ADT Inc. (NYSE: ADT), the most trusted brand in smart home and
small business security, today reported results for the second
quarter of 2024.
Financial highlights for the second quarter are
below with variances on a year-over-year basis unless otherwise
noted. Results of the former commercial and solar segments are
presented as discontinued operations, except for cash flow
measures.
Second Quarter 2024
- Total revenue
increased by 3% to $1.2 billion and end-of-period recurring
monthly revenue (RMR) increased 2% to $355 million ($4.3 billion on
an annualized basis)
- Strong customer
retention with gross revenue attrition of 12.9% and revenue payback
at 2.2 years
- GAAP income from
continuing operations of $126 million, or $0.13 per diluted share,
down $54 million
- Adjusted income
from continuing operations of $156 million, or $0.17 per
diluted share, up $3 million
- Adjusted EBITDA
from continuing operations of $629 million, down
$12 million
“ADT delivered a solid first half with continued
revenue growth momentum, as well as strong operating profitability
and cash flow generation. With our streamlined focus on the
consumer and small business markets, we continue to expand and
improve our innovative offerings, unrivaled safety, and premium
experience for security and smart home customers,” said ADT
Chairman, President, and CEO, Jim DeVries. “Our success is powered
by our employees’ dedication to the proposition that every second
counts. We are well positioned to achieve our 2024 commitments with
continued focus on driving significant cash flow while continuing
to invest in our future and simultaneously returning capital to our
shareholders.”
Business Highlights
- ADT+ platform
for professional installation – The Company continued its phased
rollout of the ADT+ platform across the country in the second
quarter. Customers can now take advantage of next-generation
hardware and technology through a proprietary app, which is
designed to be the conduit for future innovations such as Trusted
Neighbor.
- ADT’s Trusted
Neighbor – The Company announced its new Trusted Neighbor offering
in partnership with Google and Yale. ADT’s Trusted Neighbor lets
customers grant secure, temporary access to their homes based on
schedules or events, such as a package delivery or water leak,
through the ADT+ app. The offering is expected to become available
for select new customers in the third quarter of 2024.
- Implementing AI
in operations – In addition to its strong Google Nest partnership,
ADT is leveraging Google Cloud’s AI technology platform to enhance
efficiency in its business and enhance the customer experience.
Early efforts focus on implementing AI in customer care operations
and customer retention programs.
- Alarm Scoring
live nationwide – ADT’s Alarm Scoring program rolled out nationwide
in the second quarter. With this innovative method of classifying
alarms, first responders receive the most precise and crucial alarm
data to prioritize dispatch.
- Monitoring
Center of the Year – ADT won The Monitoring Association’s
Monitoring Center of the Year award, recognizing ADT’s significant
contribution to the alarm industry, including demonstration of
exceptional customer service.
- When Every
Second Counts – ADT introduced its new brand promise: When Every
Second Counts. The Company launched new advertisements on social
media platforms, major television networks, streaming services and
in theaters, as well as placements in the summer Olympic
Games.
- Mental Health
America certification – Mental Health America awarded ADT a
Platinum-level Bell Seal certification, the highest level of
certification, for its commitment to improving employee mental
health.
- ADT Multifamily
Partnership – ADT Multifamily announced a partnership with RPM
Living, a leading multifamily property management company
overseeing more than 200,000 units. ADT Multifamily is the
preferred automation vendor for RPM living.
Results of Continuing Operations
(1)(2)
(in millions, except revenue payback, attrition, and per share
data) |
|
Three Months Ended June 30, |
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
|
GAAP |
Monitoring and related services |
|
$ |
1,068 |
|
|
$ |
1,043 |
|
|
$ |
25 |
|
|
2 |
% |
Security installation, product, and other |
|
|
136 |
|
|
|
125 |
|
|
|
12 |
|
|
9 |
% |
Total revenue |
|
$ |
1,205 |
|
|
$ |
1,168 |
|
|
$ |
36 |
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
126 |
|
|
$ |
180 |
|
|
$ |
(54 |
) |
|
(30 |
)% |
Income (loss) from continuing operations per share - diluted |
|
$ |
0.13 |
|
|
$ |
0.19 |
|
|
$ |
(0.06 |
) |
|
(32 |
)% |
|
|
|
|
|
|
|
|
|
Net cash provided by (used in): |
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
563 |
|
|
$ |
493 |
|
|
$ |
70 |
|
|
14 |
% |
Investing activities |
|
$ |
(333 |
) |
|
$ |
(319 |
) |
|
$ |
(14 |
) |
|
4 |
% |
Financing activities |
|
$ |
(200 |
) |
|
$ |
(217 |
) |
|
$ |
17 |
|
|
(8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measures |
Adjusted EBITDA from continuing operations |
|
$ |
629 |
|
|
$ |
641 |
|
|
$ |
(12 |
) |
|
(2 |
)% |
Adjusted Income (Loss) from continuing operations |
|
$ |
156 |
|
|
$ |
153 |
|
|
$ |
3 |
|
|
2 |
% |
Adjusted Diluted Income (Loss) per share from continuing
operations |
|
$ |
0.17 |
|
|
$ |
0.17 |
|
|
$ |
— |
|
|
— |
% |
Adjusted Free Cash Flow (including interest rate swaps) |
|
$ |
251 |
|
|
$ |
221 |
|
|
$ |
30 |
|
|
14 |
% |
|
|
|
|
|
|
|
|
|
|
|
Other Measures |
Trailing twelve-month revenue payback |
|
2.2 years |
|
2.1 years |
|
|
0.1 |
|
|
5 |
% |
Trailing twelve-month gross customer revenue attrition |
|
|
12.9 |
% |
|
|
12.9 |
% |
|
|
— |
|
|
— |
|
End of period RMR |
|
$ |
355 |
|
|
$ |
348 |
|
|
$ |
8 |
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue was $1,205 million for the
second quarter, up 3%. Monitoring and related services (M&S)
revenue growth was driven by an increase in the recurring revenue
base due primarily to higher average pricing. Security
installation, product, and other revenue increased primarily from
higher amortization of deferred subscriber acquisition revenue.
