Adt Inc. · NYSE:ADT
Adt — Debt Investor Presentation (November 2018)
35 slides from Adt's debt investor presentation, Nov 13, 2018
Slide 1: Lender Presentation
Lender Presentation November 13th, 2018
Slide 2: Disclaimer
Disclaimer This presentation (the “Presentation”) has been prepared by ADT Inc. (the “Company”) on behalf of Prime Security Services Borrower, LLC (the “Borrower”), a wholly owned subsidiary, in connection with the syndication of the Borrower’s Incremental 1st Lien Senior Secured Term Loan Facility
Slide 3: Forward Looking Statements & Non-GAAP Measures
Forward Looking Statements & Non-GAAP Measures 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 s
Slide 4: 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, Covenant Adjusted
Slide 5: Call Participants
Call Participants Jim DeVries President, ADT Jeff Likosar Chief Financial Officer, ADT Dan Bresingham Chief Administrative Officer, ADT Brad Aston Managing Director, Barclays 5 Confidential, not for distribution or publication without express consent of ADT
Slide 6: Agenda
Agenda I. Transaction Overview II. Red Hawk Overview III. ADT Update IV. Appendix 6 Confidential, not for distribution or publication without express consent of ADT
Slide 7: Transaction Overview
Transaction Overview
Slide 8: Transaction Overview
Transaction Overview On October 24th, certain subsidiaries of ADT Inc. (“ADT” or the “Company”) signed a definitive acquisition agreement to acquire Red Hawk Fire & Security (“Red Hawk”) for a purchase price of $317.5 million Red Hawk, which is expected to generate approximately $300 million of
Slide 9: Sources and Uses of Funds & Pro Forma Capitalization
Sources and Uses of Funds & Pro Forma Capitalization (1) Sources and Uses of Funds Pro Forma Capitalization ($ in millions) ($ in millions) PF Cap 9/30/2018 Adj. 9/30/2018 Sources of Funds $ % Incremental 1st Lien Term Loan $425 62.3% Available Cash (2) $257 $98 $355 Available Cash (2) 257 37.7% 1st
Slide 10: Summary of Terms Incremental 1st Lien Senior Secured Term Loan Facility
Summary of Terms Incremental 1st Lien Senior Secured Term Loan Facility Borrower Prime Security Services Borrower, LLC (the “Borrower”) Administrative Barclays Agent Facility Offered $425 million Incremental 1st Lien Senior Secured Term Loan (the “TL”) Incremental Same as existing 1st Lien Term Loan
Slide 11: Execution Timeline
Execution Timeline November 2018 December 2018 S M T W T F S S M T W T F S 1 2 3 1 4 5 6 7 8 9 10 2 3 4 5 6 7 8 11 12 13 14 15 16 17 9 10 11 12 13 14 15 18 19 20 21 22 23 24 16 17 18 19 20 21 22 25 26 27 28 29 30 23 24 25 26 27 28 29 30 31 Market Holiday Key Transaction Date Date Event November 9th,
Slide 12: Red Hawk Overview
Red Hawk Overview
Slide 13: Red Hawk: Key Highlights
Red Hawk: Key Highlights Key Highlights ADT + Red Hawk Total Revenue 1% 18% Expected to close by end of 2018 8% Enhances commercial management expertise, technician base and sales force Increases product array with introduction of 73% additional fire related offerings Residential Small Business Comm
Slide 14: Strong Integration and Service Capabilities Across Fire and Security
Strong Integration and Service Capabilities Across Fire and Security Red Hawk has diversified offerings across fire and security, with entrenched vendor relationships enabling best-in-class solutions Fire Security Full “turn-key” solution capabilities from design to Full “turn-key” solution capa
Slide 15: Diversified, Large and Stable End Markets
Diversified, Large and Stable End Markets Successful penetration of a diverse and attractive set of end markets provides stability across economic cycles while offering large opportunities for growth and premium pricing End Market Key Attributes Position Strong recurring services base Office Build
Slide 16: ADT Update
ADT Update
Slide 17: 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 18: 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 74% 80% Interactive Cus
Slide 19: Leader in Voice-Assisted Security and Home Automation
Leader in Voice-Assisted Security and Home Automation Expanding Existing Relationship with Amazon ADT & Alexa Guard: How It Will Work 2017: Voice Integration with Amazon Alexa When at home, offers 100+ commands, such as: “Alexa, Ask ADT 1 Detect the sounds that matter to close my garage door.” “Al
Slide 20: Q3 2018: Strong Quarter Across All Areas of the Business
Q3 2018: 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 3% year-over-yea
Slide 21: Total Revenue Up 6% Year-over-Year
