UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


x ☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 25, 2021~~March 29, 2024


o ☐			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)

1~~800~~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~~Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $.01 per share	SNPO	The 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 o☒ No x☐

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 x☒ No o☐

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	o☐	Accelerated filer	o ☒
Non-accelerated filer	☒☐	Smaller reporting company	o ☒
		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. o☐

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

The registrant had outstanding ~~75,896,417~~76,535,644 shares of common stock as of ~~August 23, 2021.~~May 3, 2024.

Table of Contents


		Page No.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		3

	PART I .I. FINANCIAL INFORMATION

Item 1.	Unaudited Condensed Consolidated Financial Statements	45
	Condensed Consolidated Balance Sheets	45
	Condensed Consolidated Statements of Operations	56
	Condensed Consolidated Statements of Comprehensive Loss	67
	Condensed Consolidated Statements of Stockholders' Equity	78
	Condensed Consolidated Statements of Cash Flows	89
	Notes to the Unaudited Condensed Consolidated Financial Statements	910
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2125
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3438
Item 4.	Controls and Procedures	3540

	PART II .II. OTHER INFORMATION

Item 1.	Legal Proceedings	3642
Item 1A.	Risk Factors	3642
Item 2.	Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds and Issuer Purchases of Equity Securities	3642
Item 3.	Defaults Upon Senior Securities	3742
Item 4.	Mine Safety Disclosures	3742
Item 5.	Other Information	3742
Item 6.	Exhibits	3843
	Signatures	4144

Unless otherwise indicated, references to the “Company,” “Snap One,” “we,” ~~“us”~~“us,” and “our” in this report refer to Snap One Holdings Corp. and its consolidated subsidiaries. References to the ~~“Parent”~~“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, including without limitation statements regarding product plans; future growth; market opportunities; industry positioning; customer acquisition and retention; changes in revenue, cost, income, or losses; and strategic initiatives, including without limitation, the ability of the conditions to the closing of the anticipated acquisition of the Company by Resideo Technologies, Inc. (“Resideo”) to be timely satisfied, 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 ~~strategies.~~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.~~circumstances. As you read and consider this report, you should understand ~~that~~ these statements are not guarantees of ~~performance or results.~~performance. 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.~~them. 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.~~statements. Factors that might materially affect such forward-looking statements include:

•Risks Related to Our Business, Industry and ~~Industry;~~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 ~~final Prospectus~~Annual Report on Form 10-K for the annual period ended December 29, 2023 (the “Annual Report”) filed with the ~~SEC~~U.S. Securities and Exchange Commission (“SEC”) on ~~July 29, 2021 pursuant to Rule 424(b) under the Securities Act (hereinafter, the “Prospectus”)~~March 8, 2024).

~~The preceding list is not intended to be an exhaustive list of all of our forward-looking statements.~~ 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 of our forward-looking ~~statements we may make.~~statements. Before investing in our common stock, investors should be aware that the occurrence of the events described under the caption “Risk Factors” in our ~~Prospectus~~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 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.

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

June 25, 2021

December 25, 2020

(Unaudited)

As of

March 29, 2024

December 29, 2023

Assets

Current assets:

Cash and cash equivalents

35,850

77,458

Accounts receivable, net

56,650

49,363

Inventories, net

174,359

157,099

Prepaid expenses and other current assets

15,906

9,650

Inventories

Prepaid expenses

Other current assets

Total current assets

282,765

293,570

Long-term assets:

Property and equipment, net

20,649

20,208

Goodwill

580,842

559,735

Other intangible assets, net

611,778

617,616

Operating lease right-of-use assets

Other assets

9,815

6,409

Total assets

1,505,849

1,497,538

Liabilities and stockholders' equity

Liabilities and stockholders’ equity

Current liabilities:

Current maturities of long-term debt

6,824

21,149

Accounts payable

68,077

68,941

Accrued liabilities

79,465

80,658

Current operating lease liability

Current tax receivable agreement liability

Total current liabilities

154,366

170,748

Long-term liabilities:

Long-term debt, net of current portion

644,645

630,864

Deferred income tax liabilities, net

55,926

55,518

Operating lease liability, net of current portion

Tax receivable agreement liability, net of current portion

Other liabilities

28,022

22,669

Total liabilities

882,959

879,799

Commitments and contingencies (Note 14)

Stockholders' equity:

Common stock, $0.01 par value, 500,000 shares authorized; and 59,217 shares issued and outstanding at June 25, 2021 and December 25, 2020

592

Commitments and contingencies (Note 13)

Stockholders’ equity:

Common stock, $0.01 par value, 500,000 shares authorized; 76,472 shares issued and outstanding as of March 29, 2024 and 75,944 shares issued and outstanding at December 29, 2023

Preferred stock, $0.01 par value; 50,000 shares authorized, no shares issued and outstanding

—

Additional paid-in capital

671,356

659,093

Accumulated deficit

(50,076)

(43,018)

Accumulated other comprehensive income

736

756

Company’s stockholders’ equity

622,608

617,423

Noncontrolling interest

282

316

Accumulated other comprehensive loss

Total stockholders’ equity

622,890

617,739

Total liabilities and stockholders’ equity

1,505,849

1,497,538

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

~~Snap One Holdings Corp. and Subsidiaries~~

~~Condensed Consolidated Statements of Operations~~

~~(in thousands, except per share amounts)~~

~~(Unaudited)~~

Three Months Ended Six Months Ended
June 25,
2021 June 26,
2020 June 25,
2021 June 26,
2020
Net sales $ 253,305 $ 189,119 $ 473,773 $ 361,730
Costs and expenses:
Cost of sales, exclusive of depreciation and amortization 152,140 109,243 281,016 209,633
Selling, general and administrative expenses 78,657 60,095 154,014 127,481
Depreciation and amortization 14,198 14,500 27,910 28,983
Total costs and expenses 244,995 183,838 462,940 366,097
Income (loss) from operations 8,310 5,281 10,833 (4,367)
Other expenses (income):
Interest expense 9,543 11,742 19,078 24,545
Other income (296) (2,217) (509) (1,334)
Total other expenses 9,247 9,525 18,569 23,211
Loss before income taxes (937) (4,244) (7,736) (27,578)
Income tax expense (benefit) 119 (1,015) (644) (5,331)
Net loss (1,056) (3,229) (7,092) (22,247)
Net loss attributable to noncontrolling interest (12) (16) (34) (40)
Net loss attributable to Company $ (1,044) $ (3,213) $ (7,058) $ (22,207)
Net loss per share, basic and diluted $ (0.02) $ (0.05) $ (0.12) $ (0.38)
Weighted average shares outstanding, basic and diluted 59,217 58,885 59,217 58,513

~~See accompanying Notes to the Condensed Consolidated Financial Statements.~~

Snap One Holdings Corp. and Subsidiaries

Condensed Consolidated Statements of ~~Comprehensive Loss~~Operations

(unaudited, in ~~thousands)~~thousands, except per share amounts)

~~(Unaudited)~~

Three Months Ended Six Months Ended
June 25,
2021 June 26,
2020 June 25,
2021 June 26,
2020
Net loss $ (1,056) $ (3,229) $ (7,092) $ (22,247)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments 32 117 (20) (317)
Comprehensive loss (1,024) (3,112) (7,112) (22,564)
Comprehensive loss attributable to noncontrolling interest (12) (16) (34) (40)
Comprehensive loss attributable to Company $ (1,012) $ (3,096) $ (7,078) $ (22,524)


	Three Months Ended
	March 29, 2024		March 31, 2023
Net sales	$	246,078	$	252,040
Costs and expenses:
Cost of sales, exclusive of depreciation and amortization	137,611		145,813
Selling, general, and administrative expenses	90,820		93,797
Depreciation and amortization	15,369		15,202
Total costs and expenses	243,800		254,812
Income (loss) from operations	2,278		(2,772)
Other expenses (income):
Interest expense	14,237		13,949
Other expense (income), net	(51)		827
Total other expenses	14,186		14,776
Loss before income taxes	(11,908)		(17,548)
Income tax expense (benefit)	11,025		(3,000)
Net loss	$	(22,933)	$	(14,548)

Net loss per share, basic and diluted	$	(0.30)	$	(0.19)
Weighted average shares outstanding, basic and diluted	76,360		75,291

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Snap One Holdings Corp. and Subsidiaries

Condensed Consolidated Statements of ~~Stockholders’ Equity~~Comprehensive Loss

(unaudited, 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 25, 2020 59,217 $ 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
Equity Contributions — — 10,025 — — — 10,025
Net loss — — — (1,044) — (12) (1,056)
Foreign currency translation adjustments — — — — 32 — 32
Equity-based compensation — — 1,178 — — — 1,178
Balance - June 25, 2021 59,217 $ 592 $ 671,356 $ (50,076) $ 736 $ 282 $ 622,890

Common Stock Additional
Paid-In
Capital Accumulated
Other
Comprehensive
Income (Loss)
Shares Amount Accumulated
Deficit Noncontrolling
Interest Total
Stockholders’
Equity
Balance - December 27, 2019 58,140 $ 581 $ 654,420 $ (18,134) $ (39) $ 99 $ 636,927
Net loss — — — (18,994) — (24) (19,018)
Foreign currency translation adjustments — — — — (434) — (434)
Equity-based compensation — — 1,362 — — — 1,362
Balance - March 27, 2020 58,140 $ 581 $ 655,782 $ (37,128) $ (473) $ 75 $ 618,837
Capital contributions — — 243 — — — 243
Net loss — — — (3,213) — (16) (3,229)
Foreign currency translation adjustments — — — — 117 — 117
Equity-based compensation — — 1,185 — — — 1,185
Additional share issuance 1,077 11 (11) — — — —
Balance - June 26, 2020 59,217 $ 592 $ 657,199 $ (40,341) $ (356) $ 59 $ 617,153


	Three Months Ended
	March 29, 2024		March 31, 2023
Net loss	$	(22,933)	$	(14,548)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments	(42)		253
Comprehensive loss	$	(22,975)	$	(14,295)

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Snap One Holdings Corp. and Subsidiaries

Condensed Consolidated Statements of ~~Cash Flows~~Stockholders’ Equity

(unaudited, in thousands)

~~(Unaudited)~~

Six Months Ended
June 25, 2021 June 26, 2020
Cash flows from operating activities:
Net loss $ (7,092) $ (22,247)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization 27,910 28,983
Amortization of debt issuance costs 3,051 3,050
Unrealized loss on interest rate cap — 4
Deferred income taxes 408 (5,202)
Gain on sale of business — (979)
Loss (gain) on sale and disposal of property and equipment 205 (15)
Equity-based compensation 2,238 2,547
Bad debt expense 180 565
Fair value adjustment to contingent value rights 2,840 (1,000)
Change in operating assets and liabilities:
Accounts receivable (6,313) (7,066)
Inventories (15,234) 21,226
Prepaid expenses and other assets (6,481) 3,341
Accounts payable and accrued liabilities (6,327) 14,900
Net cash (used in) provided by operating activities (4,615) 38,107
Cash flows from investing activities:
Acquisition of business, net of cash acquired (25,821) —
Purchases of property and equipment (4,413) (5,055)
Proceeds from sale of business — 600
Other (429) 37
Net cash used in investing activities (30,663) (4,418)
Cash flows from financing activities:
Payments on long-term debt (3,595) (3,994)
Proceeds from revolving credit facility — 52,000
Payment of deferred initial public offering costs (2,730) —
Proceeds from capital contributions — 243
Net cash (used in) provided by financing activities (6,325) 48,249
Effect of exchange rate changes on cash and cash equivalents (5) (288)
Net (decrease) increase in cash and cash equivalents (41,608) 81,650
Cash and cash equivalents at beginning of the period 77,458 33,177
Cash and cash equivalents at end of the period $ 35,850 $ 114,827
Supplementary cash flow information:
Cash payments for interest $ 16,083 $ 22,877
Cash paid for taxes, net $ 743 $ 253
Noncash investing and financing activities:
Noncash equity contribution $ 10,025 $ —
Capital expenditure in accounts payable $ 251 $ 630


	Common Stock			Additional Paid-In Capital				Accumulated Other Comprehensive Income (Loss)
	Shares	Amount				Accumulated Deficit				Total Stockholders’ Equity
Balance - December 29, 2023	75,944	$	759	$	872,065	$	(109,414)	$	(3,553)	$	759,857
Net loss	—	—		—		(22,933)		—		(22,933)
Foreign currency translation adjustments	—	—		—		—		(42)		(42)
Equity-based compensation	—	—		5,721		—		—		5,721
Employee stock purchase plan	—	—		192		—		—		192
Issuance of common stock pursuant to equity incentive plans	821	8		(8)		—		—		—
Tax withholding on net share settlement of equity awards	(293)	(2)		(2,437)		—		—		(2,439)
Distribution to shareholders	—	—		(1,787)		—		—		(1,787)
Balance - March 29, 2024	76,472	$	765	$	873,746	$	(132,347)	$	(3,595)	$	738,569


	Common Stock			Additional Paid-In Capital				Accumulated Other Comprehensive Income (Loss)
	Shares	Amount				Accumulated Deficit				Total Stockholders’ Equity
Balance - December 30, 2022	75,042	$	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
Employee stock purchase plan	—	—		186		—		—		186
Issuance of common stock pursuant to equity incentive plans	332	3		(3)		—		—		—
Tax withholding on net share settlement of equity awards	(95)	(1)		(1,023)		—		—		(1,024)
Repurchase and retirement of common stock	(27)	—		(238)		—		—		(238)
Balance - March 31, 2023	75,252	$	752	$	855,202	$	(102,594)	$	(3,983)	$	749,377

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Snap One Holdings Corp. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)


	Three Months Ended
	March 29, 2024		March 31, 2023
Cash flows from operating activities:
Net loss	$	(22,933)	$	(14,548)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization	15,369		15,202
Amortization of debt issuance costs	827		772
Deferred income taxes	6,601		(5,869)


Equity-based compensation	5,913		7,763
Non-cash operating lease expense	2,518		3,310
Bad debt expense	159		307
Non-cash compensation forfeiture	(1,787)		—
Interest rate cap (income) expense	(170)		818
Fair value adjustment to contingent value rights	(1,200)		600
Valuation adjustment to TRA liability	(367)		144

Other, net	—		130
Change in operating assets and liabilities:
Accounts receivable	(173)		(2,614)
Inventories	18,435		1,205
Prepaid expenses and other assets	(2,261)		1,268
Accounts payable, accrued liabilities, and operating lease liabilities	(14,964)		(11,118)
Net cash provided by (used in) operating activities	5,967		(2,630)
Cash flows from investing activities:

Purchases of property and equipment	(2,080)		(9,164)



Other, net	—		39
Net cash used in investing activities	(2,080)		(9,125)
Cash flows from financing activities:

Payments on long-term debt	(1,300)		(1,300)
Proceeds from revolving credit facility	—		38,000

Proceeds from interest rate cap	490		—
Repurchase and retirement of common stock	—		(293)

Payment of tax withholding obligation on settlement of equity awards	(2,439)		(1,024)
Payments of tax receivable agreement	(21,107)		(10,191)
Payments of contingent consideration	—		(250)

Net cash (used in) provided by financing activities	(24,356)		24,942
Effect of exchange rate changes on cash and cash equivalents	697		148
Net increase (decrease) in cash and cash equivalents	(19,772)		13,335
Cash and cash equivalents at beginning of the period	61,023		21,117
Cash and cash equivalents at end of the period	$	41,251	$	34,452
Supplementary cash flow information:
Cash paid for interest	$	14,341	$	14,098
Cash paid for taxes, net	$	519	$	969
Noncash investing and financing activities:


Capital expenditure in accounts payable	$	238	$	937

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Snap One Holdings Corp. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

~~(Unaudited)~~

1.Organization and Description of Business

Snap One Holdings ~~Corp~~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,~~Lehi, Utah. The Company provides products, ~~services~~software, and ~~software~~support solutions to its network of professional integrators that enable them to deliver smart living experiences for their residential and ~~small~~ business end ~~users.~~consumers. The Company’s hardware and software portfolio includes leading proprietary and third-party offerings across connected, infrastructure, entertainment and ~~entertainment~~software categories. Additionally, the Company provides ~~technology-enabled workflow~~technology and software solutions designed 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 (the “IPO”) of 13,850 shares of its common stock at an offering price of $18.00 per share, resulting in net proceeds of $233,719 after deducting underwriting discounts and commissions of $15,581. Additionally, offering costs incurred by the Company are expected to total approximately $5,311. On August 18, 2021, the Company closed the underwriters exercise of their over-allotment option to purchase 1,171 additional shares of our common stock from the Company, resulting in additional net proceeds of approximately $19,757 after deducting underwriting discounts and commissions of $1,317. 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. The accompanying condensed consolidated financial statements, including share and per share amounts, do not include the effects of the IPO as it was completed subsequent to June 25, 2021. See Note 17 for further discussion of IPO-related and other subsequent events.

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 ~~25, 2020~~29, 2023, 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 ~~25, 2020~~29, 2023, appearing in the Company’s ~~final Prospectus~~Annual Report on Form 10-K for the annual period ended December 29, 2023, filed with the ~~SEC~~Securities and Exchange Commission on ~~July 29, 2021 pursuant~~March 8, 2024. There have been no changes to ~~Rule 424(b) under~~ the ~~Securities Act~~Company’s critical accounting estimates and policies or application since the date of ~~1933,~~the Annual Report except as ~~amended (hereinafter, the “Prospectus”).~~discussed below.

The Company’s fiscal year is the 5252- or ~~53 week~~53-week period that ends on the last Friday of December. Fiscal ~~year 2021 is a 53-week period~~years 2024 and ~~fiscal year 2020 was a~~2023 were 52-week ~~period.~~periods. The three months ended ~~June 25, 2021~~March 29, 2024 and ~~June 26, 2020~~March 31, 2023 were 13-week ~~periods, and the six months ended June 25, 2021 and June 26, 2020 were 26-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 ~~February 2016,~~November 2023, the Financial Accounting Standards Board ~~(the “FASB”~~(“FASB”) issued Accounting Standards Update (“ASU”) ~~No. 2016-02,~~2023-07 ~~Leases~~Segment Reporting (Topic ~~842)~~280): Improvements to Reportable Segment Disclosures~~, which establishes~~ (“ASU 2023-07”). ASU 2023-07 updates the ~~principles~~requirements for a public entity to ~~report transparent~~disclose its significant segment expense categories and ~~economically neutral~~amounts for each reportable segment. A significant segment expense is considered an expense that is significant to the segment, regularly provided to or easily computed from information ~~about~~regularly provided to the ~~assets~~chief operating decision maker, and ~~liabilities that arise from leases. This new guidance requires lessees to recognize the lease assets and lease liabilities that arise from leases~~included in the ~~statement~~reported measure 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 issuedsegment profit or loss. ASU ~~2020-05, which deferred the~~2023-07 is effective ~~date to~~for fiscal years beginning after December 15, ~~2021,~~2023, and interim periods within fiscal years beginning after December 15, ~~2022. Adoption of the new standard is expected to result in the recognition of right-of-use assets and operating lease liabilities related to currently classified operating leases.~~2024. The Company is ~~still~~currently evaluating ~~the materiality of~~ the impact of ~~this standard on its~~the adoption of ASU 2023-07 and expects that any impact would be limited to additional disclosures in the notes to the unaudited condensed consolidated financial ~~statements and disclosures.~~statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 updates the requirements for a public entity to enhance income tax disclosures to provide a better assessment on how an entity’s operations, related tax risks, tax planning, and operational opportunities affect its tax rate and prospects for future cash flows. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of the adoption of ASU 2023-09 and expects that any impact would be limited to additional disclosures in the notes to the unaudited condensed consolidated financial statements.

Snap One Holdings Corp. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

~~(Unaudited)~~

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 is currently evaluating the impact this guidance will have on its condensed consolidated financial statements.

In ~~August 2018, the FASB issued ASU 2018-15, “~~Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract”. The guidance aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This standard is effective for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. The Company is currently evaluating the impact this guidance will have on its condensed consolidated financial statements.

