ADT - Earnings call transcript Q4 2018

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Operator

Greetings, and welcome to ADT Inc’s Fourth Quarter and Full-Year 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. I would now like to turn the conference over to your host, Jason Smith, Senior Vice President of Finance and Investor Relations. sir. you, Thank

begin. You may

Jason Smith

presentation Good us evening, call. you you. website and and afternoon, are results, available on everyone, ADT’s fourth joining our slide release for press conference investor.adt.com. issued for our quarter quarterly we both Thank at a thank on XXXX This earnings

actual others, Reform materially forward-looking to we’ve These all this to we disclaim the XXXX. forward-looking those matters are subject SEC. include, will of statements our Our update the implied forward-looking of among of with afternoon remarks include by today call and differ these the statements. that Act meaning note as that that results of forward-looking could press this release expressed date obligation issued Please or These cause filings any speak risks in within from statements statements. Private to Securities Litigation our forward-looking and such statements risks only described the

non-GAAP we’ll make During measures. financial reference today’s call, to

Our non-GAAP financial upon special predict difficult exclude historical and are and dependent uncertainties. future forward-looking items, to mainly which measures

of our non-GAAP For slide reconciliation afternoon both our please are release issued historical our investor.adt.com. complete to this and measures, GAAP presentation, which of refer website a at to on financial press

our call turn President and today’s on now joining Young, Jim. call Q&A EVP CEO, me I’ll Also, Joining our to of Operations. the are and CIO Jeff for DeVries; Don is Likosar. our Field CFO, Jim us over available and

Jim DeVries

strong growth our everyone, markets share our fourth favorable results, for Thank end for our full-year for and us we’ll and across outlook and evening, quarter you, joining balanced Jason, XXXX. diverse our thank driving today. increasingly you, and This strategy

the retention, capital as company, we improved during performance better A service, efficiency, initial stronger share better year. stemmed financial accomplished through our efficiency exceeded payback. during from large improved outlook, while first that ultimately, our to raising of pleased revenue strong part a customer guidance public our year XXXX financial operating we and We’re which

RMR XX-month residential Additionally, to this attrition gross adoption we core XX.X% trailing strengthened to of for quarter. rate most our climb year in Pulse continues in recent business evidenced ADT last and our as improvement customer revenue by additions XX.X% from and growth as that

was us Another growth ADT this that organic business. roots achievement acquisitions our with talent commercial a XXXX our service platforms and this broader revenue and fire ADT. brought deep and complementary proven an returning capabilities and including particular, a demonstrated to Hawk, to capabilities and expansion, team. We product services, nationwide leadership Red customer deep reach, products supplemented brought in growth us in portfolio, immediately enhanced strong geographic

more operating more last point mentioned share again Obviously, further same revenue than this our by to operational driven $XXX with begin We made adjusted our revenue, December again were Hawk. basis penetration earlier, drive improvement was retention X%, XX%, the fourth Red to customer and our We EBITDA cash quarter attrition we pleased and I up key generated XX.X%, with than grew quarter. X% was the Pulse, We and customer items revenues double special once year. with, to strong year’s fourth as measures, a to the quarter. before that To over continued reflecting acquisition a XX-month flow. adjusted total I’m gross metrics EBITDA flow ADT strong installation improving compared on once progress prior results. along grew free revenue in performance, financial further basis our million improvement of financial and quarter including cash over trailing our free XX growth helps Turning

entire way in a during job course great maintaining customers our of and serving the on remains this the our focus did focus a Our high-quality team year.

payback, which the revenue acquisition Another higher our key of selling installation optimization is installation revenues to and in margins, net we driver continually or efficiency and improve installation costs, and greater through look customer subscriber and for us SAC.

X.X prior with consistent improvement XXXX, period. years third an of During the and our the a quarter, X.X XX-month fourth on over basis, year the quarter payback in years, trailing was the

Finally, an regarding operating in metrics, has on adding unit our our and retaining RMR metrics. high-quality focus led efficiently to improvement

as Following U.S. we our see in our you a to residential Slide the bottom customer right on positive ago successful accompanied of acquisition, with customers release. X toward the continued in shift having nearly higher-quality our core deck additions, decline three years unit have a narrow trajectory the that can

strategy our comments future Now, on evolving to company. a like our and the discuss share for I’d few

has versus last improving as levels, progress attrition Over points, and disciplined service of a results operational business basis improvements X.X This ago; with intentionally tremendous allocation. the substantial importantly, led attrition; three as focus execution. years than legacy to The XXX operating more cash generation. customer compared as XXXX include growth of flow years, outcomes, to more such years our well we’ve revenue improved payback capital gross revenue three focus free tangible on improvement and made ADT’s X.X to

these in We to come. we’ve XXXX additional over improvements is our strengthen our focused past growth made to new other continuing will to opportunities on the the remain few pursue priority years. years additionally, position key our and momentum on And measurable and

customer along acquisition continue flow, to cash attrition, of profitability growth. cost objectives with and efficiency, will our We balance core

we and I our a the As some beyond. New few on offer the begin perspective Year for want XXXX tenets role CEO, strategic to months and after key priorities as in and

what change. we first of like four to The that not actually I’d tenets is share will underscoring

