ADT Inc. (NYSE: ADT), a leading provider of security, automation,
and smart home solutions serving consumer and business customers in
the United States, today reported results for the fourth quarter
and full year 2020.
2020 HIGHLIGHTS COMPARED TO PRIOR YEAR (1)
FOURTH QUARTER
- Total revenue of $1,315 million, compared to $1,298
million
- Net loss of $112 million, compared to $72 million
FULL YEAR
- Total revenue of $5,315 million, compared to $5,126
million
- Net loss of $632 million, compared to $424 million
- Adjusted EBITDA of $2,199 million, compared to $2,483
million
- Net cash provided by operating activities of $1,367 million,
compared to $1,873 million
- Net cash used in investing activities of $1,137 million,
compared to $978 million
- Net cash used in financing activities of $70 million, compared
to $1,214 million
- Adjusted Free Cash Flow of $675 million, up from $590
million
- Trailing twelve-month revenue payback at a record low 2.2
years
- Trailing twelve-month gross customer revenue attrition of
13.1%, decreased 30 bps from a year ago
“ADT once again delivered strong financial and
operating results during the fourth quarter. We maintained our
record low revenue payback, while growing our RMR additions by
double digits and increasing our net subscribers. This performance
caps a year of delivering solid financial results while ensuring we
continued to prioritize the well-being of our employees and
customers,” stated Jim DeVries, ADT’s President and CEO. “During
2020, we took a number of steps to improve the long-term
competitive positions of ADT and set the stage for accelerating our
vision and disciplined growth strategy in 2021 and the future. We
enjoyed strong momentum in our core residential business and are
excited to welcome Dish Network and Ackerman Security. ADT’s market
leading brand and long-term partnership with Google provide a
compelling combination for future subscriber growth in the rapidly
expanding smart home and security market. Finally, we continued to
strengthen our commercial capabilities in 2020, during a
challenging year, and are well positioned to return to growth in
2021.”
FULL YEAR 2020 RESULTS (1)
Total revenue was $5,315 million, compared to
$5,126 million a year ago. Monitoring and related services revenue
(“M&S revenue”) was down $121 million or 2.8%, reflecting the
sale of ADT Canada in November 2019, offset partially by an
increase in U.S. recurring monthly revenue ("RMR"). Installation
and other revenue increased $310 million or 37.9%, primarily as a
result of higher installation revenue from outright sales to
residential customers primarily due to the Defenders acquisition
and a temporary change in the equipment ownership model for
residential transactions, partially offset by lower installation
revenue from commercial customers as a result of the COVID-19
pandemic.
The Company reported a net loss of $632 million,
compared to prior year’s net loss of $424 million. Net loss
increased primarily as a result of an increase in operating
expenses associated with the ownership of Defenders and an increase
in interest expense, net. The increase in net loss was partially
offset by higher total revenue, net of the associated costs of
revenue, and the aggregate impact due to the sale of ADT Canada in
2019. Diluted net loss per share of common stock was $(0.82)
compared to $(0.57) a year ago, and diluted net loss per share of
Class B common stock was $(0.74). Diluted net loss per share before
special items was $(0.36) versus $(0.09) in the prior year.
Adjusted EBITDA was $2,199 million, compared to
$2,483 million a year ago. The decrease in Adjusted EBITDA from the
prior year period was driven by the impact from the Defenders
acquisition, the sale of ADT Canada, and a lower volume of
commercial transactions due to the COVID-19 pandemic. A higher
volume of residential outright sale transactions and spending
controls partially offset the decrease.
Trailing twelve-month customer revenue payback
was a record low of 2.2 years from 2.3 years in the fourth quarter
of 2019. The improvement was a result of higher installation
revenue, efficient marketing, sales and installation spend, and
other productivity actions.
Trailing twelve-month gross customer revenue
attrition was 13.1%, an improvement of approximately 30 basis
points year-over-year and 20 basis points higher than record low
attrition at the end of the third quarter. The year-over-year
improvement was primarily due to fewer customer relocations and the
benefit of customer retention initiatives.
Full year net cash provided by operating
activities was $1,367 million, compared to $1,873 million in the
prior year. The decrease was primarily due to an increase in
selling, general and administrative expenses largely due to the
Defenders acquisition, an increase in outright sales to residential
customers, the sale of ADT Canada, and $81 million related to the
settlement of a pre-existing relationship in connection with the
Defenders acquisition.
Full year net cash used in investing activities
was $1,137 million, compared to $978 million in the prior year. The
increase in cash used in investing activities was primarily due to
the non-recurrence of $496 million of proceeds received as a result
of the sale of ADT Canada during 2019 and an increase in cash used
for business acquisitions, net of cash acquired, of $116 million
primarily due to the Defenders acquisition during 2020. These
increases were offset partially by a decrease in the volume of
dealer and bulk account purchases primarily due to the Defenders
acquisition, a decrease in the volume of subscriber system asset
expenditures as a result of a temporary change in the equipment
ownership model for residential transactions, and the sale of ADT
Canada.
