ADT - Earnings call transcript Q1 2024

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Operator

Good morning. Thank you for attending the ADT First Quarter 2024 Earnings Conference Call. My name is Victoria, and I'll be your moderator today. [Operator Instructions] I would now like to pass the conference over to your host, Elizabeth Landers, Senior Director, Investor Relations. Thank you.

Elizabeth. proceed, may You

Elizabeth Landers

good discuss We results. ADT's and today's you call to first morning, operator, appreciate everyone. joining Thanks, quarter XXXX

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

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

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

forward-looking expectations results Today's are statements could materially. to our that 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 measures directly those comparable Relations the also along Investor call. The in to measures reconciliation measures most financial ADT with a be earnings discuss presentation GAAP found website. our on the can on non-GAAP

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

James DeVries

segment with today financially thank strong everyone and to shortly. a CSB and had will you of describe release driving adjusted Good EBITDA morning which this ADT positive flow, year all ADT's for performance to line joining to first us discuss morning. results free start improved Jeff growth, quarter very the cash top good

believe be the and the thesis. few excited positioning a opportunities ahead, compelling comments lie want about to I investment we why about a company First, of what our remain share that to I

our consumer-oriented including footprint the industry serves leader a and model set business brand and growing home unique with and core our business security and is market, clear streamlined scale. ADT trusted of and national Our assets, focusing a large smart on

and stable the base. continuing to reduce our return to flows we to while and model service cash from are flywheel-like RMR obligations use a growing increasingly RMR where have shareholders base debt the predictable our We and able in to cash invest our also

That extraordinary segments we've expanded U.S. combination deliver commitments blue-chip penetrate our about to and even professionals, related and more partners capabilities the of stakeholders. enhanced our customer structure confident to never capital further our households. flexibility growth is of more our felt further by concierge-like for all on and And overall

methodically and well rolling During customer XXXX, new offerings as out ecosystem on experiences our infrastructure. back-office related focus of remains our as

professionally launched ADT+ year. customers of we in for know, customers self-setup last following December select new app our installed platform our last markets you earlier rollout As ADT+ to the

we to more throughout capabilities XXXX differentiated our additional as tailored expanding in are to We future new enable develop and years, the are especially will cases confident platform use unique customers' our needs. customers and geographies in

We to later our on these will plan make platform available this the of first year.

us camera continues new platform our analytics. area and Google enabled leverage around particularly video ADT's fast-growing the partnership, has expand to already our which of Nest offerings to

illustrates our and evolution Farm a continued business catalyst partnership for innovation. remains Our and State the also

proactive our with We continue We months. to risk the remain optimistic XX our growth prevention. new to the to begin remain benefit and and customers' existing in in combined in coming need more see drive detection in growth states month-on-month states Farm four on pilots opportunity to significant track State for

to digital our our best-in-class offerings unlock full new power the further advancement on service. with scaling greater provide IT while ADT+ of our and with journey refreshed the ecosystem efficiency personalized more infrastructure, including platform, providing We hardware will of

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

by Our visits. a capabilities, program in-person and simultaneously has and in our been our to value the carbon subscriber base virtual costs us efficiency, Customers also while technology increasingly virtual of better convenience reducing lowering speed traditional service of our which contributes driver assistance service footprint. more our of to utilizing key allowing already video place our

retention. While using AI still looking this we area. churn more implementation, in propensity at a anticipate to as broadly care. such across come areas Obviously, early the And to more our modeling efficiencies help significant lot improve in to customer leverage organization us and deflection call AI-led we're in customer there's ways

Solar announced selling planned. and we're remains discontinue in inventory we is sales to as operations, to all made and quarter. the continues ceased As we've progressing the as January, marketing to residential pipeline. We've which our operations expect decline, and activities, end headcount The branches, our substantially we of exit decision of installing the second by what in field closing planned all Solar

of were a offering have million to a to share Apollo's authorization even I public our proposition. value shares more we XX $XXX the of secondary common to March. XX pleased view to for investors And stock of of their brief bolster repurchase we float time, over high-quality further taking Finally, attract of positive ADT. shares just of repurchased regarding a We in ownership million completion few We XX%. as common our liquidity. period expect this Overall, million larger stock comments using offering million approximately concurrently with the below executed the $XX

will safe, customers offerings, In innovative solutions our and with team on customers' better deliver immediate our delivering a emphasis an closing, ADT's our on experience as customer to priority meet in improve efforts focus our premium on service enabling we XXXX. sustainable Collectively, faster for commitments is and experience. and we safety remain plan core and our these our confident for unrivaled smart remains The to needs. while to insight efficiency also expect

the great ADT. call this partner you for a the a officially tremendous to many seat. morning he's to know, turn in leader of with to working serving he'll call to CFO be thrilled CFO executive to I'd me. has Likosar. this and Jeff And had return been been I'm interim as like over December, Jeff now capacity on the as our Jeff again. Jeff since now