flow improving our in disciplined Our high and will the of the in business customers and cash improving at core a metrics of will free generation drive adding playbook objectives we drive core operational efficiency do to We’ve strong continue long-term and this business. our attrition, change. remain new the deploying high-quality tremendous daily we’ll our so, our overall to growth, operation, our are had customers, heart efforts fundamental focus accountability culture on philosophy and playbook not success focus, a of operating

security While these be to achieve contemporary. be an technology more home we our enhance at The and we our to objectives we some deliver acknowledge our the is process outcomes automation our and for In increase unchanged, continue times, sales XXXX, technician. modernize we to role second look evolve the to same, operating also and and a approach – of that for to more but tenet tools will frequently of positive introducing further seek will drive and the operating the use our e-commerce and plan involve by enhanced plan We use messaging brand improvements. to data will philosophy to is to tools to acknowledge evolve.

DIY XX and The moments. third strategy broader business, strengthen next some additional a diversify horizons our the will appeal of a to core will tenet commercial customers. includes describe our market as require of over we the our months, potential This penetration investments Jeff expanding which residential beyond to into set market, the deeper few XX further our in

invest, balancing on growth markets Importantly, growing leader. Accelerating we cash and of platform free EBITDA with sustained an adjusted position even to intend objectives to revenue, industry stronger our still an us which these will build while flow. as ultimately into

of received midst in the the remaining of multi-year an independent December only Red commercial players. the commercial Hawk, in which We’re acquisition large exceptional expansion, one of a with jumpstart

our our our fire, transaction significantly reach safety Given and security customer nationwide platform life service services, capabilities. and portfolio, position product commercial this commercial, Red boosted terms Hawk’s leading in of our geographic in

market The of of of do-it-yourself a roughly result our Hawk, a capital revenues favorable ended revenues. quarter with we the As business total year low opportunity intensity from is us. addition Red the customers, for representing another

to and will professionally chassis security. will bring LifeShield, a ADT systems. installed this market, the of wireless brand of that be of with well-know our solutions and We’re do home leveraging a XX% a growing a tap the U.S. for LifeShield our reputation not advanced households, into in complemented as acquisition security to and pioneer monitored home serve array approximately broader cross-section specifically, broader to have efforts

new fourth our relates to alliances and Lastly, offerings. and technologies tenet strategic

about ADT as Command with allows innovative are to wireless homes Smart any is home ADT and their our at launched our System and automate enthusiastic recently Pulse. successor is Security redesigned ADT and It Control a panel and ADT We the Command Home extensive application serves capabilities, our new newly and protect customers while very time. to that is dynamic anywhere with our Control. panel from smart Command interactive

this rolling XXXX. We’re new out panel during

will base as strategy our with means systems. our announcement, In customers substantial announced of of that the update In attract sunset which upgrade than cost Last upgrading serve the replacement a largest addition of legacy be offset one-time benefits with confidence also assessment smart Obviously, AT&T, tandem to month, part technology new half current and of notified our radio this it expected process our XXXX and the with plans to to our customers of their offering currently us will more XG evolves. spectrum, portion central our to a and piece of our provider, by publicly home you wireless as security customer we’ll using as innovation. utilize strategy customers in recurring of a latest communication. with central Command, our a

now our for opted application, with ADT focus strong is the than expanded of from the revenues at as center underscores two-thirds app Pulse home. produce ago. carry the during an of our and Pulse both and Control new an theme customers less us total And reached for and interactive higher on percentage base These puts quarter, new which relationship the panel through the services of rates XX%. customers three about us. a Amazon and interactive has quarters increase year automation our interactive important our home using fourth Our the Command retention interactive

well tools, opportunities also to talented the health Additionally, for leveraging our brand over explore our our the lower effectively XXXX, on who’ll ADT such improvement experienced security all strengths, successful will XXXX optimistic our efficient walk that leverage intensity as as through capital continues summary, and with next-generation of call In continued our develop strategic that we performance the performance, adjacencies ADT. XXXX. our capital the growth, Jeff, core These will new expand to catalyst base now I’m turn and in compete versus and are mobile, is employee execute partnerships outlook we’re trusted opportunities, network evolve. to and KPIs, financial potential of and security. poised I’ll positioned business. and to and for the us for a industry pleased continue our strategically operating definition require

Jeff Likosar

call Thanks, and our joining everyone, thanks, Jim, for today.

adjusted fourth to and free finish revenue, Our balanced our results cash a to growing and EBITDA flow. quarter reflect approach strong the year

which RMR, acquisition X% saw by growth quarter we from Our with in average Red grew better overall monthly customer resulting Hawk and recurring attrition. revenue, approximately higher completed this or revenue, gross the in revenue revenue from down, monitoring Breaking benefited driven year-over-year, X% X% fourth services higher and prices December.

