ADT - Earnings call transcript Q2 2019

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Operator

Greetings, and welcome to ADT’s Second Quarter 2019 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 pass the conference over to your host, Jason Smith, Senior Vice President of Finance and Investor Relations. begin. may you Sir,

Jason Smith

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

cause materially Litigation differ subject include XXXX. These of will today the to remarks or Act others, statements. that and press expressed the from that statements risks we These within this to with issued our forward-looking meaning statements those SEC. Reform are actual such of by Our forward-looking the implied in risks could Private include, results afternoon matters Securities among filings forward-looking release our described

forward-looking of speak the any statements of forward-looking disclaim we all this and to as date update obligation these statements. only note Please call, that

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

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

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

Jim today's also is on me CIO Don and our DeVries; for CEO, are Likosar; our CFO, our Jeff Joining of joining and available Field President EVP and and us call Q&A Young, Operations.

With call that, the I'll turn to Jim. over now

James DeVries

to everyone call. our welcome, and Jason, you, Thank

quarter results initiatives. as to able key you well be strong to as pleased are second progress with We number on share our of a our

growth. performance. Let's quarters billion our from topline start grew XX% We XX% $X.X financial accelerating with second to last quarter our

our X% growth slightly we interactive in by take growth the strong rate grew organic XX% increase above was our rate. Excluding the our quarter fourth completed in quarter an Red of and Hawk led of commercial residential very first which XXXX, also business acquisition,

a sales team closer needs during and customers a revenue. was total for our a and our the with national of broad fire. Indicative and retailer progress of spectrum commercial business including business, from over Fortune accounted of XXX at revenue CCTV our quarter, look our product sites monitoring, Taking XX% year-to-date awarded X,XXX service

to prospects in progress part three acquisitions. this completed and business. of tuck-in bright confident the We our We integrating Red make for remain smaller also continue Hawk commercial

We expect have a strong the generate pipeline the through Hawk year total acquisition, organic of growth December. which before last to additional the occurred and Red and balance lapping

the total Turning second XX% Command for new our over base a residential business moment positive of panel, and included launch XX% from as driven to is quarter small our of of earlier. by and business a up XX% our June, outcome. residential This percent Control of the services, bringing customer installs year a recent interactive our end of to

expect rates even the We further adoption robust to today. to given continue improve

driven X% million the cost particularly as over at field expanded higher EBITDA adjusted prior in year focus $XXX on as well revenues Our service by efficiencies, period the operations. our our continued

Our year quarterly before roughly remained at cash the million, strong with consistent free items ago special $XXX flow quarter.

is which June, key items, indicators free profitability, To flow performance or and continued line our support, nearly focused in growth of of remain as million KPIs. improving before generated we $XXX cash Year-to-date, our balancing on with and special expectations. we

Jeff Despite versus a will revenue attrition the our neutral we've trailing in improved the large the balance guidance our points that for the minutes. Beyond few improvement, take increase year interactive reflected outlook in rate, XX year adopted our basis year-over-year prior share in a this gross basis XX-month of updated on XX.X%. as a to

competition. in We a attrition attributable continue strides service to experienced and have make and customer increase not to levels meaningful

and those attrition deliver of high-quality as embracing emphasize that the optimizing continued superior Control. expect experience long-term, improvement Command a we customers and to the such as we Over are acquisition customer now drive

growing metrics, Continuing million, $XX during of generated consistent this the with the $XXX with we year, RMR million. our RMR increase end during recurring QX revenue or operating of additions our efficient quarter, period monthly to

