ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 46-1304852 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
4931 North 300 West Provo, UT | 84604 | |
(Address of Principal Executive Offices) | (Zip Code) |
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | x (Do not check if a smaller reporting company) | Smaller reporting company | ¨ | |||
Emerging growth company | ¨ |
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
• | references to “Vivint,” “we,” “us,” “our” and “the Company” are to APX Group Holdings, Inc. and its consolidated subsidiaries; |
• | references to “our Sponsor” are to certain investment funds affiliated with The Blackstone Group L.P.; |
• | references to the “Merger” are to the acquisition of APX Group and two of its affiliates, Vivint Solar, Inc. and 2GIG Technologies, Inc., on November 16, 2012, by an investor group comprised of certain investment funds affiliated with our Sponsor, and certain co-investors and management investors; and |
• | the terms “subscriber” and “customer” are used interchangeably. |
• | accelerate adoption of our smart home solution; |
• | establish and grow through new customer acquisition channels; |
• | increase brand awareness; |
• | meet customer expectations and address key friction points for smart home adoption and use; |
• | expand our ecosystem with third-party and proprietary devices; |
• | reduce customer attrition; |
• | lower net customer acquisition costs; |
• | improve unit economics and grow subscription revenues per customer over time; |
• | increase new customer originations, customer usage, and customer satisfaction; |
• | develop, design, and sell our own Smart Home Services that are differentiated from those of our competitors; |
• | attract, train and retain an effective sales force and other key personnel; |
• | upgrade and maintain our information technology systems; |
• | acquire and protect intellectual property; |
• | meet future liquidity requirements and comply with restrictive covenants related to our long-term indebtedness; |
• | enhance our future operating and financial results; |
• | comply with laws and regulations applicable to our business; and |
• | successfully defend litigation brought against us. |
• | risks of the smart home and security industry, including risks of and publicity surrounding the sales, subscriber origination and retention process; |
• | the highly competitive nature of the smart home and security industry and product introductions and promotional activity by our competitors; |
• | litigation, complaints or adverse publicity; |
• | the impact of changes in consumer spending patterns, consumer preferences, local, regional, and national economic conditions, crime, weather, demographic trends and employee availability; |
• | adverse publicity and product liability claims; |
• | increases and/or decreases in utility and other energy costs, increased costs related to utility or governmental requirements; |
• | cost increases or shortages in smart home and security technology products or components; |
• | the introduction of unsuccessful new Smart Home Services; |
• | privacy and data protection laws, privacy or data breaches, or the loss of data; and |
• | the impact to our business, results of operations, financial condition, regulatory compliance and customer experience of the Vivint Flex Pay plan (as defined in Note 1 - Basis of Presentation in the unaudited condensed consolidated financial statements) and our ability to successfully compete in retail sales channels. |
ITEM 1. | UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
June 30, 2018 | December 31, 2017 | ||||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 4,520 | $ | 3,872 | |||
Accounts and notes receivable, net | 50,640 | 40,721 | |||||
Inventories | 103,407 | 115,222 | |||||
Prepaid expenses and other current assets | 17,894 | 16,150 | |||||
Total current assets | 176,461 | 175,965 | |||||
Property, plant and equipment, net | 81,250 | 78,081 | |||||
Capitalized contract costs, net | 1,090,249 | — | |||||
Subscriber acquisition costs, net | — | 1,308,558 | |||||
Deferred financing costs, net | 2,578 | 3,099 | |||||
Intangible assets, net | 300,561 | 377,451 | |||||
Goodwill | 835,816 | 836,970 | |||||
Long-term notes receivables and other assets, net | 111,965 | 88,723 | |||||
Total assets | $ | 2,598,880 | $ | 2,868,847 | |||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||
Current Liabilities: | |||||||
Accounts payable | $ | 105,359 | $ | 107,347 | |||
Accrued payroll and commissions | 73,623 | 57,752 | |||||
Accrued expenses and other current liabilities | 104,976 | 74,321 | |||||
Deferred revenue | 152,948 | 88,337 | |||||
Current portion of capital lease obligations | 9,530 | 10,614 | |||||
Total current liabilities | 446,436 | 338,371 | |||||
Notes payable, net | 2,762,447 | 2,760,297 | |||||
Revolving credit facility | 160,000 | 60,000 | |||||
Capital lease obligations, net of current portion | 9,056 | 11,089 | |||||
Deferred revenue, net of current portion | 300,045 | 264,555 | |||||
Other long-term obligations | 80,020 | 79,020 | |||||
Deferred income tax liabilities | 8,659 | 9,041 | |||||
Total liabilities | 3,766,663 | 3,522,373 | |||||
Commitments and contingencies (See Note 11) | |||||||
Stockholders’ deficit: | |||||||
Common stock, $0.01 par value, 100 shares authorized; 100 shares issued and outstanding | — | — | |||||
Additional paid-in capital | 730,839 | 732,346 | |||||
Accumulated deficit | (1,870,925 | ) | (1,358,571 | ) | |||
Accumulated other comprehensive loss | (27,697 | ) | (27,301 | ) | |||
Total stockholders’ deficit | (1,167,783 | ) | (653,526 | ) | |||
Total liabilities and stockholders’ deficit | $ | 2,598,880 | $ | 2,868,847 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues: | |||||||||||||||
Recurring and other revenue | $ | 254,967 | $ | 202,783 | $ | 501,564 | $ | 399,641 | |||||||
Service and other sales revenue | — | 6,358 | — | 11,749 | |||||||||||
Activation fees | — | 2,985 | — | 6,089 | |||||||||||
Total revenues | 254,967 | 212,126 | 501,564 | 417,479 | |||||||||||
Costs and expenses: | |||||||||||||||
Operating expenses (exclusive of depreciation and amortization shown separately below) | 89,321 | 77,316 | 173,081 | 148,668 | |||||||||||
Selling expenses (exclusive of amortization of deferred commissions of $40,167; $20,189; $78,470; and $39,425, respectively, which are included in depreciation and amortization shown separately below) | 65,659 | 46,275 | 124,902 | 81,073 | |||||||||||
General and administrative expenses | 49,206 | 38,902 | 100,173 | 77,763 | |||||||||||
Depreciation and amortization | 126,873 | 80,096 | 251,131 | 156,965 | |||||||||||
Restructuring expenses | 4,141 | — | 4,141 | — | |||||||||||
Total costs and expenses | 335,200 | 242,589 | 653,428 | 464,469 | |||||||||||
Loss from operations | (80,233 | ) | (30,463 | ) | (151,864 | ) | (46,990 | ) | |||||||
Other expenses (income): | |||||||||||||||
Interest expense | 60,327 | 54,958 | 119,117 | 108,639 | |||||||||||
Interest income | — | (47 | ) | (31 | ) | (104 | ) | ||||||||
Other loss (income), net | 4,731 | (1,869 | ) | (40,509 | ) | 10,197 | |||||||||
Loss before income taxes | (145,291 | ) | (83,505 | ) | (230,441 | ) | (165,722 | ) | |||||||
Income tax (benefit) expense | (906 | ) | 732 | (1,339 | ) | 1,151 | |||||||||
Net loss | $ | (144,385 | ) | $ | (84,237 | ) | $ | (229,102 | ) | $ | (166,873 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net loss | $ | (144,385 | ) | $ | (84,237 | ) | $ | (229,102 | ) | $ | (166,873 | ) | |||
Other comprehensive (loss) income, net of tax effects: | |||||||||||||||
Foreign currency translation adjustment | (417 | ) | 1,164 | (1,076 | ) | 1,576 | |||||||||
Unrealized gain on marketable securities | — | (401 | ) | — | (258 | ) | |||||||||
Total other comprehensive (loss) income | (417 | ) | 763 | (1,076 | ) | 1,318 | |||||||||
Comprehensive loss | $ | (144,802 | ) | $ | (83,474 | ) | $ | (230,178 | ) | $ | (165,555 | ) |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (229,102 | ) | $ | (166,873 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Amortization of capitalized contract costs | 193,302 | — | |||||
Amortization of subscriber acquisition costs | — | 96,383 | |||||
Amortization of customer relationships | 42,134 | 47,328 | |||||
Depreciation and amortization of property, plant and equipment and other intangible assets | 15,695 | 13,254 | |||||
Amortization of deferred financing costs and bond premiums and discounts | 2,671 | 3,644 | |||||
Gain on fair value changes of equity securities | (740 | ) | — | ||||
(Gain) loss on sale or disposal of assets | (50,193 | ) | 230 | ||||
Loss on early extinguishment of debt | — | 12,751 | |||||
Stock-based compensation | 542 | 886 | |||||
Provision for doubtful accounts | 8,409 | 9,726 | |||||
Deferred income taxes | — | (450 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Accounts and notes receivable | (21,069 | ) | (22,640 | ) | |||
Inventories | 11,641 | (72,914 | ) | ||||
Prepaid expenses and other current assets | (1,753 | ) | (4,604 | ) | |||
Capitalized contract costs – deferred contract costs | (266,251 | ) | — | ||||
Subscriber acquisition costs – deferred contract costs | — | (212,420 | ) | ||||
Other assets | (20,359 | ) | (46,938 | ) | |||
Accounts payable | 4,214 | 59,335 | |||||
Accrued expenses and other current liabilities | 65,525 | 33,998 | |||||
Deferred revenue | 114,345 | 116,043 | |||||
Net cash used in operating activities | (130,989 | ) | (133,261 | ) | |||
Cash flows from investing activities: | |||||||
Capital expenditures | (12,193 | ) | (11,435 | ) | |||
Proceeds from the sale of intangible assets | 53,693 | — | |||||
Proceeds from the sale of capital assets | 225 | 319 | |||||
Acquisition of intangible assets | (1,022 | ) | (743 | ) | |||
Acquisition of other assets | — | (143 | ) | ||||
Net cash provided by (used in) investing activities | 40,703 | (12,002 | ) | ||||
Cash flows from financing activities: | |||||||
Proceeds from notes payable | — | 324,750 | |||||
Repayment of notes payable | — | (300,000 | ) | ||||
Borrowings from revolving credit facility | 179,000 | 113,000 | |||||
Repayments on revolving credit facility | (79,000 | ) | (13,000 | ) | |||
Repayments of capital lease obligations | (6,955 | ) | (4,712 | ) | |||
Payments of other long-term obligations | — | (1,164 | ) | ||||
Financing costs | — | (9,460 | ) | ||||
Deferred financing costs | — | (6,191 | ) | ||||
Return of capital | (2,049 | ) | — | ||||
Net cash provided by financing activities | 90,996 | 103,223 | |||||
Effect of exchange rate changes on cash | (62 | ) | (10 | ) | |||
Net increase (decrease) in cash and cash equivalents | 648 | (42,050 | ) | ||||
Cash and cash equivalents: | |||||||
Beginning of period | 3,872 | 43,520 | |||||
End of period | $ | 4,520 | $ | 1,470 | |||
Supplemental non-cash investing and financing activities: | |||||||
Capital lease additions | $ | 4,137 | $ | 1,155 | |||
Capital expenditures included within accounts payable and accrued expenses and other current liabilities | $ | 2,482 | $ | 282 | |||
Change in fair value of marketable securities | $ | — | $ | 193 |
Six Months Ended June 30, 2018 | Twelve Months Ended December 31, 2017 | ||||||
Beginning balance | $ | 5,356 | $ | 4,138 | |||
Provision for doubtful accounts | 8,409 | 22,465 | |||||
Write-offs and adjustments | (9,138 | ) | (21,247 | ) | |||
Balance at end of period | $ | 4,627 | $ | 5,356 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Amortization of capitalized contract costs | $ | 97,937 | $ | — | $ | 193,302 | $ | — | |||||||
Amortization of subscriber acquisition costs | — | 49,501 | — | 96,383 | |||||||||||
Amortization of definite-lived intangibles | 22,732 | 25,368 | 45,452 | 50,720 | |||||||||||
Depreciation of property, plant and equipment | 6,204 | 5,227 | 12,377 | 9,862 | |||||||||||
Total depreciation and amortization | $ | 126,873 | $ | 80,096 | $ | 251,131 | $ | 156,965 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Translation loss (gain) | $ | 1,592 | $ | (1,763 | ) | $ | 3,633 | $ | (2,477 | ) |
Condensed Consolidated Balance Sheets (unaudited) | |||||||||||
As Reported | Adjustments | Adjusted | |||||||||
December 31, 2017 | January 1, 2018 | ||||||||||
Assets | |||||||||||
Capitalized contract costs, net | $ | — | $ | 1,020,408 | $ | 1,020,408 | |||||
Subscriber acquisition costs, net | 1,308,558 | (1,308,558 | ) | — | |||||||
Long-term notes receivables and other assets, net | 88,723 | 2,713 | 91,436 | ||||||||
Liabilities and Stockholders' Deficit | |||||||||||
Accrued expenses and other current liabilities | 74,321 | 10,329 | 84,650 | ||||||||
Deferred revenue | 88,337 | 39,868 | 128,205 | ||||||||
Deferred revenue, net of current portion | 264,555 | (53,062 | ) | 211,493 | |||||||
Accumulated deficit | (1,358,571 | ) | (282,572 | ) | (1,641,143 | ) |
Condensed Consolidated Balance Sheets (unaudited) | |||||||||||
June 30, 2018 | |||||||||||
As Reported | Balances Without Adoption of Topic 606 | Effect of Change Higher/(Lower) | |||||||||
Assets | |||||||||||
Capitalized contract costs, net | $ | 1,090,249 | $ | — | $ | 1,090,249 | |||||
Subscriber acquisition costs, net | — | 1,440,736 | (1,440,736 | ) | |||||||
Liabilities and Stockholders' Deficit | |||||||||||
Accrued expenses and other current liabilities | 104,976 | 93,668 | 11,308 | ||||||||
Deferred revenue | 152,948 | 114,922 | 38,026 | ||||||||
Deferred revenue, net of current portion | 300,045 | 371,791 | (71,746 | ) | |||||||
Accumulated deficit | (1,870,925 | ) | (1,541,807 | ) | (329,118 | ) | |||||
Accumulated other comprehensive loss | (27,697 | ) | (28,740 | ) | 1,043 |
Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) | |||||||||||||||||||||||
Three months ended June 30, 2018 | Six months ended June 30, 2018 | ||||||||||||||||||||||
As Reported | Balances Without Adoption of Topic 606 | Effect of Change Higher/(Lower) | As Reported | Balances Without Adoption of Topic 606 | Effect of Change Higher/(Lower) | ||||||||||||||||||
Revenues: | |||||||||||||||||||||||
Recurring and other revenue | $ | 254,967 | $ | 232,780 | $ | 22,187 | $ | 501,564 | $ | 460,074 | $ | 41,490 | |||||||||||
Service and other sales revenue | — | 8,763 | (8,763 | ) | — | 16,798 | (16,798 | ) | |||||||||||||||
Activation fees | — | 2,510 | (2,510 | ) | — | 5,141 | (5,141 | ) | |||||||||||||||
Costs and expenses: | |||||||||||||||||||||||
Operating expenses | 89,321 | 95,027 | (5,706 | ) | 173,081 | 183,015 | (9,934 | ) | |||||||||||||||
Depreciation and amortization | 126,873 | 90,321 | 36,552 | 251,131 | 177,810 | 73,321 | |||||||||||||||||
Loss before income taxes | (145,291 | ) | (125,359 | ) | (19,932 | ) | (230,441 | ) | (186,605 | ) | (43,836 | ) | |||||||||||
Net loss | (144,385 | ) | (124,453 | ) | (19,932 | ) | (229,102 | ) | (185,266 | ) | (43,836 | ) | |||||||||||
Other comprehensive loss, net of tax effects: | |||||||||||||||||||||||
Foreign currency translation adjustment | (417 | ) | (1,460 | ) | 1,043 | (1,076 | ) | (2,119 | ) | 1,043 | |||||||||||||
Total other comprehensive (loss) income | (417 | ) | (1,460 | ) | 1,043 | (1,076 | ) | (2,119 | ) | 1,043 | |||||||||||||
Comprehensive loss | (144,802 | ) | (125,913 | ) | (18,889 | ) | (230,178 | ) | (187,385 | ) | (42,793 | ) |
Condensed Consolidated Statements of Cashflows (unaudited) | |||||||||||
Six Months Ended June 30, 2018 | |||||||||||
As Reported | Balances Without Adoption of Topic 606 | Effect of Change Higher/(Lower) | |||||||||
Cash flows from operating activities: | |||||||||||
Net loss | $ | (229,102 | ) | $ | (185,266 | ) | $ | (43,836 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
Amortization of capitalized contract costs | 193,302 | — | 193,302 | ||||||||
Amortization of subscriber acquisition costs | — | 119,981 | (119,981 | ) | |||||||
Changes in operating assets and liabilities: | |||||||||||
Capitalized contract costs – deferred contract costs | (266,251 | ) | — | (266,251 | ) | ||||||
Subscriber acquisition costs – deferred contract costs | — | (256,317 | ) | 256,317 | |||||||
Deferred revenue | 114,345 | 133,896 | (19,551 | ) | |||||||
Net cash used in operating activities | (130,989 | ) | (130,989 | ) | — |
Other expense and loss on extinguishment | Deferred financing costs | ||||||||||||||||||||||||||
Issuance | Original discount extinguished | Original deferred financing costs extinguished | New financing costs | Total other expense and loss on extinguishment | Original deferred financing rolled over | New deferred financing costs | Total deferred financing costs | ||||||||||||||||||||
Six months ended June 30, 2017 | |||||||||||||||||||||||||||
February 2017 issuance | $ | — | $ | 3,259 | $ | 9,491 | $ | 12,750 | $ | 1,476 | $ | 6,076 | $ | 7,552 |
Unamortized Deferred Financing Costs | |||||||||||||||||||||||
Balance December 31, 2017 | Additions | Refinances | Early Extinguishment | Amortized | Balance June 30, 2018 | ||||||||||||||||||
Revolving Credit Facility | $ | 3,099 | $ | — | $ | — | $ | — | $ | (521 | ) | $ | 2,578 | ||||||||||
2019 Notes | 2,877 | — | — | — | (751 | ) | 2,126 | ||||||||||||||||
2020 Notes | 11,209 | — | — | — | (1,922 | ) | 9,287 | ||||||||||||||||
2022 Private Placement Notes | 752 | — | — | — | (75 | ) | 677 | ||||||||||||||||
2022 Notes | 16,067 | — | — | — | (1,634 | ) | 14,433 | ||||||||||||||||
2023 Notes | 4,762 | — | — | — | (420 | ) | 4,342 | ||||||||||||||||
Total Deferred Financing Costs | $ | 38,766 | $ | — | $ | — | $ | — | $ | (5,323 | ) | $ | 33,443 |
Unamortized Deferred Financing Costs | |||||||||||||||||||||||
Balance December 31, 2016 | Additions | Refinances | Early Extinguishment | Amortized | Balance December 31, 2017 | ||||||||||||||||||
Revolving Credit Facility | $ | 4,420 | $ | 399 | $ | — | $ | — | $ | (1,720 | ) | $ | 3,099 | ||||||||||
2019 Notes | 11,693 | — | (1,949 | ) | (4,667 | ) | (2,200 | ) | 2,877 | ||||||||||||||
2020 Notes | 15,053 | — | — | — | (3,844 | ) | 11,209 | ||||||||||||||||
2022 Private Placement Notes | 903 | — | — | — | (151 | ) | 752 | ||||||||||||||||
2022 Notes | 11,714 | 6,076 | 1,476 | — | (3,199 | ) | 16,067 | ||||||||||||||||
2023 Notes | — | 4,569 | 473 | — | (280 | ) | 4,762 | ||||||||||||||||
Total Deferred Financing Costs | $ | 43,783 | $ | 11,044 | $ | — | $ | (4,667 | ) | $ | (11,394 | ) | $ | 38,766 |
June 30, 2018 | |||||||||||||||
Outstanding Principal | Unamortized Premium (Discount) | Unamortized Deferred Financing Costs (1) | Net Carrying Amount | ||||||||||||
Series D Revolving Credit Facility Due 2019 | $ | 8,108 | $ | — | $ | — | $ | 8,108 | |||||||
Series A, B Revolving Credit Facilities Due 2021 | 151,892 | — | — | 151,892 | |||||||||||
6.375% Senior Secured Notes due 2019 | 269,465 | — | (2,126 | ) | 267,339 | ||||||||||
8.75% Senior Notes due 2020 | 930,000 | 3,774 | (9,287 | ) | 924,487 | ||||||||||
8.875% Senior Secured Notes Due 2022 | 270,000 | (2,346 | ) | (677 | ) | 266,977 | |||||||||
7.875% Senior Secured Notes Due 2022 | 900,000 | 22,419 | (14,433 | ) | 907,986 | ||||||||||
7.625% Senior Notes Due 2023 | 400,000 | — | (4,342 | ) | 395,658 | ||||||||||
Total Long-Term Debt | $ | 2,929,465 | $ | 23,847 | $ | (30,865 | ) | $ | 2,922,447 |
December 31, 2017 | |||||||||||||||
Outstanding Principal | Unamortized Premium (Discount) | Unamortized Deferred Financing Costs (1) | Net Carrying Amount | ||||||||||||
Series D Revolving Credit Facility Due 2019 | $ | 3,000 | $ | — | $ | — | $ | 3,000 | |||||||
Series A, B Revolving Credit Facilities Due 2021 | 57,000 | — | — | 57,000 | |||||||||||
6.375% Senior Secured Notes due 2019 | 269,465 | — | (2,877 | ) | 266,588 | ||||||||||
8.75% Senior Notes due 2020 | 930,000 | 4,465 | (11,209 | ) | 923,256 | ||||||||||
8.875% Senior Secured Notes due 2022 | 270,000 | (2,559 | ) | (752 | ) | 266,689 | |||||||||
7.875% Senior Secured Notes due 2022 | 900,000 | 24,593 | (16,067 | ) | 908,526 | ||||||||||
7.625% Senior Secured Notes Due 2023 | 400,000 | — | (4,762 | ) | 395,238 | ||||||||||
Total Long-Term Debt | $ | 2,829,465 | $ | 26,499 | $ | (35,667 | ) | $ | 2,820,297 |
(1) | Unamortized deferred financing costs related to the revolving credit facilities included in deferred financing costs, net on the condensed consolidated balance sheets at June 30, 2018 and December 31, 2017 was $2.6 million and $3.1 million, respectively. |
June 30, 2018 | December 31, 2017 | ||||||
RIC receivables, gross | $ | 164,236 | $ | 131,024 | |||
Deferred interest | (38,471 | ) | (36,048 | ) | |||
RIC receivables, net of deferred interest | $ | 125,765 | $ | 94,976 | |||
Classified on the condensed consolidated unaudited balance sheets as: | |||||||
Accounts and notes receivable, net | $ | 24,882 | $ | 16,469 | |||
Long-term notes receivables and other assets, net | 100,883 | 78,507 | |||||
RIC receivables, net | $ | 125,765 | $ | 94,976 |
Six months ended June 30, 2018 | Twelve months ended December 31, 2017 | ||||||
Deferred interest, beginning of period | $ | 36,048 | $ | — | |||
Write-offs, net of recoveries | (12,464 | ) | (6,055 | ) | |||
Change in deferred interest on short-term and long-term RIC receivables | 14,887 | 42,103 | |||||
Deferred interest, end of period | $ | 38,471 | $ | 36,048 |
June 30, 2018 | December 31, 2017 | ||||||
Prepaid expenses and other current assets | |||||||
Prepaid expenses | $ | 13,431 | $ | 8,000 | |||
Deposits | 2,419 | 1,596 | |||||
Other | 2,044 | 6,554 | |||||
Total prepaid expenses and other current assets | $ | 17,894 | $ | 16,150 | |||
Capitalized contract costs | |||||||
Capitalized contract costs | $ | 2,134,715 | $ | — | |||
Accumulated amortization | (1,044,466 | ) | — | ||||
Capitalized contract costs, net | $ | 1,090,249 | $ | — | |||
Subscriber acquisition costs | |||||||
Subscriber acquisition costs | $ | — | $ | 1,837,388 | |||
Accumulated amortization | — | (528,830 | ) | ||||
Subscriber acquisition costs, net | $ | — | $ | 1,308,558 | |||
Long-term notes receivables and other assets | |||||||
RIC receivables, gross | $ | 139,354 | $ | 114,556 | |||
RIC deferred interest | (38,471 | ) | (36,049 | ) | |||
Security deposits | 6,595 | 6,427 | |||||
Investments | 4,156 | 3,429 | |||||
Other | 331 | 360 | |||||
Total long-term notes receivables and other assets, net | $ | 111,965 | $ | 88,723 | |||
Accrued payroll and commissions | |||||||
Accrued commissions | $ | 50,255 | $ | 27,485 | |||
Accrued payroll | 23,368 | 30,267 | |||||
Total accrued payroll and commissions | $ | 73,623 | $ | 57,752 | |||
Accrued expenses and other current liabilities | |||||||
Accrued interest payable | $ | 28,534 | $ | 28,737 | |||
Current portion of derivative liability | 43,794 | 25,473 | |||||
Service warranty accrual | 8,958 | — | |||||
Accrued taxes | 5,479 | 4,585 | |||||
Spectrum license obligation | — | 3,861 | |||||
Accrued payroll taxes and withholdings | 3,735 | 3,185 | |||||
Loss contingencies | 3,156 | 2,156 | |||||
Blackstone monitoring fee, a related party | 2,900 | 933 | |||||
Other | 8,420 | 5,391 | |||||
Total accrued expenses and other current liabilities | $ | 104,976 | $ | 74,321 |
June 30, 2018 | December 31, 2017 | Estimated Useful Lives | |||||||
Vehicles | $ | 45,746 | $ | 42,008 | 3 - 5 years | ||||
Computer equipment and software | 50,201 | 46,651 | 3 - 5 years | ||||||
Leasehold improvements | 24,556 | 20,783 | 2 - 15 years | ||||||
Office furniture, fixtures and equipment | 18,883 | 17,202 | 7 years | ||||||
Build-to-suit lease building | 8,268 | 8,268 | 10.5 years | ||||||
Construction in process | 4,457 | 4,299 | |||||||
Property, plant and equipment, gross | 152,111 | 139,211 | |||||||
Accumulated depreciation and amortization | (70,861 | ) | (61,130 | ) | |||||
Property, plant and equipment, net | $ | 81,250 | $ | 78,081 |
June 30, 2018 | December 31, 2017 | ||||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Estimated Useful Lives | |||||||||||||||||||
Definite-lived intangible assets: | |||||||||||||||||||||||||
Customer contracts | $ | 966,848 | $ | (677,652 | ) | $ | 289,196 | $ | 970,147 | $ | (637,780 | ) | $ | 332,367 | 10 years | ||||||||||
2GIG 2.0 technology | 17,000 | (14,283 | ) | 2,717 | 17,000 | (13,274 | ) | 3,726 | 8 years | ||||||||||||||||
Other technology | 2,917 | (1,458 | ) | 1,459 | 2,917 | (1,250 | ) | 1,667 | 5 - 7 years | ||||||||||||||||
Space Monkey technology | 7,100 | (4,911 | ) | 2,189 | 7,100 | (4,066 | ) | 3,034 | 6 years | ||||||||||||||||
Patents | 11,470 | (7,093 | ) | 4,377 | 10,616 | (5,835 | ) | 4,781 | 5 years | ||||||||||||||||
