby eroding our competitive advantages and harming our business.
We rely on a combination of copyright, trademark, patent and trade secret laws, nondisclosure agreements with employees, contractors and manufacturers and other contractual provisions to establish, maintain, protect and enforce our intellectual property and other proprietary rights. Our success depends, in part, on our ability to protect our intellectual property and proprietary rights under the intellectual property laws of the United States and other countries. The laws of some foreign countries may not be as protective of intellectual property rights as those of the United States, and mechanisms for enforcement of our intellectual property and proprietary rights in such countries may be inadequate. Despite our efforts to protect our intellectual property, unauthorized parties may attempt to copy aspects of our device design, to obtain and use technology and other intellectual property that we regard as proprietary, or to adopt names, trademarks and logos similar to the VIZIO name, trademark and logo, especially in international markets where intellectual property rights may be less protected. Furthermore, our competitors may independently develop similar technology or duplicate our intellectual property. Policing the unauthorized use of our intellectual property and proprietary rights is difficult and expensive. Pursuing infringers of our intellectual property and proprietary rights could result in significant costs and diversion of resources, and any failure to pursue infringers could result in our competitors utilizing our technology and offering similar devices, potentially resulting in loss of a competitive advantage and decreased sales. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential and proprietary information could be compromised by disclosure during this type of litigation. If we fail to protect and enforce our intellectual property rights adequately, our competitors might gain access to our technology, we may not receive any return on the resources expended to create or acquire the intellectual property or generate any competitive advantage based on it, and our brand, business, financial condition and results of operations may be harmed.
Additionally, various factors outside our control pose a threat to our intellectual property rights, as well as to our devices. For example, we may fail to obtain effective intellectual property protection, or the efforts we have taken to protect our intellectual property rights may not be sufficient or effective, and any of our intellectual property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable. Despite our efforts to protect our intellectual property proprietary rights, there can be no assurance our intellectual property rights will be sufficient to protect against others offering products or services that are substantially similar to ours. For example, it is possible that third parties, including our competitors, may obtain patents relating to technologies that overlap or compete with our technology. If third parties obtain patent protection with respect to such technologies, they may assert, and have in the past asserted, that our technology infringes their patents and seek to charge us a licensing fee or otherwise preclude the use of our technology.
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We rely heavily on trade secrets, unpatented proprietary know-how, expertise and information, as well as continuing technological innovation in our business and confidentiality to protect our intellectual property. We seek to protect our proprietary information by entering into confidentiality and/or license agreements with our employees, consultants, service providers and advertisers. We also enter into confidentiality and invention assignment agreements with our employees and consultants. We also seek to preserve the integrity and confidentiality of our trade secrets and proprietary information by the use of measures designed to maintain physical security of our premises and physical and electronic security of our information technology systems, but it is possible that the security measures of the premises or information technology systems used in our business and operations, some of which are supported by third parties, could be breached. However, policing unauthorized use of our trade secrets, technology and proprietary information is difficult and we cannot assure you that any steps taken by us will prevent misappropriation of our trade secrets, technology and proprietary information. We cannot be certain that we have entered into confidentiality, invention assignment and/or license agreements with all relevant parties, and we cannot be certain that our trade secrets, technology and other proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. There can be no assurance that we will be able to effectively maintain the secrecy and confidentiality of this intellectual property. Such agreements may be insufficient or breached and we also cannot be certain that we will have adequate remedies for any breach. Individuals not subject to invention assignment agreements may make adverse ownership claims to our current and future intellectual property. Additionally, to the extent that our employees, consultants or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. We may have employees leave us and work for competitors. Attempts may be made to copy or reverse-engineer aspects of our devices or to obtain and use information that we regard as proprietary. The disclosure of our trade secrets or other know-how as a result of such a breach may harm our business. If any of our trade secrets, technology or other proprietary information were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position.
To a lesser extent, we rely on patent laws to protect our proprietary methods and technologies. While we have issued patents and pending patent applications in the United States and other jurisdictions, the claims eventually allowed on any of our patents may not be sufficiently broad to protect our technology or offerings and services. Any issued patents may be challenged or invalidated in litigation and/or in other adversarial proceedings such as opposition, inter partes review, post-grant review, reissue, reexamination or other post-issuance proceedings, or may be circumvented, and any rights granted under these patents may not actually provide adequate defensive protection or competitive advantages to us. Additionally, the process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. Additional uncertainty may result from changes to intellectual property legislation enacted in the United States, including the Leahy-Smith America Invents Act, and other national governments and from interpretations of the intellectual property laws of the United States and other countries by applicable courts and agencies. Accordingly, despite our efforts, we may be unable to obtain adequate patent protection, or to prevent third parties from infringing upon or misappropriating our intellectual property.
Any additional investment in protecting our intellectual property through additional trademark, patent or other intellectual property filings could be expensive or time-consuming. We may not be able to obtain protection for our technology and even if we are successful in obtaining effective patent, trademark, trade secret and copyright protection, it is expensive to maintain these rights, both in terms of application and maintenance costs, and the time and cost required to defend our rights could be substantial. Moreover, our failure to develop and properly manage new intellectual property could hurt our market position and business opportunities.
If we fail to comply with our obligations under license or technology agreements with third parties, we may be required to pay damages and we could lose license rights that are critical to our business.
We license certain intellectual property, including patents and technology, from third parties, that is important to our business, and in the future we may enter into additional agreements that provide us with licenses to valuable intellectual property or technology. If we fail to comply with any of the obligations under our license agreements, we may be required to pay damages and the licensor may have the right to terminate the license. Termination by the licensor would cause us to lose valuable rights, and could prevent us from selling our devices or inhibit our ability to commercialize future devices. Our business would suffer if any current or future licenses terminate, if the licensors fail to abide by the terms of the license, if the licensors fail to enforce licensed patents against infringing third parties, if the licensed intellectual property rights are found to be invalid or unenforceable, or if we are unable to enter into necessary licenses on acceptable terms. In addition, our rights to certain technologies are licensed to us on a non-exclusive basis. The owners of these non-exclusively licensed technologies are therefore free to license them to third parties, including our competitors, on terms that may be superior to those offered to us, which could place us at a competitive disadvantage. Moreover, our licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or
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otherwise violating the licensor’s rights. In addition, the agreements under which we license intellectual property or technology from third parties are generally complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement. Any of the foregoing may harm our competitive position, business, financial condition and results of operations.
Risks Relating to Ownership of Our Class A Common Stock
The multi class structure of our common stock has the effect of concentrating voting power with our Founder, Chairman and Chief Executive Officer, William Wang, and his affiliates, which will limit your ability to influence or direct the outcome of key corporate actions and transactions, including a change in control.
Our Class B common stock has 10 votes per share, and our Class A common stock has one vote per share. William Wang, our Founder, Chairman and Chief Executive Officer and his affiliates hold all of the issued and outstanding shares of our Class B common stock. In addition, Mr. Wang has entered into voting agreements whereby he maintains voting control over the shares of Class B common stock held by his affiliates.
The shares beneficially owned by Mr. Wang (including shares over which he has voting control) represent a majority of the voting power of all our shares. As a result, for the foreseeable future, Mr. Wang will be able to control matters requiring approval by our stockholders, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major transaction requiring stockholder approval. Mr. Wang may have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interest. The concentration of control will limit or preclude your ability to influence corporate matters for the foreseeable future and could have the effect of delaying, preventing or deterring a change in control of our company, could deprive you and other holders of Class A common stock of an opportunity to receive a premium for your Class A common stock as part of a sale of our company, and could negatively affect the market price of our Class A common stock. In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that you may feel are in your best interest as one of our stockholders.
Future transfers by Mr. Wang and his affiliates of the Class B common stock they hold will generally result in those shares converting into shares of Class A common stock, subject to limited exceptions, such as certain transfers effected for estate planning or charitable purposes. In addition, each share of Class B common stock will convert automatically into one share of Class A common stock upon the date fixed by the Board of Directors that is no less than 61 days and more than 180 days following (i) the first date on which the number of shares of Class B common stock held by Mr. Wang and his affiliates is less than 25% of the Class B common stock held by Mr. Wang and his affiliates as of immediately prior to the completion of our IPO (the “25% Ownership Threshold”); (ii) the date on which Mr. Wang is terminated for cause (as defined in our amended and restated certificate of incorporation); or (iii) the date upon which (A) Mr. Wang is no longer providing services to us as chief executive officer and (B) Mr. Wang is no longer a member of our Board of Directors, either as a result of Mr. Wang’s voluntary resignation or as a result of a request or agreement by Mr. Wang not to be re-nominated as a member of our Board of Directors at a meeting of our stockholders. Additionally, shares of Class B common stock will convert automatically at the close of business on the date that is 12 months after the death or permanent and total disability of Mr. Wang, during which 12-month period the shares of our Class B common stock shall be voted as directed by a person designated by Mr. Wang and approved by our Board of Directors (or if there is no such person, then our secretary then in office).
The trading price of our Class A common stock has been volatile, and you could lose all or part of your investment.
The trading price of our Class A common stock has been volatile and could fluctuate significantly in response to a number of factors, most of which we cannot predict or control and which could cause you to lose all or part of your investment in our Class A common stock. Factors that could cause fluctuations in the trading price of our Class A common stock include the following:
•announcements or introductions of new devices or technologies, commercial relationships, acquisitions, strategic partnerships, joint ventures, capital commitments or other events by us or our competitors;
•failure of any of our new devices or services to achieve commercial success;
•developments by us or our competitors with respect to patents or other intellectual property rights;
•variations and actual or anticipated fluctuations in our total net revenue and other results of operations, or the results of operations of our competitors;
•fluctuations in the operating performance, stock market prices or trading volumes of securities of similar companies;
•failure by us to reach an agreement or renew an agreement with an important content provider;
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•changes in operating performance and stock market valuations of competitors;
•general market conditions and overall fluctuations in U.S. equity markets;
•general economic conditions in domestic or international markets caused by geopolitical uncertainty and instability, such as the ongoing geopolitical tensions related to conflicts in and around Ukraine, Israel and other areas of the world, resulting sanctions imposed by the United States and other countries, and retaliatory actions taken in response to such sanctions;
•changes in accounting principles;
•sales of our Class A common stock, including sales by our executive officers, directors and significant stockholders, short selling of our Class A common stock, or the anticipation of sales;
•actual or perceived cybersecurity attacks or security breaches or incidents;
•additions or departures of any of our key personnel;
•lawsuits threatened or filed by us or against us, and announcements related to any such litigation;
•changing legal or regulatory developments in the United States and other countries, including with respect to data privacy, data protection and security;
•the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;
•changes in recommendations by securities analysts, failure to obtain or maintain analyst coverage of our Class A common stock or our failure to achieve analyst earnings estimates;
•discussion of us or our stock price by the financial press and in online investor communities;
•changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; and
•other events or factors, including those resulting from war, incidents of terrorism or responses to these events.
In addition, the stock market has experienced substantial price and volume volatility that is often seemingly unrelated to the operating performance of particular companies. These broad market fluctuations may cause the trading price of our Class A common stock to decline. Furthermore, the trading price of our Class A common stock may be adversely affected by third-parties trying to drive down the price. Short sellers and others, some of whom post anonymously on social media, may be positioned to profit if the trading price of our Class A common stock declines and their activities can negatively affect the trading price of our Class A common stock. In the past, securities class action litigation has often been brought against a company after a period of volatility in the market price of its common stock. We may become involved in this type of litigation in the future. Any securities litigation claims brought against us could result in substantial expenses and the diversion of our management’s attention from our business.
We are a “controlled company” within the meaning of the New York Stock Exchange rules. As a result, we qualify for, and rely on, exemptions from certain corporate governance requirements that provide protection to stockholders of other companies.
As a result of our multi-class common stock structure, William Wang, our Founder, Chairman and Chief Executive Officer controls, a majority of the voting power of our outstanding capital stock. As a result, we are a “controlled company” within the meaning of the corporate governance standards of the New York Stock Exchange. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:
•the requirement that a majority of our Board of Directors consist of “independent directors” as defined under the New York Stock Exchange rules;
•the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;
•the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
•the requirement for an annual performance evaluation of the compensation and nominating and corporate governance committees.
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We currently utilize, and intend to continue to utilize, certain of these exemptions. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the New York Stock Exchange.
In addition, the New York Stock Exchange has developed listing standards regarding compensation committee independence requirements and the role and disclosure of compensation consultants and other advisers to the compensation committee that, among other things, requires:
•compensation committees be composed of independent directors, as determined pursuant to new independence requirements;
•compensation committees be explicitly charged with hiring and overseeing compensation consultants, legal counsel and other committee advisors; and
•compensation committees be required to consider, when engaging compensation consultants, legal counsel or other advisors, certain independence factors, including factors that examine the relationship between the consultant or advisor’s employer and us.
As a controlled company, we are not subject to these compensation committee independence requirements.
Some provisions of our amended and restated certificate of incorporation and Delaware law inhibit potential acquisition bids and other actions that you may consider favorable.
Our corporate documents and Delaware law contain provisions that may enable our Board of Directors to resist a change in control of our company even if a change in control were to be considered favorable by our stockholders. These provisions include, among other things, the authorization of undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval.
These provisions, our multi-class common stock structure and Mr. Wang’s overall voting power, could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for other stockholders to take certain corporate actions such as the election of directors of their choosing. For example, following the first date on which the outstanding shares of our Class B common stock represent less than a majority of the total combined voting power of our Class A common stock and our Class B common stock (the “Voting Threshold Date”), our stockholders will only be able to take action at a duly called annual or special meeting of our stockholders and may not be able to effect action by written consent.
In addition, we are subject to Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a Delaware corporation from engaging in any broad range of business combinations with any stockholder who owns, or at any time in the last three years owned, 15% or more of our outstanding voting stock for a period of three years following the date on which the stockholder became an interested stockholder. This provision could have the effect of delaying or preventing a change of control, whether or not it is desired by or beneficial to our stockholders.
We do not expect to pay any dividends on our Class A common stock for the foreseeable future.
We do not anticipate that we will pay any dividends to holders of our Class A common stock in the foreseeable future. Accordingly, investors must rely on sales of their Class A common stock as the only way to realize any gains on their investment. Investors seeking or expecting cash dividends should not purchase our Class A common stock. Further, in the event we do pay any cash dividends to holders of our Class A common stock, certain holders of options under our 2017 Incentive Award Plan also hold dividend equivalent rights, which entitle them to cash payments based on the number of unexercised shares subject to such options.
Our amended and restated bylaws designate a state or federal court located within the State of Delaware and the federal district courts of the United States as the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or employees.
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws, or (iv) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as defendants, and provided that this exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
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Section 22 of the Securities Act of 1933, as amended (the “Securities Act”), creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated bylaws also provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
Any person or entity purchasing or otherwise acquiring or holding or owning (or continuing to hold or own) any interest in any of our securities shall be deemed to have notice of and consented to the foregoing bylaw provisions. Although we believe these exclusive forum provisions benefit us by providing increased consistency in the application of Delaware law and federal securities laws in the types of lawsuits to which each applies, the exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or any of our directors, officers, stockholders or other employees, which may discourage lawsuits with respect to such claims against us and our current and former directors, officers, stockholders, or other employees. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder as a result of our exclusive forum provisions. Further, in the event a court finds either exclusive forum provision contained in our amended and restated bylaws to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
(a)    Amended and Restated Bylaws
On November 6, 2023, the Company’s Board of Directors adopted and approved, effective as of such date, the Amended and Restated Bylaws of the Company (the “Amended Bylaws”). The Amended Bylaws incorporate certain amendments to align the Amended Bylaws with changes to the Delaware General Corporation Law and the laws of the state of Delaware, including:
•provisions relating to delivery of notices and communications regarding adjourned stockholder meetings;
•the definition of “public announcement” for purposes of the Amended Bylaws;
•requirements for action by written consent of the Board of Directors; and
•limitations regarding indemnification.
The Amended Bylaws also incorporate certain other amendments, including:
•enhancing procedural mechanics and disclosure requirements in connection with stockholder nominations of directors and submissions of proposals regarding other business at the Company’s annual meeting of stockholders (except for proposals properly made in accordance with Rule 14a-8 under the Securities Exchange Act of 1934), including by requiring additional background information and disclosures regarding proposing stockholders, proposed nominees and business, and other persons related to a stockholder’s solicitation of proxies;
•changing certain provisions relating to stockholder nominees for election as a director to address the universal proxy rules adopted by the Securities and Exchange Commission;
•clarifying the Company’s exclusive forum provisions; and
•making certain other clarifying, conforming and ministerial changes.
The foregoing description of the Amended Bylaws is qualified in its entirety by reference to the full text of the Amended Bylaws, which is filed as Exhibit 3.1 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.
(b)     None
(c)    Securities Trading Plans of Directors and Executive Officers
During the three months ended September 30, 2023, no director or officer, as defined in Rule 16a-1(f), adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” each as defined in Regulation S-K Item 408.
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Item 6. Exhibits
Incorporated by Reference
Exhibit No.Description of DocumentFormFile No.ExhibitFiling Date
3.1
10.1
31.1
31.2
32.1†
32.2†
101The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) Condensed Consolidated Statements of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
_____________
†    The certifications attached as Exhibit 32.1 and Exhibit 32.2 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of VIZIO Holding Corp. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
VIZIO Holding Corp.
Date: November 9, 2023By:/s/  William Wang
William Wang
Chief Executive Officer
(Principal Executive Officer)
Date: November 9, 2023By:/s/  Adam Townsend
Adam Townsend
Chief Financial Officer
(Principal Financial Officer)
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AMENDED AND RESTATED BYLAWS OF VIZIO HOLDING CORP. (as amended and restated on November 6, 2023)

 
-i- TABLE OF CONTENTS Page ARTICLE I - CORPORATE OFFICES ........................................................................................................1 1.1 REGISTERED OFFICE ......................................................................................................1 1.2 OTHER OFFICES ...............................................................................................................1 ARTICLE II - MEETINGS OF STOCKHOLDERS.....................................................................................1 2.1 PLACE OF MEETINGS .....................................................................................................1 2.2 ANNUAL MEETING..........................................................................................................1 2.3 SPECIAL MEETING ..........................................................................................................1 2.4 ADVANCE NOTICE PROCEDURES ...............................................................................2 2.5 NOTICE OF STOCKHOLDERS’ MEETINGS..................................................................9 2.6 QUORUM............................................................................................................................9 2.7 ADJOURNED MEETING; NOTICE................................................................................10 2.8 CONDUCT OF BUSINESS ..............................................................................................10 2.9 VOTING ............................................................................................................................10 2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.......11 2.11 RECORD DATES .............................................................................................................11 2.12 PROXIES...........................................................................................................................12 2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE ......................................................12 2.14 INSPECTORS OF ELECTION.........................................................................................13 ARTICLE III - DIRECTORS ......................................................................................................................13 3.1 POWERS ...........................................................................................................................13 3.2 NUMBER OF DIRECTORS .............................................................................................13 3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS...............13 3.4 RESIGNATION AND VACANCIES ...............................................................................13 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE...............................................14 3.6 REGULAR MEETINGS ...................................................................................................14 3.7 SPECIAL MEETINGS; NOTICE .....................................................................................14 3.8 QUORUM; VOTING ........................................................................................................15 3.9 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING......................15 3.10 FEES AND COMPENSATION OF DIRECTORS...........................................................15 3.11 REMOVAL OF DIRECTORS ..........................................................................................16 ARTICLE IV - COMMITTEES ..................................................................................................................16 4.1 COMMITTEES OF DIRECTORS ....................................................................................16 4.2 COMMITTEE MINUTES.................................................................................................16 4.3 MEETINGS AND ACTION OF COMMITTEES ............................................................16 4.4 SUBCOMMITTEES..........................................................................................................17 ARTICLE V - OFFICERS...........................................................................................................................17 5.1 OFFICERS.........................................................................................................................17 5.2 APPOINTMENT OF OFFICERS .....................................................................................17 5.3 SUBORDINATE OFFICERS............................................................................................17 5.4 REMOVAL AND RESIGNATION OF OFFICERS ........................................................17

