Q2 2023 Vizio Holding Corp Earnings Call
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Good afternoon, and welcome to <unk> Q2, 23 earnings call on Michael <unk> Director of Investor Relations. Joining me for today's discussion are William Wang our founder and CEO and Adam Townsend. Our CFO also joining us for the Q&A portion of today's call is Michael Donal.
Our chief revenue and strategic growth Officer. Please note that in addition to our earnings release and todays remarks, a slide presentation can be found out on our Investor Relations website at investors Dot Vizio Dot com I'll refer you to the third slide in the presentation and remind you that certain statements made on this call, including certain statements about our expected third quarter results.
Advertising relationships and partners product, Rollouts and functionality and future customer demand for our products are forward looking statements that involve risks and uncertainties. These risks and uncertainties that could cause actual results to differ materially from these forward looking statements are discussed in more detail in our filings with the SEC and our press release that was issued this afternoon.
We undertake no obligation to revise any statements to reflect changes that occur. After this call except as required by law. During the call. We also refer to non-GAAP financial measures, including adjusted EBITDA and certain operational and financial metrics reconciliations to the most comparable GAAP measures for non-GAAP financial information discussed on this call as well as further information.
<unk> related to guidance definitions and metrics can be found in our earnings release, which is on the investors section of our website note that all quarterly comparisons in today's remarks will be made on a year over year basis, and all metrics reported on today's call will be for Q2, 'twenty three or as of the end of Q2, 'twenty three as applicable unless otherwise specified now I will turn the call over to William.
Thank you Michael.
Hello, everyone. Thank you for joining us today.
Our Q2 results once again validate the power of our integrated hardware and software business model.
All products and services continue to resonate with consumers.
<unk> partners.
Advertisers alike.
During the quarter.
Four of the best selling TV units in the U S market.
And Assam bars continue to drive great acclaim by reviewers.
Their value and performance.
In fact.
Our beings dot com.
<unk>.
You have to although the five satcom bars under $500.
Unlike the challenges many are facing.
In the advertising marketplace, our AD business is firing on all cylinders.
Our team delivered 35% growth in revenue during.
During the quarter.
This is even on the back of a 24% increase we saw in Q1.
Through our growing presence with agencies brands and.
In content services, we are creating demand for CTV.
<unk> to gain share with.
In the fastest growing part of the advertising marketplace.
We're continuing to invest in delivering improved quality with new features and innovations.
Deeper user engagement.
<unk> users spending more time on our platform.
We are increasing scale and generating greater monetization.
Our key metrics.
While monetization.
Podcasts are.
Grew 18% during the second quarter, surpassing $30 for the first time.
Just two years ago this metric was $117.
We have come a long way very short timeframe.
I could not be prouder of our team's exceptional performance.
With the right strategy strong execution and disciplined investment framework.
<unk> has transformed this deal.
Our company into a proven powerful CTV play that is reshaping the television industry.
We plan to continue investing in our platform to support further small cap <unk> growth.
Equipping content.
We're tightening partners was compelling twos to Amazon audiences taste and preferences.
At reach for talked ability.
And measure efficiency.
This strategy is being validated by our expanding and bottling advertising client list.
Our media and entertainment partners remain a cornerstone.
We have made tremendous strides in <unk> our client portfolio.
Major advertising categories.
And big brands like Geno waters.
Hi.
General Mills.
Yeah.
With TV plus.
In other airlines subway and.
And progressive.
Just to name a few.
Strong user engagement is the key.
Key driver behind us for the plasma growth in advertising revenue.
I'll ask the user base of nearly $18 million continues to spend most of their time, which are building operating system spending 56% of the total pie.
<unk> shipping company.
Today, we have over 170 building streaming applications.
Including our own <unk> III plus.
With me are <unk>, plus we offer users over 290 free AD supported streaming channels and thousands of on demand either.
Spanning a wide range of genres.
The power of our platform continues to be recognized by content and commerce companies alike.
Let me give you a couple of example.
Regarding content.
<unk> engagement, we partnered with NBC universal to lots of Peacock preview experience to watch the plus.
So the partnership with.
We offered our users access to full episodes are premium NBC universal comfort.
With <unk> plus <unk>.
Along with this will introduce a new feature called.
Content connections.
Which allows user to move the right between the <unk> III plus empty cart.
Just one click.
This is an example of how content partners can utilize our platform to promote and pocket content to our audiences.
To drive engagement back to the asphalt.
<unk> services.
In term of all commerce.
This past June QVC and HSN.
Launched their fee interactive streaming shopping services.
More reason market.
With the Barbie movie Lightless operating system to drive awareness and ticket sales.
Unique e-commerce enabled at England.
Hosting.
<unk> interact the commercials with Washington, plus.
With a continued focus on consumer experience. This past June we go to a re imagined design up a home sleep.
Was the new Vizio homescreen discovering.
Navigating personalization and streaming content at number being easier.
We're being thrilled to see the positive feedback.
We are getting users and reviewers.
The new home screen also support them.
Our latest business unit, the Brent encompassed with you the data driven and brand sponsor that approach towards cuso content.
We're first that's a bundling content studio model with Premier.
Three pointers.
A strong form series sponsored by bet MGM.
And I am pleased to announce that our second periods clean break this now available.
New series.