Income from continuing operations was
$126 million, or $0.13 per diluted share, down
$54 million. This was primarily attributable to a current year
charge and prior year credit related to legal settlements in
aggregate amount of approximately $40 million, an increase in the
allowance for credit losses, and higher net interest expense due to
a decrease in unrealized gains on interest rate swaps, partially
offset by continued recurring revenue growth.
Adjusted income from continuing operations was
$156 million, or $0.17 per diluted share, up $3 million.
Adjusted EBITDA was $629 million, down $12 million. These
measures included improvements from increases in recurring revenue,
and were negatively impacted by the aforementioned legal
settlements and allowance for credit losses.
Balance Sheet and Cash Flow
Net cash provided by operating activities during
the second quarter was $563 million, up $70 million or 14% and
Adjusted Free Cash Flow (including interest rate swaps) increased
by $30 million. These measures, which benefited from lower cash
interest resulting from debt reduction and timing of working
capital and other items, were partially offset by the net results
of the commercial and solar businesses. In addition, Adjusted Free
Cash Flow also includes the lower net cash flows associated with
the receivables facility.
The Company returned $50 million to shareholders
in dividends. As of June 30, 2024, approximately $257 million
remains available for future repurchases under the Share Repurchase
Plan.
Total cash and cash equivalents were $38 million
and no amounts were outstanding under the Company’s first lien
revolving credit facility at the end of the quarter.
In April, the Company redeemed the remaining
$100 million of its First Lien Senior Secured Notes due 2024 and
completed a repricing of the $1.4 billion First Lien Term Loan B
reducing borrowing costs by 25 basis points. There are no other
significant debt maturities until 2026.
In May, the Company amended and restated its
First Lien Credit Agreement, which included the refinancing of $618
million principal amount of loans under the Company’s Term Loan A
Facility for its First Lien Term Loan B due 2030. The Term Loan A
Facility has been terminated, and there is approximately $2.0
billion of First Lien Term Loan B outstanding.
2024 Financial Outlook
The Company is reiterating its 2024 financial
guidance for Total Revenue, Adjusted EBITDA, and Adjusted Free Cash
Flow while updating the range for Adjusted EPS to reflect the
presentation of the solar business as a discontinued operation.
(in millions, except per share data) |
|
|
Total Revenue |
|
$4,800 - $5,000 |
Adjusted EBITDA |
|
$2,525 - $2,625 |
Adjusted EPS |
|
$0.65 - $0.75 |
Adjusted Free Cash Flow (including interest rate swaps) |
|
$700 - $800 |
The Company is not providing forward-looking guidance for U.S. GAAP
financial measures other than Total Revenue or a quantitative
reconciliation to the most directly comparable GAAP measure for its
non-GAAP financial guidance shown above because the GAAP measures
cannot be reliably estimated and the reconciliations cannot be
performed without unreasonable effort due to their dependence on
future uncertainties and adjusting items that the Company cannot
reasonably predict at this time but which may be material. Please
see "Non-GAAP Measures" for additional information. |
Total Revenue and Adjusted EBITDA reflect the results of the former
CSB segment. GAAP cash flows include results of Solar discontinued
operations. Adjusted Free Cash Flow excludes amounts related to the
exit from the solar business, consistent with the definition of
this measure. Beginning in the third quarter of 2024, all remaining
cash flows attributable to activities of the solar business will be
excluded from Adjusted Free Cash Flow as the business is now
substantially wound down. |
|
Dividend Declaration
Effective Aug. 1, 2024, the Company’s Board of
Directors declared a cash dividend of $0.055 per share to holders
of the Company’s common stock and Class B common stock of record as
of Sep. 13, 2024. This dividend will be paid on Oct. 4, 2024.
_____________________
(1) |
|
All variances are year-over-year unless otherwise noted. Adjusted
EBITDA, Adjusted EBITDA Margin, Adjusted Free Cash Flow, Adjusted
Free Cash Flow (including interest rate swaps), Adjusted Income
(Loss), Adjusted Diluted Income (Loss) per share (or, Adjusted
EPS), Net Debt, and Net Leverage Ratio are non-GAAP measures. Refer
to the “Non-GAAP Measures” section for the definitions of the terms
and reconciliations to the most comparable GAAP measures included
herein. The operating metrics such as Gross Customer Revenue
Attrition, Unit Count, RMR, Gross RMR Additions, and Revenue
Payback are approximated as there may be variations to reported
results in each period due to certain adjustments the Company might
make in connection with the integration over several periods of
acquired companies that calculated these metrics differently, or
otherwise, including periodic reassessments and refinements in the
ordinary course of business. These refinements, for example, may
include changes due to systems conversion or historical methodology
differences in legacy systems. Results of the commercial and solar
businesses are presented as discontinued operations. Except for
cash flow measures, and unless otherwise noted, amounts herein have
been recast to reflect the results of the Company’s continuing
operations. |
(2) |
|
Amounts may not sum due to rounding. |
|
|
|
Conference Call
As previously announced, management will host a
conference call at 10 a.m. ET today to discuss the Company’s second
quarter 2024 results and lead a question-and-answer session.
