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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 March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 001-40271
VIZIO HOLDING CORP.
(Exact Name of Registrant as Specified in its Charter)
_____________________________________
Delaware365185-4185335
( State or other jurisdiction of incorporation
or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
39 Tesla
Irvine, California
(949) 428-2525
92618
(Address of principal executive offices)(Registrants telephone number, including area code)(Zip Code)
_____________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Class A common stock, par value $0.0001 per shareVZIONew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ¨    No  x
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
x
Smaller reporting company
¨
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ☐    No  
As of May 7, 2021, the registrant had 183,967,114 shares of common stock, $0.0001 par value per share, 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, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements by terminology such as “anticipates,” “believes,” “continue,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” “could,” “would,” “will” or the negative of these terms or other comparable terminology. In particular, statements regarding our plans, strategies, prospects and expectations regarding our business are forward-looking statements. These forward-looking statements include, but are not limited to, statements concerning the following:
our ability to keep pace with technological advances in our industry and successfully compete in highly competitive markets;
our expectations regarding future financial and operating performance, including our Device business, and the growth of our Platform+ business;
our ability to continue to increase the sales of our Smart TVs;
our ability to attract and maintain SmartCast Active Accounts;
our ability to increase SmartCast Hours, including to attract and maintain popular content on our platform;
our ability to attract and maintain relationships with advertisers;
our ability to adapt to changing market conditions and technological developments, including with respect to our platform’s compatibility with applications developed by content providers;
the impact of the COVID-19 pandemic on our business, operations and results of operations;
our anticipated capital expenditures and our estimates regarding our capital requirements;
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 and security laws;
our ability to implement, maintain and improve effective internal controls; and
our ability to maintain the security and functionality of our information systems or to defend against or otherwise prevent a cybersecurity attack or breach and to prevent system failures;
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
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
ii


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 thousands except per share amounts)
As of
March 31,
2021
December 31,
2020
Assets(Unaudited)(Audited)
Current assets:
Cash and cash equivalents$435,135 $207,728 
Accounts receivable, net248,503 405,609 
Other receivables due from related parties815 978 
Inventories9,743 10,545 
Income tax receivable 1,315 
Other current assets56,599 55,460 
Total current assets750,795 681,635 
Property, equipment and software, net9,829 7,929 
Goodwill, net44,788 44,788 
Intangible assets, net102 131 
Deferred income taxes25,424 26,652 
Other assets13,218 13,847 
Total assets$844,156 $774,982 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable due to related parties$159,680 $209,362 
Accounts payable128,365 166,805 
Accrued expenses146,043 154,959 
Accrued royalties77,223 81,143 
Other current liabilities12,081 5,272 
Total current liabilities523,392 617,541 
Other long-term liabilities7,810 8,210 
Total liabilities531,202 625,751 
Commitments and contingencies (Note 16)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 100,000 shares authorized and 0 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
 — 
Series A Convertible Preferred stock, $0.0001 par value; 0 and 250 shares authorized and 0 and 135 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
— 2,565 
Common stock; $0.0001 par value; 1,000,000 and 675,000 Class A shares authorized, 85,470 and 150,831 Class A shares issued, and 85,036 and 150,831 Class A shares outstanding as of March 31, 2021 and December 31, 2020, respectively; 200,000 and 0 Class B shares authorized, 98,633 and 0 Class B shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively; 150,000 Class C shares authorized; 0 Class C shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
18 15 
Additional paid-in capital262,799 98,885 
Accumulated other comprehensive (loss) income (72)873 
Retained earnings 50,209 46,893 
Total stockholders’ equity312,954 149,231 
Total liabilities and stockholders' equity$844,156 $774,982 
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 thousands except per share amounts)
Three Months Ended
March 31,
20212020
Net revenue:
Device$453,460 $308,855 
Platform+52,196 23,685 
Total net revenue505,656 332,540 
Cost of goods sold:
Device405,238 276,357 
Platform+13,753 8,456 
Total cost of goods sold418,991 284,813 
Gross profit:
Device48,222 32,498 
Platform+38,443 15,229 
Total gross profit86,665 47,727 
Operating expenses:
Selling, general and administrative67,851 30,116 
Marketing4,404 6,248 
Depreciation and amortization614 660 
Total operating expenses72,869 37,024 
Income from operations13,796 10,703 
Interest income82 348 
Other (expense) income, net (189)345 
Total non-operating (expense) income(107)693 
Income before income taxes13,689 11,396 
Provision for income taxes10,344 2,109 
Net income $3,345 $9,287 
Net income attributable to Class A and Class B stockholders:
Basic$0.02 $0.05 
Diluted$0.02 $0.05 
Weighted-average Class A and Class B common shares outstanding:
Basic145,730 144,268 
Diluted157,174 146,944 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


2


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


Three Months Ended
March 31,
20212020
Other comprehensive income
Net income $3,345 $9,287 
Foreign currency translation adjustments, net of tax(945)(2)
Comprehensive income$2,400 $9,285 
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 thousands)
Preferred StockCommon Stock and Additional Paid-In CapitalAccumulated Other Comprehensive IncomeRetained Earnings (Accumulated Deficit)Total
SharesAmountClass A, B, and C
Shares
Amount
Balance at December 31, 2019135 $2,445 150,597 $93,948 $152 $(55,462)$41,083 
Share-based compensation expense— — — 1,339 — — 1,339 
Shares issued pursuant to incentive award plans— — — 158 — — 158 
Foreign currency translation, net of tax— — — — (2)— (2)
Net income— — — — — 9,287 9,287 
Balance at March 31, 2020135 $2,445 150,597 $95,445 $150 $(46,175)$51,865 
Balance at December 31, 2020135 $2,565 150,831 $98,900 $873 $46,893 $149,231 
Share-based compensation expense— — — 26,019 — — 26,019 
Shares issued pursuant to incentive award plans— — 391 — — — — 
Accretion of preferred stock dividends— 29 — — — (29) 
Payment of accumulated preferred stock dividends(594)— — — — (594)
Conversion of Series A preferred stock upon IPO(135)(2,000)30,316 2,000 — —  
Sale of common stock in IPO, net of $13,700 of underwriting fees and other offering costs
— — 7,560 145,019 — — 145,019 
Forfeiture of RSA awards upon IPO— — (4,995)— — — — 
Shares withheld to cover withholding taxes at IPO(434)(9,121)— — $(9,121)
Foreign currency translation, net of tax— — — — (945)— (945)
Net income— — — — — 3,345 3,345 
Balance at March 31, 2021 $ 183,669 $262,817 $(72)$50,209 $312,954 
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 thousands)
Three Months Ended
March 31,
20212020
Cash flows from operating activities:
Net income$3,345 $9,287 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization614 660 
Deferred income taxes1,228  
Share-based compensation expense26,019 1,339 
Changes in operating assets and liabilities:
Accounts receivable157,102 172,180 
Other receivables due from related parties164 2,486 
Inventories808 3,889 
Income taxes receivable1,323 778 
Other current assets(1,338)(1,381)
Other assets628 (2,719)
Accounts payable due to related parties(49,680)(107,415)
Accounts payable(38,249)(69,752)
Accrued expenses(19,659)(38,892)
Accrued royalties(3,920)(115)
Income taxes payable6,823 1,339 
Other current liabilities(17)471 
Other long-term liabilities(400)2,419 
Net cash provided by (used in) operating activities84,791 (25,426)
Cash flows from investing activities:
Purchase of property and equipment(2,353)(280)
Net cash used in investing activities(2,353)(280)
Cash flows from financing activities:
Proceeds from exercise of stock options 158 
Payment of dividends on Series A convertible preferred stock(594) 
Proceeds from IPO, net of $10,700 in offering costs
148,044  
Payments of offering costs(1,363) 
Net cash provided by financing activities146,087 158 
Effects of exchange rate changes on cash and cash equivalents(1,118)(2)
Net increase (decrease) in cash and cash equivalents$227,407 $(25,550)
Cash and cash equivalents at beginning of year$207,728 $176,579 
Cash and cash equivalents at end of year$435,135 $151,029 
Supplemental disclosure of cash flow information:
Net cash paid (received) during the period for income taxes$69 $(56)
Cash paid for interest$47 $38 
Supplemental disclosure of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities$ $3,366 
Cash paid for amounts included in the measurement of operating lease liabilities$720 $551 
Payment to taxing authority in connection with shares directly withheld from
employees not yet made
$9,121 $ 
IPO costs not yet paid$1,663 $ 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

