ADT 8-K
ADT Inc. (ADT)
8-K
2021-11-09
For: 2021-11-08
View Original
Added on
April 11, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM | ||||||||
| CURRENT REPORT | ||||||||
| Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||||||
Date of Report (Date of earliest event reported): November 8, 2021
| (Exact name of Registrant as specified in its charter) | ||||||||
| (State of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||
| (Address of principal executive offices) | ||||||||
(561 ) 988-3600
(Registrant’s telephone number, including area code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||||||||
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 1.01. Entry into a Material Definitive Agreement.
Purchase Agreement
On November 8, 2021, ADT Inc. (the “Company”) entered into a Purchase Agreement (the “Purchase Agreement”) with The ADT Security Corporation, an indirect wholly owned subsidiary of the Company (“Buyer”), Compass Solar Group, LLC, a Delaware limited liability company (“CSG”), MGG SPV VIII LLC, a Delaware limited liability company (“SPV VIII”), MGG SPV VII LLC, a Delaware limited liability company (“SPV VII” and, together with SPV VIII, the “Blockers”), the members of CSG party thereto (the “CSG Members”), the members of the Blockers party thereto (the “Blocker Members”), and the Member Representative named therein, pursuant to which Buyer has agreed to acquire all of the issued and outstanding membership interests of CSG from the CSG Members and all of the issued and outstanding membership interests of each of the Blockers from the Blocker Members (together with the other transactions contemplated thereby, the “Transaction”). The base purchase price payable to the CSG Members and the Blocker Members consists of $160 million in cash (the “Cash Consideration”) and 77,750,000 shares of common stock, par value $0.01 per share (“Common Stock”), of the Company, subject to adjustment as set forth in the Purchase Agreement.
Consummation of the Transaction is subject to the satisfaction or waiver of (i) specified conditions, including that the Company and the applicable CSG Members and Blocker Members shall have entered into an Investor Rights Agreement (the “Investor Rights Agreement”), and (ii) other customary closing conditions, including (a) the accuracy of each applicable party’s representations and warranties (subject to customary qualifiers), (b) each party’s compliance in all material respects with its agreements and covenants contained in the Purchase Agreement, (c) the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 having expired, (d) no temporary restraining order, preliminary or permanent injunction or other order preventing consummation of the Transaction shall be in effect, no law, rule, regulation, order, judgment, decree, ruling or arbitration award shall be in effect that would, enjoin or prohibit the consummation of the Transaction and no action shall be pending before any court or other governmental entity seeking to prevent consummation of the Transaction, (e) the absence of any material adverse effect on CSG, (f) the payoff and termination of certain indebtedness and liens of CSG, (g) the offer of employment with the Company for Marc Jones, (h) CSG shall have delivered evidence that it has bound a D&O tail insurance policy, and (i) certain customary consents of third parties shall have been obtained. The Company expects that the Transaction will close in the fourth quarter of 2021.
The Purchase Agreement includes customary representations, warranties and covenants of the Company, the Buyer, CSG, the CSG Members, and the Blockers. CSG, the CSG Members, and the Blockers have agreed to conduct the business in the ordinary course and not to enter into certain arrangements or take certain actions between the signing of the Purchase Agreement and closing of the Transaction. Certain CSG Members and Blocker Members have also agreed to certain non-solicitation and non-competition covenants set forth in the Purchase Agreement. Buyer, the CSG Members, and the Blocker Members have agreed to use commercially reasonable efforts to obtain the clearance, approval or expiration of applicable antitrust laws with respect to the Transaction, as more fully set forth in and subject to the terms and conditions of the Purchase Agreement.
The Purchase Agreement further specifies that, upon the closing of the Transaction, the Company and the applicable CSG Members and Blocker Members (the “Holders”) will enter into the Investor Rights Agreement, pursuant to which certain Holders will agree to be bound by customary transfer restrictions, drag-along rights, and rights of first refusal, and be afforded certain customary registration rights with respect to the Common Stock held by such Holders, subject to the terms and conditions set forth therein. Under the terms of the Investor Rights Agreement, as more fully set forth therein, the Holders, other than those controlled by Marc Jones, will be prohibited, subject to certain exceptions, from transferring any shares of Common Stock issued in the Transaction for a period of six months following the closing of the Transaction, which transfer restrictions will be released with respect to the lesser of one-twelfth of their shares of Common Stock and their pro rata portion of 4.1 million shares each month thereafter. The Holders controlled by Marc Jones will be prohibited, subject to certain exceptions, from transferring any shares of Common Stock issued in the Transaction for a period of three years following the closing of the Transaction, which transfer restrictions will be released with respect to one-twelfth of their shares of Common Stock each month thereafter. In addition, the transfer restrictions applicable to Holders controlled by Marc Jones will be
released with respect to 3.2 million shares of Common Stock on the one-year anniversary of the closing of the Transaction.
The foregoing descriptions of the Purchase Agreement and the Investor Rights Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the Purchase Agreement and the Investor Rights Agreement, which will be filed with our Annual Report on Form 10-K for fiscal year 2021.
The representations, warranties and covenants contained in the Purchase Agreement were made by the parties thereto only for purposes of the Purchase Agreement and as of specific dates as set forth therein; were made solely for the benefit of the parties to the Purchase Agreement; may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Purchase Agreement; may have been made for the purposes of allocating contractual risk between the parties to the Purchase Agreement instead of establishing these matters as facts; and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors and security holders. Accordingly, such representations, warranties and covenants or any descriptions thereof should not be relied on by any persons as characterizations of the actual state of facts and circumstances of the Company or any of its subsidiaries or affiliates at the time they were made and the information in the Purchase Agreement should be considered in conjunction with the entirety of the factual disclosure about the Company in the Company’s public reports filed with the Securities and Exchange Commission (the “SEC”). Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
Item 2.02 Results of Operations and Financial Condition.
On November 9, 2021, the Company issued a press release announcing its financial results for the three and nine months ended September 30, 2021. A copy of the Company’s press release is being furnished herewith as Exhibit 99.1 and is incorporated herein by reference in its entirety.
