Slide 1: Q4 2018 Earnings Presentation
Q4 2018 Earnings Presentation March 11, 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 2019 Guidance. All statem
Slide 3: Strong Quarter to End 2018 with Results Above Guidance
Strong Quarter to End 2018 with Results Above Guidance Balanced Revenue ▪ Total Revenue increase of 7% year-over-year (5% excluding Red Hawk) Growth ▪ Increased residential interactive penetration coupled with commercial growth ▪ Exceeded full year guidance for Adj. EBITDA and Free Cash Flow before
Slide 4: Market Leader in Growing Core Residential Business
Market Leader in Growing Core Residential Business Growing, Recession-Resilient Market Home Automation Driving Increased Pulse Adoption Monitoring Revenue ($Bn)(1) 7 100% 6 Interactive Customers (millions) 12.4 13.0 71% 73% 74% 74% 80% 11.7 64% 66% 66% 11.0 5 58% 59% 61% Pulse Take Rate 9.9 55% 57%
Slide 5: The Next Generation of Security and Home Automation
The Next Generation of Security and Home Automation At the Center of the Connected Home ADT Command Panel Touchscreen Keypad Smart Home Capabilities A dynamic, wireless touch-screen panel Your smart door locks, thermostats, lights, full of smart home capabilities. and garage are all in your control.
Slide 6: Red Hawk Re-establishes ADT as a Commercial Leader
Red Hawk Re-establishes ADT as a Commercial Leader… Key Highlights ADT + Red Hawk Total Revenue(1) Revenue Profile Commercial Revenue Enhances commercial management expertise, 8% technician base and sales force 44% 56% Increases product array with introduction of additional fire related offerings 18
Slide 7: With Strong Growth Expected in Commercial Market
…With Strong Growth Expected in Commercial Market Commercial Security Market is Characterized By: Commercial Opportunity ▪ Insurance requirements and current Highly attractive market Penetration regulations increase penetration rates ▪ Large and growing ~$15 to 20 Billion(1) ▪ High structural penetr
Slide 8: LifeShield Provides a Platform for Growth in New DIY Market
LifeShield Provides a Platform for Growth in New DIY Market DIY Opportunity for ADT ▪ Adding a new leg to the ADT growth story: the DIY market Acquired Feb 4, 2019 for ~$25M ▪ Different offering for different type of buyer vs. our core ▪ Lower capital-intensity, low revenue payback eCommerce- based
Slide 9: Improvement Across Key Financial and Operating Metrics
Improvement Across Key Financial and Operating Metrics For the quarters ended ($ in millions) Dec 31, 2018 Dec 31, 2017 Y/Y Change Y/Y Change % Monitoring and Service Revenue $1,040 $1,012 $28 3% Total Revenue 1,185 1,106 80 7% Net (Loss) / Income (149) 638 (788) (123%) Adjusted EBITDA 614 598 15 3%
Slide 10: Total Revenue Up 7% Year-over-Year
Total Revenue Up 7% Year-over-Year Gross Customer Revenue Attrition(1) Total Revenue(2) % $MM $1,185 13.7% $1,106 145 13.3% 93 1,012 1,040 LTM 12/31/17 LTM 12/31/18 Q4'17 Q4'18 Monitoring & Service Installation & Other(3) Attrition improved 40 basis points Total revenue increase of 7% ▪ Growth in Mo
Slide 11: Acquiring New Customers More Efficiently
Acquiring New Customers More Efficiently Customer Revenue Payback(1)(2) Net Subscriber Acquisition Costs (SAC)(3) Years $MM $363 $369 2.5x 69 2.4x 75 288 301 LTM 12/31/17 LTM 12/31/18 Q4'17 Q4'18 Capitalized SAC Expensed SAC Revenue Payback improves 0.1x (years) Grew RMR adds 2% YoY ▪ Improvement dr
Slide 12: Continued Adjusted EBITDA and Adjusted Net Income Growth
Continued Adjusted EBITDA and Adjusted Net Income Growth Adjusted EBITDA & Margin %(1) Adjusted Net Income(2) $MM $MM $614 $598 $101 $76 59.1% 59.0% Q4'17 Q4'18 Q4'17 Q4'18 Adjusted EBITDA increase of 3% Adjusted Net Income up 33% ▪ Growth is primarily driven by flow through of high ▪ Growth in Adju
Slide 13: 2018 Full Year Summary
2018 Full Year Summary Revenue & Attrition Net Subscriber Acquisition Costs & Revenue Payback $MM, % $MM, years 2.5x 13.7% 2.4x 13.3% $1,488 $1,494 $4,582 $4,316 335 296 472 286 4,029 4,110 1,154 1,198 2017 2018 2017 2018 Monitoring & Service(1) Gross Customer Revenue Attrition Capitalized SAC Expen
Slide 14: Continued Strong Cash Flow Generation
Continued Strong Cash Flow Generation For the quarters ended For the twelve months ended (in millions) Dec 31, 2018 Dec 31, 2017 Y/Y Change Dec 31, 2018 Dec 31, 2017 Y/Y Change Adjusted EBITDA $614 $598 $15 $2,453 $2,353 $101 Less: Capitalized SAC (301) (288) (12) (1,198) (1,154) (44) Less: Cash Tax
Slide 15: Capital Structure Well-Positioned to Support Growth
Capital Structure Well-Positioned to Support Growth Capital Structure(1) Fourth Quarter and Pro Forma Highlights $MM $MM 12/31/17 12/31/18 12/31/18 Actual Actual Pro Forma(2) ▪ Completed Red Hawk acquisition and financing Revolver - - - transaction in December First Lien Term Loan 3,536 3,924 3,924
Slide 16: 2019 Guidance
2019 Guidance Revenue growth of $4,900 - $5,100M ▪ Growth of 6%-11% Total Revenue ▪ M&S Revenue growth of low to mid single digits ▪ Commercial expansion drives double digit growth in installation revenue Adjusted EBITDA of $2,460 - $2,500M ▪ Underlying core operations EBITDA growth plus full year o
