Vizio Holding Corp
NYSE:VZIO
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Vizio Holding Corp
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Good afternoon everyone and thank you for joining us for our Third Quarter 2021 Earnings Call. 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 Mike O’Donnell, our Chief Revenue Officer for Platform+. Please note that in addition to our earnings release, a slide presentation for you to follow along with our remarks can be found on our Investor Relations website at investors.vizio.com.
I’ll refer you to the second 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.
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.
Thanks Michael and hello everyone! Thank you for joining us today. I'm proud of the strength of our third quarter results as the investment we have made in our Platform+ business continue to bear fruit. VIZIO is defined as the future of the Smart TV industry. Because our fuel revenue model delivers the entire entertainment experience for the hardware and the software, for the content and the ads. We are able to deliver an attractive value proposition to consumers, advertisers and content partners alike.
I’d like to highlight a few key points and Adam will give more detail on our Q3 results later in this call.
Smart TV has gotten smarter and pay for additional bundles, because they no longer need to purchase another stick or box to watch their favorite entertainment. Multiple devices and remote controls are a horrible customer experience, which is why we created a simple, easy to use, single device experience for our VIZIO Smart TVs. The consumer increasingly favors the simplified experience. Other companies have also begun to enter the Smart TV space as they recognize the value of our business model.
At VIZIO we are always looking forward and staying aware of our competition. Old or new, they grow some more [ph], where they are investing successfully in TV and streaming business for many years will continue to invest more and focus on what we do the best, offer innovation and exceptional consumer experience at an affordable price.
On the device side of our business we have to work extremely hard to replenish retail inventories ahead of the holiday season to continue to drive customer acquisitions and grow market share, but we’re hit by the same logistical and supply chain issues that are affecting all companies right now. But we have been working very closely with our long term partners to help reduce delays and have strategically invested to expedite shipping. Although these higher freight and logistical costs have impacted our gross profit margin in the third quarter, this tactic has allowed us to mitigate supply chain disruptions and be confident that our product will be on the store shelf as we head into Black Friday.
We are gradually working with our retail partners to stimulate sales by launching saving evens, even earlier this holiday season across our product lines, which means that the amazing VIZIO deals are there for everyone. With exceptional value on products like our 75 inch P Series model in Walmart for under just $750, now that is one great holiday gift.
We're also bringing the big-screen experience to the home with incredible pricing of that buy on M Series and P Series TVs and our number one selling sound bars. Our last year’s metrics are still on track for the year, and we have also been able to grow through our space with key retailers. Thanks to great products that continue to receive excellent reviews such as our P Series Smart TV which are an Editor Choice Award from Newsweek, TechHigh [ph] and Reviewed. We have also just received a special recommendation from Rolling Stone magazine for our VIZIO 2000 P Series Sound Bar, all of which are available for the holidays.
We are creating VIZIO products to be the center of the connective home with SmartCast at the heart of all VIZIO TVs. The seamless integration of hardware and software is key to a great consumer experience, which is always our number one priority. Our software engineers are constantly working to create new ways to make our customers life easier. This includes easy to use version of refunctionality, our home page to help people find their favorite TV show and watch their favorite starts with built-in voice capability.
SmartCast also gives people content apps and hundreds of free streaming channels available right out of the box, including HBO Max, fuboTV, BET+, PBS and Funimation, which all launched this quarter. As we mentioned on our last call, we also operated our free streaming channel offering to WatchFree+ which brought an enhanced user interface and even more content though its popular destination on SmartCast and we are thrilled with the viewer feedback engagement so far.
Because of our rich glass-level data we know what people like to watch and we are now able to curate a series of VIZIO branded channels called VIZIO Features. In just three months our first two channels Fork & Flight and Investigations have already become two of the top 10 most watched channels in WatchFree+.
VIZIO Features brings audience a variety of exclusive channels that leverage our first party viewing data and home screen targeting capability to deliver a more relevant entertainment experience. Additional, recently the last VIZIO Features channels include Gamernation with Video Game and eSports programming. Mission, a channel of SiFi friends, Fear with back to back harrow movies and Polaris, a new creator driven channel that typically shares hip-hop and black culture with the world. Clearly the content on VIZIO Features delivers more of the free content that people love and generate more engagement.
