Vivint Smart Home, Inc.

Thank you for attending today's Visit Smart Home, Inc. Second Quarter 2022 Financial Results Conference Call. My name is Bethany, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to our hosts, Nate Stubbs, VP of Investor Relations at Vivint Smart Home. Please go ahead.

Good afternoon, everyone. Thank you for joining us to discuss the results of Vivint Smart Home for the three months ended June 30th, 2022. Joining me this afternoon are David Bywater, Vivint Smart Home's Chief Executive Officer, and Dana Russell, Vivint's Chief Financial Officer. Also in the room today are Rasheesh Patel, COO, and Nitin Abraham, SVP of Finance. 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 described some of these risks and uncertainties in the risk factors section in our annual report on Form 10-K, which was filed on March 1st, 2022, 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 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 in the investor relations section of our website. I will now turn the call over to David.

Great. Thank you, Nate, and good afternoon, everyone. We appreciate your interest in the Vivint story. We continue to work hard every day to earn your confidence and your support. My comments today will cover three main areas. First, I'll review some of our key financial and operating highlights for the second quarter. Second, I'll cover some business developments that have taken place since our last earnings release. And third, I'll review our strategic priorities as we continue to redefine the home experience with technology and services to create a smarter, greener, safer home. Before I begin, let me take a moment to welcome our new Chief Financial Officer, Dana Russell. We're thrilled that Dana has joined our leadership Personally, I have a rich history with Dana, having worked closely with him for seven years at our sister company, Vivint Solar, up until the successful sell to Sunrun in the fourth quarter of 2020. Dana's expertise in building and leading best-in-class finance organizations fits perfectly at Vivint as we enter our next phase of profitable growth. Though he's only been with us for a very short time, he's already made a very positive impact. Dana will review our financial results and share our updated outlook following my comments. We also have our new Chief Operating Officer, Rasheesh Patel, in the room with us today, who joined the company in May. Rasheesh has a broad charter that spans operations, technology, product, and customer experience. He is focused on improving the value and functionality of our products and services, delivering industry-leading customer experience and loyalty, and driving the next level of operational excellence and productivity. Rasheesh has extensive experience in these areas. from his prior role as the Chief Product and Platform Officer of AT&T Business, a segment of AT&T with $35 billion in annual revenue. Prior to that, he was a key executive at DirecTV during their explosive growth period. Moving on to our highlights for the quarter, I am pleased to report that our strong track record of execution as a public company continued through the second quarter of 2022. As we grew total revenue by over 17%, and adjusted EBITDA by more than 23% after normalizing for the sale of our Canadian operations. We originated over 126,000 new smart home subscribers, an all-time high for the second quarter period, with significant contributions from our smart energy partners. Our last 12-month attrition was 10.9%, which was a 17-quarter low and a 70 basis point improvement versus the prior year. We're extremely pleased with this result, and we continue to believe our attrition rate is the lowest among national smart home companies by a significant margin. Our improving customer retention is a result of years of work to improve the overall credit quality of our customers, improve the performance of our products and services, and increase the frequency of customer interactions with our platform. We ended the second quarter with our net service cost per subscriber at an all-time low, a strong indication that we are operating the business efficiently and effectively while delighting our customers. Vivid has more than 20 years of operating history, and we've developed and refined a proprietary cloud-based platform that we believe is the benchmark in the smart home space. Our reoccurring revenue model has proven resilient during challenging economic times, and we believe the peace of mind and security we provide is relevant in any environment. Another key highlight during the second quarter was the successful divestiture of our Canadian operations for $104 million in cash proceeds. As a reminder, we stopped doing direct-to-home sales in Canada in the first quarter of 2020 due to unsatisfactory new subscriber economics in that part of our business. Our Canadian revenues were generating a meaningful amount of cash flow from operations since we were no longer investing in growth there. However, our lack of investment in Canada made these customers more vulnerable to attrition, so we made the prudent and proactive decision to sell the Canadian business and secure the value of the cash source by putting years of future cash flow from operations safely on the balance sheet and removing the risk of attrition to these customers. Divesting the business also allows us to sharpen our focus on the exciting growth opportunities that exist here in the U.S., where Vivint is a leader in terms of revenue and subscriber growth. We plan to invest the resources of the transaction in value accretive areas that may include but are not limited to subscriber acquisition efficiencies, growth and adjacencies, enhancing the customer experience, and improving our cost structure. Successful execution in these areas should drive higher customer lifetime value and more durable top line growth while elevating the cash generation potential of the business. We are continuously focused on redefining the smart home experience with technology, products, and services that create a smarter, greener, safer home. And our integrated platform is the core enabler that allows us to deliver on this mission. We now process more than 1.1 billion events per day across our subscriber portfolio. Our average smart home customer has approximately 15 devices in their home, interacts with their smart home system more than 12 times per day, and stays with us for approximately nine years. a number that has increased over time as our customer retention has improved. We believe our revenue streams are resilient and customers value the technology and services they receive from Vivint. They are demonstrating this by taking more products, interacting with their systems more, and staying with us longer. We continue to install more complex technology in the home, and yet our net service cost per subscriber continues to go down. A remarkable feat, we believe, is made possible by our world-class integrated platform. Smart energy and smart insurance are natural extensions of our smart home business, and we believe they are platforms that will allow us to penetrate and retain more households with smart home technology and services. We believe that additional customer touch points will lead to even lower attrition, longer average customer lifetimes, and expanded customer lifetime value. We continue to be encouraged by the progress of our strategic adjacencies. We've seen positive momentum in our smart energy business, where we installed 11.8 megawatts of solar through our partners in the first quarter and ramped to 20 megawatts in the second quarter. Due to the seasonality of our smart energy business, we would expect the majority of our revenue generated from that business to come in the back half of the year. And we remain on track to double the 45 megawatts we installed through our partners in 2021. Our Vivint sales force and strategic partners who bundle a Vivint smart home system with solar can see considerably better sales realization rates than those who only sell solar. And we continue to make progress towards our long-term vision of combining energy production and consumption into an integrated platform that uses artificial intelligence to manage power consumption more intelligently. We believe our nationwide footprint and ability to install our award-winning smart home solution Within a day or two of a customer signing up for a solar is a game changer for the industry and for our customers. We believe that as we grow and solidify our go-to-market partnerships, we will prove to be a powerful and differentiated combination to grow and retain smart home customers. On the smart insurance front, we continue to operate as an agent, selling insurance policies to new and existing smart home subscribers. We continue to progress towards becoming a managing general agent, which will allow Vivint to develop specific homeowner coverages and enable us to accelerate growth. Because of our particular focus on optimizing the smart home experience for our customers, we've been able to grow faster than our peers and to do it for a smart home segment while generating higher profits than the alternatives do in the do-it-yourself segment. We believe that as we continue to leverage the advantages from our intelligent and integrated platform, we will further expand and extend our leadership in the Do It For Me segment. In closing, it's been just over a year since I rejoined Vivid. I continue to be impressed with the strength of the business model and the quality of our people. We truly have a world-class group of employees to match what we believe is a world-class platform for growth. We're extremely pleased with our performance for the first half of 2022, especially against the backdrop of challenging economic environment and of supply chain constraints. We recognize and sincerely appreciate the hard work and tireless efforts of our employees to achieve these results. We're excited about the future, as the markets in which we operate are large, expanding, and provide significant headroom for further growth. With that, I'll turn the call over to Dana to further discuss our second quarter results and our updated outlook for the year, which now excludes the divestiture of our Canadian operations. Dana?