Slide 1: Q2 2018 Earnings Presentation
Q2 2018 Earnings Presentation August 8, 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 5% year-over-year Adjuste
Slide 4: 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 5: 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 80% Interactive Customer
Slide 6: Highly Attractive Commercial Market Opportunity
Highly Attractive Commercial Market Opportunity ADT is Among Few National Players in Highly Fragmented ~$15-20B Commercial Market(1) ADT’s Existing Comprehensive Commercial Offering 100% Core Multi- National Integrated Commercial family Accounts Solutions 80% ▪ Monitoring Others ▪ Video Solutions 60
Slide 7: Improvement Across Key Financial and Operating Metrics
Improvement Across Key Financial and Operating Metrics For the quarters ended ($ in millions) Jun 30, 2018 Jun 30, 2017 Y/Y Change Y/Y Change % Monitoring and Service Revenue $1,023 $1,007 $16 2% Total Revenue 1,131 1,068 64 6% Net Loss (67) (93) 26 28% Adjusted EBITDA 610 583 27 5% Adjusted Net Inc
Slide 8: Total Revenue Up 6% Year over Year
Total Revenue Up 6% Year over Year Gross Customer Revenue Attrition(1)(2) Total Revenue(3) % $MM $1,131 14.1% $1,068 13.6% 108 61 1,007 1,023 LTM 6/30/17 LTM 6/30/18 Q2'17 Q2'18 Monitoring & Service Installation & Other(4) Attrition improved 50 basis points Total revenue increase of 6% ▪ Growth in M
Slide 9: Acquiring New Customers More Efficiently
Acquiring New Customers More Efficiently Customer Revenue Payback(1)(2) Net Subscriber Acquisition Costs(3) Years $MM $377 $367 2.6x 91 76 2.4x 286 290 LTM 6/30/17 LTM 6/30/18 Q2'17 Q2'18 Capitalized SAC Expensed SAC Revenue Payback improves 0.2x (years) Grew RMR adds 3% YoY, while reducing SAC 3% ▪
Slide 10: Strong Adjusted EBITDA and Adjusted Net Income
Strong Adjusted EBITDA and Adjusted Net Income Adjusted EBITDA & Margin %(1) Adjusted Net Income $MM $MM $610 $113 $583 $37 57.9% 59.7% Q2'17 Q2'18 Q2'17 Q2'18 Adjusted EBITDA increase of 5% Adjusted Net Income up $76M ▪ Growth is primarily driven by the flow through of ▪ Increase due to higher Adju
Slide 11: Continued Strong Cash Flow Generation
Continued Strong Cash Flow Generation For the quarters ended For the six months ended (in millions) Jun 30, 2018 Jun 30, 2017 Y/Y Change Jun 30, 2018 Jun 30, 2017 Y/Y Change Adjusted EBITDA $610 $583 $27 $1,230 $1,160 $70 Less: Capitalized SAC Expense (290) (286) (4) (569) (564) (5) Less: Cash Taxes
Slide 12: Capital Structure Well-Positioned to Support Growth
Capital Structure Well-Positioned to Support Growth Capital Structure(1) Second Quarter and Pro Forma Highlights $MM 12/31/17 6/30/18 6/30/18 Actual Actual Pro Forma(2) Revolver - - - ▪ Strong cash flow generation during 2nd quarter First Lien Term Loan 3,536 3,518 3,518 First Lien Notes 3,750 3,750
Slide 13: Improving FY 2018 Financial Guidance
Improving FY 2018 Financial Guidance Gross Customer Revenue Attrition(1) Total Revenue % $MM 13.7% 13.0 - 13.3% 13.0 - 13.3% 4,450-4,550 4,500-4,550 4,316 2017 2018 2018 2017 2018 2018 Actual March August Actual March August Guidance Guidance Guidance Guidance Adjusted EBITDA Free Cash Flow(2) $MM $
Slide 14: Q&A
Q&A 14 Confidential, not for distribution or publication without express consent of ADT
Slide 15: Appendix: GAAP to Non-GAAP Reconciliations & Supplemental Schedules
Appendix: GAAP to Non-GAAP Reconciliations & Supplemental Schedules
Slide 16: Additional Historical Quarterly Trend Data
Additional Historical Quarterly Trend Data $ in millions Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Key Performance Indicators Monitoring and Service Revenue $984 $990 $998 $1,007 $1,012 $1,012 $1,017 $1,023 Total Revenue 1,038 1,051 1,059 1,068 1,083 1,106 1,116 1,131 Net Loss / Income (91) (8
Slide 17: Selected Statement of Operations Components
Selected Statement of Operations Components GAAP Line Items GAAP Line Items For the quarter ended June 30, 2018 For the quarter ended June 30, 2017 Total Cost of Total Cost of ($ in millions) Revenue Revenue SG&A D&A Total Revenue Revenue SG&A D&A Total Monitoring & Service Revenue 1,023 - - - $1,02
Slide 18: Key Financial and Operating Metrics for 1H 2018
Key Financial and Operating Metrics for 1H 2018 For the six months ended ($ in millions) Jun 30, 2018 Jun 30, 2017 Y/Y Change Y/Y Change % Monitoring and Service Revenue $2,040 $2,005 $36 2% Total Revenue 2,248 2,127 121 6% Net Loss (224) (234) 10 4% Adjusted EBITDA 1,230 1,160 70 6% Adjusted Net In
Slide 19: Statements of Operations
Statements of Operations For the Quarters Ended For the Six Months Ended June 30, June 30, June 30, June 30, (in millions, except per share data) 2018 2017 2018 2017 Monitoring and related services $ 1,023 $ 1,007 $ 2,040 $ 2,005 Installation and other 108 61 207 122 Total Revenue 1,131 1,068 2,248
Slide 20: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Net loss before special items: For the Quarters Ended For the Six Months Ended June 30, June 30, June 30, June 30, (in millions) 2018 2017 2018 2017 Net loss $ (67) $ (93) $ (224) $ (234) Merger, restructuring, integration, and other costs — 19 8 40 Financing and con
Slide 21: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Adjusted EBITDA and Adjusted EBITDA Margin: For the Quarters Ended For the Six Months Ended For the Twelve Months Ended (in millions) September 30, December 31, March 31, June 30, September 30, December 31, March 31, June 30, June 30, June 30, December 31, June 30, 2
Slide 22: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Free Cash Flow before special items: For the Quarters Ended For the Six Months Ended For the Year Ended (in millions) September 30, December 31, March 31, June 30, September 30, December 31, March 31, June 30, June 30, June 30, December 31, 2016 2016 2017 2017 2017 2
Slide 23: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Debt to net income ratio: June 30, December 31, (in millions) 2018 2017 Total debt + Preferred securities (book value) $ 10,306 $ 10,852 LTM net income 352 343 Debt to net income ratio 29.3x 31.7x Net leverage ratio: June 30, December 31, (in millions) 2018 2017 Revo
Slide 24: 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