Our was business, and into installation noteworthy Drilling X% our grew fourth revenue higher that quarter, both expansion just driver Adjusted the acquisitions. and other of metrics during down I recent the our organically commercial fourth driven EBITDA up most drove revenue the $XXX through the quarter with million, mentioned. some being to of by XX% performance.

end-of-period RMR, new Red our and were million, Hawk, increase million, the a $XX $XXX Our over reached X% X% approximately period RMR year-over-year. including additions up year prior

costs. is quarter and Our and and of to X.X in in efficiency customer the increases revenues continued margins X.X installation payback payback improvement fourth selling result improved XXXX. improved XX-month in a years This net overall of on years basis trailing revenue installation in versus the

Our was overall primarily revenues SAC prior and our channel. on was while net other up up net acquisition in to additions X% down year. year-over-year SAC, our expense outright due the SAC X% cost, this efficiencies, installation subscriber Breaking on sales X%, down, our capitalized or were higher higher over dealer

in We to and XX% interest debt million quarter, to growth paid driven cash the net earlier redemptions Turning increase due year. reduction income. by generated the net $XXX adjusted in for EBITDA year-over-year to our a a

before Our period. $XX in special during earlier million increased to quarter fourth free cash items year the versus the flow $XX million

$X.XX which included before to quarter performance, fourth with billion, full-year and revenue pleased of financial special our cash XX%. billion, of up also EBITDA total $X.XX addition items up results, are $XXX million, X%; adjusted of In free we very X%; our up flow

less for in accounted point Hawk EBITDA not to our our free of was revenue material overall and growth X% and cash Red results, full-year percentage flow. those X than total For

Turning to structure. capital

Overall, debt Hawk down XXXX. fourth defined as of trailing XX-month at issuance ended over approximately leverage source net redeem ratio to Fee continue notes, our structure from to in year million the the early XXXX of ending, net capital we move debt the of EBITDA Red X. the bank X.X $XXX Our to we million. Subsequent for on I’d to $XXX the capital strength. to times, February of acquisition quarter gave adjusted the million first-lien our times of and which the included executed total of second-lien $XXX quarter our structure a notice on activities intent view January X.X now at of as outlook. during like start we

to will adjusted and As flow also Jim mentioned, XXXX. year revenue, beyond EBITDA a in sustained drive while us XXXX continue in improvements free will position that for which investments is growth, some making we balanced cash growth

a leading integrate organic platform Red engine. further commercial First, sales we we will build Hawk to out as invest establish and our

grow platform we the will it we in market XXXX and beyond. for position to expanding the in DIY acquired Second, take have LifeShield and

to some negative LifeShield rate segment the of investments EBITDA with market. additional and new plan make this enter we acquired we For reference, run we as a

investments addition, position to the security. home continue as selective ADT’s we solidify In leader we automation make brand in as and will

guidance growth X% of rate continue and of full-year we attrition billion of our inclusive to Red Hawk. XX%, $X.X to be in of to full-year to terms $X.X implies In benefit improve specific expect the of the XXXX, for a range which billion, revenues to

increases growth our our in in along otherwise top monitoring services in Our core business, by line revenue business. is revenue increases largely driven with installation and commercial in

range also in to year-over-year. expect continued ranges before growth in million billion EBITDA expect, last $XXX of Hawk growth the first business, portfolio billion, earlier combined we We approximately our in year-over-year EBITDA we flow million. partially in This make with million investments range in to described I that progress we year. XXXX cash our and the range tend to These headwind approximately our full-year items million the $XX million non-recurrence free of to we expect of to of core our the settlements $XXX some areas $X.XX for of be legal the Canadian Red the underlying of reflects offset having it guidance in is in include $XXX and and a special $X.X $XX be in which a of to generate quarter in operation recorded includes our

quarter more higher to the As settlements. would we modestly for expect first the specifically, effect for after year-over-year, EBITDA adjusting be of these

expect borrowings. the the just of activities, flow-through special interest before with EBITDA guidance million, a is Our we cash net full-year effect refinancing along by $XX to free items the driven cash flow reduction by approximately result I of LIBOR-based mentioned, higher of from interest which partially offset on

other some Now, XX-K, I’d about more in our mention few other well be like housekeeping to a as of you’ll read to items. as which items, able

charge unit by share GAAP in per The impairment that, XXXX. is in is fourth XXXX Canada a a non-cash was our on $X.XX, to negative loss underperformance basis, first driven largely quarter we which reporting took our due

comparisons challenged. on XXXX the year-over-year reform, EPS tax reminder, so a measure associated As this non-cash a from credit with GAAP and benefited one-time are

of a that, and continuing the more the to year for low-cash anticipate is finished billion we second than $X intermediate with be NOLs, term. we taxpayer The

a to third. XXXX’s to total expect $XXX million remind XXXX, will approximately want total attributable included expense the million unit decline approximately approximately IPO-related stock expense compensation I conversion and options. B by everyone $XXX in we Third, comp and top-up stock that The IPO-related decline full-year runoff to of

your to to turning and Now our allocation over we press our organic our three capital with framework, in to a bolt-on release. excited to From allocation attention to announced in business, draw dividend will capital common M&A perspective enhancements time. delevering balance we capital which continue overall, allocation. I’m opportunities, opportunistic our investments

time. reinvestment approved allow a will shares elect dividend cash in to that, has our confidence, which they program, in their in Board is first this sign receive at to shareholders in rather than of indicated to a point receive elect shareholder, will shares largest dividend rather common that cash. our Directors of The Apollo, than

