NRG Energy Inc (NRG) — Q3 2020 Earnings Call Transcript

Good afternoon, everyone. Thank you for joining us this afternoon to discuss the results of Vivint Smart Home for the 3- and 9-month periods ended September 30, 2020. Joining me on the conference call this afternoon are Todd Pedersen, Vivint's CEO; and Dale Gerard, Vivint's CFO. I would like to begin by reminding everyone that the discussion today may contain forward-looking statements, including with regards to the company's future performance and prospects. Forward-looking statements are inherently subject to risks, uncertainties and assumptions, are not guarantees of performance, and you should not put undue reliance on these statements. I would direct your attention to the risk factors detailed in our most recent annual report on Form 10-K and in our quarterly reports on Form 10-Q issued in fiscal year 2020, including for our most recent quarterly period ended September 30, 2020, which we expect to file on or about the date of this earnings call.

Thanks, Nate, and welcome to everyone joining the call this afternoon. We are pleased to report another quarter of very strong performance. Our results underscore the importance of having a proprietary, fully-integrated AI-driven smart home platform, which is the backbone of our predictable and consistent recurring revenue model. Touching briefly on a few financial highlights for the quarter. Total revenue and total subscribers grew by nearly 10%, reflecting healthy consumer demand for smart home and security services, along with our ability to retain a higher percentage of our customer portfolio. Our adjusted EBITDA margins continue to build upon previous quarters and expanded to new highs. Finally, we have stated our desire to operate the business in a more cash efficient way, and we are tracking to be cash flow positive by more than $100 million in 2020. As we continue our focus on optimizing the business, we saw solid improvement across the board in many of our key performance metrics for the quarter. Notably, the last 12-month attrition rate improved by nearly a full point in the quarter and continues to exceed our forecasts. Our LTM attrition rate for Q3 was the lowest in the past 7 quarters, and I believe it speaks to the fact that our core value proposition, proven over 2 decades of reliably taking care of our customers and their families, is as relevant today as ever. Vivint's fully-integrated and proprietary platform provides smart security and peace of mind to nearly 1.7 million customers across North America. Our customers interact with our systems on average 12 times every day, which provides our AI-based platform with over 1.5 billion pieces of data daily. This creates a real-time feedback loop, which enables us to proactively react to any issues happening in their homes. In many cases, we can identify an issue and are already working on a solution before the customer recognizes that something might be amiss. By controlling the entire customer experience from the design of the software and hardware to the sales, installation and service throughout the life of the customer, we're able to provide a robust, reliable and elegant solution to our customers. We believe that homeowners recognize the value of having increasingly complex systems professionally installed and serviced. In this do-it-for-me age we're living in, we believe we have been the leader in revolutionizing the smart home industry by delivering what consumers demand: a fully-integrated smart home and security solution that is professionally installed and seamlessly managed. We believe this consumer demand is proven and our impressive growth. We added nearly 127,000 new subscribers during the quarter, up 14% from a year ago and driven by positive contributions from each of our major sales channels. In today's environment of uncertainty, homeowners are spending more time thinking about and investing in their homes, which we believe is a very positive sign for Vivint. Our national inside sales channel continued its standout performance, generating 32% year-over-year growth in new subscribers. Meanwhile, our direct-to-home sales channel rebounded nicely from the COVID-related constraints earlier in the year, growing new subscriber adds by 5% versus the prior year period. With coverage over 98% of ZIP codes in the United States, we believe that Vivint's premier model is in the best position to deliver a full smart home and security solution to virtually every household in the U.S. Consumers continue to expect increasingly complex smart home solutions that include integrated door locks, exterior cameras, interior cameras, lighting controls and thermostats that are professionally installed, monitored and serviced, but we're just getting started. Even though we have nearly 1.7 million subscribers, our unaided consumer awareness is in the low single digits. The fact that we have been a leader in the rapidly-developing smart home market while relying mostly on grassroots efforts by our sales teams makes us believe there's a tremendous upside if we can increase consumer awareness on a national scale. As we look forward to 2021 and beyond, our focus will be on our key objective of building the Vivint brand and investing in new products, services and technologies. We want to do a better job of telling consumers who we are, what we do and how we can enhance our lives by delivering the convenience, security and peace of mind they desire. In addition, we will look to continue our leadership and differentiation in the smart home industry by increasing our investment in technology and new product development to ensure that we are on the leading edge of delivering the products and services consumers want. We believe Vivint is the clear leader in the smart home and security solutions market. We are nationwide a fully-integrated smart home and security provider, and we have an opportunity to expand our business and accelerate growth by investing in our brand and technology and helping people understand the incredible value that Vivint brings. I believe the company is ready to take the next step, and we're ready to handle the inevitable growth that will come with it. We have the technology and services that we believe consumers would absolutely want if they just knew about them. So we're excited about getting the message out, and we're excited about the possibilities and opportunities that exist for Vivint. I will now turn the call over to Dale to go through the specifics of our strong third quarter results as well as provide our updated guidance for 2020.

