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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 March 31, 2023
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 76,222,149 shares of common stock as of May 5, 2023.



Table of Contents

Page No.

2



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 (this “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, including without limitation statements regarding product plans, future growth, market opportunities, strategic initiatives, industry positioning, customer acquisition and retention, and revenue growth, 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 global conflict and other macroeconomic conditions. 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 operational and 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 30, 2022 (the “Annual Report”) filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 15, 2023.
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.

3


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 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
(unaudited, in thousands, except par value)
As of
March 31, 2023December 30, 2022
Assets
Current assets:
Cash and cash equivalents$34,452 $21,117 
Accounts receivable, net50,415 48,174 
Inventories313,555 314,588 
Prepaid expenses23,042 22,913 
Other current assets3,771 5,930 
Total current assets425,235 412,722 
Long-term assets:
Property and equipment, net41,426 34,958 
Goodwill592,195 592,186 
Other intangible assets, net541,996 554,419 
Operating lease right-of-use assets51,541 54,041 
Other assets4,949 4,195 
Total assets$1,657,342 $1,652,521 
Liabilities and stockholders’ equity
Current liabilities:
Current maturities of long-term debt$5,200 $5,063 
Accounts payable66,704 77,443 
Accrued liabilities64,255 64,605 
Current operating lease liability9,964 10,574 
Current tax receivable agreement liability23,195 10,191 
Total current liabilities 169,318 167,876 
Long-term liabilities:
Revolving credit facility, net48,876 10,800 
Long-term debt, net of current portion496,054 496,795 
Deferred income tax liabilities, net37,670 43,515 
Operating lease liability, net of current portion52,195 50,896 
Tax receivable agreement liability, net of current portion78,211 101,262 
Other liabilities25,641 24,206 
Total liabilities 907,965 895,350 
Commitments and contingencies (Note 14)
Stockholders’ equity:
Common stock, $0.01 par value, 500,000 shares authorized; 75,252 shares issued and outstanding as of March 31, 2023 and 75,042 shares issued and outstanding at December 30, 2022
752 750 
Preferred stock, $0.01 par value; 50,000 shares authorized, no shares issued and outstanding
  
Additional paid-in capital855,202 848,703 
Accumulated deficit(102,594)(88,046)
Accumulated other comprehensive loss(3,983)(4,236)
Total stockholders’ equity 749,377 757,171 
Total liabilities and stockholders’ equity$1,657,342 $1,652,521 
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
5


Snap One Holdings Corp. and Subsidiaries
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share amounts)
Three Months Ended
March 31,
2023
April 1,
2022
Net sales$252,040 $277,434 
Costs and expenses:
Cost of sales, exclusive of depreciation and amortization145,813 172,332 
Selling, general and administrative expenses93,797 86,527 
Depreciation and amortization15,202 14,889 
Total costs and expenses254,812 273,748 
Income (loss) from operations(2,772)3,686 
Other expenses (income):
Interest expense13,949 6,723 
Other expense (income), net827 (420)
Total other expenses14,776 6,303 
Loss before income taxes(17,548)(2,617)
Income tax benefit(3,000)(361)
Net loss(14,548)(2,256)
Net loss attributable to noncontrolling interest (20)
Net loss attributable to Company$(14,548)$(2,236)
Net loss per share, basic and diluted$(0.19)$(0.03)
Weighted average shares outstanding, basic and diluted 75,291 74,464 
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

6


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

Three Months Ended
March 31,
2023
April 1,
2022
Net loss$(14,548)$(2,256)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments253 6 
Comprehensive loss(14,295)(2,250)
Comprehensive loss attributable to noncontrolling interest (20)
Comprehensive loss attributable to Company$(14,295)$(2,230)
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
7