DRIP terms a million, be net approved of Board our future confidence reflecting in share to share The our buyback the Secondly, up prospects. by share of to the and is the count. on the Directors buyback in effect of offset business also sized program $XXX

third goals extend our our Notes. our Senior interest evaluate amendment seek to to Second-Priority in call, we The Don expense refinancing consistent conclusion, intend and us. our Thanks, are Secured or strategy, flexibility with a we connection be year continue in as credit during Jim, are our that, maturities, company again, and achieved agreement front and X.XX% In public exceeded with to today’s pleased will is point that your reduce associated especially to We an to take our many financial and questions. pleased with to in in near-term forward the options provide looking to alternatives. for we of joining we the XXXX opportunities I first

Operator

[Operator be Goldman a Tong line do we’ll question the time, your Our comes this with question-and-answer At first Instructions] conducting session. with Sachs. from question. of Please George

George Tong

Good business I’d you RMR? partnership the to how more do much Amazon what the that service but the update give implications the ramping, us like monitoring SAC you as perspective, How your on for from Amazon are full building not see you a Can partnership ask channel offerings? is side? integration partnership. for an on the and for And about afternoon. so so technology

Jim DeVries

three good Thank question, Great Amazon. George. evening. I’ve share about or you, comments with maybe you and got to two

cover We Amazon. changed that with answer last not didn’t have a lot the today we Amazon cover has short limited remarks. the prepared is on time our in lot from and to And a call

ready, are and yet Amazon been go-to-market a launch They to and when that. have full for the but strategy. the We’re we be to date will refine strong ADT have us, working partners Amazon with made don’t

very high a have We bar.

and as life when there the every well this a single to in pilot they refining also fully met where learn yet. we is day. not have high do tested, and technology and quite us. have bar, as place, you are ready standards but our safety capabilities for expect, we’ll be Amazon’s, As are and launch, we’re the And would a We testing

of a guide. a team As It’s upside said, into we’ve assigned. that some as result engineers not for us. this as of got built our process, And view I we

potential And we guide for incremental to be so and XXXX upside that any the would provided you. plan us

George Tong

Got helpful. it. That’s

a about flows, is XXXX you’ve which years. follow-up, two past items may assumptions around be XX% free cash the year one-time flow guidance free and in talk that that growth, on deceleration you your over you that free cash that Can be on my weighing flow this suggests from incorporating? any the year-over-year midpoint For outlook, growth cash seen included of be may for your guidance refinancing conservatism the may

Jim DeVries

of a weigh and ask Yes. comments, then I’ll answer couple in. high-level Jeff to

$XX overall cash pointed to growing opportunity I’d a very refresh. the brand million. and flow think us, year we’re business allocated investment on EBITDA. very be targeting growing with of that commercial – guidance, significant say, good market we’re market And revenue, is So flow, single on investment the help feeling as DIY investment will cash in some and every EBITDA, out, on an on that free that brand got the And a identified then for we we’ve which every that metric, attrition, single and to at another improvement investing space you

three like I that includes did mentioned. million investment high-end areas the we Jeff? for that ranges for our We’re guidance guide and targeting just XXXX, $XX obviously in XXXX of the the of

Jeff Likosar

objective The as EBITDA. that, to growth, Yes. cash thanks I with is just driver Jim with mentioned is flow already our start mentioned balance is with cash generation payback. of and key as for reminder as revenue Hey, the our has attrition, question. a George, well our I’d

quarter what And talked core XX-Q. million the some you it’s described prepared we mentioned. remarks, might as the $XXX underperformance about we the is in just about, our described So legal we And headwinds investments last have year, growth. I in settlements I in recall called, Canada then the the of, as first Jim then

as of else recent contribution our of, we from are EBITDA loan really cash to roughly a other activity big balance a including but refinancing pressure I’d puts some the and interest two-thirds offset CapEx, call SAC, higher will the takes, in zero. kind about cash to the out I’d of nothing I There’s from be and nets aside nothing higher which we infrastructure about kind the rates, flow, on unusual else of year-on-year. think is call expect timing some everything little that, you cash of flow, if And driver flow have that’s expense, bit So question term your mentioned. by we out to where the there’s marginally more handful including else, –

George Tong

Thank you.

Jeff Likosar

George. Hey, and I’d add

between very flow and you made look the cash back XXXX progress years, we’re driving few So today. at over the when past cash our about excited we’ve flow

George Tong

Got it. Thank you.

Operator

the next of Bisbee your Our America. Bank question with from proceed Please of comes with question. line Gary

Gary Bisbee

evening. good guys, Hey,

commercial, the on do initiatives, The that any I do you in how another will, incremental of spend – dynamic is improve be – first quickly is Red those? of because sort those in me, more share, now just the investment growth question on will really just to of for particularly And Any money positions helpful? on how other there? business? to new trajectory the there space think how payback you the incremental think, Hawk, drive about you guess, try to And color of it DIY that investments so much you

