Bay Street News

ADT Reports Second Quarter 2024 Results

Continued strong operating cash generation

Solid revenue growth, up 3% versus prior year period

Improved leverage and over $150 million debt reduction in the quarter

Affirming full year 2024 guidance metrics

BOCA RATON, Fla., Aug. 01, 2024 (GLOBE NEWSWIRE) — ADT Inc. (NYSE: ADT), the most trusted brand in smart home and small business security, today reported results for the second quarter of 2024.

Financial highlights for the second quarter are below with variances on a year-over-year basis unless otherwise noted. Results of the former commercial and solar segments are presented as discontinued operations, except for cash flow measures.

Second Quarter 2024

“ADT delivered a solid first half with continued revenue growth momentum, as well as strong operating profitability and cash flow generation. With our streamlined focus on the consumer and small business markets, we continue to expand and improve our innovative offerings, unrivaled safety, and premium experience for security and smart home customers,” said ADT Chairman, President, and CEO, Jim DeVries. “Our success is powered by our employees’ dedication to the proposition that every second counts. We are well positioned to achieve our 2024 commitments with continued focus on driving significant cash flow while continuing to invest in our future and simultaneously returning capital to our shareholders.”

Business Highlights

Results of Continuing Operations (1)(2)

(in millions, except revenue payback, attrition, and per share data)   Three Months Ended June 30,
    2024       2023     $ Change   % Change
  GAAP
Monitoring and related services   $ 1,068     $ 1,043     $ 25     2 %
Security installation, product, and other     136       125       12     9 %
Total revenue   $ 1,205     $ 1,168     $ 36     3 %
                 
Income (loss) from continuing operations   $ 126     $ 180     $ (54 )   (30 )%
Income (loss) from continuing operations per share – diluted   $ 0.13     $ 0.19     $ (0.06 )   (32 )%
                 
Net cash provided by (used in):                
Operating activities   $ 563     $ 493     $ 70     14 %
Investing activities   $ (333 )   $ (319 )   $ (14 )   4 %
Financing activities   $ (200 )   $ (217 )   $ 17     (8 )%
                 
    Non-GAAP Measures
Adjusted EBITDA from continuing operations   $ 629     $ 641     $ (12 )   (2 )%
Adjusted Income (Loss) from continuing operations   $ 156     $ 153     $ 3     2 %
Adjusted Diluted Income (Loss) per share from continuing operations   $ 0.17     $ 0.17     $     %
Adjusted Free Cash Flow (including interest rate swaps)   $ 251     $ 221     $ 30     14 %
                 
    Other Measures
Trailing twelve-month revenue payback   2.2 years   2.1 years     0.1             5 %
Trailing twelve-month gross customer revenue attrition     12.9 %     12.9 %          
End of period RMR   $ 355     $ 348     $ 8     2 %
                               

Total revenue was $1,205 million for the second quarter, up 3%. Monitoring and related services (M&S) revenue growth was driven by an increase in the recurring revenue base due primarily to higher average pricing. Security installation, product, and other revenue increased primarily from higher amortization of deferred subscriber acquisition revenue.

Income from continuing operations was $126 million, or $0.13 per diluted share, down $54 million. This was primarily attributable to a current year charge and prior year credit related to legal settlements in aggregate amount of approximately $40 million, an increase in the allowance for credit losses, and higher net interest expense due to a decrease in unrealized gains on interest rate swaps, partially offset by continued recurring revenue growth.

Adjusted income from continuing operations was $156 million, or $0.17 per diluted share, up $3 million. Adjusted EBITDA was $629 million, down $12 million. These measures included improvements from increases in recurring revenue, and were negatively impacted by the aforementioned legal settlements and allowance for credit losses.

Balance Sheet and Cash Flow

Net cash provided by operating activities during the second quarter was $563 million, up $70 million or 14% and Adjusted Free Cash Flow (including interest rate swaps) increased by $30 million. These measures, which benefited from lower cash interest resulting from debt reduction and timing of working capital and other items, were partially offset by the net results of the commercial and solar businesses. In addition, Adjusted Free Cash Flow also includes the lower net cash flows associated with the receivables facility.

The Company returned $50 million to shareholders in dividends. As of June 30, 2024, approximately $257 million remains available for future repurchases under the Share Repurchase Plan.

