Earnings call transcript Q1 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is David and I'll be your conference operator today. At this time, I'd like to welcome everyone to the ADT First Quarter 2023 Earnings Conference Call. Today's conference is being recorded. All lines have been placed mute to prevent any background noise. there a remarks, session. speakers' the will question-and-answer be After [Operator Instructions]

Director Elizabeth you of may Senior begin Relations, Investor Landers, your conference.

Elizabeth Landers

Thanks, appreciate you earnings morning, everyone. first good XXXX call. operator, quarter joining and ADT's We

will be EVP our Ken Speaking on CFO, today's ADT's and DeVries; and CEO, President Porpora. and Jim call

joining Communications. of and Following Officer; Chief Also analyst and the Finance, are Q&A Jill take we'll for prepared SVP Investor Operating and Relations Don remarks, Greer, questions. us Young, EVP

release press our and presentation this morning a Earlier materials on issued financial our available These website slide results. we of investor.adt.com. are at

start, mention These could results to forward-looking or include do risks statements we Before our about cause actual expectations I to need that forward-looking that today's beliefs uncertainties materially. represent that to differ are remarks events. future subject statements and

factors the in cause differences may filings. SEC that are our of described Some

financial Investor call. reconciliation with also on ADT the measures will most We those along to measures non-GAAP measures, comparable a directly Relations discuss website. on GAAP available the The are

And with turn Jim. to over call that, the I'll

Jim DeVries

start growth Thanks, thank EBITDA, and share This leverage quarter the free you today. for our us continued our joining released EPS, a ADT adjusted with adjusted growing cash morning, net I ratio and Good had solid we while each decline. am year concurrently pleased earnings. morning that in to to year-over-year, revenue everyone Elizabeth. flow to adjusted first nicely to

growth delivering with strong balance commercial Our $XXX a revenue with monthly at and total recurring of we top grew line the record very XX% ended quarter X%, million.

at ago, down stands with record from year a two a now of XX.X%. a years payback revenue at record Our gross attrition remaining X.X% low

cash and interest year. improvement this is a and year-over-year metric increase capital cash growing flow, over consecutive versus XX% swaps, flow consistent QX are drove of This factors adjusted driving better our second with of year. million $XX efficiency goal by including last These rate a for free

favorable business factors well our our are is to that meet guidance. of evident. many XXXX ADT positioned There resiliency the forward, Looking have

pressure market outperform and is is the chain to our and capture boosting supply expectations easing, First, market share. commercial showing segment strong spending our

revenue and continued While steady demonstrating sales strong remains XX%, at pipeline reinforcing recent the our approximately growth. million, a strength enormous backlog of for commercial $XXX revenue grew installation

our Equally XX% margins impressive within commercial EBITDA the quarter. exceeded was profitability. for

overall Second, retention rates ending healthy RMR grow a customer rate. are to and stellar at continues

and homeowner relocations levels when reminder, benefiting mentioning experienced relationship down, customer inverse we’re worth move trends ads, both a the the macro retention to an in As continuous retention innovations improve recently, the near new are between and existing the there's customer customer from experience.

with our Third, expand of the in in offering we've states to to year. launched State more plans three before partnership the six Farm, states with end just initial

unit, over installation year period. per Next, our Google helping partnership which product increasing the improve offering and and our quarter over is $XXX revenue up prior $XXX our is the prior

We attachment by rates year-over-year. doorbells to the per increasing customers high are and more compared device more average devices, see to and our continue offering cameras system XX% previous than buying on Nest

integrate funds. our to being DIY offerings developed quarter of Google's led integrated the new sales awareness partially products. our launch of is campaign, We're with driving a marketing of launched XXXX. In Nest which by first internally Worries over The funded versus quarter more system product No Success this in our February, products increase app self-setup, Google ADT to we XX% ADT+ first the with these

the working accelerate Most subscriber this receiving funds million million first of anticipate fund to will and year of tranche. to various unlock $XX success next forms be spent collectively $XX this the growth. We of in are marketing

introduce accelerate Install year. to when more even an partnership Pro we Google this integrated solution our expect We later

our estate key portfolio reduction our real focus on organization, rightsizing cost advancing placing our priorities. efforts streamlining CSB our we're by greater Finally, and

business, in. We meaningful and speed operating positive also efforts external environment efficiency. in savings cost are monitoring There these we're our of the expect believe many we're generate efforts outcomes lead our to increase to but and through cognizant will and

our in has consumer The higher Reduction resulting somewhat as is economic in in overall potential are experienced some industry our from At sensitive, expensive continued attrition. financing segment, non-pays the Inflation CSB example offsetting more and residential as for higher has which some pressuring are well. an pressures solar For rates interest more pressure level, business solar growth growth become Act.

