ADT Inc. (NYSE: ADT), the most trusted brand in smart home and
small business security, today reported results for the first
quarter of 2024.
Financial highlights for the first quarter are
listed below. Except for cash flow measures, prior period amounts
have been recast to exclude ADT’s former commercial business,
consistent with continuing operations GAAP presentation following
the sale of the commercial business. Variances are on a
year-over-year basis unless otherwise noted.
First Quarter 2024
- Total revenue of
$1.2 billion with end-of-period recurring monthly revenue
(RMR) up 3% to $353 million ($4.2 billion on an annualized
basis)
- Consumer and
Small Business (CSB) revenue of $1.2 billion, up 5% and
segment Adjusted EBITDA of $638 million, up 8%
- Strong customer
retention with gross revenue attrition of 13.1%
- GAAP income from
continuing operations of $92 million, or $0.10 per diluted share,
up $218 million
- Adjusted income
from continuing operations of $151 million, or $0.16 per
diluted share, up $56 million
“We are off to a strong start in 2024 with
continued momentum in CSB segment revenue and Adjusted EBITDA as
well as cash flow growth. During the quarter, we continued rolling
out our new professionally installed ADT+ platform, positioning us
to expand nationally in the coming months. We are excited about
this new platform, related innovative use cases, and more diverse
and flexible offerings for our customer base,” said ADT Chairman,
President, and CEO, Jim DeVries. “Additionally, we continue to
execute on our value creation and capital allocation strategy. We
remain focused on driving significant cash flow while continuing to
invest in growing and serving our customer base and returning
capital to shareholders.”
Foundation for Growth
- Strong RMR
balance – End-of-period RMR balance was $353 million ($4.2 billion
on an annualized basis), a 3% increase. More than 85% of CSB
revenue was generated from this durable recurring revenue.
- Maintained
strong customer retention and revenue payback – Trailing 12-month
gross customer revenue attrition was 13.1% and revenue payback
ended the first quarter of 2024 at 2.1 years.
- Solid CSB
performance – CSB segment Adjusted EBITDA margin was 54%, up
approximately 200 basis points, driven by strong execution and
operational efficiencies.
Unlocking Shareholder Value
- Share
repurchase – In March 2024, the Company repurchased 15 million
shares of its common stock as part of its existing $350 million
share repurchase authorization. This repurchase was concurrent with
a secondary offering of 74.75 million shares (including the
underwriters’ over-allotment option) of the Company’s common stock
held by certain existing shareholders. Following this transaction,
ADT ceased to be a “controlled company” under NYSE rules.
- Balance sheet
fortification – On April 15, 2024, the Company redeemed the
remaining $100 million of its First Lien Senior Secured Notes due
2024.
- Term Loan B
repricing – On April 15, 2024, the Company completed a repricing of
the $1.4 billion Term Loan B reducing borrowing costs by 25 basis
points.
- Solar business
exit – As previously announced in January 2024, the Company is
exiting the residential solar business and is in the process of
winding down its solar operations. The Company discontinued all
sales and marketing activities during the first quarter and expects
to discontinue substantially all field operations by the end of the
second quarter.
Innovative Offerings, Unrivaled Safety
and Premium Experience
- ADT+ platform
for professional installation – The Company continued the phased
rollout of the ADT+ platform, with planned geographic expansion
throughout the year. With this rollout, customers will have next
generation hardware and technology through a proprietary app which
the Company believes will become the conduit for future innovative
use cases and differentiation.
- ADT Home
Security Program for State Farm – ADT’s program for State Farm
customers is currently available in 13 states with expansion to
four additional states later this year.
- Improved
e-commerce capabilities – ADT enhanced its e-commerce shopping
experience on ADT.com such that customers can more easily shop for
individual products, configure system packages and complete
purchases.
Progress on our ESG Journey
- ADT Safe Places
Program partners – ADT’s corporate social responsibility program,
ADT Safe Places, is positively impacting communities throughout the
country with purposeful non-profit partnerships. In the first
quarter, the ADT Safe Places program made $100,000 donations to new
non-profit partners, Blacks in Green and Chicago CRED. ADT also
donated $10,000 to the Red Cross to support recovery work in
Baltimore following the collapse of the Francis Scott Key
Bridge.
