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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 001-40683
SNAP ONE HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
1800 Continental Boulevard, Suite 200
Charlotte, North Carolina
(Address of principal executive offices)
82-1952221
(I.R.S. Employer Identification No.)

28273
(Zip Code)
(704) 927-7620
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $.01 per shareSNPOThe Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  ☒   No  ☐ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
   ☐
Non-accelerated filer  
Smaller reporting company
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes        No  ☒

The registrant had outstanding 75,940,774 shares of common stock as of November 7, 2022.



Table of Contents

Page No.

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Unless otherwise indicated, references to the “Company,” “Snap One,” “we,” “us,” and “our” in this report refer to Snap One Holdings Corp. and its consolidated subsidiaries. References to the “Former Parent Entity” means Crackle Holdings, L.P., the entity that, until the completion of our initial public offering, held all of our outstanding equity.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements made in this report that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements, and should be evaluated as such. The following list is not intended to be an exhaustive list of all our forward-looking statements. Forward-looking statements include information concerning possible or assumed future results of operations, including statements relating to individual components thereof, and descriptions of our business plan, strategies, environment and the impact of COVID-19. These statements often include words such as “anticipate,” “expect,” “suggest,” “plan,” “believe,” “intend,” “project,” “forecast,” “estimates,” “targets,” “projections,” “should,” “could,” “would,” “may,” “might,” “will,” and other similar expressions. These forward-looking statements are contained throughout this report.

We base these forward-looking statements on our current expectations, plans and assumptions, which we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances and at this time. As you read and consider this report, you should understand that these statements are not guarantees of performance or results. The forward-looking statements contained herein are subject to and involve risks, uncertainties and assumptions, and therefore you should not place undue reliance on these forward-looking statements or projections. Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual financial results, and therefore actual results might differ materially from those expressed in the forward-looking statements and projections. Factors that might materially affect such forward-looking statements include:

Risks Related to Our Business, Industry and Market Conditions;
Risks Related to Our Products;
Risks Related to Our Manufacturing and Supply Chain;
Risks Related to Our Distribution Channels;
Risks Related to Laws and Regulations;
Risks Related to Cybersecurity and Privacy;
Risks Related to Intellectual Property;
Risks Related to Our International Operations;
Risks Related to Our Indebtedness;
Risks Related to Our Financial Statements;
Risks Related to Our Common Stock; and
the other factors discussed under “Risk Factors” in our Annual Report on Form 10-K for the annual period ended December 31, 2021 filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 23, 2022, as amended by the Form 10-K/A filed with the SEC on April 25, 2022 (as amended, our “Annual Report”).
The forward-looking statements are based on our beliefs, assumptions and expectations of future performance, taking into account the information currently available to us. These statements are only predictions based upon our current expectations about future events. There are important factors that could cause our actual results, level of activity, performance, or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time, and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Before investing in our common stock, investors should be aware that the occurrence of the events described under the caption “Risk Factors” in our Annual Report and elsewhere in this report could have a material adverse effect on our business, results of operations and future financial performance.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels
3


of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or occur. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations.
4


Part I - Financial Information
Item 1. Financial Statements
Snap One Holdings Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except par value)
(Unaudited)
As of
September 30, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$35,543 $40,577 
Accounts receivable, net54,171 52,620 
Inventories, net296,624 210,964 
Prepaid expenses and other current assets33,885 35,114 
Total current assets420,223 339,275 
Long-term assets:
Property and equipment, net26,160 22,603 
Goodwill592,910 580,761 
Other intangible assets, net567,907 587,192 
Operating lease right-of-use assets54,133 — 
Other assets1,733 10,550 
Total assets$1,663,066 $1,540,381 
Liabilities and stockholders’ equity
Current liabilities:
Current maturities of long-term debt$4,650 $3,488 
Accounts payable82,121 72,781 
Accrued liabilities82,334 75,517 
Current operating lease liability11,478 — 
Current tax receivable agreement liability10,191  
Total current liabilities 190,774 151,786 
Long-term liabilities:
Revolving credit facility, net55,723  
Long-term debt, net of current portion446,928 449,256 
Deferred income tax liabilities, net45,733 48,555 
Operating lease liability, net of current portion45,725 — 
Tax receivable agreement liability, net of current portion102,302 112,406 
Other liabilities21,706 30,103 
Total liabilities 908,891 792,106 
Commitments and contingencies (Note 15)
Stockholders’ equity:
Common stock, $0.01 par value, 500,000 shares authorized; 74,668 shares issued and outstanding as of September 30, 2022 and 74,427 shares issued and outstanding at December 31, 2021
747 744 
Preferred stock, $0.01 par value; 50,000 shares authorized, no shares issued and outstanding
  
