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ADT reports third quarter 2021 results

ADT reports third quarter 2021 results Increasing revenue, subscribers, end-of-period RMR, commercial rebound among Q3 highlights

ADT reports third quarter 2021 results

BOCA RATON, Fla.—ADT Inc. reported results for the third quarter of 2021, highlighted by increasing revenue, subscribers, end-of-period RMR and a strong commercial rebound.

ADT's operational highlights announced for Q3 2021, versus the prior year, were:

  • Monitoring and related services revenue increased 5 percent
  • Gross recurring monthly revenue (RMR) additions grew 7 percent in the third quarter, 19 percent year-to-date
  • End-of-period RMR of $356 million increased by 4 percent, the fifth quarter of sequential improvement
  • Solid customer retention with attrition at 13.4 percent
  • Commercial performance improves with revenue growing 18 percent

“Our third quarter results show that we are successfully delivering solid results for our shareholders while positioning the company for long-term growth,” said Jim DeVries, ADT’s President and CEO. “Our people are at the heart of ADT’s brand and I want to thank our entire team for their great work and steadfast focus on our customers. Our pending acquisition of Sunpro Solar represents an exciting new chapter for ADT, giving us a top-tier position in the fast-growing residential solar business. With our broad spectrum of integrated security, smart home, and energy management solutions – customers will now be protected, connected, and powered by ADT.”

Q3 2021 Results Versus Prior Year

Total revenue increased 1 percent year over year to $1,317 million. The revenue increase was driven primarily by a $53 million, or 5 percent increase in monitoring and related services revenue resulting from the company’s subscriber growth initiatives and an improvement in average pricing. Higher M&S revenue was partially offset by lower installation revenue, reflecting the non-cash impact of equipment ownership model changes.

Net loss of $109 million improved from $113 million in the prior year, primarily due to strong M&S revenue and lower interest expense, offset by higher radio conversion costs, which are also reflected in the $0.02 improvement in diluted net loss per share of common stock. Diluted net loss per share of Class B common stock was $(0.13) compared to $(0.07) a year ago.

Adjusted Diluted Net Loss per share (previously named diluted net loss per share before special items) improved compared to the prior year, reflecting improvements in Adjusted Net Loss (previously named net loss before special items) of $54 million compared to $58 million in the prior year.

Adjusted EBITDA was $554 million, down from $564 million in the prior year, reflecting the non-cash impact of the ownership model changes and technology investments. These items were partially offset by strong monitoring and related services revenue performance, as well as improved commercial results.

Year-to-date net cash provided by operating activities increased 16 percent year over year to $1,155 million primarily due to the impact of ownership model changes, the non-recurrence of a 2020 outflow related to the Defenders acquisition, and lower cash interest, partially offset by higher net payments for radio conversion costs.

Year-to-date net cash used in investing activities increased versus the comparable period in 2020 reflecting higher customer acquisition costs and lower cash paid for business acquisitions. The change in year-to-date cash flows from financing activities was primarily due to the company’s issuance of Class B common stock in 2020.

Year-to-date Adjusted Free Cash Flow of $289 million was down compared to the comparable period in 2020 primarily due to higher subscriber acquisition costs associated with significant growth in customers and 19 percent gross RMR additions growth year-to-date.

Acquisition of Sunpro Solar

The company has entered into a definitive agreement to acquire Sunpro Solar, a leading provider of residential solar installation, for approximately $82 million, comprised of $160 million cash and approximately 77.8 million shares of ADT common stock, subject to certain adjustments. The completion of the transaction is subject to customary closing conditions, including regulatory approvals. The transaction is expected to close by year-end 2021.

Sunpro Solar will be branded ADT Solar, giving ADT an industry-leading position and instant brand recognition in the rapidly growing residential solar market. The transaction brings numerous strategic and financial benefits, including:

  • Immediate brand and market leadership position: The highly fragmented solar industry does not have a clear brand leader, much less one with ADT’s trusted reputation.
  • Grow market share quickly: ADT’s trusted brand, national footprint, and reach to 6 million customers should enable strong, efficient solar customer lead generation and acquisition relative to competitors.
  • Expands ADT’s presence in the home: Creates opportunity to offer consumers a single provider for the protected, connected, and powered home.
  • Earnings and cash flow positive: Transaction expected to be positive to EBITDA and free cash flow immediately and accretive to EPS within the first 12 months, prior to any synergy realization.
  • Improves cash flow profile: Minimal capital expenditures, stable customer acquisition costs, and significant upfront cash generation.
  • Limited balance sheet impact: ADT will assume approximately $20 million in vehicle loans and leases; all other existing Sunpro Solar debt will be retired using the cash proceeds from the acquisition.

Business Highlights

ADT is a trusted consumer brand, driving profitable growth through innovative technology, strategic partnerships, and premium products and service. Key highlights of the company’s performance include:

  • Continued Growth of RMR – During the quarter, Gross RMR additions increased to $15.5 million, an increase of 7 percent from the prior year. As of the end of the quarter, RMR totaled $356 million, representing a 4 percent year over year increase. Approximately 80 percent of the company’s total revenues come from this durable recurring revenue.
  • Radio Conversions Progress – The company continued to make significant progress in replacing the 3G and Code-Division Multiple Access (“CDMA”) cellular equipment used in many of its security systems. During 2021, the number of customer systems to be converted was reduced by 1.4 million with approximately 480,000 customer systems remaining to be converted as of Sept. 30, 2021.
  • Proactively improving capital structure – The company completed transactions during the quarter to proactively improve its balance sheet. In July, the company issued $1 billion in new notes due in 2029 and in August used the proceeds to retire its $1 billion of notes due in 2022. Combined with other refinancing transactions in 2019 and 2020, the company has flattened near-term maturities, improved liquidity, and reduced annual cash interest by more than $100 million.
     
  • Cash dividend declared – Effective Nov. 9, 2021, the company’s board of directors declared a cash dividend of $0.035 per share to holders of the company’s common stock and Class B common stock of record as of Dec. 16, 2021. This dividend will be paid on Jan. 4, 2022.

2021 Financial Outlook

The Company remains on track to meet its 2021 guidance and is narrowing the ranges provided earlier in the year:
 

  (in millions)

 2021 Prior Guidance

2021 Updated Guidance

  Total Revenue

 $5,050 - $5,250

$5,200 - $5,250

  Adjusted EBITDA

 $2,100 - $2,200

$2,150 - $2,200

  Adjusted Free Cash Flow

 $450 - $550

$450 - $500

 

 

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