ADT - Earnings call transcript Q2 2024

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Operator

Thank you for standing by. I'd now like to welcome everyone to the ADT Second Quarter 2024 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Elizabeth Landers. Please go ahead.

Elizabeth Landers

Thank you, operator, and good morning, everyone. today's discuss joining XXXX Second you Results. appreciate call ADT's to Quarter We

our call are Chairman, questions. Earlier slide Likosar; financial be Jim on as release join will Speaking today's and prepared the ADT's available we Business will our These website remarks results. issued Financial us press following Chief take at DeVries; Chief our President morning, Officer, investor.adt.com. presentation Thorsen, Jeff analysts on of Wayne we Officer, materials also this and CEO, and a

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

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

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

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

James DeVries

results. Good morning, quarter to and second thank you ADT's to everyone today for joining discuss us

and current the a full with guidance macroeconomic the this higher midpoint passed traditional subscribers. pleased the first and performance half, for financial of the to relocations, year, rates year includes new we've which quarter particularly deliver catalyst well outlined As I overall interest is in ADT we backdrop, fewer our am February. against our positioned

also the flows And up we model. focused again strong and more very Jeff We would business X% while about future. but and cash profitability delivered prior outlook to flexibility remaining a pivotal continued adjusted in moment importantly, investments for financials take the revenue year grow balancing free I on will business years. ADT's at ADT a of with in history. month, like point about up prior XX.X% milestone, our share million, This year at details to year. XX% quarter payback to year attrition celebrating will resilience the revenue the comments provide and testament a an highlight $XXX a revenue in few like progress. I'd ADT's to our performance for X.X durability, was a the versus few This first moments, to is strategic full and from our XXXth business. extraordinary Gross be

our iconic ADT's and We just customers. been self-setup success saying I'm our ADT+ are professionally industry-leading adapt few and The and among team. to installed platform, a founded of in share of rollout story which ADT year. enduring company companies portion future several professionals next-generation as focused reasons thank on remain We this key ecosystem for pleased to new available creating more are and our customers ADT. A country for built opportunity the have next our our fueled the our a our I component follows driven a want I today. and and in people thriving goes dedicated we history, business, chapters product generations. choose our exceptional into to write even ability XXXXs teams by lead that This to and been about innovation key growing to our experience the innovate. It stay has that ready across come, have could without current is we over to still proprietary humbled great now now this and not and of residential more thoughtful have with and to chapters excited pivotal to for be company's to the is the the driven company. Today, at last in moment by investing chapter ADT the of this stand customers progress the

app, flexibility includes offers hardware advantages, of new a ADT+ Our and including configurability. enhanced and refreshed number platform a installation

it stronger with as ecosystem. Importantly, smart such Google's home and devices also Nest offers additional integrations

Our needs. ADT+ build the we experiences which future platform customers' tailored our foundation will unique is on innovate to to individual

will this or builds delivery third our ADT+ package pleased customers homes, recently have Yale our quarter. Facilitating specific innovative these as Neighbor, this partnership customers both new Lock either for we provide announce first such available secure and we're have experiences The what individuals also Trusted to leveraging an on schedule events, convenience offering water experience, familiar grant defined the a a and trusted anticipate faces Nest's become on leaks. to and feature for which or access to to customers we of their to offering will innovative branded, entered relationship. existing by be with seamlessly security temporary secure We Google solution, this during our

We terms. ADT+ options choices, I we capabilities will and and flexibility the will customers their more proprietary want to with also offers, to share disaggregated more this continue more flexibility to features our the and contracting and over forward with and and offering enjoy installation time to to enhanced rollout, buying ecosystem. we're look that including payment add owned concurrent platform our

none for precise first responders. classify share to to a alarm which us we to nationwide. capabilities, alarms on leads our live information severity, reduction second Additionally, predicted and scoring which are alarms with again, us alarm past with commitment allows progress years, for make our customers to false This to technology to in enables in now our a based the continue XXX more safety, hallmark importantly,

to and operations. business several focused their I've we on expanded Google call with artificial technology include our have efforts exploring shared previously, center as our relationship early Additionally, currently platform opportunities across cloud intelligence are