Seeing always during the quarter our VIZIO ads can continue to deliver exceptional results. As we announced previously, we closed out the 2022 upfront season with over $100 million in commitment from agency holding companies and brands, which was a fourfold increase over 2021. Our Q3 advertising growth was driven by an expanding client and category base as we continue to broaden our universe of advertising clients.
Q3 advertising revenue was five times higher in key categories, including ISO and CPG [ph] in addition to media and entertainment. Not only that, but our advertising partners are spending more with us than ever before. Our adverse revenue for advertisers was more than twice what it was at this time last year. With our accelerating advertising demand continue to be in line with broader market shares, the consumer increasingly move from linear TV to streaming. Brands are following them onto our platform and as our audience engagement grows our ACR TV streaming data also grows.
This proprietary and comprehensive flat level data, is not only informing our own VIZIO content programming and monetization strategy, but it is also empowering of future of media measurement and currency results. Other leading companies currently being considered with an alternative to traditional media measurement are powered by VIZIO inside data, which put us in a unique position in the industry and typically differentiate us from our competitors. When you put all these things together, it is easy to see why Platform+ was such a growth engine for us.
Looking ahead, we are going to continue to increase customer acquisition and market share by leveraging our fuel revenue business model, consistently developing and enhancing our VIZIO line of products to create greater consumer experience and finding new ways to engage and monetize our VIZIO audience to grow ARPU.
All other investment we made in our products, our platform, and our people are paving the way for our continued evolution of the steaming first data driven media company. I am very proud of our VIZIO team for navigating this existing and challenging time. I want to thank everyone for all their great work. We will continue to revolutionize the Smart TV industry and I am confident that we have the right strategy, the right mentality and the right people to drive the future of television.
With that, I will now turn the call over to Adam to speak to our third quarter results in more detail.
Thanks, William. In the third quarter the growth in our Platform+ business exceeded our expectations as we further ramped up our advertising execution across homes screen inventory and our expanding base of the new inventory, both on and off platform. We continue to invest in software and engineering resources to scale our platform operations and expand monetization opportunities.
In our device business, we remained intensely focused on navigating through the supply chain and logistical complexities impacting so many companies. After inventories bottomed out in early July, we made strategic investments to help rebuild sell inventories as much as possible in advance of the holiday season. Of course, some of these actions had an impact on our device gross margins, but they were prudent steps designed to both help improve customer acquisition in the short term and to drive our growth strategy over the long term.
Turning to the financials for the quarter, total company revenue grew 1% to $588 million, with Platform+ revenue up 134% to $86 million, more than offsetting an 8% decline in revenue from our device business.
The third quarter represents the 5th consecutive quarter of triple digit revenue growth in Platform+, driven by advertising revenue which grew 271% to $66 million. Both our home screen and video advertising revenue streams continue to grow and outperform and we are excited to highlight that the third quarter saw record breaking direct sold video advertising revenue.
While certain advertiser categories are working through their own supply chain challenges, as a relatively new player in the market, we are expanding our advertiser client base and deepening their total spend with us as they seek are growing combination of owned and operated inventory and first party data.
For the quarter, advertising revenue represented 77% of total Platform+ revenue. Non-advertising revenue grew 6%, driven by increased data licensing and content distribution fees. Device revenue continued to face difficult year-over-year comparison to last year's pandemic driven surge in demand, but Q3 Smart TV shipments grew 27% sequentially to $1.4 million, even in light of increased logistical constraints, and we expect Q4 to grow from there.
Higher average unit prices for both TV's and Sound Bars during Q3 helped to somewhat offset the lower unit volumes. TV AUP was up 42%, while audio was up 8%. Total company gross profit was $83 million with Platform+ gross profit of $57 million or about 69% of the total, and device gross profit of $26 million. Platform+ gross profit grew 88% year-over-year due to rapid growth in advertising revenue, which is increasingly becoming a mix of both on and off platform impressions.