Full year net cash used in financing activities
was $70 million and primarily consisted of $415 million related to
the net repayments of long-term borrowings, including call
premiums, and $109 million related to dividend payments on common
stock. These cash outflows were partially offset by $448 million of
proceeds, net of related expenses, associated with the issuance of
Class B Common Stock to Google and $76 million of net proceeds
under the receivables facility.
Full year Adjusted Free Cash Flow was $675
million, up 14% from $590 million in the prior year period. The
improvement was driven primarily by lower spending on net
subscriber acquisition costs, receipt of net proceeds under the
Company’s consumer receivables facility, and lower cash interest.
The improvement was partially offset by lower Adjusted EBITDA and
higher cash taxes.
HIGHLIGHTS
ADT and DISH Enter Into Nationwide Sales
and Service Agreement – ADT and DISH Network Corporation
announced a partnership whereby DISH will begin sales and
installation services for ADT smart home security products. DISH
customers will receive access to ADT products and services sold and
installed by DISH’s nationwide network of smart home professionals.
This partnership expands access to ADT services in rural and
exurban areas through DISH and OnTech sales, installation, and
support. This complementary agreement with an industry leader
represents yet another channel to further expand ADT’s subscriber
base. OnTech Smart Services, a subsidiary of DISH, will also serve
as an installation provider for ADT security products and
services.
Ackerman Security Joins ADT Authorized
Dealer Program – Atlanta-based Ackerman Security Systems
has joined the ADT Authorized Dealer Program and will sell and
install ADT smart home security services to its new customers.
Ackerman Security joins more than 200 independently owned and
operated ADT Authorized Dealers and expands ADT’s reach along the
east coast, specifically in the fast-growing tech hub of Atlanta.
As part of the partnership, ADT agreed to acquire approximately
half of Ackerman Security’s existing customer accounts for initial
cash consideration of $73 million.
ADT and Hippo Insurance Partner in Smart
Home Services and Discounts Program – ADT partnered with
Hippo, the home insurance group, leading a new standard of care and
protection for homeowners across 32 states. The alignment of the
two companies’ services brings homeowners even greater ways to help
save on their homeowners’ insurance and offer better protection for
their life, property, family, and assets. In the coming months, new
Hippo customers, in select states, who enroll in its smart home
program will be offered free installation of an ADT smart home
security system, a range of smart devices with their home insurance
policy, and will be eligible for Hippo smart home discounts. In
select states, ADT’s existing customers may be eligible to receive
smart home discounts on home insurance premiums offered through
Hippo Insurance Services.
ADT Command & Control Smart Home
Platform Reaches 1 Million Installations – ADT reached a
milestone in February 2021 as its award-winning smart home security
platform, ADT Command & Control, surpassed 1 million
installations. This milestone was achieved less than two years
after Command & Control’s nationwide introduction in 2019 as
the successor to ADT Pulse – the first widely adopted smart home
security system. More than 3 million residential customers now
enjoy the convenience and peace of mind provided by an ADT
interactive smart home security system.
Quarterly Dividend and Capital Structure
Update – Effective February 25, 2021, the Company’s
board of directors declared a cash dividend of $0.035 per share to
holders of the Company’s common stock and Class B common stock of
record as of March 18, 2021. This dividend will be paid on
April 1, 2021.
In December 2020, the Company made a $300
million prepayment on the First Lien Term Loan due 2026. In January
2021, the Company refinanced the loan and reduced the applicable
margin for Adjusted LIBOR loans from 3.25% to 2.750% and reduced
the floor from 1.00% to 0.750%.
2021 FINANCIAL OUTLOOK (2)With
ADT’s growth momentum in the second half of 2020, the Company
expects demand catalysts to continue in 2021 and is targeting full
year Recurring Monthly Revenue additions to grow in the mid-teens.
This growth will require increased spending on subscriber
acquisition costs and other technology investments. The Company is
providing the following financial guidance for 2021:
(in
millions) |
|
Total Revenue |
$5,050 - $5,250 |
Adjusted EBITDA |
$2,100 - $2,200 |
Adjusted Free Cash Flow |
$450 - $550 |
The Company is not providing a quantitative
reconciliation of its updated financial outlook for Adjusted EBITDA
and Adjusted Free Cash Flow to net income (loss) and net cash
provided by operating activities, which are their respective
corresponding GAAP measures, because these GAAP measures that are
excluded from the Company’s non-GAAP financial outlook are
difficult to reliably predict or estimate without unreasonable
effort due to their dependence on future uncertainties, such as
special items discussed below under the heading — “Non-GAAP
Measures—Adjusted EBITDA” and “Non-GAAP Measures—Adjusted Free Cash
Flow.” Additionally, information that is currently not available to
the Company could have a potentially unpredictable and potentially
significant impact on its future GAAP financial results.
