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The ADT Corp.

ADT names new CMO

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03/25/2014

BOCA RATON, Fla.—The ADT Corp. announced today that Jerri DeVard has joined the company as senior vice president, chief marketing officer.

ADT releases Q1 results—and stock price drops

But Imperial Capital maintains ‘outperform’ rating on ADT, saying it expects ‘positive catalysts’ from the company in 2014
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01/30/2014

BOCA RATON, Fla.—Although The ADT Corp. reported Jan. 30 that ADT Pulse take rates and recurring revenue were up in its latest quarter, it also said net income decreased 27 percent in that period—and its share price tumbled.

ADT working to ‘stabilize’ dealer program

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Wednesday, December 11, 2013

ADT officials weren’t available for comment when I wrote recently about an industry’s analyst’s report on how ADT had “culled” about 100 low-performing companies in order to improve its dealer program over the past year.

But in an ADT investor call last Friday, Alan Ferber, president of ADT’s residential business unit, confirmed much of what the analyst, Jeff Kessler, Imperial Capital’s managing director of institutional research, had said. Ferber also outlined ways ADT is working to “stabilize” that channel.

According to Seeking Alpha, which published a transcript of the Dec. 6 investor call, Ferber said:

So in 2013, we began to optimize our dealer channel to focus more resources on those that are [indiscernible] to evolving with ADT's overall direction and the trend towards automation. And while we're eliminating about 100 dealers, which obviously impacted overall net adds, our focus on the right dealers has resulted in the quality of the customers that come through that channel to remain high and actually have been improving. ARPU is about 10% above our average ARPU and growing about 5% over the past year and the creation multiple has actually come down even though there's been an increase in SAC. But we do remain focused on strengthening and continue to optimize this dealer channel to drive growth over time.

… In addition, channel growth was impacted by some changes among our largest dealers. We purchased 1, 1 had some cash flow issues that impacted their ability to increase adds and 1 left ADT for a competitive program. I'm very pleased, however, to report that, that dealer has now returned to the ADT family once he experienced the negative impact on his business of not having the powerful ADT brand behind him. So it's reconfirmed our dealer value proposition with that dealer and with many other dealers as well.

But more importantly, we're taking a number of actions to stabilize this channel. We are investing in enhanced funding to help drive further Pulse adoption, particularly higher end Pulse, where that higher level of automation has a very significant retention benefit as well. And increased funding will also enable some incremental sales and marketing activities by our dealers and also the recruitment of new high-quality dealers that are positioned to further drive automation.

… We're also investing in staffing and support to ensure success. We've added resources to provide better support for planning and performance management, and we've enhanced training and other tools to get new and existing dealers more productive, particularly with our new services. And while we certainly expect some noise in the next couple of quarters, we do believe these actions are establishing a very strong foundation for growth over time.

 

 

ADT partners with State Farm to promote Pulse

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Tuesday, December 3, 2013

Security companies often use as a selling point the fact that insurance companies give discounts to homeowners who have a security system. But ADT announced this week that it is leveraging that insurance company relationship in a new way: by partnering with State Farm to give that leading insurer’s customers special deals on Pulse. And the customers who get Pulse can also end up with a discount on their State Farm home insurance.

Seems like a pretty smart way to get customers to sign up for a smart home solution—and one that benefits both of these big companies.

Here’s more from ADT’s Dec. 3 release:
 

ADT today announced it is teaming up with State Farm to help its customers better manage and control their homes. ADT will provide special offers on its ADT Pulse home security and automation solution to State Farm customers, who may also qualify for home insurance discounts. The special offer also includes a free in-home security consultation, 24/7 professional monitoring by trained ADT security specialists and custom installation with a six-month money-back guarantee.

… “The average insurance claim for a home burglary or fire can cost thousands of dollars,” said Don Boerema, chief corporate development officer at ADT. “Through home automation capabilities and enhanced security features, ADT Pulse is the ideal solution to help State Farm customers connect to their families and homes to mitigate loss.”

“As the leading provider of homeowners insurance in North America, State Farm has a keen interest in helping customers prevent loss,” said Jack Weekes, operations vice president at State Farm. “By teaming up with ADT and other home control and monitoring providers, we are helping customers protect their family and property in today’s high tech world.”

The deal caught the attention of Insurance & Technology magazine, a business trade publication for insurers, which says in an article that it's "the latest sign that the smart device revolution is poised to shake up the insurance industry." The article wonders if insurers can "find the right tone and offering to capitalize" on the new trend. I'm wondering what other security companies will team up with insurers to better promote their security products.

One of ADT’s largest shareholders sells most of its stake

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Tuesday, November 26, 2013

The ADT Corp. reported yesterday that it was buying back 10.24 million of the shares of its third-largest shareholder, Corvex Management. Keith Meister, the hedge fund’s founder, who had been on ADT’s board since late 2012, also announced his resignation as director.

ADT’s stock price plunged early yesterday morning shortly after the news and while it recovered somewhat, was still down .59 percent this afternoon.

