Mauricio Gutierrez
President, Chief Executive Officer & Director at NRG Energy
Thank you, Kevin. Good morning, everyone, and thank you for your interest in NRG. I'm joined this morning by Bruce Chung, Chief Financial Officer. Also on the call and available for questions, we have members of the management team. Before we go into the quarterly review, I'd like to start with an overview of our value proposition. Over the last six years, we have taken the necessary steps to position NRG at the center of the energy transition, a consumer energy business that benefits from the increasing electrification of our economy while generating significant excess cash well beyond its business needs, a complementary smart home business that increases the lifetime value of our customers and enables greater optimization of our customers' energy demand and the financial flexibility to return significant capital to our shareholders while maintaining a strong balance sheet.
As you can see, we delivered compelling value today. And importantly, we have positioned our business to deliver value well into the future. So with that, I'd like to turn to the three key messages of our earnings presentation on Slide five. First, we are raising our 2023 financial guidance, driven by strong financial and operational results both in the third quarter and year-to-date. Second, we are initiating 2024 financial guidance above the plan we shared with you at our June Investor Day. And finally, with line of sight to achieving our 2025 growth road map, we are accelerating our focus on behind-the-meter load management opportunities for homes and businesses. Starting with our third quarter results on Slide six. We delivered top decile safety performance and $973 million of adjusted EBITDA, a 103% improvement from the same period last year, driven primarily by strong operational performance across the business and the addition of Vivint.
This brings our year-to-date results to $2.438 billion of adjusted EBITDA, a 74% increase above the prior year. On our last earnings call, we indicated that we were trending towards the top end of the guidance range. With strong third quarter performance and our current outlook for the balance of the year, we are increasing and narrowing our 2023 financial guidance ranges, which includes the close of STP and an increase in the company's annual incentive plan given the expected outperformance for the year. During the quarter, we continued to make good progress on our strategic priorities. Vivint integration is well underway and with early success on our growth initiatives, we are raising again our 2023 target from $60 million to $75 million. This is a 150% increase from our original $30 million target set in May. Also, during the quarter, we continued executing on our portfolio optimization efforts with the retirement of the Joliet power station and the sale of Gregory and our interest in STP. Turning to capital allocation. We are raising our 2023 share repurchase target by 15% to $1.15 billion. We have completed $200 million of share repurchases year-to-date.
And with the close of STP, expect to execute the remaining $950 million under an accelerated share repurchase program. Next, we have executed $800 million of debt reduction as part of our liability management program. Bruce will provide more details in his section. Finally, we're initiating 2024 financial guidance ahead of our June Investor Day plan. This earnings expansion is durable and represents high-quality growth and overall strengthening of our business. On capital allocation, we allocated $500 million to debt reduction and the remaining excess cash allocated 80% of return on capital and 20% to growth. Now turning to Slide seven for an update on our integrated energy business. We experienced the hottest summer on record in our core Texas market, breaking the previous peak demand record 10 times. While the power grid was stressed given record demand, it performed quite well with only a few periods of scarcity pricing when renewable output was low. Importantly, the efforts we undertook in our summer readiness and spring outage program resulted in a significant increase in our plant reliability.
In the bottom left-hand chart is our in-the-money availability, indicating the availability of our units during periods when they are profitable, which is a relevant metric for our business and shows a significant improvement. Retail saw strong performance through the quarter with in-line customer growth and better-than-expected retention. We continue to improve our digital experience with customers engaging more, increasing monthly average app usage by 20%. Moving to retail supply. The steps we have taken to enhance our diversified supply strategy, we're successful in providing predictable supply costs under different loads and price scenarios. Beyond investing in our plants, we adjusted our hedge ratios to lean long in key summer and winter months. Finally, we are beginning our efforts in residential demand response and have increased participation by 10% this year. We also managed a large C&I demand response business with 2.5 gigawatts of capacity under management. I will provide more color on the behind-the-meter opportunity later in the presentation.
Our Smart Home business also performed well with strong customer growth and margin expansion, as you can see on Slide eight. We continue to advance our technology platform with the launch of new innovative products, improving our customer experience that is consistently recognized as best in the industry by consumer publications. On the right-hand side of the slide, you will see the key performance indicators that we introduced in our last earnings call. We continue to see exceptional performance in Smart Home with 7% subscriber growth, 9% revenue growth and 9% service margin improvement versus the same period last year, consistent with the improvements we reported in our second quarter results. Acquisition costs are higher due to the impact of more products being sold and higher interest rates, but we're more than offset by higher revenue on new subscribers. Our customers are engaging more with our platform and are staying for a longer period of time. We are very encouraged by the performance we're seeing across the business and the opportunities that are arising inside the home.
Now I want to provide an update on the opportunity for demand management we see behind the meter or Virtual Power Plants on Slide nine. We have been managing energy optimization programs for commercial and industrial customers for years. And now we are seeing a growing opportunity in the residential space. New distributed technologies and a growing penetration of connected smart devices in the home have materially changed the industry, providing greater control to the consumer. Grid reliability has also played a role in accelerating adoption as flexible demand represents instantaneous peak in capacity when the grid is at peak load or in scarcity conditions. We see two primary pathways for us to create value in this market. First, through optimizing our existing customer peak demand in ERCOT and PJM where we can benefit from both energy and capacity value as well as reduce market risk. Second, through VPP services for Smart Home and utility customers, both in regulated and competitive markets. We are uniquely positioned to win this space.
We have the scale with 7.6 million customers, decades of commercial and market expertise and an integrated energy business that allows NRG to monetize the value without having to go to the wholesale market or requiring regulatory change. We also have vast data and insights from running the third largest commercial and industrial demand response program in the country. While our focus in the near term continues to be optimizing our core and integrating Vivint, over the medium and long term, we see a significant value opportunity from these programs. This value is not included in our June Investor Day plan, and I look forward to providing you updates on our progress in the future. Moving to Slide 10 for an update on our integration efforts. We are making good progress across our initiatives and are reaffirming the full plan targets totaling $550 million of recurring free cash flow before growth by the end of 2025. Our growth and cross-sell efforts have yielded strong results, allowing us to increase our 2023 growth target to $75 million.
On the right-hand side of the slide, you will see the increasing number of customers buying two or more products. I want to highlight that this is not exclusively cross-sell between Energy and Smart Home, but includes other consumer products sold across NRG that generate recurring revenues. We have been hard at work executing pilots and collecting critical insights as we prepare to scale Energy and Smart Home cross-selling in 2024 and beyond. In the appendix of today's presentation, you will find our latest growth and cost plan scorecard, so you can track our progress. So with that, I will pass it over to Bruce for the financial review.