The Company is reiterating its financial
guidance for 2024.
(in millions, except per share data) |
|
|
CSB Total Revenue |
|
$4,800 - $5,000 |
CSB Adjusted EBITDA |
|
$2,525 - $2,625 |
Adjusted EPS |
|
$0.60 - $0.70 |
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 CSB Total Revenue or CSB Adjusted
EBITDA (our segment profit measure) or a quantitative
reconciliation to the most directly comparable GAAP measures 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. |
The above measurements do not include restructuring or similar
expenditures associated with winding down and exiting the solar
business. |
TOTAL COMPANY
RESULTS (1)(2) |
|
(in millions, except revenue payback, attrition, and per share
data) |
|
Three Months Ended March 31, |
|
|
2024 |
|
|
|
2023 |
|
|
GAAP |
Net cash provided by (used in): |
|
|
|
|
Operating activities |
|
$ |
364 |
|
|
$ |
307 |
|
Investing activities |
|
$ |
(300 |
) |
|
$ |
(336 |
) |
Financing activities |
|
$ |
(75 |
) |
|
$ |
(41 |
) |
Income (loss) from continuing operations |
|
$ |
92 |
|
|
$ |
(127 |
) |
Income (loss) from continuing operations per share - basic |
|
$ |
0.10 |
|
|
$ |
(0.14 |
) |
Income (loss) from continuing operations per share - diluted |
|
$ |
0.10 |
|
|
$ |
(0.14 |
) |
|
|
Non-GAAP Measures |
Adjusted Free Cash Flow |
|
$ |
89 |
|
|
$ |
— |
|
Adjusted Free Cash Flow (including interest rate swaps) |
|
$ |
111 |
|
|
$ |
16 |
|
Adjusted Income (Loss) from Continuing Operations |
|
$ |
151 |
|
|
$ |
95 |
|
Adjusted Diluted Income (Loss) per share from Continuing
Operations |
|
$ |
0.16 |
|
|
$ |
0.11 |
|
|
|
Other Measures |
Trailing twelve-month revenue payback |
|
2.1 years |
|
2.1 years |
Trailing twelve-month gross customer revenue attrition |
|
|
13.1 |
% |
|
|
12.9 |
% |
End of period RMR |
|
$ |
353 |
|
|
$ |
344 |
|
SEGMENT RESULTS (2) |
CSB |
|
|
Three Months Ended March 31, |
(in millions, except Adjusted EBITDA Margin) |
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
Monitoring and related services |
|
$ |
1,063 |
|
|
$ |
1,029 |
|
|
$ |
34 |
|
|
3 |
% |
Security installation, product, and other |
|
|
127 |
|
|
|
104 |
|
|
|
23 |
|
|
22 |
% |
Total CSB revenue |
|
$ |
1,190 |
|
|
$ |
1,132 |
|
|
$ |
57 |
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
$ |
638 |
|
|
$ |
590 |
|
|
$ |
48 |
|
|
8 |
% |
Adjusted EBITDA Margin (as a % of Total CSB Revenue) |
|
|
54 |
% |
|
|
52 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total CSB revenue was $1,190 million for the
first quarter, up 5%. Monitoring and related services (M&S)
revenue growth was driven by increased RMR balance. Security
installation, product, and other revenue increased primarily from
higher amortization of deferred subscriber acquisition revenue,
along with a greater volume of transactions and higher installation
revenue per unit under the customer-owned equipment ownership
model.
CSB Adjusted EBITDA increased 8% to $638 million
in the first quarter. These improvements were driven by continued
recurring revenue growth and cost structure improvements.
Solar
Total Solar revenue for the first quarter was
$20 million with an Adjusted EBITDA loss of $24 million as a result
of the Company’s decision to exit the residential solar
business.
During the first quarter, the Company also
incurred charges associated with winding down and exiting the solar
business of $75 million and cash expenditures of $11 million which
have been excluded from the segment Adjusted EBITDA, Adjusted EPS,
and Adjusted Free Cash Flow (including interest rate swaps). The
Company expects to incur additional charges of up to $35 million
and additional cash expenditures of approximately $40 million to
$60 million.