SAC the to add-on attributed upgrade primarily volumes million, subscriber in up advertising and quarter total cost higher, to X% was $XXX or Our investment. and acquisition

we ahead, improvements expect increased as continue revenues Looking and well higher through to installation net to as underlying drive productivity. sales installation SAC

also incremental upgrades the panel higher strong current home expect demand We for automation Control meet customer for to services. rate and and continue investment our Command to existing

overall to our growth, in continuing delivering Summarizing our business and our second flow balancing invest revenue operating all our free levels pleased performance, for cash strong healthy we're of metrics position quarter core progress EBITDA and future. driving and while with and adjusted the

to like that our now update Since deploying approximately our is X.X count provide of our I'd last progress significant advancing radios units. which we've on call, converting made our progress an million strategy. Next, and replacement XG

key estimates few a to While our program. are as the life of I'll subject points, about provide the change, think three-year you

retention system that opportunities, revenue and solutions levels, even the involved, technology potential First, outcome. impact there variables upgrades, are many

homes. not we more Second, of customers we words, could assisting be conducted are replacements required. in XX% be other our a while In their already truck separate the there, or estimate roll would

are and develop a gross to test variety the offset continuing of associated these expenditures reduce with or we conversions. initiatives Third, to

$XXX costs million. net conversion Our $XXX estimated XG range and the between of million for the is

the efficient. we continue remain to evaluate While early and stages in cost to replacements the we'll entered the phase, have even we one-time make ways execution relatively more

to new and starting Allow Alexa of our provide on business with few me a Amazon update initiatives Guard. an

their marketing customers include opportunities. detection audio new integration addition Guard our sales and of to systems, allowing away As of installed the automation enhance previously professionally with ADT they're and feature the via when for security security and discussed, Amazon, supports ADT home Alexa benefits us

thermostats the quarter Command the integrations to new that Alexa home units Also share security. we and as X,XXX quarter we the partnership with smart more approximately have and BH. than national Guard entered Management home as during a with locks, second during partnering well launched new completed BH in quarter, multi-family with leading second pleased Control. Services, smart with I'm including and customer built-out into a ADT provider We Pulse capabilities XX,XXX

a entered pilot smart quarter launch Farmers monitored noteworthy solutions A end into platform. part the during holders. Finally, final our to a July, Citizens of second was five pilot strategic their to home and with Group in policy professionally future subsequent protection is initiative for offer Financial home of their program the we agreement quarter city partnership Insurance merchant as

an revenue. consumers an three meaningfully with Early strong expanded July, resulted finance indications have allows This the consumer unit arrangement have becoming In economics financing to ADT we in additional encouraging costs to upfront of and been program cities. higher upfront customer.

work coming our refinements to continue model opportunities. pricing to before of consumer During the our national long-term rolling growth and program the on excited efficiency both will experience a to and program sales We're level about capital the will through quarters. the implications financing the pilot, in benefit which a optimize program we we out believe

summary, the out financial results initiatives exciting we that In will on help generated business future. second strong KPIs ADT's to and drive continued quarter, rolled during progress make many our solid

I'll that, With turn Jeff. to over the call

Jeffrey Likosar

for Thanks being Jim, and you, thank with us today. everyone,

nearly up or year-ago. growth, other our a commercial of Hawk quarter strong acquisition, had growth $XXX double of X% cash acquisitions As now and items the EBITDA of business overall combined and XX% Red is special of Jim revenue mentioned, before size excluding Red free flow X% the Hawk with organic tuck-in second the a million we with

monthly X% described recurring spending acquisition growth X% upgrade our prior our add-on to As investment. X% additions revenue up $XX by volume million, was the costs primarily was over outpaced Jim year. subscriber higher up new in advertising RMR of net or was This and which due plus SAC growth or

years resulting revenue Our the XX a payback customer was on with months at consistent trailing figure. year prior X.X basis

new of during net ratio both to over plus sheet. the quarter, defined trailing we second loan. $XXX EBITDA as to with our billion which term June meaningfully months of improved use notes, $X of first a repay our now X.Xx. issuing lien Turning XX total debt first leverage notes lien ended $X.X structure balance lien debt We adjusted of million the billion We net

believe We shareholders stock at March. levels on first accelerate during we share our be the quarter. announced to may of our under we rate that addition, call quarter mentioned authorization and Board in have some attractively in we valued the first repurchases are capital our recent return quarter our earnings subsequent May the that million we and In pleased to to $XXX