Jim DeVries

tangible. some in spend, marketing of Thanks, too. less – bet. The You a would ROI, you is and to The investment expect, it the difficult little is some more bit allocate of Gary. as a tangible more

and the quite little optimistic To and the in market spend about markets maybe talent. a of little related bit ramping where to in have we more and – of scale you give side, other acquisition the talent up terms easier. is DIY the have color on where The commercial and don’t principally the commercial staffing, investment a we’re

high is is And in so bit to we’re a than commercial in little going volume. the cycle build in obviously it talent longer sales that

an investment as in XXXX. in comes that so And

and platform bought had LifeShield. terrific in we – And has in we a in On of will XXXX. in that to allocated probably investing via rate that the will XX about negative the the of higher LifeShield number in now DIY, in a run right EBITDA. neighborhood expect we DIY be million about half $XX investment that that of that, XXXX feel business be

Gary Bisbee

then flow The Jeff, what here, And in the that, slide on free for Thanks. one some of catch you’re if one, you cash it didn’t give so…? I guidance might the have you. you just just interest Great. there? refinancing assuming your expense, debt. deck assumes You second-lien us color Can says, said something about did,

Jeff Likosar

Yes, as see benefit $XX of refinancing of $XX pressure million we’re in seek assuming offset release, LIBOR-based that flexibility to $XX up a also lenders to from to financing around open And morning million this to to call million $XX we million go pursue higher have consent a from we with $XX our those avenues some announced the activities. to about you million borrowings. –

Gary Bisbee

Thanks, Great. guys.

Operator

question. Manav comes next with of the from with line your question Barclays. Our Patnaik proceed Please

Manav Patnaik

gentlemen. you. Thank company, negative strategy, doing better. to that I evening, specifically, some just wanted Good DIY ones mean, small are why the around I I LifeShield, are there EBITDA. your probably I other guess, mean, probably ask firstly

you’re made might it understand established LifeShield? So and what have that trying just sense? wasn’t to And trying how with do to they why clearly

Jim DeVries

context about specifically start a LifeShield the for color I’ll our bit then XXXX I’ll question, just or and and to Thanks You with talk bet. on minute for DIY the then of give take on plans. context a little two acquisition. little a Manav.

the is not about We’re the we opportunities assertively heading even provides customer. said DIY as playing and around XX% of more business – within the to the – capital we do from DIY. it that pro-installed times there lower some we market for a logic that excited We’ve customer Not affords into DIY continue pro-installed today customer scale the security number in us. us. discrete our commercial, services view of be think unlike that DIY are core largely who growth intensity have the And

of all on at customer DIY opportunity We when it looking – terrific of platform. team. lens standalone to think marriage principally a the of through product much the our constrained, brand is customers. talents becomes part brought on healthy to growth executive we example, as group It’s business, like we because strategy. value, constrained leaders. the of LifeShield the LifeShield of acquisitions, attack us the focused very a capital just a For us go-to-market the have And for We XX,XXX lifetime very platform very market. way about our Their of great itself a share we’re us. this deal and attractive with for LifeShield was as team the the don’t the

launch We’re when taking to process in ADT a our the of and testing working BXC a use into brand. this married the of the smart decisions. plan, long-term platform are team we and business. role, E-commerce play about through will meaningful approach in brand we the the But feel great

Manav Patnaik

help picture? And what happens be also you’re it. starts about guess, and is there impacts? talked about, XG that the got into you something I you I me coming we while XG Okay, how can how thinking And – transition just the the what’s understand should guess, timing at when it, like

Jim DeVries

Yes.

Don Let ask on new share XG, and color XG, – I’ll me perspective Young our and share on to little some on then maybe panel. bit perspective some a of

were by month, sunset terms other XXXX, notified It’s so of to try years from in in along we would now. be that XG – I’ll AT&T customers So spectrum last three essentially, be XG, with brief.

in assessing customer of context doing been but it broader we’re impact, have we a and assessing are the upgrade strategy. the We

are of know to we these an some we attract. to upgrade customers so opportunity number going that And We have our that legacy know customers.

that develop working We’re to and cost our working with together partners offset on strategy. upgrade

XG waist additional it, on an to One And – for in Manav, result from an see marketplace make in that the of sort a so some this perspective engaging before is, XG. competitors. There’s with deep us that than disruption and of comment we our but weigh even more I’ll have of purely upgrade it, we’re as Don really traditional the company. all the customers, sort the asking of level mom strategy engaging of process this in assessment, as our sunset opportunity for pops

And so sunset we’re there ADT. is viewing XG as a aspect Don? opportunistic for the that of

Don Young

Yes. Yes, Manav, the new with an Control to ability individual’s to this the comes the swap comes basically and our us Command having successor out two roll is truck. opportunistic radio themselves part a Don. which is Pulse, And ways. solution, really Number without in one,

There’s of lot come over-the-air the updates fits okay we There’s announcement. also set We that devices. feature diagnostics features the nicely into that the that Control a and two-way of of capabilities a having strategy solution to with Command remote the without think Another roll under is panel. to XG truck. upgrade do panel that and a encryption

just that’s probably Another out centers. thing, using the FirstNet our to into call weeks too, network to next and be to too go going a a the actually we the we’re three FirstNet swap getting announcement, provides and announced – years ahead able without very the which path over we’re radio, a FirstNet ago, in XG unique which few radios deep, us

Operator

Our the Suisse. next comes line from Credit your Kevin with Please proceed of with question McVeigh question.

