ADT - Earnings call 4 2023

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Operator

Good morning. I'd like to welcome you all to the ADT Fourth Quarter 2023 Conference Call. My name is Brika, and I will be your moderator for today. [Operator Instructions] And I would now like to pass the conference over to your host, Elizabeth Landers, Senior Director of Investor Relations of ADT to begin. Sir, Elizabeth. ahead. go Please

Elizabeth Landers

good call and We you appreciate Thanks, discuss morning, ADT's today's to XXXX. year-end joining operator, everyone. results for

today's ADT's be DeVries; Chief call and Officer, on Financial James Interim and Chairman, Likosar. Jeffrey CEO, our Speaking President will

we'll slide the and on Earlier this press of our are available our financial website analyst morning, Following take questions. investor.adt.com. issued we remarks, a materials at prepared presentation release results. These

the like I'd for third to remind business through beginning discontinued that as the includes date XXXX, periods current discussed metrics begin, sale. everyone quarter on will in operations. of business except operations, the of amounts this flow, we continuing for commercial historical and which reported to was related call commercial Before Financials for cash be and the

forward-looking expectations results Today's are statements could materially. to our to statements events. future remarks These cause represent also differ that about uncertainties forward-looking beliefs include actual risks and subject to or

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

We those most to directly Investor on website. will measures ADT the call. found reconciliation GAAP a financial The non-GAAP the along with can our also earnings comparable be Relations in presentation on measures measures discuss

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

James DeVries

delivered meaningfully thank portfolio for performance results. our and we quarter capital and for invested us XXXX year reshaped discuss today full our for future, and was to solid release morning, structure. Good you and ADT, year of joining the the ADT's fourth improved a pivotal

home core and model smart business. focused solar, have business we commercial and With and the residential divestiture consumer-oriented our simplified of the decision exit business to our on our security

during industry at the having our that customer and relationships cash with now additional generate with debt billion growing Our ratio XXXX, After market remaining and durable we a entered business EBITDA with and X.Xx. leverage leader flexibility strength our XXXX $X.X to flows. and we debt predictable by substantial adjusted are reduced serves proven large

strong shareholders. growing to in dedicated now to returns reducing capital is our Our providing team deploying to invest further core future, and the businesses, entirely consumer debt

I'll in share continued highlights, demonstrate to business. core solid performance financial which several very our

year, by or earnings consistent revenue mainly operations up million and revenues full with Small our driven was income the prior our segment Total net per share. diluted Consumer $X X% continuing approximately we at $X.X $XXX billion, from year. Business For generated expectations. the CSB versus We of or $X.XX billion, adjusted and grew

$X.X rate $XXX billion We including also free interest of with cash of swaps posted adjusted flow EBITDA adjusted million.

attrition million, recurring monthly X% ADT ended which up a $XXX benefited of revenue from with the record balance year strong of XX.X%.

to at We results is just under also I'll existing complementary XX,XXX and our years. revenue customer quarter of included $XX bulk subscribers. now improve strategic fourth account note portfolio continue acquisition a our footprint to was that customer This our comprised acquisition for payback million. X.X

agility throughout our challenging Given continue are we consideration strong such and performance capabilities, with the shifts, service strong we a backdrop as our best-in-class portfolio and macroeconomic of Against pleased will opportunities in economies portfolio consider to these and acquisition of our scale year. periodically

delivering and a and begin unrivaled we best-in-class our smart an remains service sustainable As premium with core customer to offerings, safety on XXXX, on experience. customers our innovative emphasis focus safe, solutions

last pilot Last of markets. ADTs app ecosystem customers of set Towards that follows new on new offerings consumer in our we self-setup select new end, our of rollout methodically customer centered hardware proprietary for year. to a professionally XXXX December, rolling our installed integrated ADT primary This and the and experiences. out plus initiatives during earlier customers launched set is app and

fast-growing unique use XXXX the has and revenue accelerate this us in also The net cases platform will needs. we approximately during around camera improved new our and customers' and platform enable, scores past Google new year. particularly customer as broader customers customer per enabled offerings, of the The to the customer We differentiated with new to plan It additional further areas which of video customers rest take to of partnership, our our technological higher $X,XXX analytics. leverage install especially with rates expand improved Nest our Google this contributed geographies devices, exceeding throughout capabilities already has develop base. confident for are camera tailored will to satisfaction promoter to