During quarter, first approximately our approximately shares second for quarter repurchases million share repurchase the repurchased our combined we which XX $XXX with completes program. substantially million,

share, shares issued $X capital of per In early under million October over worth to record dividend, a $X.XX declared we stockholder our share comprised also of increasing cash Today plan. focused and to on of and our million dividend remain returning a first XX. which $X.XX dividend quarter paid quarter reinvestment was July, $XX time. of we X September We shareholders on payable second stockholders value on per in

update and platform outlook investment free leader flow These home our enhance an for EBITDA further provide include selective to as expansion. growth, of which our bounced now profile. continuing growth positioning on and enhance growth following will XXXX a on our priorities also position to automation principally for security focus acquisition further LifeShield, DIY future adjusted brand in while ADT’s our reflect strategic to sharp commercial our and cash revenue, driving investments making I the investments continues

holds in I our spend our and overview vast the year. of investments to in to second majority with that occurring $XX our for slide outlook. change XXXX original priorities you presentation these spend approximately our during invite during full-year the no of still half There's the updated view for an million of outlook

performance a our attrition shared and half Jim with pleased neutral and both as for outlook EBITDA are full-year overall We total providing while have the for first revenue earlier. improved more ranges

is flow cash before unchanged. special outlook free Our items

Before of for we housekeeping of a items provide couple quarter call Q&A, the to balance the and I the open year. will

during quarter second million net $XX our the I that earlier. $X.X included billion million costs in of approximately loss the refinancing First, with the quarter mentioned associated $XXX of

replacement radio nominal XG our during we expense underway, quarter. programs second with Second, incurred the now some

to million which incur guidance just shared. the ranges to million approximately the special to is I included items not $XX $XX in For we in full-year, related XG conversion, expect

We performance initiatives many business reflection on performing In through is position. and well of and our our a key we flow summary, adjusted is focus generation. growth evidenced EBITDA continued place in results revenue profitable overall financial this our believe strong right by strong and that indicators have positive the with cash our June

now session, thank and us welcome I want today Q&A for I questions. our and to your Don and joining you we'll Jim, start

Operator

you. Thank

Please We [Operator will now Stanley. begin Toni from Our Instructions] question-and-answer of ahead. Morgan go comes Kaplan the session. first question

Toni Kaplan

much. Good afternoon. very Thanks

that quarter. just last to service And versus changed I thought what you're to for wondering guess your briefly, improving You do mentioned not you – the that the you along as on but it just improve the additional attrition if expectations by talk guidance prior if much leverage wondering I now how about you could was that, very the and change, could attrition? expecting you left going is much as with have customer just side

James DeVries

I'll question. improvement isn't see specifically speak Thanks, then and level, Sure. going always seeing the to are Jim. we're be for we're to your linear, optimistic or At what's of This we A attrition. we're bullish but make in changed to going Toni over a what on attrition couple today. improvement on high continued The contextual is that points question time.

is organization that attrition for the incredibly us, you focused a know, one key As on. KPI is

that satisfied. performance significant data to have we still overall some to that variance you're playbook pretty been use save we there's short, that using, service the to continue we've rate. going the traditional with, familiar analytics, levels. rate, but tools opportunity progress, In capture not made our improve And think management, we're voice analytics, We're

the of pressure little we over the accounts. of dealer quarter, our have terms from In attrition bit acquired a

or pay price these on set credit based funding We we multiple quality. the for our accounts that purchase

expect pretty causing that the that cash the the pressure we're to saw drive good to returns some and year. on and that dealer And frankly for so in flow the acquired simultaneously in second are the pressure essentially means see the what of having that to quarter of we some remainder attrition. is quarter, we And accounts able

optimize leave focused the just attrition not we drive want to with organization and to single continue driving, KPI you that to we're we're is in balancing. do. a metric flow as attrition central don't try place on the have still cash the that credit. I don't good on that impression free We standards We'll to

Toni Kaplan

you were also of in additions on anything was then year-over-year, And the can was one-time And the helpful. nice in a is That's my there RMR really quarter, talk customers? follow-up, ARPU the quarter? rate improvement. the this take of up trending Was a X% Thanks. about strong and control like-for-like which result how