____________________________
(1) |
All variances are year-over-year unless otherwise noted. Adjusted
EBITDA, Adjusted Free Cash Flow, and Diluted Net Income (Loss) per
share before special items are non-GAAP measures. Refer to the
“Non-GAAP Measures” section for the definitions of these terms and
reconciliations to the most comparable GAAP measures. The operating
metrics Gross Customer Revenue Attrition, Unit Count, RMR, 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. Record performance on metrics reflect measurements
made since the formation of ADT Inc. in 2015. |
|
|
(2) |
Guidance excludes 3G and Code-Division Multiple Access (“CDMA”)
radio conversion costs. There are many variables involved in those
costs, including retention levels, system upgrade rates, revenue
opportunities, cost-sharing opportunities, and possible technology
solutions. The Company estimates the range of net costs for this
replacement program at $225 million to $300 million, of which ADT
incurred $77 million through December 31, 2020. The Company
incurred $52 million during 2020. These amounts and ranges are net
of any revenue the Company collects from customers associated with
these radio replacements and cellular network conversions. Due to
the Company’s residential equipment ownership model transition, the
Company’s guidance includes estimated non-cash reductions in
reported revenue ($350 million to $400 million) and Adjusted EBITDA
($80 million to $100 million). |
Media Contact: |
Investor Relations Contact: |
Paul Wiseman - ADTtel:
561.356.6388paulwiseman@adt.com |
Derek Fiebig - ADT
tel: 561.226.2892derekfiebig@adt.com |
|
|
Conference Call
Management will discuss the Company’s fourth
quarter and full year 2020 financial results during a conference
call and webcast today beginning at 5:00 p.m. (ET). The conference
call can be accessed as follows:
- By dialing 1-877-407-3982 (domestic) or 1-201-493-6780
(international) and requesting the ADT Fourth Quarter 2020 Earnings
Conference Call
- Live webcast accessed through ADT’s website
at investor.adt.com.
An audio replay of the conference call will be
available from approximately 8:00 p.m. ET on February 25, 2021,
until 11:59 p.m. ET on March 11, 2021, and can be accessed by
dialing 1-844-512-2921 (domestic) or 1-412-317-6671
(international), and providing the passcode, 13715212 or by
accessing ADT's website at investor.adt.com. 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
ADT is a leading provider of security,
automation, and smart home solutions serving consumer and business
customers through more than 300 locations, 9 owned and operated
monitoring centers, and the largest network of security
professionals in the United States. The Company offers many ways to
help protect customers by delivering lifestyle-driven solutions via
professionally installed, do-it-yourself, mobile, and digital-based
offerings for residential, small business, and larger commercial
customers. For more information, please visit www.adt.com or follow
us on Twitter, LinkedIn, Facebook, and Instagram.
NON-GAAP MEASURES
To provide investors with additional information
in connection with our results as determined in accordance with
generally accepted accounting principles in the United States
(“GAAP”), we disclose Adjusted EBITDA, Adjusted EBITDA margin, Free
Cash Flow, Adjusted Free Cash Flow, Net Income (Loss) before
special items, and Diluted Net Income (Loss) per share before
special items as non-GAAP measures. These measures are not
financial measures calculated in accordance with GAAP and should
not be considered as a substitute for net income, operating income,
cash flows, or any other measure calculated in accordance with
GAAP, and may not be comparable to similarly titled measures
reported by other companies.
Adjusted EBITDA
We believe that the presentation of Adjusted
EBITDA is appropriate to provide additional information to
investors about our operating profitability adjusted for certain
non-cash items, non-routine items that we do not expect to continue
at the same level in the future, as well as other items that are
not core to our operations. Further, we believe Adjusted EBITDA
provides a meaningful measure of operating profitability because we
use it for evaluating our business performance, making budgeting
decisions, and comparing our performance against that of other peer
companies using similar measures.
We define Adjusted EBITDA as net income or loss
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, (vii) losses on extinguishment of debt, (viii) radio
conversion costs, (ix) financing and consent fees, (x) foreign
currency gains/losses, (xi) acquisition related adjustments, and
(xii) other charges and non-cash items.
There are material limitations to using Adjusted
EBITDA. Adjusted EBITDA does not take into account certain
significant items, including depreciation and amortization,
interest, taxes, and other adjustments which directly affect our
net income or loss. These limitations are best addressed by
considering the economic effects of the excluded items
independently and by considering Adjusted EBITDA in conjunction
with net income or loss as calculated in accordance with GAAP. The
Adjusted EBITDA discussion above is also applicable to its margin
measure, which is calculated as Adjusted EBITDA as a percentage of
monitoring and related services revenue.
Free Cash Flow
We believe that the presentation of Free Cash
Flow is appropriate to provide additional information to investors
about our ability to repay debt, make other investments, and pay
dividends.