While we see tremendous headroom for continued growth on platform monetization, we are also gaining traction and off platform advertising capabilities, which allows us to expand our market and tap into opportunities across the broader connected ecosystem. This broader capability offers strategic planning benefits to our advertising partners. Of course these off platform add revenue sources won't carry the same margin profile that we achieved on platform, but they expand our overall campaign TAM and create advertising growth potential beyond our TV Install base. During the quarter Platform+ gross profit margin was 67%.
Device gross profit fell 56% as we are lapping last year's COVID related surge in sales and working through the higher component and freight costs, as well as more promotion pricing versus the year ago period. As we have been anticipating for several quarters, device gross profit margin came in at just over 5%, which is back in line with pre pandemic averages. TAM and component costs peaked in July and have come down significantly in recent months, while freight and container costs remain elevated.
Total company adjusted EBITDA for the quarter was $23 million, in line with our previous expectations. As a reminder, adjusted EBITDA is only adjusted for share based compensation expense, which remained elevated this year due to a one year vesting for grants issued to certain executives in connection with our IPO earlier this year. The higher amortization expense from these grants will roll off beginning in February of next year, resulting in considerably lower run rate comp expense going forward. And finally, net income was a loss of $19 million or $0.10 per share.
In terms of our key metrics, our Q3 results highlight the growing success we are experiencing in driving overall monetization. ARPU growth this quarter accelerated to a record $19.89, up 91% over the year ago period, primarily benefiting from our improved monetization of WatchFree+. In terms of our engagement measures, as we anticipated, both total time spent on device and time on SmartCast returned to sequential growth after the dip we saw in Q2 as the country began to open back up.
On a year-over-year basis, total VIZIO hours grew 24% to $7.3 billion and SmartCast hours grew 16% to $3.6 billion. With our ever expanding content line up, which as of the third quarter now includes household name apps, such as HBO Max and BET+, as well as more channels to our WatchFree offering, we are seeing continued growth in streaming activity ahead.
SmartCast multi active accounts grew 35% over the year ago period ending the quarter at $14.4 million. While all growth is good, we do believe active account growth during the quarter was somewhat impacted by low channel inventory at the start of the quarter, followed by the previously mentioned freight related delays which pushed shipments out towards the end of the quarter. For example, 40% of the 1.4 million units shipped during the quarter was shipped in September, leaving less time than usual for units to get into stores, be purchased and converted to new active accounts within the quarterly time frame.
Now let me turn to what we expect for the fourth quarter. Starting with Platform+, our modernization initiatives are paying off and we are continuing to expand our reach and identify new opportunities. Our expanded relationships with media networks and add agencies following this year's upfront process are driving growth and creating inventory scarcity in Q4 across both VIZIO and home screen. This will continue to be favorable for pricing and sellout levels.
We are seeing increased demand for data licensing, which is contributing growth to our non-advertising revenue and also strong competition for our remote control button sponsorships which is driving increased pricing power. Based on the current trends, we expect Q4 Platform+ revenue in the range of $100 million to $110 million. We expect Platform+ gross profit in the range of $65 million to $70 million implying a mid-60% gross margin for the quarter at the midpoint of the range.
For device, we expect to see sequential growth in TV and Sound Bar unit shipments as we continue to replenish channel inventories and benefit from the holiday season. In terms of our device gross margins, given our increased confidence in our ability to grow our platform business, we see a strategic opportunity to trade lower device margins to support greater retail shelf share, to acquire active accounts and to accelerate the growth drivers of our Platform+ business. We would anticipate low single digit growth profit margins over the coming quarters in order to feed our wide array of proper monetization, all leading to significantly higher ARPU over time. Lastly, we expect total company adjusted EBITDA to be in the range of $7 million to $12 million.
So overall, 2021 has been a transformative year for VIZIO and we're very excited about the opportunities we see ahead.
With that, let's open up the call to questions. Operator?
Thank you. [Operator Instructions]. We take our first question from Laura Martin from Needham. Please go ahead.
