Greetings, welcome to ADT Incorporated Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to Derek Fiebig, Vice President of Investor Relations. Derek, you may begin.

Thank you, operator, and thank you everyone for joining us on today’s call. This afternoon we issued a press release and a slide presentation on our financial results. In addition, on Monday we issued a press release and posted a slide presentation related to our Google partnership. These materials are available on our website at investor.adt.com. Our remarks today will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks that could cause actual results to differ materially from those expressed or implied by such forward-looking statements, among others, matters that we’ve described in our press release issued this afternoon and in our filings with the SEC. Please note that we disclaim any obligation to update our forward-looking statements, which speak only as of the time they are made. During today’s call we’ll also make reference to non-GAAP financial measures. Our historic and forward-looking non-GAAP financial measures include special items that are difficult to predict and/or may be mainly dependent upon future uncertainties. For a complete reconciliation of historical non-GAAP to the most comparable GAAP financial measures, please refer to our press release and our slide presentation issued this afternoon, both of which are also available on our website. With me on today’s call are ADT’s President and CEO, Jim DeVries; our CFO, Jeff Likosar; and also joining us and available for Q&A are Don Young, our CIO and EVP of Field Operations; as well as Rich Rot, SVP of Business Operations; and Jason Smith, SVP of Finance. With that, I’ll turn the call over to Jim.