Total cash and cash equivalents were $38 million and no amounts were outstanding under the Company’s first lien revolving credit facility at the end of the quarter.

In April, the Company redeemed the remaining $100 million of its First Lien Senior Secured Notes due 2024 and completed a repricing of the $1.4 billion First Lien Term Loan B reducing borrowing costs by 25 basis points. There are no other significant debt maturities until 2026.

In May, the Company amended and restated its First Lien Credit Agreement, which included the refinancing of $618 million principal amount of loans under the Company’s Term Loan A Facility for its First Lien Term Loan B due 2030. The Term Loan A Facility has been terminated, and there is approximately $2.0 billion of First Lien Term Loan B outstanding.

2024 Financial Outlook

The Company is reiterating its 2024 financial guidance for Total Revenue, Adjusted EBITDA, and Adjusted Free Cash Flow while updating the range for Adjusted EPS to reflect the presentation of the solar business as a discontinued operation.

(in millions, except per share data)    
Total Revenue   $4,800 – $5,000
Adjusted EBITDA   $2,525 – $2,625
Adjusted EPS   $0.65 – $0.75
Adjusted Free Cash Flow
(including interest rate swaps)
  $700 – $800
The Company is not providing forward-looking guidance for U.S. GAAP financial measures other than Total Revenue or a quantitative reconciliation to the most directly comparable GAAP measure for its non-GAAP financial guidance shown above because the GAAP measures cannot be reliably estimated and the reconciliations cannot be performed without unreasonable effort due to their dependence on future uncertainties and adjusting items that the Company cannot reasonably predict at this time but which may be material. Please see “Non-GAAP Measures” for additional information.
Total Revenue and Adjusted EBITDA reflect the results of the former CSB segment. GAAP cash flows include results of Solar discontinued operations. Adjusted Free Cash Flow excludes amounts related to the exit from the solar business, consistent with the definition of this measure. Beginning in the third quarter of 2024, all remaining cash flows attributable to activities of the solar business will be excluded from Adjusted Free Cash Flow as the business is now substantially wound down.
 

Dividend Declaration

Effective Aug. 1, 2024, the Company’s Board of Directors declared a cash dividend of $0.055 per share to holders of the Company’s common stock and Class B common stock of record as of Sep. 13, 2024. This dividend will be paid on Oct. 4, 2024.

_____________________

(1)   All variances are year-over-year unless otherwise noted. Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Free Cash Flow, Adjusted Free Cash Flow (including interest rate swaps), Adjusted Income (Loss), Adjusted Diluted Income (Loss) per share (or, Adjusted EPS), Net Debt, and Net Leverage Ratio are non-GAAP measures. Refer to the “Non-GAAP Measures” section for the definitions of the terms and reconciliations to the most comparable GAAP measures included herein. The operating metrics such as Gross Customer Revenue Attrition, Unit Count, RMR, Gross RMR Additions, and Revenue Payback are approximated as there may be variations to reported results in each period due to certain adjustments the Company might make in connection with the integration over several periods of acquired companies that calculated these metrics differently, or otherwise, including periodic reassessments and refinements in the ordinary course of business. These refinements, for example, may include changes due to systems conversion or historical methodology differences in legacy systems. Results of the commercial and solar businesses are presented as discontinued operations. Except for cash flow measures, and unless otherwise noted, amounts herein have been recast to reflect the results of the Company’s continuing operations.
(2)   Amounts may not sum due to rounding.
     

Conference Call

As previously announced, management will host a conference call at 10 a.m. ET today to discuss the Company’s second quarter 2024 results and lead a question-and-answer session. Participants may listen to a live webcast through the investor relations website at investor.adt.com. A replay of the webcast will be available on the website within 24 hours of the live event.

Alternatively, participants may listen to the live call by dialing 1-800-715-9871 (domestic) or 1-646-307-1963 (international), and providing the access code 4948265. An audio replay will be available for two weeks following the call, and can be accessed by dialing 1-800-770-2030 (domestic) or 1-609-800-9909 (international), and providing the access code 4948265.

A slide presentation highlighting the Company’s results will also be available on the Investor Relations section of the Company’s website. From time to time, the Company may use its website as a channel of distribution of material Company information. Financial and other material information regarding the Company is routinely posted on and accessible at investor.adt.com.

About ADT Inc.