have us of integrating work Solar. ahead ADT still we Additionally,

these is actions a and implementing year. new the expect our experience to performance or we and actions dealer the number of and improve streamlining light of results. we're anticipate strategic quarter's strengthen for This efforts meaningful cost operations, in performance our revenue scaling end ADT's actions decline These In and to improve program by include solar the efficiency. foundation improvement growth, and in financial the of customer business we not and executing launching to a cross-selling,

all to business achieving segments goals. has challenges environment. macro broader presented our recession advancing the among we and the closing, and on across model our manage ADT have our focused XXXX we and in believe plans remain business In toward a We progress resilient solar

for results encouraging day. have momentum care determination of of them want I employees and reflect to XX,XXX-plus all and the customers Farm. Google businesses We and partners. State take they our partners ADT's in great commercial our dedication and CSB do thank our in to dealer impressive and every

will you detail. the turn results our our more Ken who in take call now through I'll to Ken? Porpora, CFO,

Ken Porpora

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

Commercial. for retention. up Commercial XX% our base and fourth was Adjusted and our and $X.XX quarter CSB we're prior average Jim for solid prior million, CSB at $X.X of net EBITDA from year to RMR margins versus higher per income adjusted quarter, in company subscriber year-over-year our to X% quarter a translated million, with share company $XXX of X% Total and year revenue, strength up up or As to Recurring monthly year. X% income. and showing $XXX off pricing consecutive mentioned, start respectively. a $XXX positive customer continued adjusted record up strong or net X% million, of billion this the outcome improved was This both versus with revenue was the

Moving to highlights. segment

Our and prior delivered up revenue year. total in Business, Consumer first by CSB for $XX adjusted billion Small $X.X cost quarter, driven by CSB revenue or with increased EBITDA combined X% discipline. the of the versus quarter, segment or million, X% increased

are for an ago. payback a We products, are within record see our improvement year demand have years which revenue Nest to strong and of a from efficiency X.X SAC CSB, continuing years X.X accelerated over driving Google

for year. XX% prior is revenue installation Install per Pro up Our unit approximately now $X,XXX, versus

Doorbells systems, average and time a X% versus customer higher Install realizing increase last base. Pro XX% XX% new than in for residential for are existing rate $X new approximately month, cameras per Nest is because roughly buying attachment is home over RPU interactive the year, approximately customers our or larger Our the same per

are We XX% seeing benefits tickets Assistance all currently ADT of being satisfied Program, service drive also satisfaction to Virtual with virtually. from which roughly continues levels of the customer high

net in The of returns XXXX. our subscriber ago, by just is ratio per an times As generating in up to about up since lifetime committed XXXX. to versus our customer improving Investor $XXX core subscriber, year average now X.X Day $X,XXX SAC of customer in per value approximately value over X.X we times business CSB a are

SAC during expected the core less estimated costs. recurring subscriber the net expected reminder, revenue value customer a and less As life equals service

drove Turning margin adjusted This our year of delivered to XXX million quarter, commercial and strong installation up both We performance with points million, versus of Commercial the XX% over expansion EBITDA XX% basis in revenue total revenue strength to XX%. revenue. in prior $XXX year segment. and prior $XX up of sales versus

We be in have we to Commercial very momentum segment. the continue pleased with our

the an EBITDA the posted expectations loss quarter, a ADT to the of and was been relative adjusted quarter a result million charge has from also segment. charge of Solar macroeconomic of This with non-cash and $XXX revenue goodwill operating Our adjusted we results In $XX Solar $XXX excluded associated current segment million impairment of Solar EBITDA. conditions took in of million. with

this by the will end of and Jim anticipate As Solar's growth improve actions mentioned, profit our we year. performance

quarter, attention of from efficiency to offset by additions higher customer partially interest volume as cash lower swaps year flow. our million $XX prior cash Adjusted $XX versus flow in investments. technology and lower was including SAC up Turning rate the free was million

our our solar in in Commercial the segments growth segment. CSB EBITDA and improved Strong and shortfall overcome us capital helped efficiency

improved efficiency spend, RMR SAC Our grow us our is which record by two-year ending to our lower XX% enabled X%, year-over-year in revenue payback. reflected on

strengthening We focus continue balance to our sheet. on

of declined quarter, XXXX. at ratio our first by closer the the ratio from or leverage substantially X.X XXXX. gets net at of year-end X.X times, being end times that end to times us down to the three This below of As

million XXXX, $XXX proceeds senior In Term prior balance March, million used approximately at We the of notes. to outstanding and hand. a using facility our redeem redeem plan borrowing secured $XXX maturity to A XXXX Loan in cash loan June on term remaining to or from we