Additional paid-in capital842,208 826,718 
Accumulated deficit(83,993)(79,420)
Accumulated other comprehensive loss(5,003)(28)
Company’s stockholders’ equity753,959 748,014 
Noncontrolling interest216 261 
Total stockholders’ equity 754,175 748,275 
Total liabilities and stockholders’ equity$1,663,066 $1,540,381 
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
5


Snap One Holdings Corp. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)

Three Months EndedNine Months Ended
September 30,
2022
September 24,
2021
September 30,
2022
September 24,
2021
Net sales$281,234 $260,746 $855,573 $734,519 
Costs and expenses:
Cost of sales, exclusive of depreciation and amortization167,435 151,281 520,162 432,297 
Selling, general and administrative expenses89,379 105,005 271,300 259,019 
Depreciation and amortization14,812 14,287 44,667 42,197 
Total costs and expenses271,626 270,573 836,129 733,513 
Income (loss) from operations9,608 (9,827)19,444 1,006 
Other expenses (income):
Interest expense10,244 7,511 24,687 26,589 
Other expense (income), net620 6,931 137 6,422 
Total other expenses10,864 14,442 24,824 33,011 
Loss before income taxes(1,256)(24,269)(5,380)(32,005)
Income tax benefit(238)(2,729)(762)(3,373)
Net loss(1,018)(21,540)(4,618)(28,632)
Net loss attributable to noncontrolling interest(8)(11)(45)(45)
Net loss attributable to Company$(1,010)$(21,529)$(4,573)$(28,587)
Net loss per share, basic and diluted$(0.01)$(0.31)$(0.06)$(0.46)
Weighted average shares outstanding, basic and diluted 74,650 68,672 74,567 62,369 
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

6


Snap One Holdings Corp. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(Unaudited)

Three Months EndedNine Months Ended
September 30,
2022
September 24,
2021
September 30,
2022
September 24,
2021
Net loss$(1,018)$(21,540)$(4,618)$(28,632)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments(2,873)(488)(4,975)(508)
Comprehensive loss(3,891)(22,028)(9,593)(29,140)
Comprehensive loss attributable to noncontrolling interest(8)(11)(45)(45)
Comprehensive loss attributable to Company$(3,883)$(22,017)$(9,548)$(29,095)
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
7


Snap One Holdings Corp. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(Unaudited)


Common Stock Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Shares Amount Accumulated
Deficit
Noncontrolling
Interest
Total
Stockholders’
Equity
Balance - December 31, 202174,427 $744 $826,718 $(79,420)$(28)$261 $748,275 
Net loss— — — (2,236)— (20)(2,256)
Foreign currency translation adjustments— — — — 6 — 6 
Equity-based compensation— — 5,599 — — — 5,599 
Issuance of common stock pursuant to equity incentive plans53 1 (1)— — —  
Balance - April 1, 202274,480 $745 $832,316 $(81,656)$(22)$241 $751,624 
Net loss— — — (1,327)— (17)(1,344)
Foreign currency translation adjustments— — — — (2,108)— (2,108)
Equity-based compensation— — 6,768 — — — 6,768 
Repurchase and retirement of common stock(94)(1)(1,047)— — — (1,048)
Issuance of common stock pursuant to equity incentive plans227 2 (2)— — —  
Balance - July 1, 2022$74,613 $746 $838,035 $(82,983)$(2,130)$224 $753,892 
Net loss— — — (1,010)— (8)(1,018)
Foreign currency translation adjustments— — — — (2,873) (2,873)
Equity-based compensation— — 5,570 — — — 5,570 
Repurchase and retirement of common stock(128)(1)(1,395)— — — (1,396)
Issuance of common stock pursuant to equity incentive plans183 2 (2)— — —  
Balance - September 30, 202274,668 $747 $842,208 $(83,993)$(5,003)$216 $754,175 



