[March 02, 2017] |
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APX Group Holdings, Inc. Reports Fourth Quarter and Fiscal 2016 Results
APX Group Holdings, Inc. ("APX Group," "Vivint Smart Home,"
"Vivint" or the "Company") today reported financial and operational
results for the fourth quarter and full year ended December 31, 2016.
"The Smart Home market continued to grow and evolve in 2016," said Todd
Pedersen, CEO of APX Group. "We're seeing customer awareness increase.
New use cases are coming to the market while estimates for the future
size of the market are increasing. Most importantly, we believe that
Vivint's strategy of deploying an integrated, full-service offering and
a curated model and product offering is a key differentiator in driving
customer experience and earning a disproportionate share of the market's
profit pool. Our sales have continued to grow nicely, in particular our
Inside Sales, which is taking advantage of our increasing brand
awareness, which drove a 53% year over year growth. The Vivint Sky
platform has increased functionality, and we released our first
artificial intelligence offering, driven by data analytics and our
direct customer engagement." Mr. Pedersen continued, "I'd also mention
that our entire team is focused on driving this momentum into 2017,
including the priorities of channel expansion, Flex Pay and platform
innovation."
Revenue and Subscriber Data
Fourth quarter total revenues increased 16.9% to $204.5 million over the
same period in 2015. The increase in total revenues was primarily driven
by a 16.2% growth in recurring revenue from an increase in the Total
Subscribers and an increase in Average Revenue per User ("ARPU") for the
same period in 2015.
The Company added 39,805 net new smart home subscribers in the fourth
quarter of 2016, a 20.0% increase compared to 33,162 in the fourth
quarter of 2015. Inside sales originated an all-time record 28,945 net
new smart home subscribers in the fourth quarter, up 31.8% as compared
to the fourth quarter of 2015.
Full year 2016 total revenues were increased by 15.9% year over year to
a record $757.9 million. The increase in total revenues was primarily
driven by a 13.1% year-over-year increase in Total Subscribers, along
with an increase of $2.31 in ARPU, from $54.92 to $57.23 for the total
portfolio. The increase in total revenues was offset by a negative
impact from foreign exchange of $2.1 million.
The Company added a record 277,241 net new smart home subscribers in
2016 or a 17.2% year-over-year increase from 2015. Our inside channels
drove a significant amount of this increase, growing 53.4%, from 65,871
to 101,035 compared to the same period in 2015. Adoption of advanced
smart home services increased 800 bps, from 78.0% in 2015 to 86.4% in
2016. Average Revenue per New User (ARPNU) increased by 8.8% from $61.43
in 2015 to $66.81 in 2016.
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Summary of Financial and Portfolio Metrics for the Last Five
Quarters
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($ in millions, except for subscriber data)
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December 31, 2015
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March 31, 2016
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June 30, 2016
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September 30, 2016
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December 31, 2016
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Total Revenues
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$
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175.0
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$
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174.3
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$
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180.8
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$
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198.3
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$
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204.5
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Net Loss
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$
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(62.4
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$
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(45.1
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$
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(89.7
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$
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(70.0
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$
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(71.2
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Adjusted EBITDA
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$
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101.5
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$
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102.8
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$
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105.0
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$
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118.0
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$
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118.3
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Adj EBITDA Margin
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58.0
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%
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59.0
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%
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58.1
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%
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59.5
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%
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57.8
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%
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Total RPU(1)
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$
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55.7
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$
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56.3
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$
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61.2
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$
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65.3
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$
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65.6
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Net New Smart Home Subscribers
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33,162
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41,830
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101,334
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94,272
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39,805
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Average Revenue per New User(1)
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$
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60.08
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$
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62.01
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$
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67.08
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$
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68.85
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$
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66.33
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Total Subscribers(1)
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1,013,917
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1,018,397
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1,088,909
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1,142,571
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1,146,746
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Average Revenue per User(1)
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$
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54.92
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$
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55.27
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$
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56.20
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$
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57.16
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$
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57.23
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Subscriber Account Attrition(2)
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12.2
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%
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12.6
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%
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12.9
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%
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12.9
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%
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12.6
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%
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(1) Total Subscribers and RPU data exclude 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
"In looking back at 2016, we'd call out several items of note. One, we
continued to financially leverage the smart home model in terms of ARPU,
which increased 8.8% or $5.38 per new subscriber to a record 66.81, and
margin dollars generated per our installed base of accounts increased by
$1.92, or 4.7%. Two, our subscriber acquisition cost continues to
decline, down 100 basis points in the last 12 months to 29.9X, and
attrition has been managed to expectations," said Mark Davies, CFO of
APX Group. "I believe possibly most importantly, our new Vivint Flex Pay
program, in partnership with Citizens Bank, will allow us to
significantly reduce our subscriber acquisition costs and therefore the
amount of external funding we will require to grow and expand our smart
home business." Mr. Davies continued, "A successful implementation and
ramp of the Flex Pay program will be a key priority across the Vivint
organization in 2017. We'll continue to focus on operational leverage,
profitable growth and channel expansion and our efforts to drive ROI
from our platform and product investments."