 
TABLE OF CONTENTS (continued) Page -ii- 5.5 VACANCIES IN OFFICES ..............................................................................................18 5.6 REPRESENTATION OF SECURITIES OF OTHER ENTITIES....................................18 5.7 AUTHORITY AND DUTIES OF OFFICERS .................................................................18 ARTICLE VI - STOCK ...............................................................................................................................18 6.1 STOCK CERTIFICATES; PARTLY PAID SHARES .....................................................18 6.2 SPECIAL DESIGNATION ON CERTIFICATES............................................................19 6.3 LOST CERTIFICATES.....................................................................................................19 6.4 DIVIDENDS......................................................................................................................19 6.5 TRANSFER OF STOCK...................................................................................................20 6.6 STOCK TRANSFER AGREEMENTS .............................................................................20 6.7 REGISTERED STOCKHOLDERS ..................................................................................20 ARTICLE VII - MANNER OF GIVING NOTICE AND WAIVER..........................................................20 7.1 NOTICE OF STOCKHOLDERS’ MEETINGS................................................................20 7.2 NOTICE TO STOCKHOLDERS SHARING AN ADDRESS .........................................20 7.3 NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.............21 7.4 WAIVER OF NOTICE......................................................................................................21 ARTICLE VIII - INDEMNIFICATION......................................................................................................21 8.1 Indemnification of Directors and Officers in Third Party Proceedings.............................21 8.2 Indemnification of Directors and Officers in Actions by or in the Right of the COMPANY .......................................................................................................................22 8.3 SUCCESSFUL DEFENSE ................................................................................................22 8.4 INDEMNIFICATION OF OTHERS.................................................................................22 8.5 ADVANCED PAYMENT OF EXPENSES......................................................................22 8.6 LIMITATION ON INDEMNIFICATION ........................................................................23 8.7 DETERMINATION; CLAIM ...........................................................................................24 8.8 NON-EXCLUSIVITY OF RIGHTS..................................................................................24 8.9 INSURANCE.....................................................................................................................24 8.10 SURVIVAL .......................................................................................................................24 8.11 Effect of Repeal or Modification .......................................................................................24 8.12 Certain Definitions.............................................................................................................25 ARTICLE IX - GENERAL MATTERS......................................................................................................25 9.1 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS ......................25 9.2 FISCAL YEAR..................................................................................................................25 9.3 SEAL..................................................................................................................................25 9.4 CONSTRUCTION; DEFINITIONS..................................................................................26 9.5 FORUM SELECTION ......................................................................................................26 ARTICLE X - AMENDMENTS .................................................................................................................26

 
- 1 - BYLAWS OF VIZIO HOLDING CORP. ARTICLE I - CORPORATE OFFICES 1.1 REGISTERED OFFICE The registered office of VIZIO Holding Corp. (the “Company”) shall be fixed in the Company’s certificate of incorporation, as the same may be amended from time to time. 1.2 OTHER OFFICES The Company may at any time establish other offices at any place or places. ARTICLE II - MEETINGS OF STOCKHOLDERS 2.1 PLACE OF MEETINGS Meetings of stockholders shall be held at a place, if any, within or outside the State of Delaware, determined by the board of directors of the Company (the “Board of Directors”). The Board of Directors may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the Delaware General Corporation Law (the “DGCL”) or any successor legislation. In the absence of any such designation or determination, stockholders’ meetings shall be held at the Company’s principal executive office. 2.2 ANNUAL MEETING The annual meeting of stockholders shall be held each year. The Board of Directors shall designate the date and time of the annual meeting. At the annual meeting, directors shall be elected and any other proper business, brought in accordance with Section 0 of these bylaws, may be transacted. The Board of Directors, acting pursuant to a resolution adopted by a majority of the Whole Board, or the chairperson of the meeting may cancel, postpone or reschedule any previously scheduled annual meeting at any time, before or after the notice for such meeting has been sent to the stockholders. For the purposes of these bylaws, the term “Whole Board” shall mean the total number of authorized directorships whether or not there exist any vacancies or other unfilled seats in previously authorized directorships. 2.3 SPECIAL MEETING (a) A special meeting of the stockholders, other than as required by statute, may be called at any time by (i) the Board of Directors acting pursuant to a resolution adopted by a majority of the Whole Board, (ii) the chairperson of the Board of Directors, (iii) the chief executive officer or (iv) the president, but a special meeting may not be called by any other person or persons and any power of stockholders to call a special meeting of stockholders is specifically denied. The Board of Directors, acting pursuant to a resolution adopted by a majority of the Whole Board, or the chairperson of the meeting may

 
- 2 - cancel, postpone or reschedule any previously scheduled special meeting at any time, before or after the notice for such meeting has been sent to the stockholders. (b) The notice of a special meeting shall include the purpose for which the meeting is called. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting by or at the direction of a majority of the Whole Board, the chairperson of the Board of Directors, the chief executive officer or the president. Nothing contained in this Section 00 shall be construed as limiting, fixing or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held. 2.4 ADVANCE NOTICE PROCEDURES (a) Annual Meetings of Stockholders. (i) Nominations of persons for election to the Board of Directors or the proposal of other business to be transacted by the stockholders at an annual meeting of stockholders may be made only (1) pursuant to the Company’s notice of meeting (or any supplement thereto); (2) by or at the direction of the Board of Directors, or any committee thereof that has been formally delegated authority to nominate such persons or propose such business pursuant to a resolution adopted by a majority of the Whole Board; (3) as may be provided in the certificate of designations for any class or series of preferred stock of the Company (“Preferred Stock”); or (4) by any stockholder of the Company who (A) is a stockholder of record at the time of giving of the notice contemplated by Section 000; (B) is a stockholder of record on the record date for the determination of stockholders entitled to notice of the annual meeting; (C) is a stockholder of record on the record date for the determination of stockholders entitled to vote at the annual meeting; (D) is a stockholder of record at the time of the annual meeting; and (E) complies with the procedures set forth in this Section 00. (ii) For nominations or other business to be properly brought before an annual meeting of stockholders by a stockholder pursuant to clause (4) of Section 000, the stockholder must have given timely notice in writing to the secretary of the Company (the “Secretary”) and any such nomination or proposed business must constitute a proper matter for stockholder action. To be timely, a stockholder’s notice must be received by the Secretary at the principal executive offices of the Company no earlier than 8:00 a.m., Pacific time, on the 120th day and no later than 5:00 p.m., Pacific time, on the 90th day prior to the day of the first anniversary of the preceding year’s annual meeting of stockholders as first specified in the Company’s notice of such annual meeting (without regard to any adjournment, rescheduling, postponement or other delay of such annual meeting occurring after such notice was first sent). However, if no annual meeting of stockholders was held in the preceding year, or if the date of the annual meeting for the current year has been changed by more than 25 days from the first anniversary of the preceding year’s annual meeting, then to be timely such notice must be received by the Secretary at the principal executive offices of the Company no earlier than 8:00 a.m., Pacific time, on the 120th day prior to the day of the annual meeting and no later than 5:00 p.m., Pacific time, on the later of the 90th day prior to the day of the annual meeting or the 10th day following the day on which public announcement of the date of the annual meeting was first made by the Company. In no event will the adjournment, rescheduling, postponement or other delay of any annual meeting, or any announcement thereof, commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above. In no event may a stockholder provide notice with respect to a greater number of director candidates than there are director seats subject to election by stockholders at the annual meeting. If the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or

 
- 3 - specifying the size of the increased Board of Directors at least 10 days before the last day that a stockholder may deliver a notice of nomination pursuant to the foregoing provisions, then a stockholder’s notice required by this Section 000 will also be considered timely, but only with respect to nominees for any new positions created by such increase, if it is received by the Secretary at the principal executive offices of the Company no later than 5:00 p.m., Pacific time, on the 10th day following the day on which such public announcement is first made. “Public announcement” means disclosure in a press release reported by a national news service or in a document publicly filed by the Company with the Securities and Exchange Commission (the “SEC”) pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934 (as amended and inclusive of rules and regulations thereunder, the “1934 Act”) or by such other means as is reasonably designed to inform the public or stockholders of the Company in general of such information, including, without limitation, posting on the Company’s investor relations website. (iii) A stockholder’s notice to the Secretary must set forth: (1) as to each person whom the stockholder proposes to nominate for election as a director: (A) such person’s name, age, business address, residence address and principal occupation or employment; (B) the class and number of shares of the Company that are held of record or are beneficially owned by such person and any (i) Derivative Instruments (defined below) held or beneficially owned by such person, including the full notional amount of any securities that, directly or indirectly, underlie any Derivative Instrument; and (ii) other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares) that has been made the effect or intent of which is to create or mitigate loss to, or to manage the risk or benefit of share price changes for, or to increase or decrease the voting power of such person with respect to the Company’s securities; (C) all information relating to such person that is required to be disclosed in connection with solicitations of proxies for the contested election of directors, or is otherwise required, in each case pursuant to Section 14 of the 1934 Act; (D) such person’s written consent (x) to being named as a nominee of such stockholder, (y) to being named in the Company’s form of proxy pursuant to Rule 14a-19 under the 1934 Act (“Rule 14a-19”) and (z) to serving as a director of the Company if elected; (E) any direct or indirect compensatory, payment, indemnification or other financial agreement, arrangement or understanding that such person has, or has had within the past three years, with any person or entity other than the Company (including, without limitation, the amount of any payment or payments received or receivable thereunder), in each case in connection with candidacy or service as a director of the Company (such agreement, arrangement or understanding, a “Third-Party Compensation Arrangement”); and (F) a description of any other material relationships between such person and such person’s respective affiliates and associates, or others acting in concert with them, on the one hand, and such stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made, and their respective affiliates and associates, or others acting in concert with them, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant

 
- 4 - to Item 404 under Regulation S-K if such stockholder, beneficial owner, affiliate or associate were the “registrant” for purposes of such rule and such person were a director or executive officer of such registrant; (2) as to any other business that the stockholder proposes to bring before the annual meeting: (A) a brief description of the business desired to be brought before the annual meeting; (B) the text of the proposal or business (including the text of any resolutions proposed for consideration and, if applicable, the text of any proposed amendment to these bylaws); (C) the reasons for conducting such business at the annual meeting; (D) any material interest in such business of such stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made, and their respective affiliates and associates, or others acting in concert with them; and (E) all agreements, arrangements and understandings between such stockholder and the beneficial owner, if any, on whose behalf the proposal is made, and their respective affiliates or associates or others acting in concert with them, and any other person or persons (including their names) in connection with the proposal of such business by such stockholder; and (3) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made: (A) the name and address of such stockholder (as they appear on the Company’s books), of such beneficial owner and of their respective affiliates or associates or others acting in concert with them; (B) for each class or series, the number of shares of stock of the Company that are, directly or indirectly, held of record or are beneficially owned by such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them; (C) any agreement, arrangement or understanding between such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them, and any other person or persons (including, in each case, their names) in connection with the proposal of such nomination or other business; (D) any (i) agreement, arrangement or understanding (including, without limitation and regardless of the form of settlement, any derivative, long or short positions, profit interests, forwards, futures, swaps, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions and borrowed or loaned shares) that has been entered into by or on behalf of such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them, with respect to the Company’s securities (any of the foregoing, a “Derivative Instrument”) including the full notional amount of any securities that, directly or indirectly, underlie any Derivative Instrument; and (ii) other agreement, arrangement or understanding that has been made the effect or intent

 
- 5 - of which is to create or mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them, with respect to the Company’s securities; (E) any proxy, contract, arrangement, understanding or relationship pursuant to which such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them has a right to vote any shares of any security of the Company; (F) any rights to dividends on the Company’s securities owned beneficially by such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them, that are separated or separable from the underlying security; (G) any proportionate interest in the Company’s securities or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them, is a general partner or, directly or indirectly, beneficially owns an interest in a general partner of such general or limited partnership; (H) any performance-related fees (other than an asset-based fee) that such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them, is entitled to based on any increase or decrease in the value of the Company’s securities or Derivative Instruments, including, without limitation, any such interests held by members of the immediate family of such persons sharing the same household; (I) any significant equity interests or any Derivative Instruments in any principal competitor of the Company that are held by such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them; (J) any direct or indirect interest of such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them, in any contract with the Company, any affiliate of the Company or any principal competitor of the Company (in each case, including, without limitation, any employment agreement, collective bargaining agreement or consulting agreement); (K) any material pending or threatened legal proceeding in which such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them is a party or material participant involving the Company or any of its officers, directors or affiliates; (L) any material relationship between such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them, on the one hand, and the Company or any of its officers, directors or affiliates, on the other hand; (M)a representation and undertaking that the stockholder is a holder of record of stock of the Company as of the date of submission of the stockholder’s notice and intends to appear in person or by proxy at the annual meeting to bring such nomination or other business before the annual meeting;

 
- 6 - (N) a representation and undertaking as to whether such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them intends, or is part of a group that intends, to (x) deliver a proxy statement or form of proxy to holders of at least the percentage of the voting power of the Company’s then-outstanding stock required to approve or adopt the proposal or to elect each such nominee (which representation and undertaking must include a statement as to whether such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them intends to solicit the requisite percentage of the voting power of the Company’s stock under Rule 14a-19); or (y) otherwise solicit proxies from stockholders in support of such proposal or nomination; (O) any other information relating to such stockholder, such beneficial owner, or their respective affiliates or associates or others acting in concert with them, or director nominee or proposed business that, in each case, would be required to be disclosed in a proxy statement or other filing required to be made in connection with the solicitation of proxies in support of such nominee (in a contested election of directors) or proposal pursuant to Section 14 of the 1934 Act; and (P) such other information relating to any proposed item of business as the Company may reasonably require to determine whether such proposed item of business is a proper matter for stockholder action. (iv) In addition to the requirements of this Section 0, to be timely, a stockholder’s notice (and any additional information submitted to the Company in connection therewith) must further be updated and supplemented (1) if necessary, so that the information provided or required to be provided in such notice is true and correct as of the record date(s) for determining the stockholders entitled to notice of, and to vote at, the annual meeting and as of the date that is 10 business days prior to the annual meeting or any adjournment, rescheduling, postponement or other delay thereof and (2) to provide any additional information that the Company may reasonably request. Any such update and supplement or additional information (including, if requested pursuant to Section 2.4(a)(iii)(3)(P)) must be received by the Secretary at the principal executive offices of the Company (A) in the case of a request for additional information, promptly following a request therefor, which response must be received by the Secretary not later than such reasonable time as is specified in any such request from the Company; or (B) in the case of any other update or supplement of any information, not later than five business days after the record date(s) for the annual meeting (in the case of any update and supplement required to be made as of the record date(s)), and not later than eight business days prior to the date for the annual meeting or any adjournment, rescheduling, postponement or other delay thereof (in the case of any update or supplement required to be made as of 10 business days prior to the annual meeting or any adjournment, rescheduling, postponement or other delay thereof). No later than five business days prior to the annual meeting or any adjournment, rescheduling, postponement or other delay thereof, a stockholder nominating individuals for election as a director will provide the Company with reasonable evidence that such stockholder has met the requirements of Rule 14a-19. The failure to timely provide such update, supplement, evidence or additional information shall result in the nomination or proposal no longer being eligible for consideration at the annual meeting. If the stockholder fails to comply with the requirements of Rule 14a-19 (including because the stockholder fails to provide the Company with all information or notices required by Rule 14a-19), then the director nominees proposed by such stockholder shall be ineligible for election at the annual meeting and any votes or proxies in respect of such nomination shall be disregarded, notwithstanding that such proxies may have been received by the Company and counted for the purposes of determining quorum. For the avoidance of doubt, the obligation to update and supplement, or provide additional information or evidence, as set forth in these bylaws shall not limit the Company’s rights with respect to any deficiencies

 
- 7 - in any notice provided by a stockholder, extend any applicable deadlines pursuant to these bylaws or enable or be deemed to permit a stockholder who has previously submitted notice pursuant to these bylaws to amend or update any nomination or to submit any new nomination. No disclosure pursuant to these bylaws will be required with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is the stockholder submitting a notice pursuant to this Section 2.4 solely because such broker, dealer, commercial bank, trust company or other nominee has been directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner. (b) Special Meetings of Stockholders. Except to the extent required by the DGCL, and subject to Section 0, special meetings of stockholders may be called only in accordance with the Company’s certificate of incorporation and these bylaws. Only such business will be conducted at a special meeting of stockholders as has been brought before the special meeting pursuant to the Company’s notice of meeting. If the election of directors is included as business to be brought before a special meeting in the Company’s notice of meeting, then nominations of persons for election to the Board of Directors at such special meeting may be made by any stockholder who (i) is a stockholder of record at the time of giving of the notice contemplated by this Section 00; (ii) is a stockholder of record on the record date for the determination of stockholders entitled to notice of the special meeting; (iii) is a stockholder of record on the record date for the determination of stockholders entitled to vote at the special meeting; (iv) is a stockholder of record at the time of the special meeting; and (v) complies with the procedures set forth in this Section 00 (with such procedures that the Company deems to be applicable to such special meeting). For nominations to be properly brought by a stockholder before a special meeting pursuant to this Section 00, the stockholder’s notice must be received by the Secretary at the principal executive offices of the Company no earlier than 8:00 a.m., Pacific time, on the 120th day prior to the day of the special meeting and no later than 5:00 p.m., Pacific time, on the 10th day following the day on which public announcement of the date of the special meeting was first made. In no event will any adjournment, rescheduling, postponement or other delay of a special meeting or any announcement thereof commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above. A stockholder’s notice to the Secretary must comply with the applicable notice requirements of Section 00, with references therein to “annual meeting” deemed to mean “special meeting” for the purposes of this final sentence of this Section 2.4(b). (c) Other Requirements and Procedures. (i) To be eligible to be a nominee of any stockholder for election as a director of the Company, the proposed nominee must provide to the Secretary, in accordance with the applicable time periods prescribed for delivery of notice under Section 00 or Section 00: (1) a signed and completed written questionnaire (in the form provided by the Secretary at the written request of the nominating stockholder, which form will be provided by the Secretary within 10 days of receiving such request) containing information regarding such nominee’s background and qualifications and such other information as may reasonably be required by the Company to determine the eligibility of such nominee to serve as a director of the Company or to serve as an independent director of the Company; (2) a written representation and undertaking that, unless previously disclosed to the Company, such nominee is not, and will not become, a party to any voting agreement, arrangement, commitment, assurance or understanding with any person or entity as to how such nominee, if elected as a director, will vote on any issue;

 
- 8 - (3) a written representation and undertaking that, unless previously disclosed to the Company, such nominee is not, and will not become, a party to any Third-Party Compensation Arrangement; (4) a written representation and undertaking that, if elected as a director, such nominee would be in compliance, and will continue to comply, with the Company’s corporate governance, conflict of interest, confidentiality, stock ownership and trading guidelines, and other policies and guidelines applicable to directors and in effect during such person’s term in office as a director (and, if requested by any candidate for nomination, the Secretary will provide to such proposed nominee all such policies and guidelines then in effect); and (5) a written representation and undertaking that such nominee, if elected, intends to serve a full term on the Board of Directors. (ii) At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director must furnish to the Secretary the information that is required to be set forth in a stockholder’s notice of nomination that pertains to such nominee. (iii) No person will be eligible to be nominated by a stockholder for election as a director of the Company, or to be seated as a director of the Company, unless nominated and elected in accordance with the procedures set forth in this Section 0. No business proposed by a stockholder will be conducted at a stockholder meeting except in accordance with this Section 0. (iv) The chairperson of the applicable meeting of stockholders will, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by these bylaws or that other proposed business was not properly brought before the meeting. If the chairperson of the meeting should so determine, then the chairperson of the meeting will so declare to the meeting and the defective nomination will be disregarded or such business will not be transacted, as the case may be. (v) Notwithstanding anything to the contrary in this Section 0, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear in person at the meeting to present a nomination or other proposed business, such nomination will be disregarded or such proposed business will not be transacted, as the case may be, notwithstanding that proxies in respect of such nomination or business may have been received by the Company and counted for purposes of determining a quorum. For purposes of this Section 0, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting, and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting. (vi) Without limiting this Section 0, a stockholder must also comply with all applicable requirements of the 1934 Act with respect to the matters set forth in this Section 0, it being understood that (1) any references in these bylaws to the 1934 Act are not intended to, and will not, limit any requirements applicable to nominations or proposals as to any other business to be considered pursuant to this Section 0; and (2) compliance with clause (4) of Section 00 and with Section 00 are the exclusive

 
- 9 - means for a stockholder to make nominations or submit other business (other than as provided in Section 000). (vii) Notwithstanding anything to the contrary in this Section 0, the notice requirements set forth in these bylaws with respect to the proposal of any business pursuant to this Section 0 will be deemed to be satisfied by a stockholder if (1) such stockholder has submitted a proposal to the Company in compliance with Rule 14a-8 under the 1934 Act; and (2) such stockholder’s proposal has been included in a proxy statement that has been prepared by the Company to solicit proxies for the meeting of stockholders. Subject to Rule 14a-8 and other applicable rules and regulations under the 1934 Act, nothing in these bylaws will be construed to permit any stockholder, or give any stockholder the right, to include or have disseminated or described in the Company’s proxy statement any nomination of a director or any other business proposal. 2.5 NOTICE OF STOCKHOLDERS’ MEETINGS Whenever stockholders are required or permitted to take any action at a meeting, a notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Except as otherwise provided in the DGCL, the certificate of incorporation or these bylaws, the notice of any meeting of stockholders shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting. 2.6 QUORUM The holders of a majority of the voting power of the capital stock of the Company issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders, unless otherwise required by law, the certificate of incorporation, these bylaws or the rules of the stock exchange on which the Company’s securities are listed. Where a separate vote by a class or series or classes or series is required, a majority of the voting power of the outstanding shares of such class or series or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter, except as otherwise required by law, the certificate of incorporation, these bylaws or the rules of the stock exchange on which the Company’s securities are listed. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (a) the chairperson of the meeting, or (b) the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the original meeting.