Sure. I’m going to interpret the one per person and I get one for William and one for Adam, so sorry. William for you, inventory channel backlog, where are you today in terms of how many weeks of channel inventory do you have and do you feel that that’s going to creep up or creep down as we head into the Christmas selling season in Q4? And then Adam, these platform numbers are excellent, up 134%. My question is you actually specifically called out data licensing and remote controls which are two of the line items. Would you be willing to give us any more granularity in Q3 about add growths versus buttons versus data by chance. Thank you, guys.
This is William. The Channel inventories is getting a lot help here in Q3. We spent a lot of, the team spent a lot of effort and tried to expedite the shipment. And the overall supply this season from Asia on components are getting a lot better. So we do see a pretty healthy inventory for us going into the holidays. And we are very aggressive on coming out with promotional price and hopefully we’ll sell our TV [inaudible]. Adam?
Yeah, thanks Laura. Yeah I specifically called out Data Licensing and the Remote, but I want to give a little bit of context of the non-advertising piece. We did indicate that non-advertising grew 270% year-over-year and that’s been driven by really strong activity, both on the home screen, as well as in the video inventory. The video piece as I had comment is getting more complex and more dynamic with a larger TAM force as we monetize inventory both on platform and off platform.
So the combination of those two is growing that pie and that's a strategic move that we are making to make sure that we aren't constrained by our installed base footprint. We want to be able to monetize against the entire connected ecosystem, so that’s a really important initiative. We rolled out a few ways, we are doing that. There is something we call household Connect, which is leveraging the relationship with the rise in media arrangements that we put out into the market last quarter, and then we're doing other programs that allow us to tap into inventory off device as well.
But seeing a strong demand in growth in categories, we're seeing growth in demand from insurance, financial services, auto, I mean these are really big advertisers in the market place that are creeping into and now coming into our overall ecosystem.
Of the non-advertising fees, data licensing is our largest component of that. The remote buttons will tie partly to shipment volumes, because it's related to the volume of remote controls that go out. People do buy independent remote controls aside from the TV’s and add on as well, so we monetize there. But what's changing is the competition. There so many streaming services and content partners now in the market place that getting access to that button availability on a remotes is getting more and more competitive and benefits us from a pricing standpoint.
Thanks very much. Thank you.
Great! Thanks Laura. Operator, we'll take the next question.
The next question comes from Michael Morris from Guggenheim. Please go ahead.
Hi! Thanks, good afternoon guys. I'll ask two if I could. First, on the Platform+ revenue growth guidance, the revenue guide, another quarter of good sequential growth. I'm hoping you can break down a little bit of the drivers, especially on the advertising side between video inventory display, you know where the strength is coming in. I think a little bit of the gross margin contraction on this side of the business reflects some of that on the inventory, but would love to hear your take on those components, and also the seasonal component, right. The first quarter is usually stronger, so we’re just trying to get a little more insight into that.
My second question is on the kind of conversion of devices to active accounts, you know units shipped. Having clarified that a bit in terms of the late deliveries, later in the quarter deliveries, but as we look forward, should we think that that reverses or just given some of these supply chain dynamics that you’re working through, you know is there going to be sort of a sustained kind of depressed conversion. I'm curious if you could share anything there? Thanks.
Mike, you want to hit the advertising drivers?
Yeah, I can talk about the drivers of advertising. So I would say for us, we’re accelerating in a couple of key areas. First is in our own WatchFree+, so are owned and operated app. We're really excited about the direction that’s heading. We know we did the redesign last Q3 or I should say last quarter, which has been very well received by our audience. We've added a lot of new content into the fold with six new VIZIO Features channels. All of that has driven higher time spent, driven in new users and ultimately added more Revenue Per Hour.
On top of that we're getting smarter, right. We're still early days building the business, so we're getting smarter about optimization, we’re getting smarter about bill rates, those have increased as well, so good momentum on the WatchFree+ side.
The second biggest driver for us is home screen. We continue to be able to monetize what I would consider is the best UI for search and discovery in the marketplace. I know we got 10 monetizable impressions directly on the home screen. So that's been very well received by the media and entertainment community and as we continue to build those out, we continue to expect significant growth on the home screen.