We define Free Cash Flow as cash flows from
operating activities less cash outlays related to capital
expenditures. We define capital expenditures to include accounts
purchased through our network of authorized dealers or third
parties outside of our 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.
Free Cash Flow adjusts for cash items that are
ultimately within management’s discretion to direct, and therefore,
may imply that there is less or more cash that is available than
the most comparable GAAP measure. Free Cash Flow is not intended to
represent residual cash flow for discretionary expenditures since
debt repayment requirements and other non-discretionary
expenditures are not deducted. These limitations are best addressed
by using Free Cash Flow in combination with the cash flows as
calculated in accordance with GAAP.
Adjusted Free Cash Flow
We define Adjusted Free Cash Flow as Free Cash
Flow adjusted for payments related to (i) net cash flow associated
with our consumer receivables facility, (ii) financing and consent
fees, (iii) restructuring and integration, (iv) integration related
capital expenditures, (v) radio conversion costs, and (vi) other
payments or receipts that may mask our operating results or
business trends. As a result, subject to the limitations described
below, Adjusted Free Cash Flow is a useful measure of our cash flow
attributable to our normal business activities, inclusive of the
net cash flows associated with the acquisition of subscribers, as
well as our ability to repay other debt, make other
investments, and pay dividends.
Adjusted Free Cash Flow adjusts for cash items
that are ultimately within management’s discretion to direct, and
therefore, may imply that there is less or more cash that is
available than the most comparable GAAP measure. Adjusted Free Cash
Flow is not intended to represent residual cash flow for
discretionary expenditures since debt repayment requirements and
other non-discretionary expenditures are not deducted. These
limitations are best addressed by using Adjusted Free Cash Flow in
combination with the GAAP cash flow numbers.
During the second quarter of 2020, Free Cash
Flow before special items was renamed Adjusted Free Cash Flow to
reflect the net cash flow associated with our consumer receivables
facility, which supports our consumer financing program that
launched nationally in 2020. The inclusion of the net cash flow
associated with our consumer receivables facility represents the
only revision to Free Cash Flow before special items.
Net Income (Loss) before special items and
Diluted Net Income (Loss) per share before special items
Net Income (Loss) before special items is
defined as net income (loss) adjusted for (i) share-based
compensation expense, (ii) merger, restructuring, integration, and
other, (iii) losses on extinguishment of debt, (iv) unrealized
gains and losses on interest rate swap contracts not designated as
hedges, (v) radio conversion costs, (vi) financing and consent
fees, (vii) foreign currency gains/losses, (viii) acquisition
related adjustments, (ix) other charges and non-cash items, and (x)
the impact these adjusted items have on taxes.
Diluted Net Income (Loss) per share before
special items is Net Income (Loss) before special items divided by
diluted weighted-average shares outstanding of common stock. In
periods of net loss, diluted weighted-average shares outstanding of
common stock does not include the assumed conversion of Class B
common stock to shares of common stock as the results would be
anti-dilutive.
We believe that Net Income (Loss) before special
items and Diluted Net Income (Loss) per share before special items
are benchmarks used by analysts and investors who follow the
industry for comparison of its performance with other companies in
the industry, although our measures may not be directly comparable
to similar measures reported by other companies.
The limitation of these measures is that they
exclude the impact (which may be material) of items that increase
or decrease our reported operating income, operating margin, net
income (loss), and diluted net income (loss) per share of common
stock and Class B common stock. This limitation is best addressed
by using the non-GAAP measures in combination with the most
comparable GAAP measures in order to better understand the amounts,
character, and impact of any increase or decrease on reported
results.
Refer to the Company’s Annual Report on Form 10-K for further
discussion regarding the computation of diluted weighted-average
shares outstanding of common stock.
FORWARD-LOOKING STATEMENTS
ADT has made statements in this press release
and other reports, filings, and other public written and verbal
announcements that are forward-looking and therefore subject to
risks and uncertainties, including under the heading 2021 Financial
Outlook. 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 are made in reliance on the safe harbor
protections provided thereunder. These forward-looking statements
relate to anticipated financial performance, management’s plans and
objectives for future operations, business prospects, outcome of
regulatory proceedings, market conditions, our ability to
successfully respond to the challenges posed by the COVID-19
pandemic, our strategic partnership and ongoing relationship with
Google, the expected timing of product commercialization with
Google or any changes thereto, the successful internal development,
commercialization and timing of our next generation platform and
other matters. 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. Forward-looking statements can be
identified by various words such as “expects,” “intends,” “will,”
“anticipates,” “believes,” “confident,” “continue,” “propose,”
“seeks,” “could,” “may,” “should,” “estimates,” “forecasts,”
“might,” “goals,” “objectives,” “targets,” “planned,” “projects,”
and similar expressions. These forward-looking statements are based
on management’s current beliefs and assumptions and on information
currently available to management. ADT cautions that these
statements are subject to risks and uncertainties, many of which
are outside of ADT’s control, and could cause future events or
results to be materially different from those stated or implied in
this document, including among others, risk factors that are
described in the Company’s Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K, and other
filings with the Securities and Exchange Commission, including the
sections entitled “Risk Factors” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”
contained therein.
