apx group holdings, inc.d18rn0p25nwr6d.cloudfront.net/cik-0001584423/d5462...2016. for the year...

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORTPursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date Earliest Event Reported):February 27, 2017

APX GROUP HOLDINGS, INC.(Exact name of registrant as specified in its charter)

Delaware 333-191132-02 46-1304852

(State or Other Jurisdictionof Incorporation)

(CommissionFile Number)

(IRS EmployerIdentification No.)

4931 North 300 WestProvo, Utah 84604

(Address of Principal Executive Offices) (Zip Code)

(801) 377-9111(Registrant’s telephone number, including area code)

Not Applicable(Former Name or Former Address, if Changed Since Last Report)

ChecktheappropriateboxbelowiftheForm8–Kfilingisintendedtosimultaneouslysatisfythefilingobligationoftheregistrantunderanyofthefollowingprovisions:

☐ WrittencommunicationspursuanttoRule425undertheSecuritiesAct(17CFR230.425)

☐ SolicitingmaterialpursuanttoRule14a–12undertheExchangeAct(17CFR240.14a–12)

☐ Pre–commencementcommunicationspursuanttoRule14d–2(b)undertheExchangeAct(17CFR240.14d–2(b))

☐ Pre–commencementcommunicationspursuanttoRule13e–4(c)undertheExchangeAct(17CFR240.13e–4(c))

Item 2.02. Results of Operations and Financial Condition.

Aspreviouslyannounced,onFebruary27,2017at2:40p.m.EST,APXGroupHoldings,Inc.(the“Company”)intendstopresentinformationabouttheCompanyattheJPMorganGlobalHighYield&LeveragedFinanceConferencebeingheldattheLoewsMiamiBeachHotelinMiamiBeach,Florida.Thepresentationwillinclude,amongotherthings,certainpreliminaryunauditedfinancialresultsfortheCompany’sfullyearendedDecember31,2016.FortheyearendedDecember31,2016,theCompany’stotalrevenuesareestimatedtobebetween$757and$759,netlossisestimatedtobebetween$273millionand$278million,andAdjustedEBITDAisestimatedtobebetween$442millionand$445million.ThewrittenpresentationmaterialsarefurnishedasExhibit99.1tothisCurrentReportonForm8-Kandareincorporatedbyreferenceherein.Theslidescontainstatementsintendedas“forward-lookingstatements,”allofwhicharesubjecttothecautionarystatementaboutforward-lookingstatementssetforthhereinandtherein.

TheselectedpreliminaryfinancialdatainthisCurrentReportonForm8-K,includingthepresentationslidesfurnishedasExhibit99.1tothisreporthasbeenpreparedby,andistheresponsibilityof,themanagementoftheCompany.TheinformationandestimateshavenotbeencompiledorexaminedbytheCompany’sindependentauditorsandaresubjecttorevisionastheCompanypreparesitsfinancialstatementsasofandfortheyearendedDecember31,2016.BecausetheCompanyhasnotcompleteditsnormalquarterlyandannualclosing,reviewandauditproceduresfortheyearendedDecember31,2016,andsubsequenteventsmayoccurthatrequireadjustmentstotheseresults,therecanbenoassurancethatthefinalresultsforthefullyearendedDecember31,2016willnotdiffermateriallyfromtheseestimates.TheseestimatesshouldnotbeviewedasasubstituteforfinancialstatementspreparedinaccordancewithU.S.GAAPorasameasureofperformance.Inaddition,theseestimatedresultsforthefullyearendedDecember31,2016arenotnecessarilyindicativeoftheresultstobeachievedforanyfutureperiod.

TheinformationinthisCurrentReportonForm8-KandExhibit99.1isbeingfurnishedpursuanttoItem2.02ofForm8-Kandshallnotbedeemedtobe“filed”forpurposesofSection18oftheSecuritiesExchangeActof1934(the“ExchangeAct”),orotherwisesubjecttotheliabilitiesofthatsection,norshallitbedeemedincorporatedbyreferenceinanyfilingmadebytheCompanyundertheSecuritiesActof1933ortheExchangeAct,exceptasshallbeexpresslysetforthbyspecificreferenceinsuchafiling.

