Vizio Holding Corp
NYSE:VZIO
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Vizio Holding Corp
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Good afternoon and welcome to the VIZIO's Q2 2022 Earnings Call. I am Michael Marks, 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 O’Donnell, our Chief Revenue and Strategic Growth Officer.
Please note that in addition to our earnings release and today’s remarks, a slide presentation can be found on our Investor Relations website at investors.vizio.com. I’ll refer you to the third slide in the presentation and remind you that certain statements made on this call 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. Reconciliations with the most comparable GAAP measures for non-GAAP financial information discussed on this call can be found in our earnings release or 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 unless otherwise specified.
Now, I will turn the call over to William.
Thank you, Michael, and hello everyone. Thank you for joining us today. VIZIO has always been focused on great design, great user experiences, but just as importantly, a culture of discipline and efficiency, we'll focus on this as well, particularly in environments that we're in now, which is filled with uncertainty and challenges. I'm very proud of our strong and seasoned management team that has endured many business cycles over our 20 year history and proven to be resilient. Our second quarter results showed the power of our leadership team and the success of the dual revenue model we have built. Despite broader marketplace pressures, our total revenue grew by 2% to $409 million, led by our platform business, which grew 69% to a record $111 million.
We continue to focus on delivering exceptional value to consumers, which comes through a combination of great technology features and ease of use all at affordable prices. We can continue to deliver great products and superior value because of our deep focus on discipline and operational efficiency. I'm also proud of the fact that we continue to maintain a strong and highly liquid balance sheet with no debt and significant flexibilities. Last quarter we announced some strategic pricing moves around selected SKUs, like our 50-inch V-Series model. That TV quickly became the number one selling TV in the country at that time and it continues to be in the second quarter as well.
Building on this momentum, we expanded our competitive pricing strategy to include additional highly performing skills such as our 40-inch D-Series model. And that TV became the number two selling TV in the country. So during the second quarter, VIZIO had the number one and number two best selling TVs in the market, which help propel us into the number two market share position in the U.S. for the quarter, an outstanding achievement in the tough market.
Looking ahead, our new collection of TVs and soundbars just started to hit stores last month and the feedback has been tremendous. Many of our new TV models include Wi-Fi 6 compatibility, an updated and more responsive operating system, and our VIZIO Voice Remote will support for Bluetooth headphones. On the audio side, our new M-Series Elevate and all-in-one soundbars pack a serious punch at a compelling price. Our technology and design enhancements continue to make the living room experience even more enjoyable and we are already receiving accolades from publications like Newsweeks, tech reviewers touting the performance and values of our new lineup.
Turning into our Platform+ business, we'll continue to build on our integrated offering by bringing more contents and enhanced viewing experiences to our users. We recently announced that TikTok, one of the fastest growing entertainment platforms, joined VIZIO. Now you can enjoy your favorable dance video on a much larger screen. We also expanded our Spanish language content offering this quarter with the new app partnership with Estrella Media and broadened our content offering across a range of categories, including kids, lifestyle, classic reality TV and cultures.
In addition to all of the great building third party apps we offer, our own app WatchFree+ continues to deliver a strong growth. The growth we are seeing in WatchFree+ showcases users increasing move to free ad-supported content as well as the power of our on screen promotion capabilities.
Once again, this quarter WatchFree+ was the second most watched ad supported app platform. During the quarter we expanded the WatchFree+ content with addition of Vevo music channels, the Jamie Oliver channel, LOL Network, and anymore. We also expanded our WatchFree+ on demand library with titles from Disney, Sony, and Warner Bros. We have created a content offering that truly has something for everyone from gamers, to kids and families, for multicultural audiences, sports fans, and many more.
This quarter, we grew our SmartCast Active Account base to over 16 million, up 15% over this times last year. Through the strong engagement on our platform, SmartCast hours where users spend the time streaming grew 22%. We're seeing streaming once again, outpace all other time spent on our TVs. To align ourselves with this growth in streaming, particularly in ad-supported content, we have continued to invest in building our ad sales team. That investment has led to greater growth and coverage across ad categories, as well as growth across new advertiser market segments. In mere two years, we have successfully developed repeat customers with largest ad agency and big brands like Apple, Disney, Progressive, Microsoft and Pfizer.
