Slide 1: Q3 2020 Earnings Presentation
Q3 2020 Earnings Presentation November 5, 2020
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 2020 Improved Financial O
Slide 3: Key Takeaways
Key Takeaways Durable recurring revenue model has performed well and gained additional momentum in the third quarter Q3 net subscriber growth with record trailing twelve-month attrition of 12.9% vs. prior quarter of 13.1% U.S. RMR additions up ~10% vs. prior year; efficient subscriber acquisition wi
Slide 4: Q3 Results and Recent Highlights
Q3 Results and Recent Highlights ▪ Positive net subscribers in Q3 and new RMR additions grew ~7% year-over-year (~10% in U.S.) Revenue and ▪ Growth in RMR drives higher sequential M&S Revenue Growth ▪ Total revenue flat year-over-year, with higher mix of outright sales to residential customers offse
Slide 5: Sustainable Growth through Macro & Company Specific Drivers
Sustainable Growth through Macro & Company Specific Drivers Macro Dynamics ADT Initiatives Increasing de-urbanization, Continued execution of particularly following additive partnerships such as COVID-19 pandemic, D.R. Horton; healthy pipeline will drive new demand of opportunities Improving marketi
Slide 6: Growing Consumer Offering Broadens Addressable Market
Growing Consumer Offering Broadens Addressable Market Expanding ADT’s addressable market now and for the future ▪ Trusted DIFM security at the core; historic 20%+ market penetration ▪ Expanding DIY offering with Blue by ADT, and ADT + Google in 2021 ▪ New channels with homebuilders and multi-family
Slide 7: ADT + Google Partnership to Build Next-Generation Smart and Helpful Home
ADT + Google Partnership to Build Next-Generation Smart and Helpful Home Best-in-Class Hardware next-generation features, easier to install, higher quality, modern aesthetics Optimal Technology Partner video analytics, data analytics, complementary strength to facilitate growth in smart and helpful
Slide 8: ADT + Google Platform Update
ADT + Google Platform Update Developing Next-Generation Accelerating ADT + Google Offering ADT-Owned Platform ▪ First generation ADT + Google professional DIFM ▪ ADT will own next-generation platform, offering accelerated to the second half of 2021 developed in coordination with Google ― Co-branded
Slide 9: Commercial Platform: Improving from Q2'2020 and Positioned for Market Recovery
Commercial Platform: Improving from Q2’2020 and Positioned for Market Recovery U.S. Commercial Total Revenue Recent Highlights $MM ▪ Commenced work on our largest National Account ever, $27 $27 $27 Family Dollar / Dollar Tree; Converted over 6,000 sites $26 $26 $25 in 19 weeks $24 $24 ▪ Awarded Oper
Slide 10: Powerful Long-Term Growth Engine
Powerful Long-Term Growth Engine Recent Momentum Next Phases of Growth ▪ Year-to-date subscriber growth ▪ Expand distribution channels including e- commerce & retail ▪ Climbing interactive customer base Core ▪ Consumer financing 2020 launch ▪ Continue driving new partnerships Pro-Install providing c
Slide 11: Significant Reduction in Attrition
Significant Reduction in Attrition 2020 impacted Gross Customer Revenue Attrition(1) Total Revenue by $57 million decrease in % $MM Total Revenue due to sale of ADT Canada (2) ~flat 13.5% $1,301 $1,299 207 253 12.9% 1,094 1,046 LTM 9/30/19 LTM 9/30/20 Q3'19 Q3'20 Monitoring & Service Installation &
Slide 12: Continuing to Improve Customer Acquisition Efficiency
Continuing to Improve Customer Acquisition Efficiency Customer Revenue Payback(1)(2) Net Subscriber Acquisition Costs (SAC)(3) Years $MM $377 $373 77 103 2.4x 2.2x 300 270 LTM 9/30/19 LTM 9/30/20 Q3'19 Q3'20 (4) (5) Capitalized SAC Non-capitalized SAC Continued to strengthen SAC efficiency Net SAC d
Slide 13: Significant Cash Flow Generation
Significant Cash Flow Generation Adjusted EBITDA & Margin %(1) Adjusted Free Cash Flow $MM 2020 decline $MM impacted by Defenders acquisition & Canada $624 disposition(2) $532 $459 $564 127 167 57.1% 53.9% Q3'19 Q3'20 Q3'19 YTD Q3'20 YTD Q3 1H Adjusted EBITDA decrease of 10%; sequential Continued st
Slide 14: Strong Cash Flow Generation
Strong Cash Flow Generation For the three months ended For the nine months ended ($ in millions) Sep 30, 2020 Sep 30, 2019 Y/Y Change Sep 30, 2020 Sep 30, 2019 Y/Y Change Adjusted EBITDA $564 $624 ($61) $1,666 $1,876 ($210) Less: Capitalized SAC(1) (270) (300) 31 (590) (891) 301 Plus: Net Proceeds f
Slide 15: Strength Across Key Financial and Operating Metrics
Strength Across Key Financial and Operating Metrics Year over Year Comparison For the three months ended ($ in millions) Sep 30, 2020 Sep 30, 2019(1) Y/Y Change Y/Y Change % Monitoring and Service Revenue $1,046 $1,094 ($48) (4%) Total Revenue $1,299 $1,301 ($2) (0%) Net Loss ($113) ($182) $69 38% A
Slide 16: Strength Across Key Financial and Operating Metrics