Costs and Expenses
Fourth quarter operating expenses increased by 21.4% compared to the
same period in 2015, to $69.1 million. The increase in operating
expenses was primarily related to equipment costs and personnel and
related costs in our smart home business.
Full year 2016 operating expenses increased $36.6 from $228.3 million in
2015 to $264.9 for the same period in 2016. The $36.6 million increase
in operating expenses in 2016 was attributable to 13.1% year-over-year
growth in the subscriber base, including personnel costs within our
monitoring, customer support and field service functions; facilities
costs; information technology costs; and payment processing fees. Net
Service Costs per Subscriber in 2016 was $14.72, driving a Net Service
Margin of 73.7% for the year.
Fourth quarter selling expenses, net of capitalized subscriber
acquisition costs, were $32.6 million compared to $33.2 million for the
same period in 2015.
Full year 2016 selling expenses, net of capitalized subscriber
acquisition costs, were $131.4 million in 2016 compared to $122.9
million in 2015. The 6.9% year-over-year increase was primarily
attributable to higher digital marketing lead generation costs
associated with the 53.4% year-over-year growth of net new smart home
subscribers from our inside sales channel, along with an increase in
facilities and information technology costs. The increase in costs were
partially offset by a decrease in legal costs of $1.7 million. The
Company's Net Subscriber Acquisition Multiple for 2016, excluding all
costs associated with new subscriber originations in the wireless
internet business, improved by 100 basis points compared to 2015, to
29.9x.
General and administrative ("G&A") expenses, net of allocations, for the
fourth quarter were $41.3 million compared to $36.4 million for the
fourth quarter of 2015. The year-over-year increase in the quarter was
primarily due to an increase in bad debt, professional services and
legal expenses. The increase was partially offset by lower expenses
related to facilities and information technology.
G&A expenses, net of allocations, increased by 33.6% to $143.2 million
in 2016 compared to $107.2 million in 2015. The $36.0 million increase
in G&A includes a $12.2 million one-time non-cash gain on settlement of
merger-related transaction expenses released from escrow and recorded
during 2015. Excluding the gain on the settlement, G&A increased 19.9%
year over year, and was primarily driven by an increase in personnel
costs, a one-time stock-based compensation charge, along with an
increase in legal and information technology costs.
Adjusted EBITDA and Net Loss
Adjusted EBITDA for the fourth quarter of 2016 grew by 16.6% to $118.3
million on a net loss of $71.2 million, compared to Adjusted EBITDA of
$101.5 million on a net loss of $62.4 million for the fourth quarter of
2015.
Adjusted EBITDA for the Full Year of 2016 was up 14.7% year over year to
$444.1 million on a net loss of $276.0 million compared to Adjusted
EBITDA of $387.1 million on a net loss of $279.1 million in 2015.
Recent Developments
On January 3, 2017, we announced the introduction of the Vivint Flex Pay
plan. Under the Vivint Flex Pay plan, we (i) will launched a program
("Consumer Financing Program") in the first quarter of 2017, pursuant to
which we will offer to qualified customers in the United States an
opportunity to finance the purchase of Products used in connection with
our smart home and security services through a third party financing
provider and (ii) have begun to offer Retail Installment Contacts
("RICs") with respect to the purchase of Products to certain customers
who do not qualify to participate in the Consumer Financing Program, but
qualify under our historical underwriting criteria. We may also
establish credit programs either directly or through an affiliate or
pursuant to an agreement with a third party to provide installment loans
or similar products to customers that do not qualify to participate in
the Consumer Financing Program. Alternatively, customers may purchase
the Products with cash or credit card.