Our advertising business is growing rapidly, up 71% in the second quarter, thanks to growth in large ad categories, such as financial services, retail and CPG. And across those categories, we have continued to develop new relationships, [indiscernible], Georgia-Pacific, HP, Little Caesars, Lowe's, and NationWide to name a few.
Within the media entertainment category, our content partners and advertisers frequently tell us we had the best platform for search and discovery in CTV. And we have to agree.
Every day, millions of consumers turn on their video and experience the power of our home screen to learn about what's on, what's new and what's available. That's why the biggest studios and streaming services rely on our ad product to promote great content across our platform.
As the streaming wars continue to intensify, VIZIO remains a powerful tool for our content partners to acquire and retain their valuable viewers. We also have a great opportunity to provide our users with a simple way to aggregate and manage their subscription services. And this quarter will launched VIZIO Account, our payment platform.
Outside of our popular new collection, we're currently rolling out this capability across our existing fleet and the vast majority of our devices. We’ll hire this capability by the end of August.
We'll take some time to get all the major partners up and running, and we're excited to bring Stars and Discovery+ to our platform, those early launching partners. We see VIZIO Account as foundational layer needed to bring new interactions and commerce to our smart TVs down the road. We are very encouraged by the early subscriber activation results for Stars. More to come in the quarters ahead on VIZIO Account.
So while our team continues to make great progress in our journey, I believe we're still in the very early earnings of what a smart TV can become. We remain focused on investing in the people, the software and the hardware to bring new possibilities to the larger screen in your home. And as we have always done, we will invest with discipline and the continued focus on efficiency.
As you can see for our second quarter results, the benefits of our dual revenue model are really paying off and providing us with a strong hand to play as we work to expand our monetization flywheel.
More SmartCast Active Accounts, to more engagement, to more content and more advertisers, we are driving higher overall values growing install base. I’m very excited for what the future holds for VIZIO, and with a strong and seasoned team leading us. There’s still much more to come.
With that, I will now turn the call over to Adam to review our second quarter results in more detail.
Thanks William. Before opening the call to questions, I’d like to take you through our quarterly financial highlights and discuss our outlook for Q3. Starting with the second quarter, total company revenue came in at $409 million up 2%. Platform Plus grew 69% to a quarterly record of $111 million and represented 27% of total company revenue in the quarter. The strong growth was driven by advertising revenue, which rose 71% to $81 million. We continue to expand our presence in the overall ad market and despite some softness emerging in the macro environment, we believe we continue to be a share gainer within a secularly growing part of the market.
To that point, we expanded our direct advertising client relationships during the quarter by 74% versus a year ago, adding more than 200 net new advertisers. Our growth in direct client relationships is key, as we saw repeat [ph] customers increase their spend by double-digit percentages. The sustained growth is coming from big brands and the largest ad category such as financial services, retail, and CPG. Our advertiser relationships continue to expand and are built on trust and transparency, brands recognize the value of direct-to-device as our owned inventory and ACR data give them on-screen validation and proof-of-campaign outcomes.
Speaking of data, Platform Plus non-advertising revenue led by our data licensing grew 65% to $30 million versus the year ago period. This was the strongest year-over-year growth in three years, as we benefited from an acceleration in data licensing revenue on the back of our previously announced deal with Nielsen as well as strong pricing trends for brand placement on our remote control buttons.
Today, our first party data helps improve user experience while enhancing advertising campaign effectiveness through better planning and targeting capabilities. For these reasons, our data is also becoming the cornerstone of the CTV measurement market through some of our licensing partners, such as iSpot, Comscore, VideoAmp, 605, TVSquared and Nielsen who all rely on our data to fuel their ad currency products.
Turning to our Device segment. Total revenue was $298 million down 11%. Growth in TV unit shipments of 5% to $1.1 million was offset by lower average selling price driven by sales of our popular value skews and strategic pricing promotions deployed on certain models during the quarter. With this our market share of smart TV sales in the U.S. improved to the number two position for the quarter.