Inaddition,thisCurrentReportonForm8-K,includingthepresentationslidesfurnishedasExhibit99.1tothisreportincludeforward-lookingstatementsasdefinedbythePrivateSecuritiesLitigationReformActof1995regarding,amongotherthings,statementswithrespecttocertainpreliminaryunauditedfinancialresultsfortheCompany’sfullyearendedDecember31,2016,whicharesubjecttofinalizationandcontingenciesassociatedwiththeCompany’squarterlyandannualfinancialandaccountingprocedures.Thesestatementsarebasedonthebeliefsandassumptionsofmanagement.AlthoughtheCompanybelievesthatitsplans,intentionsandexpectationsreflectedinorsuggestedbytheseforward-lookingstatementsarereasonable,theCompanycannotassureyouthatitwillachieveorrealizetheseplans,intentionsorexpectations.Forward-lookingstatementsareinherentlysubjecttorisks,uncertaintiesandassumptions.Generally,statementsthatarenothistoricalfacts,includingstatementsconcerningtheCompany’spossibleorassumedfutureactions,businessstrategies,eventsorresultsofoperations,areforward-lookingstatements.Thesestatementsmaybeprecededby,followedbyorincludethewords“believes,”“estimates,”“expects,”“projects,”“forecasts,”“may,”“will,”“should,”“seeks,”“plans,”“scheduled,”“anticipates”or“intends”orsimilarexpressions.

Forward-lookingstatementsarenotguaranteesofperformance.Youshouldnotputunduerelianceonthesestatementswhichspeakonlyasofthedatehereof.Youshouldunderstandthatthefollowingimportantfactors,amongothers,couldaffecttheCompany’sfutureresultsandcouldcausethoseresultsorotheroutcomestodiffermateriallyfromthoseexpressedorimpliedintheCompany’sforward-lookingstatements:

• risksofthesmarthomeandsecurityindustry,includingrisksofandpublicitysurroundingthesales,subscriberoriginationandretentionprocess;

• thehighlycompetitivenatureofthesmarthomeandsecurityindustryandproductintroductionsandpromotionalactivitybyourcompetitors;

• litigation,complaintsoradversepublicity;

2

• theimpactofchangesinconsumerspendingpatterns,consumerpreferences,local,regional,andnationaleconomicconditions,crime,weather,demographictrendsandemployeeavailability;

• adversepublicityandproductliabilityclaims;

• increasesand/ordecreasesinutilityandotherenergycosts,increasedcostsrelatedtoutilityorgovernmentalrequirements;

• costincreasesorshortagesinsmarthomeandsecuritytechnologyproductsorcomponents;and

• theimpacttotheCompany’sbusiness,resultsofoperations,financialcondition,regulatorycomplianceandcustomerexperienceoftheVivintFlexPayplan.

Inaddition,theoriginationandretentionofnewsubscriberswilldependonvariousfactors,including,butnotlimitedto,marketavailability,subscriberinterest,theavailabilityofsuitablecomponents,thenegotiationofacceptablecontracttermswithsubscribers,localpermitting,licensingandregulatorycompliance,andtheCompany’sabilitytomanageanticipatedexpansionandtohire,trainandretainpersonnel,thefinancialviabilityofsubscribersandgeneraleconomicconditions.

Theseandotherfactorsthatcouldcauseactualresultstodifferfromthoseimpliedbytheforward-lookingstatementsinthisCurrentReportonForm8-K,includingthepresentationslidesfurnishedasExhibit99.1tothisreportaremorefullydescribedinthe“RiskFactors”sectionoftheCompany’sannualreportonform10-KfortheyearendedDecember31,2015,filedwiththeSecuritiesExchangeCommission(SEC),assuchfactorsmaybeupdatedfromtimetotimeintheCompany’speriodicfilingswiththeSEC,whichareavailableontheSEC’swebsiteatwww.sec.gov.Therisksdescribedin“RiskFactors”arenotexhaustive.Newriskfactorsemergefromtimetotimeanditisnotpossibleforustopredictallsuchriskfactors,norcanweassesstheimpactofallsuchriskfactorsontheCompany’sbusinessortheextenttowhichanyfactororcombinationoffactorsmaycauseactualresultstodiffermateriallyfromthosecontainedinanyforward-lookingstatements.Allforward-lookingstatementsattributabletotheCompanyorpersonsactingonitsbehalfareexpresslyqualifiedintheirentiretybytheforegoingcautionarystatements.TheCompanyundertakesnoobligationstoupdateorrevisepubliclyanyforward-lookingstatements,whetherasaresultofnewinformation,futureeventsorotherwise.