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


Common Stock Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Shares Amount Accumulated
Deficit
Noncontrolling
Interest
Total
Stockholders’
Equity
Balance - December 30, 202275,042 $750 $848,703 $(88,046)$(4,236)$ $757,171 
Net loss— — — (14,548)— — (14,548)
Foreign currency translation adjustments— — — — 253 — 253 
Equity-based compensation— — 7,577 — — — 7,577 
Repurchase and retirement of common stock(27)— (238)— — — (238)
Issuance of common stock pursuant to equity incentive plans332 3 (3)— — —  
Tax withholding on net share settlement of equity awards(95)(1)(1,023)— — — (1,024)
Employee stock purchase plan— — 186 — — — 186 
Balance - March 31, 202375,252 $752 $855,202 $(102,594)$(3,983)$ $749,377 



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 
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

8



Snap One Holdings Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
Three Months Ended
March 31, 2023April 1, 2022
Cash flows from operating activities:
Net loss$(14,548)$(2,256)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization15,202 14,889 
Amortization of debt issuance costs772 458 
Unrealized loss on interest rate cap818  
Deferred income taxes (5,869)(2,965)
Equity-based compensation7,763 5,599 
Non-cash operating lease expense3,310 2,985 
Bad debt expense307 74 
Fair value adjustment to contingent value rights600 (2,800)
Valuation adjustment to TRA liability144  
Other, net130  
Change in operating assets and liabilities:
Accounts receivable(2,614)(2,804)
Inventories1,205 (25,032)
Prepaid expenses and other assets1,268 2,269 
Accounts payable, accrued liabilities and operating lease liabilities(11,118)(13,439)
Net cash used in operating activities(2,630)(23,022)
Cash flows from investing activities:
Acquisition of business, net of cash acquired (25,639)
Purchases of property and equipment(9,164)(3,312)
Issuance of notes receivable (600)
Other, net39 30 
Net cash used in investing activities(9,125)(29,521)
Cash flows from financing activities:
Payments on long-term debt(1,300) 
Proceeds from revolving credit facility38,000 37,000 
Repurchase and retirement of common stock(293) 
Payment of tax withholding obligation on settlement of equity awards(1,024) 
Payments of tax receivable agreement(10,191) 
Contingent consideration payments (250) 
Net cash provided by financing activities24,942 37,000 
Effect of exchange rate changes on cash and cash equivalents148 21 
Net increase (decrease) in cash and cash equivalents13,335 (15,522)
Cash and cash equivalents at beginning of the period21,117 40,577 
Cash and cash equivalents at end of the period$34,452 $25,055 
Supplementary cash flow information:
Cash paid for interest$14,098 $7,710 
Cash paid for taxes, net$969 $1,018 
Noncash investing and financing activities:
Capital expenditure in accounts payable$937 $305 
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
9


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 Lehi, 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 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 value-added services and workflow solutions to support the integrator throughout the project lifecycle, enhancing their operations and helping them to profitably grow their businesses.

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 30, 2022, 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 30, 2022, appearing in the Company’s Annual Report on Form 10-K for the annual period ended December 30, 2022 filed with the Securities and Exchange Commission on March 15, 2023. 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 2023 is a 52-week period, and fiscal year 2022 was a 52-week period. The three months ended March 31, 2023 and April 1, 2022 were 13-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.

Recently Adopted Accounting Pronouncements — 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”). ASC 848 provides practical expedients and exceptions for an entity to elect not to apply certain modification accounting requirements to contracts affected by reference rate reform if certain criteria are met. 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 were only initially available until December 31, 2022, however, in March of 2021 the UK Financial Conduct Authority (“FCA”) announced that the cessation date has been moved to June 30, 2023. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 which extends the availability of the provisions of ASU 2021-01 until December 31, 2024. The Company’s exposure related to the expected cessation of the London InterBank Offered Rate (“LIBOR”) is limited to (i) the interest expense and certain fees it incurs on balances outstanding under its credit facilities, which the Company amended April 17, 2023 to replace LIBOR with the Secured Overnight Financing Rate (“SOFR”) (see Note 19. Subsequent Events for further discussion), (ii) certain interest rates that may become applicable pursuant to our Tax Receivable Agreement (“TRA”) which may be amended by the Company and the TRA Party Representative if such interest rates become applicable and LIBOR is no longer available and (iii) the Company’s interest rate cap agreement may be subject to amendment to align with the
10


Snap One Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
Company’s credit agreement. 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 adopted the standard as of the beginning of fiscal year 2023 and the adoption did not have a material impact on the condensed consolidated financial statements. However, the ultimate impact is dependent upon the size and frequency of future acquisitions.