 
- 10 - 2.7 ADJOURNED MEETING; NOTICE Unless these bylaws otherwise require, when a meeting is adjourned to another time or place (including an adjournment taken to address a technical failure to convene or continue a meeting using remote communication), notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are (i) announced at the meeting at which the adjournment is taken, (ii) displayed, during the time scheduled for the meeting, on the same electronic network used to enable stockholders and proxy holders to participate in the meeting by means of remote communication or (iii) set forth in the notice of meeting given in accordance with Section 222(a) of the DGCL. At the adjourned meeting, the Company may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for stockholders entitled to vote is fixed for the adjourned meeting, the Board of Directors shall fix a new record date for notice of such adjourned meeting in accordance with Section 213(a) of the DGCL and Section 2.11 of these bylaws, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting. 2.8 CONDUCT OF BUSINESS The chairperson of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business and discussion as seem to the chairperson in order. The chairperson of any meeting of stockholders shall be designated by the Board of Directors; in the absence of such designation, the chairperson of the Board of Directors, if any, or the chief executive officer (in the absence of the chairperson of the Board of Directors) or the president (in the absence of the chairperson of the Board of Directors and the chief executive officer), or in their absence any other executive officer of the Company, shall serve as chairperson of the stockholder meeting. The chairperson of any meeting of stockholders shall have the power to adjourn the meeting to another place, if any, date or time, whether or not a quorum is present. 2.9 VOTING The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.11 of these bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating to voting trusts and other voting agreements) of the DGCL. Except as otherwise provided by law, the certificate of incorporation, these bylaws or the rules of the stock exchange on which the Company’s securities are listed, in all matters other than the election of directors, the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Except as otherwise required by law, the certificate of incorporation or these bylaws, directors shall be elected by a plurality of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Where a separate vote by a class or series or classes or series is required, in all matters other than the election of directors, the affirmative vote of the majority of the voting power of the outstanding shares of such class or series or classes or series present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of

 
- 11 - such class or series or classes or series, except as otherwise provided by law, the certificate of incorporation, these bylaws or the rules of the stock exchange on which the securities of the Company are listed. 2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING Unless otherwise restricted by the certificate of incorporation, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents setting forth the action so taken shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. A consent must be set forth in writing or in an electronic transmission. No consent shall be effective to take the corporate action referred to therein unless valid consents signed by a sufficient number of stockholders to take such action are delivered to the Company in the manner prescribed in this Section 2.10 and applicable law within 60 days of the first date on which a consent is so delivered to the Company. All references to a consent in this Section 2.10 mean a consent permitted by this Section 2.10 and contemplated by Section 228 of the DGCL. A consent permitted by this Section 2.10 shall be delivered (i) to the principal place of business of the Company; (ii) to an officer or agent of the Company having custody of the book in which proceedings of meetings of stockholders are recorded; (iii) to the registered office of the Company in the State of Delaware by hand or by certified or registered mail, return receipt requested; or (iv) subject to the next sentence, in accordance with Section 116 of the DGCL, to an information processing system, if any, designated by the Company for receiving such consents. In the case of delivery pursuant to the foregoing clause (iv), such consent must set forth or be delivered with information that enables the Company to determine the date of delivery of such consent and the identity of the person giving such consent, and, if such consent is given by a person authorized to act for a stockholder as proxy, such consent must comply with the applicable provisions of Sections 212(c)(2) and (3) of the DGCL. A consent may be documented and signed in accordance with Section 116 of the DGCL, and when so documented or signed shall be deemed to be in writing for purposes of the DGCL; provided that if such consent is delivered pursuant to clause (i), (ii) or (iii) of the first sentence of this paragraph, such consent must be reproduced and delivered in paper form. In the event that the Board of Directors shall have instructed the officers of the Company to solicit the vote or consent of the stockholders of the Company, an electronic transmission of a stockholder consent given pursuant to such solicitation, to be effective, must be delivered by electronic mail (as defined in Section 232 of the DGCL) to the secretary or president of the Company or to a person designated by the Company for receiving such consent, or delivered to an information processing system designated by the Company for receiving such consent. 2.11 RECORD DATES In order that the Company may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If the Board of Directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board of Directors determines, at the time it

 
- 12 - fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance with the provisions of Section 213 of the DGCL and this Section 2.11 at the adjourned meeting. In order that the Company may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. 2.12 PROXIES Each stockholder entitled to vote at a meeting of stockholders, or to take corporate action by written consent without a meeting, or such stockholder’s authorized officer, director, employee or agent, may authorize another person or persons to act for such stockholder by proxy authorized by a document or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. The authorization of a person to act as a proxy may be documented, signed and delivered in accordance with Section 116 of the DGCL; provided that such authorization shall set forth, or be delivered with information enabling the Company to determine, the identity of the stockholder granting such authorization. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL. 2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE The Company shall prepare, no later than the tenth day before each meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting; provided, however, if the record date for determining the stockholders entitled to vote is less than 10 days before the meeting date, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Company shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting for a period of ten days ending on the day before the meeting date: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such

 
- 13 - list is provided with the notice of the meeting, or (b) during ordinary business hours, at the Company’s principal place of business. In the event that the Company determines to make the list available on an electronic network, the Company may take reasonable steps to ensure that such information is available only to stockholders of the Company. 2.14 INSPECTORS OF ELECTION Before any meeting of stockholders, the Company shall appoint an inspector or inspectors of election to act at the meeting or its adjournment. The Company may designate one or more persons as alternate inspectors to replace any inspector who fails to act. Such inspectors shall take all actions as contemplated under Section 231 of the DGCL or any successor provision thereto. The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are multiple inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein. ARTICLE III - DIRECTORS 3.1 POWERS The business and affairs of the Company shall be managed by or under the direction of the Board of Directors, except as may be otherwise provided in the DGCL or the certificate of incorporation. 3.2 NUMBER OF DIRECTORS The Board of Directors shall consist of one or more members, each of whom shall be a natural person. Unless the certificate of incorporation fixes the number of directors, subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors shall be determined from time to time by resolution of a majority of the Whole Board. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires. 3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS Except as provided in Section 0 of these bylaws, each director, including a director elected to fill a vacancy or newly created directorship, shall hold office until the expiration of the term for which elected and until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws. The certificate of incorporation or these bylaws may prescribe other qualifications for directors. 3.4 RESIGNATION AND VACANCIES Any director may resign at any time upon notice given in writing or by electronic transmission to the chairperson of the Board of Directors, chief executive officer, president or secretary of the Company. A resignation is effective when the resignation is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events. A resignation which is conditioned upon the director failing to receive a specified vote for reelection as a director may provide that

 
- 14 - it is irrevocable. Unless otherwise provided in the certificate of incorporation or these bylaws, when one or more directors resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective. Unless otherwise provided in the certificate of incorporation or these bylaws, and subject to the rights of holders of Preferred Stock, vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and not by stockholders. If the directors are divided into classes, a person so chosen to fill a vacancy or newly created directorship shall hold office until the next election of the class for which such director shall have been chosen and until such person’s successor shall have been duly elected and qualified. 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE The Board of Directors may hold meetings, both regular and special, either within or outside the State of Delaware. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board of Directors may participate in a meeting of the Board of Directors by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. 3.6 REGULAR MEETINGS Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors. 3.7 SPECIAL MEETINGS; NOTICE Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the chairperson of the Board of Directors, the chief executive officer, the president, the Secretary or a majority of the Whole Board; provided that the person(s) authorized to call special meetings of the Board of Directors may authorize another person or persons to send notice of such meeting. Notice of the time and place of special meetings shall be: (a) delivered personally by hand, by courier or by telephone; (b) sent by United States first-class mail, postage prepaid; (c) sent by facsimile; (d) sent by electronic mail; or (e) otherwise given by electronic transmission (as defined in Section 232 of the DGCL),

 
- 15 - directed to each director at that director’s address, telephone number, facsimile number, electronic mail address or other contact for notice by electronic transmission, as the case may be, as shown on the Company’s records. If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile, (iii) sent by electronic mail or (iv) otherwise given by electronic transmission, it shall be delivered, sent or otherwise directed to each director, as applicable, at least 24 hours before the time of the holding of the meeting. If the notice is sent by United States mail, it shall be deposited in the United States mail at least four days before the time of the holding of the meeting. Any oral notice of the time and place of the meeting may be communicated to the director in lieu of written notice if such notice is communicated at least 24 hours before the time of the holding of the meeting. The notice need not specify the place of the meeting (if the meeting is to be held at the Company’s principal executive office) nor the purpose of the meeting, unless required by statute. 3.8 QUORUM; VOTING At all meetings of the Board of Directors, a majority of the Whole Board shall constitute a quorum for the transaction of business. If a quorum is not present at any meeting of the Board of Directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. The affirmative vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute, the certificate of incorporation or these bylaws. 3.9 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING Unless otherwise restricted by the certificate of incorporation or these bylaws, (i) any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission and (ii) a consent may be documented, signed and delivered in any manner permitted by Section 116 of the DGCL. Any person (whether or not then a director) may provide, whether through instruction to an agent or otherwise, that a consent to action will be effective at a future time (including a time determined upon the happening of an event), no later than 60 days after such instruction is given or such provision is made and such consent shall be deemed to have been given for purposes of this Section 0 at such effective time so long as such person is then a director and did not revoke the consent prior to such time. Any such consent shall be revocable prior to its becoming effective. After an action is taken, the consent or consents relating thereto shall be filed with the minutes of the proceedings of the Board of Directors, or the committee thereof, in the same paper or electronic form as the minutes are maintained. 3.10 FEES AND COMPENSATION OF DIRECTORS Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board of Directors shall have the authority to fix the compensation of directors.

 
- 16 - 3.11 REMOVAL OF DIRECTORS Any director or the entire Board of Directors may be removed from office by stockholders of the Company in the manner specified in the certificate of incorporation and applicable law. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office. ARTICLE IV - COMMITTEES 4.1 COMMITTEES OF DIRECTORS The Board of Directors may, by resolution passed by a majority of the Whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Company. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors or in these bylaws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Company, and may authorize the seal of the Company to be affixed to all papers that may require it; but no such committee shall have the power or authority to (a) approve or adopt, or recommend to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval, or (b) adopt, amend or repeal any bylaw of the Company. 4.2 COMMITTEE MINUTES Each committee and subcommittee shall keep regular minutes of its meetings. 4.3 MEETINGS AND ACTION OF COMMITTEES Unless otherwise specified by the Board of Directors, meetings and actions of committees and subcommittees shall be governed by, and held and taken in accordance with, the provisions of: (a) Section 0 (place of meetings and meetings by telephone); (b) Section 0 (regular meetings); (c) Section 0 (special meetings and notice); (d) Section 0 (quorum; voting); (e) Section 0 (action without a meeting); and (f) Section 0 (waiver of notice)

 
- 17 - with such changes in the context of those bylaws as are necessary to substitute the committee or subcommittee and its members for the Board of Directors and its members. However, (i) the time and place of regular meetings of committees or subcommittees may be determined either by resolution of the Board of Directors or by resolution of the committee or subcommittee; (ii) special meetings of committees or subcommittees may also be called by resolution of the Board of Directors or the committee or the subcommittee; and (iii) notice of special meetings of committees and subcommittees shall also be given to all alternate members who shall have the right to attend all meetings of the committee or subcommittee. The Board of Directors or a committee or subcommittee may also adopt other rules for the government of any committee or subcommittee. 4.4 SUBCOMMITTEES Unless otherwise provided in the certificate of incorporation, these bylaws or the resolutions of the Board of Directors designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee. ARTICLE V - OFFICERS 5.1 OFFICERS The officers of the Company shall be a chief executive officer, president and a secretary. The Company may also have, at the discretion of the Board of Directors, a chairperson of the Board of Directors, a vice chairperson of the Board of Directors, a chief financial officer or treasurer, one or more vice presidents, one or more assistant vice presidents, one or more assistant treasurers, one or more assistant secretaries and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person. 5.2 APPOINTMENT OF OFFICERS The Board of Directors shall appoint the officers of the Company, except such officers as may be appointed in accordance with the provisions of Section 0 of these bylaws, subject to the rights, if any, of an officer under any contract of employment. 5.3 SUBORDINATE OFFICERS The Board of Directors may appoint, or empower any officer to appoint, such other officers as the business of the Company may require. Each of such officers shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as determined from time to time by the Board of Directors or, for the avoidance of doubt, any duly authorized committee or subcommittee thereof or by any officer who has been conferred such power of determination. 5.4 REMOVAL AND RESIGNATION OF OFFICERS Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the Board of Directors or, for the avoidance of doubt, any duly authorized committee or subcommittee thereof or by any officer who has been conferred such power of

 
- 18 - removal. Notwithstanding the foregoing, the chief executive officer and the president of the Company may only be removed by the affirmative vote of a majority of the Whole Board. Any officer may resign at any time by giving notice, in writing or by electronic transmission, to the Company. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Company under any contract to which the officer is a party. 5.5 VACANCIES IN OFFICES Any vacancy occurring in any office of the Company shall be filled by the Board of Directors or as provided in Section 0. 5.6 REPRESENTATION OF SECURITIES OF OTHER ENTITIES The chairperson of the Board of Directors, the chief executive officer, the president, any vice president, the treasurer, the secretary or assistant secretary of this Company or any other person authorized by the Board of Directors or the chief executive officer, the president or a vice president, is authorized to vote, represent and exercise on behalf of this Company all rights incident to any and all shares or other securities of, or interests in, or issued by, any other entity or entities, and all rights incident to any management authority conferred on the Company in accordance with the governing documents of any entity or entities, standing in the name of this Company, including the right to act by written consent. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority. 5.7 AUTHORITY AND DUTIES OF OFFICERS Each officer of the Company shall have such authority and perform such duties in the management of the business of the Company as may be designated from time to time by the Board of Directors or, for the avoidance of doubt, by any duly authorized committee or subcommittee thereof or by any officer who has been conferred such power of designation and, to the extent not so provided, as generally pertain to such office, subject to the control of the Board of Directors. ARTICLE VI - STOCK 6.1 STOCK CERTIFICATES; PARTLY PAID SHARES The shares of the Company shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Company. Unless otherwise provided by resolution of the Board of Directors, every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of, the Company by any two officers of the Company representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may

 
- 19 - be issued by the Company with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The Company shall not have power to issue a certificate in bearer form. The Company may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly-paid shares, or upon the books and records of the Company in the case of uncertificated partly-paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully-paid shares, the Company shall declare a dividend upon partly-paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon. 6.2 SPECIAL DESIGNATION ON CERTIFICATES If the Company is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Company shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate that the Company shall issue to represent such class or series of stock, a statement that the Company will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the registered owner thereof shall be given a notice, in writing or by electronic transmission, containing the information required to be set forth or stated on certificates pursuant to this Section 0 or Sections 151, 156, 202(a), 218(a) or 364 of the DGCL or with respect to this Section 0 a statement that the Company will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated stock and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical. 6.3 LOST CERTIFICATES Except as provided in this Section 0, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Company and cancelled at the same time. The Company may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Company may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Company a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares. 6.4 DIVIDENDS The Board of Directors, subject to any restrictions contained in the certificate of incorporation or applicable law, may declare and pay dividends upon the shares of the Company’s capital stock. Dividends

 
- 20 - may be paid in cash, in property, or in shares of the Company’s capital stock, subject to the provisions of the certificate of incorporation. The Board of Directors may set apart out of any of the funds of the Company available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. 6.5 TRANSFER OF STOCK Transfers of record of shares of stock of the Company shall be made only upon its books by the holders thereof, in person or by an attorney duly authorized, and, subject to Section 6.3 of these bylaws, if such stock is certificated, upon the surrender of a certificate or certificates for a like number of shares, properly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer. 6.6 STOCK TRANSFER AGREEMENTS The Company shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes or series of stock of the Company to restrict the transfer of shares of stock of the Company of any one or more classes or series owned by such stockholders in any manner not prohibited by the DGCL. 6.7 REGISTERED STOCKHOLDERS The Company: (a) shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and notices and to vote as such owner; and (b) shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VII - MANNER OF GIVING NOTICE AND WAIVER 7.1 NOTICE OF STOCKHOLDERS’ MEETINGS Notice of any meeting of stockholders shall be given in the manner set forth in the DGCL. 7.2 NOTICE TO STOCKHOLDERS SHARING AN ADDRESS Except as otherwise prohibited under the DGCL, without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Company under the provisions of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Any such consent shall be revocable by the stockholder by written notice to the Company. Any stockholder who fails to object in writing to the Company, within 60 days of having been given written notice by the Company of its intention to send the single notice, shall be deemed to have consented to receiving such single written notice. This Section 0 shall not apply to Sections 164, 296, 311, 312 or 324 of the DGCL.

 
- 21 - 7.3 NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL Whenever notice is required to be given, under the DGCL, the certificate of incorporation or these bylaws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Company is such as to require the filing of a certificate under the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. 7.4 WAIVER OF NOTICE Whenever notice is required to be given under any provision of the DGCL, the certificate of incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws. ARTICLE VIII - INDEMNIFICATION 8.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS IN THIRD PARTY PROCEEDINGS Subject to the other provisions of this Article VIII, the Company shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) (other than an action by or in the right of the Company) by reason of the fact that such person is or was a director or officer of the Company, or is or was a director or officer of the Company serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.

