VIZIO Holding Corp.

Good afternoon, everyone, and thank you for joining us for our third quarter 2021 earnings call. Joining me for today's discussion are William Wang, our founder and CEO, and Adam Townsend, our CFO. Also joining us for the Q&A portion of today's call is Michael Donnell, our Chief Revenue Officer for Platform Plus. Please note that in addition to our earnings release, a slide presentation for you to follow along with our remarks can be found on our investor relations website at investors.visio.com. I'll refer you to the second slide in the presentation and remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our filings with the SEC and our press release that was issued this afternoon. We undertake no obligation to revise any statements to reflect changes that occur after this call. During the call, we also refer to non-GAAP financial measures, including adjusted EBITDA. Reconciliations with the most comparable GAAP measures for non-GAAP financial information discussed on this call can be found in our earnings release or on the investor section of our website. Note that all quarterly comparisons in today's remarks will be made on a year-over-year basis unless otherwise specified. Now, I will turn the call over to William.

Thanks, Michael, and hello, everyone. Thank you for joining us today. I'm proud of the strength of our third quarter results. As the investment we have made in our Platform Plus business continues to bear fruit, Vizio is defining the future of the smart TV industry. Because our dual revenue model delivers the entire entertainment experience from the hardware and the software to the content and the ads, we're able to deliver an attractive value proposition to consumers, advertisers, and content planners alike. I'd like to highlight a few key points. And then Adam will get more detail on our Q3 results later in this call. Smart TVs have gotten smarter, and people are additional dongle because they no longer need to purchase another stick or box to watch their favorite entertainment. Multiple devices and remote controls are horrible consumer experience, which is why we created a simple, easy-to-use, single-design experience found in our Brazil smart TVs. As consumers increasingly favor the simplified experience, other companies have also begun to enter the smart TV space as they recognize the value of our business model. At Vizio, we are always looking forward and staying aware of our competition, older or new, big or small. We have been investing successfully in the TV and streaming business for many years and will continue to invest more and focus on what we do the best. offer innovation and exceptional consumer experience at an affordable price. On the device side of our business, we have worked extremely hard to replenish retail inventories ahead of the holiday season to continue to drive customer acquisition and grow market share. We have been hit by the same logistical and supply chain issues affecting all companies right now. But we have been working very closely with our long-term partners to help reduce delays and have strategically invest to expedite shipping. Although these higher freight and logistical costs have impacted our gross profit margin in the third quarter, this tactic has allowed us to mitigate supply chain disruption and be confident that our product will be on the store shelf as we head into Black Friday. We are aggressively working with our retail partners to stimulate sales by launching saving events even earlier this holiday season across our product lines, which means that there are amazing video deals out there for everyone with exceptional values on product like a 75-inch V-Series model in Walmart for under just $750. Now, that is one great holiday gift. We're also bringing the big screen experience to the home with incredible pricing and fast buy on both M and P series TVs and our number one selling sun bars. Our shelf shares matrix are still on track for the year. And we have also been able to grow to our space with key retailers, thanks to great products that continue to receive excellent reviews, such as our P series smart TVs, which earn Editor's Choice Award from Newsweek tag high, and reviewed. We have also just received a special recommendation from Rolling Stone Magazine for a Vizio 2.1 V-Series Sunbar, all of which are available for the holidays. We are creating Vizio