Thanks, Todd. I will discuss the financial slides from the presentation we released today along with our third quarter earnings. As Todd mentioned, our third quarter results were robust overall. On Slide 6, we showcase key data points regarding our subscriber portfolio. Total subscribers at the end of the quarter increased from 1.56 million to 1.69 million year-over-year, representing an 8.2% growth. Total monthly revenue rose by $6.3 million, or 6.3%, with an average monthly revenue per user of $63.79. On Slide 7, we present our revenue for the three- and nine-month periods ending September 30. For the third quarter, revenue reached $319 million, a roughly 10% year-over-year increase, primarily driven by the 8.2% rise in total subscribers. It’s important to note that the third quarter of last year included a $9.1 million revenue adjustment due to a change in estimate regarding RIC revenues from prior periods. Moving to Slide 8, our adjusted EBITDA saw significant growth in both the third quarter and year-to-date periods. The main factors contributing to this were the ongoing scaling of our costs to support our subscriber base, expenses related to acquiring new subscribers, and general administrative costs. Our adjusted EBITDA grew by 53% to $154.5 million in the quarter, with adjusted EBITDA margins expanding by nearly 1,400 basis points to 48.4% of revenue compared to 34.6% in the previous year. This excellent result reflects the hard work of our entire organization. Although not displayed on this slide, covenant adjusted EBITDA, which is essential for our debt covenants, stood at $212.3 million for the quarter, a $42.9 million or 25.3% increase compared to $169.4 million in the prior year. On Slide 9, we provide some new subscriber metrics. We added 126,847 new subscribers in the third quarter, indicative of strong performance from our national inside sales channel and a rebound in our direct-to-home sales channel following earlier pandemic-related restrictions. Overall, new subscribers increased by 13.8% compared to the same quarter last year. We're focused on enhancing the cash flow dynamics of our business, as shown by the 89% reduction in RICs during this quarter. Although this shift has impacted some subscribers, focusing more on financing partners and full payment arrangements enables us to collect more cash up front, which reduces our net subscriber acquisition costs and significantly improves our cash flow. Moving on to Slide 10, we'll discuss our net service cost per subscriber and net subscriber acquisition cost for new subscribers during the quarter. We've continued to improve year-over-year in net service costs, lowering from $16.38 in the third quarter of 2018 to $14.43 in the third quarter of 2019, down to $9.82 in the latest quarter, which is a $6.56 improvement compared to 2018. This ongoing trend of lower service costs showcases the advantage of Vivint's fully integrated smart home and security platform, which includes software, hardware, installation, and ongoing customer support. As a result, our net service margin has seen a positive upward trend, climbing from 68.7% in the third quarter of 2018 to 72.4% in the third quarter of 2019, now at 80.1% in the most recent quarter. These efforts have significantly contributed to the improvement in our adjusted EBITDA for the quarter. It's important to mention that, typically in the latter part of the year, we see a rise in service costs due to seasonal trends in customer acquisition, especially in the summer. Additionally, service calls during the third quarter have been abnormally low due to concerns surrounding the COVID-19 pandemic. While we are encouraged by current trends and the benefits to our margins, we do not expect to maintain full-year results at the 80% level. On the right-hand side of the slide, our net subscriber acquisition costs for the last 12 months ending September 30 were $209, down from $1,033 in the previous year. This decrease represents nearly an 80% reduction, as we have largely phased out financing new subscribers via RICs, shifting instead to a greater share of customers using our financing partners or paying in full for their smart home products. This year-over-year comparison also benefited from improved pricing at the point of sale for products and installations. Moving on to Slide 11, we illustrate the changes in total subscribers at quarter end and our attrition rate trend. A significant highlight has been the decrease in our attrition rate, which dropped sequentially by 90 basis points, reaching the lowest level in the past seven quarters. The third quarter benefited from a 2% drop in customers nearing the end of their initial term life cycle. While this initial term mechanic helped, our portfolio has performed better than anticipated regarding customer cancellations and other leading indicators through October. We believe that factors such as the pandemic, social unrest, and improved product performance, evident in our lower net service costs per subscriber, are positively impacting our attrition rate. Before we move to our updated outlook, I want to emphasize a few factors tied to our strong third quarter, including our liquidity position, which stood at around $630 million as of September 30. Our operating cash flow for the third quarter was robust, generating $142.5 million in net cash from operating activities compared to $8.2 million during the same period in 2019. During the quarter, approximately 1.7 million warrants were exercised, contributing around $19 million to our cash position as of September 30. Finally, let's proceed to Slide 12, where I will discuss our updated financial outlook. We find Vivint's high-margin recurring revenue model to be compelling, with over 95% of our revenue being recurring. This structure provides long-term visibility and predictability for our business. Many new subscribers sign up for five-year contracts and typically remain with Vivint for about eight years, generating significant lifetime margins. Despite uncertainties related to the COVID-19 pandemic, our recurring revenue model has shown resilience, and we remain confident in our previous revenue guidance. Our better-than-expected attrition rate and improving unit economics have led us to adjust our guidance for total subscribers and adjusted EBITDA. We are raising our total subscriber guidance to between 1.66 million and 1.70 million, compared to our previous guidance of 1.62 million to 1.68 million. We are reaffirming our total revenue guidance to remain between $1.23 billion and $1.28 billion. Furthermore, we are increasing our adjusted EBITDA guidance to between $570 million and $580 million, compared to our earlier guidance of between $555 million and $565 million.