Participants may listen to a live webcast through the investor
relations website at investor.adt.com. A replay of the webcast will
be available on the website within 24 hours of the live event.
Alternatively, participants may listen to the
live call by dialing 1-800-715-9871 (domestic) or 1-646-307-1963
(international), and providing the access code 4948265. An audio
replay will be available for two weeks following the call, and can
be accessed by dialing 1-800-770-2030 (domestic) or 1-609-800-9909
(international), and providing the access code 4948265.
A slide presentation highlighting the Company’s
results will also be available on the Investor Relations section of
the Company’s website. From time to time, the Company may use its
website as a channel of distribution of material Company
information. Financial and other material information regarding the
Company is routinely posted on and accessible at
investor.adt.com.
About ADT Inc.
ADT provides safe, smart and sustainable
solutions for people, homes and small businesses. Through
innovative offerings, unrivaled safety and a premium customer
experience, all delivered by the largest networks of smart home
security professionals in the U.S., we empower people to protect
and connect to what matters most. For more information, visit
www.adt.com.
Investor Relations: |
Media Relations: |
investorrelations@adt.comTel: 888-238-8525 |
media@adt.com |
|
|
Forward-Looking Statements
ADT has made statements in this press release
that are forward-looking and therefore subject to risks and
uncertainties, including those described below. All statements,
other than statements of historical fact, included in this document
are, or could be, “forward-looking statements” within the meaning
of the Private Securities Litigation Reform Act of 1995 and the
applicable rules and regulations of the Securities and Exchange
Commission (the “SEC”) and are made in reliance on the safe harbor
protections provided thereunder. These forward-looking statements
relate to, among other things, the divestiture of the commercial
business which was completed in October 2023 (the “Commercial
Divestiture”); the Company’s exit of the residential solar business
and the expected costs and benefits of such exit (the “ADT Solar
Exit”); the repurchase of shares of the Company’s common stock
under the authorized share repurchase program; the Company’s
ability to reduce debt or improve leverage ratios, or to achieve or
maintain its long-term leverage goals; the integration of strategic
bulk purchases of customer accounts; the Company’s outlook and/or
guidance, which includes total revenue, Adjusted EBITDA, Adjusted
Diluted Income (Loss) per Share (“Adjusted EPS”) and Adjusted Free
Cash Flow (including interest rate swaps); any stated or implied
outcomes with regards to the foregoing; and other matters. Without
limiting the generality of the preceding sentences, any time we use
the words “expects,” “intends,” “will,” “anticipates,” “believes,”
“confident,” “continue,” “propose,” “seeks,” “could,” “may,”
“should,” “estimates,” “forecasts,” “might,” “goals,” “objectives,”
“targets,” “planned,” “projects,” and, in each case, their negative
or other various or comparable terminology, and similar
expressions, we intend to clearly express that the information
deals with possible future events and is forward-looking in nature.
However, the absence of these words or similar expressions does not
mean that a statement is not forward-looking. These forward-looking
statements are based on management’s current beliefs and
assumptions and on information currently available to management.
We caution that these statements are subject to risks and
uncertainties, many of which are outside of our control and could
cause future events or results to be materially different from
those stated or implied in this press release, including, among
others, factors relating to uncertainties as to any difficulties
with respect to the effect of the Commercial Divestiture and ADT
Solar Exit on our ability to retain and hire key personnel and to
maintain relationships with customers, suppliers and other business
partners; risks related to the Commercial Divestiture and ADT Solar
Exit, including ADT’s business becoming less diversified and the
possible diversion of management’s attention from ADT’s core CSB
business operations; uncertainties as to our ability and the amount
of time necessary to realize the expected benefits of the
Commercial Divestiture and ADT Solar Exit, including the risk that
the ADT Solar Exit may not be completed in a timely manner, or that
the costs of the ADT Solar Exit may exceed our best estimates; our
ability to maintain and grow our existing customer base and to
integrate strategic bulk purchases of customer accounts; activity
in repurchasing shares of ADT’s common stock under the authorized
share repurchase program; dividend rates or yields for any future
quarter; and risks that are described in the Company’s Annual
Report and its Quarterly Reports on Form 10-Q, including the
sections titled “Risk Factors” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”
contained in those reports, and in our other filings with the SEC.