The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended (the "Securities Act") or the Exchange Act.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth under Item 1.01 of this Current Report on Form 8-K relating to the agreement to issue shares of Common Stock to the CSG Members and the Blocker Members pursuant to the Purchase Agreement is incorporated herein by reference. The issuance of the shares of Common Stock to the CSG Members and Blocker Members will be exempt from registration pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act.
Item 7.01 Regulation FD Disclosure.
Common Stock Dividends
On November 9, 2021, the Company announced a dividend of $0.035 per share to holders of the Company's common stock and Class B common stock of record on December 16, 2021. The dividend will be distributed on January 4, 2022.
A copy of the press release announcing the declaration of the dividends is furnished herewith as Exhibit 99.1 and incorporated into this Item 7.01 by reference.
Entry into a Material Definitive Agreement for Compass Solar Group, LLC
On November 9, 2021, the Company issued a press release announcing the signing of the Purchase Agreement. A copy of the Company’s press release is being furnished herewith as Exhibit 99.2 and is incorporated herein by reference in its entirety.
The information furnished pursuant to this Item 7.01, including Exhibit 99.1 and Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit | Description | ||||
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document | ||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: | November 9, 2021 | ADT Inc. | |||||||||
| By: | /s/ Jeffrey Likosar | ||||||||||
| Jeffrey Likosar | |||||||||||
| Chief Financial Officer and President, Corporate Development | |||||||||||
Exhibit 99.1
 | ||||||||
ADT REPORTS THIRD QUARTER 2021 RESULTS
Announces pending acquisition of Sunpro Solar, entering into the rapidly growing residential solar market
Continued momentum in the business with total revenue, subscribers, and end of period RMR all increasing year over year
Commercial rebound continues with double-digit revenue growth
BOCA RATON, Fla. – November 9, 2021 – ADT Inc. (NYSE: ADT), the most trusted brand in smart home and small business security, today reported results for the third quarter of 2021.
THIRD QUARTER 2021 OPERATIONAL HIGHLIGHTS VERSUS PRIOR YEAR
•Monitoring and related services revenue increased 5%
•Gross recurring monthly revenue (RMR) additions grew 7% in the third quarter, 19% year-to-date
•End of period RMR of $356 million increased by 4%, the 5th quarter of sequential improvement
•Solid customer retention with attrition at 13.4%
•Commercial performance improves with revenue growing 18%
“Our third quarter results show that we are successfully delivering solid results for our shareholders while positioning the Company for long-term growth. Our people are at the heart of ADT’s brand and I want to thank our entire team for their great work and steadfast focus on our customers,” stated Jim DeVries, ADT’s President and CEO. “Our pending acquisition of Sunpro Solar represents an exciting new chapter for ADT, giving us a top-tier position in the fast-growing residential solar business. With our broad spectrum of integrated security, smart home, and energy management solutions – customers will now be protected, connected, and powered by ADT.”
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THIRD QUARTER 2021 FINANCIAL RESULTS(1)
| (in millions, except revenue payback, attrition, and per share data) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||
| GAAP | ||||||||||||||||||||||||||
| Total revenue | $ | 1,317 | $ | 1,299 | $ | 3,926 | $ | 4,000 | ||||||||||||||||||
| Net loss | (109) | (113) | (283) | (520) | ||||||||||||||||||||||
| Net cash provided by operating activities | 370 | 364 | 1,155 | 993 | ||||||||||||||||||||||
| Net cash used in investing activities | (393) | (265) | (1,171) | (800) | ||||||||||||||||||||||
| Net cash provided by (used in) financing activities | (64) | 345 | (124) | 249 | ||||||||||||||||||||||
| Net loss per share of common stock - diluted | $ | (0.13) | $ | (0.15) | $ | (0.35) | $ | (0.68) | ||||||||||||||||||
| Net loss per share of Class B common stock - diluted | $ | (0.13) | $ | (0.07) | $ | (0.35) | $ | (0.44) | ||||||||||||||||||
| Other Measures | ||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 554 | $ | 564 | $ | 1,638 | $ | 1,666 | ||||||||||||||||||
| Adjusted Free Cash Flow | 62 | 127 | 289 | 532 | ||||||||||||||||||||||
| Trailing twelve-month revenue payback | — | — | 2.3 years | 2.2 years | ||||||||||||||||||||||
| Trailing twelve-month gross customer revenue attrition (percentage) | — | — | 13.4% | 12.9 | % | |||||||||||||||||||||
| End of period RMR | — | — | $ | 356 | $ | 341 | ||||||||||||||||||||
| Adjusted Net Loss | $ | (54) | $ | (58) | $ | (166) | $ | (181) | ||||||||||||||||||
| Adjusted Diluted Net Loss per share | $ | (0.07) | $ | (0.08) | $ | (0.22) | $ | (0.24) | ||||||||||||||||||
Third Quarter 2021 Results Versus Prior Year
Total revenue increased 1% year over year to $1,317 million. The revenue increase was driven primarily by a $53 million, or 5% increase in monitoring and related services revenue resulting from the Company’s subscriber growth initiatives and an improvement in average pricing. Higher M&S revenue was partially offset by lower installation revenue, reflecting the non-cash impact of equipment ownership model changes.
Net loss of $109 million improved from $113 million in the prior year, primarily due to strong M&S revenue and lower interest expense, offset by higher radio conversion costs, which are also reflected in the $0.02 improvement in diluted net loss per share of common stock. Diluted net loss per share of Class B common stock was $(0.13) compared to $(0.07) a year ago.
Adjusted Diluted Net Loss per share (previously named diluted net loss per share before special items) improved compared to the prior year, reflecting improvements in Adjusted Net Loss (previously named net loss before special items) of $54 million compared to $58 million in the prior year.
Adjusted EBITDA was $554 million, down from $564 million in the prior year, reflecting the non-cash impact of the ownership model changes and technology investments. These items were partially offset by strong monitoring and related services revenue performance, as well as improved Commercial results.
