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AI

ADT Inc. (ADT)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue was $1.26B, GAAP diluted EPS was $0.21, Adjusted EPS was $0.20, and Adjusted EBITDA was $653M; Adjusted Free Cash Flow including swaps was $224M, with end-of-period RMR at a record $359M .
  • Management issued FY2025 guidance: revenue $5.025–$5.225B, Adjusted EBITDA $2.65–$2.75B, Adjusted EPS $0.77–$0.85, and Adjusted FCF (incl. swaps) $800–$900M; announced a new $500M share repurchase authorization and declared a $0.055 dividend .
  • Wall Street consensus estimates from S&P Global were unavailable due to data access limits; beats/misses vs. consensus cannot be assessed (S&P Global data unavailable) .
  • Capital allocation remains shareholder-friendly: net leverage fell to 2.9x Adjusted EBITDA, $345M of repurchases since Jan 2024 (51M shares), and no revolver balance at year-end; a $600M new term loan will fund partial redemption of $500M 2026 notes, further optimizing the stack .

What Went Well and What Went Wrong

What Went Well

  • Record customer retention and RMR underpin resilient M&S revenue: TTM gross revenue attrition improved to 12.7%; RMR reached $359M, with revenue payback at 2.2 years .
  • Operational execution and cash generation were strong: Q4 Adjusted FCF (incl. swaps) nearly doubled YoY to $224M; FY operating cash flow up 14% to $1.885B .
  • Strategic product/platform progress and early AI: “We delivered strong 2024 results including a record-high recurring monthly revenue balance, record customer retention, and very strong cash generation... including the launch of our proprietary ADT+ platform enabling unique and differentiated customer offerings such as Trusted Neighbor” — Jim DeVries . “We formally launched our partnership with Sierra focused on call center, artificial intelligence... reducing the need for lengthy telephonic interactions” — management .

What Went Wrong

  • EBITDA margin compression and cost headwinds: Adjusted EBITDA margin was 52% in Q4 (down vs. Q3 at 53%) as outright sales and cloud transition shifted costs into EBITDA; noncash headwinds cited for 2025 outlook .
  • Credit and allowances: Q4 commentary flagged higher allowance for credit losses impacting results alongside legal items earlier in the year .
  • Bulk account purchase weighed Q3 adjusted FCF intra-quarter: Q3 Adjusted FCF (incl. swaps) decreased to $158M due to an $81M strategic bulk purchase, despite strong operating cash generation .

Financial Results

Core Financials vs. Prior Quarters

MetricQ2 2024Q3 2024Q4 2024
Total Revenue ($USD Billions)$1.205 $1.244 $1.260
GAAP Diluted EPS ($)$0.13 $0.14 $0.21
Adjusted Diluted EPS ($)$0.17 $0.20 $0.20
Adjusted EBITDA ($USD Millions)$629 $659 $653
Adjusted EBITDA Margin (%)52% 53% 52%
Net Cash from Operating Activities ($USD Millions)$563 $498 $460
Adjusted Free Cash Flow incl. swaps ($USD Millions)$251 $158 $224

Segment Revenue Breakdown

Segment Revenue ($USD Millions)Q2 2024Q3 2024Q4 2024
Monitoring & Related Services$1,068 $1,078 $1,085
Security Installation, Product & Other$136 $166 $175

KPIs

KPIQ2 2024Q3 2024Q4 2024
End-of-Period RMR ($USD Millions)$355 $359 $359
TTM Gross Revenue Attrition (%)12.9% 12.8% 12.7%
Revenue Payback (Years)2.2 2.2 2.2

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($USD Billions)FY2025N/A$5.025–$5.225 New
Adjusted EBITDA ($USD Billions)FY2025N/A$2.65–$2.75 New
Adjusted EPS ($)FY2025N/A$0.77–$0.85 New
Adjusted Free Cash Flow incl. swaps ($USD Millions)FY2025N/A$800–$900 New
FY2024 Total Revenue ($USD Billions)FY2024 (as of Q3)$4.800–$5.000 $4.850–$4.950 Tightened (upward midpoint)
FY2024 Adjusted EBITDA ($USD Billions)FY2024 (as of Q3)$2.525–$2.625 $2.550–$2.600 Tightened
FY2024 Adjusted EPS ($)FY2024 (as of Q3)$0.65–$0.75 $0.70–$0.75 Tightened
FY2024 Adjusted FCF incl. swaps ($USD Millions)FY2024 (as of Q3)$700–$800 $725–$775 Tightened
Dividend per Share ($)Q4 declaration$0.055 (Q2/Q3) $0.055 (Q4) Maintained
Share Repurchase Authorization ($USD Millions)Announced 2/27/25Prior: $350M authorization largely used (51M shares repurchased since Jan 2024; $345M) $500M authorization through Apr 30, 2026 New/Expanded