 
- 22 - 8.2 INDEMNIFICATION OF DIRECTORS AND OFFICERS IN ACTIONS BY OR IN THE RIGHT OF THE COMPANY Subject to the other provisions of this Article VIII, the Company shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed Proceeding by or in the right of the Company to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Company, or is or was a director or officer of the Company serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such Proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Company unless and only to the extent that the Court of Chancery or the court in which such Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. 8.3 SUCCESSFUL DEFENSE To the extent that a present or former director or officer (for purposes of this Section 0 only, as such term is defined in Section 145(c)(1) of the DGCL) of the Company has been successful on the merits or otherwise in defense of any Proceeding described in Section 0 or Section 0, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith. The Company may indemnify any other person who is not a present or former director or officer of the Company against expenses (including attorneys’ fees) actually and reasonably incurred by such person to the extent such person has been successful on the merits or otherwise in defense of any Proceeding described in Section 0 or Section 0, or in defense of any claim, issue or matter therein. 8.4 INDEMNIFICATION OF OTHERS Subject to the other provisions of this Article VIII, the Company shall have power to indemnify its employees and agents, or any other persons, to the extent not prohibited by the DGCL or other applicable law. The Board of Directors shall have the power to delegate to any person or persons identified in subsections (1) through (4) of Section 145(d) of the DGCL the determination of whether employees or agents shall be indemnified. 8.5 ADVANCED PAYMENT OF EXPENSES Expenses (including attorneys’ fees) actually and reasonably incurred by an officer or director of the Company in defending any Proceeding shall be paid by the Company in advance of the final disposition of such Proceeding upon receipt of a written request therefor (together with documentation reasonably evidencing such expenses) and an undertaking by or on behalf of the person to repay such amounts if it shall ultimately be determined that the person is not entitled to be indemnified under this Article VIII or the DGCL. Such expenses (including attorneys’ fees) actually and reasonably incurred by former directors and officers or other current or former employees and agents of the Company or by persons currently or

 
- 23 - formerly serving at the request of the Company as directors, officers, employees or agents of another corporation, partnership, joint venture, trust or other enterprise may be so paid upon such terms and conditions, if any, as the Company deems appropriate. The right to advancement of expenses shall not apply to any Proceeding (or any part of any Proceeding) for which indemnity is excluded pursuant to these bylaws, but shall apply to any Proceeding (or any part of any Proceeding) referenced in Section 0 or 0 prior to a determination that the person is not entitled to be indemnified by the Company. Notwithstanding the foregoing, unless otherwise determined pursuant to Section 0, no advance shall be made by the Company to an officer of the Company (except by reason of the fact that such officer is or was a director of the Company, in which event this paragraph shall not apply) in any Proceeding if a determination is reasonably and promptly made (a) by a vote of the directors who are not parties to such Proceeding, even though less than a quorum, or (b) by a committee of such directors designated by the vote of the majority of such directors, even though less than a quorum, or (c) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, that facts known to the decision- making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the Company. 8.6 LIMITATION ON INDEMNIFICATION Subject to the requirements in Section 0 and the DGCL, the Company shall not be obligated to indemnify any person pursuant to this Article VIII in connection with any Proceeding (or any part of any Proceeding): (a) for which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid; (b) for an accounting or disgorgement of profits pursuant to Section 16(b) of the 1934 Act, or similar provisions of federal, state or local statutory law or common law, if such person is held liable therefor (including pursuant to any settlement arrangements); (c) for any reimbursement of the Company by such person of any bonus or other incentive-based or equity-based compensation or of any profits realized by such person from the sale of securities of the Company, in either case as required under any clawback or compensation recovery policy adopted by the Company, applicable securities exchange and association listing requirements, including, without limitation, those adopted in accordance with Rule 10D-1 under the 1934 Act and/or the 1934 Act (including, without limitation, any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the Company of profits arising from the purchase and sale by such person of securities in violation of Section 306 of the Sarbanes-Oxley Act), if such person is held liable therefor (including pursuant to any settlement arrangements); (d) initiated by such person, including any Proceeding (or any part of any Proceeding) initiated by such person against the Company or its directors, officers, employees, agents or other indemnitees, unless (i) the Board of Directors authorized the Proceeding (or the relevant part of the Proceeding) prior to its initiation, (ii) the Company provides the indemnification, in its sole discretion,

 
- 24 - pursuant to the powers vested in the Company under applicable law, (iii) otherwise required to be made under Section 0 or (iv) otherwise required by applicable law; or (e) if prohibited by applicable law. 8.7 DETERMINATION; CLAIM If a claim for indemnification or advancement of expenses under this Article VIII is not paid in full within 90 days after receipt by the Company of the written request therefor, the claimant shall be entitled to an adjudication by a court of competent jurisdiction of such person’s entitlement to such indemnification or advancement of expenses. The Company shall indemnify such person against any and all expenses that are actually and reasonably incurred by such person in connection with any action for indemnification or advancement of expenses from the Company under this Article VIII, to the extent such person is successful in such action, and to the extent not prohibited by law. In any such suit, the Company shall, to the fullest extent not prohibited by law, have the burden of proving that the claimant is not entitled to the requested indemnification or advancement of expenses. 8.8 NON-EXCLUSIVITY OF RIGHTS The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the certificate of incorporation or any statute, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. The Company is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advancement of expenses, to the fullest extent not prohibited by the DGCL or other applicable law. 8.9 INSURANCE The Company may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Company would have the power to indemnify such person against such liability under the provisions of the DGCL. 8.10 SURVIVAL The rights to indemnification and advancement of expenses conferred by this Article VIII shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. 8.11 EFFECT OF REPEAL OR MODIFICATION A right to indemnification or to advancement of expenses arising under a provision of the certificate of incorporation or a bylaw shall not be eliminated or impaired by an amendment to or repeal or elimination of the certificate of incorporation or these bylaws after the occurrence of the act or omission that is the subject of the Proceeding for which indemnification or advancement of expenses is sought, unless the

 
- 25 - provision in effect at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred. 8.12 CERTAIN DEFINITIONS For purposes of this Article VIII, references to the “Company” shall include, in addition to the resulting entity, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent entity, or is or was serving at the request of such constituent entity as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving entity as such person would have with respect to such constituent entity if its separate existence had continued. For purposes of this Article VIII, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Article VIII. ARTICLE IX - GENERAL MATTERS 9.1 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS Except as otherwise provided by law, the certificate of incorporation or these bylaws, the Board of Directors may authorize any officer or officers, or agent or agents, or employee or employees, to enter into any contract or execute any document or instrument in the name of and on behalf of the Company; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board of Directors or within the agency power of an officer, agent or employee, no officer, agent or employee shall have any power or authority to bind the Company by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount. 9.2 FISCAL YEAR The fiscal year of the Company shall be fixed by resolution of the Board of Directors and may be changed by the Board of Directors. 9.3 SEAL The Company may adopt a corporate seal, which shall be adopted and which may be altered by the Board of Directors. The Company may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

 
- 26 - 9.4 CONSTRUCTION; DEFINITIONS Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the DGCL shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes a corporation, partnership, limited liability company, joint venture, trust or other enterprise, and a natural person. Any reference in these bylaws to a section of the DGCL shall be deemed to refer to such section as amended from time to time and any successor provisions thereto. 9.5 FORUM SELECTION Unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Company, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, stockholder, officer or other employee of the Company to the Company or the Company’s stockholders, (c) any action arising pursuant to any provision of the DGCL or the certificate of incorporation or these bylaws (as either may be amended from time to time) or (d) any action asserting a claim governed by the internal affairs doctrine, except for, as to each of (a) through (d) above, any claim as to which such court determines that there is an indispensable party not subject to the jurisdiction of such court (and the indispensable party does not consent to the personal jurisdiction of such court within 10 days following such determination). Unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the sole and exclusive forum for the resolution of any claim against any person in connection with any offering of the Company’s securities (including, but not limited to and for the avoidance of doubt, any underwriter, auditor, expert, control person or other defendant) asserting a cause of action arising under the Securities Act of 1933, as amended. Any person or entity purchasing, holding or otherwise acquiring any interest in any security of the Company shall be deemed to have notice of and consented to the provisions of this Section 0. This provision shall be enforceable by any party to a claim covered by the provisions of this Section 9.5. For the avoidance of doubt, nothing contained in this Section 0 shall apply to any claim brought to enforce a duty or liability created by the 1934 Act or any successor thereto. ARTICLE X - AMENDMENTS These bylaws may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the affirmative vote of the holders of at least a majority of the total voting power of outstanding voting securities, voting together as a single class, shall be required for the stockholders of the Company to alter, amend or repeal, or adopt any provision of these bylaws. The Board of Directors shall also have the power to adopt, amend or repeal bylaws; provided, however, that a bylaw amendment adopted by stockholders which specifies the votes that shall be necessary for the election of directors shall not be further amended or repealed by the Board of Directors.

 

VIZIO, INC.
CHANGE IN CONTROL AND SEVERANCE AGREEMENT
This Change in Control and Severance Agreement (the “Agreement”) is made between VIZIO, Inc. (the “Company”) and [______] (the “Executive”), effective as of the last date on the signature page (the “Effective Date”).
This Agreement provides certain protections to the Executive in connection with a change in control of VIZIO Holding Corp. (“VIZIO Holding”) or in connection with the involuntary termination of the Executive’s employment under the circumstances described in this Agreement.
The Company and the Executive agree as follows:
1.Term of Agreement. This Agreement will terminate upon the date that all of the obligations of the parties hereto with respect to this Agreement have been satisfied.
2.At-Will Employment. The Company and the Executive acknowledge that the Executive’s employment is and will continue to be at-will, as defined under applicable law.
3.Severance Benefits.
(a)Qualifying Non-CIC Termination. On a Qualifying Non-CIC Termination (as defined below), the Executive will be eligible to receive the following payments and benefits from the Company:
(i)Salary Severance. A single, lump sum payment equal to Executive’s Salary (as defined below) for a period equal to 12 months, less applicable withholdings.
(ii)COBRA Coverage. Subject to Section 3(d), the Company will pay the premiums for coverage under COBRA (as defined below) for the Executive and the Executive’s eligible dependents, if any, at the rates then in effect, subject to any subsequent changes in rates that are generally applicable to the Company’s active employees (the “COBRA Coverage”), until the earliest of (A) a period from the date of the Executive’s termination of employment equal to 12 months, (B) the date upon which the Executive (and the Executive’s eligible dependents, as applicable) becomes covered under similar plans, or (C) the date upon which the Executive ceases to be eligible for coverage under COBRA.
(b)Qualifying CIC Termination. On a Qualifying CIC Termination (as defined below), the Executive will be eligible to receive the following payments and benefits from the Company:
(i)Salary Severance. A single, lump sum payment equal to 18 months of the Executive’s Salary, less applicable withholdings.
(ii)Bonus Severance. A single, lump sum payment equal to 150% of the Executive’s target annual bonus as in effect for the fiscal year in which the Qualifying CIC Termination occurs, less applicable withholdings.




(iii)COBRA Coverage. Subject to Section 3(d), the Company will provide COBRA Coverage until the earliest of (A) a period of 18 months from the date of the Executive’s termination of employment, (B) the date upon which the Executive (and the Executive’s eligible dependents, as applicable) becomes covered under similar plans, or (C) the date upon which the Executive ceases to be eligible for coverage under COBRA.
(iv)Equity Vesting. Vesting acceleration (and exercisability, as applicable) as to 100% of the then-unvested shares subject to each of the Executive’s then-outstanding VIZIO Holding equity awards. In the case of an equity award with performance-based vesting, unless otherwise specified in the applicable equity award agreement governing such award, all performance goals and other vesting criteria will be deemed achieved at the greater of (A) actual achievement (if determinable), or (B) 100% of target levels. For the avoidance of doubt, in the event of the Executive’s Qualifying Pre-CIC Termination (as defined below), any unvested portion of the Executive’s then-outstanding equity awards will remain outstanding until the earlier of (x) 3 months following the Qualifying Termination (as defined below) or (y) the occurrence of a Change in Control, solely so that any benefits due on a Qualifying Pre-CIC Termination can be provided if a Change in Control occurs within 3 months following the Qualifying Termination (provided that in no event will the Executive’s stock options or similar equity awards remain outstanding beyond the equity award’s maximum term to expiration). If no Change in Control occurs within 3 months following a Qualifying Termination, any unvested portion of the Executive’s equity awards automatically and permanently will be forfeited on the 3-month anniversary of the day following the date of the Qualifying Termination without having vested.
(c)Termination Other Than a Qualifying Termination. If the termination of the Executive’s employment with the VIZIO Group (as defined below) is not a Qualifying Termination, then the Executive will not be entitled to receive severance or other benefits.
(d)Conditions to Receipt of COBRA Coverage. The Executive’s receipt of COBRA Coverage is subject to the Executive electing COBRA continuation coverage within the time period prescribed pursuant to COBRA for the Executive and the Executive’s eligible dependents, if any. If the Company determines in its sole discretion that it cannot provide the COBRA Coverage without potentially violating, or being subject to an excise tax under, applicable law (including, without limitation, Section 2716 of the Public Health Service Act), then in lieu of any COBRA Coverage, the Company will provide to the Executive a taxable monthly payment payable on the last day of a given month, in an amount equal to the monthly COBRA premium that the Executive would be required to pay to continue his or her group health coverage in effect on the date of his or her Qualifying Termination (which amount will be based on the premium rates applicable for the first month of COBRA Coverage for the Executive and any of eligible dependents of the Executive) (each, a “COBRA Replacement Payment”), which COBRA Replacement Payments will be made regardless of whether the Executive elects COBRA continuation coverage and will end on the earlier of (x) the date upon which the Executive obtains other employment or (y) the date the Company has paid an amount totaling the number of COBRA Replacement Payments equal to the number of months in the applicable COBRA Coverage period. For the avoidance of doubt, the COBRA Replacement Payments may be used for any purpose, including, but not limited to continuation coverage under COBRA, and will be subject to any applicable withholdings. Notwithstanding anything to the contrary under this Agreement, if the Company determines in its sole discretion at any time that it cannot provide the COBRA Replacement Payments without violating applicable law (including, without
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limitation, Section 2716 of the Public Health Service Act), the Executive will not receive the COBRA Replacement Payments or any further COBRA Coverage.
(e)Non-Duplication of Payment or Benefits. For purposes of clarity, in the event of a Qualifying Pre-CIC Termination, any severance payments and benefits to be provided to the Executive under Section 3(b) will be reduced by any amounts that already were provided to the Executive under Section 3(a). Notwithstanding any provision of this Agreement to the contrary, if the Executive is entitled to any cash severance, continued health coverage benefits, or vesting acceleration of any equity awards (other than under this Agreement) by operation of applicable law or under a plan, policy, contract, or arrangement sponsored by or to which any member of the VIZIO Group is a party (“Other Benefits”), then the corresponding severance payments and benefits under this Agreement will be reduced by the amount of Other Benefits paid or provided to the Executive.
(f)Death of the Executive. In the event of the Executive’s death before all payments or benefits the Executive is entitled to receive under this Agreement have been provided, the unpaid amounts will be provided to the Executive’s designated beneficiary, if living, or otherwise to the Executive’s personal representative in a single lump sum as soon as possible following the Executive’s death.
(g)Transfer Between Members of the VIZIO Group. For purposes of this Agreement, if the Executive is involuntarily transferred from one member of the VIZIO Group to another, the transfer will not be a termination without Cause (as defined below) but may give the Executive the ability to resign for Good Reason.
(h)Exclusive Remedy. In the event of a termination of the Executive’s employment with the VIZIO Group, the provisions of this Agreement are intended to be and are exclusive and in lieu of any other rights or remedies to which the Executive may otherwise be entitled, whether at law, tort or contract, or in equity. The Executive will be entitled to no benefits, compensation or other payments or rights upon termination of employment other than those benefits expressly set forth in this Agreement.
4.Accrued Compensation. On any termination of the Executive’s employment with the VIZIO Group, the Executive will be entitled to receive all accrued but unpaid vacation, expense reimbursements, wages, and other benefits due to the Executive under any Company-provided plans, policies, and arrangements. For avoidance of doubt, receipt of accrued compensation is not subject to the Release Requirement discussed in Section 5(a).
5.Conditions to Receipt of Severance.
(a)Separation Agreement and Release of Claims. The Executive’s receipt of any severance payments or benefits upon the Executive’s Qualifying Termination under Section 3 is subject to the Executive signing and not revoking the Company’s then-standard separation agreement and release of claims (which may include an agreement not to disparage any member of the VIZIO Group, non-solicit provisions, an agreement to assist in any litigation matters, and other standard terms and conditions) (the “Release” and that requirement, the “Release Requirement”), which must become effective and irrevocable no later than the 60th day following the Executive’s Qualifying Termination (the “Release Deadline”). If the Release does not become effective and irrevocable by the Release Deadline, the Executive will forfeit any right to severance payments or benefits under Section 3.
3



(b)Payment Timing. Any lump sum Salary or bonus payments under Sections 3(a)(i), 3(b)(i), and 3(b)(ii) will be provided on the first regularly scheduled payroll date of the Company following the date the Release becomes effective and irrevocable (the “Severance Start Date”), subject to any delay required by Section 5(d) below. Any taxable installments of any COBRA-related severance benefits that otherwise would have been made to the Executive on or before the Severance Start Date will be paid on the Severance Start Date, and any remaining installments thereafter will be provided as specified in the Agreement. Any restricted stock units, performance shares, performance units, and/or similar full value awards that accelerate vesting under Section 3(b)(iv) will be settled (x) on a date no later than 10 days following the date the Release becomes effective and irrevocable, or (y) if later, in the event of a Qualifying Pre-CIC Termination, on a date no later than the Change in Control.
(c)Return of VIZIO Group Property. The Executive’s receipt of any severance payments or benefits upon the Executive’s Qualifying Termination under Section 3 is subject to the Executive returning all documents and other property provided to the Executive by any member of the VIZIO Group (with the exception of a copy of the Company employee handbook and personnel documents specifically relating to the Executive), developed or obtained by the Executive in connection with his or her employment with the VIZIO Group, or otherwise belonging to the VIZIO Group.
(d)Section 409A. The Company intends that all payments and benefits provided under this Agreement or otherwise are exempt from, or comply with, the requirements of Section 409A of the Code (as defined below) and any guidance promulgated under Section 409A of the Code (collectively, “Section 409A”) so that none of the payments or benefits will be subject to the additional tax imposed under Section 409A, and any ambiguities in this Agreement will be interpreted in accordance with this intent. No payment or benefits to be paid to the Executive, if any, under this Agreement or otherwise, when considered together with any other severance payments or separation benefits that are considered deferred compensation under Section 409A (together, the “Deferred Payments”) will be paid or otherwise provided until the Executive has a “separation from service” within the meaning of Section 409A. If, at the time of the Executive’s termination of employment, the Executive is a “specified employee” within the meaning of Section 409A, then the payment of the Deferred Payments will be delayed to the extent necessary to avoid the imposition of the additional tax imposed under Section 409A, which generally means that the Executive will receive payment on the first payroll date that occurs on or after the date that is 6 months and 1 day following the Executive’s termination of employment. The Company reserves the right to amend this Agreement as it considers necessary or advisable, in its sole discretion and without the consent of the Executive or any other individual, to comply with any provision required to avoid the imposition of the additional tax imposed under Section 409A or to otherwise avoid income recognition under Section 409A prior to the actual payment of any benefits or imposition of any additional tax. Each payment, installment, and benefit payable under this Agreement is intended to constitute a separate payment for purposes of U.S. Treasury Regulation Section 1.409A-2(b)(2). In no event will any member of the VIZIO Group reimburse, indemnify, or hold harmless the Executive for any taxes, penalties and interest that may be imposed, or other costs that may be incurred, as a result of Section 409A.
(e)Resignation of Officer and Director Positions. The Executive’s receipt of any severance payments or benefits upon the Executive’s Qualifying Termination under Section 3 is subject to the Executive resigning from all officer and director positions with all members of
4



the VIZIO Group and the Executive executing any documents the Company may require in connection with the same.
6.Limitation on Payments.
(a)Reduction of Severance Benefits. If any payment or benefit that the Executive would receive from any VIZIO Group member or any other party whether in connection with the provisions in this Agreement or otherwise (the “Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Payment will be equal to the Best Results Amount. The “Best Results Amount” will be either (x) the full amount of the Payment or (y) a lesser amount that would result in no portion of the Payment being subject to the Excise Tax, whichever of those amounts, taking into account the applicable federal, state and local employment taxes, income taxes, and the Excise Tax, results in the Executive’s receipt, on an after-tax basis, of the greater amount. If a reduction in payments or benefits constituting parachute payments is necessary so that the Payment equals the Best Results Amount, reduction will occur in the following order: (A) reduction of cash payments in reverse chronological order (that is, the cash payment owed on the latest date following the occurrence of the event triggering the excise tax will be the first cash payment to be reduced); (B) cancellation of equity awards that were granted “contingent on a change in ownership or control” within the meaning of Section 280G of the Code in the reverse order of date of grant of the awards (that is, the most recently granted equity awards will be cancelled first); (C) reduction of the accelerated vesting of equity awards in the reverse order of date of grant of the awards (that is, the vesting of the most recently granted equity awards will be cancelled first); and (D) reduction of employee benefits in reverse chronological order (that is, the benefit owed on the latest date following the occurrence of the event triggering the excise tax will be the first benefit to be reduced). In no event will the Executive have any discretion with respect to the ordering of Payment reductions. The Executive will be solely responsible for the payment of all personal tax liability that is incurred as a result of the payments and benefits received under this Agreement, and the Executive will not be reimbursed, indemnified, or held harmless by any member of the VIZIO Group for any of those payments of personal tax liability.
(b)Determination of Excise Tax Liability. Unless the Company and the Executive otherwise agree in writing, the Company will select a professional services firm (the “Firm”) to make all determinations required under this Section 6, which determinations will be conclusive and binding upon the Executive and the Company for all purposes. For purposes of making the calculations required by this Section 6, the Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Executive will furnish to the Firm such information and documents as the Firm reasonably may request in order to make determinations under this Section 6. The Company will bear the costs and make all payments for the Firm’s services in connection with any calculations contemplated by this Section 6. The Company will have no liability to the Executive for the determinations of the Firm.
7.Definitions. The following terms referred to in this Agreement will have the following meanings:
(a)“Board” means VIZIO Holding’s Board of Directors.
5