Any forward-looking statement made in this press release speaks
only as of the date on which it is made. ADT undertakes no
obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future
developments, or otherwise.
|
|
ADT INC. AND SUBSIDIARIESCONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS(in millions,
except per share data) (Unaudited) |
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monitoring and related services |
|
$ |
1,068 |
|
|
$ |
1,043 |
|
|
$ |
25 |
|
|
2% |
|
$ |
2,131 |
|
|
$ |
2,072 |
|
|
$ |
59 |
|
|
3% |
Security installation, product, and other |
|
|
136 |
|
|
|
125 |
|
|
|
12 |
|
|
9% |
|
|
264 |
|
|
|
229 |
|
|
|
35 |
|
|
15% |
Total revenue |
|
|
1,205 |
|
|
|
1,168 |
|
|
|
36 |
|
|
3% |
|
|
2,394 |
|
|
|
2,301 |
|
|
|
94 |
|
|
4% |
Cost of revenue (exclusive of depreciation and
amortization shown separately below): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monitoring and related services |
|
|
151 |
|
|
|
142 |
|
|
|
9 |
|
|
6% |
|
|
306 |
|
|
|
304 |
|
|
|
2 |
|
|
1% |
Security installation, product, and other |
|
|
45 |
|
|
|
45 |
|
|
|
— |
|
|
—% |
|
|
85 |
|
|
|
75 |
|
|
|
10 |
|
|
13% |
Total cost of revenue |
|
|
196 |
|
|
|
188 |
|
|
|
9 |
|
|
5% |
|
|
391 |
|
|
|
379 |
|
|
|
11 |
|
|
3% |
Selling, general, and administrative expenses |
|
|
388 |
|
|
|
319 |
|
|
|
69 |
|
|
22% |
|
|
747 |
|
|
|
654 |
|
|
|
93 |
|
|
14% |
Depreciation and intangible asset amortization |
|
|
334 |
|
|
|
321 |
|
|
|
13 |
|
|
4% |
|
|
667 |
|
|
|
679 |
|
|
|
(12 |
) |
|
(2)% |
Merger, restructuring, integration, and other |
|
|
2 |
|
|
|
8 |
|
|
|
(6 |
) |
|
(78)% |
|
|
14 |
|
|
|
23 |
|
|
|
(9 |
) |
|
(40)% |
Operating income (loss) |
|
|
284 |
|
|
|
332 |
|
|
|
(48 |
) |
|
(14)% |
|
|
576 |
|
|
|
565 |
|
|
|
11 |
|
|
2% |
Interest expense, net |
|
|
(110 |
) |
|
|
(83 |
) |
|
|
(26 |
) |
|
31% |
|
|
(197 |
) |
|
|
(254 |
) |
|
|
57 |
|
|
(23)% |
Other income (expense) |
|
|
12 |
|
|
|
1 |
|
|
|
11 |
|
|
N/M |
|
|
27 |
|
|
|
(1 |
) |
|
|
28 |
|
|
N/M |
Income (loss) from continuing operations before income
taxes and equity in net earnings (losses) of equity method
investee |
|
|
186 |
|
|
|
249 |
|
|
|
(63 |
) |
|
(25)% |
|
|
406 |
|
|
|
310 |
|
|
|
96 |
|
|
31% |
Income tax benefit (expense) |
|
|
(60 |
) |
|
|
(67 |
) |
|
|
7 |
|
|
(11)% |
|
|
(116 |
) |
|
|
(86 |
) |
|
|
(31 |
) |
|
36% |
Income (loss) from continuing operations before equity in
net earnings (losses) of equity method investee |
|
|
126 |
|
|
|
182 |
|
|
|
(56 |
) |
|
(31)% |
|
|
290 |
|
|
|
224 |
|
|
|
66 |
|
|
29% |
Equity in net earnings (losses) of equity method investee |
|
|
— |
|
|
|
(2 |
) |
|
|
2 |
|
|
N/M |
|
|
— |
|
|
|
(4 |
) |
|
|
4 |
|
|
N/M |
Income (loss) from continuing operations |
|
|
126 |
|
|
|
180 |
|
|
|
(54 |
) |
|
(30)% |
|
|
290 |
|
|
|
220 |
|
|
|
70 |
|
|
32% |
Income (loss) from discontinued operations, net of tax |
|
|
(34 |
) |
|
|
(88 |
) |
|
|
54 |
|
|
(62)% |
|
|
(106 |
) |
|
|
(247 |
) |
|
|
140 |
|
|
(57)% |
Net income (loss) |
|
$ |
92 |
|
|
$ |
92 |
|
|
$ |
— |
|
|
—% |
|
$ |
184 |
|
|
$ |
(27 |
) |
|
$ |
211 |
|
|
N/M |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations per share - basic |
|
$ |
0.14 |
|
|
$ |
0.20 |
|
|
|
|
|
|
$ |
0.32 |
|
|
$ |
0.24 |
|
|
|
|
|
Income (loss) from continuing operations per share - diluted |
|
$ |
0.13 |
|
|
$ |
0.19 |
|
|
|
|
|
|
$ |
0.30 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share - basic |
|
$ |
0.10 |
|
|
$ |
0.10 |
|
|
|
|
|
|
$ |
0.20 |
|
|
$ |
(0.03 |
) |
|
|
|
|
Net income (loss) per share - diluted |
|
$ |
0.10 |
|
|
$ |
0.09 |
|
|
|
|
|
|
$ |
0.19 |
|
|
$ |
(0.03 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding - basic |
|
|
848 |
|
|
|
858 |
|
|
|
|
|
|
|
852 |
|
|
|
856 |
|
|
|
|
|
Weighted-average shares outstanding - diluted |
|
|
909 |
|
|
|
917 |
|
|
|
|
|
|
|
913 |
|
|
|
919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class B Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations per share - basic |
|
$ |
0.14 |
|
|
$ |
0.20 |
|
|
|
|
|
|
$ |
0.32 |
|
|
$ |
0.24 |
|
|
|
|
|
Income (loss) from continuing operations per share - diluted |
|
$ |
0.13 |
|
|
$ |
0.19 |
|
|
|
|
|
|
$ |
0.30 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share - basic |
|
$ |
0.10 |
|
|
$ |
0.10 |
|
|
|
|
|
|
$ |
0.20 |
|
|
$ |
(0.03 |
) |
|
|
|
|
Net income (loss) per share - diluted |
|
$ |
0.10 |