ADT INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS(in
millions)(Unaudited)
|
December 31, 2020 |
|
December 31, 2019 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
205 |
|
|
$ |
49 |
|
Accounts receivable, net |
336 |
|
|
287 |
|
Inventories, net |
175 |
|
|
104 |
|
Work-in-progress |
41 |
|
|
34 |
|
Prepaid expenses and other current assets |
210 |
|
|
151 |
|
Total current assets |
967 |
|
|
625 |
|
Property and equipment, net |
326 |
|
|
329 |
|
Subscriber system assets,
net |
2,663 |
|
|
2,739 |
|
Intangible assets, net |
5,907 |
|
|
6,670 |
|
Goodwill |
5,236 |
|
|
4,960 |
|
Deferred subscriber acquisition
costs, net |
654 |
|
|
513 |
|
Other assets |
364 |
|
|
248 |
|
Total assets |
$ |
16,117 |
|
|
$ |
16,084 |
|
|
|
|
|
Liabilities and
stockholders' equity |
|
|
|
Current liabilities: |
|
|
|
Current maturities of long-term debt |
$ |
45 |
|
|
$ |
58 |
|
Accounts payable |
322 |
|
|
242 |
|
Deferred revenue |
346 |
|
|
342 |
|
Accrued expenses and other current liabilities |
584 |
|
|
477 |
|
Total current liabilities |
1,296 |
|
|
1,120 |
|
Long-term debt |
9,448 |
|
|
9,634 |
|
Deferred subscriber acquisition
revenue |
832 |
|
|
674 |
|
Deferred tax liabilities |
991 |
|
|
1,166 |
|
Other liabilities |
511 |
|
|
305 |
|
Total liabilities |
13,078 |
|
|
12,899 |
|
Total stockholders' equity |
3,039 |
|
|
3,184 |
|
Total liabilities and stockholders' equity |
$ |
16,117 |
|
|
$ |
16,084 |
|
Note: amounts may not add due to rounding
ADT INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(in millions, except per share
data)(Unaudited)
|
For the Three Months Ended |
|
For the Years Ended |
|
December 31,2020 |
|
December 31,2019 |
|
December 31,2020 |
|
December 31,2019 |
Monitoring and related services |
$ |
1,054 |
|
|
$ |
1,058 |
|
|
$ |
4,187 |
|
|
$ |
4,308 |
|
Installation and other |
261 |
|
|
240 |
|
|
1,128 |
|
|
818 |
|
Total revenue |
1,315 |
|
|
1,298 |
|
|
5,315 |
|
|
5,126 |
|
Cost of revenue (exclusive of
depreciation and amortization shown separately below) |
374 |
|
|
370 |
|
|
1,517 |
|
|
1,390 |
|
Selling, general and
administrative expenses |
445 |
|
|
359 |
|
|
1,723 |
|
|
1,407 |
|
Depreciation and intangible asset
amortization |
474 |
|
|
487 |
|
|
1,914 |
|
|
1,989 |
|
Merger, restructuring,
integration, and other |
5 |
|
|
13 |
|
|
120 |
|
|
36 |
|
Goodwill impairment |
— |
|
|
— |
|
|
— |
|
|
45 |
|
Loss on sale of business |
— |
|
|
6 |
|
|
1 |
|
|
62 |
|
Operating income |
17 |
|
|
64 |
|
|
41 |
|
|
196 |
|
Interest expense, net |
(139 |
) |
|
(154 |
) |
|
(708 |
) |
|
(620 |
) |
Loss on extinguishment of
debt |
(5 |
) |
|
(1 |
) |
|
(120 |
) |
|
(104 |
) |
Other income |
2 |
|
|
2 |
|
|
8 |
|
|
5 |
|
Loss before income taxes |
(125 |
) |
|
(88 |
) |
|
(779 |
) |
|
(522 |
) |
Income tax benefit |
13 |
|
|
16 |
|
|
147 |
|
|
98 |
|
Net loss |
$ |
(112 |
) |
|
$ |
(72 |
) |
|
$ |
(632 |
) |
|
$ |
(424 |
) |
|
|
|
|
|
|
|
|
Net loss per share -
basic: |
|
|
|
|
|
|
|
Common stock |
$ |
(0.14 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.82 |
) |
|
$ |
(0.57 |
) |
Class B common stock |
$ |
(0.14 |
) |
|
$ |
— |
|
|
$ |
(0.72 |
) |
|
$ |
— |
|
|
|
|
|
|
|
|
|
Weighted-average shares
outstanding - basic: |
|
|
|
|
|
|
|
Common stock |
761 |
|
|
743 |
|
|
760 |
|
|
747 |
|
Class B common stock |
55 |
|
|
— |
|
|
16 |
|
|
— |
|
|
|
|
|
|
|
|
|
Net loss per share - diluted: |
|
|
|
|
|
|
|
Common stock |
$ |
(0.14 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.82 |
) |
|
$ |
(0.57 |
) |
Class B common stock |
$ |
(0.14 |
) |
|
$ |
— |
|
|
$ |
(0.74 |
) |
|
$ |
— |
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding -
diluted: |
|
|
|
|
|
|
|
Common stock |
761 |
|
|
743 |
|
|
760 |
|
|
747 |
|
Class B common stock |
55 |
|
|
— |
|
|
18 |
|
|
— |
|
Note: amounts may not add due to rounding
ADT INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(in
millions)(Unaudited)
|
For the Years Ended |
|
December 31,2020 |
|
December 31,2019 |
Cash flows from operating
activities: |
|
|
|
Net loss |
$ |
(632 |
) |
|
$ |
(424 |
) |
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
Depreciation and intangible asset amortization |
1,914 |
|
|
1,989 |
|
Amortization of deferred subscriber acquisition costs |
97 |
|
|
80 |
|
Amortization of deferred subscriber acquisition revenue |
(125 |
) |
|
(107 |
) |
Share-based compensation expense |
96 |
|
|
86 |
|
Deferred income taxes |
(173 |
) |
|
(118 |
) |
Provision for losses on receivables and inventory |
120 |
|
|
55 |
|
Loss on extinguishment of debt |
120 |
|
|
104 |
|
Goodwill impairment |
— |
|
|
45 |
|
Loss on sale of business |
1 |
|
|
62 |
|
Unrealized loss on interest rate swap contracts |
60 |
|
|
9 |
|
Other non-cash items, net |
145 |
|
|
129 |
|
Changes in operating assets and
liabilities, net of the effects of acquisitions and
dispositions: |
|
|
|
Deferred subscriber acquisition costs |
(240 |
) |
|
(190 |
) |
Deferred subscriber acquisition revenue |
180 |
|
|
260 |
|
Other, net |
(194 |
) |
|
(107 |
) |
Net cash provided by operating activities |
1,367 |
|
|
1,873 |
|
Cash flows from investing
activities: |
|
|
|
Dealer generated customer
accounts and bulk account purchases |
(381 |
) |
|
(670 |
) |
Subscriber system asset
expenditures |
(418 |
) |
|
(542 |
) |
Purchases of property and
equipment |
(157 |
) |
|
(159 |
) |
Acquisition of businesses, net of
cash acquired |
(225 |
) |
|
(109 |
) |
Sale of business, net of cash
sold |
(2 |
) |
|
496 |
|
Other investing, net |
46 |
|
|
5 |
|
Net cash used in investing activities |
(1,137 |
) |
|
(978 |
) |
Cash flows from financing
activities: |
|
|
|
Proceeds from issuance of common
stock, net of expenses |
448 |
|
|
— |
|
Proceeds from long-term
borrowings |
2,640 |
|
|
3,403 |
|
Proceeds from receivables
facility |
83 |
|
|
— |
|
Repayment of long-term
borrowings, including call premiums |
(3,055 |
) |
|
(3,845 |
) |
Repayment of receivables
facility |
(7 |
) |
|
— |
|
Dividends on common stock |
(109 |
) |
|
(565 |
) |
Repurchases of common stock |
— |
|
|
(150 |
) |
Deferred financing costs |
(29 |
) |
|
(54 |
) |
Other financing, net |
(40 |
) |
|
(3 |
) |
Net cash used in financing activities |
(70 |
) |
|
(1,214 |
) |
|
|
|
|
Effect of currency translation on
cash |
— |
|
|
1 |
|
|
|
|
|
Net increase (decrease)
in cash and cash equivalents and restricted cash and restricted
cash equivalents |
159 |
|
|
(318 |
) |
Cash and cash equivalents
and restricted cash and restricted cash equivalents at beginning of
period |
49 |
|
|
367 |
|
Cash and cash equivalents
and restricted cash and restricted cash equivalents at end of
period |
$ |
208 |
|
|
$ |
49 |
|
Note: amounts may not add due to rounding
ADT INC. AND
SUBSIDIARIESU.S. GAAP to Non-GAAP
RECONCILIATIONS(Unaudited)
Adjusted EBITDA
|
For the Three Months Ended |
For the Years Ended |
(in millions) |
December 31,2020 |
|
December 31,2019 |
|
December 31,2020 |
|
December 31,2019 |
Net loss |
$ |
(112 |
) |
|
$ |
(72 |
) |
|
$ |
(632 |
) |
|
$ |
(424 |
) |
Interest expense, net |
139 |
|
|
154 |
|
|
708 |
|
|
620 |
|
Income tax benefit |
(13 |
) |
|
(16 |
) |
|
(147 |
) |
|
(98 |
) |
Depreciation and intangible
asset amortization |
474 |
|
|
487 |
|
|
1,914 |
|
|
1,989 |
|
Amortization of deferred
