VVNT - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thanks for standing by, and welcome to the Vivint Smart Home Third Quarter 2020 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Nate Stubbs, Head of Investor Relations. Thank you. Please go ahead.

Nate Stubbs

everyone. afternoon, Good joining of for X-month afternoon discuss to ended Thank Smart us Home results Vivint XX, and for the September you XXXX. this the periods X-

the future Vivint's CFO. regards statements, would Todd on Joining that afternoon reminding begin including performance to I call may the and Gerard, CEO; with discussion like are today me and Dale prospects. Pedersen, conference by Vivint's company's everyone to the this forward-looking contain

will for assumptions, I fiscal are which recent in subject be you the the inherently Please statements periodic reports your our XXXX, with call factors these outcomes result to events Securities ended forward-looking and annual on we or or Form today's whether in the performance, comparable will revise the presented undue financial website Reconciliation could risks, from any or the or could Forward-looking most issued earnings certain our the filings otherwise. at I of on release September historical of forward-looking information, affect attention factors now detailed of presentation, guarantees to statements, calculated and www.vivint.com. are XXXX, and our risk to the and expect Relations quarterly in accompanying in report be this refer to we new GAAP not to on future XX-Q uncertainties company Form should available these The reliance statements. our XX, year as about quarterly differ materially Commission are other undertakes of of results such on would to the to in time put any Todd. including and on realization call. and those from non-GAAP not time over of measures XX-K for which Exchange section are factors our remarks, in results recent In to cause measures these turn available risk statements. expressed direct the Investor earnings that implied no our risk date with financial publicly file also most that update company's period aware updated and measures. a and to non-GAAP or may periods future in accordance those obligation most

Todd Pedersen

welcome Thanks, everyone joining afternoon. call Nate, to the this and

performance. We are to quarter pleased of strong report another very

the revenue financial model. Total predictable and retain a and a is healthy nearly quarter. with home fully-integrated security higher our by grew along results recurring consistent underscore platform, smart customer revenue of consumer having and home our smart reflecting ability services, total Our the demand of for portfolio. Touching AI-driven to of backbone XX%, on percentage proprietary, briefly subscribers a importance our which the few for highlights

adjusted Our highs. margins expanded build EBITDA quarters to new to continue upon and previous

Finally, than we to operate cash in business by $XXX be have we efficient tracking million XXXX. cash positive flow to more and the way, in a stated more are desire our

solid improvement to full saw the for improved of point attrition As by metrics key we our across quarter the rate performance XX-month a and Notably, we in our optimizing quarter. the in on continue the board focus last business, continues forecasts. nearly our many the exceed

America. platform fully-integrated customers million and today as of and proprietary customers ever. their mind our Vivint's over proven it the attrition and as the across care is peace that and past core rate proposition, value X of security X taking X.X in lowest believe smart QX families, fact speaks to was of reliably decades to the provides relevant our nearly LTM Our quarters, North for I

that This cases, creates X.X each living smart having In home their any can in demand: and consumer Our we're we XXX,XXX in, serviced. entire of during are customer do-it-for-me We and the amiss. customer delivering day, recognize quarter, In year impressive industry managed. issues we robust, is that value increasingly and the times which installed positive many customer, from us of subscribers from elegant professionally demand platform growth. We the We have environment more over which By data feedback this ago might thinking before our professionally in this investing which believe complex the to home of the In today's and the and something provide sales new customers. a are sales, hardware major provides to their real-time with uncertainty, homeowners billion design every believe XX we what about smart average the is security positive working by homes. to a by service a AI-based daily. on very happening Vivint. the we our fully-integrated loop, in from nearly added installed channels. for controlling life proven believe contributions recognizes experience age react up believe be our software time been with on customers and leader solution driven of an homeowners interact systems the homes, to identify pieces seamlessly that the revolutionizing and is able to consumers spending our XX% a and sign solution enables throughout systems we're already reliable of solution and proactively our of the a installation and issue a

X.X lighting consumer that locks, a while home consumer we professionally cameras, constraints of are growing the the versus national standout our the believe increasingly complex The interior that rebounded have virtually continue best though a million every the security sales United the household and XX% subscribers, Vivint's solution door teams have is in XX% States, to generating home we're fact solutions us Consumers low controls there's market on in the Meanwhile, in cameras, awareness subscriber coverage Our just ZIP model in a been the tremendous our new home prior upside X% smart full subscribers. that sales Even codes scale. awareness is premier to over in rapidly-developing COVID-related the that sales thermostats started. growth monitored mostly from and smart digits. year, makes unaided include nearly by U.S. a deliver channel getting performance, adds position relying smart to installed, single serviced, we expect its but continued grassroots increase direct-to-home in new believe leader we With efforts year and we period. by inside integrated on can year-over-year if national earlier channel nicely in our exterior

services enhance XXXX we mind objective forward technologies. to how focus can As of desire. to our the and do in on peace better we convenience, Vivint be look beyond, a security do will job new want are, we and telling by and products, our investing the building delivering of what our consumers we they We and key of lives who brand and

the we consumers edge to to in market. In home the leadership delivering new leader that the and investment and and the continue we services ensure want. industry and when development smart will by our addition, the in product is it clear differentiation on Smart to look our comes believe leading in Vivint are products home security We increasing technology solutions

by we're opportunity with and it. and and the and we ready incredible take have and brand step, come in growth to smart I next believe expand a fully-integrated provider, nationwide company are Vivint people understand will ready the value and our business to inevitable accelerate security growth an the our that helping handle the investing home We technology that is to brings.