alternative basis advancing states. new quarter. in We unit focused self-setup up also partnership, a We're in on were second and select State the on our remain focused also RMR installation Farm both a on customer X%

we've obviously the our about this where and with of I'm turn and this the including third commitments course that recent overall more state incredibly team offering products ADT made just team partners. with the progress a proud been Georgia, achievements we've across well state on over another our new of to variety want I'll and excited first that, foundation I'm quarter. Counts, rolled this customers for closing, the XXX-year promise, excited expected very innovative of history. the has out customers our in the our developing in company's Olympics. In refreshed during month, The services we introduced our Second advertising progress, new our media and our the When recently Every that There. remains priority accomplishments and the highlight to for of call brand a outlets, our of future. Supporting We've this to launch deliver over our including shareholders, Always for I top our the provides even campaign, opportunities new for as ahead. And Jeff. the as lie We're placements

Jeffrey Likosar

and thank call. you, Jim, our for joining everyone, Thanks,

our strong mentioned, Jim our quarter, objectives, our year second As half, are very continued we today. we and full progress year first guidance full reaffirming the delivering with consistent during a

will Results we mentioned, Solar our with Commercial summarizing along as a performance, we comments operations. core CSB were through the My in therefore year half. with divested results, want substantially are -- on Elizabeth the remains focus which I Before start our down will segment wound mainly Solar, have business. I cash reflected operations. that, reiterate our flow first to our highlight last discontinued

have billion compared $XXX down expenditures X%. revenue somewhat was or retention share. gross which base. average including RMR million, additions, XX% higher rate reduction. and We prior capital ] profitability was up XX% to than items income management, As including up customer cash generated from we to free driven up swaps driven our record for have RMR. $XXX $X.XX, of pricing. generated compared generated is Monitoring and the was the new year. we in X%, interest delivered higher a $XXX basis, On On Total up basis, by was was new which earnings services This monthly flow, growth mentioned, $XXX up we our a quarter, share subscriber and XXX,XXX Jim as last the more customer year-to-date This contributed. Adjusted for X%, interest last debt million very also driven recurring Ending of the our year. with last of also from revenue, million, environment. year. of by Working half timing strong our we some SAC strong cash at revenue by is $X.XX adding million, disciplined was year-to-date per overall first or adjusted XX% $X.X quarter net than due RMR, year $XX.X lower million remain a [ to current per

also to provide fewer new consumer While customer demand for lead some they for tailwind retention. relocations less generally systems,

Our benefit and cancellations. Installation overall our to quarter, challenges higher payment driven somewhat approximately continued higher revenue delivering superior delinquencies attrition revenue by by offsetting deferred was service by and amortization. and increased driven some in related the this reflecting XX.X%, X% flat, commitment

million, expect installation the described was grow to EBITDA to down as we've to evolve model our for revenue Adjusted $XXX transfer ownership As previously, we quarter customers. our we X%. equipment

seeking $XX current net Our included quarter will this for indemnification settlement million that a these unrelated an year's effect Otherwise, performance the favorable the The mentioned we results included X% EBITDA I year, legal of in is revenue while of approximately the key are settlement. higher is unfavorable note our legal year earlier. a I prior or settlement. year-over-year. driver items

remain the dynamics field loss described continue with credit focused I mentioned, supporting Offsetting benefited and cost allowances product initiatives technology the and planned we include call investments our on also strong we from and Jim Additionally, his delinquencies center in payment with operating performance. remarks. profitability and consistent

During to repurchases. our repaid share retire the notes on $XX the drawn $XXX shareholders to ] dividends. returned our our million have $XXX million April $XX we we And [ year-to-date, and via million, returned the million XXXX revolving facility. We market final quarter, including

costs retire And Loan reducing we basis the We of by our points. our Loan to Term Term completed borrowing upsized our Loan Term A. XX also B, repricing associated B

we $X.X net $X the set of overall pleased We of this maturities average is billion milestone debt no with down a weighted achieving this EBITDA year. cost X.X%. I'm at that for especially from net significant debt of have year. is approximately billion until debt-to-adjusted approximately our time ratio last now debt Xx, Our XXXX,

structure, approximately we recent attractive capability $XXX We our allocation. overall prices. We capital share confident flexibility repurchases is capital stock in and remaining very continue in million generation remain have resulting our and to authorization think cash very the liquidity, at in

