Vivint Smart Home, Inc.

Good evening. Thank you for attending the Vivian Smart Home second quarter 2021 earnings call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, Nate Starks, VP of Investor Relations with Vivian Smart Home. Thank you. You may proceed, Mr. Starks.

Good afternoon, everyone. Thank you for joining us this afternoon to discuss the results of Vivint Smart Home for the three and six-month periods ended June 30th, 2021. Joining me on the conference call this afternoon are David Bywater, Vivint Smart Home's Chief Executive Officer, and Dale R. Gerard, Vivint's CFO. I would like to begin by reminding everyone that the discussion today may contain forward-looking statements, including with regard to the company's future performance and prospects. Forward-looking statements are inherently subject to risks and uncertainties that could cause actual outcomes or results to differ materially from those indicated in any such statements. We describe some of these risks and uncertainties in the risk factors section in our annual report on Form 10-KA for our fiscal year 2020 and in other filings we make with the SEC from time to time. The company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. In today's remarks, we will also refer to certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP, to the extent available without unreasonable effort, are available in the earnings release and accompanying presentation. which are available on the investor relations section of our website. I will now turn the call over to David.

Thank you, Nate, and good afternoon, everyone. I appreciate your interest in our company. Given that this is my first earnings call as the CEO of Vivint, I plan to focus my comments on four topics. First, I'll provide my background and outline my deep relationship with Vivint. I will then outline why I'm so bullish in the company and what I've rediscovered about Vivint after being gone for the last five years. Next, I'll outline my preliminary thoughts on where I believe Vivint needs to focus over the next few years and why I believe that will position us to be an attractive, differentiated investment. Finally, I'll touch upon a few key highlights of the quarter before turning the time over to Dale to take you through the details of the second quarter and our outlook for the full year. I know Vivint very well. I joined the company in the summer of 2013 as the Chief Operating Officer. and spent three years helping the company during those pivotal years of transforming from being a security company to a fully integrated smart home platform company. As a result, I was intimately involved in scaling the company, operationalizing our service and product offerings, scaling and maturing our supply chain capabilities, collaborating closely with our direct-to-home and national inside sales leadership to expand and grow our helping hire many of the leaders that are still with the company and improving our install service and customer care operations. It was an incredible time of innovation and maturation of the company. In May of 2016, I was asked to be the CEO of Vivint Solar, our publicly traded former sister company. During my five years at Vivint Solar, we rebuilt that company across almost every vector. Key achievements included expanding our go-to-market strategy to be omnichannel, revamping our operational model to reduce costs and materially improve quality, establishing a customer-centric focus on delighting our customers, and reigniting growth while ensuring that our growth rate was accretive to shareholders by taking share in the most attractive solar markets. We sold Vivint Solar to Sunrun in October of 2020, making the combined company the clear and dominant leader in the residential solar market. As a result, the market cap of Vivint Solar went from around $300 million in May of 2016 to over $5.4 billion on the last day of trading prior to closing the deal with Sunrun. Following the transaction, I remained on the board at Sunrun and advised the combined companies until rejoining Vivint Smart Home this past June. Prior to my time with Vivint, I spent 10 years running many of the largest service companies within Xerox. which were also tech-enabled and data-driven. Hence, I feel right at home at Vivint and in this role as the new CEO. I pride myself on being a straight shooter, as a person who enables good companies to become great companies. I also pride myself on doing what I say I will do and working to delight our customers, employees, partners, and shareholders. I demand the very best from our employees and will work tirelessly to ensure that they help build a great company the right way and create value while we protect our company, our reputation, our customers, and our shareholders. As I've rejoined Vivint, it has been incredible to rediscover how amazing this company is. I was familiar with some of the advancements during my absence, but upon my return, I've been very pleased at just how much progress has been made and on so many fronts. The transition from being a company that uses cash to one that generates cash through the consumer financing agreements we have with our banking partners is is a game changer. The team has achieved that while simultaneously improving our underwriting requirements and sales processes, all while delivering