Year-to-date net cash provided by operating activities increased 16% year over year to $1,155 million primarily due to the impact of ownership model changes, the non-recurrence of a 2020 outflow related to the Defenders acquisition, and lower cash interest, partially offset by higher net payments for radio conversion costs. Year-to-date net cash used in investing activities increased versus the comparable period in 2020 reflecting higher customer acquisition costs and lower cash paid for business acquisitions. The change in year-to-date cash flows from financing activities was primarily due to the Company’s issuance of Class B common stock in 2020.
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Year-to-date Adjusted Free Cash Flow of $289 million was down compared to the comparable period in 2020 primarily due to higher subscriber acquisition costs associated with significant growth in customers and 19% gross RMR additions growth year-to-date.
ACQUISITION OF SUNPRO SOLAR
The Company has entered into a definitive agreement to acquire Sunpro Solar, a leading provider of residential solar installation, for approximately $825 million,(2) comprised of $160 million cash and approximately 77.8 million shares of ADT common stock, subject to certain adjustments. The completion of the transaction is subject to customary closing conditions, including regulatory approvals. The transaction is expected to close by year-end 2021.
Sunpro Solar will be branded ADT Solar, giving ADT an industry-leading position and instant brand recognition in the rapidly growing residential solar market. The transaction brings numerous strategic and financial benefits, including:
•Immediate brand and market leadership position: The highly fragmented solar industry does not have a clear brand leader, much less one with ADT’s trusted reputation.
•Grow market share quickly: ADT’s trusted brand, national footprint, and reach to 6 million customers should enable strong, efficient solar customer lead generation and acquisition relative to competitors.
•Expands ADT’s presence in the home: Creates opportunity to offer consumers a single provider for the protected, connected, and powered home.
•Earnings and cash flow positive: Transaction expected to be positive to EBITDA and free cash flow immediately and accretive to EPS within the first twelve months, prior to any synergy realization
•Improves cash flow profile: Minimal capital expenditures, stable customer acquisition costs, and significant upfront cash generation.
•Limited balance sheet impact: ADT will assume approximately $20 million in vehicle loans and leases; all other existing Sunpro Solar debt will be retired using the cash proceeds from the acquisition.
BUSINESS HIGHLIGHTS
ADT is a trusted consumer brand, driving profitable growth through innovative technology, strategic partnerships, and premium products and service. Key highlights of the Company’s performance include:
•Continued Growth of RMR – During the quarter, Gross RMR additions increased to $15.5 million, an increase of 7% from the prior year. As of the end of the quarter, RMR totaled $356 million, representing a 4% year over year increase. Approximately 80% of the Company’s total revenues come from this durable recurring revenue.
•Radio Conversions Progress – The Company continued to make significant progress in replacing the 3G and Code-Division Multiple Access (“CDMA”) cellular equipment used in many of its security systems. During 2021, the number of customer systems to be converted was reduced by 1.4 million with approximately 480 thousand customer systems remaining to be converted as of September 30, 2021.
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•Proactively improving capital structure – The Company completed transactions during the quarter to proactively improve its balance sheet. In July, the Company issued $1 billion in new notes due in 2029 and in August used the proceeds to retire its $1 billion of notes due in 2022. Combined with other refinancing transactions in 2019 and 2020, the Company has flattened near-term maturities, improved liquidity, and reduced annual cash interest by more than $100 million.
•Cash dividend declared – Effective November 9, 2021, the Company’s board of directors declared a cash dividend of $0.035 per share to holders of the Company’s common stock and Class B common stock of record as of December 16, 2021. This dividend will be paid on January 4, 2022.
2021 FINANCIAL OUTLOOK (3)(4)
The Company remains on track to meet its 2021 guidance and is narrowing the ranges provided earlier in the year.
| (in millions) | 2021 Prior Guidance | 2021 Updated Guidance | |||||||||
| Total Revenue | $5,050 - $5,250 | $5,200 - $5,250 | |||||||||
| Adjusted EBITDA | $2,100 - $2,200 | $2,150 - $2,200 | |||||||||
Adjusted Free Cash Flow | $450 - $550 | $450 - $500 | |||||||||
____________________________
| (1) | All variances are year-over-year unless otherwise noted. Adjusted EBITDA, Adjusted Free Cash Flow, Adjusted Net Income (Loss), and Adjusted Diluted Net Income (Loss) per share are non-GAAP measures. Refer to the “Non-GAAP Measures” section for the definitions of these terms and reconciliations to the most comparable GAAP measures. The operating metrics 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. | ||||
| (2) | Based on a 20-day average stock price. | ||||
| (3) | Guidance excludes 3G and Code-Division Multiple Access (“CDMA”) radio conversion costs. There are many variables involved in those costs, including retention levels, system upgrade rates, revenue opportunities, cost-sharing opportunities, and possible technology solutions. The Company estimates the range of net costs for this replacement program at $260 million to $290 million, of which ADT has incurred $249 million from inception through September 30, 2021. The Company incurred $52 million during the third quarter of 2021. These amounts and ranges are net of any revenue the Company collects from customers associated with these radio replacements and cellular network conversions. Due to the Company’s residential equipment ownership model transition, the Company’s guidance includes estimated non-cash reductions in reported revenue ($350 million to $400 million) and Adjusted EBITDA ($80 million to $100 million). | ||||
| (4) | The Company is not providing a quantitative reconciliation of its updated financial outlook for Adjusted EBITDA and Adjusted Free Cash Flow, or any expected impact from the acquisition of Sunpro Solar, to net income (loss) and net cash provided by operating activities, which are their respective corresponding GAAP measures, because these GAAP measures that are excluded from the Company’s non-GAAP financial outlook are difficult to reliably predict or estimate without unreasonable effort due to their dependence on future uncertainties, such as the adjustments or items discussed below under the heading “Non-GAAP Measures.” Additionally, information that is currently not available to the Company could have a potentially unpredictable and potentially significant impact on its future GAAP financial results. | ||||
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Conference Call
Management will discuss the Company’s third quarter of 2021 results and our announced agreement to acquire Sunpro Solar during a conference call and webcast today beginning at 10:00 a.m. ET. The conference call can be accessed as follows:
•By dialing 1-877-407-3982 (domestic) or 1-201-493-6780 (international) and requesting the ADT Third Quarter 2021 Earnings Conference Call
•Live webcast accessed through ADT’s website at investor.adt.com.