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 adopted the standard as of the beginning of fiscal year 2023 and the adoption did not have an impact on the Company’s disclosures as the impact of supplier finance programs is not material to the Company’s financial statements.

3.    Acquisitions

The Company completed no acquisitions during the three month period ended March 31, 2023 and three acquisitions during fiscal year 2022, as described further in the section below. 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 names have 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. The useful lives of the assets were 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. The useful lives were 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.

11


Snap One Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
Transactions Completed in fiscal year 2022

On October 24, 2022, the Company acquired the remaining outstanding interest of its majority-owned subsidiary, Remote Maintenance Systems LP, doing business as Parasol (“Parasol”), the provider of 24/7 remote support service based on the Company’s remote management tool, OvrC, creating new opportunities for the Company’s integrators.

The Company acquired the remaining outstanding equity shares of Parasol in exchange of $1,100 of the Company’s common shares. The Company made an initial investment and established its controlling interest in 2018, and has included the results of operations, assets and liabilities in its consolidated financial reports since 2018.

The Company completed two additional acquisitions during fiscal year 2022 with Clare Controls, LLC (“Clare”) on August 8, 2022 and Staub Electronics, LTD (“Staub”) on January 20, 2022. The acquisitions added either products to the Company’s proprietary product lines or distribution services. The final allocation of the purchase price for Clare and Staub is as follows:

ClareStaub
Total purchase consideration$6,300 $26,395 
Cash and cash equivalents$ $756 
Accounts receivable 1,801 
Inventory 5,472 
Prepaid expenses263 1,616 
Property and equipment, net26 451 
Operating lease right-of-use assets160 2,309 
Identifiable intangible assets4,300 14,209 
Total identifiable assets acquired4,749 26,614 
Accounts payable568 1,570 
Accrued liabilities284 2,206 
Current operating lease liability43 343 
Deferred income tax liabilities 3,585 
Operating lease liability, net of current portion117 1,953 
Other liabilities183  
Total liabilities assumed1,195 9,657 
Net identifiable assets acquired3,554 16,957 
Goodwill2,746 9,438 
Net assets acquired$6,300 $26,395 

The Company recorded intangible assets related to the acquisitions based on estimated fair value, which consisted of the following:
ClareStaub
Useful Lives
(Years)
Acquired ValueUseful Lives
(Years)
Acquired Value
Customer relationships
$— 10$12,684 
Technology
43,400 — 
Trade name
6900 61,525 
Total intangible assets
$4,300 $14,209 

Goodwill arising from the Clare acquisition primarily consists of synergies from integrating Clare’s automation and security products into the Company’s existing product portfolio. Goodwill arising from the Staub acquisition primarily consists of synergies from integrating the distribution channels of Staub into the Company’s distribution channels.

12


Snap One Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
As a result of the Clare transaction, the Company had, for income tax purposes, goodwill of $2,746 that will be deductible in future periods.

The Company recognized $328 of transaction-related expenses for Staub consisting primarily of advisory, legal, and other professional fees, during the three months ended April 1, 2022, which were included in selling, general, and administrative expenses in the consolidated statement of operations.

Pro forma financial information related to the Clare and Staub acquisitions 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 ended April 1, 2022.

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 three months ended March 31, 2023 and April 1, 2022:

Three Months Ended
March 31,
2023
April 1,
2022
Deferred revenue – beginning of period
$35,051 $33,385 
Amounts billed, but not recognized
8,548 8,531 
Recognition of revenue
(8,728)(7,281)
Deferred revenue – end of period
$34,871 $34,635 
The Company recorded deferred revenue of $22,679 and $22,611 in accrued liabilities and $12,192 and $12,440 in other liabilities as of March 31, 2023 and December 30, 2022, respectively.

