ADT - Earnings call transcript Q2 2022

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Operator

Greetings, and welcome to ADT's Second Quarter 2022 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce Elizabeth Landers, Senior Director of Investor Relations. Thank you.

begin. may You

Elizabeth Landers

good ADT's and We you appreciate Thanks, Quarter morning, XXXX our Second Earnings joining operator, everyone. Call.

events. Development, prepared analyst financial and Speaking Finance, on and Jeff materials Jim of provide CFO CEO, will March. And that of and Also before our and our to presentation Investor represent subject and President ADT's Communications. Jim Day performance statements Relations investor.adt.com. or cause do slide and expectations morning, are website recent remarks detail. from include Corporate our Ken an President that at financial press overview start, uncertainties long-term Finance; to today's call I DeVries; in the forward-looking actual of future forward-looking Earlier that will in results. today's and mission Q&A could financial available results to be differ strategy Jeff take we release our Greer, Porpora, beliefs of will Jill need risks laid out and These on Likosar. how performance remarks, and links materially. that These After statements us mention joining about Investor EVP we the cover questions. SVP we to this at our we'll our are issued a then of are our

call filings. Jim. We'll our along And those directly non-GAAP to to factors may most at with available described discuss that our cause turn also that, the are I'll on reconciliation of SEC measures are measures a Some measures the with call. investor.adt.com. on over differences financial GAAP comparable The website the in

James DeVries

on revenue We strong first for and adjusted since our this share. $X.XX Good and our for believe generation, this earlier is key joining Day income quarter everyone year total the progress EBITDA, year-over-year best demonstrated $XX substantial today's initiatives Investor million to I results morning, during improvements free solid flow ADT. We net released in ever continued and adjusted positive cash our call. what or our morning, outlined quarter of showing per IPO, delivered and time second thanks at our

core We products ADT engine, higher and services, a average for consumer in solid demand our subscriber business, is momentum have the and our record improving while balance, growth, efficiency. operating great driving pricing also RMR

strengthen reasons more to spend stay focus on enhanced unrivaled from the our you out brand subscriber high of wallet choose customer customer giving record for customers with our are base, laid strategy to we Day: addition, ADT. producing our long-term our with expand customer, at In committed loyalty to a and even is the the each retention. retention. with ADT grow share We along ADT, plan more stated, and remain Investor brand Simply loyalty we and

We trends are our achieving our long-term that numerous strategic driving increasing business in positive in confidence give plan. us

after partnership a reached rollout is First, with launch a of few We including capital by products. our these customer and we've that an per product both level and from which improving express advertising Google campaign retention. unit the Google. the suite can't our self-setup $XX the To Google before with to indoor-outdoor the new of weeks year. of app West marketing be customers, anticipate is We partnership, partially funded and week, region this more first excitement the excitement launching team stronger for Google in installation ago. momentum our fully grow, first the of rollouts, I these technicians in rollout underpins from and seen trend sales especially of product Nest course, cameras, revenue higher with in and catalyst million The accelerate success major from Google concert Google another with growth. in our milestone joint product to national end a ADT+ efficiency fall, earlier products, the fund Google installation support rollout from our the we'll

XX% versus strength per of second Our the in quarter unit on residential launch year. and the X% quarter, year-over-year increased first the this the earlier installation revenue doorbell

We expect continue that camera Google improve to rollout. with the trend additional and to thermostat

begin You'll fourth in to this further the subsequent third in with quarter, improvements and quarters. see the expected

retention in returns strongest economic investment their the make and system. of One drivers customers this of initial our is customer

system. is Another of important factor their interaction frequency the with

over through we retention. the flow customers more systems. integrated more products, attrition others with versus net prior the more at these ADT we better factors improvement XX start and already now low, and of With the customer see comprehensive customer year. last a Gross point from improvement quarter extension X resales, XX months record the choosing We're when a continued to impressive even Google basis it's was first And to interactive, XX.X%. seeing XX.X%, and a

X.X of capital-efficient years. revenue payback to this produce All our to combines dropping growth, more with

is results second on all business the quarter, our hitting the demonstrated in Consumer As cylinders.

