Slide 1: Q3 2019 Earnings Presentation
Q3 2019 Earnings Presentation November 12, 2019 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 2019 Guidance. All statem
Slide 3: Q3 Highlights
Q3 Highlights Strong Revenue ▪ Total Revenue increase of 13% year-over-year, 5% excluding Red Hawk Growth ▪ Commercial growth combined with increased residential interactive penetration Adjusted EBITDA ▪ Adjusted EBITDA increase of 2% year-over-year and FCF Generation Remains Robust ▪ Free Cash Flow
Slide 4: Leader in Residential & Commercial Security & Automation
Leader in Residential & Commercial Security & Automation U.S. Residential & Small Business U.S. Commercial(1) Revenue by Customer Type(2) 20% $2.9B $748M Total revenue, September YTD Total revenue, September YTD 4% 8% 68% ▪ In-the-field smart home and ▪ Enterprise Solutions security experts ▪ Risk M
Slide 5: 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. 7 100% Pulse/Command & Control Take Rate 82% 82% 6 Interactive Customers (millions) 74% 75% 71% 73% 74% 80% 66% 66% ~2
Slide 6: 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 7: Enhancing & Expanding Consumer Platform for the Future
Enhancing & Expanding Consumer Platform for the Future Enhancing our Consumer Extending our Lead Providing Expanding our End-to-End Sales Approach Trusted Protection Consumer Platform Launched New Brand Campaign Trusted Security Leader Enhanced Mobile Security ▪ Operating 9 U.S. Based, UL certified
Slide 8: Continuing Strong Growth in Commercial Market
Continuing Strong Growth in Commercial Market Commercial Security Opportunity and Momentum Q3 Commercial Total Revenue and Growth $MM ▪ Large and growing ~$15 to 20 Billion market(1) $272 ▪ High structural penetration rates 98 $149 Highly ▪ Significant barriers to entry Attractive ▪ Quality of servi
Slide 9: Strength Across Key Financial and Operating Metrics
Strength Across Key Financial and Operating Metrics For the three months ended ($ in millions) Sep 30, 2019 Sep 30, 2018 Y/Y Change Y/Y Change % Monitoring and Service Revenue $1,094 $1,029 $64 6% Total Revenue $1,301 $1,148 $152 13% Net Loss ($182) ($236) $54 23% Adjusted EBITDA $624 $610 $15 2% Fr
Slide 10: Total Revenue Up 13% Year-over-Year
Total Revenue Up 13% Year-over-Year Gross Customer Revenue Attrition(1)(2) Total Revenue % $MM $1,301 13.5% $1,148 207 13.4% 119 1,029 1,094 LTM 9/30/18 LTM 9/30/19 Q3'18 Q3'19 Monitoring & Service Installation & Other(3) Attrition increased 10 basis points Total revenue increase of 13% ▪ M&S Revenu
Slide 11: Continuing to Acquire Customers Efficiently
Continuing to Acquire Customers Efficiently Customer Revenue Payback(1)(2) Net Subscriber Acquisition Costs (SAC)(3) Years $MM $405 ~flat $372 2.4x 76 2.4x 71 328 300 LTM 9/30/18 LTM 9/30/19 Q3'18 Q3'19 Capitalized SAC Expensed SAC Continued to strengthen SAC efficiency Reduced Net SAC spend 8% ▪ SA
Slide 12: Adjusted EBITDA and FCF Generation Remains Robust
Adjusted EBITDA and FCF Generation Remains Robust Adjusted EBITDA & Margin %(1) Free Cash Flow (before special items)(2) $MM $MM $624 $169 $167 $610 59.2% 57.1% Q3'18 Q3'19 Q3'18 Q3'19 Adjusted EBITDA increase of 2% Continued Strong, Positive Free Cash Flow ▪ Higher revenue and operating cost effici
Slide 13: Strong Cash Flow Generation
Strong Cash Flow Generation For the three months ended For the nine months ended ($ in millions) Sep 30, 2019 Sep 30, 2018 Y/Y Change Sep 30, 2019 Sep 30, 2018 Y/Y Change Adjusted EBITDA $624 $610 $15 $1,876 $1,840 $36 Less: Capitalized SAC (300) (328) 28 (891) (897) 6 Less: Cash Taxes (3) (1) (2) (
Slide 14: Capital Structure Well-Positioned to Support Growth
Capital Structure Well-Positioned to Support Growth Capital Structure Capital Structure(1) Recent Highlights $MM 12/31/18 9/30/19 9/30/19 Actual Actual Pro Forma(2) ▪ Completed refinancing transaction in September 2019 to amend Revolver - - - first lien credit agreement and extend debt maturity Firs
Slide 15: 2019 Guidance
2019 Guidance ▪ Despite the sale of Canadian assets and operations on November 5, 2019 and the elimination of the financial contribution from ADT Canada for the last two months of the year, reiterating financial outlook ranges for full-year 2019 due to the strength of U.S. business — Total Revenue $