Meister said in a prepared statement, “We initially invested in ADT because of its leading market position and its potential for creating long-term shareholder value. The board and management have achieved admirable results over the past year.”

Now, Corvex will have less than 1 million shares in ADT, The Wall Street Journal reported. The WSJ said ADT bought Corvex’s shares at $44.01 each, so Corvex got a return of about 20 percent on its investment.

What does it all mean? A WSJ report yesterday sheds some light:
 

Within weeks of ADT's debut as a public company in October 2012, Corvex began pushing the company to buy back 30 percent of its stock with borrowed money. The hedge fund at that time said the stock was worth at least $61.

Corvex criticized ADT's conservative approach to debt, calling the company's capital structure "indefensible" during a presentation that accompanied Corvex's disclosure of a 5 percent stake in ADT at the time.

ADT's board has followed much of Corvex's strategy, including financing stock purchases with debt. The company recently announced that it will accelerate the purchase of $400 million of stock under an agreement with J.P. Morgan Chase. Once the purchase of the Corvex shares is completed, the Boca Raton, Fla., company will have spent $2.4 billion to retire about 20 percent of its stock.

 

ADT adds 100,000 customers in fiscal 2013 and its Devcon buy boosts its RMR, but attrition climbs to 13.9 percent

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Wednesday, November 20, 2013

Just about one year after The ADT Corp. split from Tyco International and became a stand-alone, publicly traded company, the company reported today that its RMR climbed 4.7 percent in Q4 and that the rise was helped by its acquisition of Devcon Security this summer.

Boca Raton, Fla.-based ADT, which officially became independent Sept. 28, 2012, reported its Q4 and fiscal year 2013 results today. It added 100,000 subscribers in 2013, bringing its total customer based to 6.5 million, the company said.

ADT also reported average revenue per user (ARPU) had climbed to $40.31, an increase of 3.7 percent, and said that helped increase RMR. The company also said its ADT Pulse overall take rate was at 32 percent in Q4, up from 13 percent last year due to new customers and price escalations to existing ones.

In the earnings call, ADT CEO Naren Gursahaney said, "We recently passed the 500,000 mark with Pulse customers. Just to put that into perspective for you, if Pulse was a stand-alone business, it would be the sixth largest security provider in North America. While this a major milestone for us, it still only represents about 8% of our total customer base, so we still have a tremendous opportunity to further grow our Pulse customer base."

Gursahaney also said that in Q4, "Net attrition increased by 10 basis points sequentially and 40 basis points year-over-year to 13.9 percent, with more than 100 percent of the increase attributable to higher relocation disconnects as a result of the continued recovering in the housing markets." The company is launching new programs to address attrition, which it plans to announce soon, he said.

The company’s revenue increased in Q4 by 4 percent to $846 million from $812 million, higher than the $843.8 million analysts expected. EBITDA was $431 million in Q4,  up 7.5 percent compared to the previous year.

Much of ADT’s total revenue is recurring revenue, the report said. RMR was $777 million in Q4. The company also said small business RMR growth for fiscal 2013 was 7 percent, up from 3 percent in 2012.

Just before its Nov. 20 earnings report, ADT announced this week it was defending its turf by suing Utah-based Vision Security for the second time over Vision’s alleged deceptive sales practices. The new lawsuit comes shortly after Vision and Security Networks, of which Vision is an affiliate, “settled with ADT for $2.2 million and agreed to a permanent injunction [from] engaging in similar practices,” according to an ADT news release.

Vision told me it denies ADT's allegations and intends to fight them.

The AP reported ADT’s shares closed at $42.81 yesterday, Nov. 19. Shares are down 8 percent for the year to date, the AP said.

Gursahaney predicted positive results for fiscal 2014, with revenues and RMR climbing 4 percent to 5 percent. "I'm confident the momentum we have built, coupled with the improvement programs we have implemented to address our challenges, will position us for continued revenue growth and operational improvements in 2014," he said.

ADT sues Vision—again—over alleged deceptive sales practices

Vision says it 'vigorously denies the allegations' and plans to fight them
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11/18/2013

BOCA RATON, Fla.—Just months after settling one lawsuit with Utah-based Vision Security over what The ADT Corp. characterized as Vision's deceptive sales pitches, ADT announced today that it has filed a second lawsuit accusing Vision of similar practices.

Vision wages legal battle over negative posting on Ripoff Report

The Utah summer-sales company files lawsuit saying it has been defamed, but the site says it’s not responsible for what users post on it
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10/30/2013

OREM, Utah—Vision Security, a summer-sales home security/home automation company here, is suing Ripoff Report, charging that the website is refusing to remove false and defamatory statements about Vision even after the author of the posting has since stated they aren’t true.

What's with activist Ackman, ADT, Air Products—and J.C. Penney?

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Wednesday, August 14, 2013

OK, there were enough rumors in early July about activist hedge-fund manager William Ackman planning to take a stake in The ADT Corp. that they caused ADT stock to temporarily skyrocket. But it turned out that Ackman instead had his sights set on industrial gas maker Air Products & Chemicals, of which he now is that company’s biggest shareholder, owning 9.8 percent.

