Vizio Holding Corp (VZIO) 2022 Q4 法說會逐字稿

Good afternoon, and welcome to VIZIO's Q4 2022 Earnings Call. I'm 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 in 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, including certain statements about our expected first 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 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 was 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. 2022 marked our 20 anniversary for the company that has always been focused on delivering great products and experiences at affordable prices. There's no doubt that this past year presented numerous challenges, but despite them, our team did a great job executing on our dual revenue model.

In just it's third year since its launch, our Platform+ business grew revenue by 55% and gross profit by 41% in 2022. The growth and now greater scale we have achieved in our Platform+ business provides a new level of financial strength and strategic flexibility. This combines with our focus on cost management delivered 15% growth in adjusted EBITDA in the fourth quarter, further demonstrating the beneficial transformation in our business model.

We also continue to maintain a strong and heavy liquid balance sheet with no debt, which remains an important advantage in a highly competitive environment. As we continue to invest in features and innovation that would redefine the smart TV will work do so, while remaining focused and disciplined on overhead and resource management.

Today, I'm also pleased to share that VIZIO was recently honored with an Emmy Award for Technology and Engineering around our innovative use of ACR technology. It is extremely rewarding to see our engineering excellence and creativity recognized by dozens of industries, experts and peers. It is clear that our winning spirit is changing the TV industry and continues to benefit our partners across advertising, measurement and content, as well as our millions of users who turn to VIZIO every day for a better TV experience.

When the customer brings home a VIZIO TV, they're bringing home the combined power of hardware and software. We've been operating a business that's built on the combined power and the impact it has on VIZIO users. It is clear others in the marketplace have recognized this. The ability to seamlessly integrate new features and functionalities across our fleet is key to a great consumer experience. This past year, we also dramatically enhanced the user experience and expanded our content offering. Building on the successful growth of our WatchFree+ app.

We unveiled an upgraded design and improved user interface. The latest update brings a new look and feel, Intuitive Electronic Programming Guide, faster and easier navigation and personalization features as well. With all of these new enhancements, there is no surprise that WatchFree+ remains the #2 most-watched free ad-supported app on our platform. In addition to some of these new enhancements, we expanded our building streaming apps from partners like Starz, AMC+, FOX Sports, TikTok, Sling, Amazon Music and many more.

During the fourth quarter, we grew our SmartCast active account base by 15% to over 17 million, and these users remain heavily engaged with time spent on our platform, growing 24% year-over-year. With such a seamless out of the box experience, it is no surprise that consumers spend most of their time on our TVs, streaming our fast content offering.

With more user engagement and greater scale, we are in a strong position to support our advertising partners with more efficient and measurable marketing experience. Our advertiser relationships continue to expand as brands recognize the value of direct-to-device with our own inventory and ACR data give them on-screen validations and proof-of-campaign outcomes.

During the quarter, we expanded our advertising client relationship with almost 400 advertising partners across verticals like automotive, media entertainment, CPG, quick service restaurants and retail. Our advertising business is growing rapidly, with revenue up 55% in 2022. We also recently announced that we concluded our 2023 upfront negotiations with more than $200 million in direct advertising commitments from agency holding companies.

Turning to our Device segment. 2022 was a challenging year on our fund, but our team was well ahead of the curve. Our team navigated a difficult environment that was supply and then demand constraint. But despite all that, we continue to deliver award-winning product to the market. Our passion for innovation that supported on the hardware side with our new TV collections being recognized with16 editorial awards in 2022.

More recently, we were named Wirecutter's Budget Pick for Best LED TV for our M-Series Quantum X Smart TV. Incredible value also trickles down to our Dolby Atmos products. And we were awarded the Best Home Theater Sound Bar of the Year for the M-Series Elevate. Thanks to the success of our dual business model, we had the opportunity to continue impacting in innovation to elevate our award winning devices even further.

I'm very excited about what the future holds for us. And with a strong dedicated and disciplined team that is focused on innovating for the future to create a better consumer experience, there will be lot more to share in 2023. The overall business environment remains dynamic, but as always, we are focused on what we can control. And while advertising spending growth started strong in 2022, it was a softer end market to close the year. But we are cautiously optimistic for a stronger 2023. With the right team in place, we know we are in a great position to reap the benefits of operating a powerful dual business model as market conditions improve.