Slide 16: Snapshot of Business by Customer Type and Unit Count
Snapshot of Business by Customer Type and Unit Count Market Profile (LTM 9/30/19) Unit Count Small Large / Residential Total Units in millions Q3’19 Q3’18 Y/Y % Q2’19 Q/Q % Business Multi-Site Interactive 2.8 2.5 12% 2.7 3% Traditional 2.9 3.3 (11%) 3.0 (4%) Unit Count(1) ~6,300K ~500K ~300K ~7,100K
Slide 17: Q&A
Q&A 17 Confidential, not for distribution or publication without express consent of ADT
Slide 18: Appendix
Appendix
Slide 19: Key Financial and Operating Metrics for Q3 YTD 2019
Key Financial and Operating Metrics for Q3 YTD 2019 For the nine months ended ($ in millions) Sep 30, 2019 Sep 30, 2018 Y/Y Change Y/Y Change % Monitoring and Service Revenue $3,249 $3,070 $180 6% Total Revenue $3,827 $3,396 $431 13% Net Loss ($352) ($460) $108 23% Adjusted EBITDA $1,876 $1,840 $36
Slide 20: Additional Historical Quarterly Data
Additional Historical Quarterly Data $ in millions Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Key Performance Indicators Monitoring and Service Revenue $1,029 $1,040 $1,070 $1,085 $1,094 Total Revenue 1,148 1,185 1,243 1,284 1,301 Net Loss (236) (149) (66) (104) (182) Adjusted EBITDA 610 614 621 630 624 Adjusted
Slide 21: Selected Statement of Operations Components
Selected Statement of Operations Components GAAP Line Items GAAP Line Items For the quarter ended September 30, 2019 For the quarter ended September 30, 2018 Total Cost of Total Cost of ($ in millions) Revenue Revenue SG&A D&A Total Revenue Revenue SG&A D&A Total Monitoring & Service Revenue 1,093 -
Slide 22: Statements of Operations
Statements of Operations For the Three Months Ended For the Nine Months Ended (in millions, except per share data) September 30, September 30, September 30, September 30, 2019 2018 2019 2018 Monitoring and related services $ 1,094 $ 1,029 $ 3,249 $ 3,070 Installation and other 207 119 578 326 Total
Slide 23: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Net Loss Before Special Items: For the Three Months Ended For the Nine Months Ended (in millions, except per share data) September 30, September 30, September 30, September 30, 2019 2018 2019 2018 Net loss $ (182) $ (236) $ (352) $ (460) Merger, restructuring, integr
Slide 24: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Adjusted EBITDA and Adjusted EBITDA Margin: For the Three Months Ended For the Nine Months Ended For the Twelve Months Ended (in millions) September 30, June 30, March 31, December 31, September 30, September 30, September 30, September 30, December 31, 2019 2019 201
Slide 25: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Free Cash Flow, Free Cash Flow before special items: For the Three Months Ended For the Nine Months Ended (in millions) September 30, June 30, March 31, December 31, September 30, September 30, September 30, 2019 2019 2019 2018 2018 2019 2018 Net cash provided by ope
Slide 26: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Debt to Net Income Ratio: Actual Proforma(2) (in millions) September 30, September 30, December 31, 2019 2019 2018 Total debt (book value) $ 9,851 $ 9,699 $ 10,002 LTM net loss (502) (502) (609) Debt to net loss ratio (19.6x) (19.3x) (16.4x) Net Leverage Ratio: Actua
Slide 27: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Commercial Organic Revenue, Commercial Inorganic Revenue, and Commercial Organic Revenue Growth: For the Three Months Ended (in millions) September 30, September 30, 2019 2018 Total revenue $ 1,301 $ 1,148 Revenue growth 13% Commercial revenue(1) $ 272 $ 149 Commerci
Slide 28: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Revenue Excluding Red Hawk and Revenue Growth Excluding Red Hawk: For the Three Months Ended Red Hawk(1) Excl. Red Hawk (in millions) September 30, September 30, September 30, September 30, 2019 2019 2019 2018 Monitoring and related services 1,094 44 1,050 1,029 Inst
Slide 29: 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, Free Cash Flow before specia