Total definite-lived intangible assets: | $ | 1,005,335 | $ | (705,397 | ) | $ | 299,938 | $ | 1,007,780 | $ | (662,205 | ) | $ | 345,575 | |||||||||||
Indefinite-lived intangible assets: | |||||||||||||||||||||||||
Spectrum licenses | $ | — | $ | — | $ | — | $ | 31,253 | $ | — | $ | 31,253 | |||||||||||||
IP addresses | 564 | — | 564 | 564 | — | 564 | |||||||||||||||||||
Domain names | 59 | — | 59 | 59 | — | 59 | |||||||||||||||||||
Total Indefinite-lived intangible assets | 623 | — | 623 | 31,876 | — | 31,876 | |||||||||||||||||||
Total intangible assets, net | $ | 1,005,958 | $ | (705,397 | ) | $ | 300,561 | $ | 1,039,656 | $ | (662,205 | ) | $ | 377,451 |
2018 - Remaining Period | $ | 45,503 | |
2019 | 78,993 | ||
2020 | 67,808 | ||
2021 | 58,608 | ||
2022 | 48,734 | ||
Thereafter | 40 | ||
Total estimated amortization expense | $ | 299,686 |
June 30, 2018 | |||||||||||||||||||||||
Adjusted Cost | Unrealized Gains | Unrealized Losses | Fair Value | Cash and Cash Equivalents | Long-Term Notes Receivables and Other Assets, net | ||||||||||||||||||
Cash | $ | 4,514 | $ | — | $ | — | $ | 4,514 | $ | 4,514 | $ | — | |||||||||||
Level 1: | |||||||||||||||||||||||
Money market funds | 6 | — | — | 6 | 6 | — | |||||||||||||||||
Corporate securities | 2,703 | 741 | — | 3,444 | — | 3,444 | |||||||||||||||||
Subtotal | 2,709 | 741 | — | 3,450 | 6 | 3,444 | |||||||||||||||||
Total | $ | 7,223 | $ | 741 | $ | — | $ | 7,964 | $ | 4,520 | $ | 3,444 |
December 31, 2017 | |||||||||||||||||||||||
Adjusted Cost | Unrealized Gains | Unrealized Losses | Fair Value | Cash and Cash Equivalents | Long-Term Notes Receivables and Other Assets, net | ||||||||||||||||||
Cash | $ | 3,866 | $ | — | $ | — | $ | 3,866 | $ | 3,866 | $ | — | |||||||||||
Level 1: | |||||||||||||||||||||||
Money market funds | 6 | — | — | 6 | 6 | — | |||||||||||||||||
Corporate securities | 4,018 | — | (1,315 | ) | 2,703 | — | 2,703 | ||||||||||||||||
Subtotal | 4,024 | — | (1,315 | ) | 2,709 | 6 | 2,703 | ||||||||||||||||
Total | $ | 7,890 | $ | — | $ | (1,315 | ) | $ | 6,575 | $ | 3,872 | $ | 2,703 |
June 30, 2018 | December 31, 2017 | Stated Interest Rate | |||||||||||||||||
Issuance | Face Value | Estimated Fair Value | Face Value | Estimated Fair Value | |||||||||||||||
2019 Notes | $ | 269,465 | $ | 271,136 | $ | 269,465 | $ | 273,507 | 6.375 | % | |||||||||
2020 Notes | 930,000 | 892,149 | 930,000 | 952,134 | 8.75 | % | |||||||||||||
2022 Private Placement Notes | 270,000 | 274,666 | 270,000 | 276,486 | 8.875 | % | |||||||||||||
2022 Notes | 900,000 | 895,320 | 900,000 | 966,420 | 7.875 | % | |||||||||||||
2023 Notes | 400,000 | 355,000 | 400,000 | 425,000 | 7.625 | % | |||||||||||||
Total | $ | 2,769,465 | $ | 2,688,271 | $ | 2,769,465 | $ | 2,893,547 |
June 30, 2018 | December 31, 2017 | ||||||
Consumer Financing Program Contractual Obligations: | |||||||
Fair value | $ | 83,294 | $ | 46,496 | |||
Notional amount | 282,337 | 163,032 | |||||
Classified on the condensed consolidated unaudited balance sheets as: | |||||||
Accrued expenses and other current liabilities | 43,794 | 25,473 | |||||
Other long-term obligations | 39,500 | 21,023 | |||||
Total Consumer Financing Program Contractual Obligation | $ | 83,294 | $ | 46,496 |
Six months ended June 30, 2018 | Twelve months ended December 31, 2017 | ||||||
Balance, beginning of period | $ | 46,496 | $ | — | |||
Additions | 43,534 | 44,913 | |||||
Settlements | (13,632 | ) | (7,972 | ) | |||
Losses included in earnings | 6,896 | 9,555 | |||||
Balance, end of period | $ | 83,294 | $ | 46,496 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Operating expenses | $ | 26 | $ | 21 | $ | 44 | $ | 40 | |||||||
Selling expenses | 81 | 56 | 126 | 110 | |||||||||||
General and administrative expenses | 231 | 384 | 372 | 736 | |||||||||||
Total stock-based compensation | $ | 338 | $ | 461 | $ | 542 | $ | 886 |
Rent Expense | ||||||||||||||||
For the three months ended, | For the six months ended, | |||||||||||||||
June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | Lease Term | ||||||||||||
Arrangement | ||||||||||||||||
Warehouse, office space and other | $ | 3,380 | $ | 2,950 | $ | 6,679 | $ | 5,885 | 11 - 15 years | |||||||
Wireless towers and spectrum | 1,044 | 1,161 | 2,088 | 2,344 | 1 - 10 years | |||||||||||
Total Rent Expense | $ | 4,424 | $ | 4,111 | $ | 8,767 | $ | 8,229 |
• | A Master Intercompany Framework Agreement which establishes a framework for the ongoing relationship between the Company and Solar and contains master terms regarding the protection of each other’s confidential information, and master procedural terms, such as notice procedures, restrictions on assignment, interpretive provisions, governing law and dispute resolution; |
• | A Non-Competition Agreement in which the Company and Solar each define their current areas of business and their competitors, and agree not to directly or indirectly engage in the other’s business for three years; |
• | A Transition Services Agreement pursuant to which the Company will provide to Solar various enterprise services, including services relating to information technology and infrastructure, human resources and employee benefits, administration services and facilities-related services; |
• | A Marketing and Customer Relations Agreement which governs various cross-marketing initiatives between the Company and Solar, in particularly the provision of sales leads from each company to the other; and |
• | A Trademark License Agreement pursuant to which the licensor, a special purpose subsidiary majority-owned by the Company and minority-owned by Solar, will grant Solar a royalty-free exclusive license to the trademark “VIVINT SOLAR” in the field of selling renewable energy or energy storage products and services. |
Contract termination costs | Employee severance and termination benefits | Total | |||||||||
Accrued restructuring balance as of December 31, 2016 | $ | 649 | $ | — | $ | 649 | |||||
Cash payments | (91 | ) | — | (91 | ) | ||||||
Accrued restructuring balance as of December 31, 2017 | 558 | — | 558 | ||||||||
Restructuring charges | — | 4,141 | 4,141 | ||||||||
Cash payments | (23 | ) | (2,519 | ) | (2,542 | ) | |||||
Accrued restructuring balance as of June 30, 2018 | $ | 535 | $ | 1,622 | $ | 2,157 |
United States | Canada | Total | ||||||||||
Revenue from external customers | ||||||||||||
Three months ended June 30, 2018 | $ | 237,513 | $ | 17,454 | $ | 254,967 | ||||||
Three months ended June 30, 2017 | 196,735 | 15,391 | 212,126 | |||||||||
Six months ended June 30, 2018 | 466,055 | 35,509 | 501,564 | |||||||||
Six months ended June 30, 2017 | 386,765 | 30,714 | 417,479 |
Parent | APX Group, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Assets | |||||||||||||||||||||||
Current assets | $ | — | $ | 3,932 | $ | 307,297 | $ | 77,986 | $ | (212,754 | ) | $ | 176,461 | ||||||||||
Property, plant and equipment, net | — | — | 80,663 | 587 | — | 81,250 | |||||||||||||||||
Capitalized contract costs, net | — | — | 1,019,583 | 70,666 | — | 1,090,249 | |||||||||||||||||
Deferred financing costs, net | — | 2,578 | — | — | — | 2,578 | |||||||||||||||||
Investment in subsidiaries | — | 1,776,589 | — | — | (1,776,589 | ) | — | ||||||||||||||||
Intercompany receivable | — | — | 6,303 | — | (6,303 | ) | — | ||||||||||||||||
Intangible assets, net | — | — | 278,200 | 22,361 | — | 300,561 | |||||||||||||||||
Goodwill | — | — | 809,677 | 26,139 | — | 835,816 | |||||||||||||||||
Long-term notes receivables and other assets | — | 106 | 97,568 | 14,397 | (106 | ) | 111,965 | ||||||||||||||||
Total Assets | $ | — | $ | 1,783,205 | $ | 2,599,291 | $ | 212,136 | $ | (1,995,752 | ) | $ | 2,598,880 | ||||||||||
Liabilities and Stockholders’ (Deficit) Equity | |||||||||||||||||||||||
Current liabilities | $ | — | $ | 28,541 | $ | 471,677 | $ | 158,972 | $ | (212,754 | ) | $ | 446,436 | ||||||||||
Intercompany payable | — | — | — | 6,303 | (6,303 | ) | — | ||||||||||||||||
Notes payable and revolving credit facility, net of current portion | — | 2,922,447 | — | — | — | 2,922,447 | |||||||||||||||||
Capital lease obligations, net of current portion | — | — | 8,941 | 115 | — | 9,056 | |||||||||||||||||
Deferred revenue, net of current portion | — | — | 283,715 | 16,330 | — | 300,045 | |||||||||||||||||
Other long-term obligations | — | — | 80,020 | — | — | 80,020 | |||||||||||||||||
Accumulated losses of investee, net | 1,167,783 | (1,167,783 | ) | — | |||||||||||||||||||
Deferred income tax liability | — | — | 106 | 8,659 | (106 | ) | 8,659 | ||||||||||||||||
Total (deficit) equity | (1,167,783 | ) | (1,167,783 | ) | 1,754,832 | 21,757 | (608,806 | ) | (1,167,783 | ) | |||||||||||||
Total liabilities and stockholders’ (deficit) equity | $ | — | $ | 1,783,205 | $ | 2,599,291 | $ | 212,136 | $ | (1,995,752 | ) | $ | 2,598,880 |
Parent | APX Group, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Assets | |||||||||||||||||||||||
Current assets | $ | — | $ | 4,150 | $ | 284,293 | $ | 49,935 | $ | (162,413 | ) | $ | 175,965 | ||||||||||
Property, plant and equipment, net | — | — | 77,345 | 736 | — | 78,081 | |||||||||||||||||
Subscriber acquisition costs, net | — | — | 1,214,678 | 93,880 | — | 1,308,558 | |||||||||||||||||
Deferred financing costs, net | — | 3,099 | — | — | — | 3,099 | |||||||||||||||||
Investment in subsidiaries | — | 2,188,221 | — | — | (2,188,221 | ) | — | ||||||||||||||||
Intercompany receivable | — | — | 6,303 | — | (6,303 | ) | — | ||||||||||||||||
Intangible assets, net | — | — | 350,710 | 26,741 | — | 377,451 | |||||||||||||||||
Goodwill | — | — | 809,678 | 27,292 | — | 836,970 | |||||||||||||||||
Long-term notes receivables and other assets | — | 106 | 78,173 | 10,550 | (106 | ) | 88,723 | ||||||||||||||||
Total Assets | $ | — | $ | 2,195,576 | $ | 2,821,180 | $ | 209,134 | $ | (2,357,043 | ) | $ | 2,868,847 | ||||||||||
Liabilities and Stockholders’ (Deficit) Equity | |||||||||||||||||||||||
Current liabilities | $ | — | $ | 28,805 | $ | 343,398 | $ | 128,581 | $ | (162,413 | ) | $ | 338,371 | ||||||||||
Intercompany payable | — | — | — | 6,303 | (6,303 | ) | — | ||||||||||||||||
Notes payable and revolving credit facility, net of current portion | — | 2,820,297 | — | — | — | 2,820,297 | |||||||||||||||||
Capital lease obligations, net of current portion | — | — | 10,791 | 298 | — | 11,089 | |||||||||||||||||
Deferred revenue, net of current portion | — | — | 248,643 | 15,912 | — | 264,555 | |||||||||||||||||
Accumulated Losses of Investee, net | 653,526 | (653,526 | ) | — | |||||||||||||||||||
Other long-term obligations | — | — | 79,020 | — | — | 79,020 | |||||||||||||||||
Deferred income tax liability | — | — | 106 | 9,041 | (106 | ) | 9,041 | ||||||||||||||||
Total (deficit) equity | (653,526 | ) | (653,526 | ) | 2,139,222 | 48,999 | (1,534,695 | ) | (653,526 | ) | |||||||||||||
Total liabilities and stockholders’ (deficit) equity | $ | — | $ | 2,195,576 | $ | 2,821,180 | $ | 209,134 | $ | (2,357,043 | ) | $ | 2,868,847 |
Parent | APX Group, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Revenues | $ | — | $ | — | $ | 244,000 | $ | 11,613 | $ | (646 | ) | $ | 254,967 | ||||||||||
Costs and expenses | — | — | 321,835 | 14,011 | (646 | ) | 335,200 | ||||||||||||||||
Loss from operations | — | — | (77,835 | ) | (2,398 | ) | — | (80,233 | ) | ||||||||||||||
Loss from subsidiaries | (144,385 | ) | (84,923 | ) | — | — | 229,308 | — | |||||||||||||||
Other expense, net | — | 59,462 | 4,006 | 1,590 | — | 65,058 | |||||||||||||||||
Loss before income tax expenses | (144,385 | ) | (144,385 | ) | (81,841 | ) | (3,988 | ) | 229,308 | (145,291 | ) | ||||||||||||
Income tax benefit | — | — | (70 | ) | (836 | ) | — | (906 | ) | ||||||||||||||
Net loss | (144,385 | ) | (144,385 | ) | (81,771 | ) | (3,152 | ) | 229,308 | (144,385 | ) | ||||||||||||
Other comprehensive loss, net of tax effects: | |||||||||||||||||||||||
Net loss | (144,385 | ) | (144,385 | ) | (81,771 | ) | (3,152 | ) | 229,308 | (144,385 | ) | ||||||||||||
Foreign currency translation adjustment | (417 | ) | (417 | ) | — | (417 | ) | 834 | (417 | ) | |||||||||||||
Total other comprehensive loss | (417 | ) | (417 | ) | — | (417 | ) | 834 | (417 | ) | |||||||||||||
Comprehensive loss | $ | (144,802 | ) | $ | (144,802 | ) | $ | (81,771 | ) | $ | (3,569 | ) | $ | 230,142 | $ | (144,802 | ) |
Parent | APX Group, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Revenues | $ | — | $ | — | $ | 201,547 | $ | 11,255 | $ | (676 | ) | $ | 212,126 | ||||||||||
Costs and expenses | — | — | 232,927 | 10,338 | (676 | ) | 242,589 | ||||||||||||||||
(Loss) income from operations | — | — | (31,380 | ) | 917 | — | (30,463 | ) | |||||||||||||||
Loss from subsidiaries | (84,237 | ) | (30,287 | ) | — | — | 114,524 | — | |||||||||||||||
Other expense (income), net | — | 53,950 | 803 | (1,711 | ) | — | 53,042 | ||||||||||||||||
(Loss) income before income tax expenses | (84,237 | ) | (84,237 | ) | (32,183 | ) | 2,628 | 114,524 | (83,505 | ) | |||||||||||||
Income tax expense | — | — | 93 | 639 | — | 732 | |||||||||||||||||
Net (loss) income | (84,237 | ) | (84,237 | ) | (32,276 | ) | 1,989 | 114,524 | (84,237 | ) | |||||||||||||
Other comprehensive loss, net of tax effects: | — | ||||||||||||||||||||||
Net (loss) income | (84,237 | ) | (84,237 | ) | (32,276 | ) | 1,989 | 114,524 | (84,237 | ) | |||||||||||||
Foreign currency translation adjustment | — | 1,164 | — | 1,165 | (1,165 | ) | 1,164 | ||||||||||||||||
Unrealized gain on marketable securities | — | (401 | ) | (401 | ) | — | 401 | (401 | ) | ||||||||||||||
Total other comprehensive income | — | 763 | (401 | ) | 1,165 | (764 | ) | 763 | |||||||||||||||
Comprehensive (loss) income | $ | (84,237 | ) | $ | (83,474 | ) | $ | (32,677 | ) | $ | 3,154 | $ | 113,760 | $ | (83,474 | ) |
Parent | APX Group, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Revenues | $ | — | $ | — | $ | 477,788 | $ | 25,078 | $ | (1,302 | ) | $ | 501,564 | ||||||||||
Costs and expenses | — | — | 627,056 | 27,674 | (1,302 | ) | 653,428 | ||||||||||||||||
Loss from operations | — | — | (149,268 | ) | (2,596 | ) | — | (151,864 | ) | ||||||||||||||
Loss from subsidiaries | (229,102 | ) | (111,243 | ) | — | — | 340,345 | — | |||||||||||||||
Other expense (income), net | — | 117,859 | (42,964 | ) | 3,682 | — | 78,577 | ||||||||||||||||
Loss before income tax expenses | (229,102 | ) | (229,102 | ) | (106,304 | ) | (6,278 | ) | 340,345 | (230,441 | ) | ||||||||||||
Income tax expense (benefit) | — | — | 102 | (1,441 | ) | — | (1,339 | ) | |||||||||||||||
Net loss | (229,102 | ) | (229,102 | ) | (106,406 | ) | (4,837 | ) | 340,345 | (229,102 | ) | ||||||||||||
Other comprehensive loss, net of tax effects: | — | — | — | — | — | — | |||||||||||||||||
Net income | (229,102 | ) | (229,102 | ) | (106,406 | ) | (4,837 | ) | 340,345 | (229,102 | ) | ||||||||||||
Foreign currency translation adjustment | (1,076 | ) | (1,076 | ) | — | (1,076 | ) | 2,152 | (1,076 | ) | |||||||||||||
Total other comprehensive income | (1,076 | ) | (1,076 | ) | — | (1,076 | ) | 2,152 | (1,076 | ) | |||||||||||||
Comprehensive loss | $ | (230,178 | ) | $ | (230,178 | ) | $ | (106,406 | ) | $ | (5,913 | ) | $ | 342,497 | $ | (230,178 | ) |
Parent | APX Group, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Revenues | $ | — | $ | — | $ | 395,515 | $ | 23,315 | $ | (1,351 | ) | $ | 417,479 | ||||||||||
Costs and expenses | — | — | 445,668 | 20,152 | (1,351 | ) | 464,469 | ||||||||||||||||
(Loss) income from operations | — | — | (50,153 | ) | 3,163 | — | (46,990 | ) | |||||||||||||||
Loss from subsidiaries | (166,873 | ) | (47,496 | ) | — | — | 214,369 | — | |||||||||||||||
Other expense (income), net | — | 119,377 | 1,741 | (2,386 | ) | — | 118,732 | ||||||||||||||||
(Loss) income before income tax expenses | (166,873 | ) | (166,873 | ) | (51,894 | ) | 5,549 | 214,369 | (165,722 | ) | |||||||||||||
Income tax (benefit) expense | — | — | (269 | ) | 1,420 | — | 1,151 | ||||||||||||||||
Net (loss) income | (166,873 | ) | (166,873 | ) | (51,625 | ) | 4,129 | 214,369 | (166,873 | ) | |||||||||||||
Other comprehensive loss, net of tax effects: | |||||||||||||||||||||||
Net (loss) income | (166,873 | ) | (166,873 | ) | (51,625 | ) | 4,129 | 214,369 | (166,873 | ) | |||||||||||||
Foreign currency translation adjustment | — | 1,576 | — | 1,576 | (1,576 | ) | 1,576 | ||||||||||||||||
Unrealized gain on marketable securities | — | (258 | ) | (258 | ) | — | 258 | (258 | ) | ||||||||||||||
Total other comprehensive income | — | 1,318 | (258 | ) | 1,576 | (1,318 | ) | 1,318 | |||||||||||||||
Comprehensive (loss) income | $ | (166,873 | ) | $ | (165,555 | ) | $ | (51,883 | ) | $ | 5,705 | $ | 213,051 | $ | (165,555 | ) |
Parent | APX Group, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||||||
Net cash used in operating activities | $ | — | $ | — | $ | (130,919 | ) | $ | (70 | ) | $ | — | $ | (130,989 | ) | ||||||||
Cash flows from investing activities: | |||||||||||||||||||||||
Capital expenditures | — | — | (12,193 | ) | — | — | (12,193 | ) | |||||||||||||||
Proceeds from sale of intangibles | — | — | 53,693 | — | — | 53,693 | |||||||||||||||||
Proceeds from sale of capital assets | — | — | 225 | — | — | 225 | |||||||||||||||||
Investment in subsidiary | 2,049 | (98,251 | ) | — | — | 96,202 | — | ||||||||||||||||
Acquisition of intangible assets | — | — | (1,022 | ) | — | — | (1,022 | ) | |||||||||||||||
Net cash provided by (used in) investing activities | 2,049 | (98,251 | ) | 40,703 | — | 96,202 | 40,703 | ||||||||||||||||
Cash flows from financing activities: | |||||||||||||||||||||||
Borrowings from revolving credit facility | — | 179,000 | — | — | — | 179,000 | |||||||||||||||||
Repayments on revolving credit facility | — | (79,000 | ) | — | — | — | (79,000 | ) | |||||||||||||||
Proceeds from capital contribution | — | — | 100,300 | — | (100,300 | ) | — | ||||||||||||||||
Repayments of capital lease obligations | — | — | (6,768 | ) | (187 | ) | — | (6,955 | ) | ||||||||||||||
Return of capital | (2,049 | ) | (2,049 | ) | (2,049 | ) | — | 4,098 | (2,049 | ) | |||||||||||||
Net cash (used in) provided by financing activities | (2,049 | ) | 97,951 | 91,483 | (187 | ) | (96,202 | ) | 90,996 | ||||||||||||||
Effect of exchange rate changes on cash | — | — | — | (62 | ) | — | (62 | ) | |||||||||||||||
Net (decrease) increase in cash and cash equivalents | — | (300 | ) | 1,267 | (319 | ) | — | 648 | |||||||||||||||
Cash and cash equivalents: | |||||||||||||||||||||||
Beginning of period | — | 3,661 | (572 | ) | 783 | — | 3,872 | ||||||||||||||||
End of period | $ | — | $ | 3,361 | $ | 695 | $ | 464 | $ | — | $ | 4,520 |
Parent | APX Group, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||||||
Net cash (used in) provided by operating activities | $ | — | $ | — | $ | (136,796 | ) | $ | 3,535 | $ | — | $ | (133,261 | ) | |||||||||
Cash flows from investing activities: | |||||||||||||||||||||||
Capital expenditures | — | — | (11,435 | ) | — | — | (11,435 | ) | |||||||||||||||
Investment in subsidiary | — | (129,560 | ) | — | — | 129,560 | — | ||||||||||||||||
Acquisition of intangible assets | — | — | (743 | ) | — | — | (743 | ) | |||||||||||||||
Proceeds from sale of capital assets | — | — | 319 | — | — | 319 | |||||||||||||||||
Acquisition of other assets | — | — | (143 | ) | — | — | (143 | ) | |||||||||||||||
Net cash used in investing activities | — | (129,560 | ) | (12,002 | ) | — | 129,560 | (12,002 | ) | ||||||||||||||
Cash flows from financing activities: | |||||||||||||||||||||||
Proceeds from notes payable | — | 324,750 | — | — | — | 324,750 | |||||||||||||||||
Repayment on notes payable | — | (300,000 | ) | — | — | — | (300,000 | ) | |||||||||||||||
Borrowings from revolving credit facility | — | 113,000 | — | — | — | 113,000 | |||||||||||||||||
Repayments on revolving credit facility | — | (13,000 | ) | — | — | — | (13,000 | ) | |||||||||||||||
Intercompany receivable | — | — | 3,189 | — | (3,189 | ) | — | ||||||||||||||||
Intercompany payable | — | — | 129,560 | (3,189 | ) | (126,371 | ) | — | |||||||||||||||
Repayments of capital lease obligations | — | — | (4,549 | ) | (163 | ) | — | (4,712 | ) | ||||||||||||||
Payments of other long-term obligations | — | — | (1,164 | ) | — | — | (1,164 | ) | |||||||||||||||
Financing costs | — | (9,460 | ) | — | — | — | (9,460 | ) | |||||||||||||||
Deferred financing costs | — | (6,191 | ) | — | — | — | (6,191 | ) | |||||||||||||||
Net cash provided by (used in) financing activities | — | 109,099 | 127,036 | (3,352 | ) | (129,560 | ) | 103,223 | |||||||||||||||
Effect of exchange rate changes on cash | — | — | — | (10 | ) | — | (10 | ) | |||||||||||||||
Net increase (decrease) in cash and cash equivalents | — | (20,461 | ) | (21,762 | ) | 173 | — | (42,050 | ) | ||||||||||||||
Cash and cash equivalents: | |||||||||||||||||||||||
Beginning of period | — | 24,680 | 18,186 | 654 | — | 43,520 | |||||||||||||||||
End of period | $ | — | $ | 4,219 | $ | (3,576 | ) | $ | 827 | $ | — | $ | 1,470 |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | number of subscriber additions, |
• | net subscriber acquisition costs, |
• | AMRU, |
• | the total price paid by new subscribers for our Products under the Vivint Flex Pay plan, |
• | the mix of subscribers purchasing our Products through the Consumer Financing Program versus through RICs, |
• | subscriber attrition, |
• | the costs to monitor and service our subscribers, |
• | the level of general and administrative expenses; and |
• | the availability and cost of capital required to generate new subscribers. |
Twelve months ended June 30, 2018 | Twelve months ended June 30, 2017 | ||||
Beginning balance of subscribers | 1,215,056 | 1,088,909 | |||
New subscribers | 322,097 | 266,206 | |||
Subscriber contracts sold (1) | — | (7,520 | ) | ||
Attrition | (143,518 | ) | (132,539 | ) | |
Ending balance of subscribers | 1,393,635 | 1,215,056 | |||
Monthly average subscribers | 1,295,429 | 1,148,653 | |||
Attrition rate | 11.1 | % | 11.5 | % |
(1) | Represents our New Zealand and Puerto Rico subscriber contracts sold during the three months ended September 30, 2016. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Total revenues | $ | 254,967 | $ | 212,126 | $ | 501,564 | $ | 417,479 | |||||||
Total costs and expenses | 335,200 | 242,589 | 653,428 | 464,469 | |||||||||||
Loss from operations | (80,233 | ) | (30,463 | ) | (151,864 | ) | (46,990 | ) | |||||||
Other expenses | 65,058 | 53,042 | 78,577 | 118,732 | |||||||||||
Loss before taxes | (145,291 | ) | (83,505 | ) | (230,441 | ) | (165,722 | ) | |||||||
Income tax (benefit) expense | (906 | ) | 732 | (1,339 | ) | 1,151 | |||||||||
Net loss | $ | (144,385 | ) | $ | (84,237 | ) | $ | (229,102 | ) | $ | (166,873 | ) |
As of June 30, | |||||||
2018 | 2017 | ||||||
Total Subscribers (in thousands) | 1,393.6 | 1,215.1 | |||||
AMSRU | $ | 52.61 | $ | 56.40 | |||
Net subscriber acquisition costs per new subscriber | $ | 1,375 | $ | 1,815 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||
As Reported | As Adjusted (1) | As Reported | As Adjusted (1) | ||||||||||||||||||||
Total MR (in thousands) | $ | 84,989 | $ | 81,351 | $ | 70,709 | $ | 83,594 | $ | 80,336 | $ | 69,580 | |||||||||||
Total MSR (in thousands) | $ | 73,326 | N/A | $ | 68,524 | $ | 73,326 | N/A | $ | 68,524 | |||||||||||||
AMRU | $ | 62.49 | $ | 59.82 | $ | 59.56 | $ | 62.73 | $ | 60.28 | $ | 59.55 | |||||||||||
Net service cost per subscriber | $ | 16.71 | N/A | $ | 15.45 | $ | 16.87 | N/A | $ | 15.70 | |||||||||||||
Net service margin | 69 | % | N/A | 73 | % | 69 | % | N/A | 73 | % |
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2017 | % Change | |||||||||||||||||||
As Reported | Topic 606 Adjustments | As Adjusted (1) | As Reported | As Adjusted | |||||||||||||||||
Recurring and other revenue | $ | 254,967 | $ | (22,187 | ) | $ | 232,780 | $ | 202,783 | 26 | % | 15 | % | ||||||||
Service and other sales revenue | — | 8,763 | 8,763 | 6,358 | NM | 38 | % | ||||||||||||||
Activation fees | — | 2,510 | 2,510 | 2,985 | NM | (16 | )% | ||||||||||||||
Total revenues | $ | 254,967 | $ | (10,914 | ) | $ | 244,053 | $ | 212,126 | 20 | % | 15 | % |
(1) | As adjusted excludes the impact of adopting Topic 606. See Note 2 "Revenue and Capitalized Contract Costs" in the accompanying notes to the consolidated financial statements for additional information related to the impact of |
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2017 | % Change | |||||||||||||||||||
As Reported | Topic 606 Adjustments | As Adjusted (1) | As Reported | As Adjusted | |||||||||||||||||
Operating expenses | $ | 89,321 | $ | 5,706 | $ | 95,027 | $ | 77,316 | 16 | % | 23 | % | |||||||||