BALANCE SHEET, CASH, AND LIQUIDITY |
|
|
|
Three Months Ended March 31, |
(in millions) |
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
Net cash provided by (used in) operating activities |
|
$ |
364 |
|
|
$ |
307 |
|
|
$ |
57 |
|
|
19 |
% |
Adjusted Free Cash Flow |
|
$ |
89 |
|
|
$ |
— |
|
|
$ |
89 |
|
|
N/M |
Adjusted Free Cash Flow (including interest rate swaps) |
|
$ |
111 |
|
|
$ |
16 |
|
|
$ |
95 |
|
|
N/M |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities during
the first quarter was $364 million, up $57 million or 19%, and
Adjusted Free Cash Flow (including the benefit of interest rate
swaps) increased by $95 million versus the prior year period.
During the first quarter, improved CSB operating profitability,
lower payroll-related payments, and lower cash interest resulting
from debt reduction, were partially offset by results of the
commercial business included in the prior year.
During the quarter, the Company spent $300
million in net cash subscriber acquisition costs and invested $54
million in capital and software expenditures.
The Company returned $32 million to shareholders
in dividends during the first quarter of 2024. Additionally, the
Company paid approximately $93 million to repurchase and retire
15 million shares of common stock (at a price of $6.22 per
share). As of March 31, 2024, approximately $257 million
remains available for future repurchases under the Share Repurchase
Plan.
The Company ended the first quarter with $4
million of cash and a $50 million drawn revolving credit
balance.
On April 15, 2024, 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 Term Loan B
reducing borrowing costs by 25 basis points. There are no other
significant debt maturities until 2026.
Effective April 25, 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 June 13, 2024. This dividend will be paid on July 9,
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 these
terms and reconciliations to the most comparable GAAP measures. 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 business
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 first
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 1-833-470-1428 (domestic) or 1-404-975-4839
(international), and providing the access code 271635. An audio
replay will be available for two weeks following the call, and can
be accessed by dialing 1-866-813-9403 (domestic) or 1-929-458-6194
(international), and providing the access code 213414.
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 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 the December 2023 strategic bulk purchase of
customer accounts; the Company’s outlook and/or guidance, which
includes total revenue and Adjusted EBITDA for the Consumer and
Small Business (“CSB”) segment and Adjusted Diluted Income (Loss)
per Share (“Adjusted EPS”) and Adjusted Free Cash Flow (including
interest rate swaps) for total company; 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 at
all; our ability to maintain and grow our existing customer base
and to integrate the December 2023 strategic bulk purchase 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.
|
|
Three Months Ended March 31, |
|
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
Revenue: |
|
|
|
|
|
|
|
|
Monitoring and related services |
|
$ |
1,063 |
|
|
$ |
1,029 |
|
|
$ |
34 |
|
|
3% |
Security installation, product, and other |