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 ended March 31, 2023 and April 1, 2022:


Three Months Ended
March 31,
2023
April 1,
2022
Domestic integrators(a)
$209,477 $225,406 
Domestic other(b)
9,242 13,353 
International(c)
33,321 38,675 
Total
$252,040 $277,434 
(a)Domestic integrators is defined as professional “do-it-for-me” integrator customers who transact with Snap One through a traditional integrator channel in the United States, excluding the impact of revenue earned by our Access Networks enterprise grade network solution business, a recently acquired business.
(b)Domestic other is defined as Access Networks revenue 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.

13


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 ended March 31, 2023 and April 1, 2022:

Three Months Ended
March 31,
2023
April 1,
2022
Proprietary products(a)
$171,375 $187,797 
Third-party products(b)
80,665 89,637 
Total
$252,040 $277,434 

(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 ended March 31, 2023 and April 1, 2022:

Three Months Ended
March 31,
2023
April 1,
2022
Products transferred at a point in time
$243,312 $270,153 
Services transferred over time
8,728 7,281 
Total
$252,040 $277,434 

5.Balance Sheet Components

Accounts Receivable, net:

As of March 31, 2023 and December 30, 2022, the Company’s accounts receivable, net consisted of the following:

March 31,
2023
December 30,
2022
Accounts receivable
$52,673 $50,445 
Allowance for credit losses
(2,258)(2,271)
Accounts receivable, net
$50,415 $48,174 

Inventories:

As of March 31, 2023 and December 30, 2022, the Company’s inventory consisted of the following:

March 31,
2023
December 30,
2022
Finished goods
$307,584 $308,768 
Raw materials
19,025 19,457 
Work in process
430 500 
Reserve for obsolete and slow-moving inventory
(13,484)(14,137)
Total inventories
$313,555 $314,588 
14


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

Accrued liabilities as of March 31, 2023 and December 30, 2022, consisted of the following:

March 31,
2023
December 30,
2022
Deferred revenue$22,679 $22,611 
Payroll, vacation, and bonus accruals13,186 11,068 
Warranty reserve10,312 10,682 
Sales return allowance5,494 5,148 
Customer rebate program4,861 5,863 
Incurred but not reported self-insurance1,880 1,860 
Taxes945 944 
Interest payable658 1,578 
Other accrued liabilities4,240 4,851 
Total accrued liabilities
$64,255 $64,605 

6.Goodwill and Other Intangible Assets, Net

Goodwill as of March 31, 2023 and December 30, 2022, was $592,195 and $592,186, respectively. Changes in goodwill reflect the impact of foreign currency translation.

As of March 31, 2023 and December 30, 2022, other intangible assets, net, consisted of the following:

March 31, 2023
Estimated
Useful Life
Gross Carrying
Amount (a)
Accumulated
Amortization
Net Carrying
Amount
Customer relationships
525 years
$520,838 $(129,976)$390,862 
Technology
415 years
98,478 (58,557)39,921 
Trade names – definite
210 years
59,964 (25,315)34,649 
Trade names – indefiniteindefinite76,564 — 76,564 
Total intangible assets$755,844 $(213,848)$541,996 

December 30, 2022
Estimated
Useful Life
Gross Carrying
Amount (a)
Accumulated
Amortization
Net Carrying
Amount
Customer relationships
525 years
$520,825 $(123,393)$397,432 
Technology
415 years
98,478 (54,391)44,087 
Trade names – definite
210 years
59,963 (23,627)36,336 
Trade names – indefiniteindefinite76,564 — 76,564 
Total intangible assets$755,830 $(201,411)$554,419 
(a) Amounts also include any net changes in intangible asset balances for the periods presented that resulted from foreign currency translation.

Total amortization expense for intangible assets for the three months ended March 31, 2023 and April 1, 2022, was $12,437 and $12,661, respectively. The weighted-average useful life remaining for amortizing definite lived intangible assets was approximately 14.3 years as of March 31, 2023.