And then the last I think as Adam has touched on is our off platform. We continue to build out or educate the market place around our audience expansion products and our ability to leverage our first party data to drive video solutions based on what your viewing habits are on the screen into a mobile and desktop environment, and that’s been really well received. When you talk about Q4, as we look ahead, you know as inventory across the entire market place starts to tighten, our audience expansion products give us a good opportunity to continue to drive value with our advertisers.
Yes, on the active account conversion, thanks for asking that Mike, it’s certainly an interesting dynamic that we look at very, very closely, because it’s a combination of both, what I'll call sort of top of the bucket, so newly converted accounts, and then managing the base, which is the fleet that goes all the way back to when we started shipping SmartCast to use back in 2016. So we look at newly sold TV's. We have a pretty consistent conversion of north of 90% of nearly sold TV’s converted into an active account and that's great, so that’s feeding the top of the bucket.
But then you have a multiyear fleet that has dynamics to it. There may be a wide range of reasons why someone might in any given period fall out of that activity level. To be active you have to engage with the TV, you have to turn it on, it has to be connected to the internet. So to qualify for that, you have to achieve those attributes, and if you don't, for whatever reason that might be, you become what I’ll call churn attrition and so we look very closely at why that happens, what can we do about it. We want to pick that up in terms of reengagement and we think there's room for opportunity to improve. I mean there's definitely places to go there.
But we are seeing right now in the short term to your part of the question, yes the latency in the supply chain dynamics certainly played a role. When we were low in stock back in July and a lot of the shipments that went out were just initially to kind of get product back on the shelves, to have it turn into sell through and then a conversion with active account, we’re definitely seeing some latency around that given the supply situation that we're going through.
I think that normalizes over time as these things work out through the system, but we're going to attack both the, kind of the top of the bucket acquisition level and the bottom of the bucket in terms of churn or the engagement opportunities. We have multiple millions of units that are in the market place that we know are not old enough to have been discarded or replaced at this point, that are not in our active account number and that's an opportunity for us as we look forward.
Okay, thank you guys.
Thanks Mike. Operator, we'll take our next question.
Next, we have a question from Steven Cahall from Wells Fargo. Please go ahead.
Thanks. One on TV sales and then one on Platform+. So on the TV sales side I think you said you expect sales to be up sequentially. I'm just wondering if they are also up year-over-year and the 40% I think you said ARPU growth was pretty strong. Do you think that that’s more about price or do you think that's more about mix as you upped here or a little bit of both?
Well, let me take the first one and I may have you restate the second one. Yeah, on the first, well look we're going into strong seasonal period of the year. We have worked very hard with our logistics partners and our retail partners to get inventories up as we head into it and be ready to meet that demand. So we feel like we're in a really good position there.
Whether it ultimately ends up being more or less than you know last year, I think it's kind of hard to comp against that number. I think that shouldn't be a surprise to you, but it'll be sequentially up nicely and I wanted to point that out, because we know that and we look at the cadence of the year, Q2 was strong. Q1 was a trough quarter. We indicated that at the time and we thought that would be the lowest quarter of the year, Q3 up from there and Q4 up again. So we're in a trajectory now as we come out of and into the holiday season.
And could you just reframe the Platfrom+ question? I think I missed that.
Yeah, well so the second part of the first question was just whether or not the pricing growth that you saw was more a mix or just price growth because of supply constraints, and then I had a quick follow up on Platform+.
Yeah, sorry about that. Yeah, actually both Steven. We saw a premium increase. We shipped twice as much premium line product in Q3 as we did in Q2. So we saw an increase in our premiums, our M Series and our P Series. We saw a sizing up as well, so demand for larger screens, that’s contributing as well. And early in the quarter when there was some scarcity of inventories in the market place, there wasn't a need to discount heavily and so prices could remain where they were. So I think all those factors played into the 42% increase in AUP that we highlighted year-over-year.