ADT provides safe, smart and sustainable solutions for people, homes and small businesses. Through innovative offerings, unrivaled safety and a premium customer experience, all delivered by the largest networks of smart home security professionals in the U.S., we empower people to protect and connect to what matters most. For more information, visit www.adt.com.

Investor Relations: Media Relations:
investorrelations@adt.com
Tel: 888-238-8525
media@adt.com
   

Forward-Looking Statements

ADT has made statements in this press release that are forward-looking and therefore subject to risks and uncertainties, including those described below. All statements, other than statements of historical fact, included in this document are, or could be, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) and are made in reliance on the safe harbor protections provided thereunder. These forward-looking statements relate to, among other things, the divestiture of the commercial business which was completed in October 2023 (the “Commercial Divestiture”); the Company’s exit of the residential solar business and the expected costs and benefits of such exit (the “ADT Solar Exit”); the repurchase of shares of the Company’s common stock under the authorized share repurchase program; the Company’s ability to reduce debt or improve leverage ratios, or to achieve or maintain its long-term leverage goals; the integration of strategic bulk purchases of customer accounts; the Company’s outlook and/or guidance, which includes total revenue, Adjusted EBITDA, Adjusted Diluted Income (Loss) per Share (“Adjusted EPS”) and Adjusted Free Cash Flow (including interest rate swaps); any stated or implied outcomes with regards to the foregoing; and other matters. Without limiting the generality of the preceding sentences, any time we use the words “expects,” “intends,” “will,” “anticipates,” “believes,” “confident,” “continue,” “propose,” “seeks,” “could,” “may,” “should,” “estimates,” “forecasts,” “might,” “goals,” “objectives,” “targets,” “planned,” “projects,” and, in each case, their negative or other various or comparable terminology, and similar expressions, we intend to clearly express that the information deals with possible future events and is forward-looking in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. These forward-looking statements are based on management’s current beliefs and assumptions and on information currently available to management. We caution that these statements are subject to risks and uncertainties, many of which are outside of our control and could cause future events or results to be materially different from those stated or implied in this press release, including, among others, factors relating to uncertainties as to any difficulties with respect to the effect of the Commercial Divestiture and ADT Solar Exit on our ability to retain and hire key personnel and to maintain relationships with customers, suppliers and other business partners; risks related to the Commercial Divestiture and ADT Solar Exit, including ADT’s business becoming less diversified and the possible diversion of management’s attention from ADT’s core CSB business operations; uncertainties as to our ability and the amount of time necessary to realize the expected benefits of the Commercial Divestiture and ADT Solar Exit, including the risk that the ADT Solar Exit may not be completed in a timely manner, or that the costs of the ADT Solar Exit may exceed our best estimates; our ability to maintain and grow our existing customer base and to integrate strategic bulk purchases of customer accounts; activity in repurchasing shares of ADT’s common stock under the authorized share repurchase program; dividend rates or yields for any future quarter; and risks that are described in the Company’s Annual Report and its Quarterly Reports on Form 10-Q, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in those reports, and in our other filings with the SEC. Any forward-looking statement made in this press release speaks only as of the date on which it is made. ADT undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments, or otherwise.

 
 
ADT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data) (Unaudited)
 
    Three Months Ended June 30,   Six Months Ended June 30,
      2024       2023     $
Change
  %
Change
    2024       2023     $
Change
  %
Change
Revenue:                                
Monitoring and related services   $ 1,068     $ 1,043     $ 25     2%   $ 2,131     $ 2,072     $ 59     3%
Security installation, product, and other     136       125       12     9%     264       229       35     15%
Total revenue     1,205       1,168       36     3%     2,394       2,301       94     4%
Cost of revenue (exclusive of depreciation and amortization shown separately below):                                
Monitoring and related services     151       142       9     6%     306       304       2     1%
Security installation, product, and other     45       45           —%     85       75       10     13%
Total cost of revenue     196       188       9     5%     391       379       11     3%
Selling, general, and administrative expenses     388       319       69     22%     747       654       93     14%
Depreciation and intangible asset amortization     334       321       13     4%     667       679       (12 )   (2)%
Merger, restructuring, integration, and other     2       8       (6 )   (78)%     14       23       (9 )   (40)%
Operating income (loss)     284       332       (48 )   (14)%     576       565       11     2%
Interest expense, net     (110 )     (83 )     (26 )   31%     (197 )     (254 )     57     (23)%
Other income (expense)     12       1       11     N/M     27       (1 )     28     N/M
Income (loss) from continuing operations before income taxes and equity in net earnings (losses) of equity method investee     186       249       (63 )   (25)%     406       310       96     31%
Income tax benefit (expense)     (60 )     (67 )     7     (11)%     (116 )     (86 )     (31 )   36%
Income (loss) from continuing operations before equity in net earnings (losses) of equity method investee     126       182       (56 )   (31)%     290       224       66     29%
Equity in net earnings (losses) of equity method investee           (2 )     2     N/M           (4 )     4     N/M
Income (loss) from continuing operations     126       180       (54 )   (30)%     290       220       70     32%
Income (loss) from discontinued operations, net of tax     (34 )     (88 )     54     (62)%     (106 )     (247 )     140     (57)%
Net income (loss)   $ 92     $ 92     $     —%   $ 184     $ (27 )   $ 211     N/M
                                 