consistent revenue growth. That's an incredible achievement. The team has streamlined costs and redirected that spend to fund innovation and growth. The technology has gotten so much better as well, and we believe the product and service offerings we provide to the market are incredible. I am more convinced now than ever that that it's illogical for any consumer to trust the protection of their largest financial asset, their home, to inferior products that are often incorrectly scoped, improperly installed, and either incorrectly or not monitored and maintained by DIY or MeToo solutions. Our fully integrated solution is intended to align every person within Vivint to ensure that the solutions meet or exceed customer needs, that they are sold, installed, and serviced correctly, resulting in an average contract term of over eight years, and what we believe to be among the lowest customer attrition rates in the industry. I've also rediscovered the incredible core asset we own. With an average of 15 devices per home, we own a data-rich environment that helps us not only protect our customers, but also improve the efficiency of their homes and elevate their peace of mind. This proprietary solution that we design, engineer, deploy, and manage provides a platform upon which we believe we can continue to integrate and leverage additional solutions that logically link to our smart home platforms. We believe this will lead to new solutions that will create deeper value and savings for our customers. Finally, it has been a delight to reunite with so many employees and leaders that I had previously worked with. They are professionals who share my deep conviction to delight our customers, to bring innovative solutions to the market that create more value for our customers, to work in a respectful and professional environment that celebrates each other and diversity, and to do the right thing in every situation, every time. Vivint isn't a perfect company. Like every company out there, it has room for improvement. but it is a company that learns and improves, one that has an incredible culture and DNA to win and win the right way. We will continue to learn from our mistakes and get better every day. I am so delighted to innovate forward with this company and with this team. Going forward, we will aim to deepen our competitive advantage within our core smart home platform and business. We expect to continue to introduce industry-leading smart home products that our customers trust and value. We believe that these products and solutions will further entrench us in the homes of our customers and allow us to create more value than our peers. We will continue to work to strengthen our balance sheet, deliver smart growth, and invest intelligently to defend and expand our market position. An example of this smart growth is the recent announcement of our strategic partnership with Freedom Forever, one of the nation's largest and fastest growing solar installers. This partnership will expand upon our smart home solution to include clean energy and will allow us to continue our exclusive arrangement with Sunrun for solar PPAs. The partnership will work to bundle a Vivint smart home solution with each new solar cell. We believe this is one of the most desired bundled solutions for solar customers, and it allows a home to truly be smart by producing smart energy and consuming energy more intelligently through our integrated smart home platform. Our goal is to enable consumers to make better decisions regarding their energy consumption as they better understand what is happening in their homes. We are just beginning to introduce a solution into select markets. But given my experience and background in both smart home and solar, I'm confident this will be another game changer. More details will be forthcoming on future calls. Another example of smart growth is our insurance pilot. We are working with a variety of large insurance companies to develop solutions for our customers that will leverage the data we have on their homes. We collect data around occupancy and other usage patterns derived from our smart home devices. That will allow insurance carriers to underwrite home insurance policies more intelligently. We believe a consumer that has our solution, which includes significant home occupancy data and properly working sensors that reduce the risk of fire, flood, or theft catastrophes, should pay less than a consumer without our solution. Our customers should save money on their home insurance because of our solutions. This is another logical growth opportunity for us to leverage our core smart home solutions and expand the value we bring to our customers. More details will follow as we work to bring these solutions to market in a controlled and effective manner. Finally, wrapping up, we delivered a strong second quarter across all key metrics, revenue, adjusted EBITDA, and cash, and we expect to deliver on our full-year guidance. The debt refinancing we recently completed underscores the strength of our business model and the confidence the capital markets have in our team and path forward. I appreciate the incredible teamwork across our company to deliver that result. With that, let me turn the time over to Dale to take you through the details of the second quarter and the guidance for the full year. Dale.