subscriber acquisition costs |
27 |
|
|
22 |
|
|
97 |
|
|
80 |
|
Amortization of deferred
subscriber acquisition revenue |
(34 |
) |
|
(29 |
) |
|
(125 |
) |
|
(107 |
) |
Share-based compensation
expense |
21 |
|
|
21 |
|
|
96 |
|
|
86 |
|
Merger, restructuring,
integration, and other |
5 |
|
|
13 |
|
|
120 |
|
|
36 |
|
Goodwill impairment |
— |
|
|
— |
|
|
— |
|
|
45 |
|
Loss on sale of business |
— |
|
|
6 |
|
|
1 |
|
|
62 |
|
Loss on extinguishment of
debt |
5 |
|
|
1 |
|
|
120 |
|
|
104 |
|
Radio conversion costs,
net(1) |
28 |
|
|
12 |
|
|
52 |
|
|
25 |
|
Financing and consent
fees(2) |
— |
|
|
— |
|
|
5 |
|
|
23 |
|
Foreign currency gains(3) |
— |
|
|
(1 |
) |
|
— |
|
|
(1 |
) |
Acquisition related
adjustments(4) |
(1 |
) |
|
6 |
|
|
— |
|
|
22 |
|
Other(5) |
(5 |
) |
|
5 |
|
|
(10 |
) |
|
22 |
|
Adjusted EBITDA |
$ |
533 |
|
|
$ |
607 |
|
|
$ |
2,199 |
|
|
$ |
2,483 |
|
|
|
|
|
|
|
|
|
Net loss to total revenue
ratio |
(8.5 |
)% |
|
(5.5 |
)% |
|
(11.9 |
)% |
|
(8.3 |
)% |
Adjusted EBITDA Margin (as
percentage of M&S Revenue) |
50.6 |
% |
|
57.4 |
% |
|
52.5 |
% |
|
57.6 |
% |
Note: amounts may not add due to
rounding_______________________
(1) |
Represents costs, net of any incremental revenue earned, associated
with replacing cellular technology used in many of our security
systems pursuant to a replacement program. |
(2) |
Represents fees expensed associated with financing
transactions. |
(3) |
Represents the conversion of intercompany loans that are
denominated in Canadian dollars to U.S. dollars. |
(4) |
Represents amortization of purchase accounting adjustments and
compensation arrangements related to acquisitions. |
(5) |
Represents other charges and non-cash items. The three and twelve
months ended December 31, 2020 included recoveries of $3 million
and $10 million, respectively, associated with notes receivable
from a former strategic investment. The three and twelve months
ended December 31, 2019 included losses of $5 million and $10
million, respectively, associated with notes receivable from a
former strategic investment. The twelve months ended December 31,
2019 included $6 million associated with an estimated legal
settlement, net of insurance. |
|
|
ADT INC. AND
SUBSIDIARIESU.S. GAAP to Non-GAAP RECONCILIATIONS
(continued)(Unaudited)
Free Cash Flow and Adjusted Free Cash Flow
|
For the Three Months Ended |
|
For the Years Ended |
(in millions) |
December 31,2020 |
|
December 31,2019 |
|
December 31,2020 |
|
December 31,2019 |
Net cash provided by operating activities |
$ |
373 |
|
|
$ |
414 |
|
|
$ |
1,367 |
|
|
$ |
1,873 |
|
Net cash (used in) provided by
investing activities |
(337 |
) |
|
179 |
|
|
(1,137 |
) |
|
(978 |
) |
Net cash used in financing
activities |
(319 |
) |
|
(704 |
) |
|
(70 |
) |
|
(1,214 |
) |
|
|
|
|
|
|
|
|
Net cash provided by
operating activities |
$ |
373 |
|
|
$ |
414 |
|
|
$ |
1,367 |
|
|
$ |
1,873 |
|
Dealer generated customer
accounts and bulk account purchases |
(116 |
) |
|
(155 |
) |
|
(381 |
) |
|
(670 |
) |
Subscriber system assets |
(146 |
) |
|
(112 |
) |
|
(418 |
) |
|
(542 |
) |
Purchases of property and
equipment |
(45 |
) |
|
(39 |
) |
|
(157 |
) |
|
(159 |
) |
Free Cash Flow |
67 |
|
|
108 |
|
|
410 |
|
|
502 |
|
Net proceeds from receivables
facility |
34 |
|
|
— |
|
|
76 |
|
|
— |
|
Financing and consent
fees |
— |
|
|
3 |
|
|
5 |
|
|
23 |
|
Restructuring and integration
payments |
2 |
|
|
5 |
|
|
20 |
|
|
14 |
|
Integration related capital
expenditures |
8 |
|
|
8 |
|
|
23 |
|
|
16 |
|
Radio conversion costs |
25 |
|
|
12 |
|
|
43 |
|
|
25 |
|
Other, net(1) |
7 |
|
|
(5 |
) |
|
97 |
|
|
10 |
|
Adjusted Free Cash Flow |
