Prospectus Summary
PROSPECTUS SUMMARY The following summary highlights selected information contained elsewhere in this prospectus and does not contain all the information that you should consider before investing in our Class A common stock. You should read the entire prospectus carefully, including the “Risk Factors,” “Special Note Regarding Forward-Looking Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes appearing elsewhere in this prospectus before making an investment decision.Prior to the consummation of the Reorganization Transaction (as defined below) and in reference to events which took place prior to the consummation of the Reorganization Transaction, unless the context requires otherwise, the words “VIZIO,” “we,” the “Company,” “us” and “our” refer to VIZIO, Inc., a California corporation, and its subsidiaries. Subsequent to the consummation of the Reorganization Transaction and in reference to events which are to take place subsequent to the consummation of the Reorganization Transaction, unless the context requires otherwise, the words “VIZIO,” “we,” the “Company,” “us” and “our” refer to VIZIO Holding Corp., a Delaware corporation, and its subsidiaries. In addition, unless otherwise stated or the context otherwise requires, “Parent” refers to VIZIO Holding Corp., a Delaware corporation, and “California VIZIO” refers to VIZIO, Inc., a California corporation. See “—Corporate Information.” References to our “common stock” include our Class A common stock, Class B common stock and Class C common stock.
VIZIO Holding Corp.
Our Mission
VIZIO’s mission is to deliver immersive entertainment and compelling lifestyle enhancements that make our products the center of the connected home.
Overview
VIZIO is driving the future of televisions through our integrated platform of cutting-edge Smart TVs and powerful SmartCast operating system. Every VIZIO Smart TV enables consumers to search, discover and access a broad array of content. In addition to watching cable TV, viewers can use our platform to stream a movie or show from their favorite over-the-top (OTT) service, watch hundreds of free channels through our platform, including on our WatchFree and VIZIO Free Channel offerings, enjoy an enhanced immersive experience catered to gaming or access a variety of other content options. Our platform gives content providers more ways to distribute their content and advertisers more tools to target and dynamically serve ads to a growing audience that is increasingly transitioning away from linear TV.
We currently offer:
And this is just the beginning. Today, a television is primarily viewed as an entertainment device – but our Smart TVs are capable of so much more. Our seamless integration of devices and software allows us to create new interactive use cases, such as personal communications, fitness and wellness, commerce, social interaction and dynamic entertainment experiences. We believe we can reshape the way consumers use the largest screen in their home.
Throughout our history, we have been an innovator and a market disruptor. Founded in Orange County, California in 2002, we saw an opportunity to bring U.S. consumers quality televisions and sound bars with a significantly greater value proposition. We are based in the United States. We believe this gives us a better understanding of U.S. consumer preferences. As of December 1, 2020, we have sold approximately 82.2 million televisions and 11.8 million sound bars over the lifetime of our company. According to OMDIA, VIZIO was #2 in television market share in North America on a unit shipment basis for the January 2018 to December 2020 combined period. In addition, according to The NPD Group Retail Tracking Service, VIZIO was the #1 sound bar brand in America on a unit sales basis for the January 2018 to December 2020 combined period.
We have both driven and benefitted from powerful secular trends that are transforming the way consumers, content providers and advertisers interact in the entertainment industry. Due to the proliferation of high-speed internet access and a growing array of content options, we foresaw that consumers would shift increasing amounts of their entertainment into the home. In 2009, we embedded the Netflix application directly on a TV, bypassing the need for additional, externally connected hardware to stream OTT content. Building on this success, we launched our upgraded operating system in 2016, known today as SmartCast, driving consumers to change the way they access and consume content. Through our acquisition of Inscape in 2015, which enhanced our data capabilities including our proprietary Automatic Content Recognition (ACR) technology, we offer valuable data-driven insights and targeting opportunities for our advertisers. Our easy-to-use and integrated platform gives content providers an additional distribution channel and offers advertisers incremental reach to a growing audience that is transitioning away from linear TV.
We have accomplished all of this by staying faithful to our founding principle that VIZIO is “Where Vision Meets Value,” and that same principle will continue to guide us as we move forward.