Total Revenue Up 6% Year-over-Year Gross Customer Revenue Attrition (1) Total Revenue (2) % $MM $1,148 $1,083 13.8% 119 13.4% 71 1,012 1,029 LTM 9/30/17 LTM 9/30/18 Q3'17 Q3'18 Monitoring & Service Installation & Other (3) Attrition improved 40 basis points Total revenue increase of 6% Growth in M
Slide 22: Acquiring New Customers More Efficiently
Acquiring New Customers More Efficiently Customer Revenue Payback (1)(2) Net Subscriber Acquisition Costs (3) Years $MM 2.5x $405 $385 2.4x 76 84 301 328 LTM 9/30/17 LTM 9/30/18 Q3'17 Q3'18 Capitalized SAC Expensed SAC Revenue Payback improves 0.1x (years) Grew RMR adds 7% YoY Improvement driven b
Slide 23: Strong Adjusted EBITDA and Adjusted Net Income
Strong Adjusted EBITDA and Adjusted Net Income Adjusted EBITDA & Margin % (1) Adjusted Net Income (2) $MM $MM $610 $594 $208 $194 58.7% 59.2% Q3'17 Q3'18 Q3'17 Q3'18 Adjusted EBITDA increase of 3% Adjusted Net Income down 7% Growth is primarily driven by flow through of high Growth in Adjusted E
Slide 24: Improvement Across Key Financial and Operating Metrics
Improvement Across Key Financial and Operating Metrics For the quarters ended ($ in millions) Sep 30, 2018 Sep 30, 2017 Y/Y Change Y/Y Change % Monitoring and Service Revenue $1,029 $1,012 $17 2% Total Revenue 1,148 1,083 65 6% Net Loss (236) (62) (174) (281%) Adjusted EBITDA 610 594 15 3% Adjusted
Slide 25: Improvement Across Key Financial and Operating Metrics
Improvement Across Key Financial and Operating Metrics For the nine months ended ($ in millions) Sep 30, 2018 Sep 30, 2017 Y/Y Change Y/Y Change % Monitoring and Service Revenue $3,070 $3,017 $53 2% Total Revenue 3,396 3,210 186 6% Net Loss (460) (296) (164) (56%) Adjusted EBITDA 1,840 1,754 86 5% A
Slide 26: Continued Strong Cash Flow Generation
Continued Strong Cash Flow Generation For the quarters ended For the nine months ended (in millions) Sep 30, 2018 Sep 30, 2017 Y/Y Change Sep 30, 2018 Sep 30, 2017 Y/Y Change Adjusted EBITDA $610 $594 $15 $1,840 $1,754 $86 Less: Capitalized SAC (328) (301) (27) (897) (865) (32) Less: Cash Taxes (1)
Slide 27: Raising FY 2018 Financial Guidance
Raising FY 2018 Financial Guidance Gross Customer Revenue Attrition (1) Total Revenue % $MM 13.7% 13.0 - 13.3% 13.2 - 13.3% 4,500-4,550 4,525-4,550 4,316 2017 2018 2018 2017 2018 2018 Actual Prior November Actual Prior November Guidance Guidance Guidance Guidance Adjusted EBITDA Free Cash Flow (2) $
Slide 28: Q&A
Q&A 28 Confidential, not for distribution or publication without express consent of ADT
Slide 29: Appendix
Appendix
Slide 30: Additional Historical Quarterly Trend Data
Additional Historical Quarterly Trend Data $ in millions Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Key Performance Indicators Notes: Monitoring and Service Revenue $990 $998 $1,007 $1,012 $1,012 $1,017 $1,023 $1,029 Total Revenue 1,051 1,059 1,068 1,083 1,106 1,116 1,131 1,148 Net (Loss) / Inc
Slide 31: Selected Statement of Operations Components
Selected Statement of Operations Components GAAP Line Items GAAP Line Items For the quarter ended September 30, 2018 For the quarter ended September 30, 2017 Total Cost of Total Cost of ($ in millions) Revenue Revenue SG&A D&A Total Revenue Revenue SG&A D&A Total Monitoring & Service Revenue 1,029 -
Slide 32: Statements of Operations
Statements of Operations For the Quarters Ended For the Nine Months Ended S eptember 30, S eptember 30, S eptember 30, S eptember 30, (in millions, except per share data) 2018 2017 2018 2017 M onitoring and related services $ 1,029 $ 1,012 $ 3,070 $ 3,017 Installation and other 119 71 326 193 Total
Slide 33: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Adjusted EBITDA, Adjusted EBITDA Margin, and Covenant Adjusted EBITDA (Pre-SAC): For the Quarters Ended For the Nine Months Ended For the Twelve Months Ended (in millions) December 31, March 31, June 30, September 30, December 31, March 31, June 30, September 30, Sep
Slide 34: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Free Cash Flow and Free Cash Flow Before Special Items: For the Quarters Ended For the Nine Months Ended For the Year Ended (in millions) December 31, March 31, June 30, S eptember 30, December 31, March 31, June 30, S eptember 30, S eptember 30, S eptember 30, Decem
Slide 35: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Debt to Net Income Ratio and Net Income to Cash Interest Ratio: Pro forma Capitalization September 30, 2018 September 30, 2018 (1) Total debt (book value) 9,568 9,993 LTM net income 179 179 Debt to net income ratio 53.5x 55.8x LTM cash interest 707 730 Net income to