APX — SPAC Merger (October 2019)
69 slides from APX's SPAC merger presentation, Oct 29, 2019
Slide 1: Creating the Smart Home Experience Investor Presentation October 2019
C R E A T I N G T H E S M A R T H O M E E X P E R I E N C E I N V E S T O R P R E S E N T A T I O N O C T O B E R 2 0 1 9
Slide 2: Explanatory Note and Disclaimers
Explanatory Note and Disclaimers Explanatory Note This presentation supplements and updates the investor presentation, dated September 16, 2019 (the “Original Presentation”), substantially to reflect the following changes: Revised Slide 3 to reflect the filing of the S-4 prior to the date of this pr
Slide 3: Explanatory Note and Disclaimers
Explanatory Note and Disclaimers Disclaimers The recipient of this presentation shall not use it for any purpose other than expressly authorized by Mosaic Acquisition Corp. (“Mosaic”) and Vivint Smart Home, Inc. (“Vivint”). Any reproduction or distribution of this presentation, in whole or in part,
Slide 4: Today's presenters and leadership
Today’s presenters and leadership Todd Pedersen Alex Dunn Dale Gerard Drew McKnight David Maura Vivint Smart Home Vivint Smart Home Vivint Smart Home Fortress Investment Group Mosaic Acquisition Corp. Founder and Chief Executive Officer President Interim Chief Financial Officer Managing Partner Chai
Slide 5: Strong base of committed shareholders with aligned interests
Strong base of committed shareholders with aligned interests, including: Long-standing Commitment to Vivint Global investment manager with $545 billion1 in assets under management, and a 30+ year track record of value creation Notable history of successfully investing in the technology sector Highly
Slide 6: Agenda
AGENDA 1 I N V E S T M E N T T H E S I S 2 C O M P A N Y O V E R V I E W 3 G R O W T H S T R A T E G Y 4 F I N A N C I A L S U M M A R Y 5 T R A N S A C T I O N O V E R V I E W A N D C O M P A R A B L E S A P P E N D I X A : G E N E R A L A P P E N D I X B : F I N A N C I A L S U P P L E M E N T 6
Slide 7: Investment Thesis
INVESTMENT THESIS
Slide 8: Investment thesis for Vivint Smart Home
Investment thesis for Vivint Smart Home Proprietary cloud-based software platform Attractive recurring business model Compelling unit economics with Flex Pay Strong subscriber momentum delivering premier Smart-Home-as-a-Service significantly enhancing capital efficiency Subscribers (M) 1.5M 20M+ Lar
Slide 9: Company Overview
COMPANY OVERVIEW
Slide 10: Customer Experience Video
CUSTOMER EXPERIENCE VIDEO vivint.com/cxvideo
Slide 11: In the next hour…
In the next hour… 84M 98K 36K 31K 33K 101K events processed in live video views from views of home changes to locks and actions performed home state changes to the cloud by the Vivint apps and panels, plus activity history from thermostats via apps, automatically by the Away decided by Smart Home OS
Slide 12: Vivint's Mission
VIVINT’S MISSION Redefine the home experience through intelligently designed cloud-enabled solutions delivered to every home by people who care. 12
Slide 13: Delivering a transformative Smart Home experience
Delivering a transformative Smart Home experience requires simply and affordably integrating consumers’ digital and physical worlds Transforming everyday experiences sets a high bar for consumer-facing technology Digital Physical Doing this in mainstream consumers’ Transformative homes requires exte
Slide 14: Vivint is in the early days of a big opportunity
Vivint is in the early days of a big opportunity Significant household opportunity in North America Conventional market sizing underestimates the home opportunity North American Smart Home Market (2019E – 2023E)3 20% CAGR $33B 1.5M 160M $16B Current U.S. and Canadian Subscribers1 households2 2019E 2
Slide 15: Vivint is succeeding at delivering a transformative Smart Home experience