our $XX about customer we're installation Like to availability, experiencing been backlog. businesses, impact has and momentum XX% Commercial delays of chain Turning the in our very increase retention. account many to The solid managing We're challenges. which some installation million with lack segment. due strong, Commercial driven a supply increase new wins parts sales a in or has roughly both of

inflation Additionally, on margins cost hardware. by our pressured are commercial

demand to increases, very in Some have we installed we a expect in which solar we we've price improve efficiency increase resulting year-over-year. to remain second the revenue for already extremely half. translating These to some XX% Solar offset and systems affected residential have with implemented. profit, our which segment, in enthusiastic successfully which in systems, see In strong dynamics of continue

partners as cross-selling, a manage from to momentum, [indiscernible] This rapid began out-of-court liquidation, infrastructure down challenges exacerbated an to is during processes the unexpected made sales an winding XX% solely temporary in isolated our quarter commenced build growth. operations and sales financing of also ADT launched to And continue with in this solar space. with and was quarter this as this progress which We ecosystem. event we additional all our we of face we for solar requisite the the lender. one pilot generating With approximately retail growth with the some successful

the We And solar we have alternative Solar was financing I to In we're X business, to impacted Net, demand the continue partners working leave be long-term very ADT. and these we're incredibly transition healthy. other this partners. been of success have about the to for whole, have confidence we strategy our with. to segment. strong remain Summarizing, fantastic and conclusion, headlines customers in encouraged on financing quarter by you this a confident seeing the

our momentum CSB business. in core incredible First, we have and strength

more a as accelerated for is Google taking shape and the growth. Second, serve will partnership catalyst

our well. and pipeline in business profit Third, finally, challenges chain for being terrific managed is and experiencing Commercial, is growth. future Solar our are And supply revenue strong the

outstanding We quarter. contributor expect These dealer material work. profitable employees quarter all to thank cover turn results of and are to our Jeff detail. for now become call in more great reflection growth partners and financial to a ADT. a over to your And that I the remain of performance an want direct I'll and the confident segment will overall this absolutely our

Jeffrey Likosar

joining you, Jim, today. our call you, thank Thank for everyone, and

the results. benefit of across including our overall As solid billion, exceptionally Jim company Solar momentum quarter very up revenue described, our acquisition. strong Total we've the and $X.X pleased business second our continued are was with XX%,

X%. revenue our Solar, grew Excluding approximately

or the revenue, higher level higher last $XXX monthly of recurring our was $XX mentioned, Jim our record year. reflects base, which than RMR grew pricing. customer the million, growth initiatives, average and to This improved million benefits Importantly, retention

by the XX% $X.X year. increase small and CSB drove increase improvements, monitoring versus Our $XX core increased by driven and a last combined highlight X% driven revenue performance This or The combined outstanding $XXX just which performance. services strong was million. and from EBITDA the revenue I an the of in total million quarter million or XX% with or delivered revenue adjusted with cost this was of efficiency the mentioned. RMR business growth, performance our was EBITDA to revenue $XX resulting growth CSB consumer by billion, segment, increased of adjusted for

driver program Our our of efficiency. virtual been key assistance has a

visits, us place is more increasingly Commercial versus demand. in-person subscriber utilizing our in initiative services revenue. these by year, value This this prior some million Year-to-date, improved were fulfilling and as resolve growing to and also visits. segment, $XXX questions in our delivered adjusted and X% satisfaction In conducted reflecting convenience problems. service $XX reminder, increasingly X.X EBITDA a million and while margin we base, service revenues a the footprint relatively to reduced the and of of as service carbon As monitoring customers which growth strong challenges, million, double-digit our virtual an offset rate. was costs higher revenue was almost on traditional technology speed respond by in to Commercial we we've allowing video increase lowering with our interactive Jim solid and and described, delays flat which inflation-driven our as

segment million reserves growth. Solar as installs our of of solidify posted insolvency and driven adjusted the Our EBITDA structure to revenue by loss sales for to an million, challenges and manage and we $XX converting $XXX lender processes rapid

recurring and driven in flow to and acquisition generating quarter, to higher cash meaningful year-over-year. in We efficiency investments. a program, revenue free subscriber our RMR on flow flow-through enhancements in the additions lower installation was Turning gross revenue, and million, XX% up securitization SAC other efficiencies. $XXX delivered net and X% cash subscriber mix cost lower quarter, balance higher cost net improvement the XX% the sheet. increase in was on net This by Adjusted

our sheet. improving Beyond for the growth top balance funding, the cash is priority flow