Selling expenses | 65,659 | — | 65,659 | 46,275 | 42 | % | 42 | % | |||||||||||||
General and administrative | 49,206 | — | 49,206 | 38,902 | 26 | % | 27 | % | |||||||||||||
Depreciation and amortization | 126,873 | (36,552 | ) | 90,321 | 80,096 | 58 | % | 13 | % | ||||||||||||
Restructuring expenses | 4,141 | — | 4,141 | — | NM | NM | |||||||||||||||
Total costs and expenses | $ | 335,200 | $ | (30,846 | ) | $ | 304,354 | $ | 242,589 | 38 | % | 25 | % |
(1) | As adjusted excludes the impact of adopting Topic 606. See Note 2 "Revenue and Capitalized Contract Costs" in the accompanying notes to the consolidated financial statements for additional information related to the impact of adopting this standard and a discussion of our updated policies related to revenue recognition and accounting for costs to obtain and fulfill a customer contract. |
Three Months Ended June 30, | ||||||||||
2018 | 2017 | % Change | ||||||||
Interest expense | $ | 60,327 | $ | 54,958 | 10 | % | ||||
Interest income | — | (47 | ) | NM | ||||||
Other (income) loss, net | 4,731 | (1,869 | ) | NM | ||||||
Total other expenses, net | $ | 65,058 | $ | 53,042 | 23 | % |
Three Months Ended June 30, | |||||||||
2018 | 2017 | % Change | |||||||
Income tax (benefit) expense | $ | (906 | ) | $ | 732 | NM |
Six Months Ended June 30, 2018 | Six Months Ended June 30, 2017 | % Change | |||||||||||||||||||
As Reported | Topic 606 Adjustments | As Adjusted (1) | As Reported | As Adjusted | |||||||||||||||||
Recurring and other revenue | $ | 501,564 | $ | (41,490 | ) | $ | 460,074 | $ | 399,641 | 26 | % | 15 | % | ||||||||
Service and other sales revenue | — | 16,798 | 16,798 | 11,749 | NM | 43 | % | ||||||||||||||
Activation fees | — | 5,141 | 5,141 | 6,089 | NM | (16 | )% | ||||||||||||||
Total revenues | $ | 501,564 | $ | (19,551 | ) | $ | 482,013 | $ | 417,479 | 20 | % | 15 | % |
(1) | As adjusted excludes the impact of adopting Topic 606. See Note 2 "Revenue and Capitalized Contract Costs" in the accompanying notes to the consolidated financial statements for additional information related to the impact of adopting this standard and a discussion of our updated policies related to revenue recognition and accounting for costs to obtain and fulfill a customer contract. |
Six Months Ended June 30, 2018 | Six Months Ended June 30, 2017 | % Change | |||||||||||||||||||
As Reported | Topic 606 Adjustments | As Adjusted (1) | As Reported | As Adjusted | |||||||||||||||||
Operating expenses | $ | 173,081 | $ | 9,934 | $ | 183,015 | $ | 148,668 | 16 | % | 23 | % | |||||||||
Selling expenses | 124,902 | — | 124,902 | 81,073 | 54 | % | 54 | % | |||||||||||||
General and administrative | 100,173 | — | 100,173 | 77,763 | 29 | % | 29 | % | |||||||||||||
Depreciation and amortization | 251,131 | (73,321 | ) | 177,810 | 156,965 | 60 | % | 13 | % | ||||||||||||
Restructuring expenses | 4,141 | — | 4,141 | — | NM | NM | |||||||||||||||
Total costs and expenses | $ | 653,428 | $ | (63,387 | ) | $ | 590,041 | $ | 526,654 | 24 | % | 12 | % |
(1) | As adjusted excludes the impact of adopting Topic 606. See Note 2 "Revenue and Capitalized Contract Costs" in the accompanying notes to the consolidated financial statements for additional information related to the impact of adopting this standard and a discussion of our updated policies related to revenue recognition and accounting for costs to obtain and fulfill a customer contract. |
Six Months Ended June 30, | ||||||||||
2018 | 2017 | % Change | ||||||||
Interest expense | $ | 119,117 | $ | 108,639 | 10 | % | ||||
Interest income | (31 | ) | (104 | ) | NM | |||||
Other (income) loss, net | (40,509 | ) | 10,197 | NM | ||||||
Total other expenses, net | $ | 78,577 | $ | 118,732 | (34 | )% |
Six Months Ended June 30, | |||||||||
2018 | 2017 | % Change | |||||||
Income tax (benefit) expense | $ | (1,339 | ) | $ | 1,151 | NM |
Six Months Ended June 30, | ||||||||||
2018 | 2017 | % Change | ||||||||
Net cash used in operating activities | $ | (130,989 | ) | $ | (133,261 | ) | NM | |||
Net cash provided by (used in) investing activities | 40,703 | (12,002 | ) | NM | ||||||
Net cash provided by financing activities | 90,996 | 103,223 | (12 | )% |
• | a $50.2 million gain associated with sale of our spectrum intangible assets, |
• | $254.3 million in non-cash amortization, depreciation, and stock-based compensation, and |
• | a provision for doubtful accounts of $8.4 million. |
• | a $266.3 million increase in capitalized contract costs (formerly subscriber acquisition costs), |
• | a $4.2 million increase in accounts payable due primarily to increased inventory purchases, |
• | a $20.4 million increase in other assets primarily due to increase in notes receivables associated with RICs, |
• | a $21.1 million increase in accounts receivable driven primarily by the recognition of billed RICs under Vivint Flex Pay and the growth in the number of our Total Subscribers, and |
• | a $1.8 million increase in prepaid expenses and other current assets. |
• | a $65.5 million increase in accrued expenses and other liabilities due primarily to increases in the derivative liability associated with the Consumer Financing Program introduced in early 2017, and an increase in accrued commissions during the six months ended June 30, 2018, |
• | a $114.3 million increase in deferred revenue due to the increased subscriber base and the generation of deferred revenues associated with the sale of Products under the Vivint Flex Pay plan, offset by a reduction in deferred revenue of $19.6 million associated with accelerated revenue recognition from the implementation of Topic 606, and |
• | a $11.6 million decrease in inventories partially from decreased Products on hand to support our strategic partnership with Best Buy at the end of 2017. |
• | $161.5 million in non-cash amortization, depreciation, and stock-based compensation, |
• | a $12.8 million loss on early extinguishment of debt |
• | a provision for doubtful accounts of $9.7 million, |
• | a $212.4 million increase in subscriber acquisition costs, |
• | a $72.9 million increase in inventories in advance of our direct-to-home summer selling season, |
• | a $22.6 million increase in accounts receivable, |
• | a $4.6 million increase in prepaid expenses and other current assets, and |
• | a $46.9 million increase in other assets primarily due to increase in notes receivables associated with RICs. |
• | a $59.3 million increase in accounts payable due primarily to increases in inventory purchases, |
• | a $34.0 million increase in accrued expenses and other liabilities due primarily to increases in accrued interest on our long term debt, |
• | an $116.0 million increase in deferred revenue due to the increased subscriber base and the establishment of deferred revenues associated with RICs. |
• | incur or guarantee additional debt or issue disqualified stock or preferred stock; |
• | pay dividends and make other distributions on, or redeem or repurchase, capital stock; |
• | make certain investments; |
• | incur certain liens; |
• | enter into transactions with affiliates; |
• | merge or consolidate; |
• | enter into agreements that restrict the ability of restricted subsidiaries to make dividends or other payments to APX Group, Inc.; |
• | designate restricted subsidiaries as unrestricted subsidiaries; |
• | amend, prepay, redeem or purchase certain subordinated debt; and |
• | transfer or sell certain assets. |
Three Months Ended June 30, 2018 | Six Months Ended June 30, 2018 | Twelve months ended June 30, 2018 | |||||||||
Net loss | $ | (144,385 | ) | $ | (229,102 | ) | $ | (472,428 | ) | ||
Interest expense, net | 60,327 | 119,086 | 236,193 | ||||||||
Other expense, net | 4,731 | 9,880 | 27,669 | ||||||||
Gain on sale of spectrum (1) | — | (50,389 | ) | (50,389 | ) | ||||||
Income tax expense (benefit) | (906 | ) | (1,339 | ) | (1,412 | ) | |||||
Restructuring expenses (2) | 4,141 | 4,141 | 4,141 | ||||||||
Depreciation and amortization (3) | 28,934 | 57,829 | 120,349 | ||||||||
Amortization of capitalized contract costs | 97,939 | 193,302 | 303,072 | ||||||||
Non-capitalized contract costs (4) | 83,078 | 153,929 | 306,334 | ||||||||
Non-cash compensation (5) | 256 | 415 | 1,015 | ||||||||
Other adjustments (6) | 19,745 | 31,827 | 69,431 | ||||||||
Adjustment for a change in accounting principle (Topic 606) (7) | (16,620 | ) | (29,485 | ) | (29,485 | ) | |||||
Adjusted EBITDA | $ | 137,240 | $ | 260,094 | $ | 514,490 |
(1) | Gain on sale of spectrum intangible assets during the three months ended March 31, 2018. (See Note 7 to the accompanying unaudited condensed consolidated financial statements). |
(2) | Restructuring employee severance and termination benefits expenses. (See Note 14 to the accompanying unaudited condensed consolidated financial statements). |
(3) | Excludes loan amortization costs that are included in interest expense. |
(4) | 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 subscriber contracts, as compared to our organic generation of new subscribers, which requires us to expense a portion of our subscriber acquisition costs under GAAP. |
(5) | Reflects non-cash compensation costs related to employee and director stock and stock option plans. Excludes non-cash compensation costs included in non-capitalized subscriber acquisition costs. |
Three Months Ended June 30, 2018 | Six Months Ended June 30, 2018 | Twelve months ended June 30, 2018 | |||||||||
Product development (a) | $ | 5,770 | 11,513 | $ | 26,156 | ||||||
Litigation settlement (b) | — | $ | — | 10,012 | |||||||
Certain legal and professional fees (c) | 2,135 | 5,722 | 9,735 | ||||||||
Projected run-rate restructuring cost savings (d) | 5,756 | 5,756 | 5,756 | ||||||||
Monitoring fee (e) | 1,030 | 2,116 | 3,275 | ||||||||
Hiring, retention and termination payments (f) | 2,762 | 2,861 | 3,022 | ||||||||
Start-up of new strategic initiatives (g) | — | — | 2,669 | ||||||||
Purchase accounting deferred revenue fair value adjustment (h) | 395 | 911 | 2,308 | ||||||||
All other adjustments (i) | 1,897 | 2,948 | 6,498 | ||||||||
Total other adjustments | $ | 19,745 | $ | 31,827 | $ | 69,431 |
(a) | Costs related to the development of control panels, including associated software, peripheral devices and Wireless Internet Technology. |
(b) | ADT litigation settlement. |
(c) | Legal and related professional fees associated with strategic initiatives and financing transactions. |
(d) | Projected run-rate savings related to June 2018 reduction-in-force. |
(e) | BMP monitoring fee (See Note 12 to the accompanying unaudited condensed consolidated financial statements). |
(f) | Expenses associated with retention bonus, relocation and severance payments to management. |
(g) | Costs related to the start-up of potential new service offerings and sales channels. |
(h) | Add back revenue reduction directly related to purchase accounting deferred revenue adjustments. |
(i) | Other adjustments primarily reflect costs associated with payments to third parties related to various strategic and financing activities, including the monthly financing fee paid under the Consumer Financing Plan, and costs to implement Sarbanes-Oxley Section 404. |
(7) | The adjustments to eliminate the impact of the Company's adoption of Topic 606, are as follows (in thousands): |
Three Months Ended June 30, 2018 | Six Months Ended June 30, 2018 | Twelve months ended June 30, 2018 | |||||||||
Net loss | $ | 19,932 | $ | 43,836 | $ | 43,836 | |||||
Amortization of capitalized contract costs | (97,937 | ) | (193,302 | ) | (193,302 | ) | |||||
Amortization of subscriber acquisition costs | 61,385 | 119,981 | 119,981 | ||||||||
Topic 606 adjustments | $ | (16,620 | ) | $ | (29,485 | ) | $ | (29,485 | ) |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | OTHER INFORMATION |
ITEM 6. | EXHIBITS |
Incorporated by Reference | ||||||||||||
Exhibit Number | Exhibit Title | Form | File No. | Exhibit No. | Filing Date | Provided Herewith | ||||||
31.1 | X | |||||||||||
31.2 | X | |||||||||||
32.1 | X | |||||||||||
32.2 | X | |||||||||||
101.INS | XBRL Instance Document. | X | ||||||||||
101.SCH | XBRL Taxonomy Extension Schema Document. | X | ||||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | X | ||||||||||
101.DEF | XBRL Taxonomy Extension Schema Document. | X | ||||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | X | ||||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | X |
APX Group Holdings Inc. | |||||||
Date: | August 1, 2018 | By: | /s/ Todd Pedersen | ||||
Todd Pedersen | |||||||
Chief Executive Officer and Director (Principal Executive Officer) | |||||||
Date: | August 1, 2018 | By: | /s/ Mark Davies | ||||
Mark Davies | |||||||
Chief Financial Officer (Principal Financial Officer) |
/s/ Todd Pedersen |
Todd Pedersen |
Chief Executive Officer and Director (Principal Executive Officer) |
/s/ Mark Davies |
Mark Davies |
Chief Financial Officer (Principal Financial Officer) |
• | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
• | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein. |
/s/ Todd Pedersen |
Todd Pedersen |
Chief Executive Officer and Director (Principal Executive Officer) |
• | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
• | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein. |
/s/ Mark Davies |
Mark Davies |
Chief Financial Officer (Principal Financial Officer) |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Aug. 01, 2018 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | ck0001584423 | |
Entity Registrant Name | APX Group Holdings, Inc. | |
Entity Central Index Key | 0001584423 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 100 |
Condensed Consolidated Balance Sheets (unaudited) (Parenthetical) - $ / shares |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized (in shares) | 100 | 100 |
Common stock, issued (in shares) | 100 | 100 |
Common stock, outstanding (in shares) | 100 | 100 |
Condensed Consolidated Statements of Operations (unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Revenues: | ||||
Recurring and other revenue | $ 254,967 | $ 202,783 | $ 501,564 | $ 399,641 |
Service and other sales revenue | 0 | 6,358 | 0 | 11,749 |
Activation fees | 0 | 2,985 | 0 | 6,089 |
Total revenues | 254,967 | 212,126 | 501,564 | 417,479 |
Costs and expenses: | ||||
Operating expenses (exclusive of depreciation and amortization shown separately below) | 89,321 | 77,316 | 173,081 | 148,668 |
Selling expenses (exclusive of amortization of deferred commissions of $40,167; $20,189; $78,470; and $39,425, respectively, which are included in depreciation and amortization shown separately below) | 65,659 | 46,275 | 124,902 | 81,073 |
General and administrative expenses | 49,206 | 38,902 | 100,173 | 77,763 |
Depreciation and amortization | 126,873 | 80,096 | 251,131 | 156,965 |
Restructuring expenses | 4,141 | 0 | 4,141 | 0 |
Total costs and expenses | 335,200 | 242,589 | 653,428 | 464,469 |
Loss from operations | (80,233) | (30,463) | (151,864) | (46,990) |
Other expenses (income): | ||||
Interest expense | 60,327 | 54,958 | 119,117 | 108,639 |
Interest income | 0 | (47) | (31) | (104) |
Other loss (income), net | 4,731 | (1,869) | (40,509) | 10,197 |
Loss before income taxes | (145,291) | (83,505) | (230,441) | (165,722) |
Income tax (benefit) expense | (906) | 732 | (1,339) | 1,151 |
Net loss | $ (144,385) | $ (84,237) | $ (229,102) | $ (166,873) |
Condensed Consolidated Statements of Operations(unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Income Statement [Abstract] | ||||
Amortization of deferred commissions | $ 40,167 | $ 20,189 | $ 78,470 | $ 39,425 |
Condensed Consolidated Statements of Comprehensive Loss (unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (144,385) | $ (84,237) | $ (229,102) | $ (166,873) |
Other comprehensive (loss) income, net of tax effects: | ||||
Foreign currency translation adjustment | (417) | 1,164 | (1,076) | 1,576 |
Unrealized gain on marketable securities | 0 | (401) | 0 | (258) |
Total other comprehensive (loss) income | (417) | 763 | (1,076) | 1,318 |
Comprehensive loss | $ (144,802) | $ (83,474) | $ (230,178) | $ (165,555) |
Basis of Presentation and Significant Accounting Policies |
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Basis of Presentation and Significant Accounting Policies | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Unaudited Interim Financial Statements —The accompanying interim unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared by APX Group Holdings, Inc. and subsidiaries (the “Company”) without audit. The accompanying consolidated financial statements include the accounts of APX Group Holdings, Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The information as of December 31, 2017 included in the unaudited condensed consolidated balance sheets was derived from the Company’s audited consolidated financial statements. The unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q were prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments (all of which are considered of a normal recurring nature) considered necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods and dates presented. The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. These unaudited condensed consolidated financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements and related notes as set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as filed with the Securities and Exchange Commission (“SEC”) on March 6, 2018, which is available on the SEC’s website at www.sec.gov. Basis of Presentation —The unaudited condensed consolidated financial statements of the Company are presented for APX Group Holdings, Inc. (“Holdings") and its wholly-owned subsidiaries. The Company has prepared the accompanying unaudited condensed consolidated financial statements pursuant to GAAP. Preparing financial statements requires the Company to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and accompanying disclosures. Although these estimates are based on the Company’s best knowledge of current events and actions that the Company may undertake in the future, actual results may be different from the Company’s estimates. The results of operations presented herein are not necessarily indicative of the Company’s results for any future period. Vivint Flex Pay—In January 2017, the Company announced the introduction of the Vivint Flex Pay plan (“Vivint Flex Pay”), which became the Company's primary sales model beginning in March 2017. Under Vivint Flex Pay, customers pay separately for the products (including control panel, security peripheral equipment, smart home equipment, and related installation) (“Products”) and Vivint's smart home and security services (“Services”). The customer has the following three options to pay for the Products: (1) qualified customers in the United States may finance the purchase of Products through a third-party financing provider (“Consumer Financing Program”) (2) customers not eligible for the Consumer Financing Program, but who qualify under the Company's underwriting criteria, may enter into a retail installment contract (“RIC”) directly with Vivint, or (3) customers may purchase the Products at the outset of the service contract with check, automatic clearing house payments (“ACH”), credit or debit card. Although customers pay separately for Products and Services under the Vivint Flex Pay plan, the Company has determined that the shift in model does not change the Company's conclusion that the sale of Products and Services are one single performance obligation. As a result, all forms of transactions under Vivint Flex Pay create deferred revenue for the gross amount of Products sold. Gross deferred revenues are reduced by imputed interest on the RICs and the present value of expected payments due to the third-party financing provider under the Consumer Financing Program. Under the Consumer Financing Program, qualified customers are eligible for installment loans provided by a third-party financing provider of up to $4,000 for either 42 or 60 months. The Company pays a monthly fee to the third-party financing provider based on the average daily outstanding balance of the installment loans. Additionally, the Company shares liability for credit losses depending on the credit quality of the customer. Because of the nature of these provisions under the Consumer Financing Program, the Company records a derivative liability at its fair value when the third-party financing provider originates installment loans to customers, which reduces the amount of estimated revenue recognized on the provision of the services. The derivative liability is reduced as payments are made from the Company to the third-party financing provider. Subsequent changes to the fair value of the derivative liability are realized through other loss/(income), net in the Condensed Consolidated Statement of Operations. (See Note 8). Retail Installment Contract Receivables—For customers that enter into a RIC under the Vivint Flex Pay plan, the Company records a receivable for the amount financed. The RIC receivables are recorded at their present value, net of the imputed interest. At the time of installation, the Company records a long-term note receivable within long-term notes receivables and other assets, net on the condensed consolidated balance sheets for the present value of the receivables that are expected to be collected beyond 12 months of the reporting date. The unbilled receivable amounts that are expected to be collected within 12 months of the reporting date are included as a short-term notes receivable within accounts and notes receivable, net on the condensed consolidated balance sheets. The billed amounts of notes receivables are included in accounts receivable within accounts and notes receivable, net on the condensed consolidated balance sheets. The Company imputes the interest on the RIC receivable using a risk adjusted market interest rate and records it as an adjustment to deferred revenue and as an adjustment to the face amount of the related receivable. The imputed interest discount considers a number of factors, including collection experience, aging of the remaining RIC receivable portfolios, credit quality of the subscriber base and other qualitative considerations, including macro-economic factors. The imputed interest income is recognized over the term of the RIC contract as recurring and other revenue on the condensed consolidated statement of operations. When the Company determines that there are RIC receivables that have become uncollectible, the Company records an adjustment to the imputed interest discount and reduce the related note receivable balance. Account balances are written-off if collection efforts are unsuccessful and future collection is unlikely based on the length of time from the day accounts become past due. Accounts Receivable —Accounts receivable consists primarily of amounts due from customers for recurring monthly monitoring Services and the billed portion of RIC receivables. The accounts receivable are recorded at invoiced amounts and are non-interest bearing and are included within accounts and notes receivable, net on the condensed consolidated balance sheets. Accounts receivable totaled $25.8 million and $24.3 million at June 30, 2018 and December 31, 2017, respectively net of the allowance for doubtful accounts of $4.6 million and $5.4 million at June 30, 2018 and December 31, 2017, respectively. The Company estimates this allowance based on historical collection experience and subscriber attrition rates. When the Company determines that there are accounts receivable that are uncollectible, they are charged off against the allowance for doubtful accounts. As of June 30, 2018 and December 31, 2017, no accounts receivable were classified as held for sale. The provision for doubtful accounts is included in general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations and totaled $4.4 million and $5.0 million for the three months ended June 30, 2018 and 2017, respectively, and $8.4 million and $9.7 million for the six months ended June 30, 2018 and 2017, respectively. The changes in the Company’s allowance for accounts receivable were as follows for the periods ended (in thousands):