Turning now to gross profit. Total company gross profit was $74 million for the quarter. Platform Plus gross profit was a record $70 million up 47% year-over-year with a 63% margin. For the quarter Platform Plus gross profit represented 95% of the total. Device gross profit came in at $4 million with a 1.3% margin. Given the high contribution margin of our platform business, we remain focused on the strategy of building great products and competitive pricing to continue to deliver exceptional value to our consumers and expand our household install base.
Total company adjusted EBITDA for the quarter was $11 million. Well ahead of our expectations and down from $26 million a year ago. The improvement relative to our expectations was attributable to more managed growth in SG&A expenses, slightly lower marketing and stronger Platform Plus gross profit. We continue to maintain a highly liquid balance sheet with no debt. Cash equivalents ended the quarter at $336 million, which was up quarter-over-quarter.
Now, turning to our key performance metrics. Our Q2 results continue to highlight the growing success of our efforts to drive overall monetization across our platform. ARPU grew to a record $25.87 up 54% over the year ago period. Our platform monetization continues to benefit from strong demand from home screen ads or promotion placement. Growth in video advertising revenue, particularly within WatchFree+ app where growth in viewing hours again outpaced overall streaming growth across the platform.
Total time spent streaming also outpaced all other times spent by our users as measured by a 22% increase in SmartCast Hours versus a 14% increase in total VIZIO hours. This growth also translated into a return to growth in SmartCast Hours per SmartCast Active Account, which grew 6% as we have now left the sharp spike in streaming we saw due to the pandemic lockdowns and subsequent content disruptions. Looking forward, we expect to see streaming return to share gains versus linear as viewing trends normalize. SmartCast Active Accounts grew 500,000 sequentially and 2.1 million year-over-year to a new record level of 16.1 million.
So, let me now turn to what we expect for the third quarter. Like all companies, we are managing the business through heightened uncertainty and market challenges. Against this backdrop, we are focused on balancing cost discipline and resource support and investment for growth and opportunities that we see ahead. Given there a significant opportunity for growth in our high margin Platform Plus business, we intend to prudently invest resources there while being extremely disciplined about cost in other areas of the company. Our focus will be on identifying efficiencies and driving productivity to support profitability and operating leverage.
For Q3, we expect Platform Plus revenue to be between $120 million and $125 million with continued growth and home screen and video advertising as well as data licensing. Political advertising remains at wildcard for the quarter with timing and pacing hard to predict. While we believe we are well positioned to bring in significant political dollars, we remain conservative within our outlook, given its lower predictability. We expect Platform Plus gross profit to be between $75 million and $78 million implying continued margins of over 60% at the midpoint of the ranges.
From a total company perspective, we expect Q3 adjusted EBITDA to be in the range of $8 million to $13 million. We continue to expect second half adjusted EBITDA to exceed first half as we benefit from greater operating leverage in our seasonally strong fourth quarter period. So, overall we are pleased with the commitment and determination of our team in Q2, which delivered solid results. And we remain disciplined and focused on continuing to generate near term profitability while investing for long term growth.
With that, let’s turn the call over to question. Operator?
We will now begin the question-and-answer session. [Operator Instructions] Thank you. The first question comes from Nick Zangler with Stephens. Your line is open.
Hey guys congrats on the results, and congrats on the launch of VIZIO Account. Now, on the streaming side, the streaming services side for VIZIO Account, you’ve got these early launch partners in Stars and Discovery Plus amongst some others. I’m curious what goes into forging that relationship? And what might that imply for the timing of additional account partners, VIZIO Account partners?
Yeah. Hey Nick, it’s Mike, I’ll take this. Well, look, I think we’ll just start with VIZIO Account itself, right? We’re pretty excited about the rollout. I think we’re excited with the initial results. It’s just starting to come to market now, but having a single place to subscribe, track payments and manage streaming service for our consumers, we think is really important for the future. And you mentioned we were able to bring on some good launch partners. I think in total we had over a quarter or roughly about 27% of all paid apps, subscription apps on our platform are now integrated with VIZIO Account.
