ADT Inc.

2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow today's presentation. If you need operator assistance, you may press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Elizabeth Landers, Senior Director of Investor Relations. Thank you. You may begin.

Thanks, Operator, and good morning, everyone. We appreciate you joining our ADT's second quarter 2022 earnings call. Speaking on today's call will be ADT's President and CEO, Jim DeVries, and our CFO and President of Corporate Development, Jeff LeCassar. Jim will provide an overview of our recent financial performance and how that links to the mission and long-term strategy we laid out at our investor day in March. Jeff will then cover our financial performance in detail. After the prepared remarks, we'll take analyst questions. Also joining us from Q&A are Ken DePora, EDP of Finance, and Joe Greer, SPP of Finance, Investor Relations, and Communications. Earlier this morning, we issued a press release and slide presentation of our financial results. These materials are available on our website at investor.adt.com. And before we start, I do need to mention that today's remarks include forward-looking statements that represent our beliefs or expectations about future events. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Some of the factors that may cause differences are described in our SEC filings. We'll also discuss non-GAAP financial measures on the call. The most directly comparable GAAP measures, along with the reconciliation to those measures, are available on our website at investor.adt.com. And with that, I'll turn the call over to Jim.

Good morning, and thanks to everyone for joining today's call. We released our strong second quarter results this morning, showing substantial year-over-year improvements in total revenue and adjusted EBITDA, solid free cash flow generation, and for the first time since our IPO, positive adjusted net income of $50 million or $0.06 per share. We demonstrated continued progress on our key initiatives outlined earlier this year during our investor day. and delivered what I believe is our best quarter ever at ADT. We have great momentum in our core engine, the consumer business, solid demand for ADT products and services, is driving subscriber growth, higher average pricing, and a record RMR balance while also improving our operating efficiency. In addition, our unrivaled focus on the customer is producing enhanced brand loyalty along with record high retention. We remain committed to the plan we laid out for you at our investor day, a long-term strategy to grow our subscriber base, expand the share of wallet from each customer, and strengthen our brand loyalty and customer retention. Simply stated, we are giving customers even more reasons to choose ADT, stay with ADT, and spend more with ADT. We are driving numerous positive trends in our business that give us increasing confidence in achieving our long-term strategic plan. First, of course, is Google partnership, which is a catalyst to accelerate growth. We reached another major milestone earlier this week and with the national rollout of more Google Nest products, including indoor-outdoor cameras, after a West Region launch a few weeks ago. I can't fully express the level of excitement we've seen from our customers, our sales team, and installation technicians for these Google products. We anticipate that excitement to grow, especially with the rollout of our new ADT Plus app in concert with the self-setup Google product suite before the end of the year. To support these product rollouts, we'll be launching our first joint marketing and advertising campaigns with Google in the fall, partially funded by the first $50 million in success funds from Google. The momentum from our Google partnership and product rollout underpins an improving trend in capital efficiency from both higher installation revenue per unit and stronger customer retention. Our residential installation revenue per unit increased 23% year-over-year in the second quarter and 7% versus the first quarter on the strength of the doorbell launch earlier this year. We expect that trend to continue to improve with the additional Google camera and thermostat rollout. You'll begin to see this in the third quarter with further expected improvements in the fourth and subsequent quarters. One of the strongest drivers of customer retention and our economic returns is this initial investment customers make in their system. Another important factor is the frequency of interaction with their system. With the extension of the Google products, we now see more ADT customers choosing interactive, integrated, and more comprehensive systems. we're already seeing these two factors and others start to flow through to better customer retention. Gross customer attrition over the last 12 months was 12.7%, a record low, with continued improvement from the first quarter and a 60 basis point improvement versus prior year. And when we net resales, it's even more impressive at 10.1%. All of this combines to produce more capital efficient growth with our revenue payback dropping to 2.2 years. As our results demonstrated in the second quarter, the consumer business is hitting on all cylinders. Turning to our commercial segment, the momentum in commercial sales has been very strong with both new account wins and solid customer retention. Like many businesses, we're managing the impact of supply chain challenges. We're experiencing some installation delays due to lack of parts availability, which has driven a roughly $40 million increase or about a 10% increase in our installation backlog. Additionally, our commercial margins are pressured by cost inflation on hardware, some of which we have already offset with price increases, which we've successfully implemented. These dynamics have affected some efficiency in translating revenue to profit, which we expect to improve in the second half. In our solar segment, we remain extremely enthusiastic and continue to see very strong demand for residential solar systems, resulting in a 50% increase in systems installed year over year. We also made progress in the corridor with cross-selling. with approximately 15% of solar sales generated from our ADT ecosystem, and we launched a successful pilot with Lowe's for additional solar sales in the retail space. With all this growth momentum, we face some temporary challenges during the quarter as we continue to build the requisite infrastructure and processes to manage this rapid growth. This was exacerbated as one of our financing partners began winding down operations and commenced an out-of-court liquidation, an unexpected event which is isolated solely to this lender. We have confidence our other solar financing partners remain healthy, and we have been working to transition impacted customers to these alternative financing partners. Next. We continue to be very confident about the long-term strategy and success of the solar business, and we're encouraged by the incredibly strong demand we're seeing in this segment. Summarizing, on the whole, this was a fantastic quarter for ADT. In conclusion, I have four headlines to leave you with. First, we have incredible momentum and strength in our core CSB business. Second, The Google partnership is taking more shape and will serve as a catalyst for accelerated growth. Third, our pipeline for future revenue and profit is strong in commercial and the supply chain challenges are being managed well. And finally, our solar business is experiencing terrific growth. We expect profitable growth and remain confident that this segment will absolutely become a material contributor to overall ADT. I want to thank all of our employees and dealer partners for an outstanding quarter. These results are a direct reflection of your great work. And now I'll turn the call over to Jeff to cover our financial performance and the quarter in more detail.