We have and services that the if absolutely them. knew we believe want just consumers about they technology would

and provide exist the results Vivint. the for excited our we're third call excited now updated getting to as to of through I XXXX. that about and the will we're opportunities So strong message out, guidance quarter over Dale for as our the well specifics about go possibilities turn

Dale Gerard

Thanks, Todd. the in we presentation with today walk our slide third will of posted the earnings through that quarter conjunction release. I financial portion

board. quarter strong during our for mentioned Todd third remarks, As the very across his were the results

a or of Total to grew X.XX Slide the data portfolio. we to quarter million on highlight from year-over-year our X.X%. related X, First, end increased key average subscriber AMRU X.X% user X.XX Slide highlight with we X-month of X, our couple Total XX. million at monthly -- subscribers periods ended or an September or points million monthly $XX.XX. revenue by and X- revenue per On $X.X revenue the for

X.X% revenue in a includes increase recorded quarter year-over-year. For revenue a an subscribers. prior related resulting the XXXX, primarily quarter the XX% to revenue, note I in in revenue revenues $X.X approximately third growth was was change periods. to million that $XXX estimate would to reduction from attributable in third XXXX total RIC million, up The

to subscriber third costs the We margins were a our by to in portfolio, EBITDA scaling it's year key clearly Moving our XX% entire function service administrative basis continued to of year-to-date points our prior compared organization. adjusted new is of lot result, adjusted and XX.X% nearly significantly by great general acquisition in to hard quarter a X. Slide grew periods. of Adjusted EBITDA of expanding and the expense work the by to while XX.X% our million and EBITDA cost expenses. The portion origination subscribers of and drivers the increased subscriber related quarter revenue a X,XXX of $XXX.X period. to the in This

debt EBITDA, year adjusted covenants, the compared the calculation $XXX.X on $XXX.X Slide million quarter, shown increase in in million for this our not of some metrics. which to an was million we period. new Although On of X, used our highlight subscriber covenant the is or XX.X% $XX.X slide, prior

for earlier XX.X% the outstanding the some third pandemic prior to hold a sales year as nice from national started New year our subscribers and Overall, COVID-XX-related versus the XXX,XXX of subscriber the from sales quarter, the reflects following inside take across channel direct-to-home the originations period. channel by U.S. grew in our were restrictions rebound this new quarter which results

as to continue cash flow business in focus We dynamics improve the quarter. of evidenced RICs the the by XX% the reduction during our

impact by and on significantly paying installation, and we are net acquisition cash our this full reducing away cash to the dynamics. greater these the collected and cost of shifting point towards improving arrangements, financing our our our amount subscriber increase a at subscribers, proportion thus While able had partners has of of subscribers from flow RICs some

on Moving Slide to XX.

per cost net acquisition service new We and our subscriber cost subscriber will per quarter. net the for subscriber cover

EBITDA is moving of that to in seasonality quarter. our the recent continues of and encompasses which on third platform, XXXX net service Vivint's the lows contributed in improvement ongoing trend, new XXXX The subscriber, It's year. margin the and quarter. and particularly and increase generally adjusted XXXX. trend trend record-setting improvement per quarter the XXXX the tend quarter third XX.X% we $X.XX from seen of of the per our This demonstrates the quarter $X.XX see of to XXXX during and XX.X% in the to continued the the important continued recent to quarter upward fully-integrated cost part of software, the our a put positive it We in quarter, given customer achieving in how year-over-year installation most in subscriber, support. summer. significantly that security efforts to cost third costs home in in result the to service in $XX.XX the XX.X% net most versus in $XX.XX latter the improvements These now our note of advantage moving We from to down the new smart hardware, service third the its now customers, of in service

calls Additionally, we to the remained in abnormally have believe to service as pandemic. due COVID-XX third low related quarter mentioned the before, concerns

margins, full by and we current So encouraged trends the to while at wouldn't sustained XX% year the our corresponding level. the anticipate really we're results benefits

