ADT Q3 paves the way forward through account acquisition and valuable partnerships

BOCA RATON, Fla. — In spite of challenging market conditions ADT has shown admirable financial growth in the third quarter thanks to bulk account acquisition and partnerships with other major platforms.

“I'm pleased to report that ADT is continuing to deliver on our 2024 objectives and as we closeout the year, we're well positioned to deliver the full year financial guidance,” ADT CEO Jim DeVries told investors during a webcast.

He added, “In addition to year over year gross ad growth and our pro install residential business, I'll note that our results included a strategic customer portfolio acquisition for $81 million. This bulk account purchase is complementary to our existing customer footprint and was comprised of 49,000 subscribers. We believe that both deals such as this one, are an ongoing and attractive option for capital allocation.”

During Q&A later in the call ADT CFO Jeff Likosar elaborated on the purchase in response to a representative who asked about prevailing conditions and trends ADT was seeing in the residential market and how those conditions were informing its spending intentions for subscriber acquisition costs.

“It’s really on a relative basis,” Likosar said. “We we've seen some challenges in the macro environment, interest rates higher, fewer moves in some cases. Customer credit quality as we look at what customers to underwrite not quite as great as it once was. I'd also highlight that we're in the process of rolling out our new platform and ecosystem, which we're really excited about some of the early things we're seeing there.”

Likosar continued, “Then there's a couple of parts of our business we don't talk about quite as much that we've deemphasized. Health, for example. Ultimately, we will transition health to the new platform, but while we're making that transition, we're not deploying capital to take on as many health customers with the older hardware. So, they're all related to the reasons that that we found the bulk relatively more attractive. It's a little bit deeper detail maybe than we normally share, but I'd also point out that excluding bulk, if we just look at our core professionally installed residential customers, those adds were up in the period year over year also.”

During the presentation DeVries discussed the companies future investing in its product and experience ecosystem, in particular its proprietary ADT Plus platform and partnerships as with Google Nest devices and its recently released trusted neighbor app, DIY partnerships with State Farm ,and the co-development of a lock with Yale that grants access through biometrics which is still in the early stages. 

Financial highlights for the third quarter are as follows:

• Total revenue increased by 5% to $1.2 billion and end-of-period recurring monthly revenue (RMR) increased 2% to $359 million ($4.3 billion on an annualized basis)
• Strong customer retention with gross revenue attrition of 12.8% and revenue payback at 2.2 years
• GAAP income from continuing operations of $132 million, or $0.14 per diluted share, up $9 million
• Adjusted income from continuing operations of $183 million, or $0.20 per diluted share, up $39 million
• Adjusted EBITDA from continuing operations of $659 million, up $35 million
• Year to date net cash provided by operating activities of $1.4 billion up 14%; Adjusted Free Cash Flow (including interest rate swaps) of $520 million up 28%