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AI

ADT Inc. (ADT)·Q2 2025 Earnings Summary

Executive Summary

  • ADT delivered a clean beat on Q2 2025: revenue $1.287B vs consensus $1.276B*, adjusted EPS $0.23 vs $0.20*, and adjusted EBITDA $674M vs $674M*, driven by price increases in Monitoring & Services and higher installation mix under ADT+ .
  • Guidance was reaffirmed for revenue, EBITDA, and adjusted FCF, while adjusted EPS guidance was raised to $0.81–$0.89 (prior $0.77–$0.85), reflecting a lower diluted share count from repurchases .
  • Capital return and balance sheet actions remain a catalyst: $143M in Q2 (12M shares repurchased for $96M and $47M dividends), $589M YTD; lender commitments for $550M Term Loan due 2032 to redeem 2026 notes, with net leverage at 2.8x and efficient ~4.4% weighted average interest rate .
  • Management flagged Q3 phasing headwinds (cash interest ~+$70M sequential), but reiterated confidence in meeting FY 2025 guidance and absorbing tariff exposure within ranges .

What Went Well and What Went Wrong

What Went Well

  • Record RMR and strong top-line: RMR $363M (+2% YoY); total revenue +7% YoY to $1.287B; installation revenue up 44% to $197M on ADT+ mix .
  • Robust cash generation and returns: Adjusted FCF (incl swaps) $274M (+9% YoY); $143M capital returns in Q2; $589M YTD; no revolver draw; refinancing actions tighten capital structure .
  • Strategy/product traction: ADT+ adoption, Trusted Neighbor feature; Yale Assure Touch launch integrating fingerprint biometrics with ADT+; management emphasized customer satisfaction and AI-enabled service efficiencies (“90% of chats processed by AI agents”) .

What Went Wrong

  • Sequential attrition ticked up vs Q1 (12.8% vs 12.6%); nonpayment cancellations modestly higher and voluntary losses impacted by a large multifamily customer loss; save rates modestly down .
  • State Farm partnership underperforming vs initial aspirations (~33k cumulative subscribers); ADT redesigning approach (targeting movers) to improve traction; management conservatively budgets limited impact .
  • Near-term phasing headwinds: Q3 adjusted EBITDA/EPS “similar to or slightly lower” than Q2; adjusted FCF to decline sequentially due to ~+$70M cash interest timing; tariff uncertainty remains a watch item (mitigations in place) .

Financial Results

Headline P&L and Margins (quarterly trend vs estimates)

MetricQ4 2024Q1 2025Q2 2025Q2 2025 Consensus*
Total Revenue ($USD Billions)$1.260 $1.267 $1.287 $1.276*
GAAP Diluted EPS – Continuing Ops ($)$0.21 $0.16 $0.19 —
Adjusted EPS ($)$0.20 $0.21 $0.23 $0.20*
Adjusted EBITDA ($USD Millions)$653 $661 $674 $674*
Adjusted EBITDA Margin (%)52% 52% 52% —
Income from Continuing Ops / Revenue (%)16% 11% 13% —

Note: Consensus values marked with * are from S&P Global.

YoY Comparison (Q2 2025 vs Q2 2024)

MetricQ2 2024Q2 2025
Total Revenue ($USD Millions)$1,205 $1,287
GAAP Diluted EPS – Continuing Ops ($)$0.13 $0.19
Adjusted EPS ($)$0.17 $0.23
Adjusted EBITDA ($USD Millions)$629 $674
RMR ($USD Millions)$355 $363
Attrition (%)12.9% 12.8%

Segment Revenue Breakdown

Segment ($USD Millions)Q4 2024Q1 2025Q2 2025
Monitoring & Related Services$1,085 $1,083 $1,090
Security Installation, Product & Other$175 $184 $197
Total Revenue$1,260 $1,267 $1,287

KPIs and Cash Flow

KPIQ4 2024Q1 2025Q2 2025
RMR ($USD Millions)$359 $360 $363
Gross Revenue Attrition (%)12.7% 12.6% 12.8%
Revenue Payback (Years)2.2 2.3 2.3
Adjusted Free Cash Flow incl swaps ($USD Millions)$224 $226 $274
New Subscriber Adds (000s)—172 242
New RMR Added ($USD Millions)—$10.6 $14.3

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($USD Billions)FY 2025$5.025–$5.225 $5.025–$5.225 Maintained
Adjusted EBITDA ($USD Billions)FY 2025$2.650–$2.750 $2.650–$2.750 Maintained
Adjusted EPS ($)FY 2025$0.77–$0.85 $0.81–$0.89 Raised
Adjusted Free Cash Flow incl swaps ($USD Millions)FY 2025$800–$900 $800–$900 Maintained
Dividend per Share ($)Q3 record date Sept. 11, 2025$0.055 (ongoing program) $0.055 (pay Oct. 2, 2025) Maintained
Q3 Phasing (Qualitative)Q3 2025—Adj. EBITDA/EPS similar/slightly lower than Q2; adjusted FCF larger sequential decline; cash interest ~+$70M New phasing detail

