Slide 1: Q3 2018 Earnings Presentation
Q3 2018 Earnings Presentation November 7, 2018
Slide 2: Forward Looking Statements
Forward Looking Statements 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. All statements, other than statements of historical fact, included in this
Slide 3: Strong Quarter Across All Areas of the Business
Strong Quarter Across All Areas of the Business Balanced Revenue ▪ Total Revenue increase of 6% year-over-year, driven by higher revenue in Growth with FCF commercial and multi-site accounts and higher residential Pulse penetration Optimization ▪ Adjusted EBITDA increase of 3% year-over-year Adjuste
Slide 4: Red Hawk Will Re-establish ADT as a Commercial Leader
Red Hawk Will Re-establish ADT as a Commercial Leader Key Highlights ADT + Red Hawk Total Revenue 1% 18% Expected to close by end of 2018 8% Enhances commercial management expertise, technician base and sales force Increases product array with introduction of 73% additional fire related offerings Re
Slide 5: At the Center of the Connected Home
At the Center of the Connected Home Pulse Mobile Application Security + Home Automation, Accessible Anywhere from One App Home Home Security Fire, Home Monitoring Security Automation Cameras & Safety Services Lights Thermostat Garage Door Doorbell Electric Locks Sensors Water Leaks Alerts Video Clip
Slide 6: Increased Interactive Services Penetration Represents Substantial Opportunity
Increased Interactive Services Penetration Represents Substantial Opportunity Interactive Service is Becoming the New Pulse Sales Penetration Continues to Rise Norm for New ADT Customers(3) 7 100% ~90M Pulse Take Rate and % of Total Customer Base Average Monthly App Logins 6 74% 80% Interactive Cust
Slide 7: Leader in Voice-Assisted Security and Home Automation
Leader in Voice-Assisted Security and Home Automation Expanding Existing Relationship with Amazon ADT & Alexa Guard: How It Will Work 2017: Voice Integration with Amazon Alexa ▪ When at home, offers 100+ commands, such as: “Alexa, Ask ADT 1 Detect the sounds that matter to close my garage door.” “Al
Slide 8: Improvement Across Key Financial and Operating Metrics
Improvement Across Key Financial and Operating Metrics For the quarters ended ($ in millions) Sep 30, 2018 Sep 30, 2017 Y/Y Change Y/Y Change % Monitoring and Service Revenue $1,029 $1,012 $17 2% Total Revenue 1,148 1,083 65 6% Net Loss (236) (62) (174) (281%) Adjusted EBITDA 610 594 15 3% Adjusted
Slide 9: Total Revenue Up 6% Year-over-Year
Total Revenue Up 6% Year-over-Year Gross Customer Revenue Attrition(1) Total Revenue(2) % $MM $1,148 $1,083 13.8% 119 13.4% 71 1,012 1,029 LTM 9/30/17 LTM 9/30/18 Q3'17 Q3'18 Monitoring & Service Installation & Other(3) Attrition improved 40 basis points Total revenue increase of 6% ▪ Growth in Moni
Slide 10: Acquiring New Customers More Efficiently
Acquiring New Customers More Efficiently Customer Revenue Payback(1)(2) Net Subscriber Acquisition Costs(3) Years $MM 2.5x $405 $385 2.4x 76 84 301 328 LTM 9/30/17 LTM 9/30/18 Q3'17 Q3'18 Capitalized SAC Expensed SAC Revenue Payback improves 0.1x (years) Grew RMR adds 7% YoY ▪ Improvement driven by
Slide 11: Strong Adjusted EBITDA and Adjusted Net Income
Strong Adjusted EBITDA and Adjusted Net Income Adjusted EBITDA & Margin %(1) Adjusted Net Income(2) $MM $MM $610 $594 $208 $194 58.7% 59.2% Q3'17 Q3'18 Q3'17 Q3'18 Adjusted EBITDA increase of 3% Adjusted Net Income down 7% ▪ Growth is primarily driven by flow through of high ▪ Growth in Adjusted EBI
Slide 12: Continued Strong Cash Flow Generation
Continued Strong Cash Flow Generation For the quarters ended For the nine months ended (in millions) Sep 30, 2018 Sep 30, 2017 Y/Y Change Sep 30, 2018 Sep 30, 2017 Y/Y Change Adjusted EBITDA $610 $594 $15 $1,840 $1,754 $86 Less: Capitalized SAC (328) (301) (27) (897) (865) (32) Less: Cash Taxes (1)