Vivint is succeeding at delivering consumers a transformative Smart Home experience USER EXPERIENCE GO-TO-MARKET SCALE Smart Home Operating System that U.S. and Canada sales, installation and service 1.5M subscribers across North America4 delivers a seamlessly integrated and footprint with coverage
Slide 16: Vivint Flex Pay pricing model and unit-of-one economics
Vivint Flex Pay pricing model gives flexibility to consumers and delivers powerful unit-of-one economics Devices and services Attractive unit economics sold separately create long-term value3 ~$48 ~8 yr ~70% Monthly service Subscriber life Net Service revenue margin $1,500 ~$48 avg. equipment purcha
Slide 17: Improving unit economics driving enterprise scaling
Improving unit economics and business model innovation are driving significant enterprise scaling Annual bookings trending at over Net subscriber cost ($) Adj. EBITDA growth and margin expansion ($M) 1.5x of GAAP revenue each year ($B) Adj. EBITDA Revenue Bookings ($B) $1,996 $1.8 (47%) $1,444 $1.7
Slide 18: Consumers want Do-It-For-Me (DIFM) services
Consumers want Do-It-For-Me (DIFM) services VS Integrating numerous devices that were not designed to work together is difficult and often results in an experience that is complex, inconsistent, and unreliable DIY solutions put a large burden on homeowners to accurately and correctly install and sup
Slide 19: Vivint's model for delivering an end-to-end Smart Home solution
Vivint’s model for delivering an end-to-end Smart Home solution Find Design Install Manage 98% of U.S. zip codes covered1 In-home, online, and retail 4,800+ total sales representatives across all channels2 ~8M consumer conversations per year across all channels2 Consultative sales critical for compr
Slide 20: Vivint's consultative sales channels
Vivint’s consultative sales channels bring Smart Home to the consumer New In Home Online Channels 4,500+ in-home sales representatives 43% of net new subscribers2 ~8M in-home conversations per year1 28% 4-year CAGR3 1. Based on management’s estimates for 2019E 2. LTM as of June 30, 2019 3. Reflects
Slide 21: Patented technology empowers Smart Home Pros
Vivint’s patented technology empowers its Smart Home Pros to design, finance and install a customized system for every consumer Street Genie Tech Genie Care Genie Area and performance management Lead distribution Demographics and pre-qualification Licensing and compliance Configuration, pricing Sche
Slide 22: Standalone device strategy vs winning Smart Home strategy
A standalone device strategy is different than a winning Smart Home strategy Standalone Device Smart Home Multiple apps Many devices required to create a smart home DIY install Seamless and intuitive experience in a single app One-time purchase with little or no subscription Hassle-free DIFM install
Slide 23: Extensive suite of proprietary Smart Home devices
Vivint’s extensive suite of proprietary Smart Home devices enables comprehensive coverage of the home… 9 15 14 7 6 8 10 12 5 4 3 2 13 11 1 1. Non-proprietary devices primarily sold wholesale 2. Average across active subscribers on Vivint Smart Home OS as of June 30, 2019 1 2 3 4 5 Outdoor Doorbell I
Slide 24: Partners want their devices integrated into Vivint's ecosystem
Partners want their devices integrated into Vivint’s curated ecosystem… …which makes them smarter 24
Slide 25: Vivint Smart Home Operating System
The Vivint Smart Home Operating System seamlessly integrates all of these devices into a unified, intuitive experience Smart Home Operating “Tell Vivint I’m System going out” DATA KNOWLEDGE ACTION = 1. As of June 30, 2019 Vivint Smart Home OS: Proprietary software running in the home, the cloud, and
Slide 26: Proprietary data and AI-driven software fuel growth
Proprietary data underpinned by Vivint’s powerful AI-driven software fuels product innovation and additional growth opportunities Technology, service, and business model 1.5M innovation enable superior customer subscribers experience 20M+ managed Accurate modeling of home occupancy devices 98% of U.
