Slide 1: Business Overview and Financial Modeling April 2022
Business Overview and Financial Modeling April 2022
Slide 2: Forward Looking Statements and Non-GAAP Measures
Forward Looking Statements and Non-GAAP Measures ADT has made statements in this presentation that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are made in reliance on the safe harbor protections provided thereunder. These forward-lo
Slide 3: Agenda
Agenda 1. Company Overview 2. Segment Overviews • Consumer and Small Business (CSB) • Commercial • Solar 3. Key Business Metrics • Subscriber Acquisition Costs (SAC) • Recurring Monthly Revenue (RMR) • Attrition 4. Modeling and Financial Statements • Income Statement • Segment Modeling Overviews • C
Slide 4: Purpose of ADT Business Overview and Financial Modeling
Purpose of ADT Business Overview and Financial Modeling 1• Provide overview for analysts and investors interested in learning more about ADT 2• Address frequently asked analyst and investor questions 3• Summarize key segments and review key business metrics More information on ADT’s business strateg
Slide 5: 1. Company Overview
1. Company Overview
Slide 6: Executive Leadership Team
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Executive Leadership Team Diverse and experienced management team driving ADT’s next chapter of growth and innovation. Jim DeVries Dan Bresingham Jamie Haenggi President and CEO EVP, Commer
Slide 7: ADT: Safe, Smart, and Sustainable Solutions for Customers
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements ADT: Safe, Smart, and Sustainable Solutions for Customers ADT provides safe, smart, and sustainable solutions for people, homes and businesses. Through innovative products, partnerships, an
Slide 8: Financial Overview
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Financial Overview Total Revenue Adjusted EBITDA 2020 decline driven by $ in Millions $ in Millions Canada disposition & Defenders $4,582 $5,126 $5,315 $5,307 acquisition $4,316 $2,353 $2,4
Slide 9: Three Segments with Different Financial Profiles
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Three Segments with Different Financial Profiles Consumer & Small Business Commercial Solar Market Growth (2020-2025 CAGR) ~15% ~6% ~13% ADT market leader, Several large players, No clear m
Slide 10: ADT Generates Attractive Returns Across Each Segment
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements ADT Generates Attractive Returns Across Each Segment Consumer & Small Commercial Solar Business Key Unit Economics: Key Unit Economics: Key Unit Economics: • ~$50 recurring monthly revenue
Slide 11: Financial Profile Will Evolve As We Grow
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Financial Profile Will Evolve As We Grow Business 2021 Future Segment/Profile Consumer and ~70% of combined Implications from Small Business revenue Changing Mix Growing • Higher EBITDA mar
Slide 12: 2. Segment Overviews
2. Segment Overviews • Consumer and Small Business (CSB) • Commercial • Solar
Slide 13: Consumer and Small Business: Segment Overview
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements CONSUMER AND SMALL BUSINESS Segment Overview Key Offerings and Characteristics Segment Statistics (LTM 12/31/21) • Full-service smart home and small business security company with national
Slide 14: We have a broad range of offerings to serve customers throughout their life
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements CONSUMER AND SMALL BUSINESS We have a broad range of offerings to serve customers throughout their life Mobile Security Point Solutions and Professionally-Installed Smart Aging Do-It-Yourse
Slide 15: Segment Financials and Key Metrics
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements CONSUMER AND SMALL BUSINESS Segment Financials and Key Metrics Revenue Gross RMR Additions $ in Millions $ in Millions $4,325 86% 86% $4,080 $4,146 Interactive 82% $189 $565 $273 take rate
Slide 16: Business Model
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements CONSUMER AND SMALL BUSINESS Business Model Key Metrics • Subscriber growth 1 Efficient New Customer Acquisition • Subscriber Acquisition Cost (SAC) Efficiency 2 Profitable Service of Custom
Slide 17: Illustrative Single Subscriber Example
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements CONSUMER AND SMALL BUSINESS Illustrative Single Subscriber Example Monitoring & Revenue Payback ARPU $50 80% RMR Attrition 13.0% 2.5x Service Margin (in years) Year 0 Year 1 Year 2 Year 3 Y
Slide 18: Ownership Model
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements CONSUMER AND SMALL BUSINESS Ownership Model Equipment Ownership Accounting • In our CSB segment, ADT has historically retained ownership of equipment for most installations. • Mix will shif
Slide 19: Commercial: Segment Overview
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements COMMERCIAL Segment Overview Key Offerings and Characteristics Segment Statistics (LTM 12/31/21) • Full suite of services for business customers including security, fire, life Commercial saf
Slide 20: Products and Services
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements COMMERCIAL Products and Services • Integrated solutions reduce cost and minimize potential risks while protecting what matters most to your organization – your people, property, and assets.