Item 7.01. Regulation FD Disclosure

TheinformationincludedinItem2.02aboveisincorporatedhereinbyreference.

Item 9.01 Financial Statements and Exhibits.

(d)Exhibits.ThefollowingExhibitisfurnishedaspartofthisCurrentReportonForm8-K.Exhibit

No. Description

99.1 PresentationSlidesdatedFebruary27,2017

3

SIGNATURES

PursuanttotherequirementsoftheSecuritiesExchangeActof1934,theregistranthasdulycausedthisreporttobesignedbytheundersignedhereuntodulyauthorized.

APXGROUPHOLDINGS,INC.

By: /s/DaleGerardName: DaleGerardTitle: SeniorVicePresidentofFinanceandTreasurer

Date:February27,2017

4

EXHIBIT LISTExhibit

No. Description

99.1 PresentationSlidesdatedFebruary27,2017

5

Exhibit 99.1

APXGroupHoldings,Inc.JPMorganGlobalHighYield&LeveragedFinanceConferenceFebruary27,2017

2PresentersMarkDaviesChiefFinancialOfficerDaleGerardSVPFinanceandTreasurer

3PreliminaryStatementThispresentationincludesforward-lookingstatementsasdefinedbythePrivateSecuritiesLitigationReformActof1995regarding,amongotherthings,statementswithrespecttocertainpreliminaryunauditedfinancialresultsfortheCompany’squarterandfullyearendedDecember31,2016,whicharesubjecttofinalizationandcontingenciesassociatedwiththeCompany’squarterlyandannualfinancialandaccountingprocedures.Thesestatementsarebasedonthebeliefsandassumptionsofmanagement.AlthoughtheCompanybelievesthatitsestimates,plans,intentionsandexpectationsreflectedinorsuggestedbytheseforward-lookingstatementsarereasonable,theCompanycannotassureyouthatitwillachieveorrealizetheseestimates,plans,intentionsorexpectations.Forward-lookingstatementsareinherentlysubjecttorisks,uncertaintiesandassumptions.Generally,statementsthatarenothistoricalfacts,includingstatementsconcerningtheCompany’spossibleorassumedfutureactions,businessstrategies,eventsorresultsofoperations,areforwardlookingstatements.Thesestatementsmaybeprecededby,followedbyorincludethewords“believes,”“estimates,”“expects,”“projects,”“forecasts,”“may,”“will,”“should,”“seeks,”“plans,”“scheduled,”“anticipates”or“intends”orsimilarexpressions.Forward-lookingstatementsarenotguaranteesofperformance.Youshouldnotputunduerelianceonthesestatementswhichspeakonlyasofthedatehereof.Youshouldunderstandthatthefollowingimportantfactors,amongothers,couldaffecttheCompany’sfutureresultsandcouldcausethoseresultsorotheroutcomestodiffermateriallyfromthoseexpressedorimpliedintheCompany’sforward-lookingstatements:1)risksofthesmarthomeandsecurityindustry,includingrisksofandpublicitysurroundingthesales,subscriberoriginationandretentionprocess;2)thehighlycompetitivenatureofthesmarthomeandsecurityindustryandproductintroductionsandpromotionalactivitybytheCompany’scompetitors;3)litigation,complaintsoradversepublicity;4)theimpactofchangesinconsumerspendingpatterns,consumerpreferences,local,regional,andnationaleconomicconditions,crime,weather,demographictrendsandemployeeavailability;5)adversepublicityandproductliabilityclaims;6)increasesand/ordecreasesinutilityandotherenergycosts,increasedcostsrelatedtoutilityorgovernmentalrequirements;7)costincreasesorshortagesinsmarthomeandsecuritytechnologyproductsorcomponents;andtheimpacttotheCompany’sbusinessresultsofoperations,financialconditions,regulatorycomplianceandcustomerexperienceoftheVivintFlexPayplanInaddition,theoriginationandretentionofnewsubscriberswilldependonvariousfactors,including,butnotlimitedto,marketavailability,subscriberinterest,theavailabilityofsuitablecomponents,thenegotiationofacceptablecontracttermswithsubscribers,localpermitting,licensingandregulatorycompliance,andtheCompany’sabilitytomanageanticipatedexpansionandtohire,trainandretainpersonnel,thefinancialviabilityofsubscribersandgeneraleconomicconditions.Theseandotherfactorsthatcouldcauseactualresultstodifferfromthoseimpliedbytheforward-lookingstatementsinthispresentationaremorefullydescribedinthe“RiskFactors”sectionintheCompany’sannualreportonform10-KfortheyearendedDecember31,2015,filedwiththeSecuritiesExchangeCommission(SEC),assuchfactorsmaybeupdatedfromtimetotimeintheCompany’speriodicfilingswiththeSEC,whichareavailableontheSEC’swebsiteatwww.sec.gov.Therisksdescribedin“RiskFactors”arenotexhaustive.Newriskfactorsemergefromtimetotimeanditisnotpossibleforustopredictallsuchriskfactors,norcanweassesstheimpactofallsuchriskfactorsontheCompany’sbusinessortheextenttowhichanyfactororcombinationoffactorsmaycauseactualresultstodiffermateriallyfromthosecontainedinanyforward-lookingstatements.Allforward-lookingstatementsattributabletotheCompanyorpersonsactingonitsbehalfareexpresslyqualifiedintheirentiretybytheforegoingcautionarystatements.TheCompanyundertakesnoobligationstoupdateorrevisepubliclyanyforward-lookingstatements,whetherasaresultofnewinformation,futureeventsorotherwise,exceptasrequiredbylaw.ThispresentationincludesAdjustedEBITDA,whichisasupplementalmeasurethatisnotrequiredby,orpresentedinaccordancewith,accountingprinciplesgenerallyacceptedintheUnitedStates(“GAAP”).AdjustedEBITDAisnotameasurementofourfinancialperformanceunderGAAPandshouldnotbeconsideredasanalternativetonetincome(loss)oranyothermeasurederivedinaccordancewithGAAPorasanalternativetocashflowsfromoperatingactivitiesasameasureofourliquidity.WebelievethatAdjustedEBITDAprovidesusefulinformationaboutflexibilityunderourcovenantstoinvestors,lenders,financialanalystsandratingagenciessincethesegroupshavehistoricallyusedEBITDA-relatedmeasuresinourindustry,alongwithothermeasures,toestimatethevalueofacompany,tomakeinformedinvestmentdecisions,andtoevaluateacompany’sabilitytomeetitsdebtservicerequirements.AdjustedEBITDAeliminatestheeffectofnon-cashdepreciationoftangibleassetsandamortizationofintangibleassets,muchofwhichresultsfromacquisitionsaccountedforunderthepurchasemethodofaccounting.AdjustedEBITDAalsoeliminatestheeffectsofinterestratesandchangesincapitalizationwhichmanagementbelievesmaynotnecessarilybeindicativeofacompany’sunderlyingoperatingperformance.AdjustedEBITDAisalsousedbyustomeasurecovenantcomplianceundertheindenturegoverningourseniorsecurednotes,theindenturegoverningourseniorunsecurednotesandthecreditagreementgoverningourrevolvingcreditfacility.WecautioninvestorsthatamountspresentedinaccordancewithourdefinitionofAdjustedEBITDAmaynotbecomparabletosimilarmeasuresdisclosedbyotherissuers,becausenotallissuersandanalystscalculateAdjustedEBITDAinthesamemanner.SeetheAppendixofthispresentationforareconciliationofAdjustedEBITDAtonetlossfortheCompany,whichwebelieveisthemostcloselycomparablefinancialmeasurecalculatedinaccordancewithGAAP.AdjustedEBITDAshouldbeconsideredinadditiontoandnotasasubstitutefor,orsuperiorto,financialmeasurespresentedinaccordancewithGAAP.