I settlement the adjusted business that third to to reflect guidance we first to we like Solar the than operation. Due XXXX, a payments discontinued second we have with, EBITDA we look the of described, lower beginning second, in as EPS the we of flow the cash We'll our the the rest year. in to look adjusted mainly the and if This a cash to mainly free the are at and quarter legal we guidance first As little adjusted shared expect note quarter reiterating updated quarters quarter our than not the more fourth quarter. than and interest expect third. line lower third is first because much are the be presented

in to higher purchase. third Additionally, spending bulk a account potential we SAC some due anticipate quarter the

remain want and We building new factors execution the line to all for to strong pleased very and partners you please for open year writing ranges we the chapters first to objectives Jim And today. Operator, XXXX half legacy, call XXX-year thank our excited questions. our position are to have thank and focused our I year's to success. our contributions we achieve considered our this for full on these with disciplined to joining in be teams, described. everyone, beyond. Overall, again, the our and their including on

Operator

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

Keen Fai Tong

subscriber helps taking it also acquisition current come is with which be SAC cash in SAC investment -- drive the need effect investments? more preserve what good, growth? your aggressive mentioned to priorities to disciplined of markers do approach you're flow You to How impacting with externally to it does but And respect environment, adds. which spend a you cost with you of versus balance would the gross the see

James DeVries

pressure Thanks Jim. relocations. It's for business And some from fewer perspective. our housing The in have the organic question, share I'll some -- George. we so

higher. even affiliates We direct up things and marketing standards frankly, DIY costs, also bit like for little a are and credit tightened mail in

doesn't And meet about disciplined our chase gunpowder standards, going and mentioned, growth. it bulk we're a growth QX. not We're so keeping dry we have return very some for that Jeff opportunity when been to in our potential something

last handful as allocation We've deals. opportunity in organic. a both buy dealer of versus most bulk versus As We years. it you know, of of there's us ample view done to dynamic, for capital the that sort

a some December. dry our and acquired the using code anticipate the from of gunpowder QX. the got we seller dealer that returns we great in bulk It's same some what SAC, of bulk out of characteristics so It's ZIP we business. for from in that actually of that And last for gates have the

Jeffrey Likosar

George, add George, just it's would to sorry, I -- Jeff.

reminder that acquire on by the is that profitability much always focused we're customer? which the cost customer these, does of a driven long with we're to do customer, do stay the Just how be what we to expect expect us. the to we as evaluating And how it IRR,

beginning the also basis always highlight was may tracking between on year-to-date flat. vary, to that it's mix would we largest basis, range. objective. at that approximately of in of guidance, the quarter. right SAC but factors the those said year we our pursuit be year, our And Last a So in in SAC year, I full quarter that we're expected Fourth on a --

So through of work as you're with consistent we're the that we remains way it. Jim's the second at the looking comments, year, half

Keen Fai Tong

talk with And revenue can then to offerings. State partnership, progressing, that's milestones bit you about it. and expectations how the little respect incremental joint a That's Got for helpful. from contributions Farm

James DeVries

Sure.

give progress intact. essentially the made to vision We, restoration The first on from prevention I'll half. State homeowners the losses. partnership. perspective operating So Farm together, remains prediction to include avoid and business to transform want good some We in purely the you

slower hoped. had than little have we been a areas Some

a have of accomplished. regulatory deal and work compliance that's great We

both George, I call, think in in and install revenue sales XX basis, we're I RMR X,XXX had X,XXX We're at unit during the states. year-to-date. sales last mentioned a up We per X% XXXX. On are sequentially. unit

high we economics, upsell. X/X well. that of improving it's installs as have of Customer about So very include satisfaction terms an and the in the is

anticipate making tracking, a DIY later this addition in DIY in currently we're in progress. I'll alternative launch that then year a So We moving we We're to at we're one looking testing Washington last that, hope as thing in Georgia. test and mention along, for you. out rolling to well. QX, water-specific

Operator

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

Ashish Sabadra

to as on self-install have follow congrats and in you So installers ADT+ ] launch. customers install, the [ feedback from on to the wanted for side, but of there I but from of might and in also efficiencies professional particularly up initial that what received terms just also you color see wanted experience, the go in the feedback any -- installation or on from terms any front? ADT+,

James DeVries

Wayne, question, take the for Thanks you want Ashish. to do this one?