Kevin McVeigh

million in mirror was going loss just back a your right, real in to Hey, Great, a LifeShield. a quick XXXX. It’s Jeff, $XX there thanks.

associated is fair it million XXXX investment it So in $XX there’s if million with be say of $XX to loss there’ll that, mean, does there? a

Jeff Likosar

with Yes, Kevin, does rate. costs, of run loss sale. everything is is outright Most acquisition about LifeShield subscriber million their associated $XX it’s

how so business to little But advertising-related be cost. the subscriber that still incremental of investment have as investment work technology invest that of acquisition to will work. significant exactly drive and business, think as would accounting investment in a on that as we of bit fair portion marketing, And it’s we in well. build growth So that it to through

Kevin McVeigh

like And The it was headwind Did trying reconcile sounds $XX Got million. the Canada say then to it. kind just of you much EBITDA. just, legal the was? how

Jeff Likosar

No, we not you same in didn’t. a quite of amount. think similar it the But range, can

Kevin McVeigh

Okay.

around about way think $XX that So those all two million, million, in a $XX somewhere to fair components? is

Jeff Likosar

context of and our of to there, out we it in Yes, XXXX just But items. items going there’s line a couple break thought somewhere line not overall the detailed worth guidance. things in was by we’re mentioning, routinely

Kevin McVeigh

Yes, three million but like between seems it those items. about it’s $XX

you. Thank cool. Okay,

Operator

Kaplan proceed next comes question. Stanley. of the from Toni question Our with your Please with Morgan line

Toni Kaplan

you that below you come your to attrition guidance you could above Like, – thoughts on target? the you. any for guidance? long-term hit to levers the are how thought And in Jim, what need Thank thinking updated or XX% about make pull attrition XXXX.

Jim DeVries

Thanks bet. question, You for the Toni.

XXX pleased – the And bps We’re bps we’ve as not times, even bps. attrition tougher a sequential, the bps are talked year-over-year the know, of XXX XX going but I’d the XX satisfied. to as last our us with and I’d – characterize than next be number of you say, improvement

progress, always we’re XXXX, I’d retention say, But record in Our won’t be confident example, our to last year. QX had guide. for levels, compared linear. we

confident focus continue time. We’re that areas in we’ll to on. improvement over four three or There’s

last us. I time, think, on the call for area that perspective on and I focus some is Canada, shared a

We’re deploying which data is for more a analytics, area fully focus us.

gone, all you’re playbook attrition. to tool and gone. some variance we cetera, rates, the Toni have low-hanging the think, management, be performance deploying attacking capture analytics the familiar shared that et our is fruit isn’t managing opportunity. voice of I’ve And using save capability fruit although I then that much traditional low-hanging have with that And prescriptive more about rates, before still of

our So confident the attrition on the is, takeaway we’re in guide.

and for time. over optimistic shooting to attrition about continue improving improvement be We’re on our the higher-end

Toni Kaplan

monthly the margins be expecting appreciate be disclosure Slide on revenue Pulse? you future in be I on lower, then ADT And color – provided would Perfect. and XX, on of are from to sort could quarterly Command in differ any Is a not? higher Maybe really quickly economics elaborate on there SAC, you Control. Thank the basis extra that and know or you. subscribers And helpful? I really to on wanted saw the the just on, color if would how

Jim DeVries

Yes. I’ll a Control, Command on comments weigh have on and in. couple modest SAC ask to basis. of high-level, Don we a offer unit in At pickup a then and a

– we but better less our better better paying Command this launch month. built the customer, what we for for the be end prior will for guide. is The of paying than built panel, at were it’s that’s and technology, the So national into in aesthetics, experience

up – that eager of the so And SAC of we’re upside to improvement. the pick

Don, want product to of weigh do little the you bit? in a In terms itself,

Don Young

upon to the Yes, expand sure. before. opportunity, answer appreciate gave Toni, the I I

already to of We’ve X,XXX excited obviously out homes We’re about approach. a this to rolled part this successor phased as Pulse. a being

go end Jim at the said, will We month. national, as this of

updates, diagnostics, before, mentioned remote already experienced over-the-air so what I the As the we’ve significant enhancement to far.

We have with a a much larger broader range of sensors range.

easily yet, was some forecast think, lower design. thing, see actually as install most – again, We not very install workforce efficient of but important to I starting it’s I’m financial this – is, the times. mentioned, to and I some experiences, nothing we’ve we’re actually install that. in improved But written a impact have a our to for ready forecast The upgradeable ready modular

add to want of from Well, the from some we very created. really and sets cost looking end okay us of great the our actually We’ve and month. user customers, I at feature great to them feedback roll said, do easy it. we’re feedback to customer, gotten for effective the So field, like out it’s forward,

Toni Kaplan

thanks. Perfect,

Jim DeVries

I Toni, that answer today. the at units Essentially, high-level, different the And any a I’ll on strategy that we question our isn’t the business had. you think, way briefly run

ending in some We’re Hawk. the in over to information requests There trying terms more color also on we’re provide business are RMR information to about of more responsive shared be XXXX detail. focused Red versus more disclosure. unit added but some for enhanced We’ve XXXX that materials mix. We on the units,

expect that Our transparent to would annual game we on stage this. I’d the be share objective level basis. detail an at that on this is of of