Strength Across Key Financial and Operating Metrics Sequential Comparison For the three months ended ($ in millions) Sep 30, 2020 June 30, 2020 Q/Q Change Q/Q Change % Monitoring and Service Revenue $1,046 $1,041 $4 0% Total Revenue $1,299 $1,331 ($32) (2%) Net Loss ($113) ($107) ($6) (6%) Adjusted
Slide 17: Capital Structure Well-Positioned to Support Growth
Capital Structure Well-Positioned to Support Growth Capital Structure(1) Recent Highlights $MM 12/31/19 9/30/20 Actual Actual Revolver - - ▪ Issued $1B 2027 Notes at 3.375%; redeemed 6.25% 2021 Notes First Lien Term Loan 3,102 3,079 ▪ Received $450M from Google, issued 54.7 million shares of ADT Fir
Slide 18: Cash Generation and Efficient Capital Deployment
Cash Generation and Efficient Capital Deployment Flexible Capital Deployment Invest In Efficient Selectively Pursue Optimize Capital Return Capital To Organic Growth Accretive Acquisitions Structure/Debt Level Shareholders • On-going RMR adds • Red Hawk • 4 refinancing events • >$600M cash 2019/2020
Slide 19: 2020 Improved Financial Outlook
2020 Improved Financial Outlook (1)(2) Total Revenue of $5,200M - $5,350M; previously $5,050M - $5,300M ▪ Improving the range based on Q3 performance Total Revenue ▪ Residential direct sales (excluding legacy Defenders) were converted to historical ADT ownership model during Q2, which is expected to
Slide 20: Snapshot of Business by Customer Type and Unit Count
Snapshot of Business by Customer Type and Unit Count Market Profile (LTM 9/30/20) Unit Count Small Large / Residential Total Business Multi-Site Units in millions Q3’20 Q3’19 Y/Y % Q2’20 Q/Q % Interactive 3.1 2.8 9% 3.0 2% Unit Count ~5,800K ~500K ~250K ~6,500K Traditional 2.7 2.9 (9%) 2.7 (2%) Endi
Slide 21: Q&A
Q&A 21
Slide 22: Appendix
Appendix
Slide 23: 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. 82% 82% 82% 84% 85% 85% 75% 71% 73% 74% 74% 66% ~20% CAGR 49% 50% 44% 47% 48% ~20% 39% 40% 41% 43% 33 $33B 35% 37% 38
Slide 24: Installation Revenue
Installation Revenue Installation & Other Revenue ($MM) Small Large / Period Residential Y/Y Change Business Y/Y Change Multi-Site Y/Y Change Total Y/Y Change 3Q2020 $112 $73 $8 - $133 ($27) $253 $46 2Q2020 158 125 8 - 124 (33) 290 92 1Q2020 165 135 8 1 151 15 324 151 4Q2019 47 18 8 1 186 76 240 95
Slide 25: Strength Across Key Financial and Operating Metrics
Strength Across Key Financial and Operating Metrics For the nine months ended ($ in millions) Sep 30, 2020 Sep 30, 2019(1) Y/Y Change Y/Y Change % Monitoring and Service Revenue $3,133 $3,249 ($116) (4%) Total Revenue $4,000 $3,827 $173 5% Net Loss ($520) ($352) ($168) (48%) Adjusted EBITDA $1,666 $
Slide 26: Additional Historical Quarterly Data
Additional Historical Quarterly Data For the Three Months Ended (in millions) September 30, December 31, March 31, June 30, September 30, 2019 2019 2020 2020 2020 Key Performance Indicators Monitoring and Service Revenue $1,094 $1,058 $1,046 $1,041 $1,046 Total Revenue $1,301 $1,298 $1,370 $1,331 $1
Slide 27: Selected Statement of Operations Components
Selected Statement of Operations Components GAAP Line Items GAAP Line Items For the three months ended September 30, 2020 For the three months ended September 30, 2019 Total Cost of Total Cost of ($ in millions) Revenue Revenue SG&A D&A Total Revenue Revenue SG&A D&A Total Monitoring & Service Reven
Slide 28: Statements of Operations
Statements of Operations Statements of Operations: 28
Slide 29: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Net Loss Before Special Items and Diluted Net Loss Per Share Before Special Items: Notes: 1. Represents fees expensed associated with financing transactions. 2. Represents the conversion of intercompany loans that are denominated in Canadian dollars to U.S. dollars.
Slide 30: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Adjusted EBITDA and Adjusted EBITDA Margin: Notes: 1. Represents costs, net of any incremental revenue earned, associated with replacing cellular technology used in many of our security systems pursuant to a replacement program. 2. Represents fees expensed associated
Slide 31: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Free Cash Flow and Adjusted Free Cash Flow: Note: 1. The three months ended March 31, 2020 included $81 million related to the settlement of a pre-existing relationship in connection with the Defenders acquisition. This was partially offset by $39 million advance pay
Slide 32: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Debt to Net Income Ratio: Net Leverage Ratio: Note: 1. Debt instruments are stated at face value. 32
Slide 33: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations U.S. Commercial Organic Revenue: Notes: 1. ADT Canada was disposed of in November 2019. 33 2. Represents total revenue associated with commercial and national accounts. 3. Represents incremental total revenue associated with U.S. commercial and national accounts from
Slide 34: 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, Adjusted Free Cash Flow, Ne