VIZIO HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except share and per share amounts, term and percentage data)

Note 1. Organization and Nature of Business
VIZIO Holding Corp. was incorporated as a Delaware corporation on December 7, 2020 in order to facilitate the holding company reorganization of VIZIO, Inc. and its subsidiaries (together with VIZIO Holding Corp., the “Company” or “VIZIO”). VIZIO, Inc. was incorporated in the State of California on October 21, 2002 and commenced operations in January 2003. On March 12, 2021, VIZIO Holding Corp. acquired 100% of the outstanding shares of VIZIO, Inc.
The Company’s devices include high-performance Smart televisions (“Smart TVs”), sound bars, and accessories. These products are sold to retailers and through online channels throughout the United States. Additionally, VIZIO 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, as well as VIZIO Free Channels. The Company provides broad support for third-party voice platforms and second screen experiences to offer additional interactive features and experiences.
VIZIO purchases all of its products from manufacturers based in Asia. Since inception, the Company has purchased a portion of its televisions from one manufacturer who holds a noncontrolling interest in the Company through its ownership of voting common stock. Since 2012, VIZIO 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 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.
Reorganization Transaction
On March 12, 2021, the Company implemented a holding company structure through the merger of VIZIO Reorganization Sub, LLC, a wholly-owned subsidiary of VIZIO Holding Corp., pursuant to an agreement and plan of merger, with and into VIZIO, Inc., with VIZIO, Inc. surviving as a wholly-owned subsidiary of VIZIO Holding Corp (the “Reorganization Transaction”). As a result of the Reorganization Transaction:
VIZIO Holding Corp. became a holding company with no material assets other than 100% of the equity interests of VIZIO, Inc.;
Each share of Class A common stock and Series A convertible preferred stock, respectively, of VIZIO, Inc. was cancelled in exchange for the issuance of one share of Class A common stock and Series A convertible preferred stock, respectively, of VIZIO Holding Corp.;
VIZIO Holding Corp. began consolidating the financial results of VIZIO, Inc. and its subsidiaries;
VIZIO Holding Corp. assumed the VIZIO, Inc. 2007 Incentive Award Plan and the VIZIO, Inc. 2017 Incentive Award Plan, and the stock options and other awards granted thereunder, on a one-for-one basis and on the same terms and conditions; and
All of the business operations continue to be conducted through VIZIO, Inc. and its subsidiaries.
Between the incorporation of VIZIO Holding Corp. on December 7, 2020 and the completion of the Reorganization Transaction, VIZIO Holding Corp. did not conduct any activities other than those incidental to its formation and preparation for the IPO (as defined below).
Forward Stock Split
On March 15, 2021, the Company amended its Amended and Restated Certificate of Incorporation to effect a nine-for-one forward stock split of the Company’s Class A common stock. The number of authorized shares of Class A common stock was proportionally increased in accordance with the nine-for-one stock split, and the par value of the Class A common stock was not adjusted as a result of this forward stock split. As a result of the stock split, each share of the Company’s Series A preferred stock became convertible into 225 shares of Class A common stock. All Class A common stock, stock options, RSUs and per share information presented within these unaudited condensed consolidated financial statements and related notes have been adjusted to reflect this forward stock split on a retroactive basis for all periods presented.
6

VIZIO HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except share and per share amounts, term and percentage data)
Initial Public Offering
On March 29, 2021, the Company closed its initial public offering (“IPO”) of 12,250,000 shares of its Class A common stock at a public offering price of $21.00 per share. The Company issued and sold 7,560,000 shares of Class A common stock, and certain existing stockholders sold an aggregate of 4,690,000 shares of Class A common stock. The Company received net proceeds of approximately $145.1 million after deducting underwriting discounts and commissions of approximately $10.7 million and offering expenses of $3.0 million. On March 31, 2021, certain existing stockholders sold an additional 1,709,274 shares of Class A common stock at $21.00 per share pursuant to the underwriters’ option to purchase additional shares. We did not receive any proceeds from the sale of shares by the selling stockholders.
Immediately prior to the completion of the IPO, 134,176 shares of Series A redeemable convertible preferred stock then outstanding converted into 30,315,600 shares of shares of Class A common stock. Immediately prior to the completion of the IPO, the Company filed its Amended and Restated Certificate of Incorporation, which authorizes a total of 1,000,000,000 shares of Class A common stock, 200,000,000 shares of Class B common stock, 150,000,000 shares of Class C common stock, and 100,000,000 shares of undesignated preferred stock. Immediately after the conversion and prior to the completion of the IPO, a total of 98,633,025 shares of Class A common stock held by William Wang and his respective affiliated trusts were exchanged for an equivalent number of shares of Class B common stock pursuant to the terms of certain exchange agreements. As a result, following the completion of the IPO, the Company has three classes of authorized common stock: Class A common stock, Class B common stock and Class C common stock. See Note 9 to these unaudited condensed consolidated financial statements for further information.
Impact of COVID-19
On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The challenges posed by the COVID-19 pandemic on the global economy increased significantly as the year progressed. In response to COVID-19, national and local governments around the world have instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing. The full impact of COVID-19 on the Company’s results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time. However, to date the Company has not been negatively impacted by the COVID-19 pandemic despite the global shipping delays caused by port congestion during the first quarter of 2021.
Note 2. Summary of Significant Accounting Policies
Other than policies updated below, there have been no significant changes from the significant accounting policies disclosed in Note 2 of the “Notes to Consolidated Financial Statements” of the audited consolidated financial statements for the year ended December 31, 2020, which are included in our prospectus filed pursuant to Rule 424(b)(4) on March 25, 2021 (the “Prospectus”).
Basis of Consolidation
The Company has prepared these accompanying unaudited condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). These unaudited condensed consolidated financial statements include the accounts of VIZIO and all subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The functional currency of most of the foreign subsidiaries is the U.S. dollar. The accounts of these remaining foreign subsidiaries have been translated using the U.S. dollar as the functional currency. Gains or losses resulting from remeasurement of these accounts from local currencies into U.S. dollars are recorded in other comprehensive income in these unaudited condensed consolidated financial statements. Financial statements of the Company’s foreign subsidiaries for which the functional currency is the local currency are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and the transaction date.
The condensed consolidated balance sheet as of December 31, 2020 and included herein was derived from the audited financial statements as of the same date. We have 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, 2020 included in the Prospectus. In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive
7

