APX Group Holdings, Inc. Reports Third Quarter 2016 Results

APX Group Holdings, Inc. ("APX Group", "Vivint" or the "Company") today reported results for the quarter ended September 30, 2016.

"We finished the selling season with a record number of new subscribers and the highest Average RMR per New Subscriber in our company's history," said Todd Pedersen, CEO of APX Group. "Of particular note was the growth in our national inside sales channel, which grew 47% year over year in the third quarter, a result of increased brand recognition and execution of the sales team. We're also pleased with the higher attach rates for smart home devices, which not only increases value to our customers, but also drives higher RMR and margin per subscriber for Vivint."

APX Group reported total revenues of $198.3 million for the quarter ended September 30, 2016, an increase of 17.6% from $168.6 million in the third quarter of the prior year. The $29.7 million increase in total revenues was driven primarily by a 12.5% increase in the Company's smart home subscriber base, along with a 3.9% increase in Average RMR per Subscriber to $57.16. Smart home adoption rate for subscribers originated in the third quarter was 88.6%, up from 79.6% in the third quarter 2015.

Year to date total revenues for the nine month period ended September 30, 2016, were $553.4 million, a 15.6% increase over the same period in 2015. Recurring revenue for the nine months ended September 30, 2016, was up 15.8% to $529.0 million compared to the same period in 2015. Canadian foreign exchange rates negatively impacted total revenues for this period by $1.4 million. Total revenues from the Company's wireless internet business for the year to date period ended September 30, 2016 were $8.3 million, an increase of $2.7 million year-over-year for the same period in 2015.

"From an operational perspective, the Vivint team delivered another solid quarter," said Mark Davies, CFO of APX Group. "LTM Creation cost was down 0.1x quarter over quarter and 0.8x year over year; service margins improved 150 bps year over year; and the install base average RMR per subscriber increased $2.16 year over year on the strength of our new customer smart home adoption rate. Maybe most important, as our smart home adoption rates and Avg RMR per Subscriber continue to grow, we are seeing improvements in customer satisfaction scores, underscoring our belief that as customers take full advantage of our integrated smart home platform, they are realizing more value and a better customer experience."
               

Summary of Key Financial and Portfolio Metrics

($ in millions, except for subscriber data)
 

September 30, 2015

December 31, 2015

March 31, 2016

June 30, 2016

September 30, 2016
Total Revenues $ 168.6 $ 175.0 $ 174.3 $ 180.8 $ 198.3
 
Net Loss $ (125.1 ) $ (62.4 ) $ (45.1 ) $ (89.7 ) $ (70.0 )
 
Adjusted EBITDA $ 102.7 $ 101.5 $ 102.8 $ 105.0 $ 118.0
Adj EBITDA Margin 60.9 % 58.0 % 59.0 % 58.1 % 59.5 %
Total RMR (1) $ 55.8 $ 55.7 $ 56.3 $ 61.2 $ 65.3
 
Net New Smart Home Subscribers 88,406 33,162 41,830 101,334 94,272
 
Average RMR per New Subscriber (1) $ 61.30 $ 60.08 $ 62.01 $ 67.08 $ 68.85
 
Total Subscribers (1) 1,015,267 1,013,917 1,018,397 1,088,909 1,142,571
 
Average RMR per Subscriber (1) $ 55.00 $ 54.92 $ 55.27 $ 56.20 $ 57.16
 
Subscriber Account Attrition (2) 12.0 % 12.2 % 12.6 % 12.9 % 12.9 %
 

(1) Total Subscribers and RMR data excludes wireless internet business and are provided as of each period end (2) Subscriber attrition is reported on an LTM basis for each period end and excludes wireless internet business

Costs and Expenses

Operating expenses were $68.9 million for the quarter ended September 30, 2016, up from $61.5 million in the same period of 2015. The 12.0% increase was primarily driven by personnel and related costs to support the 12.5% growth in our subscriber base. Net Service Cost per Subscriber decreased by $0.30 from $14.89 for the period ended September 30, 2015, to $14.59 for the period ended September 30, 2016. Vivint's Net Service Margin was 74.1% for the quarter, excluding operating expenses associated with the Company's wireless internet service.