Common Stock:                                
Income (loss) from continuing operations per share – basic   $ 0.14     $ 0.20             $ 0.32     $ 0.24          
Income (loss) from continuing operations per share – diluted   $ 0.13     $ 0.19             $ 0.30     $ 0.23          
                                 
Net income (loss) per share – basic   $ 0.10     $ 0.10             $ 0.20     $ (0.03 )        
Net income (loss) per share – diluted   $ 0.10     $ 0.09             $ 0.19     $ (0.03 )        
                                 
Weighted-average shares outstanding – basic     848       858               852       856          
Weighted-average shares outstanding – diluted     909       917               913       919          
                                 
Class B Common Stock:                                
Income (loss) from continuing operations per share – basic   $ 0.14     $ 0.20             $ 0.32     $ 0.24          
Income (loss) from continuing operations per share – diluted   $ 0.13     $ 0.19             $ 0.30     $ 0.23          
                                 
Net income (loss) per share – basic   $ 0.10     $ 0.10             $ 0.20     $ (0.03 )        
Net income (loss) per share – diluted   $ 0.10     $ 0.09             $ 0.19     $ (0.03 )        
                                 
Weighted-average shares outstanding – basic     55       55               55       55          
Weighted-average shares outstanding – diluted     55       55               55       55          

Note: amounts may not sum due to rounding

 
ADT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS 
(in millions) (Unaudited)
 
    June 30, 2024   December 31, 2023
Assets        
Current assets:        
Cash and cash equivalents   $ 38   $ 15
Restricted cash and restricted cash equivalents     111     115
Accounts receivable, net     386     370
Inventories, net     203     201
Prepaid expenses and other current assets     241        242
Current assets of discontinued operations     6     61
     Total current assets     986     1,005
Property and equipment, net     263     254
Subscriber system assets, net     3,019     3,006
Intangible assets, net     4,836     4,877
Goodwill     4,904     4,904
Deferred subscriber acquisition costs, net     1,249     1,176
Other assets     727     699
Noncurrent assets of discontinued operations     3     43
          Total assets   $ 15,986   $ 15,964
         
Liabilities and stockholders’ equity        
Current liabilities:        
Current maturities of long-term debt   $ 192   $ 312
Accounts payable     222     277
Deferred revenue     247     255
Accrued expenses and other current liabilities     605     556
Current liabilities of discontinued operations     49     80
     Total current liabilities     1,315     1,480
Long-term debt     7,532     7,513
Deferred subscriber acquisition revenue     2,035     1,915
Deferred tax liabilities     1,080     1,027
Other liabilities     200     219
Noncurrent liabilities of discontinued operations     16     21
          Total liabilities     12,178     12,175
         
          Total stockholders’ equity     3,808     3,789
          Total liabilities and stockholders’ equity   $ 15,986   $ 15,964

Note: amounts may not sum due to rounding

 
ADT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(in millions)  (Unaudited)
 