VIZIO HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except share and per share amounts, term and percentage data)
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, 2021.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates and assumptions. Significant items subject to such estimates and assumptions include the allowances for doubtful accounts and sales returns, reserves for excess and obsolete inventory, accrued price protection and rebates, accrued royalties, share-based compensation, intellectual property and related intangible assets, valuation of deferred tax assets and other contingencies. Supplier and customer concentrations also increase the degree of uncertainty inherent in these estimates and assumptions.
Customer Allowances
The Company offers sales incentives through various programs, consisting primarily of discounts, cooperative advertising and market development fund programs. The Company records cooperative advertising and market development fund programs with customers as a reduction to revenue unless the Company receives a distinct benefit in exchange for credits claimed by the customer and can reasonably estimate the fair value of the benefit received. These arrangements are recorded as accrued liabilities. Cooperative advertising arrangements recorded as a reduction of net revenue totaled $850 and $938 for the three months ended March 31, 2021 and 2020, respectively.
Research and Development Costs
Research and development expense consists 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 as consumed. Research and development costs were $9,833 and $3,692 for the three months ended March 31, 2021 and 2020, respectfully, and are recorded in selling, general and administrative expense in the accompanying consolidated statements of operations.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued guidance, ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, to reduce complexity in accounting standard. The guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification Topic 740 ("ASC 740") as well as by improving consistent application of the topic by clarifying and amending existing guidance. This standard is effective for the Company for the year ending December 31, 2021. The adoption of this standard did not result in a material impact to the Company’s consolidated financial statements.
There have been no further developments to recently issued accounting standards, including the expected dates of adoption and estimated effects on the Company’s consolidated financial statements and footnote disclosures, from those disclosed in the audited consolidated financial statements included in the Prospectus.
Note 3. Net Revenue
The Company derives revenue primarily from the sale of televisions and sound bars, advertising and data services. Revenue is recognized when control of the promised goods or services is transferred to the Company’s retailers, in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. The Company applies a five-step approach as defined in Financial Accounting Standards Board (“FASB”) ASC 606, Revenue from Contracts with Customers (Topic 606), in determining the amount and timing of revenue to be recognized: (1) identifying the contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations in the contract; and (5) recognizing revenue when the corresponding performance obligation is satisfied. The Company sells products to certain retailers under terms that allow them to receive price protection on future price reductions and may provide for limited rights of return, discounts and advertising credits.
The Company disaggregates net revenue by (i) Device Revenue, and (ii) Platform+ Revenue, as it believes it best depicts how the nature, timing and uncertainty of revenue and cash flows are affected by economic factors.
8

VIZIO HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except share and per share amounts, term and percentage data)
The revenue recognized from the contract liabilities consisted of the Company satisfying performance obligations during the normal course of business. The Company did not identify nor record any material contract assets as of March 31, 2021 and December 31, 2020. 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
VIZIO is a wholesale distributor of televisions and other home entertainment products, which are sold to the largest retailers and wholesale clubs in North America, primarily in the United States. The Company’s sales can be impacted by consumer spending and the cyclical nature of the retail industry.
The following customers account for more than 10% of net revenue:
Three Months Ended
March 31,
20212020
Net revenue:
Customer A
41 %47 %
Customer B
15 13 
Customer C
12 10 
The following customers account for more than 10% of accounts receivable:
As of
March 31,
2021
December 31,
2020
Net receivables:
Customer A
48 %41 %
Customer B
12 18 
Customer C
14 16 
Customer A and Customer C, and certain other customers not separately identified in the table above, are affiliates under common control. Collectively, they comprised 53% and 57% of VIZIO’s net revenue for the three months ended March 31, 2021 and 2020, respectively. Their collective accounts receivable balance as of March 31, 2021 and December 31, 2020 was 62% and 57% of our total net receivables, respectively. However, throughout VIZIO’s history and presently, the Company has dealt with separate purchasing departments at Customer A and Customer C, and have at times sold products to Customer C without selling products to Customer A.
Note 4. Accounts Receivable
Accounts receivable consists of the following:
As of
March 31,
2021
December 31,
2020
Accounts receivable$249,275 $406,608 
Allowance for sales returns
(744)(981)
Allowance for doubtful accounts(28)(18)
Total accounts receivable, net of allowances$248,503 $405,609 
VIZIO 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.
9

VIZIO HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except share and per share amounts, term and percentage data)
Note 5. Inventories
Inventories consist of the following:
As of
March 31,
2021
December 31,
2020
Inventory on hand
$767 $3,237 
Inventory in transit8,976 7,308 
Total inventory$9,743 $10,545 
Significant Manufacturers
VIZIO purchases a significant amount of its product inventory from certain manufacturers. The inventory is purchased under standard product supply agreements that outline the terms of the product delivery. Once all aspects of the product are agreed upon, the manufacturers are then responsible for transporting the product to their warehouses located in the United States. The manufacturers are considered the importers of record and are required to insure the product as it is shipped to the warehouses. The title and risk of loss of the product passes to VIZIO upon shipment from the manufacturer’s warehouse in the United States to the customer. The product supply agreement stipulates that the manufacturer will (i) generally reimburse VIZIO for at least a portion of the price protection or sales concessions negotiated between the Company and customers on product purchased, and (ii) indemnify VIZIO 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
March 31,
20212020
Inventory purchases:
Supplier A31 %35 %
Supplier B – related party43 44 
Supplier C10 8 
As of
March 31,
2021
December 31,
2020
Accounts payable:
Supplier A33 %16 %
Supplier B – related party50 21 
The Company is currently reliant upon these manufacturers for products. Although VIZIO 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 $3,472 and $3,033 due from the manufacturers as of March 31, 2021 and December 31, 2020, 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 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
10