Following allowing maturities debt our to XXXX due confidence year up our year. And hand next redeeming left no this shift $XXX to we focus $XXX continued cash we today have our us notes million, reflecting generation. in to coming meaningful maturities on repayment, million with are cash

end of year. in this million we the $XXX the pay approximately completed debt By quarter second down have will

maturities, in well reduction We of are rate variable limited a we are by strong With rates. total XXXX positioned interest exposure debt rising our goal mix, $XXX manageable solid our in step against XXXX. by over million recurring debt reduce debt achieving planning to billion to and $X net revenue

XX, We continue and momentum in XXXX trends flows that And to full business on to achieve result macro finally overcome February our the and full the turning in expect on metrics for earnings year. guidance we revenue, growth to guidance. track as to the year we cash of announced first remain

transition investors. towards to confident family add opportunity path cash guidance, am illustrating my their we I with attractive stock the free XXXX our represents XXXX Before ADT for achieve continued and are effort I'd flow this goals, long-term sincere past progress thanks we we to an entire on to that our XX% our a believe quarter. Q&A, extraordinary for like yield, nearly to

call please Operator, open questions. for the up

Operator

[Operator Instructions] question Christiansen Thank We'll our Peter first from with you. Citigroup. take

line Your open. is

Peter Christiansen

curious you. the seeing we Google unit year this And though, bit efficiency versus looks the last do-it-for-me efficiency you've in latest question. how get balance Thank perhaps do attrition and At CSP many release growth? Jim, actually XXXX, could you that guys. I guess are shown the you between Thanks Good that you Thank into obviously, about thinking quarters the balance nice. a for And are into you. improvement just declining. shift? I'm time the same growth new particularly the of morning, later quite once in think

Jim DeVries

adds QX Pete. yes, us impacted a for on definitely -- environment. for Thanks by most questions, The macro the was gross the side

portion of coin gross is from adds benefit significant a a know comes us headwind of we represent you our and QX. perspective, that As coin, experienced it bit And well, provides relocations retention when a to in some two-headed of that little a adds. it

I feel -- bullish our continue product be that good about just Google with Farm. this the coming mentioned year I'm later State DIFM when about product we and integrate to bullish you launch

coming I think dealers our of nicely. are around some

So, a -- from impact I of the the think an lack relocations but relocations we offset can macro it, perspective. is definitely

Peter Christiansen

market helpful. metering And a bit of in today. was follow-up, then net spot sore want little the to likely a it's That's and Obviously dig pre we just Solar. know into Thanks. I California a as XX% changes

some digest wondering next and in Just if the can how a a just -- and some the juxtapose we just the certainly new are market traction you of rates wondering evolving interest you're juxtapose getting outside, California But see so months get the coming if of consumers of over for sense factor economics? you as could you everyone.

Jim DeVries

takes. Yes, obviously puts the so -- there's and

For pretty installations been us, California net small. the of modest. within California California, market X% Less so metering for than impact is in are us relatively the our has

offset utility for Interest rates some more business. Reduction a increase, as making as expensive. energy well. you issue an as nice Inflation There there. solar puts that increase, rates is And an definitely this know of are tailwind Act takes somewhat prices The be and are will

bullish that forward. Solar from to our got to is do about think We're operations significant going to under us, perspective -- an work growth I think continue for get one a we us legs but Pete. market this term some market We've to continue

Peter Christiansen

Jim. Really helpful. you, care. Take Thank

Operator

we'll George next to Tong Goldman And you. Sachs. with Thank go

line open. now Your is

George Tong

morning. Good thanks. Hi,

of with six launching more about State offering plan year. the with Farm You Can traction talked some offerings that with in to then far in three involved you're customer and states the this are that seeing new adoption about talk that launch a you've joint so joint and terms states launched the you offering?

Jim DeVries

Sure for the Thanks question. George.

losses restoration here prevention, to insurance are what business product State purely devices to transform homeowners detection to and prediction So, we we the homeowner intrusion, Protection the fire, with -- essentially from vision avoid claims. Circle call is to include Farm and a help and mitigate the is water and using

We in Illinois in a out We rolled last out ago. rolled Thursday. Indiana few and weeks Pennsylvania

early very in teams experience. together. working on are We well The are the

so, on about wild, but agents pretty But sales We'll in in think another throughout its early I George. it, we and in the buy it. be in feel process. feels zone early but states traction, game, something or about excited at year. The the it's of of game, we're have training working six flow the the and rest the We're the XXX good. still we we're good least in the out upsell