Thanks, David, and welcome back. This afternoon, I will provide an overview of our second quarter and year-to-date results, as well as our updated thoughts on guidance for the full year. We will open the call for Q&A after my prepared remarks. I will be referencing slides from our second quarter earnings presentation that was posted to our investor relations website prior to this call. Turning to slide six, we highlight a few of our key subscriber portfolio metrics. Total subscribers as of June 30, 2021, were 1.78 million, up 10.6% from June 30, 2020. Average monthly recurring revenue per user, or AMRU, for the quarter increased by 2.6% versus the prior year period, driven by customers purchasing more smart home and security products at the point of sale. The combination of growth in total subscribers and growth in AMRU lifted total monthly recurring revenue by 13.8% year-over-year to $114.8 million. Moving to slide seven, we highlight our revenue for the second quarter and six-month period into June 30, 2021. For the second quarter of 2021, revenue was $355.2 million, an increase from the prior period of 16.9% or $51.3 million. The primary drivers of the revenue growth were $34.5 million from the increase in total subscribers and $5.6 million from the increase in average monthly reoccurring revenue per user. Our sales pilot initiatives also contributed $9.5 million to the year-over-year revenue growth. The 16.9% revenue growth in the second quarter of 2021 was more than double the growth rate for the same period in 2020. Revenue for the six months into June 30, 2021, was $698.5 million, an increase of 15.1% from the six-month period in the prior year. Like the second quarter, growth in total subscribers AMRU, and sales pilots were the primary drivers of the revenue growth during the six-month period in 2021. On slide eight, adjusted EBITDA was up 3.6% in the second quarter of 2021 versus the year-ago period. The adjusted EBITDA growth in the second quarter was in line with our expectations. As we have stated on previous calls, we plan to make investments in brand, innovation, and information technology during 2021, with a large portion of the spend hitting in the second and third quarters. The investment spending for the three aforementioned items in the second quarter was roughly $11 million. The other year-over-year anomaly when comparing adjusted EBITDA growth is the impact that the COVID-19 pandemic had on our second quarter 2020 results. As a reminder, we paused our entire direct-to-home sales program for six weeks, which delayed the normal start of the summer selling season. Due to the noise in the second quarter of 2020 related to the pandemic, we believe it's appropriate to look at the comparison of adjusted EBITDA growth in the second quarter of 2021 versus the second quarter of 2019. Adjusted EBITDA in the second quarter of 2021 grew by 76.7% as compared to the same period in 2019. And our adjusted EBITDA margin expanded from 31.4% in the second quarter of 2019 to 43.9% in 2021. Adjusted EBITDA for the six-month period into June 30, 2021, was $318.1 million, up 11.4% compared to the same period in 2020, and up 62.6% compared to 2019. Adjusted EBITDA margins for the six-month period in 2021 remain strong at 45.5%. Now moving to slide nine, we highlight new subscriber originations during the second quarter of 2021. Led by 22.4% year-over-year growth in our national inside sales channel, we installed 121,599 new subscribers during the quarter. we continue to focus on underwriting high-quality, profitable customers. For the second quarter of 2021, more than 99% of new subscribers either paid in full or financed the purchase of their equipment. For the six-month period into June 30, 2021, the company added 181,726 new subscribers, up 15% from the same period in 2020. Turning to slide 10, I will cover net service cost per subscriber and net subscriber acquisition cost per new subscriber. Net service cost per subscriber for the second quarter of 2021 was essentially flat versus the second quarter of 2020 at $10.03. Our net service margin in the second quarter of 2021 remained robust at 79%. While we've seen customer interactions in our call centers and in-home service business rebound from the abnormally low levels during the height of the pandemic in the second quarter of last year, I'm pleased that our teams have been able to provide exceptional service to our customers while managing that service cost per subscriber to be essentially flat versus the same period last year. I would note that given the seasonality of how we generally put on new subscribers, particularly in the summer, we tend to see an increase in service costs during the third and fourth quarter of the year. On the right side of slide 10, we highlight the significant reduction in net subscriber acquisition costs over the past three years. Net subscriber acquisition costs per new subscriber for the period ended June 30, 2021, decreased to $70, an 88.9% or $560 reduction from the prior year period, while the average proceeds collected at the point of sale increased to $2,144. For the period ended June 30, 2021, we are seeing the full impact of the changes we made in the upfront product and installation pricing in April of 2020, the reduction of RICs to approximately 1%, and the impact of discontinuing direct-to-home sales in Canada. Moving to slide 11, our last 12-month attrition rate was 11.6% for the period ended June 30, 2021. 210 basis points lower than the same period last year, and a 12-quarter low for customer attrition. We are very pleased with the resilience of our subscriber portfolio, and we continue to see favorable trends in key leading indicators. In terms of cash from operating activities, we had another strong quarter generating over $78 million. I would note that our cash from flow from operations in the quarter includes the impact of the change in timing of payments associated with the New Citizens Agreement, the investments in brand, innovation, and IT, as well as cash costs associated with changes in executive management. We finished the second quarter with over $345 million of cash on hand and a solid liquidity position of approximately $661 million. In July, we completed a global refinancing of our existing debt structure, which decreased our total debt outstanding by approximately $90 million, lowered our average cost of debt, and increased our revolving credit facility from $334 million to $370 million. We expect the refinancing to save the company approximately $50 million in annualized interest expense. Finally, In terms of guidance for the full year, on slide 12, the top of the slide reiterates several of the attractive fundamental characteristics of our financial model, including monthly reoccurring revenue from long-term subscriptions, a highly predictable business model, and the ability to thrive in all economic environments, which we believe has been proven out during the past year. As we have reviewed on this call, our second quarter results were strong across the board. We believe there is a lot of positive momentum in our business, and we remain optimistic about the rest of the year despite a few of the falling headwinds. Recent flare-ups of COVID variants across the U.S., continued disruption in the global supply chain and manufacturing environment, and inflationary pressures and hiring constraints. While any or all of the above-mentioned factors could affect our performance during the second half of the year, we still expect to achieve the guidance we previously provided for 2021. As such, we are reaffirming our original guidance for the full year as follows. Total subscribers in the range of 1.8 to 1.85 million. Total revenue in the range of $1.38 to $1.42 billion, and adjusted EBITDA between $640 and $655 million. This concludes our prepared remarks. Operator, please open the call for Q&A.

