Slide 1: Q4 2017 Earnings Presentation
Q4 2017 Earnings Presentation March 15, 2018
Slide 2: Forward Looking Statements
Forward Looking Statements ADT has made statements in this press release and other reports, filings, and other public written and verbal announcements that are forward-looking and therefore subject to risks and uncertainties. All statements, other than statements of historical fact, included in this
Slide 3: Today's Presenters
Today’s Presenters Timothy J. Whall Jim DeVries Jeff Likosar Chief Executive Officer President Chief Financial Officer 3 Confidential, not for distribution or publication without express consent of ADT
Slide 4: Why We Are Excited to Tell the ADT Story
Why We Are Excited to Tell the ADT Story Center of the Security and Connected Smart Home Ecosystem ▪ 5x the size of next largest residential competitor and one of the largest national players ▪ Trusted partner of choice for connectivity and access into the home ▪ Unparalleled market leader with #1 b
Slide 5: Service is Our Business and Our Key Competitive Advantage
Service is Our Business and Our Key Competitive Advantage Our Expansive National Footprint Iconic Brand with Unparalleled Recognition 200+ % of Consumers Surveyed Who Viewed ADT as the Best Branch Locations Brand vs. Other Competitors (1) 54% ~7.2MM Customers (2) ~2MM+ Disaster Recovery Annual Servi
Slide 6: Our Operating Focus is Centered on Three Core Objectives
Our Operating Focus is Centered on Three Core Objectives Key Levers and Objectives Management Attributes Retain Our 1 Existing ▪ Data and daily management Customers are core to how we manage the company ▪ Fluent in and integrated with field employees ‘day- to-day’ ▪ Customer at the center of everyth
Slide 7: Customer Retention Has Improved Significantly
Customer Retention Has Improved Significantly Retain our Existing Customers: Trailing 12-Months Gross Revenue Attrition Our Key Metric is Gross Revenue Attrition We Have Opportunity for Further Improvement ▪ Captures all customer loss and focuses management ▪ Customer service initiatives are in the
Slide 8: Our Efficient Customer Acquisition Approach
Our Efficient Customer Acquisition Approach Net Subscriber Acquisition Costs (‘SAC’) are down substantially and Revenue Payback improved from 2.7x to 2.5x since 2015(1) Customer Profile (2) Our Focus on RMR Commercial Residential Small Business Large / Multi-Site ▪ Our focus is on adding high qualit
Slide 9: Financial Overview
SECURED BY 800.ADT.ASAP ADT.COM Financial Overview
Slide 10: Q4'17 Key Performance Indicators: Retain Our Existing Customers and Drive Revenue Growth
Q4’17 Key Performance Indicators 1 Retain Our Existing Customers and Drive Revenue Growth Gross Customer Revenue Attrition (1)(2) Revenue % $MM 14.8% 1,106 1,055 13.7% 93 61 994 (3) 1,012 LTM 12/31/2016 LTM 12/31/2017 Q4 CY16 Q4 CY17 Monitoring & Service Installation & Other(4) Attrition down 110 ba
Slide 11: Q4'17 Key Performance Indicators: Acquire New Customers More Efficiently
Q4’17 Key Performance Indicators 2 Acquire New Customers More Efficiently Customer Revenue Payback (1) Net Subscriber Acquisition Costs (2) Years $MM 2.7x 379 363 2.5x 95 75 284 288 LTM 12/31/2016 LTM 12/31/2017 Q4 CY16 Q4 CY17 Capitalized SAC Expensed SAC Revenue Payback improves 0.2x Spend down 4%
Slide 12: Q4'17 Key Performance Indicators: Optimize Adjusted EBITDA
Q4’17 Key Performance Indicators 3 Optimize Adjusted EBITDA Adjusted EBITDA(1) Cash Net Income(1) $MM $MM 598 76 553 11 Q4 CY16 Q4 CY17 Q4 CY16 Q4 CY17 Adjusted EBITDA increase of 8% Cash Net Income up $65M ▪ Higher recurring revenues flow through at high ▪ Measure of Adjusted EBITDA less capitalize
Slide 13: 2017 Full Year Summary