$ |
143 |
|
|
$ |
132 |
|
|
$ |
675 |
|
|
$ |
590 |
|
Note: amounts may not add due to
rounding_______________________
(1) |
The twelve months ended December 31, 2020 included $81 million
related to the settlement of a pre-existing relationship in
connection with the Defenders acquisition. |
|
|
ADT INC. AND
SUBSIDIARIESU.S. GAAP to Non-GAAP RECONCILIATIONS
(continued)(Unaudited)
Net Loss Before Special Items and Diluted Net Loss Per
Share Before Special Items
|
For the Three Months Ended |
|
For the Years Ended |
(in millions, except per share
data) |
December 31,2020 |
|
December 31,2019 |
|
December 31,2020 |
|
December 31,2019 |
Net loss |
$ |
(112 |
) |
|
$ |
(72 |
) |
|
$ |
(632 |
) |
|
$ |
(424 |
) |
Share-based compensation
expense |
21 |
|
|
21 |
|
|
96 |
|
|
86 |
|
Merger, restructuring,
integration, and other |
5 |
|
|
13 |
|
|
120 |
|
|
36 |
|
Goodwill impairment |
— |
|
|
— |
|
|
— |
|
|
45 |
|
Loss on sale of business |
— |
|
|
6 |
|
|
1 |
|
|
62 |
|
Loss on extinguishment of
debt |
5 |
|
|
1 |
|
|
120 |
|
|
104 |
|
Interest rate swaps,
net(1) |
(29 |
) |
|
— |
|
|
60 |
|
|
8 |
|
Radio conversion costs,
net(2) |
28 |
|
|
12 |
|
|
52 |
|
|
25 |
|
Financing and consent
fees(3) |
— |
|
|
— |
|
|
5 |
|
|
23 |
|
Foreign currency gains(4) |
— |
|
|
(1 |
) |
|
— |
|
|
(1 |
) |
Acquisition related
adjustments(5) |
(1 |
) |
|
6 |
|
|
— |
|
|
22 |
|
Other(6) |
(5 |
) |
|
5 |
|
|
(10 |
) |
|
22 |
|
Tax adjustments(7) |
(6 |
) |
|
(14 |
) |
|
(86 |
) |
|
(74 |
) |
Net loss before special items |
$ |
(93 |
) |
|
$ |
(24 |
) |
|
$ |
(274 |
) |
|
$ |
(66 |
) |
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding - diluted: |
|
|
|
|
|
|
|
Common stock |
761 |
|
|
743 |
|
|
760 |
|
|
747 |
|
Class B common stock |
55 |
|
|
— |
|
|
18 |
|
|
— |
|
|
|
|
|
|
|
|
|
Net loss per share -
diluted: |
|
|
|
|
|
|
|
Common stock |
$ |
(0.14 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.82 |
) |
|
$ |
(0.57 |
) |
Class B common stock |
$ |
(0.14 |
) |
|
$ |
— |
|
|
$ |
(0.74 |
) |
|
$ |
— |
|
|
|
|
|
|
|
|
|
Net loss per share
before special items - diluted:(8) |
$ |
(0.12 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.36 |
) |
|
$ |
(0.09 |
) |
Note: amounts may not add due to
rounding_______________________
(1) |
Primarily represents unrealized losses on interest rate swap
contracts not designated as hedges. |
(2) |
Represents costs, net of any incremental revenue earned, associated
with replacing cellular technology used in many of our security
systems pursuant to a replacement program. |
(3) |
Represents fees expensed associated with financing
transactions. |
(4) |
Represents the conversion of intercompany loans that are
denominated in Canadian dollars to U.S. dollars. |
(5) |
Represents amortization of purchase accounting adjustments and
compensation arrangements related to acquisitions. |
(6) |
Represents other charges and non-cash items. The three and twelve
months ended December 31, 2020 included recoveries of $3 million
and $10 million, respectively, associated with notes receivable
from a former strategic investment. The three and twelve months
ended December 31, 2019 included losses of $5 million and $10
million, respectively, associated with notes receivable from a
former strategic investment. The twelve months ended December 31,
2019 included $6 million associated with an estimated legal
settlement, net of insurance. |
(7) |
Represents tax impact on special items. |
(8) |
Represents net loss before special items divided by diluted
weighted-average shares outstanding of common stock. |
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