8


Common Stock Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Shares Amount Accumulated
Deficit
Noncontrolling
Interest
Total
Stockholders’
Equity
Balance - December 25, 202059,217 $592 $659,093 $(43,018)$756 $316 $617,739 
Net loss— — — (6,014)— (22)(6,036)
Foreign currency translation adjustments — — — — (52)— (52)
Equity-based compensation— — 1,060 — — — 1,060 
Balance - March 26, 2021$59,217 $592 $660,153 $(49,032)$704 $294 $612,711 
Net loss— — — (1,044)— (12)(1,056)
Foreign currency translation adjustments— — — — 32 — 32 
Equity-based compensation— — 1,178 — — — 1,178 
Equity contributions— — 10,025 — — — 10,025 
Balance - June 25, 2021$59,217 $592 $671,356 $(50,076)$736 $282 $622,890 
Net loss— — — (21,529)— (11)(21,540)
Foreign currency translation adjustments— — — — (488)— (488)
Equity-based compensation— — 14,391 — — — 14,391 
Issuance of common stock for initial public offering, net of offering costs15,021 150 249,004 — — — 249,154 
Establishment of income tax receivable liability— — (112,681)— — — (112,681)
Other— — (243)— — (243)
Balance - September 24, 2021$74,238 $742 $821,827 $(71,605)$248 $271 $751,483 
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

9



Snap One Holdings Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Nine Months Ended
September 30, 2022September 24, 2021
Cash flows from operating activities:
Net loss$(4,618)$(28,632)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization44,667 42,197 
Amortization of debt issuance costs1,388 4,208 
Write-off of unamortized debt issuance costs 6,645 
Deferred income taxes (6,169)(3,563)
Loss on sale and disposal of property and equipment81 195 
Equity-based compensation17,937 16,629 
Non-cash operating lease expense9,859  
Bad debt expense532 443 
Fair value adjustment to contingent value rights(6,200)1,200 
Valuation adjustment to TRA liability86  
Provision for credit losses on notes receivable5,872  
Change in operating assets and liabilities:
Accounts receivable2,117 (4,097)
Inventories(85,134)(15,250)
Prepaid expenses and other assets3,286 (23,959)
Accounts payable, accrued liabilities and operating lease liabilities935 (7,255)
Net cash used in operating activities(15,361)(11,239)
Cash flows from investing activities:
Acquisition of business, net of cash acquired(30,539)(26,077)
Purchases of property and equipment(10,024)(6,819)
Issuance of notes receivable(600) 
Other75 (429)
Net cash used in investing activities(41,088)(33,325)
Cash flows from financing activities:
Payments on long-term debt(2,325)(220,992)
Proceeds from revolving credit facility57,000  
Proceeds from initial public offering, net of offering costs 249,155 
Repurchase and retirement of common stock(2,410) 
Net cash provided by financing activities52,265 28,163 
Effect of exchange rate changes on cash and cash equivalents(850)(466)
Net decrease in cash and cash equivalents(5,034)(16,867)
Cash and cash equivalents at beginning of the period40,577 77,458 
Cash and cash equivalents at end of the period$35,543 $60,591 
Supplementary cash flow information:
Cash paid for interest$14,904 $25,069 
Cash paid for taxes, net$4,943 $265 
Noncash investing and financing activities:
Noncash tax receivable agreement liability$ $112,681 
Noncash equity contribution$ $10,025 
Capital expenditure in accounts payable$613 $237 
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
10


Snap One Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
(in thousands, except per share amounts)

1.Organization and Description of Business

Snap One Holdings Corp. (referred to herein as “Snap One” or the “Company”) is incorporated in Delaware with its principal executive offices located in Charlotte, North Carolina and Draper, Utah. The Company provides products, services, and software to its network of professional integrators that enable them to deliver smart living experiences for their residential and small business end users. The Company’s hardware and software portfolio includes leading proprietary and third-party offerings across connected, infrastructure, and entertainment categories. Additionally, the Company provides technology-enabled workflow solutions to support the integrator throughout the project lifecycle, enhancing their operations and helping them to profitably grow their businesses.