    Three Months Ended June 30,   Six Months Ended June 30,
      2024       2023       2024       2023  
Cash flows from operating activities:                
Net income (loss)   $ 92     $ 92     $ 184     $ (27 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:                
Depreciation and intangible asset amortization     334       346       669       729  
Amortization of deferred subscriber acquisition costs     55       48       109       95  
Amortization of deferred subscriber acquisition revenue     (86 )     (76 )     (170 )     (148 )
Share-based compensation expense     21       12       29       27  
Deferred income taxes     38       (61 )     49       (131 )
Provision for losses on receivables and inventory     46       41       107       67  
Goodwill, intangible, and other asset impairments     1       185       21       428  
Unrealized (gain) loss on interest rate swap contracts     8       (55 )     (2 )     (22 )
Other non-cash items, net     22       24       43       53  
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:                
Deferred subscriber acquisition costs     (94 )     (98 )     (183 )     (185 )
Deferred subscriber acquisition revenue     69       75       135       148  
Other, net     57       (40 )     (65 )     (235 )
          Net cash provided by (used in) operating activities     563       493       927       799  
                 
Cash flows from investing activities:                
Dealer generated customer accounts and bulk account purchases     (142 )     (136 )     (260 )     (252 )
Subscriber system asset expenditures     (143 )     (161 )     (284 )     (320 )
Purchases of property and equipment     (47 )     (30 )     (87 )     (89 )
Proceeds (payments) from interest rate swaps     (2 )           (4 )      
Other investing, net     2       9       3       7  
          Net cash provided by (used in) investing activities     (333 )     (319 )     (633 )     (655 )
                 
Cash flows from financing activities:                
Proceeds from long-term borrowings     811       50       906       650  
Proceeds from receivables facility     80       76       146       140  
Proceeds (payments) from interest rate swaps     24       20       48       36  
Repurchases of common stock                 (93 )      
Repayment of long-term borrowings, including call premiums     (961 )     (266 )     (1,018 )     (873 )
Repayment of receivables facility     (100 )     (48 )     (158 )     (92 )
Dividends on common stock     (50 )     (32 )     (82 )     (64 )
Payments on finance leases     (8 )     (10 )     (15 )     (21 )
Other financing, net     4       (7 )     (8 )     (33 )
          Net cash provided by (used in) financing activities     (200 )     (217 )     (275 )     (258 )
                 
Cash and cash equivalents and restricted cash and restricted cash equivalents:                
Net increase (decrease)     30       (43 )     19       (113 )
Beginning balance     119       304       130       374  
Ending balance   $ 149     $ 261     $ 149     $ 261  

Note: amounts may not sum due to rounding

ADT sometimes uses information (“non-GAAP financial measures”) that is derived from the consolidated financial statements, but that is not presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”). Under SEC rules, non-GAAP financial measures may be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results.

The following information includes definitions of the Company’s non-GAAP financial measures used in this release, reasons management believes these measures are useful to investors regarding the Company’s financial condition and results of operations, additional purposes, if any, for which management uses the non-GAAP financial measures, and limitations to using these non-GAAP financial measures, as well as reconciliations of these non-GAAP financial measures to the most comparable GAAP measures. Each non-GAAP financial measure is presented following the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure. The limitations of non-GAAP financial measures are best addressed by considering these measures in conjunction with the appropriate GAAP measures. In addition, computations of these non-GAAP measures may not be comparable to other similarly titled measures reported by other companies.

With regard to the Company’s financial guidance for 2024, the Company is not providing a quantitative reconciliation for forward-looking Adjusted EBITDA to GAAP income (loss) from continuing operations, Adjusted EPS to GAAP diluted income (loss) per share from continuing operations, and Adjusted Free Cash Flow (including interest rate swaps) to GAAP net cash provided by operating activities, which are the most directly comparable respective GAAP measures. These GAAP measures cannot be reliably predicted or estimated without unreasonable effort due to their dependence on future uncertainties, such as the adjustment of items used in the following reconciliations. Additionally, information not currently available to the Company about other adjusting items could have a potentially unpredictable and potentially significant impact on future GAAP financial results.

Unless otherwise noted, non-GAAP measures herein reflect the results of only the Company’s continuing operations. Free Cash Flow, Adjusted Free Cash Flow, and Adjusted Free Cash Flow (including interest rate swaps) reflect the results of both continuing and discontinued operations, which is consistent with the presentation of the GAAP measure net cash provided by (used in) operating activities. Adjusted Free Cash Flow and Adjusted Free Cash Flow (including interest rate swaps) exclude amounts related to the exit from the solar business, consistent with the definition of these measures. Beginning in the third quarter of 2024, all remaining cash flows attributable to activities of the solar business will be excluded from these measures as the business is now substantially wound down.