|
|
$ |
0.09 |
|
|
|
|
|
|
$ |
0.19 |
|
|
$ |
(0.03 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding - basic |
|
|
55 |
|
|
|
55 |
|
|
|
|
|
|
|
55 |
|
|
|
55 |
|
|
|
|
|
Weighted-average shares outstanding - diluted |
|
|
55 |
|
|
|
55 |
|
|
|
|
|
|
|
55 |
|
|
|
55 |
|
|
|
|
|
Note: amounts may not sum due to rounding
|
ADT INC. AND SUBSIDIARIESCONDENSED
CONSOLIDATED BALANCE SHEETS (in millions)
(Unaudited) |
|
|
|
June 30, 2024 |
|
December 31, 2023 |
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
38 |
|
$ |
15 |
Restricted cash and restricted cash equivalents |
|
|
111 |
|
|
115 |
Accounts receivable, net |
|
|
386 |
|
|
370 |
Inventories, net |
|
|
203 |
|
|
201 |
Prepaid expenses and other current assets |
|
|
241 |
|
|
242 |
Current assets of discontinued operations |
|
|
6 |
|
|
61 |
Total current assets |
|
|
986 |
|
|
1,005 |
Property and equipment, net |
|
|
263 |
|
|
254 |
Subscriber system assets, net |
|
|
3,019 |
|
|
3,006 |
Intangible assets, net |
|
|
4,836 |
|
|
4,877 |
Goodwill |
|
|
4,904 |
|
|
4,904 |
Deferred subscriber acquisition costs, net |
|
|
1,249 |
|
|
1,176 |
Other assets |
|
|
727 |
|
|
699 |
Noncurrent assets of discontinued operations |
|
|
3 |
|
|
43 |
Total
assets |
|
$ |
15,986 |
|
$ |
15,964 |
|
|
|
|
|
Liabilities and stockholders' equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Current maturities of long-term debt |
|
$ |
192 |
|
$ |
312 |
Accounts payable |
|
|
222 |
|
|
277 |
Deferred revenue |
|
|
247 |
|
|
255 |
Accrued expenses and other current liabilities |
|
|
605 |
|
|
556 |
Current liabilities of discontinued operations |
|
|
49 |
|
|
80 |
Total current liabilities |
|
|
1,315 |
|
|
1,480 |
Long-term debt |
|
|
7,532 |
|
|
7,513 |
Deferred subscriber acquisition revenue |
|
|
2,035 |
|
|
1,915 |
Deferred tax liabilities |
|
|
1,080 |
|
|
1,027 |
Other liabilities |
|
|
200 |
|
|
219 |
Noncurrent liabilities of discontinued operations |
|
|
16 |
|
|
21 |
Total
liabilities |
|
|
12,178 |
|
|
12,175 |
|
|
|
|
|
Total stockholders'
equity |
|
|
3,808 |
|
|
3,789 |
Total liabilities and
stockholders' equity |
|
$ |
15,986 |
|
$ |
15,964 |
Note: amounts may not sum due to rounding
|
ADT INC. AND SUBSIDIARIESCONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (in
millions) (Unaudited) |
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
92 |
|
|
$ |
92 |
|
|
$ |
184 |
|
|
$ |
(27 |
) |
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities: |
|
|
|
|
|
|
|
|
Depreciation and intangible asset amortization |
|
|
334 |
|
|
|
346 |
|
|
|
669 |
|
|
|
729 |
|
Amortization of deferred subscriber acquisition costs |
|
|
55 |
|
|
|
48 |
|
|
|
109 |
|
|
|
95 |
|
Amortization of deferred subscriber acquisition revenue |
|
|
(86 |
) |
|
|
(76 |
) |
|
|
(170 |
) |
|
|
(148 |
) |
Share-based compensation expense |
|
|
21 |
|
|
|
12 |
|
|
|
29 |
|
|
|
27 |
|
Deferred income taxes |
|
|
38 |
|
|
|
(61 |
) |
|
|
49 |
|
|
|
(131 |
) |
Provision for losses on receivables and inventory |
|
|
46 |
|
|
|
41 |
|
|
|
107 |
|
|
|
67 |
|
Goodwill, intangible, and other asset impairments |
|
|
1 |
|
|
|
185 |
|
|
|
21 |
|
|
|
428 |
|
Unrealized (gain) loss on interest rate swap contracts |
|
|
8 |
|
|
|
(55 |
) |
|
|
(2 |
) |
|
|
(22 |
) |
Other non-cash items, net |
|
|
22 |
|
|
|
24 |
|
|
|
43 |
|
|
|
53 |
|
Changes in operating assets and liabilities, net of effects of
acquisitions and dispositions: |
|
|
|
|
|
|
|
|
Deferred subscriber acquisition costs |
|
|
(94 |
) |
|
|
(98 |
) |
|
|
(183 |
) |
|
|
(185 |
) |
Deferred subscriber acquisition revenue |
|
|
69 |
|
|
|
75 |
|
|
|
135 |
|
|
|
148 |
|
Other, net |
|
|
57 |
|
|
|
(40 |
) |
|
|
(65 |
) |
|
|
(235 |
) |
Net cash provided by (used in)
operating activities |
|
|
563 |
|
|
|
493 |
|
|
|
927 |
|
|
|
799 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Dealer generated customer accounts and bulk account purchases |
|
|
(142 |
) |
|
|
(136 |
) |
|
|
(260 |
) |
|
|
(252 |
) |
Subscriber system asset expenditures |
|
|
(143 |
) |
|
|
(161 |
) |
|
|
(284 |
) |
|
|
(320 |
) |
Purchases of property and equipment |
|
|
(47 |
) |
|
|
(30 |
) |
|
|
(87 |
) |
|
|
(89 |
) |
Proceeds (payments) from interest rate swaps |
|
|
(2 |
) |
|
|
— |
|
|
|
(4 |
) |
|
|
— |
|
Other investing, net |
|
|
2 |
|
|
|
9 |
|
|
|
3 |
|
|
|
7 |
|
Net cash provided by (used in)
investing activities |
|
|
(333 |
) |
|
|
(319 |
) |
|
|