|
|
127 |
|
|
|
104 |
|
|
|
23 |
|
|
22% |
Solar installation, product, and other |
|
|
20 |
|
|
|
145 |
|
|
|
(125 |
) |
|
(86)% |
Total revenue |
|
|
1,209 |
|
|
|
1,277 |
|
|
|
(68 |
) |
|
(5)% |
Cost of revenue (exclusive of depreciation and
amortization shown separately below): |
|
|
|
|
|
|
|
|
Monitoring and related services |
|
|
155 |
|
|
|
162 |
|
|
|
(7 |
) |
|
(4)% |
Security installation, product, and other |
|
|
40 |
|
|
|
30 |
|
|
|
10 |
|
|
33% |
Solar installation, product, and other |
|
|
42 |
|
|
|
98 |
|
|
|
(57 |
) |
|
(58)% |
Total cost of revenue |
|
|
236 |
|
|
|
290 |
|
|
|
(54 |
) |
|
(19)% |
Selling, general, and administrative expenses |
|
|
398 |
|
|
|
393 |
|
|
|
5 |
|
|
1% |
Depreciation and intangible asset amortization |
|
|
334 |
|
|
|
362 |
|
|
|
(28 |
) |
|
(8)% |
Merger, restructuring, integration, and other |
|
|
45 |
|
|
|
16 |
|
|
|
30 |
|
|
N/M |
Goodwill impairment |
|
|
— |
|
|
|
242 |
|
|
|
(242 |
) |
|
N/M |
Operating income (loss) |
|
|
195 |
|
|
|
(26 |
) |
|
|
221 |
|
|
N/M |
Interest expense, net |
|
|
(89 |
) |
|
|
(171 |
) |
|
|
82 |
|
|
(48)% |
Other income (expense) |
|
|
16 |
|
|
|
(1 |
) |
|
|
17 |
|
|
N/M |
Income (loss) from continuing operations before income
taxes and equity in net earnings (losses) of equity method
investee |
|
|
122 |
|
|
|
(198 |
) |
|
|
320 |
|
|
N/M |
Income tax benefit (expense) |
|
|
(31 |
) |
|
|
74 |
|
|
|
(105 |
) |
|
N/M |
Income (loss) from continuing operations before equity in
net earnings (losses) of equity method investee |
|
|
92 |
|
|
|
(124 |
) |
|
|
216 |
|
|
N/M |
Equity in net earnings (losses) of equity method investee |
|
|
— |
|
|
|
(3 |
) |
|
|
3 |
|
|
N/M |
Income (loss) from continuing operations |
|
|
92 |
|
|
|
(127 |
) |
|
|
218 |
|
|
N/M |
Income (loss) from discontinued operations, net of tax |
|
|
— |
|
|
|
8 |
|
|
|
(8 |
) |
|
N/M |
Net income (loss) |
|
$ |
92 |
|
|
$ |
(119 |
) |
|
$ |
210 |
|
|
N/M |
|
|
|
|
|
|
|
|
|
Common Stock: |
|
|
|
|
|
|
|
|
Income (loss) from continuing operations per share - basic |
|
$ |
0.10 |
|
|
$ |
(0.14 |
) |
|
|
|
|
Income (loss) from continuing operations per share - diluted |
|
$ |
0.10 |
|
|
$ |
(0.14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share - basic |
|
$ |
0.10 |
|
|
$ |
(0.13 |
) |
|
|
|
|
Net income (loss) per share - diluted |
|
$ |
0.10 |
|
|
$ |
(0.13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding - basic |
|
|
856 |
|
|
|
854 |
|
|
|
|
|
Weighted-average shares outstanding - diluted |
|
|
918 |
|
|
|
854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class B Common Stock: |
|
|
|
|
|
|
|
|
Income (loss) from continuing operations per share - basic |
|
$ |
0.10 |
|
|
$ |
(0.14 |
) |
|
|
|
|
Income (loss) from continuing operations per share - diluted |
|
$ |
0.10 |
|
|
$ |
(0.14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share - basic |
|
$ |
0.10 |
|
|
$ |
(0.13 |
) |
|
|
|
|
Net income (loss) per share - diluted |
|
$ |
0.10 |
|
|
$ |
(0.13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding - basic |
|
|
55 |
|
|
|
55 |
|
|
|
|
|
Weighted-average shares outstanding - diluted |
|
|
55 |
|
|
|
55 |
|
|
|
|
|
Note: amounts may not sum due to rounding
|
March 31, 2024 |
|
December 31, 2023 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
4 |
|
|
$ |
15 |
|
Restricted cash and restricted cash equivalents |
|
115 |
|
|