Toni Kaplan

you. Thank

Jeff Likosar

as we’ll Hawk the that, it’s or our some also point, the of share precisely determine add is measures with it on. the present this things Jeff. we’re I’d of how possible integrate the customer base, Red additional we differently some commercial rest as adjust going that either Toni, that and year information. business to at integrate run we And would And and goes also

Toni Kaplan

Make sense. again. Thanks,

Operator

Christiansen with question. Citibank. your proceed comes of Please Peter from the question next with Our line

Peter Christiansen

questions the for you Thank and appreciate the added you. Thank transparency.

of now couple a bit a we or the replacement way flow I’m embedded the that understand the plan through here. going special walk just And measure? then forward, flows buyback is more. of cash as manage there? we us combination radio motivation you a timing flow to item, a questions think this just your is cash Just into or to cost time? more for cash think Is really should trying that the the Can over of that still about official free DRIP

Jeff Likosar

really indicated add to receive DRIP it start the for I saying, take I’m two sorry, Jeff. discount to this the our crack it’s the Peter, DRIP, to years. largest It stock capital cash. first. structure. Apollo, all anything approved of no gives opportunity we’re intent dividend by all opportunity has I’ll our pretty in Hey, a happy shares. a at It’s Board or instead the investors, to dividend or their – take shareholder basic

the be it’s we it if we offset it plans. And be which effectively, in changed. the DRIP, buying So is we sized that such time our would of then to a buyback, on share going high effect count also way offset the more have same announced Apollo conveyed share in conviction it at They confidence would sign shares. in over us the materially executed effect the not would is business level. assuming a And that net very the and authorized that see such as in

just your largest early manner we replacement of work by would So yet our to we’re very from way shareholder. And I second tell through confidence then assessed our radio pleased which by the have cost. question, too you, vote the we’re

we’ll their described. of Jim more not we that through strategy building we’re our the yet to determined. share plans a It’s so but early in the as three-year program, get phases So year, have bride execute

Peter Christiansen

Thanks.

Jeff Likosar

XX-K in well. can our you And read more a as Form little bit

Peter Christiansen

you. Thank Great.

Operator

comes with next proceed Our Please your Capital. Kessler of Imperial the with question. Jeff line from question

Jeff Kessler

you. Thank

Canada. is question First

Before ever of of good little just is better, weaker since there there parts has clearly bit a on Canada, type side. marketing I that been with besides one wondering, United but – company the – a parts meetings. I’m there it there spoken residential enough. know ADT before – Protectron than the gotten of it And issues, and see a And in in performing on the up merged is had little the this be bit not about States? the may cultural you is you’ve what are issue different or other branding acquisition, But

Jim DeVries

your our It total question. Canada, is positive about question, and of Jim, provide Thanks I’ll and to is offer – an produces The is to revenue. is, of context Jeff. context your then cash a for Canada free offer the This flow. I’ll little X% bit answer

we successful IT new the the There’s make you that our the continue business will resources the progress in or do offer One have market hasn’t a unique years time we’ve I over the it that time. As the we’ve final I to And Canada we is of system, we you dynamics. for processes. us. And experience. U.S. hired here, turnaround comment shifting now mentioned, attention mentioned with may the top deployed a to And some it’s and He some on We’ve industry improving first that be that of well confident Canada. Canada, priority his He’s on playbook various list dealers for the overall, in the terrific merger that like off separate the been marketplace veteran, Protectron as in are that run having But to in dynamics semi-autonomously of Canada. in there’s we start. last in turn an ideas three We’ve think business. the marketplace. and I’ll there. know, this to and leader to been historically attention separate course are so U.S., unique has

in see XXXX, we’ll on revenue EBITDA that that expect do we contemplated the a improvement and drag and was guide. but expect We sales service in and

Jeff Kessler

that marketing of a FirstNet. question getting to about little what ADT FirstNet bit question, bit to what invest for – but point what you’re involved it’s Don, for the the point out competition? is sought have to works My companies relative to getting other it that well, obviously, need or view both in to little to you, does with in to you this a of not yet a involved in, maybe make want AT&T, about to technology to talk trying out to throw verification ADT Okay, as I’m this word – some and second not? to thing a also what waiting whether means it’s that guys to I softball gets but And and to follow-up it about – them, – a it to get some do my show technologies now great. from different show doing, view as not basically

Don Young

is sure. Jeff, I for Hey, this Don. the question appreciate

it’s probably what out or is think, pointing Jeff. maybe worth important I FirstNet

highway, literally a and moment contract cellular to looking hard radio as responsiveness. provide maybe easy and government. it, that a last aren’t. to this you the where federal of with bring terms worked it, that on to partnered them was customer we’re the to the separate to purpose the explain network. network only really lane be them, The that Hurricane lane with that of in of congestion Eventually, created we To public travel. fast to certain forward with in all the upgrade months, is we’re really ADT the thing of this bring about And to this what people signed within to that now XG highway AT&T to on XX your An created this that point, which to at value explain will AT&T. the quickly safety can because FirstNet AT&T to build to other the the has that value but was others It approval. to first with just easiest just market is familiar networks the we’ve agency happens advertise talking the to their Jeff, of way during contacting literally agency get I the begun, the think, Katrina, are or forward. result is each trying intimately prevented commit from Very I responders being then contacted what and

things. brochure yes, going we’re plenty that more branding, to in – our out still So how plenty on in more of figure those our we to but discuss, material, incorporate all to have

be tuned, stay out soon. and we’ll So breaking process of that kind

Jeff Kessler

you Thank very Okay. much.