I've got three quick ones. First of all, Dale, can you talk to us about the debt refinancing plans?

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

Okay. Got you. The service costs are going up in the fourth quarter, although I think you said that they might go up in the third quarter, and they didn't. So obviously, you got a good handle on things. But I also noticed that the average monthly revenue declined. Can you just talk us through that dynamic a little bit?

Yes. Paul, we have discussed this in previous calls. We are intentionally lowering the average monthly subscription because we are charging more initially. When you consider the total out-of-pocket expense for our customers, it has actually increased year-over-year in terms of the total dollars related to the financing component, which goes to the financing partner along with what they are paying us. So we have shifted some of the amount they were paying us monthly in subscription fees to the financing partner. However, this strategy allows us to bring in more cash upfront, which is why our cash from operations is at the level it is. That is the main factor behind this change.

And to add to that, this is Todd. The $209 subscriber acquisition costs is a direct result of that, so we couldn't be happier about it. However, we appreciate the question regarding revenue per subscriber, as it seems to be coming down, but that's not actually the case. We are selling more hardware than we ever have at a high margin upfront, and the business is performing very well.

And then we're booked on the service cost fall. Again, we're cautious. We think that there's still calls in terms of truck rolls, and calls coming from our call centers are still down somewhat compared to what we think would be a normal trend. And so we do expect, at some point, those calls will come back. But we think there's a big part of this, is where our new hardware, our software is performing better, and thus, that's also a big driver in terms of this. But we're very excited about where that service cost is on a subscriber basis and working very hard to keep it low as possible but still maintain a very, very high-quality customer experience.