Slide 27: Easy, affordable, transformative Smart Home experience
Vivint delivers an easy, affordable, and transformative Smart Home experience Technology Digital: HomeKit Physical: Service Capabilities Note: Based on management’s estimates 27
Slide 28: Founder-led management team
Founder-led management team with significant industry experience Todd Pedersen Alex Dunn Founder and President Chief Executive Officer Matt Eyring Todd Santiago Scott Hardy Dale Gerard Jeremy Warren EVP, General Manager EVP, General Manager of Chief Operating Officer Interim Chief Financial Officer
Slide 29: Growth Strategy
GROWTH STRATEGY 29
Slide 30: Five-pronged strategy for growth
Vivint has a five-pronged strategy for growth Entering adjacent markets 5 Expanding product and service offerings 4 Selling to existing customers Adding new 3 Growing channels existing channels 2 1 30
Slide 31: Growing existing channels
1 Growing existing channels Direct-to-home growth strategy Continued dedication to new and established recruiting hubs Open new recruiting hubs each year New pay scale incentives to drive recruiting National inside sales growth strategy Capitalize on increasing awareness of Vivint and Smart Home cat
Slide 32: Adding new channels
2 Adding new channels Retail Multifamily – Vivint Smart Properties Professional channels In-store lead generation coupled with in-home sales experience Design, sale and install of systems in a single appointment creates significant efficiencies Excellent customer experience, with a tNPS of 821 Sizea
Slide 33: Selling to existing customers
3 Selling to existing customers Vivint is just beginning to offer upgrades to its existing subscriber base Full-system upgrades Vivint Flex Pay unlocks the ability to offer full-system upgrades Focus in 2019 has been on subscribers near the end of or out of contract: ~18K upgrades sold through YTD J
Slide 34: Expanding product and service offerings
4 Expanding product and service offerings New products create opportunities for subscription revenue growth Vivint Car Guard launched in 2019 Vivint can sell Car Guard not only to new subscribers, but also to its existing subscriber base Seamlessly integrated into the Vivint Smart Home Operating Sys
Slide 35: Entering adjacent markets
5 Entering adjacent markets: Vivint is in the early days of a big opportunity Vivint is able to unlock additional market opportunities, building upon: Capabilities to sell, deploy Breadth of data and depth of understanding that comes Existing subscriber base and manage services from comprehensive, p
Slide 36: Financial Summary
FINANCIAL SUMMARY 36
Slide 37: Superior financial model
Superior financial model ~ Subscription-based business model ~ Leading scale ~ Margin outperformance ~ Strong adjusted EBITDA growth ~ Expanding subscriber base ~ Differentiated unit economics ~ Long-term customer relationships ~ Predictable revenue ~ Robust backlog 95%+ Recurring revenue $1.17B Rev
Slide 38: Smart-Home-as-a-Service model yielding growth and margin expansion
Compelling Smart-Home-as-a-Service subscription model yielding differentiated growth and margin expansion Subscribers Revenue In M In $M $1,444 1.9 $1,303 1.7 $1,168 1.6 $1,050 1.4 $882 1.3 $758 1.1 2016A 2017A 2018A 2019E 2020E 2021E 2016A 2017A 2018A 2019E 2020E 2021E 62% projected growth from 201
Slide 39: Adjusted EBITDA margin expansion bridge
Continued portfolio growth and service cost optimization driving Adjusted EBITDA margin expansion 2018A – 2019E Adjusted EBITDA bridge Commentary 35% Portfolio growth: Higher subscription and margin A equipment revenue driven by increasing number of subscribers (1.4M 1.6M) 27% margin •B Service cost
Slide 40: Flex Pay accelerating subscriber acquisition; deleveraging trajectory
As Flex Pay has scaled, Vivint has accelerated the acquisition of new subscribers at increasingly attractive economic terms Third Party Financing Partner new subscriber mix % Strong deleveraging trajectory (Net Leverage1) 5.7x 68% 5.5x 64% 43% 4.3x ~4.0x <3.0x 2017A 2018A Q2’19 LTM Q2’18 Q2’19 Pro F
Slide 41: Excellence in technology and real-world operations
Vivint’s excellence in both technology and real-world operations powers a Smart Home business that delivers for consumers and investors Digital Proprietary cloud-enabled Vivint Smart Home OS delivers a seamlessly integrated, intuitive experience Digital Physical Broad portfolio of proprietary device