Under the Vivint Flex Pay plan, customers pay separately for the
Products and our smart home and security services. Under the Consumer
Financing Program, qualified customers will be eligible for installment
loans provided by a third party financing provider of up to $4,000 for
either a term of 42 or 60 months. In connection with the Consumer
Financing Program, a subsidiary of ours entered into the CFP Agreement
with Citizens pursuant to which Citizens will be the exclusive provider
of installment loans under the Consumer Financing Program for our
customers who are eligible for such loans. Pursuant to the CFP
Agreement, we will pay a monthly fee to Citizens based on the average
daily balance of the loans provided by Citizens outstanding and we will
share with Citizens liability for credit losses, with Vivint being
responsible for approximately 5% to 100% of lost principal balances,
depending on factors specified in the CFP Agreement. The initial term of
the CFP Agreement is five years, subject to automatic, one-year renewals
unless terminated by either party in accordance with its terms. We are
initially offering RICs for 42 or 60 month terms to certain customers
who do not qualify to participate in the Consumer Financing Program, but
qualify under our historical underwriting criteria, and may establish
credit programs either directly or through an affiliate or pursuant to
an agreement with a third party to provide installment loans or similar
products to such customers. Along with the purchase of the Products,
customers enter into a service agreement with simple pricing of $39.99
per month for basic security or $49.99 per month for smart home with the
same term lengths as their installment loan agreements or RICs.
Liquidity
As of December 31, 2016, the Company's liquidity position on a
consolidated basis, defined as cash on hand, short-term marketable
securities and available borrowing capacity under the Company's
revolving credit facility, was approximately $327 million.
On February 1, 2017, APX issued an additional $300.0 million aggregate
principal amount of the 2022 notes at a price of 108.250%. We primarily
used the net proceeds from the offering of these 2022 notes to redeem
$300.0 million aggregate principal amount of the existing 2019 notes and
pay the related redemption premium, and to pay all fees and expenses
related thereto and will use any remaining proceeds for general
corporate purposes.
Certain Credit Statistics
Our net leverage ratio, defined as the ratio of net debt to LTM Adjusted
EBITDA, was 5.6x at December 31, 2016.
Conference Call
Vivint Smart Home will host a conference call and webcast to discuss the
quarterly results at 5:30 p.m. ET today, March 2, 2017. To join the live
webcast and conference call, please visit the investor relations section
of the Vivint Smart Home website, www.investors.vivint.com/events-presentations/events
or dial (877) 201-0168 for domestic participants or (647) 788-4901 for
international participants with the conference code of 77500318. A
financial results presentation and online access to join the webcast
will be available immediately before the call on the Investor Relations
section of the Company's website at http://www.investors.vivint.com/events-presentations/events.
A replay of the webcast will be available for 30 days on the Investor
Relations section of the Company's website at www.investors.vivint.com
following the completion of the webcast and conference call.
About Vivint Smart Home
Vivint Smart Home is a leading provider of smart home services in North
America. Vivint delivers an integrated smart home system with in-home
consultation, professional installation and support delivered by its
Smart Home Pros, as well as 24/7 customer care and monitoring. Dedicated
to redefining the home experience with intelligent products and
services, Vivint serves more than one million customers throughout the
U.S. and Canada. For more information, visit www.vivint.com.
Forward-Looking Statements
This earnings release and accompanying conference call include certain
forward-looking statements as defined by the Private Securities
Litigation Reform Act of 1995, including statements regarding, among
other things, our plans, strategies and prospects, both business and
financial. Forward-looking statements convey the Company's current
expectations or forecasts of future events. All statements contained in
this earnings release other than statements of historical fact are
forward-looking statements. These statements are based on the beliefs
and assumptions of our management. Although we believe that our plans,
intentions and expectations reflected in or suggested by these
forward-looking statements are reasonable, we cannot assure you that we
will achieve or realize these plans, intentions or expectations.
Forward-looking statements are inherently subject to risks,
uncertainties and assumptions. These statements may be preceded by,
followed by or include the words "believes," "estimates," "expects,"
"projects," "forecasts," "may," "will," "should," "seeks," "plans,"
"scheduled," "anticipates" or "intends" or similar expressions.
Forward-looking statements are not guarantees of performance. You should
not put undue reliance on these statements which speak only as of this
date hereof. You should understand that the following important factors,
in addition to those discussed in "Risk Factors" in our most recent
annual report on Form 10-K, and other reports filed with the Securities
and Exchange Commission ("SEC"), as such factors may be updated from
time to time in our periodic filings with the SEC, which are available
on the SEC's website at www.sec.gov,
could affect our future results and could cause those results or other
outcomes to differ materially from those expressed or implied in our
forward-looking statements:
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risks of the smart home and security industry, including risks of and
publicity surrounding the sales, subscriber origination and retention
process;
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the highly competitive nature of the smart home and security industry
and product introductions and promotional activity by our competitors;
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litigation, complaints or adverse publicity;
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the impact of changes in consumer spending patterns, consumer
preferences, local, regional, and national economic conditions, crime,
weather, demographic trends and employee availability;
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adverse publicity and product liability claims;
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increases and/or decreases in utility and other energy costs,
increased costs related to utility or governmental requirements;
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cost increases or shortages in smart home and security technology
products or components; and
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the impact to the Company's business results of operations, financial
condition, regulatory compliance, and customer experience of the
Vivint Flex Pay plan
In addition, the origination and retention of new subscribers will
depend on various factors, including, but not limited to, market
availability, subscriber interest, the availability of suitable
components, the negotiation of acceptable contract terms with
subscribers, local permitting, licensing and regulatory compliance, and
our ability to manage anticipated expansion and to hire, train and
retain personnel, the financial viability of subscribers and general
economic conditions.
These and other factors that could cause actual results to differ from
those implied by the forward-looking statements in this press release
are more fully described in the "Risk Factors" section in our most
recent annual report on Form 10-K, and other reports as such factors may
be updated from time to time in our periodic filings with the SEC. These
risk factors should not be construed as exhaustive. We undertake no
obligations to update or revise publicly any forward-looking statements,
whether a result of new information, future events, or otherwise, except
as required by law.
Certain Definitions
Total Subscribers - The aggregate number of active smart home and
security subscribers at the end of a given period
Monthly Revenue per User ("RPU") - The recurring monthly revenue billed
to a smart home and security subscriber
Total Revenue per User - The aggregate RPU billed for all smart home and
security subscribers
Average RPU ("ARPU") - The Total RPU divided by Total Subscribers
Average Revenue per New User ("ARPNU") - The aggregate RPU for new
subscribers originated during a period divided by the number of new
subscribers originated during such period
Attrition - The aggregate number of canceled security and home
automation subscribers during a period divided by the monthly weighted
average number of total security and home automation subscribers for
such period. Subscribers are considered canceled when they terminate in
accordance with the terms of their contract, are terminated by us, or if
payment from such subscribers is deemed uncollectible (when at least
four monthly billings become past due). Sales of contracts to third
parties and moves are excluded from the attrition calculation
Net Subscriber Acquisition Costs - Defined as direct and indirect costs
to create a new security and home automation subscriber. These include
commissions, equipment, installation, marketing and other allocations
(G&A and overhead), less activation fees and up sell revenue. These
costs also exclude residuals and long-term equity expenses associated
with the direct-to-home sales channel.
Net Subscriber Acquisition Cost Multiple - Defined as Net Subscriber
Acquisition Costs, divided by the number of net new subscribers
originated, and then divided by the ARPNU
Adjusted EBITDA - Net Income (loss) before interest expense (net of
interest income), income and franchise taxes and depreciation and
amortization (including amortization of capitalized subscriber
acquisition costs), further adjusted to exclude the effects of certain
contract sales to third parties, non-capitalized subscriber acquisition
costs, stock-based compensation, the historical results of the Company's
Solar variable interest entity and certain unusual, non-cash,
non-recurring and other items permitted in certain covenant calculations
under the indentures governing the notes
Last Quarter Annualized Adjusted EBITDA ("LQA Adjusted EBITDA") - A
common industry measure used to reflect the step-function in earnings
during the sales season related to the subscribers generated from April
to August. LQA Adjusted EBITDA, calculated by multiplying Adjusted
EBITDA for the most recent fiscal quarter by 4, represents the ongoing
earnings power of Vivint's current subscriber base and is potentially a
more relevant metric than LTM due to the recurring nature of the revenue
and expected earnings
Net Service Cost - Defined as total service costs, including monitoring,
customer service, field service and other allocations (G&A and overhead)
costs, less total service revenue divided by total service subscribers
Net Service Margin - Defined as Average RPU per subscriber less Net
Service Costs divided by Average RPU
Advanced Smart Home Services - represents subscribers who have
contracted for one or more smart home services beyond basic security
offering
1 This earning release includes Adjusted EBITDA, a metric
that is not calculated in accordance with Generally Accepted Accounting
Principles in the U.S. ("GAAP"). See the "Statement Regarding Non-GAAP
Financial Measures" section at the end of this earnings release for the
definition of Adjusted EBITDA and a reconciliation to its most directly
comparable financial measure calculated in accordance with GAAP.