(633 |
) |
|
|
(655 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from long-term borrowings |
|
|
811 |
|
|
|
50 |
|
|
|
906 |
|
|
|
650 |
|
Proceeds from receivables facility |
|
|
80 |
|
|
|
76 |
|
|
|
146 |
|
|
|
140 |
|
Proceeds (payments) from interest rate swaps |
|
|
24 |
|
|
|
20 |
|
|
|
48 |
|
|
|
36 |
|
Repurchases of common stock |
|
|
— |
|
|
|
— |
|
|
|
(93 |
) |
|
|
— |
|
Repayment of long-term borrowings, including call premiums |
|
|
(961 |
) |
|
|
(266 |
) |
|
|
(1,018 |
) |
|
|
(873 |
) |
Repayment of receivables facility |
|
|
(100 |
) |
|
|
(48 |
) |
|
|
(158 |
) |
|
|
(92 |
) |
Dividends on common stock |
|
|
(50 |
) |
|
|
(32 |
) |
|
|
(82 |
) |
|
|
(64 |
) |
Payments on finance leases |
|
|
(8 |
) |
|
|
(10 |
) |
|
|
(15 |
) |
|
|
(21 |
) |
Other financing, net |
|
|
4 |
|
|
|
(7 |
) |
|
|
(8 |
) |
|
|
(33 |
) |
Net cash provided by (used in)
financing activities |
|
|
(200 |
) |
|
|
(217 |
) |
|
|
(275 |
) |
|
|
(258 |
) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents and restricted cash and
restricted cash equivalents: |
|
|
|
|
|
|
|
|
Net increase (decrease) |
|
|
30 |
|
|
|
(43 |
) |
|
|
19 |
|
|
|
(113 |
) |
Beginning balance |
|
|
119 |
|
|
|
304 |
|
|
|
130 |
|
|
|
374 |
|
Ending balance |
|
$ |
149 |
|
|
$ |
261 |
|
|
$ |
149 |
|
|
$ |
261 |
|
Note: amounts may not sum due to rounding
ADT sometimes uses information (“non-GAAP
financial measures”) that is derived from the consolidated
financial statements, but that is not presented in accordance with
accounting principles generally accepted in the U.S. (“GAAP”).
Under SEC rules, non-GAAP financial measures may be considered in
addition to results prepared in accordance with GAAP, but should
not be considered a substitute for or superior to GAAP results.
The following information includes definitions
of the Company’s non-GAAP financial measures used in this release,
reasons management believes these measures are useful to investors
regarding the Company’s financial condition and results of
operations, additional purposes, if any, for which management uses
the non-GAAP financial measures, and limitations to using these
non-GAAP financial measures, as well as reconciliations of these
non-GAAP financial measures to the most comparable GAAP measures.
Each non-GAAP financial measure is presented following the
corresponding GAAP measure so as not to imply that more emphasis
should be placed on the non-GAAP measure. The limitations of
non-GAAP financial measures are best addressed by considering these
measures in conjunction with the appropriate GAAP measures. In
addition, computations of these non-GAAP measures may not be
comparable to other similarly titled measures reported by other
companies.
With regard to the Company’s financial guidance
for 2024, the Company is not providing a quantitative
reconciliation for forward-looking Adjusted EBITDA to GAAP income
(loss) from continuing operations, Adjusted EPS to GAAP diluted
income (loss) per share from continuing operations, and Adjusted
Free Cash Flow (including interest rate swaps) to GAAP net cash
provided by operating activities, which are the most directly
comparable respective GAAP measures. These GAAP measures cannot be
reliably predicted or estimated without unreasonable effort due to
their dependence on future uncertainties, such as the adjustment of
items used in the following reconciliations. Additionally,
information not currently available to the Company about other
adjusting items could have a potentially unpredictable and
potentially significant impact on future GAAP financial
results.
Unless otherwise noted, non-GAAP measures herein
reflect the results of only the Company’s continuing operations.
Free Cash Flow, Adjusted Free Cash Flow, and Adjusted Free Cash
Flow (including interest rate swaps) reflect the results of both
continuing and discontinued operations, which is consistent with
the presentation of the GAAP measure net cash provided by (used in)
operating activities. Adjusted Free Cash Flow and Adjusted Free
Cash Flow (including interest rate swaps) exclude amounts related
to the exit from the solar business, consistent with the definition
of these measures. Beginning in the third quarter of 2024, all
remaining cash flows attributable to activities of the solar
business will be excluded from these measures as the business is
now substantially wound down.