Thank you, Derek, and it’s a pleasure to welcome everyone to today’s call. As you know on Monday, we announced our long-term partnership with Google, which we believe positions us for a major leap forward in our development and long-term growth potential. Our existing initiatives combined with our Google partnership enable us to continue to lead the industry well into the future. I hope many of you were able to join our call on Monday where we discussed this exciting alliance in more detail. I’ll share a brief recap of our agreement in a moment, but first I’d like to spend some time discussing ADT’s very strong second-quarter performance. In early May, we shared with you the transformational effort by our team to navigate the COVID-19 environment, highlighted especially by an extraordinary shift of our nearly 5,000 call center employees to a work-from-home environment. As we progressed through the second quarter, we accomplished many similar objectives towards adjusting our business operations, including the extraordinary customer service provided by our entire field organization. I’m both pleased and proud that the ADT team quickly moved from navigating during a challenging time to simply thriving. From a customer care standpoint, the pandemic has allowed us to rethink the possible, and we are encouraged by the high levels of service and effectiveness we achieved. These efforts resulted in a healthy year-over-year improvement in our NPS score to an all-time high. During the quarter, we also introduced our first artificial intelligence chatbot to handle customer service issues. Additionally, we delivered our highest-ever first-call resolution rate and saw an increase in our customers’ use of our self-service interactive voice response. In our field operations, ADT technicians continued to safely and efficiently service both new and existing customers. The second quarter also represented our best quarter for technician productivity. While acknowledging the many economic challenges throughout the country, the demand for ADT’s products and services remained firm overall, with strength in residential demand partially offsetting a softer environment for our commercial customers. In May, we actually began adding technicians to our team and expect to continue to do so through the balance of August. These strong customer service and satisfaction levels supported customer retention, and our 12-month gross customer revenue attrition improved by approximately 40 basis points sequentially to 13.1%. We experienced improvements across both our direct and dealer channels, and actually in every category we track, including customer relocations. As we’ve highlighted a number of times before, progress in customer retention will not always be linear, but I’m pleased with our performance during the quarter. We’ll continue to drive the customer service initiatives I shared earlier, which we expect will result in higher customer satisfaction and strong retention over the long run. Turning to our residential business, new residential sales also finished the quarter with each month better than the prior month. As shared during our first-quarter call, COVID-19 and shelter-in-place restrictions negatively impacted our business in late March and in April before sales demand improved during the course of May and spiked higher in June. With our June U.S. residential RMR additions up on a year-over-year basis, net customer additions remained positive for the first six months of the year. We’re monitoring the resurgence of COVID-19 and the broader macroeconomic situation carefully. Despite the near-term uncertainty, the resilient characteristics of our business are illustrated with consumers placing a high value on safety, security, and peace of mind. Looking further into the future, we are increasingly encouraged by current and potential long-term market trends. On a per household basis, consumers continue to desire more services and more helpful home services, and we expect that macro trend to continue for years to come. Record low interest rates, recent trends towards de-urbanization, and a growing millennial population seeking new homes all bode well for housing and home automation over time. These trends present both short-term and long-term opportunities for us. I’m also excited about ADT’s new long-term partnership with DR Horton, the nation’s largest homebuilder. Through one of our most exceptional dealers, Safe Haven, ADT is now the exclusive provider for DR Horton and will professionally deliver smart home security and automation solutions for new homes built by DR Horton. This will include connected thermostats, video doorbells, door locks, lights, and additional security. We’re excited to be a partner to DR Horton now and for many years to come. The strength we experienced in residential demand offset weakness stemming from COVID-19 related pressure in our commercial business. Throughout 2019 and early 2020, we experienced low double-digit organic growth rates in commercial revenue with a large portion of the growth coming from the installation of new systems and ongoing service visits. As shared previously, in March, our commercial business experienced a year-over-year decline due to COVID-19, which continued into the second quarter with revenue ending down approximately 15% from a year ago. However, we continue to make progress in our long-term commercial position, and while we believe that many of our growth prospects are deferred, they are not diminished. A great example of this growth, announced in May, was our largest commercial partnership ever with Dollar Tree and Family Dollar. We anticipate this partnership to eventually span more than 15,000 locations across the United States. While we’ve experienced pockets of success and progress during the quarter, we remain cautious about the balance of the year and expect to see continued year-over-year pressure in this part of our business, which is factored into our total Company guidance. However, we will look to continue to strengthen the commercial business through integrating our existing operations, adding to our capabilities, and acquiring new talent to position commercial for 2021 and grow well into the future. Overall, we’re pleased with our financial performance, especially our cash generation, and Jeff will describe additional details in a few moments. As mentioned, our trailing 12-month revenue attrition ended at 31%, improving by approximately 20 basis points from a year ago and approximately 40 basis points sequentially. Our subscriber acquisition or SAC efficiency improved over the past year as well, with our trailing 12-month revenue payback coming in at 2.3 years, down from 2.4. In summary, ADT performed very well during the second quarter. Thanks to the efforts and accomplishments of our dedicated employees along with our dealer partners who worked tirelessly to deliver essential services to millions of customers in this challenging environment. Our strong second-quarter performance demonstrates not only the resilience of our business model, which features recurring contractual revenues, strong cash flow, and flexibility in expenditures, but also our team’s ability to stay focused on the business at hand while continuing to prioritize health and safety. Before turning things over to Jeff, I’d like to take a moment to revisit our announcement from two days ago regarding Google. On Monday, as most of you already know, we announced a transformational long-term strategic partnership with Google that significantly enhances ADT’s long-term growth opportunities. Over time, this groundbreaking partnership will enable us to develop new offerings, new products, and technology to service the rapidly growing smart home market. Our shared vision, mutual commitment to serving customers, complementary strengths, significant equity investment, and meaningful go-to-market funding position our partnership for success for many years to come. I’d encourage you to review Monday’s reported call and slide presentation for more information on our partnership with Google. I will now turn the call over to Jeff to provide further details on our second-quarter results, along with an updated outlook for 2020.

