Slide 1: Q2 2020 Earnings Presentation
Q2 2020 Earnings Presentation August 5, 2020 Confidential, not for distribution or publication without express consent of ADT
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 2020 Updated Financial Ou
Slide 3: Key Takeaways
Key Takeaways ▪ Year-to-date unit growth, revenue payback improvement, and better customer retention drive results — Trailing twelve-month attrition of 13.1% vs. prior quarter of 13.5% ▪ Adjusted Free Cash Flow(1) of $232 million, up from $121 million; $405 million year to date ▪ Strong second quart
Slide 4: Q2 Results & Recent Highlights
Q2 Results & Recent Highlights ▪ Total revenue increase of 4% year-over-year, despite the sale of Canada and reduction in commercial volume due to COVID-19 Revenue Growth ▪ Higher mix of outright sales to residential customers due to revenue model change and Defenders acquisition ▪ Adjusted Free Cas
Slide 5: Managing 2020 with Focus on Long-Term Value Creation
Managing 2020 with Focus on Long-Term Value Creation ADT’s Business Model is Performing Well Long-Term Focus to Position for a to Date During COVID-19 Post-COVID-19 Environment Economic uncertainty interacts differently with ADT’s ▪ Signed and announced comprehensive, long-term contractual recurring
Slide 6: Numerous Macro Tailwinds to Propel ADT on Accelerated Growth Trajectory
Numerous Macro Tailwinds to Propel ADT on Accelerated Growth Trajectory Increasing suburbanization, Increased demand for particularly following security driven by recent COVID-19 pandemic, national events heightening will drive new demand awareness for home monitoring offerings ADT Named Premier Pro
Slide 7: ADT + Google Nest Are Committing to a Long-Term Strategic Partnership
ADT + Google Nest Are Committing to a Long-Term Strategic Partnership – Advancing Leadership in Smart Home, Security, & Safety Solutions Google investments in the Unmatched partnership Customer Experience $450M investment in ADT common Profitable equity Growth (1) Innovation $150M commitment in trai
Slide 8: Solidifying ADT's Long-Term Growth Opportunities
Solidifying ADT’s Long-Term Growth Opportunities New, future + products & A broader services product $300M in Curator of the Next-gen, combined, go- smart, helpful offering Unlock new intelligent home 6 Million + opportunities professional to-market with best- Combined funding for existing install o
Slide 9: Key Indicative Partnership Milestones
Key Indicative Partnership Milestones Horizon 3: Re-Imagination Horizon 2: Innovation Horizon 1: ▪ Future of automation & security Integration ▪ New intelligent products and services enabled by new technologies ▪ A new generation of customers ▪ Develop and launch next- generation professional instal
Slide 10: Commercial Market: Growth Deferred, Not Diminished
Commercial Market: Growth Deferred, Not Diminished Commercial Market Opportunity and Momentum Q2 Commercial Total Revenue $MM ▪ Large and historically growing ~$15 to 20 $263 Billion market(1) $227 Highly ▪ High structural penetration rates Attractive ▪ Significant barriers to entry 255 Long-Term 21
Slide 11: Strength Across Key Financial and Operating Metrics
Strength Across Key Financial and Operating Metrics Year over Year Comparison For the three months ended ($ in millions) June 30, 2020 June 30, 2019(1) Y/Y Change Y/Y Change % Monitoring and Service Revenue $1,041 $1,085 ($44) (4%) Total Revenue $1,331 $1,284 $48 4% Net Loss ($107) ($104) ($3) (3%)
Slide 12: Strength Across Key Financial and Operating Metrics
Strength Across Key Financial and Operating Metrics Sequential Comparison For the three months ended ($ in millions) June 30, 2020 March 31, 2020 Q/Q Change Q/Q Change % Monitoring and Service Revenue $1,041 $1,046 ($5) (0%) Total Revenue $1,331 $1,370 ($38) (3%) Net Loss ($107) ($300) $194 64% Adju
Slide 13: Total Revenue Up 4% Year-over-Year
Total Revenue Up 4% Year-over-Year Gross Customer Revenue Attrition(1) Total Revenue % $MM 13.3% $1,284 $1,331 198 290 13.1% 1,085 1,041 LTM 6/30/19 LTM 6/30/20 Q2'19 Q2'20 Monitoring & Service Installation & Other(2) Attrition decreased 20 basis points YoY; Total reported revenue increase of 4% imp
Slide 14: Continuing to Acquire Customers Efficiently
Continuing to Acquire Customers Efficiently Customer Revenue Payback(1)(2) Net Subscriber Acquisition Costs (SAC)(3) Years $MM $375 76 $305 2.4x 145 2.3x 299 160 LTM 6/30/19 LTM 6/30/20 Q2'19 Q2'20 (4) (5) Capitalized SAC Non-capitalized SAC Continued to strengthen SAC efficiency Reduced Net SAC spe
Slide 15: Significant Cash Flow Generation
Significant Cash Flow Generation Adjusted EBITDA & Margin %(1) Adjusted Free Cash Flow $MM $MM $630 $232 $563 $121 58.1% 54.1% Q2'19 Q2'20 Q2'19 Q2'20 Adjusted EBITDA decrease of 11%; sequential Continued strong, positive cash flow generation increase of 4% ▪ Prior year comparison is impacted by the
Slide 16: Strong Cash Flow Generation
Strong Cash Flow Generation For the three months ended For the six months ended ($ in millions) June 30, 2020 June 30, 2019 Y/Y Change June 30, 2020 June 30, 2019 Y/Y Change Adjusted EBITDA $563 $630 ($67) $1,103 $1,252 ($149) Less: Capitalized SAC(1) (160) (299) 140 (320) (591) 271 Plus: Net Procee
Slide 17: Capital Structure Well-Positioned to Support Growth
Capital Structure Well-Positioned to Support Growth Capital Structure(1) Recent Highlights $MM 12/31/19 6/30/20 Pro forma for Google Actual Actual Investment(3) Revolver - - - ▪ Repaid outstanding revolver balance of $220M during the First Lien Term Loan 3,102 3,087 3,087 quarter First Lien Notes 5,