Revenue Recognition— The Company offers its customers smart home services combining Products, including a proprietary control panel, door and window sensors, door locks, security cameras and smoke alarms; installation; and a proprietary back-end cloud platform software and Services. These together create an integrated system that allows the Company’s customers to monitor, control and protect their home (“Smart Home Services”). The Company’s customers are buying this integrated system that provides them with these Smart Home Services. The number and type of Products purchased by a customer depends on their desired functionality. Because the Products and Services included in the customer’s contract are integrated and highly interdependent, and because they must work together to deliver the Smart Home Services, the Company has concluded that installed Products, related installation and Services contracted for by the customer are generally not distinct within the context of the contract and, therefore, constitute a single, combined performance obligation. Revenues for this single, combined performance obligation are recognized on a straight-line basis over the customer’s contract term. The Company has determined that certain contracts that do not require a long-term commitment for monitoring services by the customer contain a material right to renew the contract, because the customer does not have to purchase Products upon renewal. Proceeds allocated to the material right are recognized over the period benefit, which is generally three years. The majority of the Company’s subscription contracts are between three and five years in length and are non-cancelable. These contracts with customers generally convert into month-to-month agreements at the end of the initial term, and some customer contracts are month-to-month from inception. Payment for recurring monitoring and other Smart Home Services is generally due in advance on a monthly basis. Sales of Products and other one-time fees such as service fees or installation fees are invoiced to the customer at the time of sale. Revenues for wireless internet service provided by Vivint Wireless Inc. (“Wireless Internet” or “Wireless”) and any Products or Services that are considered separate performance obligations are recognized when those Products or Services are delivered. Taxes collected from customers and remitted to governmental authorities are not included in revenue. Payments received or amounts billed in advance of revenue recognition are reported as deferred revenue. Deferred Revenue— The Company's deferred revenues primarily consist of amounts for sales (including upfront proceeds) of Smart Home Services. Deferred revenues are recognized over the term of the related performance obligation. Capitalized Contract Costs —Capitalized contract costs represent the costs directly related and incremental to the origination of new contracts, modification of existing contracts or to the fulfillment of the related customer contracts. These include commissions, other compensation and related costs paid directly for the origination and installation of new or upgraded customer contracts, as well as the cost of Products installed in the customer home at the commencement or modification of the contract. These costs are deferred and amortized on a straight-line basis over the expected period of benefit that the Company has determined to be five years. Amortization of capitalized contract costs is included in “Depreciation and Amortization” on the consolidated statements of operations. These deferred costs are periodically reviewed for impairment. Contract costs not directly related and incremental to the origination of new contracts, modification of existing contracts or to the fulfillment of the related customer contracts are expensed as incurred. These costs include those associated with housing, marketing and recruiting, non-direct lead generation costs, certain portions of sales commissions and residuals, overhead and other costs considered not directly and specifically tied to the origination of a particular subscriber. On the condensed consolidated statement of cash flows, capitalized contract costs are classified as operating activities and reported as “Capitalized contract costs – deferred contract costs” as these assets represent deferred costs associated with customer contracts. Cash and Cash Equivalents— Cash and cash equivalents consists of highly liquid investments with remaining maturities when purchased of three months or less. Inventories —Inventories, which are comprised of smart home and security system Products and parts, are stated at the lower of cost or net realizable value with cost determined under the first-in, first-out (FIFO) method. The Company adjusts the inventory balance based on anticipated obsolescence, usage and historical write-offs. Long-lived Assets and Intangibles —Property, plant and equipment are stated at cost and depreciated on the straight-line method over the estimated useful lives of the assets or the lease term for assets under capital leases, whichever is shorter. Intangible assets with definite lives are amortized over the remaining estimated economic life of the underlying technology or relationships, which ranges from five to ten years. Definite-lived intangible assets are amortized on the straight-line method over the estimated useful life of the asset or in a pattern in which the economic benefits of the intangible asset are consumed. Amortization expense associated with leased assets is included with depreciation expense. Routine repairs and maintenance are charged to expense as incurred. The Company reviews long-lived assets, including property, plant and equipment, capitalized contract costs, and definite-lived intangibles for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company considers whether or not indicators of impairment exist on a regular basis and as part of each quarterly and annual financial statement close process. Factors the Company considers in determining whether or not indicators of impairment exist include market factors and patterns of customer attrition. If indicators of impairment are identified, the Company estimates the fair value of the assets. An impairment loss is recognized if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The Company conducts an indefinite-lived intangible impairment analysis annually as of October 1, and as necessary if changes in facts and circumstances indicate that the fair value of the Company’s indefinite-lived intangibles may be less than the carrying amount. When indicators of impairment do not exist and certain accounting criteria are met, the Company is able to evaluate indefinite-lived intangible impairment using a qualitative approach. When necessary, the Company’s quantitative impairment test consists of two steps. The first step requires that the Company compare the estimated fair value of its indefinite-lived intangibles to the carrying value. If the fair value is greater than the carrying value, the intangibles are not considered to be impaired and no further testing is required. If the fair value is less than the carrying value, an impairment loss in an amount equal to the difference is recorded. During the three and six months ended June 30, 2018 and 2017, no impairments to long-lived assets or intangibles were recorded. The Company’s depreciation and amortization included in the consolidated statements of operations consisted of the following (in thousands):
Wireless Spectrum Licenses—The Company had capitalized, as an intangible asset, wireless spectrum licenses that its subsidiary, Vivint Wireless, acquired from a third party. The cost basis of the wireless spectrum asset included the purchase price paid for the licenses at the time of acquisition, plus costs incurred to acquire the licenses. The asset and related liability were recorded at the net present value of future cash outflows using the Company's incremental borrowing rate at the time of acquisition. The Company determined that the wireless spectrum licenses met the definition of indefinite-lived intangible assets because the licenses were able to be renewed periodically for a nominal fee, provided that the Company continued to meet the service and geographic coverage provisions. During the six months ended June 30, 2018, the Company terminated the wireless spectrum licenses for cash consideration. See Note 7 for further discussion. Long-term Investments —The Company’s long-term investments are comprised of equity securities in both privately held and public companies. As of June 30, 2018 and December 31, 2017, the Company's equity investments totaled $4.2 million and $3.4 million, respectively. Management determines the appropriate fair value measurement of its investments at the time of purchase and reevaluates the fair value measurement at each balance sheet date. Equity securities are classified as either short-term or long-term, based on the nature of each security and its availability for use in current operations. The Company’s equity securities are carried at fair value, with gains and losses reported in other income or loss within the statement of operations. The Company's equity investments without readily determinable fair values totaled $0.7 million as of June 30, 2018 and December 31, 2017, respectively. The Company performs impairment analyses of its investments without readily determinable fair values when events occur or circumstances change that would, more likely than not, reduce the fair value of the investment below its carrying value. When indicators of impairment do not exist, the Company evaluates impairment using a qualitative approach. Additionally, increases or decreases in the carrying amount resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer are adjusted through the statement of operations as needed. As of June 30, 2018 and December 31, 2017, no indicators of impairment or changes in observable prices existed associated with investments without readily determinable fair values. Deferred Financing Costs —Costs incurred in connection with obtaining debt financing are deferred and amortized utilizing the straight-line method, which approximates the effective-interest method, over the life of the related financing. Deferred financing costs incurred with draw downs on APX Group, Inc.’s (“APX”) revolving credit facility will be amortized over the amended maturity dates discussed in Note 3. If such financing is paid off or replaced prior to maturity with debt instruments that have substantially different terms, the unamortized costs are charged to expense. Deferred financing costs included in the accompanying unaudited condensed consolidated balance sheets within deferred financing costs, net at June 30, 2018 and December 31, 2017 were $2.6 million and $3.1 million, net of accumulated amortization of $9.1 million and $8.6 million, respectively. Deferred financing costs included in the accompanying unaudited condensed consolidated balance sheets within notes payable, net at June 30, 2018 and December 31, 2017 were $30.9 million and $35.7 million, net of accumulated amortization of $50.0 million and $45.2 million, respectively. Amortization expense on deferred financing costs recognized and included in interest expense in the accompanying unaudited condensed consolidated statements of operations, totaled $2.7 million and $2.9 million for the three months ended June 30, 2018 and 2017, respectively and $5.3 million and $5.9 million for the six months ended June 30, 2018 and 2017, respectively (See Note 3). Residual Income Plans —The Company has a program that allows certain third-party sales channel partners to receive additional compensation based on the performance of the underlying contracts they create (the “Channel Partner Plan”). In addition, during the three months ended June 30, 2018, the Company introduced a new residual sales compensation plan (the “Residual Plan”). Under the Residual Plan, the Company's sales personnel (each, a “Plan Participant”) have the option to convert up to a specified portion of their earnings (as defined in the Residual Plan) into the right to receive monthly residual compensation payable over the life of the subscriber accounts sold by such Plan Participant. For both the Channel Partner Plan and Residual Plan, the Company calculates the present value of the expected future residual payments and records a liability for this amount in the period the subscriber account is originated. These initial costs and subsequent adjustments to the estimated liability are recorded to capitalized contract costs. The Company monitors actual payments and customer attrition on a periodic basis and, when necessary, makes adjustments to the liability. For the Channel Partner Plan, the amount included in accrued payroll and commissions was $4.4 million and $3.3 million at June 30, 2018 and December 31, 2017, respectively, and the amount included in other long-term obligations was $24.6 million and $18.5 million at June 30, 2018 and December 31, 2017, respectively, representing the present value of the estimated amounts owed to third-party sales channel partners. The impact of the Residual Plan to the Company’s unaudited interim financial statements for the three and six months ended June 30, 2018 was immaterial. Stock-Based Compensation —The Company measures compensation costs based on the grant-date fair value of the award and recognizes that cost over the requisite service period of the awards (See Note 10). Advertising Expense —Advertising costs are expensed as incurred. Advertising costs were $8.6 million and $10.2 million for the three months ended June 30, 2018 and 2017, respectively and $21.7 million and $21.1 million for the six months ended June 30, 2018 and 2017, respectively. Income Taxes —The Company accounts for income taxes based on the asset and liability method. Under the asset and liability method, deferred tax assets and deferred tax liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets when it is determined that it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. The Company recognizes the effect of an uncertain income tax position on the income tax return at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. The Company’s policy for recording interest and penalties is to record such items as a component of the provision for income taxes. Concentrations of Credit Risk —Financial instruments that potentially subject the Company to concentration of credit risk consist principally of receivables and cash. At times during the year, the Company maintains cash balances in excess of insured limits. The Company is not dependent on any single customer or geographic location. The loss of a customer would not adversely impact the Company’s operating results or financial position. Concentrations of Supply Risk —As of June 30, 2018, approximately 76% of the Company’s installed panels were SkyControl panels and 23% were 2GIG Go!Control panels. During the three months ended March 31, 2018 the Company transitioned to a new panel supplier. The loss of the Company's panel supplier could potentially impact its operating results or financial position. Fair Value Measurement —Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities subject to on-going fair value measurement are categorized and disclosed into one of three categories depending on observable or unobservable inputs employed in the measurement. These two types of inputs have created the following fair value hierarchy: Level 1: Quoted prices in active markets that are accessible at the measurement date for assets and liabilities. Level 2: Observable prices that are based on inputs not quoted in active markets, but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. The Company recognizes transfers between levels of the hierarchy based on the fair values of the respective financial measurements at the end of the reporting period in which the transfer occurred. There were no transfers between levels of the fair value hierarchy during the six months ended June 30, 2018 and 2017. The carrying amounts of the Company’s accounts receivable, accounts payable and accrued and other liabilities approximate their fair values due to their short maturities. Goodwill —The Company conducts a goodwill impairment analysis annually in the fourth fiscal quarter, as of October 1, and as necessary if changes in facts and circumstances indicate that the fair value of the Company’s reporting units may be less than their carrying amounts. When indicators of impairment do not exist and certain accounting criteria are met, the Company is able to evaluate goodwill impairment using a qualitative approach. When necessary, the Company’s quantitative goodwill impairment test consists of two steps. The first step requires that the Company compare the estimated fair value of its reporting units to the carrying value of the reporting unit’s net assets, including goodwill. If the fair value of the reporting unit is greater than the carrying value of its net assets, goodwill is not considered to be impaired and no further testing is required. If the fair value of the reporting unit is less than the carrying value of its net assets, the Company would be required to complete the second step of the test by analyzing the fair value of its goodwill. If the carrying value of the goodwill exceeds its fair value, an impairment charge is recorded. The Company’s reporting units are determined based on its current reporting structure, which as of December 31, 2017 and June 30, 2018 consisted of two reporting units. As of June 30, 2018, there were no changes in facts and circumstances since the most recent annual impairment analysis to indicate impairment existed. Foreign Currency Translation and Other Comprehensive Income —The functional currency of Vivint Canada, Inc. is the Canadian dollar. Accordingly, Vivint Canada, Inc. assets and liabilities are translated from their respective functional currencies into U.S. dollars at period-end rates and Vivint Canada, Inc. revenue and expenses are translated at the weighted-average exchange rates for the period. Adjustments resulting from this translation process are classified as other comprehensive income (loss) and shown as a separate component of equity. When intercompany foreign currency transactions between entities included in the consolidated financial statements are of a long term investment nature (i.e., those for which settlement is not planned or anticipated in the foreseeable future) foreign currency translation adjustments resulting from those transactions are included in stockholders’ deficit as accumulated other comprehensive loss or income. When intercompany transactions are deemed to be of a short term nature, translation adjustments are required to be included in the condensed consolidated statement of operations. The Company has determined that settlement of Vivint Canada, Inc. intercompany balances is anticipated and therefore such balances are deemed to be of a short term nature. Translation activity included in the statement of operations in other loss, net related to intercompany balances was as follows: (in thousands)
Letters of Credit —As of June 30, 2018 and December 31, 2017, the Company had $11.5 million and $9.5 million, respectively, of letters of credit issued in the ordinary course of business, all of which are undrawn. Restructuring and Asset Impairment Charges —Restructuring and asset impairment charges represent expenses incurred in relation to activities to exit or dispose of portions of the Company's business that do not qualify as discontinued operations. Liabilities associated with restructuring are measured at their fair value when the liability is incurred. Expenses for related termination benefits are recognized at the date the Company notifies the employee, unless the employee must provide future service, in which case the benefits are expensed ratably over the future service period. Liabilities related to termination of a contract are measured and recognized at fair value when the contract does not have any future economic benefit to the entity and the fair value of the liability is determined based on the present value of the remaining obligation. The Company expenses all other costs related to an exit or disposal activity as incurred (See Note 14). Recent Accounting Pronouncements —In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-13, “Financial Instruments—Credit Losses (Topic 326)” which modifies the measurement of expected credit losses of certain financial instruments. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019 and must be applied using a modified-retrospective approach, with early adoption permitted. The Company is evaluating the adoption of ASU 2016-13 and plans to provide additional information about its expected impact at a future date. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 326)” to increase transparency and comparability among organizations as it relates to lease assets and lease liabilities. The update requires that lease assets and lease liabilities be recognized on the balance sheet, and that key information about leasing arrangements be disclosed. Prior to this update, GAAP did not require operating leases to be recognized as lease assets and lease liabilities on the balance sheet. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018 and must be applied using a modified retrospective approach, with early adoption permitted. The Company is in the initial stages of evaluating the impact of ASU 2016-02 on its accounting policies, processes, and system requirements. The Company’s current operating lease portfolio is primarily comprised of network, real estate, and equipment leases. Upon adoption of this standard, the Company expects the balance sheet to include a right of use asset and liability related to substantially all operating lease arrangements. The Company has assigned internal resources to perform the evaluation. Furthermore, the Company has made and will continue to make investments in systems to enable timely and accurate reporting under the new standard. While the Company continues to assess the potential impacts of ASU 2016-02, including the areas described above, and anticipates this standard could have a material impact on the consolidated financial statements, the Company does not know or cannot reasonably estimate quantitative information related to the impact of the new standard on the financial statements at this time. Recently Adopted Accounting Standards ASU 2016-01 In January 2016, the FASB issued ASU 2016-01, "Financial Instruments-Overall (Subtopic 825-10)" which enhances the reporting model for financial instruments by addressing certain aspects of the recognition, measurement, presentation and disclosure of financial instruments. Key provisions require equity investments (except those accounted for under the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income (loss). In addition, the exit price notion must be used when measuring the fair value of financial instruments for disclosure purposes. ASU 2016-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company adopted ASU 2016-01 on January 1, 2018, with a cumulative-effect adjustment to increase accumulated deficit by $0.7 million for the net unrealized losses within accumulated other comprehensive income related to equity investments. During the three and six months ended June 30, 2018, the Company recorded a net gain of $0.4 million and $0.7 million, respectively, to other income associated with the change in fair value of equity investments. ASU 2014-09 In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605).” Under Topic 606, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, Topic 606 requires enhanced disclosures, including disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Topic 606 also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer. Collectively, the Company refers to Topic 606 and Subtopic 340-40 as the “new standard”. The Company adopted the new standard as of January 1, 2018, utilizing the modified retrospective method of transition (the cumulative catch-up transition method). Adoption of the new standard resulted in changes to the accounting policies for revenue recognition, deferred revenue, and capitalized contract costs (formerly subscriber acquisition costs). The cumulative effect of applying the new standard to all contracts with customers that were not completed as of January 1, 2018 was recorded as an adjustment to accumulated deficit as of the adoption date. The comparative information has not been adjusted and continues to be reported under Topic 605. See Note 2 "Revenue and Capitalized Contract Costs" for additional information related to the impact of adopting this standard and a discussion of the Company's updated policies related to revenue recognition and accounting for costs to obtain and fulfill a customer contract. |