Thank you, Jim, and thank you everyone for joining today’s call. As Jim mentioned, we are very pleased with our overall second-quarter results and our accomplishments during the first half of 2020. Our performance demonstrates the resilience of our business and the fortitude of our teams, who have delivered strong near-term results while concurrently strengthening our long-term position despite the challenging macro environment so far in 2020. Our total reported revenues in the quarter grew by approximately 4% year-over-year despite our 2019 Canada disposition and 2020 effects of COVID-19. The main contributor to revenue was installation and other revenue, driven mainly by higher reported residential outright sales revenue, which more than offset the softness in sales to commercial customers. Monitoring and services revenue declined by 4% on a total Company basis with the divestiture of Canada. However, U.S. recurring monthly revenue grew by approximately 1% in the quarter even with the COVID-19 related slowdown, which has especially affected sales to commercial customers. We are pleased that our adjusted EBITDA of $563 million grew sequentially by approximately 4% compared to the first quarter. As in the first quarter, our adjusted EBITDA was down year-over-year, driven primarily by expenses recognized in our P&L as a result of the Defenders acquisition, the disposition of Canada, and a lower volume of commercial transactions. Cash generation, which benefited from the Defenders acquisition, was again a highlight in the quarter, and we generated $232 million of adjusted free cash flow during the second quarter and $405 million on a year-to-date basis. This compares to $292 million for the first half of last year. As I will describe in a bit more detail later, our adjusted free cash flow for the first time includes net inflows from our new consumer financing arrangement and the Google partnership, which contributed $19 million in the quarter. The benefits of our consumer financing program contributed to efficiency in net subscriber acquisition costs or SAC, which were down 19% year-over-year on a 14% reduction in addition to recurring monthly revenue or RMR. Customer revenue payback on a trailing-12 month basis improved to 2.3 versus 2.4 years. Additional contributing factors to net SAC efficiency include improved pricing, the Defenders acquisition, and our ongoing cost efficiency actions. As in the first quarter, net SAC shifted between capitalized and non-capitalized due to the Defenders acquisition and the shift to more residential outright sales. Another highlight in the quarter was improvement in our gross revenue attrition, which declined by approximately 20 basis points versus the prior year and approximately 40 basis points on a sequential basis. As Jim mentioned, attrition improvements were driven by several factors, including fewer relocations, a number of positive customer service trends, and the effectiveness of our retention initiatives. From a demand perspective, we ended the quarter with widespread softness due to COVID-19 related shutdowns as we described on our last call. However, residential new unit demand strengthened throughout the quarter, with volumes improving in May versus April and in June versus May. We exited the quarter at a run rate moderately above the prior year’s levels, and we saw a strong increase in net customer accounts during June. While U.S. residential RMR additions were down for the full quarter, it increased year-over-year in the last month of the quarter. Turning now to the balance sheet, our overall capital structure did not materially change during the second quarter. As a result of our strong cash generation, we repaid during the second quarter the $220 million balance outstanding on our revolving credit facility as of the end of the first quarter. In addition, we today declared our quarterly dividend of $0.035 per share payable in early October. I also want to point out that in consideration of recent market strength, we are considering accessing the capital markets in the near term to refinance our 6.25% notes due in October of 2021. Now I’ll share a brief update on our outlook for full-year 2020. While the economy continues to face uncertainty as a result of COVID-19 and other dynamics, we are fortunate to benefit from our recession-resilient characteristics, exposure to favorable trends, and demonstrated strong execution in the first half. Consequently, we have improved our overall financial outlook relative to the ranges we shared in May. Our new revenue range is $5.05 billion to $5.3 billion, our adjusted EBITDA range is $2.1 billion to $2.2 billion, and our adjusted free cash flow range is $625 million to $725 million. As always, we will continue to balance short- and longer-term objectives with a focus on the pursuit of selected incremental investments to generate future period returns. Before turning to Q&A, I want to mention a couple of other items related to our results and outlook. First, as I mentioned earlier, our second-quarter results for the first time included the net cash inflows from our new pricing model changes, a consumer receivables facility Mizuho, which we entered into during the quarter. Due to the inclusion of this new inflow, which we had included and described in our original 2020 financial outlook, we are now using the term adjusted free cash flow to describe our primary non-GAAP cash flow measure. The inclusion of this new planned inflow is the only change to the measure, which you can see in more detail in our earnings materials. Secondly, as I mentioned on our first-quarter call in May, certain of our interest rate swap cash flow hedges were designated in March as the decrease in interest rates caused the hedges to no longer be highly effective. This resulted in approximately $28 million in mark-to-market changes recorded in the second-quarter earnings. Third, as we also described during our first-quarter call, our transition back to a predominately ADT-owned equipment model, which we began during the second quarter for legacy ADT residential sales, will result in lower reported installation revenues in the second half of the year compared to the first half. Lastly, the outlook ranges I just shared consider recurring expectations for the near-term effects of our newly announced partnership with Google. However, because we have only recently signed and announced this exciting partnership, we’re in the early stages of building our near and longer-term investment plans. We will share in our relevant updates as we announce our third-quarter earnings. To conclude my comments today, we are very pleased with our strong results through the first six months of 2020 and excited by the progress we have made, positioning ADT for the longer term and the resulting opportunities in front of us.

Our first question is from George Tong with Goldman Sachs.