An audio replay of the conference call will be available from approximately 1:00 p.m. ET on November 9, 2021, until 11:59 p.m. ET on November 23, 2021, and can be accessed by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international), and providing the passcode, 13724615 or by accessing ADT's website at investor.adt.com. 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 is the most trusted brand in smart home and small business security. Through innovative products, partnerships and the largest network of smart home security professionals in the United States, we connect and protect what matters most to our customers at home, work and on the go. For more information, visit www.adt.com.
| Media Inquiries: | Investor Relations: | ||||
Paul Wiseman - ADT | Jill Greer - ADT tel: 888.238.8525 | ||||
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FORWARD-LOOKING STATEMENTS
ADT has made statements in this press release and other reports, filings, and other public written and verbal announcements that are forward-looking and therefore subject to risks and uncertainties. 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 are made in reliance on the safe harbor protections provided thereunder. These forward-looking statements relate to anticipated financial performance, management’s plans and objectives for future operations, our proposed acquisition of Sunpro Solar and its anticipated impact on our business and financial condition, our anticipated timing for the Sunpro acquisition, business prospects, outcome of regulatory proceedings, market conditions, our ability to successfully respond to the challenges posed by the COVID-19 pandemic, our strategic partnership and ongoing relationship with Google, the expected timing of product commercialization with Google or any changes thereto, the successful internal development, commercialization and timing of our next generation platform and other matters. 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. Forward-looking statements can be identified by various words such as “expects,” “intends,” “will,” “anticipates,” “believes,” “confident,” “continue,” “propose,” “seeks,” “could,” “may,” “should,” “estimates,” “forecasts,” “might,” “goals,” “objectives,” “targets,” “planned,” “projects,” and similar expressions. These forward-looking statements are based on management’s current beliefs and assumptions and on information currently available to management. ADT cautions that these statements are subject to risks and uncertainties, many of which are outside of ADT’s control, and could cause future events or results to be materially different from those stated or implied in this document, including among others, risks and uncertainties related to the parties’ ability to successfully close the Sunpro Solar acquisition, which is subject to various closing conditions, our ability to integrate the acquired business successfully and to achieve synergies and other benefits, the possibility that the acquisition may cause disruption to the Sunpro Solar business and to its customers, any distraction of our management team from our business, the possibility that the acquisition may adversely impact our financial results, other risks associated with our ability to execute on the transaction, and risk factors that are described in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the Securities and Exchange Commission, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained therein.
Impact on Non-GAAP Measures
The Company is not providing a quantitative reconciliation of the impact that the acquisition of Sunpro Solar will have on the Company's EBITDA and free cash flow to net income (loss) and net cash provided by operating activities, which are their respective corresponding GAAP measures, because the impact of the acquisition of Sunpro Solar on these GAAP measures is difficult to reliably predict or estimate without unreasonable effort due to their dependence on future uncertainties, such as special items. Additionally, information that is currently not available to the Company could have a potentially unpredictable and potentially significant impact on its future GAAP financial results.
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ADT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Monitoring and related services | $ | 1,098 | $ | 1,046 | $ | 3,245 | $ | 3,133 | |||||||||||||||
| Installation and other | 219 | 253 | 681 | 867 | |||||||||||||||||||
| Total revenue | 1,317 | 1,299 | 3,926 | 4,000 | |||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization shown separately below) | 372 | 358 | 1,135 | 1,142 | |||||||||||||||||||
| Selling, general, and administrative expenses | 449 | 411 | 1,344 | 1,279 | |||||||||||||||||||
| Depreciation and intangible asset amortization | 480 | 473 | 1,424 | 1,440 | |||||||||||||||||||
| Merger, restructuring, integration, and other | (7) | (6) | 19 | 115 | |||||||||||||||||||
| Operating income | 23 | 63 | 5 | 24 | |||||||||||||||||||
| Interest expense, net | (133) | (157) | (348) | (569) | |||||||||||||||||||
| Loss on extinguishment of debt | (37) | (49) | (37) | (115) | |||||||||||||||||||
| Other income | 2 | 2 | 5 | 7 | |||||||||||||||||||
| Loss before income taxes | (146) | (141) | (375) | (654) | |||||||||||||||||||
| Income tax benefit | 36 | 28 | 92 | 133 | |||||||||||||||||||
| Net loss | $ | (109) | $ | (113) | $ | (283) | $ | (520) | |||||||||||||||
| Net (loss) income per share - basic: | |||||||||||||||||||||||
| Common stock | $ | (0.13) | $ | (0.15) | $ | (0.35) | $ | (0.68) | |||||||||||||||
| Class B common stock | $ | (0.13) | $ | 0.05 | $ | (0.35) | $ | (0.10) | |||||||||||||||
| Weighted-average shares outstanding - basic: | |||||||||||||||||||||||
| Common stock | 767 | 761 | 765 | 760 | |||||||||||||||||||
| Class B common stock | 55 | 8 | 55 | 3 | |||||||||||||||||||
| Net loss per share - diluted: | |||||||||||||||||||||||
| Common stock | $ | (0.13) | $ | (0.15) | $ | (0.35) | $ | (0.68) | |||||||||||||||