Certainly. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your touchtone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, please press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly to allow questions to generate in queue. The first question is from the line of Vlad Hall, with Goldman Sachs. You may proceed.

Hi, this is RK on behalf of Rod. Thanks for taking my question and nice results. David, could you talk about what are the areas where you think Varian needs to improve the most?

Sure. Thanks for the question and the interest in the company. You know, I think for us as a company, there's still a lot of areas that we can improve upon around deepening the value for our customers. So, you know, one of the key things that the team has done a great job on is you can see manifested nutrition and also the value that we're bringing to customers around the number of devices in the home and just the, you know, what they pay us for that solution. I think the thing I'm most interested in is continuing to figure out how we bring more value to them. So when you think about the adjacent growth more money, having us have more solutions in the home, having us be more central to who they are, and then the technology, but we own the install, we own the maintenance and the servicing. It's a fully integrated package. So, you know, I'm really excited about the stuff that we've already got going. These pilots and insurance are very logical. It can really help our customers see additional value in their wallets by leveraging our system more. And, you know, this partnership we have We'll bring more value to customers. I've been really pleased with how the technology suite and the focus on quality has really started to manifest itself with the customers. I mean, Bill talked about what our servicing costs are in Q2. If you guys read into that, it's really incredible. To be flat to where we were last year, despite the fact that call volumes are up, manifestation in that low cost per month per subscriber is really incredible, because there's a lot of things that have come to fruition around the technology stack being that much more effective. I mean, the number of calls that we're getting from consumers is much less than we had before around all of it, even though we've increased more cameras in the home. And so I think just the operational and technical our solutions day one, and the reduction in the number of issues that have to be resolved has gone down. There's always room for improvement. And then for us to be able to articulate the value that we can share to our customers as they trust us, as we expand our relationship with them, we'll continue to improve. And then we're also looking for additional ways to meet the customer on how they want to engage with us. So, you know, we love our direct-to-home team. It's phenomenal. It is the right answer for so many customers. We love our inside sales team. It's the right answer for so many customers. And we're always looking at other partnerships and other ways that we can meet the customer. So a lot of improvement, but I'm really pleased with what I'm inheriting and what the team's already accomplished and the momentum we have.

Appreciate all that, Kala David. Are you seeing any difference in the spending environment or attrition as we enter reopening?

On what we mean, attrition with customers or can you just elaborate a bit on?

Yeah, just either the demand environment in terms of your new subscriber ads or attrition within your customer base. Is there any change as we move into reopening?

You know, it's worth seeing. So it's interesting. There's definitely been a shift more and more of that adoption with our customers. And so the number of devices we have in the home has actually been going up, not down. So that's been very, very positive. And then you start to see more and more people pulling the solution in through our inside sales. So you're seeing, you know, I need more people in the home thinking about their home. And I think that's here to stay. You see that inside of sales with really strong 20% growth. So, you know, that's a very favorable thing. Once again, we're trying to be customer-centric and give them the solution and meet them where they want us to meet. So I think it's very positive. And then our attrition, you've seen our trends there. They've actually gone in the right direction. So, you know, I think the model is proving to be very robust. It was robust before the pandemic. It's been very robust during the pandemic. And as we've emerged from the pandemic, it's very robust. So, you know, I think there's a validation there of what we're doing. And then, you know, for me, like I said before, I think the fact that we own the technology stack, both the backend and the solution stack, and the install and service stack, you know, as we continue to refine that, I think we're delighting customers more at every point of interaction with them. So I think that, you know, the customers are more pleased with which is both well for us around referrals and for them to continue to trust us. So I'm seeing positive trends. I'm not seeing negative trends. I'm seeing positive trends.