So, I think we’ve got some good momentum on that front. And recently we just completed actually our first developer conference, which we had over 250 attendees. We educated them about the ease of building for the VIZIO platform, but also about features and benefits such as VIZIO Account. So, we’ve got a good momentum at the start and we expect to continue to onboard partners for the foreseeable future.
Very cool. Any plans though to entice some of your current VIZIO active account users to go ahead and sign up for VIZIO Account?
I think one, the benefit of VIZIO is the fact that it’s backwards compatible. So VIZIO Account is rolling out, not only on new devices that we sell, but also on legacy SmartCast models we have. So, we got lot of tools to educate consumers about VIZIO Account, and we’re utilizing them, or we’ll be utilizing them, obviously normal channels, point of sale, email, social, but really on device and the partnerships we can form with the app partners we have. We believe, we’ll continue to help drive adoption.
For example, today if you go in and want to sign up for Stars on the VIZIO platform, you need to use VIZIO Account and we give an offer of seven days free of Stars. So, we think continuing to work with our partners to drive promotional benefits, we’ll continue to increase adoption not only for new models, but for legacy models we have in the market.
Great. Great. One more if I could, if you don’t mind, since you mentioned it, but any more details here on how you’re thinking about political ads spend contribution within that 3Q guide, and maybe if you could just frame up your general positioning to capture the ads spend dollars associated with political? Thank you.
Hey Nick, it’s Adam. Let me start, and I think Mike can get some more details here. As I said in the prepared comments, we’re looking very closely at political. We think we’re in a very strong position to be able to take political dollars, but sometimes those political dollars come around in, at less predictable timelines and cadences. So we've been very thoughtful about that and been conservative in our guidance to assume significant contribution from political. Political comes in stronger than we anticipated then that could be a source of upside. So we're going to look at that and watch the pacing of it as we approach the voting cycle. But Mike, you want to add any color?
Yes. I think, when we launched this business in 2020, the last real election period, we were just getting started. So we were able to capture some advertising dollars, but this is our first real political cycle that we're going through. So we're pretty optimistic about the opportunities we have in front of us. I think if you look from 2020 to today, we obviously have significant growth in terms of our active user base. We've got a large direct sales team out in the marketplace that can educate advertisers across all different categories, including political.
And I think we've got a lot of tools available to help political advertisers, leverage our platform, including adding incremental reach. So we know there's dollars coming into Connected TV. We're cautiously optimistic about how many – how much of those dollars we can obtain, but we think we're positioned really well, not only for Q3, but really as we enter into the key political season really to start of Q4.
Awesome. Congrats guys, and good luck going forward.
Great. Thanks Nick.
Thanks Nick. Operator, we'll take our next question.
Absolutely. The next question comes from Laura Martin with Needham. Please proceed.
Hi there. Okay. So William, let's start with a philosophical one for you. So we added $20 million to the platform business with a 63% margin, and it did not flow through to the gross profit line because we just subsidized devices more. So that is my philosophical question. Are we going to basically, is your view that as you make more money in the platform business, we're just going to subsidize devices so that we can get a faster installed base and basically have you be the second fast, second rank television installer? Is that theory here?
Yes, Laura, good question. From time to time, it depends on the market situation, will decide what we're going to do with the increased gross margin? And sometimes we invest in technology and sometimes we invest in the price and sometimes we'll invest into hiring bigger, stronger advertising Salesforce. So this year with the macroeconomic headwinds, I think this is – in during Q2, we decided to make sure our TV outcome [ph] really affordable due to the inventory challenges in the retail environment. So the whole idea is just make more money, make more money for the shareholder. And if we can, we will subsidize TV sets. And because in the long term that will produce better results for our shareholders. So to answer a question, yes, this is a good year for us. We can pass into digital TV side sales with additional gross profit, which generate offsetting revenue model.