15


Snap One Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
As of March 31, 2023, the estimated amortization expense for intangible assets for the next five fiscal years and thereafter are as follows:

Remainder of 2023
$37,148 
202443,204 
202535,588 
202635,233 
202734,417 
2028 and thereafter
279,842 
Total$465,432 

7.Debt Agreements

On December 8, 2021, the Company entered into and became a party to a credit agreement by and between the Company, the various financial institutions and Morgan Stanley Senior Funding, Inc., as administrative agent (the “Administrative Agent”) (as amended from time to time, the “Credit Agreement”) consisting of $465,000 in aggregate principal amount of senior secured term loans maturing in seven years (the “Term Loan”) and a $100,000 senior secured revolving credit facility (which includes borrowing capacity available for letters of credit) maturing in five years (the “Revolving Credit Facility”).

Additionally, on October 2, 2022, the Company became a party to an incremental agreement (the “Incremental Agreement”) with the lenders party thereto and the Administrative Agent to provide incremental term loans (the “Incremental Term Loan”) in an aggregate principal amount of $55,000. The Incremental Term Loan matures in three years. The Incremental Agreement amended the Credit Agreement (the Credit Agreement, as amended by the Incremental Agreement, the “Amended Credit Agreement”).

On October 26, 2022, the Company entered into an interest rate cap agreement, on the London Inter-bank offered rate (“LIBOR”) component of interest, with Bank of America as the counterparty. The interest rate cap became effective December 31, 2022. The Company will pay a premium of $6,573 at the maturity date of December 31, 2025. The notional amount of the interest rate cap is $350,000 and has a strike rate of 5.00%, which effectively caps the LIBOR rate on $350,000 of the floating rate debt at 5.00%.

Borrowings under the Term Loan will bear interest at a rate per annum equal to, at the Company’s option, either (1) an applicable margin plus a base rate determined by reference to the highest of (a) 0.50% per annum plus the federal funds effective rate, (b) the prime rate and (c) the eurocurrency rate determined by reference to the cost of funds for U.S. dollar deposits for an interest period of one month adjusted for certain additional costs, plus 1.00%; provided that such rate is not lower than a floor of 1.50% or (2) an applicable margin plus a eurocurrency rate determined by reference to the cost of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs; provided that such rate is not lower than a floor of 0.50%.

Borrowings under the Incremental Term Loan will bear interest at a rate per annum equal to, at the Company’s option, either (1) an applicable margin plus a base rate determined by reference to the highest of (a) 0.50% per annum plus the federal funds effective rate, (b) the prime rate and (c) the forward-looking term rate based on the Secured Overnight Financing Rate (“SOFR”) for an interest period of one month plus 1.00%; provided that such rate is not lower than a floor of 1.50% or (2) an applicable margin plus a forward-looking rate based on SOFR for the interest period relevant to such borrowing provided that such rate is not lower than a floor of 0.50%.

The interest rate for the Term Loan was 9.13% as of March 31, 2023 and 7.38% as of December 30, 2022. The interest rate for the Incremental Term Loan was 11.48% as of March 31, 2023 and 10.42% as of December 30, 2022.

Borrowings under the Revolving Credit Facility will bear interest at a rate per annum equal to an applicable margin based upon a leverage-based pricing grid, plus, at the Company’s option, either (1) a base rate determined by reference to the highest of (a) 0.50% per annum plus the federal funds effective rate, (b) the prime rate and (c) the eurocurrency rate determined by reference to the cost of funds adjusted for certain additional costs, plus 1.00%; provided such rate is not lower than a floor of 1.00% or (2) a eurocurrency rate determined by reference to the applicable cost of funds for such
16


Snap One Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
borrowing adjusted for certain additional costs; provided such rate is not lower than a floor of zero. The interest rate for the Revolving Credit Facility was 9.39% as of March 31, 2023 and 9.22% as of December 30, 2022.

Subsequent to the period end, the Company, on April 17, 2023, amended the Credit Agreement to modify the eurocurrency rate determined by reference to the cost of funds for U.S. dollar deposits for an interest period of one month adjusted for certain additional costs to utilize the forward-looking term rate based on the Secured Overnight Financing Rate (“SOFR”) in place of LIBOR going forward. See Note 19. Subsequent Events for further discussion.