Free Cash Flow, Adjusted Free Cash Flow, and Adjusted Free Cash Flow including interest rate swaps

The Company defines Free Cash Flow as cash flows from operating activities less cash outlays related to capital expenditures. The Company defines capital expenditures to include accounts purchased through the Company’s network of authorized dealers or third parties outside of the Company’s authorized dealer network, subscriber system asset expenditures, and purchases of property and equipment. These items are subtracted from cash flows from operating activities because they represent long-term investments that are required for normal business activities.

The Company defines Adjusted Free Cash Flow as Free Cash Flow adjusted for net cash flows related to (i) net proceeds from the Company’s consumer receivables facility; (ii) restructuring and integration payments; (iii) integration-related capital expenditures; and (iv) transaction costs and other payments or receipts that may mask operating results or business trends. Adjusted Free Cash Flow including interest rate swaps reflects Adjusted Free Cash Flow plus net cash settlements on interest rate swaps presented outside of net cash provided by (used in) operating activities.

The Company believes the presentations of these non-GAAP measures are appropriate to provide investors with useful information about the Company’s ability to repay debt, make other investments, and pay dividends. The Company believes the presentation of Adjusted Free Cash Flow is also a useful measure of the cash flow attributable to normal business activities, inclusive of the net cash flows associated with the acquisition of subscribers, as well as the Company’s ability to repay other debt, make other investments, and pay dividends. Further, Adjusted Free Cash Flow including interest rate swaps is a useful measure of Adjusted Free Cash Flow inclusive of all cash interest.

There are material limitations to using these non-GAAP measures. These non-GAAP measures adjust for cash items that are ultimately within management’s discretion to direct, and therefore, may imply that there is less or more cash available than the most comparable GAAP measure. These non-GAAP measures are not intended to represent residual cash flow for discretionary expenditures since debt repayment requirements and other non-discretionary expenditures are not deducted.

The non-GAAP measures in the table below include cash flows associated with both continuing and discontinued operations consistent with the applicable GAAP presentation on the Statement of Cash Flows.

    Three Months Ended June 30,
(in millions)     2024       2023  
Net cash provided by (used in):        
Operating activities   $ 563     $ 493  
Investing activities   $ (333 )   $ (319 )
Financing activities   $ (200 )   $ (217 )
         
Net cash provided by (used in) operating activities   $ 563     $ 493  
Dealer generated customer accounts and bulk account purchases     (142 )     (136 )
Subscriber system asset expenditures     (143 )     (161 )
Purchases of property and equipment     (47 )     (30 )
Free Cash Flow     231       165  
Net proceeds (payments) from receivables facility     (20 )     28  
Restructuring and integration payments(1)     12       7  
Integration-related capital expenditures            
Other, net(2)     7       (1 )
Adjusted Free Cash Flow   $ 229     $ 201  
Interest rate swaps presented outside operating activities(3)     22       20  
Adjusted Free Cash Flow (including interest rate swaps)   $ 251     $ 221  

Note: amounts may not sum due to rounding
_______________________
(1) During 2024, primarily includes costs related to the ADT Solar Exit. During 2023, primarily represents ADT Solar integration costs and restructuring activities.
(2) During 2024, primarily includes third party costs associated with implementation of a new ERP system that the Company will not continue to incur once the ERP system is fully implemented, which is expected to complete in the second half of 2025.
(3) Includes net settlements related to interest rate swaps presented outside of net cash provided by (used in) operating activities.
  

Adjusted EBITDA from Continuing Operations (“Adjusted EBITDA”) and Adjusted EBITDA Margin from Continuing Operations (“Adjusted EBITDA Margin”)

The Company believes Adjusted EBITDA is useful to investors to measure the operational strength and performance of its business. The Company believes the presentation of Adjusted EBITDA is useful as it provides investors additional information about operating profitability adjusted for certain non-cash items, non-routine items the Company does not expect to continue at the same level in the future, as well as other items not core to its operations. Further, the Company believes Adjusted EBITDA provides a meaningful measure of operating profitability because the Company uses it for evaluating business performance, making budgeting decisions, and comparing company performance against other peer companies using similar measures.