| Class B common stock | $ | (0.13) | $ | (0.07) | $ | (0.35) | $ | (0.44) | |||||||||||||||
| Weighted-average shares outstanding - diluted: | |||||||||||||||||||||||
| Common stock | 767 | 761 | 765 | 760 | |||||||||||||||||||
| Class B common stock | 55 | 17 | 55 | 6 | |||||||||||||||||||
Note: amounts may not sum due to rounding
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ADT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
(Unaudited)
| September 30, 2021 | December 31, 2020 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 61 | $ | 205 | |||||||
| Accounts receivable, net | 363 | 336 | |||||||||
| Inventories, net | 214 | 175 | |||||||||
| Work-in-progress | 55 | 41 | |||||||||
| Prepaid expenses and other current assets | 178 | 210 | |||||||||
| Total current assets | 872 | 967 | |||||||||
| Property and equipment, net | 335 | 326 | |||||||||
| Subscriber system assets, net | 2,818 | 2,663 | |||||||||
| Intangible assets, net | 5,521 | 5,907 | |||||||||
| Goodwill | 5,245 | 5,236 | |||||||||
| Deferred subscriber acquisition costs, net | 797 | 654 | |||||||||
| Other assets | 435 | 364 | |||||||||
| Total assets | $ | 16,022 | $ | 16,117 | |||||||
| Liabilities and stockholders' equity | |||||||||||
| Current liabilities: | |||||||||||
| Current maturities of long-term debt | $ | 101 | $ | 45 | |||||||
| Accounts payable | 361 | 322 | |||||||||
| Deferred revenue | 339 | 346 | |||||||||
| Accrued expenses and other current liabilities | 607 | 584 | |||||||||
| Total current liabilities | 1,409 | 1,296 | |||||||||
| Long-term debt | 9,508 | 9,448 | |||||||||
| Deferred subscriber acquisition revenue | 1,099 | 832 | |||||||||
| Deferred tax liabilities | 900 | 991 | |||||||||
| Other liabilities | 365 | 511 | |||||||||
| Total liabilities | 13,282 | 13,078 | |||||||||
| Total stockholders' equity | 2,740 | 3,039 | |||||||||
| Total liabilities and stockholders' equity | $ | 16,022 | $ | 16,117 | |||||||
Note: amounts may not sum due to rounding
8
ADT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
| Nine Months Ended September 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | (283) | $ | (520) | |||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
| Depreciation and intangible asset amortization | 1,424 | 1,440 | |||||||||
| Amortization of deferred subscriber acquisition costs | 91 | 70 | |||||||||
| Amortization of deferred subscriber acquisition revenue | (123) | (90) | |||||||||
| Share-based compensation expense | 46 | 75 | |||||||||
| Deferred income taxes | (102) | (147) | |||||||||
| Provision for losses on receivables and inventory | 30 | 99 | |||||||||
| Loss on extinguishment of debt | 37 | 115 | |||||||||
| Intangible asset impairments | 18 | — | |||||||||
| Unrealized (gain) loss on interest rate swap contracts | (115) | 90 | |||||||||
| Other non-cash items, net | 100 | 104 | |||||||||
| Changes in operating assets and liabilities, net of effects of acquisitions: | |||||||||||
| Deferred subscriber acquisition costs | (235) | (170) | |||||||||
| Deferred subscriber acquisition revenue | 202 | 125 | |||||||||
| Other, net | 66 | (196) | |||||||||
| Net cash provided by operating activities | 1,155 | 993 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Dealer generated customer accounts and bulk account purchases | (512) | (265) | |||||||||
| Subscriber system asset expenditures | (519) | (273) | |||||||||
| Purchases of property and equipment | (127) | (112) | |||||||||
| Acquisition of businesses, net of cash acquired | (16) | (182) | |||||||||
| Other investing, net | 4 | 32 | |||||||||
| Net cash used in investing activities | (1,171) | (800) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of common stock | — | 450 | |||||||||
| Proceeds from long-term borrowings | 1,011 | 2,640 | |||||||||
| Proceeds from receivables facility | 118 | 44 | |||||||||
| Repayment of long-term borrowings, including call premiums | (1,075) | (2,748) | |||||||||
| Repayment of receivables facility | (28) | (2) | |||||||||
| Dividends on common stock | (87) | (80) | |||||||||
| Deferred financing costs | (12) | (28) | |||||||||
| Other financing, net | (50) | (26) | |||||||||
| Net cash (used in) provided by financing activities | (124) | 249 | |||||||||
| Cash and cash equivalents and restricted cash and restricted cash equivalents: | |||||||||||
| Net (decrease) increase during the period | (139) | 442 | |||||||||
| Beginning balance | 208 | 49 | |||||||||
| Ending balance | $ | 68 | $ | 491 | |||||||
Note: amounts may not sum due to rounding
9
ADT INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(in millions)
(Unaudited)
Total Revenue by Segment
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
| CSB: | ||||||||||||||||||||||||||
| Monitoring and related services | $ | 976 | $ | 940 | $ | 2,892 | $ | 2,814 | ||||||||||||||||||
| Installation and other | 60 | 120 | 205 | 459 | ||||||||||||||||||||||
| CSB | $ | 1,036 | $ | 1,060 | $ | 3,097 | $ | 3,274 | ||||||||||||||||||
| Commercial: | ||||||||||||||||||||||||||
| Monitoring and related services | $ | 123 | $ | 105 | $ | 352 | $ | 319 | ||||||||||||||||||
| Installation and other | 159 | 133 | 477 | 408 | ||||||||||||||||||||||
| Commercial | 281 | 239 | 829 | 726 | ||||||||||||||||||||||
| Total Revenue | $ | 1,317 | $ | 1,299 | $ | 3,926 | $ | 4,000 | ||||||||||||||||||
Adjusted EBITDA by Segment
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
| CSB | $ | 529 | $ | 549 | $ | 1,558 | $ | 1,637 | ||||||||||||||||||
| Commercial | 26 | 15 | 80 | 30 | ||||||||||||||||||||||
| Total | $ | 554 | $ | 564 | $ | 1,638 | $ | 1,666 | ||||||||||||||||||
10
ADT INC. AND SUBSIDIARIES
NON-GAAP MEASURES
ADT sometimes uses information (“non-GAAP financial measures”) that is derived from the condensed 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 our non-GAAP financial measures used in this release, reasons we believe these measures are useful, 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 along with 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.