Into the world of mobilization tips and tricks.
Sponsored SC Johnson.
Turning to our devices.
We are thrilled to see.
Consumers.
To expand the <unk> presence in the living room.
Larger more monetize a bow street.
Example of.
While 50 inch and 65 inch models, where tool the top selling units in the market during the quarter.
Through our data, we know that larger screen sizes tend to be the main television.
In the home.
And showed the highest engagement.
Additionally.
Our profitable <unk> business is the best way to complete the whole entertainment experience.
Credible value.
As always we'll pick our spots.
We're willing to be aggressive on pricing to support some of the best selling units in the market.
And we do not see the need to play a race to the bottom again.
The industry is navigating a demand constrained environment, which has led to aggressive pricing strategies by many of our competitors.
With that.
We will continue to be disciplined with respect to our cost management.
Residents to deliver exceptional value.
Two customers.
We almost have very well.
Bye bye.
This is only one consideration.
For consumers.
But as I, often say value isn't just price.
We continue to focus on bringing feature rich.
Great quality and reliable products to the market.
Along with the affordable pricing.
And award winning customer service.
So I hope, it's very clear.
We are driven by our passion for improving our customer's life and plan to continue investing in our mission to deliver the best user experience in the industry.
We have come a long way, but we are just scratching the surface of what's possible and it is exciting to see how the many years on impacting our platform is now creating so many opportunities.
I wanted to thank our team.
Helping to deliver strong advertising performance in a challenging marketplace.
And for achieving.
Record small cast are.
<unk> after quarter.
With that I will turn the call over to Adam to review, our second quarter results in more detail.
Thanks, William before opening the call to questions I will take you through our second quarter results and discuss our outlook for Q3.
Our second quarter results once again demonstrated the strength of our integrated model, which allows us to compete on device sales, while expanding profit margin to a rapidly growing platform businesses, despite a challenging macro environment.
Taken together total company revenue came in at $394 million down 4%.
This was through a combination of lower device revenue of 15% fewer unit volumes and lower average unit price, partially offset by higher platform plus revenue, which grew 28% on strong advertising.
Again benefiting from the strong growth of our high margin platform plus revenue total company gross profit grew 17% to $86 million.
Total company gross profit margin improved by 376 basis points to a new record 21, 8%.
Platform plus represented a new high of 36% of total revenue and 100% of consolidated gross profit dollars.
Total adjusted EBITDA came in at $18 million well ahead of our expectations. Thanks to an acceleration in high margin advertising revenue more judicious price promotions on device and lower operating expenses.
To provide some additional segment level context, I'll start with platform plus our.
Our strong platform plus revenue growth of 28% was driven by a 35% increase in advertising revenue as William said, our advertising business is firing on all cylinders during the quarter accelerating from an already strong growth rate of 24% during the first quarter.
We are most pleased by the fact that we are achieving this growth despite a less than ideal advertising environment is due to our expanded presence in the marketplace, where we continue to take share of the advertising dollars within CTV the fastest growing segment of the market.
During the quarter, we expanded our direct advertising client relationships by 25%, adding 80 net new advertisers and is a returning to advertisers they increase their spend with us by 48% versus the year ago period.
While the media and entertainment category continues to be a key advertising category for us, particularly for our home screen revenue, we remain strategically focused on expanding and diversifying our advertising clients across our video inventory.
Verticals like auto to ESR, CPG and pharmaceuticals were all up significantly during the quarter.
With strong demand for our advertising inventory driving user engagement, specifically within our AD supported content such as our own watch free plus App remains a key lever in our growth opportunity.
During the quarter, we expanded our content offering with the addition of more local broadcast channels and watch free plus along with an exclusive premium preview channel from Peacock.
We also added appstore platform, including the weather channel power nation and Wilder.
We continue to invest in new features functionality and user interface enhancements to drive content discovery and engagement and example of this is our investment in our re imagined home screening, which is already paying off since.
Since rolling out the re imagine homescreen in June we've already seen an increase of over 20% and click through rates on our hero banner and training now row, which are the premium home screen ad units.
And as we bring more content to our viewers and enhance the user experience. It translates into deeper engagement time spent screening by our users increased during the quarter as measured by the outpaced growth of smart cast hours versus total vizio hours smart cast hours grew 16% to $5 billion compared to a 9% increase in total vizio hours.
This means the shift to streaming continues and is the primary way our viewers are using their Tvs time.
Time spent on smart cast hours as a percent of total video hours reached an all time, new high of 56% during the quarter said differently. Our users are spending more time screening that on cable television broadcast game consoles or attached media players combined.
Our non advertising revenue within platform plus also showed healthy growth up 10% to $33 million.
Data and content distribution revenue growth was partially offset by a decline in button revenue due to fewer TV shipments.
In Q2, our smart cast ARPA grew 18% to a new record of $30 55, surpassing $30 for the first time with.
With the strength of our team our product offering and the improving quality of our user base as seen by our engagement and monetization measures. We believe smart cast <unk> will continue to grow.
Our smart cast active account base grew $1 $5 million year over year to a new record $17 6 million.
Turning to our device segment total revenue was $252 million.
<unk> TV shipments declined 11% to just over $1 million in the quarter with an average unit price down 4%. The market remains highly competitive and we are committed to our disciplined approach to our pricing strategies and focused on growing our installed base of highly engaged users.