The Term Loan amortizes in fixed equal quarterly installments in an amount equal to 1.00% per annum of the total aggregate principal amount thereof immediately after borrowing, with the balance due at maturity. The Company may voluntarily prepay loans or reduce commitments under the Credit Agreement, in whole or in part, subject to minimum amounts, with prior notice but without premium or penalty (subject to customary exceptions).

The Company’s outstanding debt as of March 31, 2023 and December 30, 2022 was as follows:

InstrumentMaturity DateMarch 31, 2023December 30, 2022
Credit Agreement
Term LoanDecember 8, 2028$460,350 $461,513 
Incremental Term LoanOctober 2, 2025$54,863 $55,000 
Revolving Credit FacilityDecember 8, 2026$50,000 $12,000 
Outstanding letters of CreditDecember 8, 2026$9,760 $5,060 


The amount available under the Revolving Credit Facility was $40,240 and $82,940 as of March 31, 2023 and December 30, 2022, respectively.

As of March 31, 2023, the future scheduled maturities of the above notes payable are as follows:

Remainder of 2023
$3,900 
20243,900 
202558,688 
202654,650 
20275,813 
Thereafter438,262 
Total future maturities of debt565,213 
Unamortized debt issuance costs(15,083)
Total indebtedness550,130 
Less: Current maturities of long-term debt5,200 
Long-term debt and revolving credit facility$544,930 

Unamortized costs related to the issuance of the Term Loan were $13,959 and $14,655 as of March 31, 2023 and December 30, 2022, respectively, and were presented as a direct deduction from the carrying amount of long-term debt. Unamortized costs related to the issuance of the Revolving Credit Facility were $1,124 and $1,200 as of March 31, 2023 and December 30, 2022, respectively, and were presented as a direct deduction from the carrying amount of the revolving
17


Snap One Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
credit facility. The costs related to debt issuances are amortized to interest expense over the life of the related debt. As of March 31, 2023, the future amortization of debt issuance costs was as follows:

Remainder of 2023
$2,395 
20243,396 
20253,374 
20262,123 
20271,918 
Thereafter1,877 
Total$15,083 

Debt Covenants and Default Provisions — There have been no changes to the debt covenants or default provisions related to the Company’s outstanding debt arrangements or other obligations during the current year. The Company was in compliance with all debt covenants as of March 31, 2023 and December 30, 2022. For additional information on the Company’s debt arrangements, debt covenants and default provisions, see Note 8 of the Notes to the Consolidated Financial Statements for the year ended December 30, 2022, in the Annual Report.

The Company may also be required to make additional payments under the financing agreement equal to a percentage of the Company’s annual excess cash flows or net proceeds from any non-ordinary course asset sales or certain debt issuances, if any. The lender has the option to decline the prepayment. As of December 30, 2022, the Company did not incur a required additional payment.

8.Fair Value Measurement

Fair Value of Financial Instruments The fair values and related carrying values of financial instruments that are not required to be remeasured at fair value on the condensed consolidated statements of operations were as follows:


As of March 31, 2023
As of December 30, 2022
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Assets
Notes receivable, net $21 $21 $59 $59 
Liabilities
Term Loan$460,350 $418,919 $461,513 $421,130 
Incremental Term Loan$54,863 $51,571 $55,000 $51,700 
The fair values of notes receivable are estimated using a discounted cash flow analysis using interest rates currently offered for loans with similar credit quality which represent Level 2 inputs, and are included in other assets and other current assets on the balance sheet. The fair value of long-term debt was established using current market rates for similar instruments traded in secondary markets representing Level 2 inputs. The fair value of the Revolving Credit Facility approximates carrying value as the related interest rates approximate the Company’s incremental borrowing rate for similar obligations. Additionally, cash and cash equivalents, accounts receivable, net, prepaid expenses, accounts payable, and accrued liabilities are classified as Level 1 and the carrying value of these assets and liabilities approximates the fair value due to the short-term nature of these financial instruments.