Wayne Thorsen

Ashish. Thanks out national roll the the Thanks, question. just June. for completed We Yes. in

all now it's available So in regions.

it we're our use quality spring, installers initially, initial the is seeing other out, thrilled we since So And -- back. about has an that. excited late we're that around score we we're rolling offerings. what seeing are quality to our The incredibly go we're example, one with do as often here a as how lot have surpassed

also month-over-month installation both be was in as can to well gains, really efficiency DIY is this methodology a efficient because be about designed equipment we're We're pro a which as really, fashion. So that. installed seeing happy the

So with we're pleased it. really

Ashish Sabadra

very helpful That's color.

any I quarter, other be cognizant that there Just the And the possible year, rest then for excluding get takes the the would if we full puts just better it to are EBITDA the need to for understand wanted the for of settlement? legal just to year. and what be of was

James DeVries

then for to comment Ashish, share will I'll you. more lawsuit, the have some Jeff on and color

of our EBITDA The quarter a infringement the mentioned, patent terms by negatively are impacted settlement that was this confidential. case. As was It Jeff settlement.

that to were the detail. is supplier the with do supplier point Virtually unwilling of has resolved. products completely by us, is suppliers. the I impacted indemnify to all can that case share our that it's hardware this supplied of strongly So to one required We comment difficult been so. believe to contractually

enforce And contractual so our to filed essentially lawsuit rights. a we've

additional some have you did Jeff, And comments?

Jeffrey Likosar

to There's and very legal but a of takes, including be would always we're even first Yes. or highlight. else thing we quarter happy I settlement everything we're in to to of position the aware specific the year, the we forth will manage to achieve the and earlier those and through There's puts no half objectives that those second half, the objectives. second the we're that affirm sorry, I'm -- confident guidance achieve put

Operator

Next comes question from line Toni from the Kaplan of Morgan Stanley.

Toni Kaplan

expect should You of How we opportunities find along Are think to mentioned return in it margin your you with And development sort there. to and stages? there? sort long what AI call how to center I of of sort improvement any from we of I the the regard guess, Google your far you at about frame or of time initiative? yet? could try early that anything sort to about could looking at we efficiencies should Or are be the still or terms take? implications guess, think of

James DeVries

add couple perspective. the to It's Toni. then a some on Sure, of share timing and Wayne ask Jim. additional comments I'll

in late Our are last We AI year. partnership. year Cloud anchored Google largely this that early opportunities or expanded partnership

As around in customer lies call deflection. care, you opportunity first largely mentioned, our

we'll begin docket modeling. see second, is think the impact to propensity year. then modeling, for I on to And some churn this us some propensity late

meaningful of that's is than opportunity to us. Wayne? terms 'XX. them financial 'XX both what for But impact, of bring In be more we it think expect a I pretty

Wayne Thorsen

now Yes. phase, Google with execution about Tony. Cloud, which the We're And super is thanks, we're and excited partnership into the terrific.

new versus specifically thing early to are on is hardened centers, are The these using technology. is Vertex and agents agent focus So great about hardened bring and within products this the CCAI absolutely there. like virtual great The products call tools. that progress assistant

we outcomes. confidence see numerous these deflections where expect outcomes. that So similar to very examples there same using have people reached we significant are have the really And products in high

Toni Kaplan

ask quarter to I little bit of broad trends a of how seeing of July, the question end regard been health through any just thinking and change the change consumer of to that. of or stuff in marketing wanted about a change there, second through you're in what just the competitive environment. about have I landscape? guess, Great. any And kind with Any like