Great! And then just on Platform+, you know I think your hours per day per account, they are I think about 80% of Roku and your ARPU is only about 50% of Roku, so it seems like you've got a lot of pricing headroom, but also maybe a little bit of engagement headroom. I guess how do you think about driving both of those two different pieces that drive ARPU higher? Thank you.
I think in terms of driving the ARPU higher, we still have a lot of runway, right. If you look, I continue to reinforce the point that we're only about 20 months into the advertising business, right. So we made a lot of headway in terms of breaking new categories, in terms of building our relationships with advertisers and brands. We did about – we announced over $100 million in upfront commitments from our partners. We've grown the advertiser base. I think we said 50% year-over-year as well as average advertising spend over 200%, so we still got a lot of room to run.
We've grown ARPU and nearly doubled it year-over-year from 10 to 20, but we still have a lot of room for growth and a lot of headway to make in the marketplace as we continue to evangelize our offerings.
Yeah, and see there's a number of things that we're investing in to help longer term drive, continued expansion and growth in ARPU. I think we talked about over the time you know our investments were making in software development and engineering capabilities to add new use cases and features to our platform and that will just benefit us over the long term to be able to drive additional incremental ARPU.
But to Mike’s point, a lot of headroom, a lot of levers to pull in terms of getting – closing the gap. To your point, you know activity levels is pretty good. We want to push that higher obviously, but the monetization piece of it is going to get a fast follow.
Yeah, thanks.
Thanks Steve. Operator, we'll take the next question.
Next we have a question from Cory Carpenter with JPMorgan. Corey, please go ahead.
You know I’ll share the system and ask two as well. Just on WatchFree+ could you talk a bit about just framing the longer term month based activity that’s certainly a big driver right now, but if we think of it as, you know we’re actually 1% time spent today. Of course the system estimate could be wrong, but you know what's stopping you from doubling your falling back over time. And then maybe, this is probably for you too Mike, but just maybe your features hoping you could talk a bit more about that and you're ambitions there. Thanks.
Yeah, I think they actually tie together, so it might actually be one question. So we talk about the big opportunity to grow, WatchFree+. I think I just touched on the fact that we did a redesign, we've been enhancing user experience, creating a better environment for our consumers to engage. That's really important, because we need to continue to grow new users into the fold, we need to increase time spent and we're going to continue invest in bringing in new feature and new content into WatchFree+ and I think one great example of that is what we've done with the VIZIO Features, right.
So VIZIO Features is our data informed programming. [Audio Gap] Perform really well as William pointed out, with Fork in flight and VIZIO Investigations being [Audio Gap] but for anything else, for example or I should say another example of [Audio Gap] and we built VIZIO Investigation. But this channel which is a cable like experience has [Audio Gap] revenue per hour that we're gaining within WatchFree, which is really important to us.
It also helps us create a second monetization opportunity, right, as we can sell brand sponsorships into these channels as we promote them. So for example, we also rolled out VIZIO House, which is our DIY channel. We have Progressive as the presenting sponsor. That gives them the opportunity to advertise or integrate directly into the channel, but also gives them an opportunity to get real estate on our home screen, which is a good opportunity for us to expand beyond just media and entertainment on the home screen, bring new advertisers into the fold and give a good consumer experience for our viewers.
So for us you know it's a great opportunity to build on WatchFree+, but also double dip on the monetization opportunities.
Thank you.
Thanks Cory.
Great! Thanks. Operator we’ll take our next question.
We have a question from Wamsi Mohan from Bank of America. Please go ahead.
Yes, thank you. Adam, you noted willingness to take lower device gross margins to accelerated option of Platform+. You just added about 400K SmartCast account. Any sense for how much of an acceleration you can see with this initiative and how much will you flex this lever? It sounds like you're talking about maybe low single digit device gross margins, but why not push that even lower?
And then as a follow up I also were ask, it appears as though you're SmartCast hours grew slower than total VIZIO Hours. That's not been historically the case. What's driving that and do you think that that continues, that trend continues? Thank you.
