Slide 1: Q1 2019 Earnings Presentation
Q1 2019 Earnings Presentation May 7, 2019
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 Affirming 2019 Guidance.
Slide 3: Q1 Performance Highlights
Q1 Performance Highlights Balanced Revenue ▪ Total Revenue increase of 11% year-over-year, 4% excluding Red Hawk Growth ▪ Increased residential interactive penetration coupled with commercial growth ▪ Adjusted EBITDA slightly improved, despite $17.5M of favorable legal settlements in Adjusted EBITDA
Slide 4: The Next Generation of Security and Home Automation
The Next Generation of Security and Home Automation At the Center of the Connected Home Driving Increased Interactive Adoption 7 100% ADT Command Panel Touchscreen Keypad 6 Interactive Customers (millions) 75% 71% 73% 74% 74% Pulse/Control Take Rate 80% 66% 66% 5 58% 59% 61% 64% 55% 57% 4 60% Smart
Slide 5: Strong Growth Opportunities in Commercial Market
Strong Growth Opportunities in Commercial Market Commercial Security Opportunity and Momentum Q1 Commercial Total Revenue and Growth ▪ Large and growing ~$15 to 20 Billion(1) $237 ▪ High structural penetration rates 95 $132 Highly ▪ Significant barriers to entry Attractive Market ▪ Quality of servic
Slide 6: Strength Across Key Financial and Operating Metrics
Strength Across Key Financial and Operating Metrics For the quarters ended ($ in millions) Mar 31, 2019 Mar 31, 2018 Y/Y Change Y/Y Change % Monitoring and Service Revenue $1,070 $1,017 $53 5% Total Revenue $1,243 $1,116 $127 11% Net Loss ($66) ($157) $91 58% Adjusted EBITDA $621 $620 $2 0% Free Cas
Slide 7: Total Revenue Up 11% Year-over-Year
Total Revenue Up 11% Year-over-Year Gross Customer Revenue Attrition(1)(2) Total Revenue % $MM $1,243 13.6% $1,116 173 99 13.3% 1,017 1,070 LTM 3/31/18 LTM 3/31/19 Q1'18 Q1'19 Monitoring & Service Installation & Other(3) Attrition improved 30 basis points Total revenue increase of 11% ▪ M&S Revenue
Slide 8: Customer Revenue Payback Continues to Improve
Customer Revenue Payback Continues to Improve Customer Revenue Payback(1)(2) Net Subscriber Acquisition Costs (SAC)(3) Years $MM $354 $365 2.5x 2.4x 75 74 279 291 LTM 3/31/18 LTM 3/31/19 Q1'18 Q1'19 Capitalized SAC Expensed SAC Revenue Payback improves 0.1x (years) Higher SAC spend on upgrades and a
Slide 9: Adjusted EBITDA and FCF Generation Remains Robust
Adjusted EBITDA and FCF Generation Remains Robust Adjusted EBITDA & Margin %(1) Free Cash Flow (before special items) $MM $MM $187 $620 $621 $171 60.9% 58.0% Q1'18 Q1'19 Q1'18 Q1'19 Adjusted EBITDA is marginally up Continued Strong, Positive Free Cash Flow ▪ Higher revenue and operating cost discipl
Slide 10: Strong Cash Flow Generation
Strong Cash Flow Generation For the quarters ended ($ in millions) Mar 31, 2019 Mar 31, 2018 Y/Y Change Adjusted EBITDA $621 $620 $2 Less: Capitalized SAC (291) (279) (12) Less: Cash Taxes 2 2 0 Less: Cash Interest (99) (94) (5) Less: Capital Expenditures(1) (37) (29) (8) Less: Working Capital & Oth
Slide 11: Capital Structure Well-Positioned to Support Growth
Capital Structure Well-Positioned to Support Growth Capital Structure(1) Recent Highlights $MM $MM 12/31/18 3/31/19 3/31/19 ▪ Redeemed $300M 2nd lien notes on 2/1/19 Actual Actual Pro Forma(2) ▪ Issued $1.5B new 1st lien notes in April to repay $1B 2nd lien Revolver - - 35 notes and $0.5B 1st lien t
Slide 12: Affirming 2019 Guidance
Affirming 2019 Guidance Total Revenue Adjusted EBITDA $MM $MM $4,900-$5,100 $2,460-$2,500 $2,453 $4,582 2018 2019 2018 2019 Free Cash Flow (before special items)(1) Gross Customer Revenue Attrition(2) $MM % $570-$610 $538 13.3% 13.2% - 12.8% 2018 2019 2018 2019 Notes: 12 1. On July 2, 2018, the Comp
Slide 13: Snapshot of Business by Customer Type and Unit Count
Snapshot of Business by Customer Type and Unit Count Market Profile (LTM 3/31/19) Unit Count Small Large / Residential Total Units in millions Q1’19 Q1’18 Y/Y % Q4’18 Q/Q % Business Multi-Site Interactive 2.7 2.4 13% 2.6 3% Traditional 3.1 3.5 (10%) 3.2 (2%) Unit Count(1) ~6,400K ~500K ~300K ~7,200K
Slide 14: Q&A
Q&A 14 Confidential, not for distribution or publication without express consent of ADT
Slide 15: Appendix
SECURED BY ADOT 800.ADT.ASAP ADT.COM Appendix
Slide 16: Additional Historical Quarterly Data
Additional Historical Quarterly Data $ in millions Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Key Performance Indicators Monitoring and Service Revenue $1,017 $1,023 $1,029 $1,040 $1,070 Total Revenue 1,116 1,131 1,148 1,185 1,243 Net (Loss) / Income (157) (67) (236) (149) (66) Adjusted EBITDA 620 610 610 614 62
Slide 17: Selected Statement of Operations Components
Selected Statement of Operations Components GAAP Line Items GAAP Line Items For the quarter ended March 31, 2019 For the quarter ended March 31, 2018 Total Cost of Total Cost of ($ in millions) Revenue Revenue SG&A D&A Total Revenue Revenue SG&A D&A Total Monitoring & Service Revenue 1,070 - - - $1,
Slide 18: Statements of Operations
Statements of Operations For the Three Months Ended (in millions, except per share data) March 31, March 31, 2019 2018 M onitoring and related services $ 1,070 $ 1,017 Installation and other 173 99 Total revenue 1,243 1,116 Cost of revenue (exclusive of depreciation and amortization shown separately
Slide 19: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Net Loss Before Special Items: For the Three Months Ended March 31, March 31, (in millions, except per share data) 2019 2018 Net loss $ (66) $ (157) M erger, restructuring, integration, and other 6 8 Financing and consent fees 1 — Foreign currency (gains)/losses (1)
Slide 20: 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) March 31, June 30, S eptember 30, December 31, March 31, December 31, March 31, 2018 2018 2018 2018 2019 2018 2019 Net (loss) income $ (157) $ (67) $ (236
Slide 21: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Free Cash Flow, Free Cash Flow before special items: For the Twelve For the Three Months Ended Months Ended (in millions) March 31, June 30, S eptember 30, December 31, March 31, December 31, 2018 2018 2018 2018 2019 2018 Net cash provided by operating activities $ 5
Slide 22: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Debt to Net Loss Ratio: March 31, December 31, (in millions) 2019 2018 Total debt (book value) $ 9,714 $ 10,002 LTM net loss (518) (609) Debt to net loss ratio (18.7x) (16.4x) Net Leverage Ratio: March 31, December 31, (in millions) 2019 2018 Revolver $ - $ - First l
Slide 23: 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 disclose Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow, Free Cash Flow before special items, Net Inc