The Company defines Adjusted EBITDA as income (loss) from continuing operations adjusted for (i) interest; (ii) taxes; (iii) depreciation and amortization, including depreciation of subscriber system assets and other fixed assets and amortization of dealer and other intangible assets; (iv) amortization of deferred costs and deferred revenue associated with subscriber acquisitions; (v) share-based compensation expense; (vi) merger, restructuring, integration, and other items; (vii) impairment charges; and (viii) non-cash, non-routine, or other adjustments or charges not necessary to operate our business.

There are material limitations to using Adjusted EBITDA as it does not include certain significant items which directly affect income (loss) from continuing operations (the most comparable GAAP measure).

The discussion above is also applicable to Adjusted EBITDA margin, which is calculated as Adjusted EBITDA as a percentage of total revenue.

    Three Months Ended June 30,
(in millions)     2024       2023  
Income (loss) from continuing operations   $ 126     $ 180  
Interest expense, net     110       83  
Income tax expense (benefit)     60       67  
Depreciation and intangible asset amortization     334       321  
Amortization of deferred subscriber acquisition costs     55       46  
Amortization of deferred subscriber acquisition revenue     (86 )     (74 )
Share-based compensation expense     21       8  
Merger, restructuring, integration and other     2       8  
Other, net(1)     8        
Adjusted EBITDA from continuing operations   $ 629     $ 641  
         
Income (loss) from continuing operations to total revenue ratio     10 %     15 %
Adjusted EBITDA Margin (as percentage of Total Revenue)     52 %     55 %

Note: amounts may not sum due to rounding
_______________________
(1) During 2024, primarily includes unrealized (gains) / losses related to interest rate swaps presented in other income (expense) and loss on extinguishment of debt.

Adjusted Income (Loss) from Continuing Operations (“Adjusted Income (Loss)”) and Adjusted Diluted Income (Loss) per Share from Continuing Operations (“Adjusted Diluted Income (Loss) per Share” or “Adjusted EPS”)

The Company defines Adjusted Income (Loss) as income (loss) from continuing operations adjusted for (i) merger, restructuring, integration, and other; (ii) share-based compensation expense; (iii) unrealized gains and losses on interest rate swap contracts not designated as hedges; (iv) impairment charges; (v) non-cash, non-routine, or other adjustments or charges not necessary to operate our business; and (vi) the impact these adjusted items have on taxes.

Adjusted Diluted Income (Loss) per share is Adjusted Income (Loss) divided by diluted weighted-average shares outstanding of common stock. When the control number for the GAAP calculation is negative, diluted weighted-average shares outstanding of common stock does not include the assumed conversion of Class B common stock and other potential shares, such as share-based compensation awards, to shares of common stock.

The Company believes Adjusted Income (Loss) and Adjusted Diluted Income (Loss) per share are benchmarks used by analysts and investors who follow the industry for comparison of its performance with other companies in the industry, although these measures may not be directly comparable to similar measures reported by other companies.

There are material limitations to using these measures, as they do not reflect certain significant items which directly affect income (loss) from continuing operations and related per share amounts (the most comparable GAAP measures).

    Three Months Ended June 30,
(in millions, except per share data)     2024       2023  
Income (loss) from continuing operations   $ 126     $ 180  
Merger, restructuring, integration, and other     2       8  
Share-based compensation expense     21       8  
Interest rate swaps, net(1)     8       (55 )
Other, net     5        
Tax impact on adjustments(2)     (6 )     10  
Adjusted Income (Loss) from continuing operations   $ 156     $ 153  
         
Weighted-average shares outstanding – diluted(3):        
Common Stock     909       917  
Class B Common Stock     55       55  
         
Income (loss) per share from continuing operations – diluted:        
Common Stock   $ 0.13     $ 0.19  
Class B Common Stock   $ 0.13     $ 0.19  
         
Adjusted Diluted Income (Loss) per share(4)   $ 0.17     $ 0.17  

Note: amounts may not sum due to rounding.
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(1) Primarily includes the unrealized (gain) or loss on interest rate swaps not designated as cash flow hedges.
(2) Represents the federal and state blended statutory rate.
(3) Refer to the Company’s Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K for further discussion regarding the computation of diluted weighted-average shares outstanding of common stock.
(4) Calculated as Adjusted Income (Loss) divided by diluted weighted-average shares outstanding of common stock.


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