Slide 1: Q2 2019 Earnings Presentation
Q2 2019 Earnings Presentation August 6, 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 Updating 2019 Guidance. A
Slide 3: Q2 Performance Highlights
Q2 Performance Highlights Strong Revenue ▪ Total Revenue increase of 13% year-over-year, 5% excluding Red Hawk Growth ▪ Increased residential interactive penetration coupled with commercial growth Adjusted EBITDA ▪ Adjusted EBITDA increase of 3% year-over-year and Cash Flow Growth ▪ Free Cash Flow b
Slide 4: Pulse/Control Take Rate
The Next Generation of Security and Home Automation At the Center of the Connected Home Driving Increased Interactive Adoption 7 100% ADT Command Panel 82% 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% Sm
Slide 5: Continuing Strong Growth in Commercial Market
Continuing Strong Growth in Commercial Market Commercial Security Opportunity and Momentum Q2 Commercial Total Revenue and Growth ▪ Large and growing ~$15 to 20 Billion(1) $263 ▪ High structural penetration rates 98 $139 Highly ▪ Significant barriers to entry Attractive ▪ Quality of service drives m
Slide 6: Strength Across Key Financial and Operating Metrics
Strength Across Key Financial and Operating Metrics For the quarters ended ($ in millions) June 30, 2019 June 30, 2018 Y/Y Change Y/Y Change % Monitoring and Service Revenue $1,085 $1,023 $62 6% Total Revenue $1,284 $1,131 $152 13% Net Loss ($104) ($67) ($37) (56%) Adjusted EBITDA $630 $610 $20 3% F
Slide 7: Total Revenue Up 13% Year-over-Year
Total Revenue Up 13% Year-over-Year Gross Customer Revenue Attrition(1)(2) Total Revenue % $MM $1,284 $1,131 198 13.5% 108 13.3% 1,023 1,085 LTM 6/30/18 LTM 6/30/19 Q2'18 Q2'19 Monitoring & Service Installation & Other(3) Attrition improved 20 basis points Total revenue increase of 13% ▪ M&S Revenue
Slide 8: Continued to Acquire Customers Efficiently
Continued to Acquire Customers Efficiently Customer Revenue Payback(1)(2) Net Subscriber Acquisition Costs (SAC)(3) Years $MM $367 $370 ~flat 71 2.4x 2.4x 76 290 299 LTM 6/30/18 LTM 6/30/19 Q2'18 Q2'19 Capitalized SAC Expensed SAC Continued to generate SAC efficiency SAC up 1% YoY while RMR adds up
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 $630 $123 $121 $610 59.7% 58.1% Q2'18 Q2'19 Q2'18 Q2'19 Adjusted EBITDA increase of 3% Continued Strong, Positive Free Cash Flow ▪ Higher revenue and operating cost disciplin
Slide 10: Strong Cash Flow Generation
Strong Cash Flow Generation For the quarters ended For the six months ended ($ in millions) June 30, 2019 June 30, 2018 Y/Y Change June 30, 2019 June 30, 2018 Y/Y Change Adjusted EBITDA $630 $610 $20 $1,252 $1,230 $21 Less: Capitalized SAC (299) (290) (9) (591) (569) (21) Less: Cash Taxes (6) (5) (1
Slide 11: Capital Structure Well-Positioned to Support Growth
Capital Structure Well-Positioned to Support Growth Capital Structure(1) $MM Recent Highlights $MM 12/31/18 6/30/19 Actual Actual Revolver - 99 ▪ Issued $1.5B new 1st lien notes to repay $1B 2nd lien First Lien Term Loan 3,924 3,414 notes and $0.5B 1st lien term loan in April’19 First Lien Notes 3,7
Slide 12: Updating 2019 Guidance
Updating 2019 Guidance Total Revenue Adjusted EBITDA $MM $4,900-$5,100 $5,000-$5,150 $MM $2,460-$2,500 $2,470-$2,500 $2,453 $4,582 2018 2019 2019 2018 2019 2019 March August March August Guidance Guidance Guidance Guidance Free Cash Flow (before special items)(1) Gross Customer Revenue Attrition(2)
Slide 13: Snapshot of Business by Customer Type and Unit Count