X.Xx Our debt-to-adjusted from at EBITDA quarter, XXXX. ratio X.Xx down year-end this was

XXXX. to committed billion at last our recurring end We debt revenue from the X.Xx, by down debt remain reducing $X net by of year. Our ratio was to X.Xx

against million drawn down During the our repaid million. to facility, we credit total $XX amount quarter, the revolving $XX bringing

is markets dependent the refinance Our access of first June. million all to next that with the plan debt, note timing, next amount upon capital structure or maturity market and the some We exact upcoming due lien $XXX conditions. to

We when strong the and remaining expect generation our a to draw also it due. maturity comes of paying the down portion repay to considering cash are revolver use XXXX

our we're for year, in full is the momentum business, drivers ADT. full spends and on achieving retention subscribers, amount focused core customer described confidence guidance, each with value in we us year strong the Regarding business improving This improving which gives are affirming producing new the increasing we've of the our and our adding today. increasing key outlook the

demonstrate of strong, also franchise. built the we and challenging as want generation I to to balance near-term business our are the meaningful of improvements any our resilience, uncertain, trajectory The growth investments Our guidance ADT reflect will note scenario. business. conditions year across and is achievement that further macroeconomic full in durability and revenue our continue flexibility to succeed with cash XXXX remains and over

highly Day customers we business flexibility. that We have out a offerings executing on several segments a significant we billion-plus and characteristics, recession-resisting durable improved solid stream, diversification foundation, profitability to laid $X that at strategy cash revenue Investor on the our growth, value, across customer drive stronger loyalty, higher flows. of set recurring are capital and Building

first pleased the investors. progress without and year. employees, not We through progress the partners, customers, suppliers, half made with of our are communities this possible very we be This dealers, will

of for whom support Thank this questions. Operator, continued of open like the would our All morning. call joining everyone, I line please you, to for for their thank ADT.

Operator

[Operator Instructions].

Our Goldman Sachs. George line with first the question from Tong comes of

George Tong

on You mentioned labor there? had in Could of much on the And due how quarter? you delays tightness. the elaborate impact saw what to an you quarter that seeing some installation market

James DeVries

George, it's Jim.

impact the labor relatively which on We not particularly of material. core business in was challenges it had of CSB terms installations, throughput. the In the some But Solar impacted in business, labor minor. it's

Jeffrey Likosar

segment that in contributed Jim our Commercial also described. it build to the some backlog And of

George Tong

helpful. That's it. Got

costs pricing seeing installation of trends, mentioned offset about with those hardware also throughput sufficient input a little in costs. you Could you're whether impact You stabilization seeing to is some margin bit that? rising whether talk associated those evidence and

James DeVries

Yes.

wages, the So mostly we and sure, again. The delays. Commercial related that to That's is Jim It's hardware see products pressure fuel, space. inflation George. pressure in pricing

XX%, offset has with price great increases, through EBITDA team that the on done puts margins We've increasing just first pressure putting inflationary from quarter. to Commercial bit little a well are of We The a margins pressures. these came the prices partners manufacturing in space. job. and in south up done with Our

pressure. we good the So offset about feel power pricing to pretty inflationary our

well. an we feel around good in reached agreement the to And Resideo pressures. together our recently supply challenges them. team, supply outstanding an agreement the own our On the with with very side, chain amend been principle They've partner. We core and inflation we've through inflationary navigated in residential pressure very chain with

Jeffrey Likosar

also at seeing and residential the that. quarter in efficiency George, add segment that on kind expansion Jim just mentioning, the What the seeing SAC you CSB margin was XX% for to that see you're on of you're the results the there. comments

offsetting SAC So we efficiencies flowing margins. our not as increase, just efficiency on greater operating pricing as are side but through the the well both the

Operator

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

Toni Kaplan

on ask macro the environment. Perfect. Wanted a question to

have understand maybe all things end Just in customers conversations into if client more this you difference to any towards if and seen into converting quarter buying changes or particular of impacting Solar the in the wanted July? in any more Just maybe there's is at not. business or the

