Adt Inc. · NYSE:ADT
Adt — Investor Day (September 2012)
73 slides from Adt's investor day presentation, Sep 18, 2012
Slide 1: The ADT Corporation Investor Day Presentation
Exhibit 99.1 The ADT Corporation INVESTOR SEPTEMBER DAY 18, PRESENTATION 2012
Slide 2: Safe Harbor
Safe Some “expects,” statements. obligation Various Our competition allegations unauthorized our an downturns entry shifts interruption interference changes risks potential capital failure difficulty Given uncertainties included review should sections 2elsewhere increase ability dependence greater a
Slide 3: Introduction to Today's Presentation
Introduction Naren Kathryn Don 3Chief Boerema Executive Financial Corporate Gursahaney Mikells to Today’s Officer Officer Development Presentation Officer
Slide 4: Introduction and Agenda
Introductionand Agenda 4Residential to ADT Small Business Security Market Strategic Priorities Financial Overview Closing Remarks Q&A
Slide 5: Creating Our Strategy
Strategy Creating Our Strengthen Extend 5Invest Mission Strategic for our builds Customers customers growth the leadership Priorities core on demonstrated for forposition Life Life – and capabilities, Value for Our providing Shareholders for significant growth opportunities Business model provides s
Slide 6: Comprehensive Residential and Small Business Portfolio
Comprehensive Residential Fast Burglar Carbon Panic Medical Small Intrusion Access Video Management Monitoring Adding 24/7 Remote Custom 6Robust Alarm Alarm Life Button Business Surveillance Control Solutions Monoxide Alarm Lifestyle System Notifications Alert Detection Safety Service Security & Sys
Slide 7: Unparalleled Scale and Service Footprint
Unparalleled Unmatched ~4,500 ~3,900 Nationwide Centralized Nearly Standardized Seven Service Install Customer Sales 7Dedicated &year representatives technicians 450 sales installation technicians Service Care Field average authorized account capabilities network professionals National admin operato
Slide 8: Robust Industry-leading Monitoring Infrastructure
Robust Industry-leading Six Real-time Sophisticated Centers Monitoring 8Fault-tolerant Monitoring fullyMonitoring inredundant, load the centers 24/7 monitoring U.S. sharing Centers monitoring staffing and handle Infrastructure U.L. Canada Across certified infrastructure over model infrastructure the
Slide 9: Well-Established Channel Partners
Well-Established Channel Exclusive 450 Largest Dealers Diverse Affinity Strategic Emerging (Pulte 9Localized ADTpays.com authorized Homes) dealer are lead partnerships Partner sales Authorized partnerships related certified generation network partners and dealers Network and home utilities and with
Slide 10: Leading Brand Reputation and Marketing
Leading Leadership Reputation Blue Search ADT.com Display Mobile Social Television Email Known ADT Advertising Multichannel 75% 1Additional 10 aided Ribbon isMedia Engines and the Monthly Brand advertising marketing for clear Position Tablet considered and Award marketing Service Awareness marketing
Slide 11: Valuable Customer Attributes
Valuable Customer Strong Attractive High Stickiness > < 1150kuse 10k customers credit Customer of Attributes customer from electronic scores high 10k-50k Attributes tenure average payment customers install and (60% Business fee average, ($650) Model 80% for new Drive new) subscribers High, Stable Re
Slide 12: Strong Board of Directors
Strong BRUCE Nominating THOMAS TIMOTHY BOB NAREN BRIDGETTE & KATHLEEN ?DINESH Experienced Note: 12 Vice Chairman, Lead Dir, Executive President CEO, EVP President, COO, SVP, Director, Chairman Wound, DUTKOWSKY Targus, List Office CNH Chair, & Board Finance Director, ADT, Tech Constellation GORDON GU