Snapshot of Business by Customer Type and Unit Count Market Profile (LTM 6/30/19) Unit Count Small Large / Residential Total Units in millions Q2’19 Q2’18 Y/Y % Q1’19 Q/Q % Business Multi-Site Interactive 2.7 2.4 12% 2.7 3% Traditional 3.0 3.4 (10%) 3.1 (4%) Unit Count(1) ~6,300K ~500K ~300K ~7,100K
Slide 14: Q&A
Q&A 14 Confidential, not for distribution or publication without express consent of ADT
Slide 15: Appendix
SECURED BY ADOT 800.ADT.ASAP ADT.COM Appendix
Slide 16: Key Financial and Operating Metrics for 1H 2019
Key Financial and Operating Metrics for 1H 2019 For the six months ended ($ in millions) June 30, 2019 June 30, 2018 Y/Y Change Y/Y Change % Monitoring and Service Revenue $2,156 $2,040 $115 6% Total Revenue $2,527 $2,248 $279 12% Net Loss ($171) ($224) $54 24% Adjusted EBITDA $1,252 $1,230 $21 2% F
Slide 17: Additional Historical Quarterly Data
Additional Historical Quarterly Data $ in millions Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Key Performance Indicators Monitoring and Service Revenue $1,023 $1,029 $1,040 $1,070 $1,085 Total Revenue 1,131 1,148 1,185 1,243 1,284 Net Loss (67) (236) (149) (66) (104) Adjusted EBITDA 610 610 614 621 630 Adjusted
Slide 18: Selected Statement of Operations Components
Selected Statement of Operations Components GAAP Line Items GAAP Line Items For the quarter ended June 30, 2019 For the quarter ended June 31, 2018 Total Cost of Total Cost of ($ in millions) Revenue Revenue SG&A D&A Total Revenue Revenue SG&A D&A Total Monitoring & Service Revenue 1,085 - - - $1,08
Slide 19: Statements of Operations
Statements of Operations For the Quarters Ended For the S ix Months Ended (in millions, except per share data) June 30, June 30, June 30, June 30, 2019 2018 2019 2018 M onitoring and related services $ 1,085 $ 1,023 $ 2,156 $ 2,040 Installation and other 198 108 371 207 Total revenue 1,284 1,131 2,5
Slide 20: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Net Loss Before Special Items: For the Quarters Ended For the S ix Months Ended June 30, June 30, June 30, June 30, (in millions, except per share data) 2019 2018 2019 2018 Net loss $ (104) $ (67) $ (171) $ (224) M erger, restructuring, integration, and other 7 — 13
Slide 21: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Adjusted EBITDA and Adjusted EBITDA Margin: For the Three Months Ended For the S ix Months Ended For the Twelve Months Ended (in millions) June 30, S eptember 30, December 31, March 31, June 30, June 30, June 30, June 30, December 31, 2018 2018 2018 2019 2019 2019 20
Slide 22: 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 For the S ix Months Ended Months Ended (in millions) June 30, S eptember 30, December 31, March 31, June 30, June 30, June 30, December 31, 2018 2018 2018 2019 2019 2019 20
Slide 23: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Debt to Net Income Ratio: June 30, December 31, (in millions) 2019 2018 Total debt (book value) $ 9,811 $ 10,002 LTM net loss (556) (609) Debt to net loss ratio (17.7x) (16.4x) Net Leverage Ratio: June 30, December 31, (in millions) 2019 2018 Revolver $ 99 $ - First
Slide 24: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Commercial Organic Revenue Growth: For the Three Months Ended (in millions) June 30, June 30, 2019 2018 Total revenue $ 1,284 $ 1,131 Revenue growth 13% (1) Commercial revenue $ 263 $ 139 Commercial revenue growth 90% Acquisition-related commercial revenue (2) $ 98 $
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 Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow, Free Cash Flow before special items, Net Inc