George Tong

number of key milestones And business overall will of what also plans a take you would including where you. various some Can actions like underlying Thank of improve it Solar then program a initiatives. on the strategic the are? of you performance see the business you color. helpful new these your launching elaborate cost of how mentioned at? and to efficiency to point undertaking improve to to Solar you're That's dealer your grow And you long operations

Jim DeVries

You bet.

long playing go slow last in faster this some on we I call, challenges we the ran year, Midyear where into last our going game we're we're permitting. now later. So around mentioned, so can Solar.

all went panel of change. operational caused It than We liked. of what we grow a One supplier liquidated. a to Solar And also challenges. our rapidly change that would have less exposed name dealers some through

customer our backlog. made down clean are invest we And in the the experience, We our decision in XX%. made to Inspection to Incompletes reputation. up invest down XX%. decision backlogs

sales call our the frankly scale. the From to And to in longer year. in for Solar in sale We operations be long cycle show, short-term improvements process our pain of to rebuilding to start three The opted sometimes. we're operations four in months install the So later business. than for in is CSB going for term. the for to it that's our

output we positive turn more And expect I in more start in ship QX. George. materially think to QX the

George Tong

Very helpful. Thank you.

Operator

Toni Kaplan Next Stanley. Morgan we'll to go with

Your is line open.

Toni Kaplan

Jim confidence guess, end you Thank you point have last could able to operational that so by turn of in you Solar to actions. I been actually the will follow challenges would to an guess, there you with up the example the very like give an past I that around. where you've could Solar is year? much. it on that just I of -- question be analogy That give improve us helpful. wanted the that on had

Jim DeVries

Yeah.

doing So operations we're much house. the the the work -- around on improvement now work process Toni that of of side is the

couple We earlier. in mentioned improving a We're We're are work We're I could the of time. leakage. have investing in better of infrastructure. deal reducing a data cycle so that we great analytics, reporting. doing improvements

little and levels pretty than are where permission to operate. backlog customers down the moving we to Incompletes needed cleanup, a XX%. backlog is down at inspection XX% PTO more record significant are Our to

And we before And before we'll again of jet it's before the experience to turn that so in time the the as we We've operation to the on fuel. out take and like on see show what shared improvement like customer going then turn to confidence with lean great financial will we the be it into signs the wanted George, results. need be solar. And cross-selling. We on gain got marketing I team we we time some a because I there. cycle to start of early

Toni Kaplan

looked thought there? talk that that the about Great. quarter. just this sustainability good drivers well. profitability particular also pretty about as good Maybe ask and commercial Wanted quarter well, in Any the out, as in very to I to call was

any So, color maybe additional on just commercial?

Jim DeVries

Yeah.

before And that up commercial green very that is government. drawing XX%, unimportantly mentioned I've expense of and We're verticals do solid and developing education QX didn't well cylinder. most hitting down in last tackling. are the solid, new -- was starting we EBITDA we show blocking way up capabilities. significantly. rock year. on shoots revenue day-to-day at backlog. quarter every We're and this So not was grow energy to a against our didn't our doing in in

levels. Our it. backlog is value still IR record Toni business, customers service. both for are business in at about it's excellent rewarded the provide has This and been RMR a to our We and

done as productivity. team of front, that. the EBITDA great improve margin to has job the a On from The result expansion we cost continue perspective a management a and

Toni Kaplan

Thanks so much.

Jim DeVries

you. Thank

Operator

Next Brian Capital. with we'll Imperial go to Ruttenbur

open. is line Your

Brian Ruttenbur

State you fire Farm. you can systems the very a have right or anything to us on leak ARPUs you're you bit little the you Thank much. these that in about detection. putting now to Can or grab as structure Question Yeah. give on talk that

into us homeowner put go in or these Farm reference. and what your ARPU? something your higher to Give policyholder, normal? normal you it So is than lower it's is an than assume, existing I State and you

Jim DeVries

is lower Yeah, ARPU Brian, the as is SAC. the

smoke So the for including as devices of of circle good where And it's think include video, home the way Google some return -- protection The product is light model the circle but of cameras. handful the works products. mitigation, smart doesn't sort there's that a the and pretty protection it of a or doorbell core water water on business It's of basically us. detection. of is, excluding

services. is to tech to other engineer customer is that and early. when upsell devices seeks And other this And installed, very product is the the again,

don't but bullishness. have early have our I under soon is that to bow, early the -- lead to would being that celebrate, to of again, suggests indications but belt We too curtain thesis it's enough don't the the we experience So real. think upsell able