So with that let me now turn to what we expect for the third quarter for Q3, we expect platform plus revenue to come in between 153 and $157 million.
Representing 21% growth at the midpoint.
This range contemplates expected delays in AD spend from content partners due to the Ogden labor strikes and our outlook for continued strong trends from other ad categories.
We expect platform plus gross profit of $93 million to $96 million, representing a margin of 61% at the midpoint.
And finally, we expect total company adjusted EBITDA in the range of $10 million to $15 million.
In closing through our significant and thoughtful investments in technology software and people, we have positioned <unk> to capitalize on a number of powerful trends now playing out across the industry with that let's open the call up to questions operator.
Thank you if you'd like to ask a question. Please do so now by pressing star followed by the number one on your telephone keypad.
If you change your mind I would like to be removed from the queue. Please press star and then case.
I'll ask that you please limit yourself to one question and one follow up.
Operator, we will take the first question.
Okay.
Thank you. Your first question comes from the line of Martin with Needham Nomura. Please go ahead. Your line is now.
Yeah, Hi, I wanted to drill down into the homepage.
Kpis are success you said the click through rate went up are you seeing higher got really nice CPM increases here is that because of the hunk screen do over do you think and other metrics that you prove their success or failure of the new home screen would be due in June .
Hey, Laura.
I answer the question. So we've been working on a new home screens experienced well over a year.
First of all I want to thank our amazing team for putting this together so all of.
These onto product and engineering team components, you had development.
Everyone had a big part to it I want to thank you all.
On your home screen.
Awesome.
Well I wish I can sure I should add for you in person. It is more immersed evidenced a lot easier to search easier to discover new content and a lot easier to personalize and navigate.
Now the preliminary response on consumer so we're encouraged and like you mentioned.
Let's hear engagements increased over 20%.
Advertisers loved it Mike.
Mike do you care to add a little more for that yes, I think.
I think you've covered in terms of the experience I think ties directly into kind of future CPM growth.
That should be contemplated I think Laura in terms of the timing.
We rolled this out towards the end of the quarter just coming into the start of Q3, so that shouldnt be contemplated into the Q2 numbers that said with this experience is William pointed out it's more immersive, it's more intuitive better personalized opportunities larger AD units more video.
We're already seeing.
Increased demand as well as increase in CPM for the units that we have there. So it was very good both from a consumer experience perspective.
A better well receive consumer experience, but also we believe we will have a good impact on the business and I think just a 20% increase in engagement I think the number Adam shared in his opening remarks.
Is is a good indicator.
Our ability to drive better performance for the partners that to advertise on the platform.
Awesome and then my second and final question has to do with the 290 channels of SaaS. You have now like can you guys run an integrated hardware software platform. So can you talk about discovery and whether there's just too much choice at some point, where consumers can't find what they want to watch because theres just overwhelming.
Choice of the free channel.
So.
I think theres kind of two parts to that Laura Theres, one how do we get the consumers and Theres a lot of choice on the platform.
Great we have a lot of different content opportunities.
Within vizio itself on the <unk> platform. So how do we get consumers into watch free plus and then how do we get them to find the right content, they're looking for within the EP Gee, we have within water plus.
So on the first part I think this ties into your first question.
We know the home screen is critical for search and discovery right. We saw in terms of time spent from last year to this year, a 68% increase in time spent on the home screen just in search and discovery, so our ability to leverage the data we have as well as create.
Engaging ad units.
For watch free plus that we can use from what we consider what we call an editorial perspective.
Can help identify what viewers like to watch and help them find that within the watch free plus environment right. So if you're interested in sports we can recommend sports channels within water plus.
Give you the opportunity to click and drive directly into that once within watch free plus we've invested a lot in continuing to enhance the user experience and user interface within there.
We have a lot of different categories and different types of many guides that help our consumers navigate through the EPA once they've got there to look for the content. They most like to watch her we've recommended for them, we make it pretty seamless and easy for them to find other additional channels, but but more importantly other.
Categories that they can search for throughout.
And then Laura this is Adam just looking at our conference here. So as we think about water treatment.
We think about watch free plus being a.
Cable replacement you think about the models is different this is a rev share structure model. So as we source content and bring it in if people watch it and we're able to drive engagement, we make money and the partners make money and so the different dynamics in running their cable service, where youre going out and paying affiliate fees to bring content into your service and then hope that people watch it and you have an opportunity to monetize it.
Actually the reverse of that in a much much more.
Economically beneficial structure.
Thank you.
Thanks, Laura.
Thanks Lauren.
Operator, we'll take the next question.
Yes.
Our next question comes from Kamran Mcveigh with Morgan Stanley Cowen. Please go ahead. Your line is open.
Hi, Thanks for taking my question I'm.
Curious if you could discuss the categories of strength or weakness in AD spend that youre seeing are really difficult strength at the moment, 35% growth in AD spend it's quite impressive in this environment.
And just how your visibility is into the back half of the year.
Yes, I think.
I'll take that one.
<unk>.
For the first half of this year.
We saw Q1 start pretty slow, but ramp as the quarter went on Q2, we saw that momentum at the end of Q1 carried through to the end of the quarter right. So we saw 24% growth in advertising in Q1, 35% growth in Q2, and we remain very enthusiastic about our opportunity heading into the <unk>.