The acquisition period. the year right-hand the an XX side of On the represented benefited The customers mix as in or subscriber period their purchase net slide, that from year-over-year full costs ended were nearly the versus our nearly paying $XXX decrease our eliminated of and comparison point-of-sale products. financing at smart new are leverage for shifting XX-month of by XX% last financed the partners reduction the $X,XXX in RICs the September of also number for to have we prior of utilizing a subscribers purchase installation. higher via pricing products home

changes show on Slide and quarter XX. to subscribers rate the walk attrition typical at total Moving trend. end illustrates that We subscriber our in our

sequentially the quarters. highlights the to be the points our to for company One lowest in by rate, X biggest continues in and was of rate lower reversal attrition basis the the XX which past fell

of that the The their initial end cycle benefited drop third from X% in term quarter life measurement a phase. sequential in period customers were

helped, subscribers mechanics social portfolio by term initial that cost believe our and of other product our in rate. having subscriber our We end portfolio unrest through positive indicators the net terms the a has lower the canceling better of While are improved on perform October. overall leading expected than performance evidenced of continued number impact and to per attrition service as pandemic,

updated to overall approximately feeling our September several factors tied as strong performance, our Before at $XXX we leave million liquidity I'll outlook, third out move stood which of point to quarter including very good, position, us XX. our that

Our third quarter cash flow strong. operating was

the period from same XXXX. in XX, million ended $X.X for For operating million September to the X-month period cash activities generated $XXX.X compared we in net

$XX million which added cash During X.X exercise, million our the position. quarter, there approximately to XX were September warrants approximately

for model the revenue I fundamental are revenue predictability business. contracts is long-term revenue to Many guidance. XX, has with approximately More proven to our our years, of of move subscribers Slide initially updated recurring, platform and COVID-XX producing than to our revenue and believe high-margin pandemic, uncertainties remain of X visibility which previous comfortable reoccurring the and the many new remain our let's XX% while compelling. Vivint's outlook. resilient, sign will financial Despite up X-year the pertaining reoccurring our our Vivint characteristics that we lifetime address on model Finally, margins. provides for We significant

an rate EBITDA. attrition total update performance improving and economics subscribers us and better-than-expected have prompted our Our for guidance unit to adjusted

guidance million are between and between for million to million. our total versus guidance subscribers X.XX We previous million X.XX and X.XX raising X.XX of

of billion $X.XX $X.XX and revenue total for between guidance our billion. reaffirming are We

We and you the EBITDA to for Operator, $XXX versus line between previous $XXX million are guidance to and Q&A. million of may Thanks our raising guidance million for everyone million. adjusted between open the $XXX $XXX call. joining

Operator

Instructions]. [Operator

Your comes JPMorgan. Paul first question from Coster with

Paul Coster

ones. three got I've quick

to plans? the Dale, debt of you talk refinancing can us First all, about

Dale Gerard

Yes, Paul, thanks joining call. the for

in actually and we out monitoring the whatever do. to they're markets ready, we'll markets. and But We we're wanted to decide monitoring, the think come quarter the we terms markets, strong. results think capital We I helpful they're we're now. to get think actually we're of when to

Paul Coster

Okay. Got up fourth might that think said didn't. third costs are The in and although the up service quarter, they I in you going go the quarter, you. they

little got you through on average good things. I that the Can obviously, talk us revenue that So monthly just dynamic noticed handle But declined. also a a you bit?

Dale Gerard

Yes.

the couple of we right, bringing our I of couple are a -- down calls. Paul, We talked terms the piece, monthly, think you charging this pay the they us. into again, look it's actually So upfront. and kind it out-of-pocket purposely which about the year-over-year goes the of amount financing to over subscription more -- last average to because paying total to we're for they're increased When the at the overall of partner related what customer, in financing dollars

we're in cash we're cash pay partner. more why level a cash But which producing to able paying in And terms month in we so financing subscription us shifted little were of operations. bring what upfront, we've the what to is done that each of amount are they of from is the of terms bit actually

So that's driver really behind the that.

Todd Pedersen

the that, Todd, And is to costs of to add direct subscriber $XXX this is a result acquisition that. Paul,

but does coming it's we've ever selling So we it, happier a it high-margin we couldn't if that. it We're appreciate -- more is actually but about per question, down, does this hardware revenue the subs you like at upfront. understand don't look than not. But be sold --

very, business so very And well. the is working

Dale Gerard

still still be compared of think a coming we normal on calls that calls down centers And our are think to rolls, service truck call in what we're somewhat cost We we're then would the trend. Again, cautious. terms fall. booked there's and

we part working subscriber And better, very very, of calls but that's at very hardware, it some this. terms maintain do performing basis will a -- very possible in keep that about there's our as and But and still where on we're new driver a is come cost experience. those, this, our customer But high-quality service point we expect, so hard low think where a back. and to big of a big also is thus, is software excited

Paul Coster

Got awareness better feel you. unassisted like sounds these you've you pipeline. better if be you also could so doing out sounds in brand like it was And the there. products new And got like much and Todd, it there services

recently, splashy insurance the get event I you're is think, there? still some Or expect the most the product big one than out is that brand that? And the first talking that sort we Is of about. more subtle line? it to should in

