Adt Inc. · NYSE:ADT
Adt — Investor Presentation (September 2018)
27 slides from Adt's investor presentation, Sep 13, 2018
Slide 1: Investor Presentation September 2018
Investor Presentation September 2018 Exhibit 99.1
Slide 2: Forward Looking Statements & Non-GAAP Measures
Forward Looking Statements & 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. All statements, other than statements of historical fac
Slide 3: An American Security Icon Positioned to Outperform
Over 2.5 Million Pulse Customers For 7.2 Million Customers An American Security Icon Positioned to Outperform HAS BEEN TRUSTED LONGER THAN EST. 1892 EST. 1898 EST. 1903 EST. 1894 EST. 1886 EST. 1902 EST. 1892 EST. 1892 180 Billion System Events Expected in 2018 3,200+ Field & Phone Sales Professiona
Slide 4: Investment Highlights
Investment Highlights Center of the Security and Connected Smart Home Ecosystem ~5x the size of next largest residential competitor(1) and one of the largest national players Trusted partner of choice for connectivity and access into the home Unparalleled market leader with #1 brand recognition; syn
Slide 5: Security Market: Large, Growing, & Underpenetrated
Substantial Opportunity for Growth in the Underpenetrated Residential Market(2) ~20% Penetration Notes Total Industry Monitoring and Service Revenue based on Barnes Associates February 2018 Security Alarm Industry Overview Parks Associates Home Security, 2Q 2018 Report U.S. commercial market size ba
Slide 6: Professionally Installed, Serviced, and Monitored Market is Our Core
Professionally Installed, Serviced, and Monitored Market is Our Core Customer who… Seeks peace of mind through security, life safety, and a seamlessly connected home through ADT Pulse Wants one-app integration of leading 3rd party devices including Alexa, Nest, Schlage, and others Values professiona
Slide 7: Long-Term Cash Flow Focus
Long-Term Cash Flow Focus Retain Our Existing Customers Optimize Adjusted EBITDA Improve Acquisition Cost Efficiency Efficient Core Revenue Growth Invest for Future Growth Efficient Operating Model Balanced Approach to Growth Focuses on Long-Term Cash Flow Generation
Slide 8: Service is Our Business and Key Competitive Advantage
Service is Our Business and Key Competitive Advantage Trusted Security Provider - Service is the Biggest Competitive Advantage and Differentiator Expansive National Footprint Distribution Center National Account Center Boca Raton Disaster Recovery Center Locations Monitoring Centers Corporate Headqu
Slide 9: Daily Operating Scorecard
Daily Operating Scorecard Rolled-out fully in 2018 Real time, daily data in the hands of all general managers and other field and corporate leaders Daily progress vs. budget & prior year Visibility into over 50 different metrics Daily competitive ranking vs. other managers Drill down to the location
Slide 10: Pulse Mobile Application
Pulse Mobile Application Security + Home Automation, Accessible Anywhere from One App Home Security Home Automation Security Cameras Fire, Home & Safety Monitoring Services Lights Thermostat Garage Door Doorbell Electric Locks Sensors Water Leaks Alerts Video Clips At the Center of the Connected Hom
Slide 11: Efficient Subscriber Acquisition Cost Drives Cash Flow
Illustrative Annual SAC Reduction from Revenue Payback Multiple Improvement(3) Revenue Payback (years) Notes Costs of acquiring new revenue and installation expenditures (expensed & capitalized), net of installation revenue (recognized & deferred) Recurring revenue is revenue generated from contract
Slide 12: Key Metric is Gross Revenue Attrition
Notes Recurring revenue lost as a result of customer attrition net of dealer charge-backs and reinstatements Resales are inactive customer sites that are returned to active service Reduction of 50bps is a result of combining legacy ADT and legacy P1 companies Legacy ADT net customer revenue attritio
Slide 13: Subscriber Acquisition Costs and Recurring Revenue Growth
Notes SAC required for growth = (% growth less ~1% price escalations) * recurring revenue * revenue payback plus SAC required to replace attrition Costs of acquiring new revenue and installation expenditures (expensed & capitalized), net of installation revenue (recognized & deferred) Recurring reve
Slide 14: New Paths for Revenue Growth