Jeffrey Likosar

It's Jeff. Hi, Toni.

than also we're a performance. speaks So lesser RMR by increasing our to payback. SAC our efficiency which grew We're with our amount pleased with pleased that yes, RMR, revenue

is Hawk you remind I in is thing Red The there.

portion mainly – installation, So you some Red growth to commercial business. see Hawk our year-over-year ads of the of generally and some which contributed is a continues perform then but more the are headlines, also with some where commercial

And residential really point per to driven Command take unit side in which interactive then the that and we your new our rate our rollout up well. revenue of platform. that's on have more to by is definitely related Control our And is and our pricing, as

Toni Kaplan

you. Thank

Operator

Our next Barclays. with question comes from Manav Patnaik

Manav Patnaik

maybe it guess, question XX%, more how evening, please? is, growth I My is competitive some And guess, when that guys. does just that? I Thank on of Good there first sustainable you. account just commercial say color the is

James DeVries

question, It's Jim. the for Thanks Manav. Yep.

for terrific XX% So, organic. quarter us,

first X%. The quarter at was

reasonable I a about XX% is that first to and to assume one be the going that to a think performance quarter match. X% difficult it's is

that that leadership probable think and Bobby will I entire hitting Mike the all the are between really Dan team it's, is on those – doing commercial, cylinders. The McWilliams, we're two. in Bresingham be well team rate Dale, growth

second XX% really, lower flow to the feel, We've optimistic well, this growth. and the the to and great are capital about, And success the Hawks XX% for We are and that intensity, can in quarter. financial doing lever about space, as accounts. pretty doing tuck-ins win liked cash service continue acquired core feel well Red we our we proud national profile commercial margins,

Manav Patnaik

included Is guidance Okay. the Got help that. so payments, last on all some end? settlement in million because of two, could I in the guide. raises, just I it. wanted that recent think $XX I hoping $XX of you understand the had your commercial And just include Does EBITDA side, clarify that EBITDA? was to million on then million that these and lower the just because this then you me $XXX to growth revenue

Jeffrey Likosar

It's Hi, Yes. Jeff. Manav.

higher predominantly part driver driver add in main the So amount or of yes, had of commercial the couple revenue is first a EBITDA range revenue that acquisitions, the that EBITDA, the tuck is of the don't your the that commercial. drop but revenue We've generally is revenue also really on – question, material from small performance. increasing comes the through

the some through And sitting then halfway there's here only year.

have So a we feel confident, but you don't crystalball.

of still optimistic flow this we'll about those at also we really good the able are We not be year, point we in certain. through held we're feel number free are months. that hit And numbers. each good six So the where to then – there's of things guidance, cash a first overall that at just because fully the

Manav Patnaik

you. Thank

Operator

next comes Gary Bisbee The America. Bank question with from of

Gary Bisbee

upgrade. I afternoon. guess the Hi, XG guys. radio Good on

of this you've cash and it I free adjusted but next guess So you're flow couple like How sounds $XX you the that your Any years? to be play year. to out million said guidance, cost. you're this the that maintaining million back going now got adding does cadence of to $XX over earnings, color

or So you add it, you'd is that free is within included that X whatever cash call back flow one-time items whatever? cash flow adjusted that to or free or something your,

James DeVries

Yes, anything Gary, to to Jeff a bit clarify, in. I'll him step has ask context I'll give and of little if

so in special there to and So item we amount done what that you There I of Most upgrades. our while that $XX a you're we amount QX. XXXX. are call very was small right, upgrades incurred think million during to far incur, are in of million $XX that expect we costs we've nominal

significant that calls taking be use is the service I then to we're of achieved we X,XXX And test to continue the say year we us day upgrade going expect to upgrades the execute. X,XXX, very Essentially there. the to of portion would of to while advantage forward. that radio remainder the to help a methods a that we're going And

some the to at the And we're mentioned of technology remarks, this but I of vendor revenue then if Jeff, then on hard any? prepared a estimated we offsets, the range a And down. different expense we're before million broad a range, drive so bit with million, that had doing stage. the you expense are alternatives is little estimate and couple to $XXX as working a We've mentioned still $XXX telcos negotiation, in of net best working