With that, I will now turn the call over to Adam to review our fourth quarter results in more detail.

Thanks, William. Before opening the call to questions, I'll take you through our fourth quarter results and discuss our outlook for Q1. Starting with the fourth quarter, total company revenue came in at $533 million. Breaking this down into our segments. Total Platform+ revenue grew 30% to a new quarterly record of $137 million. This represented 26% of total company revenue in the quarter, up from 17% a year ago.

Growth in Platform+ revenue was driven by advertising, which was 25% to $103 million. This marks our first single quarter where advertising revenue surpassed $100 million, a great milestone for the team. Within our advertising business, we continue to expand our direct ad client relationship. Over the past year, we have expanded the number of brands we have worked with by 66% to over 1,400.

Advertisers across categories continue to place value on our premium streaming ad inventory and cross-platform offerings. In addition, the number of brands spending in our managed services offering, which provides an opportunity to access our real-time ACR targeting and analytics suite grew by 37%. The tools we provide advertisers are well recognized. From our owned and operated inventory to our unique data targeting and measurement capabilities. These assets create a great opportunity to gain wallet share for VIZIO amongst top advertisers investment plans.

Overall, we are highly encouraged by the 25% growth in our advertising revenue during the fourth quarter, despite the highly publicized downturn in the ad market late in the quarter, which led to revenue coming in just under our expected range. Our advertising growth rate relative to many of our peers showed tremendous strength in a tough environment.

Non-advertising revenue grew 46% to $33 million. Within our non-advertising revenue, data licensing was again the largest contributor to growth. With additional strength from healthy demand for brand placement on our remote control buttons, data licensing was up 55% year-over-year.

Our currency-grade viewership data is highly valuable in the marketplace and relied on by measurement companies, agencies and networks alike. While we anticipate the demand for this valuable data will drive continued growth, we expect the growth rate to begin to moderate in Q1, as we start to lap the step-up from the Nielsen deal which commenced around this time last year.

Turning to our device segment. Total revenue was $397 million. The year-over-year decline in device revenue was due to the combination of lower average selling price on more aggressive promotion campaigns than a year ago and fewer smart TV shipments. TV unit sell-through volumes grew year-over-year as consumers responded favorably to the promotion offers.

As our mix of business continues to shift toward a larger contribution from our higher margin Platform+ business, total company gross profit grew 11% for the quarter to $86 million. Platform+ gross profit was a record $83 million, up 23% over the year ago period, representing around 97% of the total company's gross profit. This too came in just under our expected range for the quarter as the high margin advertising revenues slowed late in the quarter. Platform+ gross profit margin was still a solid 61%.

Total company adjusted EBITDA for the quarter was $20 million, up 15% over the year ago period. As we stated previously, we remain vigilant in managing our SG&A expenses, while continuing to invest in new features and capabilities. We plan to remain focused on operational efficiencies and expense management to allow us to reinvest back into the business to support competitiveness and drive future growth opportunities.

Now turning to our key performance metrics. As William mentioned, our Q4 results highlight the growing success of our efforts to drive overall monetization across the platform. SmartCast ARPU grew to a record $20.30, up 31% over the year ago period. Total time spent streaming also outpaced all other time spent by our users as measured by 24% increase in SmartCast hours, against a 13% increase in total VIZIO hours.

User adoption of streaming on our platform continued its upward trajectory demonstrated by further growth in streaming time spent per active account. SmartCast active accounts grew by almost 800, 000 and 2.3 million year-over-year to a new record 17.4 million.

So with that, let me now turn to what we expect for the first quarter. We are encouraged by the resurgence in advertising activity thus far in the quarter, particularly with respect to demand for video inventory. In this area, key categories for us include auto, insurance, pharma and telco, which are all showing a pickup in activity so far in the first quarter.

We do expect the media and entertainment category to lag as the industry works through their own priorities. That said, our data continues to support a compelling argument for advertising on our home screen as it is a highly visible and engaging placement right in the living room where intent to view could be higher.

On device, we expect the TV market to remain highly competitive. Our first-party viewership data informs our pricing strategies and we will continue to remain aggressive and seek to gain share particularly on units that support our business model best.

