ADT Inc. (ADT) Q3 2026 Earnings Call Transcript

DATE

Nov. 3, 2026

CALL PARTICIPANTS

• Vice President of Investor Relations - Elizabeth Landers
• Chairman, President, and CEO - Jim DeVries
• Chief Financial Officer - Jeff Likosar

TAKEAWAYS

• Acquisition Price -- $10 per share in cash, representing a premium of 46% to the unaffected closing share price on Oct. 27.
• Total Transaction Value -- Approximately $7.6 billion in equity value and $15.3 billion in enterprise value, reflecting the definitive agreement to be acquired by Thrive Holdings.
• Total Revenue -- $1,349 million, representing a 4% increase driven by a higher mix of professionally installed systems under the outright sales model.
• Installation and Product Revenue -- $265 million, growing 32% due to the transition toward a professional installation sales mix.
• Monitoring and Related Services Revenue -- $1,084 million, a 1% decline reflecting the divestiture of the multifamily business in Oct. 2025.
• Adjusted EPS -- $0.24, an increase of 4% benefiting from a lower diluted share count and reduced interest expense.
• GAAP EPS -- $0.20, representing an 18% increase from $0.17 in the prior year.
• Adjusted EBITDA -- $665 million, a 2% decrease reflecting higher general and administrative costs and technology investments.
• Adjusted Free Cash Flow -- $217 million, a 4% increase including the impact of interest rate swaps.
• Year-to-Date Adjusted Free Cash Flow -- $1,037 million, representing 46% growth and exceeding the total generation for the full year of 2025.
• Recurring Monthly Revenue (RMR) -- $360 million, a 1% decrease primarily attributed to the multifamily business divestiture.
• Gross Customer Revenue Attrition -- 13.1%, up 10 basis points due to elevated non-pay cancellations.
• Revenue Payback -- 2.3 years, remaining consistent with the prior-year level.
• Gross Unit Additions -- 195,000 units, with $12.1 million in gross RMR additions during the quarter.
• Quarterly Share Repurchases -- 3 million shares, retired for an aggregate price of $23 million.
• Year-to-Date Share Repurchases -- 89 million shares, representing a return of $617 million to stockholders.
• Total Year-to-Date Capital Return -- $748 million, including both share repurchases and $131 million in dividends.
• Net Leverage -- 2.7x Adjusted EBITDA, improving from 2.8x in the prior year.
• Incremental Borrowings -- $100 million, secured in August under the First Lien Term Loan A due 2030 to enhance financial flexibility.
• Bulk Account Purchase -- $9 million in cash for approximately 8,000 customer accounts completed during the third quarter.
• Cash and Cash Equivalents -- $228 million at the end of the quarter, with zero borrowings under the revolving credit facility.

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RISKS

• Elizabeth Landers stated, "These statements are subject to risks and uncertainties... including the risks related to timing and completion of the proposed transaction," noting that actual results could differ materially.
• Jeff Likosar noted that gross customer revenue attrition was 13.1% compared with 13% a year ago, with elevated non-pay cancellations partially offset by fewer voluntary disconnects.

SUMMARY

ADT Inc. (NYSE:ADT) entered into a definitive agreement to be acquired by Thrive Holdings in an all-cash transaction expected to close in the first quarter of 2027. Management reported that the company is transitioning toward an intelligent, connected platform through investments in artificial intelligence and next-generation sensing technologies. The company also announced a new service partnership to support retail customers and expanded its digital distribution footprint. Management stated that the organization remains focused on its core safety differentiators and customer experience while operating as an independent company until the merger concludes.

• The merger agreement includes a go-shop period running through Nov. 28, during which CEO DeVries stated, "we do not intend to disclose developments with respect to that process unless and until we determine disclosure is appropriate or otherwise required."
• Management launched ADT Partner Services to install and service select products for Apple Retail customers in the U.S. beginning in the fall of 2026.
• CEO DeVries reported that the company's data and privacy policies will remain unchanged following the acquisition, stating, "no new data sharing will occur without customer permission."
• The company introduced Unusual Activity Alerts in the ADT+ platform, which utilizes connected device data to provide proactive customer notifications based on changes in household activity.
• Management is progressing with Origin AI-powered presence sensing capabilities, with commercialization and launch planning targeted for 2027.
• Digital distribution reach expanded through the addition of the ADT Blu DIY security offering to Walmart.com during the quarter.