Jeffrey Likosar

Yes, I would question. to of add just the your last part

we the quarter. expense I think a intend prepared item. was We nominal exclusive the guidance second incurred I of which this range radio expenditures in of mentioned treat upgrades, remarks, in a but bit the my as shared but we to it the do was on special

Gary Bisbee

Okay.

and And sort a bring down way I going expense be you're talk the two I that building to understand that mean, trying it different in do, years is that year things to next to all over than that is net you would the taking be know try these so about reasonable it would that I beyond that? you're but timeline to or think this about of after reasonable. a

James DeVries

Yes, Gary. the between approximation, two I that’s think It's reasonable split roughly years. a

Gary Bisbee

just within of then follow-up that year. quickly, to investment $XX And Okay. million this incremental

of you that and investment? what I One to technology give advertising. doing to to be can going the us upgrade some a now guess, people on is about focused sense this or advertising was getting items there you're the how going are portion you new the of

James DeVries

initiative or or the like. this than in largely about around of orbiting It's that relevant build about is said more upgrades I of year around to the portion specific half The – transformation. reposition less and principally and the brand majority forward hits It's helping tech the and XG to is or about as second a response be spend direct advertising brand is more more brand contemporary. and

Gary Bisbee

Great. Thank you.

Operator

with McVeigh Kevin Suisse. from comes question Credit next The

Kevin McVeigh

attrition just up the bit. wanted to little a I on focus Hey, Great.

free You’re of kind any to able to sensitivities flow historical way maintain desegregate, increasing an same to Is those lines? the remain the and cash attrition there despite along kind just the because around obviously historically those questions? the today, the so yet been it attrition's thoughts up commercial's any lower? business that's a much like seems bigger coming percentage and the of Just

James DeVries

say what love repeat to with of I'd We flow. of managing KPIs shared of in number We're to do a a last response of couple is thing to a what not questions. And the little cash expand front a had One that cash I we things, Toni's drive Kevin. metric. it's to metric, but critical and cash flow It's attrition the story. think only center. continue We want not bit can I put the flow. is

And so some about, the we to able attrition on we're we're this our able cash pressure on see attributable issue deliver to largely number. on to that I while flow and still EBITDA number dealer talked deliver still

an of And that's try dozen with have on – couple And a we your front impact a bankruptcy, because number on a on small the than accounts little normally of to via would commercial with in number attrition. we're commercial specifically higher mix, do to commercial that to we're movements the We what so. expect. More lost metrics quarter. here regard dealing contributed question, balancing to second can base a

Kevin McVeigh

then specific, outpace And it. industry you maybe what coming to in growth competitors allowing where – Got the of but nice you're commercial are share. kind imply, growth? of thoughts in terms taking really Any that not of market obviously market parts really, the just would that's

James DeVries

construction. a very Kevin, we handful little business new coming is times. about from we've principally that And most share, is the what said market new a this, is of of It get

and the this just space service a space. on talent based our of core You're in service sweet And on outstanding, that spot. simply reputation commercial winning in that's based

business. say of I it's would are it, is We've industries. and commercial Hawk. momentum. killing all, got going acquisitions core tuck-in accounts say lot all National across of Red our it's the across commercial, aspects well I'd a

and So principally all tides boats a are taking rising with it share. result as the rising is of

Kevin McVeigh

you. Thank Got it.