Got you. And Todd, it sounds like you feel like you could be doing so much better if there was better unassisted brand awareness out there. And it also sounds like you've got these new products and services in the pipeline. I think, most recently, the insurance product is the one that you're talking about. Is that still the sort of first in line? And should we expect some big splashy event to get the brand out there? Or is it more subtle than that?

Speaking on branding, I've made it clear that until we were certain about becoming cash flow positive as a company, we were cautious. Now we are projecting $100 million in positive cash flow on a levered basis, which we're very excited about, and we believe the markets are as well. This includes funds allocated for a marketing launch in Q4. Our approach at the company is to test and analyze our spending carefully. We're taking a strategic and methodical approach to our marketing expenditures, focusing on the messaging and results we can achieve. We are initiating a nationwide branding and marketing campaign in Q4 that we've been planning for some time, and we anticipate being cash flow positive for the year, which we think will give us a significant advantage. However, it's important to remember that launching a branding campaign for a national brand is a long-term commitment, requiring dedication over years, not just months. We'll be very precise about how we allocate our resources and present our products and services to consumers. You'll likely see some developments in the coming weeks. What was the next question, Paul?

That was it.

No, no, there's something else.

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

We are still very pleased with the progress in insurance. We aren't ready to share numbers yet, as we are taking our time with the product launch, our partnerships, and our positioning with consumers. However, we believe we have a significant advantage thanks to the insights we gather from our proprietary smart home platform. This will greatly benefit our customers, who trust our services beyond just smart home technologies. We're very excited about this. At some point next year, we may begin discussing the numbers and their relevance to our future business, but we are dedicated to continuing to test and expand this product and service.

Congratulations on your successful quarter. It's great to witness. I wanted to discuss the attrition rate, which is clearly decreasing. I'd like to hear your feedback on what you’re hearing from your customers about what is retaining them and, conversely, what factors might stop them from leaving the platform. Additionally, how does this situation differ from the commentary you provided two or three quarters ago when you mentioned that attrition rates might increase towards the end of the year? I also have a follow-up question.

Attrition is a complex issue without a simple solution. It's about many small interactions with customers that shape their experience with us. We have made ongoing improvements in this area, which is crucial for our differentiation from competitors. We create our customers through a direct sales approach, installing hardware designed by our engineers who also develop the software and firmware. We control our platform, creating a unique feedback loop that others cannot replicate. While competitors are attempting to imitate our model, our strength lies in the numerous touchpoints and knowledge we leverage to enhance product reliability. This includes how we handle customer calls, our installation processes, and service protocols. It may not be obvious to everyone, but we have experienced several downturns, and our products and services, especially in smart security, have performed exceptionally well during these times. In the last downturn, we fared quite well, and the burglar alarm security industry as a whole has managed to maintain attrition rates effectively. Typically, when facing economic challenges, individuals tend to safeguard their most significant investment—their homes and families—through our services. The current environment, shaped by COVID and the shift to remote work, has led to a renewed focus on the home, influencing how people live and function within their spaces. There’s an increased demand for home delivery services and how we integrate with those needs, enhancing safety and comfort for consumers. Today, numerous factors are working in our favor, which is reassuring as this situation can often feel daunting. Our smart security solutions offer peace of mind. I hope for a calm resolution for all globally, but what stands out to me is the remarkable engagement with our products, services, and app at the consumer level, which our customers will remember. Additionally, we are launching a branding and advertising campaign to clearly convey who we are, what sets us apart, and the value we bring, and we believe this will propel us forward.

That's really helpful. My follow-up is, why are you raising your year-end subscriber targets but not your revenue guidance? What was the rationale behind that, and are there any factors we should consider?

Yes, we are increasing our subscriber targets because attrition rates are performing better than we anticipated. Our revenue guidance remains comfortable within a significant range, even if we gain an additional 20,000 to 40,000 subscribers. Our recurring revenue allows us to have clear visibility into our expected revenue for next year. We feel more confident now, in early November, regarding our subscriber numbers based on how the metrics and attrition have developed into the fourth quarter. This is why we decided to revise our guidance.