new offerings, and experience. in progress our our In substantial addition make improving customer operating to we efficiencies to continue

launched example, the threshold tickets As alternative like recently closing a rolling mid-XXXX truck. are to XX% we an I crossed would of a virtual of which where and program, service versus assistance our highlight virtually

the In early efforts focused relationship on on on Nest our focus business Google's hardware, customer AI experience, platform with several our addition, to efficiency broadened we with opportunities center explore with a have and technology be across Google operations. utilizing further call

defined customers additional more to make Farm is in offering to Our offer significant little methodical very XXXX beyond XX geographies. with states report our strong for risk partnership services as and benefit early and in And the and and closed continues continue need progress progress. have new available offering. products customers' combined no the in by State detection prevention Farm X at satisfaction and also navigating to the purchased our experience Similar have with and to our testing enter a also proactive We the base joint XXXX reminder, cost. to majority with local to approvals plans customer Google, State

enabling to various growth expect We infrastructure, efficiency capability retirement also initiatives, customers' other newly the a efforts during with our leverage and flow and the free million especially come, combined are authorization. Collectively, cash program to return these to Underpinned resulting in enables platform want customer making these experience a and to by years integrated of ERM, increase and confidently solid the we growth earnings recent in will and and in capital e-commerce delivering including meet growth significant while in of in XXXX our repurchase needs. earlier, flow a improve to in dividend cloud-based are XX% share systems. shareholders, CRM better reduction our significant modernized commitment legacy investments the and to revenue, faster refreshed our strong we forecasting announcement us cash noted our I XXXX. I our and insight in underscore which $XXX

in than and thank efforts down Before but I to winding time I the space. trajectory turn of their moment our difficult that Jeff, during This value continued of generate just take would would we the operations the like announced. this our which also I recently I'll them a for challenging a to solar things conditions over board on a result our industry investment to exit decision, as was and operations the in with residential touch employees concluded of more acknowledge XXXX, and for our shareholders dedication ADT. and solar

you including the Jeff, I'll financial who will take for call through results, our over to XXXX. guidance now turn

Jeffrey Likosar

adjusted you, full on Jim, fourth billion and our growth Strong $XXX company revenue EBITDA year fourth adjusted for quarter company $XXX minutes year. the $X.XX XXXX or plans. the mentioned, and for and for XXXX. margins per quarter billion Jim income losses, few year. was slight $X.XX million mentioned. total Adjusted per solar the also share offset for million share as and the generating net million the CSB EBITDA or $X.XXX and quarter and for company Thanks, our year, additional financial Jim revenue $XXX to was the as the some our performance quarter joining call thank and $X everyone, the billion comments $X.X today. share for Total take I'll for next XXXX was Total

for system improved CSB described. increased the payback Our the XX%. approximately year, Full towards revenue sizes Installation deferred unit EBITDA higher billion and contributes our segment fourth attrition higher in the up billion was by amortization strong delivered CSB trend revenue and year year, approximately and $X.XXX increase. at $X.X was full up XX.X% for X%. outright Jim million driven the by sales. X% per total year services monitoring installation quarter The grew XX%, in also and and years revenue Full balance of by RMR billion an adjusted revenue revenue $X.X X.X to $XXX record quarter driven rate. X%, revenue the larger

on resulting and investments and Overall, and we The for our the higher the addition delivered demonstrated described. pleased to Jim progress also solid results efficiency future priorities In are cost the ecosystem infrastructure revenue, with enable profitability efforts. stronger our the investing in performance. benefits also very XXXX we while CSB

the October, sales cash will net early commercial As presented approximately used to sale adjusted a last discontinued resulting debt. our contribution to billion repay is savings offset of The which as we flow date. Commercial's of closed the $X.X We XXXX free operations. through reminder, interest proceeds the disposition unit,

quarter. million of revenue million The EBITDA Solar the segment and generated loss adjusted in fourth $XX a $XX

with all EBITDA other revenue. adjusted $XXX had million parcel We impaired goodwill solar Solar's certain XXXX. and year, written previously the For was in in $XXX shutdown our on off million connection of loss assets