I wanted to dive deeper into the potential financial implications of the new Google long-term partnership. You’ve laid out three time horizons for the partnership to ramp. Could you perhaps put a framework around what the timing is around each of the horizons, what that corresponds to your perspective and then which horizon would you expect to see a material financial impact from the partnership?

It’s Jim. Clarity on the horizon, first, the horizons aren’t necessarily sequential. We’ve been working with Google for almost a year now on their technology and how that can advance the ADT plus Google vision for smart home, and how we can transform the industry and really create a special customer experience. And so it’s not necessarily sequential, but let me speak to your question. Horizon one is essentially the introduction of products available today to our current and to our legacy customers. That will occur over the next 12 months. Then, horizon two is a fully integrated solution that utilizes net products in Pro Install. There are some additional features like enhanced alarm verification, and the total launch of horizon two is no later than June of 2022. And then probably what we’re most excited about, what we call the re-imagination horizon, that’s all about the art of the possible, and rethinking the smart home experience using AI, machine intelligence, and building a platform that ties all of that together. We’re not prepared to give quantitative impacts at this point for each of those horizons, but that’s a timeframe and a little descriptive for you on what the horizons look like.

Hi, George, and just I’d add - one thing I’d add to that too is the way we’re thinking about this is it fundamentally changes our long-term growth trajectory. And if that’s kind of in the horizon two, horizon three, but it exposes us to more quickly growing markets, some smart home markets in addition to our core security market. It makes us appeal to consumers who might be a little bit more smart home first instead of security first. It gives us a more compelling broader set of offerings even for those security-first customers, and it gives us more differentiation which Jim mentioned with differentiated monitoring, video analytics, possibly prioritized alarm response and to the heart of the possible point, video over the last 24 to 36 hours. We’ve got a lot of inbound ideas of other places that this could go over time, and we’re excited to have this being now signed in and in motion and more to share later, but I’d just emphasize this.

And just a follow-up on the partnership. How does the Google partnership differ fundamentally from your Amazon partnership, how does it augment the market and the addressable opportunity differently than the Amazon partnership did?

So the Amazon partnership really orbited around Alexa and using Alexa Guard as an audio detection device in the home and outside of home swim lanes, that was the extent of the Amazon relationship. The Google relationship, it’s just fundamentally different partnership. It involves deep integration. You know about the investment and the incremental $150 million in growth funds. We viewed and still view the Amazon relationship as helpful to the organization, but the Google relationship is really a great accelerator for us and exceptionally deep integration, product roadmap, joint marketing, co-branding, all part of what’s involved with Google.

Our next question is from Toni Kaplan with Morgan Stanley. Please proceed.

The attrition rate in the quarter was exceptionally strong. I was hoping you could help break down the drivers. I know you mentioned fewer relocations, and that makes sense since COVID I think would lead to fewer people moving during the period, but just talk us through the factors and how sustainable the number looks from here. I expect that potentially it could tick up a little bit if it is driven by the fewer moves. Thanks.

Thanks, Toni. So first just a little bit of context on attrition, our number one objective is, as you know, is capital efficient growth, and that involves balancing a number of metrics like cost to acquire customers, customer retention, cost to serve, a number of other factors. Attrition is obviously extremely important, and it receives sometimes more attention than warranted because it’s a balancing act for us to drive capital efficient growth. That said, we’re unbelievably proud of the improvement in attrition. We’ve shared a number of times, the improvement will be linear, but we like what we saw in Q2. MPDS, for us, it was a record level, customer satisfaction with our service agents was at record levels, first-call resolution was at near record level, and then we did have fewer relocations, and that was certainly a driver, but we improved in retention in every single category we tracked, non-pay voluntary lock competition, and not unimportantly, we improved in every region of the country and in customers generated from direct and dealer. So we think Q2 retention is an excellent proof point to highlight recession resistance and the value that customers place on our service. So we feel great long-term. We know that attrition won’t be linear - attrition improvement won’t be linear, but we feel great about the performance in the quarter.

That’s great. And on the Google partnership, we’ve received a number of questions on what it could mean for your residential pricing and also if there would be any cannibalization of the Pro Install business. I was hoping you could share your perspective on that. And also if you could clarify if there is a revenue- or profit-sharing component to the sale of each unit, that’s something people have asked us about as well. Thank you.