Yes, I have a couple of questions as well, Todd. First, you've discussed increasing your brand awareness and recognition. I would like to understand the strategy behind that. Have you conducted tests in smaller regions or cities? If so, what do the metrics look like for you? Additionally, as you consider scaling this up as you've mentioned, what does the investment look like in terms of costs for calendar year 2021?

We haven't yet tested the branding and advertising strategies we plan to implement. As you know, our inside sales team accounts for about half of our annual consumer additions. We do allocate budget for branding and advertising, primarily focused on lead generation. However, this upcoming effort will have a different branding approach. We haven't fully launched it yet, which is why we're being cautious. We plan to initiate testing on a national scale. It's significantly more costly to advertise in individual cities or regions compared to a national campaign, which is why we're focusing on a national approach rather than a local one.

I understand. I was curious if there is any way to outline what the cost structure will look like for 2021. Additionally, I noticed that net service margins have significantly improved again, and while I realize some of this may be temporary, especially for those who visit homes less frequently, is there a way to assess how much of this improvement is due to structural changes versus temporary factors that might disappear in a post-COVID environment, if that ever happens?

Yes, we believe that we have been very focused on improving our servicing costs. Looking back 24 months, we were dealing with servicing costs in the high $18 range. The advantage of our fully-integrated model, where we control the software, product, hardware, sales, and installation, creates a feedback loop that allows us to identify issues. One significant concern is the demand for video products, such as indoor and outdoor cameras and doorbell cameras. Connectivity issues have been a major factor, leading to increased calls to our centers and the necessity to dispatch technicians to homes, which can be costly. By introducing new products like advanced cameras, doorbell cameras, and a new hub, and upgrading associated firmware and software, we have worked hard to enhance our technology. We've focused on ensuring that the equipment we install has proper Wi-Fi connectivity, allowing everything to function correctly before we complete the installation. As a result, we are seeing a reduction in servicing costs and fewer incoming calls. Our feedback loop enables us to assess the nature of these calls and address them through product updates and installation adjustments. While some of this improvement may be related to COVID, we are fine-tuning our products and services to reduce service-related issues. Enhanced video performance has been a specific focus, as a positive experience with our products encourages customer retention. Updates to our system ensure that when customers access their cameras, they receive timely notifications and have a seamless experience, which contributes to their continued loyalty.

Could you explain why the subscriber acquisition cost has decreased significantly and how we should view the sustainability of that? It was a substantial decrease. Additionally, how are current or potential subscribers responding to your new pricing plan? Those are my two questions.

Sure. I'll begin by addressing your second question first, as it relates closely to the first. Regarding our pricing model, we consistently evaluate and adjust it, and you can expect to see some tweaks as we move into 2021. We're always experimenting, refining our approach until we find what works best. In terms of customer acceptance, we experienced a 14% increase in subscribers in the third quarter compared to the previous year, and we continue to attract new customers. One significant contributor is our inside sales channel, where potential customers often discover us through online searches related to smart home and security solutions. As they explore options, they're exposed to various offers, and this channel saw a 32% growth this quarter. Customers appreciate the transparency in our pricing; they know exactly what they're paying for in terms of equipment. They can choose what they want rather than being stuck with unnecessary items. As Todd pointed out earlier, customers are opting for more equipment now, including smart home devices such as outdoor cameras, doorbell cameras, and smart locks. This trend enhances their home management, and feedback from both channels indicates that customers are responding positively. Regarding the decrease in net subscriber acquisition costs, which we touched on in our last call, there are several factors at play. We've significantly reduced our RICs, which are the customers we've been financing and carrying on our balance sheet. This number dropped by 89% year-over-year. Now, nearly all new customers are paying upfront, either directly or through our financing partners. This shift has fundamentally changed our cash flow dynamics. You're observing a decline in net subscriber acquisition costs reflecting this change, as we transitioned from 950 in the first quarter to 630 in the second quarter, and now we're in the 208 to 209 range this quarter. This change, driven by higher RIC percentages dropping off, marks a significant transformation for our business. It boosts our cash flow, enabling us to invest more in branding, marketing, and future initiatives. We plan to continue adjusting our approach, and as we look ahead to the fourth quarter, we anticipate RICs to be around 8% to 12%. If that figure stabilizes at 1%, we expect subscriber acquisition costs to keep decreasing.