(b)“Business Day” means any day that is not a Saturday, a Sunday or other day on which federal banks are required or authorized by law to be closed.
(c)“Cause” means that the Executive has:
(i)been convicted of or pled guilty or no contest to a felony under federal or state law, or of a misdemeanor involving fraud, moral turpitude or embezzlement;
(ii)committed an intentional act of fraud, embezzlement, theft, dishonesty or any intentional material violation of law that occurs during or in the course of employment with any VIZIO Group member, including any material violation of any securities law, which has or may reasonably be expected to result in economic or financial injury, or have a material adverse effect upon, any VIZIO Group member;
(iii)intentionally disclosed confidential or proprietary information of any VIZIO Group member contrary to the Employment Agreement, the EPIIA, or the policies of any VIZIO Group member or in breach of any nondisclosure or confidentiality agreement between any VIZIO Group member and the Executive;
(iv)breached the Executive’s material obligations under the Employment Agreement or the EPIIA;
(v)intentionally engaged in any competitive activity that would constitute a breach of obligations under the Employment Agreement or the EPIIA;
(vi)intentionally breached any of the material written policies of any VIZIO Group member, including but not limited to its Code of Conduct and Employee Handbook;
(vii)failed to substantially perform the lawful duties and responsibilities for the applicable VIZIO Group member under the Employment Agreement (other than as a result of incapacity due to physical or mental illness, or any such actual or anticipated failure after the Executive’s issuance of a notice of termination for Good Reason); or
(viii)willfully engaged in conduct that is demonstrably and materially injurious to any VIZIO Group member, monetarily or otherwise;
provided, however, in the case of subsections (iii) through (viii), the Executive will have received written demand from the applicable VIZIO Group member or the Board for substantial performance, which specifically identifies the conduct giving rise to the Cause and the Executive will have not cured the same within 30 Business Days of the Executive’s receipt of such notice (or, if able to be cured and the cure reasonably requires longer than 30 Business Days, then within such longer reasonable period, provided the Executive promptly undertakes action to cure and diligently pursues the same until cured), provided, however, with respect to subsequent identical or substantially similar failures, the right to cure will only extend to the first such failure. For purposes of this Section 7(c), any act, or a failure to act, will not be deemed willful or intentional, as those terms are used herein, unless it is done, or omitted to be done, by the Executive in bad faith or without a reasonable belief that the Executive’s action or omission was in the best interest of the VIZIO Group. Failure to meet performance standards or objectives, by itself, does not constitute Cause (provided that such directions do not require the Executive to
6



take any actions that the Executive reasonably believes to be unlawful after a reasonable inquiry).
For purposes of this provision, no act or failure to act on the part of the Executive will be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the VIZIO Group. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company will be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the VIZIO Group. [CEO only: The termination of the Executive’s employment will not be deemed to be for Cause unless and until there has been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than two-thirds of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of any of the conduct above, and specifying the particulars thereof in detail.]
“Change in Control” means the occurrence of any of the following events:
(ix)A change in the ownership of VIZIO Holding which occurs on the date that any one person, or more than one person acting as a group (“Person”), acquires ownership of the stock of VIZIO Holding that, together with the stock held by such Person, constitutes more than 50% of the total voting power of the stock of VIZIO Holding; provided, however, that for purposes of this subsection, (i) the acquisition of additional stock by any one Person, who is considered to own more than 50% of the total voting power of the stock of VIZIO Holding will not be considered a Change in Control, and (ii) if the stockholders of VIZIO Holding immediately before such change in ownership continue to retain immediately after the change in ownership, in substantially the same proportions as their ownership of shares of VIZIO Holding’s voting stock immediately prior to the change in ownership, the direct or indirect beneficial ownership of 50% or more of the total voting power of the stock of VIZIO Holding or of the ultimate parent entity of VIZIO Holding, such event will not be considered a Change in Control under this subsection (i). For this purpose, indirect beneficial ownership will include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own VIZIO Holding, as the case may be, either directly or through one or more subsidiary corporations or other business entities; or
(x)A change in the effective control of VIZIO Holding which occurs on the date that a majority of members of the Board is replaced during any 12-month period by Board members whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this subsection (ii), if any Person is considered to be in effective control of VIZIO Holding, the acquisition of additional control of VIZIO Holding by the same Person will not be considered a Change in Control; or
(xi)A change in the ownership of a substantial portion of VIZIO Holding’s assets which occurs on the date that any Person acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from VIZIO Holding that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of VIZIO Holding immediately
7



prior to such acquisition or acquisitions; provided, however, that for purposes of this subsection (iii), the following will not constitute a change in the ownership of a substantial portion of VIZIO Holding’s assets: (A) a transfer to an entity that is controlled by VIZIO Holding’s stockholders immediately after the transfer, or (B) a transfer of assets by VIZIO Holding to: (1) a stockholder of VIZIO Holding (immediately before the asset transfer) in exchange for or with respect to VIZIO Holding’s stock, (2) an entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by VIZIO Holding, (3) a Person, that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of VIZIO Holding, or (4) an entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a Person described in this subsection (iii)(B)(3). For purposes of this subsection (iii), gross fair market value shall mean the value of the assets of VIZIO Holding, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
For purposes of this definition, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with VIZIO Holding.
Notwithstanding the foregoing, a transaction will not be deemed a Change in Control unless the transaction qualifies as a change in control event within the meaning of Section 409A.
Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (x) its sole purpose is to change the state of VIZIO Holding’s incorporation, or (y) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held VIZIO Holding’s securities immediately before such transaction.
(d) “Change in Control Period” means the period beginning 3 months prior to a Change in Control and ending 18 months following a Change in Control.
(e)“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(f)“Code” means the Internal Revenue Code of 1986, as amended.
(g)“VIZIO Group” means VIZIO Holding and its subsidiaries.
(h)“Disability” means a total and permanent disability as defined in Section 22(e)(3) of the Code.
(i)“Employment Agreement” means the employment letter agreement by and between the Company and the Executive dated [ ] (or any other agreement that sets forth the terms of the Executive’s employment with any member of the VIZIO Group), as may be amended from time to time.
(j)“EPIIA” means the Employee Proprietary Information and Inventions Agreement between the Company and the Executive.
8



(k)“Good Reason” means the termination of the Executive’s employment with any VIZIO Group member by the Executive in accordance with the last paragraph of this Section 7(l) after the occurrence of one or more of the following events without the Executive’s express written consent:
(i)the material reduction, without the Executive’s consent, in the Executive’s Base Salary (other than a reduction in Base Salary implemented as part of a decrease of base compensation of all officers of the applicable VIZIO Group member, and then by no greater percentage as the percentage decrease in the base compensation of all such officers);
(ii)the material diminution, without the Executive’s consent, of the Executive’s authority, duties, responsibilities, or title (other than a temporary suspension of authority, duties or responsibilities due to the Executive’s illness or disability, or an investigation of misconduct), or the assignment to the Executive, without the consent of the Executive, of any duties materially inconsistent with the Executive’s position, authority, duties or responsibilities (including status, offices, titles and reporting requirements);
(iii)the applicable VIZIO Group member’s material breach of the Employment Agreement;
(iv)the failure of any successor to the Company (whether by merger, acquisition, consolidation, reorganization or otherwise) to assume, upon the successor becoming such, the obligations of the Company hereunder; and/or
(v)a material change in the geographic location of the Executive’s principal place of employment to a location more than 50 miles from the Company’s Irvine, California offices.
For purposes of interpreting Section 7(l)(ii), following a Change in Control, the Executive will have experienced a material diminution in his or her “authority, duties or responsibilities” if he or she does not serve in the capacity with titles and offices of the Ultimate Parent Entity that are comparable to those set forth in the Employment Agreement and his or her duties or authority is not customary for that position (or an equivalent position, and the duties and authority customary for that position).
The Executive’s resignation will only constitute a resignation for Good Reason hereunder if (x) the Executive provides the Company with a written notice of termination within 60 days following the initial existence of the action or event that the Executive believes gives rise to Good Reason, (y) the applicable VIZIO Group member has failed to cure the same within 30 Business Days of its receipt of such notice (or, if able to be cured and the cure reasonably requires longer than 30 Business Days, then within such longer reasonable period, provided the applicable VIZIO Group member promptly undertakes action to cure and diligently pursues the same until cured), and (z) the date of termination occurs no later than 110 days after the later of (a) the initial occurrence of the action or event constituting Good Reason or (b) the date on which the Executive learns or reasonably should have learned of such action or event (but in no event later than 2 years after the initial occurrence of the action or event constituting Good Reason). The applicable VIZIO Group member may relieve the Executive of some or all of his or her authority, duties and responsibilities during any notice period, and such relief will not serve as a basis for the Executive to claim “Good Reason.”
9



(l)“Qualifying Pre-CIC Termination” means a Qualifying CIC Termination that occurs prior to the date of the Change in Control.
(m)“Qualifying Termination” means a termination of the Executive’s employment either (i) by a VIZIO Group member without Cause (excluding by reason of the Executive’s death or Disability), or (ii) by the Executive for Good Reason, in either case, during the Change in Control Period (a “Qualifying CIC Termination”) or outside of the Change in Control Period (a “Qualifying Non-CIC Termination”).
(n)“Salary” means the Executive’s annual base salary as in effect immediately prior to the Executive’s Qualifying Termination (or if the termination is due to a resignation for Good Reason based on a material reduction in base salary, then the Executive’s annual base salary in effect immediately prior to the reduction) or, if the Executive’s Qualifying Termination is a Qualifying CIC Termination and the amount is greater, at the level in effect immediately prior to the Change in Control.
(o)“Ultimate Parent Entity” means the highest entity in an unbroken chain of entities ending with the surviving corporation (in the event of a merger) or the acquiring entity (in the case of an acquisition or sale of assets); provided that each entity in the unbroken chain owns, at the time of the determination, securities possessing 50% or more of the total combined voting power of all classes of securities in one of the other entities in such chain.
8.Successors. This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors, and legal representatives of the Executive upon the Executive’s death, and (b) any successor of the Company. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, “successor” means any person, firm, corporation, or other business entity which at any time, whether by purchase, merger, or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company. None of the rights of the Executive to receive any form of compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution. Any other attempted assignment, transfer, conveyance, or other disposition of the Executive’s right to compensation or other benefits will be null and void.
9.Notice.
(a)General. All notices and other communications required or permitted under this Agreement will be in writing and will be effectively given (i) upon actual delivery to the party to be notified; (ii) upon transmission by email; (iii) 24 hours after confirmed facsimile transmission; (iv) 1 business day after deposit with a recognized overnight courier; or (v) 3 business days after deposit with the U.S. Postal Service by first class certified or registered mail, return receipt requested, postage prepaid, addressed (A) if to the Executive, at the address the Executive will have most recently furnished to the Company in writing, (B) if to the Company, at the following address:
VIZIO, Inc.
39 Tesla
Irvine, California 92618
Attention: General Counsel
10



(b)Notice of Termination. Any termination by a VIZIO Group member for Cause will be communicated by a notice of termination to the Executive, and any termination by the Executive for Good Reason will be communicated by a notice of termination to the Company, in each case given in accordance with Section 9(a) of this Agreement. The notice will indicate the specific termination provision in this Agreement relied upon, will set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and will specify the termination date (which will be not more than 30 days after the later of (i) the giving of the notice or (ii) the end of any applicable cure period).
10.Resignation. The termination of the Executive’s employment for any reason will also constitute, without any further required action by the Executive, the Executive’s voluntary resignation from all officer and/or director positions held at any member of the VIZIO Group, and at the Board’s request, the Executive will execute any documents reasonably necessary to reflect the resignations.
11.Miscellaneous Provisions.
(a)No Duty to Mitigate. The Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any payment be reduced by any earnings that the Executive may receive from any other source except as specified in Section 3(e).
(b)Waiver; Amendment. No provision of this Agreement will be modified, waived, or discharged unless the modification, waiver, or discharge is agreed to in writing and signed by an authorized officer of the Company (other than the Executive) and by the Executive. No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party will be considered a waiver of any other condition or provision or of the same condition or provision at another time.
(c)Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.
(d)Entire Agreement. This Agreement constitutes the entire agreement of the parties and supersedes in their entirety all prior representations, understandings, undertakings, or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter of this Agreement, including, for the avoidance of doubt, any other employment letter or agreement, severance policy or program, or equity award agreement [including for the avoidance of doubt the Change in Control and Severance Agreement entered into by and between the Executive and VIZIO, Inc. as of [ ], which is hereby superseded in its entirety].
(e)Choice of Law. This Agreement will be governed by the laws of the State of California without regard to California’s conflicts of law rules that may result in the application of the laws of any jurisdiction other than California. To the extent that any lawsuit is permitted under this Agreement, the Executive hereby expressly consents to the personal and exclusive jurisdiction and venue of the state and federal courts located in California for any lawsuit filed against the Executive by the Company.
11



(f)Severability. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect.
(g)Withholding. All payments and benefits under this Agreement will be paid less applicable withholding taxes. The Company is authorized to withhold from any payments or benefits all federal, state, local, and/or foreign taxes required to be withheld from the payments or benefits and make any other required payroll deductions. No member of the VIZIO Group will pay the Executive’s taxes arising from or relating to any payments or benefits under this Agreement.
(h)Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

[Signature page follows.]

12



By its signature below, each of the parties signifies its acceptance of the terms of this Agreement, in the case of the Company by its duly authorized officer.
COMPANY        
VIZIO, INC.


By:             
Title:     
Date:     

EXECUTIVE

            

Date:     




[Signature page to Change in Control and Severance Agreement]
13


Exhibit 31.1


CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William Wang, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of VIZIO Holding Corp.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 9, 2023By:/s/ William Wang
William Wang
Chief Executive Officer


Exhibit 31.2


CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Adam Townsend, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of VIZIO Holding Corp.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 9, 2023By:/s/ Adam Townsend
Adam Townsend
Chief Financial Officer


Exhibit 32.1


CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, I, William Wang, Chief Executive Officer of VIZIO Holding Corp. (“the Company”), hereby certify, that, to my knowledge:
(1)    The Quarterly Report on Form 10-Q for the period ended September 30, 2023 (the “Report”) fully complies with the requirements of section Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 9, 2023By:/s/ William Wang
William Wang
Chief Executive Officer