Half.
We do expect some challenges on the media and entertainment side with the writers strike.
As it remains somewhat unclear.
As to when that will end and we think those delays are we're confident those delays will impact fall premieres.
But when you look at that 35% advertising growth in Q2, a majority of that growth came from categories outside of media and entertainment.
We've strategically focused.
On expanding and diversifying the advertising clients we have.
So we can become continue to become less reliant on a single vertical.
So we did see this past quarter verticals like automotive <unk> pharma, they all had triple digit growth in the quarter for our CPG was up 80%.
We talked about adding 80, new advertisers again this quarter nearly all of those were from categories outside of M&A. So team has done a great job of executing on this end.
We're fairly confident about the back half of this year across.
All verticals outside of M&A, which we're just cautious about right now.
Great. Thank you guys.
Thanks, Kamran operator, we will take the next question.
Okay.
Our next question comes from Jason <unk> with Craig Hallum. Jason. Please go ahead. Your line is open.
Great. Thank you first one for William I, just wanted to get your thoughts on the longer term evolution for hardware pricing I'm curious if you think there is a point in the macro cycle, where that pressure starts to abate or or if we're just seeing more competition in the market right now thats, keeping pricing tighter and profitability more challenged.
Yes, great question.
Well like I mentioned, many times of great value for consumers.
Price.
The quarter.
With these many comments on irrational irrational prices move back that was motivated by many different factors.
Because it's a newcomer coming fighting for the incremental CTV market share.
Because.
Physical inventory.
And as you know the global demand on TV dropped dramatically.
A lot of inventory out there looking for a home and.
So by vertical I believe prices not only valuable can't invest in the long term success for our shareholders.
And consumers will stay extremely disciplined and focus on investment that's on television.
On a bigger TV sizes, where it means the most of all for the.
Most engagement for us.
Also maintaining an investment in critical areas, such as customer satisfaction software development and a healthy margin profile for our retail partners, although if matter.
Long term success as we are increasing our and we do see the.
Sure.
The pricing gap.
Yes.
Decreasing most recently as we see.
Sure.
The pricing out of TV creeping out in the last few weeks.
On the elements of that.
Yes, so I think it's something we're going to watch pretty closely because it is going to drive how we think about some of our pricing strategies towards the back half of the year.
And it depends on what our competitors are doing as William said earlier in our prepared remarks.
Don't feel the need to chase.
Deep into a race to the bottom kind of dynamics. So we're going to be pretty disciplined we're going to we're going to sit back. There are places, where we have continued to gain share and screen sizes, even without being the price leader. So I think that speaks to the strength of the brand strength speaks of the strength of the value prop we are bringing to consumers and we're going to use that as a part of our overall pricing as we think about strategies on what device margins should look like going forward.
Perfect. Thank you bet Adam sticking with you just in your guide you talked about being that being impacted by the labor strike can you just maybe expand on how you would be impacted by that.
Yes, it really goes back to the media and entertainment category being a key advertiser, particularly as we go into the fall Premier launches.
Specifically on our home screen, that's a place where they tend to spend that nicely with us to promote their new shows if we don't have any shows due to the labor.
Michael Morris with Guggenheim Michael. Please go ahead your line is open.
[noise]. Thank you guys good afternoon.
I wanted to ask about pricing and the topic of CPM that came up earlier, you're you're you're obviously growing.
You're active accounts in your hours well, but thank you growing revenue faster as you see in the <unk>.
I know that you've been you've kind of referencing supply constrained in the past. So I guess my question is.
Is all of the difference and that stronger growth above the hours viewed coming from pricing or are you creating more.
Inventory or supply even within those hours and you have a number of these new initiatives I'm homescreen and things like that so if you could help US bridge, how much pricing is driving the strength versus how much incremental engagement and incremental supply can be helping their that'd be my first question.
Yeah, I'll take that I think there's a couple of different factors that Bill then first we we have been able to generate more supply within the platform. We talked about on the home screen alone. There is 68 per cent growth year over year in terms of.
Time spent in search and discovery, that's led to a lot more impressions not only in terms of for the home screen AD units, but also our ability to drive consumers into Morton monetize little places like our own luxury plus so with 18% increase in engagement year over year or usage of of smart cat.
[noise] itself, we've been able to increase the time spent in those in those monetizable environments.
So supply has has helped.
We've also invested heavily on the adtec infrastructure side to improve our our fell rates. So we've invested both in the technology itself as well as in people are continuing to increase headcount around product engineering on this front, that's helped us not only execute better on our direct sales.
But also increase and fell more through programmatic channels.
And then the last piece is the CPM growth, we do have best in class data in the marketplace through our first party viewing data as more dollars shift out of linear into connected T. V. Budgets. There is more of an appetite for a digital like by that has helped us increase our cpm's whether that be for.
For that T V viewing data or for identifying things like incremental reach or leveraging the data to identify incremental reach so that's helped our CPM growth. So.
I think there's a couple of different factors that have helped increased advertising revenue.
That's that's really helpful. I appreciate that insight.
One other question I wanted to ask us about the upfront.
You showed some good information about the new prime.
Prior call.