But perhaps that’s good a thing for ADT, given the news yesterday that Ackman’s failed two-year effort to remake traditional department store J.C. Penney ended in his exit from Penney’s board. His decision to step down was voluntary but there is speculation his leaving was “under duress,” according to Reuters.

Ackman’s activism and ADT—who knows where that might have led?

Here’s more from Reuters report yesterday on the J.C. Penney dust up:
 

Hedge fund billionaire Bill Ackman's two-year campaign to transform department store J.C. Penney came to an abrupt end on Tuesday with his decision to step down from the board, after a weeklong public spat with fellow board members.

Ackman's decision to leave comes after a failed two-year attempt by his $11.2 billion hedge fund to remake Penney into an upscale retail chain and a week of public fighting with other board members, including interim CEO Officer Myron (Mike) Ullman.

People close to Ackman and the retailer said his decision to leave the board was necessary for Penney to focus on its operations and continue the search for a new chief executive.

Ackman agreed to step down on Monday night, and the move removes a major distraction as Penney prepares for the holiday season. Some retail analysts said the public feuding threatened to unnerve vendors and lenders.

Penney's shares closed down 3.7 percent at $12.68 on the New York Stock Exchange.

... Ackman's Pershing Square Management Capital Management started buying Penney shares nearly three years ago to the day, paying an average of $22 for 39 million shares. The hedge fund now holds nearly 18 percent of Penney's stock.

If Ackman were to sell them at current prices, he'd lose $356 million, or a 40 percent loss.

 

More on activist investor Ackman and ADT

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Wednesday, July 17, 2013

There was additional speculation this week about whether activist hedge-fund manager William Ackman is intending to take a stake in The ADT Corp. An article in The New York Times said that his investing in the home security/home automation giant is more likely than his buying into FedEx, another company he is rumored to be considering.

The article said that’s basically because Ackman would have less say in FedEx, a much larger company than ADT, where he could wield greater influence.

There’s a possibility we could find out the answer later this week. Bloomberg reported July 9 that Ackman, who runs $12 billion Pershing Square Capital Management, was raising $1 billion over the next 10 days to buy a stake in a “large-capitalization, investment-grade U.S. corporation that principally operates in one business” that he didn’t name.

If he's successful, that would mean he’d have the money by this Thursday or Friday and he could reveal his pick then. However, he also could wait until later this year before announcing the choice, Nicholas Heymann, co-group head of global industrial infrastructure for New York-based William Blair & Company, told me.

"The issue is once you raise the money you have to put it to work," he said. However, Heymann said, "chances are, especially if it happens to be including some of his other 12 billion dollars of funds that he manages in addition to the $1 billion single stock fund, you and I are not going to know what his positions are until they’re reported 45 days after the close of the quarter, so we could end up hearing about this in mid-November."  The news could come earlier if Ackman chooses to voluntarily disclose it, Heymann said.

ADT has told Security Systems News the company does not comment on market rumors.

But some other important industry news is also related to ADT, and that’s the recent announcement that Monitronics plans to acquire Security Networks next month.

“We continue to look at the ramifications of the Security Networks acquisition by Monitronics as it relates to the implied value of ADT,” Heymann said.

In a July 11 William Blair & Company industry report authored by Heymann, the company explained how that pending deal sheds light on the value of ADT. Here’s some more detail from the report:
 

Our belief that ADT remains the most undervalued company in our multi-industry universe was starkly highlighted with the announcement after the close yesterday that Ascent Capital Group’s (ASCMA $84.15) primary operating subsidiary, Monitronics International, has signed a definitive agreement to acquire Security Networks for total compensation of $507.5 million, or about 60 times Security Networks’ average recurring monthly revenue. Before the announcement of this transaction, Monitronics was the third-largest North American residential security company and Security Networks was the 14th-largest. Following the completion of the proposed acquisition, the combined company will have 1.034 million customers (almost the same number as Protection One, the current second-largest North American residential security provider) and, on a pro forma basis, hold just under a 4% share of the North American residential security market.

… The valuation paid for Network Securities by Monitronics would value ADT between $67 and $74 per share. On an implied market capitalization basis, ADT would be valued in a range of $15.4 billion-$16.8 billion, well above the company’s current $9.2 billion market capitalization.

ADT stock closed at $42.68 per share today. That's down 28 cents or .65 percent from its $42.96 close yesterday and Heymann speculated later today that talk that Ackmann was NOT interested in buying into ADT may have caused the drop, the opposite of last week when ADT stock climbed based on speculation that Ackman was interested. "We think Ackman may have been at this big hedge fund meeting this afternoon and said something that implied he was NOT looking at ADT ... or an ADT type company," Heymann told me in an email this afternoon.

So which company does Ackman have his sights on? The situation is decidedly very fluid, and very interesting. I’ll be reporting more on this. Stay tuned!

 

 

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