Exhibit 32.2


CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, I, Adam Townsend, Chief Financial Officer of VIZIO Holding Corp. (“the Company”), hereby certify, that, to my knowledge:
(1)    The Quarterly Report on Form 10-Q for the period ended September 30, 2023 (the “Report”) fully complies with the requirements of section Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 9, 2023By:/s/ Adam Townsend
Adam Townsend
Chief Financial Officer

v3.23.3
Cover - shares
 9 Months Ended
Sep. 30, 2023
Nov. 03, 2023
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2023  
Document Transition Report false  
Entity File Number 001-40271  
Entity Registrant Name VIZIO HOLDING CORP.  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 85-4185335  
Entity Address, Address Line One 39 Tesla  
Entity Address, City or Town Irvine  
Entity Address, State or Province CA  
City Area Code 949  
Local Phone Number 428-2525  
Entity Address, Postal Zip Code 92618  
Title of 12(b) Security Class A common stock, par value $0.0001 per share  
Trading Symbol VZIO  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Central Index Key 0001835591  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2023  
Document Fiscal Period Focus Q3  
Amendment Flag false  
Class A common stock    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   121,016,127
Class B common stock    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   76,180,453
Class C common stock    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   0
v3.23.3
Condensed Consolidated Balance Sheets - USD ($)
$ in Millions
Sep. 30, 2023
Dec. 31, 2022
Current assets:    
Cash and cash equivalents $ 215.5 $ 288.7
Short-term investments 119.4 58.9
Accounts receivable, net 345.6 357.9
Inventories 17.6 15.5
Income tax receivable 0.0 1.7
Prepaid and other current assets 54.4 53.5
Total current assets 752.5 778.4
Property, equipment and software, net 19.9 19.9
Goodwill 44.8 44.8
Deferred income taxes 51.2 51.2
Other assets 38.4 21.4
Total assets 906.8 915.7
Current liabilities:    
Accrued expenses 175.8 204.9
Accrued royalties 40.8 47.4
Income taxes payable 1.0 0.0
Other current liabilities 6.7 5.5
Total current liabilities 466.1 523.2
Other long-term liabilities 19.2 18.8
Total liabilities 485.3 542.0
Commitments and contingencies (Note 11)
Stockholders’ equity:    
Preferred stock 0.0 0.0
Common stock 0.0 0.0
Additional paid-in capital 399.8 366.9
Accumulated other comprehensive loss (0.4) (0.3)
Retained earnings 22.1 7.1
Total stockholders’ equity 421.5 373.7
Total liabilities and stockholders’ equity 906.8 915.7
Related Party    
Current assets:    
Other receivables due from related parties 0.0 2.2
Current liabilities:    
Accounts payable 104.5 148.2
Nonrelated Party    
Current liabilities:    
Accounts payable $ 137.3 $ 117.2
v3.23.3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Sep. 30, 2023
Dec. 31, 2022
Stockholders’ equity:    
Preferred stock, par value (in dollars per share) $ 0.0001 $ 0.0001
Preferred stock, authorized (in shares) 100,000,000 100,000,000.0
Preferred stock, issued (in shares) 0 0
Preferred stock, outstanding (in shares) 0 0
Common stock, par value (in dollars per share) $ 0.0001 $ 0.0001
Common stock, authorized (in shares) 1,350,000,000 1,350,000,000
Class A common stock    
Stockholders’ equity:    
Common stock, issued (in shares) 124,800,000 121,900,000
Common stock, outstanding (in shares) 121,000,000.0 118,100,000
Class B common stock    
Stockholders’ equity:    
Common stock, issued (in shares) 76,200,000 76,800,000
Common stock, outstanding (in shares) 76,200,000 76,800,000
Class C common stock    
Stockholders’ equity:    
Common stock, issued (in shares) 0 0
Common stock, outstanding (in shares) 0 0
v3.23.3
Condensed Consolidated Statements of Operations - USD ($)
shares in Millions, $ in Millions
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Net revenue:        
Total net revenue $ 426.2 $ 435.0 $ 1,177.3 $ 1,329.3
Cost of goods sold:        
Total cost of goods sold 329.7 354.9 919.2 1,102.5
Gross profit:        
Total gross profit 96.5 80.1 258.1 226.8
Operating expenses:        
Selling, general and administrative 63.6 54.8 180.4 167.5
Marketing 9.2 8.8 26.9 31.3
Research and development 9.8 10.8 31.7 29.4
Depreciation and amortization 1.2 1.0 3.3 2.8
Total operating expenses 83.8 75.4 242.3 231.0
Income (loss) from operations 12.7 4.7 15.8 (4.2)
Interest income, net 3.5 0.4 9.0 0.4
Other (expense) income, net (0.1) 0.1 0.1 (0.6)
Total non-operating income (expense), net 3.4 0.5 9.1 (0.2)
Income (loss) before income taxes 16.1 5.2 24.9 (4.4)
Provision for income taxes 2.3 3.2 9.9 2.3
Net income (loss) $ 13.8 $ 2.0 $ 15.0 $ (6.7)
Net income (loss) per share attributable to Class A and Class B stockholders:        
Basic (in dollars per share) $ 0.07 $ 0.01 $ 0.08 $ (0.03)
Diluted (in dollars per share) $ 0.07 $ 0.01 $ 0.08 $ (0.03)
Weighted-average Class A and Class B common shares outstanding:        
Basic (in shares) 196.7 193.8 196.0 192.6
Diluted (in shares) 199.9 200.2 200.2 192.6
Device        
Net revenue:        
Total net revenue $ 270.0 $ 307.0 $ 753.4 $ 987.9
Cost of goods sold:        
Total cost of goods sold 273.3 305.8 754.7 974.8
Gross profit:        
Total gross profit (3.3) 1.2 (1.3) 13.1
Platform+        
Net revenue:        
Total net revenue 156.2 128.0 423.9 341.4
Cost of goods sold:        
Total cost of goods sold 56.4 49.1 164.5 127.7
Gross profit:        
Total gross profit $ 99.8 $ 78.9 $ 259.4 $ 213.7
v3.23.3
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Millions
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Statement of Comprehensive Income [Abstract]        
Net income (loss) $ 13.8 $ 2.0 $ 15.0 $ (6.7)
Other comprehensive loss:        
Foreign currency translation adjustments 0.0 (0.1) (0.1) (0.1)
Comprehensive income (loss) $ 13.8 $ 1.9 $ 14.9 $ (6.8)
v3.23.3
Condensed Consolidated Statements of Stockholders' Equity - USD ($)
$ in Millions
Total
Class A common stock
Class B common stock
Preferred Stock
Common Stock
Class A common stock
Common Stock
Class B common stock
Additional Paid-In Capital
Accumulated Other Comprehensive Loss
Retained Earnings (Accumulated Deficit)
Preferred stock, beginning balance (in shares) at Dec. 31, 2021 [1]       0          
Common stock, beginning balance (in shares) at Dec. 31, 2021 [1],[2]         113,200,000 76,800,000      
Beginning balance at Dec. 31, 2021 $ 330.6     $ 0.0 [1]     $ 323.3 $ (0.2) $ 7.5
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Share-based compensation expense 16.5           16.5    
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes) (in shares) [1],[2]         2,600,000        
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes) (6.7)           (6.7)    
Net income (loss) (11.0)               (11.0)
Preferred stock, ending balance (in shares) at Mar. 31, 2022 [1]       0          
Common stock, ending balance (in shares) at Mar. 31, 2022 [1],[2]         115,800,000 76,800,000      
Ending balance at Mar. 31, 2022 329.4     $ 0.0 [1]     333.1 (0.2) (3.5)
Preferred stock, beginning balance (in shares) at Dec. 31, 2021 [1]       0          
Common stock, beginning balance (in shares) at Dec. 31, 2021 [1],[2]         113,200,000 76,800,000      
Beginning balance at Dec. 31, 2021 330.6     $ 0.0 [1]     323.3 (0.2) 7.5
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Foreign currency translation (0.1)                
Net income (loss) (6.7)                
Preferred stock, ending balance (in shares) at Sep. 30, 2022 [1]       0          
Common stock, ending balance (in shares) at Sep. 30, 2022 [1],[2]         117,500,000 76,800,000      
Ending balance at Sep. 30, 2022 356.5     $ 0.0 [1]     356.0 (0.3) 0.8
Preferred stock, beginning balance (in shares) at Mar. 31, 2022 [1]       0          
Common stock, beginning balance (in shares) at Mar. 31, 2022 [1],[2]         115,800,000 76,800,000      
Beginning balance at Mar. 31, 2022 329.4     $ 0.0 [1]     333.1 (0.2) (3.5)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Share-based compensation expense 6.4           6.4    
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes) (in shares) [1],[2]         800,000        
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes) 3.3           3.3    
Net income (loss) 2.3               2.3
Preferred stock, ending balance (in shares) at Jun. 30, 2022 [1]       0          
Common stock, ending balance (in shares) at Jun. 30, 2022 [1],[2]         116,600,000 76,800,000      
Ending balance at Jun. 30, 2022 341.4     $ 0.0 [1]     342.8 (0.2) (1.2)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Share-based compensation expense 11.0           11.0    
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes) (in shares) [1],[2]         900,000        
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes) 2.2           2.2    
Foreign currency translation (0.1)             (0.1)  
Net income (loss) 2.0               2.0
Preferred stock, ending balance (in shares) at Sep. 30, 2022 [1]       0          
Common stock, ending balance (in shares) at Sep. 30, 2022 [1],[2]         117,500,000 76,800,000      
Ending balance at Sep. 30, 2022 $ 356.5     $ 0.0 [1]     356.0 (0.3) 0.8
Preferred stock, beginning balance (in shares) at Dec. 31, 2022 0     0 [1]          
Common stock, beginning balance (in shares) at Dec. 31, 2022   118,100,000 76,800,000   118,100,000 [1],[2] 76,800,000 [1],[2]      
Beginning balance at Dec. 31, 2022 $ 373.7     $ 0.0 [1]     366.9 (0.3) 7.1
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Share-based compensation expense 8.0           8.0    
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes) (in shares) [1],[2]         600,000        
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes) 1.7           1.7    
Foreign currency translation 0.0                
Net income (loss) (0.7)               (0.7)
Preferred stock, ending balance (in shares) at Mar. 31, 2023 [1]       0          
Common stock, ending balance (in shares) at Mar. 31, 2023 [1],[2]         118,700,000 76,800,000      
Ending balance at Mar. 31, 2023 $ 382.7     $ 0.0 [1]     376.6 (0.3) 6.4
Preferred stock, beginning balance (in shares) at Dec. 31, 2022 0     0 [1]          
Common stock, beginning balance (in shares) at Dec. 31, 2022   118,100,000 76,800,000   118,100,000 [1],[2] 76,800,000 [1],[2]      
Beginning balance at Dec. 31, 2022 $ 373.7     $ 0.0 [1]     366.9 (0.3) 7.1
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Foreign currency translation (0.1)                
Net income (loss) $ 15.0                
Preferred stock, ending balance (in shares) at Sep. 30, 2023 0     0 [1]          
Common stock, ending balance (in shares) at Sep. 30, 2023   121,000,000.0 76,200,000   121,000,000.0 [1],[2] 76,200,000 [1],[2]      
Ending balance at Sep. 30, 2023 $ 421.5     $ 0.0 [1]     399.8 (0.4) 22.1
Preferred stock, beginning balance (in shares) at Mar. 31, 2023 [1]       0          
Common stock, beginning balance (in shares) at Mar. 31, 2023 [1],[2]         118,700,000 76,800,000      
Beginning balance at Mar. 31, 2023 382.7     $ 0.0 [1]     376.6 (0.3) 6.4
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Share-based compensation expense 9.7           9.7    
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes) (in shares) [1],[2]         900,000        
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes) 1.1           1.1    
Foreign currency translation (0.1)             (0.1)  
Net income (loss) 1.9               1.9
Preferred stock, ending balance (in shares) at Jun. 30, 2023 [1]       0          
Common stock, ending balance (in shares) at Jun. 30, 2023 [1],[2]         119,600,000 76,800,000      
Ending balance at Jun. 30, 2023 395.3     $ 0.0 [1]     387.4 (0.4) 8.3
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Share-based compensation expense 12.1           12.1    
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes) (in shares) [1],[2]         800,000        
Shares issued pursuant to incentive award plans (net of shares in lieu of taxes) 0.3           0.3    
Foreign currency translation 0.0                
Conversion of class B shares into class A shares (in shares) [1],[2]         600,000 (600,000)      
Net income (loss) $ 13.8               13.8
Preferred stock, ending balance (in shares) at Sep. 30, 2023 0     0 [1]          
Common stock, ending balance (in shares) at Sep. 30, 2023   121,000,000.0 76,200,000   121,000,000.0 [1],[2] 76,200,000 [1],[2]      
Ending balance at Sep. 30, 2023 $ 421.5     $ 0.0 [1]     $ 399.8 $ (0.4) $ 22.1
[1] There were no shares of Preferred Stock or Class C common stock issued or outstanding as of September 30, 2023 and September 30, 2022.
[2] As of both September 30, 2023 and December 31, 2022, the par value on common stock outstanding was $20 thousand
v3.23.3
Condensed Consolidated Statements of Stockholders' Equity (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Common Stock    
Par value on common stock outstanding $ 20 $ 20
v3.23.3
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Millions
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Cash flows from operating activities:    
Net income (loss) $ 15.0 $ (6.7)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:    
Depreciation and amortization 5.6 2.8
Amortization of premium and discount on investments (3.3) (0.3)
Change in fair value of investment securities 0.0 0.7
Deferred income taxes 0.0 (0.2)
Share-based compensation expense 30.4 34.0
Change in allowance for doubtful accounts 0.9 (0.1)
Changes in operating assets and liabilities:    
Accounts receivable 11.4 35.5
Other receivables due from related parties 2.2 4.3
Inventories (2.1) (22.2)
Income taxes receivable 1.7 (2.9)
Prepaid and other current assets (3.7) 29.0
Other assets (15.5) (4.3)
Accounts payable due to related parties (43.7) (58.5)
Accounts payable 19.4 (3.5)
Accrued expenses (29.4) 6.8
Accrued royalties (6.6) (13.1)
Income taxes payable 1.0 0.0
Other current liabilities 1.2 0.3
Other long-term liabilities 0.4 6.2
Net cash (used in) provided by operating activities (15.1) 7.8
Cash flows from investing activities:    
Purchase of property and equipment (2.0) (11.7)
Purchase of investments (164.5) (60.5)
Maturity of investments 105.9 0.0
Net cash used in investing activities (60.6) (72.2)
Cash flows from financing activities:    
Proceeds from the exercise of stock options 1.9 10.7
Withholding taxes paid on behalf of employees on net settled share-based awards (0.6) (12.0)
Proceeds from sale of stock under ESPP 1.2 0.0
Net cash provided by (used in) financing activities 2.5 (1.3)
Effects of exchange rate changes on cash and cash equivalents 0.0 0.0
Net decrease in cash and cash equivalents (73.2) (65.7)
Cash and cash equivalents at beginning of period 288.7 331.6
Cash and cash equivalents at end of period 215.5 265.9
Supplemental disclosure of cash flow information:    
Cash paid for income taxes 5.1 4.2
Cash paid for interest 0.1 0.2
Cash paid for amounts included in the measurement of operating lease liabilities 3.3 2.5
Supplemental disclosure of non-cash investing and financing activities:    
Right-of-use assets obtained in exchange for new operating lease liabilities 1.8 6.1
Additions to property and equipment financed by accounts payable $ 0.7 $ 0.0
v3.23.3
Organization and Nature of Business
 9 Months Ended
Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Nature of Business 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 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.
v3.23.3
Summary of Significant Accounting Policies
 9 Months Ended
Sep. 30, 2023
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies 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 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, 2022 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, 2022 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, 2023.
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, 2022.
v3.23.3
Net Revenue
 9 Months Ended
Sep. 30, 2023
Revenue from Contract with Customer [Abstract]  
Net Revenue 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, 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 retailers under terms that allow the retailer 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 September 30, 2023 and December 31, 2022, the Company recorded $26.1 million and $22.0 million of contract assets, respectively. As of September 30, 2023, $24.3 million and $1.8 million of contract assets were recorded in other current assets and other assets, respectively, in the accompanying condensed consolidated balance sheets. As of December 31, 2022, all contract assets were recorded in other current assets in the accompanying condensed consolidated balance sheets. As of September 30, 2023 the Company recorded $2.7 million of contract liabilities, which are recorded in other current liabilities in the accompanying condensed consolidated balance sheets. There were no material contract liabilities as of December 31, 2022. 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 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
September 30,		Nine Months Ended
September 30,
2023202220232022
Net revenue:
Customer A37 %36 %35 %38 %
Customer B7 10 10 12 
Customer C7 8 8 10 
Customer D3 10 3 8 
Customer A and Customer B are affiliates under common control with one another. Collectively, they comprised 44% and 45% of the Company’s net revenue for the three and nine months ended September 30, 2023, and 46% and 50% of the Company’s net revenue for the three and nine months ended September 30, 2022, respectively.
v3.23.3
Investments
 9 Months Ended
Sep. 30, 2023
Investments, Debt and Equity Securities [Abstract]  
Investments InvestmentsThe Company’s investments consist of U.S. Treasury bills 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, 2023, 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, 2023 and September 30, 2022, the Company did not recognize any impairment losses related to these securities.
The following tables summarize the Company’s Short-term investments:
September 30, 2023
Maturity Amortized CostsGross Unrealized Gains Gross Unrealized LossesEstimated Fair Value
(In millions)
U.S. Treasury bills
1 year or less
$119.4 $— $(0.2)$119.2 
Total $119.4 $— $(0.2)$119.2 
December 31, 2022
Maturity Amortized CostsGross Unrealized Gains Gross Unrealized LossesEstimated Fair Value
(In millions)
U.S. Treasury bills
1 year or less
$58.9 $— $(0.2)$58.7 
Total $58.9 $— $(0.2)$58.7 
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.
v3.23.3
Accounts Receivable
 9 Months Ended
Sep. 30, 2023
Receivables [Abstract]  
Accounts Receivable Accounts Receivable
Accounts receivable consists of the following:
September 30,
2023		December 31,
2022
(In millions)
Accounts receivable$346.7 $358.1 
Allowance for doubtful accounts(1.1)(0.2)
Total accounts receivable, net of allowance$345.6 $357.9 
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, 2023, the Company recorded bad debt expense of $0.2 million and $0.9 million, respectively. During the three and nine months ended September 30, 2022, the Company recorded a reduction of bad debt expense of $2.8 million and $0.1 million, respectively, due to a recovery.
The following customers account for more than 10% of accounts receivable:
September 30,
2023		December 31,
2022
Net receivables:
Customer A37 %38 %
Customer B5 12 
Customer A and Customer B are affiliates under common control with one another. Their collective accounts receivable balance as of September 30, 2023 and December 31, 2022 was 42% and 50% of our total net receivables, respectively.
v3.23.3
Inventories
 9 Months Ended
Sep. 30, 2023
Inventory Disclosure [Abstract]  
Inventories Inventories
Inventories consist of the following:
September 30,
2023		December 31,
2022
(In millions)
Inventory on hand$12.0 $12.6 
Inventory in transit - outbound4.4 2.9 
Inventory in transit - inbound1.2 — 
Total inventory$17.6 $15.5 
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
September 30,		Nine Months Ended
September 30,
2023202220232022
Inventory purchases:
Supplier A — related party34 %43 %35 %46 %
Supplier B 19 25 20 23 
Supplier C 36 12 31 13 
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 $0.7 million and $3.0 million due from these manufacturers as of September 30, 2023 and December 31, 2022, 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 $2.3 million and $4.5 million for the three and nine months ended September 30, 2023 and $2.2 million and $3.7 million for the three and nine months ended September 30, 2022. These amounts are recorded in Cost of goods sold in the accompanying condensed consolidated statements of operations.
v3.23.3
Property, Equipment and Software, Net
 9 Months Ended
Sep. 30, 2023
Property, Plant and Equipment [Abstract]  
Property, Equipment and Software, Net Property, Equipment and Software, Net
Property, equipment and software, net consist of the following:
September 30,
2023		December 31,
2022
(In millions)
Building$10.2 $10.1 
Machinery and equipment1.2 2.0 
Leasehold improvements8.0 4.2 