Initial Public Offering — On July 30, 2021, the Company completed its initial public offering (“IPO”) of 13,850 shares of its common stock, and on August 18, 2021, completed the sale of 1,171 shares of additional common stock to the underwriters pursuant to their option to purchase additional shares, at an offering price of $18.00 per share. The Company raised net proceeds of $249,154 through the IPO, after deducting underwriting discounts and other offering costs of $21,219. During the three months and nine months ended September 24, 2021, the Company expensed $1,648 and $4,569 of IPO-related costs. There were no expenses related to the IPO during the three months and nine months ended September 30, 2022. The Company’s registration statement on Form S-1 (File No. 333-257624) relating to its IPO was declared effective by the Securities and Exchange Commission (the “SEC”) on July 27, 2021.

2.Significant Accounting Policies

Basis of Presentation — The accompanying condensed consolidated financial statements are unaudited and have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial statements. The condensed consolidated financial statements were prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods presented. The condensed consolidated financial statements include the accounts of the Company and all subsidiaries required to be consolidated. All intercompany balances and transactions have been eliminated in the condensed consolidated financial statements. The condensed consolidated balance sheet as of December 31, 2021, has been derived from the audited consolidated financial statements of the Company.

The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the fiscal year ended December 31, 2021, appearing in the Company’s Annual Report on Form 10-K for the annual period ended December 31, 2021, as amended by the Form 10-K/A filed with the Securities and Exchange Commission on April 25, 2022 (as amended, the “Annual Report”). There have been no changes to the Company’s critical accounting estimates and policies or application since the date of the Annual Report except as discussed below.

The Company’s fiscal year is the 52- or 53-week period that ends on the last Friday of December. Fiscal year 2022 is a 52-week period, and fiscal year 2021 was a 53-week period. The three months ended September 30, 2022 and September 24, 2021 were 13-week periods, and the nine months ended September 30, 2022 and September 24, 2021 were 39-week periods.

Use of Accounting Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. Accordingly, the actual amounts could differ from those estimates. If actual amounts differ from estimates, revisions are included in the condensed consolidated statements of operations in the period the actual amounts become known.

Recent Accounting Pronouncements Pending Adoption — In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Accounting Standards Codification 848, “ASC 848”). The amendments in this ASU were put forth in response to the market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. GAAP requires entities to evaluate whether a contract modification, such as the replacement or change of a reference rate, results in the establishment of a new contract or continuation of an existing contract. ASC 848 allows an entity to elect not to apply certain modification accounting
11


Snap One Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
requirements to contracts affected by reference rate reform. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848). The objective of the new reference rate reform standard is to clarify the scope of Topic 848 and provide explicit guidance to help companies applying optional expedients and exceptions. The provisions of these updates are only available until December 31, 2022, when the reference rate replacement activity is expected to be completed. The Company’s exposure related to the expected cessation of LIBOR is limited to the interest expense and certain fees it incurs on balances outstanding under its credit facilities. The Company does not expect that there will be a material impact to its financial statements as a result of adopting these ASUs.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 606): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires that an entity recognize and measure contract assets and liabilities from contracts with customers in a business combination in accordance with ASC 606 as if it had originated the contracts. The amendment in this update is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The guidance should be applied prospectively to business combinations occurring on or after the effective date of the amendment in this update. The Company does not expect the adoption of this update to have a material impact to its financial statements.