|
115 |
|
Accounts receivable, net |
|
387 |
|
|
|
390 |
|
Inventories, net |
|
210 |
|
|
|
230 |
|
Prepaid expenses and other current assets |
|
285 |
|
|
|
254 |
|
Total current assets |
|
1,001 |
|
|
|
1,005 |
|
Property and equipment, net |
|
261 |
|
|
|
283 |
|
Subscriber system assets, net |
|
3,011 |
|
|
|
3,006 |
|
Intangible assets, net |
|
4,844 |
|
|
|
4,877 |
|
Goodwill |
|
4,904 |
|
|
|
4,904 |
|
Deferred subscriber acquisition costs, net |
|
1,210 |
|
|
|
1,176 |
|
Other assets |
|
712 |
|
|
|
713 |
|
Total assets |
$ |
15,944 |
|
|
$ |
15,964 |
|
|
|
|
|
Liabilities and stockholders' equity |
|
|
|
Current liabilities: |
|
|
|
Current maturities of long-term debt |
$ |
322 |
|
|
$ |
321 |
|
Accounts payable |
|
260 |
|
|
|
294 |
|
Deferred revenue |
|
252 |
|
|
|
264 |
|
Accrued expenses and other current liabilities |
|
575 |
|
|
|
601 |
|
Total current liabilities |
|
1,409 |
|
|
|
1,480 |
|
Long-term debt |
|
7,567 |
|
|
|
7,523 |
|
Deferred subscriber acquisition revenue |
|
1,976 |
|
|
|
1,915 |
|
Deferred tax liabilities |
|
1,039 |
|
|
|
1,027 |
|
Other liabilities |
|
217 |
|
|
|
230 |
|
Total liabilities |
|
12,208 |
|
|
|
12,175 |
|
|
|
|
|
Total stockholders' equity |
|
3,736 |
|
|
|
3,789 |
|
Total liabilities and stockholders' equity |
$ |
15,944 |
|
|
$ |
15,964 |
|
Note: amounts may not sum due to rounding
|
Three Months Ended March 31, |
|
|
2024 |
|
|
|
2023 |
|
Cash flows from operating activities: |
|
|
|
Net income (loss) |
$ |
92 |
|
|
$ |
(119 |
) |
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities: |
|
|
|
Depreciation and intangible asset amortization |
|
334 |
|
|
|
383 |
|
Amortization of deferred subscriber acquisition costs |
|
55 |
|
|
|
47 |
|
Amortization of deferred subscriber acquisition revenue |
|
(83 |
) |
|
|
(72 |
) |
Share-based compensation expense |
|
8 |
|
|
|
16 |
|
Deferred income taxes |
|
11 |
|
|
|
(70 |
) |
Provision for losses on receivables and inventory |
|
61 |
|
|
|
26 |
|
Goodwill, intangible, and other asset impairments |
|
20 |
|
|
|
243 |
|
Unrealized (gain) loss on interest rate swap contracts |
|
(10 |
) |
|
|
33 |
|
Other non-cash items, net |
|
21 |
|
|
|
29 |
|
Changes in operating assets and liabilities, net of effects of
acquisitions and dispositions: |
|
|
|
Deferred subscriber acquisition costs |
|
(89 |
) |
|
|
(87 |
) |
Deferred subscriber acquisition revenue |
|
66 |
|
|
|
74 |
|
Other, net |
|
(121 |
) |
|
|
(195 |
) |
Net cash provided by (used in) operating activities |
|
364 |
|
|
|
307 |
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
Dealer generated customer accounts and bulk account purchases |
|
(118 |
) |
|
|
(116 |
) |
Subscriber system asset expenditures |
|
(141 |
) |
|
|
(159 |
) |
Purchases of property and equipment |
|
(41 |
) |
|
|
(59 |
) |
Proceeds (payments) from interest rate swaps |
|
(2 |
) |
|
|
— |
|
Other investing, net |
|
1 |
|
|
|
(2 |
) |
Net cash provided by (used in) investing activities |
|
(300 |
) |
|
|
(336 |
) |
|
|
|
|
Cash flows from financing activities: |
|
|
|
Proceeds from long-term borrowings |
|
95 |
|
|
|
600 |
|
Proceeds from receivables facility |
|
66 |
|
|
|
64 |
|
Proceeds (payments) from interest rate swaps |
|
24 |
|
|
|
16 |
|
Repurchases of common stock |
|
(93 |
) |
|
|
— |
|
Repayment of long-term borrowings, including call premiums |
|
(57 |
) |
|
|
(607 |
) |