The success of our Device business has created a massive growth opportunity for us. Our Smart TVs provide us with the opportunity to add consumers that are actively engaged with our SmartCast operating system, which in turn, expands our Platform+ monetization opportunities. While we generate the significant majority of our total net revenue from sales of our Smart TVs and sound bars, our Platform+ net revenue has grown 304.4% from $36.4 million in 2018 to $147.2 million in 2020. We believe that Platform+ will be the key driver of our future margin growth and financial performance.
Our key financial metrics for 2018, 2019 and 2020 included:
Our key business metrics for 2018, 2019 and 2020 included:
Our Businesses
We operate two distinct but fully integrated businesses: Device and Platform+.
Device
We offer a portfolio of cutting-edge Smart TVs and a versatile series of sound bars that provide an immersive consumer entertainment experience and cater to a range of different consumer price segments. Our devices are sold both in stores and online, including at major national retailers, such as Amazon, Best Buy, Costco, Sam’s Club, Target and Walmart. We also sell our devices through our online channel at VIZIO.com. Through our strong and long-standing relationships with our retailers, our product lines are well distributed across the country, which attracts consumers across a broad range of demographics. By working closely with our suppliers, we have been able to focus our resources on design, marketing and distribution.
Platform+
Platform+ is comprised of SmartCast, our award-winning Smart TV operating system, which 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, Netflix, Peacock and YouTube TV, and hosts our own free, ad-supported apps, WatchFree and VIZIO Free Channels. 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.
Our proprietary Inscape technology enables ACR, which identifies most content displayed on the Smart TV screen regardless of the input. We aggregate this viewing data to increase transparency and enhance targeting abilities for our advertisers. Additionally, we are a leader in driving the innovation and development of Dynamic Ad Insertion (DAI). We launched Project OAR (Open, Accessible, Ready), an industry consortium working directly with many of the largest television networks to establish a technology standard to advance the adoption of DAI and addressable advertising. The adoption of our DAI technology is in its early stages and is an example of our innovation in the marketplace.
We monetize Platform+ through several avenues:
Advertising
Data licensing
Content distribution, transactions and promotion
Industry Trends
We have both driven and benefitted from powerful secular trends that are transforming the way consumers, content providers and advertisers interact in the entertainment industry, including:
Future Role of the TV in the Home
We believe we are well positioned to capitalize on these trends and drive the next big shift in the television landscape. Consider everything in a home that can currently be controlled from a smart phone—things like setting a thermostat, adjusting the lights, controlling the refrigerator or setting the alarm. Our vision is for VIZIO Smart TVs to become the center of the connected home and empower these and many other functions.
We have invested in this future, including through the introduction of our SmartCast platform, and we intend to continue to improve our innovative features, such as mobile app control, IoT voice support and our dynamic operating system to augment such connectivity. Over time, we envision consumers using their VIZIO Smart TVs for:
These services create opportunities for in-app transactions and we believe that by enabling these transactions we will increase monetization on our platform.
Our Market Opportunity
We believe we have a sizable market opportunity in Smart TVs. Beyond this opportunity, we have large market opportunities spanning the television advertising and SVOD markets, as well as the developing connected home market.
As we expand the functionalities of our Smart TVs and SmartCast operating system, we expect to generate recurring revenue by facilitating additional services.
Our Products
While our Smart TVs and sound bars continue to generate the majority of our total net revenue, we believe our advertising products offer the largest opportunity to profitably grow our business. We intend to significantly invest in expanding our advertising capabilities further accelerating the secular shift to connected TV advertising.
Advertising
Our advertising products benefit advertisers and content providers by offering a range of options to connect with our audience. Our primary advertising products include:
Smart TVs
Our broad Smart TV portfolio consists of five series, each designed to target a specific consumer segment and their preferences for high picture quality, powerful processing and video performance, smart capabilities, a wide variety of content, streamlined connectivity and convenience features, and a stylish, modern industrial design.
Sound bars
Our broad collection of high-performance sound bars delivers the home theater experience with immersive sound, powerful performance and modern designs optimized to fit the user’s room and television size.