Operator

next Tong Goldman with George The question comes Sachs. from

George Tong

Good thanks. Hi, afternoon.

structural you dealer the impact accounts causing for if can the accounts discuss or and longer-term to it's that shift this you that quarter attrition, whether pressure in are attrition acquired underlying be remainder the a your to could back Going isolated in should of mentioned for rates? year, strategy XXXX dealer

James DeVries

quality don't we've a on accounts on Yes. long-term some that something business Good attrition, because I helps of acquisition credit Interestingly for We that [Kevin]. question, of great and enough, on that is brought is it's adjusted the for payback. think that our high-return but on the cash goals the on us. price putting us flow, based the results customer. bring in EBITDA and achieve pressure issue

balancing So like said it's a a of earlier, I bit act.

think as will XXXX. the be we the forward less coming optimized of see of through an pressure customers some I credit quality a lower to that going of after impact have that result

George Tong

helpful. That's it. Got

early potential XQ help the the of longer-term and up revenue You to what that launched and marketing are efficiencies hope opportunity efficiencies, on touched Amazon you channel. milestones the hit? sales and in partnership from you the the partnership Can frame

James DeVries

Yes, you bet.

of to specifics We're expectations. haven't and our We continue share engineering teams. deal on working shared can a and on that, marketing volume we great co-marketing on I work distribution with with Amazon teams them,

launched we not second other with We're build that of customers revenue mentioned relationship. But in. stage we think not locked result quarter. material. We've Amazon. got XX,XXX guard yet would I the as incremental this cases in at in a exploring It's I use the

George Tong

helpful. Got you. it. Thank Very

Operator

Weber RBC with comes The next Seth Capital Markets. from question

Seth Weber

you on more around provide get or a wondering if implications here, think the that just be you I for details national but going XXXX consumer for phased a of Hey, over any just can next the couple years? how you're of the the that Thanks up I good bumping level? kind afternoon. could Thanks. finance Is know to that is was ramp business. program. color in to just the event

James DeVries

Seth. Thanks. Sure.

has pilot gone I think XXXX well. a The it's event.

five and I the make say we rate, tradeoffs at the early with potentially terms but higher We're We're install pleased would experience first in pilot. always the implication looking expanded reviewing we we've of and now were volume economics. think that revenue. customer we're I that markets in ensuring with units that's

be we'll expanded a launch and XXXX. pilots in the anticipating said, I As national

Jeffrey Likosar

and that Command one add thing is the Consumer by our I would encouraged Financing between we're rollout. too interplay Control Seth, And

allows build of that pilot One And we've customers things seen more the comprehensive we with and systems. that this markets financing across it in the to more the both is broadly seen financing country. have

a extra equipment that addition to the buy. cost margin in and on to upfront the peripherals reduce So way being they customers taking of on the via

We also yet can't because expect, for although be but their that to systems it, prove will time customers more. those over attrition expect use tend positive very

Seth Weber

That's program. Right. helpful. And a the follow-up repurchase on maybe just share you. Thank then

You on some the it through thinking burned pretty of sort you Thanks. or are capital quickly. here Should the of we see how about expect to allocation program rest new reopening a for year?

Jeffrey Likosar

levels Yes. be for Thanks the a investment that to both Yes, our shares for use the good questions. company's of we call and recent the mentioned to some company in also the attractive see stock some shareholders. way retire to return its capital. an we last to It's capital

also of So will our time on initial focused on focused we making that investments a we're organically. the expect $XXX but over authorization significant making we flows portion in right M&A or we cash utilize million be to continue remain delivering, the sure

announced opportunities to capital quarterly could in additional return our we in that repurchase nothing shareholders today our looking normal press shareholder to changes also beyond release. the to could dividends, what to it include that or And dividend talk about for value include reauthorizations to but drive

Seth Weber

[Question Inaudible]

Jeffrey Likosar

conversion XG into sorry, long-term The is am yes, every does. about we're it allocation third word, does getting program you our but those, play about answer I were strategy? only if asking

Seth Weber

Okay.