Slide 42: Transaction Overview and Comparables
TRANSACTION OVERVIEW AND COMPARABLES 42
Slide 43: Transaction detail
Transaction detail Estimated sources and uses ($M)1 Sources Uses Mosaic Cash and Investments Held in Trust Account2 $353 Total Debt Paydown $690 Mosaic FPA Cash $150 Vivint Equity Rollover $2,316 Fortress PIPE Proceeds $125 Vivint Rollover Net Debt $2,494 Blackstone PIPE Proceeds $100 Estimated Fees
Slide 44: Vivint is a Category of One
Vivint is a Category of One, offering a highly differentiated strategic and financial opportunity to own the Smart Home subscriber Vivint’sattributes … Subscriber base is a strategic asset Advantaged go-to-market Exceptional subscription profile Attractive unit economics Highly scalable and accelera
Slide 45: Elite group of companies with runway for growth
Vivint’s business and financial profile places it in an elite group of companies with significant runway for growth and margin Smart Home Consumer Subscription Comparable Companies 30.5x 20.8x 2020E 10.5x FV / Adj. EBITDA End-to-End Platform Integration Proprietary OS33 Strong Recurring Revenue333 H
Slide 46: Competitively differentiated Smart Home platform
Competitively differentiated Smart Home platform Proprietary software platform Smart home data / analytics Proprietary devices DIFM service Nationwide consultative go-to-market Consumer financing Vivint’s purpose-built, end-to-end technology platform delivers the Smart Home experience to custo
Slide 47: Smart-Home-as-a-Service model yields superior margins
Vivint’s Smart-Home-as-a-Service model yields differentiated visibility into growth and superior margins Smart Home Consumer Subs 2018A – 2020E Adjusted EBITDA CAGR Vivint is positioned to Median: 31% Median: 30% deliver significant equity accretion via a Overall combination of earnings median 30% g
Slide 48: Attractive entry point for investors
Attractive entry point for investors Attractive entry point … deal valuation at discount to peers Highly visible growth 95%+ recurring revenue1 $5.7B backlog1 Compelling B2C service model Leader in Smart-Home-as- a-Service Compelling returns driven by Flex Pay model Attractive cash flow dynamics and
Slide 49: Transaction overview
Transaction overview Mosaic Acquisition Corp. (“Mosaic”) has entered into a definitive agreement to merge with Vivint Smart Home, Inc. (“Vivint”) Following the merger, Mosaic will be renamed Vivint Smart Home, Inc. Transaction Structure Pro forma corporate structure is a NYSE-listed Delaware corpora
Slide 50: Anticipated transaction timeline
Anticipated transaction timeline Date Event Transaction Agreement Executed September 2019 Transaction Announced S-4 and Preliminary Proxy Materials Filed with the SEC Mail Final Proxy Materials to Shareholders November / December 2019 Record Date for Shareholder Vote Fourth quarter of 2019 / first q
Slide 51: Appendix A: General
APPENDIX A: GENERAL 51
Slide 52: Illustrative pro forma capital structure
Illustrative pro forma capital structure Illustrative Pro Forma Capitalization1 Net Leverage Based on Covenant Adjusted EBITDA5,6 $M 6/30/20192 Adj PF xEBITDA3 Cash $3 $ — $3 — Revolver $134 $ — $134 — 5.5x Term Loan $804 $ — $804 —Senior Secured Notes4 $1,395 $ — $1,395 — Senior Secured Debt $2,333
Slide 53: Vivint's direct-to-home sales process
Vivint’s direct-to-home sales process Sales rep training Customer credit check Customer onboarding Company policy requires each representative Sales representatives may run a hard credit check on After customer builds proposed smart to be licensed and complete in-person and a prospective customer, w
Slide 54: Adjusted EBITDA and Covenant Adjusted EBITDA reconciliation
Adjusted EBITDA and Covenant Adjusted EBITDA reconciliation Year Ended December 31, LTM ($M) 2016A 2017A 2018A 6/30/2019 Net loss ($276.0) ($410.2) ($467.9) ($443.9) Interest expense, net 197.5 225.6 244.8 255.2 Income tax expense (benefit) 0.1 1.1 (1.6) (1.1) Depreciation 16.8 21.3 25.0 25.6 Amorti
Slide 55: Free cash flow and unlevered free cash flow reconciliation
Free cash flow and unlevered free cash flow reconciliation Year Ended December 31, LTM ($M) 2016A 2017A 2018A 6/30/2019 Operating cash flow ($365.7) ($309.3) ($220.5) ($220.5) Capital expenditures ($11.6) ($20.4) ($19.4) ($11.9) Free Cash Flow ($377.3) ($329.7) ($239.9) ($232.4) Cash interest1 $188.