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APX GROUP HOLDINGS, INC. and SUBSIDIARIES
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Consolidated Statements of Operations
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(In thousands)
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Years ended December 31,
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Three Months Ended December 31,
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2016
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2015
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2016
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2015
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Revenues:
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Recurring revenue
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$
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724,478
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$
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624,989
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$
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195,528
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$
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168,342
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Service and other sales revenue
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22,855
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22,700
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6,013
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4,980
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Activation fees
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10,574
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6,032
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2,971
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1,712
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Total revenues
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757,907
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653,721
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204,512
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175,034
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Costs and expenses:
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Operating expenses
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264,865
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|
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228,315
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69,059
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56,870
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Selling expenses
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131,421
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122,948
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|
|
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32,565
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|
|
|
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33,229
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General and administrative expenses
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|
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143,168
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|
|
|
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107,212
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|
|
|
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41,334
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|
|
|
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36,440
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Depreciation and amortization
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|
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288,542
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|
|
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244,724
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|
|
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79,124
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|
|
|
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63,218
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Restructuring and asset impairment charges
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|
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1,013
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|
|
|
|
59,197
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|
|
|
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(752
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)
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|
|
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1,206
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Total costs and expenses
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|
|
829,009
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|
|
|
|
762,396
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|
|
|
|
221,330
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|
|
|
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190,963
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Loss from operations
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|
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(71,102
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)
|
|
|
|
(108,675
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)
|
|
|
|
(16,818
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)
|
|
|
|
(15,929
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)
|
|
|
|
|
|
|
|
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Other expenses (income):
