Vizio Resumes 'Aggressive' TV Pricing After Shipping 700K Fewer Sets in Q4

Vizio returned to “aggressive promotions” last month after shipping 700,000 fewer TVs in Q4 than a year earlier, said Chief Financial Officer Adam Townsend on the company’s Thursday earnings call. The company shipped 1.5 million TVs in Q4, down from 2.2 million in the 2020 quarter. Device revenue dropped 22% year on year to $523.7 million, it said. Total revenue fell 14% to $628.8 million. For the year, revenue grew 4% to $2.1 billion, said the company.Shares plunged 16.3% Friday, closing at $11.08.

The company cut the price of its 50-inch V Series TVs to $299 in early February, and it has been the top-selling 50-inch model in the U.S for the past two weeks, Townsend said. It plans more promotions to spur sales and user engagement, he said.

Vizio expects to benefit from its “improved inventory position” across sales channels, said Townsend, acknowledging that market dynamics “are still somewhat uncertain.” The company is "working closely with our retail partners on promotions and merchandising tactics to move units, being particularly aggressive early in the year,” he said. It's also working with ODM suppliers to secure volume commitments “at competitive pricing.”

Taking a more upbeat stance, CEO William Wang said in opening remarks that inventory levels “have normalized,” and the TV maker is executing on aggressive pricing strategies to boost demand and grow market share. Citing Vizio’s dual-revenue business model, including its SmartCast business, and “healthy inventory dynamics,” Wang said Vizio will “continue to leverage that strength and implement additional pricing tactics as we push to increase market share.”

Vizio sees a return to lower “single-digit like margins” as typical TV market dynamics return, Townsend said. The margins it had during the COVID-19 pandemic "were elevated” due to “atypical” market conditions including “excessive demand,” and “pull down of inventory,” which meant there was “no need to promote or market products or cut pricing,” he said. The resulting double-digit margins in the TV business were “never sustainable,” he said.

Steep promotions squeeze profit margin, Townsend noted, but the company sees its “high gross margin” Platform+ business as a “strategic enabler” to drive customer acquisition. The company’s platform revenue grew 74% year on year to $105.1 million, and SmartCast active accounts rose 24% to 15.1 million. Viewing time on Vizio smart TVs increased 11% to 3.9 billion hours in Q4, and average revenue per user (ARPU) expanded 67% to $21.68. Platform+ revenue grew 39% to $67.3 million, with advertising accounting for 78%. It’s forecasting Q1 Platform+ revenue of $90 million-$95 million and gross profit of $57 million-$60 million, implying a gross margin of 63% at the midpoint, Townsend said.

Ad revenue includes video impressions both on and off devices. Vizio built more home screen inventory by adding category page hero banners and more sponsorship opportunities, Townsend said. The company had strong growth across core categories including insurance, retail, automotive, media and entertainment, he said. Half of all ads it runs are targeted, based on first-party viewing data, he said. ARPU is benefiting from more awareness in the marketplace, Townsend said, saying that means higher demand and more targeted campaigns, which bring in higher cost per thousand impressions.

Non-advertising revenue, including data licensing, branded buttons on remote controls and content distribution fees, grew 7% year on year in Q4, Townsend said. Vizio expects the growth trajectory to continue, referencing a strong pipeline for new data deals, plus upcoming licensing renewals.

Despite a stronger inventory position, Vizio is still experiencing fulfillment bottlenecks, said Townsend. Some of the smaller TVs are “still stuck on vessels and slow to get through the ports, and we’ll just continue to work with all of our partners to try to mitigate that as much as possible,” he said. “But we are in a significantly better position coming into 2022 in terms of channel inventories.”

Vizio shipped 5.5 million TVs in 2021 vs. 6 million units in 2019 and 7.1 million in 2020, said Chief Revenue and Strategic Growth Officer Michael O’Donnell, saying 2021 “took the brunt” of supply chain and logistics challenges. “There was a hangover that came into the year in terms of chip supplies, panel, supplies, freight, trucking," he said: "Every element of the supply chain was challenged in 2021.”

Supply on the component side is “much, much better,” O’Donnell said. With channel inventories improving, a strong product lineup, new SmartCast features and the “ability to promote," he said, “we think we should be able to see a return to growth in unit shipments.”

Wang said Vizio maintained its position in 2021 as a top-three smart TV brand in the U.S. and the No. 1-selling sound bar brand. Its holiday season promotional strategy to focus on big-screen and premium TVs paid off in driving higher viewing hours, he said. “As people move to streaming, brands need to find those audiences and we are able to deliver them,” said the executive. The company is building out Household Connect, which will allow it to sell ads across other devices, he said.

Wang highlighted Vizio’s TV data capability as a differentiator that’s “increasingly important to the $70 billion-plus linear TV industry.” Five of the top seven TV measurement companies use Vizio viewing data, he said. O’Donnell noted Vizio has eight years of experience with data, calling it “currency-grade data” that’s powering “currencies of the future.” Media companies such as NBCUniversal, WarnerMedia and Disney are looking at “outcome-based solutions” based on that type of data, he said.

On Roku CEO Anthony Wood's comments last month (see 2202180043) predicting a consolidation of TV operating systems, Wang said the connected TV market is “pretty solid,” citing Samsung, LG, Google and Roku, which supplies Hisense and TCL, plus Comcast “joining the camp.” Wang doesn’t see a smartphone-like consolidation of platforms to one or two TV operating systems any time soon. Currently, TV makers each have about 7% or 8% market share, making it unlikely the market will shrink to one or two in the immediate future, he said.

Responding to a question on the launch of Vizio's tools with digital wallet capabilities, O’Donnell said it’s eyeing a mid-summer time frame to have its Partner Portal open. It’s working to integrate partners into the system to create a better one-to-one relationship with consumers, he said. “It’s critical that we get Vizio Account onto the platform,” Townsend said, calling it the “backbone of the future of television.”

Vizio added the Amazon Music streaming audio service to the SmartCast platform, it said Friday. Amazon Prime members have access to 2 million songs ad-free via their membership. The premium Amazon Music Unlimited service has more than 75 million songs. A free, ad-supported version is also available, providing users with access to a selection of playlists and stations on Amazon Music.