For Q1, we expect Platform+ revenue to come in between 114 and $119 million, representing 14% growth at the midpoint. Keep in mind that within Platform+ revenue, we are expecting video advertising to outpace home screen, and as I mentioned, we will begin to lap last year's data licensing deal with Nielsen, so the non-advertising growth rate should start to moderate from last year's accelerated pace.

In addition, we are making investments in critical ad infrastructure to support our platform+ business and AI solutions to create efficiencies in engineering, support and logistics. We expect Platform+ gross profit of between 66 and $70 million for the quarter. And finally, we expect total company adjusted EBITDA in the range of flat to positive $5 million.

In closing, advertising spending and user adoption of connected TV continues to be where the growth is across the industry. We know smart TV households continue to expand. Cord cutting is accelerating and the age of AVOD is here. VIZIO was incredibly well aligned to the benefit from these tailwinds. Since the launch of our Platform+ business only three years ago, we have successfully increased our active user base by 2.3x and grown ARPU by almost 4x. Looking forward, we now have greater scale and a stronger presence in the marketplace which puts us in a great position to continue to execute on our strategy and we are excited about the opportunities that lie ahead.

With that, let's open up the call to questions. Operator?

(Operator Instructions) Our first question for today comes from Laura Martin of Needham.

My first question is for William around competitive development. So Roku has announced it's going to do an integrated operating system and TV, so we should take a bit re-lap on that, as you're right about that. But my question is, as an analyst is, does that mean that over the next two years, they, in theory, catch up with you with its integrated TV and hardware, that this becomes a price war because the only way to compete is then on price. And staying with competition, Amazon, Google and Roku all now have home devices as well as on the smart TVs where they own the hardware and software. So my question is, are you going to -- do you have an update us in a while and what's the in-homes device strategy is? And should we expect to see costs -- our expenses invested in home devices in 2023?

Laura, well, we've been doing this well in the last 20 years, so having December competition is really nothing new to us. Again, we've built a great deal of business model, which is I think everybody's envy. And -- but I do see the competition to be pretty strong in the next few years having the new players such as Roku coming in to compete in the device space directly. But we have experience and we have the knowledge and we'll be ready. And I think the competitors such as the new entry device maker will have a lot to learn in the next few years. And -- but we're ready to compete.

And as far as your second question on connected home, I think with the macroeconomy situation, I don't think that's for our interest to spend a lot of money on connected home as of now. And I do believe the money will be spent more wisely, just on our TV. I think we had lot more room to grow, a lot more innovation we can put on the TV and we really don't need to build our life out to control our life at home. So we're pretty excited with our current opportunities. So as of now, we do not have connected home strategy at the time.

And then my follow-up question is for Michael. You guys have continued to really do a great job of adding new advertisers last quarter and this quarter. My question is, when you -- do you break the new category and then a lot of guys follow you in? Is there any pattern recognition we can see in the type of new advertisers you have adding over the last six months?

Well, I think, look, coming out of Q4 there was definitely some softness in the ad market. I think we saw it, especially in December. But as you pointed out, in the face of that softness, we were able to add once again, I believe, a 130 new advertisers to the platform and that's helped us push to grow platform revenue 30% on the quarter year-over-year finish out 55% up for the full year. So positive trends there.

In terms of where we're seeing the growth in categories, I think what was exciting for us is, we're starting to significantly grow other categories outside of media and entertainment like spend from CPG, QSR, pharma, all those categories were up a 100% year-over-year -- quarter-over-quarter on the year. So couple that, with the significant upfront commitments we have, while there is softness in Q1 and I think it was mentioned we're cautiously optimistic about the Q1 rebound we are seeing, I think we're well positioned for continued growth and continued expansion of those categories specifically.

Our next question comes from Tom Champion of Piper Sandler.

This is Jim on for Tom. I guess first on advertising, is there anything to call out from sort of the off platform component that could be having an impact? And second, I guess, are you making any changes on how you run the business in a more growth constrained environment?

Yes, I think on the off platform question, I'll take that. Yes. We see continued growth from Household Connect. I think today, it is the fastest growing ad vertical we have and as a reminder, Household Connect is our audience extension product that enables us to recognize viewership data or what people are watching on the screen and target them inside the home and outside the home and other devices, whether that be mobile, desktop, tablet.