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|
|
|
|
|
|
|
|
|
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Interest expense
|
|
|
197,965
|
|
|
|
|
161,339
|
|
|
|
|
53,138
|
|
|
|
|
44,403
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|
Interest income
|
|
|
(432
|
)
|
|
|
|
(90
|
)
|
|
|
|
(279
|
)
|
|
|
|
(81
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)
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Other loss, net
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|
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7,255
|
|
|
|
|
8,832
|
|
|
|
|
1,951
|
|
|
|
|
2,108
|
|
Total other expenses
|
|
|
204,788
|
|
|
|
|
170,081
|
|
|
|
|
54,810
|
|
|
|
|
46,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(275,890
|
)
|
|
|
|
(278,756
|
)
|
|
|
|
(71,628
|
)
|
|
|
|
(62,359
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) expense
|
|
|
67
|
|
|
|
|
351
|
|
|
|
|
(460
|
)
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(275,957
|
)
|
|
|
$
|
(279,107
|
)
|
|
|
$
|
(71,168
|
)
|
|
|
$
|
(62,375
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
APX GROUP HOLDINGS, INC. and SUBSIDIARIES
|
Condensed Consolidated Balance Sheets
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2016
|
|
|
2015
|
ASSETS
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
43,520
|
|
|
|
$
|
2,559
|
|
Accounts receivable, net
|
|
|
12,891
|
|
|
|
|
8,060
|
|
Inventories
|
|
|
38,452
|
|
|
|
|
26,321
|
|
Prepaid expenses and other current assets
|
|
|
10,158
|
|
|
|
|
10,626
|
|
Total current assets
|
|
|
105,021
|
|
|
|
|
47,566
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
63,626
|
|
|
|
|
55,274
|
|
Subscriber acquisition costs, net
|
|
|
1,052,434
|
|
|
|
|
790,644
|
|
Deferred financing costs, net
|
|
|
4,420
|
|
|
|
|
6,456
|
|
Intangible assets, net
|
|
|
475,392
|
|
|
|
|
558,395
|
|
Goodwill
|
|
|
835,233
|
|
|
|
|
834,416
|
|
Long-term investments and other assets, net
|
|
|
11,536
|
|
|
|
|
10,893
|
|
Total assets
|
|
$
|
2,547,662
|
|
|
|
$
|
2,303,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
Accounts payable
|
|
$
|
49,119
|
|
|
|
$
|
52,207
|
|
Accrued payroll and commissions
|
|
|
46,288
|
|
|
|
|
38,247
|
|
Accrued expenses and other current liabilities
|
|
|
34,265
|
|
|
|
|
35,573
|
|
Deferred revenue
|
|
|
45,722
|
|
|
|
|
34,875
|
|
Current portion of capital lease obligations
|
|
|
9,797
|
|
|
|
|
7,616
|
|
Total current liabilities
|
|
|
185,191
|
|
|
|
|
168,518
|
|
|
|
|
|
|
|
|
|
Notes payable, net
|
|
|
2,486,700
|
|
|
|
|
2,118,112
|
|
Revolving Credit Facility
|
|
|
-
|
|
|
|
|
20,000
|
|
Capital lease obligations, net of current portion
|
|
|
7,935
|
|
|
|
|
11,171
|
|
Deferred revenue, net of current portion
|
|
|
58,734
|
|
|
|
|
44,782
|
|
Other long-term obligations
|
|
|
47,080
|
|
|
|
|
10,530
|
|
Deferred income tax liabilities
|
|
|
7,204
|
|
|
|
|
7,524
|
|
Total liabilities
|
|
|
2,792,844
|
|
|
|
|
2,380,637
|
|
|
|
|
|
|
|
Total stockholders' deficit
|
|
|
(245,182
|
)
|
|
|
|
(76,993
|
)
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit
|
|
$
|
2,547,662
|
|
|
|
$
|
2,303,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
APX GROUP HOLDINGS, INC. and SUBSIDIARIES
|
Summary Cash Flow Data
|
(In thousands)
|
|
|
|
|
|
Years ended December 31,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
Net cash used in operating activities
|
|
$
|
(365,706
|
)
|
|
$
|
(255,307
|
)
|
Net cash used in investing activities
|
|
|
(15,147
|
)
|
|
|
(35,615
|
)
|
Net cash provided by financing activities
|
|
|
422,280
|
|
|
|
284,400
|
|
Effect of exchange rate changes on cash
|
|
|
(466
|
)
|
|
|
(1,726
|
)
|
Net Increase in cash
|
|
|
40,961
|
|
|
|
(8,248
|
)
|
|
|
|
|
|
Cash:
|
|
|
|
|
Beginning of Period
|
|
|
2,559
|
|
|
|
10,807
|
|
End of period
|
|
$
|
43,520
|
|
|
$
|
2,559
|
|
|
|
|
|
|
Statement Regarding Non-GAAP Financial Measures
Non-GAAP Financial Measures
This earnings release includes Adjusted EBITDA, which is a supplemental
measure that is not required by, or presented in accordance with,
accounting principles generally accepted in the United States ("GAAP").
"Adjusted EBITDA" is defined as net income (loss) before interest
expense (net of interest income), income and franchise taxes and
depreciation and amortization (including amortization of capitalized
subscriber acquisition costs), further adjusted to exclude the effects
of certain contract sales to third parties, non-capitalized subscriber
acquisition costs, stock based compensation, the historical results of
Solar and certain unusual, non-cash, non-recurring and other items
permitted in certain covenant calculations under the indentures
governing our notes and the credit agreement governing our revolving
credit facility.
We believe that the presentation of Adjusted EBITDA is appropriate to
provide additional information to investors about the calculation of,
and compliance with, certain financial covenants in the indentures
governing our notes and the credit agreement governing our revolving
credit facility. We caution investors that amounts presented in
accordance with our definition of Adjusted EBITDA may not be comparable
to similar measures disclosed by other issuers, because not all issuers
and analysts calculate Adjusted EBITDA in the same manner.
Adjusted EBITDA is not a measurement of our financial performance under
GAAP and should not be considered as an alternative to net income (loss)
or any other performance measures derived in accordance with GAAP or as
an alternative to cash flows from operating activities as a measure of
our liquidity.
Adjusted EBITDA margin represents the ratio of Adjusted EBITDA to total
revenues.