4TheLeadingSmartHomeCompanyinNorthAmerica#1LargestSmartHomeplatformintheworld*~1.2millionCustomersacrossNorthAmerica~18.4millionConnecteddevices~$780—$800millionAnnualrecurringrevenueand$460—$480millioninLQAEBITDAIncubatedSuccessfuladjacentbusinesses500+millionDailyeventsprocessedbyartificialintelligencesystemNationwideSales,installation,andservicefootprint*StrategyAnalytics,Jan2017

520102011201220132014201520162017LaunchedSmartHomeServicesOpenedInnovationCenterKeyMilestonesLaunchedIntegratedSmartHomeProductSuiteandCloudServicesIntroducedFlexPayConsumerFinancingSurpassed1MActiveCustomersAnnouncedasAirbnb’sPreferredSmartHomePartnerAcquiredbyBlackstonefor$2BillionPeterThielLed$100MInvestmentLaunchedaIndustry-LeadingSmartHomeAISky

6IoTDeviceExplosionDevicesTimeSensor-fedartificialintelligencewilldriveastreamlined,massmarketSmartHomeexperienceServiceproviderswiththemostinstalleddevicesandthebestartificialintelligencewillhavetheadvantageDevicesinthehomewillbethekeyadvantageforSmartHomeserviceproviders

7AcceleratingMomentumastheSmartHomeLeader

88.39.39.711.411.513.014.414.515.916.317.218.019.421.223.225.027.020002001200220032004200520062007200820092010201120122013201420152016$50B+Opportunity:NorthAmericanSmartHome&Security?Penetrationrate~2%...Significantgrowthpotential•HighlevelofARPUandmargindollars•Integratedsolution(“highswitchingcost”)•Regularsystemusageresultsinlowcustomerattrition•Non-commodity…opportunitytoinnovate20142021$3$2637%CAGRSource:ABIandBarnesandBuchanan—Basedonannualrevenue;includesproducts(e.g.,lighting,access,energymanagement,HVAC)andservices.Estimatesvarysignificantlyandnumbersaboveareconservative.~8%CAGRSmartHomeindustryexpectedtogrowto$25billionby2021Commercial&ResidentialMonitoringServicesRevenueInBillions$inbillions

9Vivint’sSmartHomemodelovercomestheeightbarrierstomassadoption…1)Lackofclearandcompellingconsumerusecases2)Difficultyeducatingconsumerthroughtypicalsaleschannels3)Burdenonconsumertounderstandinteroperability4)Highup-frontpricing5)Difficultyofinstallation6)Poorproductandsystemreliability7)Lackofpost-installservice8)SecurityandprivacyconcernsEightBarrierstoMassMarketAdoptionVivint’sIntegratedSmartHomeModel

10Vivint’sPathstoSubscriberGrowthGrowwhatweknowPullthroughAdjacentmarketsAccelerationinexistingchannelsNewsaleschannelsSamevalueproposition,newpathstomarketUsingsmarthometosolvecriticalproblemsinlargeadjacentmarketsIntegrationandco-marketingwithhighvolumeproducts

11ResultssincerepositioningthecompanyaroundSmartHomein2010VivintARPUNewSubscribersUSD$VivintcustomerschoosingSmartHomepackagevs.securityonlyofferingPackage%MoreVivintcustomersarechoosingSmartHomepackages……whichisimprovingVivint’sARPU055158617077~87100954942393023~13SmartHomeSecurityonly2009201120122013201444.5048.5356.2457.5958.3561.8961.43*66—67201020152016E20092010201120122013201420152016E*Pricingofbasesecuritypackagedecreasedby$4Source:Companyfinancialreports