Furniture and fixtures4.9 4.7 
Computer and software16.2 17.7 
Construction in progress0.9 4.8 
Total property, equipment and software41.4 43.5 
Less accumulated depreciation and amortization(21.5)(23.6)
Total property, equipment and software, net$19.9 $19.9 
Depreciation and amortization expense was $1.9 million and $5.6 million for the three and nine months ended September 30, 2023 and $1.0 million and $2.5 million for the three and nine months ended September 30, 2022, respectively.
Disposal of fully depreciated assets reduced property, equipment and software and accumulated depreciation and amortization by $7.7 million with no impact to the income statement for the three and nine months ended September 30, 2023. There were no material disposals for the year ended December 31, 2022.
v3.23.3
Accrued Expenses
 9 Months Ended
Sep. 30, 2023
Payables and Accruals [Abstract]  
Accrued Expenses Accrued Expenses
The Company’s accrued expenses consist of the following:
September 30,
2023		December 31,
2022
(In millions)
Accrued price protection$34.2 $51.3 
Accrued other customer related expenses58.6 55.8 
Accrued supplier/partner related expenses42.9 54.0 
Accrued payroll expenses37.0 36.1 
Accrued other expenses3.1 7.7 
Total accrued expenses$175.8 $204.9 
v3.23.3
Accrued Royalties
 9 Months Ended
Sep. 30, 2023
Payables and Accruals [Abstract]  
Accrued Royalties 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 September 30, 2023 is as follows:
September 30,
2023
(In millions)
2023 (remaining)$3.7 
202420.3 
202511.4 
20266.5 
20276.0 
2028 and thereafter1.5 
Total$49.4 
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.
v3.23.3
Leases
 9 Months Ended
Sep. 30, 2023
Leases [Abstract]  
Leases 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 2028. 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):
ClassificationSeptember 30,
2023		December 31,
2022
Assets:
Right-of-use assetOther assets$12.6$14.0
Liabilities:
Current portion of lease liabilitiesOther current liabilities$3.9$3.5
Long term portion of lease liabilitiesOther long-term liabilities$9.6$11.5
Weighted-average remaining lease term3.64.1
Weighted-average discount rate5.5 %4.9 %
Operating lease costs were $1.5 million and $4.3 million for the three and nine months ended September 30, 2023, respectively. Operating lease costs were $1.2 million and $4.1 million for the three and nine months ended September 30, 2022, 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 September 30, 2023:
September 30,
2023
(In millions)
2023 (remainder)$1.3 
20244.5 
20253.9 
20263.3 
20271.7 
2028 and thereafter0.4 
Total minimum lease payments15.1 
Less imputed interest(1.6)
Total lease liabilities$13.5 
v3.23.3
Commitments and Contingencies
 9 Months Ended
Sep. 30, 2023
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies 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, 2023, no liabilities were recorded related to this supply commitment.
Revolving Credit Facility
The Company is party to a credit agreement with Bank of America, N.A. (as amended, the “Credit Agreement”), which provides 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 is collateralized by substantially all of the Company’s assets.
On April 13, 2021, the Company entered into an amendment to the Credit Agreement, which (i) extended the maturity date to April 13, 2024, (ii) provided an update for use of a London Interbank Offering Rate (“LIBOR”) successor rate and (iii) provided a change in the definition of Availability Reserve and Borrowing Base. In connection with the amendment, the Company paid a fee of $75,000 in the second quarter of 2021.
On April 25, 2023, the Company entered into another amendment to the Credit Agreement which replaced the reference of LIBOR to Secured Overnight Financing Rate (“SOFR”).
Fees related to this unused line of credit were not material in any of the periods presented. For the three and nine months ended September 30, 2023 and 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.) (the “Maxell CD Cal Complaint”).
Additionally, on September 15, 2022, Maxell filed a complaint with the International Trade Commission (the “ITC”) against the Company alleging the Company’s TVs infringe several of its patents related to various television-related technologies and on October 18, 2022, the ITC instituted an investigation based on Maxell’s complaint. See In the Matter of Certain Smart Televisions, Inv. No. 337-TA-1338 (collectively with the Maxell CD Cal Complaint, the “Maxell Matters”).
On August 24, 2023, the Company and Maxell executed a definitive settlement agreement regarding the Maxell Matters.
On October 24, 2022, DivX, LLC filed a complaint with the ITC against Amazon.com, Inc. and the Company alleging certain Amazon.com, Inc.’s products and the Company's TVs infringe several of its patents related to certain streaming media-related technologies. See In the Matter of Certain Video Processing Devices and Components Thereof, Inv. No. 337-TA-1343 (ITC). On October 24, 2022, DivX, LLC also filed a companion complaint in United States District Court for the Central District of California against the Company alleging the Company's TVs infringe the same patents. See DivX, LLC v. VIZIO, Inc., Case No. 8:22-cv-01955 (C.D. Cal.). The parties executed a definitive settlement agreement, effective August 11, 2023, regarding these legal proceedings.
The settlements for these matters did not have a material impact to the condensed consolidated statements of operations.
v3.23.3
Stockholders' Equity
 9 Months Ended
Sep. 30, 2023
Share-Based Payment Arrangement [Abstract]  
Stockholders' Equity Stockholders’ Equity
Preferred Stock
As of September 30, 2023, 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.
On July 1, 2023, 634,185 shares of Class B common stock were converted into 634,185 fully paid and nonassessable shares of Class A common stock. Subsequently, on September 26, 2023 the Company's Board of Directors approved the retirement of such shares of Class B common stock, at which time they resumed the status of authorized and unissued.
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 Options
A summary of the Company’s stock option activity under the Plans as of September 30, 2023, 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, 202214.4 $3.88 7.0$54.1 
Granted1.3 6.73 
Exercised(0.6)3.92 
Forfeited and expired(0.9)11.17 
Outstanding at September 30, 202314.2 $7.71 6.73$10.9 
Options vested and exercisable at September 30, 20238.7 $6.33 5.58$10.9 
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 nine months ended September 30, 2023 and September 30, 2022 (shares in millions):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Number of options granted0.1 0.2 1.3 4.9 
Volatility45.9 %59.7 %45.9 %45.7 %
Expected term (years)6.25 years6.25 years6.25 years6.25 years
Dividend yield0.0 %0.4 %0.0 %0.8 %
Risk-free interest rate4.3 %3.3 %3.8 %2.8 %
Fair value of common stock $6.42 $10.79 $6.73 $8.97 
Grant date fair value per share determined using a Black-Scholes-Merton option pricing model for purposes of determining compensation expense$3.26 $6.13 $3.37 $3.98 
As of September 30, 2023, the Company had $20.4 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 2.2 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 September 30, 2023 is presented below:
Number of SharesWeighted Average Grant Date Fair Value
(In millions)
Outstanding at December 31, 20226.3 $12.16 
Granted7.8 7.03 
Vested(1.7)13.37 
Forfeited(1.0)11.94 
Outstanding at September 30, 202311.4 $9.20 
As of September 30, 2023, the Company had $94.2 million of unrecognized share-based compensation expense related to RSUs, which the Company expects to recognize over a weighted average vesting period of approximately 3.0 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.
A summary of the Company’s activity related to PSUs as of September 30, 2023 is presented below:
Number of SharesWeighted Average Grant Date Fair Value
(In millions)
Outstanding at December 31, 2022— $— 
Granted1.7 6.72 
Outstanding at September 30, 20231.7 $6.72 
The weighted-average input assumptions used by the Company were as follows (shares in millions):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Number of PSUs granted— — 1.7 — 
Volatility— %— %61.3 %— %
Expected term (years)— — 4 years— 
Dividend yield— %— %0.0 %— %
Risk-free interest rate— %— %5.0 %— %
Fair value of common stock$— $— $6.49 $— 
Grant date fair value per PSU determined using a Monte-Carlo simulation model for purposes of determining compensation expense$— $— $6.72 $— 
As of September 30, 2023, the Company had $9.3 million of unrecognized share-based compensation expense related to PSUs, which the Company expects to recognize over a weighted average vesting period of approximately 3.8 years.
Share-based Compensation Expense
Total share-based compensation expense was $12.3 million and $30.4 million for the three and nine months ended September 30, 2023, respectively. Total share-based compensation expense was $11.0 million and $34.0 million for the three and nine months ended September 30, 2022, respectively. For the three and nine months ended September 30, 2023, $0.9 million and $2.1 million is included in Cost of goods sold, respectively, and $1.7 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 nine months ended September 30, 2022, $0.0 million and $0.6 million is included in Cost of goods sold, respectively, and $0.2 million and $1.0 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.
v3.23.3
Income Taxes
 9 Months Ended
Sep. 30, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income TaxesThe Company recorded a tax expense of $2.3 million, resulting in an effective tax rate of 14%, and $3.2 million, resulting in an effective tax rate of 61%, for the three months ended September 30, 2023 and September 30, 2022, respectively. The Company recorded a tax expense of $9.9 million, resulting in an effective tax rate of 40%, and a tax expense of $2.3 million, resulting in an effective tax rate of (51)%, for the nine months ended September 30, 2023 and September 30, 2022, respectively. For the three and nine months ended September 30, 2023, the effective tax rate differs from the statutory tax rate of 21% primarily due to the approximately $1.3 million and $8.4 million, federal and state combined, respectively, in permanent book-to-tax difference for the share-based compensation expense deduction limitation on certain executive officers as a publicly held corporation. The tax provision for the nine months ended September 30, 2023 includes a net income tax provision of $1.0 million for discrete items primarily due to excess tax expense relating to share-based compensation.
v3.23.3
Net Income (Loss) Per Share
 9 Months Ended
Sep. 30, 2023
Earnings Per Share [Abstract]  
Net Income (Loss) Per Share 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 three and nine months ended September 30, 2023 and the three months ended September 30, 2022, the potential dilutive shares relating to outstanding stock options were included in the computation of diluted earnings. For the nine months ended September 30, 2022, 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.
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
September 30,
20232022
Class AClass BClass AClass B
Numerator:(In millions, except per share amounts)
Net income attributable to common stockholders - basic and diluted$8.5 $5.3 $1.2 $0.8 
Denominator:
Weighted-average common shares outstanding - basic120.5 76.2 117.0 76.8 
Weighted-average effect of dilutive securities3.2 — 6.4 — 
Weighted-average common shares outstanding - diluted123.7 76.2 123.4 76.8 
Net income per share attributable to Class A and Class B common stockholders:
Basic$0.07 $0.07 $0.01 $0.01 
Diluted$0.07 $0.07 $0.01 $0.01 
Anti-dilutive equity awards under share-based award plans excluded from the determination of diluted EPS14.7 4.0 
Nine Months Ended
September 30,
20232022
Class AClass BClass AClass B
Numerator:(In millions, except per share amounts)
Net income (loss) attributable to common stockholders - basic and diluted$9.1 $5.9 $(4.0)$(2.7)
Denominator:
Weighted-average common shares outstanding - basic119.4 76.6 115.8 76.8 
Weighted-average effect of dilutive securities4.2 — — — 
Weighted-average common shares outstanding - diluted123.6 76.6 115.8 76.8 
Net income (loss) per share attributable to Class A and Class B common stockholders:
Basic$0.08 $0.08 $(0.03)$(0.03)
Diluted$0.08 $0.08 $(0.03)$(0.03)
Anti-dilutive equity awards under share-based award plans excluded from the determination of diluted EPS13.3 21.1 
As of September 30, 2023, the PSUs granted in 2023 had an expected achievement level of 13%. No similar awards were outstanding as of September 30, 2022. Refer to Note 12 for additional information related to the PSUs.
v3.23.3
Subsequent Events
 9 Months Ended
Sep. 30, 2023
Subsequent Events [Abstract]  
Subsequent Events
v3.23.3
Pay vs Performance Disclosure - USD ($)
$ in Millions
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Sep. 30, 2022
Jun. 30, 2022
Mar. 31, 2022
Sep. 30, 2023
Sep. 30, 2022
Pay vs Performance Disclosure                
Net Income (Loss) Attributable to Parent $ 13.8 $ 1.9 $ (0.7) $ 2.0 $ 2.3 $ (11.0) $ 15.0 $ (6.7)
v3.23.3
Insider Trading Arrangements
 3 Months Ended
Sep. 30, 2023
Trading Arrangements, by Individual  
Rule 10b5-1 Arrangement Adopted false
Non-Rule 10b5-1 Arrangement Adopted false
Rule 10b5-1 Arrangement Terminated false
Non-Rule 10b5-1 Arrangement Terminated false
v3.23.3
Summary of Significant Accounting Policies (Policies)
 9 Months Ended
Sep. 30, 2023
Accounting Policies [Abstract]  
Basis of Consolidation - Presentation 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.The condensed consolidated balance sheet as of December 31, 2022 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, 2022 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, 2023.
Basis of Consolidation - Consolidation All intercompany transactions and balances have been eliminated in consolidation.
Basis of Consolidation - Foreign Currency 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.
Use of Estimates Use of EstimatesThe 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.
Net Revenue 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, 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 retailers under terms that allow the retailer 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 September 30, 2023 and December 31, 2022, the Company recorded $26.1 million and $22.0 million of contract assets, respectively. As of September 30, 2023, $24.3 million and $1.8 million of contract assets were recorded in other current assets and other assets, respectively, in the accompanying condensed consolidated balance sheets. As of December 31, 2022, all contract assets were recorded in other current assets in the accompanying condensed consolidated balance sheets. As of September 30, 2023 the Company recorded $2.7 million of contract liabilities, which are recorded in other current liabilities in the accompanying condensed consolidated balance sheets. There were no material contract liabilities as of December 31, 2022. 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 any costs associated with fulfilling its contracts. All costs to obtain contracts were expensed as incurred as a practical expedient.
v3.23.3
Net Revenue (Tables)
 9 Months Ended
Sep. 30, 2023
Revenue from Contract with Customer [Abstract]  
Schedule of Concentration Risk
The following customers account for more than 10% of net revenue:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Net revenue:
Customer A37 %36 %35 %38 %
Customer B7 10 10 12 
Customer C7 8 8 10 
Customer D3 10 3 8 
The following customers account for more than 10% of accounts receivable:
September 30,
2023		December 31,
2022
Net receivables:
Customer A37 %38 %
Customer B5 12 
The Company has the following significant concentrations related to suppliers:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Inventory purchases:
Supplier A — related party34 %43 %35 %46 %
Supplier B 19 25 20 23 
Supplier C 36 12 31 13 
v3.23.3
Investments (Tables)
 9 Months Ended
Sep. 30, 2023
Investments, Debt and Equity Securities [Abstract]  
Summary of Debt Securities, Held-to-Maturity
The following tables summarize the Company’s Short-term investments:
September 30, 2023
Maturity Amortized CostsGross Unrealized Gains Gross Unrealized LossesEstimated Fair Value
(In millions)
U.S. Treasury bills
1 year or less
$119.4 $— $(0.2)$119.2 
Total $119.4 $— $(0.2)$119.2 
December 31, 2022
Maturity Amortized CostsGross Unrealized Gains Gross Unrealized LossesEstimated Fair Value
(In millions)
U.S. Treasury bills
1 year or less
$58.9 $— $(0.2)$58.7 
Total $58.9 $— $(0.2)$58.7 
v3.23.3
Accounts Receivable (Tables)
 9 Months Ended
Sep. 30, 2023
Receivables [Abstract]  
Schedule of Accounts Receivable Accounts receivable consists of the following:
September 30,
2023		December 31,
2022
(In millions)
Accounts receivable$346.7 $358.1 
Allowance for doubtful accounts(1.1)(0.2)
Total accounts receivable, net of allowance$345.6 $357.9 
Schedule of Concentration Risk
The following customers account for more than 10% of net revenue:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Net revenue:
Customer A37 %36 %35 %38 %
Customer B7 10 10 12 
Customer C7 8 8 10 
Customer D3 10 3 8 
The following customers account for more than 10% of accounts receivable:
September 30,
2023		December 31,
2022
Net receivables:
Customer A37 %38 %
Customer B5 12 
The Company has the following significant concentrations related to suppliers:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Inventory purchases:
Supplier A — related party34 %43 %35 %46 %
Supplier B 19 25 20 23 
Supplier C 36 12 31 13 
v3.23.3
Inventories (Tables)
 9 Months Ended
Sep. 30, 2023
Inventory Disclosure [Abstract]  
Schedule of Inventory
Inventories consist of the following:
September 30,
2023		December 31,
2022
(In millions)
Inventory on hand$12.0 $12.6 
Inventory in transit - outbound4.4 2.9 
Inventory in transit - inbound1.2 — 
Total inventory$17.6 $15.5 
Schedule of Concentration Risk
The following customers account for more than 10% of net revenue:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Net revenue:
Customer A37 %36 %35 %38 %
Customer B7 10 10 12 
Customer C7 8 8 10 
Customer D3 10 3 8 
The following customers account for more than 10% of accounts receivable:
September 30,
2023		December 31,
2022
Net receivables:
Customer A37 %38 %
Customer B5 12 
The Company has the following significant concentrations related to suppliers:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Inventory purchases:
Supplier A — related party34 %43 %35 %46 %
Supplier B 19 25 20 23 
Supplier C 36 12 31 13 
v3.23.3
Property, Equipment and Software, Net (Tables)
 9 Months Ended
Sep. 30, 2023
Property, Plant and Equipment [Abstract]  
Schedule of Property, Equipment and Software, Net
Property, equipment and software, net consist of the following:
September 30,
2023		December 31,
2022
(In millions)
Building$10.2 $10.1 
Machinery and equipment1.2 2.0 
Leasehold improvements8.0 4.2 
Furniture and fixtures4.9 4.7 
Computer and software16.2 17.7 
Construction in progress0.9 4.8 
Total property, equipment and software41.4 43.5 
Less accumulated depreciation and amortization(21.5)(23.6)
Total property, equipment and software, net$19.9 $19.9 
v3.23.3
Accrued Expenses (Tables)
 9 Months Ended
Sep. 30, 2023
Payables and Accruals [Abstract]  
Schedule of Accrued Expenses
The Company’s accrued expenses consist of the following:
September 30,
2023		December 31,
2022
(In millions)
Accrued price protection$34.2 $51.3 
Accrued other customer related expenses58.6 55.8 
Accrued supplier/partner related expenses42.9 54.0 
Accrued payroll expenses37.0 36.1 
Accrued other expenses3.1 7.7 
Total accrued expenses$175.8 $204.9 
v3.23.3
Accrued Royalties (Tables)
 9 Months Ended
Sep. 30, 2023
Payables and Accruals [Abstract]  
Schedule of Future Commitments on Royalty Obligations
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 September 30, 2023 is as follows:
September 30,
2023
(In millions)
2023 (remaining)$3.7 
202420.3 
202511.4 
20266.5 
20276.0 
2028 and thereafter1.5 
Total$49.4 
v3.23.3
Leases (Tables)
 9 Months Ended
Sep. 30, 2023
Leases [Abstract]  
Supplemental Balance Sheet Information 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):
ClassificationSeptember 30,
2023		December 31,
2022
Assets:
Right-of-use assetOther assets$12.6$14.0
Liabilities:
Current portion of lease liabilitiesOther current liabilities$3.9$3.5
Long term portion of lease liabilitiesOther long-term liabilities$9.6$11.5
Weighted-average remaining lease term3.64.1
Weighted-average discount rate5.5 %4.9 %
Schedule of Undiscounted Cash Flows of Operating Leases
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, 2023:
September 30,
2023
(In millions)
2023 (remainder)$1.3 
20244.5 
20253.9 
20263.3 
20271.7 
2028 and thereafter0.4 
Total minimum lease payments15.1 
Less imputed interest(1.6)
Total lease liabilities$13.5 