But we haven't really heard anything I don't believe about sort of dollar commitment and it's been it's slower marketplace. Overall this year. So I'm curious.
Your take on upfront dollars, how would impact your business, if you're giving some of that.
Usual denounced dynamics in the market this year.
Yeah.
So the new fronts were very successful for US I think we talked about it last quarter, Great show well received by both advertising agencies and brands themselves and I think set us up very well heading into these upfront conversations they are a little slower.
Then they have been but I'm pretty confident they will get closed in time to to launch during the queue for a time period, which is the typical seasonality for upfront.
And in terms of the discussions on our side I mean, we're not ready to to share a dollar value, but how'd you know we've we've really been just over three years in this business. So two years ago and our first upfront we did 100 million.
This past year, we did $200 million and we expect to grow that once again based on the conversations were having heading into next year.
Great. Thank you very much appreciate the answer.
Thanks, Mike Operator, we will take the next question.
And next question comes from Steven <unk>.
Please go ahead yet.
Thanks, maybe first can you talk about how different <unk> accounts that have younger devices versus older devices. We only see the net adds on your active accounts, but just wondering what you're seeing and gross adds and if you're able to drive you know and installed.
<unk> has a better setup for trying to drive <unk> and if that's one of the key drivers of some of the RP straying through the add strength that you've talked about and which appears to be strong versus the peer group and similarly, I'm wondering if you can roll out the home screen.
To the entire installed base or a percentage of it or if it's only available to customers with with new devices.
Yeah. Thank Steve Yeah. Thanks for the question cause you're touching on a really important point about.
The improvements, we're making and the quality of our user base I think you're seeing that in the growth and <unk> you are seeing it in the outpaced smart cast hour. So screaming hours versus total time spent using the television. So our user base is not only growing but it's growing in the areas that is most valuable to us many highly engaged around screaming as we mentioned in the prepared remarks.
56% of time spent using our Tvs is now in our streaming environment, that's a new record for us.
If you look at smart cast hours proactive account this quarter was the highest since going back to Q1 of 2021. So we're back on that upward trajectory in terms of the adoption and move into streaming and that's a really powerful opportunity for us to continue to drive.
Monetization.
There was absolutely a highly of high positive correlation between screen size and engagement. It makes sense right the larger the screen it tends to be the.
The main television the home, that's where you're gonna be doing most of your entertainment time spent and that's going to be really valuable for us. So we do want to be able to be competitive in those larger screens. We wanna, we Wanna have strategies to make sure. We are continuing to grow and gain share in the units that worked well for a model and drive our monetization opportunities. So I think it's all coming together you are seeing it.
For sure in the engagement numbers in our metrics that sets us up from a quality standpoint to keep driving up who hire from here.
And then just a follow up on device.
In that kind of competitive environment, how willing are you to step into a little bit more lower margin or negative margin and maybe what's implied in the EBITDA Guy for device margins for Q3. Thank you.
Yeah. So we're going to turn the back half of the year, which tends to be a seasonally stronger period for consumers to be purchasing a new television. So it is an area that makes sense, where we want to be competitive we're still going to maintain our same discipline that we have around.
The rights pricing strategies on the right units that we think we can really make an impact we've seen great success and consumers responding to our offers around particular screen sizes and being able to move product. That's why even in this quarter competitive environment, maybe overall shipments didn't grow year over year, but we did gain share and then we had top five sorry four of the top cell.
Units in the market and the quarter. So it speaks to the strength of the brand even when we're not the price leader on a screen size by screen size basis. So I think that's helpful to us.
We go into the back half of the year, we obviously want to accelerate active account growth a key way to do that is to increase sell through which means pushy.
Pushing more products off the shelf without into homes. So we will deploy pricing strategies that we think give us the best opportunity to achieve exactly that and leaning to that where it makes the most sense, Steve I just realized they forgot to tie back to your homescreen question on the on the first question Uhm, Yeah, we're able to do the backwards compatibility to all of our smart cast enabled a units.
In the field, so coming up with a new home screen like that and be able to deploy that out across the fleet is really great. So here's the user experience someone's had a television for multiple years and they just got a brand new experience with it.
Brought into their into their unit.
It's a great user experience is great for us as well because we can deploy new features that will include engagement monetization opportunities all of that comes together and to be able to do that on a backward compatibility basis is really a great attribution to our software team in our in our overall architecture.
Thank you.
Yep. Thanks.
Steep operator, we will take the next question.
The next question comes from Saint Cloud with Stevens.
Nick. Please go ahead your line is Natalie.
Hey, guys congrats on the quarter.
I still Wanna buy pizza through.
Through my T V, but in the meantime, looking to drill down into some of these announcements made in the quarter first.
Can you just talk about the recent partnership was into it.
Which seems to have built a retail median network here just incremental opportunity on the advertising front is does the video and into a partnership represent and is this just one of many potential retail media like partnerships that are to come.
Yeah. Thanks.
Look I think we're excited about the into partnership.
What that is is it.
Launching a small business focused retail media network called SNB media labs.
It allows advertisers to target customers, a quick books across various media properties.
Video is the exclusive connect the Teevee partner.
Very valuable data set for reaching small business and small business owners.
And we think there's a high value prop being able to augment our best in class television data with into its hostility datasets.
