ADT Inc.

I'd like to welcome you all to the ADT fourth quarter 2023 conference call. My name is Brica and I will be your moderator for today. All lines are on mute for the presentation portion of the call today with an opportunity for questions and answers at the end. If you would like to ask a question during this time, please press star followed by one on your touch phone keypad. If you change your mind at any time, please press star then two. And I would now like to pass the conference over to your host, Elizabeth Landers, Senior Director of Investor Relations of ADT, to begin. So, Elizabeth, please go ahead.

Thanks, Operator, and good morning, everyone. We appreciate you joining today's call to discuss ADT's year-end results for 2023. Speaking on today's call will be ADT's Chairman, President, and CEO, Jim DeVries, and our Interim Chief Financial Officer, Jeff Lekasar. Following the prepared remarks, we'll take analyst questions. 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. Before we begin, I'd like to remind everyone that beginning in the third quarter of 2023, the commercial business was reported as discontinued operations. Financials and metrics for current and historical periods discussed on this call will be for continuing operations, except for cash flows, which includes amounts related to the commercial business through the date of sale. Today's remarks also include forward-looking statements to 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 will also discuss non-GAAP financial measures on the call. The most directly comparable gap measures, along with a reconciliation to those measures, can be found in our earnings presentation on the ADT Investor Relations website. And with that, I'm excited to turn the call over to Jim.

Good morning, and thank you for joining us today to discuss the release of ADT's fourth quarter and full year results. 2023 was a pivotal year for ADT, and we delivered solid performance. invested for the future, reshaped our portfolio, and meaningfully improved our capital structure. With the divestiture of our commercial business and the decision to exit residential solar, we have simplified our business model and focused on our consumer-oriented core security and smart home business. Our remaining business serves a large and growing market, and we are the proven industry leader with durable customer relationships that generates substantial and predictable cash flows. After having reduced our debt by $2.1 billion during 2023, we entered 2024 with additional strength and flexibility with our debt to adjusted EBITDA leverage ratio now at 3.2 times. Our team is now entirely dedicated to growing our core consumer businesses deploying capital to invest in the future, further reducing debt, and providing strong returns to shareholders. I'll share several financial highlights which continue to demonstrate very solid performance in our core business. For the full year, we grew revenues and earnings consistent with our expectations. Total revenue was approximately $5 billion, driven mainly by our consumer and small business or CSB segment at $4.7 billion up 6% versus the prior year. We generated adjusted net income from continuing operations of $439 million or 51 cents per diluted share. We also posted adjusted EBITDA of $2.4 billion with adjusted free cash flow including interest rate swaps of $525 million. ADT ended the year with a record recurring monthly revenue balance of $353 million, up 4%, which benefited from strong attrition of 12.9%. We also continue to improve our revenue payback now at 2.1 years. I'll note that our fourth quarter results included a strategic customer portfolio acquisition for just under $90 million. This bulk account acquisition is complementary to our existing customer footprint and was comprised of 57,000 subscribers. Given our strong economies of scale and best-in-class service capabilities, we will continue to periodically consider portfolio acquisition opportunities such as these. Against a challenging macroeconomic backdrop and inconsideration of our portfolio shifts, we are pleased with our strong performance and agility throughout the year. As we begin 2024, our core focus remains on delivering safe, smart, and sustainable solutions to our customers with an emphasis on innovative offerings, unrivaled safety, and a premium, best-in-class customer service experience. Towards that end, a primary set of initiatives during 2024 is centered on methodically rolling out our new ecosystem of customer offerings and experiences. Last December, we launched our new ADT Plus consumer app and new integrated and proprietary hardware set for professionally installed customers in select pilot markets. This follows the rollout of our ADT Plus app to self-setup customers earlier last year. We plan to expand to broader geographies and customers throughout 2024 and are confident in the differentiated capabilities this new platform will enable, especially as we develop additional use cases tailored to our customers' unique needs. The new platform will further leverage our Google Nest partnership, which has already enabled us to accelerate our technological offerings, particularly around the fast-growing areas of camera and video analytics. The improved camera take rates contributed to approximately $1,400 of install revenue per new customer during this past year. It has also improved customer satisfaction with higher net promoter scores for customers with Google devices exceeding the rest of our customer base. In addition to our new offerings, we continue to make substantial progress in improving our operating efficiencies and customer experience. As an example, I would like to highlight our virtual assistance program, which launched mid-2022 and recently crossed a threshold where we are closing 50% of service tickets virtually versus the alternative of rolling a truck. In addition, we have further broadened our relationship with Google beyond the Nest hardware with a focus on efficiency and customer experience, utilizing Google's AI technology platform to explore several opportunities across our business with early efforts focused on call center operations. Our State Farm partnership also continues to progress. And as a reminder, is defined by the significant benefit to our combined customer's need for proactive risk detection and prevention at little to no cost. We closed 2023 with the offering available in 13 states and have plans in early 2024 to enter four more and continue to make methodical progress navigating local approvals and testing in new geographies. Similar to our experience with Google, customers with our joint State Farm offer also report very strong customer satisfaction, and the majority have purchased additional products and services beyond the base offering. We are making significant investments in our infrastructure, including the newly modernized and integrated CRM platform a refreshed cloud-based ERM, e-commerce capability, and the retirement of various legacy systems. Collectively, we expect these efforts will improve our efficiency and customer experience while also enabling better and faster insight to meet our customers' needs. Underpinned by these and other initiatives, we are forecasting solid growth in revenue, earnings, and significant growth in free cash flow in 2024. I especially want to underscore our commitment to delivering strong cash flow growth during 2024 and in the years to come, which combined with the leverage reduction I noted earlier, enables us to confidently return capital to shareholders, resulting in our recent announcement of a 57% increase in our dividend and a $350 million share repurchase program authorization. Before I turn things over to Jeff, I'll take just a moment to touch on the exit of our residential solar operations, which we also recently announced. This was a difficult decision, but as a result of the challenging conditions in the industry and our trajectory during 2023, our board and I concluded that winding down operations would generate more value for shareholders than continued investment in this space. I would like to acknowledge the efforts of our solar employees and thank them for their dedication and time with ADT. I'll now turn the call over to Jeff, who will take you through our financial results, including guidance for 2024.