Jeffrey Likosar

thing reiterate app the prepared Jeff. capabilities and call earlier out. equipment strengthens higher the no and have a in just competitors is think of we as said beyond most The It's of that what Toni. the we that irrespective change we we'd and specific lower the moves off and There's our new are position the interest to the no excitement the particular rates, And what start. a couple really doing. that competitive comments. would Thanks, There's described, it's highlight some would our I noteworthy. of offerings any the forthcoming we good of Wayne remarks

the that's in your question. point probably response I'd So main offer to

Operator

Your next from Patnaik question the line comes Barclays. Manav of from

Ronan Kennedy

is Manav. This for Kennedy on Ronan

elements Just you of were If be to to demand or upon further Toni's we and well. on flexibility further expand of be should as deterioration the the of in you see further resilience George's be guess, the how a spoke should to I can the that expand strength durability, there there model demonstrated, question, consumer weakness? expect to environment, the in

Jeffrey Likosar

comes I've of approaching in the mind think I that Yes. having people been we're company, now. times found X value more, very couple -- And you're company been it. myself, joining the the of company that experienced with peace seeing said for generally well remember cycles, a We the challenging years it that, we never often something but having economic positioned. through having security at

times tends on their tough generally in in bills value of at found seek list. top not then relocations, budgets, be who seen that as look reduce is already couple are challenging a they we've security and there personal they the do that, times, fewer and to that among of we've times. Additionally, mentioned that And if it customers to

cutting company, an a same The new So cycles, we that with Plus, time out. think puts been ] we think one stuff even [ we position. we're couple then have proven And I've all in positioned. down plug. that's the before. well last in this And point then better maybe in the been as us of

Ronan Kennedy

And that how benefits recently [ seeing from and investment implemented customer on experiences? investments, current insights and efficiency, needs ERM? faster these the CRM about then of to should around and the ] then topic recent cloud-based expected -- the it. you And are we experience, the Got meet reflects of the solutions you customer all for spend innovative platform level think for better

James DeVries

for Ronan, it's Thanks question, the Jim.

the rolling on So we're our We're ADT+. in in to DIFM out the it just DIFM, customers. relatively our investment early days in now

Trusted results app we doing feel it's with and customer really are some positive. We're So testing very about. Neighbor experience But the that early early. good

watermark to investing in us front. kind it's And hard in course will of will for We've mention, investments, be expect. I years. the back that last return of a answer on And what a we that investments of been with over pulled significantly of precision so XXXX expect pretty the will terms be those the technology high handful bit. we XXXX,

on ADT+, results And from so standpoint. at from little positive, to and early customer response But efficiency we'll difficult both that a bit in the early game, but perspective, point quantify. perspective of little this have are a a tailwind an a

Operator

line Our next Christiansen from question from comes Peter of the Citi.

Peter Christiansen

of nice as the trends Jim there. it bulk idea curious relates to Jeff, purchases. and I'm

nature? new or that faster part Now purchases, I when or great users your you're Is evaluating that of accelerate this that Anything a decision-making upgrade whether potential that can process? have all your ADT+, rollout? potential of Does maybe calculus stuff. you you guess, that not, bulk change helps

James DeVries

calculus Ronan, I early is. to our app, is as of path part it's the is but It to increasingly in ADT+ it game upgrade. the Pete, as The was mentioning

], it's before. and adds ever today a more at speaking, marketing mentioned our allocation some terms bulk. the look a In way looking just are looking than at we're of we're at And of capital we costs at We're dealer looking I'd bit. generally exercise how of up [ that organic.

with in positive a -- the selling it us had basis, more and makes we relative very a also same experience December. on bulk so a have bulk And seller, attractive,

at how those at look the our we we allocating when and of return. allocate SAC looking we're best buckets each the dollars so for And

opportunities I be over will time. think that for more us the attractive organic more and

experiences neighbor we'll that greater make these allocation, differentiated, we organic going to there's overall for be are Some SAC. like of of demand our truly it, think solid and trusted percent a and that total