Revenue and Capitalized Contract Costs |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue and Capitalized Contract Costs | REVENUE AND CAPITALIZED CONTRACT COSTS Customers are typically invoiced for Smart Home Services in advance or at the time the Company delivers the related Smart Home Services. The majority of customers pay at the time of invoice via credit card, debit card or ACH. The Company does not generally record any contract assets. Deferred revenue relates to the advance consideration received from customers, which precedes the Company’s satisfaction of the associated performance obligation. The Company’s deferred revenues primarily result from customer payments received in advance for recurring monthly monitoring and other Smart Home Services, or other one-time fees, because these performance obligations are satisfied over time. The Company records deferred revenues when cash payments are received or due in advance of performance of the Company's obligations, including amounts which are refundable. The increase in the deferred revenue balance during the six months ended June 30, 2018 is primarily driven by cash payments received or due in advance of satisfying the Company's performance obligations, offset by $92.1 million of revenues recognized that were included in the deferred revenue balance as of December 31, 2017. Transaction Price Allocated to the Remaining Performance Obligations As of June 30, 2018, approximately $2.6 billion of revenue is expected to be recognized from remaining performance obligations for subscription contracts. The Company expects to recognize revenue on approximately 59% of these remaining performance obligations over the next 24 months, with the remaining balance recognized over an additional 36 months. Financial Statement Impact of Adopting Topic 606 The Company adopted Topic 606 using the cumulative catch-up transition method. The cumulative effect of applying the new standard to all contracts with customers that were not completed as of January 1, 2018 was recorded as an adjustment to accumulated deficit as of the adoption date. As a result of applying the modified retrospective method to adopt the new revenue guidance, the following adjustments were made to select consolidated balance sheet line items as of January 1, 2018 (in thousands):
The following tables compare the select reported condensed consolidated balance sheets, statements of operations and cash flows line items to the amounts had the previous guidance been in effect (in thousands):
Timing of Revenue Recognition The Company previously recognized certain service and other sales revenue when the Services were provided or when title to Products sold transferred to the customer. Revenue from the sale of Products that were not part of the service offering (i.e., those Products sold subsequent to the date of the initial installation) were also generally recognized upon delivery of Products. Under the new standard, the Company considers Products, related installation, and its proprietary back-end cloud platform software and services an integrated system that allows the Company’s customers to monitor, control and protect their homes. These Smart Home Services are accounted for as a single performance obligation that is recognized over the customer’s contract term. Accordingly, the Company now defers a larger portion of certain Smart Home Services revenue, as prior to the adoption of Topic 606 certain of this revenue was recognized at the time services were provided or upon delivery. The Company previously amortized deferred revenues related to sales of Products and activation fees on subscriber contracts over the expected life of the customer, which was 15 years using a 240% declining balance method. Under the new standard, activation fees are included in the transaction price allocated to the single Smart Home Service performance obligation and recognized straight-line over the customer’s contract term, which is generally three to five years. Capitalized Contract Costs Capitalized contract costs generally include commissions, other compensation and related costs paid directly for the generation and installation of new or modified customer contracts, as well as the cost of Products installed in the customer home at the commencement or modification of the contract. The Company previously deferred and amortized these costs for new customer contracts in a pattern that reflected the estimated life of subscriber relationships and generally expensed all costs associated with modified customer contracts. Under the new standard, the Company defers and amortizes these costs for new or modified customer contracts on a straight-line basis over the expected period of benefit of five years. |
Long-Term Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt | LONG-TERM DEBT Notes Payable On November 16, 2012, APX issued $1.3 billion aggregate principal amount of notes, of which $925.0 million aggregate principal amount of 6.375% senior secured notes due 2019 (the “2019 notes”) mature on December 1, 2019 and are secured on a first-priority lien basis by substantially all of the tangible and intangible assets whether now owned or hereafter acquired by the Company, subject to permitted liens and exceptions, and $380.0 million aggregate principal amount of 8.75% senior notes due 2020 (the “2020 notes”), mature on December 1, 2020. During 2013, APX completed two offerings of additional 2020 notes under the indenture dated November 16, 2012. On May 31, 2013, APX issued $200.0 million of 2020 notes at a price of 101.75% and on December 13, 2013, APX issued an additional $250.0 million of 2020 notes at a price of 101.50%. During 2014, APX issued an additional $100.0 million of 2020 notes at a price of 102.00%. In October 2015, APX issued $300.0 million aggregate principal amount of 8.875% senior secured notes due 2022 (the “2022 private placement notes”), pursuant to a note purchase agreement dated as of October 19, 2015 in a private placement exempt from registration under the Securities Act. The 2022 private placement notes will mature on December 1, 2022, unless on September 1, 2020 (the 91st day prior to the maturity of the 2020 notes) more than an aggregate principal amount of $190.0 million of such 2020 notes remain outstanding or have not been refinanced as permitted under the note purchase agreement for the 2022 private placement notes, in which case the 2022 private placement notes will mature on September 1, 2020. The 2022 private placement notes are secured, on a pari passu basis, by the collateral securing obligations under the 2019 notes, the 2022 private placement notes, the 2022 notes (as defined below), and the 2023 notes (as defined below) and the revolving credit facilities, in each case, subject to certain exceptions and permitted liens. In May 2016, APX issued $500.0 million aggregate principal amount of 7.875% senior secured notes due 2022 (the “2022 notes”), pursuant to an indenture dated as of May 26, 2016 among APX, the guarantors party thereto and Wilmington Trust, National Association, as trustee and collateral agent. The 2022 notes will mature on December 1, 2022, or on such earlier date when any outstanding pari passu lien indebtedness matures as a result of the operation of any “Springing Maturity” provision set forth in the agreements governing such pari passu lien indebtedness. The 2022 notes are secured, on a pari passu basis, by the collateral securing obligations under the 2019 notes and 2022 private placement notes and the revolving credit facilities, in all cases, subject to certain exceptions and permitted liens. APX used a portion of the net proceeds from the issuance of the 2022 notes to repurchase approximately $235 million aggregate principal amount of the outstanding 2019 notes and 2022 private placement notes in privately negotiated transactions and repaid borrowings under the existing revolving credit facility. In August 2016, APX issued an additional $100.0 million aggregate principal amount of the 2022 notes at a price of 104.00%. In February 2017, APX issued an additional $300.0 million aggregate principal amount of the 2022 notes at a price of 108.25% (“February 2017 issuance”). A portion of the net proceeds from the offering of these 2022 notes were used to redeem $300.0 million aggregate principal amount of the existing 2019 notes and pay the related accrued interest and redemption premium, and to pay all fees and expenses related thereto and any remaining proceeds will be used for general corporate purposes. In August 2017, APX issued $400.0 million aggregate principal amount of the 7.625% senior notes due 2023 (the “2023 notes” and, together with the 2019 notes, the 2020 notes and the 2022 private placement notes, the “notes”). The proceeds from the outstanding 2023 notes offering were used to redeem $150.0 million aggregate principal amount of the outstanding 2019 notes and pay the related accrued interest and redemption premium, and to pay all fees and expenses related thereto. Any remaining net proceeds have been or will be used for general corporate purposes, which may include the repayment of outstanding borrowings under the revolving credit facility. The notes are fully and unconditionally guaranteed, jointly and severally by APX and each of APX’s existing restricted subsidiaries that guarantee indebtedness under APX’s revolving credit facility or the Company's other indebtedness. Interest accrues at the rate of 6.375% per annum for the 2019 notes, 8.75% per annum for the 2020 notes, 8.875% per annum for the 2022 private placement notes, 7.875% per annum for the 2022 notes and 7.625% per annum for the 2023 notes. Interest on the 2019 notes, 2020 notes, 2022 private placement notes and 2022 notes is payable semiannually in arrears on each June 1 and December 1. Interest on the 2023 notes is payable semiannually in arrears on each March 1 and September 1. APX may redeem the notes at the prices and on the terms specified in the applicable indenture or note purchase agreement. Debt Modifications and Extinguishments In accordance with ASC 470-50 Debt – Modifications and Extinguishments, the Company performed analyses on a creditor-by-creditor basis for the February 2017 issuance to determine if the repurchased notes were substantially different than the notes issued to determine the appropriate accounting treatment of associated issuance fees. As a result of these analyses the company recorded the following amounts of other expense and loss on extinguishment and deferred financing costs during the six months ended June 30, 2017 (in thousands):
The original unamortized portion of deferred financing costs associated with new creditors and creditors under the repurchased notes, whose debt instruments were not deemed to be substantially different, will be amortized to interest expense over the life of the issued notes. The Company had no debt issuances or related modification or extinguishment costs during the three and six months ended June 30, 2018 or the three months ended June 30, 2017. The following table presents deferred financing activity for the six months ended June 30, 2018 and year ended December 31, 2017 (in thousands):
Revolving Credit Facility On November 16, 2012, APX entered into a $200.0 million senior secured revolving credit facility, with a five year maturity. On March 6, 2015, APX amended and restated the credit agreement governing the revolving credit facility to provide for, among other things, (1) an increase in the aggregate commitments previously available to APX thereunder from $200.0 million to $289.4 million (“Revolving Commitments”) and (2) the extension of the maturity date with respect to certain of the previously available commitments. On August 10, 2017, APX further amended and restated the credit agreement governing the revolving credit facility to provide for, among other things, (1) an increase in the aggregate commitments previously available to the Company from $289.4 million to $324.3 million and (2) the extension of the maturity date with respect to certain of the previously available commitments. Borrowings under the amended and restated revolving credit facility bear interest at a rate per annum equal to an applicable margin plus, at APX’s option, either (1) the base rate determined by reference to the highest of (a) the Federal Funds rate plus 0.50%, (b) the prime rate of Bank of America, N.A. and (c) the LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for an interest period of one month, plus 1.00% or (2) the LIBOR rate determined by reference to the London interbank offered rate for dollars for the interest period relevant to such borrowing. The applicable margin for base rate-based borrowings (1)(a) under the Series A Revolving Commitments of approximately $267.0 million and Series D Revolving Commitments of approximately $15.4 million is currently 2.0% per annum and (b) under the Series B Revolving Commitments of approximately $21.2 million is currently 3.0% and (2)(a) the applicable margin for LIBOR rate-based borrowings (a) under the Series A Revolving Commitments, Series C Revolving Commitments, and Series D Revolving Commitments is currently 3.0% per annum and (b) under the Series B Revolving Commitments is currently 4.0%. The applicable margin for borrowings under the revolving credit facility is subject to one step-down of 25 basis points based on APX meeting a consolidated first lien net leverage ratio test at the end of each fiscal quarter. In November 2017, previous commitments of $20.8 million under the Series C Revolving Commitments had expired. Outstanding borrowings under the amended and restated revolving credit facility are allocated on a pro-rata basis between each Series based on the total Revolving Commitments. In addition to paying interest on outstanding principal under the revolving credit facility, APX is required to pay a quarterly commitment fee (which will be subject to one interest rate step-down of 12.5 basis points, based on APX meeting a consolidated first lien net leverage ratio test) to the lenders under the revolving credit facility in respect of the unutilized commitments thereunder. APX also pays customary letter of credit and agency fees. APX is not required to make any scheduled amortization payments under the revolving credit facility. The principal amount outstanding under the revolving credit facility will be due and payable in full on (1) with respect to the non-extended commitments under the Series D, March 31, 2019 and (2) with respect to the extended commitments under the Series A Revolving Credit Facility and Series B Revolving Credit Facility, March 31, 2021. As of June 30, 2018 and December 31, 2017, there were $160.0 million and $60.0 million, respectively, of outstanding borrowings under the credit facility. As of June 30, 2018 the Company had $132.1 million of availability under our revolving credit facility (after giving effect to $11.5 million of letters of credit outstanding and $160.0 million in borrowings). The Company’s debt at June 30, 2018 and December 31, 2017 consisted of the following (in thousands):
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Retail Installment Contract Receivables |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retail Installment Contract Receivables | RETAIL INSTALLMENT CONTRACT RECEIVABLES Certain subscribers have the option to purchase Products under a RIC, payable over either 42 or 60 months. Short-term RIC receivables are recorded in accounts and notes receivable, net and long-term RIC receivables are recorded in long-term notes receivables and other assets, net in the condensed consolidated unaudited balance sheets. The following table summarizes the installment receivables (in thousands):
Activity in the deferred interest for the RIC receivables was as follows (in thousands):
The amount of RIC imputed interest income recognized in recurring and other revenue was $3.5 million and $1.1 million during the three months ended June 30, 2018 and 2017, respectively, and $6.8 million and $1.2 million during the six months ended June 30, 2018 and 2017, respectively. |
Balance Sheet Components |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Components | BALANCE SHEET COMPONENTS The following table presents material balance sheet component balances (in thousands):
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Property Plant and Equipment |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property Plant and Equipment | PROPERTY PLANT AND EQUIPMENT Property, plant and equipment consisted of the following (in thousands):
Property, plant and equipment, net includes approximately $27.2 million and $26.2 million of assets under capital lease obligations at June 30, 2018 and December 31, 2017, respectively, net of accumulated amortization of $19.3 million and $16.6 million at June 30, 2018 and December 31, 2017, respectively. Depreciation and amortization expense on all property, plant and equipment was $6.2 million and $5.2 million for the three months ended June 30, 2018 and 2017, respectively and $12.4 million and $9.9 million for the six months ended June 30, 2018 and 2017, respectively. Amortization expense relates to assets under capital leases and is included in depreciation and amortization expense. |
Goodwill and Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | GOODWILL AND INTANGIBLE ASSETS Goodwill As of June 30, 2018 and December 31, 2017, the Company had a goodwill balance of $835.8 million and $837.0 million, respectively. The change in the carrying amount of goodwill during the six months ended June 30, 2018 was the result of foreign currency translation adjustments. Intangible assets, net The following table presents intangible asset balances (in thousands):
During the year ended December 31, 2016, Vivint Wireless entered into leasing agreements with Nextlink Wireless, LLC (“Nextlink”) for designated radio frequency spectrum in 40 mid-sized metropolitan markets. The lease term was for seven years, with an option to become the licensor of record with the Federal Communications Commission (“FCC”) with respect to the applicable spectrum licenses at the end of this term for a nominal fee. The Company acquired $31.3 million of spectrum licenses, measured using the present value of the lease payments, and recorded an intangible asset and a corresponding liability within other long-term obligations. While licenses are issued for only a fixed time, such licenses are subject to renewal by the FCC. On January 10, 2018, Vivint Wireless and Verizon consummated the transactions contemplated by a termination agreement to which the parties agreed, among other things, to terminate the spectrum leases between Vivint Wireless and Nextlink, a subsidiary of Verizon, in exchange for a cash payment by Verizon to Vivint Wireless. The calculation of the gain recorded included cash proceeds of $55.0 million, extinguishment of the spectrum license liability of $27.9 million, offset by the write-off of the spectrum license asset in the amount of $31.3 million and regulatory costs associated with the sale of $1.3 million for a total net gain on sale of $50.4 million which is included in other income, net in the condensed consolidated statement of operations. Amortization expense related to intangible assets was approximately $22.7 million and $25.4 million for the three months ended June 30, 2018 and 2017, respectively and $45.5 million and $50.7 million during the six months ended June 30, 2018 and 2017, respectively. As of June 30, 2018, the remaining weighted-average amortization period for definite-lived intangible assets was 4.3 years. Estimated future amortization expense of intangible assets, excluding approximately $0.3 million in patents currently in process, is as follows as of June 30, 2018 (in thousands):
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Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments | FINANCIAL INSTRUMENTS Cash, Cash Equivalents and Equity Securities Cash equivalents and equity securities with readily available determinable fair values (“Corporate Securities”) are classified as level 1 assets, as they have readily available market prices in an active market. As of June 30, 2018 and December 31, 2017, the Company held an immaterial amount of money market funds. As of June 30, 2018 and December 31, 2017, the company held $3.4 million and $2.7 million, respectively, of Corporate Securities classified as level 1 investments. The following tables set forth the Company’s cash and cash equivalents and Corporate Securities’ adjusted cost, gross unrealized gains, gross unrealized losses, gross realized gains, gross realized losses and fair value by significant investment category recorded as cash and cash equivalents or long-term notes receivables and other assets, net as of June 30, 2018 and December 31, 2017 (in thousands):
The Corporate Securities represents the Company's investment of $3.0 million in publicly traded common stock of a non-affiliated company (“investee”). During the three months ended June 30, 2018 and 2017, the Company recorded an unrealized gain of $0.4 million and an unrealized loss of $0.4 million, respectively, associated with the change in fair value of the investee's stock. During the six months ended June 30, 2018 and 2017, the Company recorded an unrealized gain of $0.7 million and $0.2 million, respectively, associated with the change in fair value of the investee's stock. As of June 30, 2018 the Company had no accumulated other comprehensive income associated with unrealized gains and losses for the change in fair value of the investment as a result of the adoption of ASU 2016-01. The balance of accumulated other comprehensive income associated with unrealized gains and losses for the change in fair value totaled net losses of $0.3 million at December 31, 2017. The carrying amounts of the Company’s accounts and notes receivable, accounts payable and accrued and other liabilities approximate their fair values. Long-Term Debt Components of long-term debt including the associated interest rates and related fair values are as follows (in thousands, except interest rates):
The fair values of the 2019 notes, the 2020 notes, the 2022 private placement notes, the 2022 notes and the 2023 notes were considered Level 2 measurements as the values were determined using observable market inputs, such as current interest rates, prices observable from less active markets, as well as prices observable from comparable securities. Derivative Financial Instruments Under the Consumer Financing Program, the Company pays a monthly fee to a third-party financing provider based on the average daily outstanding balance of the installment loans and shares the liability for credit losses, depending on the credit quality of the customer. Because of the nature of certain provisions under the Consumer Financing Program, the Company records a derivative liability that is not designated as a hedging instrument and is adjusted to fair value, measured using the present value of the estimated future payments. Changes to the fair value are recorded through other loss (income), net in the Consolidated Statement of Operations. The following represent the contractual obligations with the third-party financing provider under the Consumer Financing Program that are components of the derivative: •The Company pays a monthly fee based on the average daily outstanding balance of the installment loans •The Company shares the liability for credit losses depending on the credit quality of the customer •The Company pays transactional fees associated with customer payment processing The derivative is classified as a Level 3 instrument. The derivative positions are valued using a discounted cash flow model, with inputs consisting of available market data, such as market yield discount rates, as well as unobservable internally derived assumptions, such as collateral prepayment rates, collateral default rates and loss severity rates. These derivatives are priced quarterly using a credit valuation adjustment methodology. In summary, the fair value represents an estimate of the present value of the cash flows the Company will be obligated to pay to the third-party financing provider for each component of the derivative. The following table summarizes the fair value and the notional amount of the Company’s outstanding derivative instrument as of June 30, 2018 and December 31, 2017 (in thousands):