Repayment of receivables facility |
|
(58 |
) |
|
|
(44 |
) |
Dividends on common stock |
|
(32 |
) |
|
|
(32 |
) |
Payments on finance leases |
|
(7 |
) |
|
|
(11 |
) |
Other financing, net |
|
(12 |
) |
|
|
(26 |
) |
Net cash provided by (used in) financing activities |
|
(75 |
) |
|
|
(41 |
) |
|
|
|
|
Cash and cash equivalents and restricted cash and
restricted cash equivalents: |
|
|
|
Net increase (decrease) |
|
(11 |
) |
|
|
(70 |
) |
Beginning balance |
|
130 |
|
|
|
374 |
|
Ending balance |
$ |
119 |
|
|
$ |
304 |
|
Note: amounts may not sum due to rounding
Revenue by Segment
|
|
Three Months Ended March 31, |
(in millions) |
|
|
2024 |
|
|
|
2023 |
|
CSB: |
|
|
|
|
Monitoring and related services |
|
$ |
1,063 |
|
|
$ |
1,029 |
|
Security installation, product, and other |
|
|
127 |
|
|
|
104 |
|
Total CSB |
|
$ |
1,190 |
|
|
$ |
1,132 |
|
|
|
|
|
|
Solar: |
|
|
|
|
Solar installation, product, and other |
|
$ |
20 |
|
|
$ |
145 |
|
Total Solar |
|
$ |
20 |
|
|
$ |
145 |
|
|
|
|
|
|
Total Revenue |
|
$ |
1,209 |
|
|
$ |
1,277 |
|
|
Adjusted EBITDA by Segment
|
|
Three Months Ended March 31, |
(in millions) |
|
|
2024 |
|
|
|
2023 |
|
CSB |
|
$ |
638 |
|
|
$ |
590 |
|
Solar |
|
|
(24 |
) |
|
|
(11 |
) |
Total |
|
$ |
614 |
|
|
$ |
579 |
|
|
Adjusted EBITDA Margin by
Segment
|
|
Three Months Ended March 31, |
|
|
2024 |
|
|
2023 |
|
CSB (as a % of Total CSB Revenue) |
|
54 |
% |
|
52 |
% |
Solar (as a % of Total Solar Revenue) |
|
(120 |
)% |
|
(7 |
)% |
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 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.
CSB Adjusted EBITDA is the Company’s segment profit measure.
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.
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 March 31, |
(in millions) |
|
2024 |
|
|
|
2023 |
|
Net cash provided by (used in): |
|
|
|
Operating activities |
$ |
364 |
|
|
$ |
307 |
|
Investing activities |
$ |
(300 |
) |
|
$ |
(336 |
) |
Financing activities |
$ |
(75 |
) |
|
$ |
(41 |
) |
|
|
|
|
Net cash provided by (used in) operating
activities |
$ |
364 |
|
|
$ |
307 |
|
Dealer generated customer accounts and bulk account purchases |
|
(118 |
) |
|
|
(116 |
) |
Subscriber system asset expenditures |
|
(141 |
) |
|
|
(159 |
) |
Purchases of property and equipment |
|
(41 |
) |
|
|
(59 |
) |
Free Cash Flow |
|
65 |
|
|
|
(28 |
) |
Net proceeds from receivables facility |
|
8 |
|
|
|
19 |
|
Restructuring and integration payments(1) |
|
13 |
|
|
|
7 |
|
Integration-related capital expenditures |
|
— |
|
|
|
— |
|
Transaction costs and other, net |
|
2 |
|
|
|
2 |
|
Adjusted Free Cash Flow |
|
89 |
|
|
|
— |
|
Interest rate swaps presented outside operating activities(2) |
|
22 |
|
|
|
16 |
|
Adjusted Free Cash Flow (including interest rate
swaps) |
$ |
111 |
|
|
$ |
16 |
|
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) 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 March 31, |
(in millions) |
|
2024 |
|
|
|
2023 |
|
Income (loss) from continuing operations |
$ |
92 |
|
|
$ |
(127 |
) |
Interest expense, net |
|
89 |
|
|
|
171 |
|
Income tax expense (benefit) |
|
31 |
|
|
|
(74 |
) |
Depreciation and intangible asset amortization |
|
334 |
|
|
|
362 |
|
Amortization of deferred subscriber acquisition costs |
|
55 |
|
|
|
44 |
|
Amortization of deferred subscriber acquisition revenue |
|
(83 |
) |
|
|
(70 |
) |
Share-based compensation expense |