As announced now as in down Jim January, mentioned, we and operations winding altogether. are

for the down including driven refocused swaps, flow, higher offsetting we interest free $XXX business rate company in CSB solar As we year. by year, the and past full net interest our cash was performance adjusted cash XXXX continued expense strong This the during CSB. Total was slightly generation progress. million versus

versus [ debt In cash $X.X ratio ] last adjusted debt contributed of corporate last our net of recognition our the reduced Combined to our of We generation S&P XXXX. X.X with total our to Moody's repayments commercial both year. upgraded proceeds, to ratings thereby debt billion year. EBITDA and end at ] [ progress, X.X

by refinanced $X.X to XXXX costs borrowing B, our XX We and maturity the reducing basis points. loan also extending billion term

this no debt of XXXX from XXXX. million notes maturities until April, the due have $XXX Aside we remaining now significant

average our Substantially, generate good these in debt about and to while to a very to our all dividend recent reshaped weighted repurchase in we've substantial the We now our The commitment at his led made share and and continue capital delivering Jim effectively of to years grow shareholder in rate These returns. remarks. our invest enables structure, mentioned factors feel quarterly is we actions X.X%. cash authorization our progress business. increase ability fixed

Turning to forward guidance.

underpins disciplined for and XXXX. and balanced capital cash generation Our approach allocation plans to our

is swaps XX%. anchored RMR, and be a Our free drive we by million costs. factors which growth resilient in adjusted structure midpoint, SAC, flow, to of represents These growing financing capital-efficient growth very $XXX cash this expect well-controlled the budget including reduced At to cost $XXX million. our strong

growth guiding and EBITDA We continued adjusted CSB are also business. our core to in revenue

CSB in and of $X $X.XXX of full a $X.X billion We $X.XXX billion. in to adjusted range billion expect EBITDA a range to billion year revenue

we Additionally, positive adjusted of share to $X.XX and $X.XX. growing continued expect per earnings

is primarily driven cash solar our approximately adjusted Our and growth by CSB exit. planned SAC strong with flat growth EBITDA

commercial is cash the disposition earlier, of As approximately mentioned interest. effect the lower by offset

quarter flow historically lowest the trends XXXX to is expect first reminder, our we a XXXX. cash As and quarter, similar

costs, such incur due expenditures related other Additionally, and measurements as we these solar exit. exclude restructuring to our will

want progress to about underscore turning past enthusiasm Q&A, Before to year. I my our during the

our in sharpened focus, shareholders. better and We XXXX entered We by beyond. generation to for I'm our long-term capital and and have prospects near growth year meaningfully enhanced while capital to our excited strengthened our returning very positioned structure. this invest cash

be progress you, I everyone, and call customers, possible joining for employees, their our This morning. for stakeholders suppliers, the to of all for would not without want please communities line Q&A. this Thank dealers, continued open investors. the support thank Operator, partners, our ADT.

Operator

have the we George from Sachs. Tong Goldman And Instructions] first of [Operator question

Keen Fai Tong

wind to logistical for with fully and elaborate exit you on when exit decision business. your you the about line able business? talked the Can down solar might time steps to be the the next You

James DeVries

for Thanks just a on question. of as well. Jim. Jeff pins I'll comments sort some comments It's to George. I and ask Sure, set to then the solar of add the couple have

in announced late strategic restructuring the know, and solar all we And decision activities the January, the business then review underway. in you wind-down to As announced are exit QX.

help We're were real So want of head than comment the will marketing navigate the shut end pipeline. solar reductions jobs, We've on in XXX less costs you XXX wind-down some the installing got estate. the to line. governance the cost off than in quarter. finishing by and employees existing some the investments, And time engaged off down focused structure now selling count Jeff, new time? be sales. shut if trucks around the solar less the to And we've on wind activities and a the and leasing inventory like We're

