Slide 1: Q4 2019 Earnings Presentation
Q4 2019 Earnings Presentation March 5, 2020 Confidential, not for distribution or publication without express consent of ADT
Slide 2: Forward Looking Statements and Non-GAAP Measures
Forward Looking Statements and Non-GAAP Measures ADT has made statements in this presentation and other reports, filings, and other public written and verbal announcements that are forward-looking and therefore subject to risks and uncertainties, including under the heading 2020 Preliminary Outlook.
Slide 3: Q4 Results & Recent Highlights
Q4 Results & Recent Highlights Strong Revenue ▪ Total revenue increase of 10% year-over-year, 6% adjusting for Red Hawk and ADT Canada Growth ▪ Commercial growth combined with strong residential interactive penetration ▪ Adjusted EBITDA decrease of 1% year-over-year (including -2% impact from sale o
Slide 4: Pricing & Consumer Financing
Pricing & Consumer Financing National Launch of new Consumer Financing Program in February 2020 Program Benefits Residential Early Program ▪ Facilitates more install revenue and more Baseline devices per new system, leading to higher Results Illustration customer engagement ▪ Flexibility to choose 3
Slide 5: Defenders Overview
Defenders Overview Business Highlights Strategic Advantages Key Financial Impacts Largest ADT dealer and the only Reported Adj. EBITDA ▪ Enhances customer experience dealer to be designated as an ▪ Simplifies operating ecosystem ▪ All dealer account acquisition Authorized Premier Provider costs capi
Slide 6: Continuing Strong Growth in Commercial Market
Continuing Strong Growth in Commercial Market Commercial Security Opportunity and Momentum FY2019 Commercial Total Revenue and Growth $MM ▪ Large and growing ~$15 to 20 Billion market(1) $1,064 ▪ High structural penetration rates 370 Highly $605 ▪ Significant barriers to entry Attractive Market ▪ Qu
Slide 7: Strength Across Key Financial and Operating Metrics
Strength Across Key Financial and Operating Metrics For the three months ended ($ in millions) Dec 31, 2019 Dec 31, 2018 Y/Y Change Y/Y Change % Monitoring and Service Revenue $1,058 $1,040 $18 2% Total Revenue $1,298 $1,185 $113 10% Net Loss ($72) ($149) $77 52% Adjusted EBITDA $607 $614 ($6) (1%)
Slide 8: Total Revenue Up 10% Year-over-Year
Total Revenue Up 10% Year-over-Year Gross Customer Revenue Attrition(1)(2) Total Revenue % $MM $1,298 13.4% $1,185 240 13.3% 145 1,040 1,058 LTM 12/31/18 LTM 12/31/19 Q4'18 Q4'19 Monitoring & Service Installation & Other(3) Attrition increased 10 basis points Total revenue increase of 10% ▪ M&S Reve
Slide 9: Continuing to Acquire Customers Efficiently
Continuing to Acquire Customers Efficiently Customer Revenue Payback(1)(2) Net Subscriber Acquisition Costs (SAC)(3) Years $MM $369 69 $318 2.4x 67 2.3x 301 251 LTM 12/31/18 LTM 12/31/19 Q4'18 Q4'19 Capitalized SAC Expensed SAC Continued to strengthen SAC efficiency Reduced Net SAC spend 14% ▪ Drive
Slide 10: Adjusted EBITDA and Continued Robust FCF Generation
Adjusted EBITDA and Continued Robust FCF Generation Adjusted EBITDA & Margin %(1) Free Cash Flow before special items $MM $MM $132 $614 $607 $59 59.0% 57.4% Q4'18 Q4'19 Q4'18 Q4'19 Adjusted EBITDA decrease of 1% Continued Strong, Positive Free Cash Flow ▪ Higher revenue and operating cost efficienci
Slide 11: 2019 Full Year Summary
2019 Full Year Summary Revenue & Attrition(1) Net Subscriber Acquisition Costs & Revenue Payback(2) $MM, % $MM, years 13.4% 2.4x 13.3% 2.3x $5,126 $1,494 $4,582 $1,425 818 296 283 472 4,110 4,308 1,198 1,142 2018 2019 2018 2019 Monitoring & Service Installation & Other Capitalized SAC Expensed SAC G
Slide 12: Strong Cash Flow Generation
Strong Cash Flow Generation For the three months ended For the twelve months ended ($ in millions) Dec 31, 2019 Dec 31, 2018 Y/Y Change Dec 31, 2019 Dec 31, 2018 Y/Y Change Adjusted EBITDA $607 $614 ($6) $2,483 $2,453 $30 Less: Capitalized SAC (251) (301) 50 (1,142) (1,198) 56 Less: Cash Taxes 9 (2)
Slide 13: Capital Structure Well-Positioned to Support Growth
Capital Structure Well-Positioned to Support Growth Capital Structure(1) Recent Highlights $MM $MM 12/31/18 12/31/19 12/31/19 ▪ Completed 2L refinancing transaction in January 2020 Actual Actual Pro Forma(2) ‒ Lowered coupon by 300 bps Revolver - - 220 ‒ Extended maturity by 5 years First Lien Term
Slide 14: 2020 Preliminary Outlook
2020 Preliminary Outlook(1)(2) Continued Focus on Driving Strong, Efficient Cash Flow Growth Total Revenue of $5,000M - $5,300M ▪ Midpoint represents ~5% growth vs. 2019, adjusted for November Canada sale (Canada ~4% of 2019 Revenue) Total Revenue ▪ Reflects anticipated strong installation revenue g
Slide 15: Snapshot of Business by Customer Type and Unit Count