Recently Adopted Accounting Pronouncements — In ~~December 2019,~~March 2020, the FASB issued ASU ~~2019-12,~~ 2020-04,~~Income Taxes~~ Reference Rate Reform (Topic ~~740)~~848): ~~Simplifying~~Facilitation of the ~~Accounting~~Effects of Reference Rate Reform on Financial Reporting (Accounting Standards Codification 848, “ASC 848”). ASC 848 provides practical expedients and exceptions for ~~Income Taxes.~~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, ~~This update simplifies accounting for income taxes by eliminating some exceptions~~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. 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 ~~general approach in Accounting Standards Codification~~cessation of the London InterBank Offered Rate (“~~ASC”~~LIBOR”) ~~740, Income Taxes, related~~is limited to ~~intraperiod tax allocation,~~(i) the ~~methodology~~interest expense and certain fees it incurs on balances outstanding under its credit facilities, which the Company amended on April 17, 2023 to replace LIBOR with the Secured Overnight Financing Rate (“SOFR”) (see Note 6 for ~~calculating income tax in an interim period~~further discussion), (ii) certain interest rates that may become applicable pursuant to the Company’s Tax Receivable Agreement (“TRA”) which may be amended by the Company and the ~~recognition of deferred tax liabilities~~TRA Party Representative if such interest rates become applicable and (iii) the Company’s interest rate cap agreement, which was amended on June 30, 2023 to replace LIBOR with SOFR as the interest rate benchmark for ~~outside basis differences. This update is effective~~the Term Loan. The Company utilized the practical expedients set forth in Topic 848 and has continued to account for ~~fiscal years,~~its interest rate cap at fair value and ~~interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.~~has not applied modification accounting to its debt instruments. The ~~amendments in this update should be applied on either a retrospective basis, a modified retrospective basis or prospectively, depending on the provision within the amendment. The~~ Company fully adopted the standard ~~for~~as of June 30, 2023 and the ~~fiscal year beginning December 26, 2020. Adoption of the standard~~adoption did not have a material impact on ~~the~~our condensed consolidated financial statements.

3. ~~Acquisitions~~

On May 4, 2021, the Company entered into a Purchase Agreement (the “Purchase Agreement”) pursuant to which it acquired all of 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 will enhance the Company’s networking solutions for residential and commercial networks. The Company agreed to a purchase price of $36,334, consisting of both cash and equity, plus contingent consideration of up to $2,000 based upon the achievement of specified financial targets. The acquisition closed on May 28, 2021.

The Company recorded tangible and intangible assets acquired and liabilities assumed in the transaction under 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.

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 through the use of the asset. Estimated useful life was determined based on management’s estimate of the period the name will be in use.

~~Snap One Holdings Corp. and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(in thousands, except per share amounts)~~

~~(Unaudited)~~

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 and recorded in other liabilities in the accompanying condensed consolidated balance sheet.

~~The acquisition was funded using cash consideration of $26,309, rollover equity of $10,025 and contingent consideration of $2,000.~~

~~The preliminary allocation of the purchase price for the acquisition is as follows:~~


~~Total purchase consideration~~	$	~~38,334~~
~~Cash and cash equivalents~~	$	~~488~~
~~Accounts receivable~~	~~1,101~~
~~Inventory~~	~~2,029~~
~~Property and equipment~~	77
~~Identifiable intangible assets~~	~~17,700~~
~~Total identifiable assets acquired~~	~~21,395~~
~~Accounts payable~~	~~1,266~~
~~Accrued liabilities~~	~~1,218~~
~~Other liabilities~~	~~586~~
~~Deferred income tax liabilities~~	~~1,098~~
~~Total liabilities assumed~~	~~4,168~~
~~Net identifiable assets acquired~~	~~17,227~~
~~Goodwill~~	~~21,107~~
~~Net assets acquired~~	$	~~38,334~~

~~For income tax purposes, a carryover basis in goodwill of $14,491 will be deductible in future periods.~~

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

Useful Lives
(Years) Acquired Value
Customer relationships 10 $ 14,400
Trade name 6 3,300
Total intangible assets $ 17,700

Long-term 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 is considered to approximate the fair value of the remaining obligation for the acquisitions. Deferred revenue was recorded at fair value, resulting in a cumulative balance for the acquisition of $883 in accrued liabilities and $586 in other long-term liabilities.

The Company recognized $197 of transaction-related expenses, consisting primarily of advisory, legal, and other professional fees related to the 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 six months ended June 25, 2021.

~~Snap One Holdings Corp. and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(in thousands, except per share amounts)~~

~~(Unaudited)~~

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 ~~six~~three months ended ~~June 25, 2021~~March 29, 2024 and ~~June 26, 2020:~~March 31, 2023:


	Three Months Ended
	March 29, 2024		March 31, 2023
Deferred revenue – beginning of period	$	34,921	$	35,051
Amounts billed, but not recognized	8,970		8,548
Recognition of revenue	(9,351)		(8,728)
Deferred revenue – end of period	$	34,540	$	34,871

Six Months Ended
June 25,
2021 June 26,
2020
Deferred revenue – beginning of period $ 30,466 $ 23,820
Amounts billed, but not recognized 13,271 12,911
Recognition of revenue (13,592) (11,008)
Deferred revenue acquired 1,469 —
Deferred revenue – end of period $ 31,614 $ 25,723

~~For the~~ ~~six months ended June 25, 2021 and June 26, 2020,~~ the Company recognized revenue related to marketing incentive programs of $1,684 and $2,024, respectively. The expense associated with marketing incentive programs was included in cost of sales, exclusive of depreciation and amortization.

~~The~~ ~~Company recorded deferred revenue of $19,176 in accrued liabilities and $12,438 in other liabilities as of June 25, 2021.~~ The Company recorded deferred revenue of ~~$18,654~~$23,187 and $23,261 in accrued liabilities and ~~$11,812~~$11,353 and $11,660 in other liabilities as of March 29, 2024 and December ~~25, 2020.~~29, 2023, respectively.

Disaggregation of Revenue — The following table sets forth revenue ~~from~~by geography between the United States and all ~~international dealers and distributors~~geographies outside of the United States for the three months ended March 29, 2024 and ~~six months~~ ~~ended June 25, 2021 and June 26, 2020:~~March 31, 2023:


		Three Months Ended				Six Months Ended
		June 25, 2021		June 26, 2020		June 25, 2021		June 26, 2020
United States		$	223,820	$	169,343	$	417,898	$	323,811
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 29, 2024
		March 29, 2024
		March 29, 2024
Domestic integrators(a)
Domestic integrators(a)
Domestic integrators(a)
Domestic other(b)
Domestic other(b)
Domestic other(b)
International(c)
International(c)
International(c)	International(c)	29,485		19,776		55,875		37,919
Total	Total	$	253,305	$	189,119	$	473,773	$	361,730
Total
Total

(a)“Domestic integrators” is defined as professional “do-it-for-me” integrators who transact with Snap One through a traditional integrator channel in the United States.

(b)“Domestic other” is defined as 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.

Snap One Holdings Corp. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

~~Additionally~~

(d),Certain amounts, including ANLA, LLC (“Access Networks”) net sales, have been reclassified to conform to the current period presentation.

The following table sets forth revenue by product type between proprietary products and third-party products for the three months ended March 29, 2024 and March 31, 2023:


	Three Months Ended
	March 29, 2024		March 31, 2023
Proprietary products(a)	$	163,621	$	171,375
Third-party products(b)	82,457		80,665
Total	$	246,078	$	252,040

(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 29, 2024 and ~~six months~~March 31, 2023:


	Three Months Ended
	March 29, 2024		March 31, 2023
Products transferred at a point in time	$	236,727	$	243,312
Services transferred over time	9,351		8,728
Total	$	246,078	$	252,040

4. ~~ended June 25, 2021 and June 26, 2020:~~Balance Sheet Components

Three Months Ended Six Months Ended
June 25,
2021 June 26,
2020 June 25,
2021 June 26,
2020
Products transferred at a point in time $ 245,776 $ 183,714 $ 460,181 $ 350,722
Services transferred over time 7,529 5,405 13,592 11,008
Total $ 253,305 $ 189,119 $ 473,773 $ 361,730
Accounts Receivable, net:

As of ~~June 25, 2021,~~March 29, 2024 and December ~~25, 2020,~~29, 2023, the Company’s accounts receivable, net consisted of the following:


	March 29, 2024		December 29, 2023
Accounts receivable	$	47,509	$	48,138
Allowance for credit losses	(2,169)		(2,259)
Accounts receivable, net	$	45,340	$	45,879

June 25,
2021 December 25,
2020
Accounts receivable $ 59,021 $ 51,716
Allowance for doubtful accounts (2,371) (2,353)
Accounts receivable, net $ 56,650 $ 49,363
Inventories:

As of March 29, 2024 and December 29, 2023, the Company’s inventory consisted of the following:


	March 29, 2024		December 29, 2023
Finished goods	$	252,059	$	270,153
Raw materials	12,666		13,846
Work in process	36		276
Reserve for obsolete and slow-moving inventory	(15,520)		(15,482)
Total inventories	$	249,241	$	268,793

Snap One Holdings Corp. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

~~(Unaudited)~~

5.~~Inventories, Net~~

AsAccrued Liabilities:

Accrued liabilities as of ~~June 25, 2021,~~March 29, 2024 and December ~~25, 2020, the Company’s inventory~~29, 2023, consisted of the following:

June 25,
2021 December 25,
2020
Raw materials $ 8,953 $ 11,340
Work in process 394 591
Finished goods 177,142 155,618
Reserve for obsolete and slow moving inventory (12,130) (10,450)
Total inventories, net $ 174,359 $ 157,099


	March 29, 2024		December 29, 2023
Deferred revenue	$	23,187	$	23,261
Payroll, vacation, and bonus accruals	11,735		13,973
Warranty reserve	8,316		8,776
Customer rebate program	6,396		6,722
Sales return allowance	2,058		5,267
Incurred but not reported self-insurance	1,750		1,610
Taxes	1,078		568

Interest payable	—		931
Other accrued liabilities	3,993		1,523
Total accrued liabilities	$	58,513	$	62,631

6.5.Goodwill and Other Intangible Assets, Net

Goodwill asas of ~~June 25, 2021,~~March 29, 2024 and December ~~25, 2020,~~29, 2023, was ~~$580,842~~$592,186 and ~~$559,735,~~$592,389, respectively. ~~Goodwill increased by $21,107~~Changes in ~~2021 due to~~goodwill reflect the ~~acquisition~~impact of ~~Access Networks (see Note 3). There were no changes to goodwill during the year ended December 25, 2020.~~foreign currency translation.

As of ~~June 25, 2021,~~March 29, 2024 and December ~~25, 2020,~~29, 2023, other intangible assets, net, consisted of the following:


				June 25, 2021
		Estimated Useful Life		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
			March 29, 2024											March 29, 2024
	Estimated Useful Life									Estimated Useful Life	Gross Carrying Amount (a)	Accumulated Amortization	Net Carrying Amount
Customer relationships	Customer relationships	5 – 25 years		$	509,162	$	(82,793)	$	426,369
Technology	Technology	5 – 15 years		95,078		(30,313)		64,765
Trade names – definite	Trade names – definite	2 – 10 years		57,660		(13,580)		44,080
Trade names – indefinite	Trade names – indefinite	indefinite		76,564		—		76,564
Total intangible assets	Total intangible assets			$	738,464	$	(126,686)	$	611,778


				December 25, 2020
		Estimated Useful Life		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
			December 29, 2023											December 29, 2023
	Estimated Useful Life									Estimated Useful Life	Gross Carrying Amount (a)	Accumulated Amortization	Net Carrying Amount
Customer relationships	Customer relationships	5 – 25 years		$	494,333	$	(70,060)	$	424,273
Technology	Technology	5 – 15 years		95,078		(22,406)		72,672
Trade names – definite	Trade names – definite	2 – 10 years		54,360		(10,253)		44,107
Trade names – indefinite	Trade names – indefinite	indefinite		76,564		—		76,564
Total intangible assets	Total intangible assets			$	720,335	$	(102,719)	$	617,616

(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 ~~June 25, 2021~~March 29, 2024 and ~~June 26, 2020,~~March 31, 2023 was ~~$12,079~~$12,145 and ~~$11,872, respectively. Total amortization expense for intangible assets for the six months ended June 25, 2021 and June 26, 2020, was $23,967 and $23,747,~~$12,437, respectively. The weighted-average useful life remaining for amortizing definite lived intangible assets was approximately ~~15.5~~13.9 years as of ~~June 25, 2021.~~March 29, 2024.

Snap One Holdings Corp. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

~~(Unaudited)~~

As of ~~June 25, 2021,~~March 29, 2024, the estimated amortization expense for intangible assets for the next five fiscal years and thereafter are as follows:

Remainder of 2021 $ 24,586
2022 48,321
2023 47,183
2024 40,681
2025 33,065
2026 and thereafter 341,378
Total $ 535,214


Remainder of 2024	$	30,937
2025	35,588
2026	35,233
2027	34,417
2028	33,871
2029 and thereafter	246,083
Total	$	416,129

7.6.Debt Agreements

On ~~August 4, 2017,~~December 8, 2021, the ~~Company’s wholly owned subsidiary, Wirepath LLC (the “Borrower”)~~Company entered into and became a party to a credit agreement by and between the Company, 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 a$465,000 in aggregate principal amount of senior secured term ~~loan~~loans maturing seven years from the effective date (the ~~“Initial Term~~“Term Loan”) and a $100,000 senior secured revolving credit facility (which includes borrowing capacity available for letters of credit) maturing five years from the effective date (the “Revolving Credit Facility”). ~~On February 5, 2018,~~

Additionally, on October 2, 2022, the ~~Borrower repriced~~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 three years from the effective date. The Incremental Agreement amended the Credit Agreement ~~to reduce~~(the Credit Agreement, as amended by the ~~margin~~Incremental Agreement, the “Amended Credit Agreement”).

On October 26, 2022, the Company entered into an interest rate cap agreement on the ~~Initial~~floating rate component of interest (LIBOR, subsequently transitioned to SOFR) for the Term Loan, 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. As of March 29, 2024, the notional amount of the interest rate cap is $347,100 of the Term Loan and ~~Revolving~~has a strike rate of 4.79%, which effectively caps SOFR on the notional amount at 4.79%. As of March 29, 2024, the three-month SOFR rate was 5.35%.

On April 17, 2023, the Company entered into an Amendment to the Credit ~~Facility. On~~Agreement (the “Amendment to the Credit Agreement”), further amending the Credit Agreement dated as of December 8, 2021 (as amended by the Amended Credit Agreement dated as of October ~~31, 2018,~~2, 2022). The Amendment to the ~~Borrower repriced~~Credit Agreement replaces LIBOR with SOFR as the ~~Initial~~interest rate benchmark for certain loans as provided thereunder along with other conforming changes. Other than the foregoing, the parties to the Credit Agreement continue to have the same obligations set forth in the Credit Agreement prior to the effectiveness of the Amendment to the Credit Agreement.

Borrowings under the Term Loan ~~facility~~will bear interest at a rate per annum equal to, ~~further reduce~~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 (subsequently changed to the forward-looking term rate based on SOFR for rates initiated after the effective date of the Amendment to the Credit Agreement) 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 (subsequently changed to the forward-looking term rate based on SOFR for rates initiated after the effective date of the Amendment to the Credit Agreement) 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 ~~Initial~~Incremental Term Loan ~~increased~~will bear interest at a rate per annum equal to, at the ~~aggregate amount~~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 ~~Initial~~federal funds effective rate, (b) the prime rate and (c) the forward-looking term rate based on the SOFR for an interest period of one month plus 1.00%; provided that such rate is not lower than a floor of 1.00% or (2) an applicable margin plus

Snap One Holdings Corp. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

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 10.00% as of March 29, 2024 and ~~further reduced~~10.04% as of December 29, 2023. The interest rate for the ~~margin~~Incremental Term Loan was 12.10% as of March 29, 2024 and 12.14% as of December 29, 2023.

Borrowings under the Revolving Credit ~~Facility. On August 1, 2019,~~Facility will bear interest at a rate per annum equal to an applicable margin based upon a leverage-based pricing grid, plus, at the ~~Borrower amended~~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 (subsequently changed to the forward-looking term rate based on SOFR for rates initiated after the effective date of the Amendment to the Credit ~~Agreement~~Agreement) for an interest period of one month, plus 1.00%; provided such rate is not lower than a floor of 1.00% or (2) a eurocurrency rate determined by reference to ~~borrow an~~the applicable cost of funds for such borrowing adjusted for certain additional ~~senior secured~~costs (subsequently changed to the forward-looking term ~~loan (the “Incremental Term Loan” and, together with~~rate based on SOFR for rates initiated after the ~~Initial Term Loan, as amended,~~effective date of the ~~“Term Loans”) and increased~~Amendment to the ~~commitments~~Credit Agreement); provided such rate is not lower than a floor of zero, subsequently changed to 0.50% based on SOFR for rates initiated after the effective date of the Amendment to the Credit Agreement. There were no borrowings under the Revolving Credit ~~Facility.~~ Facility as of March 29, 2024 or December 29, 2023.

The ~~Company makes~~Term Loan amortizes in fixed equal quarterly installments ~~on the Term Loans~~ in an amount equal to ~~1.0%~~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 29, 2024 and December 29, 2023 was as follows:


Instrument	Maturity Date	March 29, 2024		December 29, 2023
Credit Agreement
Term Loan	December 8, 2028	$	455,700	$	456,863
Incremental Term Loan	October 2, 2025	$	54,313	$	54,450
Revolving Credit Facility	December 8, 2026	$	—	$	—
Outstanding Letters of Credit	December 8, 2026	$	4,940	$	4,940

Instrument Maturity Date Amount Interest Rate
Effective rate
(as of June 25, 2021)
Credit Agreement (as amended)
Initial Term Loan 8/4/2024 292,355 LIBOR plus 4.00% 4.20 %
Incremental Term Loan 8/4/2024 390,000 LIBOR plus 4.75% 4.95 %
Revolving Credit Facility 8/4/2022 60,000 LIBOR plus 4.00% 4.20 %
Credit Agreement (at origination)
Initial Term Loan 8/4/2024 265,000 LIBOR plus 5.25%
Revolving Credit Facility 8/4/2022 50,000 LIBOR plus 5.25%

The amount available under the Revolving Credit Facility was $95,060 and $95,060 as of March 29, 2024 and December 29, 2023, respectively.

As of March 29, 2024, the future scheduled maturities of the above notes payable are as follows:


Remainder of 2024	$	2,600
2025	58,688
2026	4,650
2027	5,813
2028	438,262
Total future maturities of debt	510,013
Unamortized debt issuance costs	(11,043)
Total indebtedness	498,970
Less: Current maturities of long-term debt	3,900
Long-term debt	$	495,070

Unamortized costs related to the issuance of the Term Loan were $11,043 and $11,793 as of March 29, 2024 and December 29, 2023, 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 $818 and $895 as of March 29, 2024 and

Snap One Holdings Corp. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

December 29, 2023, and were included in other assets in the consolidated balance sheet. The costs related to debt issuances are amortized to interest expense over the life of the related debt. As of March 29, 2024, the future amortization of debt issuance costs was as follows:


Remainder of 2024	$	2,569
2025	3,374
2026	2,123
2027	1,918
2028	1,877
Total	$	11,861

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 29, 2024 and December 29, 2023. For additional information on the Company’s debt arrangements, debt covenants and default provisions, see Note 7 of the Notes to the Consolidated Financial Statements for the year ended December 29, 2023, 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 ~~25, 2020, in accordance with these provisions,~~29, 2023, the Company ~~estimated~~did not incur a mandatory excess cash flow payment offer related to the term loans of $14,325 to the lender. The entire amount of the expected payment was classified within current maturities of long-term debt on the consolidated balance sheet as of December 25, 2020. Subsequent to the issuance of the Company’s audited financial statements as of and for the period ended December 25, 2020, the Company elected an option available in the financing agreement to accelerate expected cash outlays in fiscal year 2021 that would eliminate the requirement for an excess cash flow payment for fiscal year 2020. As a result, the estimated excess cash payment was not made and only the contractual payments under the financing agreement are considered current maturities of long-term debt as of June 25, 2021.

As of June 25, 2021 and December 25, 2020, the Company had no borrowings outstanding under the Revolving Credit Facility and $4,894 of outstanding letters of credit. The amount available under the Revolving Credit Facility was $55,106 as of June 25, 2021 and December 25, 2020. The Company borrowed $47,375 under the Revolving Credit Facility during the six months ended June 26, 2020 in order to enhance liquidity as a precautionary measure in response to the COVID-19 pandemic and the borrowings were repaid in full later in the year ending December 25, 2020.

~~Snap One Holdings Corp. and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(in thousands, except per share amounts)~~

~~(Unaudited)~~

~~As of June 25, 2021, the future scheduled maturities of the above notes payable are as follows:~~

Remainder of 2021 $ 5,118
2022 6,824
2023 6,824
2024 650,431
Total future maturities of long-term debt 669,197
Unamortized debt issuance costs (17,728)
Total indebtedness 651,469
Less: Current maturities of long-term debt 6,824
Long-term debt $ 644,645

Unamortized costs related to the issuance of the Term Loans were $17,728 and $20,595 as of June 25, 2021 and December 25, 2020 and are 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 $399 and $583 as of June 25, 2021 and December 25, 2020 and are included in other assets in the condensed consolidated balance sheets. The costs related to debt issuances are amortized to interest expense over the life of the related debt. As of June 25, 2021, the future amortization of debt issuance costs is as follows:

Remainder of 2021 $ 3,050
2022 5,951
2023 5,735
2024 3,391
Total $ 18,127

~~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 June 25, 2021 and December 25, 2020. Forrequired additional information on the Company’s debt arrangements, debt covenants and default provisions, see Note 8, Debt Agreements, of the consolidated financial statements for the year ended December 25, 2020 in the Prospectus.payment.