Great. And last question from me. Value supply constraint in the quarter and how much cost inflation are you seeing? Thanks. Yeah.

I read an article the other day that said like 97% or 95% of all of the global Fortune 500 are having some kind of supply constraints. Were we impacted? We were. But the team did an incredible job of managing through it. So, you know, and that's manifested in us maintaining our full-year guidance. So, you know, were we impacted? Yes. Did the team work hard and with our partners to find solutions? They did. Were we able or are we confident that we're able to navigate through that for the year? We are. We would not have reiterated our guidance for the full year. But it has been a to work tirelessly to make that happen. And to our partners, we really appreciate our partners that sided with us and helped us and supported us through the process. But I think it was a function of good planning, I think deep relationships, and also do some good old-fashioned grit by our team to find solutions. And so we've navigated through it so far and feel very confident for the balance of the year. So impacted, but managed through, and that's what you guys pay us to do, and that's what the team's delivered on. And then, again, I'll say the cost in terms of additional shipping costs and all of those are factored into our full-year guidance, so that doesn't change what we're saying for the full year.

Great. Thanks, guys.

Thank you, Mr. Hall. The next question is from the line of Eric Woodgreen with Morgan Stanley. You may proceed.

Thank you, David. Very nice to meet you over the phone here. Looking forward to working with you into the future. I guess if I started just at the top here, so over the last few years, you've generated about 48% of your annual revenue in the first half of the year. Right now, based on your annual guidance, you're trending at about 50%, so a little bit more front-end loaded of a year. Is that how we should think about it, the front half of the year being more front-end loaded? Or would you say your guidance for the full year is a bit conservative and you think you can achieve that? And if so, what are the major constraints in the back half of the year, if any? And then I have a follow-up. Thanks.

Great. Good to meet you. I look forward to meeting you in person and definitely working with you. I think, you know, 48%, 50%, not a big difference, but there's a difference. I think the key among that is our insight sales is a year-round mall. and inside sales, you know, you'll probably see a bit of that flattening because, you know, we're working, the demand for our solutions isn't just a seasonal demand, it's a year-round demand. So, I think with the growth there in inside sales, that's not surprising. So, you'll probably see a bit more of a flattening between the first half and second year. But, you know, Bill, if I turn to you to see if you have any different point of view on that, but that Yeah, yeah, I think you're right, David.

I mean, if you think about it, Eric, as we've said, we've got this long-term subscription business, reoccurring revenue.

So when we come into the full year, into each year, we know we've got, you know, 85-plus percent of our revenue for that year. And as David said, because we're seeing kind of this more kind of rattle volume or new subscribers come on because of that sales channel,

But again, 2%, some of it, by the way, is also related to the fact that we have these sales pilots. And in previous years, those sales pilots were kind of really insignificant in terms of the dollars. We called out the sales pilots for the first half of the year were about $15 million of the year-over-year increase. And some of these pilots that David talked about earlier around insurance, solar,

the growth in the first half of the year versus the second half of the year. Yeah, and I think the final thing is, as Del mentioned a bit on the just leave it up, we did have a bit of a delay last year in our direct-to-home. Yeah, direct-to-home is super important to us. It's a super valuable channel. But, you know, it was a bit delayed last year, too, and this year it went out on schedule. So you probably saw a bit more, you know, I think it will evolve over time. Yeah, it will. But we think it's all good evolution where all of our channels will grow and looking forward to that.

Okay, that color is really helpful. Thank you very much, both of you guys. Maybe my follow-up will just be similar to RK, just in terms of thinking about component constraints and the supply chain. So your inventory balance came down fairly considerably this quarter. If we look back at the last two years, it's come up. Is there, or maybe I'd add to that, you see other companies trying to build inventory ahead of what could be further cost inflation or further constraints. So just any thoughts there on how you expect your inventory on the balance sheet to trend over time? Are there any issues? Or when it comes to issues procuring components, are they acute in any certain products or... Okay. No, that's great. And then maybe just a quick one to end it there is, Dale, you were talking about service and cost and how you guys have been able to basically serve the higher call volumes and maintain your higher service margins. So just curious, do you think high 70% is more sustainable now versus kind of mid-70s before? Or is mid-70s still how we should think about the more kind of run rate net service margins? And that's it for me. Thank you, guys.