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

Jeffrey Likosar

for and today. our for Thanks, year's share some kind Jim, income comments was per our $X.XX call rest of share, words, quarter last to financial highlight well the for million everyone, that take joining above adjusted additional $X.XX. minutes first I'll and next $XXX quarter outlook on or thank the is first few the our net performance XXXX. A total company you,

which very last of million $XXX adjusted Additionally, free flow, was strong year. delivered including almost rate ahead swaps interest we cash

X% the with We mainly flat $X.X $XXX and generated higher million focus X%, where gross Monitoring our segment, As revenue our revenue generally $XX.X on of a of up I'll was SAC. RMR new result approximately was Solar of of XXX,XXX our decision which RMR CSB additions by grew exit X%. billion business, services driven to also customer approximately our level balance, consistent additions. million year-over-year. was This and

including acquisition a Importantly, macro spending, disciplined environment, in especially relocations. fewer we'll remain subscriber challenging in

revenue driven sales. by deferred revenue and increased by Installation higher amortization XX%, higher outright

described system equipment nearly payback to revenue we've unit efficient sales Installation we ownership $X,XXX. growth revenue strong sizes transfer we more X.X of often towards The as As at outright customers. larger per our years. trend to remained previously, contributed continued our expect

correlated rate. larger systems retention, supporting are Additionally, customer our strong with XX.X% attrition

self-setup on reflects does of RMR attrition offset or include relocating trailing customers professionally installed their service. rate attrition XX metric As a the It systems. not our cancellations the customers, of reminder, months

was in EBITDA quarter, adjusted year. X% last an $XXX CSB versus million the increase

improvements. focused Our cost we increased as approximately remain by margin and on rate XXX efficiency points basis

the investments fund to and priorities in continue We Jim infrastructure the described. ecosystem

of some We coincide to modestly advertising with we benefited also from timing spending, new rollout. which platform of our the deferred

plans This interest rate Adjusted timing swaps last and on benefits to cash contributed this partially CSB payroll flow favorable growth $XX of our cash flow which sale including in prior interest These cash business, the quarter. significant a solid performance. our profitability the contributed Lower by $XXX contributor of items positive were million was some mentioned flow, year. million the offset to all I earlier. year reduced debt, free to Commercial versus compared

due our with $XXX significant repaid XXXX remaining leaving the we notes, maturities During debt million April, no until XXXX. on us

associated our points. reducing basis $X.X We a billion the XX by term cost repricing also of borrowing completed loan B,

Our debt adjusted X.Xx EBITDA. remains at

million rate of average repurchase remaining described, all authorization. Jim to have substantially we a million rate at share in interest $XXX the weighted swaps, fixed X.X%. Due $XX our Following debt is

are We capital cash in our overall in capital allocation. generation structure, very resulting and confident capability, flexibility liquidity

planned ceased. Jim As all wind and installation mentioned, is our having sales activity progressing down new Solar as with

quarter was revenue in $XX $XX EBITDA of loss segment the with an million. million Solar adjusted

expenditures in the of We and which our be We first included not incurred charges quarter. expect we to cash total are million or of ranges adjusted metrics, $XX million cash EBITDA costs, these within in February. provided exit $XX the in

shared of in look the we we anchored are rest growth. affirming we February, As we which strong on XXXX, to the cash guidance flow

our adjusted due the for CSB exit, full segment. for reminder, our is a Solar to and As EBITDA revenue year guidance

in to earlier, second In the mentioned expect approximately offsets. the our expect towards our from general, reflect guided cash the first. XXXX start pleased lower longer-term exception we and versus quarter expect quarter very Overall, that we interest objectives. flat first in we As relatively to timing items are the to A progress is quarter. second million the $XX quarter some our to year noteworthy some and first we with in the be benefited the second our quarter and metrics compared

Before and questions, investors. to our suppliers, turning customers, our to communities I'd thank our dealers, employees, like partners, our

will your contributions not Our be without possible successes support. and

for line everyone, you, joining please open today. questions. to Operator, the call the Thank

Operator

first Our Sachs. with Instructions] George line the Tong [Operator comes question from of Goldman

Keen Fai Tong

be impact more the out of it Is traction talk is far you Is roll which to rollout. kind be about ADT+ to to going continuing be and it seen Can that to retention? to you've unit? You're to benefits Is so it out? anticipate going roll what Just idea see. financial around with the platform, some going you financial ARPU? great

James DeVries

been initial is the hardware George, What software features be platform that We're at super date. we've The excited both ADT+ parity the really on will about question. about ADT+. side rollouts. with what the rollout excited the most Thanks, in to available for for and we're subsequent installing is with

upside markets upside for going We're really is -- lift we most be in a couple expanding in the in of have coming XXXX the we months. limited. in that see to us Any the evident now. platform for the is ADT+ that out us rolled of We're XXXX. fairly the But nationally in