Slide 13: Experienced Management Team
Experienced 9Naren CEO President President, Tony Marketing Various Anita 51Human Years Kathryn <1 CFO Held 7David Legal roles Wells Graham Gursahaney Previously Steve 30 Sales Prior Don Corporate Years Year Resources leadership Year of Boerema variousVP, at Chief leadership Gribbon Years Bleisch Ex-
Slide 14: Introduction and Agenda
Introductionand Agenda Residential 14 to ADT Small Business Security Market Strategic Priorities Financial Overview Closing Remarks Q&A
Slide 15: Market Share and Protection Leader
TheMonitronics Share 25% 0% Protection 4% 2% 3% 2012 66% Size Thousands ADT Customer Unrivaled National Large, Robust, Purchasing Leading 15 Clear ~$13.0B &Est. advantages of established, fully interactive North install Market base Leader brand 1of leverage redundant, Others American ~6x and Vivint
Slide 16: Large, Growing, Resilient Security Market
Monitored CAGR: Residential 2016 2012 2008 $14.4B $13.0B $12.5B Sustained Under-penetrated 16 2-3% 1-2% improvement Security & Small security market Market market Business inpresents housing continued is Large, Electronic significant market Growing, to grow Security willgrowth throughout and provide
Slide 17: Target Markets Underpenetrated
Targettechnologies Market Wireless 1% 19% 4% Unmonitored 68% 69% 86% 98% Security New Lower Energy: 17 Markets cost Penetration Parks penetration Video/TV andAssociates for portable are Our Internet ofrate lowering Related Services hardware much 2011; Wired Services lower costs Security: areoptions
Slide 18: Industry Drivers
Industry Modest Demographics Aging Technology Higher Lower Stage Customer Concerns Interest Mortgage Foreclosures Housing Gallup Crime Preliminary Some Regulations Increasing Net 18 migration Impact set jurisdictions population IP-enabled reports broadband in population Drivers Market market for abo
Slide 19: New Technologies Creating Opportunities to Grow
NewStyle Emergency Fire Security Carbon High/low Water Connected Total Energy Business Lifestyle Interactive Home Life Wireless Entertainment Thermostats Lighting Broadband Mobility Open Affordability 19 Safety Technologies life standards detection and health management Monoxide technologies service
Slide 20: Introduction and Agenda
Introduction Agenda Residential Security Strategic Financial Closing 20 Q&A Remarks Market Priorities Overview and to ADT Small Business
Slide 21: Our Strategic Priorities
Our Strategic Strengthen Extend Invest 21 for ourgrowth the leadership Priorities core position
Slide 22: Strengthen the Core: Key Customer Value Drivers
Strengthen Key Customer Subscriber Average Cost 22 (Attrition) Tenure Value to Serve Revenue Additions Drivers Acquisition the(Gross corePerMargin Customer Cost (SAC) Percent) (ARPU)
Slide 23: Expanding Gross Customer Additions
Expanding Gross YOY LTM 2011A 2010A1 2009A 1,167 1,088 1,025 971 Utilize Dealer Direct Extend Enhance Investing Deploy Expand Strengthen 1Improved Customizable/upgradeable 23 Jun Ended growth Customer comprehensive coverage mobility sales pricing FY’10 opportunities 2012 in product Channels resales
Slide 24: Leverage Subscriber Acquisition Cost
Leverage Subscriber SAC LTM 2011A 2010A 2009A Sales Direct Dealer Optimizing Engaged Product Redesigned Centralized Deployed Reduced Accelerated Manage 24 Ended &&Marketing: sales sales component Technology mobility Installation: Acquisition lead and panel sharing Jun mix partners automated 2012 sou
Slide 25: Growing ARPU