12$101.5$116-$119Q42015Q4201633,16239,500—40,000Q42015Q42016FourthQuarter2016KeyMetrics(Estimates)Notes:.Subscriberdataexcludeswirelessinternetbusinessandisstatedasoftheendofeachperiod.2015metricsareestimatedfortheperiodendedDecember31,2015(1)RevenueandAdjustedEBITDAareshownonaconsolidatedbasisforAPXGroupHoldings,Inc.SeeAppendixforReconciliationofNon-GAAPMeasuresY-o-Y%growth16%—18%Y-o-Y%growth16%—17%Revenue(1)AdjustedEBITDA(1)LTMQuarterlyAttrition$inmillions$inmillionsNewSubscribersinthousandsY-o-Y%growth19%—21%LTMCreationCostMultipleNetServiceMargin12.2%12%—13%Q42015Q42016$175.0$203—$206Q42015Q4201630.9x29x—31xQ42015Q4201675.0%74%—75%Q42015Q42016

13681,834803,413899,1741,015,2671,144,000–1,147,00020122013201420152016E$455.2$500.9$563.7$653.7$757—$75920122013201420152016E$244.0$292.3$309.4$387.1$442—$44520122013201420152016EIndustryLeadingSmartHomeFinancials(2016Estimates)Note:2011–2013financialsshownonaconsolidatedbasisforVivintand2GIG.2015financialsandsubscriberdata(excludeswirelessinternetbusiness)areestimatesfortheperiodendedDecember31,2015;CAGRismeasuredtothemid-pointofthe2015estimate.(1)RevenueandAdjustedEBITDAareshownonaconsolidatedbasisforAPXGroupHoldings,Inc.andProformafortheNovember2012transaction.SeeAppendixforreconciliationofnon-GAAPmeasures.Revenue(1)AdjustedEBITDA(1)TotalSubscribersTotalNetSubscriberAdditionsinmillionsinmillionsinthousands144,268168,031155,395170,691176,000-177,00036,07951,00349,06965,871100,500–101,50020122013201420152016E

142017StrategicPrioritiesPlatformInnovationChannelExpansionFunding“PoweredbyAI…Skywilllockdoors,armasecuritysystem,andadjustthethermostatwithaneyetowardenergyconservation…intuitivelyknowingwhentomakeadjustments…learninghowtooperateonitsown.”“Allthatsiliconmademyhomesmart,butnotintelligent.VivintsaysitsnewSkysystemcanchangethat.”

15APXGroupHoldings,Inc.AnnexA

162015201420152014Netloss(70.0)—(75.0)(62.4)(65.6)(273.0)—(278.0)(279.1)(238.7)Interestexpense,net52.0—53.044.338.0196.5—198.0161.2146.1Otherexpense(income),net1.5—2.62.1(2.0)6.8—7.58.8(1.8)Incometax(benefit)expense(0.5)—0.00.8—0.10.40.5Restructuringandassetimpairment(i)(1.0)—0.9—0.9—1.259.2-Depreciationandamortization(ii)33.5—33.837.241.4133.3—133.9151.7162.6Amortizationofcapitalizedsubscriberacquisitioncosts45.0—45.826.018.4154.0—155.193.058.7Non-capitalizedsubscriberacquisitioncosts(iii)43.0—43.840.938.3175.0—176.4164.0135.0Non-cashcompensation(iv)—1.00.60.53.5—4.52.51.9OtherAdjustments(v)12.5—14.011.814.345.0—46.325.345.1AdjustedEBITDA$116.0—$119.0$101.5$84.1$442.0—$445.0$387.1$309.4ThreeMonthsEndedDecember31,YearsEndedDecember31,20162016ReconciliationofNon-GAAPFinancialMeasures–APXGroup($inMillions)(i)ReflectscostsrelatedtorestructuringchargesandassetimpairmentsrelatedtothetransitionofourWirelessInternetbusinessandthesalein2016ofourNewZealandandPuertoRicosubscribercontracts.(ii)Excludesloanamortizationcoststhatareincludedininterestexpense.(iii)Reflectssubscriberacquisitioncostthatareexpensedasincurredbecausetheyarenotdirectlyrelatedtotheacquisitionofspecificsubscribers.Certainotherindustryparticipantspurchasesubscribersthroughsubscribercontractpurchases,andasaresult,maycapitalizethefullcosttopurchasethesesubscriberscontracts,ascomparedtoourorganicgenerationofnewsubscribers,whichrequiresustoexpenseaportionofoursubscriberacquisitioncostsunderGAAP.(iv)Reflectsnon-cashcompensationcostsrelatedtoemployeeanddirectorstockandstockoptionplans(v)Otheradjustmentsincludingitemssuchasproductdevelopmentcosts,firerelatedexpenses,subcontractedmonitoringfeesavings,non-recurringgain,bonusandtransactionrelatedcostsassociatedwiththe2GIGsale,andothersimilaradjustments.