Changes in Level 3 Fair Value Measurements The following table summarizes the change in the fair value of the Level 3 outstanding derivative liability instrument for the six months ended June 30, 2018 and the twelve months ended December 31, 2017 (in thousands):
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Income Taxes |
6 Months Ended |
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Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | INCOME TAXES In order to determine the quarterly provision for income taxes, the Company uses an estimated annual effective tax rate, which is based on expected annual income and statutory tax rates in the various jurisdictions in which the Company operates. Certain significant or unusual items are separately recognized in the quarter during which they occur and can be a source of variability in the effective tax rates from quarter to quarter. The Company’s effective income tax rate for the six months ended June 30, 2018 and 2017 was approximately 0.69% and a negative 0.53%, respectively. Income tax expense for the six months ended June 30, 2018 was affected by year to date loss in Canada and estimated minimum state taxes in the US. Both the 2018 and 2017 effective tax rates differ from the statutory rate primarily due to the combination of not benefiting from expected pre-tax US losses, a result of changes to the valuation allowance, and recognizing current state income tax expense for minimum state taxes. On December 22, 2017, the U.S. Tax Cuts and Jobs Act of 2017 (“Tax Reform”) was signed into law. Among other changes in the Tax Reform, effective January 1, 2018, the U.S. statutory tax rate was lowered from 35% to 21%, the deduction for net business interest is limited to 30% of adjusted taxable income, business deductions are disallowed for entertainment expenses, limitation of net operating losses generated after fiscal 2017 to 80% of taxable income, and certain exceptions for performance-based compensation and commissions were eliminated from the definition of applicable employee remuneration subject to a $1.0 million deduction limit. In December 2017, the SEC issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which provides guidance on accounting for the tax effects of Tax Reform. SAB 118 provides a measurement period that should not extend beyond one year from the enactment date for companies to complete the accounting relating to Tax Reform under ASC Topic 740. In accordance with SAB 118, to the extent that a company’s accounting for certain income tax effects of Tax Reform is incomplete, but it is able to determine a reasonable estimate, the company should report a provisional estimate in its financial statements. Where a reasonable estimate cannot be determined, a company should continue to apply ASC Topic 740 based on the provisions of the tax laws that were in effect immediately before the enactment of Tax Reform. The Company has not fully completed its accounting for the income tax effects of Tax Reform but will have an updated analysis at year end. Items for which a reasonable estimate has been determined include the impact of the change in the corporate tax rate from 35% to 21%, limitation on the current deductibility of net interest expense in excess of 30 percent of adjusted taxable income, changes to the non-deductible executive compensation provisions, and entertainment and other expense deduction limitations. Other significant provisions that did not have an impact on the interim provision but may impact income taxes at the Company’s year-end or in future years include: a limitation of net operating losses generated after fiscal 2017 to 80% of taxable income, 100% bonus depreciation on certain assets, and the impact of the inclusion of any global intangible low-taxed income, the potential deductions on foreign-derived intangible income and the GILTI inclusion amount, and the base erosion and anti-abuse tax. Significant judgment is required in determining the Company’s provision for income taxes, recording valuation allowances against deferred tax assets, and evaluating the Company’s uncertain tax positions. In evaluating the ability to realize its deferred tax assets, in full or in part, the Company considers all available positive and negative evidence, including past operating results, forecasted future earnings, and prudent and feasible tax planning strategies. Due to historical net losses incurred and the uncertainty of realizing the deferred tax assets, for all the periods presented, the Company has maintained a valuation allowance against the domestic deferred tax assets that remain after offset by domestic deferred tax liabilities. The Company has not recorded a valuation allowance against its foreign deferred tax assets due to being in a net deferred tax liability position. |
Stock-Based Compensation and Equity |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation and Equity | STOCK-BASED COMPENSATION AND EQUITY 313 Incentive Units The Company’s indirect parent, 313 Acquisition LLC (“313”), which is majority owned by Blackstone, has authorized the award of profits interests, representing the right to share a portion of the value appreciation on the initial capital contributions to 313 (“Incentive Units”). As of June 30, 2018, 85,362,836 Incentive Units had been awarded, and were outstanding, to current and former members of senior management and a board member, of which 42,169,456 were outstanding to the Company’s Chief Executive Officer and President. In June 2018, the Incentive Units and SARs (defined below) vesting terms were modified (“Modification”). Prior to the Modification, the Incentive Units were subject to time-based and performance-based vesting conditions, with (1) one-third subject to ratable time-based vesting over a five year period from the applicable vesting reference date and (2) two-thirds subject to the achievement of certain investment return thresholds by The Blackstone Group, L.P. and its affiliates (“Blackstone”). Pursuant to the Modification the Incentive Units are subject to time-based and performance-based vesting conditions, with (1) one-third subject to ratable time-based vesting over a five year period from the applicable vesting reference date, (2) one-third subject to the achievement of certain investment return thresholds by Blackstone and (3) one-third subject to ratable time-based vesting over a five year period from the applicable vesting reference date or June 2018 for those granted prior to the modification. The Company has not recorded any expense related to the performance-based portion of the awards, as the achievement of the vesting condition is not yet deemed probable. The fair value of stock-based awards is measured at the grant date, or the Modification date, and is recognized as expense over the employee’s requisite service period. The grant date fair value was primarily determined using a Monte Carlo simulation valuation approach with the following assumptions: expected volatility varies from 55% to 125%; expected exercise term between 3.96 and 6.00 years; and risk-free rates between 0.62% and 1.18%. Vivint Stock Appreciation Rights The Company’s subsidiary, Vivint Group, Inc. (“Vivint Group”), has awarded Stock Appreciation Rights (“SARs”) to various levels of key employees, pursuant to an omnibus incentive plan. The purpose of the SARs is to attract and retain personnel and provide an opportunity to acquire an equity interest of Vivint Group. Prior to the Modification in June 2018, the SARs were subject to time-based and performance-based vesting conditions, with (1) one-third subject to ratable time-based vesting over a five year period from the applicable vesting reference date and (2) two-thirds subject to the achievement of certain investment return thresholds by Blackstone. Pursuant to the Modification the Incentive Units are subject to time-based and performance-based vesting conditions, with (1) one-third subject to ratable time-based vesting over a five year period from the applicable vesting reference date, (2) one-third subject to the achievement of certain investment return thresholds by Blackstone and (3) one-third subject to ratable time-based vesting over a five year period from the applicable vesting reference date or June 2018 for those granted prior to the modification. The Company has not recorded any expense related to the performance-based portion of the awards, as the achievement of the vesting condition is not yet deemed probable. In connection with this plan, 43,098,869 SARs were outstanding as of June 30, 2018. In addition, 53,621,891 SARs have been set aside for funding incentive compensation pools pursuant to long-term sales and installation employee incentive plans established by the Company. The fair value of the Vivint Group awards is measured at the grant date, or the Modification date, and is recognized as expense over the employee’s requisite service period. The fair value is determined using a Black-Scholes option valuation model with the following assumptions: expected volatility varies from 55% to 125%, expected dividends of 0%; expected exercise term between 6.00 and 6.47 years; and risk-free rates between 0.61% and 1.77%. Due to the lack of historical exercise data, the Company used the simplified method in determining the estimated exercise term, for all Vivint Group awards. Restricted Stock Units In June 2018, the Company’s subsidiary, Vivint Group, awarded 360,000 Restricted Stock Units (“RSUs”) to certain board members, pursuant to an omnibus incentive plan. The purpose of the RSUs is to compensate board members for their board service and align their interests of those of the Company's shareholders. The RSUs are subject to a three year time-based ratable vesting period. Stock-based compensation expense in connection with all stock-based awards is presented as follows (in thousands):
For the three and six months ended June 30, 2018, the impact to stock-based compensation expense related to the Modification and RSUs issued in June 2018 was immaterial. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Indemnification – Subject to certain limitations, the Company is obligated to indemnify its current and former directors, officers and employees with respect to certain litigation matters and investigations that arise in connection with their service to the Company. These obligations arise under the terms of its certificate of incorporation, its bylaws, applicable contracts, and Delaware and California law. The obligation to indemnify generally means that the Company is required to pay or reimburse these individuals’ reasonable legal expenses and possibly damages and other liabilities incurred in connection with these matters. Legal – The Company is named from time to time as a party to lawsuits arising in the ordinary course of business related to its sales, marketing, and the provision of its services and equipment claims. Actions filed against the Company include commercial, intellectual property, customer, and labor and employment related claims, including complaints of alleged wrongful termination and potential class action lawsuits regarding alleged violations of federal and state wage and hour and other laws. In general, litigation can be expensive and disruptive to normal business operations. Moreover, the results of legal proceedings are difficult to predict and the costs incurred in litigation can be substantial. The Company believes the amounts provided in its financial statements are adequate in light of the probable and estimated liabilities. Factors that the Company considers in the determination of the likelihood of a loss and the estimate of the range of that loss in respect of legal matters include the merits of a particular matter, the nature of the matter, the length of time the matter has been pending, the procedural posture of the matter, how the Company intends to defend the matter, the likelihood of settling the matter and the anticipated range of a possible settlement. Because such matters are subject to many uncertainties, the ultimate outcomes are not predictable and there can be no assurances that the actual amounts required to satisfy alleged liabilities from the matters described above will not exceed the amounts reflected in the Company’s financial statements or that the matters will not have a material adverse effect on the Company’s results of operations, financial condition or cash flows. The Company regularly reviews outstanding legal claims and actions to determine if reserves for expected negative outcomes of such claims and actions are necessary. The Company had reserves for all such matters of approximately $3.2 million and $2.2 million as of June 30, 2018 and December 31, 2017, respectively. In conjunction with one of the settlements, the Company is obligated to pay certain future royalties, based on sales of future Products. Operating Leases —The Company leases office and warehouse space, certain equipment, towers, wireless spectrum, software and an aircraft under operating leases with related and unrelated parties expiring in various years through 2028. The leases require the Company to pay additional rent for increases in operating expenses and real estate taxes and contain renewal options. The Company's operating lease arrangements and related terms consisted of the following (in thousands):
Capital Leases —The Company also enters into certain capital leases with expiration dates through May 2022. On an ongoing basis, the Company enters into vehicle lease agreements under a Fleet Lease Agreement. The lease agreements are typically 36 month leases for each vehicle and the average remaining life for the fleet is 14 months, as of June 30, 2018. As of June 30, 2018 and December 31, 2017, the capital lease obligation balance was $18.6 million and $21.7 million, respectively. Build-to-Suit Lease Arrangements —In April 2017, construction on the Logan Facility was completed and the Company commenced occupancy. The building asset totaled $8.3 million and $8.3 million, respectively, net of accumulated depreciation of $0.8 million and $0.3 million, respectively, as of June 30, 2018 and December 31, 2017. |
Related Party Transactions |
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Related Party Transactions [Abstract] | |||||||||||||||||||||
Related Party Transactions | RELATED PARTY TRANSACTIONS Transactions with Vivint Solar The Company and Vivint Solar, Inc. (“Solar”) have entered into agreements under which the Company provided certain ongoing administrative services to Solar through September 2017, and the Sales Dealer Agreement (as defined below). During the three months ended June 30, 2018 and 2017, the Company charged $3.7 million and $0.6 million, respectively, and $4.7 million and $1.1 million for six months ended June 30, 2018 and 2017, respectively, of net expenses to Solar in connection with these agreements. The balance due from Solar in connection with these agreements and other expenses paid on Solar’s behalf was $0.1 million, and $0.2 million at June 30, 2018 and December 31, 2017, respectively, and is included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets. In connection with Solar’s initial public offering in 2014, the Company entered into a number of agreements with Solar related to services and other support that it has provided and will provide to Solar including:
In 2016, the Company and Solar amended the Marketing and Customer Relations Agreement to update certain terms and conditions governing existing cross-marketing initiatives and to implement new cross-marketing initiatives, including a pilot program with the purpose of exploring potential opportunities for each company to offer, sell and integrate the other company’s respective products and services with its standard product offering. In 2017, the Company and Solar entered into a Sales Dealer Agreement (the “Sales Dealer Agreement”), pursuant to which each party will act as a non-exclusive dealer for the other party to market, promote and sell each other’s products. The agreement has an initial two-year term, which will be automatically renewed for successive one-year terms unless written notice of termination is provided by one of the parties to the other no less than 90 days prior to the end of the then current term. The products, territories and consideration that is payable by each party to the other will be determined in accordance with the agreement. The Sales Dealer Agreement governs and replaces substantially all of the activities that were previously undertaken under the Marketing and Customer Relations Agreement described above, including the pilot program. The Company and Solar also agreed to extend the term of the non-solicitation provisions under the existing Non-Competition Agreement to match the term of the Sales Dealer Agreement. Other Related-party Transactions Long-term notes receivables and other assets, includes amounts due for non-interest bearing advances made to employees that are expected to be repaid in excess of one year. Amounts due from employees as of both June 30, 2018 and December 31, 2017, amounted to approximately $0.3 million. As of June 30, 2018 and December 31, 2017, this amount was fully reserved. Prepaid expenses and other current assets at June 30, 2018 and December 31, 2017 included a receivable for $0.6 million and $0.5 million, respectively, from certain members of management in regards to their personal use of the corporate jet. The Company incurred additional expenses of $0.6 million and $0.5 million during the three months ended June 30, 2018 and 2017, respectively, and $1.2 million and $0.8 million during the six months ended June 30, 2018 and 2017, respectively, for other related-party transactions including contributions to the charitable organization Vivint Gives Back, legal fees, and other services. Accrued expenses and other current liabilities at June 30, 2018 and December 31, 2017, included a net payable associated with these related-party transactions of $0.1 million and $1.4 million, respectively. On November 16, 2012, the Company was acquired by an investor group comprised of certain investment funds affiliated with Blackstone Capital Partners VI L.P., and certain co-investors and management investors through certain mergers and related reorganization transactions (collectively, the “Merger”). In connection with the Merger, the Company engaged Blackstone Management Partners L.L.C. (“BMP”) to provide monitoring, advisory and consulting services on an ongoing basis. In consideration for these services, the Company agreed to pay an annual monitoring fee equal to the greater of (i) a minimum base fee of $2.7 million, subject to adjustments if the Company engages in a business combination or disposition that is deemed significant and (ii) the amount of the monitoring fee paid in respect of the immediately preceding fiscal year, without regard to any post-fiscal year “true-up” adjustments as determined by the agreement. The Company incurred expenses for such services of approximately $1.0 million and $1.2 million during the three months ended June 30, 2018 and 2017, respectively, and $2.1 million and $2.4 million during the six months ended June 30, 2018 and 2017, respectively. Accrued expenses and other current liabilities at June 30, 2018 included a liability for $2.9 million to BMP in regards to the monitoring fee. Under the support and services agreement, the Company also engaged BMP to arrange for Blackstone’s portfolio operations group to provide support services customarily provided by Blackstone’s portfolio operations group to Blackstone’s private equity portfolio companies of a type and amount determined by such portfolio services group to be warranted and appropriate. BMP will invoice the Company for such services based on the time spent by the relevant personnel providing such services during the applicable period but in no event shall the Company be obligated to pay more than $1.5 million during any calendar year. During the three and six months ended June 30, 2018 and 2017 the Company incurred no costs associated with such services. Blackstone Advisory Partners L.P. participated as one of the initial purchasers in the issuance of 2022 notes in February 2017 and received approximately $0.2 million of fees at the time of closing of such issuance. From time to time, the Company does business with a number of other companies affiliated with Blackstone. Transactions involving related parties cannot be presumed to be carried out at an arm’s-length basis. |
Employee Benefit Plan |
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Postemployment Benefits [Abstract] | |
Employee Benefit Plan | EMPLOYEE BENEFIT PLAN The Company offers eligible employees the opportunity to contribute a percentage of their earned income into company-sponsored 401(k) plans. Beginning in January 2018, participants in the 401(k) plans are eligible for the Company's matching program. Under this new matching program, the Company matches an employee’s contributions to the 401(k) savings plan dollar-for-dollar up to 1% of such employee’s eligible earnings and $0.50 for every $1.00 for the next 5% of such employee’s eligible earnings. The maximum match available under the 401(k) plan is 3.5% of the employee’s eligible earnings. For employees who have been employed by the Company for less than two years, matching contributions vest on the second anniversary of their date of hire. The Company's matching contributions to employees who have been employed by the Company for two years or more are fully vested. Matching contributions that were made to the plans during the three and six months ended June 30, 2018 totaled $1.4 million and $3.0 million, respectively. No matching contributions were made to the plans during the three and six months ended June 30, 2017. |
Restructuring and Asset Impairment Charges |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Asset Impairment Charges | RESTRUCTURING AND ASSET IMPAIRMENT CHARGES In July 2018, the Company announced a number of cost reduction initiatives that are expected to reduce certain of the Company’s General and Administrative, Customer Service, and Sales Support fixed costs. The Company expects to complete the majority of these cost reduction initiatives in the second and third quarters of 2018, with the remainder by the end of 2018. In addition to resulting in meaningful cost reductions, the Company’s initiatives are expected to streamline operations, focus engineering and innovation and provide a better focus on driving customer satisfaction. As part of these initiatives, the Company and Best Buy agreed in principle to end the co-branded Best Buy Smart Home by Vivint arrangement, which resulted in the elimination of in-store sales positions during the three months ended June 30, 2018. In addition, the Company eliminated other general and administrative positions during the three months ended June 30, 2018. These actions resulted in one-time cash employee severance and termination benefits expenses of $4.1 million during the three and six months ended June 30, 2018. The following table presents accrued restructuring activity for the six months ended June 30, 2018 and the twelve months ended December 31, 2017 (in thousands):
Contract termination costs represent ongoing contractual commitments related to the 2015 restructuring of the Company's Wireless Internet Business. Additional charges may be incurred in the future for facility-related or other restructuring activities as the Company continues to align resources to meet the needs of the business. |
Segment Reporting and Business Concentrations |
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Segment Reporting and Business Concentrations | SEGMENT REPORTING AND BUSINESS CONCENTRATIONS For the three and six months ended June 30, 2018 and 2017, the Company conducted business through one operating segment, Vivint. The Company primarily operated in two geographic regions: United States and Canada. Revenues disaggregated by geographic region were as follows (in thousands):
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Guarantor and Non-Guarantor Supplemental Financial Information |