James DeVries

macro I -- the in facing businesses are experiencing chain we're same Jim. say challenges mean, Toni, that I would it's the supply many environment.

consumer. to The of demand very In in continues Commercial. strong terms customer strong the be demand's demand, in

expected. challenges, Solar the increase we It's $XX search for increase is Commercial. Solar, of Since million ADT year-over-year from And The chain be our through supply that's chain As In ADT in is has coming higher XX%. the driven. organic ADT has helping traffic what ADT. brand a we've or that's leads XX%. supply about off side, on increased tripled. strong. a well. Sunpro XX%, But of the the increased than backlog it demand as QX XX% in demand generally to been Solar, XX% is rebranding continues Website charts. backlog a result the for Growth

all credits Act, demand likely way So rooftop there's tax up solar is next XX tailwind you we for and Inflation the via a to the strong think potential the X% that for extends years. the Solar in know Reduction which

another catalyst So growth that yet for that be could in space.

Jeffrey Likosar

many we during anti-recession we in our our There's some add going type to even remarks of is highly highly trends by in haven't periods Jeff. more seen to customers. so what I'd There's believe valued my other that pieces, core mentioned recessionary things characteristics, And this historically evidence kinds Toni, And I've -- offering have lots be well this that of prepared in periods. uncertainty. they of we negative value moving business. several

to good environment strong pretty hard causes. mentioned, isolate about so look feel our currently it's any at when with environment for attrition face, individual record adds efficiency, So that and the navigating our really strong Ken you the we RMR we But just matter. the in

Toni Kaplan

Commercial. Also, constraints Super. chain just on the supply in

they are really sign do meet expecting Or able to issues, the to now, same million backlog. too. now? need so to mentioned be to $XX the that service look Are the I -- are alternatives having definitely the You you business? be imagine to ultimately this everyone these Or they able all other clients and the demand seeing is

that if not how meet to So play just others out? demand. sure the are able does But

James DeVries

view not the and is that this will in almost pick Yes. the in. backlog. cancellations I'm of aware in your as cancels Toni, the sure as backlog, aware I'm I'm some. space parts business. supply -- delayed no any. the as we soon everybody come any We point, had up is Commercial the To the commercial navigating of have through not there in issues. chain But The same business product

Operator

Imperial line Our Ruttenbur next Brian of the question Capital. comes from with

Brian Ruttenbur

what First this of and you acquisition, of multifamily, moving acquisition IOTAS in multifamily a Can all, size on involved. which very the guys haven't about move into much historically been, the you for I and that's talk don't you focus believe, means? the

Jeffrey Likosar

Jeff. the Thanks It's for question. Sure.

a in something XX tuck-in the it. to space. acquisitions, U.S. our you So type million mentioned, IOTAS as growth, -- the multifamily business we size multifamily is talk north the about, within CSB It's of of accelerate There's households that's and in

for thermostats, in detection, enterprise fleet Very, known our within control. residents and well in we're business. compelling space. then with a it's very company and integrate smart opportunity. CSB owners, And excited access locks landlords really So the home They're to it

we be from come. us, years in for the to introduces Importantly lives of those it they their early opportunity many think in for addition often that also to dwellings, are can in while customers to us customers ADT customers, kinds

Kenneth Porpora

Brian, Ken. it's And

technology there's to the in add table growth multifamily now. Jeff to stakes what mentioned, is market. Just explosive almost The

within with speed for with multifamily expanding space. platform platform and the So IOTAS the sharpen skills market allows ADT there us the family, technology our specifically to and us to is our now working made

we're So it. about excited

Brian Ruttenbur

Okay. Can you terms million. about bit. And be dropped drop forward? positive to from amortization, you it a for quarter? enabled I of looking want about On this amortization to in you second GAAP you're quarter guys what a to EPS. little you talk $XX talk I first first going that Can from quarter to going just have and this question. financial second talk quarter about that Because forward? understand

Jeffrey Likosar

Sure. of initial step-ups accounting just that of Apollo some back that purchase to ADT. really Yes. goes asset had One It's the acquisitions Protection of related been and roll-off amortizing the the

Brian Ruttenbur

kind the should then further Okay. quarter drop this moving to level be there correct of using a second Or And is forward, the is numbers? from here? be

Jeffrey Likosar

assets rolled significant most The those off. of has

So expect first see you similar I'm the second quarter. to quarter. the sorry, to quarters to No, look future similar should

Sorry.