Operator

proceed Please from next RBC the comes question line your of Seth Capital with with Our Weber question. Markets.

Seth Weber

ask Is us that evening, good about XXXX, can starting to anyway help opportunities synergies, thinking sort – I some about there I XXXX? we revenue about some of call there Hawk. the, are on cost the, about, you How there synergies. you cost to guys. slide, Hey, the maybe your wanted and think guess, $XXX should synergies what expectations be talked it, the Red million relative run rate? in The

Jim DeVries

for Thanks Good the question, Seth. evening.

Let me on of and give color details. you additional a Hawk little provide some bit Red

for million products, EBITDA Hawk. scale It’s rate Red benefits It’s profile strategic actually in give but little are lower, I paid for about low we take mentioned, $XX We intensity. a and a us, talented big or returned about to low XXXX with $XXX have DIY So team. and million strong attrition. bit EBITDA. attractive revenue, leadership run of saw an was capital $XXX geographic higher as LifeShield, fire really here, IRR. million margins reach,

We’ll And XXXX but no to year. platform. XXXX as are late amount begin beyond. on XXXX, approach overriding realization in operating primarily synergies be investment to the disruption. is to the There’s synergies of so we those The integration and will moderate customer objective a an execute in IT going be in the going of

Seth Weber

too just that synergies just of or sort framework in to work deals X just – can soon a there And Maybe of is should past? on there be we kind the XXXX? Right. a how say. it’s expected, having of a playbook anything framework, Is with percentage for – done – a

Jeff Likosar

XXXX. share Nothing specific Jeff. would in guidance way I of for the it’s Seth,

excited trajectory just of any XXXX opportunities commercial portfolio, lots specific there. of our to We’re share But guidance yet. the not about going we’re

Seth Weber

pricing color the Okay. whether just I getting ask times, made from of Thanks. could, Maybe side the pricing. resi release environment? And customers? in as And progress the – on us any then couple maybe upfront some pricing mentioned a more you a in if I improvement you’ve follow-up, on give just think, about

Jim DeVries

Yes.

a made some pricing, We progress it mix. have of by driven lot in

about traditional to will to talk Command what transition we of it we when base Pulse, So a subscriber soon be more Control. of is have from lot a changes and in the average pricing, and interactive

on mix typically, to per a unit, at there’s component so So come a higher customers revenue those it.

We time install and changes of then also base. seek We’ve and the have in the a we time are success revenue install. in future. XXXX collect more more at that get in to more bit that think opportunity some piloting to there’s of during there’s our of had escalation And of that contemplating

Seth Weber

super. guys. I it. appreciate Okay, you, Thank

Jim DeVries

Thanks, Seth.

Operator

Please from Ashish Deutsche Our Bank. final question. your the with with of comes line proceed question Sabadra

Ashish Sabadra

Thanks for taking question. my

in follow forward Hawk, these on acquired should well? front? to How million going DIY think to are $XX So as or investments you’ve the those investment going we Are maybe and forward? the up just on like XXXX. Red about Any color be recurring investment that one-time going these as

Jim DeVries

opportunistic. proportion IT million. But is with branding have how I’ll less DIY, some of mentioned And $XX I couple dependent to DIY. launch, some in and of investments the infrastructure. probably more of one-time, one I part of or the short the space. are I answer earlier, as view That Thanks successful of we that but one-time. recurring investments or view more on DIY which as on early in customer On represents offer really commercial largely category comments, it in is it’s We a very our question. that to volume and tend the more growing are the is marketing the in we DIY, business much half would There acquisition investment, much the Ashish. for are think that there in that, is the in associated the how

Ashish Sabadra

is the there? the back-end forward helpful. DIY you for that’s has infrastructure then business, just that that could opportunities going cost be, existing further maybe leverage and on in And And cost synergies opportunity for monitoring get ADT synergies in would the you where follow-up once scale infrastructure, other question a there

Jim DeVries

of as a doesn’t in attack earlier, that XX% play us LifeShield the have professional small to Ashish. modestly DIY here and the minimal, is And organization. professional market equipment. very grow monitor, for We the Very were relatively installed business ADT. that space market, mentioned DIY at we is the that

side on the is cost growth really takeout. for than us play so the focused the And more

Ashish Sabadra

Thanks. That’s Thank very helpful. you.

Jim DeVries

Thank Ashish. you,

Operator

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

Jim DeVries

us for efforts today. a to our partners call to by that thank successful and Oh, such and want for my all each I’d expressing right. Thank conclude everyone dealer operator. all like every on the I XXXX appreciation ADT colleagues day our year. made to you, joining their many

to Have forward looking evening. an We’re XXXX, updating again We throughout forward extraordinary for a and the thanks joining us. look good to you year.

Operator

This concludes today’s teleconference.

your disconnect and for wonderful participation, at day. Thank now lines this a You have your may time. you

ADT (ADT) 11 Mar 192018 Q4 Earnings call transcript