Growing ARPU Q3 2011A 2010A 2009A $34 $36 $38 $40 $42 $44 Shift Average New Drive Continue Deploy Optimize Review Redesign Ensure 25 2012A mix increased compliance targeted price Revenue ARPU to pricing expand ADT escalation adoption upgrade Via strategy architecture Pulse per with offerings, New Cu
Slide 26: Driving Down Cost to Serve
Driving Cost Q3 2011A 2010A 2009A 65% 70% 75% Enhance Launched 700,000 Up Upgrade Deliver Panel Embed Standardize 26 2012A toTo toredesign 150% remote Serve single Serve Reduction new customer Interactive myADT.com product increase registered (GM%) contact monitoring and service in standardization V
Slide 27: Improving Attrition and Tenure
Improving Q3 2011A 2010A 2009A 13.0% 13.5% 13.3% 14.3% Attrition Tenure Support Net Reduce Optimizing Improve Enhance Leverage Up-sell Drive Targeted Pricing Increase Revamping 27 2012A promoter “Customers upgrade strategy &disconnects customer quality existing relocation retention outbound predicti
Slide 28: Creating Customer Value Through Key Levers
Creating Customer Subscriber Average Cost Tenure Gross ADT Traditional Base Pricing Monthly Operational Attrition Reduce Increase High Metric 5% 1% 50bps 28 increase reduction to ARPU quality Pulse adds reduction leverage (Attrition) Serve for Pulse traditional Revenue customer facility Value cost A
Slide 29: Extend Our Leadership Position
Extend&our Install Sales Marketing Products Monitoring 29 & Service leadership Solutions position
Slide 30: Well-Positioned Against Competitors
Well-Positioned Trusted Marketing Cable/Telco Security Traditional Efficient Online, Strong Large Nationwide Sales Mix Uni-channel Primarily Some Install Robust Positive Focus Negative May Limited Company Monitoring Smaller Fewer Typically Products Highly-rated Quality Most Lead Bundling Aggressive
Slide 31: Utilize and Strengthen Marketing Channels
Utilizeand Strengthen Marketing Social Mobile/App Leverage Trust Reliability Build Mover’s Lifestyle Improve Micro Usage 31 new segmentation analysis media Full program marketing (e.g. advertising technology partnerships and our Breadth ––new lead capabilities timely lead of security parents, genera
Slide 32: Strengthen Sales Channels and Tools
ADTnew Live Sales Location Spot Geo-specific Library Capture Camera materials iBooks Expand Grow Add Strengthen Develop Introduce Leverage Equip iPad, Electronic Enhance 32 demonstrations Crime application Pulse Genie and sales of and sales images new eCommerce information dealers technology alterna
Slide 33: Enhance Install and Service Technology
Enhance Install Build iPhone/Android Efficient “Over Feature-enabled Software-driven Ease Technology 33 ofon the &use Customer existing mobile Service air” for tools activation, customer app panels upgrades app myADT.com that Ease for enhance with easy ofDIY programming Use software maintenance peri
Slide 34: Build on Best-in-Class Monitoring Capabilities
Build Monitoring Analytics Continuous Enhanced Messages Calls Continued Basic 3G 34 technology (automated wireline on Best-in-Class on (text customer-selected investment improvement training 25telecommunication to messages million or Internet live) andinMonitoring annual recognition infrastructure o
Slide 35: Continuing Product Innovation
Driveapps Products Continuing Home Business Wireless Peripherals User Customized Software iPad “Over-the-air” Mobility Alerts Continue Improve Develop Expand Establish Leverage 35 profiles Continued Automation based energy ADT distinctive loW & Productivity to strategic scale to Solutions expand act
Slide 36: Invest for Growth
Invest Business Small Residential Health 36 for Monitoring growth
Slide 37: ADT Pulse Interactive Solutions
ADT Pulse Interactive Solutions 37