We think from a from an opportunity perspective, obviously this can help us expand our partnerships with with categories. We already are growing like telco and travel, but we also think it helps us expand into some newer categories like like Fintech in workplace services.
And yes retail marketing is is rapidly growing portion of the AD market. So we're excited about this partnership and think.
I think there are some good opportunities for us in this in this space in the future.
Got it helpful. And then just on the peak out a preview experienced delving a little bit deeper there obviously knew this quarter.
Generally it just demonstrates yet another way the streaming services are willing to engage with you as an operating system.
I guess the question is how should we think about like monetization of these incremental relationships and then just whether you see additional products like these being adopted by other various streaming services just again as in another yet another means of attracting viewership.
Yeah. So I think the the Peacock preview was another excited will call another exciting partnership for us.
We actually because it could be a great model for the future. So.
Just to give an update on what that was we partnered with NBC you Peacock to offer episodes of the original content within our watch free plus App for Friday to our customers. So episodes of Belair for existence for instance.
Was available for free to our consumers and programmed in a in a fast channel by us great for Peacock because it generated.
Exposure to a new audience.
Added promotion off the home screen.
Customers to engage in C C. Their new content, great for us because it got additional premium content into the watch free plus environment. So.
All around great for them, great for us great for consumers or viewers of watch free plus but what made it really cool I believe is that we added an indirect interactive overlaid to this that enabled.
Enable viewers to jump or with one click directly head into Peacock to watch more episodes.
Scrod.
And catch up on past episodes. So we add an interactive component component that made it very seamless to jump between watch free plus and the Peacock App and we saw that I believe a 14% engagement rate on that overlay itself.
Which was great but to me. This is a great example.
Partners can tend to utilize our platform to promote their content at content in new ways and drive back to their subscription services. So from a monetization standpoint, obviously, there's great great opportunities for us to continue to partner with these apps that are we have.
Core relationships with and had been working with on the media and entertainment side to build out new features that can help them not only grow engagement, but grows subscribers reduce churn.
In that it'll it'll lead to increased homescreen promotion, obviously opportunities for us to capture some of that subscription revenue and also new ways to monetize through the interactive interactive overlap.
Awesome color. Thanks, I appreciate it guys.
Thanks, Nick Operator, we will take the next question.
Our next question comes through time champion with Pakistan.
Please go ahead.
[noise] Hi, this is Jim on for Tom. Thanks for taking my question I guess for first one for William It seems like we're having a lot of success with selling some of the larger size Tvs is it possible. These customers are either more likely to convert to smartass or potentially just higher valued customers I guess, how should we think about that.
Yeah the.
Larger screen has a tendency to be <unk> living room.
Versus secondary a bedroom so.
So people use that in Gaza was.
Plus streaming on an everyday usage so the engagement are.
Some of them any longer than a smaller sizes.
At any moment iPhone data.
Yeah, I mean, I think as I mentioned earlier that strong correlation to the growth what it does is it shows us what the lifetime value of that television. So we look very closely at how long the TV stays engaged in the home and what the streaming time spent is.
We analyze this across our entire our entire unit lineup and so we know that those units are very valuable.
Once you get a 65 inch on your on your wall at home, you're probably sticking with that unit for awhile and to your question. These are these are sophisticated consumers who are adopting a moving into streaming more and more and so as we continue to bring more content to the platform.
More ways to engage with them more information on the home screen. It allows them to interact with content and search and discover as Mike pointed out.
Absolutely. These these are very quality.
Households to have and we see a lot of opportunities to drive monetization over time with them yeah.
Between two two.
R 60 finance was the best selling P D.
In the U S.
It's a very valuable television for us.
Mmm.
Okay, Great and then I guess just follow up on the smart <unk> as a result is there any seasonality we should keep in mind with two Q or I guess, how should we think about the cadence of that going forward.
Thank you.
Yeah, Yeah. There is yeah. There there is some seasonality.
Let me see some seasonality around June typically we see some cincinnati even.
February .
Can the impact of the first quarter so.
First have definitely have some some dynamics to it that's why we think about the back half now we do expect to see improvement in that metric.
The growth rate of active accounts should pick up along with as I mentioned earlier some of our initiatives to drive more sell through in volume around the seasonally strong period of the year for television. So I think we'll see and pick up you've already seen an acceleration here in Q3 I know it's early it's only you only got a month month of data behind us, but we definitely saw better trends in July and then we saw.
Through most of.
Q too so that's encouraging so far but we do think it will be a seasonally stronger period for overall growth in the back half of the year versus the first half.
Great. Thank you.
Thanks, Jim Operator, we will take the next question.
The next question comes from when he May have.
<unk>. Please go ahead.
Your line is Natalie.
Thanks for taking the question.
Thank you for taking the questions filling in for Rumsey today.
Adam I had two questions one on the advertising revenue in one on the non advertising, let me start with the non advertising so that grew 10% year on year.
Which was a little bit less than the 19% that you saw last quarter.
When you think about these three booklets data licensing content distribution and the buttons can you help us understand like how these three <unk>.
Between quarters, like which of the three was stronger than the first quarter, which was weaker than the first quarter.
Sure Yeah. So.
So 10% growth still good double digit growth there I would say, but I want to remind you that it's not just the three components that you pointed out all sorts of dig into each of those but but also this is the first full quarter of copying against the Nielsen deal that we did in the middle of Q1 last year. So 19 per cent growth in Q1 was only a partial partial quarter <unk>.