Jeffrey Likosar

add dollars $X point the too, milestone feel I'd achieve reiterating -- good capital building set not Pete, just compared to year ago, The that couple allocation this closer a about billion and we've year. on our billion of we we to And compared got something made. how down we progress debt ago, a to long down to to Xx leverage to that the the out

the organic the year. in [ about. ], is what reduction. that and would optimize as the the returning of earlier time we're to normal repurchases in to us growth, very there So substantial focused share capital between allows allocation flexibility But on M&A, where a the dividend capital priority bulks do is that. increases still talking we shareholders between say #X always We're to was debt looking increase

gives lot for that more us and shareholders. the having for both returns So opportunities flexibility a company to generate

Peter Christiansen

think a that of organic kind Right. thought RMR of you have over the the that but mind uplift what like on user coming do-it-for-me upgrade kind you in a years? side, basis per to opportunity [ wise a of Right. of sure. unit super job on too terms sense for I early, about for have existing your as guys the target on or any opportunity helpful. Maybe allocation That's ], done upgrade it's And capital good base you in

Wayne Thorsen

Yes...

Jeffrey Likosar

ahead, Wayne. Go

Wayne Thorsen

things can our hardware the Yes. platform -- is We integrate that both evaluating, thanks and to we Thanks, from in we that find that the us home. software this on the have with for having benefits through and the that question we're even of own one so and we of allows now may one work that. is equipment

do the bulks starts start new of is once on to you stages out about to some super then we're at platform, experience in at like look look efficient which else. And other from somebody products thinking ways either such of So able rolling out, from older to the that, first when us be than early or equipment some Neighbor. to capital our we're even upgrade we the rolling become as or things of product Trusted that it

without -- direction, You there at having start specific you look to more able equipment -- making handles add in provide you to there. some of start being can to to in able that by the be

a this shared take few case, we something we're -- the these to would Trusted app. having we the equipment Neighbors rolling are which be premium of IRPU to later involved, also in often away. have We as by see more uniquely churn right Neighbor out of going you quarter, one quarters product higher to cameras addition then in and up and of that the in start end this able such ago, cameras the to think the not have I ADT+ in have homes. And improved propensity there, some equipment, higher like themselves that older with you kind characteristics things we locks were Trusted things download to and we packages more start when to when do

our help it. and assist need they they subscribers as so And when

an themselves, who for people, to are be from the that not opportunity actually able many earn us customers. but So leaves these to our new own new who Trust subscribers Neighbors are

And we have unique a so opportunity an to for opportunity us earn. it creates that

Jeffrey Likosar

decisions and who kinds lot needs, firm characteristics, to optimal link designed cost attributes. be outcome those different. way price is are to of conclusions, of seek compared be what economic gives we from may customers. us all the adjust different A optimize overall an customers, have It profitability, portfolio but course, for to which ] said, the emphasize I'd generate more is sure make to back of [ this but might I into different attracted the too broader And broader be or sensitivity, attractive and maybe the a to and earlier we add, knobs mix, for everything the all have outcome. And return a compared of mix different or dials to ongoing will saying returns it of -- those our of excited pursue just we a test attrition lifetime different to more I or almost would foundation value early our and TAM. mix degrees combinations the just again, just And customers levers we're these a of levers with TAM different more broader to is how to be of upfront to to Wayne we'll was

Peter Christiansen

top powerful be adding imagine That's great. helpful. I of watch. exciting an user was brand acquisition to a can name, growth Yes. organic -- it on organic would That

James DeVries

Thanks, Pete.

Operator

the you. more Seeing I for over there remarks. now will are turn back ADT closing team as to the call no questions. Thank

James DeVries

Okay. you, operator. today. everyone, Thanks, time us for to the Thank join taking

our to we've heard, We're delivered you forward ADT a strong business. looking partners. guidance and results XXXX. core employees and to our I'd continued dealer our appreciation extend like solid As in affirmed my to

a results Our are of efforts. reflection their

today, thanks have So a great joining everybody, us again, and for day.

Operator

Ladies concludes that pleasant and you day. Have gentlemen, today's all a for joining. Thank call.

ADT (ADT) 1 Aug 242024 Q2 Earnings call transcript