VIZIO HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except share and per share amounts, term and percentage data)
expensed as incurred. Recycling costs were $2,592 and $1,083 for the three months ended March 31, 2021 and 2020, respectively, and are recorded in cost of goods sold in the accompanying condensed consolidated statements of operations.
Note 6. Property and Equipment
Property and equipment consist of the following:
As of
March 31,
2021
December 31,
2020
Building$9,998 $9,998 
Machinery and equipment1,644 1,284 
Leasehold improvements3,438 3,438 
Furniture and fixtures2,840 2,840 
Computer and software21,185 19,184 
Automobile and truck22 22 
Total property and equipment39,127 36,766 
Less accumulated depreciation and amortization(29,298)(28,837)
Total property and equipment, net$9,829 $7,929 
During the three months ended March 31, 2021 and 2020, the Company capitalized software development costs of $621 and $573, respectively. During the three months ended March 31, 2021 and 2020 amortization of capitalized software development costs was $690 and $830, respectively, and are recorded in costs of goods sold in the accompanying condensed consolidated statements of operations.
Depreciation expense was $461 and $429 for the three months ended March 31, 2021 and 2020, respectively. The Company’s long-lived assets, which include property and equipment and other intangible assets of $9,931 and $8,060 as of March 31, 2021 and December 31, 2020 respectively, are located entirely within the United States.
Note 7. Goodwill and Other Intangible Assets
(a)Goodwill
The Company’s goodwill balance was $44,788 as of March 31, 2021 and December 31, 2020. The goodwill balance was determined based on the excess of the purchase price paid over the fair value of the identifiable net assets acquired and represents its future revenue and earnings potential and certain other assets acquired that do not meet the recognition criteria, such as assembled workforce. The Company performed an impairment test of its goodwill on October 1st in accordance with its accounting policy. The results of this test indicated that the Company’s goodwill was not impaired. No goodwill impairment was recorded for the three months ended March 31, 2021 or 2020.
(b)Other Intangible Assets
Intangible assets primarily consist of acquired developed technology, customer relationships, trademarks resulting from business combinations and acquired patent intangible assets, which are recorded at acquisition-date fair value, less accumulated amortization. The Company determines the appropriate useful life of its intangible assets by performing an analysis of expected cash flows of the acquired assets. Intangible assets are amortized over their estimated useful lives using a straight-line method, which approximates the pattern in which the economic benefits are consumed.
11

VIZIO HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except share and per share amounts, term and percentage data)
Acquired intangible assets from business combinations and accumulated amortization consist of the following as of March 31, 2021 and December 31, 2020:
Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Developed technology$5,500 $(5,500)$ 
Customer relationships1,870 (1,870) 
Trademarks30 (30) 
Total$7,400 $(7,400)$ 
Amortization expense recorded for intangible assets for the three months ended March 31, 2021 and 2020 was $0 and $215, respectively, and is included in cost of goods sold.
The Company has a portfolio of patents that provide a variety of benefits including defense against in progress and potential future lawsuits. The acquired patents and related fees are recorded at cost (which approximates fair value) and are being amortized using the straight-line method over the average life of the underlying patents. There were no patents purchased during the three months ended March 31, 2021.
The acquired patent intangible assets are as follows:
As of
March 31,
2021
December 31,
2020
Acquired patents$7,663 $7,663 
Less accumulated amortization(7,561)(7,532)
Total patents$102 $131 
Amortization expense on acquired patent intangibles for the three months ended March 31, 2021 and 2020, was $29 and $29, respectively, and is included in cost of goods sold. The weighted-average remaining useful life for acquired patents as of March 31, 2021 was 0.14 years. Estimated future amortization of acquired intangible assets from business combinations and acquired patent intangible assets is not material.
12

VIZIO HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except share and per share amounts, term and percentage data)
Note 8. Accrued Expenses
The Company’s accrued expenses consisted of the following:
As of
March 31,
2021
December 31,
2020
Accrued price protection$47,441 $61,331 
Accrued other customer related expenses46,981 54,404 
Accrued supplier related expenses12,598 12,434 
Accrued payroll expenses23,740 10,874 
Accrued tax expenses114 2,741 
Accrued other expenses15,169 13,175 
Total accrued expenses$146,043 $154,959 
The Company periodically grants certain sales discounts and incentives to customers, such as rebates and price protection, which are treated as variable consideration for purposes of determining the transaction price. In certain instances, the Company will, in turn, negotiate with its manufacturers for reimbursement of a portion of the incentives so that the manufacturers are responsible for absorbing some of the rebates and price protection. The Company’s procedures for estimating customer allowances recorded as a reduction of revenue are based upon historical experience, as adjusted for the current environment, and management judgment. Customer allowances are accrued for when the related product sale is recognized. The accrued customer allowances are presented on the consolidated balance sheets in accrued expenses and recorded in the condensed consolidated statements of operations as a reduction of net revenue.
Note 9. Stockholders’ Equity

Forward Stock Split
As described in Note 1—Organization and Description of Business, on March 15, 2021, the Company amended its Amended and Restated Certificate of Incorporation to effect a nine-for-one forward stock split of the Company’s Class A common stock.
Conversion of Redeemable Convertible Preferred Stock and Amendment and Restatement of Certificate of Incorporation
As described in Note 1—Organization and Description of Business, immediately prior to the IPO:
all 134,176 shares of Series A redeemable convertible preferred stock then outstanding converted into 30,315,600 shares of Class A common stock;
the Company amended and restated its Amended and Restated Certificate of Incorporation to, among other things, authorize (i) 1,000,000,000 shares of Class A common stock, par value $0.0001 per share, (ii) 200,000,000 shares of Class B common stock, par value $0.0001 per share, (iii) 150,000,000 shares of Class C common stock, par value $0.0001 per share, and (iv) 100,000,000 shares of undesignated preferred stock, the rights, preferences and privileges of which may be designated from time to time by the Company’s Board of Directors; and
a total of 98,633,025 shares of Class A common stock held by William Wang and his respective affiliated trusts were exchanged for an equivalent number of shares of Class B common stock pursuant to the terms of certain exchange agreements.
As a result, following the completion of the IPO, the Company has three classes of authorized common stock – Class A common stock, Class B common stock and Class C common stock, in addition to authorized undesignated preferred stock.
Initial Public Offering
As described in Note 1—Organization and Description of Business, on March 29, 2021 the Company closed its IPO of 12,250,000 shares of Class A common stock, in which the Company issued and sold 7,560,000 shares of Class A common stock and certain existing stockholders sold an aggregate of 4,690,000 shares of Class A common stock at a public offering price of $21.00 per share. In connection with the IPO, the Company received net proceeds of approximately $145,100 after deducting underwriting discounts and commissions of approximately $10,700 and other offering expenses of approximately $3,000.