Slide 21: Segment Financials and Key Metrics
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements COMMERCIAL Segment Financials and Key Metrics Revenue Adjusted EBITDA $ in Millions $ in Millions $1,114 $1,045 $990 $109 $96 $629 $639 $563 $45 $417 $426 $474 2019 2020 2021 2019 2020 2021
Slide 22: Solar: Segment Overview
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements SOLAR Segment Overview Key Offerings Segment Statistics (LTM 12/31/21) • Design, sale, installation and service of residential solar and energy efficient Solar solutions • Financing availab
Slide 23: Products and Services
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements SOLAR Products and Services Sales Support Sales Proposals • Internally Generated Leads • Solar Systems • Custom & Comprehensive • Mobile Technology + Sales Incentives • Roof Replacements •
Slide 24: Segment Financials and Key Metrics
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements SOLAR Segment Financials and Key Metrics • ADT acquired Sunpro in December 2021. • 2021 Combined Revenue and Adjusted EBITDA includes both ADT Solar Segment Total Revenue (GAAP) and Adjuste
Slide 25: 3. Key Business Metrics
3. Key Business Metrics • Subscriber Acquisition Costs (SAC) • Recurring Monthly Revenue (RMR) • Attrition
Slide 26: Cash Subscriber Acquisition Costs
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Cash Subscriber Acquisition Costs • Net Subscriber Acquisition Costs (SAC) represent all installation revenue and installation costs in our CSB and Commercial segments. • Net SAC is the sub
Slide 27: Balanced Approach to Capital Allocation
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Balanced Approach to Capital Allocation Category Allocation Waterfall Capital to Allocate Adjusted FCF prior to subscriber acquisition 2021: $2B+ Attrition SAC spend to maintain RMR base Re
Slide 28: Recurring Monthly Revenue
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Recurring Monthly Revenue Example Calculation • Recurring monthly revenue (RMR) is the ongoing ($ in Millions) Year 1 Year 2 revenue generated from providing monthly monitoring Beginning RM
Slide 29: Attrition
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Attrition Attrition Sensitivity: Cash Flow • Gross Customer Revenue Attrition is the percentage of total recurring revenue lost as a result of customers 2021 end of period RMR $359M cancell
Slide 30: 4. Modeling and Financial Statements
4. Modeling and Financial Statements • Income Statement • Segment Modeling Overviews • Cash Flow Statement • Adjusted Free Cash Flow
Slide 31: Income Statement
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Income Statement ADT Q4’21 Press Release ADT INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) (Unaudited) Monthly subscription type fees for
Slide 32: Simplified Modeling: CSB
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Simplified Modeling: CSB FY 2021 • Average RMR is the best starting point to forecast total revenues, as ~90% of CSB revenue is generated from RMR. 2020 - End of period RMR $315M 2021 - End
Slide 33: Simplified Modeling: Commercial
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Simplified Modeling: Commercial FY 2021 • Commercial revenue includes an RMR component with more significant non-recurring service revenue than CSB, albeit at lower 2020 - End of period RMR
Slide 34: Simplified Modeling: Solar
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Simplified Modeling: Solar FY 2021 • Solar Revenue is calculated by multiplying the number of solar sales and the average solar system sales price. Gross Revenue / Install ~$47K (x) Annual
Slide 35: Cash Flow Statement
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements ADT Q4’21 Press Release ADT INC. AND SUBSIDIARIES Cash Flow Statement CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (Unaudited) Years Ended December 31, Note: amounts may not add due
Slide 36: Adjusted Free Cash Flow Modeling Overview
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements A DJUSTED FR EE CA SH FLOW Modeling Overview Adjusted Free Cash Flow can be calculated as Adjusted EBITDA FY2021 prior to subscriber acquisition costs less Net SAC, CapEx, Cash Taxes, Cash
Slide 37: 5. Other Items
5. Other Items • Capital Structure Overview • Depreciation and Amortization • Interest • Tax Considerations
Slide 38: Capital Structure Overview
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Capital Structure Overview Debt Maturity Profile • Net Leverage Ratio is calculated as the ratio of Net Debt to $ in Millions Adjusted EBITDA. 1st Lien Notes 4,572 1st Lien Term Loans 2nd L