17TotalSubscribers–TheaggregatenumberofactivesecurityandhomeautomationsubscribersattheendofagivenperiodMonthlyRevenueperUser(“RPU”)–TherecurringmonthlyrevenuebilledtoasmarthomeandsecuritysubscriberTotalRevenueperUser–TheaggregateRPUbilledforallsmarthomeandsecuritysubscribersAverageRPU–TheTotalRPUdividedbyTotalSubscribers.AverageRevenueperNewUser(“ARPNU’)–TheaggregateRPUfornewsubscribersoriginatedduringaperioddividedbythenumberofnewsubscribersoriginatedduringsuchperiodAttrition–Theaggregatenumberofcanceledsecurityandhomeautomationsubscribersduringaperioddividedbythemonthlyweightedaveragenumberoftotalsecurityandhomeautomationsubscribersforsuchperiod.Subscribersareconsideredcanceledwhentheyterminateinaccordancewiththetermsoftheircontract,areterminatedbyus,orifpaymentfromsuchsubscribersisdeemeduncollectible(whenatleastfourmonthlybillingsbecomepastdue).SalesofcontractstothirdpartiesandmovesareexcludedfromtheattritioncalculationNetSubscriberAcquisitionCosts–Definedasdirectandindirectcoststocreateanewsecurityandhomeautomationsubscriber.Theseincludecommissions,equipment,installation,marketingandotherallocations(G&Aandoverhead),lessactivationfeesandupsellrevenue.Thesecostsalsoexcluderesidualsandlong-termequityexpensesassociatedwiththedirect-to-homesaleschannel.NetCreationCostMultiple–DefinedasNetSubscriberAcquisitionCosts,dividedbythenumberofnetnewsubscribersoriginated,andthendividedbytheARPNUAdjustedEBITDA–NetIncome(loss)beforeinterestexpense(netofinterestincome),incomeandfranchisetaxesanddepreciationandamortization(includingamortizationofcapitalizedsubscriberacquisitioncosts),furtheradjustedtoexcludetheeffectsofcertaincontractsalestothirdparties,non-capitalizedsubscriberacquisitioncosts,stock-basedcompensation,thehistoricalresultsoftheCompany’sSolarvariableinterestentityandcertainunusual,non-cash,non-recurringandotheritemspermittedincertaincovenantcalculationsundertheindenturesgoverningthenotesLastQuarterAnnualizedAdjustedEBITDA(“LQAAdjustedEBITDA”)–Acommonindustrymeasureusedtoreflectthestep-functioninearningsduringthesalesseasonrelatedtothesubscribersgeneratedfromApriltoAugust.LQAAdjustedEBITDA,calculatedbymultiplyingAdjustedEBITDAforthemostrecentfiscalquarterby4,representstheongoingearningspowerofVivint’scurrentsubscriberbaseandispotentiallyamorerelevantmetricthanLTMduetotherecurringnatureoftherevenueandexpectedearningsNetServiceCost–Definedastotalservicecosts,includingmonitoring,customerservice,fieldserviceandotherallocations(G&Aandoverhead)costs,lesstotalservicerevenuedividedbytotalservicesubscribersNetServiceMargin–DefinedasAverageRPUpersubscriberlessNetServiceCostsdividedbyAverageRPUSteadyStateFreeCashFlow(“SSFCF”)–Providesanestimateofthecashflowofacompany,ifitweretoinvestinnewRPUonlytotheextentrequiredtoreplaceattrition.SSFCFisdefinedasLQAAdjustedEBITDAlesscosttoreplaceRPUattrited,plusanadd-backforproformaG&Aexpenses.CosttoreplaceRPUattritediscalculatedbymultiplyingRPUbytheattritionrateinsteadystatebytheNetCreationCostMultipleCertainDefinitions