VIZIO HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except share and per share amounts, term and percentage data)
In addition, in connection with the IPO, certain stockholders forfeited 434,334 shares of restricted stock to the Company to satisfy tax withholding obligations in connection with the IPO (the “RSA Forfeiture”). The Company recorded the value of the forfeited shares as treasury stock within Additional paid-in capital in its unaudited condensed consolidated balance sheet dated March 31, 2021 based on the fair value of the stock at the time of forfeit.
Preferred Stock
As of March 31, 2021, pursuant to the terms of the Company’s Amended and Restated Certificate of Incorporation, which became effective on March 29, 2021 in connection with the closing of the IPO (the “Restated Certificate”) the Company’s Board of Directors is authorized to issue up to an aggregate of 100,000,000 shares of undesignated preferred stock, par value $0.0001 per share, in one or more series and to fix or alter the designations, preferences, rights and any qualifications, limitations or restrictions of the shares of each of these series including the dividend rights, dividend rates, conversion rights, voting rights, term of redemption, including sinking fund provisions, redemption price or prices, liquidation preferences and the number of shares constituting any series or designations of a series without further vote or action by the stockholders.
Series A Convertible Preferred Stock
On March 29, 2021, in connection with the closing of the Company’s IPO, all 134,736 shares of Series A convertible preferred stock outstanding immediately prior to the IPO were converted into an aggregate of 30,315,600 shares of Class A common stock and recorded in the unaudited condensed consolidated balance sheet to common stock and additional paid-in capital. Additionally, approximately $588 in dividends accumulated through the conversion date were paid to the holders of outstanding shares of Series A convertible preferred stock as of immediately prior to the closing of the IPO. As of the effectiveness of the Amended and Restated Certificate of Incorporation on March 29, 2021, there are no shares of the Series A convertible preferred stock authorized for issuance.
Common Stock
As of March 31, 2021, pursuant to the terms of the Restated Certificate, the Company is authorized to issue 1,350,000,000 shares of common stock with $0.0001 par value, of which 183,668,829 shares are issued and outstanding. The Company has three classes of authorized common stock, Class A common stock, Class B common stock and Class C common stock. The rights of the holders of Class A common stock, Class B common stock, and Class C common stock are identical, except with respect to voting and conversion.
Voting rights: The holders of Class A common stock are entitled to one vote per share of Class A common stock and holders of Class B common stock are entitled to 10 votes per share of Class B common stock. Holders of our Class C common stock are not entitled to vote on any matter that is submitted to a vote of stockholders, except as otherwise required by law.
Conversion rights: Each share of Class B common stock is convertible into one share of Class A common stock at any time at the option of the holder and will automatically convert into Class A common stock upon any transfer, except for certain permitted transfers and so long as the transferor retains sole dispositive power and exclusive voting control with respect to the shares of Class B common stock. All shares of Class B common stock will convert automatically into an equivalent number of shares of Class A common stock on the date fixed by the Company’s Board of Directors that is no less than 61 days and no more than 180 days following (i) the first time that William Wang and his affiliates hold less than 25% of the shares of Class B common stock held by Mr. Wang and his affiliates as of the date of the completion of the IPO, (ii) following the date on which Mr. Wang is terminated for cause (as defined in the Company’s Restated Certificate); or (iii) the date upon which (A) Mr. Wang is no longer providing services to us as our Chief Executive Officer and (B) Mr. Wang is no longer a member of the Company’s Board of Directors. 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 the Company’s Board of Directors (or if there is no such person, then our secretary then in office).
After the conversion or exchange of all outstanding shares of the Company’s Class B common stock into shares of Class A common stock, all outstanding shares of Class C common stock will convert automatically into Class A common stock, on a share-for-share basis, on the date or time specified by the holders of a majority of the outstanding shares of Class A common stock, voting as a separate class.
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VIZIO HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except share and per share amounts, term and percentage data)
Dividends: The holders of the Company’s common stock are entitled to share equally, on a per share basis, in any dividends declared by the Company’s Board of Directors out of legally available funds, subject to the rights of holders of preferred stock, if any, and the terms of any existing or future agreements between the Company and its lenders.
Liquidation: In the event of the Company’s liquidation, dissolution or winding up, holders of its common stock are entitled to share equally, on a per share basis, in all assets legally available for distribution after payment of all debts and other liabilities, and subject to the prior rights of any holders of outstanding shares of preferred stock, if any.
Common Stock Issuance: On June 20, 2018, VIZIO issued approximately 12,978,000 shares of its Class A common stock for $70,000, or $5.39 per share, to two related party manufacturers one of which was Supplier B as referenced in Note 5. In conjunction with this common stock issuance, VIZIO entered into strategic cooperation agreements with these suppliers. Prior to the IPO, if certain conditions set out in the agreements were achieved, the agreements provided opportunities for potential further equity investment in VIZIO. The agreements also provided for preference in future board member assignment, and future strategic financial incentives. After the expiration of the warrants the opportunity for further investment closed, while the other rights remain. The value of these were determined to be immaterial within the arrangement and to the consolidated financial statements.
Warrant Issuance: On December 31, 2019, VIZIO issued warrants to the same two suppliers in accordance with the strategic cooperation agreements entered into on June 20, 2018, upon the achievement of certain purchase volume milestones as set out in the strategic cooperation agreements. The warrants provided the suppliers the right to purchase a total of $15,000 of Class A common stock at an exercise price of $5.39 per share. The awards were exercisable in cash for a period of six months from the grant date and had a fair value of $1,927 at the grant date. The warrants were valued using the Black-Scholes option pricing model as of the issuance date and have been expensed in full within cost of goods sold within the consolidated statement of operations. Assumptions used include the annualized volatility of 48%, fair value of common stock of $5.39 and the dividend rate of 3%. In July 2020, the warrants expired unexercised.
Note 10. Share-Based Compensation
In August 2017, the Company’s Board of Directors adopted the 2017 Incentive Award Plan (as amended, the “2017 Plan”), which provides for the granting of qualified and nonqualified stock options, restricted stock awards, restricted stock units, dividend equivalents, stock appreciation rights and other share-based awards. The 2017 Plan was amended and restated prior to the Company’s IPO. The 2017 Plan, reserves for issuance to eligible employees, directors and consultants a total of (i) 24,446,502 shares of common stock in addition to (ii) the number of shares that, as of the date the 2017 Plan was originally adopted, were available for issuance under the 2007 Plan (as described below), plus (iii) the number of shares subject to awards outstanding under the 2007 Plan as of the date the 2017 Plan was originally adopted, that on or after that date, are forfeited or otherwise terminate or expire for any reason without the issuance of shares to the holders of the awards; provided, that the maximum number of shares of Class A common stock that may be added to the number of shares reserved under the 2017 Plan under clauses (ii) and (iii) is 40,520,655 shares. 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. Any stock options or stock appreciation rights granted under the Plan will have a term of not more than 10 years and the vesting of the awards are set at the discretion of the Board of Directors but is not expected to exceed four years for any grant.
The Company’s 2007 Incentive Award Plan (the “2007 Plan”), which the Board of Directors had adopted in 2007, was terminated in connection with the adoption of the 2017 Plan. Any outstanding awards that had been granted under the 2007 Plan prior to its termination remain outstanding, subject to the terms of the 2007 Plan and awards agreements, until such awards vest and are exercised (as applicable) or until they terminate or expire by their terms. As of March 31, 2021, options to purchase a total of 1,878,822 shares of Class A common stock remained outstanding and subject to the terms of the 2007 Plan. The awards under the 2007 Plan have a term of not more than 10 years and the vesting of the awards was set at the discretion of the Board of Directors upon grant but is not expected to exceed four years for any grant. All awards are subject to forfeiture within 90 days if employment or other services terminate prior to the vesting of the awards. Grants are no longer permitted from the 2007 Plan.
15