2017 Full Year Summary 1 Revenue & Attrition (1) 2 SAC & Revenue Payback (1) 3 Adj. EBITDA & Cash Net Income(2) $MM, % $MM, Year $MM 14.8% 2.7x 13.7% 2.5x 2,353 1,640 2,177 4,316 4,167 1,488 286 212 519 426 3,954 4,029 1,517 1,352 2016 2017 2016 2017 2016 2017 Monitoring & Service Total SAC AEBITDA
Slide 14: Cash Flow Summary
Cash Flow Summary For the quarter ended For the twelve months ended ($ in millions) Dec 31,2017 Dec 31,2016 Y/Y Change Dec 31,2017 Dec 31,2016 Y/Y Change Adjusted EBITDA 598 553 45 2,353 2,177 176 Less: Capitalized SAC Expense (288) (284) (4) (1,154) (1,234) 80 Less: Cash Taxes (5) (2) (3) (19) (7)
Slide 15: Pro Forma Capital Structure and Capital Allocation Framework
Pro Forma Capital Structure and Capital Allocation Framework IPO Sources and Uses Capital Allocation Framework $MM $MM Sources A Organic Growth Gross IPO Proceeds 1,470 ▪ Focus on account creation that supports stable and Total Sources 1,470 profitable growth Uses (1) Funds to Escrow for Redemption
Slide 16: FY 2018 Guidance
FY 2018 Guidance Gross Customer Revenue Attrition (1) Total Revenue % $MM 13.7% 4,450-4,550 13.0 - 13.3% 4,316 2017 2018 2017 2018 Adjusted EBITDA (2) Free Cash Flow (2)(3) $MM $MM 2,415-2,435 475-525 2,353 403 2017 2018 2017 2018 Notes 1. Excludes wholesale customers who outsource their monitoring
Slide 17: Strengthening Profile For Future Growth
Strengthening Profile For Future Growth Illustrative Revenue Growth Build A Core Growth & Efficiency B Commercial Expansion C New Markets/Market Growth Improving core operations with Building out Commercial and Positioning for opportunities in data and outlier management Multi-Site capabilities new
Slide 18: Q&A
Q&A 18 Confidential, not for distribution or publication without express consent of ADT
Slide 19: Appendix
Appendix
Slide 20: Statements of Operations
Statements of Operations For the Quarters Ended For the Years Ended December 31, December 31, 2017 2016 2017 2016(1) 2016 (in millions) Actual Actual Actual Pro Forma Actual Monitoring and related services $ 1,012 $ 990 $ 4,029 $ 3,954 $ 2,748 Installation and other (2) 93 61 286 212 202 Total Reven
Slide 21: Free Cash Flow and Historical Combined Free Cash Flow
Free Cash Flow and Historical Combined Free Cash Flow Historical Combined For the For the Year Quarters Ended For the Years Ended Ended(1) \ December 31, December 31, December 31, (in millions) 2017 2016 2017 2016 2016 Actual Actual Actual Actual Pro Forma Net cash provided by operating activities $
Slide 22: Adjusted EBITDA Reconciliation to Net Income (Loss)
Adjusted EBITDA Reconciliation to Net Income (Loss) For the Quarters Ended For the Years Ended December 31, December 31, 2017 2016 2017 2016(1) 2016 (in millions) Actual Actual Actual Pro Forma Actual Net income (loss) $ 638 $ (85) $ 343 $ (285) $ (537) Interest expense, net 179 184 733 750 521 Inco
Slide 23: Cash Net Income
Cash Net Income For the Quarters Ended For the Years Ended December 31, December 31, (in millions) 2017 2016 2017 2016(1) 2016 Actual Actual Actual Pro Forma Actual Adjusted EBITDA $ 598 $ 553 $ 2,353 $ 2,177 $ 1,533 Capitalized SAC (288) (284) (1,154) (1,234) (852) Cash taxes (5) (2) (19) (7) (5) C
Slide 24: Net (Loss) Income and Diluted EPS Before Special Items
Net (Loss) Income and Diluted EPS Before Special Items(2) For the Quarters Ended For the Years Ended December 31, December 31, (in millions) 2017 2016 2017 2016(1) 2016 Actual Actual Actual Pro Forma Actual Net income (loss) $ 638 $ (85) $ 343 $ (285) $ (537) Merger, restructuring, integration, and
Slide 25: Non-GAAP Measures
Non-GAAP Measures To provide investors with additional information in connection with our results as determined by generally accepted accounting principles in the United States (“GAAP”), we also disclose the following non-GAAP financial measures: Adjusted EBITDA, Supplemental Pro Forma Adjusted EBIT