Yeah, thanks, Eric.

I mean, I'm still, the way I look at this, the way I'm still modeling this, I think our operations team and our innovation team, because it's really, because we have this integrated platform, we're all working together to make sure we're providing the best experience and the best products to the customers that we can. You know, I'm still saying, in terms of how I think about it, we're probably in that mid, and maybe it's, you know, tweaked out, maybe it's 76% or 77%.

service margin, but I'm still thinking for your model, how I've been thinking about it, it's still kind of in that mid-70s range.

Perfect. Thanks, guys. And congrats. Thank you. Thanks.

Thank you, Mr. Woodring. The next question is from the line of Brian Rutenberg with Imperial Capital. You may proceed.

Great. Thank you guys very much for taking my call. A couple quick questions. First of all, David, welcome. I just have a couple questions for you, then maybe some questions that you may want to pawn off. But you mentioned attacking some issues facing the company as you step into this new role. Can you talk about maybe selling practices that Vivint has had in the past in terms of current and past lawsuits and other things like that and how you plan to address that? And then I have a follow-up. You know, we're not perfect, and no company is.

All the companies that I run all the time, you know, you always find areas for improvement, and this is an area for improvement. The company actually addressed a lot of these issues, and they've been working on them for the past several quarters. So they were being proactive on trying to close some of those gaps that they had and have done a good job. You know, they've worked closely with the government agencies. And we have an ongoing compliance that we've invested heavily to do that. So there is a very regular cadence, trust me, where we have the team report out and we have independent auditors working with us and also we meet up our internal audit team. And they're very, very attentive to making sure we address the identified gaps and keep those gaps closed. as well as continue to test all of our processes moving forward. So I think the level of investment there is significantly higher, and I'm very pleased with the results that I've seen from all of our audits and appreciate all the folks at Interpol. And, you know, I also think it's really important to mention this is a good company. We've got really good people. Unfortunately, every company has a few bad applications. diligent in making sure that bad apples are not with the company. And you have to be diligent in making sure that you're always retesting, retesting, retesting. And so, you know, I know the culture of this company, and it's a good company. And people are great. So I think we've done a really good job addressing those issues. We will continue to be very diligent about doing that. We just hired a chief compliance officer. We joined shortly. Very excited about the resume and background of this individual, what they'll bring to further our efforts there. That compliance officer reports directly to our audit committee and also to me. So very excited to partner with this person to, you know, continue to elevate and be the industry leader on this.

That's great. Thank you.

I think this is very serious, Brian. So if anyone ever has any questions about that, talk to me personally. This is a very important matter, and I know that resonates with my entire leadership team and our entire company.

That's great. Thank you. Maybe an easier question or harder, whatever way you want to look at it, is attrition. Right now you're at a record low, 11.6. You know, where can this go? Can it hold fast here? Can you get below 11? Can you get into the 10s? What is realistic over the next couple quarters next year? You know, I don't know. You know, we'll give it some more. I'm actually really pleased where it's at. And, you know, I think where the company is right now, I'm really proud of what they've done.

So, you know, I'll continue to do some modeling with the key looking at this one and figure out what we want to do. There's always tradeoffs. So, you know, if you're low attrition, can you go to that? And obviously high attrition can be good and bad. But we compare it to our peers. Um, and I compare it to, um, you know, electrician, snowboarder, DIY competitors. And I think we're, we're, we're, we're half theirs. So, and I think compared to our peers, we're doing really, really well. So, hey, if you can dip below 11% into 10%, fantastic. You gotta understand what the costs are. So, I don't have a very good answer for you right now. Uh, we'll look into it. Um, but we'll try to always make the right decision and the right trade-offs. Um, Dale, you got anything you want to add to that?

Great. Thank you so much. Brian, I look forward to getting a notice. Thank you. Thank you.

Thank you, Mr. Redenberg. Again, to ask a question, please press star followed by 1 on your touchtone keypad. The next question is from the line of Michael Fisher with Evercore. You may proceed.