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 / Q1 2025)Current Period (Q2 2025)Trend
ADT+ platform and product mixOutright sales rising; ADT+ rollout; installation revenue up; Trusted Neighbor launched Continued ADT+ mix; Yale Assure Touch biometric lock integrated; higher average installation revenue; Trusted Neighbor uplift Positive adoption and monetization
AI in customer careEarly AI pilots; 90% of chats processed, ~50% resolved without agent Expanded AI: 90% chats via AI, ~50% resolved; initial rollout of AI voice agents Scaling efficiency
State Farm partnershipAvailable in 17 states; pilots; growth but modest ~33k cumulative subscribers; redesigning program towards movers; expectations tempered Underperforming; pivoting
Bulk account purchasesNone in Q1; disciplined pipeline Q2 bulk purchase: ~50k accounts for $89M; high density and credit quality; strong returns; attrition protection Opportunistic growth lever
Tariffs and macroUncertain; mitigations (supplier, inventory, pricing) Exposure manageable within FY guidance; Q3 interest timing headwind Manageable risk; watch Q3
Customer retentionRecord attrition 12.6% (Q1) Attrition 12.8%; drivers: nonpay up modestly, voluntary losses (multifamily), relocation down; NPS record Near-record; slightly higher sequential

Management Commentary

  • CEO: “ADT delivered another strong quarter, highlighted by record recurring monthly revenue, robust cash flow generation, and strong earnings per share growth” .
  • CFO: “We generated $274M of adjusted free cash flow including swaps in the second quarter and $500M through the first half… We are increasing our adjusted EPS range by $0.04 to $0.81 to $0.89 per share reflecting our lower diluted share count” .
  • Product: “ADT launched the new Yale Assure Touch smart lock designed to integrate seamlessly with ADT+… including fingerprint recognition” .
  • Strategy on State Farm: “The trajectory has been positive… but the pace and the volume isn’t what… either party had hoped… we’re working together on redesigning our approach… focused on movers” .

Q&A Highlights

  • Bulk purchase economics and integration: High-density, good credit; attrition protection; returns comparable to dealer model; opportunity to upgrade but not underwritten into returns .
  • State Farm partnership: Cumulative ~33k subs; redesign to target movers; impact conservatively budgeted—limited effect on commitments .
  • Attrition drivers: Nonpay modestly higher; voluntary losses elevated due to a large multifamily loss; relocation losses modestly lower; NPS at record; attrition improvement unlikely to be linear .
  • Macro and tariffs: Business resilient; tariff exposure can be managed within guidance; cash interest timing creates Q3 phasing headwind (~+$70M) .
  • Go-to-market and DIY/SMB: Tech engineer model boosting install revenue; tightening credit in DIY/Health; SMB a focus area; dealer channel expected to recover in H2 .

Estimates Context

  • Q2 2025 beats: Revenue $1.287B vs $1.276B*; adjusted EPS $0.23 vs $0.20*; adjusted EBITDA $674M vs $674M* .
  • Forward estimates: Q3 2025 consensus EPS ~$0.215*, revenue ~$1.293B*, EBITDA ~$676M*; management guided Q3 adjusted EBITDA/EPS similar or slightly lower than Q2, with adjusted FCF lower sequentially on cash interest timing .
  • Implication: Street likely nudges FY EPS higher (share count benefit) while trimming Q3 FCF/EPS phasing; tariff mitigation reduces need for broad estimate cuts.
    Note: Consensus values marked with * are from S&P Global.

Key Takeaways for Investors

  • Positive print: Broad-based beat on revenue and adjusted EPS, margin stability (52% adj. EBITDA margin), and raised adjusted EPS guidance—supported by significant share repurchases .
  • Cash generation durable: Adjusted FCF strength supports ongoing buybacks and dividend; refinancing actions reduce near-term maturity risk and keep leverage at 2.8x .
  • Near-term setup: Expect a softer Q3 on cash interest timing; watch tariff developments—management believes exposure manageable within FY ranges .
  • Strategic execution: ADT+ ecosystem, Trusted Neighbor, and Yale Assure Touch biometrics drive higher installation revenue and differentiation; AI efficiencies should expand in FY26 .
  • Growth levers: Bulk acquisitions pipeline strong; dealer channel recovery expected in H2; SMB and refined DIY approach could support gross adds into late 2025/early 2026 .
  • Risk checks: Attrition slightly higher sequentially; State Farm channel reset needed; keep an eye on nonpay trends and voluntary churn pockets .
  • Trading lens: Estimate beat and EPS guidance raise are supportive; any Q3 phasing-driven weakness could be a buying opportunity if FY trajectory is intact.