The Company is not providing a quantitative reconciliation of non-GAAP measures used in its financial outlook (including a quantitative reconciliation of the impact that the acquisition of Sunpro Solar will have on the Company’s EBITDA and free cash flow) as we are not able to reconcile forward looking non-GAAP financial measures without unreasonable efforts because the adjusting items such as those used in the reconciliations below will not be known until the end of the period and could be significant.
11
ADT INC. AND SUBSIDIARIES
U.S. GAAP to Non-GAAP RECONCILIATIONS
(Unaudited)
Adjusted EBITDA, Adjusted EBITDA Margin, and Reconciliation to GAAP Net Loss
We believe the presentation of Adjusted EBITDA provides useful information to investors about our operating profitability adjusted for certain non-cash items, non-routine items that we do not expect to continue at the same level in the future, as well as other items that are not core to our operations. Further, we believe Adjusted EBITDA provides a meaningful measure of operating profitability because we use it for evaluating our business performance, making budgeting decisions, and comparing our performance against that of other peer companies using similar measures.
We define Adjusted EBITDA as net income or loss 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; (vii) losses on extinguishment of debt; (viii) radio conversion costs net of any related incremental revenue earned; and (ix) other income/gain or expense/loss items such as impairment charges, financing and consent fees, or acquisition-related adjustments.
There are material limitations to using Adjusted EBITDA as it does not reflect certain significant items which directly affect our net income or loss (the most comparable GAAP measure).
The Adjusted EBITDA discussion above is also applicable to its margin measure, which is calculated as Adjusted EBITDA as a percentage of monitoring and related services revenue.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Net loss | $ | (109) | $ | (113) | $ | (283) | $ | (520) | |||||||||||||||
| Interest expense, net | 133 | 157 | 348 | 569 | |||||||||||||||||||
| Income tax benefit | (36) | (28) | (92) | (133) | |||||||||||||||||||
| Depreciation and intangible asset amortization | 480 | 473 | 1,424 | 1,440 | |||||||||||||||||||
| Amortization of deferred subscriber acquisition costs | 33 | 25 | 91 | 70 | |||||||||||||||||||
| Amortization of deferred subscriber acquisition revenue | (45) | (31) | (123) | (90) | |||||||||||||||||||
| Share-based compensation expense | 16 | 26 | 46 | 75 | |||||||||||||||||||
| Merger, restructuring, integration and other | (7) | (6) | 19 | 115 | |||||||||||||||||||
| Loss on extinguishment of debt | 37 | 49 | 37 | 115 | |||||||||||||||||||
Radio conversion costs, net(1) | 52 | 13 | 172 | 24 | |||||||||||||||||||
| Other, net | — | (1) | — | 2 | |||||||||||||||||||
| Adjusted EBITDA | $ | 554 | $ | 564 | $ | 1,638 | $ | 1,666 | |||||||||||||||
| Net loss to total revenue ratio | (8.3) | % | (8.7) | % | (7.2) | % | (13.0) | % | |||||||||||||||
Adjusted EBITDA Margin (as percentage of M&S Revenue) | 50.5 | % | 53.9 | % | 50.5 | % | 53.2 | % | |||||||||||||||
Note: amounts may not sum due to rounding
_______________________
(1) Represents net costs associated with replacing cellular technology used in many of our security systems pursuant to a replacement program.
12
ADT INC. AND SUBSIDIARIES
U.S. GAAP to Non-GAAP RECONCILIATIONS (continued)
(Unaudited)
Free Cash Flow, Adjusted Free Cash Flow, and Reconciliation to GAAP Net Cash Provided by Operating Activities
We believe the presentation of Free Cash Flow and Adjusted Free Cash Flow are appropriate to provide investors with useful information about our ability to repay debt, make other investments, and pay dividends. In addition, we believe the presentation of Adjusted Free Cash Flow is also a useful measure of our cash flow attributable to our normal business activities, inclusive of the net cash flows associated with the acquisition of subscribers, as well as our ability to repay other debt, make other investments, and pay dividends.
We define Free Cash Flow as cash flows from operating activities less cash outlays related to capital expenditures. We define capital expenditures to include accounts purchased through our network of authorized dealers or third parties outside of our 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.
We define Adjusted Free Cash Flow as Free Cash Flow adjusted for net cash flows related to (i) net proceeds from our consumer receivables facility; (ii) financing and consent fees; (iii) restructuring and integration; (iv) integration-related capital expenditures; (v) radio conversion costs net of any related incremental revenue collected; and (vi) other payments or receipts that may mask our operating results or business trends.
Free Cash Flow and Adjusted Free Cash Flow 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. Free Cash Flow and Adjusted Free Cash Flow are not intended to represent residual cash flow for discretionary expenditures since debt repayment requirements and other non-discretionary expenditures are not deducted.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Net cash provided by operating activities | $ | 370 | $ | 364 | $ | 1,155 | $ | 993 | |||||||||||||||
| Net cash used in investing activities | $ | (393) | $ | (265) | $ | (1,171) | $ | (800) | |||||||||||||||
| Net cash provided by (used in) financing activities | $ | (64) | $ | 345 | $ | (124) | $ | 249 | |||||||||||||||
| Net cash provided by operating activities | $ | 370 | $ | 364 | $ | 1,155 | $ | 993 | |||||||||||||||
| Dealer generated customer accounts and bulk account purchases | (173) | (121) | (512) | (265) | |||||||||||||||||||
| Subscriber system asset expenditures | (180) | (135) | (519) | (273) | |||||||||||||||||||
| Purchases of property and equipment | (43) | (36) | (127) | (112) | |||||||||||||||||||
| Free Cash Flow | (25) | 72 | (2) | 343 | |||||||||||||||||||
| Net proceeds from receivables facility | 35 | 22 | 90 | 41 | |||||||||||||||||||
| Financing and consent fees | — | — | 4 | 5 | |||||||||||||||||||
| Restructuring and integration payments | 2 | 6 | 9 | 18 | |||||||||||||||||||
| Integration-related capital expenditures | 2 | 4 | 9 | 15 | |||||||||||||||||||
| Radio conversion costs, net | 50 | 11 | 173 | 18 | |||||||||||||||||||
Other, net(1) | (2) | 12 | 8 | 90 | |||||||||||||||||||
| Adjusted Free Cash Flow | $ | 62 | $ | 127 | $ | 289 | $ | 532 | |||||||||||||||
Note: amounts may not sum due to rounding
_______________________
(1) The nine months ended September 30, 2020 included $81 million related to the settlement of a pre-existing relationship in connection with the Defenders acquisition.