So the Google relationship will involve both our DIY segment and our Do-It-For-Me segment. There isn’t a revenue-sharing aspect to the agreement per se. We’re excited about what we can do with Google in both segments, but I would say most of our attention and frankly most of the attention, and the reason why Google was attracted to us was because of our Do-It-For-Me segment. Our 5,000 or so technicians are deep experienced and expertise in distribution, the brand, our trusted reputation and the ability for us to be the curator of Google product in the smart home is where we focused a great deal of attention, and at the end of the day, it was really what tipped Google to choose ADT as their strategic partner.

And Toni, to your pricing question too, I want to add that not related to Google, of course, in the quarter, but we continue to make really good progress on our new pricing model that as you may recall we rolled out in the first quarter and launched nationally towards the end of the first quarter, and the second quarter was our first quarter where we had our new structure in place. Our focus there was to have a simple pricing structure. It was to enable sales teams to sell a more comprehensive solution to customers and rely less on discounting, all enabled by the availability of financing solution. So after our first quarter having us played, we’re very pleased with the progress that has led to us realizing more installed revenue for the average residential installation, which is a meaningful contributor to the SAC improvement that you see in the revenue payback that you see year-over-year. And Google is just going to help that more because it gives us both products and services that we think give us additional differentiation relative to other solutions that might be out there.

Our next question is from Seth Weber with RBC Capital Markets. Please proceed.

I wanted to ask a little bit on the commercial business. The commercial side of the business is down 15% in the quarter. Can you just give us any color as to trend rate through the quarter and then I guess just - it looks like the customer account was pretty flat. So are you expecting things to get a little bit worse before they get better here going forward? Thanks.

Thanks, Seth. It’s Jim. So the commercial business grew by 10% in Q1. Obviously, the impact by COVID-19 changed the trajectory pretty significantly in the second quarter. Again, maybe three or four takeaways on the commercial business for you. First, we expect softness in EBITDA and revenue essentially through the remainder of the year, that’s baked into our guidance. Secondly, we think the softness is temporary. As the country navigates through the pandemic, we are long-term bullish about this part of our business. And third, we’re using this time to position ADT Commercial to be even stronger over the long term. We are focused on the integration of Red Hawk. We had a big systems milestone just completed this past weekend. We continue to look at tuck-in M&A, that remains part of our ongoing strategy here, and we are opportunistically reviewing those options. And then we’re actually still in the market from a commercial talent acquisition standpoint, especially on the technician front, and we’ll continue to focus on net important work. So, ultimately share gaining here is on customer service and that’s our sweet spot, and as I mentioned we’re bullish about this business. When we think about the opportunity here, we think it’s deferred, not diminishing.

And that definitely grew - we started doing acquisitions to grow our commercial, essential part of that was to diversify the portfolio and while that’s part of our business, it is performing quite as well in the COVID-19 world. We’re very fortunate to have the diversification and the resilience in the residential side that some of the trends that Jim described earlier about the suburbanization, more demand for peace of mind, and fewer relocations has led our sales to residential customers and retention risk customers to remain strong, which allows us to be in a position, even despite the COVID-19 dynamics affecting commercial, to have raised our guidance in the period.

Right. I appreciate that. I was just trying to get a finer point as to whether the trends in June were different from April, May, whether you saw any improvement through the quarter on a year-over-year basis, just if you’re willing to address that or if you don’t want to get that granular, that’s fine, but that’s really the spirit of the question.

Yes, I would say, well we have - there’s macroeconomic uncertainty we have a wider range in our guidance than we normally would. It was clear on the residential side, and as we mentioned in the prepared remarks that the trends improved over the course of the quarter. That’s the clarity, I’d say at this point as to how commercial is likely to play out between now and the rest of the year.

And can you talk to whether you’re seeing challenges on the collections side on the credit - I’m sorry, on the commercial side of the business, just credit quality, anything that you would call out there that we should be aware of? Thank you.

Yes, it’s something we’re watching closely. We increased our credit loss provision in the first quarter. We did materially change it in the second quarter, and we’ve had some exposure to some of the kinds of businesses that you read about, everyone is through some difficult times. I would add though that our commercial exposures are reasonably diverse, and some of those exposures are to the segments of the economy that are less affected. So we’re watching this closely, managing it closely, trying to balance the risk with our growth objectives. But so far, I’d say it’s played out a little bit better than we maybe would have expected going in.