And for us, it's been a great product for us, it's helped us expand the TAM off platform, it has helped us expand or deliver incremental reach for advertisers, allows us to tap into some new budgets. And we're actually continuing to add partnerships to build more scale there. So, we recently launched a partnership with Tapad to drive additional capabilities as well. So while it is the fastest growing category, it's still coming off a smaller base. So it's an important component for us for those reasons I mentioned, but video will still be the largest acceleration for us in 2023 specifically within WatchFree+.

Yes, Jim, this is Adam. On your second question, if I understood it correctly, just thinking about the macro environment, you're phrasing it as a growth constrained environment. I think what we're doing from a management standpoint is really focusing, as I mentioned on controlling what we can control, which is principally around our costs. We're really looking at efficiency, we're looking at headcount growth. As you know, over the last couple of years, we've been in a pretty rapid expansion mode. We really increased the size of our ad sales team, our ad tech capabilities, our engineering resources and that was an important investment to sort of get us to where we are today and build up to the scale that we've now created.

And so from here forward, we are going to be a bit more cautious about growth in expenses. We're looking at headcount, very, very carefully. But we also want to continue to invest in the features and capabilities that are going to bring that future growth. So in this environment, every dollar we can save allows us to put that back into the business to be competitive on the device side, to attracting team the right kind of talent, and also set us up to take advantage of the rebound when the macro environment strengthens.

But what we want to do is, basically get the company in a position to really be ready to drive significant growth with a stronger tailwind. But even given that as you heard on this call here today, even in a relatively growth constrained environment, our ad business grew 25% in the fourth quarter, 55% for the year, really strong growth because we are in the middle of the rapidly growing part of the market and we're continuing to take share within that rapidly growing part of the market. So we're just going to continue to set ourselves up for future success.

Our next question comes from Cory Carpenter of JPMorgan.

Maybe Adam, one for you, and one for William. Just on EBITDA sticking to that. Last quarter, I think 1Q was the lowest profit quarter of the year. Just curious maybe any color you can give us on how you expect that expenses to progress through the year. Is it reasonable to think 1Q would be the ballpoint again in 2023? And then for William, just hoping you could talk a bit about your decision earlier this week to expand the Board.

Yes. Cory, yes. So typically given the cadence of the business and seasonality Q1 does tend to be a lower period, obviously from the -- on the device side we're coming off of the holidays, which creates a lot of demand and then into the Q1 where there is some opportunities like the Super Bowl, for example, but we also are mindful of the environment and the consumer demand level. So as we said before, we want to be competitive, we're going to be aggressive on pricing. Those strategies are going to be informed by the data that we have around usage, we understand and look at our pricing strategies from a customer lifetime value standpoint. So that all gets factored into our considerations. We're also mindful of the mixed signals that are going on in the macroeconomic environment.

On the advertising side, as Mike said, January was a little bit slow, February has picked up a lot. Again, cautiously optimistic as the term, we're certainly hopeful that those high margin dollars come in, but given the mixed signals out there, I think it's prudent to be conservative on that front.

So I think that sets us up. And then we'll see how the year progresses, what kind of strategy, we needed to deploy to move product on the device side? Because remember, as we sell through units into homes, that's the foundation for us to then grow the flywheel against our Platform business, right? And so being there, being competitive, gaining homes, that's really core to the long-term success.

This is William. So yes, I couldn't be more excited that Mike Mohan joined us on our Board. He brought to us years and years of experience in the consumer electronics space, retail, hardware, software, logistics, supply chain. I don't think we can find a better candidate to help us to keep on -- to help us, guide us, to grow our business and also he has a great experience beyond multiple different boards and he can help us -- the Board such as Bloomin' Brands, Petco, Jackson Family Winery, I think can really help us to guide us to the next stage.

Our next question comes from Ben Swinburne from Morgan Stanley.

Two questions, maybe first on media and entertainment. I think, Adam, you called out weakness there, which I think we're all aware of the drivers of that. Can you help us think about the exposure between home screen and video advertising? It sounds like that's a bigger factor, and home screen just wanted to hear you sort of confirm that and walk us through how we should think about that part of the business as we move through '23, and where you think that might be a point of pressure and where it might actually start to alleviate itself?

And then more on the television and smart TV side, you guys have a sense of whether you gained share last year in sort of North American marketplace, and do you expect the overall market to grow in '23? I know you're not typically forecasting for the industry, but given the pressures we've seen in the last couple of years, would appreciate your perspective.