|
8 |
|
|
|
13 |
|
Merger, restructuring, integration and other(1) |
|
45 |
|
|
|
16 |
|
Goodwill impairment(2) |
|
— |
|
|
|
242 |
|
Other solar exit costs(3) |
|
38 |
|
|
|
— |
|
Non-cash acquisition-related adjustments and other, net(4) |
|
6 |
|
|
|
2 |
|
Adjusted EBITDA from continuing operations |
$ |
614 |
|
|
$ |
579 |
|
|
|
|
|
Income (loss) from continuing operations to total revenue
ratio |
|
8 |
% |
|
(10 |
)% |
Adjusted EBITDA Margin (as
percentage of Total Revenue) |
|
51 |
% |
|
|
45 |
% |
Note: amounts may not sum due to
rounding_______________________(1) During 2024,
primarily includes $37 million of charges related to asset
impairments and other write-offs, employee separation costs, and
other charges related to the ADT Solar Exit. During 2023, includes
restructuring costs primarily related to certain facility exits, as
well as integration and third-party costs related to the strategic
optimization of the Solar business operations following the ADT
Solar acquisition.(2) During 2023, represents
goodwill impairment charges related to the Solar reporting
unit.(3) Includes other costs associated with the
ADT Solar Exit, including charges of $19 million primarily
associated with the disposition of the existing installation
pipeline and $15 million associated with the write-down and
disposition of inventory on hand.(4) During 2024,
primarily includes unrealized (gains) / losses related to interest
rate swaps presented in other income (expense).
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 March 31, |
(in millions, except per share data) |
|
2024 |
|
|
|
2023 |
|
Income (loss) from continuing operations |
$ |
92 |
|
|
$ |
(127 |
) |
Merger, restructuring, integration, and other(1) |
|
45 |
|
|
|
16 |
|
Goodwill impairment(1) |
|
— |
|
|
|
242 |
|
Share-based compensation expense |
|
8 |
|
|
|
13 |
|
Interest rate swaps, net(2) |
|
(10 |
) |
|
|
33 |
|
Other solar exit costs(1) |
|
38 |
|
|
|
— |
|
Non-cash acquisition-related adjustments and other, net |
|
— |
|
|
|
2 |
|
Tax impact on adjustments(3) |
|
(21 |
) |
|
|
(83 |
) |
Adjusted Income (Loss) from continuing
operations |
$ |
151 |
|
|
$ |
95 |
|
|
|
|
|
Weighted-average shares outstanding -
diluted(4): |
|
|
|
Common Stock |
|
918 |
|
|
|
854 |
|
Class B Common Stock |
|
55 |
|
|
|
55 |
|
|
|
|
|
Income (loss) per share from continuing operations -
diluted: |
|
|
|
Common Stock |
$ |
0.10 |
|
|
$ |
(0.14 |
) |
Class B Common Stock |
$ |
0.10 |
|
|
$ |
(0.14 |
) |
|
|
|
|
Adjusted Diluted Income (Loss) per
share(5) |
$ |
0.16 |
|
|
$ |
0.11 |
|
Note: amounts may not sum due to
rounding._______________________(1) Refer to the
footnotes to the reconciliation of Adjusted EBITDA to income (loss)
from continuing operations.(2) Primarily includes
the unrealized (gain) or loss on interest rate swaps not designated
as cash flow hedges.(3) Represents the statutory
rate, inclusive of the federal statutory rate, which reflects the
tax impact of the Company’s filing posture in combined, unitary,
and separate reporting states. The Company’s state tax profile
varies by state.(4) 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.(5) Calculated as
Adjusted Income (Loss) divided by diluted weighted-average shares
outstanding of common stock.
ADT (NYSE:ADT)
Historical Stock Chart
From Apr 2024 to May 2024
ADT (NYSE:ADT)
Historical Stock Chart
From May 2023 to May 2024