INDUSTRY GLOSSARY

• ADT+: The company's unified smart home security application and technology platform.
• ADT Blu: The brand name for the company's do-it-yourself (DIY) home security products and services.
• Go-shop Period: A provision in a merger agreement that allows the seller to actively solicit and evaluate alternative acquisition proposals for a specific period after signing.
• Origin AI: A technology partner and acquisition focused on WiFi-based presence sensing for security and automation applications.
• Revenue Payback: The time required, measured in years, to recover the subscriber acquisition costs through the cash flow generated by a new customer.
• RMR (Recurring Monthly Revenue): The monthly fees contracted from customers for monitoring and related services.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us, and welcome to the ADT third-quarter 2026 earnings conference call. I will now hand the conference over to Elizabeth Landers, Vice President of Investor Relations. Please go ahead.

Elizabeth Landers: Good morning, and thank you for joining us today. Speaking on today's call are Jim DeVries, ADT's Chairman, President, and CEO, and Jeff Likosar, our Chief Financial Officer. As you know, on October 29th, we announced that ADT has entered into a definitive agreement to be acquired by Thrive Holdings. In consideration of the pending transaction, we will not be taking questions on today's call. Additionally, we will not be providing financial guidance and are withdrawing previously issued guidance. This morning, we issued a press release and presentation summarizing our third quarter results. Both are available at investor.adt.com. During today's call, we'll reference certain non-GAAP financial measures.

Reconciliations to the most comparable GAAP measures are included in the earnings presentation on our website. Unless noted otherwise, all financials and metrics discussed reflect continuing operations. Our remarks today also include forward-looking statements that fall within the safe harbour provisions provided by the Private Securities Litigation Reform Act, including statements regarding the proposed transaction. These statements are subject to risks and uncertainties that are described in the earnings presentation and in our SEC filings, including the risks related to timing and completion of the proposed transaction. Actual results may differ materially. Please refer to our SEC filings for more details.

We also refer you to the information in our press release regarding the proxy statement ADT intends to file with the SEC in connection with the proposed transaction and regarding participants in the solicitation. Investors and stockholders are urged to read the proxy statement when it becomes available. Now, I'm happy to turn the call over to Jim.

Jim DeVries: Thanks, Elizabeth, and good morning, everyone. I'll keep my remarks brief this morning, focusing on the transaction we announced last Thursday, and Jeff will walk through our third-quarter results. On Thursday, October 29th, we announced that we have entered into a definitive agreement to be acquired by Thrive Holdings in an all-cash transaction. Under the terms of the agreement, which our board of directors unanimously approved, ADT stockholders will receive $10 per share in cash upon completion. $10 represents a premium of 46% to ADT's unaffected closing share price on October 27th and 52% to our 30-day volume-weighted average share price ending on that date.

The agreement values ADT at approximately $7.6 billion in equity value and $15.3 billion in enterprise value. We believe this transaction represents an important next chapter for ADT, bringing together our more than 150 years of security experience, nationwide service network, and trusted customer relationships with Thrive Holdings' long-term capital and engineering capabilities. I am pleased with this outcome, which recognizes the value built by our more than 12,000 employees and dealer partners, our longstanding commitment to providing peace of mind, and our continued advancement of ADT's capabilities and technologies. Our progress and this transaction deliver an attractive cash premium to our stockholders.

ADT's leadership in smart home security is built on a legacy of trust, longstanding customer relationships, and the dedication of our people. Importantly for our customers, ADT's data and privacy policies will remain unchanged, and no new data sharing will occur without customer permission. We anticipate this transaction to close in the first quarter of 2027, subject to customary closing conditions, including approval by ADT stockholders and receipt of U.S. antitrust approval. This is an all-cash transaction, and Thrive expects to finance it through a combination of equity, debt, and preferred equity. As outlined in our announcement, the merger agreement includes a go-shop period that runs through November 28th.