VIZIO HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except share and per share amounts, term and percentage data)
Stock Option Awards
A summary of the status of the Company’s stock option plans as of March 31, 2021 presented below:
Number of
Options
Weighted Average Exercise PriceWeighted Average Remaining Contractual Term (Years)Aggregate Intrinsic Value
Outstanding at December 31, 202016,416 4.16 7.171,934 
Granted860 11.08 
Exercised  
Forfeited and expired(191)4.75 
Outstanding at March 31, 202117,085 $4.50 7.0$337,491 
Options vested and exercisable at March 31, 2021 9,560 $3.11 5.9$202,072 
In February 2021, the Company granted approximately 688,068 stock option awards to various employees. These options vest over a four year period and the fair value of the option on the grant date was $10.54 as determined using the Black Scholes Option Pricing Model and a market price of $19.49, volatility of 39%, a dividend yield of 2%, a risk free rate of 1%, and an expected term of 6.25 years.
In March 2021, the Company granted 172,196 stock options to various employees. These options vest over a four year period and the fair value of the option on the grant date was $7.63 using the Black-Scholes Options Pricing Model and a market price of common stock of $21.00, volatility of 44%, a dividend yield of 2%, a risk free rate of 1% and an expected term of 6.25 years.
March 31, 2021March 31, 2020
Weighted average grant date fair value of stock options granted during the year$9.95 $ 
A summary of the nonvested stock options as of March 31, 2021 is as follows:
Shares Weighted
average
grant date
fair value
Nonvested at December 31, 20207,154 $1.64 
Granted860 $9.95 
Forfeited or expired(122)$2.84 
Vested(359)$3.57 
Nonvested at March 31, 20217,533 $6.27 
Restricted Stock Awards
Effective October 29, 2010, the Board of Directors granted a total of 4,995,000 restricted stock awards (“RSA”) to the Company’s Chief Executive Officer and Chief Operating Officer with a stock price of $1.93 per share. The restricted stock awards vest and become non-forfeitable ratably over a four-year period assuming VIZIO made its first public offering of common stock pursuant to a registration statement filed with the Securities and Exchange Commission during this period. Under the terms of the grant, if a public offering did not occur within the four-year vesting period, the restricted stock awards would remain outstanding and unvested for an additional three-year period and all shares would vest contingent upon an initial public offering. If after seven years, VIZIO was not successful at completing an initial public offering, all of the restricted stock awards would forfeit. Effective April 25, 2017, the forfeiture date on these awards was extended to December 31, 2020. In estimating the fair value of the common stock at the grant date, the Company engaged an independent valuation specialist to assist in determining the stock price.
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VIZIO HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except share and per share amounts, term and percentage data)
Effective December 29, 2017, the Board of Directors granted a total of 1,179,000 restricted stock awards to members of senior management with a stock price of $2.89 per share. On October 8, 2019, the Board of Directors granted a total of 234,000 restricted stock awards to members of senior management with a stock price of $5.39 per share. Subsequent to December 31, 2020, 4,995,000 of these RSAs were forfeited.
Restricted Stock Units
On December 31, 2020, the Board of Directors granted a total of 2,034,000 restricted stock units (“RSU”) to members of senior management with a stock price of $8.54 per share. The restricted stock units vest and become nonforfeitable ratably over a one to four-year period assuming VIZIO made its first public offering of common stock pursuant to a registration statement filed with the Securities and Exchange Commission in December 2020. Under the terms of the grant, if a public offering did not occur within the vesting period, the RSUs would remain outstanding and unvested for an additional period and all shares shall vest contingent upon an initial public offering. Since the vesting of the RSUs was contingent upon an initial public offering, VIZIO deferred the recognition of compensation expense for these awards until the first quarter of 2021. In estimating the fair value of the common stock at the grant date, the Company engaged an independent valuation specialist to assist in determining the stock price. See further discussion of valuation below.
In February 2021, the Company granted 5,085,000 restricted stock units to several key employees. These RSUs vest ratably over a twelve month period and were measured based on a grant date fair value of $19.49 per share as further described below.
Fair Value of Share-Based Awards
Share-based compensation expense resulting from grants of employee and non-employee stock options is recognized in the unaudited condensed consolidated financial statements based on the respective grant date fair values of the awards. Stock option, restricted stock unit, restricted stock and warrant grant date fair values are estimated using the Black-Scholes-Merton option pricing model.
Prior to the IPO, given the absence of a public trading market, the Company’s Board of Directors considered numerous objective and subjective factors to determine the fair value of the common stock at each grant date. These factors included, but were not limited to (a) the prices at which the Company sold its Class A common stock to outside investors in arms-length transactions, (b) an independent third-party valuation of the Company’s Class A common stock, (c) the Company’s results of operations, financial position, and capital resources, (d) industry outlook, (d) the likelihood of achieving a liquidity event, such as an initial public offering or a sale of the Company, given prevailing market conditions, (e) the history and nature of the Company’s business, industry trends and competitive environment; and (f) general economic outlook including economic growth, inflation and unemployment, interest rate environment, and global economic trends, including the impact of COVID-19.
No awards were granted for the three months ended March 31, 2020. The table below provides information on the weighted-average assumptions used for stock options granted during the three months ended March 31, 2021.
Three Months Ended
March 31,
20212020
Number of options granted860  
Volatility 40 % 
Expected term (years)6.25— 
Dividend yield1.92  
Risk-free interest rate1 % 
Fair value of common stock $19.79 $ 
Fair market value per option determined using a Black-Scholes-Merton Option pricing model for purposes of determining compensation expense$9.95 $ 
After consideration of the difference between $8.54, the per share fair value of the Company’s Class A common stock used to record share-based compensation for certain equity awards granted in December 2020 and February 2021, and $22.00, which was the midpoint of the price range set forth on the cover page of the Company’s preliminary prospectus related to the Company’s IPO, the Company used a linear interpolated fair value from $8.54 to $22.00 to measure additional share-based compensation expense for its option and RSU grants made in December 2020, February 2021 and March 2021. As a result, the
17