The answer is that our business model is sustainable. We've been discussing this for a few quarters now. We anticipated a decrease from 1,000, and while we haven't specified an exact number, we're very close to reaching cash flow breakeven when acquiring a customer. This is now public knowledge, which represents a significant shift for our business compared to when we used to be reliant on debt. Our subscriber acquisition costs once reached $2,200, making this turnaround quite remarkable. You can see the positive cash flow dynamics in our company, which stem from reduced service costs and lower overhead. We've been focused on operating as a lean organization, investing in areas expected to stimulate growth, such as improved technologies, software, and service delivery. Over the past couple of years, our efforts are starting to pay off. Looking ahead, we aim to expand our business further by enhancing our products and services to meet consumer demand and effectively sharing our story. You might be curious about our competition, and at present, it's largely the low awareness of our brand. Despite generating over $1 billion in revenue with impressive margins and strong service delivery, our brand recognition is still limited. However, we believe that once consumers understand the value we can bring into their homes, we will gain momentum. Although this won't happen overnight, we are patient and committed, and we are optimistic about the future.

This is Akash on for Kunal. I just have two questions. I guess the first question being, looking at third quarter versus second quarter, could we dig maybe a little bit deeper into buyer behaviors? And any changes in product mix that you guys saw in 3Q versus 2Q? And then also on the topic of competition, actually, looking at the landscape, any new trends that you guys are seeing in terms of the competition as it maybe relates to Amazon Ring, X System, or Google Nest? And any color there would be great.

I'm going to start by discussing the competition since it's something you asked about. We consistently monitor what our competitors are doing because it's essential to our business. However, this industry is challenging. I'm not referring to single products like a doorbell camera or an Arlo camera outside a home. We focus on comprehensive smart home systems that integrate 14 devices within a home. This requires a strong installation network, which we have, and our employees handle it. It's crucial for us to manage the entire customer experience, from sales to installation and ongoing support, whether through technical assistance over the phone or, if necessary, sending out someone to ensure we meet our commitments. So far, we haven't seen anyone match the level of service we're providing. While others might have good products like cameras or doorbells, we have a significant advantage due to our two decades of experience in this field. Rebuilding what we've accomplished is difficult. I acknowledge Google's investment in ADT, and we appreciate the partnership, which reinforces their belief in the necessity of this infrastructure in homes, beyond just phone calls. Google has also invested heavily in their Google Nest security products, which reflects the substantial costs involved in this sector. It's not a simple task for consumers to buy these products and install them independently. There's a DIY aspect to this industry, which we're exploring, but we also prioritize high margins and long-term customer relationships. While we have the capability for DIY, we want to ensure that any growth we pursue adds to our profits and customer retention, rather than just increasing subscriber numbers. We are attentive to the competition and observe industry trends, but with our 20 years of experience, we consider ourselves the leading provider in smart home as a service. We're excited about how consumers interact with our platform and the diverse ways they engage with our services. In today's environment, many are focusing on their homes as they adapt to their new realities, and we believe we are well-positioned to offer valuable services to them.

Mix of buyers.

Oh, so mix of buyers, not much change quarter-over-quarter. I mean not really actually. Sorry, I missed the last part.

I mean a great quarter. Good to see, I guess, year-over-year growth in subs, even with COVID. Two questions coming out of that. I guess first of all, is there any way to think about how much better or easier it would be to kind of sell and close and install and service customers without COVID? As you look forward, I know you've talked about continued growth, but how much is that kind of holding you back now, if that's the way to think about it? And I guess, secondly, you talked a little bit about the SAC cost, this is for costs being on an LTM basis, really only a couple of hundred dollars. I mean if my math is right, you're basically paying nothing to add subs now, and it looks like you kind of suggested the same. Is there any reason to think that, that doesn't continue to be the case? In other words, you can kind of grow with effectively a $0 cash cost of adding that new subscriber?