Jeffrey Likosar

add of the purchase, efficient some a acquisition question, may of of ways shift we've channels. to it's choose it's described respect offer somewhat other changes your the that with above. to The to customers with George, more all more that a rollout platform coincide the will Jeff. I'd towards structure, different of

customers, better we attractive it lower efficiency to enables So now think of over that Jim's offerings to I lead as SAC, expect the more more time, economics, But more things. customers. foundation would point, for make our to those those that customers it would serving would all of to

Keen Fai Tong

progress some additional with Got helpful what currently State Can it. partnership in the partnership, details is scale provide terms you context. and forward to four generation then the selling much additional That's of How been push like? the in? and you're XX states revenue states. states And client penetration that with on rollouts that with Farm the of you're in has feedback continuing

James DeVries

absolutely. Yes,

George, XXXX. under So incredibly continues of satisfaction In was high. we're did the of sales Customer March know, be We in just sales. 'XX, you launch, X,XXX 'XX. to as X,XXX QX

the be continues in be Farm DIY we're in the installs things pretty an which have had And terms who screen, in a offering quarter, water than to of then our testing think in essentially will we two to states, is radar customer water I that past. Every detection-led month consistent at to the be prior. on State our the pilot, better we're then claims expectations. And include for XX% and SAT. upsell, upcoming exploring with month June. marketed a were of customers X/X going

And little on see liked net, to further in DIY But and companies closely budget. continue We penetration results bit internal watching would to the QX. forward in we go things aligned So like a vision. look Things well. consistent the our the our They were quarter. states our faster. the end XX existing be to we'll always are with of at going pilot

Operator

from of RBC. next question The with Ashish comes the line Sabadra

David Paige Papadogonas

Paige on Ashish. is David This for

CFO It's on congratulations title great see. the official to role. Jeff, First,

Looking working forward you. with to

regard? anything or terms guess, of, done the portfolio, needs standpoint guys rightsizing other actions In anything attractive that's now? in M&A I or or you to that is terms that's there of are done more in that an corporate just to left Or color add be

James DeVries

add. bulk to plentiful say, for -- area Jeff that our call fairly I Thanks are Yes. have comments, -- an question, pure If couple attractive at M&A an that Maybe we'll And really jump any would be to don't those for The look perspective, we acquisition an officially to opportunities. a I returns. us. continue and in of in They're do be know where the if David. deploy but M&A, we'd yields M&A, would core capital it'd opportunity business. it we from

any I material wind-down Solar for mode, future of sold going see be divesting and in terms in And we anything with divestiture, us don't that would forward. Commercial

Jeffrey Likosar

And X, rounding One so, our I specific that good our made for us. we generation. we with down or structure bit leverage progress it question, little getting -- reduced in a flexibility just cash results general year add your more would the thing just feel that's to past maybe but about of on to where so having than to all our the rounds debt more capital instead all X progress over

So opportunistically. we'll certainly look at things

thing as across To we organic investments come emphasize about but we'll flexibility no I growth, we now But have. adjustments make return of shareholders opportunities. in company, point, and go Jim's the longer-term specific today, would just and talk to capital to we as the balancing

Operator

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

John Ronan Kennedy

This on is Manav. for Ronan Kennedy

almost higher to I GDP to us macro you inflation news or challenged. just given expected. morning, I years, than some had seeing, give further referred lower as the think insight think especially this release what you GDP Could the you're in lowest X as

days macro, et specifically, the cetera, customer of the more it, ADT the you the customer? -- characterize resiliency, trends and delinquency, on you're seeing please? And customer would XX see you perhaps past strength any how the So there as due, are in

James DeVries

Yes. make comments. Thanks for question. the a I'll couple of

some Jeff share things think well. to as I has

great macro position pressure employee X-year I We're for challenge wages the inflationary manage. turnover. environment, in We've supply Labor in from shape. a to think a chain at most perspective. a benefit in the we're managed of is low

relocations. area that some challenges gross from pressure gross adds for that's real adds. presents a very And fewer is One some us, headwinds, and puts on perspective

my is a impact But think least on macro Of the retention I front. course, business. terms the from perspective, pronounced the at on positive most probably that's in relocation of

Jeffrey Likosar

I from that And the context, it's Yes. we not add different entering would materially year. what in expected

not to some much environment an noted we and be expected of those flat, we conditions. goes deploying SAC that guidance, as year of SAC challenging our full approximately spending with Our where because we're

focus. customers in I'd will economic we to our channels in of emphasize original that specifically different as balance SAC will to guidance laid first on cash as remain that opportunities returns, acquiring objectives, disciplined seeking but quarter. in be did the deploying and we're all our in generate always strong places we of generating we're And and we focused out methods and across that and in continue our

John Ronan Kennedy

just I trending? are XX And the days confirm discontinuations then how can -- it. service of Got or past service the

James DeVries

Yes.