Operator

Our of Shen with next ROTH Partners. from comes question the Philip line Capital

Philip Shen

to wanted could terms little through in EBITDA X. talk of from the expect could I the in business you see QX bit maybe Solar charge And share if you the a you what business to of and you do Maybe business? that that expect And in so to that found forth? that much was? transition you with work you Have how with how other lender. lenders and took Solar

James DeVries

if smart Jeff customers Ken And a top think us we We line. they to with, a said start, Phil, trust the or I for had that line. to and that smart asked this energy. top feel Toni I'll trust start couldn't when home, the mentioned the earlier I'll to I add ask thesis for about add then better answer. us around question

the relationship are it's Appointments stores Florida mentioned sell significantly. in customers We in XX up And from I'd is in been have the a are helping growth be quarter. in fourth then in because up. trusted lights just out retail. solar so at very Conversion Will a [indiscernible] perspective. confidence to brand. a North with rates Carolina. brand developed And Launched

that They're installation ability major away varying convert unable great lender to our driver in question, about insolvency, obviously of we X,XXX grow So To to expectations. have the was liquidation. feel throughput a shifted central we that below business. effectively. this insolvency, were were we stages obviously lender at a The way. in About your results lender. customers process, financial And from impacted

X Phil, One, partners. We major dealer dividend. is have

by know or And the second probably add? You those Stock And traded is guys, owned New York Bank. company. both Third Jeff Fifth anything to Ken, got of faith organizations. those Financial, then Sunlight good Exchange in publicly we've

Jeffrey Likosar

just for other We, reserved I'd to transition little right with require circumstances Yes. add. believe rules the accounting XXX% That's time, opportunities, pursue continuing the bit insolvency. relatively from course, isolated of though are smoothly, We XXX%. million. just receivables described. to as that it us are $XX lender a with takes other We the at Jim to recovery of even reserve lenders

Philip Shen

Great.

what for for X, in see contribution? because you're million for that year. you slide, X? to the the When Do you your you year, EBITDA you and see think that EBITDA Do of down breakeven. Solar, issues see about growth and ahead -- outlook QX do of this again? integration for breakeven you Last had $XX were QX looking maybe if So QX at you you look and charge some and

Jeffrey Likosar

we always current the good range the see as we We strong trends of continue we've segments. all Yes. of balance in the total though We to challenges offset and segments. Very within about to Solar. CSB. shared the rest our beginning contingencies that the the results. to have that affirmed you very across And plan at saw land sales in having the through very, guidance quarter, portfolio strong We, year results and to to in allowances really X the the don't revenue the feel year. guidance -- for guide -- and some We aren't company going individual

Operator

Sabadra of Our Ashish RBC Markets. the line next question comes from with Capital

Ashish Sabadra

Wi-Fi attach initial believe any question earlier you you of partnership. -- But could for the going Google you the from year any on you in could the on if mentioned interactive if be the half And share and improved wondering a into option. will retention, back I the -- metrics helpful. uptick or was the could if lessons year. sell quantitative sorry, So launch any Google provide color color rate? the launches And on just in attach expectations you upsell 'XX, of Doorbell front. campaign, I as that wondering any and your

James DeVries

Sure, to financials. color on and provide Jim. bit it's perspective Google how on cascades into the I'll -- through share ask his on then a Ashish, Ken our of little it

release installation right an the from by the around this teams is And the The the in expect, That would camera, earlier camera, about is we co-branded record with And partially we've increase this the Nest drive reminder, rolled of out to And start, has going our and supporting marketing by Fund. market to revenue We Google And you the million the doorbell the now first off Mesh Wi-Fi, the creative. marketing, per feel Max, relationship $XX in with floodlight about that joint other thermostat. launched As we're Google. XX% to rate quarter. already as resulted Google. great week, second Hub, attachment be launch outdoor devices, funded XX% of from we'll doorbell helping impressive for XX%, video together customer. year. that and indoor on attach a Hub the really in tranche just rate Success working a

And excellent. with terrific net-net a fruition. have setting come this together. the to customer see worked it's both sure done the make roll it work, So experience of lot We've Google, out, pins to to well organizations is