8.7.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 June 25, 2021 As of December 25, 2020
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Assets
Notes receivable, net $ 5,309 $ 5,375 $ 5,115 $ 5,494
Liabilities
Initial Term Loan $ 285,046 $ 270,081 $ 286,508 $ 267,169
Incremental Term Loan $ 384,150 $ 382,229 $ 386,100 $ 384,652


	As of March 29, 2024				As of December 29, 2023
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Liabilities
Term Loan	$	455,700	$	454,561	$	456,863	$	444,299
Incremental Term Loan	$	54,313	$	55,670	$	54,450	$	54,450

~~The fair value 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.~~ 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

~~Snap One Holdings Corp. and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(in thousands, except per share amounts)~~

~~(Unaudited)~~

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.

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 (subsequently transitioned to SOFR) 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 accordingly, the Company records the fair value of the agreement 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 ~~to be~~ a Level 2 measurement. The interest rate cap had noa fair value of $4,427 and $4,597 as of ~~June 25, 2021~~March 29, 2024 and December ~~25, 2020.~~29, 2023, respectively, and is recorded in other liabilities on the Company’s condensed consolidated balance sheets. The change in fair value was recognized as a component of other expense (income), net, in the condensed consolidated statements of operations and was $170 of income and $818 of expense for the three months ended March 29, 2024 and March 31, 2023, respectively. As there was an other-than-insignificant financing element present at inception of the interest rate cap agreement, proceeds from periodic settlements of the interest rate cap were reflected as a financing activity on the Company’s condensed consolidated statements of cash flows.

~~This fair value of the contingent consideration liability related~~

Snap One Holdings Corp. and Subsidiaries

Notes to the Access Networks acquisition was based on unobservable inputs, including management estimates and assumptions about future revenues, and is, therefore, classified as Level 3. The fair value of the contingent consideration was Unaudited Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

~~$2,000~~ ~~as of~~ ~~June 25, 2021~~.

The Company utilizes ~~the option-pricing method, which was used with the Black-Scholes option-pricing model (“OPM”)~~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~~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. ~~Accordingly, the CVRs are classified as Level 3.~~

Fair value at
June 25, 2021
Valuation Technique
Unobservable
Input
Volatility
Contingent Value Rights $6,840 OPM Volatility 37.1%

~~Changes in the CVRs for the six months ended June 25, 2021 and June 26, 2020 were as follows:~~

June 25,
2021 June 26,
2020
CVR fair value – beginning of period $ 4,000 $ 3,200
Fair value adjustments $ 2,840 $ (1,000)
CVR fair value – end of period $ 6,840 $ 2,200

CVR liabilities are ~~classified~~categorized as other liabilities in the accompanying condensed consolidated balance sheets and ~~changes to the fair value of CVR liabilities~~ are ~~included in selling, general and administrative expenses in the condensed consolidated statements of operations.~~classified as Level 3.

Fair value at

March 29, 2024

Valuation Technique

Unobservable

Input

Volatility

Contingent Value Rights

$200

Monte Carlo

Volatility

60%

Changes in the CVRs for the three months ended March 29, 2024 and March 31, 2023 were as follows:


	March 29, 2024		March 31, 2023
CVR fair value – beginning of period	$	1,400	$	1,700
Fair value adjustments	(1,200)		600
CVR fair value – end of period	$	200	$	2,300

There were no transfers into or out of Level 3 ~~investments~~ during the three months ~~and six months~~ended ~~June 25, 2021~~March 29, 2024 or ~~June 26, 2020.~~March 31, 2023.

9.~~Accrued Liabilities~~

~~Accrued liabilities as of June 25, 2021 and December 25, 2020, consisted of the following:~~

June 25,
2021 December 25,
2020
Payroll, vacation, and bonus accruals $ 21,821 $ 29,700
Deferred revenue 19,176 18,654
Warranty reserve 14,996 11,767
Interest payable 7,521 7,576
Sales return allowance 4,192 3,741
Customer rebate program 2,712 2,140
Incurred but not reported 1,198 1,215
Taxes 1,176 752
Other accrued liabilities 6,673 5,113
Total accrued liabilities $ 79,465 $ 80,658

~~Snap One Holdings Corp. and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(in thousands, except per share amounts)~~

~~(Unaudited)~~

~~10.~~8.Warranties

Changes in the Company’s accrued warranty liability for the ~~six~~three months ended ~~June 25, 2021~~March 29, 2024 and ~~June 26, 2020, are~~March 31, 2023 were as follows:


		June 25, 2021		June 26, 2020
	March 29, 2024								March 29, 2024			March 31, 2023
Accrued warranty – beginning of period	Accrued warranty – beginning of period	$	16,523	$	19,989	Accrued warranty – beginning of period	$	11,910		$	15,039
Warranty claims	Warranty claims	(5,810)		(5,546)		Warranty claims	(2,959)			(2,945)
Warranty provisions	Warranty provisions	8,588		3,766		Warranty provisions	1,993			1,944
Accrued warranty – end of period	Accrued warranty – end of period	$	19,301	$	18,209	Accrued warranty – end of period	$	10,944		$	14,038

As of ~~June 25, 2021,~~March 29, 2024, the Company has recorded accrued warranty liabilities of ~~$14,996~~$8,316 in accrued liabilities and ~~$4,305~~$2,628 in other liabilities in the accompanying condensed consolidated balance sheet. As of December ~~25, 2020,~~29, 2023, the Company has recorded accrued warranty liabilities of ~~$11,767~~$8,776 in accrued liabilities and ~~$4,756~~$3,134 in other ~~liabilities.~~liabilities.

~~11.~~9.Retirement Plan

The Company has a ~~legacy~~ 401(k) plan that covers eligible employees as defined by the plan agreement. ~~As of January 1, 2020, the~~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 ~~$919~~$1,458 and ~~$346~~$1,335 for the three months ended ~~June 25, 2021~~March 29, 2024 and ~~June 26, 2020, respectively. Company contributions to the plan, net of forfeitures, were $2,089 and $1,501 for the six months ended June 25, 2021 and June 26, 2020,~~March 31, 2023, respectively.

Snap One Holdings Corp. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

~~12.~~

10.Equity Agreements and Incentive Equity Plans

Former Parent Incentive Plan — In October 2017, ~~Crackle Holdings, L.P. (the “Parent”)~~the Former Parent Entity approved the Class B Unit Incentive Plan ~~which established~~(the “2017 Plan”) pursuant to the ~~terms and provided for grants of certain incentive units to employees, officers, directors, consultants, and advisors of the Company containing service-based and/or market-based vesting criteria.~~Company’s partnership agreement. Class B-1 Incentive Units (“B-1 Units”) ~~become vested~~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”) ~~have~~issued under the 2017 Plan contained both ~~service-based~~service conditions consistent with the B-1 Units and market-based vesting conditions ~~as they are subject to the same service conditions as the B-1 Units, but also require~~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”) and initially reserved 10,500 shares for issuance. The number of shares available for issuance under the 2021 Plan is subject to adjustment for certain changes in the Company’s capitalization. In addition, the 2021 Plan contains an evergreen provision such that on the first day of each fiscal year, the number of shares available for issuance shall be increased by that number of shares, if any, equal to the lesser of (i) a number of shares such that the aggregate amount of shares available following the increase is equal to 4.0% of the fully diluted shares outstanding on the last day of the preceding fiscal year, or (ii) a lesser amount determined by the Company’s Compensation Committee. Pursuant to this provision, the Company ~~estimated~~increased the number of shares in the 2021 Plan by approximately 1,625 shares during the three months ended March 29, 2024.

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 the Company’s restricted common stock. Vested Incentive Units were exchanged into shares of the Company’s 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 ~~discount~~derived service period. All the outstanding restricted stock awards issued to replace B-2 Units were forfeited on February 4, 2024, for ~~lack~~failure to meet certain performance hurdles required pursuant to their terms. For additional information on the Equity Award Conversion, see Note 11 of ~~marketability (“DLOM”) using a put option model.~~the Notes to the Consolidated Financial Statements for the fiscal year ended December 29, 2023, 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 ~~DLOM reflects~~grant date fair value of restricted stock awards was determined to be $18.00 per share, based on the ~~lower value placed~~initial listing price of the Company’s common stock on ~~securities that are not freely transferable, as compared~~the grant date. All B-2 Units were forfeited on February 4, 2024, for failure to ~~those that trade frequently in established markets.~~meet certain performance hurdles required pursuant to their terms.

The summary of the Company’s ~~incentive unit~~restricted stock awards activity ~~as of June 25, 2021~~ is as follows:

B-1 Incentive Units B-2 Incentive Units
Number of
Units
(in 000’s)
Weighted-
Average
Grant-Date
Fair Value
Number of
Units
(in 000’s)
Weighted-
Average
Grant-Date
Fair Value
Outstanding units-December 25, 2020 70,739 $ 0.34 19,822 $ 0.06
Units granted 1,200 0.51 — —
Units forfeited 3,353 0.39 — —
Outstanding units-June 25, 2021 68,586 $ 0.34 19,822 $ 0.06
Vested units-June 25, 2021 34,916 $ 0.31 — —
Nonvested units-June 25, 2021 33,670 $ 0.37 19,822 $ 0.06


	Restricted Stock Awards
	B-1 Incentive Units			B-2 Incentive Units
	Number of Units	Weighted- Average Grant-Date Fair Value		Number of Units	Weighted- Average Grant-Date Fair Value
Outstanding at December 29, 2023	103	$	18.00	662	$	18.00
Granted	—	—		—	—
Vested	40	18.00		—	—
Forfeited	1	18.00		662	18.00
Outstanding at March 29, 2024	62	$	18.00	—	$	—

Snap One Holdings Corp. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

~~During~~

Stock Options

In connection with the ~~six months ended June 25, 2021, 3,366~~IPO, the Company granted options to holders of B-1 Units ~~vested with a total grant-date~~(“Time-based Options”) and options to holders of B-2 Units (“Market-based Options”), as further discussed in Note 11 of the Notes to the Consolidated Financial Statements for the year ended December 29, 2023, in the Annual Report. All market-based options were forfeited on February 4, 2024, for failure to meet certain performance hurdles required pursuant to the terms.

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


	Time-based Options					Market-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 29, 2023	3,755	$	6.50	$	—	935	$	5.66	$	—
Granted	—	—		—		—	—		—
Exercised	—	—		—		—	—		—
Forfeited	54	6.79		—		935	5.66		—
Outstanding at March 29, 2024	3,701	$	6.50	$	—	—	$	—	$	—
Options exercisable at March 29, 2024	3,306	$	6.39	$	—	—	$	—	$	—

(a) The intrinsic value represents the amount by which the fair value of ~~$962.~~the Company’s stock exceeds the option exercise price as of March 29, 2024 and December 29, 2023.

Restricted Stock Units ~~There~~— The Company grants restricted stock units (“RSUs”) with time-based vesting requirements under the 2021 Plan. These RSUs typically have an initial annual cliff vest and then vest quarterly over the remaining service period, which is generally four years. The fair value of RSUs is based on the Company’s closing stock price on the date of grant.

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


	Restricted Stock Units
	Number of Units	Weighted-Average Grant-Date Fair Value
Outstanding at December 29, 2023	2,491	$	12.63
Granted	1,505	8.50
Vested	468	12.28
Forfeited	62	13.19
Outstanding at March 29, 2024	3,466	$	10.87

As of March 29, 2024, there were ~~no grants~~105 vested and unissued restricted stock units.

Performance Stock Units — During the three months ended March 29, 2024 and March 31, 2023, the Company granted performance-based restricted stock units (“PSUs”) to certain employees under the 2021 Plan. The awards issued during the three months ended ~~June 25, 2021.~~ March 29, 2024 and March 31, 2023, contain three separate tranches, each for a separate one-year performance period and each with a performance target to be established concurrently with the annual budget process. Accordingly, each tranche is accounted for as a separate grant. The ~~Company recognized $1,178~~targets for the PSUs issued during the three

Snap One Holdings Corp. and ~~$1,185~~Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

months ended March 29, 2024 and March 31, 2023 include Company-specific annual earnings targets and internal performance measures.

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


	Performance Stock Units
	Number of Units	Weighted-Average Grant-Date Fair Value
Outstanding at December 29, 2023	338	$	14.35
Granted	568	8.50
Vested	280	13.13
Forfeited	3	11.59
Outstanding at March 29, 2024	623	$	9.55

As of March 29, 2024, there were 71 vested and unissued performance stock units.

Total equity-based compensation expense — Equity-based compensation expense is included within selling, general and administrative expenses in the accompanying condensed consolidated statements of ~~operations~~operations. For all equity-based compensation awards, the Company recognizes forfeitures as they occur. Compensation expense for the three months ended March 29, 2024 and March 31, 2023, and unrecognized stock compensation expense and weighted average remaining expense period as of March 29, 2024 consisted of:


	Compensation Expense				As of March 29, 2024
	Three Months Ended March 29, 2024		Three Months Ended March 31, 2023			Unrecognized Compensation Expense		Weighted-Average Remaining Contractual Term (Years)
2021 Plan
Restricted stock awards	$	447	$	633		$	1,298	0.88
Time-based options	838		1,022			2,381		1.02
Market-based options	212		629			—		0.00
Restricted stock units	3,047		3,543			35,338		3.02
Performance stock units	1,077		1,650			4,614		0.92
Other equity-based compensation	100		100			326		0.81
Total	$	5,721	$	7,577		$	43,957	1.89

Employee Stock Purchase Plan — The Company’s board of directors adopted, and its shareholders approved, the Snap One Holdings Corp. 2021 Employee Stock Purchase Plan (the “ESPP”). The ESPP initially reserved 750 shares for issuance. The number of shares available for issuance under the ESPP is subject to adjustment for certain changes in the Company’s capitalization. In addition, the ESPP contains an evergreen provision such that each January 1, starting in 2022 and ending in 2031, the number of shares available for issuance shall be increased by that number of shares equal to the lesser of (i) a number of shares such that the aggregate amount of shares available following the increase is equal to 1% of the fully diluted shares outstanding on December 31 of the preceding year, or (ii) a lesser amount determined by the Company’s Compensation Committee. Pursuant to this provision the Company increased the number of shares in the ESPP by approximately 346 shares during the three months ended ~~June 25, 2021~~March 29, 2024 and ~~June 26, 2020, respectively.~~186 shares during the three months ended March 31, 2023. Under the ESPP, shares of common stock may be purchased by eligible participants during defined purchase periods at 85% of the lesser of the closing price of the Company’s common stock on the first day or last day of each purchase period. The Company used a Black-Scholes option pricing model to value the common stock purchased as part of the Company’s ESPP. The fair value estimated by the option pricing model is affected by the price of the common stock as well as subjective variables that include assumed interest rates, the Company’s expected dividend yield, and the expected share volatility over the term of the award.

1720

Snap One Holdings Corp. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

~~(Unaudited)~~

~~recognized $2,238~~Offering periods are generally six months long and ~~$2,547~~begin on May 23 and November 23 of each year. The Company did not have any shares purchased under the ESPP for the three months ended March 29, 2024. Stock-based compensation expense ~~within~~recognized related to the ESPP was $192 and $186 for the three months ended March 29, 2024 and March 31, 2023, and is included in selling, general, and administrative expenses in the accompanying condensed consolidated statements of ~~operations~~operations. Eligible participants contributed $881 and $256 as of March 29, 2024 and December 29, 2023, respectively, which is included in accrued liabilities in the accompanying condensed consolidated balance sheets. Unrecognized compensation expense as of March 29, 2024 was $117.

11.Income Taxes

The effective income tax rate for the Company was an expense of 92.58% on a pre-tax loss for the three months ended March 29, 2024, as compared to a benefit of 17.10% on a pre-tax loss for the three months ended March 31, 2023. The change in the effective tax rate for the three months ended March 29, 2024, and the difference from the U.S. federal statutory rate of 21%, was primarily the result of an increase in the valuation allowance and FIN 48 reserve offset by research & development (“R&D”) credits.

Income tax expense was $11,025 during the three months ended March 29, 2024, compared to a benefit of $3,000 during the three months ended March 31, 2023.

12. ~~six months~~Tax Receivable Agreement

~~ended June 25,~~

On July 29, 2021, the Company executed a Tax Receivable Agreement (“TRA”) with certain pre-IPO owners (“TRA Participants”). The TRA provides for payment by the Company to the TRA Participants of 85% of the amount of cash savings, if any, in U.S. federal, state and ~~June 26, 2020, respectively.~~local income tax that the Company utilizes in the future from net operating losses and certain other tax benefits that arose prior to the IPO. The Company recognizes this contingent liability in its condensed consolidated financial statements when incurrence of the liability becomes probable and amounts are reasonably estimable. Subsequent changes to the measurement of the TRA liability are recognized in the condensed consolidated statements of operations as a component of other expense (income), net. The Company will retain the benefit of the remaining 15% of these cash tax savings.

As of June 25, 2021, there was approximately $11,546 of unrecognized compensation expense related to outstanding incentive units, which is expected to be recognized subsequent to June 25, 2021, over a weighted-average period of approximately four years.

~~Control4 Equity Awards~~ ~~— In connection with the acquisition of Control4 Corporation in 2019,~~March 29, 2024, the Company ~~agreed to~~recognized a ~~settlement~~total liability of ~~Control4 equity awards that were outstanding immediately prior to~~$80,562, of which $12,827 and $67,735 are recorded within the ~~acquisition date, consisting of stock options (“C4 Stock Options”)~~current and ~~restricted stock units (“C4 RSUs” and, together with C4 Stock Options, “C4 Equity Awards”).~~noncurrent tax receivable agreement liability financial statement line items, respectively. As of December 29, 2023, the ~~acquisition date, 2,998 shares~~Company recognized a total liability of ~~C4 Equity Awards~~$102,036, of which $21,107 and $80,929 was recorded within the current and noncurrent tax receivable agreement liability financial statement line items, respectively. For the three months ended March 29, 2024 and March 31, 2023, the Company recognized measurement adjustments of $(367) and $144, respectively, which were ~~cancelled and converted into rights to receive cash payments (the “Replacement Awards”).~~recognized in other expense (income), net, on the condensed consolidated statements of operations. During the three months ended ~~June 25, 2021, Replacement Awards forfeited were 1. As~~March 29, 2024 and March 31, 2023, the Company made payments to TRA participants of ~~June 25, 2021, 126 unvested Replacement Award units remain outstanding. There were no vested Replacement Award units outstanding as~~$22,089 and $10,468 respectively, which included interest of ~~June 25, 2021.~~$982 and $277.

~~The~~With respect to certain pre-IPO owners that are not TRA Participants, the Company ~~recognized $818~~has recorded amounts held in escrow for these participants in prepaid expense of $24 and ~~$2,266~~$124 as of ~~compensation expense relating~~March 29, 2024 and December 29, 2023, respectively. During the three months ended March 29, 2024, $1,787 of the amount held in escrow was forfeited by pre-IPO owners due to the ~~Replacement Awards~~failure to meet certain required performance hurdles and distributed to certain shareholders, resulting in the reversal of previously recognized compensation expense. The amount distributed to certain shareholders represents a non-cash financing distribution for the three months ended March 29, 2024. For the three months ended March 29, 2024 and March 31, 2023, the Company recorded $(1,687) and $279 within selling, general, and administrative expenses in the accompanying condensed consolidated statement of operations during the three months ended June 25, 2021 and June 26, 2020, respectively. The Company recognized $2,544 and $5,068 of compensation expense relating to the Replacement Awards within selling, general and administrative expenses in the accompanying condensed consolidated statement of operations during the six months ended June 25, 2021 and June 26, 2020, respectively.

There was approximately $2,572 of unrecognized compensation expense related to the nonvested Replacement Awards, which is expected to be recognized subsequent to June 25, 2021 over a weighted- average period of approximately 1 year. Total unrecognized compensation expense will be adjusted for future forfeitures.operations.

13.~~Income Taxes~~

The effective income tax rate for the Company was an expense of 12.7% and a benefit of 8.3% for the three and six months ended June 25, 2021, respectively, as compared to a benefit of 23.9% and 19.3%% for the three and six months ended June 26, 2020, respectively. The change in the effective tax rate for the three and six months ended June 25, 2021, and the difference from the U.S. federal statutory rate of 21% was primarily the result of discrete items recognized related to one-time transaction costs, the adjustment of deferred tax liabilities and the benefit of certain tax credits.

Income tax expense was $119 during the three months ended June 25, 2021, compared to income tax benefit of $1,015 during the three months ended June 26, 2020. Income tax benefit was $644 during the six months ended June 25, 2021, compared to income tax benefit of $5,331 during the six months ended June 26, 2020.