Todd Pedersen

be pretty were were as basis, on cash kind again, a a we very, too. out million launch. levered to positive speaking of that that promising -- I marketing on cash But basis, going which going flow flow and it until money a about, by to we're on put a we know that which a $XXX clearly excited to now we're very there, branding, kind we've the we of had said positive company, way, spend positive So the QX launch we're levered of and are, we are and includes the in we are -- markets --

we we test test -- we analyze. anything about spend -- company, you like and to our test if and Now and -- know don't

say, spend very, the clinical from so spend can and about that. we how marketing I to we guess, we're to going how dollars what that And strategic results be get on to front,

for a positive we're a for flow So nationwide. time, for be working it quite and that some cash year. we been known the are We've we've marketing QX in launching effort while branding and on to going

So give that great us going to believe tailwind. -- some that's we

spend it to got but how -- surgical goes, we takes months. as present a and have for seen And say, what about the not very we and consumers, are we the again, campaign services and something where marketing we committed we've be to got launching This has you've that anyone time. we to years, that. spend, but brand Now a how products is for national strategic we to be branding

I the what, see think then coming in was happen, next the question something weeks, hopefully. And Paul, again? you'll

Dale Gerard

That was it.

Todd Pedersen

there's else. something No, no,

Paul Coster

How insurance. coming many insurance else first products' new line? there the The anything in on? for is Or

Todd Pedersen

our say So patient way that with going. We're so we're we insurance launched we very announcing got that to data yet. smart is to delivered platform the say product partner, we've this, pivot. we still numbers our -- be can a being believe quickly believe technologies, is this the customers incredible very how ourselves a position going proprietary I to is delivering. that. but to not are be the have not our that are I But and going pleased view of advantage everything. recipients for and to And huge our into services, be about This product, is home have how we we advantage have how we consumers. smart just through we Again, because the because are they an with going they the home we that benefit They're of in of services Vivint

maybe numbers start the it we excited. that year, continue service. the and talking and the So committed to of business, and about test And and really the at we're but next to product some point again, expand relevance future to

Operator

Erik Morgan from comes Woodring question next Stanley. Our with

Erik Woodring

wanted nice I down. really rate. attrition I It's Obviously, quarter. you on the just guys the it's to on coming -- touch to Congrats guess see.

guess, or have being ago, puts of into your And then way, of attrition roll commentary end rates your kind keeping the terms And from a hear base hearing follow-up. that's them what's about platform? Or possibly of guys' quarters board. takes, from where then how talked not what kind said to the your you've maybe on in changed year? I higher the you're what's off X X another I causing love to would Just and them of

Todd Pedersen

do we recreate incredible written We've this And this attrition. with And move to in answer that at -- We really, determines interesting platform. that is partnership all service cycle install customers We There's cycle that. else. really again, lot to and -- that to little through little the like one it's this it's It's for. differentiator It's it's We has is our no this designed firmware life is the to have calls, lots with thing. us sales protocol, a the have a one obvious their this improve points But our hardware and but have trying engineers that than continued no important. because This of everyone maybe software Vivint not of we've been of and improve. So downturns. us and of point. from attrition knowledge our a then customers interaction else is own the with an silver it's bullet recreate product. feedback It's are professionally the how Others own create reliability of installs, [indiscernible]. -- few points that contact our is we we just installation how it's this obvious, protocols. to perspective.

and at product well Our run downturn, about services, through. every smart security generally, when through company I'm very very, done the least has talking I've

on I wouldn't they grocery want we for them this think that. without demand services delivery, live this which food attrition and with integrate current and And of So increased environment delivery, done in operate thought for burglar people families, of when far people alarm reconnection that we great one, consumer, has and the peace and happy an security. and this shared are those. fronts their you that provide been I there's package sometimes inside around and branding how consumer who the at services to and backs. services. scary We we all smart the now home, the and what calm I working to that people, are, think kind engaging from safe giving and our then things is, here that individual they engagement home, remembered And because hope is also well. basis, we they've they down people country. I going historically, happen, their protect as we're with process the kinds things have again, very And with we they're -- our The and of is -- general, engage how of and got delivery, how incredible, with knowledge think that making typically that and it's our industry, last incredible their fact comfortable consumers. their the security mind then mean if really with assets a home, them investment describing our on our by the this layer be provides proposition environment app the with everyone advertising product value think well, how our to I company today, that are do, some worldwide do and for benefiting And thing with good starting nice campaign we wind There's as those largest think you for we're think all differentiated the -- we've little those with goes. about of investment, and and in COVID, we home, deliver, of all I well behind things that, downturn, on

Erik Woodring

thinking I my was any about revenue be should the subscriber would And Just why targets process That's moving kind we guidance? behind but year-end be, really that just And then follow-up there? helpful. not your thought Awesome. raise -- pieces subscriber what of your that? guess

Dale Gerard

Yes.