Kenneth Porpora

revenue. Google put XX% per increase in that the in revenue some that's side, here the what Again, XX% installation these year-over-year. was that unit, $X,XXX installation on per driven quarter increase you mentioned. largely that's about the a To that just home Ashish, in in saw of economic perspective, And is that devices by Jim

And only we've a couple of jump launched devices. year-over-year. a So significant

this that SAC back seeing of $XXX in you're of continue annual more we'll in drives home in $XXX me to So total see Every million of what per installation flow. SAC increased revenue per or side. cash unit. reduction brings to efficiency upside net And on business the

us if the profitable it's the So more as exciting for this to revenue, about do well. installation think hugely and the of on you what in for opportunity home products can consumer get these

Ashish Sabadra

That's kind great you on the just stretched? color. was the of have any or Maybe or as I wondering, seen macro in payment getting the delays consumer. among consumers lower-income just are consumer any those increased attrition

James DeVries

Yes.

fantastic -- the attrition ended Ashish, a for quarter overall so We been XX.X% the has story at us. attrition.

and more that's think improvement last offers. from And success. than save an the We're the strong becoming There's that there way, XX low. bps in More that, better handful in from equipment bps backlog environment, leads better I last -- sophisticated retenant at record about -- more more customers. in that than a at of our to year. fewer reasons for We an year. Service then XX well. looks know we're are about as coming improvement is relocations. a by That's macro selling July, QX install. is the

to uptick of attrition. small. It's been there we your has non-pay. all easily call of influences tailwinds are what non-pay. question, to And relatively But other have been There for all in And has cancellations uptick slight positive non-pays. overcome modest a sort the headwinds a those of improve in so on the non-pays,

Operator

Christiansen Citi. of the question with Pete next comes from Our line

Peter Christiansen

trends, gentlemen. Nice nice. Really

this install paying for X customers big offering and also -- seeing CSB. to attributable Are that with now on more uptick Just a equipment? Is efficiency for a SAC of the questions. just combine average the that One, it in you're that Google outright Is that upfront? just the and opting equipment lot contributor?

Kenneth Porpora

quality, roll greater Ken. this seeing and start and it's Google What advertise. what Thanks far to see co-brand higher new the in -- way, you're the But for phase call is first so for the X residential offer the and this excited base. We're quality. it's we immediate continue customer revenue million I'll helping is quantity to to as we'll the revenue by to seeing well. to more your question, to base revenue as of of that this from Pete, we're is What there. out And note answer quality yes, drive consumer over Google largely our existing customers.

Peter Christiansen

nail just the on really coffin questions recession on helpful. That's here. a put And to hopefully

on modestly the previous quarter-over-quarter to is bad that are up up roles debt. looking saw guess, provisions pay the question. And no that particular. only modestly. in I I Just follow-up bill How were on delinquencies, said pay you --

curious lot Just major think is clients a given just bring to types just of up, it. it dig issues. I And a are just wanted telecom these having of into further

Jeffrey Likosar

I'd it's we've No. What a higher efficiency effectively add quite well. it's overall that Jim thing bit remarks performed drives advance program, -- problem. a mentioned it also that effect of hasn't that is flywheel securitization evidence prepared too one enhancements just SAC a a creates the evidence earlier, was We adequately And and slight briefly means just the I having building on. saying some a in which seen to of bit my meaningful book which uptick. think rate, and we're reserved. our no There's little

Kenneth Porpora

And Pete, existing part XX that, has our analysis. to score XXX, customer of average X, too, is of over base an previous closer credit

a to service the lead the especially. higher and on the little customer tends So discretionary average space spend side in ADT demographic

Operator

remarks. There are the closing call back for questions like management the hand I'd queue. to no further to in

James DeVries

taking to our I'd us my appreciation like today. Thank everyone, the partners. for dealer time Thanks, Okay. to employees extend to again join operator. our you, and to

great results. quarter directly are efforts in Your reflected

the day. be Have about joining a today. to optimistic great appreciate us We And year. again, continue everybody

Operator

Thank Ladies for and gentlemen, you this does your conclude today's teleconference. participation.

lines time, and this may wonderful at your You a day. have disconnect

ADT (ADT) 4 Aug 222022 Q2 Earnings call transcript