Jeffrey Likosar

and the optimize just including focused assets disposition the especially are I seeking add sure speed but for risk we the of to jobs, we're remaining pipeline the existing economics, would Yes. activities, mitigation. also on and that

expect of the we'd with of business to the So some service in wound obligations. down have next vast months ongoing the majority couple

customers. And care we're then, to of course, take of committed our

our with information and this XX-K the more we'll afternoon. and some release So shared we press in an also, X-K later

still then going of to it be. what months. the can work make And said, things As as I there's expecting, in a we're to the to as are is to we to efficient where in be. the we mirror largely effect accounting ranges, next to also work going precisely have couple the this this through as of have rearview couple But

Keen Fai Tong

Got it. with And that XX Very year. Farm, State as relates out it mentioned this you XXXX closed helpful. then to states early you

projections You're more. X you monetization an Farm, with wins, going Can opportunity enter big provide how on with the revenue for be? the State update scale recent State your to including Farm and of efforts can base

James DeVries

That the Farm as states. We're The about earnest George, State Jim. partnership in in that. Yes, it's represents you about of sales year. we had during at in force. -- March policies shot in we of so now know, the a XX launched I'll XX% take X,XXX

very we've good So got overlap.

shared things better the be subsequent to and each than One is month is one I've that of the the prior before continues that case.

high it states. to couple offer water of Two will state And past. those George. in were have had new those who of about in 'XX. X we in DIY different with is will about Customer feel farm Farm. We're January we're offering, that's going alternatives to and think pilot great about of very a XX%, in satisfaction states, XX%, at claim be a marketed that. About State X,XXX sales a we water-led of well effectively two working a upsell, systems the customers be states an I include so the X/X of

to exist So couple where continue to in we of the penetrate we're XX test a ideas and new states excited already.

Operator

Our Morgan comes Toni Kaplan Stanley. next from question from

Toni Kaplan

technology virtually the that in received of see Should closing Thank and modernizing from margins additional. the tickets this to Or you. Jim, from you to CRM the you made any the a size of these of reinvest efficiencies system, through plan service through we about XX% efficiencies number comments similar way of technology? virtual flow to future? and efficiencies is the the some some

James DeVries

pretty installation handful high we're add-ons comment I Yes. substantial our the made to in that existing we're of a opportunities about super would I even service investments really beyond a support Toni. question, we're Great watermark would digital, in expanding that the had investment in see say doing are work the technology for -- AI, that customers. virtual We've virtual, there say XXXX. those and will excited you about. that

in spend, Much related XXXX of improvement Anything start Jeff? we'll beyond. margin IT and the on also 'XX beyond. see see is improvement and to else, to we'll in the the baked And 'XX less IT virtual into The expense guide.

Jeffrey Likosar

Yes. definitely objective you -- part the efficiency, add and that asked would here. specifically of I And is about

customers to in the and of that up show also of and enhanced Some growth in benefits, attractive are though, features capabilities different segments enhanced will service attrition. therefore,

grow and efficiency is RMR. it continuing of base and to customers of is some of So service and some it our

Toni Kaplan

know have last then answer piloting mentioned about then you know a I And the to that in is, big That's launched DIY. State DIY I give Maybe pilots you about with could you DIY to forward? how I Farm. strategy you ask And great. and DIY your wanted number it's on us just growing an ago. years business how around fast update going it the of

James DeVries

lens It's forward. particularly going us. I the but lot smallish for look lifetime where it pools Toni, are but interesting at us think not growth to be value, still you through customer I for will of an profit when The It's growth opportunity Yes. of a becomes there's think compared DIY DIY us, for to the -- DIFM, here.

to the just a DIY business. to lean related small XXXX, business. in this Farm. assertively State have lean into you inclusive -- more that small We're So that's and going pilots business of going We're we to mentioned

Jeffrey Likosar

available self-setup it's as the I Toni, to roll of will new and the Jeff, app, hardware one is install. for professional And described, that be the products thing either would add for out same we or ecosystem Jim

respects, broader we're choose a for well. professional to customers, our of to focused here to themselves install avail a blur that to customers will little some those to We'd will of and is attracted set bit install serve services distinction in of of and whom themselves. having it So many much what choose are love the offerings on even as

Operator

RBC. comes Ashish question next Your from Sabadra from

Ashish Sabadra

I the wanted focus partnership. Google on more to

about well? existing your is terms in talked And You how particularly as where you base but helped like much the in it's IRU years. as talk penetration they seeing also of double uplift RMR side the about upgrade? Can customers, the the X the opportunity how you're penetration among customer for there, on the new just that