Yeah look, what I'm excited about is that we are at a point now where we've proven over the last year that we can really monetize the platform. The team's done an extraordinary job of driving monetization and what that allows us to do is be a little bit more strategically flexible with where our profit comes and where our growth is coming from. And so as we think about that, and there’s opportunity in the market place to be aggressive on getting more units into homes, fore going some margin in exchange for account growth is now really viable, and so we're excited about what that looks like.
We're going to tiptoe into it and be careful. You know I don't know that we need to go if you're suggesting sort a loss leader type dynamic, I don't know if we have to go that far right now, but I think we are bringing the consumer a very compelling value proposition of great quality at a really amazing price. They are getting something that’s a razor thin margin to us, great products for them and then obviously as we bring value to them in terms of the content, the platform experience and obviously the partnerships we have now with the media companies and advertisers, it becomes a win-win across the border. So we think we can certainly separate ourselves from the pack in the marketplace and that should translate into active account growth.
In terms of SmartCast, the growth rate comparisons, you know I think that's really a function of the kind of odd comparisons we were looking to back to Q3 of last year when we were going through the early days the pandemic. It was a time when people were rushing to streaming, there wasn't a lot of new network content, there weren’t new live events and sports and we are seeing some normalization of that. It was good to see on a sequential basis, that its return to growth trajectory after dipping last quarter, but I think long term there's no doubt in my mind that the continued shift toward streaming, adopting of streaming is going to be really strong.
Within our own platform, even in the context of SmartCast hours, our WatchFree+ time spent is way up. And that's important, because those SmartCast hours, not every hour is created equally in terms of monetization. So it depends on where consumers are spending their time within that. I think you see it, even though the growth rate wasn't as strong on SmartCast hours versus VIZIO Hours, look at the modernization, look at the acceleration in ARPU, that's where its translating.
Thanks Wamsi. Operator, we'll take the next question.
Next we have a question from Nick Zangler from Stephens. Please go ahead.
Yeah. Hey guys, great results. With regard to expectations for shipments and new account additions in 4Q, can you just elaborate on the measures you’ve taken to get VIZIO Smart TV into the hands of retailers. It sounds like you're paying up for prioritize shipping. Does prioritized shipping give you prioritized delivery at ports, even when there is extreme congestion?
Look there is a number of dynamic that come throughout the supply chain and logistics process. On one hand the inbound freights are coming from our suppliers. We are partnered with many of the largest suppliers in this product in the world, and we use their scale and leverage and influence to make sure that things are prioritized. They certainly use their scale and capabilities on that front to benefit themselves as well, and so that partnership really sort of pays off when we go to squeezes like this.
When you get on land, then it becomes a very different dynamic, right. You are dealing with making decisions around rail versus truck versus warehousing. We work with many of our three PL partners to help them hire and get workers in to warehouses and truck drivers to try to mitigate some of the challenges that have emerged in the market place.
It’s still very challenging. I don't pretend that it's not. But we have certainly used our team and their expertise. Our groups been around for a long time. They have really great relationships and a lot of experience in this area, and so they've been able to get involved and mitigate these challenges as much as possible.
So you know I think we're in a better position than we would otherwise have been in. It wasn’t perfect; it hasn’t been perfect for anybody, so still room to improve and we are looking forward to some of these bottlenecks easing up with some time.
That's great. And then I’d love to just to get some general thoughts on all the incremental competition that’s come to, particularly in the last quarter really from some sizeable players.
You know VIZIO has held market share really across TV sales over the years. You know that’s even as – it’s Walmart’s on brand that’s seen a lot of success taking share. So just as more competitors come to market, maybe you could just frame up your specific value proposition for consumers relative to some of the new entrants that you are seeing. Thanks.
Yeah. We have this view in our revenue model which everybody envy and obviously the competitors are what we did in the last few years, and they are eagerly jumping to it. We’ve been doing this for many, many years and some of the big companies think the future for them to promote their own content is to have their own TV. And we’ll work on the challenge and we’ll be working very hard to keep on investing and keep on hiring some of the best talent in the world to help us navigate through this competition.