Yes. Ben. So as you can imagine, the home screen is very prone for the media and entertainment category. Obviously, highlighting not only content, but also the services themselves. It's also a great place where we can run promotions with various partners. We've done deals with virtual MVPDs for example or Apple TV service or various others on that home screen. So I think there is a lot of reasons for those partners to understand the power of our home screen, whether they're trying to attract or retain viewers, as well as potential new subscribers to their services.

And so, I think that it is a high margin revenue source for us. So if there is a mix shift there, it's something just to consider as we go through the dynamic. Video is going to continue to outpace the growth of home screen. We certainly been planning for that and that is factored into our considerations and forecasts. But it's a very effective destination right there in the home, right where, as I mentioned, where viewers are intending to view, it can be a better place for a content company to promote themselves. Mike, do you want anything to the dynamics of that.

Yes. I think when we think about the home screen as well, it's not just limited to media and entertainment. And I think that's an important growth opportunity for us, especially this year. Obviously, home screen is an incredibly valuable tool for us for monetization. It's the first thing, consumers see when they turn on the TV. I'd continue to say we've got the best UI for search and discovery in the marketplace. But those huge styles, right, the great creative or ability to leverage data creates other opportunities. So for us, we've seen an expansion in what we consider non-endemic or non-media and entertainment sponsorships.

I think in Q4, we were up 37% year-over-year bringing partners like (inaudible) to sponsor our Halloween collection or McDonald's in to sponsor our football kickoff collection. We're also able to touch kind of outside of what we would consider the core kind of app partnerships. We've expanded our relationships with studios right, working closely with them, in particular to boost kind of the impact of box office premieres. And then we see a lot of opportunities in leveraging the data we have to track gameplay and expand into the gaming category tied into our home screen.

So as Adam pointed out, video will continue to grow faster than home screen, but from a home screen standpoint, there continues to be good opportunities for us to expand our customer base outside of core media and entertainment.

And then on the market share point, yes, we don't -- we're not predicting necessarily the overall market, but we do look at some third-party research out there. I've seen a range of kind of what call sort of flattish for the year. Remember we're coming off of still the kind of post-COVID period, where there was a big demand that surge and then there were supply chain problems, and then now, we were facing inflation and constraints on consumer discretionary spending.

So we understand that and we're going to be competitive in that marketplace. We think we've got a great value proposition to consumers. We're bringing out new features adding more content to the platform making it just a better and better overall experience for our consumers. And we think we've got a great voice in the market on that.

And so, part of it will be pricing. We're going to have strategic pricing plans in the market as we did last year. As you may recall, last year we were able to go out and stimulate a lot of reaction to our TVs with our 50-inch and 40-inch. But we have the number one and number two selling TVs in the market through most of last year. So we'll look for opportunities to stimulate demand and play in that marketplace, but overall it's about just increasing our installed base, increasing our active account base and driving ARPU after that.

Our next question comes from Steve Cahall from Wells Fargo.

Maybe first, just wondering what kind of growth you're expecting this year in SmartCast hours. It's remain actually pretty robust in terms of the growth rate year-on-year, but I know you've talked over the last few quarters about trying to introduce more products that are designed to get to more kind of the primary TV in the house. So just wondering if you're seeing any of that benefit mix shift tailwind yet or if it's a little bit too early?

And then just as a follow-up on AVOD services like Netflix and Disney+ and HBO, as they really pushing more into AVOD and I think that your demographic overlap is maybe more to the AVOD-centric consumer. Is there an opportunity there, that you've been able to tap into to be a marketing partner with any of those services and is that something that could sort of supports your home screen revenue as we kind of go through the softer macro patch?

Sure. I'll -- maybe I'll tackle the first one and then hand it over to Mike. To your point about growth, we really focused on it from a standpoint of engagement, right. We're focused on bringing in more and more content that suits what our viewers are looking for. That's what I want the places where our ACR data is so valuable, right, it informs us about what kind of content our users are looking for one, what they already consumed. And so that helps us as we bring new channels into WatchFree+, as we partner with additional ad partners on the platform and bring that in, continuing to feed that desire for content is really important.