Great. Thanks for taking my question. I wanted to get a little more detail around the Sunrun deal, specifically looking at the go-to-market strategy there. Is this going to be more Sunrun Salesforce selling Vivint equipment or the other way around or a bit of a mix?

I'll take that one as well. Michael, look forward to it tonight as well. This is David. So the relationship, we've always had, over the last few years, been selling solar in certain aspects. There's a bundled desire by our customers to do both. And so we've been doing some pilots here and there. The relationship we have is with Freedom Forever. Freedom Forever, that we just announced, is one of the largest installers We had a relationship with Sunrun where we were selling some PPAs from them. So that relationship will continue. I'll continue to do our exclusive PPAs through Sunrun. I know that company very well. They bought my old company, and I'm very confident in their ability to deliver and the quality of products they bring. Freedom also sources their PPAs through Sunrun, and so it was a very natural extension for us to partner with Freedom who has a very broad array of installation people across the country. And the key to this relationship is they are also very committed to installing a vivid smart home package for each of their solar installs. We think that's the true definition of a smart home. A smart home has smart production of power on their roof and really intelligent consumption of power in the home. And our platform, I think, uniquely positions to do that. And the integration that we'll do through the apps and the information we'll bring to bear for our customers is really compelling. So there is this group of partners that are working together around financing, which is through Sunrun for the PPAs and Mosaic for the loans. We're working with Freedom Forever on the installation. And the service has a solar piece. And of course, we will We think that we will sell that ourselves and there are dealers that work for Freedom Forever and for someone who can also sell that solution because I think it's very compelling to the consumer. We're excited about it. We're very measured in how we are investing to make sure we have really good integration. We measure in how we roll it out to make sure we're delighting customers. There will be a learning curve. We'll learn quickly and make sure we're delighting customers. But it is a very exciting partnership. I think it's with the right partners. We know that. And we think that it is going to address a very high fundamentally desire our consumers, and we need to be able to go back to our key thesis, which is how you delight customers and add more value to customers. So in our mind, it's just all the boxes, and we're looking forward to it.

Yeah, thanks for the color. And then the other thing I wanted to dig into a little bit was the national marketing campaign. I think it's been going... six, seven months now, and I was just curious maybe to reflect on it a little bit. Do you think it's been successful so far, and how are you thinking about your marketing spend going forward?

Yeah, I'll take that one as well. They're all just shy because they're afraid to take any hard questions, so I'll take them all. No, I think we're pleased so far. We're pleased so far with the results and the early data. You know, marketing and branding has a long gestation cycle and a long payback period. But, you know, we've seen it's really interesting in the markets that we've Over in Nexon, on a lot of those national marketing campaigns, we've seen an improvement in our average sales per professional salesperson. So we're still collecting all the data. We're still working to validate it all. We're working to make revisions to that. But, you know, the early days have been encouraging, but we're still learning. But definitely are encouraged by what we see.

Thank you for taking my question. Thank you.

Thank you.

Thank you, Mr. Fisher. Again, to ask a question, please press star followed by one on your touchtone keypad. There are no additional questions waiting at this time. I would like to pass the conference back over to David Bywater for any closing remarks.

Great. Appreciate that. Thank you. Guys, we appreciate your interest. We'll continue to grow the company, make good decisions, and work to create value for our customers and our shareholders and our employees. I think it was a solid quarter. If you think about it, growth on revenue neared 17%, subscribers up by 13%. That's really, really impressive. Attrition is at a 12-quarter low. Our SAC is now sub $100 at $70. Amazing, being down almost 90% from last year. Service team costs are at $10, and that is with a fully normalized workload. And that's a function of the benefits from our innovation team and our operations team really working together to bring down costs. to 2019 is up considerably. So I think the cost management really to my Haskin team on what they've done there are quite incredible. You know, cash is positive. It's accretive. It's pretty amazing. And once again, if you normalize, I think it's a really impressive level. We further delevered the company. We're now at 2.5%. the refinancing i thought was an incredible endorsement of what the team's done in the business model and we've also we're you know reaffirming our four-year guidance we've done that while also advancing our strategic initiatives around logical core extensions of solutions to our customers that provide more value to them and deepen our relationship so uh pretty pleased with all of that we have a lot of work to do still um we'll keep our heads down And until we talk again.

That concludes the Vivian Smart Home second quarter 2021 earnings call. I hope you all enjoy the rest of your day.