Inside ADT’s $89M subscriber purchase: High-density, planned attrition, strong returns

BOCA RATON, Fla. — ADT’s bulk customer portfolio acquisition of 50,000 subscribers for $89 million during the second quarter helped to boost the company’s recurring monthly revenue (RMR) 2% to $363 million year over year. 

The company’s customer retention rate also improved slightly from the previous quarter and decreased only one-tenth of a percent from the previous year. 

“This includes further expansion of our ADT Plus to a larger percentage of our new customers, increased availability across additional sales channels and enhanced capabilities to enable existing customers to enjoy some of the features available to new customers,” CEO Jim DeVries told investors during a recent webcast. “This is driving average installation revenue to approximately $1,500 per unit.” 

As a result, ADT added 242,000 new subs and $14.3 million of new RMR, inclusive of the bulk accounts purchase according to the company's financial results. 

Bulk deal details 

During the Q&A portion of the webcast, when an investor asked about what made the accounts an attractive purchase for ADT, DeVries said the acquisition was from a single seller, with high density and good credit scores.  

“As you know, we always build in attrition protection for ADT, and we did so again this time,” he said. “The returns for bulk are generally consistent with our dealer business. The bulk pipeline is strong. I'd say probably stronger than we've seen even in the last couple of years. And we'll continue to review bulk as an option for incremental subscriber ads.” 

Retention & attrition 

Addressing another question from the queue, company officials admitted that while they do see heightened attrition rates at the start of conversion for new accounts, attrition protection is something they’ve planned for and see strong returns from.  

“As Jim notes, the returns are very strong,” said CFO Jeff Likosar. “You can think of it similar to dealers, a little bit less efficient at the time of acquisition.”  

Likosar added, “But your specific question about seeking to upgrade those customers or have additional sales or revenue opportunities over time – we don't underwrite based on that, but that for sure would be an opportunity. But we speak of their terms where we're not banking on that.”