As we look at SmartCast hours per active account, it was up 7% quarter year-over-year in the fourth quarter, which is really good, but it's also shows that that's the third consecutive quarter of growth in hours per active account since we had to kind of lap against the big surgeons from the COVID dynamics. So we're encouraged that our viewers are understanding the value prop are bringing, they're understanding more and more about the content that's available, they're engaging in that content.

Obviously the macro elements of cord cutting has certainly play right into our favor on this topic. And as people begin to stream and have a good experience streaming, they continue to stream more and more, and we're starting to see that really show up in our data. And so, everything we do from a user experience standpoint is to help drive engagement, increase the probability of someone spend a little more time ideally on ad supported concept that we control the inventory and that helps us drive that monetization. So more to come there, but we continue to focus on and across every corner of the company. Mike?

Yes. Steve, I'll take the second. Look, I think from a marketing partnership standpoint, we got great relationships with all the partnerships, you mentioned, right. We're one of the largest distribution players in this space, I think you just referenced, we continue to drive an increase in significant time spent in engagement. And we have a customer that has an affinity for ad supported content. So we have been and we'll, I expect to continue to be and grow more the marketing partnerships we have with these partners as they dive into -- further into AVOD. I think in general, too, it's good, really good for the space. I mean these guys in the AVOD marketplace. I think we've talked about it in the past, but there still a huge gap between time spent on smart TVs, time spent streaming versus linear dollars or dollars pumping in, and I think those linear dollars as they shift into the connected TV space, I think more of these players with premium content will help drive more and more of that shift out of linear into connected TV, so.

Our next question comes from Wamsi Mohan from Bank of America.

It's Ruplu filling in for Wamsi today. You had a good upfront commitments last year for the 2023 season more than $200 million. So far have you seen any push outs or cancellations in those upfront commitments? And then as you head into the current season, the 2024 upfront, do you think there'll be a greater percent of advertising dollars moving towards the upfront versus the scatter market? And is your strategy changing any -- as you head into this year's upfront?

Also, what's with the current upfront. No, we're still progressing well as you mentioned we closed over $200 million in upfront commitments last year. We're very happy with the progression that we've had and I think what we're seeing is it helped us as we mentioned, expand into a lot of new verticals or a lot of new categories. So I mentioned before that we grew CPG, QSR pharma or were up over 100% on the quarter year-over-year, right. A lot of that is driven based on upfront commitments that we worked with some of those partners on.

In terms of our strategy for this year, we haven't announced the date yet, but we will be participating once again in the new fronts. And in terms of our focus, I think we're positioned exceptionally well to grow our upfront commitments once again this year. I think there will be more dollars poured into the upfront for connected television. And I think with our distribution continuing to grow as one of the largest players in the space, I think over 17 million now with the time spent and engagement more impression opportunities, as well as with all the core products, we have. So WatchFree+, our first-party data that we have, especially our viewing data as well as the home screen. I think we're well positioned to capture the increase in dollars this next year.

If I can ask a question on EBITDA. I think your guidance for 1Q is just slightly lower than the Street. Any thoughts on what are the main areas of spend for this year? And when you think about OpEx control versus the need to spend on your ad tech platform as well as the fact that you have some more competition on the TV space, any early thoughts on what EBITDA can be for the full year or maybe on a year-over-year comparison to 2022? Any thoughts on annual EBITDA?

Yes. As you know, we don't guide to full year EBITDA at this time, but I can give you a little sense of kind of some of the factors to think about as the year will progress. And I think also -- note that in the first quarter, I think if you look at the guidance which we do give around Platform+ revenue, and Platform+ gross profit dollars, you see the margin coming down a little bit there. Part of that has to do with actually a step-up on some cloud infrastructure that we need to make an investment in to support the ongoing growth of the business.

I believe that we're going to scale against that step-up in cost as the year progresses. So that will probably help ease the headwind of that a bit as the year progresses. Other factors will be mix of advertising business on the Platform+ side as we talked about, video is going to outpace growth in the home screen that is a little bit different margin profile than home screen as we've mentioned before. So that's a consideration in it.

And then the question will be, how aggressive are we going to be and do we need to be on moving device, smart TVs in the marketplace. We know it's going to be competitive. We're planning for it to be competitive, but we're also looking for efficiencies in the operations overall to help us fund that competitiveness. So lots of puts and takes in there, but we'll see how the year progresses. And we're going to do what's physically smart for our business, and obviously as I said before, set us up for significant growth as the macro environment improves.