Free Cash Flow, Adjusted Free Cash Flow,
and Adjusted Free Cash Flow including interest
rate swaps
The Company defines Free Cash Flow as cash flows
from operating activities less cash outlays related to capital
expenditures. The Company defines capital expenditures to include
accounts purchased through the Company’s network of authorized
dealers or third parties outside of the Company’s authorized dealer
network, subscriber system asset expenditures, and purchases of
property and equipment. These items are subtracted from cash flows
from operating activities because they represent long-term
investments that are required for normal business activities.
The Company defines Adjusted Free Cash Flow as
Free Cash Flow adjusted for net cash flows related to (i) net
proceeds from the Company’s consumer receivables facility; (ii)
restructuring and integration payments; (iii) integration-related
capital expenditures; and (iv) transaction costs and other payments
or receipts that may mask operating results or business trends.
Adjusted Free Cash Flow including interest rate swaps reflects
Adjusted Free Cash Flow plus net cash settlements on interest rate
swaps presented outside of net cash provided by (used in) operating
activities.
The Company believes the presentations of these
non-GAAP measures are appropriate to provide investors with useful
information about the Company’s ability to repay debt, make other
investments, and pay dividends. The Company believes the
presentation of Adjusted Free Cash Flow is also a useful measure of
the cash flow attributable to normal business activities, inclusive
of the net cash flows associated with the acquisition of
subscribers, as well as the Company’s ability to repay other debt,
make other investments, and pay dividends. Further, Adjusted Free
Cash Flow including interest rate swaps is a useful measure of
Adjusted Free Cash Flow inclusive of all cash interest.
There are material limitations to using these
non-GAAP measures. These non-GAAP measures adjust for cash items
that are ultimately within management’s discretion to direct, and
therefore, may imply that there is less or more cash available than
the most comparable GAAP measure. These non-GAAP measures are not
intended to represent residual cash flow for discretionary
expenditures since debt repayment requirements and other
non-discretionary expenditures are not deducted.
The non-GAAP measures in the table below include
cash flows associated with both continuing and discontinued
operations consistent with the applicable GAAP presentation on the
Statement of Cash Flows.
|
|
Three Months Ended June 30, |
(in millions) |
|
|
2024 |
|
|
|
2023 |
|
Net cash provided by (used in): |
|
|
|
|
Operating activities |
|
$ |
563 |
|
|
$ |
493 |
|
Investing activities |
|
$ |
(333 |
) |
|
$ |
(319 |
) |
Financing activities |
|
$ |
(200 |
) |
|
$ |
(217 |
) |
|
|
|
|
|
Net cash provided by (used in) operating
activities |
|
$ |
563 |
|
|
$ |
493 |
|
Dealer generated customer accounts and bulk account purchases |
|
|
(142 |
) |
|
|
(136 |
) |
Subscriber system asset expenditures |
|
|
(143 |
) |
|
|
(161 |
) |
Purchases of property and equipment |
|
|
(47 |
) |
|
|
(30 |
) |
Free Cash Flow |
|
|
231 |
|
|
|
165 |
|
Net proceeds (payments) from receivables facility |
|
|
(20 |
) |
|
|
28 |
|
Restructuring and integration payments(1) |
|
|
12 |
|
|
|
7 |
|
Integration-related capital expenditures |
|
|
— |
|
|
|
— |
|
Other, net(2) |
|
|
7 |
|
|
|
(1 |
) |
Adjusted Free Cash Flow |
|
$ |
229 |
|
|
$ |
201 |
|
Interest rate swaps presented outside operating activities(3) |
|
|
22 |
|
|
|
20 |
|
Adjusted Free Cash Flow (including interest rate
swaps) |
|
$ |
251 |
|
|
$ |
221 |
|
Note: amounts may not sum due to
rounding_______________________(1) During 2024, primarily includes
costs related to the ADT Solar Exit. During 2023, primarily
represents ADT Solar integration costs and restructuring
activities.(2) During 2024, primarily includes third party costs
associated with implementation of a new ERP system that the Company
will not continue to incur once the ERP system is fully
implemented, which is expected to complete in the second half of
2025.(3) Includes net settlements related to interest rate swaps
presented outside of net cash provided by (used in) operating
activities.
Adjusted EBITDA from Continuing
Operations (“Adjusted EBITDA”) and Adjusted EBITDA Margin from
Continuing Operations (“Adjusted EBITDA Margin”)
The Company believes Adjusted EBITDA is useful
to investors to measure the operational strength and performance of
its business. The Company believes the presentation of Adjusted
EBITDA is useful as it provides investors additional information
about operating profitability adjusted for certain non-cash items,
non-routine items the Company does not expect to continue at the
same level in the future, as well as other items not core to its
operations. Further, the Company believes Adjusted EBITDA provides
a meaningful measure of operating profitability because the Company
uses it for evaluating business performance, making budgeting
decisions, and comparing company performance against other peer
companies using similar measures.
The Company defines Adjusted EBITDA as income
(loss) from continuing operations adjusted for (i) interest; (ii)
taxes; (iii) depreciation and amortization, including depreciation
of subscriber system assets and other fixed assets and amortization
of dealer and other intangible assets; (iv) amortization of
deferred costs and deferred revenue associated with subscriber
acquisitions; (v) share-based compensation expense; (vi) merger,
restructuring, integration, and other items; (vii) impairment
charges; and (viii) non-cash, non-routine, or other adjustments or
charges not necessary to operate our business.