That's super helpful. And I sure do like that answer. And then the second thing is we have the imminent December 8th Disney just said, it's going to launch its ad driven tier, HBO has an ad driven tier in the market and Netflix. I think second half next year as those come on board, have any of those negotiated their deals to be seen on VIZIO TVs? And do you increase your negotiating leverage as you guys cross like this 16 million installed based hurdle? Do you think you can cut better deals with these sort of latecomers to the ad tier section of the streaming business?
I think Laura I'll think that. I don't think we'll necessarily speak to any specific deals that said, look at over 16 million active devices where a major player or major distribution platform in the space. And you're talking about some long-term partners we have, but for us, we're excited about them coming into the market. We think anything that drives potentially new eyeballs, anything that's going to increase time spend on SmartCast.
Anything that could bring new advertisers or larger advertising commitments into the space is really good for us. So from an advertising share standpoint, not going to comment, but where I think we really stand to benefit is the fact that we understand how to help our partners grow whatever it is whether it's subscription or ad supported services on the platform. And we've got a lot of tools about our disposal. We have a audience that we know through the data has an appetite for ad supported content. So we think there's good opportunities from there. And then I think as more and more eyeballs come into the space and more and more partners continue to innovate. We have a lot of different ways we can make money and I think we'll benefit or stand to benefit in a lot of different ways from this.
Thanks very much.
Thank you, Laura.
Thanks Laura. Operator, we will take the next question.
Thank you. The next question comes from Steven Cahall with Wells Fargo. Your line is open.
Thank you. And I joined a little late, so I apologize if this has already been covered or been asked. SmartCast ARPU is up really nicely year-on-year. I think maybe you're even closing the gap against some of your connected TV peers a little bit. I was wondering if you could just unpack ARPU for us a little bit and maybe talk about trends you're seeing in home screen trends you're seeing in AVOD where it sounds like the scatter programmatic market could be a little weaker and then trends you're seeing in data licensing or anything else. And then maybe just on TV shipments, I think you had some nice market share gains in the quarter. Can you talk about the product development pipeline for your television sets and if there's any parts of the market where you're particularly kind of focused on to make some investments and look to shape market share? Thank you.
Yes, I'll touch on trends in the market with regards to ARPU. I think for us where we're seeing the fastest growth is within the video sector. We continue to grow our relationships with brands and agencies. We continue to push out or evangelize watch three plus, which is the number two ad supported app on our platform. We continue to be able to leverage our Inscape data, which is the best robust, most robust data set in the marketplace to increase our relationships and increase CPMs with our partners on the video side. We continue to see success with our home screen. Media and entertainment continues to be a key category, but we've grown significantly or what we call non-endemic or non-medium entertainment clients that are soaring to leverage our home screened in order to drive more KPIs.
So, for example this past quarter, we rolled out a campaign with GEICO around pride month. They were able to sponsor a series of content for our consumers gave benefit to our consumers, but was able to bring them a new opportunity to advertise with VIZIO. So on the advertising side, those are important for us and the fastest growing. We're also seeing household connect continue to grow and generate some more TAM for us off platform. So in terms of ARPU growth really on the advertising side, that's the fastest trajectory for us.
Yes. Steve, it’s Adam, and then on the share gains in the quarter, we're very proud of that. And in fact, I think it speaks volumes to the fact that VIZIO has a strong brand presence in the marketplace that speaks to value and has a attractive pricing for consumers. And you you'll know that some actions we took in the first quarter, particularly around some pricing strategies on our V50 inch series, quickly vaulted that TV into the number one selling TV in the marketplace.
We then built on that success in Q2 and expanded that strategy into our D Series 40 inch which itself became the number two selling TV in the market. So as William mentioned, during the prepared remarks during the first quarter – sorry, during the second quarter, we had both the number one and number two selling TV in the market. So as consumers are looking for value, and they're looking for great products and great solutions for their home entertainment, they're coming to VIZIO and that's helping us gain share. We're going to continue to look at that strategy and look at other possible models in our fleet that could have similar types of results. So moving back up into the number two position was something that the team is very proud of for the second quarter. And we're going to look to see how we continue to drive growth throughout the year.