products to be the center of the connected home, with SmartCast at the heart of all Vizio TVs. The seamless integration of hardware and software is key to a great consumer experience, which is always our number one priority. Our software engineers are constantly working to create new ways to make our customers' lives easier. This includes easy-to-use search and discovery functionality on our home page to help people find their favorite TV show and watch their favorite stars with building voice capabilities. Broadcast also gives people tons of apps and hundreds of free streaming channels available right out of the box, including HBO Max, FuboTV, BET+, PBS, and Funimation, which all launched this quarter. As we mentioned on our last call, we also upgraded our free streaming channel offering to Watch Free+. which brought an enhanced user interface and even more content to its popular destinations on Smartcast. And we're thrilled with the viewer feedback and engagement so far. Because of our rich, flat-level data, we know what people like to watch. And we're now able to curate a series of Visio-branded channels called Visio Features. In just three months, our first two channels full-time flight, and investigation have already become two of the top 10 most watched channels in Watch Free Plus. Visual features brings the audience a variety of exclusive channels that leverage our first-party viewing data and home screen targeting capability to deliver a more relevant entertainment experience. Additional recently launched visual feature channels include Gamer Nation with video game and e-sports programming, Mission, a channel for sci-fi fans, Fear with back-to-back horror movies, and Polaris, a new creator-driven channel that authentically shares hip-hop and black culture with the world. Curate the content from video features delivers more of the free content that people love and generate more engagement. Speaking of which, during the quarter, Oblisio's ad team continued to deliver exceptional results. As we announced previously, we closed out the 2022 upfront season with over $100 million in commitment from agency holding companies and brands, which was a four-fold increase over 2021. Our Q3 advertising growth was driven by an expanding client and category base as we continue to broaden our universe of direct advertising clients. Q3 advertising revenue was five times higher in key categories, including auto and CPG, in addition to media and entertainment. Not only that, but our advertising partners are spending more with us than ever before. Our average revenue for advertisers is more than twice what it was at this time last year. This accelerating advertising demand continues to be in line with broader market shifts. As consumers increasingly move from linear TV to streaming, brands are following them onto our platform. And as our audience engagement grows, our ACR TV streaming data also grows. This proprietary and comprehensive graph-level data is not only informing our own visual content programming and monetization strategy, it is also empowering the future of media measurement and currency itself. All the leading companies currently being considered as an alternative to traditional media measurements are powered by Visio Inkscape data, which put us in a unique position in the industry and significantly differentiates us our competitors. When you put all these things together, it is easy to see why Platform Plus is such a growth engine for us. Looking ahead, we're going to continue to increase customer acquisition and market share by leveraging our dual revenue business model, consistently developing and enhancing our business line of product to create greater consumer experience. and finding new ways to engage and monetize our virtual audience to grow our pool. All of the investments we've made in our products, our platform, and our people are paving the way for our continued evolution as a streaming-first, data-driven media company. I'm very proud of our virtual team for navigating this exciting and challenging time. I want to thank everyone for all their great work will continue to revolutionize the smart TV industry. And I am confident that we have the right strategy, the right mentality, and the right people to drive the future of television. With that, I will now turn the call over to Adam to speak to our third quarter results in more detail.