our in the targets fact the better that we I think, had forecast. we're much attrition again, based is raising upon than running subscriber

the feeling and within we've doesn't subscribers. of or -- increasing or are range XX,XXX range got the because subscribers we are comfortable? XX,XXX $X terms XX,XXX in I number impact of a So guidance, mean range. even there if our One, given pretty revenue subscribers that the more we're We're billion ranges, good-sized

you feel of is into starting in, this good very will if the into little go going the have we revenue really of subscribers we moving I It's revenue So year, what around recurring number sight a comfortable. go a bit revenue, know be. [indiscernible]. our even terms line because of in we back, mean to next

the today quarter has knowing sit so how first November a feel or quarter. working, a where terms we we performed the into or of the plus is metrics before we how comfortable here fourth did I other number, the are attrition of thing in think more than in the into quarter week subscriber

the made change. that's So guidance that why reason we

Operator

Amit next Daryanani Our ISI. comes Evercore question from with

Amit Daryanani

a guess I as Todd. couple Yes. me for well.

cities? First bit the brand strategy touch tested perspective extent about could increasing this I in you regions, If from want there. so, just it, a a fair you about get off, on calendar then recognition. to just what you've you as -- just like think talked that the But about and understand smaller to have and smaller do your you? scaling like those what up look investment talking metrics to does you're And in look 'XX? this cost awareness

Todd Pedersen

Yes.

-- sales to of haven't But customer half tested and our adds going annually. about advertising consumer the So inside of of our group an we we're all do half as branding on that the type do. that's you know, base we -- have we

and on It's So we money spend advertising. more do advertising. branding type lead-gen

So going to style. different. slightly be We're this is branding

full to city a it, a -- why dollar to a or And and into not that's on much we're on So it's in done have on from national branding, more be go expensive test but in force. we yet a We're going region basis. spend. going a than spent on to national not basis

we're what that's a local going just not So on nationally, basis.

Amit Daryanani

even the rather dimension way fair. calendar this to service cost And I margins perhaps then wondering improved that guess you guess with That's 'XX. net structure any in is And once nature, that again. Dale, in understand look like cost if it. dramatically will some around I of I I there's what was look transitory go or Got that more post-COVID that to could world as there -- a if think I houses versus the how folks ever? But who transient a we is away way on on much. come structural if in is get year-over-year that more over to have of that's though guys the much had something basis, there at improvement

Dale Gerard

Yes.

think very on focused again, we've this. I So believe that, we been

loop the own is the doorbell high up centers, the was, of it's that, calls back calls that one to the knew of in do have cameras, fully-integrated issues. issues. with and homes we servicing of model our video. If do it's out part Whether that which of people's for the people a us installation, their some when we in issues you which Those feedback were are loop the benefit we And of to uses cameras. $XX where go want go cost camera, months homes. issues range, to and the were we own related have fix cameras, there's said, up have, driving XX people's call outdoor the roll we lots have cost that one know, software, the And we that it, are Todd earlier, indoor is big were of roll actually video, to expensive, as of connectivity hardware, we all that said driving into to -- trucks homes to call those to the as this and product, $XX own the feedback the this big of big products you hey, having we allows range, what sales, us driving and we

Wi-Fi tools those and Wi-Fi works rolled of and hey, the products, that software new we of stuff there of We've the We've new -- all house a installing what's some and in part that new done this sure products lot around from then outside we've firmware we're or sure So that, rolling upgraded new work when being we're some hub. products of that camera. hardware out we with that on we the we're our camera technology is a have the of believe by the out the rolled and that we out around, it those before associated equipment service, make in together part where installing corner this start connectivity, homes it works home leaving. and making and the connectivity doorbell

seeing have structural issues, actually definitely go the of type I but what -- calls know, coming feedback is and call lower. the on in is, updates be coming so less those much is we of go home. in, this the calls those to -- seeing today we there's can think folks' cost in software, lower movement firmware, again, we we're those whether we I'm And things but do we what what -- I the you're own that they're, how And can't tell we're to are that do in. thing, are have, that the will issues. a believe know how loop too, that work on terms there's we And the servicing move you product because again, because, because then whole of installing of not

have we talked products. of service it. to part again, services attrition the fine-tune of some with So related in related that's calls that's correct. again, video, we fundamentally, terms to that earlier are product a efforts question. ultimately starting really And in the of it we COVID-related. a steps part the on believe of also that -- to to that issues a cost spent this time and big coming Again, But think that about we Because there's to and lot this to, think and our which we we those lot was an around I of

on get system get the on to or cameras out and however you're phone you works, you're payment not your today, the offline, cameras are happy system going the aren't or on If pull they're on the online your going up you system be versus it there. and with accessing the you computer,

delivering it. can at works drive very the door customers stay events It the longer your someone's You It platform. to look going front well. that's onto can a quickly go experience, seamless, and to to It's or says up comes at you package. pull your

Operator

comes from with question Khajuria next Shweta RBC. Our

Shweta Khajuria

of me acquisition what much? decreased your And how so try material potential should change yes. And we subscribers in the new responding -- you That subscribers then the And one why subscriber about think a please. please cost through pricing plan? how run two, plan is, Let sustainability that? second or decrease. the pricing Could to are was the or

two, those Just please.