Slide 39: Depreciation and Amortization
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Depreciation and Amortization • In connection with the Company’s acquisition of Protection One, Inc. and ASG Intermediate Holding Corp. in 2015 and the acquisition of The ADT Security Corpo
Slide 40: Interest
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Interest Interest Expense • In 2021, our GAAP interest expense was $458 million. • At YE21, our total debt carried an average effective interest rate of approximately 5%. • Interest expense
Slide 41: Tax Considerations
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Tax Considerations Net Operating Losses (NOLs) • NOLs are used to offset taxable income and results in minimal cash taxes; current NOL is $2.2B as of 12/31/2021. • ADT’s NOLs are a result o
Slide 42: 6. Appendix
6. Appendix • Glossary of Terms • Select Financial Information • GAAP to Non-GAAP Reconciliations
Slide 43: Glossary of Terms
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Glossary of Terms Average Customer Life: Represents the approximate average customer life based on trailing twelve-month attrition. Calculated as 1 divided by the approximate gross attritio
Slide 44: Additional Historical Quarterly Data
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Additional Historical Quarterly Data For the Three Months Ended (in millions) December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2021 2021 2021 2021
Slide 45: Income Statement
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Income Statement (in millions, except per share data) Three Months Ended December 31, March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, 2020 2020 2
Slide 46: Segment Information
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Segment Information (in millions) Three Months Ended March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, Total revenue 2020 2020 2020 2020 2021 2021
Slide 47: Solar Information
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Solar Information (in millions) Three Months Ended Combined March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, Total revenue - Solar 2020 2020 2020
Slide 48: Segment and Other Information
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Segment and Other Information Total Revenue by Segment: (in millions) Twelve Months Ended December 31, 2021 CSB $ 4,146 Commercial 1,114 Solar 47 Total $ 5,307 Combined Solar Revenue and Co
Slide 49: Segment and Other Information
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Segment and Other Information Sunpro and Combined Solar Adjusted EBITDA: (in millions) Three Months Ended March 31, June 30, September 30, December 31, March 31, June 30, September 30, Dece
Slide 50: Non-GAAP Measures
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements Non-GAAP Measures We sometimes use information (“non-GAAP financial measures”) that is derived from the condensed consolidated financial statements, but that is not presented in accordance
Slide 51: GAAP to Non-GAAP Reconciliations
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements GAAP to Non-GAAP Reconciliations Adjusted EBITDA and Adjusted EBITDA Margin: We believe the presentation of Adjusted EBITDA provides useful information to investors about our operating prof
Slide 52: GAAP to Non-GAAP Reconciliations
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements GAAP to Non-GAAP Reconciliations Adjusted EBITDA and Adjusted EBITDA Margin: (in millions) Twelve Months Ended December 31, December 31, December 31, December 31, December 31, 2017 2018 201
Slide 53: GAAP to Non-GAAP Reconciliations
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements GAAP to Non-GAAP Reconciliations Free Cash Flow and Adjusted Free Cash Flow: We believe the presentation of Free Cash Flow and Adjusted Free Cash Flow are appropriate to provide useful info
Slide 54: GAAP to Non-GAAP Reconciliations
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements GAAP to Non-GAAP Reconciliations Free Cash Flow, Adjusted Free Cash Flow, and Adjusted Free Cash Flow prior to subscriber acquisition: (in millions) Twelve Months Ended December 31, Decembe
Slide 55: GAAP to Non-GAAP Reconciliations
Modeling and Financial Company Overview Segment Overviews Key Business Metrics Other Items Appendix Statements GAAP to Non-GAAP Reconciliations Net Leverage Ratio and Net Debt: Net Leverage Ratio is calculated as the ratio of net debt to Adjusted EBITDA. Net Leverage Ratio (prior to subscriber acqui