Our next question comes from Nick Zangler of Stephens.

Wondering if you could talk about the potential to drive further engagement on WatchFree+ and maybe particularly in light of streaming services like HBO Max making their broader library of content available to some of the fast channels out there. I would imagine for those looking to grow distribution, WatchFree+ is an ideal destination, but just your thoughts on your ability to form new partnerships to grow WatchFree+.

Yes. On the first side, look from a home -- WatchFree+ engagement standpoint, our home screen is the best tool we have available to drive viewership in the WatchFree+. Not only have we grown our distribution and grown the time spent. But it's the first thing you see when you turn your television on, right. That's a hugely valuable tool for us to drive promotion. In Q4 alone, we saw a 72% growth in search and discovery during the holiday season. So very impactful and we'll continue to leverage that to promote the content offerings we have available to our consumers.

On top of that we have the ability to leverage our viewing data, right, understanding what type of content household views and watches that allows us to source and promote specific types of content they may want to watch within the WatchFree+ environment, right. And that's a big advantage for us owning the platform, and I would say, a key part to us becoming the #2 free ad-supported app on our platform.

In terms of your second question around -- look, we've got great relationships with all the big content players in the space. We are in constant discussions with them around a lot of different opportunities. I think for us, we're always looking at what the best use of capital is, and I think as those relationships continue to expand, we'll continue to find opportunities to bring in more -- bigger partnerships and more of that type of content.

I was just going to add to that, as we think about, we talked a lot about WatchFree+ there, but also just the broader App launches. We launched 17 additional apps to the platform in the fourth quarter alone, ranging from FOX Sports to AMC+ to even at best of Roblox which I know my kids are watching a lot of. So that is the whole point bringing more content, promoting that content. It gives those app owners an opportunity to then promote themselves on our platform in the home screen all to drive engagement and audience origination for themselves, and then we have opportunity to monetize them. And if -- most, if not, all those cases add available inventory in those apps. So it really creates a great monetization machine.

Got it. And then just one more here. On the quarter, you guys had active accounts with a pretty strong beat relative to Street expectation, shipments also a beat. Is this reflective of the aggressive pricing strategy that you guys have employed over the last few quarters, this very recent success? And if so, just what does it say about your approach as we continue to push forward particularly as we think about our models. Should we assume that you guys are going to remain pretty aggressive in the current macro.

Yes, look, I think there's some dynamics around shipments versus sell-through as well. And as we mentioned on the call sell-through actually grew nicely year-over-year. Sell-through is really what's going to then trigger the growth of an active account, once it gets in the home and it's inactivated television. So there's an ebb and flow that happens with inventory levels in the marketplace. Shipments will then backfill strong sell-through periods and so there is some of that dynamic, it goes on.

But overall, in normalized times, we think that those will be much more similar to each other, and so that kind of up and down we've seen over the last, frankly, couple of years. It's been a little bit of noise because of the environment we've been in. To your question, yes, you should assume that we will continue to be aggressive. Consumers have responded very well to our pricing strategy that we've rolled out. Even this last year, we will look to do more of that.

We don't need to do it across the entire fleet per se. We can be more surgical than that and be a little bit more strategic about what units we want to be aggressive on and where we think we have an opportunity to differentiate ourselves versus some of our peers and our peers respective relative pricing. We also understand engagement levels, we understand usage trends around different screen sizes. So all of that comes into play as we think about what the right strategy is. But it's really about moving more units into homes and driving the business.

Our next question comes from Vasily Karasyov of Cannonball Research.

My question is for Michael. Michael about M&A, so not only for you, but also for other platforms and peers of yours, they are growth decelerated significantly, and it would seem that the right inference there would be the big monetization games have been picked away in the previous couple of years. And I was wondering what your view is, a, what could drive reacceleration of that revenue, because the real estate is obviously very valuable, right, there are -- the apps need to promote the -- promote themselves and so on.

But at the same time we hear from the companies that on the apps that they are rationalizing their costs and so on. So I wonder a, what kind of conversations you're having with M&A advertisers about that? And what kind of potential pricing models or any kind of changes that you think could lead to reacceleration in that revenue stream growth.