Thanks, William. In the third quarter, the growth in our Platform Plus business exceeded our expectations as we further ramped up our advertising execution across home screen inventory and our expanding base of video inventory, both on and off platform. We continued to invest in software and engineering resources to scale our platform operations and expand monetization opportunities. In our device business, we remained intensely focused on navigating through the supply chain and logistical complexities impacting so many companies. After inventories bottomed out in early July, we made strategic investments to help rebuild channel inventories as much as possible in advance of the holiday season. Of course, some of these actions had an impact on our device gross margins, but they were prudent steps designed to both help improve customer acquisition in the short term and to drive our growth strategy over the long term. Turning to the financials for the quarter, total company revenue grew 1% to $588 million, with Platform Plus revenue up 134% to $86 million, more than offsetting an 8% decline in revenue from our device business. The third quarter represents the fifth consecutive quarter of triple-digit revenue growth in Platform Plus, driven by advertising revenue, which grew 271% to $66 million. Both our home screen and video advertising revenue streams continue to grow and outperform, and we are excited to highlight that the third quarter saw record-breaking direct sold video advertising revenue. While certain advertiser categories are working through their own supply chain challenges, as a relatively new player in the market, we are expanding our advertiser client base and deepening their total spend with us as they seek our growing combination of owned and operated inventory and first-party data. For the quarter, advertising revenue represented 77% of total Platform Plus revenue. Non-advertising revenue grew 6%, driven by increased data licensing and content distribution fees. Device revenue continued to face difficult year-over-year comparisons to last year's pandemic-driven surge in demand, but Q3 Smart TV shipments grew 27% sequentially to $1.4 million, even in light of increased logistical constraints, and we expect Q4 to grow from there. Higher average unit prices for both TVs and soundbars during Q3 helped to somewhat offset the lower unit volumes. TV AUP was up 42%, while audio was up 8%. Total company gross profit was $83 million, with Platform Plus gross profit of $57 million, or about 69% of the total, and device gross profit of $26 million. Platform Plus gross profit grew 88% year-over-year, due to rapid growth in advertising revenue, which is increasingly becoming a mix of both on and off platform impressions. While we see tremendous headroom for continued growth on platform monetization, we are also gaining traction in off-platform advertising capabilities, which allows us to expand our market and tap into opportunities across the broader connected ecosystem. This broader capability offers strategic planning benefits to our advertising partners. Of course, these off-platform ad revenue sources won't carry the same margin profile that we achieve on-platform, but they expand our overall TAM and create advertising growth potential beyond our TV install base. During the quarter, Platform Plus gross profit margin was 67%. Device gross profit fell 56% as we were lapping last year's COVID-related surge in sales and working through the higher component and freight costs, as well as more promotion pricing versus the year-ago period. As we have been anticipating for several quarters, device gross profit margin came in at just over 5%, which is back in line with pre-pandemic averages. Panel and component costs peaked in July and have come down significantly in recent months, while freight and container costs remain elevated. Total company adjusted EBITDA for the quarter was $23 million, in line with our previous expectations. As a reminder, adjusted EBITDA is only adjusted for share-based compensation expense, which remains elevated this year due to a one-year vesting for grants issued to certain executives in connection with our IPO earlier this year. The higher amortization expense from these grants will roll off beginning in February of next year, resulting in considerably lower run rate comp expense going forward. And finally, net income was a loss of $19 million, or $0.10 per share. In terms of our key metrics, our Q3 results highlight the growing success we are experiencing in driving overall monetization. ARPU growth this quarter accelerated to a record $19.89, up 91% over the year-ago period, primarily benefiting from our improved monetization of Watch Free+. In terms of our engagement measures, as we anticipated, both total time spent on device and time on smart caps returned to sequential growth after the dip we saw in Q2 as the country began to open back up. On a year-over-year basis, total Vizio hours grew 24% to $7.3 billion, and smart caps hours grew 16% to $3.6 billion. With our ever-expanding content lineup, which as of the third quarter now includes household name apps such as HBO Max and BET+, as well as more channels to our watch-free offering, we are seeing continued growth in streaming activity ahead. SmartCast monthly active accounts grew 35% over the year-ago period, ending the quarter at 14.4 million. While all growth is good, we do believe active account growth during the quarter was somewhat impacted by low channel inventory at the start of the quarter, followed by the previously mentioned freight-related delays, which pushed shipments out towards the end of the quarter. For example, 40% of the 1.4 million units shipped during the quarter were shipped in September, leaving less time than usual for units to get into stores, be purchased, and converted to new active accounts within the quarterly timeframe. Now let me turn to what we expect for the fourth quarter. Starting with Platform Plus, our monetization initiatives are paying off and we are continuing to expand our reach and identify new opportunities. Our expanded relationships with media networks and ad agencies following this year's upfront process are driving growth and creating inventory scarcity in Q4 across both video and home screen. This will continue to be favorable for pricing and sellout levels. We are seeing increased demand for data licensing, which is contributing growth to our non-advertising revenue, and also strong competition for our remote control button sponsorships, which is driving increased pricing power. Based on the current trends, we expect Q4 Platform Plus revenue in the range of $100 to $110 million. We expect Platform Plus gross profit in the range of $65 to $70 million, implying a mid-60% gross margin for the quarter at the midpoint of the range. For device, we expect to see sequential growth in TV and soundbar unit shipments as we continue to replenish channel inventories and benefit from the holiday season. In terms of our device gross margins, given our increased confidence in our ability to grow our platform business, we see a strategic opportunity to trade lower device margins to support greater retail shelf share, to acquire active accounts, and to accelerate the growth drivers of our Platform Plus business. We would anticipate low single-digit gross profit margin over the coming quarters in order to feed our wide array of platform monetization, all leading to significantly higher ARPU over time. Lastly, we expect total company-adjusted EBITDAs to be in the range of $7 million to $12 million. So overall, 2021 has been a transformative year for Vizio, and we are very excited about the opportunities we see ahead. With that, let's open up the call to questions. Operator?