13
ADT INC. AND SUBSIDIARIES
U.S. GAAP to Non-GAAP RECONCILIATIONS (continued)
(Unaudited)
Adjusted Net Income (Loss), Adjusted Diluted Net Income (Loss) per share, and Reconciliations to GAAP Net Loss and GAAP Diluted Net Loss per Share
Adjusted Net Income (Loss) is defined as net income (loss) adjusted for (i) merger, restructuring, integration, and other; (ii) losses on extinguishment of debt; (iii) radio conversion costs net of any related incremental revenue earned; (iv) share-based compensation expense; (v) unrealized gains and losses on interest rate swap contracts not designated as hedges; (vi) other income/gain or expense/loss items such as impairment charges, financing and consent fees, or acquisition-related adjustments; and (vii) the impact these adjusted items have on taxes.
Adjusted Diluted Net Income (Loss) per share is Adjusted Net Income (Loss) divided by diluted weighted-average shares outstanding of common stock. In periods of net loss, diluted weighted-average shares outstanding of common stock does not include the assumed conversion of Class B common stock to shares of common stock as the results would be anti-dilutive.
We believe Adjusted Net Income (Loss) and Adjusted Diluted Net 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 our 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 our net income or loss and related per share amounts (the most comparable GAAP measures).
During the third quarter of 2021, Net Income (Loss) before special items was renamed Adjusted Net Income (Loss), and Diluted Net Income (Loss) per share before special items was renamed Adjusted Diluted Net Income (Loss) per share. There has been no change to the calculation of these measures.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions, except per share data) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Net loss | $ | (109) | $ | (113) | $ | (283) | $ | (520) | |||||||||||||||
| Merger, restructuring, integration, and other | (7) | (6) | 19 | 115 | |||||||||||||||||||
| Loss on extinguishment of debt | 37 | 49 | 37 | 115 | |||||||||||||||||||
| Radio conversion costs, net | 52 | 13 | 172 | 24 | |||||||||||||||||||
| Share-based compensation expense | 16 | 26 | 46 | 75 | |||||||||||||||||||
Interest rate swaps, net(1) | (23) | (8) | (115) | 89 | |||||||||||||||||||
| Other, net | — | (1) | — | 2 | |||||||||||||||||||
Tax adjustments(2) | (21) | (18) | (41) | (80) | |||||||||||||||||||
| Adjusted Net Loss | $ | (54) | $ | (58) | $ | (166) | $ | (181) | |||||||||||||||
Weighted-average shares outstanding - diluted(3): | |||||||||||||||||||||||
| Common stock | 767 | 761 | 765 | 760 | |||||||||||||||||||
| Class B common stock | 55 | 17 | 55 | 6 | |||||||||||||||||||
| Net loss per share - diluted: | |||||||||||||||||||||||
| Common stock | $ | (0.13) | $ | (0.15) | $ | (0.35) | $ | (0.68) | |||||||||||||||
| Class B common stock | $ | (0.13) | $ | (0.07) | $ | (0.35) | $ | (0.44) | |||||||||||||||
Adjusted Diluted Net Loss per share(4) | $ | (0.07) | $ | (0.08) | $ | (0.22) | $ | (0.24) | |||||||||||||||
Note: amounts may not sum due to rounding
_______________________
(1) Primarily represents the change in the fair value of interest rate swaps not designated as hedges.
(2) Represents tax impact on adjustments.
(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 Net Loss divided by diluted weighted-average shares outstanding of Common Stock.
14
Exhibit 99.2
ADT To Expand Its Residential Footprint With Acquisition of Sunpro Solar and Launch ADT SolarTM
Combination will leverage ADT’s national reach, high brand awareness and trust, coupled with cross-selling opportunities to accelerate expansion of solar and establish “ADT Solar” as a residential market leader
ADT to offer consumers solutions for a safer, smarter, and powered home
Transaction expected to be positive to EBITDA and free cash flow immediately and accretive to EPS within the first 12 months, prior to any synergy realization
Nearly all of sellers’ consideration is in ADT stock, reflecting their conviction in ADT’s future growth
BOCA RATON, Fla., Nov. 9, 2021 -- ADT Inc. (NYSE: ADT), the most trusted brand in smart home and small business security, announced today an agreement to acquire Sunpro Solar (Sunpro), ranked #2 for 2021 Top Residential Rooftop Solar Contractors1 in the U.S., for $160 million in cash plus approximately 77.8 million shares of ADT common stock, implying a total enterprise value of approximately $825 million, subject to certain adjustments. ADT will rebrand Sunpro to “ADT SolarTM” and enter the rooftop solar business to offer ADT customers a protected, connected, and now powered home.
“With its strong focus on the customer, Sunpro is the perfect partner for ADT and a logical extension of our ecosystem, unlocking an integrated home experience that includes security, automation, and energy management,” said Jim DeVries, ADT President and Chief Executive Officer. “By combining a cash-flow-positive company in the high-growth solar space with ADT’s trusted brand, national footprint, and cross-sell potential, we can expand offerings to our customers and accelerate growth for both ADT and ADT Solar.”