Our Key Differentiators
Founder-led team with clear vision
William Wang founded VIZIO in 2002, with a dream for making home entertainment accessible to everyone. As our Chairman and CEO, he leads our vision to position the Smart TV as the center of the connected home. We strive to live by his founding principle of “Where Vision Meets Value” by providing high-quality, feature-rich products at affordable pricing. Our commitment to value while delivering high performance enables us to attract consumers and deliver on our vision.
Trusted brand with history of innovation
We have built a strong and trusted brand that symbolizes premium technology, quality and value. The VIZIO platform provides consumers with cutting-edge picture and audio performance that enhances the entertainment experience, while being easy to use and connecting viewers to a broad array of content. We have developed a reputation as a visionary company and market disruptor.
Unique asset-light operating model with outsourced manufacturing and supply chain excellence
We have created and continue to leverage an asset-light operating model with outsourced manufacturing that provides scale-driven cost savings and greater flexibility. Our manufacturing partners maintain the full production process for our Smart TVs and sound bars while we focus on designs, product specifications, marketing and distribution. We work very closely with our manufacturing partners in providing exceptional service to consumers throughout the warranty period.
Integrated hardware and software solutions
We have evolved from being a designer of cutting-edge televisions to becoming a pioneer of Smart TVs. Our integrated offering enables us to have full control over the user experience. Equipped with our SmartCast operating system, our Smart TVs offer consumers a unified solution for their entertainment needs, allowing us to generate recurring revenue and deliver significant lifetime value, which further enables us to deploy competitive Smart TVs in the future.
Broad access to OTT services provide multiple revenue streams
Our platform provides consumers with seamless access to many popular OTT services, including Amazon Prime Video, Apple TV+, Disney+, Hulu, Netflix, Peacock and YouTube TV. Our largest monetization opportunity stems from third-party content through WatchFree, VIZIO Free Channels and select AVOD platforms. On these services, we receive ad inventory that we sell directly to brands, ad agencies and programmatic connected TV ad buyers. We facilitate a win-win relationship with our content providers by acting as another distribution channel for their content.
Platform+ is well-positioned to monetize the shift to OTT
The consumer shift away from linear TV has disrupted the traditional TV advertising model, which is undergoing a transition to OTT. Smart TVs offer an attractive value proposition for advertisers to reach cord-cutters who have disconnected their Pay TV subscription or consumers who have never subscribed to Pay TV in a more targeted way. Our large Smart TV footprint in the United States provides us with the scale to reach a growing audience of consumers who are shifting away from linear TV. Through WatchFree and VIZIO Free Channels, we offer ad inventory that is attractive to both programmatic and direct advertising buyers. Additionally, we effectively monetize advertising capabilities by leveraging our data and technologies, including ACR, to offer increased transparency and enhanced targeting abilities to advertisers.
The VIZIO Value Proposition
Consumers
For consumers, we deliver a premium and interactive entertainment experience at an affordable price. We offer a large portfolio of Smart TVs and sound bars, and our SmartCast operating system provides many of the leading streaming apps through an easy-to-use interface.
Retailers
For retailers, we provide quality, affordable and competitive products that attract consumers across a broad range of demographics, driving additional consumers to these retailers and helping grow their revenue.
Content providers
For content providers, our large base of Smart TVs that are in millions of homes across the United States provides an additional avenue to increase viewership and subscriptions. SmartCast enables them to reach a growing audience that is shifting away from linear TV.
Advertisers
For advertisers, we offer truly incremental reach to linear TV advertising as many VIZIO consumers either do not connect a cable or satellite box to their Smart TVs, or supplement their linear TV viewing with streaming content. Additionally, we expect our ACR and DAI capabilities to allow for more targeted advertising, including for those consumers who view linear TV on our Smart TVs.
Our Growth Strategy
Increase the sales of our Smart TVs
Our current market position reflects consumer demand for our cutting-edge technology at affordable prices. We will continue to invest in designing and developing new features, as well as in our sales and marketing, to increase the sales of our Smart TVs.