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Guarantor And Non Guarantor Supplemental Financial Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantor and Non-Guarantor Supplemental Financial Information | GUARANTOR AND NON-GUARANTOR SUPPLEMENTAL FINANCIAL INFORMATION The notes were issued by APX and are fully and unconditionally guaranteed, jointly and severally by Holdings and each of APX’s existing and future material wholly-owned U.S. restricted subsidiaries. APX’s existing and future foreign subsidiaries are not expected to guarantee the notes. Presented below is the condensed consolidating financial information of APX, subsidiaries of APX that are guarantors (the “Guarantor Subsidiaries”), and APX’s subsidiaries that are not guarantors (the “Non-Guarantor Subsidiaries”) as of June 30, 2018 and December 31, 2017 and for the three and six months ended June 30, 2018 and 2017. The unaudited condensed consolidating financial information reflects the investments of APX in the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries using the equity method of accounting. Supplemental Condensed Consolidating Balance Sheet June 30, 2018 (in thousands) (unaudited)
Supplemental Condensed Consolidating Balance Sheet December 31, 2017 (in thousands)
Supplemental Condensed Consolidating Statements of Operations and Comprehensive Loss For the Three Months Ended June 30, 2018 (in thousands) (unaudited)
Supplemental Condensed Consolidating Statements of Operations and Comprehensive Loss For the Three Months Ended June 30, 2017 (in thousands) (unaudited)
Supplemental Condensed Consolidating Statements of Operations and Comprehensive Loss For the Six Months Ended June 30, 2018 (in thousands) (unaudited)
Supplemental Condensed Consolidating Statements of Operations and Comprehensive Loss For the Six Months Ended June 30, 2017 (in thousands) (unaudited)
Supplemental Condensed Consolidating Statements of Cash Flows For the Six Months Ended June 30, 2018 (in thousands) (unaudited)
Supplemental Condensed Consolidating Statements of Cash Flows For the Six Months Ended June 30, 2017 (in thousands) (unaudited)
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Basis of Presentation and Significant Accounting Policies (Policies) |
6 Months Ended |
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Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation —The unaudited condensed consolidated financial statements of the Company are presented for APX Group Holdings, Inc. (“Holdings") and its wholly-owned subsidiaries. The Company has prepared the accompanying unaudited condensed consolidated financial statements pursuant to GAAP. Preparing financial statements requires the Company to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and accompanying disclosures. Although these estimates are based on the Company’s best knowledge of current events and actions that the Company may undertake in the future, actual results may be different from the Company’s estimates. The results of operations presented herein are not necessarily indicative of the Company’s results for any future period. |
Vivint Flex Pay | Vivint Flex Pay—In January 2017, the Company announced the introduction of the Vivint Flex Pay plan (“Vivint Flex Pay”), which became the Company's primary sales model beginning in March 2017. Under Vivint Flex Pay, customers pay separately for the products (including control panel, security peripheral equipment, smart home equipment, and related installation) (“Products”) and Vivint's smart home and security services (“Services”). The customer has the following three options to pay for the Products: (1) qualified customers in the United States may finance the purchase of Products through a third-party financing provider (“Consumer Financing Program”) (2) customers not eligible for the Consumer Financing Program, but who qualify under the Company's underwriting criteria, may enter into a retail installment contract (“RIC”) directly with Vivint, or (3) customers may purchase the Products at the outset of the service contract with check, automatic clearing house payments (“ACH”), credit or debit card. Although customers pay separately for Products and Services under the Vivint Flex Pay plan, the Company has determined that the shift in model does not change the Company's conclusion that the sale of Products and Services are one single performance obligation. As a result, all forms of transactions under Vivint Flex Pay create deferred revenue for the gross amount of Products sold. Gross deferred revenues are reduced by imputed interest on the RICs and the present value of expected payments due to the third-party financing provider under the Consumer Financing Program. Under the Consumer Financing Program, qualified customers are eligible for installment loans provided by a third-party financing provider of up to $4,000 for either 42 or 60 months. The Company pays a monthly fee to the third-party financing provider based on the average daily outstanding balance of the installment loans. Additionally, the Company shares liability for credit losses depending on the credit quality of the customer. Because of the nature of these provisions under the Consumer Financing Program, the Company records a derivative liability at its fair value when the third-party financing provider originates installment loans to customers, which reduces the amount of estimated revenue recognized on the provision of the services. The derivative liability is reduced as payments are made from the Company to the third-party financing provider. Subsequent changes to the fair value of the derivative liability are realized through other loss/(income), net in the Condensed Consolidated Statement of Operations. (See Note 8). |
Retail Installment Contract Receivables | Retail Installment Contract Receivables—For customers that enter into a RIC under the Vivint Flex Pay plan, the Company records a receivable for the amount financed. The RIC receivables are recorded at their present value, net of the imputed interest. At the time of installation, the Company records a long-term note receivable within long-term notes receivables and other assets, net on the condensed consolidated balance sheets for the present value of the receivables that are expected to be collected beyond 12 months of the reporting date. The unbilled receivable amounts that are expected to be collected within 12 months of the reporting date are included as a short-term notes receivable within accounts and notes receivable, net on the condensed consolidated balance sheets. The billed amounts of notes receivables are included in accounts receivable within accounts and notes receivable, net on the condensed consolidated balance sheets. The Company imputes the interest on the RIC receivable using a risk adjusted market interest rate and records it as an adjustment to deferred revenue and as an adjustment to the face amount of the related receivable. The imputed interest discount considers a number of factors, including collection experience, aging of the remaining RIC receivable portfolios, credit quality of the subscriber base and other qualitative considerations, including macro-economic factors. The imputed interest income is recognized over the term of the RIC contract as recurring and other revenue on the condensed consolidated statement of operations. When the Company determines that there are RIC receivables that have become uncollectible, the Company records an adjustment to the imputed interest discount and reduce the related note receivable balance. Account balances are written-off if collection efforts are unsuccessful and future collection is unlikely based on the length of time from the day accounts become past due. |
Accounts Receivable | Accounts Receivable —Accounts receivable consists primarily of amounts due from customers for recurring monthly monitoring Services and the billed portion of RIC receivables. The accounts receivable are recorded at invoiced amounts and are non-interest bearing and are included within accounts and notes receivable, net on the condensed consolidated balance sheets. Accounts receivable totaled $25.8 million and $24.3 million at June 30, 2018 and December 31, 2017, respectively net of the allowance for doubtful accounts of $4.6 million and $5.4 million at June 30, 2018 and December 31, 2017, respectively. The Company estimates this allowance based on historical collection experience and subscriber attrition rates. When the Company determines that there are accounts receivable that are uncollectible, they are charged off against the allowance for doubtful accounts. As of June 30, 2018 and December 31, 2017, no accounts receivable were classified as held for sale. The provision for doubtful accounts is included in general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations and totaled $4.4 million and $5.0 million for the three months ended June 30, 2018 and 2017, respectively, and $8.4 million and $9.7 million for the six months ended June 30, 2018 and 2017, respectively. |
Revenue Recognition | Revenue Recognition— The Company offers its customers smart home services combining Products, including a proprietary control panel, door and window sensors, door locks, security cameras and smoke alarms; installation; and a proprietary back-end cloud platform software and Services. These together create an integrated system that allows the Company’s customers to monitor, control and protect their home (“Smart Home Services”). The Company’s customers are buying this integrated system that provides them with these Smart Home Services. The number and type of Products purchased by a customer depends on their desired functionality. Because the Products and Services included in the customer’s contract are integrated and highly interdependent, and because they must work together to deliver the Smart Home Services, the Company has concluded that installed Products, related installation and Services contracted for by the customer are generally not distinct within the context of the contract and, therefore, constitute a single, combined performance obligation. Revenues for this single, combined performance obligation are recognized on a straight-line basis over the customer’s contract term. The Company has determined that certain contracts that do not require a long-term commitment for monitoring services by the customer contain a material right to renew the contract, because the customer does not have to purchase Products upon renewal. Proceeds allocated to the material right are recognized over the period benefit, which is generally three years. The majority of the Company’s subscription contracts are between three and five years in length and are non-cancelable. These contracts with customers generally convert into month-to-month agreements at the end of the initial term, and some customer contracts are month-to-month from inception. Payment for recurring monitoring and other Smart Home Services is generally due in advance on a monthly basis. Sales of Products and other one-time fees such as service fees or installation fees are invoiced to the customer at the time of sale. Revenues for wireless internet service provided by Vivint Wireless Inc. (“Wireless Internet” or “Wireless”) and any Products or Services that are considered separate performance obligations are recognized when those Products or Services are delivered. Taxes collected from customers and remitted to governmental authorities are not included in revenue. Payments received or amounts billed in advance of revenue recognition are reported as deferred revenue. |
Deferred Revenue | Deferred Revenue— The Company's deferred revenues primarily consist of amounts for sales (including upfront proceeds) of Smart Home Services. Deferred revenues are recognized over the term of the related performance obligation. |
Subscriber Acquisition Costs | Capitalized Contract Costs —Capitalized contract costs represent the costs directly related and incremental to the origination of new contracts, modification of existing contracts or to the fulfillment of the related customer contracts. These include commissions, other compensation and related costs paid directly for the origination and installation of new or upgraded customer contracts, as well as the cost of Products installed in the customer home at the commencement or modification of the contract. These costs are deferred and amortized on a straight-line basis over the expected period of benefit that the Company has determined to be five years. Amortization of capitalized contract costs is included in “Depreciation and Amortization” on the consolidated statements of operations. These deferred costs are periodically reviewed for impairment. Contract costs not directly related and incremental to the origination of new contracts, modification of existing contracts or to the fulfillment of the related customer contracts are expensed as incurred. These costs include those associated with housing, marketing and recruiting, non-direct lead generation costs, certain portions of sales commissions and residuals, overhead and other costs considered not directly and specifically tied to the origination of a particular subscriber. On the condensed consolidated statement of cash flows, capitalized contract costs are classified as operating activities and reported as “Capitalized contract costs – deferred contract costs” as these assets represent deferred costs associated with customer contracts. |
Cash and Cash Equivalents | Cash and Cash Equivalents— Cash and cash equivalents consists of highly liquid investments with remaining maturities when purchased of three months or less. |
Inventories | Inventories —Inventories, which are comprised of smart home and security system Products and parts, are stated at the lower of cost or net realizable value with cost determined under the first-in, first-out (FIFO) method. The Company adjusts the inventory balance based on anticipated obsolescence, usage and historical write-offs. |
Long-lived Assets and Intangibles, Property, Plant and Equipment | Long-lived Assets and Intangibles —Property, plant and equipment are stated at cost and depreciated on the straight-line method over the estimated useful lives of the assets or the lease term for assets under capital leases, whichever is shorter. Intangible assets with definite lives are amortized over the remaining estimated economic life of the underlying technology or relationships, which ranges from five to ten years. Definite-lived intangible assets are amortized on the straight-line method over the estimated useful life of the asset or in a pattern in which the economic benefits of the intangible asset are consumed. Amortization expense associated with leased assets is included with depreciation expense. Routine repairs and maintenance are charged to expense as incurred. The Company reviews long-lived assets, including property, plant and equipment, capitalized contract costs, and definite-lived intangibles for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company considers whether or not indicators of impairment exist on a regular basis and as part of each quarterly and annual financial statement close process. Factors the Company considers in determining whether or not indicators of impairment exist include market factors and patterns of customer attrition. If indicators of impairment are identified, the Company estimates the fair value of the assets. An impairment loss is recognized if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. |
Long-lived Assets and Intangibles, Intangible Assets | Wireless Spectrum Licenses—The Company had capitalized, as an intangible asset, wireless spectrum licenses that its subsidiary, Vivint Wireless, acquired from a third party. The cost basis of the wireless spectrum asset included the purchase price paid for the licenses at the time of acquisition, plus costs incurred to acquire the licenses. The asset and related liability were recorded at the net present value of future cash outflows using the Company's incremental borrowing rate at the time of acquisition. The Company determined that the wireless spectrum licenses met the definition of indefinite-lived intangible assets because the licenses were able to be renewed periodically for a nominal fee, provided that the Company continued to meet the service and geographic coverage provisions. During the six months ended June 30, 2018, the Company terminated the wireless spectrum licenses for cash consideration. Long-lived Assets and Intangibles —Property, plant and equipment are stated at cost and depreciated on the straight-line method over the estimated useful lives of the assets or the lease term for assets under capital leases, whichever is shorter. Intangible assets with definite lives are amortized over the remaining estimated economic life of the underlying technology or relationships, which ranges from five to ten years. Definite-lived intangible assets are amortized on the straight-line method over the estimated useful life of the asset or in a pattern in which the economic benefits of the intangible asset are consumed. Amortization expense associated with leased assets is included with depreciation expense. Routine repairs and maintenance are charged to expense as incurred. The Company reviews long-lived assets, including property, plant and equipment, capitalized contract costs, and definite-lived intangibles for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company considers whether or not indicators of impairment exist on a regular basis and as part of each quarterly and annual financial statement close process. Factors the Company considers in determining whether or not indicators of impairment exist include market factors and patterns of customer attrition. If indicators of impairment are identified, the Company estimates the fair value of the assets. An impairment loss is recognized if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The Company conducts an indefinite-lived intangible impairment analysis annually as of October 1, and as necessary if changes in facts and circumstances indicate that the fair value of the Company’s indefinite-lived intangibles may be less than the carrying amount. When indicators of impairment do not exist and certain accounting criteria are met, the Company is able to evaluate indefinite-lived intangible impairment using a qualitative approach. When necessary, the Company’s quantitative impairment test consists of two steps. The first step requires that the Company compare the estimated fair value of its indefinite-lived intangibles to the carrying value. If the fair value is greater than the carrying value, the intangibles are not considered to be impaired and no further testing is required. If the fair value is less than the carrying value, an impairment loss in an amount equal to the difference is recorded. |
Long-term Investments | Long-term Investments —The Company’s long-term investments are comprised of equity securities in both privately held and public companies. As of June 30, 2018 and December 31, 2017, the Company's equity investments totaled $4.2 million and $3.4 million, respectively. Management determines the appropriate fair value measurement of its investments at the time of purchase and reevaluates the fair value measurement at each balance sheet date. Equity securities are classified as either short-term or long-term, based on the nature of each security and its availability for use in current operations. The Company’s equity securities are carried at fair value, with gains and losses reported in other income or loss within the statement of operations. The Company's equity investments without readily determinable fair values totaled $0.7 million as of June 30, 2018 and December 31, 2017, respectively. The Company performs impairment analyses of its investments without readily determinable fair values when events occur or circumstances change that would, more likely than not, reduce the fair value of the investment below its carrying value. When indicators of impairment do not exist, the Company evaluates impairment using a qualitative approach. Additionally, increases or decreases in the carrying amount resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer are adjusted through the statement of operations as needed. As of June 30, 2018 and December 31, 2017, no indicators of impairment or changes in observable prices existed associated with investments without readily determinable fair values. |
Deferred Financing Costs | Deferred Financing Costs —Costs incurred in connection with obtaining debt financing are deferred and amortized utilizing the straight-line method, which approximates the effective-interest method, over the life of the related financing. Deferred financing costs incurred with draw downs on APX Group, Inc.’s (“APX”) revolving credit facility will be amortized over the amended maturity dates discussed in Note 3. If such financing is paid off or replaced prior to maturity with debt instruments that have substantially different terms, the unamortized costs are charged to expense. |
Residual Income Plans | Residual Income Plans —The Company has a program that allows certain third-party sales channel partners to receive additional compensation based on the performance of the underlying contracts they create (the “Channel Partner Plan”). In addition, during the three months ended June 30, 2018, the Company introduced a new residual sales compensation plan (the “Residual Plan”). Under the Residual Plan, the Company's sales personnel (each, a “Plan Participant”) have the option to convert up to a specified portion of their earnings (as defined in the Residual Plan) into the right to receive monthly residual compensation payable over the life of the subscriber accounts sold by such Plan Participant. For both the Channel Partner Plan and Residual Plan, the Company calculates the present value of the expected future residual payments and records a liability for this amount in the period the subscriber account is originated. These initial costs and subsequent adjustments to the estimated liability are recorded to capitalized contract costs. The Company monitors actual payments and customer attrition on a periodic basis and, when necessary, makes adjustments to the liability. |
Stock-Based Compensation | Stock-Based Compensation —The Company measures compensation costs based on the grant-date fair value of the award and recognizes that cost over the requisite service period of the awards (See Note 10). |
Advertising Expense | Advertising Expense —Advertising costs are expensed as incurred. |
Income Taxes | Income Taxes —The Company accounts for income taxes based on the asset and liability method. Under the asset and liability method, deferred tax assets and deferred tax liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets when it is determined that it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. The Company recognizes the effect of an uncertain income tax position on the income tax return at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. The Company’s policy for recording interest and penalties is to record such items as a component of the provision for income taxes. |
Concentrations of Credit Risk | Concentrations of Credit Risk —Financial instruments that potentially subject the Company to concentration of credit risk consist principally of receivables and cash. At times during the year, the Company maintains cash balances in excess of insured limits. The Company is not dependent on any single customer or geographic location. The loss of a customer would not adversely impact the Company’s operating results or financial position. |
Concentrations of Supply Risk | Concentrations of Supply Risk —As of June 30, 2018, approximately 76% of the Company’s installed panels were SkyControl panels and 23% were 2GIG Go!Control panels. During the three months ended March 31, 2018 the Company transitioned to a new panel supplier. The loss of the Company's panel supplier could potentially impact its operating results or financial position. |
Fair Value Measurement | Fair Value Measurement —Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities subject to on-going fair value measurement are categorized and disclosed into one of three categories depending on observable or unobservable inputs employed in the measurement. These two types of inputs have created the following fair value hierarchy: Level 1: Quoted prices in active markets that are accessible at the measurement date for assets and liabilities. Level 2: Observable prices that are based on inputs not quoted in active markets, but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. The Company recognizes transfers between levels of the hierarchy based on the fair values of the respective financial measurements at the end of the reporting period in which the transfer occurred. There were no transfers between levels of the fair value hierarchy during the six months ended June 30, 2018 and 2017. The carrying amounts of the Company’s accounts receivable, accounts payable and accrued and other liabilities approximate their fair values due to their short maturities. |