“We’re excited to offer consumers even more peace of mind by giving them the opportunity to power their homes with sustainable and affordable solar energy. Residential solar represents a $15 billion annual market, but still only in 3 percent of all U.S. homes,” DeVries continued. “With more than 6 million ADT customers and our best-in-class sales force and marketing channels, we will be well-positioned to further scale ADT Solar while lowering customer acquisition costs and accelerating overall solar adoption. We believe we have the potential to grow ADT Solar
1 Solar Power World 2021 Top Solar Contractor List, among residential solar contractors
https://www.solarpowerworldonline.com/2021-top-solar-contractors/ (the contents of such website are not incorporated herein by reference)
into a multi-billion-dollar business over time as we meaningfully increase the accessibility and penetration of residential solar across America.”
Founded in 2008, Sunpro is a leading provider of rooftop solar systems in the United States. Sunpro markets, designs, sells, installs, and maintains solar power systems on residential and commercial properties through their 3,600-person, full-time workforce of solar energy professionals with 56 locations in 22 states. The company has been growing quickly, with a 90 percent year-over-year increase in installs in 2020 and has a cash-flow-positive, asset-light business model with more than four consecutive years of positive EBITDA. The transaction price represents 10x estimated standalone next twelve months’ EBITDA.
The cash portion of the proceeds are expected to be used for debt reduction and sellers’ taxes. Nearly all of the sellers’ consideration is in ADT stock, reflecting their conviction in ADT’s future growth.
Sunpro founder Marc Jones and the Sunpro management team are expected to join ADT to help build ADT Solar into the U.S. rooftop solar industry leader.
“Becoming part of the ADT family will accelerate our ability to bring residential and commercial rooftop solar to more customers, helping them save money and also become more energy independent,” Marc Jones said. “With our shared mission to further advance smart home technologies and renewable energy solutions for customers, our expansion will make a meaningful difference in how our customers live daily.”
Strategic and Financial Benefits of Transaction
•Increasing total addressable market: With a larger presence in the home automation and energy management markets, ADT to expand its consumer offerings, leading to an increase in its total addressable market.
•Immediate brand and market leadership position: Residential solar is a highly fragmented industry without a clear and trusted brand leader, such as ADT. ADT Solar will immediately become a leading national residential solar installer.
•Superior customer acquisition and cross-selling: ADT’s trusted brand, national footprint and reach into 6 million homes should enable strong, efficient solar customer lead generation and low-cost acquisition relative to competitors. ADT’s field team visits 10,000 households per day and has a salesforce of more than 3,000 people, creating the opportunity for substantial cross-selling between security and solar customers.
•Leverage our national network of strong partnerships: ADT Solar should also benefit from ADT’s broad, national network of homebuilders, ADT Authorized Dealers, and retailers, and will have new opportunities to create additional mutually beneficial relationships to expand its distribution network.
•Expands ADT’s presence in the home: Customers will benefit from a single, trusted supplier that can offer a complementary suite of security, smart home, and solar products and services.
•Earnings and cash flow positive: Transaction is expected to be positive to EBITDA and free cash flow immediately and accretive to EPS within the first 12 months, prior to any synergy realization.
•Limited balance sheet impact: As part of the acquisition, ADT will assume approximately $20 million in vehicle loans and leases; all other existing Sunpro debt will be retired with the cash proceeds received from ADT at closing.
The completion of the transaction is subject to customary closing conditions, including regulatory approvals. The transaction is expected to close by year-end 2021.
Transaction Advisors
Citi is serving as financial advisors to ADT, and Morgan, Lewis & Bockius is serving as legal advisor to ADT. Deutsche Bank Securities Inc. is serving as financial advisor to Sunpro, and Vinson & Elkins is serving as legal advisor to Sunpro.
Forward-Looking Statements
ADT has made statements in this press release that are forward-looking and therefore subject to risks and uncertainties. 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 are made in reliance on the safe harbor protections provided thereunder. These forward-looking statements relate to our proposed acquisition of Sunpro Solar, its anticipated impact on our business and financial condition, our anticipated timing for closing the acquisition, our anticipated plans and strategies, our anticipated cross-selling opportunities, anticipated growth in the demand for residential solar power, our ability to expand Sunpro’s existing distribution network, and our ability to integrate the Sunpro business into our own. 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. Forward-looking statements can be identified by various words such as “expects,” “intends,” “will,” “anticipates,” “believes,” “confident,” “continue,” “propose,” “seeks,” “could,” “may,” “should,” “estimates,” “forecasts,” “might,” “goals,” “objectives,” “targets,” “planned,” “projects,” and similar expressions. These forward-looking statements are based on management’s current beliefs and assumptions and on information currently available to management. ADT cautions that these statements are subject to risks and uncertainties, many of which are outside of ADT’s control, and could cause future events or results to be materially different from those stated or implied in this document, including among others, risks and uncertainties related to the parties’ ability to successfully close the Sunpro Solar acquisition, which is subject to various closing conditions, our ability to integrate the acquired business successfully and to achieve synergies and other benefits, the possibility that the acquisition may cause disruption to the Sunpro Solar business and to its customers, any distraction of our management team from our business, the possibility that the acquisition may adversely impact our financial results, risks associated with the demand for residential solar power, including changes in governmental regulations and
incentives, other risks associated with our ability to execute on the transaction, and risk factors that are described in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the Securities and Exchange Commission, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained therein.
Impact on Non-GAAP Measures
The Company is not providing a quantitative reconciliation of the impact that the acquisition of Sunpro Solar will have on the Company’s EBITDA and free cash flow to net income (loss) and net cash provided by operating activities, which are their respective corresponding GAAP measures, because the impact of the acquisition of Sunpro Solar on these GAAP measures is difficult to reliably predict or estimate without unreasonable effort due to their dependence on future uncertainties, such as special items. Additionally, information that is currently not available to the Company could have a potentially unpredictable and potentially significant impact on its future GAAP financial results.
About ADT Inc.
ADT is the most trusted brand in smart home and small business security. Through innovative products, partnerships, and the largest network of smart home security professionals in the United States, we connect and protect what matters most to our customers at home, work, and on the go. For more information, visit www.adt.com.
Investor Relations:
Jill Greer
Tel: 888-238-8525
Media Inquiries:
Paul Wiseman
Tel: 561-356-6388