And I do see more competitors coming in, but we’ll have – you know being a company which competes with some of the biggest giants in this industry for many, many years, will work on their talents and will look forward to compete.
Great! Best of luck going forward. Thanks.
Thanks.
Thanks Nick. Operator we’ll take the next question.
We have a question from Vasily Karasyov from Cannonball Research. Please go ahead.
Thank you very much; a quick clarification. I think I understand that not every power is created equal in terms of monetization. So if you could explain in a little more detail what you meant. And then my question is about Platform+ revenue. If we look at the quarterly progression in this fiscal year, is that pretty much how you think the normalized seasonality will play out, and if not, how – what drivers would be, what would drive the difference between this year and future years. Thank you very much.
Sure, yeah, in terms of SmartCast hours what I trying to describe was that there are different monetization opportunities, depends on what content you are engaging with, right. So if you want to start at the highest level, WatchFree+ is our highest. We control all the add inventory in that. We monetize it, we control the full waterfall, we can do really interesting campaigns for ad buyers and so that's our kind of best monetization destination on the platform.
As you move over into other content offerings around AVOD services, there's a mix their of hybrid of how much inventory we have in any one of these deals, all the way to for example time spent in Netflix, which is not ad supported, obviously we're not going to monetize those hours and as you can imagine they are a pretty big hour contributor to the totals. YouTube you know as well. Times spent in YouTube, the time spent, it adds to our hours, but it doesn't – we're not monetizing that directly.
So it really matters to me where people are spending time, and that's why we are so focused our home screen, our searching and discovery, our platform, the first party data we have to drive people into the content where we have the best opportunity to monetize and also give them a great user experience. Content, we know they want to watch, they're interested in, they’ve shown that before, they have an affinity for it. Let’s make a great value proposition where we can drive them into that and increase economics.
So even if total hours were to stay flat, let's say hypothetically, but we drove an increased 10%, 20%, 30% of the time spent in WatchFree+, you are going to see that show up in our revenue.
And then in terms of the cadence, fair question, hard to say. I mean we are still – we are pretty new at this and far from mature. I know pretty well the mature cadence cycles of media companies and content consumption and we are still in building mode. So we might see different cadences, because of that newness. But generally speaking obviously there's more behavior in time spent in the fall around content, rolls into Q1. Summer tends to be a little bit lower consumption, but I think we are still in a place where we are growing through those normal mature cycles, because of just expansion in the platform.
Thank you very much.
You bet.
Operator we have time for one more question.
Thank you. We’ll take our last question from Tom Champion from Piper Sandler. Tom, your line is open.
Thanks very much, good afternoon. Curious if there's an update on the payments opportunity. I think we're looking for an announcement in the second half of the year. And then maybe for Adam, just a clarification on the 4Q EBITDA guide of $7 million to $12 million for 4Q. That's a little bit lower than what we're expecting, a little bit lower sequentially. Just curious if you can walk us through in broad strokes what might be driving that. Any comments would be helpful. Thank you.
Yes, so I can give an update on VIZIO home or our payment structure. We're currently on track. We recently released what we call our partner portal, which is the tools that we provide to the app partners, so that they can build and integrate the payment system into their apps. So we have content partners that are starting to work on that, we’ll continue to build, we’ll continue to add partners to that and we expected to roll out to consumers next year.
Yeah Tom, and then in terms of the EBITDA guidance, look what we want to do is make sure we reflect the commentary and expectation around device gross profit margin that flows through to that, as you could imagine given up those dollars, but for all those strategic reasons that we highlighted, I think it makes a ton of sense.
We also know we're investing in building out capabilities to fund future growth as well. So we're adding heads, we’ve hired over 270 people this year largely on that software development side, the engineering side. That’s going to help suite us and set us up for future growth. So it’s a combination of taking our SG&A expectations higher, while the device gross profit margin comes down a little bit, net-net all translated into a strong position for growth as we see a real option on the horizon here.
Thank you.
Okay. Thank you.
Thanks Tom, and thanks everyone for joining. This concludes today's call. Have a great evening!
Today’s call has now come to an end. Please disconnect your lines.