Thank you. If you'd like to ask a question, please press star followed by one on your telephone keypad now. If you'd like to remove your question, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally, and please limit your questions to a maximum of one per person. We take our first question from Laura Martin from Needham. Please go ahead.

Sure. I'm going to interpret the one per person, and I get one for William and one for Adam. So sorry. William, for you, inventory. Inventory channel backlog, where are you today in terms of how many weeks of channel inventory do you have? And do you feel that that's going to creep up or creep down as we head into the Christmas selling season in Q4? And then, Adam, these platform numbers are excellent, up 134%. My question is, you actually specifically called out data licensing and remote controls, which are two of the line items. Would you be willing to give us any more granularity in Q3 about ad growth versus buttons versus data by chance? Thank you, guys.

This is William. The channel inventory is getting a lot healthier in Q3, and the team spent a lot of effort and tried to expedite the shipment. And the overall supply situation, from Asia components are getting a lot better. So we do see a pretty healthy inventory for us going into the holidays. And we're very glad that it's coming out for a promotional price. Hopefully we'll see a lot of TV this Thanksgiving, Black Friday. Adam?

Yeah, thanks, Laura. Yeah, I specifically called out data licensing and the remote budget, so I want to give a little bit of context of the non-advertising piece. We did indicate that non-advertising grew 270% year over year, and that's being driven by really strong activity both on the home screen as well as in the video inventory. The video piece, as I had commented, is getting more complex and more dynamic with a larger TAM for us as we monetize inventory both on-platform and off-platform. So the combination of those two is growing that pie, and that's a strategic move that we're making to make sure that we aren't constrained by our install-based footprint. We want to be able to monetize against the entire connected ecosystem. So that's a really important initiative. We've rolled out a few ways we're doing that with something we call Household Connect, which is leveraging the relationship with the Verizon Media arrangement that we put out in the market last quarter, and then we're doing other programs that allow us to tap into inventory off-device as well. But seeing the strong demand and growth in categories, we're seeing growth in demand from insurance, financial services, auto. I mean, these are really big advertisers in the marketplace that are creeping into and now coming into our overall ecosystem. Of the non-advertising piece, data licensing is our largest component of that. The remote buttons will tie partly to shipment volumes because it's related to the volume of remote controls that go out. People do buy independent remote controls aside from the TV as an add-on as well, so we monetize there. But what's changing is the competition. There's so many streaming services and content partners now in the marketplace that getting access to that button availability on our remotes is getting more and more competitive, and that benefits us from a pricing standpoint.

Thanks very much. Go ahead. Thank you.

Great. Thanks, Laura. Operator, we'll take the next question.

The next question comes from Michael Morris from Guggenheim. Please go ahead.

Thanks. Good afternoon, guys. I'll ask two if I could. First, on the platform plus revenue growth guide or the revenue guide, another quarter of good sequential growth I'm hoping you can break down a little bit of the drivers, especially on the advertising side, between video inventory, display, where the strength is coming in. I think maybe a little bit of the gross margin contraction on this side of the business reflects some of that owned inventory. But I would love to hear your take on those components. And also the seasonal component, right? Fourth quarter is usually stronger. So just try to get a little more insight into that. My second question is on the kind of conversion of devices to active accounts, unit shift. Adam, you clarified that a bit in terms of the late deliveries or later in the quarter deliveries. But as we look forward, should we think that that reverses? Or just given some of these supply chain dynamics that you're working through, is there going to be sort of a sustained kind of depressed conversion? I'm curious if you could share anything there. Thanks.

Mike, do you want to hit the advertising drivers?

Yeah, I can talk about the drivers of advertising. So, Mike, I would say for us, we're accelerating in a couple key areas first is on our own watch free plus so our owned and operated app uh we're really excited about the direction that's heading uh we know we did the redesign last q3 uh or i should say last quarter uh which uh which has been very well received by our audience we've added a lot of new content into the fold with uh six new vizio features channels All of that has driven higher time spent, driven in new users, and ultimately added more revenue per hour. On top of that, we're getting smarter, right? We're still early days building the business. So we're getting smarter about optimizations. We're getting smarter about fill rates. Those have increased as well. So good momentum on the Watch Free Plus side. The second biggest driver for us is home screened. We continue to be able to monetize what I would consider is the best UI for search and discovery in the marketplace. I mean, we got 10 monetizable impressions directly on the home screen. So that's been very well received by the media and entertainment community. And as we continue to build those out, we continue to expect significant growth on the home screen. And then the last, I think, as Adam has touched on, is our off platform. We continue to build out or educate the marketplace around our audience extension products and our ability to leverage our first party data to drive video solutions based on what your viewing habits are on the screen into a mobile and desktop environment. And that's been really well received that when you talk about Q4, as we look ahead, as inventory across the entire marketplace starts to tighten, audience extension products give us a good opportunity to continue to drive value with our advertisers.