Brian Ruttenbur

State Z that just their gets say, to into homeowner a off month representative of $XX on Y a then the Farm insurance. and And to hey, a to gets discount need fully, house. Okay. therefore sell it that understand lead you follow-up and X, whatever or And

So kind Is it basically sale? that wash that becomes of system. the a for

Jim DeVries

Yes.

sorts the insurance agent monitoring that intrusion fee State fire intent protection. the That the to for process selling is Farm provide by an Farm incurs. discount discount. the of and of introduces to customer state, customers monitored So a smoke customer have State the varies And the of alternative during the of discount but that of offset have the to that circle

Brian Ruttenbur

And on looking I we real that to you flattish, at on spoke I'm thinking attrition call, don't Perfect. Is quick the attrition. be where the but what that that's then you're of question year. attrition? because Okay. on if year last my kind as Last exact I know last rereading write, words was your were on flattish least for the flattish stuff.

Jim DeVries

predict. So tough to

a have of We bit on pressure little cancels. non-pay

lot a relocation continues for stickier Brian, us, We around but lead indicators say a more Our unit be a like the are. for the invests they to continue of customer us. revenue upfront Installation that $X,XXX. to be I'd positive right per the tailwind know is

about is Our record just a service low. at backlog

credit have scores. in We uptick an

So of our the excellent. quality new customers been has

good positive in So little as of bit feeling cancels, to pretty now, it. momentum but categories again the other of non-pay on it, with I'm a offset about pressure

Brian Ruttenbur

both. you, Thank right. All

Ken Porpora

that add add a also to Brian one. I'd Brian, quick just

which rates On well good the sign. I down, weeks come are some to the couple that think last is a of delinquency seen of nationally we've and starting as

the quarter. I of in signs delinquency side, starting the weeks. to felt but some last specifically pressure positive of a the first see think we in in little couple bit

Brian Ruttenbur

color. you the All for additional right. Thank

Operator

Capital Markets. Sabadra [Operator Instructions] with RBC to We'll Ashish go

is Your line open.

Ashish Sabadra

Farm on fund the going $XX unlocked and marketing better Google the for Thanks gross does drive agents the particularly addition onto also the How on the RMR wanted an and I program? Farm you in RMR question. as million at Google just improvement partnership partnership side help you also to addition. State onboarded get Thanks. X,XXX forward my taking understand State the of from

Ken Porpora

this okay. it's Ashish if Sure. it's Ken. grab one, I'll Hey,

us catalysts So on number of year well, side RMR this to the bullish has going forward. in Google, next start the kick into State which and year and a Farm as in

mentioned expand Jim the earlier, We'll as year side, in three states for be continue couple to end a in only and weeks Farm there. now. State we're the by of On nine of this

protection is there opportunity especially Farm the with as of circle State with tremendous earlier. RMR So adds; package that the outlined far Jim as

start learn states we'll in customers. as We're see learning we'll and the the from and again, and we and to early more pilots then So, the ramp. to more more we now package the get that offer accelerate also more tweak as

two is into subscriber on back dollars side, the -- Farm second, will grease fund also Google Farm to growing count a hundred several the million exciting way us. for opportunity catalysts we opportunity the State to On skids main tap with our by kind of the for State an

one just is, On we Google, callouts, ago two months DIY main a launched new with Google. our the couple first product of

and to this of essentially see of is accelerating Google we've in killer self-setup the tackle that DIY some ADT our product designed, We that years. last an that And as So the this product. with opportunity been partners. that's increasing couple TAM is

So we're is and nice some the growth. DIY essentially fresh signs just market really that in seeing in

we services app hardware fully And of with and with our well. this an product year, our there we're to some launching and be offer that success our fund Google will later our mentioned we'll That tap next-generation that marketing very cool as ADT+ all in new opportunity the into will pro-install well. us next-generation remarks, prepared allow as then as

very excited So the near over those those couple partners of catalysts with us key term. term have we see long and that

Ashish Sabadra

That’s Thank you. very helpful, so thanks.

Operator

or I'd are to All questions. additional show to there any for like remarks. back right. management turn And over call the now closing I no further

Jim DeVries

you, Thank time and thanks for today. the operator, everyone join to taking

building capital brand improving business, efficiency. today, growing As loyalty, effectively you heard we're our our

momentum good XXXX. start strong and a State in we're our Farm off catalyst growth and Google for businesses, in have with to We

partners to extend terrific ADT quarter. employees to my our dealer a like I'd and appreciation for

great direct day. have a reflection Our results your and are efforts. a everyone, of Thanks again,

Operator

concludes call. today's conference This

You may now disconnect.

ADT (ADT) 2 May 232023 Q1 Earnings call transcript