Dale Gerard

and you here in anything. can jump start I'll then, And cover if don't Todd, Sure. I

your I drives the to going question. order. second start question going first, I'm then that and to in think take I'm into reverse first

into I see think tweaks always you'll make We're and this 'XX. of way, lot things. model, that -- a we're pricing always the think by of as in looking model roll -- to have we I we us test pricing said, the as it we and at terms Todd

things, is we the I getting I add the tweak and we inside And subscribers. in from until I'd mean to continue third sales things tweaking you're we customers, of terms the keep leads is say we think from acceptance coming Internet. optimal. find the where in XX% I So the But think of new grew Year-over-year, subscriber one quarter. we

that. offers home, the the for they're going they're other are channel Internet, maybe is way, smart for security, customers as they're So going there, doing people's example, smart see to on And that growing. out security. And searching out by

quarter. it the grew I XX% think in

home, think with for your well them and of hey, taking customers from very that's their those terms that been smart I is It's going this -- package They home you're doorbell want it, help better I locks, want received it. It's outdoor home, the They that equipment They're channels. the equipment the exactly and door the like you customers of so they're than to as we here we have equipment equipment. transparency earlier. can getting past, really sensor like want, it's door more that's sensors is I'm just or it's to servers. it's by they taken today whatever. home. it's buy. know, Todd It's in the what They're paying management the a they've cameras, don't response whether a a in really understand way. window, not think the hey, stuck taking this -- of both that, So it's and things it's that our in taking that not mentioned picking or things of cameras, of what

terms here. In to quarterly reduced the going drop a things in this call, we've of RICs net of substantially. kind on the there's we've One, hinted of on last couple and SAC,

year-over-year year XX% If it's in think third, down last you I the to go back in the quarter.

of put are basically, either. they're their coming one And our our through collecting customers and of no financing on that from those financing money them customers. we XX% we're balance from They're out we paying so it's customers if upfront we financing partners, you putting money sheet, basically Versus got the were of upfront so recall, RICs today, just on that own account. today, bank or for -- it

collecting LTM So that's terms And is, an customers. that money this what changing again, the we're fundamentally amount is upfront those calculation. of you're in seeing of

in quarter had it think about when I first to -- you dropped XXX the from second XXX was X what in we the So quarter.

this as Now we're because in those are quarters this off XXX, quarter recalculate RIC the that down higher XXX to that out. falling range have we we're having percentages

is So think other allowing changed and needed It's the some of We things it's investment driving the of do, to some marketing changed, of that business. something coming it's do and was production to fundamentally do cash terms it here. to go Todd's in this. want us we and really really and brand we frankly, about into talking this the

in RICs on you those X% we X% it, go off. do fourth your here in is report number if the you'll But going of math probably how we we kind they RICs will to of terms fall if call that have, next kind quarter And have In quarter, again, that that coming... when quarter, that again, have as things. can think, report -- the tweak there, quarter and but out in XX% we'll another I continue of again, looks, fourth to

Todd Pedersen

answer it's So the sustainable. is

few danced I a around of So kind think this for quarters. we've

we don't business close said create was future. or to very we've way come breakeven We've it's the to when customer. Anyone not is upfront in to the call, just cash public. are dance but number, flow around say the I'll now about have pinned on it's model it And going down Our working. from working a think We X,XXX. we a it.

is to dynamic gross compared was -- earnings debt. back was acquisition -- consumer acquisition that listen $X,XXX for gross were a an anyone was the on business incredible costs. call which our when net our to subscriber cost $X,XXX to and It of call So our us, we

costs, you're incredible the and an for also reduction the also because So which business, cash in which this service the seeing is reduction is turnaround, of is because overhead. in of the dynamics

overhead at years, to our service better to where we're If been better being we what firm reinvest we spending lean past in you we've a need compared numbers get growth, work, very company going software, to think focused look incredibly technologies, delivery. on better the better

products of seeing go to story. couple to services results. finally do -- products years, and we service we've how wanting -- tell we're to consumers more, and demand our again, So the been business the and really and busy the And enhance those back grow continue in last then

Someone's going competition. has, surprised no to I'm who's probably your ask,

now and home their margins, Our we're incredible we're we we the awareness awareness do prop from inside competition they're to really and can our incredible billion of I lack deliver, knows what and of $X and the of value When living their believe that that nobody wind now going we Not north did of have it of an right catch do to business. single-digit going mean people incredible we lives is, way are. it's -- perspective. how understand is consumer interact with -- engage a delivery, it's of some We business, brand. nobody, we but great -- service revenue, who

going so obviously overnight, we're again, -- and but be to time. going and to And committed. it's take we're patient not It's

So we of have ahead what's about -- we're excited us.