v3.23.3
Stockholders' Equity (Tables)
 9 Months Ended
Sep. 30, 2023
Share-Based Payment Arrangement [Abstract]  
Schedule of Stock Option Activity
A summary of the Company’s stock option activity under the Plans as of September 30, 2023, 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, 202214.4 $3.88 7.0$54.1 
Granted1.3 6.73 
Exercised(0.6)3.92 
Forfeited and expired(0.9)11.17 
Outstanding at September 30, 202314.2 $7.71 6.73$10.9 
Options vested and exercisable at September 30, 20238.7 $6.33 5.58$10.9 
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions
The following provides information on the weighted-average assumptions used for stock options granted during the three and nine months ended September 30, 2023 and September 30, 2022 (shares in millions):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Number of options granted0.1 0.2 1.3 4.9 
Volatility45.9 %59.7 %45.9 %45.7 %
Expected term (years)6.25 years6.25 years6.25 years6.25 years
Dividend yield0.0 %0.4 %0.0 %0.8 %
Risk-free interest rate4.3 %3.3 %3.8 %2.8 %
Fair value of common stock $6.42 $10.79 $6.73 $8.97 
Grant date fair value per share determined using a Black-Scholes-Merton option pricing model for purposes of determining compensation expense$3.26 $6.13 $3.37 $3.98 
The weighted-average input assumptions used by the Company were as follows (shares in millions):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Number of PSUs granted— — 1.7 — 
Volatility— %— %61.3 %— %
Expected term (years)— — 4 years— 
Dividend yield— %— %0.0 %— %
Risk-free interest rate— %— %5.0 %— %
Fair value of common stock$— $— $6.49 $— 
Grant date fair value per PSU determined using a Monte-Carlo simulation model for purposes of determining compensation expense$— $— $6.72 $— 
Schedule of Restricted Stock Unit Activity
A summary of the Company’s activity related to RSUs as of September 30, 2023 is presented below:
Number of SharesWeighted Average Grant Date Fair Value
(In millions)
Outstanding at December 31, 20226.3 $12.16 
Granted7.8 7.03 
Vested(1.7)13.37 
Forfeited(1.0)11.94 
Outstanding at September 30, 202311.4 $9.20 
Share-Based Payment Arrangement, Performance Shares, Activity
A summary of the Company’s activity related to PSUs as of September 30, 2023 is presented below:
Number of SharesWeighted Average Grant Date Fair Value
(In millions)
Outstanding at December 31, 2022— $— 
Granted1.7 6.72 
Outstanding at September 30, 20231.7 $6.72 
v3.23.3
Net Income (Loss) Per Share (Tables)
 9 Months Ended
Sep. 30, 2023
Earnings Per Share [Abstract]  
Schedule of Basic and Diluted Earnings Per Share
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
September 30,
20232022
Class AClass BClass AClass B
Numerator:(In millions, except per share amounts)
Net income attributable to common stockholders - basic and diluted$8.5 $5.3 $1.2 $0.8 
Denominator:
Weighted-average common shares outstanding - basic120.5 76.2 117.0 76.8 
Weighted-average effect of dilutive securities3.2 — 6.4 — 
Weighted-average common shares outstanding - diluted123.7 76.2 123.4 76.8 
Net income per share attributable to Class A and Class B common stockholders:
Basic$0.07 $0.07 $0.01 $0.01 
Diluted$0.07 $0.07 $0.01 $0.01 
Anti-dilutive equity awards under share-based award plans excluded from the determination of diluted EPS14.7 4.0 
Nine Months Ended
September 30,
20232022
Class AClass BClass AClass B
Numerator:(In millions, except per share amounts)
Net income (loss) attributable to common stockholders - basic and diluted$9.1 $5.9 $(4.0)$(2.7)
Denominator:
Weighted-average common shares outstanding - basic119.4 76.6 115.8 76.8 
Weighted-average effect of dilutive securities4.2 — — — 
Weighted-average common shares outstanding - diluted123.6 76.6 115.8 76.8 
Net income (loss) per share attributable to Class A and Class B common stockholders:
Basic$0.08 $0.08 $(0.03)$(0.03)
Diluted$0.08 $0.08 $(0.03)$(0.03)
Anti-dilutive equity awards under share-based award plans excluded from the determination of diluted EPS13.3 21.1 
v3.23.3
Organization and Nature of Business (Details)
Sep. 30, 2023
manufacturer
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Number of manufacturers 3
v3.23.3
Net Revenue - Narrative (Details) - USD ($)
 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Dec. 31, 2022
Concentration Risk [Line Items]          
Contract assets     $ 26,100,000   $ 22,000,000
Contract liability $ 2,700,000   2,700,000   0
Capitalized contract costs $ 0   $ 0   $ 0
Affiliates Under Common Control | Net Revenue | Customer concentration          
Concentration Risk [Line Items]          
Concentration risk, percentage 44.00% 46.00% 45.00% 50.00%  
Other Current Assets          
Concentration Risk [Line Items]          
Contract assets     $ 24,300,000    
Other Noncurrent Assets          
Concentration Risk [Line Items]          
Contract assets     $ 1,800,000    
v3.23.3
Net Revenue - Customers (Details) - Net Revenue - Customer concentration
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Customer A        
Concentration Risk [Line Items]        
Concentration risk, percentage 37.00% 36.00% 35.00% 38.00%
Customer B        
Concentration Risk [Line Items]        
Concentration risk, percentage 7.00% 10.00% 10.00% 12.00%
Customer C        
Concentration Risk [Line Items]        
Concentration risk, percentage 7.00% 8.00% 8.00% 10.00%
Customer D        
Concentration Risk [Line Items]        
Concentration risk, percentage 3.00% 10.00% 3.00% 8.00%
v3.23.3
Investments - Narrative (Details) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Investments, Debt and Equity Securities [Abstract]        
Debt securities, held-to-maturity, impairment loss $ 0 $ 0 $ 0 $ 0
v3.23.3
Investments - Debt Securities, Held-to-Maturity (Details) - USD ($)
$ in Millions
 9 Months Ended 12 Months Ended
Sep. 30, 2023
Dec. 31, 2022
Schedule of Held-to-Maturity Securities [Line Items]    
Debt securities, held-to-maturity, term 1 year 1 year
Amortized Costs $ 119.4 $ 58.9
Gross Unrealized Gains 0.0 0.0
Gross Unrealized Losses (0.2) (0.2)
Estimated Fair Value 119.2 58.7
U.S. Treasury bills    
Schedule of Held-to-Maturity Securities [Line Items]    
Amortized Costs 119.4 58.9
Gross Unrealized Gains 0.0 0.0
Gross Unrealized Losses (0.2) (0.2)
Estimated Fair Value $ 119.2 $ 58.7
v3.23.3
Accounts Receivable - Balances (Details) - USD ($)
$ in Millions
Sep. 30, 2023
Dec. 31, 2022
Receivables [Abstract]    
Accounts receivable $ 346.7 $ 358.1
Allowance for doubtful accounts (1.1) (0.2)
Total accounts receivable, net of allowance $ 345.6 $ 357.9
v3.23.3
Accounts Receivable - Narrative (Details) - USD ($)
$ in Millions
 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Dec. 31, 2022
Concentration Risk [Line Items]          
Allowance for doubtful accounts recorded $ 0.2 $ (2.8) $ 0.9 $ (0.1)  
Net Receivables | Credit concentration risk | Customers A and B, common control          
Concentration Risk [Line Items]          
Concentration risk, percentage     42.00%   50.00%
v3.23.3
Accounts Receivable - Customers (Details) - Net Receivables - Credit concentration risk
 9 Months Ended 12 Months Ended
Sep. 30, 2023
Dec. 31, 2022
Customer A    
Concentration Risk [Line Items]    
Concentration risk, percentage 37.00% 38.00%
Customer B    
Concentration Risk [Line Items]    
Concentration risk, percentage 5.00% 12.00%
v3.23.3
Inventories - Balances (Details) - USD ($)
$ in Millions
Sep. 30, 2023
Dec. 31, 2022
Inventory [Line Items]    
Total inventory $ 17.6 $ 15.5
Inventory on hand    
Inventory [Line Items]    
Total inventory 12.0 12.6
Inventory in transit - outbound    
Inventory [Line Items]    
Total inventory 4.4 2.9
Inventory in transit - inbound    
Inventory [Line Items]    
Total inventory $ 1.2 $ 0.0
v3.23.3
Inventories - Inventory Purchases (Details) - Inventory Purchases - Supplier concentration risk
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Supplier A — related party        
Concentration Risk [Line Items]        
Concentration risk, percentage 34.00% 43.00% 35.00% 46.00%
Supplier B        
Concentration Risk [Line Items]        
Concentration risk, percentage 19.00% 25.00% 20.00% 23.00%
Supplier C        
Concentration Risk [Line Items]        
Concentration risk, percentage 36.00% 12.00% 31.00% 13.00%
v3.23.3
Inventories - Narrative (Details) - USD ($)
$ in Millions
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Dec. 31, 2022
Inventory [Line Items]          
Recycling cost (credit) $ 2.3 $ 2.2 $ 4.5 $ 3.7  
Other receivables, manufacturers          
Inventory [Line Items]          
Receivables due from manufacturers $ 0.7   $ 0.7   $ 3.0
v3.23.3
Property, Equipment and Software, Net - Components (Details) - USD ($)
$ in Millions
Sep. 30, 2023
Dec. 31, 2022
Property, Plant and Equipment [Line Items]    
Total property, equipment and software $ 41.4 $ 43.5
Less accumulated depreciation and amortization (21.5) (23.6)
Total property, equipment and software, net 19.9 19.9
Building    
Property, Plant and Equipment [Line Items]    
Total property, equipment and software 10.2 10.1
Machinery and equipment    
Property, Plant and Equipment [Line Items]    
Total property, equipment and software 1.2 2.0
Leasehold improvements    
Property, Plant and Equipment [Line Items]    
Total property, equipment and software 8.0 4.2
Furniture and fixtures    
Property, Plant and Equipment [Line Items]    
Total property, equipment and software 4.9 4.7
Computer and software    
Property, Plant and Equipment [Line Items]    
Total property, equipment and software 16.2 17.7
Construction in progress    
Property, Plant and Equipment [Line Items]    
Total property, equipment and software $ 0.9 $ 4.8
v3.23.3
Property, Equipment and Software, Net - Narrative (Details) - USD ($)
 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Dec. 31, 2022
Property, Plant and Equipment [Abstract]          
Depreciation expense $ 1,900,000 $ 1,000,000 $ 5,600,000 $ 2,500,000  
Disposal of property, plant and equipment $ 7,700,000   $ 7,700,000   $ 0
v3.23.3
Accrued Expenses (Details) - USD ($)
$ in Millions
Sep. 30, 2023
Dec. 31, 2022
Payables and Accruals [Abstract]    
Accrued price protection $ 34.2 $ 51.3
Accrued other customer related expenses 58.6 55.8
Accrued supplier/partner related expenses 42.9 54.0
Accrued payroll expenses 37.0 36.1
Accrued other expenses 3.1 7.7
Total accrued expenses $ 175.8 $ 204.9
v3.23.3
Accrued Royalties - Future Commitments on Royalty Obligations (Details) - Royalty obligations
$ in Millions
Sep. 30, 2023
USD ($)
Other Commitments [Line Items]  
2023 (remaining) $ 3.7
2024 20.3
2025 11.4
2026 6.5
2027 6.0
2028 and thereafter 1.5
Total $ 49.4
v3.23.3
Leases - Supplemental Balance Sheet Information (Details) - USD ($)
$ in Millions
Sep. 30, 2023
Dec. 31, 2022
Assets:    
Right of use assets, balance sheet [extensible enumeration] Other assets Other assets
Right-of-use asset $ 12.6 $ 14.0
Liabilities:    
Current portion of lease liabilities, balance sheet [extensible enumeration] Other current liabilities Other current liabilities
Current portion of lease liabilities $ 3.9 $ 3.5
Long term portion of lease liabilities, balance sheet [extensible enumeration] Other long-term liabilities Other long-term liabilities
Long term portion of lease liabilities $ 9.6 $ 11.5
Weighted-average remaining lease term 3 years 7 months 6 days 4 years 1 month 6 days
Weighted-average discount rate 5.50% 4.90%
v3.23.3
Leases - Narrative (Details) - USD ($)
$ in Millions
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Leases [Abstract]        
Operating lease costs $ 1.5 $ 1.2 $ 4.3 $ 4.1
v3.23.3
Leases - Reconciliation of Undiscounted Cash Flows of Operating Leases (Details)
$ in Millions
Sep. 30, 2023
USD ($)
Leases [Abstract]  
2023 (remainder) $ 1.3
2024 4.5
2025 3.9
2026 3.3
2027 1.7
2028 and thereafter 0.4
Total minimum lease payments 15.1
Less imputed interest (1.6)
Total lease liabilities $ 13.5
v3.23.3
Commitments and Contingencies (Details) - USD ($)
 3 Months Ended
Jun. 30, 2021
Sep. 30, 2023
Sep. 30, 2022
Apr. 13, 2021
Line of Credit Facility [Line Items]        
Liability for supply commitment   $ 0    
Revolving credit facility | Line of credit        
Line of Credit Facility [Line Items]        
Maximum borrowing capacity       $ 50,000,000
Debt fee $ 75,000      
Draws on line of credit   $ 0 $ 0  
v3.23.3
Stockholders' Equity - Narrative (Details)
$ in Millions
 3 Months Ended 9 Months Ended
Jul. 01, 2023
shares
Sep. 30, 2023
USD ($)
plan
class
shares
Sep. 30, 2022
USD ($)
Sep. 30, 2023
USD ($)
plan
class
shares
Sep. 30, 2022
USD ($)
Dec. 31, 2022
shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Preferred stock, authorized (in shares) | shares   100,000,000   100,000,000   100,000,000.0
Number of classes of stock | class   3   3    
Number of plans | plan   2   2    
Unrecognized share-based compensation expense   $ 20.4   $ 20.4    
Unrecognized compensation costs, vesting period       2 years 2 months 12 days    
Award requisite service period       1 year    
Share-based compensation expense   12.3 $ 11.0 $ 30.4 $ 34.0  
Cost of sales            
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Share-based compensation expense   0.9 0.0 2.1 0.6  
Research and development            
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Share-based compensation expense   1.7 $ 0.2 4.1 $ 1.0  
RSUs            
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Unrecognized share-based compensation expense   94.2   $ 94.2    
Unrecognized compensation costs, vesting period       3 years    
Performance Shares            
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Unrecognized share-based compensation expense   $ 9.3   $ 9.3    
Unrecognized compensation costs, vesting period       3 years 9 months 18 days    
Vesting term       4 years    
Award requisite service period       1 year    
Performance Shares | Minimum            
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Eligible award vesting rights, percentage       0    
Performance Shares | Maximum            
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Eligible award vesting rights, percentage       2    
Class B common stock            
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Conversion of convertible securities (in shares) | shares 634,185          
Class A common stock            
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Conversion of convertible securities (in shares) | shares 634,185          
v3.23.3
Stockholders' Equity - Stock Option Awards Activity (Details) - USD ($)
$ / shares in Units, shares in Millions, $ in Millions
 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Dec. 31, 2022
Number of Shares          
Beginning balance (in shares)     14.4    
Granted (in shares) 0.1 0.2 1.3 4.9  
Exercised (in shares)     (0.6)    
Forfeited and expired (in shares)     (0.9)    
Ending balance (in shares) 14.2   14.2   14.4
Options vested and exercisable (in shares) 8.7   8.7    
Weighted Average Exercise Price          
Beginning balance (in dollars per share)     $ 3.88    
Granted (in dollars per share)     6.73    
Exercised (in dollars per share)     3.92    
Forfeited and expired (in dollars per share)     11.17    
Ending balance (in dollars per share) $ 7.71   7.71   $ 3.88
Options vested and exercisable (in dollars per share) $ 6.33   $ 6.33    
Weighted Average Remaining Contractual Term (Years)          
Options outstanding     6 years 8 months 23 days   7 years
Options vested and exercisable     5 years 6 months 29 days    
Aggregate Intrinsic Value          
Options outstanding $ 10.9   $ 10.9   $ 54.1
Options vested and exercisable $ 10.9   $ 10.9    
v3.23.3
Stockholders' Equity - Fair Value Assumptions of Options (Details) - $ / shares
shares in Millions
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Share-Based Payment Arrangement [Abstract]        
Number of options granted (in shares) 0.1 0.2 1.3 4.9
Volatility 45.90% 59.70% 45.90% 45.70%
Expected term (years) 6 years 3 months 6 years 3 months 6 years 3 months 6 years 3 months
Dividend yield 0.00% 0.40% 0.00% 0.80%
Risk-free interest rate 4.30% 3.30% 3.80% 2.80%
Fair value of common stock (in dollars per share) $ 6.42 $ 10.79 $ 6.73 $ 8.97
Grant date fair value per share determined using a Black-Scholes-Merton option pricing model for purposes of determining compensation expense (in dollars per share) $ 3.26 $ 6.13 $ 3.37 $ 3.98
v3.23.3
Stockholders' Equity - RSU and PSU Activity (Details) - $ / shares
shares in Millions
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
RSUs        
Number of Shares        
Outstanding, beginning (in shares)     6.3  
Granted (in shares)     7.8  
Vested (in shares)     (1.7)  
Forfeited (in shares)     (1.0)  
Outstanding, ending (in shares) 11.4   11.4  
Weighted Average Grant Date Fair Value        
Outstanding, beginning (in dollars per share)     $ 12.16  
Granted (in dollars per share)     7.03  
Vested (in dollars per share)     13.37  
Forfeited (in dollars per share)     11.94  
Outstanding, ending (in dollars per share) $ 9.20   $ 9.20  
Performance Shares        
Number of Shares        
Outstanding, beginning (in shares)     0.0  
Granted (in shares) 0.0 0.0 1.7 0.0
Outstanding, ending (in shares) 1.7   1.7  
Weighted Average Grant Date Fair Value        
Outstanding, beginning (in dollars per share)     $ 0  
Granted (in dollars per share) $ 0 $ 0 6.72 $ 0
Outstanding, ending (in dollars per share) $ 6.72   $ 6.72  
v3.23.3
Stockholders' Equity - Fair Value Assumptions of PSUs (Details) - $ / shares
shares in Millions
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Volatility 45.90% 59.70% 45.90% 45.70%
Expected term (years) 6 years 3 months 6 years 3 months 6 years 3 months 6 years 3 months
Dividend yield 0.00% 0.40% 0.00% 0.80%
Risk-free interest rate 4.30% 3.30% 3.80% 2.80%
Performance Shares        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Number of PSUs granted (in shares) 0.0 0.0 1.7 0.0
Volatility 0.00% 0.00% 61.30% 0.00%
Expected term (years)     4 years  
Dividend yield 0.00% 0.00% 0.00% 0.00%
Risk-free interest rate 0.00% 0.00% 5.00% 0.00%
Fair value of common stock (in dollars per share) $ 0 $ 0 $ 6.49 $ 0
Grant date fair value per PSU determined using a Monte-Carlo simulation model for purpose of determining compensation expense (in dollars per share) $ 0 $ 0 $ 6.72 $ 0
v3.23.3
Income Taxes (Details) - USD ($)
$ in Millions
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Income Tax Disclosure [Abstract]        
Tax expense (benefit) $ 2.3 $ 3.2 $ 9.9 $ 2.3
Effective tax rate (percent) 14.00% 61.00% 40.00% (51.00%)
Effect of share-based compensation expense, compensation deduction limitation $ 1.3   $ 8.4  
Effective tax rate difference due to share-based compensation expense     $ 1.0  
v3.23.3
Net Income (Loss) Per Share - Schedule of Basic and Diluted Earnings Per Share (Details) - USD ($)
$ / shares in Units, shares in Millions, $ in Millions
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Denominator:        
Weighted-average common shares outstanding - basic (in shares) 196.7 193.8 196.0 192.6
Weighted-average common shares outstanding - diluted (in shares) 199.9 200.2 200.2 192.6
Net income per share attributable to Class A and Class B common stockholders:        
Basic (in dollars per share) $ 0.07 $ 0.01 $ 0.08 $ (0.03)
Diluted (in dollars per share) $ 0.07 $ 0.01 $ 0.08 $ (0.03)
Class A        
Numerator:        
Net income (loss) attributable to common stockholders - basic $ 8.5 $ 1.2 $ 9.1 $ (4.0)
Net income (loss) attributable to common stockholders - diluted $ 8.5 $ 1.2 $ 9.1 $ (4.0)
Denominator:        
Weighted-average common shares outstanding - basic (in shares) 120.5 117.0 119.4 115.8
Weighted-average effect of dilutive securities (in shares) 3.2 6.4 4.2 0.0
Weighted-average common shares outstanding - diluted (in shares) 123.7 123.4 123.6 115.8
Net income per share attributable to Class A and Class B common stockholders:        
Basic (in dollars per share) $ 0.07 $ 0.01 $ 0.08 $ (0.03)
Diluted (in dollars per share) $ 0.07 $ 0.01 $ 0.08 $ (0.03)
Anti-dilutive equity awards under share-based award plans excluded from the determination of diluted EPS (in shares) 14.7 4.0 13.3 21.1
Class B        
Numerator:        
Net income (loss) attributable to common stockholders - basic $ 5.3 $ 0.8 $ 5.9 $ (2.7)
Net income (loss) attributable to common stockholders - diluted $ 5.3 $ 0.8 $ 5.9 $ (2.7)
Denominator:        
Weighted-average common shares outstanding - basic (in shares) 76.2 76.8 76.6 76.8
Weighted-average effect of dilutive securities (in shares) 0.0 0.0 0.0 0.0
Weighted-average common shares outstanding - diluted (in shares) 76.2 76.8 76.6 76.8
Net income per share attributable to Class A and Class B common stockholders:        
Basic (in dollars per share) $ 0.07 $ 0.01 $ 0.08 $ (0.03)
Diluted (in dollars per share) $ 0.07 $ 0.01 $ 0.08 $ (0.03)
v3.23.3
Net Income (Loss) Per Share - Narrative (Details)
Sep. 30, 2023
Performance Shares  
Class of Stock [Line Items]  
Expected achievement percentage 0.13
VIZIO (NYSE:VZIO)
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