ADT exits residential solar market

BOCA RATON, Fla. – ADT revealed late in January that the company would be exiting its residential solar business.

The company said it will remain focused on cash flow generation and capital-efficient growth within its core security and smart home business. As part of this continued focus, ADT is also advancing its capital allocation strategy, including a cash dividend increase and authorization of a new share repurchase program.

“The decision to exit solar operations was made after careful deliberation, and we expect this strategic action to drive substantial operational and financial benefits to ADT,” said Jim DeVries, ADT chairman, president and CEO. “We want to acknowledge and thank our employees, partners and customers as we work through this transition.”

ADT revealed that during the first nine months of 2023, their solar business faced a number of challenges, including operational difficulties and macroeconomic headwinds causing deterioration of conditions industrywide. As a result of these challenges, the solar segment generated an adjusted EBITDA loss of $89 million during this period. Following the previously announced restructuring of its solar footprint and a detailed strategic review, ADT’s Board of Directors has approved the exit of this segment, which may include the transfer of components of the business to other parties.

In their release the company said it expects to incur certain one-time exit charges and cash expenditures with potential offsets from asset sales or reduced tax expenses. As they previously disclosed, as of Sept. 30, 2023, the goodwill balance for the solar reporting unit was zero. “At this time, the company is still analyzing the estimated net amount or range of amounts expected to be incurred in connection with this plan,” ADT wrote.

Despite the challenges faced by its solar division ADT experienced strong cash flow generation from its core business, and as a result announced a dividend increase. The company’s Board of Directors declared a quarterly cash dividend of $0.055 per share, payable on April 4, 2024, to shareholders of record at the close of business on March 14, 2024.

The board also authorized a $350 million share repurchase program. As the company executes share repurchases, the board will periodically review the remaining authorization as part of its capital allocation strategy. ADT’s financials have also been buoyed by the bulk purchase of approximately 57,000 customer accounts for $89 million cash. ADT stated that this portfolio of customers is concentrated in a few key geographies, all of which align with existing platforms, enabling strong economies of scale upon integration. This transaction was not included in prior cash flow guidance.

As for existing ADT Solar customers, the company relayed to other media outlets that it would follow through on its warranties (25-year limited Workmanship Warranty and 25-year Power Production Guarantee) to protect customers and their hardware, with the agreements covering major system components like panels, mounting systems, and more.

ADT has promised further details and an update on the business during its Fourth Quarter (Q4) and full-year 2023 results on Feb. 28, 2024. Following the release, management will host a conference call at 10 a.m. ET to discuss the financial results and lead a question-and-answer session.