~~14.~~Commitments and Contingencies

Legal Proceedings — During the normal course of business, the Company is occasionally involved with various claims and litigation. Reserves are established in connection with such matters when a loss is probable, and the amount of such loss can be reasonably estimated. As of ~~June 25, 2021,~~March 29, 2024 and December ~~25, 2020,~~29, 2023, no ~~material~~significant reserves were recorded. The determination of probability and the estimation of the actual amount of any such loss are inherently unpredictable, and it is therefore possible that the eventual outcome of such claims and litigation could exceed the

Snap One Holdings Corp. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

estimated reserves, if any. However, the Company does not expect the outcome of the matters currently pending will have a material adverse effect on the condensed consolidated financial statements.

14.Leases

~~Lease Commitments~~ — The Company determines if an arrangement is a lease or contains a lease at inception. For all leases with a term longer than 12 months, operating leases are recorded under the noncurrent asset operating lease financial statement line item and the current and noncurrent operating lease liability financial statement line items on the Company’s condensed consolidated balance sheets. The Company has lease agreements with lease and non-lease components, which the Company has elected to account for as a single lease component for all asset classes. Lease expense is recognized on a straight-line basis over the lease term.

Right-of-Use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Since most of the Company’s leases do not provide an implicit rate, the Company uses its own incremental borrowing rate (“IBR”) on a collateralized basis in determining the present value of lease payments. The Company utilizes a market-based approach to estimate the IBR.

The Company’s lease arrangements primarily consist of operating leases for offices, warehouse space, and distribution centers. ~~These~~The leases have remaining lease terms of 1 year to 10 years, some of which include options to extend for up to an additional 5 years, and some of which include options to terminate prior to completion of the contractual lease term with or without penalties. The Company’s lease term only includes periods covered by options if those options are ~~classified~~reasonably certain of being exercised (or not reasonably certain of being exercised as ~~operating leases with various expiration dates through 2028. In addition~~it relates to ~~base rent,~~termination options). Variable lease payments that depend on an index or rate (such as the ~~Company~~Consumer Price Index or a market interest rate) are included in the measurement of ROU assets and lease liabilities using the index or rate at the commencement date. Variable payments, other than those dependent upon an index or rate, are excluded from the measurement of the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is ~~obligated~~incurred. The variable lease cost primarily represents variable payments related to ~~reimburse certain~~ common area maintenance and utilities. The Company’s leases do not contain any material residual value guarantees.

The components of the Company’s lease costs ~~required~~are:


	Three Months Ended
	March 29, 2024		March 31, 2023
Operating lease cost (a)	$	3,771	$	4,226
Variable lease cost	1,366		1,371
Short-term lease cost	43		72
Total lease cost	$	5,180	$	5,669

(a)Included in cost of sales, exclusive of depreciation and amortization, and selling, general and administrative expenses in the Company’s unaudited condensed consolidated statements of operations.

Supplemental cash flow information and non-cash activity related to ~~operate~~ the ~~facilities. Substantially all the~~Company’s operating leases include renewal options with varying terms. The Company recognizes rental expense and amortizes tenant improvement allowances on a straight-line basis over the stated lease term, including renewal periods if reasonably assured of being exercised. Total rental expense for the three months ended June 25, 2021 and June 26, 2020, was approximately $2,771 and $2,856, respectively. Total rental expense for the six months ended June 25, 2021 and June 26, 2020, was approximately $5,899 and $5,424, respectively.are as follows:


	Three Months Ended
	March 29, 2024		March 31, 2023
Cash paid for amounts included in the measurement of lease liabilities	$	3,922	$	3,683
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations	$	457	$	985

1822

Snap One Holdings Corp. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

~~(Unaudited)~~

Weighted-average remaining lease term and discount rate for the Company’s operating leases are as follows:


	March 29, 2024
Weighted-average remaining lease term	6.02 years
Weighted-average discount rate	7.99	%

As of March 29, 2024, future lease payments under non-cancelable lease commitments for the next five fiscal years and thereafter were as follows:


Remainder of 2024	$	11,986
2025	14,842
2026	12,653
2027	10,677
2028	8,396
Thereafter	20,603
Total lease payments	79,157
Less: Imputed interest	17,931
Less: Lease incentive receivable	33
Present value of lease liabilities	$	61,193

As of March 29, 2024, the Company has entered into one additional lease agreement for office space that has not yet commenced. Aggregate lease payments for this lease total $863 on an undiscounted basis.

15.Stockholders’ Equity

Holders of voting common stock are entitled to one vote per share and to receive dividends. ~~The Company had~~There was no noncontrolling ~~interests of $282 and $316~~interest outstanding as of ~~June 25, 2021 and~~March 29, 2024 or December ~~25, 2020, respectively, related to a joint venture formed prior to 2018.~~

~~Changes in noncontrolling interests each period include net income attributable to noncontrolling interests and cash contributions by minority partners to the Company’s consolidated subsidiaries.~~29, 2023. There were no cash contributions by minority partners for the three months ended March 29, 2024 or March 31, 2023.

Share Repurchase Program — On May 12, 2022, the Board of Directors authorized a $25,000 share repurchase program. Under the share repurchase program, Snap One may purchase shares of common stock on a discretionary basis from time to time through open market repurchases, privately negotiated transactions or other means, including through Rule 10b5-1 trading plans or through other techniques such as accelerated share repurchases. The timing and ~~six months~~ ~~ended June 25, 2021~~number of shares repurchased will depend on a variety of factors, including stock price, trading volume, and general business and market conditions. The repurchase program does not obligate the Company to acquire a specified number of shares and may be modified, suspended or ~~June 26, 2020, respectively.~~discontinued at any time at the board of directors’ discretion. The repurchase program was set to expire at the end of 2023, but on November 6, 2023, the Company’s Board of Directors extended the expiration of the repurchase program until the end of 2024.

~~In connection with~~Share repurchase activity consists of the ~~IPO,~~following:


	Three Months Ended
	March 29, 2024		March 31, 2023
Number of shares repurchased	—		27
Total cost	$	—	$	238
Average per share cost including commissions	$	—	$	8.81

The Company has elected to retire shares repurchased to date. Shares retired become part of the ~~Company increased~~pool of authorized but unissued shares. The purchase price of the ~~authorized number~~retired shares in excess of ~~shares of its common stock~~par value, including transaction costs, is recorded as a decrease to ~~500,000~~additional paid-in capital.

Snap One Holdings Corp. and ~~authorized 50,000 shares of preferred stock. There was no preferred stock outstanding as of~~ ~~June 25, 2021 and December 25, 2020. All references~~Subsidiaries

Notes to ~~share and~~the Unaudited Condensed Consolidated Financial Statements

(in thousands, except per share ~~amounts in the Company’s condensed consolidated financial statements have been retrospectively revised to reflect the stock split, the increase in par value and the increase in authorized shares.~~amounts)

16.Loss Per Share

Basic loss per share represents net loss divided by the weighted-average shares outstanding. Diluted loss per share is the same as basic income or loss per ~~share, as the~~share. The Company ~~had no potentially dilutive securities~~was in a loss position during the three months ended March 29, 2024 and ~~six months~~ ~~ended June 25, 2021 or June 26, 2020.~~March 31, 2023. The following table presents the calculations of basic and diluted loss per share for the three months ended March 29, 2024 and ~~six months~~ ~~ended June 25, 2021 and June 26, 2020:~~March 31, 2023:

Three Months Ended Six Months Ended
June 25,
2021 June 26,
2020 June 25,
2021 June 26,
2020
Net loss attributable to Company (1,044) (3,213) (7,058) (22,207)
Weighted-average shares outstanding-basic and diluted 59,217 58,885 59,217 58,513
Loss per share-basic and diluted $ (0.02) $ (0.05) $ (0.12) $ (0.38)


	Three Months Ended
	March 29, 2024		March 31, 2023
Net loss attributable to Company	$	(22,933)	$	(14,548)
Weighted-average shares outstanding - basic and diluted	76,360		75,291
Loss per share - basic and diluted	$	(0.30)	$	(0.19)

The Company’s restricted stock awards, stock options, restricted stock units and performance stock units were excluded from the computation of diluted net loss per share because their effect would have been anti-dilutive. Awards with performance and market-based vesting conditions are excluded from the calculation of dilutive potential common shares until the conditions have been satisfied. The following potentially dilutive shares were excluded from the computation of diluted net loss per share attributable to common stockholders:


	Three Months Ended
	March 29, 2024	March 31, 2023
Restricted stock awards	337	979
Time-based options	3,731	4,150
Market-based options	370	1,126
Restricted stock units	2,935	2,042
Performance stock units	536	321
Other equity-based compensation	28	69
Total	7,937	8,687

17.Related Parties

The Company’s controlling shareholder, Hellman & Friedman, LLC (“H&F”), has an ownership interest in a human capital management, payroll, HR service and workforce management vendor used by the Company. For the three months ended March 29, 2024 and March 31, 2023, the Company incurred $107 and $56 of expenses, respectively, related to this vendor. These expenses are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. Amounts owed by the Company in connection with the expenses described above were not material as of March 29, 2024 and March 31, 2023, respectively.

18.Subsequent Events

On ~~July 16, 2021,~~April 14, 2024, the Company ~~declared~~and Resideo Technologies, Inc. (“Resideo”) executed an Agreement and Plan of Merger (the “Merger Agreement”), the form of which was filed by the Company with the SEC in a ~~special dividend~~Current Report on Form 8-K on April 18, 2024. Pursuant to ~~its Parent of $13,046 with cash on hand which will~~the Merger Agreement, Resideo agreed to acquire Snap One in an all-cash transaction for $10.75 per share. The transaction is expected to be ~~used to pay certain pre-IPO owners for their interests in lieu of their participation~~completed in the ~~tax receivable agreement as further discussed below. Approximately $2,754~~second half of ~~the cash payments to pre-IPO owners are~~2024, and is subject to ~~vesting requirements~~customary closing conditions, including receipt of applicable antitrust and will be held in escrow. The cash payments held in escrow will be expensed over the requisite vesting period. The remaining $10,292 of the cash payments were paid and expensed in conjunction with the closing of the IPO.other regulatory approvals.

~~On July 16, 2021,~~Also pursuant to the Merger Agreement, the Company ~~adopted~~together with the 2021 Equity Incentive Plan in order to provide a means through which to attract, retain and motivate key personnel. Awards available for grant under the 2021 Equity Incentive Plan include non-qualified and incentive stock options, restricted shares of our common stock, other ~~equity based awards tied~~parties to the ~~value of our common stock~~TRA have agreed to waive any unpaid payments due and cash-based awards. In conjunction with the IPO, the Company issued 1,659 restricted shares of common stock to convert all outstanding and unvested incentive units under the 2017 Incentive Plan. These restricted shares are subject to similar vesting terms and conditions that applied to the incentive units under the 2017 Incentive Plan prior to the conversion. Additionally, the Company issued 5,399 stock options to holders of incentive units under the 2017 Incentive Plan. The stock options allow the recipient to purchase common stockowing as of the ~~Company following the IPO at a strike price of $18.00 and have similar vesting terms and conditions that applied to the incentive units under the 2017 Incentive Plan. As a result of issuance~~date of the ~~stock options,~~Merger Agreement and terminate the ~~Company expects~~TRA. Certain of the Company’s executive officers received cash retention bonuses which totaled $6,799, pursuant to ~~record share-based compensation expense in conjunction with the IPO based~~a form of Retention Bonus Agreement that was also disclosed on the ~~grant-date fair value of the awards.~~

~~On July 29, 2021, the Company executed a tax receivable agreement (the “TRA”) with certain pre-IPO owners (the “TRA Participants”) that provides for payment~~Current Report on 8-K filed by the Company towith the TRA Participants of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that the Company expects to be able to utilize in the future from net operating losses and certain other tax benefits that arose prior to the IPO. The Company will record an estimated liability of approximately $112,681 representing the probable and reasonably estimable amount of its obligation over the term of the TRA with a corresponding charge to additional paid in capital as of July 29, 2021.

SEC on April 18, 2024.

~~Snap One Holdings Corp. and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(in thousands, except per share amounts)~~

~~(Unaudited)~~

In July 2021, the Company further amended its amended and restated certificate of incorporation which, among other things, effected a 150-for-1 stock split of its shares of common stock, increased the par value of its common stock from $0.001 to $0.01 per share, increased the authorized number of shares of its common stock to 500,000 and authorized 50,000 shares of preferred stock. All references to share and per share amounts in the Company’s condensed consolidated financial statements have been retrospectively revised to reflect the stock split, the increase in par value and the increase in authorized shares.

~~On July 30, 2021 the Company completed its IPO. For details of this event, see Note 1.~~

On August 4, 2021, the Company used a portion of the net proceeds from the IPO to repay a portion of the Incremental Term Loan outstanding under the Credit Agreement totaling $215,874, plus accrued interest of $1,028. The Company will incur a charge of $6,645 related to the write-off of unamortized debt issuance costs.

On August 18, 2021, the Company closed the underwriters exercise of their over-allotment option to purchase 1,171 additional shares of our common stock from the Company, resulting in additional net proceeds of approximately $19,757 after deducting underwriting discounts and commissions of $1,317.

2024

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this quarterly report on Form 10-Q, as well as our ~~final Prospectus filed with the Securities and Exchange Commission (the “SEC”) on July 29, 2021 (hereinafter, the “Prospectus”).~~Annual Report. The statements in this discussion ~~regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and all other non-historical statements in this discussion are~~contain forward-looking statements and are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our ~~management.~~management and involve risks and uncertainties. Actual results could differ materially from those discussed in or implied by forward-looking statements ~~as a result of~~due to various factors, including ~~those discussed~~ below and ~~elsewhere~~other sections in this Form 10-Q and ~~the Prospectus, particularly~~ in our “Risk Factors” or in ~~other sections of this Form 10-Q and the Prospectus.~~our Annual Report.

We operate on a 52-week or 53-week fiscal year ending on the last Friday of December each year. Our fiscal year is divided into four quarters of 13 weeks, each beginning on a Saturday and containing one 5-week period followed by two 4-week periods. When a 53-week fiscal year occurs, we report the additional week in the fourth fiscal quarter. References to fiscal year ~~2020~~2023 are to our 52-week fiscal year ended December ~~25, 2020.~~29, 2023. The fiscal quarters ended ~~June 25, 2021~~March 29, 2024 and ~~June 26, 2020~~March 31, 2023 were both 13-week periods.

Overview

Snap One powers smart living by enabling professional integrators to deliver seamless experiences in the connected homes and ~~small~~ businesses where people live, work, and play. ~~The combination of our~~We offer an end-to-end product ecosystem delivered through our powerful distribution network and further bolstered by our ~~technology-enabled workflow solutions delivers~~value-added services and support solutions. We serve a ~~compelling value proposition to our~~ loyal and growing network of professional do-it-for-me (“DIFM”) integrator customers. We provide integrators with a leading, comprehensive, proprietary, and third-party suite of connected, infrastructure, entertainment, and software solutions ~~so the entire~~that deliver exceptional smart living ~~experience is exceptional for~~experiences to the end consumer. Our product and service offerings encompass all of the elements required by integrators to build integrated smart living systems that are easy to install and simple to manage ~~serving~~while creating a powerful and premium experience for the ~~needs of both integrators and~~ end ~~consumers.~~consumer. Our ~~differentiated~~ technology and ~~software-enabled workflow tools have been~~software solutions are designed to support the integrator throughout the project lifecycle, enhancing their operations and helping them to profitably grow their businesses.

We are vertically integrated with ~~the majority~~most of our Net Sales and Contribution Margin, a Non-GAAP financial metric reconciled below, coming from our ~~proprietary-branded,~~proprietary branded, internally developed products ~~that are only available~~sold to DIFM integrators ~~directly~~in home technology, security, and commercial markets. Our comprehensive suite of solutions allows integrators to find everything they need in one place and to deliver high-quality, reliable, and configurable systems to end consumers. We also offer subscription-based services for end consumers, including Parasol, 4Sight, Control4 Connect, and Control4 Assist. We launched Control4 Connect and Control4 Assist in January 2024, and we believe these new services significantly enhance our software platform, providing a foundation from ~~Snap One. These proprietary products are manufactured on an asset-light basis through~~which to build future service innovations and offerings. We have carefully designed our ~~network of contract manufacturing and joint development suppliers located primarily in Asia. In addition, we offer a curated set of leading third-party products~~software platforms to enhance the ~~one-stop shop experience~~long-term satisfaction of the end consumer, drive recurring revenue and incremental profitability for ~~integrators, driving~~Snap One and our partners, and align the industry in a way that focuses on the end consumer. We believe these service offerings establish Snap One as a leader in the industry as it evolves to manage increasingly complex technology and more demanding customer ~~stickiness and sales growth.~~expectations.

Recent Developments

On ~~May 28, 2021,~~April 14, 2024, Snap One and Resideo executed the Merger Agreement, the form of which we ~~completed~~filed with the acquisition of ANLA, LLC. (“Access Networks”), an enterprise-grade networking solutions provider offering networking products, design, configuration, monitoring and support services. We expect thatSEC in a Current Report on Form 8-K on April 18, 2024. Pursuant to the ~~acquisition will enhance our networking solutions for residential and commercial networks. The Company~~Merger Agreement, Resideo agreed to ~~a purchase price~~acquire Snap One in an all-cash transaction for $10.75 per share. The transaction is expected to be completed in the second half of ~~$36.3 million, consisting~~2024, and is subject to customary closing conditions, including receipt of ~~both cash~~applicable antitrust and ~~equity, plus contingent consideration of up to $2.0 million based upon the achievement of specified financial targets. See Note 3~~ ~~of the~~ ~~Notes to the Condensed Consolidated Financial Statements for more information regarding the acquisition.~~other regulatory approvals.

~~On July 16, 2021, we declared a special dividend~~Pursuant to the ~~Parent of $13.0 million.~~ ~~See Note 17~~ Merger Agreement, the Company together with the other parties to the TRA have agreed to waive any unpaid payments due and owing as of the ~~Notes~~date of the Merger Agreement and terminate the TRA. Certain of the Company’s executive officers received cash retention bonuses which totaled $6.8 million, pursuant to a form of Retention Bonus Agreement that was also disclosed on the ~~Condensed Consolidated Financial Statements for more information regarding~~Current Report on 8-K filed by the ~~special dividend.~~Company with the SEC on April 18, 2024.

~~On July 30, 2021, we completed our initial public offering (the “IPO”) of 13,850,000 shares of our common stock at~~Snap One will prepare an ~~offering price of $18.00 per share, resulting in net proceeds of $233.7 million after deducting underwriting discounts and commissions of $15.6 million. On August 18, 2021,~~information statement for its stockholders containing the Company closed the underwriters exercise of their over-allotment option to purchase 1,170,812 additional shares of our common stock from the Company, resulting in additional net proceeds of approximately $19.8 million after deducting underwriting discounts and commissions of $1.3 million. ~~See Notes 1 and 17~~ ~~of the~~ ~~Notes~~information with respect to the ~~Condensed Consolidated Financial Statements for more~~Merger specified in Schedule 14C promulgated under the Exchange Act and describing the pending Merger. When completed, a definitive information ~~regarding the IPO.~~

statement will be mailed to Snap One’s stockholders. INVESTORS ARE URGED TO CAREFULLY READ THE INFORMATION STATEMENT REGARDING THE PENDING MERGER AND ANY

2125

~~In connection with our IPO, we executed a tax receivable agreement (the “TRA”) with certain pre-IPO owners.~~ ~~See Note 17~~ ~~of the~~ ~~Notes to the Condensed Consolidated Financial Statements for more information regarding the TRA.~~OTHER RELEVANT DOCUMENTS IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PENDING MERGER.

~~On August 4, 2021,~~Snap One’s stockholders may obtain free copies of the documents we ~~used a~~file with the SEC through the Investors Relations portion of ~~the net proceeds from the IPO to repay a portion of the Incremental Term Loan outstanding~~Snap One’s website at investors.snapone.com under the ~~Credit Agreement totaling $215.9 million, plus accrued interest of $1.0 million. The Company will incur a charge of $6.6 million related to~~link “Reports and Filings” and then under the ~~write-off of unamortized debt issuance costs.~~link “SEC Filings” or by contacting Snap One’s Investor Relations Department by (a) mail at 1355 W. Innovation Way, Suite 125, Lehi, UT 84043, (b) telephone at (949) 574-3860, or (c) e-mail at IR@snapone.com.

Key Factors Affecting Our Performance

Our historical financial performance has been primarily driven by the following factors, ~~which~~and we also expect these factors to continue to be the primary drivers of our financial performance in the future.

~~Grow Wallet Share to Increase~~Increased Average Spend per Integrator via Wallet Share Expansion. Increasing wallet share with integrators depends, in part, on our ability to continue expanding our omni-channel coverage, extending our productsuite, bolstering our supportservices, and creating deeper integration across our products to ~~make it compelling for~~compel integrators to use Snap One as their one-stop shop. Average wallet share with our integrators varies across DIFM markets, with particular strength in home technology and demonstrated success in commercial markets. We believe we can increase our wallet share with existing integrators through the adoption of our ecosystems, new product innovation, and ~~security.~~our compelling loyalty program.