In September 2022, the FASB issued ASU 2022-04, Liabilities- Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, which requires buyers in a supplier finance program to disclose information related to the key terms of the program and the obligations the buyer has confirmed as valid to the finance provider or intermediary. The buyers are required to disclose obligations outstanding in interim reporting periods. The amendment in this update is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company does not expect the adoption of this update to have a material impact to its financial statements.

Recently Adopted Accounting Pronouncements — In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. This new guidance requires lessees to recognize the lease assets and lease liabilities that arise from leases in the statement of financial position and to disclose qualitative and quantitative information about lease transactions, such as information about variable lease payments and options to renew and terminate leases. Recently, the FASB issued ASU 2020-05, which deferred the effective date to fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

The Company adopted the new leasing standard as of January 1, 2022, using the modified retrospective approach. Therefore, results for reporting periods beginning after January 1, 2022 are presented under Topic 842, while comparative information has not been restated and continues to be reported under accounting standards in effect for those periods. There was not a cumulative-effect adjustment to accumulated deficit at the beginning of the period of adoption. In adopting the new guidance, the Company elected the package of practical expedients permitted under the transition guidance within the standard, which eliminates the reassessment of whether existing contracts contain leases, lease classification and capitalization of initial direct costs. The Company also elected an accounting policy to not recognize assets or liabilities for leases with a term of less than 12 months, to not separate lease and non-lease components for all asset classes and not elect to use the hindsight practical expedient. The adoption of the new leasing standard resulted in the recognition of approximately $40,906 and $43,862 of right-of-use (“ROU”) assets and lease liabilities, respectively, on the Company’s condensed consolidated balance sheets for its operating lease commitments. The difference between the ROU assets and lease liabilities is primarily attributable to deferred rent and lease incentives. The adoption of the standard did not have a material impact on the Company’s condensed consolidated statements of operations or on the condensed consolidated statements of cash flows.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses. The ASU sets forth a current expected credit loss (“CECL”) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. This ASU was effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. In November 2019, the FASB issued ASU 2019-10 which deferred the effective date to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company early adopted the standard for the fiscal year beginning January 1, 2022. Adoption of the standard did not have a material impact on the condensed consolidated financial statements.
12


Snap One Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
(in thousands, except per share amounts)

3.    Acquisitions

All of the Company’s acquisitions have been accounted for under ASC 805, Business Combinations. Accordingly, the accounts of the acquired companies, after adjustments to reflect fair values assigned to assets and liabilities, have been included in the condensed consolidated financial statements from their respective dates of acquisition.

The Company records purchase price in excess of amounts allocated to identifiable assets and liabilities as goodwill. Goodwill includes, but is not limited to, the value of the workforce in place, ability to generate profits and cash flows, and an established going concern.

Customer relationships have been valued using the multi-period excess earnings method, a derivative of the income approach. The multi-period excess earnings method estimates the discounted net earnings attributable to the customer relationships that were acquired after considering items such as possible customer attrition. Estimated useful lives were determined based on the length and trend of projected cash flows. The length of the projected cash flow period was determined based on the expected attrition of the customer relationships, which is based on the Company’s historical experience in renewing and extending similar customer relationships and future expectations for renewing and extending similar existing customer relationships. The useful life of the customer relationships intangible assets represents the number of years over which the Company expects the customer relationships to economically contribute to the business.

The trade name has been valued using the relief from royalty method under the income approach to estimate the cost savings that will accrue to the Company, which would otherwise have to pay royalties or license fees on revenue earned by using the asset. Estimated useful life was determined based on management’s estimate of the period of time the name will be in use.

Technology has been valued using the multi-period excess earnings method, a derivative of the income approach. The net earnings attributed to the existing technology considers items such as projected research and development costs expected to be incurred to maintain the technology. Estimated useful life was determined based on the length and trend of projected cash flows after considering items such as the projected research and development expected to be incurred to maintain the technology.