Seth, Jeff was talking about the commercial side. It’s probably worth mentioning the SMB of our business as well, where I know there has been some concern expressed. Year-to-date retention in our small business segment is, through June 30, similar to last year, and there is a slight mix shift in what cancels, predominantly as you might expect, the higher end in the current economic environment. But overall, year-to-date retention, even in SMB, is the same as last year through June 30. So we’re monitoring that pay on SMB closely. On past dues, it’s a bit higher than expected, but whether it’s flat to last year, we feel good about that.

Our next question is from Jeffrey Kessler with Imperial Capital. Please proceed.

Can you elaborate a little bit on one of the - in terms of commercial, you did get a boost to keep it from being down further from what I would call the winning the Dollar group, the installation - the beginning of the installation there. Can you describe what you have done - what you showed because the competition who had pretty good technology. What have you been doing with your national accounts and what are you doing - and then on a broader basis, what are you doing in terms of implementing technology to get assuming that COVID begins to relax in 2021 and you are positioning yourselves to take advantage of the marketplace, what are you doing to take advantage and get greater share through both technology and the types of service you’re telling the potential clients you can give them that their incumbent can’t give them?

Yeah. So, I’ll give a little bit of color and then - at a high level, Jeff, and then hand it over to Don. Ultimately, like I mentioned earlier, we see share gain here as of our customer service, and no one in this space provides the level of service that ADT does, that Red Hawk and ADT together do, and we think that that has been and will continue to be the single most important source of growth for us. Specifically, to your question on Dollar Tree and Family Dollar, we announced that in May; that was our largest national partnership ever announced. The work has already started. We have a material impact on the quarter. Ultimately, that could be as large as 15,000 locations, and we think that there continues to be pretty significant opportunity in the national accounts space, again driven principally by world-class service.

So, Jeff, this is Don. Let me offer - from a technology standpoint, Family Dollar had a one-stop shopping solution offered to them, like combined phone service, broadband, security, etc. And they shifted their focus. They came up with other alternatives for the broadband and the phone service as the primary reason for seeking a new alternative, and then we just basically were able to close the deal just based on our prowess and our service levels.

So my follow-up question is, Don, you know that I’m going to be at - what I am asking you, but this past quarter an appeals court upheld the Sandy Springs suit or if you want to call it, there are onerous fine and actually their police response types of rules for providers that - and customers who have to make false alarms. That brings up the question of differentiation in the marketplace and where are you in the process of putting together a verification capability that will satisfy police from not - so they’ll put you at the top of their scoring system and so that you don’t get hit - your clients don’t get hit by fines for false alarms. Where is that progress at this point?

Yes, so we have talked about this before, Jeff, fire alarms have their own different category of response and intrusion alarms. Typically, it’s been difficult to try to prioritize. The technology we’ve been working on literally for years, but more importantly, the last six months or so with Google’s help, their analytic progress really accelerates us to a place where we’re very comfortable deploying a prioritized version of an intrusion alarm. So basically categorizing that prioritization within the compliance lines up to this point. Combined that with foreign standards, and we think we’re really well positioned to go into a market with not only the technology to support it, but also a standard in the industry to go out and match it up.

And is there a general time frame on this? Is this something you hope to roll out in 2021?

Probably difficult for me to roll it - paint a picture from a time horizon standpoint. I would expect in 2021 a scoring standard or at least the first version of that to be available, and the technology to at least prioritize some portion of intrusion alarms, mainly in the video portion. The question that remains is how far and how fast we can go on the other sources of data. I would say video leads the way, followed quickly by location information.

Our next question is from Gary Bisbee with Bank of America. Please proceed.

This is Jay Hannon on for Gary today. Just going back to that Google partnerships conversation, how should we expect some of the more immediate costs just from that initial integration process, like on your slide? I’ll take the first step, is just the combined DIY offerings. Is there going to be some cost there we should expect in the next two quarters, and is that reflected in the guidance you just updated?