A B C Core Growth Consistent Profitable Recurring Revenue Growth New RMR Growth Increasing Interactive Mix Improving Retention Stable & Improving Growth A Commercial Expansion Strengthening Commercial and Multi-Site capabilities Well-Known Brand Profitable Install Revenue Tuck in M&A to expand capab
Slide 15: Core Business Growth and Efficiency
A Interactive Services Growth More market demand for Home Automation Pulse Take Rate growing with built-in RMR Growth as customer base (~40%) converges to take rate (~70%+) Customer Retention Continued benefits of Customer Selection, better Service, and Variance Performance Management Launched Call
Slide 16: Commercial Market: Attractive Growth Opportunity
Commercial Market: Attractive Growth Opportunity Comprehensive Commercial Offering Core Commercial Multi- family National Accounts Integrated Solutions Monitoring Video Solutions Fire & Life Safety Intrusion Alarms Enterprise Solutions Managed Services Analytics & Reporting Inspection & Maintenance
Slide 17: Exciting Opportunities for Future Revenue Growth
C New Revenue Opportunities Notes ADT-sponsored online survey of 1,000 nationally representative U.S. adults, ages 18-35 (April 2017) 2017 Symantec Internet Security Threat Report 2016 Symantec Internet Security Threat Report Exciting Opportunities for Future Revenue Growth DIY Home Safety Partnersh
Slide 18: Long-Term Free Cash Flow Growth Potential
Not drawn to scale Illustrative Revenue Payback Improvement 0.2x x Illustrative Recurring Revenue Additions (New RMR ~$50mm x 12 months) ~$600mm Cash Flow Impact ~$120mm Illustrative M&S Revenue Growth Rate 2.5% Implied 2-yr Incremental Revenue @ 2.5% Annual Growth ~$200mm x Adjusted EBITDA Margin 6
Slide 19: Strong Financial Performance
Notes 2015 and 2016 are presented on a supplemental pro forma basis up to the acquisition date; reconciliations can be found in the appendix Recurring revenue lost as a result of customer attrition net of dealer charge-backs and reinstatements Excludes wholesale customers who outsource their monitor
Slide 20: Investment Highlights
Investment Highlights Center of the Security and Connected Smart Home Ecosystem ~5x the size of next largest residential competitor(1) and one of the largest national players Trusted partner of choice for connectivity and access into the home Unparalleled market leader with #1 brand recognition; syn
Slide 21: Appendix: GAAP to Non-GAAP Reconciliations
Appendix: GAAP to Non-GAAP Reconciliations
Slide 22: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Adjusted EBITDA and Adjusted EBITDA Margin: For the Twelve Months Ended For the Six Months Ended June 30, December 31, June 30, June 30, 2018 2017 2018 2017 (in millions) Net (loss) income $ 352 $ 343 $ (224) $ (234) Interest expense, net 712 733 349 369 Income tax b
Slide 23: GAAP to Non-GAAP Reconciliations: Supplemental Pro Forma
GAAP to Non-GAAP Reconciliations Supplemental Pro Forma Financial Information: The ADT Corporation Historical ADT Inc. Historical Year Ended 12/31/2016 Pro Forma Adjustments Supplemental Pro Forma Year Ended 12/31/2016 Three Months Ended 3/31/2016 Period from 4/1/2016 to 5/1/2016 (in millions) Net (
Slide 24: GAAP to Non-GAAP Reconciliations: Supplemental Pro Forma
GAAP to Non-GAAP Reconciliations Supplemental Pro Forma Financial Information: Predecessor Successor ASG The ADT Corporation (in millions) Period from 1/1/2015 through 6/30/2015 From Inception through 12/31/2015 Six Months Historical Ended 6/30/2015 Other Pro Forma Adjustments Subtotal Twelve Months
Slide 25: GAAP to Non-GAAP Reconciliations: Free Cash Flow
GAAP to Non-GAAP Reconciliations Free Cash Flow, Free Cash Flow before special items, and Unlevered Free Cash Flow before special items: For the Twelve Months Ended For the Six Months Ended June 30, December 31, June 30, June 30, 2018 2017 2018 2017 Net cash provided by operating activities $ 1,811
Slide 26: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations For the Twelve Months Ended December 31, 2016 December 31, 2015 Successor Free Cash Flow $ (337) $ (32) Predecessor Free Cash Flow N/A 4 The ADT Corporation Free Cash Flow 106 257 ASG Free Cash Flow N/A (7) Historical Combined Free Cash Flow (231) 221 Plus: Cash Inte
Slide 27: 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