~~AddNew~~ DIFM Integrator ~~Customers~~Additions in Home Technology, ~~Security,~~ Commercial, and Internationally. We are a market leader in our core domestic home technology market, and we believe ~~that~~ our value proposition appeals to integrators in attractive adjacent markets. We are utilizing our proven strategy of acquiring integrators in the home technology market to attract integrators in ~~security and~~ commercial markets, where we are less penetrated but have displayed a track record of growth. We believe ~~that~~ strategic investments in expanding our product portfolio, ~~and~~improvements in targeted sales and marketing, and new integrator onboarding initiatives will allow us to grow our network of integrators across these markets. We also believe there is a meaningful opportunity to expand our existing market share in non-U.S.markets. We plan to grow in these markets by investing in sales resources, broadening our available product portfolio, and strengthening our direct-to-integrator sales ~~approach.~~approach in certain targeted international markets.

~~Continue to Invest~~Investments in Our Integrated Platform. Our end-to-end product and software ecosystem and ~~technology-enabled~~ workflow solutions create an integrated platform of leading offerings, which we believe drive significant value for our integrators and personalized, immersive experiences for end consumers. We believe we can extend the value of our integrated platform by delivering value-added services to integrators and end consumers on a subscription basis.

~~Enhance Our~~ Omni-Channel ~~Strategy.~~Strategy Expansion. Our business model is built around an e-commerce centric, ~~omni- channel~~omni-channel go-to-market strategy. We provide a comprehensive e-commerce portal, which allows integrators to easily research products, design projects, receive training and certifications, order products, and solicit ongoing support. Our e-commerce portal is complemented by a growing network of 2743 domestic local branches, two Canadian local branches, and ~~seven~~six distribution ~~centers.~~centers as of March 29, 2024. The local branch presence is an important part of our strategy as it allows us to better serve integrators ~~locally~~ by providing ~~same day~~same-day product availability when necessary, creating a site for relationship building with our support team, and for training and product demonstration sessions. We believe integrators value the relationships and support we can deliver at the local level, and this further increases their loyalty ~~with~~to our business across channels.

~~Execute~~ Strategic Acquisitions. In addition to our organic growth, we continue to grow our business through strategic acquisitions such as our acquisitions of Access Networks, Staub Electronics, LTD (“Staub”), Remote Maintenance Systems LP, doing business as Parasol (“Parasol”) and Clare Controls, LLC (“Clare”) to better serve existing and new integrators, broaden our product categories and extend the geographic reach of our omni-channel capabilities. We ~~will~~expect to continue to pursue disciplined, accretive acquisitions that enhance our products, software and workflow solutions and expand into adjacent markets that allow us to better serve our integrator base.

~~Impact of the COVID-19 Pandemic~~Macroeconomic Factors

~~The connected home market has fared well throughout~~Throughout the COVID-19 pandemic, as market data indicates that there has been an increase in the percentage of disposable income being spent on home- related goods and services as more of the working population has been staying at home. Furthermore, integration companies were deemed “essential workers” by the United States federal government, allowing a majority of integrators to remain open throughout the COVID-19 pandemic. Throughout the pandemic, we ~~have~~ supported professional integrators with their business challenges ~~including staff considerations and the dynamic of practicing social distancing with their customers,~~ to allow them to continue to provide their customers the infrastructure and connectivity ~~needed to create personalized experiences for individuals~~they needed. In the wake of the COVID-19 pandemic, in 2021 and ~~families who~~2022, global supply chain constraints resulted in component sourcing, shipping, and logistics challenges resulting in cost inflation; which in turn resulted in delayed product availability in some cases. Although many supply chain issues have stabilized, and we are ~~spending more time at home.~~

no longer experiencing any material impacts from COVID-19, we expect

2226

~~Following initial demand declines~~that some impact, including potential delayed product availability, may continue for ~~our products and services in March and April 2020, sales recovered~~ as ~~professional integrators’ services became increasingly important for homeowners working and seeking entertainment from home. Our favorable liquidity position, disciplined~~long as the global supply chain ~~execution and inventory availability drove strong performance. This has resulted~~is experiencing these residual effects. We continue to invest in ~~accelerated growth in our business and reinforced our mission-criticality to our integrators. This macroeconomic trend has primarily been favorable to our business results to date, but more recent~~ supply chain ~~challenges, increasing supplier costs,~~initiatives to attempt to mitigate the ~~possible sustained spread or resurgence~~impact of ~~the pandemic, and any government response thereto, increase the uncertainty regarding~~ future ~~economic conditions upon which our future business depends.~~disruptions.

In February 2022, Russian military forces launched a military action in Ukraine and continued conflict and disruption in the region is likely. Although the length, impact, and outcome of the ongoing military action is highly unpredictable, this conflict has caused some global supply chain disruption, including volatility in commodity prices and supply of energy resources, instability in financial markets, political and social instability, and increases in cyberattacks and cyber and corporate espionage. Further, the Israel-Hamas War has caused substantial regional instability and world-wide concern and may disrupt global markets and foreign interest rates, cause increased inflation in energy and logistics costs, and disrupt the supply chain. Due to recent shipping disruptions in the Red Sea and surrounding waterways caused by attacks on shipping vessels in response to the Israel-Hamas war, we have taken preventative measures to avoid this route for any transportation activity. These alternative routes have not yet materially affected any of our lead-times or costs. We are actively monitoring these situations and potential impacts on the Company, but to date we have not experienced any material interruptions in our infrastructure, supplies, technology systems, or networks needed to support our operations from these international conflicts.

For additional information of risks related to macroeconomic factors, including military conflict and COVID-19, refer to “Risk Factors” in our Annual Report.

Key Metrics and Reconciliation of Non-GAAP Financial Data

In addition to the measures presented in our consolidated financial statements, we ~~use~~present the following ~~additional~~ key business metrics on a fiscal year basis to help us monitor the performance of our business, ~~measure our performance,~~ identify trends affecting our business, and assist us in making strategic decisions:

Domestic Integrator Net Sales, Transacting Domestic Integrators, Spend per Transacting Domestic Integrator

We define “Domestic Integrator Net Sales” as sales in the fiscal year period from professional DIFM integrator customers who transact with Snap One in the United States through a traditional integrator channel. Domestic Integrator Net Sales is presented as a component of our revenue disaggregation.

We define “Transacting Domestic Integrators” as a unique integrator business that transacted with Snap One domestically in a fiscal year period.

We calculate “Spend per Transacting Domestic Integrator” as Domestic Integrator Net Sales divided by Transacting Domestic Integrators.

We believe these metrics are useful measures for evaluating our performance on a fiscal year basis by providing insight into the expansion of our integrator network and our ability to further capture wallet share.

The following table presents a reconciliation of Domestic Integrator Net Sales, Transacting Domestic Integrators and Spend per Transacting Domestic Integrator for the periods presented:


	Fiscal years ended
	December 29, 2023			December 30, 2022
	($ in thousands)
Domestic integrator net sales	$	904,788		$	941,676
Divided by:
Transacting domestic integrators (in thousands)	19.7			19.6
Spend per domestic integrator	$	45.9		$	48.0

Year over year growth %
Transacting domestic integrators	0.5		%
Spend per domestic integrator	(4.4)		%

Adjusted EBITDA and Adjusted Net (Loss) Income

We define ~~Adjusted EBITDA~~“Adjusted EBITDA” as net loss, plus interest expense, ~~net,~~ income tax ~~benefit,~~expense (benefit), depreciation and amortization, other expense (income), net, further adjusted to exclude equity-based compensation, ~~acquisition-~~acquisition-related and ~~integration- related~~integration-related costs and certain other non-recurring, non-core, infrequent or unusual charges as ~~described~~set forth in the reconciliation in this section below.

We define ~~Adjusted~~“Adjusted Net ~~Income~~(Loss) Income” as net loss, plus amortization, further adjusted to exclude equity-based compensation, ~~acquisition-~~acquisition-related and integration-related costs, (income) expense related to the interest rate cap and certain non-recurring, non-core, infrequent or unusual charges, including the estimated tax impacts of these ~~adjustments.~~adjustments, as set forth in the reconciliation in this section below.

Adjusted EBITDA and Adjusted Net (Loss) Income are key measures used by management to understand and evaluate our financial performance ~~trends~~ and generate future operating plans. Management uses these key measures to make strategic decisions regarding the allocation of capital and to analyze investments in initiatives that are focused on cultivating new markets for our products and services. We believe Adjusted EBITDA and Adjusted Net (Loss) Income are useful measurements for analysts, investors and other interested parties to evaluate companies in our markets as they help identify underlying trends that could otherwise be masked by certain expenses that we do not consider indicative of our ongoing performance.

Adjusted EBITDA and Adjusted Net (Loss) Income have limitations as analytical tools. These measures are not calculated in accordance with GAAP and should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. In addition, Adjusted EBITDA and Adjusted Net (Loss) Income may not be comparable to similarly titled metrics of other companies due to differences among the methods of calculation.

The following table presents a reconciliation of net loss to Adjusted EBITDA for the periods presented:

Three Months Ended Six Months Ended
June 25,
2021 June 26,
2020 June 25,
2021 June 26,
2020
(in thousands)
Net loss $ (1,056) $ (3,229) $ (7,092) $ (22,247)
Interest expense 9,543 11,742 19,078 24,545
Income tax expense (benefit) 119 (1,015) (644) (5,331)
Depreciation and amortization 14,198 14,500 27,910 28,983
Other income (296) (2,217) (509) (1,334)
Equity-based compensation 1,178 1,185 2,238 2,547
Fair value adjustment to contingent value rights(a)
1,530 (700) 2,840 (1,000)
Acquisition- and integration-related costs(b)
222 899 236 4,377
Initial public offering costs(c)
1,210 — 2,921 —
Deferred revenue purchase accounting adjustment(d)
141 280 289 650
Deferred acquisition payments(e)
1,428 2,933 3,580 6,235

Other(f)

1,095

1,807

Three Months Ended

March 29,
2024

(in thousands)

Net loss

Interest expense

Income tax expense (benefit)

Depreciation and amortization

Other expense (income), net

Equity-based compensation

Compensation expense for payouts in lieu of TRA participation(a)

Fair value adjustment to contingent value rights(b)

IT system transition costs(c)

Severance cost(d)

Deferred acquisition payments(e)

Other professional services costs(f)

Other(g)

Adjusted EBITDA

29,312

24,409

52,654

37,471

Adjusted EBITDA

The following table presents a reconciliation of net loss to Adjusted Net (Loss) Income for the periods presented:


		Three Months Ended				Six Months Ended
		June 25, 2021		June 26, 2020		June 25, 2021		June 26, 2020
		(in thousands)
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 29, 2024
		March 29, 2024
		March 29, 2024
		(in thousands)
		(in thousands)
		(in thousands)
Net loss	Net loss	$	(1,056)	$	(3,229)	$	(7,092)	$	(22,247)
Amortization	Amortization	12,079		11,872		23,967		23,747
Foreign currency (gains) loss		(143)		(985)		(191)		157
Gain on sale of business		—		(979)		—		(979)
Amortization
Amortization
Equity-based compensation	Equity-based compensation	1,178		1,185		2,238		2,547
Equity-based compensation
Equity-based compensation
Foreign currency loss (gain)
Foreign currency loss (gain)
Foreign currency loss (gain)
Interest rate cap (income) expense
Interest rate cap (income) expense
Interest rate cap (income) expense
Compensation expense for payouts in lieu of TRA participation(a)
Compensation expense for payouts in lieu of TRA participation(a)
Compensation expense for payouts in lieu of TRA participation(a)
Fair value adjustment to contingent value rights~~(a)~~(b)	Fair value adjustment to contingent value rights~~(a)~~(b)	1,530		(700)		2,840		(1,000)
Acquisition and integration related costs(b)		222		899		236		4,377
Initial public offering costs(c)		1,210		—		2,921		—
Deferred revenue purchase accounting adjustment(d)		141		280		289		650
Fair value adjustment to contingent value rights~~(a)~~(b)
Fair value adjustment to contingent value rights~~(a)~~(b)
IT system transition costs(c)
IT system transition costs(c)
IT system transition costs(c)
Severance cost(d)
Severance cost(d)
Severance cost(d)
Deferred acquisition payments(e)	Deferred acquisition payments(e)	1,428		2,933		3,580		6,235
Deferred acquisition payments(e)
Deferred acquisition payments(e)
Other professional services costs(f)
Other professional services costs(f)
Other professional services costs(f)
Other~~(f)~~(g)
Other~~(f)~~(g)
Other~~(f)~~(g)	Other~~(f)~~(g)	1,067		(46)		1,757		(108)
Income tax effect of adjustments~~(g)~~(h)	Income tax effect of adjustments~~(g)~~(h)	(3,790)		(3,570)		(7,645)		(8,426)
Adjusted Net Income		$	13,866	$	7,660	$	22,900	$	4,953
Income tax effect of adjustments~~(g)~~(h)
Income tax effect of adjustments~~(g)~~(h)
Adjusted Net (Loss) Income
Adjusted Net (Loss) Income
Adjusted Net (Loss) Income

(a)Represents expense, net of forfeitures, related to payments to certain pre-IPO owners in lieu of their participation in the TRA. Management does not believe such costs are indicative of our ongoing operations as they are one-time awards specific to the establishment of the TRA.

(b)Represents noncash gains and losses recorded from fair value adjustments related to ~~contingent~~CVR liabilities. Fair value ~~right liabilities. Contingent value right (“CVR”)~~adjustments related to CVR liabilities represent potential obligations to the prior sellers in conjunction with the acquisition of the Company by investment funds managed by Hellman & Friedman, LLC (“H&F”) in August ~~2017 and are based on estimates of expected cash payments to the prior sellers based on specified targets for the return on the original capital investment.~~2017.

~~(b)Represents costs directly associated with acquisitions and acquisition-related integration activities. For~~ ~~three months and six months~~ ended June 26, 2020, the costs relate primarily to third-party consultant and information technology integration costs directly related to the Company’s acquisition of Control4 Corporation in August 2019. These costs also include certain restructuring costs (e.g., severance) and other third-party transaction advisory fees associated with the acquisitions.

(c)Represents ~~expenses related~~costs associated with the implementation of enterprise resource planning systems, customer resource management systems, and business intelligence systems as part of our initiative to ~~professional fees in connection with preparation for~~modernize our ~~initial public offering.~~information technology (“IT”) infrastructure.

(d)~~Represents an adjustment related to the fair value of deferred revenue related to the Control4 acquisition.~~Severance cost associated with various restructuring actions such as warehouse relocation, departmental reorganization, and focused reduction in workforce.

(e)Represents expenses incurred related to deferred payments to employees associated with ~~our Control4 acquisition and other~~ historical acquisitions. The deferred payments are cash retention awards for key personnel from the acquired companies and ~~are expected to be~~were paid to employees through 2023. Management does not believe such costs are indicative of our ongoing operations as they are one-time awards specific to acquisitions and are incremental to our typical compensation costs incurred and we do not expect such costs to be reflective of future increases in base compensation expense.

(f)Represents professional service fees associated with managements remediation of the material weakness that was disclosed as part of our initial Registration Statement, preparation for compliance with the Sarbanes-Oxley Act (“SOX”), the implementation of new accounting standards, and accounting for non-recurring transactions.

(g)Represents non-recurring expenses ~~primarily~~ related to consulting, restructuring, and ~~restructuring fees~~other expenses, including costs associated with the merger agreement which management believes are not representative of our operating performance.

~~(g)~~

(h)Represents the tax impacts with respect to each adjustment noted above after ~~taking into account~~considering the impact of permanent differences using the statutory tax rate related to the applicable federal and foreign jurisdictions and the blended state tax rate.

Contribution Margin

We define ~~Contribution Margin~~“Contribution Margin” for a particular period as net sales, less cost of sales, exclusive of depreciation and amortization, divided by net sales. Management uses this key measure to understand and evaluate our financial performance ~~trends~~ and generate future operating plans, make strategic decisions regarding the allocation of capital, and

analyze investments in initiatives ~~that are~~ focused on cultivating new markets for our products and services. We believe Contribution Margin is a useful measurement for analysts, investors, and other interested parties to evaluate companies in our markets as they help identify underlying trends that could otherwise be masked by certain expenses that we do not consider indicative of our ongoing performance.

Contribution Margin has limitations as an analytical tool. This measure is not calculated in accordance with GAAP and should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. In addition, Contribution Margin may not be comparable to similarly titled metrics of other companies due to differences among the methods of calculation.

The following table presents the calculation of Contribution Margin:


		Three Months Ended						Six Months Ended
		June 25, 2021			June 26, 2020			June 25, 2021			June 26, 2020
		(in thousands)
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 29, 2024
		March 29, 2024
		March 29, 2024
		(in thousands)
		(in thousands)
		(in thousands)
Net sales	Net sales	$	253,305		$	189,119		$	473,773		$	361,730
Cost of sales, exclusive of depreciation and amortization (a)	Cost of sales, exclusive of depreciation and amortization (a)	152,140			109,243			281,016			209,633
Cost of sales, exclusive of depreciation and amortization(a)
Cost of sales, exclusive of depreciation and amortization(a)
Net sales less cost of sales, exclusive of depreciation and amortization
Net sales less cost of sales, exclusive of depreciation and amortization
Net sales less cost of sales, exclusive of depreciation and amortization	Net sales less cost of sales, exclusive of depreciation and amortization	$	101,165		$	79,876		$	192,757		$	152,097
Contribution Margin	Contribution Margin	39.9		%	42.2		%	40.7		%	42.0		%
Contribution Margin
Contribution Margin

(a)Cost of sales ~~exclusive of depreciation and amortization~~ for the three months ended ~~June 25, 2021~~March 29, 2024 and ~~June 26, 2020~~March 31, 2023 excludes depreciation and amortization of ~~$14,198~~$15.4 million and ~~$14,500, respectively. Cost of sales, exclusive of depreciation and amortization for the six months ended June 25, 2021 and June 26, 2020 excludes depreciation and amortization of $27,910 and $28,983,~~$15.2 million, respectively.

Free Cash Flow

We define ~~Free~~“Free Cash ~~Flow~~Flow” as net cash provided by (used in) ~~provided by~~ operating activities less capital expenditures, ~~(which~~which consist of purchases of property and equipment as well as purchases of information technology, software development, and leasehold improvements). We believe it is useful to exclude capital expenditures from our Free Cash Flow in order to measure the amount of cash we generate because the timing of such capital investments made may not directly correlate to the underlying financial performance of our business operations.improvements. Free Cash Flow is not a measure calculated in accordance with GAAP and should not be considered in isolation from, or as a substitute for financial information prepared in accordance with GAAP. In addition, Free Cash Flow may not be comparable to similarly titled metrics of other companies due to differences among methods of calculation. Free Cash Flow provides useful information to investors and others in understanding and evaluating our ability to generate additional cash from our business in the same manner as our management and board of directors. Free Cash Flow may be affected in the near to medium term by the timing of capital investments (such as purchases of information technology and other equipment and leasehold improvements), fluctuations in our growth and the effect of such fluctuations on working capital and changes in our cash conversion cycle due to increases or decreases of vendor payment terms as well as inventory turnover.

The following table presents a reconciliation of net cash provided by (used in) ~~provided by~~ operating activities to Free Cash Flow for the periods presented:

Six Months Ended

June 25,
2021

June 26,
2020

(in thousands)

Net cash (used in) provided by operating activities

(4,615)

38,107

Three Months Ended

March 29,
2024

March 31,
2023

(in thousands)

Net cash provided by (used in) operating activities

Purchases of property and equipment

(4,413)

(5,055)

Free Cash Flow

(9,028)

33,052

Basis of Presentation and Key Components of Results of Operations

Net Sales

We generate net sales by selling hardware products, primarily to our professional integrators, ~~hardware products~~ both with and without embedded software, which are then resold to end consumers, typically in the installation of an audio/video, IT, smart-home, or surveillance-related ~~package.~~solution. We act both as a principal in selling proprietary products and as an agent in selling certain third-party products through strategic partnerships with outside suppliers. In addition, we generate a small but growing percentage of our revenue through recurring revenue from subscription services associated with product sales including hosting services, technical support and access to ~~unspecified~~ software updates and upgrades. Revenue is recognized when the integrator obtains control of the product, which typically occurs upon shipment, in an amount that reflects the consideration expected to be received in exchange for those products net of estimated discounts, rebates, returns, allowances, and any taxes collected and remitted to government authorities. Revenue allocated to subscription services is recognized over time as services are provided. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates and Policies — Revenue Recognition” in the ~~Prospectus.~~Annual Report.

Cost of ~~sales, exclusive~~Sales, Exclusive of ~~depreciation~~Depreciation and ~~amortization~~Amortization

Cost of sales, exclusive of depreciation and amortization, includes expenses related to production of proprietary finished goods, including raw materials and inbound freight, purchase costs for third-party products produced by strategic partners and sold by Snap One, rebates, inventory reserve adjustments, and employee costs related to assembly services. The components of our cost of sales, exclusive of depreciation and amortization may not be comparable to our peers. The changes in our cost of sales, exclusive of depreciation and amortization generally correspond with the changes in net sales and may be impacted by any significant fluctuations in the components of our cost of sales, exclusive of depreciation and amortization.