Yeah, on the active account conversion, I think you're asking that, Mike. It's certainly an interesting dynamic that we look at very, very closely because it's a combination of both what I'll call sort of top of the bucket, so newly converted accounts, and then managing the base, which is the fleet that goes all the way back to when we started shipping SmartCast TVs back in 2016. So when we look at newly sold TVs, we have a pretty consistent conversion of north of 90%. of newly sold TVs converted into an active account. And that's great. So that's feeding the top of the bucket. But then you have a multi-year fleet that has dynamics to it that may be a wide range of reasons why someone might, in any given period, fall out of that activity level. To be active, you have to engage the TV, you have to turn it on, it has to be connected to the Internet. So to qualify for that, you have to achieve those goals. uh attributes and if you don't for whatever reason that might be you'll become what i'll call churn or attrition and so we look very closely at why that happens what can we do about it we want to pick that up uh in terms of re-engagement and we think there's room for opportunity to to improve i mean that's that there's definitely places to go there but um we are seeing right now in the short term to your part of your question Yes, the latency in the supply chain dynamics certainly played a role. When we were low in stock back in July and a lot of the shipments that went out were just initially to kind of get product back on the shelves. to have it turn into sell-through and then a conversion to an active account, we're definitely seeing some latency around that given the supply situation that we're going through. I think that normalizes over time as these things work out through the system, but we're going to attack both the kind of top-of-the-bucket acquisition level and the bottom-of-the-bucket in terms of turn or re-engagement opportunities. We have multiple millions of units that are in the marketplace that we know are not old enough to have been discarded or replaced at this point that are not in our active account number, and that's an opportunity for us as we look forward. Great. Thank you, guys. Thanks, Mike. Operator, we'll take the next question.

Next, we have a question from Steve Cahill from Wells Fargo. Please go ahead.

Thanks. One on TV sales and then one on Platform Plus. So on the TV sales side, I think you said you expect sales to be up sequentially. I'm just wondering if they're also up year on year. And the 40%, I think you said, ARPU growth was pretty strong. Do you think that's more about price or do you think that's more about mix as you up here or a little bit of both?

Let me take the first one. I may have you restate the second one. Yeah, on the first one, look, we're going into a strong seasonal period of the year. We have worked very hard with our logistics partners and our retail partners to get inventories up as we head into it and be ready to meet that demand. So we feel like we're in a really good position there. Whether it ultimately ends up being more or less than than last year. I think it's kind of hard to cop against that number. I think that shouldn't be a surprise to you, but it will be sequentially up nicely. And I wanted to point that out because we know that if we look at the cadence of the year, Q2 was strong. Q1 was the trough quarter. We indicated that at the time that we thought that would be the lowest quarter of the year. Q3 up from there and Q4 up again. So we're in an upward trajectory now as we come out of and into the holiday season. And could you just reframe the – The platform plus question, I think I missed that.

Yeah. Well, so the second part of the first question was just whether or not the pricing growth that you saw was more mix or just price growth because of supply constraints. And then I had a quick follow-up on platform plus.

Yeah, sorry about that. Yeah, actually both, Stephen. We saw a premium up increase. We shipped twice as much premium line product in Q3 as we did in Q2. So we saw an increase in our premiums for our M series and our P series. We saw a sizing up as well, so demand for larger screens. That's contributing as well. And early in the quarter when there was some scarcity of inventories in the marketplace, there wasn't a need to discount heavily. And so prices remained where they were. So I think all those factors played into the 42% increase in AUP that we highlighted year over year.