Hi Jay, it’s Jeff, and I agree I may have mentioned in my prepared remarks, but our guidance outlook for the year includes consideration of the initial expenses associated with the recently announced partnership because we’re so new to being formerly aligned. We are in the process, as you can imagine. We are working through the details and specifics, and if anything is meaningfully different, we’ll of course talk about it on our next call. In the near term, we wouldn’t expect to see a material difference on outside bigger changes I just shared, as we thought really what we’re most excited about is if you are doing, those near-term investments could drive a materially meaningful different set of opportunities for us over the longer term.

Okay, great. And then just quickly on the consumer financing offering, it sounded like it was nicely additive in Q2. Is there any concern on the credit side going forward? It strikes me that the typical customer that might perceive that offer might have some more obligations crop up elsewhere in the next couple of quarters.

Yes, it’s something we watch closely, and we don’t offer, as you can imagine, we don’t offer the financing program to every single customer. We evaluate and stick to credit standards because it’s new, we’re watching it super closely. To the earlier question about commercial credit losses, we are very attuned to payment rates and your credit card accept rates and ACH accept rates, and all of those things have continued to perform in a range that so far is going okay. But as stimulus runs out and depending on how the economy performs in the coming weeks and months, we will continue to watch that closely and potentially make some adjustments.

We have time for one more question. And that would be Bryan Lim with Credit Suisse. Please proceed.

We are closely monitoring payment rates, credit card acceptance rates, and ACH acceptance rates, all of which are currently performing well. However, as stimulus measures end and depending on the economic situation in the near future, we will keep a close eye on these factors and may make adjustments as necessary.

Kevin, we couldn’t make out most of what you said. Could you repeat that please?

I am trying to understand the business mix after the Google partnership and whether it will help you expedite the shift to commercial. How are you assessing the percentage of your business that is residential compared to the partnership you just announced?

Okay. Kevin, I got about one out of every four words. So I’m going to answer the question I think you asked. The Google partnership is focused right now on the residential and small business parts of ADT. We think that there is some optionality on the commercial side in the future, but right now we are focused principally on high volume residential and SMB.

And then I guess within the context of the retention, do you look at the retention to get better than some of this that you already put out there or how should we think about retention?

Absolutely, the retention will improve. We know that the more that a customer uses their system, the more they interact with their system, the higher the retention, and a smart home customer that has more devices in their home that recur rate will be a stickier customer. And not only is the retention advantageous there, Kevin, but another advantage is from a SAC cost perspective, we have higher installation revenue, and we were able to acquire smart home customers more efficiently. So to answer your question, our retention is yes. We expect improved retention characteristics, and also because our installed revenue, it would be a tailwind for us in SAC.

Is there a way to consider the average retention rate for smart home customers compared to the technical difficulties?

Yes, I would say, Kevin, to go back to what Jim was saying earlier that we’re confident that all things equal, this is going to lead to customers using their systems more and is going to lead to better retention over time. We’re also balancing that, managing that with the cost to acquire customers that you can envision different models that have different contractual terms into the future. And then we felt that always also against the possibility of serving the customers. So back to what Jim said at the beginning about our number one job being to optimize the customer lifetime value and NPV of customers we take on, the way I would look at that is we are highly confident that this partnership is going to both enable us to do that and also lead to a meaningfully different long-term growth trajectory as the partnership fully comes together.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

Thank you, operator. So it was obviously a very strong quarter for us, especially in the context of the environment of COVID-19. We’re feeling very good about the anticipated benefits of our recent announcements as well. We had strong Q2 financials, outstanding cash generation. As I mentioned earlier, customer service is at record levels. Our customer retention was strong. Technician productivity, revenue payback are both pointed in the right direction. A number of operating KPIs were also terrific. We successfully partnered with one of the largest retailers in America, Dollar Tree/Family Dollar. And then, as most of you know, just last week DR Horton, the largest builder in the country selected us as their extensive partner. And then, of course, we announced our long-term partnership with Google this week, and couldn’t be more excited about what that relationship will do to accelerate growth. Finally, I want to thank all the ADT employees and our dealer partners for their relentless commitment as we continue to navigate the pandemic and serve our customers. So, thanks for taking the time this evening. We appreciate your interest in ADT. Good night, everyone.

Thank you. This does conclude today’s conference. You may disconnect your lines at this time and have a good evening.