Great. Thank you.
Thanks Steve. Operator, we'll take the next question.
Operator
Absolutely. The next question comes from Tom Champion with Piper Sandler. Your line is open.
Hi guys. Good evening. Maybe for Mike O’Donnell. Mike, can you just talk about what you're seeing in the scatter market and also just elaborate on the ad verticals of strength. I think you highlighted retail and CPG some have cited those as verticals of weakness. So, curious why you're bucking the trend here and then maybe for William, just curious your latest thoughts on supply chain in the consumer. Curious if the consumer may be bouncing back a little bit from lower gas prices. Thank you.
Yes. So Tom, there's no doubt there's some softness in the marketplace in some key categories, including automotive and CPG. But we're not feeling it right now just because we're working off a smaller base in the past. So as you know we're only two and a half years into this. We've continued to invest in the sales team. We think we got best sales team in the marketplace right now out there evangelizing all the key capabilities we have.
So we were able to add this quarter, I think alone we grew 74% in terms of new advertisers on the direct sales side over 240 new advertisers into the fold. So for us, we are still growing in terms of our advertiser base. And that's allowed us to, withstand some of the pressure in the marketplace and continue to scale, and we expect to continue to scale and grow our advertising base for the foreseeable future.
Yes. For the – for your question on supply chain, our team has done a great job managing supply chain over the last three quarters. And there's no really, it's not really a supply chain challenging right now. And the thing where dealing was is more what has to do with the macroeconomic headwinds and demand issues. And so far we haven't really seeing any significant pickup due to the lower gasoline prices. And but we're pretty hopeful that, that's going to improve the overall situation, the gasoline price continue to fall.
Got it. Thanks a lot, guys.
Thanks, Tom. Operator, we will take the next question.
Absolutely. The next question comes from Jason Kreyer with Craig-Hallum. Please proceed.
Great. Thank you guys. Maybe first for William, if you can just talk about how VIZIO has performed in past economic downturn cycles and what you can do strategically to position the company for share gains?
Yes. Jason – ever since the beginning VIZIO has always been known as the best value brand in the TV industry. So over the last 20 years, we really consistently delivered great technology at affordable price. With also by focusing on building the cost of this for any efficiency, so like I mentioned earlier, I'm very proud of a strong season management team that have done a faster job over the last 20 years and proven to be resilient.
During the great recession, we did extremely well, and we have become the number one flat screen TV maker in the USA during that time. And now in fact, over 14 years later, we added our dual revenue business model. So was a combination of dual revenue model, a really strong balance sheet and the really strong season management team, which I'm so proud of. We are ready to take on any kind of macroeconomics headwinds, so we're ready.
Okay. And then just a follow up any notable takeaways from the upfront as you've I assume you've wrapped up that process by now.
I don't think we're necessarily ready to share a number. We are still wrapping up the, the upfronts on our end. What – I think I can share is we will be significantly up over the last year. I think we're, we've had some great we've closed, some great deals in the marketplace and we continue to have some conversations to onboard even more brands. So not exactly ready to share a number, but can share that it, it will be significantly up year-over-year and core to us growing in 2023.
All right. Thanks guys.
Thanks, Jason. Operator, we will take the next question.
Absolutely. The next question comes from Jim Goss with Barrington Research. Your line is open.
Thank you. Got a couple, one I wanted to build on something I think Adam was talking about earlier about the 50-inch V-series and the 40-inch D-series being the number one and two sets. Do you have a pattern you think you might be employing in terms of targeting certain, certain categories that might fit different users and try to continue this process? It looks like you've done at least a couple. Do you have a strategy in mind in terms of rolling that out, just to continue that process of gaining the best platform usage available?
Yes. Thanks, Jim. So, one of the benefits of us having the extensive data that we do is we know the usage levels by TV by series. So we have a sense of what units tend to over index in terms of your engagement and therefore opportunities for ARPU for us. And so that goes into our thinking about which units we want to be more aggressive with in pricing. And so it's not a coincidence to your exact question that we started with that, that V-series 50 there's two things pertain to that unit. We sell a lot of them and it's a very highly engaged unit. It's about, it's likely to be the main TV in the home in a lot of cases, a lot of our customers.