James DeVries

the question. the customer Ashish. to Google, testing with Both at on I may new together have strong organizations last for Thanks benefits products experience. of chain had it's revenue in installation supply XX-plus of enjoying The the to to partnership, have our to increased Yes. install. think quality of prior customers mentioned XX% well We're going the work the appeal. from -- quarter, time Google customer We're year devices. the this And continue everything I

that XXXX, is XX%. figure in And

been a invest our important because X-year the devices. that's who better is XX-plus about on retention retain XX% devices of SAC than and XX installation more So rates customers very efficiency influence with better with than customers our for those at time also improving fewer

it's So comments product higher products positive aesthetics. who Google well. even more going dependability, functionality, Customers have satisfaction, products. on a Google have

the going Google partnership. So we're really It's continuing about to feel well. good

Operator

next Manav question from from Patnaik have now the Barclays. We

John Ronan Kennedy

we continued KPIs, how the the talk in to you of SAC level. on whether from how up or the with expect think about further remind please, could the the you revenue Kennedy framing should expect timing Farm see looking penetration to regards on opportunities. us on Farm for impact may, a partnership? Ronan impact of is we the would follow then State see This I Can And about just to efficiencies Manav. questions on RPU when you should it's broadly, to material granular higher If State

James DeVries

Sure. it. Thanks question. Jeff team on with for tag I'll the

it's State of the bit the are a we will In -- while more with lighter. RMR come economics, little than traditional Farm, a maybe as the even same, our IRRs in the traction approximately and terms model model higher, get DIFM different

a for zone $XX. RMR of in the Farm average customer Our is State

comes little very expense And very the cost customer little acquire that also there's because to much and expense sales lower. marketing in

it unit will be a improving SAC to So Anything RMRs lighter. effect Jeff? per basis, of have efficiency but the on will add,

Jeffrey Likosar

I of the our customers talked as the and to Economics, true to that how we would even long disaggregation more which for or we've bundles to customer of a does about some it is broaden further cost model, optimize the slightly more the that's that we serving its earn as and available to stay forward say move previously, earlier alluding -- do overall seeks our time. model our was characteristics with remarks, combination combinations acquire I to Jim's and customer to is that or overall. having of how much leaning us customer, over

with of composition but So the Jim not segments State as some of other Farm, variables. high different inconsistent has generates describing, we're those IRR, was targeting the

John Ronan Kennedy

second And question, for then Okay. my please.

periodically opportunities. had bulk strategic said to I the acquisition continue think acquisition, Following will you consider portfolio you

and us for shareholder with increase et returns allocation? frame significantly dividend you You've a capital cetera. just of help buybacks, priorities approach Can the the enhanced the significant delevering,

James DeVries

returns-based opportunistic. Ronan. are categories. there and bet say you policy allocation And I describe X capital Yes, is I'd our

just essentially outlined. You

The IRRs XXs. SAC, in first is organic the growth,

purchases our or bulk in account core. Secondly, M&A

debt is us. stock to buyback, paying lastly, return down still capital then shareholders, of for Thirdly, priority a and dividends,

be leverage our commitment year-end. by at lower holding to Xx We're to or

towards analysis. point the critical priorities. return, apply mindset the returns-based with we'll and we'll X the those shareholder the math, eye maximizing we'll is a against And capital do So do

Operator

would call any remarks. I the for like Jim now back turn to over to DeVries final

James DeVries

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

appreciation the reshaped improved year. and to structure. I'd an XXXX. capital results and portfolio we're invested our to As like in for our and our meaningfully extend my and catalyst quarter business, strong delivered solid the growth, ADT our to you ADT a good employees dealer future, heard, looking We've forward for for core momentum got partners outstanding great in

Our results are a direct efforts. reflection of your

So have thanks great and day. everybody, a again,

Operator

confirm joining. for conclude Earnings the can Conference all you Fourth I that does XXXX Thank Call. Quarter ADT

and day. lines, may You enjoy of your disconnect the now please your rest

ADT (ADT) 28 Feb 242023 Q4 Earnings call transcript