Selling, ~~general~~General, and ~~administrative expenses~~Administrative Expenses

Selling,, general, and administrative costs include payroll and related costs, occupancy costs, costs related to warehousing, distribution, outbound shipping to integrators, credit card processing fees, warranty, purchasing, advertising, research and development, non-income-based taxes, equity-based compensation, acquisition-related expenses, compensation expense for payouts in lieu of the TRA participation, provision for credit losses, and other corporate overhead costs. We expect that our selling, general and administrative expenses will increase in future periods as we continue to grow, and due to additional legal, accounting, insurance and other expenses that we expect to incur as a result of being a public company, including compliance with the Sarbanes-Oxley Act.

Depreciation and ~~amortization~~Amortization

Depreciation expense is related to investments in property and equipment. Amortization expense consists of amortization of intangible assets originating from our acquisitions. Acquired intangible assets include developed technology, customer relationships, trademarks, and trade names. ~~We expect in the future that depreciation and amortization may increase based on acquisition activity, development of our platform and capitalized expenditures.~~

Interest ~~expense~~Expense

Interest expense includes interest expense on debt, including ~~the Revolving Credit Facility, the Initial Term Loan,~~term loans and ~~the Incremental Term Loan~~revolving credit facilities (each of which is described in more detail below under “— Liquidity and Capital Resources — Debt Obligations”), as well as the non-cash amortization of deferred financing costs.

Other ~~income~~Expense (Income), Net

Other ~~income~~ expense (income), net includes interest income, foreign currency remeasurement, TRA liability adjustment, interest rate cap (income) expense, gains and losses on disposal of business, and transaction gains and losses.

Income ~~tax expense (benefit)~~Tax Expense (Benefit)

We are subject to U.S. federal, state, and local income taxes as well as foreign income taxes based on enacted tax rates in each jurisdiction, as adjusted for allowable credits and deductions. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. As a result, we recognize tax liabilities based on estimates of whether additional taxes will be due.

Results of Operations

The following table sets forth our results of operations and results of operations data expressed as a percentage of net sales for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results.


		Three Months Ended								Six Months Ended
		June 25, 2021		% of Net sales		June 26, 2020		% of Net sales		June 25, 2021		% of Net sales		June 26, 2020		% of Net sales
		($ in thousands)
Net Sales		$	253,305	100.0	%	$	189,119	100.0	%	$	473,773	100.0	%	$	361,730	100.0	%
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 29, 2024
		March 29, 2024
		March 29, 2024
		($ in thousands)
		($ in thousands)
		($ in thousands)
Net sales
Costs and expenses:	Costs and expenses:
Cost of sales, exclusive of depreciation and amortization. .		152,140		60.1	%	109,243		57.8	%	281,016		59.3	%	209,633		58.0	%
Selling, general and administrative expenses		78,657		31.1	%	60,095		31.8	%	154,014		32.5	%	127,481		35.2	%
Costs and expenses:
Costs and expenses:
Cost of sales, exclusive of depreciation and amortization
Cost of sales, exclusive of depreciation and amortization
Cost of sales, exclusive of depreciation and amortization
Selling, general, and administrative expenses
Selling, general, and administrative expenses
Selling, general, and administrative expenses
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization	Depreciation and amortization	14,198		5.6	%	14,500		7.7	%	27,910		5.9	%	28,983		8.0	%
Total costs and expenses	Total costs and expenses	244,995		96.7	%	183,838		97.2	%	462,940		97.7	%	366,097		101.2	%
Total costs and expenses
Total costs and expenses
Income (loss) from operations
Income (loss) from operations
Income (loss) from operations	Income (loss) from operations	8,310		3.3	%	5,281		2.8	%	10,833		2.3	%	(4,367)		(1.2)	%
Other expenses (income):	Other expenses (income):
Other expenses (income):
Other expenses (income):
Interest expense	Interest expense	9,543		3.8	%	11,742		6.2	%	19,078		4.0	%	24,545		6.8	%
Other (income) expense		(296)		(0.1)	%	(2,217)		(1.2)	%	(509)		(0.1)	%	(1,334)		(0.4)	%
Interest expense
Interest expense
Other expense (income), net
Other expense (income), net
Other expense (income), net
Total other expenses
Total other expenses
Total other expenses	Total other expenses	9,247		3.7	%	9,525		5.0	%	18,569		3.9	%	23,211		6.4	%
Loss before income taxes	Loss before income taxes	(937)		(0.4)	%	(4,244)		(2.2)	%	(7,736)		(1.6)	%	(27,578)		(7.6)	%
Loss before income taxes
Loss before income taxes
Income tax expense (benefit)
Income tax expense (benefit)
Income tax expense (benefit)	Income tax expense (benefit)	119		—	%	(1,015)		(0.5)	%	(644)		(0.1)	%	(5,331)		(1.5)	%
Net loss	Net loss	(1,056)		(0.4)	%	(3,229)		(1.7)	%	(7,092)		(1.5)	%	(22,247)		(6.1)	%
Net loss attributable to noncontrolling interest		(12)		0.0	%	(16)		0.0	%	(34)		0.0	%	(40)		0.0	%
Net loss attributable to Company		$	(1,044)	(0.4)	%	$	(3,213)	(1.7)	%	$	(7,058)	(1.5)	%	$	(22,207)	(6.1)	%
Net loss
Net loss

Three Months ~~and Six Months~~ Ended ~~June 25, 2021~~March 29, 2024, Compared to the Three Months ~~and Six Months~~ Ended ~~June 26, 2020~~March 31, 2023

Net Sales


	Three Months Ended
	March 29, 2024		March 31, 2023		$ Change		% Change
	($ in thousands)
Net sales	$	246,078	$	252,040	$	(5,962)	(2.4)	%

Net ~~Sales~~

Three Months Ended Six Months Ended
June 25,
2021 June 26,
2020 $ Change % Change June 25,
2021 June 26,
2020 $ Change % Change
($ in thousands)
Net Sales $ 253,305 $ 189,119 $ 64,186 33.9 % $ 473,773 $ 361,730 $ 112,043 31.0 %

~~Net~~sales ~~increased~~decreased by ~~$64.2~~$6.0 million, or ~~33.9%~~2.4%, in the three months ended ~~June 25, 2021~~March 29, 2024, compared to the three months ended ~~June 26, 2020. The growth during~~March 31, 2023. Of the ~~quarter was driven~~2.4% decrease in net sales from the comparable year ago period, we estimate that a significant portion of this year-over-year decrease is represented by ~~strong overall demand across the business. Both proprietary and third-party product portfolios grew over 29%, with all product categories, geographic regions and markets experiencing growth~~a decline in organic net sales, partially offset by a decrease in the ~~quarter. Additionally,~~pace of channel inventory destocking. Organic performance reflects a decrease in ~~the prior year quarter net~~ sales ~~were affected~~volume, partially offset by ~~initial declines in demand due to the impact of COVID-19. Net sales in the most recent quarter also benefited~~growth from the continued ramp of local branches with the opening of five additional branches between the end of the second quarter of 2020 and end of the second quarter of 2021. Net sales growth was partially offset by supply chain challenges resulting in stock outs lateopened in the ~~second quarter~~past year and the cumulative impact of ~~2021.~~proprietary product price adjustments taken in the past year.

~~Net~~ ~~sales increased by $112.0 million, or 31.0%, in the six months ended June 25, 2021 compared to the six months ended June 26, 2020. Growth~~was strong across product categories, geographic regions, and markets as we added new integrators, increased spend per integrator and lapped the demand trough from COVID-19 in the second quarter of the prior year.

Cost of Sales, ~~exclusive~~Exclusive of ~~depreciation~~Depreciation and ~~amortization~~Amortization


		Three Months Ended										Six Months Ended
		June 25, 2021			June 26, 2020			$ Change		% Change		June 25, 2021			June 26, 2020			$ Change		% Change
		($ in thousands)
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 29, 2024
		March 29, 2024
		March 29, 2024
		($ in thousands)
		($ in thousands)
		($ in thousands)
Cost of sales, exclusive of depreciation and amortization	Cost of sales, exclusive of depreciation and amortization	$	152,140		$	109,243		$	42,897	39.3	%	$	281,016		$	209,633		$	71,383	34.1	%
As a percentage of net sales	As a percentage of net sales	60.1		%	57.8		%					59.3		%	58.0		%
As a percentage of net sales
As a percentage of net sales

Cost of sales, exclusive of depreciation and amortization, ~~increased $42.9~~decreased $8.2 million, or ~~39.3%~~5.6%, in the three months ended ~~June 25, 2021~~March 29, 2024, compared to the three months ended ~~June 26, 2020,~~March 31, 2023, primarily driven by ~~higher sales volumes.~~a decrease in net sales. As a percentage of net sales, cost of sales, exclusive of depreciation and amortization, ~~increased~~decreased to ~~60.1%~~55.9% in the current period from ~~57.8%~~57.9% in the prior period. The ~~increase~~decrease in cost of sales, exclusive of depreciation and amortization, as a percentage of net sales was primarily due to ~~accelerated~~the execution of supply chain cost management initiatives which drove input cost efficiencies. This was partially offset by lower proprietary product mix in the period due to growth in third-party product sales, ~~relative to the sales growth of proprietary product. The increasing mix of third-party product~~which was largely driven by ~~expansion of product and~~new local branch openings, incremental brand assortment, accelerated by the execution of our omni-channel strategy of opening local branches, which typically sell more third-party product relative to proprietary product. Our third-party products also have higher cost of sales, exclusive of depreciation and ~~amortization, as a percentage of net sales relative to our proprietary products.~~certain manufacturer promotions. The increase in cost of sales, exclusive of depreciation and amortization, as a percentage of net sales was also partially due to increasing costs from suppliers and higher inbound freight costs given ongoing supply chain pressures. This increasedecrease in cost of sales, exclusive of depreciation and amortization, as a percentage of net sales resulted in a ~~lower~~higher Contribution Margin of ~~39.9% for three months ended June 25, 2021 compared to 42.2%~~44.1% for the three months ended ~~June 26, 2020.~~

~~Cost of sales, exclusive of depreciation and amortization, increased $71.4 million, or 34.1%, in~~March 29, 2024, compared to 42.1% for the ~~six~~three months ended June 25, 2021 compared to the six months ended June 26, 2020, driven by higher sales volumes. As a percentage of net sales, cost of sales, exclusive of depreciation and amortization, increased to 59.3% in the current period from 58.0% in the prior period. The increase in cost of sales, exclusive of depreciation and amortization, as a percentage of net sales was primarily due to growth in third-party product sales mix as we further execute our omni-channel strategy by opening local branches which typically sell more third-party product than proprietary product, as well as increasing costs from suppliers and higher inbound freight costs given ongoing supply chain pressures. This increase in cost of sales, exclusive of depreciation and amortization, as a percentage of net sales resulted in a lower Contribution Margin of 40.7% for the six months ended June 25, 2021, compared to 42.0% for the six months ended June 26, 2020.March 31, 2023.

Selling, General, and Administrative (“SG&A”) Expenses


		Three Months Ended										Six Months Ended
		June 25, 2021			June 26, 2020			$ Change		% Change		June 25, 2021			June 26, 2020			$ Change		% Change
		($ in thousands)
Selling, general and administrative expenses		$	78,657		$	60,095		$	18,562	30.9	%	$	154,014		$	127,481		$	26,533	20.8	%
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 29, 2024
		March 29, 2024
		March 29, 2024
		($ in thousands)
		($ in thousands)
		($ in thousands)
Selling, general, and administrative expenses
As a percentage of net sales	As a percentage of net sales	31.1		%	31.8		%					32.5		%	35.2		%
As a percentage of net sales
As a percentage of net sales

Selling, general, and administrative expenses ~~increased $18.6~~decreased $3.0 million, or ~~30.9%~~3.2%, in the three months ended ~~June 25, 2021~~March 29, 2024, compared to the three months ended ~~June 26, 2020. The increase~~March 31, 2023. The decrease in selling, general, administrative expenses was due to increases in variable operating expenses, including outbound shipping, credit card processing fees and warranty, driven by higher sales volumes, the return to normalized spending following the temporary cost reductions taken to mitigate the impact of COVID-19 in 2020~~, continued investments to support strategic growth initiatives, and costs associated with becoming a public company.~~

~~Selling,~~ general, and administrative expenses ~~increased $26.5~~was attributable in part, to a $2.0 million ~~or 20.8%,~~year-over-year decrease in ~~the six months ended June 25, 2021 compared~~compensation expense for payouts in lieu of TRA participation, a $1.9 million decrease in equity-based compensation, and a $1.8 million decrease in fair value adjustments to ~~the six months ended June 26, 2020.~~ ~~The~~contingent value rights, partially offset by an increase in ~~selling, general, administrative expenses was due to increases in variable~~ operating expenses, including ~~outbound shipping, credit card processing fees~~event spend related to the launch of Control4 Connect and ~~warranty, driven by higher sales volumes, the return to normalized spending following the temporary cost reductions taken to mitigate the impact of COVID-19 in 2020, continued investments to support strategic growth initiatives,~~Control4 Assist and ~~costs associated with becoming a public company.~~general inflationary increases.

2833

Depreciation and Amortization

Three Months Ended Six Months Ended
June 25,
2021 June 26,
2020 $ Change % Change June 25,
2021 June 26,
2020 $ Change % Change
($ in thousands)
Depreciation and amortization $ 14,198 $ 14,500 $ (302) (2.1) % $ 27,910 $ 28,983 $ (1,073) (3.7) %
As a percentage of net sales 5.6 % 7.7 % 5.9 % 8.0 %


	Three Months Ended
	March 29, 2024			March 31, 2023			$ Change		% Change
	($ in thousands)
Depreciation and amortization	$	15,369		$	15,202		$	167	1.1	%
As a percentage of net sales	6.2		%	6.0		%

Depreciation and amortization expenses ~~decreased~~increased by $0.2 million, or 1.1%, in the three months ended March 29, 2024, compared to the three months ended March 31, 2023. Depreciation expense increased primarily due to the opening of new local branches between periods.

Interest Expense


	Three Months Ended
	March 29, 2024			March 31, 2023			$ Change		% Change
	($ in thousands)
Interest expense	$	14,237		$	13,949		$	288	2.1	%
As a percentage of net sales	5.8		%	5.5		%

Interest expense increased by $0.3 million, or 2.1%, in the three months ended ~~June 25, 2021~~March 29, 2024, compared to the three months ended ~~June 26, 2020, and~~March 31, 2023. The increase was primarily driven by ~~$1.1 million, or 3.7%,~~higher interest rates in the ~~six~~three months ended ~~June 25, 2021~~March 29, 2024 compared to the ~~six~~three months ended June 26, 2020. Depreciation expense decreased primarily due to certain software assets that became fully depreciated during fiscal year 2020. Amortization expense associated with intangible assets acquired remained flat between periods.March 31, 2023.

~~Interest~~Other Expense (Income), Net


		Three Months Ended										Six Months Ended
		June 25, 2021			June 26, 2020			$ Change		% Change		June 25, 2021			June 26, 2020			$ Change		% Change
		($ in thousands)
Interest Expense		$	9,543		$	11,742		$	(2,199)	(18.7)	%	$	19,078		$	24,545		$	(5,467)	(22.3)	%
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 29, 2024
		March 29, 2024
		March 29, 2024
		($ in thousands)
		($ in thousands)
		($ in thousands)
Other expense (income), net
As a percentage of net sales	As a percentage of net sales	3.8		%	6.2		%					4.0		%	6.8		%
As a percentage of net sales
As a percentage of net sales

~~Interest~~Other expense decreased by ~~$2.2~~$0.9 million, or ~~18.7%~~106.2%, in the three months ended ~~June 25, 2021~~March 29, 2024, compared to the three months ended June 26, 2020, and by $5.5 million, or 22.3%, in the six months ended June 25, 2021 compared to the six months ended June 26, 2020. The decrease was primarily driven by lower average borrowing rates on our debt and a lower average outstanding balance on our revolving credit facility in the current period.

~~Other Income~~

Three Months Ended Six Months Ended
June 25,
2021 June 26,
2020 $ Change % Change June 25,
2021 June 26,
2020 $ Change % Change
($ in thousands)
Other income $ (296) $ (2,217) $ 1,921 (86.6) % $ (509) $ (1,334) $ 825 (61.8) %
As a percentage of net sales (0.1) % (1.2) % (0.1) % (0.4) %

~~Other income decreased by $1.9 million, or 86.6%, in the three months ended June 25, 2021 compared to the three months ended June 26, 2020,~~March 31, 2023, primarily due to income related to the interest rate cap and a ~~$1.0 million gain~~TRA measurement adjustment, partially offset by losses on ~~the sale of a business in the prior year, as well as~~ foreign ~~currency gains in the prior year resulting from favorable foreign currency movements in the U.K. and Australia.~~currency.

Other income decreased by $0.8 million, or 61.8%, in the six months ended June 25, 2021 compared to the six months ended June 26, 2020 due to a $1.0 million gain on the sale of a business in the prior year.

Income Tax Expense (Benefit)

Three Months Ended Six Months Ended
June 25,
2021 June 26,
2020 $ Change % Change June 25,
2021 June 26,
2020 $ Change % Change
($ in thousands)
Income tax expense (benefit) $ 119 $ (1,015) $ 1,134 (111.7) % $ (644) $ (5,331) $ 4,687 (87.9) %
As a percentage of net sales — % (0.5) % (0.1) % (1.5) %


	Three Months Ended
	March 29, 2024			March 31, 2023			$ Change		% Change
	($ in thousands)
Income tax expense (benefit)	$	11,025		$	(3,000)		$	14,025	(467.5)	%
As a percentage of net sales	4.5		%	(1.2)		%

~~The Company recognized income~~Income tax expense ~~of $0.1~~increased by $14.0 million, ~~for~~or 467.5%, in the three months ended ~~June 25, 2021~~March 29, 2024, compared to ~~a benefit of $1.0 million for~~ the three months ended ~~June 26, 2020~~.March 31, 2023. The effective tax rate for the three months ended ~~June 25, 2021~~March 29, 2024, was an expense of ~~12.7%, and~~92.6% on a ~~benefit of 23.9% for~~ ~~the~~ ~~three months ended June 26, 2020. The change in the effective tax rate in the~~ ~~three months ended June 25, 2021~~ and the difference from the statutory rate, was primarily the result of discrete items recognized related to one-time transaction costs, the adjustment of deferred tax liabilities and the benefit of certain tax credits.

Income tax benefit decreased by $4.7 million, or 87.9%, in the six months ended June 25, 2021 compared to the six months ended June 26, 2020. The effective tax rate for the six months ended June 25, 2021 was a benefit of 8.33%pre-tax loss, compared to a benefit of ~~19.33%~~17.1% on a pre-tax loss for the ~~six~~three months ended ~~June 26, 2020.~~March 31, 2023. The change in the effective tax rate for the ~~six~~three months ended ~~June 25, 2021,~~March 29, 2024, and the difference from the U.S. federal statutory rate of 21%, was primarily the result of ~~discrete items recognized related to one-time transaction costs, the adjustment of deferred tax liabilities~~an increase in valuation allowance and ~~the benefit of certain tax~~FIN 48 reserve, offset by R&D credits.

Liquidity and Capital Resources and Material Changes in Financial Position

Sources of Liquidity

Our primary sources of liquidity are net cash provided by operating activities and availability under our Credit Agreement. WeWe assess our liquidity in terms of our ability to generate adequate amounts of cash to meet current and future needs. Our expected primary uses on a short-term and long-term basis are for working capital requirements, capital expenditures, geographic or service offering expansion, acquisitions, debt service requirements and other general corporate purposes. Our primary working capital requirements are for the purchase of inventory, payroll, rent, other facility costs, distribution costs and general and administrative costs. Our working capital requirements fluctuate during the year, driven primarily by seasonality and the timing of inventory purchases. Our capital expenditures are primarily related to infrastructure-related investments, including investments related to upgrading and maintaining our information technology systems, ongoing location improvements (joint design and manufacturing tooling), expenditures related to our ~~distributions~~distribution centers, and new ~~location~~local branch openings. ~~We expect to fund capital expenditures from net cash provided by operating activities.~~

We have ~~historically~~typically funded our operations and acquisitions primarily through internally generated cash on hand and our Credit ~~Facilities, except for the acquisition of Control4 which was partially funded by a capital contribution from Crackle Holdings, L.P. (the “Parent”).~~ Most recently, we raised an aggregate of $233.7 million, after deducting underwriting discounts and commissions, in our initial public offering (“IPO”) which closed on July 30, 2021, and on August 18, 2021, we received an additional $19.8 million, after deducting underwriting discounts and commissions, from the sale of 1,170,812 additional shares of common stock to the underwriters of the IPO pursuant to the underwriters’ exercise of their option to purchase additional shares. On August 4, 2021, the Company used a portion of the net proceeds from the IPO to repay a portion of the Incremental Term Loan outstanding under the Credit Agreement totaling $215.9 million, plus accrued interest of $1.0 million. The Company will incur a charge of $6.6 million related to the write-off of unamortized debt issuance costs.Facilities.