VIZIO HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except share and per share amounts, term and percentage data)
Company recorded additional share-based compensation expense of approximately $9,913 during the three-months ended March 31, 2021 and expects to recognize an additional share-based compensation amount of approximately $48,000 during the remaining nine months of 2021. Further, the Company expects to recognize additional share-based compensation expense of approximately $16,200, $16,200 and $16,200 for the years ending 2022, 2023 and 2024, respectively, for the unvested portion of the December 2020, February 2021, and March 2021 grants.
Total share-based compensation expense including the additional share-based compensation discussed above was $26,019 and $1,339 for the three months ended March 31, 2021 and March 31, 2020, respectively, and is included in selling, general and administrative expense in the consolidated statements of operations.
As of March 31, 2021, the Company had $131,817 of unrecognized compensation costs related to share-based payments, which is expected to be recognized over a weighted average vesting period of approximately 1.4 years.
Employee Stock Purchase Plan
On March 25, 2021, the Company established an employee stock purchase plan (the “2021 ESPP”) and reserved 1,800,000 shares of Class A common stock for issuance under this plan. The 2021 ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code for U.S. employees. The number of shares of common stock available for issuance under the 2021 ESPP will be increased on the first day of each calendar year, beginning in 2022, in a number of shares of common stock equal to the least of (i) 5,400,000 shares of common stock, (ii) one percent (1%) of the outstanding shares of all classes of the Company’s common stock on the last day of the immediately preceding fiscal year, or (iii) an amount determined by the Company. The 2021 ESPP is expected to be implemented through a series of offerings under which participants are granted purchase rights to purchase shares of the Company’s common stock beginning in May 2021. As of March 31, 2021, there have been no transactions related to the plan.
Note 11. Net Income Per Share
The Company computes earnings per share (“EPS”) of Class A and Class B common stock 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 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 represents net income divided by the weighted-average number of common shares outstanding, inclusive of the effect of potential common shares, if dilutive. For the three-month periods ended March 31, 2021 and 2020, the potential dilutive shares relating to outstanding stock options in the computation of diluted earnings per share.
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VIZIO HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except share and per share amounts, term and percentage data)
Basic and diluted earnings per share and the weighted-average shares outstanding have been computed for all periods as shown below:
Three Months Ended
March 31
20212020
Class AClass B
Numerator:
Net income $3,270 $75 $9,287 
Less: Accumulated dividends on preferred shares(29) (30)
Undistributed earnings3,241 75 9,257 
Less: Earnings attributable to participating securities(255)(6)(2,090)
Net income attributable to common stockholder - basic$2,986 $69 $7,167 
Reallocation of net income as a result of conversion of Class B shares to Class A shares69 — — 
Reallocation of net income to Class B shares— (4)— 
Net income attributable to common stockholders – diluted$3,055 $65 $7,167 
Denominator:
Weighted-average common shares outstanding - basic142,450 3,280 144,268 
Conversion of Class B to Class A common shares outstanding3,280   
Weighted-average effect of dilutive securities
Employee stock options8,164  2,676 
Weighted-average common shares outstanding - diluted153,894 3,280 146,944 
Net income per share attributable to Class A and Class B common stockholders:
Basic$0.02 $0.02 $0.05 
Diluted$0.02 $0.02 $0.05 
Anti-dilutive equity awards under share-based award plans excluded from the determination of diluted EPS3,397  3,761 
Note 12. Income Taxes
The Company recorded a provision for income taxes of $10,344 resulting in an effective tax rate of 75% and $2,109 resulting in an effective tax rate of 19% for the three months ended March 31, 2021 and March 31, 2020, respectively. The effective tax rate differs from the statutory tax rate of 21% primarily due to the approximately $6,328 in permanent book-to-tax difference for the share-based compensation expense deduction limited on certain executive officers as a publicly held corporation. The tax provision for the three months ended March 31, 2021 includes a net income tax expense of $1,633 for discrete items including the deferred tax asset adjustment for share-based compensation expense, and excess tax benefits relating to executive share-based compensation, and state law changes.
Note 13. Defined Contribution Retirement Plan
VIZIO maintains a 401(k) defined contribution plan allowing eligible U.S.-based employees to contribute up to an annual maximum amount as set periodically by the Internal Revenue Service. The Company provides for solely discretionary matching contributions on the employee deferred amounts. For the three months ended March 31, 2021 and 2020, the Company recognized estimated discretionary matching contributions of $438 and $200, respectively. Discretionary amounts are approved annually in the fourth quarter of the year and generally paid during the first quarter of the following year.
Note 14. Accrued Royalties
VIZIO is engaged in, and in certain cases has 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
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VIZIO HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except share and per share amounts, term and percentage data)
disposition of some of these claims and suits, the Company has entered into, or may enter into, license arrangements, which may include royalty payments to be made for historical and/or prospective sales of the Company’s 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, the Company recorded an aggregate accrual of $77,223 and $81,143 for all historical product sales as of March 31, 2021 and December 31, 2020, respectively. To the extent that VIZIO is indemnified under its product supply agreements with its manufacturers, the Company has offset intellectual property expenses and recorded amounts as other receivable balances included in other current assets. Historically, VIZIO has been contractually indemnified and reimbursed by its manufacturers for most intellectual property royalty obligations and commitments. The Company will make future payments for the licensed technologies with funding received from the manufacturers, either through direct reimbursement from the manufacturers or payment of the net purchase price, as these royalty payments become due. In certain circumstances, VIZIO has the contractual ability to renegotiate the annual license fee in future years if certain unit sales volumes are not met in a given year.
A summary of future commitments on royalty obligations as of March 31, 2021 is as follows:
2021 (nine months)$29,155 
202210,465 
20236,752 
20245,200 
2025 and thereafter3,450 
Total$55,022 
For potential future settlements related to historical sales for which the Company does not expect to be reimbursed, a reserve of $47,099 and $49,643 has been recorded as of March 31, 2021 and December 31, 2020, respectively, as part of accrued royalties. Any patent infringement lawsuit in which VIZIO is not indemnified is expensed when management determines that it is probable that a liability has been incurred and the amount is estimable.
In certain instances, the Company administers refundable deposits on behalf of its manufacturers for asserted intellectual property infringement claims and related active litigation in accordance with the terms of the supply agreements. The use of the refundable deposits is limited to the resolution or settlement of these claims and active cases. Management reviews the nature of these claims and active cases with the manufacturers on a periodic basis. The deposit amounts received and recorded are determined and adjusted quarterly based on mutual consent of both parties and using all available information at that time. In the event of an unfavorable resolution or settlement that exceeds the amount recorded as a refundable deposit, the excess shall be paid by VIZIO and then reimbursed by the manufacturer in accordance with the contractual indemnification provisions in the product supply agreement. Refundable deposits of $30,124 and $31,500 have been recorded as of March 31, 2021 and December 31, 2020, respectively, which are presented within accrued royalties in the consolidated balance sheets.
In the ordinary course of business, management anticipates that VIZIO will 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.
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VIZIO HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except share and per share amounts, term and percentage data)
Note 15. 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 2026. The table below presents supplemental balance sheet information related to the Company’s operating leases as follows (in thousands, except lease term and discount rate):
As of
ClassificationMarch 31,
2021
December 31,
2020
Assets:
Right-of-use assetOther assets$7,340 $7,993 
Liabilities:
Current portion of lease liabilitiesOther current liabilities2,762 2,856 
Long term portion of lease liabilitiesOther long-term liabilities4,578 5,137 
Weighted-average remaining lease term (years)3.63.7
Weighted-average discount rate3 %3 %
Operating lease costs were $920 and $972 for the three months ended March 31, 2021 and 2020, 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 consolidated balance sheet as of March 31, 2021.
2021 (nine months)$2,194 
20222,021 
20231,333 
2024943 
2025741 
2026 and Thereafter594 
Total minimum lease payments7,826 
Less imputed interest(486)
Total lease liabilities$7,340 
Note 16. 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 March 31, 2021, no liabilities were recorded related to this supply commitment.
Revolving Credit Facility
Bank of America Facility
On April 13, 2016, VIZIO entered into a credit agreement with Bank of America, N.A. Under the credit agreement, Bank of America, N.A. agreed to provide VIZIO with a revolving credit line of up to $50,000 with a maturity date of April 13, 2021, for the purposes of repurchasing certain outstanding shares of common stock held by a related party supplier and other general business requirements, including working capital. The Company’s indebtedness to Bank of America, N.A. under the credit agreement is collateralized by substantially all of the Company’s assets.
Any indebtedness under this credit agreement bears interest at a variable rate based either on LIBOR, the federal funds rate, or the prime rate. The credit agreement contains affirmative and negative covenants which, among other things, requires the Company to deliver to Bank of America, N.A. specified annual and monthly financial information. VIZIO repaid the Bank of
21

