Adt Inc. · NYSE:ADT
Adt — Q1 2020 Earnings Presentation
32 slides from Adt's earnings presentation, May 7, 2020
Slide 1: Q1 2020 Earnings Presentation
Q1 2020 Earnings Presentation May 7, 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 Updated Financial Ou
Slide 3: Key Takeaways
Key Takeaways ▪ Free Cash Flow before special items of $173 million, up from $171 million, despite $66 million increase in cash interest due to quarterly timing of payments — Unit growth and revenue payback reduction demonstrate improved capital efficiency ▪ ADT had momentum heading into the COVID-1
Slide 4: Q1 Results & Recent Highlights
Q1 Results & Recent Highlights ▪ Total revenue increase of 10% year-over-year Strong Revenue ▪ Higher mix of outright sales to residential customers due to revenue model changes and Growth Defenders acquisition ▪ Continued Commercial growth ▪ Free Cash Flow before special items of $173M, up year-ove
Slide 5: Immediate & Comprehensive Response to COVID-19 Pandemic
Immediate & Comprehensive Response to COVID-19 Pandemic Top Priority: Health & Welfare of Our Employees & Customers ▪ Transitioned to working remotely in call centers and headquarters ▪ Health checklist for ADT employees, who interact with customers in-person ▪ Equipped techs and sales reps with enh
Slide 6: Managing 2020 with Focus on Long-Term Value Creation
Managing 2020 with Focus on Long-Term Value Creation COVID-19 Dynamics Long-Term Focus to Position for a & Potential Near-Term Impacts Post-COVID-19 Environment Broader economic uncertainty interacts differently with ▪ Retention of best-in-industry labor force and expertise ADT’s contractual recurri
Slide 7: Leader in Residential & Commercial Security & Automation with Resilient Business Model
Leader in Residential & Commercial Security & Automation with Resilient Business Model Highlights Residential & Small Business Revenue by Customer Type(2) ▪ Recurring Monthly Revenue of $339M ▪ Diverse base of ~6.5M ~$4B 21% customers Total revenue, TTM ▪ In-the-field smart home and security experts
Slide 8: Historic Attrition & Security Industry Performance in Downturns
Historic Attrition & Security Industry Performance in Downturns Industry has Grown Every Year, Including During Customer Retention Improves when Recessionary Periods(1) Relocations Decrease Monitoring & Service Revenue ($Bn) Customer Attrition by Reason $32 Other $31 Lost to $29 Competition $27 $25
Slide 9: Residential Well-Positioned for Growth
Residential Well-Positioned for Growth Pricing & Consumer Financing Defenders Acquisition & Recent Developments Integration Update ▪ Successfully completed Q1 national rollout(1) of ▪ Key Attributes: consumer financing program – Enhances customer experience – Deployed a retail-installment contract m
Slide 10: Commercial Market Pressured – Growth Deferred, Not Diminished
Commercial Market Pressured – Growth Deferred, Not Diminished Commercial Market Opportunity and Momentum Q1 Commercial Total Revenue and Growth $MM ▪ Large and growing ~$15 to 20 Billion market(1) $257 ▪ High structural penetration rates $237 14 Highly Attractive ▪ Significant barriers to entry Long
Slide 11: Strength Across Key Financial and Operating Metrics
Strength Across Key Financial and Operating Metrics For the three months ended ($ in millions) Mar 31, 2020 Mar 31, 2019(1) Y/Y Change Y/Y Change % Monitoring and Service Revenue $1,046 $1,070 ($24) (2%) Total Revenue $1,370 $1,243 $127 10% Net Loss ($300) ($66) ($234) (352%) Adjusted EBITDA $539 $6
Slide 12: Total Revenue Up 10% Year-over-Year
Total Revenue Up 10% Year-over-Year Gross Customer Revenue Attrition(1) Total Revenue % $MM $1,370 $1,243 13.5% 324 173 13.3% 1,070 1,046 LTM 3/31/19 LTM 3/31/20 Q1'19 Q1'20 Monitoring & Service Installation & Other(2) Attrition increased 20 basis points Total reported revenue increase of 10% ▪ High
Slide 13: Continuing to Acquire Customers Efficiently
Continuing to Acquire Customers Efficiently Customer Revenue Payback(1)(2) Net Subscriber Acquisition Costs (SAC)(3) Years $MM $368 $331 2.4x 77 171 2.3x 291 160 LTM 3/31/19 LTM 3/31/20 Q1'19 Q1'20 (4) (5) Capitalized SAC Non-capitalized SAC Continued to strengthen SAC efficiency Net SAC down 10% wi
Slide 14: Robust FCF Generation
Robust FCF Generation Adjusted EBITDA & Margin %(1) Free Cash Flow before special items $MM $MM $621 $171 $173 $539 58.0% 51.6% Q1'19 Q1'20 Q1'19 Q1'20 Adjusted EBITDA decrease of 13% Continued strong, positive Free Cash Flow ▪ Decrease was driven by previously disclosed impact ▪ Free Cash Flow befo