Grow awareness and adoption of SmartCast
By selling Smart TVs, we have the opportunity to bring additional consumers onto our SmartCast operating system. Through a combination of a vast array of content from leading third-party apps and expanding our platform’s functionalities, we are focused on making SmartCast the primary source for content streaming and driving SmartCast Active Accounts.
Drive user engagement
Our SmartCast operating system is the gateway to a streamlined entertainment experience, and we believe that SmartCast can one day power the connected home. SmartCast provides consumers with access to a broad range of content, and our intuitive user interface can deliver a wide variety of relevant, personalized content recommendations based on user viewing behavior. By growing our content library, delivering a more personalized viewing experience and increasing the functionalities of our Smart TVs, we can enhance the consumer experience and drive user engagement.
Grow SmartCast ARPU
We expect to grow SmartCast ARPU as we increase our monetization capabilities and the hours spent on our platform. Increasing advertising on our platform is currently the largest opportunity to enhance our SmartCast ARPU. We intend to leverage our significant market share in U.S. homes, our engaged user base on SmartCast, our Inscape data capabilities and investments in our advertising sales force to increase our advertising revenue.
Risk Factors Summary
Our ability to successfully operate our business is subject to numerous risks, including those identified in the section titled “Risk Factors” immediately following this prospectus summary. These risks include, among others:
Our Capital Structure
Upon the closing of this offering, we will have three classes of common stock. Our Class A common stock, which is the stock we are offering by means of this prospectus, has one vote per share, our Class B common stock has 10 votes per share, and our Class C common stock has no voting rights, except as otherwise required by law.
Upon the completion of this offering, all shares of Class B common stock will be held by William Wang, our Founder, Chairman and Chief Executive Officer and his affiliates. In addition, Mr. Wang is expected to enter into voting agreements whereby he will maintain voting control over the shares of Class B common stock held by his affiliates. Accordingly, upon completion of this offering, assuming an offering size as set forth above, the shares beneficially owned by Mr. Wang (including shares over which he has voting control) will represent % of the total voting power of our outstanding capital stock. Mr. Wang will be able to determine or significantly influence any action requiring the approval of our stockholders, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and bylaws, and the approval of any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction.
Shares of our Class C common stock, which entitle the holder to zero votes per share, will not be issued and outstanding at the closing of the offering and we have no current plans to issue shares of Class C common stock. These shares will be available to be used in the future to further strategic initiatives, such as financings or acquisitions, or issue future equity awards to our service providers. Because the shares of Class C common stock have no voting rights (except as otherwise required by law), the issuance of such shares will not result in further dilution to the voting power held by Mr. Wang. Further, one of the events that will result in the final conversion of all of the outstanding shares of Class B common stock is the date fixed by the board of directors that is no less than 61 days and more than 180 days following the first date after the completion of this offering that 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 the date of the completion of this offering (the 25% Ownership Threshold).
The multi-class structure of our common stock is intended to ensure that, for the foreseeable future, Mr. Wang continues to control or significantly influence our governance which we believe will permit us to continue to prioritize our long-term goals rather than short-term results, to enhance the likelihood of stability in the composition of our board of directors and its policies, and to discourage certain types of transactions that may involve an actual or threatened acquisition of us. This multi-class structure is intended to preserve this control until Mr. Wang departs our company or the 25% Ownership Threshold is no longer met.
Controlled Company Status
Following this offering, because William Wang, our Founder, Chairman and Chief Executive Officer will control more than 50% of the voting power of our Class A and Class B common stock, we will be considered a “controlled company” under the New York Stock Exchange rules. As such, we are permitted to opt out of compliance with certain New York Stock Exchange corporate governance requirements and we intend to rely on certain of such exemptions. Accordingly, stockholders will not have the same protections afforded to stockholders of companies that are subject to all of the New York Stock Exchange corporate governance requirements. See “Risk Factors—We are a “controlled company” within the meaning of the New York Stock Exchange rules. As a result, we qualify for, and intend to rely on, exemptions from certain corporate governance requirements that provide protection to stockholders of other companies.”