VIZIO HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except share and per share amounts, term and percentage data)
America Facility on September 26, 2018. Unused fees related to this line of credit was $324 and $191 for the three months ended March 31, 2021 and 2020, respectively. The Company is in compliance with all required financial covenants as of March 31, 2021. The credit agreement was amended in April 2021, see Note 18 for additional information.
Legal Matters
Advanced Micro Devices, Inc. (“AMD”) presented the Company with a claim letter dated May 11, 2015 in which AMD claimed the Company is infringing its patents that cover graphics processing and semiconductor technologies. On January 23 and 24, 2017, respectively, AMD filed complaints in the U.S. District Court for the District of Delaware and the International Trade Center (ITC) alleging infringement of AMD’s U.S. patents. On August 22, 2018, the ITC ruled against VIZIO and recommended limited exclusion and cease and desist orders. On August 30, 2018, the parties entered into a settlement agreement including payments of $39,000 in total, and the cases were subsequently dismissed. Of the $39,000 settlement outlined in the agreement, $15,000 was negotiated to apply to the release for units shipped prior to the effective date of the agreement which is indemnified by VIZIO’s suppliers. This is reflected in the first three payments due to AMD under the license, which were paid by the end of 2018. Payments beginning with the fourth payment are scheduled on an annual basis in May of each subsequent calendar year for payment of ongoing license from September 2018 and included in accrued royalties in Note 14. In connection with the IPO, approximately $14,000 in payments were accelerated and paid.
In November 2020, the Company entered into a settlement agreement with AmTRAN Technology Co., Ltd. (“AmTRAN”) and one of its subsidiaries. AmTRAN is a beneficial holder of more than 5% of the Company’s Class A common stock. Pursuant to the settlement agreement, the Company agreed, among other things, to pay AmTRAN approximately $8,200. In return, on November 23, 2020 AmTRAN terminated its security agreement. AmTRAN further agreed to pay outstanding fees owed by it for IP licenses related to the manufacturing of the Company’s devices. The parties further agreed that VIZIO would continue to retain a reserve of approximately $4,000 for payment of, future claims attributable to devices manufactured by AmTRAN. On December 31, 2022 VIZIO will release to AmTRAN the lesser of (i) 50% of the remaining balance of the reserve or (ii) approximately $2,000, with a like amount to be retained by the Company.

Note 17. Subsequent Events
On April 13, 2021, the Company entered into a Second Amendment to the Loan and Security Agreement (“Second Amendment”) with Bank of America N.A., to include among other things, (i) an update to provide for use of a LIBOR successor rate, (ii) to amend the definition of Availability Reserve and Borrowing Base, and (iii) an extension of the termination date to April 13, 2024. In connection with the Second Amendment, the Company will pay a fee of $75 in the second quarter.
22


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 “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 final prospectus dated March 25, 2021 (the “Prospectus”) that forms a part of our Registration Statement on Form S-1 (File No. 333-253682), as filed with the Securities and Exchange Commission (“SEC”) pursuant to Rule 424 promulgated under the Securities Act of 1933 as amended (the “Securities Act”) on March 25, 2021. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Glossary of Selected Terminology
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 and VIZIO Free Channel offerings, 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 Blu-ray player, game console, or set-top box (e.g., Apple TV, Google Chromecast or Roku).
Dynamic Ad Insertion (“DAI”): Technology that seamlessly replaces TV ads with targeted ads from the Smart TV in real time, across multiple inputs. HDTV: High-definition television.
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 and VIZIO Free Channels 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).
Transactional Video on Demand (“TVOD”): Distribution method by which consumers purchase video-on-demand content         on a pay-per-view 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).
WatchFree: VIZIO’s free, ad-supported OTT app. Offers access to news, sports, movies and general entertainment TV shows in a format similar to linear TV through programmed channels.
VIZIO Free Channels: VIZIO’s free, ad-supported OTT app with linear channels. Content is sourced from a variety of providers into a curated set of channels across news, sports, movies and general entertainment.



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 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:
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 March 31, 2021 included:
Net revenue increased 52% year over year to $505.7 million 
Platform+ net revenue increased 120% year over year to $52.2 million
Gross profit increased 82% year over year to $86.7 million 
Net income of $3.3 million decreased 64% versus net income of $9.3 million in the three months
ended March 31, 2020
Adjusted EBITDA increased 218% year over year to $40.4 million 
SmartCast Active Accounts grew 57% year over year to 13.4 million 
SmartCast hours grew 70% year over year to 3.6 billion 

Initial Public Offering
On March 29, 2021, we closed our initial public offering (“IPO”) of 12,250,000 shares of our Class A common stock at a public offering price of $21.00 per share. We issued and sold 7,560,000 shares of Class A common stock, and certain existing stockholders sold an aggregate of 4,690,000 shares of Class A common stock. We received net proceeds of approximately $145.1 million after deducting underwriting discounts and commissions of approximately $10.7 million and $3.0 million of offering expenses. On March 31, 2021, certain existing stockholders sold an additional 1,709,274 shares of Class A common stock at $21.00 per share pursuant to the underwriters’ option to purchase additional shares. We did not receive any proceeds from the sale of shares by the selling stockholders. Additionally, in connection with the IPO, all outstanding shares of our redeemable convertible preferred stock were converted into an aggregate of 30,315,600 shares of Class A common stock.

Our Business Model
We generate revenue primarily from (1) selling our Smart TVs, sound bars and remote controls and (2) monetizing our digital platform. While the substantial majority of our current total net revenue comes 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+
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Our state-of-the-art Smart TV operating system, SmartCast, delivers a vast amount of content and applications through an elegant and easy-to-use interface. SmartCast supports many leading streaming content apps such as Amazon Prime Video, Apple TV+, Disney+, Hulu, Netflix, Paramount+, Peacock and YouTube TV, and hosts our own free, ad-supported apps, WatchFree and VIZIO Free Channels.
Our Inscape technology is able to identify the content displayed on the screen of our Smart TVs, providing first-hand 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. This first-hand data allows us to monetize our own ad inventory and provides the potential for a better user experience through more relevant advertisements. We also license a portion of this data to advertising agencies, networks and ad tech companies.
We monetize these capabilities through:
Advertising
AVOD: Ad inventory on services such as WatchFree, VIZIO Free Channels and certain third-party AVOD services. In exchange for distributing their 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: Ad placements on our SmartCast home screen by streaming services, studios and other consumer brands
Partner marketing: 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: Fees from ad tech companies, advertising agencies and networks to license data generated from our Inscape technology to inform their ad buying decisions
Content distribution, transactions and promotion
Branded buttons on remote controls: Partners who want to place a button for their service on our VIZIO remote controls so that consumers can have quick access to their service
SVOD and vMVPD: Revenue shared by SVOD and vMVPD services on new user subscriptions activated or reactivated through our platform
PVOD and TVOD: Revenue shared by PVOD and TVOD services for purchases made on our platform
As the Smart TV evolves to take on a more prominent role in the connected home, we believe new monetization opportunities will develop. For example, we expect:
A growing user base will lead to higher advertising revenue, especially as our user base increasingly includes audiences no longer reachable through linear TV
The vast amount of data obtained through our platform will improve the effectiveness of advertisement, generating higher returns for advertisers and potentially increasing ad rates for us
That data will be used to create more personalized content recommendations and drive higher user engagement
Additionally, interactive ads and improved subscription billing can increase the number of purchases made on our platform, including subscriptions, content rentals, ecommerce, food delivery and other micro transactions, for which we will receive a portion of the sales