Slide 15: Strong Cash Flow Generation
Strong Cash Flow Generation For the three months ended ($ in millions) Mar 31, 2020 Mar 31, 2019 Y/Y Change Adjusted EBITDA $539 $621 ($82) Less: Capitalized SAC(1) (160) (291) 131 Less: Cash Taxes (1) 2 (3) Less: Cash Interest (165) (99) (66) Less: Capital Expenditures(2) (30) (37) 8 Less: Working
Slide 16: Capital Structure Well-Positioned to Support Growth
Capital Structure Well-Positioned to Support Growth Capital Structure(1) Recent Highlights $MM 12/31/19 3/31/20 Actual Actual ▪ Completed 2L refinancing during first quarter Revolver - 220 First Lien Term Loan 3,102 3,094 — Lowered coupon by 300 bps First Lien Notes 5,550 5,550 — Extended maturity b
Slide 17: 2020 Updated Financial Outlook
2020 Updated Financial Outlook Total Revenue of $5,000M - $5,300M, unchanged ▪ Lower commercial installation revenues, offset by higher reported residential installation Total Revenue revenues due to higher mix of outright sales ▪ Recurring revenues down slightly vs. prior expectations due to near t
Slide 18: Snapshot of Business by Customer Type and Unit Count
Snapshot of Business by Customer Type and Unit Count Market Profile (LTM 3/31/20) Unit Count Small Large / Residential Total Business Multi-Site Units in millions Q1’20 Q1’19 Y/Y % Q4’19 Q/Q % Interactive 2.9 2.7 10% 2.9 2% Unit Count ~5,800K ~500K ~300K ~6,500K Traditional 2.8 3.1 (11%) 2.8 (1%) En
Slide 19: Q&A
Q&A 19 Confidential, not for distribution or publication without express consent of ADT
Slide 20: Appendix
Appendix
Slide 21: 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 22: 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% 84% 75% 71% 73% 74% 74% 64% 66% 66% ~20% CAGR 44% 47% 48% ~20% 38% 39% 40% 41% 43% Penetration $33B 33 33%
Slide 23: Additional Historical Quarterly Data
Additional Historical Quarterly Data For the Three Months Ended (in millions) March 31, June 30, September 30, December 31, March 31, 2019 2019 2019 2019 2020 Key Performance Indicators Monitoring and Service Revenue $1,070 $1,085 $1,094 $1,058 $1,046 Total Revenue 1,243 1,284 1,301 1,298 1,370 Net
Slide 24: Selected Statement of Operations Components
Selected Statement of Operations Components GAAP Line Items GAAP Line Items For the quarter ended March 31, 2020 For the quarter ended March 31, 2019 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 1,037 - - - $1,03
Slide 25: Statements of Operations
Statements of Operations Statements of Operations: 25 Confidential, not for distribution or publication without express consent of ADT
Slide 26: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Net Loss Before Special Items: Diluted EPS Before Special Items: Notes: 1. Represents fees expensed associated with financing transactions 2. Represents the conversion of intercompany loans that are denominated in Canadian dollars to U.S. dollars 3. Represents costs,
Slide 27: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Adjusted EBITDA and Adjusted EBITDA Margin: Notes: 1. Represents costs, net of any incremental revenue earned, associated with replacing cellular technology used in many of our security systems pursuant to a replacement program 2. Represents fees expensed associated
Slide 28: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Free Cash Flow, Free Cash Flow before special items: Note: 1. The three months ended March 31, 2020 included $81 million related to the settlement of a pre-existing relationship, partially offset by $25 million related to an unrealized advance payment received for 28
Slide 29: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Debt to Net Income Ratio: Net Leverage Ratio: Note: 1. Debt instruments are stated at face value 29 Confidential, not for distribution or publication without express consent of ADT
Slide 30: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Commercial Organic Revenue and Commercial Organic Revenue Growth: Notes: 1. Represents total revenue associated with commercial and national accounts 2. Represents incremental total revenue associated with commercial and national accounts from acquisitions until ther
Slide 31: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Revenue Excluding Canada; and Revenue Growth Excluding Canada: Note: 1. Represents total revenue from ADT Canada as a result of the sale of ADT Canada 31 Confidential, not for distribution or publication without express consent of ADT
Slide 32: 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