And so knowing that information, we were willing to price very aggressively to move more units and more volume because it feeds right into the flywheel of us growing active accounts and the right active accounts, highly engaged active accounts that are using our platform. They're engaged with streaming. They tend to use WatchFree+ that's where our best monetization occurs. So it is, there is a connection between our pricing strategies and how the usage trends translate into our ARPU opportunity.
Okay. And so as not to let this, totally trash your TV, the margins on the, the hardware, do you think at some point, you say, you let it be known that there might be another couple of months before this unit is no longer on sale and we rotate something else, so that it encourages the consumers and the sales people to push those models and then sort of move on to the next thing.
Yes, look we work very closely with our retail partners on that merchandising effort and the promotion activities that we put into place. We look at timelines throughout the year around selling events, opportunities Black Friday, things of that nature, right? And so we work very closely on a schedule to ensure that we do that. But keep in mind, our fleet is fairly broad. And so if we take a much lower margin, for example on a couple of these very targeted skews, like we've talked about here, other skews are generating, higher margins to that. So on a blended basis; we can help manage the overall gross profit contribution from the TV business.
All that being said, and back to the point of our dual revenue model strategically, we're willing to be at a low gross profit margin on our TV unit sales, because they're so valuable once we get those units in homes and generate that recurring revenue stream that comes from ARPU model and with the useful life of a TV averaging somewhere around six or seven years, as we're generating now, as you see over $25 in ARPU per unit on average.
And these units that we're talking about here are some of the higher indexing units to that. The customer lifetime value is incredibly high for us. And so to, to have a low margin at the onset of selling a unit to then drive high margin platform business, that strategy works incredibly well. And we're now scaled up at a level where we want to lean into that approach.
Okay. And one other that you spoke about the legacy televisions sort of in multi VIZIO TV households. And that could be a way to sort of increase the usage within a household and therefore increase the potential value to you and the ARPU within that, that household. How important is that effort and how do you promote it?
Yes, I think overall it's important, right? We want to have a whole home solution, right? We want consumers to see the value in our units, what we're bringing to the SmartCast platform, meeting their streaming needs, bringing them new features and capabilities to just make that experience that much better hopefully than our competitors. And as we continue to do that, then they're adding other VIZIO TVs in that household.
And so it is part of the overall thinking to make sure that the consumers have a great user experience, that there's no need to go get a dongle or any kind of plug-in device we're meeting their needs. We're bringing great content to the platform. We're using our data to enhance their search and discovery output so that they stay highly engaged and are seen what they want, when they want on our great value priced products. So absolutely we'd love to see consumers continue to add more units in their home and have VIZIO be their primary entertainment source.
Okay. Thanks.
Thanks Jim.
Thanks Jim. Operator, we have time for one more question.
Absolutely. The final question is from Vasily Karasyov with Cannonball Research. Please proceed.
Thank you. Good afternoon. I have a question about your philosophy going into a potential macro downturn. So growing CPMs for your advertising units has been, people have expected you to pull the lever and accelerate revenue and that's part of the bull faces here. If you saw a softening in demand, would you give up some CPM increase that you have been able to obtain and go for higher sell-through, or would you accept a lower sell through, but hold the CPMs would? Thank you very much.
Yes. I think CPMs, CPMs are really a function of supply and demand. And I think right now there continues to be that there's softness in the marketplace, but there continues to be demand for Connected Television. And as we've mentioned, we are a core player in this space. We've built a really strong business with WatchFree+ we have the best data in the marketplace. We have for the median entertainment community; we have the best UI for search and discovery in the marketplace. So our strategy today is not to reduce CPMs. We still believe there's upside and continued growth on the CPM side.
Thank you.
Thanks Vasily. And thanks everyone for joining. This concludes today's call. Have a great evening.
This concludes the VIZIO, Inc Q2 2022 earnings call. Thank you for your participation. You may now disconnect your line.