ADT Inc. (ADT)·Q3 2025 Earnings Summary

Executive Summary

• ADT delivered Q3 revenue of $1.30B (+4% y/y) and Adjusted EPS of $0.23, modestly ahead of S&P Global consensus; Adjusted EBITDA was $676M with a 52% margin, essentially flat sequentially and y/y . EPS beat consensus $0.215 and revenue slightly topped $1.293B estimates, while EBITDA tracked in line to modestly above consensus (see Estimates Context) (*) (Values retrieved from S&P Global).
• Full-year 2025 guidance tightened: revenue raised by $50M at both ends, Adjusted EPS midpoint nudged higher, Adjusted EBITDA range narrowed slightly lower at the midpoint, and Adjusted FCF held at $800–$900M . Management reiterated confidence in meeting 2025 commitments .
• Cash generation and balance sheet actions remain a highlight: Q3 Adjusted FCF of $208M (+32% y/y), year-to-date $709M (+36%), leverage at 2.8x, and refinancing lowered average borrowing cost to 4.3% . October transactions: $1.0B first-priority notes due 2033 and $300M TLB add-on used to redeem $1.3B of 2028 second lien notes .
• Watch items: gross revenue attrition ticked to 13.0% (from record lows earlier in 2025) and RMR growth remained modest; management cited higher non-pay and voluntary churn, lower relocations, and disciplined SAC pacing (including smaller bulk adds) .

What Went Well and What Went Wrong

• What Went Well

  • “Solid revenue growth, robust cash flow, and very strong EPS” with Adjusted FCF $208M in Q3 and $709M YTD; ADT returned $746M YTD via buybacks/dividends and ended with 2.8x leverage .
  • Product execution and AI progress: ADT+ adoption around 25% of new sales; AI agents handle 100% of chat with ~50% containment and ~50% of voice calls with ~20% containment; remote assistance continues to eliminate ~50% of service visits .
  • Debt refinancing extended maturities and reduced cost: issued $1.0B notes, $300M TLB add-on, repaid $1.3B 2028 second lien; lowered average cost of debt to 4.3% .

• What Went Wrong

  • Attrition ticked to 13% and RMR ended slightly below internal expectations due to higher non-pay and voluntary disconnects, plus fewer bulk adds (15k in Q3’25 vs 49k in Q3’24) .
  • Installation/services mix tailwind to revenue had offsetting SAC discipline and bulk pacing, restraining gross adds and RMR additions despite ADT+ adoption .
  • Tariff uncertainty and cautious consumer macro added some EBITDA pressure (partly offset elsewhere and in EPS), though management still expects to meet full-year guidance .

Financial Results

Note: S&P Global shows EBITDA estimate of ~$0.676B and an actual of ~$0.681B, while company-reported Adjusted EBITDA was $0.676B; definitions may differ slightly (*) (Values retrieved from S&P Global).

Segment revenue

Key KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “ADT again delivered solid revenue growth, robust cash flow, and very strong earnings per share… We remain focused on execution… and long-term value creation.” — Jim DeVries, CEO .
• “Adjusted Free Cash Flow… $208M in Q3 and $709M YTD, up 36%… leverage at 2.8x… net debt $7.5B.” — Jeff Likosar, CFO .
• On attrition/retention: “We ended the quarter… ~13%… non-pay cancels were higher… voluntary losses worse… initiatives underway… ADT+, Trusted Neighbor, video penetration… should improve retention.” — Jim DeVries .
• On AI: “Chat volumes now 100% [AI]; containment ~50%. Voice… ~50% of voice calls have virtual agent… containment just below 20%… expect acceleration in 2026.” — Jim DeVries .
• On tariffs: “Tariffs… have a bit of an effect on EBITDA… offset in EPS… feel really good about cash generation… delivering guidance.” — Jeff Likosar .

Q&A Highlights

• Free cash flow drivers into 2026: lower borrowing costs from refinancings and better cash taxes; broader capital deployment flexibility; 2026 guidance to come with longer-range outlook in early 2026 .
• Retention path and timing: expect early improvements in voluntary churn by Q1–Q2 2026; collections process changes driving non-pay stabilization; underwriting adjustments should help as they flow through .
• SAC and bulk adds: SAC spending disciplined; bulk purchases evaluated with returns focus; range of FCF guidance retained to preserve optionality for potential Q4 bulk deals .
• State Farm: pivot to a digital, relocation-focused flow; ~32–33k cumulative subs; aim for better traction by integrating into buy flow rather than agent-dependent channel .
• Hardware optimization: engaging ODMs to lower costs; not material in 2025 but meaningful in 2026; remote service steady at ~50% of service calls .

Estimates Context

• Versus S&P Global consensus, Q3 results were modest beats on revenue and EPS: $1.298B vs $1.293B and $0.23 vs $0.215; EBITDA was in line to slightly above consensus depending on definition (*) (Values retrieved from S&P Global).
• Given EPS midpoint raise and tighter ranges, sell-side models may lift full-year EPS, trim EBITDA midpoint, and maintain FCF; attrition/RMR softness and bulk pacing could temper top-line adds near term .

Key Takeaways for Investors

• Quarter quality was driven by cash flow and capital structure management; operationally, revenue and EPS were steady with stable 52% Adjusted EBITDA margin .
• Guidance tightening with an EPS midpoint raise and maintained FCF signals confidence; near-term narrative supported by strong cash generation and deleveraging .
• Customer metrics mixed: attrition up to 13% and modest RMR growth; management’s retention playbook (ADT+, AI, collections, underwriting) suggests improvement beginning in early 2026 .
• AI is translating to measurable service efficiencies (chat/voice containment) and should increasingly contribute to cost savings into 2026 .
• Debt actions reduce interest headwinds and extend runway; average cost of debt at 4.3% provides cushion in a high-rate environment .
• Watch bulk account purchase cadence, SAC discipline, and tariff pass-through; any Q4 bulk execution could influence FCF within the guided range .
• Potential stock catalysts: sustained FCF outperformance, visible retention improvement, and continued deleveraging progress; counterpoints include macro/consumer pressure on non-pay churn and RMR adds .

Footnote: (*) Values retrieved from S&P Global.