As is customary, we do not intend to disclose developments with respect to that process unless and until we determine disclosure is appropriate or otherwise required. Until the transaction closes, ADT will continue to operate independently as a public company. Importantly, with this transaction, ADT's focus has not changed. We remain committed to serving our customers, supporting our dealers and partners, and executing our key initiatives. During the quarter, we continued to make progress across our three core differentiators: unrivalled safety, premium customer experience, and innovative offerings.

We introduced Unusual Activity Alerts in ADT+, advanced pilots of our Origin AI presence sensing technology, expanded ADT Blu to walmart.com, and launched ADT Partner Services, through which we will install and service select products for Apple Retail and its customers beginning later this month. Before I turn the call over to Jeff, I want to thank our employees, our dealers and partners, and the first responders we work alongside every day. Your commitment is what has earned ADT the trust of millions of customers for more than 150 years. I'll now turn the call over to Jeff.

Jeff Likosar: Thanks, Jim, and good morning, everyone. I'll take the next few minutes to describe our third quarter with all comparisons year-over-year unless I note otherwise. In summary, I'm very pleased to report that ADT again delivered strong results with continued revenue growth, solid earnings, and robust cash generation, all in line with our expectations. Our consistent performance, while we continue to invest in our business, underscores the strength of our cash generation capabilities, which remain a highlight of our results. Adjusted Free Cash Flow, including interest rate swaps, was $217 million, up 4% in the quarter.

On a year-to-date basis, we're up 46%, having generated more than $1 billion through the first three quarters, in excess of last year's full-year level. Key drivers include lower cash taxes and interest, along with working capital management and some timing favorability. On the top line, total revenue was $1.35 billion, up 4%. Installation, product, and other revenue was $265 million, up 32%, driven by a higher mix of professionally installed systems under our outright sales model. Monitoring and related services revenue was $1.08 billion, down 1%, which includes the revenue loss from the October 2025 divestiture of our Multifamily business.

Ending recurring monthly revenue was $360 million compared to $362 million a year ago, with that decline also primarily reflecting the Multifamily Divestiture. Adjusted EBITDA was $665 million, down 2%. This reflects higher general and administrative costs, including technology investments, partially offset by the margin on our higher installation revenue. Adjusted EPS was $0.24, up 4%, and on a year-to-date basis, we have generated $0.71 of Adjusted EPS, up 6%, benefiting from a lower diluted share count along with lower interest expense. Turning to operational metrics, gross customer revenue attrition was 13.1% compared with 13% a year ago, with elevated non-pay cancellations partially offset by fewer voluntary disconnects. Trailing 12-month revenue payback was 2.3 years, consistent with the prior year.

Gross RMR additions were $12.1 million on 195,000 gross unit additions. Direct professional install unit and RMR additions continue to perform strongly, improving versus the prior year, offset by lower volume from dealers and bulk account purchases. During the quarter, we completed a bulk account purchase of approximately 8,000 customer accounts for $9 million in cash. In August, we secured $100 million of incremental borrowings under our First Lien Term Loan A due 2030. We designated the proceeds for general corporate purposes, which may include repayment of a portion of our 2027 notes. Including these proceeds, we ended the quarter with $228 million of cash and cash equivalents, with no borrowings under our revolving credit facility.

Net leverage was 2.7x Adjusted EBITDA compared with 2.8x a year ago. During the quarter, we returned $64 million to shareholders, including $23 million in share repurchases and $41 million in dividends. Year to date, we have returned $748 million to shareholders through dividends and the repurchase of 89 million shares. To conclude, we delivered solid overall third-quarter results with revenue growth, strong year-to-date cash generation, and stable core operating metrics, all while continuing to invest in our business for the long term. As Elizabeth mentioned, due to the pending transaction, we won't be taking questions today. Thank you to our employees for their continued dedication, and thank you to our customers, dealers, partners, and our investors.

Thank you all for joining us this morning. Operator, that concludes today's call.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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