There are material limitations to using Adjusted
EBITDA as it does not include certain significant items which
directly affect income (loss) from continuing operations (the most
comparable GAAP measure).
The discussion above is also applicable to
Adjusted EBITDA margin, which is calculated as Adjusted EBITDA as a
percentage of total revenue.
|
|
Three Months Ended June 30, |
(in millions) |
|
|
2024 |
|
|
|
2023 |
|
Income (loss) from continuing operations |
|
$ |
126 |
|
|
$ |
180 |
|
Interest expense, net |
|
|
110 |
|
|
|
83 |
|
Income tax expense (benefit) |
|
|
60 |
|
|
|
67 |
|
Depreciation and intangible asset amortization |
|
|
334 |
|
|
|
321 |
|
Amortization of deferred subscriber acquisition costs |
|
|
55 |
|
|
|
46 |
|
Amortization of deferred subscriber acquisition revenue |
|
|
(86 |
) |
|
|
(74 |
) |
Share-based compensation expense |
|
|
21 |
|
|
|
8 |
|
Merger, restructuring, integration and other |
|
|
2 |
|
|
|
8 |
|
Other, net(1) |
|
|
8 |
|
|
|
— |
|
Adjusted EBITDA from continuing operations |
|
$ |
629 |
|
|
$ |
641 |
|
|
|
|
|
|
Income (loss) from continuing operations to total revenue
ratio |
|
|
10 |
% |
|
|
15 |
% |
Adjusted EBITDA Margin (as
percentage of Total Revenue) |
|
|
52 |
% |
|
|
55 |
% |
Note: amounts may not sum due to
rounding_______________________(1) During 2024, primarily includes
unrealized (gains) / losses related to interest rate swaps
presented in other income (expense) and loss on extinguishment of
debt.
Adjusted Income (Loss) from Continuing
Operations (“Adjusted Income (Loss)”) and Adjusted Diluted Income
(Loss) per Share from Continuing Operations (“Adjusted Diluted
Income (Loss) per Share” or “Adjusted EPS”)
The Company defines Adjusted Income (Loss) as
income (loss) from continuing operations adjusted for (i) merger,
restructuring, integration, and other; (ii) share-based
compensation expense; (iii) unrealized gains and losses on interest
rate swap contracts not designated as hedges; (iv) impairment
charges; (v) non-cash, non-routine, or other adjustments or charges
not necessary to operate our business; and (vi) the impact these
adjusted items have on taxes.
Adjusted Diluted Income (Loss) per share is
Adjusted Income (Loss) divided by diluted weighted-average shares
outstanding of common stock. When the control number for the GAAP
calculation is negative, diluted weighted-average shares
outstanding of common stock does not include the assumed conversion
of Class B common stock and other potential shares, such as
share-based compensation awards, to shares of common stock.
The Company believes Adjusted Income (Loss) and
Adjusted Diluted Income (Loss) per share are benchmarks used by
analysts and investors who follow the industry for comparison of
its performance with other companies in the industry, although
these measures may not be directly comparable to similar measures
reported by other companies.
There are material limitations to using these
measures, as they do not reflect certain significant items which
directly affect income (loss) from continuing operations and
related per share amounts (the most comparable GAAP measures).
|
|
Three Months Ended June 30, |
(in millions, except per share data) |
|
|
2024 |
|
|
|
2023 |
|
Income (loss) from continuing operations |
|
$ |
126 |
|
|
$ |
180 |
|
Merger, restructuring, integration, and other |
|
|
2 |
|
|
|
8 |
|
Share-based compensation expense |
|
|
21 |
|
|
|
8 |
|
Interest rate swaps, net(1) |
|
|
8 |
|
|
|
(55 |
) |
Other, net |
|
|
5 |
|
|
|
— |
|
Tax impact on adjustments(2) |
|
|
(6 |
) |
|
|
10 |
|
Adjusted Income (Loss) from continuing
operations |
|
$ |
156 |
|
|
$ |
153 |
|
|
|
|
|
|
Weighted-average shares outstanding -
diluted(3): |
|
|
|
|
Common Stock |
|
|
909 |
|
|
|
917 |
|
Class B Common Stock |
|
|
55 |
|
|
|
55 |
|
|
|
|
|
|
Income (loss) per share from continuing operations -
diluted: |
|
|
|
|
Common Stock |
|
$ |
0.13 |
|
|
$ |
0.19 |
|
Class B Common Stock |
|
$ |
0.13 |
|
|
$ |
0.19 |
|
|
|
|
|
|
Adjusted Diluted Income (Loss) per
share(4) |
|
$ |
0.17 |
|
|
$ |
0.17 |
|
Note: amounts may not sum due to
rounding._______________________(1) Primarily includes the
unrealized (gain) or loss on interest rate swaps not designated as
cash flow hedges.(2) Represents the federal and state blended
statutory rate.(3) Refer to the Company’s Quarterly Reports on Form
10-Q and Annual Reports on Form 10-K for further discussion
regarding the computation of diluted weighted-average shares
outstanding of common stock.(4) Calculated as Adjusted Income
(Loss) divided by diluted weighted-average shares outstanding of
common stock.
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