<unk> against that deal from the year ago period Q2, now we have the full full quarter comparison, so we've been indicating for a couple of quarters that we would eventually lap on that deal and we would expect the growth rate of non advertising to moderate a bit.
We're still very bullish on the growth in our data licensee business. We know we have the most valuable data in the marketplace or ACR data is really valuable to all of our partners that subscribed to that data and we think that that continues to have value and we'll have renewables that allow us to price that higher as we go forward. So that there'll be a steady growth contribution there from the data.
Business. The content distribution side is really are in ramp up mode. It's still pretty early for US. There are a lot of that is tied to the.
Our growth and Vizio account and consumers, adding that feature and then being able to as absurd subscribed to content through that through that mechanism.
I think we're in we're in the building phase there and so I think there's certainly runway for growth for that to continue to contribute over time. So it's another component of our overall growth the button revenue.
Is a nice revenue source, but it is definitely tied to our shipment volumes. So as you've seen shipment volumes come down a little bit I think we're down about 11% in Q2 was going to be a direct correlation to that because that's just a per unit pricing.
The dynamics so in periods, where there is lower shipments that is going to be a headwind to the growth for non advertising revenue.
Got it thanks for the details there.
For my follow up let me ask you on advertising revenue so strong growth at 35% a year on year I think traditionally most of your sales have come from direct sales vs open marketplace.
Programmatic becomes more.
It becomes a higher percent of overall TPB spend you think that makes changes or do you think as you gain.
More traction with advertisers and continued to gain market share most of the sales will still be through direct sales suggest your thoughts on that makes a programmatic versus direct sales.
Yeah, I think generally given where we are in the phase of building up clients and relationships and broadening with big TB brands.
Like some of the categories that we mentioned already we think that that that the value in building those relationships through the AD agencies and with those branch directly in many cases lean.
Leaves us towards more managed services or direct sales as a percent of the total we've been we've been trending around kind of 820 in terms of direct versus open marketplace programmatic, we could certainly have opportunities to adjust that mix. That's one of the beauties of our models that were pretty agile around this topic, but as we Wanna do deeper bigger.
Campaigners with Big AD buyers that are looking for reaching some cases target ability in some cases using our first party data.
Leverage our off platform capabilities with household connect lot of different dynamics that we can bring to them to help them achieve their goals around their campaigns and that requires more of a higher touch managed services approach, but make you want to add anything there yeah I think.
I think Adam you touched on all the points I would add.
Cpm's are also factor so.
<unk> standpoint.
820 mix today connected television is still relatively new in the marketplace right. There is this big shift out of linear dollars into into screaming are connected television, but that that takes a lot of education.
For for some of the larger advertisers who have been spending for for a very long time in a linear environment. So what we found is through the direct sales are through the managed service aspect, we've been able today to generate higher cpm's. So as we continue to generate higher cpm's from our direct sales efforts will continue to use programmatic.
Somewhat of a backfill.
To increase fell rates and make more dollars I think over time, we should see as expected overtime, we should see programmatic cpm's continue to increase in as they increase I think we'll see that mix continued to change.
Okay. Thanks for all the details I appreciate it.
Yep, Thanks for Blue Operator, we will take the next question.
Our next question comes from <unk> can I see off much Cannonball research if any please can I have your lines now any pain.
[noise] Hello. Thank you good afternoon, my <unk> I have one for you.
You mentioned that you're taking.
A thousand dollars from the <unk> those who are looking at the ground throw broke makes sense, but can you explain to us mechanical how how you think that happens on why so you come to an advertiser.
Give us advertise <unk> from other channels.
From other connected TVT platforms or.
A what services or just give it to you or do both just give the incremental dollars to you and if so why is so can you just help us understand how this happened something on the ground and what helps you achieve that.
Yeah.
I think it <unk>.
From our perspective, I would say, we focus less necessarily on trying to take share from the rest of the market place I think it's been a significantly increasing.
Hi out there I think this year, there's going to be $25 billion spent and connected television next year. The expectation is that jumps up to 30 billion. So what I think our team has done really well and we look at that 80 20 in terms of direct sales.
Our direct sales team has done an incredible job getting out there and educating the marketplace not only in the value of vizio and smart television itself, but the value of our inscape data are our first party dataset and that first party datasets solves problems for the customer not only in terms of how to reach our target audience is based on.
Doing data, but we also have a really good story around incremental rich or how do you identify planned target and measure against incremental reach.
That may have been lost and historically linear environment. So.
Continuing to build the new tools around our data as I mentioned, whether it be for planning targeting measurement and then the sales team doing a really good job executing around that story in the marketplace has helped US continue to ramp up then I think get a very strong position in the marketplace.
Well, let me ask you a follow up thank you for that but if you are pitching yourself as selling incremental reach right. So bad by definition.
Puts you in a <unk> come to in competition with the linear television right. So does that mean, but your pricing.
That would be comparing your pricing to believe me.
Television option right. So do you price yourself on par.
You know below above how how do you think about pricing.
Pricing something that allows you to <unk>.
Get your foot in the door or is it.
The differentiation because of the first part of the data.
What is it.
Yeah I think.