Clare Controls, LLC. — On August 8, 2022, the Company entered into a purchase agreement pursuant to which it acquired the assets and specific liabilities of Clare Controls, LLC. (“Clare”), a provider of home automation and security products for whom Snap One has been a distributor since 2019. The Clare acquisition enables Snap One to convert Clare’s product suite into higher-margin proprietary products and drive growth with professional integrators in adjacent markets. The Company agreed to a purchase price of $6,300, consisting of $4,900 cash paid and $1,400 related to the settlement of the pre-existing note receivable from Clare owed to the Company.

The Company recorded tangible and intangible assets acquired and liabilities assumed in the transaction according to the acquisition method of accounting, under ASC 805, Business Combinations. The consideration was allocated to the assets acquired and liabilities assumed based on their fair values as of the closing date and are subject to change within the measurement period, which does not exceed twelve months after the closing date. The Company allocated any excess purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed to goodwill.

13


Snap One Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
The preliminary allocation of the purchase price for the Clare acquisition is as follows:

Total purchase consideration$6,300 
Prepaid expenses$263 
Property and equipment, net26 
Operating lease right-of-use assets160 
Identifiable intangible assets4,300 
Total identifiable assets acquired4,749 
Accounts payable533 
Accrued liabilities284 
Current operating lease liability43 
Operating lease liability, net of current portion117 
Other liabilities183 
Total liabilities assumed1,160 
Net identifiable assets acquired3,589 
Goodwill2,711 
Net assets acquired$6,300 

The Company recorded intangible assets related to the Clare acquisition based on estimated fair value, which consisted of the following:
Useful Lives
(Years)
Acquired Value
Technology
4$3,400 
Trade name
6900 
Total intangible assets
$4,300 

The Company recognized $303 of transaction-related expenses, consisting primarily of advisory, legal, and other professional fees related to the Clare acquisition. These transaction-related expenses were incurred by and for the benefit of the Company, and were included in selling, general, and administrative expenses in the condensed consolidated statements of operations.

Pro forma financial information related to the Clare acquisition has not been provided as it is not material to the Company’s consolidated results of operations. The results of operations of the Clare acquisition are included in the Company’s consolidated results of operations from the date of acquisition and were not significant for the three months and nine months ended September 30, 2022.

Staub Electronics, LTD. — On January 20, 2022, the Company, through its wholly owned subsidiary, Snap One Acquisition Corp., entered into a purchase agreement pursuant to which it acquired the issued and outstanding shares of Staub Electronics, LTD. (“Staub”), a long-time Canadian distribution partner. The Staub acquisition adds two Canadian locations to the Company’s distribution footprint. The Company agreed to a purchase price of $26,395.

The Company recorded tangible and intangible assets acquired and liabilities assumed in the transaction according to the acquisition method of accounting, under ASC 805, Business Combinations. The consideration was allocated to the assets acquired and liabilities assumed based on their fair values as of the closing date and are subject to change within the measurement period, which does not exceed twelve months after the closing date. During the measurement period, certain adjustments were recorded to increase goodwill to $9,438 to account for updated working capital calculations. The Company allocated any excess purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed to goodwill.

14


Snap One Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
The allocation of the purchase price for the Staub acquisition is as follows:

Total purchase consideration$26,395 
Cash and cash equivalents$756 
Accounts receivable1,801 
Inventory5,472 
Prepaid expenses1,616 
Property and equipment451 
Operating lease right-of-use assets2,309 
Identifiable intangible assets14,209 
Total identifiable assets acquired26,614 
Accounts payable1,570 
Accrued liabilities2,206 
Current operating lease liability343 
Deferred income tax liabilities3,585 
Operating lease liability, net of current portion1,953 
Total liabilities assumed9,657 
Net identifiable assets acquired16,957 
Goodwill9,438 
Net assets acquired$26,395 

The Company recorded intangible assets related to the Staub acquisition based on estimated fair value, which consisted of the following:

Useful Lives
(Years)
Acquired Value
Customer relationships
10$12,684 
Trade name
61,525 
Total intangible assets
$14,209 

The Company recognized $328 of transaction-related expenses, consisting primarily of advisory, legal, and other professional fees related to the Staub acquisition. These transaction-related expenses were incurred by and for the benefit of the Company, and were included in selling, general, and administrative expenses in the condensed consolidated statements of operations.