Snapshot of Business by Customer Type and Unit Count Market Profile (LTM 12/31/19) Unit Count Small Large / Residential Total Business Multi-Site Units in millions Q4’19 Q4’18 Y/Y % Q3’19 Q/Q % Interactive 2.9 2.6 11% 2.8 2% Unit Count ~5,800K ~500K ~300K ~6,500K Traditional 2.8 3.2 (12%) 2.9 (3%) E
Slide 16: Q&A
Q&A 16 Confidential, not for distribution or publication without express consent of ADT
Slide 17: Appendix
Appendix
Slide 18: Growing Portfolio of Smart Home & Safety Devices
Growing Portfolio of Smart Home & Safety Devices At the center of the Security + home automation accessible anywhere from one app connected home ADT Control Touchscreen Keypad Home Home Security Fire, Home & Monitoring Automation Security Cameras Safety Services Smart Home Capabilities SixTM Wireles
Slide 19: America's #1 Smart Home Security Provider
America’s #1 Smart Home Security Provider(1) A large and growing …and dramatically growing …that ADT has demonstrated market for security… smart home market… the ability to capture. 82% 82% 82% 75% 71% 73% 74% 74% 66% 66% ~20% CAGR 61% 64% 44% 47% ~20% 38% 39% 40% 41% 43% Penetration $33B 33 31% 33%
Slide 20: Key Financial and Operating Metrics for FY2019
Key Financial and Operating Metrics for FY2019 For the twelve months ended ($ in millions) Dec 31, 2019 Dec 31, 2018 Y/Y Change Y/Y Change % Monitoring and Service Revenue $4,308 $4,110 $198 5% Total Revenue $5,126 $4,582 $544 12% Net Loss ($424) ($609) $185 30% Adjusted EBITDA $2,483 $2,453 $30 1%
Slide 21: Additional Historical Quarterly Data
Additional Historical Quarterly Data For the Three Months Ended (in millions) December 31, March 31, June 30, September 30, December 31, 2018 2019 2019 2019 2019 Key Performance Indicators Monitoring and Service Revenue $1,040 $1,070 $1,085 $1,094 $1,058 Total Revenue 1,185 1,243 1,284 1,301 1,298 N
Slide 22: Selected Statement of Operations Components
Selected Statement of Operations Components GAAP Line Items GAAP Line Items For the quarter ended December 31, 2019 For the quarter ended December 31, 2018 Total Cost of Total Cost of (in millions) Revenue Revenue SG&A D&A Total Revenue Revenue SG&A D&A Total Monitoring & Service Revenue 1,058 - - -
Slide 23: Statements of Operations
Statements of Operations Statements of Operations: For the Three Months Ended For the Twelve Months Ended (in millions, except per share data) December 31, December 31, December 31, December 31, 2019 2018 2019 2018 Monitoring and related services $ 1,058 $ 1,040 $ 4,308 $ 4,110 Installation and othe
Slide 24: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Net Loss Before Special Items: For the Three Months Ended For the Twelve Months Ended (in millions, except per share data) December 31, December 31, December 31, December 31, 2019 2018 2019 2018 Net loss $ (72) $ (149) $ (424) $ (609) M erger, restructuring, integrat
Slide 25: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Adjusted EBITDA and Adjusted EBITDA Margin: For the Three Months Ended For the Twelve Months Ended (in millions) December 31, S eptember 30, June 30, March 31, December 31, December 31, December 31, 2019 2019 2019 2019 2018 2019 2018 Net loss $ (72) $ (182) $ (104) (
Slide 26: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Free Cash Flow, Free Cash Flow before special items: For the Three Months Ended For the Twelve Months Ended (in millions) December 31, September 30, June 30, March 31, December 31, December 31, December 31, 2019 2019 2019 2019 2018 2019 2018 Net cash provided by oper
Slide 27: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Debt to Net Income Ratio: Actual Pro forma(2)(3) (in millions) December 31, December 31, December 31, 2019 2019 2018 Total debt (book value) $ 9,692 $ 9,960 $ 10,002 LTM net loss (424) (424) (609) Debt to net loss ratio (22.9x) (23.5x) (16.4x) Net Leverage Ratio: (2)
Slide 28: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Commercial Organic Revenue and Commercial Organic Revenue Growth: For the Three Months Ended For the Twelve Months Ended (in millions) December 31, December 31, December 31, December 31, 2019 2018 2019 2018 Total revenue $ 1,298 $ 1,185 $ 5,126 $ 4,582 Revenue growth
Slide 29: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Revenue Excluding Red Hawk and Canada; and Revenue Growth Excluding Red Hawk and Canada: For the Three Months Ended Excl. Red Hawk Red Hawk (1) Canada(2) and Canada Canada(2) Excl. Canada (in millions) December 31, December 31, December 31, December 31, December 31,
Slide 30: Non-GAAP Measures
Non-GAAP Measures To provide investors with additional information in connection with our results as determined in accordance with generally accepted accounting principles in the United States (“GAAP”), we disclose Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow, Free Cash Flow before specia