Thanks for the questions. The net subscriber acquisition cost is currently a choice for us. Before we introduced consumer financing, the combination of hardware and service was a bit confusing. It's much clearer now because customers can choose to pay upfront without a contract, and it's month-to-month from that point, or they can opt for 0% financing. Most customers prefer the 60-month financing option. We now have various options available that allow us to operate at a minimum of breakeven on subscriber acquisition, which is truly remarkable. When we initially set out to achieve this about 18 months ago, we weren't sure we could succeed. The same goes for our goal to reduce the servicing cost to under $10 a month, which we aimed for about 3.5 years ago. The fact that we reached this goal is a mix of favorable market conditions and our own choices and investments, and we are very pleased with that. So the answer is yes for now. If the economic environment shifts in the future and we rely more on consumer financing, which has been fantastic, we can maintain this approach. We believe it's the right strategy moving forward.

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

Yes. From a COVID perspective, we had to pause our direct sales organization. Additionally, I want to reiterate that we eliminated about 40,000 subscribers that we would have added in the form of RICs. When we examine our sales performance, customer additions, and revenue, the result is outstanding. We have benefited from people being at home and more engaged with their living spaces. Our performance per sales representative and revenue per customer has increased significantly. I believe this trend will continue because there is greater awareness in the market about Vivint. As we implement our branding and marketing campaign to effectively communicate the quality, design, and value of our services, I am confident we will maintain these gains moving forward.

I have a quick question about attrition. A few quarters ago, you mentioned a level around 14.5% to 15%, primarily due to lower cohorts coming due. Can you provide any updates on whether this has changed in light of the improvements over the last two quarters, or if it has been extended or spread over a longer timeframe?

I just want to clarify in response to the question about attrition. We have seen very positive signs regarding attrition, particularly in relation to the number of cancellations from customers who were in their initial term, which has been significantly lower than we anticipated. Our payment indicators also showed strong performance with customer payments. Overall, the portfolio is performing well. Looking forward to the rest of the year, while COVID cases are spiking across the country, it’s uncertain how this might impact our customer base. At this point, I feel comfortable estimating our attrition rate for this year to be around 12.5% to 13%, which is consistent with our current level. Once we have a better understanding of the situation heading into next year, we will provide further guidance for 2021. We believe that the fundamental improvements in our service delivery and the products we offer, combined with customers focusing on upgrading their homes while at home, will encourage them to remain with the Vivint platform for a longer duration.

Got it. And that's what I was getting at, Dale, is that instead of saying x amount of cohorts are coming due, normally, we see this type of behavior, that the past 2 quarters have been much better than my expectation. So it's not that, that 14% or whatever that number was got pushed forward. You could actually maybe even see that attrition or those cohorts coming due maybe spread out over a longer period. I guess my point is, that 14.5% to 15%, is that necessarily still out there and just pushed out? Or based on what you said in terms of people reconnecting with their home, we could actually see a shift in that to some extent?

Yes, we don't believe that the range of 14.5% to 15% is realistic for the end of this year. We think we are more likely in the 12.5% to 13% range this year. We'll assess the situation for next year, but if things continue to perform as they are currently, we expect to stay around the 13% mark. We do not anticipate a return to the higher range of over 14% or 15%.

Yes. So we just want to thank everyone for getting on the call. We are excited about the quarter that we've had and the year that we've had to this point. Hopefully, we've lived up and beat expectations, at least that we've told you in the market. I want to make sure you all know this, we're incredibly focused on the current quarter, all of the dynamics of the business. We've got a pulse on everything, where we feel very confident in what we've stated and what we've promised for the year. But as an organization, and I think you'll learn this over time, it's not just the next quarter. We are investing currently in making sure that we make improvements and strides towards better service delivery and everything for the future of the business. We hope to continue to outperform expectations in the future. So thank you.