From our perspective differentiation is around the first party data, which separates us from typically how how someone buys linear which is on a on a.
Audience or demographic basis, right typically we're adding and.
Targeting capabilities, which is more of a digital by.
That helps us get kind of increasingly cpm's are typically cpm's in the marketplace. So we are we are <unk>.
Positioning ourselves or selling ourselves on the value prop two two advertisers different necessarily then.
Then broadly.
Linear environment, it's more of an addressable solution.
So that that's worked well with us and I think the other component of that is when we look at incremental reach give an example, we have a product we call true incremental rich and which we have been able to generate higher cpm's by by leveraging the data we have which we understand what people are watching and a cable <unk>.
<unk> and a streaming environment as well and being able to.
Guarantee certain levels of incremental rich if we hit those targets those cpm's go up.
And if we don't they go down, but but we have the tools and planning tools in place to help us deliver and execute against that.
Yes, Vassilios, Adam I, just wanted to add one idea here.
Oh, we don't think about this as a sort of a zero sum game, obviously CTV is expanding and the advertisers chasing where the viewers are going so as we continue to grow and generate more scale. There's just more capacity there we continue to be.
Sort of supply constrained so as we grow our base and we grow our user base in terms of where they're spending their time and more hours of screaming in AD supported content. It as an opportunity to tell advertisers hey, we now can take your campaigns, we can bring those dollars in because we're in a bigger scale. So I think kind of where we are in terms of our maturation is an important part to think about this and the scale of the offers.
Unity.
Thank you.
Thanks, So silly operator, we have time for one more question.
Thank you I'll final question today comes from Scott.
<unk>.
Got to keep going ahead. Your line is now a pin.
Hey, good afternoon. Thanks for taking my questions and maybe just to go back quickly to smart cast net additions. It's slowed the last couple of quarters. It sounds like from your comments that single legacy devices that are turning off wanted to just get clarity on that front beyond seasonality, if there's something to read into it.
Older devices, turning off and your devices are still sort of maintaining that higher attach rate and high oil crews that go along with it.
Yeah, Scott, Yes, absolutely newly sold television is still we see them activate after being purchased at over 90% rate. It's never been 100%. There's reasons why people would bring it home and have different use cases for is someone who my television to be a monitor or some other purpose and so it's never been 100%, but it still makes me over $90.
And that really hasn't hasn't changed.
Our installed base is getting bigger and as it grows if you think about even just to use some generic numbers like a 1% churn number in a bigger base is going to be more quarterly or monthly headwinds you've gotta be shipping more selling more through gaining more at the top of the funnel to offset that turned in the base. We have seen an environment, where we have shipped fewer.
So and silvery rates have been a little bit lower so at the top of the funnel has not been as strong to help offset what is.
Growth in.
Absolute number terms in terms of the the churn out of the base.
Again, our definition of an active account includes someone who's the unit is connected to the Internet and it's and it's turned on during the months. So if it falls off the Internet for some reason that they decided to put it in a different part of the house and not use it as a frequently that will add to our the term number and so those two those factors working together is what general dates out our <unk>.
<unk> account growth, but we are doing a number of initiatives to help improve.
And prove that engagement and reengagement activity, we're doing some activities around marketing, we're working with a customer service agent as well, we're working with our engineering team to make sure. We're deploying updates in a timely way that reduces friction or disruptions to consumers. So lot of different ways. We're looking to attack this and improve the net ads going forward and I am as I said earlier.
Very optimistic that the back half of the year will show stronger growth in our active accounts base than we saw in the first half so far.
Okay very helpful. Unless I think it did just wrap up uhm smart cast off who has been growing at a good clip, although it's been coming down a little bit over the past couple of quarters, but the delta between <unk> growth and smart cast hours has been narrowing and I assume part of that is related to capacity and still rates and what you've been able to do on.
That fun I'm wondering what's the sustainability of <unk> growth in excess of smart cast our growth given cpm's, given things like bringing AWOL, an ecommerce capabilities and and now with the home page home page is does that drive and inflection and an expansion of the delta between those two numbers. Thanks.
Well I think one of the factors that can think about is.
You know you are drawing a correlation between time spent in <unk> and for us it really matters, where they're spending their time as I've said before someone increases their their quarterly hours in screaming, but it happens to be in a non AD supported service, that's not going to add to our <unk>. So it's incumbent upon us to make sure that we are bringing great content and Greg user.
Experienced into our AD supported apps and channels, where we have.
Inventory of monetization opportunity so that that every hour becomes more valuable to us.
In that sense, so that we can actually lift that monetization and how and how that disconnect. The other direction. So it just depends on where they're spending their time, that's an important consideration to that factor. We think there's plenty of room for upside and <unk>. We know what the marketplaces 40 look at some of our peers in the market. We know what those numbers are we've had our eye on it for a long time we.
Made a lot of progress in a pretty short period as we've talked about.
Plenty of headroom to go for <unk> growth from here the us marketplace of supports much stronger numbers and wherever we even our today. So we're excited about how we can execute against that and keep driving growth.
Alright, thank you.
You bet, Thanks, Scott and thanks, everyone for joining this concludes today's call have a great evening.
And can you pronounce the joining us today you may now disconnect your lines.
Uh-huh.
Uh-huh.
Mhm.
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