Pro forma financial information related to the Staub acquisition has not been provided as it is not material to the Company’s consolidated results of operations. The results of operations of the Staub acquisition are included in the Company’s consolidated results of operations from the date of acquisition and were not significant for the three months and nine months ended September 30, 2022.
15


Snap One Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
(in thousands, except per share amounts)

ANLA, LLC — On May 4, 2021, the Company entered into a purchase agreement pursuant to which it acquired the issued and outstanding shares of ANLA, LLC. (“Access Networks”), an enterprise-grade networking solutions provider offering networking products, design, configuration, monitoring and support services. The acquisition enhances the Company’s networking solutions for residential and commercial networks. The Company agreed to a purchase price of $36,641, consisting of both cash and equity, plus contingent consideration of up to $2,000 based upon the achievement of specified financial targets. The Access Networks acquisition closed on May 28, 2021.

The Company recorded tangible and intangible assets acquired and liabilities assumed in the transaction according to the acquisition method of accounting, under ASC 805, Business Combinations. The consideration was allocated to the assets acquired and liabilities assumed based on their fair values as of the closing date. The Company allocated any excess purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed to goodwill. Goodwill arising from the Access Networks acquisition primarily consists of synergies from integrating the distribution of products through the Company’s existing distribution channels.

The Company may be required to pay additional consideration upon the achievement of a revenue-based earnout. As of the acquisition date, the fair value of the contingent consideration was $2,000.

The allocation of the purchase price for the Access Networks acquisition is as follows:

Total purchase consideration$38,641 
Cash and cash equivalents$795 
Accounts receivable794 
Inventory2,029 
Property and equipment77 
Identifiable intangible assets17,700 
Total identifiable assets acquired21,395 
Accounts payable1,266 
Accrued liabilities1,218 
Other liabilities586 
Deferred income tax liabilities710 
Total liabilities assumed3,780 
Net identifiable assets acquired17,615 
Goodwill21,026 
Net assets acquired$38,641 

For income tax purposes, a carryover basis in goodwill of $13,616 will be deductible in future periods.

The Company recorded intangible assets related to the Access Networks acquisition based on estimated fair value, which consisted of the following:

Useful Lives
(Years)
Acquired Value
Customer relationships
10$14,400 
Trade name
63,300 
Total intangible assets
$17,700 

Other liabilities assumed consisted primarily of warranty reserves and deferred revenue. The long-term warranty reserves are primarily based on historical failure rates, costs to repair or replace the product, and any necessary shipping costs, which are considered to approximate the fair value of the remaining obligation. Deferred revenue was recorded at fair value, resulting in a cumulative balance for the Access Networks acquisition of $883 in accrued liabilities and $586 in other liabilities.
16


Snap One Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
(in thousands, except per share amounts)

The Company recognized $197 of transaction-related expenses, consisting primarily of advisory, legal, and other professional fees related to the Access Networks acquisition. These transaction-related expenses were incurred by and for the benefit of the Company, and were included in selling, general, and administrative expenses in the condensed consolidated statements of operations.

Pro forma financial information related to the Access Networks acquisition has not been provided as it is not material to the Company’s consolidated results of operations. The results of operations of the Access Networks acquisition are included in the Company’s consolidated results of operations from the date of acquisition and were not significant for the three months and nine months ended September 24, 2021.

4.Revenue and Geographic Information

Contract Balances — Amounts invoiced in advance of revenue recognition are recorded as deferred revenue on the condensed consolidated balance sheets. Deferred revenue primarily relates to unspecified software updates and upgrades, hosting, technical support, marketing incentive programs, and subscription services. The following table represents the changes in deferred revenue for the nine months ended September 30, 2022 and September 24, 2021:

Nine Months Ended
September 30,
2022
September 24,
2021
Deferred revenue – beginning of period
$33,385 $30,466 
Amounts billed, but not recognized
25,809 20,971 
Recognition of revenue
(24,641)(20,168)
Deferred revenue acquired218 1,469 
Deferred revenue – end of period
$34,771 $32,738 
The Company recorded deferred revenue of $22,121 in accrued liabilities and $12,650 in other liabilities as of September 30, 2022. The Company recorded deferred revenue of $20,944 in accrued liabilities and $12,441 in other liabilities as of December 31, 2021.