Great. And then just on platform plus, you know, I think your hours per day per account, there may be about 80% of Rokus and your ARPU is only about 50% of Rokus. So it seems like you've got a lot of pricing headroom, but also maybe a little bit of engagement headroom, I guess. How do you think about driving both of those two different pieces that drive ARPU higher? Thank you.

I think in terms of driving the ARPU higher, we still have a lot of runway. If you look, I continue to reinforce the point that we're only about 20 months into the advertising business. Right. So we've made a lot of headway in terms of breaking new categories, in terms of building our relationships with advertisers and brands. We did about or we announced over $100 million in upfront commitments from our partners. We've grown the advertiser base. I think we said 50%. year over year, as well as average advertising spend over 200%. So we've still got a lot of room to run. We've grown ARPU and nearly doubled it year over year from 10 to 20. But we still have a lot of room for growth and a lot of headway to make in the marketplace as we continue to evangelize our offerings.

Yeah, and, Stephen, there's a number of things that we're investing in to help longer-term drive continued expansion and growth in ARPU. I think we've talked about over the time our investment we're making in software development and engineering capabilities to add new use cases and features to our platform, and that will just benefit us over the long term to be able to drive additional incremental ARPU. But to Mike's point, a lot of headroom, a lot of levers to pull in terms of closing the gap To your point, you know, our activity level is pretty good. We want to push that higher, obviously, but the monetization piece of it is going to be a fast follow. Yeah, thanks. Thanks, Steve. Operator, we'll take the next question.

Next, we have a question from Corey Carpenter from J.P. Morgan. Corey, please go ahead.

I'm going to skirt the system and try to ask you as well. Just on Wall Street+, Could you talk a bit about just framing the longer-term monetization opportunity that's certainly a big driver right now, but if we think of it as roughly 1% of time spent today, and of course, that's just our estimate, could be wrong, but what's stopping you from doubling or tripling that over time? And then maybe, this is probably for you too, Mike, but just video features, hoping you could talk a bit more about that and your ambitions there. Thanks.

Yeah, I think they actually tie together, so it might actually be one question. So when we talk about the big opportunity to grow Watch Free Plus, I think I just touched on the fact that we did a redesign. We've been enhancing the user experience, creating a better environment for our consumers to engage. That's really important because we need to continue to grow new users into the fold. We need to increase time spent, and we're going to continue to invest in bringing in new features and new content into Watch Free Plus. And I think one great example of that is what we've done with Visio Features. So Visio Features is our data-informed programming that's created for our audience, specifically for our audience, and can only be found in Watch Free Plus. These are distinct channels that can't be found anywhere else. And because they're unique to us, they perform really well, as William pointed out, with fork-and-flight and video investigation being some of the top channels within Watch Free Plus already just after being recently launched. But, you know, for example, or I should say another example, our data tells us, that our viewers love crime-driven programs. So we looked across the platform, looked at linear data, streaming data, and we built Visio Investigation. This channel, which is a cable-like experience, has helped us bring in these new viewers, helped grow our active users within Watch Free Plus, has helped us increase time spent, and most importantly, has helped us increase the revenue per hour. that we're gaining within Watch Free, which is really important to us. It also helps us create a second monetization opportunity, right, as we can sell brand sponsorships into these channels as we promote them. So, for example, we also rolled out Vizio House, which is our DIY channel. We have Progressive as the presenting sponsor. That gives them the opportunity to advertise or integrate directly into the channel, but also gives them an opportunity to get real estate on our home screen. which is a good opportunity for us to expand beyond just media and entertainment on the home screen, bring new advertisers into the fold, and give a good consumer experience for our viewers. So for us, you know, it's a great opportunity to build on Watch 3+, but also double dip on the monetization opportunities.

Thank you. Thanks, Corey. Great. Thanks, Corey. Operator, we'll take the next question.

We have a question from Wamsi Mohan from Bank of America. Please go ahead.

Yes, thank you. Adam, you noted willingness to take lower device-based margins to accelerate adoption of Platform Plus. You just added about 400K SmartCast accounts. Any sense for how much of an acceleration you can see with this initiative, and how much will you flex this lever? It sounds like You're talking about maybe low single-digit device growth margins, but why not push that even lower? And then as a follow-up, I also wanted to ask, it appears as though your smart cast hours grew slower than total Vizio hours. That's not been historically the case. What's driving that, and do you think that that continues, that trend continues? Thank you.

