As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to the following terms have the respective meaning as defined below:

Ad-supported Video on Demand (AVOD): Over-the-Top video services supported by serving ads. These include free platforms like YouTube TV, Pluto TV or our WatchFree+ as well as those, like Hulu, that charge a subscription fee in addition to serving ads.

Automatic Content Recognition (ACR): Technology that tracks viewing data on connected TVs. Advertisers and content providers use this data, among other things, to measure viewership reach and ad effectiveness.

Connected TV: A television that is connected to the internet through built-in capabilities (i.e., a Smart TV) or through another device such as a Blu-ray player, game console, or set-top box (e.g., Apple TV, Google Chromecast or Roku).

Dynamic Ad Insertion (DAI): Technology that seamlessly replaces TV ads with targeted ads from the Smart TV in real time, across multiple inputs.

Linear TV: Live, scheduled television programming distributed through cable, satellite or broadcast (antennae).

Multichannel Video Programming Distributor (MVPD): A service provider that delivers multiple television channels over cable, satellite, or wireline or wireless networks (e.g., Comcast's Xfinity cable TV and DISH satellite TV).

Over-the-Top (OTT): Any app or website that bypasses MVPD distribution and provides streaming video content directly to viewers, over the internet (e.g., Disney+, Hulu, Netflix and YouTube TV).

Premium Video on Demand (PVOD): Similar to TVOD, but lets consumers access premium on-demand content at a higher price point. Examples include feature films made available alongside, or in place of, a traditional movie theater release.

SmartCast: VIZIO's proprietary Smart TV operating system. The software platform where consumers can access VIZIO's WatchFree+ as well as a wide array of third-party OTT apps (e.g. Amazon Prime Video, Apple TV+, Disney+, Hulu, Netflix, Paramount+, Peacock and YouTube TV).

Smart TV: A television with built-in internet capability. Often includes an operating system.

Subscription Video on Demand (SVOD): OTT services that generate revenue through selling subscriptions to consumers (e.g., Disney+ and Netflix).

Virtual Multichannel Video Programming Distributor (vMVPD): An MVPD that is delivered over the internet; interchangeable with "linear OTT" (e.g., Sling TV and YouTube TV).

•a broad range of high-performance Smart TVs that encompass a variety of price points, technologies, features and screen sizes, each designed to address specific consumer preferences;

•a portfolio of innovative sound bars that deliver immersive audio experiences; and

•a proprietary Smart TV operating system, SmartCast, which enhances the functionality and monetization opportunities of our devices.

Financial and operating results for the three months ended June 30, 2022 as compared to the corresponding period of last year included:

We offer a range of high-performance Smart TVs designed to address specific consumer preferences, as well as a portfolio of sound bars that deliver immersive audio experiences. We generate revenue from the shipment of these devices to retailers and distributors across the United States, as well as directly to consumers through our website, VIZIO.com.

Our award winning Smart TV operating system, SmartCast, delivers a vast amount of content and applications through an elegant and easy-to-use interface. SmartCast supports most leading streaming content apps such as Amazon Prime Video, Apple TV+, discovery+, Disney+, HBO Max, Hulu, Netflix, Paramount+, Peacock and YouTube TV, and hosts our ad-supported app, WatchFree+.

We monetize these capabilities through:

•Home screen: Ad placements on our SmartCast home screen by streaming services, studios and other consumer brands

•Inscape: Fees from measurement services, ad tech firms, ad agencies and networks to license data generated from our Inscape technology to measure viewership trends and advertising performance

Content distribution, transactions and promotion

•Branded buttons on remote controls: Partners who want to place a button for their service on our VIZIO remote controls so that consumers can have quick access to their service

•SVOD and vMVPD: Revenue shared by SVOD and vMVPD services on new user subscriptions activated or reactivated through our platform

•PVOD and TVOD: Revenue shared by PVOD and TVOD services for purchases initiated on our platform

As the Smart TV evolves to take on a more prominent role in the connected home, we believe new monetization opportunities will develop. For example, we expect:

•A growing user base will lead to higher advertising revenue, especially as our user base increasingly includes audiences no longer reachable through linear TV

•The vast amount of data obtained through our platform will improve the effectiveness of advertisement, generating higher returns for advertisers and potentially increasing ad rates for us

•That data will be used to create more personalized content recommendations and drive higher user engagement

Our sales and marketing approach

In addition to our results determined in accordance with U.S. generally accepted accounting principles (GAAP) we believe that Adjusted EBITDA, a non-GAAP financial measure, is useful in evaluating our business.

•We actively diversify our supply chain in order to mitigate potential risks.

Our Device business encompasses a variety of Smart TVs and sound bars with different price points and features. Changes to our product mix may cause fluctuations in our gross profit as they reflect a range of margin profiles.

Ability to grow SmartCast Active Accounts

Ability to increase engagement and monetize SmartCast Active Accounts

Demand for a more connected home

Ability to continue to invest

Components of Our Results of Operations and Financial Condition

Device cost of goods sold

Platform+ cost of goods sold

We classify our operating expenses into four categories:

Provision for (benefit from) income taxes

Should actual events or results differ from our current expectations, charges or credits to our provision for (benefit from) income taxes may become necessary.

The following table sets forth the components of our condensed consolidated statements of operations for each of the periods presented:

Cost of goods sold, gross profit and gross margin

Device cost of goods sold, Device gross profit, and Device gross margin

Platform+ cost of goods sold, Platform+ gross profit, and Platform+ gross margin

Research and development expenses increased $2.1 million, or 29% for the three months ended June 30, 2022, as compared to the same period in 2021, and increased $1.5 million, or 9% for the six months ended June 30, 2022, as compared to the same period in 2021, due to higher engineering personnel costs.

Provision for (benefit from) income taxes

The following table sets forth the major components of our condensed consolidated statements of cash flows data for the periods presented:

Cash flows from operating activities

Cash flows from investing activities

Cash flows from financing activities

royalty payments to be made for historical and/or prospective sales of our products. Certain of these settlements have included cross-licenses, covenants not to sue, and litigation holds.

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