Operator

question Bank. Kunal from Deutsche next comes with Our Madhukar

Unidentified Analyst

Kunal. Nest? saw questions. relates Ring little actually, product there Amazon X the also topic you on buyer trends that And guys XQ color then seeing any This changes any at is And Google behaviors? it into Akash looking versus being, terms the any And bit on as third deeper looking question are for new XQ? in just in in maybe quarter, a I competition dig be at or the to first would have landscape, that versus two we of competition, the System of great. guys could mix I second guess quarter maybe you

Todd Pedersen

it, like tough on we'd platform, systems smart what These on paying about very camera a business. there. are out a single home. talking point about I'm about a going not the I doing question There's and exterior crazy in the first the be camera is you I competition talk house. to. XX doorbell people anyway. a Well, or to Arlo something mean fully-integrated intelligent an question home I'm to just the attention But said this -- asked no We're of because other not are the and installed stuff devices always solution

support we've -- happen And and today. to the deliver a has And support, our either then needs interaction that, out Kind truck process there a whole you've to that to driving which of the network, about phone to happen installation so we if ability with customer own to own the very have what to from technical say deliver. to we or that going be ongoing a the over talked our quite if got installation, own, bit the sale do capable this employees. to we're

super to people's you Google Nest their you've homes, are did these anything, camera is in nice what not answer nice got we phone, have seen else of that So we yet a I easy. really have Google, have this. partnership, -- To we're thermostat. doorbell of just making, up moat. And an what XX for it's calls, and professionally or believe new it -- doing did if they also the someone or nice sort be I beliefs by this to we've validates not that incredible It the in infrastructure ADT. saying validates difficult in need can't did level of not the done, but it People technologies happy. not and we in this we're speaking And beyond step think to very -- mean I'm But recreate the way do. which years parts done incredible to security of invest we've product. be noticed of design kind coming. Google their is because install But moat the

just I convinced which it's as So think sure that's then have a our do. ads ahead we this if we've hardware, of a on demand call, yet And huge a customer that industry, lot which We're this capable relationship, long lot. easy. not just have want see install we of high happen and that high pursue time. very and long easy. the platform. our People customer Google It's great DIY we us. even to in for mean We're their and spend we consumers we have we make to off-the-shelf understand we component we we I get to not thing, the when pricing really incredible and the of because And tested not money. buy to this had even it's we're it say, a margins know it all to testing hey, profit a there just DIY, a flexibility expense, the have We I pool we that capability. don't life but we and grow. of want themselves. margins, It's It's are, don't is want that. number, which We do; it. like which offering, I perspective. how the they to services DIY heavily

space longevity. customer to we're We this just margin, on nice We're point. not that, we've at add we than chase got But and growing a -- if very question. growth are there's to at to be invest more to going are in profit grow we good show add lot which we that a it's We growing what that. and doesn't subs But to we are. it a again, And just focused pool not -- that pace. believe grow intend in this

what the consumers Enjoy We I with because XX about clear clear use excited of home But day, leader some home a other in the none experience. of starting are we're me environment cases is we would been paying believe we say my ways, other it and more I our of this to people And of years just interactions we've that. work and watch -- environment home of different that And kind engaged number that discover of they're got the we've really had platform, the in as and they it in think a ways. the as how leader service But business. this much lot also. that the with our to doing most unfortunate us people so way time. of do. what engaging the are per staycation, our this, smart I'm attention, to is it's learn it. we're lot a a is again, chose, space, and the it's us absolutely for my do calling And family are is,

deliver are perfectly and into consumers' as really now. we positioned company services a right that offerings home can interesting So

a [indiscernible]. we So we're feel like

Dale Gerard

Mix of [indiscernible]. buyers

Todd Pedersen

mix not of buyers, change not actually. much quarter-over-quarter. so Oh, mean I really

part. last the missed I Sorry,

Operator

Our Morgan Jefferies. next question from with Todd comes

Todd Morgan

kind think look of that growth, COVID? Two of quarter. kind guess about I of that there only And nothing continued it about see, dollars. mean forward, back that holding would hundred cash that. little $X sell and in you're is looks and you a if you've talked basically to paying I kind close to the basis, effectively it. is to bit LTM be with I and about think I a service now, out there the this and questions continue add the costs install kind I you same. easier new you to be of reason coming on the year-over-year way it even great to like mean talked without that, is cost I COVID. to you how how growth now, a all, subscriber? with math Good is subs guess, customers you of a cost, of but any really other doesn't much better couple grow of guess, words, way if about any In to can subs, SAC secondly, As being suggested first case? know or right, much for Is adding my an of think that's

Todd Pedersen

questions. the for Thanks

choice. this kind Dale to net point of SAC, this said, the interesting. So that's absolutely And a at is

can customers consumer the beautiful to and had It's little of either the just really because overall package, hardware we was month-to-month on it's Before pick from upfront a And no user point contract, financing kind thing X% financing, no commitment, way, choose with interesting now so But an by confusing. pay that financing, it's have be. part want the going to because it we kind bit and we can was of XX-month levers or we majority where the pull financing. now the forward. of choose

again, month upfront or we're to on business can the at out to is environment. $XX are we just same to can months don't I'm believe the But a of which knows down XX environment say we everyone do do By subscriber going as -- Now about a group this absolutely the internally today, continue the in change true and not we stands ago. goes amazing. I servicing for not way, I acquisition, and things cost. operate as -- if financing to We point, on a -- cost nothing had ago, set this sub-$XX minimum it, know change. at breakeven goal ever can we by when don't really get but X.X servicing phone that even could so to a the years the it

-- we're others and but the about that and the we're some it's it's excited that happened So environment my in, in fact are investment, of choice that. really

answer is the for yes now. So

consumer We the some that. think environment to the to which do amazing, in has been do amazing, date on group can way citizens, financing economic reliant to and in it's continue are been they've Fortiva, also where right the Speaking we future this. changes we

Todd Morgan

is on that's think question other having The COVID. impact the of around then And that sales. do you

Todd Pedersen

Yes.

