Vizio SmartCast Business Basks in Soaring ARPU, Active Accounts, Says IPO

Vizio’s 2020 net profit soared 344% to $102.48 million on an 11% net revenue increase to $2.04 billion, reported the vendor in an S-1 registration statement Monday for an initial public stock offering, its second try in five and a half years at going public. Vizio shipped 7.1 million smart TVs last year, up 20.3% from 2019 and 61.4% from 2018.

Vizio has sold about 82.2 million TVs and 11.8 million sound bars since its 2002 founding, said the IPO. Its SmartCast operating system business is booming, said the filing. Vizio had 12.2 million active SmartCast accounts Dec. 31, 60.5% more than a year earlier and nearly 240% more than the end of 2018, it said. SmartCast average revenue per user rose to $12.99 at the end of 2020, a 78% increase from a year earlier.

The Vizio business is built to operate like a “powerful flywheel,” based on selling more smart TVs and growing more SmartCast active accounts, said the IPO: “SmartCast’s broad content offering and easy-to-use interface draws VIZIO consumers onto the platform.” It converted 65% of its 2020 smart TV shipments into SmartCast active accounts, it said.

The goal is to deepen SmartCast “engagement,” it said. “As we continue to introduce new features and services on SmartCast, we increase the amount of time consumers spend on the platform.” SmartCast viewing hours last year increased 173% from 2019, with a 54% increase year over year in hours viewed per active account, it said. “Users spent more time on their SmartCast TVs streaming on the SmartCast platform than any other activity” in the year ended Dec. 31, it said.

SmartCast supports many of the leading streaming apps and hosts Vizio’s own free, ad-supported apps, WatchFree and Vizio Free Channels. The platform also supports Apple AirPlay 2 and Chromecast functionalities, to allow users to stream additional content from their other devices, and provides “broad support” for third-party voice platforms, plus second-screen viewing “to offer additional interactive features and experiences,” the IPO said.

As SmartCast scales “in number of users and engagement, it enhances our monetization capabilities,” said the IPO. “By enabling more targeted ads with greater reach, we will attract more ad dollars onto our platform,” said Vizio. As engagement increases on content with “higher ad monetization opportunities,” the goal is to “attract higher ad rates,” it said.

The TV industry is “evolving,” said usually low-profile Chairman-CEO William Wang in a letter to prospective shareholders. “When we started, we were simply focused on building the best possible hardware. Now, with a combination of our Smart TVs and our evolving software platform, we have a path to integrate the VIZIO experience into a lifestyle. The evolution of TVs is calling for a revolution, and VIZIO is here to answer it.”

Vizio will operate publicly as a “controlled company” under New York Stock Exchange rules because Wang will own more than 50% of the voting power of all common shares, said the IPO. The CEO “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.”

Much of the same corporate structure was embedded in Vizio’s first attempt at going public with a July 2015 IPO (see 1507260001). That filing touched off a slew of video privacy class-action complaints for its disclosures about Vizio’s proprietary Inscape viewer-tracking technology and how the vendor planned to sell viewership data to third-party advertisers and research companies. Vizio ultimately pulled the IPO when it signed a July 2016 deal to be bought by LeEco for $2 billion. The agreement fell apart acrimoniously nine months later after Vizio learned LeEco was too cash-poor to complete the transaction (see 1704100045).

The California Consumer Privacy Act and California Privacy Rights Act “could mark the beginning of a trend toward more stringent privacy legislation” in the U.S., said the IPO. "The CCPA has prompted a number of proposals for federal and state privacy legislation that, if passed, could increase our potential liability, add layers of complexity to compliance in the U.S. market, increase our compliance costs and adversely affect our business.”

Vizio has “historically maintained,” and consumers have come to expect, “extensive backward compatibility for our older products and the software that supports them, allowing older products to continue to benefit from new software updates,” said the IPO. “We expect that in the near term, this backward compatibility will no longer be practical or cost-effective, and we may decrease or discontinue service for our older products.”