ADT Inc.

Good morning, and welcome to ADT's 2022 Investor Day. In just a few minutes, we'll kick things off with ADT's President and CEO, Jim DeVries, who will lay out his vision and strategy for the company. We'll then hear from members of our leadership team, who will detail our growth plans for our consumer and small business, commercial, and solar businesses. Our CFO and President, Corporate Development, Jeff Likasar, will wrap up the formal presentations with details on our 2022 and long-term financial outlooks and our capital allocation framework. We'll conclude the day with a Q&A session with our executive team. To ask a question, simply select the Q&A button on the right side of the page at any time during the event and type your question. In addition to hosting our Investor Day, we released our fourth quarter and full year 2021 earnings this morning. I'd note that our results now include a new segment, ADT Solar, and reflect only the 23 days after the closing of our SunPro acquisition on December 8th. Some highlights of our performance. Fourth quarter revenues grew 5% to $1.4 billion, taking our full year revenue to $5.3 billion. We grew our subscriber base by approximately 2% for the year, and our end-of-period recurring monthly revenue, or RMR, was $359 million, up 5%. We've now had six consecutive quarters of improvement in this metric. Our adjusted net loss was $25 million or $0.03 per share for the quarter and $191 million or $0.25 per share for the full year, both significant improvements year over year. Our adjusted EBITDA was $574 million for the quarter and $2.2 billion for the full year on the high end of our initial guidance. We generated $176 million in adjusted free cash flow for the quarter, taking us to $465 million for the full year. Our strong cash generation allowed us to invest meaningfully in growing the business and return $116 million to our owners through dividends. We ended the year with $9.7 billion of net debt. On behalf of Jim, Jeff and our entire leadership team, I'd like to thank the ADT team for producing a great year in 2021. With your unrelenting focus on the customer, we're able to meet or exceed all of our financial goals while building a solid foundation for long-term growth. You're going to hear much more about that in just a few minutes. More details on our results are available on our investor relations website, investor.adt.com. You can find a copy of today's presentation materials there as well. Before we get started, I do need to tell you that today's presentation contains forward-looking statements. The risks and uncertainties that may cause our actual results to differ from these projections are contained in our SEC filings and available on our website. We'll be using non-GAAP financial metrics. Reconciliation for those metrics are also available on our site. As I wrap up, I'd like to take a moment to recognize our finance, IR, and communications teams. Getting to today took a lot of long hours, late nights, and sacrificed weekends. I cannot thank you enough, and it's an honor to work alongside all of you every day. So now it's time for us to get started with our main event, and I'm pleased to turn the stage over to ADT's President and CEO, Jim DeVries.

Thanks, Jill, and good morning, everyone. We appreciate you joining us today and your interest in ADT. It's a great time for all of us at ADT. After several years of progress reshaping our company, we're well positioned to accelerate our growth. We're very excited by our next chapter and very appreciative of the opportunity to describe it to you today. This morning, we're going to lay out our refreshed long-term strategy You'll see it's a strategy that leverages our position as the market leader with unique strategic differentiators. It's a strategy that focuses on the customer, growing our subscriber base, expanding the share of wallet we capture from each customer, and strengthening our brand loyalty and customer retention. It's a strategy that drives profitable, capital efficient revenue growth. It's a strategy that delivers long-term shareholder value. And it's a strategy for which we have the best team in the industry to execute. Setting the stage, we are, without a doubt, the clear market leader. With 98% brand awareness, ADT is synonymous with safety and peace of mind. We're the most trusted brand, the most considered brand, and two times the most preferred brand relative to the closest competitor. ADT is the only company in our industry with national scale. We have 6.6 million customers and we've grown net subscribers each of the last two years. With over 25,000 best-in-class employees, including more than 7,000 installers and service technicians, our people are a strategic advantage. Our installers have an average tenure of five years and our service technicians have an average tenure of over nine years. An amazing feat in a high turnover industry and a testament to the passion and commitment of our frontline. We've built an increasingly broad and diversified revenue base spread across our consumer security and smart home offerings, residential solar and commercial. Importantly, roughly 80% of our 2021 revenue came from durable, contractual, recurring revenues. Our work over the past several years has focused on building and strengthening our platform for growth. By delivering significant improvement against virtually every operating metric, we are firmly positioned to deliver stronger returns for each incremental dollar of capital we invest in growth. Our top objective is to delight and protect our customers. We are obsessively focused on customer satisfaction to drive strong brand loyalty and increased customer retention. In fact, we have meaningfully improved customer retention with attrition dropping from nearly 17% for legacy ADT to 13.1% at the end of 2021. Long term, our aspiration is to achieve single digit attrition. Concurrently, we've been focused on subscriber acquisition efficiency and have reduced our revenue payback to 2.3 years. Most importantly, we have expanded beyond core security with a clear focus on the smart home. Interactive services are now included in the vast majority of our installations. In addition to improving our operating performance, we have transformed and strengthened our portfolio. Several years ago, ADT was focused exclusively on residential premise security. Today, we are a diversified, scale business poised for accelerating growth and expanding markets. I want to highlight just a few areas that have undergone meaningful transformation. First, our footprint. We have significantly expanded our consumer offerings to cover a full smart home ecosystem. Additionally, we've used a combination of organic growth and acquisitions to offer a broader suite of services and support to our commercial and national account customers. And customers who trust ADT for smart home can now trust us for smart energy as well. Second is technology. You'll hear more today about our work underway to develop our proprietary interactive platform used to control the customer's smart home. We're investing in innovation across the company, developing more technology in-house. Over the next three years, we're on a path to more than double our patent portfolio. Owning our technology and intellectual property creates a deeper moat around our business. Third is partnerships. We've developed strategic partnerships with category leaders such as D.R. Horton and, more recently, Ford. Our most transformative partnership is with Google, where we'll be offering co-branded, jointly developed solutions. We successfully rolled out the Google Doorbell last month and will be launching additional devices later this year. These partnerships broaden our distribution reach and customer offerings. And finally, we're expanding our commitment to consumer safety to extend beyond the home, to the car, to the mobile device, and more. I mentioned we've reached an inflection point after all the progress during recent years. With all the pieces of our portfolio in place, we're now positioned for a new chapter. During much of our 147-year history, ADT was focused solely on personal home security. But today's consumers are expanding their definition of safety, and ADT is changing with them. Therefore, our mission has evolved beyond the traditional definition of security to a mission of safe, smart, and sustainable. Safe, we protect what matters most, smart, We deliver innovative, customer-focused experiences to make customers' lives safe and simple, sustainable. We make life better for the customers and communities we serve. By staying true to our mission, we'll achieve our vision, a world where customers always feel safe. Safe at home, while walking on campus, and at work. Safe from risks such as fire, water intrusion, and rising energy prices. Safe to stay in their homes as they grow older, to leave tools in their trucks at a job site, or to withstand energy disruptions. Safe in the ways that matter most. And these are only examples. Let me show you what this looks like in action.

The last two years have changed everything.