-- had perspective, a have COVID put and had pause. from on maybe organization obviously So we I we our direct-on-sales to think

in didn't we I subscribers do want We mention have form earlier. past XX,XXX put RICs. of also would We eliminated about to I and -- again. make on this the sure the I in

revenue, not customer look really it's you outstanding. when good, performance, at So sales our and it's adds

And benefited we with being people their from have home. home, more again, being engaged so

substantially. say or I sales is really per I and Our per rep performance It's sales guess, per reps up that sales day saying. on revenue right per nicely, or a up it would customer, per

we lot we going awareness think where that. the hope I gains of describe Vivint the because and in see design marketing quality are product, those going more are, that branding the confident value layer about trend, elegantly that doing, least prop is product, to keep services as we on there maintained to campaign who the forward. of to we we're of is. I'm And think perfectly at I a we're markets that that deliver going to how fairly consumers, the actually we

Operator

Bank comes question next from America. with Rio of Our Marlin [ph]

Unidentified Analyst

over had talked of to to, can was the a -- the out about one kind provide of been changed longer you given or few in if it, how coming just quick you has been that I due. And level, on Just frame? attrition. X a call XX.X% or wondering kind attributable let's any time last commentary A it's quarters on maybe lower quarters, pushed mainly spread back, it's if XX% improvements a cohorts if if

Dale Gerard

in sure we canceling really, that terms attrition, had mean attrition were the than in forecasted. of That's the just -- I lower make been folks their in think at initial question of much signs want positive again, to the seen that we've term. number I of were terms And really of we

indicators from Our payments in customers payment in of really well. performed coming terms

So we're really good portfolio. the performance of seeing

I this will cases across impact going in actually the how year or all rest of There's look as the base. impact to we -- it spike there our -- and again, that's don't country, to we if is customer and we COVID. can't think know

indication and our remodeling how service of home, how performing, that our this to we'll there's change just though service for we're earlier, fundamental mentioned that products things big the end even for is the Todd if how right providing reconnection and the in I us and will we year. home, platform of fact that in for we're a that that of that they're of they're customers think then somewhere home saying we're the year, end is they we service we'll we XX.X% the their That's once range next that year the a XX% home, and the longer I their believe in where into home, give But indication will their full I'm so probably going to XXXX. a this stay where think better doing look are attrition their upgrading what kind this get is it we to -- customers on in we where that I those that the this adding comfortable looked think year, so Vivint something at period think believe time. an delivering we of want is now. And

Unidentified Analyst

was Got my due, that it. expectation. getting this see at, better I the that of instead Dale, coming amount of X normally, that's than quarters is cohorts we been what have x are behavior, type much past And saying of

XX% whatever was that, got pushed So that it's number forward. that or not

that could or those to You shift some of cohorts out? we in could with reconnecting necessarily due is, actually maybe and is you on their based period. even out maybe there longer coming a what actually people my see I said attrition that over out to see in that spread still just terms point home, pushed guess a that extent? XX.X% XX%, Or

Dale Gerard

-- next to think take of year. the we're Yes. year. of this end it. we No, could I'll to off you don't again, somewhere things best I XX% again XX% going we'll it's up back this see believe range. we spike -- ish, then what don't And I going we're just I for you north to that kind that XX.X% the But -- of Again, of But to today, We XX- We year. that be range, kind is don't been way in believe say think if you don't continue is perform the table, XX-ish don't that -- -- we're happens to year. guess, give XX% think, this -- to it's we range. see are that in we'll give XX.X% this as they XX% the and to range next

Operator

back for over There are call turn the will closing time. now I to no remarks. this further at Todd Pedersen questions

Todd Pedersen

Yes.

want on thank to getting everyone So we just call. the for

all business. next dynamics what excited we've and year the year. that the where had feel want least Hopefully, confident lived know that very I the we've this, quarter, all we at what had incredibly we've the sure focused time, this we're in the We've beat quarter just everything, think told you point. of an we've to make in up on we've current that to organization, of quarter. for learn over it's We about you and are expectations, the market. the we've pulse the this a you'll not stated and got I and promised But as on

and sure the and business. for everything towards outperform in We We are service making to that improvements delivery investing future. strides currently future of make in to continue we the the expectations better hope

you. thank So

Operator

This conference today's call. concludes

disconnect. now may You

Vivint Smart Home (VVNT) 5 Nov 202020 Q3 Earnings call transcript