Operator

with Jeffrey Imperial Capital. comes Kessler question next The from

Jeffrey Kessler

you. Thank

as the monitoring in we'll continued those want question their say in but line? coming customers would they doing service, problems The what can tell granted for EBITDA to and in essentially need is, What cetera, As what what better begin et and in they we've different cetera. those the talk just you're that what to figure or commercial accounts centers commercial down monitoring you First are? are out capture, out you you what’s you improvement et monitoring commercial have the commercial? and to doing growth centers as national residential seen, not center about of well within

Donald Young

great a Yes, the to to it trying be be of. versus mature part this that of both capabilities and a Jim versus events the to starting call mentioned really to earlier, want customers Don. Yes, voice we're Jeff, our was Certainly priority question. data. high low humans part on we're analytics, identify automation

ADT. AI, go like and other We that, the figuring Yet make and haven't at ML. had deploy where customer chatbots the just not to sense technologies ahead kinds But to like those most our experience. of we're out kind damage ahead and and stride go of starting opportunity with the things hit

or the provide and that accommodate. additional it's with and The That other really exchanging Jeff, part, I to technologies human the kinds without labor added offer new is interaction would escalated encouraging have levels of last we of cops. with expense XXX the whether is more requirement that all them intervention to enforcement [indiscernible] ASAP-to-PSAP data, effective arguably by law

and encouraged So calls. about that able something especially future more we'll to that's we're that talk about be in

Jeffrey Kessler

Okay. question A Thank follow-up on the side. you. financing

you've financing to business program, want some play them sure attrition try that particularly dealer there's been pressure that. be, that the like as said were the you in things program does the How credit scores that gone dealer You toward to attrition level making to help at the into rates on there?

James DeVries

I the for ground, mechanisms, will the sense is funding dealers. are program in mechanism don't financing impact tool dealer. specifically ADT to attrition directed In through the business. the that financing program our financing in fact Jeff, will the a And we think be a for the direct rates whole and

see And dealer so or don't dealer quality. and I financing relationship between accounts a

Jeffrey Kessler

Okay, great. Thank you very much.

James DeVries

Thank you, Jeff.

Operator

The from Citi. next comes question Christiansen Peter from

Andrew Schmidt

on better I just for wanted I Andrew to wanted just follow-up to is on Hey guys. on XG Pete. upgrade This the that costs. there. the understand delta

would the towards what it low end? and think drive end the high I

James DeVries

I levers may are I'd three the – variables I have that most think the that say Andrew, important mentioned. probably three are

which extent in we're The successful to is revenue the offsets. first

And the The we're couple the our are that end of a drive truck. telcos. negotiating together we're still technology the those that influence or influence range. third with second how lower different on outcome with the alternatives there frequently roll will is we would And three could need partners, the to is potentially to and of both end a whether higher hardware to an able variables side

Andrew Schmidt

Understood. percent over organic there then said two, Okay. growing you aiming in the to a for commercial revenues revs at a that And you. nice too? I in Thank is quarter. commercial you're percent guess kind side, a terms of next get year as of or the XX% clip, this of of

James DeVries

commercial brand We specific the every Andrew. and live and ADT for strength. We we on We business. this provides said win our We day. plays our is I think times offer think of will targeted our service, percentage, call diversification that significant the couple with well. future. that's a of on a haven't We've a part

You're the financial profile, retention. familiar intensity, capital with better less

while so part be increasingly a don't I specific target, business. have important will it of important can And our underscore target, that a I an and

Andrew Schmidt

for it. Appreciate Thanks time the guys.

James DeVries

Thank you.

Operator

session. concludes would time for like to for This question-and-answer remarks. conference the I the closing over allocated Jim turn to DeVries back

James DeVries

for Sinead, and joining Thank us to today. you, thanks everyone

customers. efforts ADT to and for thank serving be progress successful and possible dedication the of partners. many of without tireless colleagues and them dealer efforts ongoing wouldn't millions Our our our want our ADT continued I

increasingly again of XXXX for last a you tell excited results, update speak and our growth looking to to As our joining providing we'll number Thanks quarterly you to we're couple call is initiatives months. good up a forward evening shaping you We're can in a to today. a year. Have very next be solid from our and about our soon. of

Operator

call. conference This concludes today's

may you pleasant lines. your have and participating You disconnect a day. for Thank

ADT (ADT) 6 Aug 192019 Q2 Earnings call transcript