Slide 13: Capital Structure Well-Positioned to Support Growth
Capital Structure Well-Positioned to Support Growth Capital Structure(1) Third Quarter Highlights $MM $MM 12/31/17 9/30/18 Revolver - - First Lien Term Loan 3,536 3,509 ▪ Redeemed Preferred Securities on 7/2/2018 First Lien Notes 3,750 3,750 Capital Leases 41 35 ▪ Entered into agreement to acquire R
Slide 14: Raising FY 2018 Financial Guidance
Raising FY 2018 Financial Guidance Gross Customer Revenue Attrition(1) Total Revenue % $MM 13.7% 13.0 - 13.3% 13.2 - 13.3% 4,500-4,550 4,525-4,550 4,316 2017 2018 2018 2017 2018 2018 Actual Prior November Actual Prior November Guidance Guidance Guidance Guidance Adjusted EBITDA Free Cash Flow(2) $MM
Slide 15: Q&A
Q&A 15 Confidential, not for distribution or publication without express consent of ADT
Slide 16: Appendix
SECURED BY 7 800.ADT.ASAP ADT.COM Appendix
Slide 17: Additional Historical Quarterly Trend Data
Additional Historical Quarterly Trend Data $ in millions Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Key Performance Indicators Notes: Monitoring and Service Revenue $990 $998 $1,007 $1,012 $1,012 $1,017 $1,023 $1,029 Total Revenue 1,051 1,059 1,068 1,083 1,106 1,116 1,131 1,148 Net (Loss) / Inc
Slide 18: Selected Statement of Operations Components
Selected Statement of Operations Components GAAP Line Items GAAP Line Items For the quarter ended September 30, 2018 For the quarter ended September 30, 2017 Total Cost of Total Cost of ($ in millions) Revenue Revenue SG&A D&A Total Revenue Revenue SG&A D&A Total Monitoring & Service Revenue 1,029 -
Slide 19: Improvement Across Key Financial and Operating Metrics
Improvement Across Key Financial and Operating Metrics For the nine months ended ($ in millions) Sep 30, 2018 Sep 30, 2017 Y/Y Change Y/Y Change % Monitoring and Service Revenue $3,070 $3,017 $53 2% Total Revenue 3,396 3,210 186 6% Net Loss (460) (296) (164) (56%) Adjusted EBITDA 1,840 1,754 86 5% A
Slide 20: Statements of Operations
Statements of Operations For the Quarters Ended For the Nine Months Ended S eptember 30, S eptember 30, S eptember 30, S eptember 30, (in millions, except per share data) 2018 2017 2018 2017 M onitoring and related services $ 1,029 $ 1,012 $ 3,070 $ 3,017 Installation and other 119 71 326 193 Total
Slide 21: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Net Loss Before Special Items: For the Quarters Ended For the Nine Months Ended S eptember 30, S eptember 30, S eptember 30, S eptember 30, (in millions, except per share data) 2018 2017 2018 2017 Net loss $ (236) $ (62) $ (460) $ (296) M erger, restructuring, integr
Slide 22: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Adjusted EBITDA and Adjusted EBITDA Margin: For the Quarters Ended For the Nine Months Ended For the Twelve Months Ended (in millions) December 31, March 31, June 30, S eptember 30, December 31, March 31, June 30, S eptember 30, S eptember 30, S eptember 30, December
Slide 23: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Free Cash Flow Before Special Items: For the Quarters Ended For the Nine Months Ended For the Year Ended (in millions) December 31, March 31, June 30, S eptember 30, December 31, March 31, June 30, S eptember 30, S eptember 30, S eptember 30, December 31, 2016 2017 2
Slide 24: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Debt to Net Income Ratio: S eptember 30, December 31, (in millions) 2018 2017 Total debt + Preferred securities (book value) $ 9,568 $ 10,852 LTM net income 179 343 Debt to net income ratio 53.5x 31.7x Net Leverage Ratio: S eptember 30, December 31, (in millions) 201
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 disclose the following non-GAAP financial measures: Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow, F