Working Capital, Excluding Deferred Revenue

The following table summarizes our cash, cash equivalents, accounts receivable, and working capital, which we define as current assets minus current liabilities excluding deferred ~~revenue, for the periods indicated:~~revenue:

As of

June 25,
2021

December 25,
2020

(in thousands)

As of

March 29,
2024

December 29,
2023

(in thousands)

Cash and cash equivalents

35,850

77,458

Accounts receivable, net

56,650

49,363

Working capital, excluding deferred revenue

147,575

141,476

Our cash and cash equivalents as of ~~June 25, 2021~~March 29, 2024 are available for working capital purposes. We do not enter into investments for trading purposes, and our investment policy is to invest any excess cash in ~~short term,~~short-term, highly liquid investments that reduce the risk of principal loss; therefore, our cash and cash equivalents are held in demand deposit accounts that generate very low returns.

We believe ~~that~~ our existing cash and cash equivalents, together with expected cash flow from operating activities, will be sufficient to fund our operations and capital expenditure requirements for the next 12 months. Beyond the next 12 months, our primary capital requirements ~~primarily~~ consist of required principal and interest payments on long-term debt, TRA payments and lease payments under non-cancelable lease commitments as further described in Notes 86, 12 and 14 of the Notes to ~~our consolidated financial statements included in our Prospectus.~~the Unaudited Condensed Consolidated Financial Statements. If cash provided by operating activities and borrowings under our Credit Agreement are not sufficient or available to meet our ~~short~~short- and long-term capital requirements, then we may consider additional equity or debt financing in the future. There can be no assurance debt or equity financing will be available to us if we need it or, if available, the terms will be satisfactory to us. Our sources of liquidity could be affected by factors described under “Risk Factors” in our ~~Prospectus.~~

Annual Report.

Debt Obligations

On ~~August 4, 2017, our wholly-owned subsidiary, Wirepath LLC (the “Borrower”)~~December 8, 2021, we entered into a ~~Credit Agreement~~credit agreement (the “Credit Agreement”) with various financial institutions and Morgan Stanley Senior Funding, Inc., as administrative agent (the “Administrative Agent”) consisting of a ~~Revolving Credit Facility that provided for borrowings of up to $50.0~~$465.0 million ~~and an Initial Term Loan in the~~aggregate principal amount of ~~$265.0 million. The Revolving~~senior secured term loans (the “Term Loan”) maturing in 2028 and a $100.0 million senior secured revolving credit facility (the “Revolving Credit Facility matures on August 4, 2022, and the Initial Term Loan matures on August 4, 2024. We can elect that loans under the Revolving Credit Facility and Initial Term Loan be alternate base rate loans or LIBOR-based loans, each at the published interest rates, plus the applicable margin as further discussed below. We have elected LIBOR-based loansFacility”) (which includes borrowing capacity available for letters of credit) maturing in ~~each instance.~~2026.

On ~~February 5, 2018,~~October 2, 2022, we entered into an Incremental Agreement (the “Incremental Agreement”) with the lenders party thereto and the Administrative Agent to provide incremental term loans (the “Incremental Term Loans”) in an aggregate principal amount of $55.0 million. The Incremental Agreement amended the Credit Agreement ~~was~~(the Credit Agreement, as amended ~~to reduce~~by the ~~applicable interest rate margin on~~Incremental Agreement, the ~~Revolving~~“Amended Credit ~~Facility and Initial Term Loan by 0.75 percentage points each. On October 31, 2018,~~Agreement”).

We further amended the Credit Agreement ~~was amended~~on April 17, 2023 to replace LIBOR with SOFR as applicable. See Note 6 to our Notes to the Unconsolidated Condensed Consolidated Financial Statements for ~~a second time to increase~~additional information about this amendment.

Borrowings under the ~~Initial~~ Term Loan ~~principal~~will bear interest at a rate per annum equal to, ~~$292.4 million, with~~at the Company’s option, either (1) an applicable margin plus a ~~reduction of 0.50 percentage points~~base rate determined by reference to the ~~applicable interest~~highest of (a) 0.5% per annum plus the federal funds effective rate, ~~margin~~(b) the prime rate, and (c) the eurocurrency rate determined by reference to the cost of funds for U.S. dollar deposits (subsequently changed to the forward-looking term rate based on SOFR for rates initiated after the ~~Revolving Credit Facility and Initial Term Loan. On August 1, 2019,~~effective date of the Amendment to the Credit ~~Agreement was amended~~Agreement) for an interest period of one month adjusted for certain additional costs, plus 1.0%; provided that such rate is not lower than a ~~third time~~floor of 1.5% or (2) an applicable margin plus a eurocurrency rate determined by reference to ~~provide an~~the cost of funds for U.S. dollar deposits (subsequently changed to the forward-looking term rate based on SOFR for rates initiated after the effective date of the Amendment to the Credit Agreement) for the interest period relevant to such borrowing adjusted for certain additional costs; provided that such rate is not lower than a floor of 0.5%.

Borrowings under the Incremental Term Loan inwill bear interest at a rate per annum equal to, at the ~~amount~~Company’s option, either (1) an applicable margin plus a base rate determined by reference to the highest of ~~$390.0 million~~(a) 0.5% per annum plus the federal funds effective rate, (b) the prime rate, and ~~increase commitments under~~(c) the ~~Revolving Credit Facility~~forward-looking term rate based on the SOFR for an interest period of one month plus 1.0%; provided that such rate is not lower than a floor of 1.0% or (2) an applicable margin plus a forward-looking rate based on SOFR for the interest period relevant to ~~$60.0 million.~~ such borrowing provided that such rate is not lower than a floor of 0.5%.

Borrowings under the Revolving Credit Facility ~~and term loans~~will bear interest at a ~~variable~~ rate per annum equal to an applicable margin based upon a leverage-based pricing grid, plus, at the ~~Borrower’s~~Company’s option, either (1) a base rate determined by reference to the highest of ~~either (i) a eurodollar~~(a) 0.5% 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 (subsequently changed to the forward-looking term rate based on ~~LIBOR~~SOFR for ~~a specific interest period plus an applicable margin, subject~~rates initiated after the effective date of the Amendment to ~~a eurodollar rate floor of 0.00%, or (ii) an alternate base rate plus an applicable margin, subject to a base rate floor of 0.00%. Interest on~~ the ~~Revolving~~ Credit ~~Facility and the term loans is payable quarterly in arrears with respect to alternate base rate loans and payable on the last day of each applicable interest period (or, in the case of~~Agreement) for an interest period ~~in excess~~ of ~~three months,~~one month, plus 1.0%; provided such rate is not lower than a floor of 1.0% or (2) a eurocurrency rate determined by reference to the applicable cost of funds for such borrowing adjusted for certain additional costs (subsequently changed to the forward-looking term rate based on ~~three-month intervals~~SOFR for rates initiated after the effective date of the ~~first day~~Amendment to the Credit Agreement); provided such rate is not lower than a floor of ~~such interest period) with respect~~zero, subsequently changed to ~~eurodollar rate loans. The margins~~0.5% based on SOFR for rates initiated after the ~~Revolving~~effective date of the Amendment to the Credit Facility range from 3.50% to 4.00% per annum for eurodollar rate loans and 2.50% to 3.00% per annum for alternate base rate loans, depending on the applicable first lien secured leverage ratio. The margins for the Initial Term Loan are fixed at 4.00% per annum for eurodollar rate loans and 3.00% per annum for alternate base rate loans. The margins for the Incremental Term Loan are fixed at 4.75% per annum for eurodollar rate loans and 3.75% per annum for alternate base rate loans. Unused commitments under the Revolving Credit Facility are subject to a commitment fee ranging from 0.25% to 0.50% depending on the applicable first lien secured net leverage ratio.Agreement.

The ~~LIBOR-based rate for the Revolving~~ Credit ~~Facility~~Agreement contains various customary affirmative and ~~the Initial Term Loan is LIBOR (0.20% and 0.22%~~negative covenants. We were in compliance with such covenants as of June 25, 2021 and December 25, 2020, respectively), plus the applicable margin (4.00% as of June 25, 2021 and December 25, 2020), amounting to an effective rate of 4.20% as of June 25, 2021 and 4.22% as of December 25, 2020. The LIBOR-based rate for the Incremental Term Loan is LIBOR (0.20% and 0.22% as of June 25, 2021 and December 25, 2020, respectively), plus the applicable margin (4.75% as of June 25, 2021 and December 25, 2020), amounting to an effective rate of 4.95% as of June 25, 2021 and 4.97% as of December 25, 2020.

On December 31, 2018, we purchased an interest rate cap to guard against unexpected increases in LIBOR to which our debt instruments are tied. Pursuant to the agreements, we have capped LIBOR at 3.55% with respect to the aggregate notional amount of $189.6 million, decreasing by scheduled principal payments on the Initial Term Loan through the expiration of the agreements in December 2021. In the event LIBOR exceeds 3.55%, we will pay interest at the capped rate plus the applicable margin. In the event LIBOR is less than 3.55%, we will pay interest at the prevailing LIBOR rate plus the applicable margin. The asset is recorded at fair value.March 29, 2024.

The ~~term loans amortize~~Term Loan amortizes in fixed equal quarterly installments in an amount equal to 1.0% per annum of the total aggregate principal amount thereof immediately after borrowing, with the balance due at maturity. We 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). We may be required, with certain exceptions, to make mandatory payments under the Credit Agreement using a percentage of our annual excess cash flows or net proceeds from any ~~non- ordinary~~non-ordinary course asset sales or certain debt issuances, if any.

The Borrower’s obligations under the Credit Agreement are guaranteed by its direct parent company, our wholly owned subsidiary Crackle Purchaser LLC (formerly known as Crackle Purchaser Corp.) and each of the Borrower’s current and future direct and indirect subsidiaries other than (i) foreign subsidiaries, (ii) unrestricted subsidiaries, (iii) non-wholly owned subsidiaries, (iv) immaterial subsidiaries and (v) certain holding companies of foreign subsidiaries, and are secured by a first lien on substantially all of their assets, including the capital stock of subsidiaries (subject to certain exceptions).

The Credit Agreement contains various customary affirmative and negative covenants. The financial covenants we are measured against are consolidated earnings before interest, taxes, depreciation and amortization, adjusted for allowable add-backs specified in the Credit Agreement (“consolidated EBITDA”), and associated ratios, as defined in the Credit Agreement. We were in compliance with such covenants as of June 25, 2021 and December 25, 2020.

In addition, the Revolving Credit Facility is subject to a first lien secured net leverage ratio of ~~8.15~~7.50 to ~~1:00,~~1.00, tested quarterly, if, and only if, the aggregate principal amount from the revolving facility loans, letters of credit (to the extent not cash collateralized or backstopped or, in the aggregate, not in excess of the greater of ~~$5.0~~$10.0 million and the stated face amount of letters of credit outstanding on the initial closing date of the Credit Agreement) and swingline loans outstanding and/or issued, as applicable, exceeds 35.0% of the total amount of the Revolving Credit Facility commitments.

As of ~~June 25, 2021,~~March 29, 2024 and December 29, 2023, we had no outstanding borrowings under the Revolving Credit ~~Facility, $285.0 million outstanding under the Initial Term Loan and $384.2 million outstanding under the Incremental Term Loan.~~Facility. As of March 29, 2024 and December ~~25, 2020, the Company~~29, 2023, we had ~~no borrowings~~$4.9 million of outstanding letters of credit. The amount available under the Revolving Credit Facility ~~$286.5~~was $95.1 million ~~outstanding under~~as of March 29, 2024 and December 29, 2023.

On October 26, 2022, the ~~Initial~~Company entered into an interest rate cap agreement on LIBOR (subsequently transitioned to SOFR) on the floating rate 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 $6.6 million at the maturity date of December

31, 2025. For the period ended March 29, 2024, the notional amount of the interest rate cap is $347.1 million of the Term Loan and ~~$386.1 million outstanding under~~has a strike rate of 4.79%, which effectively caps SOFR on the ~~Incremental Term Loan.~~notional amount at 4.79%.

The Company was in compliance with all debt covenants as of March 29, 2024 and December 29, 2023. For additional information on the Company’s debt arrangements, debt covenants, and default provisions, see Note 7 of the Notes to the Consolidated Financial Statements for the year ended December 29, 2023, in the Annual Report.

Historical Cash Flows

The following table sets forth our cash flows for the ~~six~~three months ended ~~June 25, 2021~~March 29, 2024 and ~~June 26, 2020:~~March 31, 2023:

Six Months Ended

June 25, 2021

June 26, 2020

(in thousands)

Net cash (used in) provided by operating activities

(4,615)

38,107

Three Months Ended

March 29, 2024

March 31, 2023

(in thousands)

Net cash provided by (used in) operating activities

Net cash used in investing activities

(30,663)

(4,418)

Net cash (used in) provided by financing activities

(6,325)

48,249

Operating Activities

Net cash provided by operating activities was $6.0 million in the three months ended March 29, 2024, compared to net cash used in operating activities ~~was $4.6~~of $2.6 million in the ~~six~~three months ended ~~June 25, 2021 as compared to~~March 31, 2023, an increase in cash provided of $8.6 million. The increase in net cash provided ~~of $38.1 million in~~by operating activities during the ~~six~~three months ended ~~June 26, 2020, an increase of $42.7 million. The increase~~March 29, 2024 was ~~driven primarily by~~ due to a$12.5 million net increase in adjustments related to deferred income taxes and a $12.3 million net increase in cash ~~used for~~provided by operating assets and liabilities, ~~including~~partially offset by an increase in ~~inventory to protect against supply chain uncertainty.~~ ~~In the prior year, we managed our working capital position in light~~net loss of the COVID-19 pandemic by increasing focus on collections of accounts receivable, managing inventory levels, and negotiating extended payment terms with vendors, resulting in increased cash flow from operations in fiscal year 2020. These increases were partially offset by$8.4 million, a decrease in ~~net losses.~~equity based compensation of $1.9 million and a decrease in the fair value adjustment to CVR of $1.8 million. Specifically, the increase in cash provided by inventory is driven by our continued efforts to rebalance inventory levels.

Investing Activities

Net cash used in investing activities was ~~$30.7~~$2.1 million in the ~~six~~three months ended ~~June 25, 2021 as~~March 29, 2024, compared to ~~$4.4~~$9.1 million in ~~six~~the three months ended ~~June 26, 2020, an increase~~March 31, 2023, a decrease of ~~$26.3~~$7.0 million. The ~~increase~~decrease in ~~net~~the three months ended March 29, 2024 was primarily driven by cash used in ~~investing activities~~the prior period of $7.1 million for the ~~six months ended June 25, 2021 was primarily due to the acquisition~~purchase of ~~Access Networks in the current period.~~property and equipment.

Financing Activities

Net cash used in financing activities was ~~$6.3~~$24.4 million for the ~~six~~three months ended ~~June 25, 2021~~March 29, 2024, compared to net cash provided by financing activities of ~~$48.2~~$24.9 million in the ~~six~~three months ended ~~June 26, 2020,~~March 31, 2023, a decrease of ~~$54.5~~$49.3 million. The decrease in net cash provided by financing activities for the three months ended March 29, 2024 was due primarily ~~due~~ to a decrease in proceeds from our ~~revolving credit facility~~Revolving Credit Facility of ~~$52.0~~$38.0 million and an increase in ~~the prior year which included~~ cash ~~borrowings taken in order~~used of $10.9 million related to ~~enhance our liquidity during the COVID-19 outbreak. See Note 7~~ ~~of the~~ ~~Notes to the Condensed Consolidated Financial Statements for more information.~~ ~~Additionally, in the six months ended June 25, 2021, we had $2.4 million in payments of deferred IPO costs.~~TRA payments.

Off-Balance Sheet Arrangements

As of ~~June 25, 2021~~March 29, 2024 and December ~~25, 2020,~~29, 2023, we had off-balance sheet arrangements totaling $4.9 million related to our outstanding letters of ~~credit~~credit. We have not entered into any other off-balance sheet arrangements, except as ~~further described in Note 7~~ ~~of the~~ ~~Notes to the Condensed Consolidated Financial Statements.~~disclosed herein.

Contractual Obligations

AsWe have contractual obligations comprised of payments of debt and interest, lease commitments, TRA and CVRs.

We may use our Revolving Credit Facility to fund general corporate expenses; however, as of March 29, 2024, we had no outstanding debt under the Revolving Credit Facility.

~~June 25, 2021~~
,

Except for the leases described in Note 14 of the Notes to the Unaudited Condensed Consolidated Financial Statements and the debt agreement as described herein, as of March 29, 2024, there have been no material changes in our contractual

obligations and commitments other than in the ordinary course of business from the contractual obligations and commitments for the year ended December 29, 2023, as previously disclosed in our ~~Prospectus.~~

Annual Report.

Critical Accounting Estimates and Policies

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates and Policies” and our consolidated financial statements and related notes disclosed in our ~~Prospectus~~Annual Report for accounting policies and related estimates we believe are the most critical to understanding our consolidated financial statements, financial condition and results of operations and which require complex management judgment and assumptions or involve uncertainties. These critical accounting estimates and policies ~~include~~include: revenue ~~recognition;~~recognition, share-based ~~compensation;~~compensation, income ~~taxes;~~taxes, business ~~combinations;~~combinations, inventories, ~~net;~~net, goodwill and intangible ~~assets; warranties;~~assets, warranties and ~~contingent valuation rights.~~CVRs. There have been no changes to our critical accounting estimates and policies or their application since the date of ~~the Prospectus~~.our Annual Report.

Recent Accounting Pronouncements

~~Refer to~~See Note 2 of the Notes to the Unaudited Condensed Consolidated Financial Statements for information regarding recently issued accounting pronouncements.

Emerging Growth Company and Smaller Reporting Company Status

We qualify as an “emerging growth company” as defined in the JOBS Act. An emerging growth company may take advantage of reduced reporting requirements that are not otherwise applicable to public companies. These provisions include, but are not limited to:

•being permitted to present only two years of audited financial statements and only two years of related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Prospectus;

•~~not~~Not being required to comply with the auditor attestation requirements on the effectiveness of our internal controls over financial reporting;

•not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion of critical audit matters);

•~~reduced~~Reduced disclosure obligations regarding executive compensation arrangements in our periodic reports, proxy statements, and registration ~~statements, including in our Prospectus;~~statements; and

•~~exemptions~~Exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We may use these provisions until the last day of our fiscal year in which the fifth anniversary of the completion of our IPO occurs (which will be our 2026 fiscal year). However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed ~~$1.07~~$1.235 billion, or we issue more than $1.0 billion of nonconvertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.

Under the JOBS Act, emerging growth companies also can delay adopting new or revised accounting standards until such time as those standards would otherwise apply to private companies. We currently intend to take advantage of this exemption.

We are also a “smaller reporting company,” because the market value of our shares held by non-affiliates was less than $250 million as of the end of our most recently completed second fiscal quarter. We may continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our earnings and financial position are exposed to financial market risk, including those resulting from changes in interest rates and market concentration risk.

Interest Rate Risk

We are subject to interest rate risk in connection with our Amended Credit Agreement. As of ~~December 25, 2020,~~March 29, 2024, we had ~~$672.6~~$455.7 million outstanding under the ~~term loan~~Term Loan portion and $54.3 million outstanding under the Incremental Term Loan portion of the Amended Credit ~~Agreement.~~Agreement and no outstanding borrowings under the Revolving Credit Facility. The term loans and revolver bear interest at variable rates. ~~After taking into account our interest rate caps: (i) an~~Each quarter point increase ~~of 100 basis points~~ in the variable rates on the amounts outstanding under the Credit Agreement and Revolving Credit Facility as of ~~December 25, 2020~~March 29, 2024 would ~~have increased~~increase annual cash interest in the aggregate by approximately ~~$7.1 million; and (ii) a decrease of 100 basis points in the variable rates would have decreased annual cash interest in the aggregate by approximately $5.8~~$1.3 million. ~~Please refer~~In order to “— Liquidity and Capital Resources — Debt Obligations” for information regarding the interest rate cap agreement that we entered into to guard against unexpected increases in LIBOR on a portion of our variable-rate term loans and limitmitigate our exposure to interest rate ~~variability.~~increases on our floating rate debt, we have entered into an interest-rate cap. This agreement caps LIBOR (subsequently transitioned to SOFR) on a notional amount of $347.1 million at 4.79% for the period ended March 29, 2024, thus reducing the impact of interest-rate increases on future income.