Notes Receivable — During the three months ended September 30, 2022, the Company acquired Clare, which had an outstanding unsecured loan with the Company. The Company recorded a of $5,872 loss on the settlement of the unsecured loan from Clare during the three months ended July 1, 2022. At the acquisition date, the Company settled the notes receivable for $1,400 as part of the transaction. See Note 3 for more information regarding the Clare acquisition.

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis — On October 26, 2022, the Company entered into an interest rate cap agreement on the LIBOR component of interest. The interest rate cap became effective December 31, 2022. The interest rate cap agreement does not qualify for hedge accounting treatment and,
18


Snap One Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
accordingly, the Company records the fair value of the agreements as an asset or liability and the change in fair value as income or expense during the period in which the change occurs. The fair value of the interest rate cap is determined using widely accepted valuation techniques based on its maturity and observable market-based inputs, including interest rate curves. This measurement is considered a Level 2 measurement. The interest rate cap had a fair value of $3,381 and $2,563 as of March 31, 2023 and December 30, 2022, respectively, and is recorded in other liabilities on the Company’s consolidated balance sheet.

The fair value of the contingent consideration liability related to the Access Networks acquisition is based on unobservable inputs, including management estimates and assumptions about future revenues, and is, therefore, classified as Level 3. During the year ended December 30, 2022, the agreement was modified to change the covered revenue period, reducing expected payouts based on future revenues. As a result of the modification, the fair value of the contingent consideration was reduced to $250 and was paid during the three months ending March 31, 2023. The Company recorded a liability of $250 as of December 30, 2022 in accrued liabilities.

The Company utilizes a Monte Carlo simulation in an option pricing framework, where a range of possible scenarios are simulated, in order to determine the fair value of the contingent value rights (“CVRs”). Any future increase in the fair value of the CVR obligations, based on an increased likelihood that the underlying milestones will be achieved, and the associated payment or payments will, therefore, become due and payable, will result in a charge to selling, general and administrative expenses in the period in which the increase is determined. Similarly, any future decrease in the fair value of the CVR obligations will result in a reduction in selling, general and administrative expenses. CVR liabilities are categorized as other liabilities in the accompanying condensed consolidated balance sheets and are classified as Level 3.

Fair value at
March 31, 2023
Valuation Technique
Unobservable
Input
Volatility
Contingent Value Rights $2,300Monte CarloVolatility
 55%

Changes in the CVRs for the three months ended March 31, 2023 and April 1, 2022 were as follows:

March 31,
2023
April 1,
2022
CVR fair value – beginning of period
$1,700 $8,900 
Fair value adjustments
600 (2,800)
CVR fair value – end of period
$2,300 $6,100 
There were no transfers into or out of Level 3 during the three months ended March 31, 2023 or April 1, 2022.

9.Warranties

Changes in the Company’s accrued warranty liability for the three months ended March 31, 2023 and April 1, 2022 were as follows:

March 31,
2023
April 1,
2022
Accrued warranty – beginning of period
$15,039$18,772
Warranty claims
(2,945)(2,323)
Warranty provisions
1,944175
Accrued warranty – end of period
$14,038$16,624
As of March 31, 2023, the Company has recorded accrued warranty liabilities of $10,312 in accrued liabilities and $3,726 in other liabilities in the accompanying condensed consolidated balance sheet. As of December 30, 2022, the Company has recorded accrued warranty liabilities of $10,682 in accrued liabilities and $4,357 in other liabilities.

10.Retirement Plan

The Company has a 401(k) plan that covers eligible employees as defined by the plan agreement. The Company matches 100% of employee contributions to the plan, up to 3% of the employees’ total compensation, and 50% of employee contributions to the plan, up to 6% of the employees’ total compensation. Company contributions to the plan, net of forfeitures, were $1,335 and $1,531 for the three months ended March 31, 2023 and April 1, 2022, respectively.
19


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

11.Equity Agreements and Incentive Equity Plans

Former Parent Incentive Plan — In October 2017, the Former Parent Entity approved the Class B Unit Incentive Plan (the “2017 Plan”) pursuant to the Company’s partnership agreement. Class B-1 Incentive Units (“B-1 Units”) issued under the 2017 Plan vest in installments over a five-year period, subject to the grantee’s continued employment or service. Class B-2 Incentive Units (“B-2 Units” and collectively with the B-1 Units, “Incentive Units”) issued under the 2017 Plan contained both service conditions consistent with the B-1 Units and market-based vesting conditions that required the achievement of a specified return hurdle to the controlling shareholders in order to vest.