Yeah, look, what I'm excited about is that we are at a point now where we've proven over the last year that we can really monetize the platform. The team's done an extraordinary job of driving monetization. And what that allows us to do is be a little bit more strategically flexible with where our profit comes from or where our growth is coming from. And so as we think about that and as an opportunity in the marketplace to be aggressive on getting more units into homes, foregoing some margin in exchange for account growth is now really viable. And so we're excited about what that looks like. We're going to tiptoe into it and be careful. You know, I don't know that we need to go, if you're suggesting sort of loss leader type dynamic, I don't know if we have to go that far right now, but I think we are bringing the consumer a very compelling idea value proposition of great quality at a really amazing price. They're getting something at a razor-thin margin to us, great product for them. And then, obviously, as we bring value to them in terms of the content, the platform experience, and obviously the partnerships we have now with the media companies and the advertisers, it becomes a win-win across the board. So we think we can certainly separate ourselves in the pack in the marketplace, and that should translate into active account growth. In terms of SmartCast, the growth rate comparisons, I think that's really a function of the kind of odd comparisons we're looking to back to Q3 of last year when we were going through the early days of the pandemic. It was a time when people were rushing to streaming. There wasn't a lot of new network content. There weren't any live events in sports. And we're seeing some normalization of that. It was good to see on a sequential basis. that it's returned to growth trajectory after dipping last quarter. But I think long-term, there's no doubt in my mind that the continued shift towards streaming, adoption of streaming, is going to be really strong. Within our own platform, even in the context of SmartCast hours, our watch free plus time spent is way up. And that's important because those SmartCast hours, not every hour is created equally in terms of monetization. So it depends on where consumers are spending their time within that. I think you see it, even though the growth rate wasn't as strong on SmartCast hours versus Vizio hours, look at the monetization, look at the acceleration in ARPU. That's where it's translating. Thanks, Wamsi. Great. Thanks, Wamsi. Operator, we'll take the next question.

Next, we have a question from Nick Zangner from Stevens. Please go ahead.

Yeah. Hey, guys. Great results. With regard to expectations for shipments and new account additions in 4Q, can you just elaborate on the measures you've taken to get Vizio Smart TV into the hands of retailers? It sounds like you're paying up for prioritized shipping. And then does prioritized shipping mean give you prioritized delivery at ports, even when there is extreme congestion?

Yeah, look, there's a number of dynamics that come throughout the supply chain and logistics process. On one hand, the inbound freights are coming from our suppliers. We are partnered with many of the largest suppliers in this product in the world, and we use their scale and leverage and influence to make sure that things are prioritized. They certainly use their their scale and capabilities on that front to benefit themselves as well. And so that partnership really sort of pays off when we go to squeezes like this. When you get it on land, then it becomes a very different dynamic, right? You're dealing with making decisions around rail versus truck versus warehousing. We've worked with many of our 3PL partners to help them hire and get workers into warehouses and truck drivers to try to mitigate some of the challenges that have emerged in the marketplace. It still is very challenging. I don't want to pretend that it's not, but we have certainly used our team and their expertise. Our group's been around for a long time. They have really great relationships and a lot of experience in this area, and so they've been able to get involved and mitigate these challenges as much as possible. So, you know, I think we're in a better position than we would otherwise have been in. It wasn't perfect, and it hasn't been perfect for anybody, so still room to improve, and we're looking forward to some of these bottlenecks easing up with some time.

That's great. And then, you know, I'd love just to get some general thoughts on all the incremental competition that's come to, you know, particularly in the last quarter, really, from some sizable players. You know, Vizio has held market share really across TV sales over the years. You know, that's even as Walmart's on-brand has seen a lot of success taking share. So, Just as more competitors come to market, maybe you could just frame up your specific value proposition for consumers relative to some of the new entrants that you're seeing. Thanks.

Yeah. We have this dual revenue model, which everybody envies, and obviously the competitors saw what we did in the last few years. and they eagerly jump into it. And we've been doing this for many, many years. And some of the big companies think the future for them to promote their own content is to have their own TV. And we'll work on the challenge, and we'll be working very hard, keep on investing, and keep on hiring some of the best talent in the world to help us navigate through this competition. And I do see more competitors coming in, but we'll have, you know, being a Being a company which competes with some of the biggest giants in this industry for many, many years, we'll work on that challenge, and we look forward to compete. Great. Best of luck going forward.