Goodwill | Goodwill —The Company conducts a goodwill impairment analysis annually in the fourth fiscal quarter, as of October 1, and as necessary if changes in facts and circumstances indicate that the fair value of the Company’s reporting units may be less than their carrying amounts. When indicators of impairment do not exist and certain accounting criteria are met, the Company is able to evaluate goodwill impairment using a qualitative approach. When necessary, the Company’s quantitative goodwill impairment test consists of two steps. The first step requires that the Company compare the estimated fair value of its reporting units to the carrying value of the reporting unit’s net assets, including goodwill. If the fair value of the reporting unit is greater than the carrying value of its net assets, goodwill is not considered to be impaired and no further testing is required. If the fair value of the reporting unit is less than the carrying value of its net assets, the Company would be required to complete the second step of the test by analyzing the fair value of its goodwill. If the carrying value of the goodwill exceeds its fair value, an impairment charge is recorded. The Company’s reporting units are determined based on its current reporting structure, which as of December 31, 2017 and June 30, 2018 consisted of two reporting units. As of June 30, 2018, there were no changes in facts and circumstances since the most recent annual impairment analysis to indicate impairment existed. |
Foreign Currency Translation and Other Comprehensive Income | Foreign Currency Translation and Other Comprehensive Income —The functional currency of Vivint Canada, Inc. is the Canadian dollar. Accordingly, Vivint Canada, Inc. assets and liabilities are translated from their respective functional currencies into U.S. dollars at period-end rates and Vivint Canada, Inc. revenue and expenses are translated at the weighted-average exchange rates for the period. Adjustments resulting from this translation process are classified as other comprehensive income (loss) and shown as a separate component of equity. When intercompany foreign currency transactions between entities included in the consolidated financial statements are of a long term investment nature (i.e., those for which settlement is not planned or anticipated in the foreseeable future) foreign currency translation adjustments resulting from those transactions are included in stockholders’ deficit as accumulated other comprehensive loss or income. When intercompany transactions are deemed to be of a short term nature, translation adjustments are required to be included in the condensed consolidated statement of operations. |
Letters of Credit | Letters of Credit —As of June 30, 2018 and December 31, 2017, the Company had $11.5 million and $9.5 million, respectively, of letters of credit issued in the ordinary course of business, all of which are undrawn. |
Restructuring and Asset Impairment Charges | Restructuring and Asset Impairment Charges —Restructuring and asset impairment charges represent expenses incurred in relation to activities to exit or dispose of portions of the Company's business that do not qualify as discontinued operations. Liabilities associated with restructuring are measured at their fair value when the liability is incurred. Expenses for related termination benefits are recognized at the date the Company notifies the employee, unless the employee must provide future service, in which case the benefits are expensed ratably over the future service period. Liabilities related to termination of a contract are measured and recognized at fair value when the contract does not have any future economic benefit to the entity and the fair value of the liability is determined based on the present value of the remaining obligation. The Company expenses all other costs related to an exit or disposal activity as incurred (See Note 14). |
New Accounting Pronouncements | Recent Accounting Pronouncements —In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-13, “Financial Instruments—Credit Losses (Topic 326)” which modifies the measurement of expected credit losses of certain financial instruments. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019 and must be applied using a modified-retrospective approach, with early adoption permitted. The Company is evaluating the adoption of ASU 2016-13 and plans to provide additional information about its expected impact at a future date. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 326)” to increase transparency and comparability among organizations as it relates to lease assets and lease liabilities. The update requires that lease assets and lease liabilities be recognized on the balance sheet, and that key information about leasing arrangements be disclosed. Prior to this update, GAAP did not require operating leases to be recognized as lease assets and lease liabilities on the balance sheet. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018 and must be applied using a modified retrospective approach, with early adoption permitted. The Company is in the initial stages of evaluating the impact of ASU 2016-02 on its accounting policies, processes, and system requirements. The Company’s current operating lease portfolio is primarily comprised of network, real estate, and equipment leases. Upon adoption of this standard, the Company expects the balance sheet to include a right of use asset and liability related to substantially all operating lease arrangements. The Company has assigned internal resources to perform the evaluation. Furthermore, the Company has made and will continue to make investments in systems to enable timely and accurate reporting under the new standard. While the Company continues to assess the potential impacts of ASU 2016-02, including the areas described above, and anticipates this standard could have a material impact on the consolidated financial statements, the Company does not know or cannot reasonably estimate quantitative information related to the impact of the new standard on the financial statements at this time. Recently Adopted Accounting Standards ASU 2016-01 In January 2016, the FASB issued ASU 2016-01, "Financial Instruments-Overall (Subtopic 825-10)" which enhances the reporting model for financial instruments by addressing certain aspects of the recognition, measurement, presentation and disclosure of financial instruments. Key provisions require equity investments (except those accounted for under the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income (loss). In addition, the exit price notion must be used when measuring the fair value of financial instruments for disclosure purposes. ASU 2016-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company adopted ASU 2016-01 on January 1, 2018, with a cumulative-effect adjustment to increase accumulated deficit by $0.7 million for the net unrealized losses within accumulated other comprehensive income related to equity investments. During the three and six months ended June 30, 2018, the Company recorded a net gain of $0.4 million and $0.7 million, respectively, to other income associated with the change in fair value of equity investments. ASU 2014-09 In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605).” Under Topic 606, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, Topic 606 requires enhanced disclosures, including disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Topic 606 also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer. Collectively, the Company refers to Topic 606 and Subtopic 340-40 as the “new standard”. The Company adopted the new standard as of January 1, 2018, utilizing the modified retrospective method of transition (the cumulative catch-up transition method). Adoption of the new standard resulted in changes to the accounting policies for revenue recognition, deferred revenue, and capitalized contract costs (formerly subscriber acquisition costs). The cumulative effect of applying the new standard to all contracts with customers that were not completed as of January 1, 2018 was recorded as an adjustment to accumulated deficit as of the adoption date. The comparative information has not been adjusted and continues to be reported under Topic 605. See Note 2 "Revenue and Capitalized Contract Costs" for additional information related to the impact of adopting this standard and a discussion of the Company's updated policies related to revenue recognition and accounting for costs to obtain and fulfill a customer contract. |
Basis of Presentation and Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Company's Allowance for Accounts Receivable | The changes in the Company’s allowance for accounts receivable were as follows for the periods ended (in thousands):
The following table summarizes the installment receivables (in thousands):
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Schedule Of Depreciation And Amortization Expense | The Company’s depreciation and amortization included in the consolidated statements of operations consisted of the following (in thousands):
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Schedule Of Foreign Translation Activity | Translation activity included in the statement of operations in other loss, net related to intercompany balances was as follows: (in thousands)
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Revenue and Capitalized Contract Costs (Tables) |
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | As a result of applying the modified retrospective method to adopt the new revenue guidance, the following adjustments were made to select consolidated balance sheet line items as of January 1, 2018 (in thousands):
The following tables compare the select reported condensed consolidated balance sheets, statements of operations and cash flows line items to the amounts had the previous guidance been in effect (in thousands):
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Long-Term Debt (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Expense and Loss on Extinguishment and Deferred Financing Costs | As a result of these analyses the company recorded the following amounts of other expense and loss on extinguishment and deferred financing costs during the six months ended June 30, 2017 (in thousands):
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Schedule of Deferred Financing Activity | The following table presents deferred financing activity for the six months ended June 30, 2018 and year ended December 31, 2017 (in thousands):
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Summary of Debt | The Company’s debt at June 30, 2018 and December 31, 2017 consisted of the following (in thousands):
|
Retail Installment Contract Receivables (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Installment Receivables | The changes in the Company’s allowance for accounts receivable were as follows for the periods ended (in thousands):
The following table summarizes the installment receivables (in thousands):
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Allowance for Credit Losses on Financing Receivables | Activity in the deferred interest for the RIC receivables was as follows (in thousands):
|
Balance Sheet Components (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Company's Balance Sheet Components | The following table presents material balance sheet component balances (in thousands):
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Property and Equipment (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Property Plant and Equipment | Property, plant and equipment consisted of the following (in thousands):
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Goodwill and Intangible Assets (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Indefinite-Lived Intangible Assets | The following table presents intangible asset balances (in thousands):
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Schedule of Definite-Lived Intangible Assets | The following table presents intangible asset balances (in thousands):
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Schedule of Estimated Future Amortization Expense of Intangible Assets Excluding Patents Currently in Process | Estimated future amortization expense of intangible assets, excluding approximately $0.3 million in patents currently in process, is as follows as of June 30, 2018 (in thousands):
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Financial Instruments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, by Balance Sheet Grouping | The following tables set forth the Company’s cash and cash equivalents and Corporate Securities’ adjusted cost, gross unrealized gains, gross unrealized losses, gross realized gains, gross realized losses and fair value by significant investment category recorded as cash and cash equivalents or long-term notes receivables and other assets, net as of June 30, 2018 and December 31, 2017 (in thousands):
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Schedule of Long-term Debt Instruments | Components of long-term debt including the associated interest rates and related fair values are as follows (in thousands, except interest rates):
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Schedule of Derivative Liabilities at Fair Value | June 30, 2018 and December 31, 2017 (in thousands):
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Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation | The following table summarizes the change in the fair value of the Level 3 outstanding derivative liability instrument for the six months ended June 30, 2018 and the twelve months ended December 31, 2017 (in thousands):
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Stock-Based Compensation and Equity (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation Expense | Stock-based compensation expense in connection with all stock-based awards is presented as follows (in thousands):
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Commitments and Contingencies (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Leases of Lessee Disclosure | The Company's operating lease arrangements and related terms consisted of the following (in thousands):
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Restructuring and Asset Impairment Charges (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Restructuring Activity | The following table presents accrued restructuring activity for the six months ended June 30, 2018 and the twelve months ended December 31, 2017 (in thousands):
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Segment Reporting and Business Concentrations (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas | Revenues disaggregated by geographic region were as follows (in thousands):
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Guarantor and Non-Guarantor Supplemental Financial Information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantor And Non Guarantor Supplemental Financial Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Condensed Consolidating Balance Sheet | Supplemental Condensed Consolidating Balance Sheet June 30, 2018 (in thousands) (unaudited)
Supplemental Condensed Consolidating Balance Sheet December 31, 2017 (in thousands)
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Supplemental Condensed Consolidating Statements of Operations and Comprehensive (Loss) Income | Supplemental Condensed Consolidating Statements of Operations and Comprehensive Loss For the Three Months Ended June 30, 2018 (in thousands) (unaudited)
Supplemental Condensed Consolidating Statements of Operations and Comprehensive Loss For the Three Months Ended June 30, 2017 (in thousands) (unaudited)
Supplemental Condensed Consolidating Statements of Operations and Comprehensive Loss For the Six Months Ended June 30, 2018 (in thousands) (unaudited)
Supplemental Condensed Consolidating Statements of Operations and Comprehensive Loss For the Six Months Ended June 30, 2017 (in thousands) (unaudited)
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Supplemental Condensed Consolidating Statements of Cash Flows | Supplemental Condensed Consolidating Statements of Cash Flows For the Six Months Ended June 30, 2018 (in thousands) (unaudited)
Supplemental Condensed Consolidating Statements of Cash Flows For the Six Months Ended June 30, 2017 (in thousands) (unaudited)
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Basis of Presentation and Significant Accounting Policies - Accounts Receivable (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
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Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
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Accounting Policies [Abstract] | |||||
Accounts receivable classified as held for sale | $ 0 | $ 0 | $ 0 | ||
Allowance for Doubtful Accounts Receivable [Roll Forward] | |||||
Beginning balance | 5,356,000 | $ 4,138,000 | 4,138,000 | ||
Provision for doubtful accounts | 4,400,000 | $ 5,000,000 | 8,409,000 | $ 9,726,000 | 22,465,000 |
Write-offs and adjustments | (9,138,000) | (21,247,000) | |||
Balance at end of period | $ 4,627,000 | $ 4,627,000 | $ 5,356,000 |
Basis of Presentation and Significant Accounting Policies - Depreciation and Amortization (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
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Property, Plant and Equipment [Line Items] | ||||
Total depreciation and amortization | $ 126,873 | $ 80,096 | $ 251,131 | $ 156,965 |
Depreciation of property, plant and equipment | ||||
Property, Plant and Equipment [Line Items] | ||||
Total depreciation and amortization | 6,204 | 5,227 | 12,377 | 9,862 |
Amortization of capitalized contract costs | ||||
Property, Plant and Equipment [Line Items] | ||||
Total depreciation and amortization | 97,937 | 0 | 193,302 | 0 |
Amortization of subscriber acquisition costs | ||||
Property, Plant and Equipment [Line Items] | ||||
Total depreciation and amortization | 0 | 49,501 | 0 | 96,383 |
Amortization of definite-lived intangibles | ||||
Property, Plant and Equipment [Line Items] | ||||
Total depreciation and amortization | $ 22,732 | $ 25,368 | $ 45,452 | $ 50,720 |
Revenue and Capitalized Contract Costs - Remaining Performance Obligations (Details) $ in Billions |
6 Months Ended |
---|---|
Jun. 30, 2018
USD ($)
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Revenue from Contract with Customer [Abstract] | |
Performance obligations expected to be satisfied | $ 2.6 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-04-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation, percentage | 3 years |
Performance obligations expected to be satisfied, expected timing | 59.00% |
Retail Installment Contract Receivables - Allowance for Credit Losses (Details) - Retail Installment Contracts - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2018 |
Dec. 31, 2017 |
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Financing Receivable, Allowance for Credit Losses [Roll Forward] | ||
Deferred interest, beginning of period | $ 36,048 | $ 0 |
Write-offs, net of recoveries | (12,464) | (6,055) |
Change in deferred interest on short-term and long-term RIC receivables | 14,887 | 42,103 |
Deferred interest, end of period | $ 38,471 | $ 36,048 |
Property Plant and Equipment - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
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Property, Plant and Equipment [Line Items] | |||||
Property plant and equipment, gross | $ 152,111 | $ 152,111 | $ 139,211 | ||
Accumulated amortization | 70,861 | 70,861 | 61,130 | ||
Depreciation and amortization expense | 6,200 | $ 5,200 | 12,400 | $ 9,900 | |
Assets Under Capital Lease Obligations | |||||
Property, Plant and Equipment [Line Items] | |||||
Property plant and equipment, gross | 27,200 | 27,200 | 26,200 | ||
Accumulated amortization | $ 19,300 | $ 19,300 | $ 16,600 |
Goodwill and Intangible Assets - Future Amortization Expense (Detail) $ in Thousands |
Jun. 30, 2018
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
2018 - Remaining Period | $ 45,503 |
2019 | 78,993 |
2020 | 67,808 |
2021 | 58,608 |
2022 | 48,734 |
Thereafter | 40 |
Total estimated amortization expense | $ 299,686 |
Financial Instruments - Derivative Fair Value (Details) - Level 2 - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Derivatives, Fair Value [Line Items] | ||
Fair value | $ 83,294 | $ 46,496 |
Notional amount | 282,337 | 163,032 |
Accrued expenses and other current liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Fair value | 43,794 | 25,473 |
Other long-term obligations | ||
Derivatives, Fair Value [Line Items] | ||
Fair value | $ 39,500 | $ 21,023 |
Financial Instruments - Level 3 (Details) - Fair Value, Inputs, Level 3 - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2018 |
Dec. 31, 2017 |
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Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward] | ||
Balance, beginning of period | $ 46,496 | $ 0 |
Additions | 43,534 | 44,913 |
Settlements | (13,632) | (7,972) |
Losses included in earnings | 6,896 | 9,555 |
Balance, end of period | $ 83,294 | $ 46,496 |
Income Taxes (Detail) |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Income Tax Disclosure [Abstract] | ||
Effective income tax rate | 0.69% | (0.53%) |
Stock-Based Compensation and Equity - Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation | $ 338 | $ 461 | $ 542 | $ 886 |
Operating expenses | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation | 26 | 21 | 44 | 40 |
Selling expenses | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation | 81 | 56 | 126 | 110 |
General and administrative expenses | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation | $ 231 | $ 384 | $ 372 | $ 736 |
Employee Benefit Plan (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
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Postemployment Benefits [Abstract] | ||||
Employer matching contribution, percent of employees' gross pay | 1.00% | |||
Employer matching contribution, amount for every employees' dollar contributed | $ 0.50 | |||
Employer matching contribution, percent of employees' gross pay for 50% matching for every dollar contributed | 5.00% | |||
Maximum annual contributions per employee, percent | 3.50% | |||
Matching contributions to the plan | $ 1,400,000 | $ 0 | $ 3,000,000 | $ 0 |
Restructuring and Asset Impairment Charges (Detail) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2018 |
Dec. 31, 2017 |
|
Restructuring Reserve [Roll Forward] | ||
Accrued restructuring, beginning balance | $ 558 | $ 649 |
Restructuring charges | 4,141 | |
Cash payments | (2,542) | (91) |
Accrued restructuring, ending balance | 2,157 | 558 |
Contract termination costs | ||
Restructuring Reserve [Roll Forward] | ||
Accrued restructuring, beginning balance | 558 | 649 |
Restructuring charges | 0 | |
Cash payments | (23) | (91) |
Accrued restructuring, ending balance | 535 | 558 |
Employee severance and termination benefits | ||
Restructuring Reserve [Roll Forward] | ||
Accrued restructuring, beginning balance | 0 | 0 |
Restructuring charges | 4,141 | |
Cash payments | (2,519) | 0 |
Accrued restructuring, ending balance | $ 1,622 | $ 0 |
Segment Reporting and Business Concentrations (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2017
USD ($)
|
Jun. 30, 2018
USD ($)
region
segment
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Jun. 30, 2017
USD ($)
segment
|
|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Number of operating segments | segment | 1 | 1 | ||
Number of geographic regions | region | 2 | |||
Revenue from external customers | $ 254,967 | $ 212,126 | $ 501,564 | $ 417,479 |
United States | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Revenue from external customers | 237,513 | 196,735 | 466,055 | 386,765 |
Canada | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Revenue from external customers | $ 17,454 | $ 15,391 | $ 35,509 | $ 30,714 |
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