2021 Incentive Plan — On July 16, 2021, the Company adopted the 2021 Equity Incentive Plan (the “2021 Plan”) in order to provide a means through which to attract, retain, and motivate key personnel. Awards available for grant under the 2021 Plan include non-qualified and incentive stock options, restricted shares of our common stock, and other equity-based awards tied to the value of our common stock and cash-based awards.

During the quarter ended March 31, 2023, upon the settlement date of certain outstanding equity awards, shares were withheld to cover the required withholding tax, which was based on the value of a share on the settlement date as determined by the closing price of our common stock on the trading day of the applicable settlement date. The remaining shares were delivered to the recipient as shares of our common stock. The amount remitted to the tax authorities for the employees’ tax obligation was reflected as a financing activity on our consolidated statements of cash flows. These shares withheld by us as a result of the net settlement of equity awards issued under the 2021 Plan were not considered issued and outstanding. These shares were returned to the 2021 Plan reserve and are available for future issuance thereunder. We may also require employees to sell a portion of the shares that they received upon the vesting of equity awards in order to cover any required withholding taxes.

Equity Award Conversion — During the year ended December 31, 2021, and in connection with the Company’s initial public offering (“ IPO”), all outstanding unvested Incentive Units were replaced with newly issued shares of our restricted common stock. Vested Incentive Units were exchanged into shares of our common stock using the same formula as unvested Incentive Units (together, the “Equity Award Conversion”). The restricted shares of common stock that the holders received in exchange for their unvested B-1 Units are subject to the same vesting terms that applied to the B-1 Units prior to the Equity Award Conversion.

The restricted stock awards issued to replace B-2 Units vest based upon achievement of one or more hurdles, which are substantially the same as the previous market-condition vesting criteria of the B-2 Units. Although the restricted stock awards that replace the B-2 Units do not contain an explicit service condition, the vesting is subject to continued employment, resulting in a derived service period. For additional information on the Equity Award Conversion, see Note 13 of the Notes to the Consolidated Financial Statements for the year ended December 30, 2022, in the Annual Report.

Restricted Stock Awards

In connection with the IPO, the Company issued restricted common stock to holders of unvested B-1 Units and B-2 Units. The grant date fair value of restricted stock awards was determined to be $18.00 per share, based on the initial listing price of the Company’s common stock on the grant date.

20


Snap One Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
The summary of the Company’s restricted stock awards activity is as follows:

Restricted Stock Awards
B-1 Incentive UnitsB-2 Incentive Units
Number of
Units
Weighted-
Average
Grant-Date
Fair Value
Number of
Units
Weighted-
Average
Grant-Date
Fair Value
Outstanding at December 30, 2022223 $18.00 792 $18.00 
Granted    
Vested46 18.00   
Forfeited5 18.00   
Outstanding at March 31, 2023172 $18.00 792 $18.00 

Stock Options

In connection with the IPO, the Company granted options to holders of B-1 Units (“Time-based Options”) and options to holders of B-2 Units (“Market-based Options” and collectively with the Time-based Options, “Leverage Replacement Options”), as further discussed in Note 13 of the Notes to the Consolidated Financial Statements for the year ended December 30, 2022, in the Annual Report.

The summary of the Company’s option activity is as follows:

Time-based OptionsMarket-based Options
Number of
Units
Weighted-
Average
Grant-Date
Fair Value
Aggregate Intrinsic Value (a)
Number of
Units
Weighted-
Average
Grant-Date
Fair Value
Aggregate Intrinsic Value (a)
Outstanding at December 30, 20224,233 $6.47 $ 1,125 $5.66 $ 
Granted $   $  
Exercised $   $  
Forfeited132 $6.29   $  
Outstanding at March 31, 20234,101 $6.47 $