Slide 18: 2020 Improved Financial Outlook
2020 Improved Financial Outlook (1)(2) Total Revenue of $5,050M - $5,300M; previously $5,000M - $5,300M ▪ Strength in monthly recurring revenues offset by lower service and installation revenues in Total Revenue Commercial due to COVID-19 and related impacts ▪ Residential direct sales (excluding leg
Slide 19: Snapshot of Business by Customer Type and Unit Count
Snapshot of Business by Customer Type and Unit Count Market Profile (LTM 6/30/20) Unit Count Small Large / Residential Total Business Multi-Site Units in millions Q2’20 Q2’19 Y/Y % Q1’20 Q/Q % Interactive 3.0 2.7 10% 2.9 2% Unit Count ~5,800K ~500K ~300K ~6,500K Traditional 2.7 3.0 (10%) 2.8 (2%) En
Slide 20: Q&A
Q&A 20 Confidential, not for distribution or publication without express consent of ADT
Slide 21: Appendix
Appendix
Slide 22: Strength Across Key Financial and Operating Metrics
Strength Across Key Financial and Operating Metrics For the six months ended ($ in millions) June 30, 2020 June 30, 2019(1) Y/Y Change Y/Y Change % Monitoring and Service Revenue $2,087 $2,156 ($69) (3%) Total Revenue $2,701 $2,527 $174 7% Net Loss ($407) ($171) ($237) (139%) Adjusted EBITDA $1,103
Slide 23: ADT is the Leader in Security & Automation
ADT is the Leader in Security & Automation For 6.5 Million Providing From approximately 20,000 Generating $5 Billion Total Customers Professional Service Employees, including 5,000 of Revenue with ~80% with Over 3 Million 24 Hours/Day Service Professionals Contractually Recurring Interactive Custome
Slide 24: Growing Portfolio of Smart Home & Safety Devices
Growing Portfolio of Smart Home & Safety Devices At the center of the Security + home automation accessible anywhere from one app connected home ADT Control Touchscreen Keypad Home Home Security Fire, Home & Monitoring Automation Security Cameras Safety Services Smart Home Capabilities SixTM Wireles
Slide 25: America's #1 Smart Home Security Provider
America’s #1 Smart Home Security Provider (1) A large and growing …and dramatically growing …that ADT has demonstrated market for security… smart home market… the ability to capture. 82% 82% 82% 84% 85% 75% 71% 73% 74% 74% 66% 66% ~20% CAGR 49% 44% 47% 48% ~20% 39% 40% 41% 43% $33B 33 34% 35% 37% 38
Slide 26: Additional Historical Quarterly Data
Additional Historical Quarterly Data For the Three Months Ended (in millions) June 30, September 30, December 31, March 31, June 30, 2019 2019 2019 2020 2020 Key Performance Indicators Monitoring and Service Revenue $1,085 $1,094 $1,058 $1,046 $1,041 Total Revenue $1,284 $1,301 $1,298 $1,370 $1,331
Slide 27: Selected Statement of Operations Components
Selected Statement of Operations Components GAAP Line Items GAAP Line Items For the three months ended June 30, 2020 For the three months ended June 30, 2019 Total Cost of Total Cost of ($ in millions) Revenue Revenue SG&A D&A Total Revenue Revenue SG&A D&A Total Monitoring & Service Revenue 1,033 -
Slide 28: Statements of Operations
Statements of Operations Statements of Operations: 28 Confidential, not for distribution or publication without express consent of ADT
Slide 29: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Net Loss Before Special Items: Diluted EPS Before Special Items: Notes: 1. Represents fees expensed associated with financing transactions 2. Represents the conversion of intercompany loans that are denominated in Canadian dollars to U.S. dollars 3. Represents costs,
Slide 30: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Adjusted EBITDA and Adjusted EBITDA Margin: Notes: 1. Represents costs, net of any incremental revenue earned, associated with replacing cellular technology used in many of our security systems pursuant to a replacement program 2. Represents fees expensed associated
Slide 31: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Free Cash Flow and Adjusted Free Cash Flow: Note: 1. The three months ended March 31, 2020 included $81 million related to the settlement of a pre-existing relationship in connection with the Defenders Acquisition. This was partially offset by $25 million related to
Slide 32: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Debt to Net Income Ratio: Net Leverage Ratio: Note: 1. Debt instruments are stated at face value 2. Giving effect to the recently announced agreement by Google LLC to acquire $450 million of newly created ADT Class B common stock as if such transaction had occurred o
Slide 33: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Commercial Organic Revenue and Commercial Organic Revenue Growth: Notes: 1. Represents total revenue associated with commercial and national accounts 2. Represents incremental total revenue associated with commercial and national accounts from acquisitions until ther
Slide 34: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Revenue Excluding Canada; and Revenue Growth Excluding Canada: Note: 1. Represents total revenue from ADT Canada, which was sold in November 2019 34 Confidential, not for distribution or publication without express consent of ADT
Slide 35: Non-GAAP Measures
Non-GAAP Measures To provide investors with additional information in connection with our results as determined in accordance with generally accepted accounting principles in the United States (“GAAP”), we disclose Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow, Adjusted Free Cash Flow, Net