Vizio Holds to Discounting Strategy Amid 'General Conservatism'
Vizio Chief Technology Officer Adam Townsend cited “a general conservatism” in the market, on a Wednesday earnings call, referencing “pockets of uncertainty out there.” Vizio’s Q4 projections for earnings before interest, taxes, depreciation and amortization were below analysts’ expectations at $15 million to $19 million, compared with adjusted EBITDA of $16.7 million in Q3.
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Townsend said Vizio had a “more measured hiring phase” in Q3 that continued into Q4, along with different “dynamics and characteristics.” The company has several promotional activities in play to drive TV sell-through during the holiday sales season, which he said will help “feed the Platform+ business."
Vizio expects a “very competitive environment” during the holiday sales season, Townsend said, continuing trends of the past several months. A difference this year vs. last is “good supply in the channels,” he said: “We’ve got products out there ready to go.” He highlighted promotional programs with Sam’s Club, Target and Walmart.
Q3 revenue was $435 million vs. $588.3 million in Q3 2021, with device revenue of $307 million vs. $502 million in the prior-year quarter. Smart TV shipments dropped 15% to 1.2 million in the quarter. Townsend attributed the 39% drop in device revenue to a combination of lower smart TV shipments and lower average selling prices (ASPs), due to promotions. Though pricing strategies affected ASPs compared with a year ago period, "they have also had the intended consequence of increasing our competitiveness in the market to improve sell-through volumes, which in turn helped drive growth in our base of SmartCast active accounts for Platform+ monetization opportunities."
The strategy is paying off, Townsend said, saying Vizio remained the No. 2 selling TV brand in the U.S. during the quarter and year to date. SmartCast average revenue per user (ARPU) grew to a record $27.69, up 39% from the year-ago period, he said. SmartCast active accounts grew 15% to 16.6 million; of the 8.1 million total Vizio hours viewed in Q3, 4.2 million were SmartCast hours, he said. Shares jumped 22.8% Thursday, closing at $11.31.
Responding to an analyst's comment on Vizio not being "a significant seller at Costco,” Townsend said the company values “deeply” its relationship with Costco and expects "to do more with them down the road.” But “we’ve got to do it in the context of a financial model that works well for both companies," he said. Vizio is “optimistic” that looking into 2023, “we would hope to do more business with Costco.”
Vizio’s recently launched developer program is designed to speed the onboarding process for new features and services, said CEO William Wang. The company has been building Vizio Account, Bluetooth capability, an interactivity overlay and Vizio mobile, he said: “We believe we're ready now,” along with the company’s 16 million user base, and it’s time for Vizio to “help certify developers to make some money," Wang said.
Mike O’Donnell, chief revenue-strategic growth officer, said Vizio has been “laying the foundation” for foundational components to “get closer to the app community” and encourage them to build apps for the “future TV." Those components are better communication to the TV through voice -- on every TV model moving forward -- continued improvements to the mobile app, notifications and interactivity tools, and payments and subscriptions through Vizio Account. Vizio will generate a “cut or share” of the developer dollars generated on its platform, O’Donnell said.