Yes. Look, I think, just to clarify from an M&A perspective in Q4, we actually did grow quarter-over-quarter -- year-over-year and quarter-over-quarter in the business. It just wasn't growing as fast as it had historically been. So we still have very strong relationships and we see lots of opportunities for us to continue to build on those right, continue to offer them products beyond the home screen so continue to invest in growing the relationship on the video side as well as through our Household Connect offering. So, we'll continue to build and strengthen our partnerships there. But with that softness, again, as I mentioned, we're expanding from a home screen standpoint. We're expanding into other categories that I think will help offset any weakness that M&A could bring this next year.

So we're looking at, continued growth in sponsorships. So as I mentioned we're continuing to build on that bringing advertisers from other categories, whether it'd be CPG Insurance, QSR, et cetera on to the home screen, continuing to enhance our relationships with the studios as box office premiers continue to become more important and expanding into new categories that also factor into our televisions. So again, continuing to look at solutions that invest will bring gaming partners on to the platform.

That said, we're also looking to get more innovative with them around ad products. So specific to media and entertainment, we have leveraged our Jump View product, which we've spoken about in the past, which enables advertisers or content partners to jump directly from a linear TV environment directly into their app, those new ad units help us expand our deal sizes. We're also looking at new pricing models and working with them on performance pricing models that will help us I think continue kind of accelerate growth -- that could help us continue to accelerate growth and potentially bring even new app partners that we have onto the platform. So, while there is softness in this space, I will say, I believe we're still doing a good job with M&A and lots more opportunities on the home screen.

Our final question for today comes Scott Searle from ROTH.

Just to piggyback on a couple of the earlier comments, VIZIO hours I think were up overall 13% year-over-year, SmartCast hours were up 23%, 24%, and ARPU growth is up north of 30% and that's been coming down. I'm wondering if you could talk a little bit in terms of how we should think about SmartCast, ARPU growth going forward, given that you've got 20% type growth in SmartCast hours. How much incremental monetization can you see from engagement home screen and otherwise? How we should be thinking about that in '23 and beyond? And then I have a follow-up.

Yes. So there's significant headroom to continue to grow ARPU not only from a macro when you look at some of the competitors out in the marketplace and where their monetization is versus where we are, we've made tremendous strides, but a lot of room to go there. It shows that the CTV marketplace supports that type of monetization of a user base. But for us specifically, we're still in the learning curve phase of bringing content on to the platform, driving consumers into content particularly around our WatchFree, just this last year.

Last fall, we upgraded our kind of user interface, the EPG around WatchFree place to make -- WatchFree+ to make it more user friendly, quicker, more agile and that will drive -- reduces friction points, right. So better experience, people spend incrementally more time there. So as we think about the experience, the navigation, functionality, the content that's in it continuing to add more and more channels and then use the viewership data to then drive awareness and promote that content on our home screen, it has the potential to increase number of hours spent in ad supported content where we're going to monetize the best and most effectively.

And so that's the headroom that we have there, we think we have a lot of room to keep pushing that and we're focused on it across the board.

Okay. And if I could just follow-up, I'm not sure if I heard on the call. Any updates on e-wallet. I was wondering if you could give us your thoughts there in terms of timeline monetization opportunity.

Yes, that's kind of became rebranded VIZIO accounts, which is sort of our payment platform on the system. We've launched that, I guess, awhile back now maybe eight months or so, six months or so ago. It's really -- it's growing, people starting to become aware of it. We're promoting it on device, so that people can understand that. What's also important about having that capability is it's allowed us to bring additional partners on the platform that we didn't previously have because they want us to handle the billing, the financial transaction component.

One example of that would be Starz, premium cable network out there in the marketplace on some of our competitors' platforms, but we hadn't launch with them yet, because they wanted us to have the billing capability. That's great -- having that foundational opportunity is going to be important to bring additional partners on the platform.

And then as we think about linking that to other user engagement, other features and capabilities, it becomes sort of the cornerstone of our relationship and that direct relationship with our consumers. So it's going to continue to grow, I think we're excited about where it is, I'm glad that it's functioning well, we got to help promote it drive more awareness and it just starts to feed on itself from there.

Thanks, Scott, and thanks everyone for joining. This concludes today's call. Have a great evening.

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