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
ADT+ platform and Trusted NeighborPhased rollout; Trusted Neighbor announced, expected Q3 . Nationwide availability; high app ratings; deeper integrations .Continued rollout across geographies and channels; enhanced bundles/pricing flexibility; optimization ahead .Expanding adoption and monetization.
AI/call center efficiencyImplementing Google Cloud AI in customer care and retention . Virtual service >50% of requests; continued efficiency .Partnership with Sierra launched; 50% of chats already AI, targeting 90% by end of Q1; begin AI voice with ~20% containment by YE .Accelerating AI deployment.
State Farm partnershipProgram advancing; expanding offerings . New water leak solution in MD and MI .Available in 17 states; 2024 sales ~18,000 vs 5,500 in 2023; plans to expand in 2025 .Scaling distribution and volumes.
Bulk account acquisitionsStrategic bulk purchase of ~49k accounts for $81M .No bulk in Q4; opportunistic approach with 2–3 parties under review .Opportunistic contributor.
Capital allocation/debt stackRedeemed $100M 2024 notes; repriced term loan B by 25 bps .Revolver extended to 2029, +$225M commitments .New $600M 7-year term loan; redeem $500M 2026 notes; net leverage 2.9x; $500M buyback .
Tariffs/macroNot emphasized.Not emphasized.CFO: tariffs modeled in guidance; high margins provide some insulation, effects within ranges .

Management Commentary

  • “We delivered strong 2024 results including a record-high recurring monthly revenue balance, record customer retention, and very strong cash generation... launch of our proprietary ADT+ platform enabling unique and differentiated customer offerings such as Trusted Neighbor” — Jim DeVries .
  • “We remain very intentional and disciplined in our capital allocation... enabled the $500 million share repurchase authorization we announced this morning. We believe our stock is very attractively valued at recent prices” — Management .
  • “Adjusted free cash flow... was up 42% to $744 million... net leverage with net debt at 2.9x adjusted EBITDA below the 3.0 threshold we committed to reach” — Jeff Likosar .
  • “We successfully resolved more service calls utilizing cost-efficient remote alternatives... avoiding thousands of truck rolls and contributing to reductions in our field service costs” — Management .

Q&A Highlights

  • Bulk accounts: ~49k accounts purchased in 2024; no Q4 bulk; remain disciplined/opportunistic vs. dealer/direct additions for capital deployment .
  • State Farm: Program in 17 states; 2024 sales ~18k vs ~5.5k in 2023; high customer satisfaction; 2025 expansion planning underway .
  • Offer/pricing optimization: New ADT+ offers across geographies; dialing bundles, financing, install vs. recurring balance to optimize volumes and economics .
  • AI/virtual service: Over 3M customers served virtually all-time; >50% of service jobs now virtual; AI handling 50% of chats (target 90% in Q1) and ~20% of voice calls by YE .
  • Tariffs in guidance: Management reviewed contracts; potential tariff effects contemplated within FY2025 guidance ranges; high margins provide some buffer .

Estimates Context

  • S&P Global consensus estimates for Q4 revenue/EPS/EBITDA and next quarter were unavailable due to data access limits; we cannot determine beats/misses versus Wall Street consensus at this time (S&P Global data unavailable) .
  • Given FY2025 guidance implies ~5% revenue growth and ~8% EPS growth at the midpoint, sell-side models may need to adjust for outright sales mix, cloud transition costs moving into EBITDA, and share count reductions from repurchases .

Key Takeaways for Investors

  • Cash generation and capital returns are central to the story: Q4 Adjusted FCF (incl. swaps) $224M; FY operating cash flow $1.885B; new $500M buyback; dividend maintained at $0.055/share .
  • Balance sheet improving: net leverage at 2.9x, revolver undrawn, with proactive refinancing (new $600M term loan) and $500M partial redemption of 2026 notes forthcoming .
  • ADT+ and outright sales shift drive install revenue growth but modestly pressure EBITDA margin; management is optimizing offers, pricing, and financing to balance near-term profitability with long-term RMR value .
  • AI-enabled service and call center automation are tangible cost-reduction and CX drivers, with aggressive near-term containment targets that can improve efficiency and retention metrics .
  • Distribution expansions (State Farm, SMB focus) are scaling; State Farm volumes more than tripled YoY and present a lever for RMR and install revenue growth .
  • Tariff risk is under active review and incorporated into guidance ranges; high-margin M&S and pricing actions provide some insulation .
  • Near-term trading lens: capital return announcement and de-leveraging acts as a support; lack of consensus comparison limits beat/miss narrative, but strong FY2025 guidance and buyback are potential positive catalysts .