Vizio’s smart TV platform business keeps growing in Q4

Vizio in the fourth quarter reported financial results that continued a trend seen for the smart TV maker across the past several quarters, where revenue from its platform business, including advertising, kept on a growth trajectory while device revenue dipped once again.  

Earlier this month Walmart announced plans to acquire Vizio in deal valued around $2.3 billion, and as a result Vizio didn’t hold the usual quarterly earnings call accompanying the financial report. For more on Walmart’s Vizio acquisition and what it could mean for retail, advertising and competitors like Roku read here and here.

Alongside financial results, in a letter to shareholders signed by Vizio Founder and CEO William Wang and CFO Adam Townsend, the executives cited excitement for the deal.

“Since Vizio was founded, we have always worked to bring great products at great value to consumers. This customer-centric mindset aligns well with Walmart’s long-standing value proposition,” the executives stated.

“Twenty-one years ago, we dreamed of making home entertainment accessible to everyone. Along the way, with the right strategy, strong execution, and a disciplined investment framework, our team has transformed Vizio from a hardware company into a powerful CTV platform company that has been a part of helping to reshape the TV industry. Our success has not come easily, and this milestone is a true testament to the hard work of the entire Vizio team,” the letter continued, adding there’s still more work to do to finalize and close the transaction.

As for the fourth quarter, Vizio saw Platform+ net revenue – which includes advertising on the integrated WatchFree+ free ad-supported streaming TV (FAST) service, home screen placements, distribution, and sponsorships, among other  – grow 28% year over year to about $174 million. For the full year 2023 Platform+ revenue grew 25% to $598 million.

The letter to shareholders attributed the strong Platform growth to a 36% increase in advertising revenue, saying “our advertising business continued to fire on all cylinders during Q4, which again delivered an upside against our expectations.” The growth in ad revenue was attributed to expansions in large advertising categories including financial services, retail and CPG (consumer package goods).

“And even the recently challenged Media & Entertainment category was up almost 20% year-over-year. We are encouraged by the green shoots we are seeing in this category,” the executives said in the letter. “Additionally, our overall advertising growth was supported by a 32% increase in direct advertising relationships” including adding 117 net new advertisers in Q4.  

 And in Q4 Vizio grew its pool of SmartCast users, ending the quarter with a monthly active user base of 18.5 million. That marks an increase of 600,000 compared to the 17.9 million it had at the end of Q3. Streamed hours on the SmartCast platform also climbed in Q4 to reach 5.5 billion hours, up 15% yoy. And Vizio’s generating more revenue per user, with record SmartCast ARPU of $32.48 in Q4, up 15% compared to the same period a year ago.

During Q4 Vizio continued to expand content on its WatchFree+ FAST, which now counts over 290 free linear ad-supported channels. It launched 24 new apps on the platform for a total of more than 200 built-in apps. In Q4 Vizio also rolled out a significant software update meant to provide faster loading apps and channels, improved responsiveness and better voice and text search, alongside an enhanced home screen.

Still, it wasn’t all rosy for Vizio in Q4, as smart TV shipments dropped and declines in net hardware revenue outpaced revenue growth from its platform business. Smart TV shipments in Q4 were down 12% yoy to 1.3 million and for the full year were down 16% compared to 2022. Quarterly net revenue from devices dropped 17% year over year to about $328 million and net device revenue for the full year 2023 declined 22% to $1.08 billion. With drops in net device revenue offsetting gains in its platform revenue, Vizio’s total net revenue declined for the quarter (down 6% to $503 million) and for the full year 2023 (down 10% to $1.68 billion).

As Vizio points out in its earning materials, smart TV shipments are important not only to drive device revenue, but because they “provide the foundation for increased adoption of our SmartCast operating system and the growth of our Platform+ revenue.” Meaning selling more smart TVs leads to more SmartCast users and eyeballs, which in turn helps drive more advertising and platform revenue. And while TV shipments impact device net revenue, the rate of decline or growth between smart TV shipments and device net revenue aren’t directly correlated as the latter can also be impacted by factors like the series and sizes of smart TVs sold in the period.

But alongside a focus on high-margin advertising revenue, Vizio posted quarterly gross profit growth of 14% yoy and positive results including quarterly net income of $13.2 million, up 110%, and Adjusted EBITDA of $23.9 million, up 20% over the prior year period. Full year Adjusted EBITDA of $75.7 million was up 44% yoy.  

“In just our fourth year, the growth in our Platform+ business continues to exceed our expectations driven by strong user engagement trends, accelerating ad revenue growth - up 36% year over year in Q4 - and record ARPU,” said Wang in a statement. “These results continue to prove the strength and resiliency of the integrated hardware and software model we've built.”

Indeed, just last quarter Vizio disclosed plans to license its TVOS to third-party OEMs. Whether those plans are still on the table with the pending acquisition by Walmart, remains to be seen.