Disaggregation of Revenue The following table sets forth revenue by geography between the United States and all geographies outside of the United States for the three months and nine months ended September 30, 2022 and September 24, 2021:


Three Months EndedNine Months Ended
September 30,
2022
September 24,
2021
September 30,
2022
September 24,
2021
United States integrators(a)
$230,173 $208,524 $694,254 $603,713 
United States other(b)
14,940 19,037 46,107 41,746 
International(c)
36,121 33,185 115,212 89,060 
Total
$281,234 $260,746 $855,573 $734,519 
(a)United States integrators is defined as professional “do-it-for-me” integrator customers who transact with Snap One through a traditional integrator channel and excludes the impact of recently acquired businesses domestically, specifically Access Networks.
(b)United States other is defined as recently acquired entities, specifically Access Networks, and revenue generated through managed transactions with non-integrator customers, such as national accounts.
(c)International consists of all integrators and distributors who transact with Snap One outside of the United States.

17


Snap One Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
The following table sets forth revenue by product type between proprietary products and third-party products for the three months and nine months ended September 30, 2022 and September 24, 2021:

Three Months EndedNine Months Ended
September 30,
2022
September 24,
2021
September 30,
2022
September 24,
2021
Proprietary products(a)
$192,172 $184,640 $588,165 $517,095 
Third-party products(b)
89,062 76,106 267,408 217,424 
Total
$281,234 $260,746 $855,573 $734,519 

(a)Proprietary products consist of products and services internally developed by Snap One and sold under one of Snap One’s proprietary brands.
(b)Third-party products consist of products that Snap One distributes but to which Snap One does not own the intellectual property.

Additionally, the Company’s revenue includes amounts recognized over time and at a point in time, and are as follows for the three months and nine months ended September 30, 2022 and September 24, 2021:

Three Months EndedNine Months Ended
September 30,
2022
September 24,
2021
September 30,
2022
September 24,
2021
Products transferred at a point in time
$271,500 $254,170 $830,932 $714,351 
Services transferred over time
9,734 6,576 24,641 20,168 
Total
$281,234 $260,746 $855,573 $734,519 

As of September 30, 2022 and December 31, 2021, the Company’s accounts receivable, net consisted of the following:

September 30,
2022
December 31,
2021
Accounts receivable
$56,553 $55,088 
Allowance for doubtful accounts
(2,382)(2,468)
Accounts receivable, net
$54,171 $52,620 
5.Inventories, Net

As of September 30, 2022 and December 31, 2021, the Company’s inventory consisted of the following:

September 30,
2022
December 31,
2021
Finished goods
$293,846 $210,540 
Raw materials
15,466 10,454 
Work in process
422 548 
Reserve for obsolete and slow-moving inventory
(13,110)(10,578)
Total inventories, net
$296,624 $210,964 
18


Snap One Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
6.Goodwill and Other Intangible Assets, Net

Goodwill as of September 30, 2022 and December 31, 2021, was $592,910 and $580,761, respectively. Goodwill increased by $12,149 in 2022 due to the acquisitions of Staub and Clare. During the year ended December 31, 2021, goodwill increased by $21,026 due to the acquisition of Access Networks. See Note 3 for more information regarding Staub, Clare and Access Networks.

As of September 30, 2022 and December 31, 2021, other intangible assets, net, consisted of the following:

September 30, 2022
Estimated
Useful Life
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Customer relationships
525 years
$521,846 $(116,889)$404,957 
Technology
415 years
98,478 (50,224)48,254 
Trade names – definite
210 years
60,085 (21,953)38,132 
Trade names – indefiniteindefinite76,564 — 76,564 
Total intangible assets$756,973 $(189,066)$567,907 

December 31, 2021
Estimated
Useful Life
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Customer relationships
525 years
$509,162