Thanks. Thanks. Thanks, Nick. Operator, we'll take the next question.

We have a question from Vasily Karasov from Cannon Pool Research. Please go ahead.

Oh, thank you very much. Quick clarification. I think, Adam, you said that not every power is created equal in terms of monetization. So if you could explain in a little more detail what you meant. And then my question is about platform plus revenue. If you look at the quarterly progression in this fiscal year, is that pretty much how you think the normalized seasonality will play out? And if not, how, you know, what drivers would be... What would drive the difference between this year and future years? Thank you very much.

Sure, yeah. In terms of SmartCast hours, what I was trying to describe was that there are different monetization opportunities. It depends on what content you're engaging with, right? So if you want to start at the highest level, Watch Free Plus is our highest. We control all the ad inventory in that. We monetize it. We control the full waterfall. We can do really interesting campaigns for ad buyers. And so that's our kind of best monetization destination on the platform. As you move over into other content offerings around the AVOD services, there's a mix there, a hybrid of how much inventory we have in any one of those deals, all the way to, for example, time spent in Netflix, which is not ad-supported. Obviously, we're not going to monetize those hours. And as you can imagine, they're a pretty big deal. you know, our contributor to the totals. YouTube, you know, as well. You know, time spent on YouTube, good time spent. It adds to our hours, but we're not monetizing that directly. So it really matters to me where people are spending time, and that's why we're so focused on using our home screen our search and discovery our platform the first party data we have to drive people into the content we have the best opportunity to monetize and also give them a great user experience content they know they want to watch they're interested in they've shown that before they have an affinity for it let's make a great value proposition where we can drive them into that and increase economics so even if total hours were to stay flat let's say hypothetically but we drove an increase 10, 20, 30% of the time spent in Watch Free Plus, you're going to see that show up in our revenue. And then in terms of the cadence, fair question, hard to say. I mean, we're pretty new at this and far from mature. I know pretty well the mature cadence cycles of media companies and content consumption, and we are still in building mode. So we might see different cadences because of that newness. But generally speaking, obviously, there's more behavior and time span are in the fall around content, rolls into Q1. Summer tends to be a little bit lower consumption. But, you know, I think we're still in a place where we're growing through those normal mature cycles because of just the expansion of the platform.

Thank you very much.

You bet. Operator, we have time for one more question.

Okay. We take our last question from Tom Champion from Piper Sandler. Tom, your line is open.

Thanks very much. Good afternoon. Curious if there's an update on the payments opportunity. I think we were looking for an announcement in the second half of the year. And then maybe for Adam, just a clarification on the 4Q EBITDA guide of $7 to $12 million for 4Q. That's A little bit lower than what we're expecting, a little bit lower sequentially. Just curious if you can walk us through in broad strokes what might be driving that. Any comments would be helpful. Thank you.

Yeah, so I can give an update on Vizio Home or our payment structure. We're currently on track. We recently released what we call our partner portal, which is the tools that we provide to the app partners so that they can build and integrate the payment system into their apps. So we have content partners that have started to work on that. We'll continue to build. We'll continue to add partners to that. And we expect to roll out to consumers next year.

Yeah, Tom, and then in terms of the EBITDA guidance, what we want to do is make sure we reflect the commentary and expectation around device gross profit margin that flows through to that, as you can imagine, giving up those dollars. But for all the strategic reasons that we highlighted, I think it makes sense. a ton of sense. We also know we're investing in building out capabilities to fund future growth as well. So we're adding heads. We've hired over 270 people this year, largely on the software development side, the engineering side. That's going to help suit us and set us up for future growth. So it's a combination of ticking our SG&A expectations higher while the device gross profit margin comes down a little bit, net-net, all translating into a strong position for growth as we see a real opportunity on the horizon here. Thank you. Okay. Thank you. Thanks, Tom, and thanks, everyone, for joining. This concludes today's call. Have a great evening.

Today's call has now come to an end. Please disconnect your lines.