Slide 38: ADT Pulse Features & Capabilities
ADT Pulse Features & Capabilities 38
Slide 39: Leveraging Pulse as the Platform for Growth
Leveraging Security Revenue Home Energy Entertainment Health 39 & Monitoring Management and Business Pulse Life & Lifestyle Safety as Control the Platform For Growth
Slide 40: Illustrative Residential Opportunity
We Households Illustrative Residential US Connected Broadband Wireless Bring Interactive Expand ADT Security Increase Continually 40 Believe Pulse newour share and remains households services Home Residential is the share adding Monitored considered ofSecurity Households highly our (illustrative) of
Slide 41: Our Foundation Will Allow Us to Outpace Category Growth
Our foundation Life Residential The Savings Energy Automations Connections Lifestyle Media Entertainment Alerts Real-time 41 Robust Safety integration from content Platform and consumption and scheduling and heritage Functionality control management of ADT’s andoffer Partner and rate Ecosystem reduc
Slide 42: Small Business Opportunity
Opportunity Small Estimated No 5.5M Non-monitored ADT security Monitored Businesses: Share Potential Claim Investment Expand Increase Develop Partners Source Retailers 42 security Share Opportunity Business leadership Studies: dedicated feet specialized toNumber 30 50 Focus of grow 20 14% to onIncre
Slide 43: Small Business Productivity with ADT Pulse
While Productivity Small “ADT Convenience “I Highly Wireless-To-Go Over-index 64% Spend An Start-ups Premise-based Example Pulse Control Employee 43 can evolving use bundle Business do Driving Pulse over mobile, and laptops solutions are things productivity 8on monitoring has Tools demographic incre
Slide 44: Baby Boomers Driving Health Monitoring Growth
Baby Health U.S. 54.8 350 400 300 Population 200 02250 50 100 9.1% 2012 7.1% 8.6% Under 25 65 Source: 44 010 to40.2 years 63.9 Population Personal 2015 2013 44 9.1% Boomers 18 Monitoring Population IMS years and 46.8 years 72.1 2020 2014 in 9.2% over 2012 Ms Emergency 45 Driving 18 Growth 2025 2015
Slide 45: Health Monitoring Segment Opportunity
Segment Health 65+ % Desire Pay Like Would 96% Recent Boomers Willing Looking Opportunity Trusted Unparalleled ADT Source: 45 Somewhat for Age to 92% Isto Pulse like Monitoring consumer know services Well AARP to brand for Views to strongly continue 95% pay to a‘Age ways to Positioned ready experien
Slide 46: Building Home Health Solutions
Building 3G Enhance In-unit Advanced Two-way Mobile Fall PERS Remote Life Alerts Phase Health Integrated Vitals Disease 46 transmission detection safety, monitoring I: II: III: IV: + and Monitoring motion PERS management control ADT PERS design Enhanced voice home PERS, notifications health Pulse se
Slide 47: Introduction and Agenda
Introductionand Agenda Residential 47 to ADT Small Business Security Market Strategic Priorities Financial Overview Closing Remarks Q&A
Slide 48: Track Record of Strong Results
Track Strong leverage, Total $2.2B 12% $2.6B 11% 10% $3.1B 14% $2.1B 89% 16% 84% 88% 2007A Recurring 58) 14% 90% 86% Revenue2 Adjusted CAGR $0.9B $1.0B $1.2B $1.5B 44.5% 41.9% 2007PF 21Adj. 2012Record $2.2B growth 2008A 2012 9% Broadview 86% Revenue EBITDA 48.1% 46.0% 42.6% full =2008PF~$3.2B of ful
Slide 49: Growth in Recurring Revenue and Subscribers
Growth Recurring $1.8B $1.9B $2.3B 21$2.8B Total CAGR 4,570K 4,753K 1,358K in Broadview 6,285K 2007A 2012 10% Revenue2 Recurring 49 Subscribers2 2008A =4,627K full ~$2.9B Includes 7% 6,351K 2009Ayear Revenue impactestimate 6,447K 2010A Driven reflects of Broadview 2011A 2012E1 Q3byFY2012 Subscriber
Slide 50: Operating Income Growth and Margin Expansion