Slide 17: Dividend Reinvestment Plan and Share Buyback
Dividend Reinvestment Plan and Share Buyback Dividend Reinvestment Plan (“DRIP”) and Share Buyback Underpinned by Conviction in ADT Story ▪ We announced today a series of actions that demonstrate the confidence that both the Company and our largest shareholder have in the future of our business – wh
Slide 18: Snapshot of Business by Customer Type and Unit Count
Snapshot of Business by Customer Type and Unit Count Market Profile Unit Count Small Large / Residential Total Units in millions 2017 2018 Y/Y % Business Multi-Site (1) Interactive 2.3 2.6 13% Traditional 3.5 3.2 (10%) Unit Count(2) ~6,400K ~500K ~300K ~7,200K US Residential 5.8 5.8 (1%) Ending RMR
Slide 19: Q&A
Q&A 19 Confidential, not for distribution or publication without express consent of ADT
Slide 20: Appendix
SECURED BY ADOT 800.ADT.ASAP ADT.COM Appendix
Slide 21: Significantly Strengthened Financial Performance Since 2015
Significantly Strengthened Financial Performance Since 2015 Total Revenue(1) Adjusted EBITDA(1) $MM $MM $4,582 $2,453 $4,316 $2,353 $4,057 $4,167 472 212 286 160 $2,177 $2,031 3,897 3,954 4,029 4,110 2015 2016 2017 2018 2015 2016 2017 2018 Monitoring & Service Installation & Other LTM Revenue Paybac
Slide 22: Improvement Across Key Financial and Operating Metrics
Improvement Across Key Financial and Operating Metrics For the twelve months ended ($ in millions) Dec 31, 2018 Dec 31, 2017 Y/Y Change Y/Y Change % Monitoring and Service Revenue $4,110 $4,029 $81 2% Total Revenue 4,582 4,316 266 6% Net (Loss) / Income (609) 343 (952) (278%) Adjusted EBITDA 2,453 2
Slide 23: Additional Historical Quarterly Data
Additional Historical Quarterly Data $ in millions Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Key Performance Indicators Monitoring and Service Revenue $990 $998 $1,007 $1,012 $1,012 $1,017 $1,023 $1,029 $1,040 Total Revenue 1,051 1,059 1,068 1,083 1,106 1,116 1,131 1,148 1,185 Net (Loss)
Slide 24: Selected Statement of Operations Components
Selected Statement of Operations Components GAAP Line Items GAAP Line Items For the quarter ended December 31, 2018 For the quarter ended December 31, 2017 Total Cost of Total Cost of ($ in millions) Revenue Revenue SG&A D&A Total Revenue Revenue SG&A D&A Total Monitoring & Service Revenue 1,040 - -
Slide 25: Statements of Operations
Statements of Operations For the Quarters Ended For the Years Ended December 31, 2018 December 31, 2017 December 31, 2018 December 31, 2017 Monitoring and related services $ 1,040 $ 1,012 $ 4,110 $ 4,029 Installation and other 145 93 472 286 Total revenue 1,185 1,106 4,582 4,316 Cost of revenue (exc
Slide 26: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Net Loss Before Special Items: For the Quarters Ended For the Years Ended December December December December (in millions) 31, 2018 31, 2017 31, 2018 31, 2017 Net (loss) income $ (149) $ 638 $ (609) $ 343 Merger, restructuring, integration, and other (5) 11 (3) 65 F
Slide 27: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Adjusted EBITDA and Adjusted EBITDA Margin: For the Quarters Ended For the Years Ended (in millions) December 31, March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, December 31, December 31, 2016 2017 2017 2017 2017 2018 2018
Slide 28: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Free Cash Flow, Free Cash Flow before special items, Unlevered Free Cash Flow before special items: For the Quarters Ended For the Years Ended (in millions) December 31, March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, Decem
Slide 29: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Debt to Net Income Ratio: December 31, December 31, (in millions) 2018 2017 Total debt + Preferred securities (book value) $ 10,002 $ 10,852 LTM net (loss) income (609) 343 Debt to net (loss) income ratio (16.4x) 31.7x Net Leverage Ratio: December 31, December 31, (i
Slide 30: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Supplemental Pro Forma Financial Information: The ADT Corporation Historical ADT Inc. Supplemental Pro Pro Forma Historical Year Three Months Period from 4/1/2016 Forma Year Adjustments Ended 12/31/2016 Ended 3/31/2016 to 5/1/2016 Ended 12/31/2016 (in millions) Net (
Slide 31: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Supplemental Pro Forma Financial Information: Predecessor Successor ASG The ADT Corporation Period from From Inception Six Months Supplemental Pro Other Pro Forma Twelve Months Ended ADT Acquisition 1/1/2015 through through Historical Ended Subtotal Forma Year Adjust
Slide 32: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Free Cash Flow, Historical Combined Free Cash Flow, and Unlevered Historical Combined Free Cash Flow before special items: The ADT The ADT Successor Corporation Successor Predecessor Corporation ADT Inc. Historical Historical for the From Inception Period from 1/1/20
Slide 33: 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, Unlever