Slide 56: Definition of non-GAAP financial measures
Definition of non-GAAP financial measures This presentation includes Adjusted EBITDA, Covenant Adjusted EBITDA, and Unlevered Free Cash Flow, which are supplemental measures that are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAA
Slide 57: Certain definitions
Certain definitions Total Subscribers - is the aggregate number of active Smart Home and security subscribers at the end of a given period. Total Monthly Service Revenue – is the contracted recurring monthly service billings to our smart home and security subscribers, based on the Total Subscribers
Slide 58: Appendix B: Financial Supplement
APPENDIX B: FINANCIAL SUPPLEMENT 58
Slide 59: The "Unit of 1" defines one subscriber's value
The “Unit of 1” defines one subscriber’s value Profile of one subscriber Key business drivers Subscriber Subscriber Acquisition Costs Service margin acquisition costs Gross subscriber acquisition cost - Cost to acquire and Subscription-based Average equipment proceeds at sale activate one subscriber
Slide 60: Flex Pay materially decreases net subscriber acquisition cost
Flex Pay materially decreases the net subscriber acquisition cost while delivering a higher lifetime customer return Flex Pay today3 Flex Pay optimized3 Pre-Flex Pay2 Financing partners + RIC Financing partners only, no RIC Unit of 1 profile1 Equipment included w/ service Customer finances equipment
Slide 61: Flex Pay and scaling drive profitability and cash flow
Utilization of Flex Pay and continued scaling of the business continues to drive differentiated profitability and cash flow 2016A 2019E 2021E non-RIC 1 72% non-RIC Legacy PIF RIC PIF RIC 14% New customer mix 14% TPFA Third party Financing Provider (TPF) 59% TPFB TPF Legacy / Retail installment contr
Slide 62: Subscriber transaction at point of sale
Subscriber transaction at point of sale 2 Subscriber acquisition cost 3 Monthly subscriber economics $1,151 Original purchase Revenue Avg. proceeds W Avg Term length Payment type transaction recognition1 at sale The 2 components of each purchase include Financing partners, equipment and ongoing serv
Slide 63: Illustrative consumer financing: Third Party Financing Provider A
Illustrative consumer financing: Third Party Financing Provider A (“TPFA”) Monthly amount billed to subscriber (cash Margin per user during initial contract term Subscriber acquisition costs received) Payment from TPFA is netted against gross SAC Customer payment to Total monthly TPFA Blended Procee
Slide 64: Illustrative consumer financing: Third Party Financing Provider B
Illustrative consumer financing: Third Party Financing Provider B (“TPFB”) Monthly amount billed to subscriber (cash Margin per user during initial contract term Subscriber acquisition costs received) Payment from TPFB is netted against gross SAC Customer payment to Total monthly TPFB Blended Procee
Slide 65: Illustrative paid-in-full contract
Illustrative paid-in-full contract (“PIF”) Monthly amount billed to subscriber (cash Margin per user during initial contract term Subscriber acquisition costs received) Total monthly Blended Rec’d from Service RPU Equipment payments Service margin Equipment margin/contribution SAC(gross) customer SA
Slide 66: Illustrative retail installment contract
Illustrative retail installment contract (“RIC”) Monthly amount billed to subscriber (cash Margin per user during initial contract term Subscriber acquisition costs received) RIC1 Blended Rec’d from Service RPU RIC Total RPU Service margin Contribution margin/contribution SAC(gross) customer SAC(net
Slide 67: Subscriber life of ~8 years remains constant
While quarterly attrition may vary given cohort dynamics of the business, Vivint’s subscriber life of ~8 years remains constant Illustrative cohort attrition In-term End of term Post-initial term 28–35% 15–18% 7–9% Attrition is typically expected to 11–14% increase at first major renewal year 85+ (m
Slide 68: Accounting for key items
Accounting for key items Item Accounting Methodology Translation to Financial statements Equipment proceeds Deferred over contract period B/S: Deferred revenue Equipment financing fees Recorded as a liability over contract period B/S: Current & LT liabilities Point of Sale Equipment loss share Recor
Slide 69: vivint.SmartHome
vivint.SmartHomeTM