Operating Adjusted CAGR 17.4% 21.9% ~21.5% $365M $387M $440M $517M 2007PF Adj. 212012 58) 350 Operating full 17.7% =2008PF Includes 14% Operating Adjusted Income year 19.6% $681M Income estimate 2009PF impact Expansion operatingIncome2,3 20.0% ~$695M Adj. reflects 2010PF of Broadview income Op isDri
Slide 51: Continued Strong Q3 Performance
Continued Pro Q3 ($MM) Recurring Other Total Adjusted % Ending Gross ARPU 21Customer public corporate 51Adj. Operating Margin FY2011 Forma1 Revenue Revenue Customers EBITDA company (dollars) Numbers EBITDA Operating allocation Attrition Revenue 48.1% 21.9% Strong YTD income 2,316 256 $37.01 and cost
Slide 52: Free Cash Flow and Capital Investment
Free Capital Subscriber Dealer Maintenance $$1,052M $801M $736M $189M $347M $511M $532M $581M $650M $36M 2009A Total 2012A Additions Adjusted CAGR $629M 82% 92% $312M $423M 2009PF 71% Adj. 2012PF 1Increased 252902M Adj.FCF Cash 78% Sub Accounts 2010A =Expenditures1 $31M $ $247M 2010PF FCFIncludes 42
Slide 53: Subscriber Economic Investment Model
New ADT (Illustrative Subscriber Upfront Revenue 0Cumulative Cash Years Information 531 2 Customers 3breakeven Customer 4Upfront Cost 5 Acquisition 6pool Cash shown 7 to 8Economic is Typically 9Investment Serve of Flow 10 on is customers an combined Cost Cash incremental Yield Model Installation Pay
Slide 54: Customer-Owned Residential Example
Customer-Owned Immediate Direct (Per Costs Sales Marketing, Total Net New The $(1,075) Installation A 54portion Cash example Residential Subscriber Costs (commissions) and Sales of Expenses: accounting Other Revenues $950 revenue $1,725 Example the above commissions Investment Installation) $0 Sales
Slide 55: ADT-Owned Residential Example
ADT-Owned Immediate Direct (Per Costs Installation Sales Marketing, Total Net New The $(1,075) installation/equipment 55 Cash example Residential Subscriber Costs (commissions) and Sales Expenses: accounting Other Revenues $950 $1,725 Example Cash above Investment Installation) Capitalized Sales Flo
Slide 56: Dealer Account Acquisition Example
Immediate Dealer (Per Costs Installation Sales Marketing, Total New The Marketing Account 56 example Account Subscriber Costs (commissions) and Account Example Acquisition acquisition Expenses: materials, accounting Other Revenues $0 $1,190 above Acquired) $0 Cash Investment Sales $0iscosts Costs $0
Slide 57: Q4 2012 Updated Outlook
Q4 2012 Previous guidance 31, Recurring Non Total Adj. Incremental 1Operating reserves) 57 Recurring Operating Revenue Organic Updated Tyco conference (as Revenue Income legal provided Business (YOY Revenue Income growth reserves Outlook Margin (YOY call) organic on Margin Unit (YOY isJuly % growth
Slide 58: Q4 and Corporate Cost Guidance
Q4Corporate 25.50%— 25.75% -200 23.9% 23.65%— Previous 21.90% Unit provided Margin 2012 1reserve annual 2~$17M 58 2012 guidance bps conference run adjustments) % quarterly, -25 Annual Updated 21.65% Tyco on(incl. -160 rate bps costs July (as Business for bps legal dis-synergies call) 31, -which in R
Slide 59: Significant GAAP Tax Assets Enable Low Cash Tax Rate
Significant GAAP ADT In Expect 1Canadian 2will 59 Actual Per addition, include will expects Form income cash cash income have Tax 10 ADT 4th taxes to tax proforma, tax significant Assets quarter have expects rates and to rate be $1.0-$1.2 withholding Enable will will driven earnings/loss expected to
Slide 60: Strong Capital Structure and Liquidity Profile
Strong -($ Total Expect Minimum $750M Net No 60Short-term Long-term innear-term Debt Debt/EBITDA millions) cash debt shareholders’ capitalization Capital minimum 5-year (debt cash $2,526 $300 debt debt revolving Pro Structure –balance cash) $2,525 $1 total maturities forma =equity (debt ~1.5x cash $