See the following table for a quantitative reconciliation of Adjusted
EBITDA to Net Loss, which we believe is the most comparable financial
measure calculated in accordance with GAAP.
|
|
|
|
|
|
|
|
APX GROUP HOLDINGS, INC. and SUBSIDIARIES
|
Reconciliation of Non-GAAP Financial Measures
|
(In millions)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
December 31,
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
2016
|
|
|
2016
|
|
|
2016
|
Net loss
|
|
$
|
(62.4
|
)
|
|
|
$
|
(45.1
|
)
|
|
|
$
|
(89.7
|
)
|
|
|
$
|
(70.0
|
)
|
|
|
$
|
(71.2
|
)
|
Interest expense, net
|
|
|
44.3
|
|
|
|
|
45.4
|
|
|
|
|
47.4
|
|
|
|
|
51.8
|
|
|
|
|
52.9
|
|
Other (income) expense, net
|
|
|
2.1
|
|
|
|
|
( 5.1
|
)
|
|
|
|
9.9
|
|
|
|
|
0.6
|
|
|
|
|
2.0
|
|
Income tax expense
|
|
|
0.0
|
|
|
|
|
1.1
|
|
|
|
|
( 0.4
|
)
|
|
|
|
( 0.1
|
)
|
|
|
|
( 0.5
|
)
|
Restructuring and asset impairment (i)
|
|
|
1.2
|
|
|
|
|
0.0
|
|
|
|
|
( 0.7
|
)
|
|
|
|
2.4
|
|
|
|
|
( 0.8
|
)
|
Depreciation and amortization (ii)
|
|
|
37.2
|
|
|
|
|
33.2
|
|
|
|
|
33.4
|
|
|
|
|
33.5
|
|
|
|
|
33.5
|
|
Amortization of capitalized creation costs
|
|
|
26.0
|
|
|
|
|
27.4
|
|
|
|
|
38.6
|
|
|
|
|
43.3
|
|
|
|
|
45.6
|
|
Non-capitalized subscriber acquisition costs (iii)
|
|
|
40.9
|
|
|
|
|
36.0
|
|
|
|
|
51.5
|
|
|
|
|
45.2
|
|
|
|
|
43.3
|
|
Non-cash compensation (iv)
|
|
|
0.6
|
|
|
|
|
0.4
|
|
|
|
|
2.7
|
|
|
|
|
0.5
|
|
|
|
|
0.5
|
|
Other Adjustments (v)
|
|
|
11.5
|
|
|
|
|
9.5
|
|
|
|
|
12.4
|
|
|
|
|
10.8
|
|
|
|
|
13.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
101.5
|
|
|
|
$
|
102.8
|
|
|
|
$
|
105.0
|
|
|
|
$
|
118.0
|
|
|
|
$
|
118.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(276.0
|
)
|
|
|
$
|
(279.1
|
)
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
197.5
|
|
|
|
|
161.2
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense, net
|
|
|
7.3
|
|
|
|
|
8.8
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
0.1
|
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
Restructuring and asset impairment (i)
|
|
|
1.0
|
|
|
|
|
59.2
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization (ii)
|
|
|
133.7
|
|
|
|
|
151.7
|
|
|
|
|
|
|
|
|
|
|
Amortization of capitalized creation costs
|
|
|
154.9
|
|
|
|
|
93.0
|
|
|
|
|
|
|
|
|
|
|
Non-capitalized subscriber acquisition costs (iii)
|
|
|
175.9
|
|
|
|
|
164.0
|
|
|
|
|
|
|
|
|
|
|
Non-cash compensation (iv)
|
|
|
4.0
|
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
Other Adjustments (v)
|
|
|
45.7
|
|
|
|
|
25.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
444.1
|
|
|
|
$
|
387.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
i.
|
|
Reflects costs related to restructuring charges and asset
impairments related to the transition of our Wireless Internet
business and the 2016 Contracts Sales
|
ii.
|
|
Excludes loan amortization costs that are included in interest
expense.
|
iii.
|
|
Reflects subscriber acquisition costs that are expensed as
incurred because they are not directly related to the acquisition
of specific subscribers. Certain other industry participants
purchase subscribers through subscriber contract purchases, and as
a result, may capitalize the full cost to purchase these
subscribers' contracts, as compared to our organic generation of
new subscribers, which requires us to expense a portion of our
subscriber acquisition costs under GAAP.
|
iv.
|
|
Reflects non-cash compensation costs related to employee and
director stock and stock option plans
|
v.
|
|
Other adjustments including items such as product development
costs, fire related expenses, subcontracted monitoring fee
savings, non-recurring gain, bonus and transaction related costs
associated with the 2GIG sale, and other similar adjustments.
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20170302006394/en/
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|