Foreign Currency Exchange Risk

~~Substantially all~~Changes in the exchange rates for the functional currencies of our ~~net~~international subsidiaries may positively or negatively impact our sales, ~~and~~ operating expenses ~~are currently denominated~~and earnings. Historically, we have not hedged our currency exposure and fluctuations in ~~U.S. dollars. An immediate 10% increase or decrease~~exchange rates have not materially affected our operating results. While our international operations, including Canada, the United Kingdom, and Australia, without limitation, accounted for only 11.9% of total net revenue during the three months ended March 29, 2024, our exposure to currency rate fluctuations could be material in the ~~relative value~~remainder of 2024 and future years, to the ~~U.S. dollar as compared to other currencies in the foreign jurisdictions in which~~extent that either currency rate changes are significant or that our international operations comprise a larger percentage of our consolidated results.

Inflation Risk

Inflationary factors may adversely affect our operating results. Although we ~~operate would~~do not ~~have~~believe that inflation has had a material impact on our financial position or results of operations to date, the current rate of inflation may have an adverse effect on our ~~operating results.~~ability to maintain current levels of expenses as a percentage of revenue if our revenue does not correspondingly increase with inflation.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the ~~Securities~~ Exchange Act of 1934 (the “Exchange Act”), our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our ~~disclosure~~“disclosure controls and procedures,” as defined in Rule 13a-15(e) of the Exchange Act, as of the end of the period covered by this report. Based upon that evaluation, our ~~Chief Executive Officer~~CEO and ~~Chief Financial Officer~~CFO concluded ~~that, as of the end of the period covered by this report,~~ our disclosure controls and procedures were not effective due to ~~provide reasonable assurance that~~the material weakness discussed below, and in our Annual Report, related to the inability to design or maintain an effective control environment over certain information ~~required~~technology (“IT”) general controls or information systems and applications relevant to ~~be disclosed by us in~~ the reports that we file or submit under such Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated topreparation of our ~~management, including our Chief Executive Officer and Chief Financial Officer.~~consolidated financial statements.

Previously Reported Material Weakness in Internal Control Over Financial Reporting

As disclosed in Item 9A “Controls and Procedures” and in the section entitled “Risk Factors” in our ~~Prospectus,~~Annual Report, we previously identified a material weakness in our internal control over financial reporting. Specifically, we did not design or maintain an effective control environment over certain information technology ~~(“IT”)~~ general controls (“ITGC”) or information systems and applications that are relevant to the preparation of our consolidated financial statements. Our business process controls (automated and manual) that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted. We identified a material weakness in internal control related to ineffective ITGCs in the areas of where we did not design and maintain (1) program change management controls to ensure that IT program and data changes affecting financial IT applications and underlying accounting records that are relevant to the preparation of our financial statements are identified, tested, authorized and implemented appropriately, and (2) access controls to ensure access to programs and data is authorized and entitlements and privileges are recertified on a periodic basis to validate that only authorized individuals have access to Company data.

While the deficiency did not result in a material misstatement to the financial statements, it presented a reasonable possibility that a material misstatement to the financial statements could have occurred.

Status of Remediation

We have taken and intend to continue to take ~~steps~~actions to remediate the material weakness described above. The intended actions include, but are not limited to:

•Finalizing enhanced control design and the migration of the remaining Snap One Partner Stores to a newly designed ERP application, resulting in the retirement of four legacy ERP platforms.

•Implementing new control procedures over certain areas previously deemed ineffective related to design and operating effectiveness of change management, segregation of duties, and restricted access controls.

•Expanding the scope and frequency of both design and operating effectiveness testing over key business process and information technology controls.

•Designing and implementing new software and upgrading legacy applications to enhance the related business process and information technology controls.

•Implementing guidelines to establish requirements for documenting our procedures for validating the data sourced from key systems applicable to key business process and information technology controls.

•Determining any additional resources that may be necessary to effectively implement additional review and control procedures.

The planned or in-process remedial actions above ~~through additional measures that include hiring additional personnel with public company experience,~~are in addition to the following remediation actions completed:

•Completed the consolidation of certain key software applications for the Company’s domestic e-commerce transactions and ~~further evolving our accounting~~began the migration of legacy Snap One Partner Stores to a new enterprise resource planning

(“ERP”) application, providing an opportunity to consolidate and enhance related business process and information technology controls.

•Designed and implemented enhanced change management workflows to strengthen the formalization of change requests, improve quality assurance requirements, and retain review and approval evidence.

•Designed and implemented new software tools and applications to support the monitoring and review of access controls, enhancing management’s review of segregation of duties and restrictive access risks.

•Implemented new control procedures over certain areas previously deemed ineffective related to design and operating effectiveness of both information technology general controls and business process controls.

•Formally enhanced, developed, and implemented policies, procedures, and processes ~~related~~relating to our internal controls over financial reporting, including the testing of a ~~plan for~~significant number of additional business process and information technology controls.

•Continued hiring of additional accounting, information technology, and internal controls personnel who possess public company accounting, auditing and reporting expertise.

•Continued engagement with outside consultants to advise on changes to the design of controls, procedures, and the implementation of future ~~system enhancements.~~business processes and information technology systems.

•Enhanced our internal disclosure processes and the frequency and scope of internal governance discussions to provide greater representation across functions to improve opportunities to identify matters requiring controls and disclosures consideration.

These actions are subject to ongoing senior management review, as well as oversight of the audit committee of our board of directors. We may conclude that additional measures are required to remediate the material weakness or we may determine there is a need to modify the remediation plans described above. We will not be able to fully remediate this material weakness until these steps have been completed and have been operating effectively for a sufficient period of time. We will continue to monitor the design and effectiveness of these and other processes, procedures, and controls and make any further changes management deems appropriate.

Changes in Internal Control over Financial Reporting

~~There~~Other than those described above, there were no changes in our internal control over financial reporting ~~identified in connection with the evaluation required by Rule 13a-15(d) or 15d-15(d) under the Securities Exchange Act of 1934 that occurred~~ during the ~~period covered by this report~~three months ended March 29, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our ~~Chief Executive Officer~~CEO and ~~Chief Financial Officer,~~CFO, do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how ~~well~~ well-conceived and operated, can provide only reasonable, not absolute, assurance that ~~the~~its objectives ~~of the control system~~ are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. ~~Because of~~Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been or would be detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple ~~error or mistake.~~error. Additionally, controls can be circumvented by ~~the~~ individual acts, ~~of some persons, by~~ collusion of two or more people, or by management ~~override of the controls.~~override. The design of any system of controls is also based in part upon ~~certain~~ assumptions ~~about~~regarding the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate ~~because of changes in~~due to changed conditions, or because the degree of compliance with policies or procedures may deteriorate. ~~Because of~~Due to the inherent limitations in a cost-effective control system, misstatements due to error, or fraud may occur and ~~not be detected.~~go undetected.

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Part II - Other Information

Item 1. Legal Proceedings

From time to time, we are involved in legal proceedings arising in the ordinary course of our business. Management believes that we do not have any pending or threatened litigation which, individually or in the aggregate, would have a material adverse effect on our business, results of operations, financial condition or cash flows.

For additional information, see Note 1413 of the Notes to the Unaudited Condensed Consolidated Financial ~~Statements, which is incorporated herein by reference.~~Statements.

Item 1A. Risk Factors

There have been no material changes ~~to our risk factors that we believe are material to our business, results of operations and financial condition,~~ from the risk factors previously disclosed in our ~~Prospectus which is accessible~~Annual Report on Form 10-K for the ~~SEC’s website at www.sec.gov.~~year ended December 29, 2023.

Item 2. Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds

~~Unregistered Sales~~ and Issuer Purchases of Equity Securities

In connection with the IPO of Snap One Holdings Corp.’s common stock, Snap One Holdings Corp. effected a series of transactions occurring at various times prior to and/or concurrently with the closing of the IPO that resulted in a reorganization of its business (the “Equity Conversion”). In connection with the Equity Conversion, on July 27, 2021, Snap One Holdings Corp. issued 1,658,940 restricted shares of its common stock and on July 28, 2021, Snap One Holdings Corp. issued options to purchase 5,398,617 shares of its common stock at an exercise price of $18.00 per share. The restricted shares and stock options were issued to certain current and former members of management and employees who had, until the Equity Conversion, held partnership interests in Crackle Holdings, L.P., the former sole shareholder of Snap One Holdings Corp., which was dissolved and liquidated in connection with the Equity Conversion.~~In connection with the IPO, Snap One Holdings Corp. issued~~ ~~383,354~~ restricted stock units and options to acquire 200,000 shares of common stock at an exercise price of $18.00 per share to certain employees. No underwriters were involved in the issuance of these restricted shares of common stock, restricted stock units and options to purchase common stock.

None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering. The issuance of the above securities was made in reliance on Section 4(a)(2) of the Securities Act ~~or Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the Securities Act,~~ ~~as transactions by an issuer not involving any public offering~~ ~~or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701~~.

~~Use of Proceeds~~

On July 30, 2021, we completed our IPO in which we issued and sold 13,850,000 shares of common stock. On August 18, 2021, we sold an additional 1,170,812 shares of common stock to the underwriters pursuant to the underwriters’ exercise of their option to purchase additional shares. The shares sold in the IPO were registered under the Securities Act pursuant to our Registration Statement on Form S-1 (File No. 333-257624) which was declared effective by the U.S. Securities and Exchange Commission on July 27, 2021. Our shares of common stock, including the 1,170,812 additional shares sold to the underwriters pursuant to their exercise of their option to purchase additional shares, were sold at an initial offering price of $18.00 per share, which generated net proceeds of approximately $253.5 million after deducting underwriting discounts and commissions of $16.9 million. We incurred offering expenses of approximately $5.3 million. We used the proceeds (net of underwriting discounts and offering expenses) from the issuance of 13,850,000 shares ($228.4 million) in the IPO to repay a portion of the term loan outstanding under our Credit Agreement totaling $215.9 million, plus accrued interest thereon of approximately $1.0 million. We will use the remaining proceeds, including the proceeds from the sale of the 1,170,812 additional shares sold to the underwriters, for general corporate purposes. No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries and to non-employee directors pursuant to our director compensation policy.

~~Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC, Jefferies LLC and UBS Securities LLC acted as lead book-running managers and as representatives of the underwriters for the offering.~~

None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None.~~Not applicable.

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Item 6. Exhibits

Exhibit

Number

Description

2.1

Agreement and Plan of Merger, dated as of ~~June 19, 2017,~~April 14, 2024 , by and among ~~Crackle Purchaser Corp.~~Resideo Technologies , Inc., Po p Acquisition Inc., ~~Crackle Merger Sub I Corp., Crackle Merger Sub II Corp., General Atlantic (Amplify) Holdco LLC, Amplify~~and Snap One Holdings ~~LLC, General Atlantic (Amplify) LLC, GA Escrow, LLC and JWF Rollover, LLC~~Co rp. (incorporated by reference to Exhibit 2.1 of the ~~Registrant’s Registration Statement on Form S-1, as~~ 8-K for Snap One Holdings Corp . filed with the SEC on ~~SEC~~ ~~on July 2, 2021~~ ~~(hereinafter~~ ~~the~~ “~~Registration Statement~~ ~~filed on July 2~~”April 18, 2024 )).

3.1*3.1

Third Amended and Restated Certificate of Incorporation of Snap One Holdings Corp. (incorporated by reference to Exhibit 3.1 of the 10-Q for Snap One Holdings Corp. for the quarterly period ending June 25, 2021, filed on August 27, 2021).

3.2*3.2

Second Amended and Restated Bylaws of Snap One Holdings Corp. (incorporated by reference to Exhibit 3.2 of the 10-Q for Snap One Holdings Corp. for the quarterly period ending June 25, 2021, filed on August 27, 2021).

~~4.1~~10.1+

Form of Performance-Based Restricted Stock ~~Certificate for Common~~ ~~Stock(incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statementfiled on July 2~~).

10.1*

~~Stockholders Agreement, dated as of July 27, 2021~~ ~~among Snap One Holdings Corp. and the other parties named therein~~.

~~10.2~~

~~Credit Agreement, dated as of August 4, 2017 by and among Wirepath~~ ~~LLC, as borrower, Crackle PurchaserCorp. as holdings, the lenders and letter of credit issuers from time to time party thereto,~~ ~~UBS AG, Stamford~~ ~~Branch, as the administrative agent, collateral agent and swingline lender, and the other parties thereto(incorporated by reference to Exhibit 10.2 of the Registrant’s Registration Statementfiled on July 2~~).

~~10.3~~

~~Amendment~~ ~~Agreement, dated as of November~~ ~~1, 2017, to the Credit Agreement, by and among WirepathLLC, as borrower, Crackle Purchaser~~ ~~Corp.as holdings, the lenders and letter of credit issuers from time to time party thereto,~~ ~~UBS AG, Stamford~~ ~~Branch, as the administrative agent, collateral agent and swingline lender, and the other parties thereto(incorporated by reference to Exhibit 10.3 of the Registrant’s Registration Statementfiled on July 2~~).

~~10.4~~

~~Incremental Agreement No. 1, dated as of February 5, 2018, to the Credit Agreement, by and amongWirepath~~ ~~LLC, as borrower, Crackle Purchaser~~ ~~LLC (f/k/a Crackle Purchaser~~ ~~Corp.), as holdings, the lenders and letter of credit issuers from time to time party thereto,~~ ~~UBS AG, Stamford~~ ~~Branch, as the administrative agent, collateral agent and swingline lender, and the other parties thereto(incorporated by reference to Exhibit 10.4 of the Registrant’s Registration Statementfiled on July 2~~).

~~10.5~~

~~Incremental Agreement No. 2, dated as of October 31, 2018, to the Credit Agreement, by and amongWirepathLLC, as borrower, Crackle Purchaser~~ ~~LLC (f/k/a Crackle PurchaserCorp.), as holdings, the lenders and letter of credit issuers from time to time party thereto,~~ ~~UBS AG, Stamford~~ ~~Branch, as the administrative agent, collateral agent and swingline lender, and the other parties thereto(incorporated by reference to Exhibit 10.5 of the Registrant’s Registration Statementfiled on July 2~~).

~~10.6~~

~~Incremental Agreement No. 3, dated as of August 1, 2019, to the Credit Agreement, by and among WirepathLLC, as borrower, Crackle PurchaserLLC (f/k/a Crackle PurchaserCorp.), as holdings, the lenders and letter of credit issuers from time to time party thereto,UBS AG, StamfordBranch, as the administrative agent, collateral agent and swingline lender, and the other parties thereto(incorporated by reference to Exhibit 10.6 of the Registrant’s Registration Statementfiled on July 2~~).

~~10.7+~~

~~Form of Indemnification Agreement between Snap One Holdings Corp. and directors and officers of Snap One Holdings Corp.(incorporated by reference to Exhibit 10.~~7 ~~of the Registrant’s Registration Statementfiled on July 2~~).

~~10.8+~~

~~Snap One Holdings Corp. 2021~~ ~~Equity~~ ~~Incentive Plan(incorporated by reference to Exhibit 10.8 of the Registrant’s~~ ~~Registration Statement filed on July 19~~).

~~10.9+~~

~~Form of Option~~Unit Agreement under the Snap One Holdings Corp. 2021 Equity Incentive Plan (Employee, 2024 version)(incorporated by reference to Exhibit ~~10.9~~10.1 of the ~~Registrant’s Registration Statement~~Company’s 8-K, filed with the SEC on ~~July 2~~).February 20, 2024.

~~10.10+~~

~~Form of RestrictedStock Agreement under the Snap One Holdings Corp. 2021~~ ~~Equity~~ ~~Incentive Plan (Employee)(incorporated by reference to Exhibit 10.10 of the Registrant’s Registration Statementfiled on July 2~~).

~~10.11+~~

~~Form of Restricted Stock Agreement under the Snap One Holdings Corp. 2021~~ ~~Equity~~ ~~Incentive Plan (Director)~~ ~~(incorporated by reference to Exhibit 10.11 of the Registrant’s Registration Statementfiled on July 2~~).

~~10.12+~~

~~Snap One Holdings Corp. 2021 Employee Stock Purchase Plan~~ ~~(incorporated by reference to Exhibit 10.12 of the Registrant’s~~ ~~Registration Statement filed on July 19~~).

~~10.13+~~

~~Snap One Holdings Corp. Director Deferral Plan (incorporated by reference to Exhibit 10.13 of the Registrant’s~~ ~~Registration Statement filed on July 19~~).

10.14*

~~Tax Receivable Agreement~~ ~~dated July 27, 2021~~ ~~between Snap One Holdings Corp. and the TRA Participants named therein~~.

~~10.15~~

~~Form of Exchange Agreement among Snap One Holdings Corp. and the other parties named therein (Employee) (incorporated by reference to Exhibit 10.15 of the~~ ~~Registrant~~’s ~~Registration Statement filed on July 19~~).

~~10.16~~

~~Form of Exchange Agreement among Snap One Holdings Corp. and the other parties named therein (Director) (incorporated by reference to Exhibit 10.16 of the Registrant’sRegistration Statement filed on July 19~~).

~~10.17~~

~~Form of Escrow Agreement among Snap One Holdings Corp. and the other parties named therein (incorporated by reference to Exhibit 10.17 of the Registrant’sRegistration Statement filed on July 19~~).

~~10.18+~~

Amended and Restated Employment Agreement, dated as of August 4, 2017, by and between Wirepath Home Systems, LLC (d/b/a SnapAV) and John Heyman (incorporated by reference to Exhibit 10.18 of the Registrant’s ~~Registration Statement filed on July 19~~).

~~10.19+~~

~~Employment Agreement, dated as of March 22, 2016, by and between Wirepath Home Systems, LLC (d/b/a SnapAV) and Jeffrey Hindman (incorporated by reference to Exhibit 10.19 of the Registrant’s~~ ~~Registration Statement filed on July 19~~).

~~10.20+~~

~~Offer Letter, dated as of August 4, 2017, by and between Wirepath Home Systems, LLC (d/b/a SnapAV) and Jeffrey Hindman (incorporated by reference to Exhibit 10.20 of the Registrant’s~~ ~~Registration Statement filed on July 19~~).

~~10.21+~~

~~Employment Agreement, dated as of October 7, 2014, by and between Wirepath Home Systems, LLC (d/b/a SnapAV) and Michael Carlet (incorporated by reference to Exhibit 10.21 of the Registrant’s~~ ~~Registration Statement filed on July 19~~).

~~10.22+~~

~~Offer Letter, dated as of August 4, 2017, by and between Wirepath Home Systems, LLC (d/b/a SnapAV) and Michael Carlet (incorporated by reference to Exhibit 10.22 of the Registrant’s~~ ~~Registration Statement filed on July 19~~).

31.1*

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101

The following financial information from Snap One Holdings Corp.’s Quarterly Report on Form 10-Q for the quarter ended ~~June 25, 2021~~March 29, 2024 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Loss, (iv) the Consolidated Statements of Changes in Stockholders Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Unaudited Condensed Consolidated Financial Statements.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

+ Indicates a management contract or compensatory plan or arrangement.

* Filed herewith.

**Furnished herewith. The certifications attached as Exhibit 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Snap One Holdings Corp. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

4043

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Snap One Holdings Corp.

~~August 27, 2021~~May 7, 2024	By:	/s/ John Heyman
		Name: John Heyman
		Title: Chief Executive Officer
		(Principal Executive Officer)


~~August 27, 2021~~May 7, 2024	By:	/s/ Michael Carlet
		Name: Michael Carlet
		Title: Chief Financial Officer
		(Principal Financial and Accounting Officer)

4144


	Useful Lives (Years)	Acquired Value
Customer relationships	10	$	14,400
Trade name	6	3,300
Total intangible assets		$	17,700


Remainder of 2021	$	24,586
2022	48,321
2023	47,183
2024	40,681
2025	33,065
2026 and thereafter	341,378
Total	$	535,214


Remainder of 2021	$	5,118
2022	6,824
2023	6,824
2024	650,431
Total future maturities of long-term debt	669,197
Unamortized debt issuance costs	(17,728)
Total indebtedness	651,469
Less: Current maturities of long-term debt	6,824
Long-term debt	$	644,645


Remainder of 2021	$	3,050
2022	5,951
2023	5,735
2024	3,391
Total	$	18,127


	As of June 25, 2021				As of December 25, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets
Notes receivable, net	$	5,309	$	5,375	$	5,115	$	5,494
Liabilities
Initial Term Loan	$	285,046	$	270,081	$	286,508	$	267,169
Incremental Term Loan	$	384,150	$	382,229	$	386,100	$	384,652


	B-1 Incentive Units			B-2 Incentive Units
	Number of Units (in 000’s)	Weighted- Average Grant-Date Fair Value		Number of Units (in 000’s)	Weighted- Average Grant-Date Fair Value
Outstanding units-December 25, 2020	70,739	$	0.34	19,822	$	0.06
Units granted	1,200	0.51		—	—
Units forfeited	3,353	0.39		—	—
Outstanding units-June 25, 2021	68,586	$	0.34	19,822	$	0.06
Vested units-June 25, 2021	34,916	$	0.31	—	—
Nonvested units-June 25, 2021	33,670	$	0.37	19,822	$	0.06