Slide 61: Long-Term Financial Goals
Long-Term Historical Recurring 1Adj. 61Organic EBITDA FY’08 growth Revenue Financial Margin –isFY’12 (annual a Goals non-GAAP % ~42% Long-Term organic —49% measure growth1) Target ~50% andFY’13 4%— adjusts 6% – FY’17 for 5%—7% foreign currency impact and acquisitions (incl. large non-dealer bulk pur
Slide 62: A Disciplined Capital Allocation Approach
A Disciplined Illustrative $200 ~$1.6B ~$(1.1)B $(35)—(50)M EBITDA Organic Productivity Return Acquisitions Subscriber Operation Strategic Share Dividends 62 –Repurchases of 250M Growth acquisitions Capex ~$(95)M Capital efficiencies systems Annual Improvements Approach ~$(120)M Interest Investments
Slide 63: Introduction and Agenda
Introductionand Agenda Residential 63 to ADT Small Business Security Market Strategic Priorities Financial Overview Closing Remarks Q&A
Slide 64: Clear Strategic Priorities
ClearStrategic flows Creating Our Strengthen Extend Invest 64 Mission leader for our Customers growth the leadership inPriorities core a large, forposition fragmented, Life – and Value life growing for Our market Shareholders Strategy builds on demonstrated capabilities, providing for significant gr
Slide 65: Introduction and Agenda
Introductionand Agenda Residential 65 to ADT Small Business Security Market Strategic Priorities Financial Overview Closing Remarks Q&A
Slide 66: Q&A
Q&A
Slide 67: Appendix
67 Appendix
Slide 68: Q3 Operating Income Reconciliation
Q3Operating ($M) Adjusted Restructuring Broadview Dis-synergies—Pro Operating Memo: 1above) Assumes 2fully for 68Pro aFY2011 net incurred. 2007 Forma 79 Corporate benefit Operating a71 Income 2008 $40M Acquisition Q3 income dis-synergies 67 &FY2012 of 69 Other 2009 midpoint Expense –Reconciliation $
Slide 69: Last Four Quarters Operating Income Reconciliation
Quarterly Last ($M) Adjusted Restructuring Broadview Dis-synergies—Pro 1Operating Assumes 2fully for 69Pro Operating a Four net incurred. Q4 Forma benefit FY2011 Operating aOperating Quarters Income—Form $40M Acquisition income dis-synergies & of Other midpoint Q1 $10M Ended Income—Pro Forma1 for In
Slide 70: Q3 Adjusted EBITDA Reconciliation
Q3Operating ($M) Adjusted Restructuring Broadview Costs Dis-synergies—Pro EBITDA Interest, Income Depreciation 1Net Assumes 2fully for 70Pro aFY2011 Income—Form net incurred. 2007 Forma 0 0Tax net benefit –EBITDA a0 2008 $40M Acquisition Form (35) Q3 Expense (56) income dis-synergies &&Amortization,
Slide 71: Last Four Quarters Adjusted EBITDA Reconciliation
Quarterly Last ($M) Adjusted Restructuring Broadview Dis-synergies—Pro EBITDA Interest, Income Depreciation 1Net Assumes 2fully for 71Pro Operating aIncome Four net incurred. Q4 Forma Tax net benefit FY2011 –EBITDA aAdjusted Quarters $40M Acquisition Form –Expense (21) income dis-synergies &Form &Am
Slide 72: Q3 Free Cash Flow Reconciliation
Q3Operating ($M) Adjusted Dis-synergies—Pro Forma Special Interest P/L Deferred Cash Free Dealer Subscriber purchases Capital 1Operating 2$30M-$50M for 72Pro aFY2011 Income Cash net Income 2009 Forma generated expenditures items Expense, benefit income FCF Free Cash Flow system 2010 tax Q3 income di
Slide 73: Last Four Quarters Free Cash Flow Reconciliation
Last ($M) Adjusted Dis-synergies—Pro Special Interest P/L Deferred Cash Free Dealer Subscriber purchases Capital 1Operating 2$30M-$50M for 73Pro Operating aIncome Four Cash net Income Q4 Forma generated expenditures items Expense, benefit FY2011 income FCF Free Quarters Cash Flow system tax income d