Ronan, picture, broader a you give of I'll attrition -- the So overall.

from year-end quarter to XX.X, So we at end. XX.X March ticked up

at We will expect end April XX.

Year-over-year, a worse we're just for voluntary in relocation flat bit. a nonpay lost April, much on and little down for better much, competition. essentially coming and So

nonpay past a from due perspective, been. roughly from where and we're perspective flat a we've to So

John Ronan Kennedy

think timing of and please? operations, of kind deflection opportunities, the smart thing, contextualize Appreciate also modeling, that advanced it. and comments could of it monitoring and timing impact, ask assistance, the terms whether to I impact assessment the have Can the tech, platform. the additional virtual call may, more more know the of of and the and And propensity is I one type center just alarms. that tech if utilization response Google churn I I you of you Google of on system the the call the of in the from

James DeVries

Yes.

with yes, we've excited couldn't So couldn't our Nest excited it. beyond working hardware Google -- and more -- super about expanded be Cloud the with Google and be essentially partnership excited about into

to customer some this deploying may year. drive for first care, late The be in will as that two you AI deflection. We call mentioned, impact areas, see

to most in of starts become think a I XXXX. it reality

the early Ronan, propensity We're be next generally upside it I'd year this late the the modeling, there's them, think, have But delivered putting if an together. meaningful real fruits the for will on of days with Both say us. And of thing. plan in year. impact, I churn same modeling,

Operator

with next of from [Operator Christiansen question Instructions] Our comes Peter Citi. line the

Peter Christiansen

to welcome Jeff, you Great back the CFO to seat. have back.

Jeffrey Likosar

Thank you.

Peter Christiansen

get growth-wise, you to Jeff, I'm you to and quickly when the size, compare, pretty those how accelerate a to larger had does just market in product the newer rest versus thinking states, curious, you as markets? able motions, Just relates are the of sales sense even cross-sells some -- some Farm I'm those right out, just and in to how go testing it trying those markets guess, of State good your about fit you would of adapt that learnings, curious success faster? partnership, and that in your get active to after rolled have you're you've states that. I

James DeVries

for and the rather the We're Pete. XX so to the and as And think, let's size XX. the execute beyond in in a our decided of force, to it's represents was, Absolutely, TAM, decision. those we, continue State expanding on XX additional policies XX% And that And I in given massive get question. then begin with what The so than learnings, the we these states, made expand to together Farm about go-to-market, better already. XX states -- fine-tune states -- grow XX% states thanks State Farm TAM. of the Yes. we states in

to going in that, in single June testing be I in to frame. was exception Georgia. we're The where earlier and time was exception single the Washington, mentioned The Georgia that DIY

Peter Christiansen

those have returns of rate of the to do And in the the of returns quarters, on you are general, then in I'm about the in terms Jeff, those of with there capital, particularly for longer, ones coincidentally, curious think you're recent that how rising thinking added enhance pricing cost portfolios, higher helpful. over you've and what room And have the some seeing time? you some of you, returns? you That's just portfolio

Jeffrey Likosar

maybe speaks Generally, overall just strong deploy is Yes. Jim to our I'll and objective capital, model, back generate of flywheel returns. remind, step

profitability the that generate use size is amount reducing of we spending, Our by the can the returns increasing required, really of RMR And we're of the and things then by to biggest about are and those the working of single life. subscriber acquisition always customer, all recent duration the the price, performing capital your point importantly, of those well. customer and so extending customers SAC your comes optimize with of and cohorts

the cost, example, upfront system some retention characteristics. but customer both with SAC investment, reducing dynamics correlation for more of the noted, I sizes, the upfront the benefit larger having of also

feel we to continue And with importantly, the less that good really new out and we cash we've with we'll progress. And be out, talked make believe efficiency case. about more be of customers So acquire the to about the able then rolling ecosystem pocket. platform that to upfront

about all by this in really the new returns environment feel assisted we we So our generate coming. ability to good platform have work

Operator

are Jim CEO, like conference questions the to back no would DeVries, to additional closing for I There now remarks. time. this at waiting pass

James DeVries

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

a we've solid employees, good continues to heard, looking our extend ADT structure the in the you forward partners. capital my to strengthened, appreciation business results CSB momentum XXXX. I'd strong like delivered our and business, we ADT and continue got in future, to invest be our dealer core employees, to to for As we're

direct their reflection are results Our efforts. a of

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

Operator

today's participation for day. and That the of your rest enjoy your Thank concludes call. you

ADT (ADT) 25 Apr 242024 Q1 Earnings call transcript