ADT (ADT) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue grew 3% year-over-year to $1.2 billion, with recurring monthly revenue up 2% to $355 million and strong adjusted free cash flow of $251 million, up 14% year-over-year.

• Adjusted EBITDA for Q2 was $629 million, with net income at $92 million and adjusted net income at $156 million ($0.17 per share); GAAP income was $126 million ($0.13 per share), impacted by legal settlements and higher SG&A.

• Gross revenue attrition was 12.9%, and revenue payback period was 2.2 years; end of Q2 subscribers totaled 6.4 million, with 67% interactive customers.

• The business is now focused on the consumer and small business segment after completing exits from commercial and solar operations, incurring $89 million in solar exit charges year-to-date.

• Strategic partnerships with Google and Yale Lock expanded, ADT Plus platform launched nationally, and new features like Trusted Neighbor and AI for call centers were introduced.

Financial highlights

• Monitoring and related services revenue was $1.07 billion in Q2, up 2% year-over-year; security installation and product revenue rose 9% to $136 million.

• Adjusted EBITDA margin was 52% in Q2; Adjusted Free Cash Flow (including interest rate swaps) rose 14% to $251 million.

• Net cash from operating activities for H1 2024 was $927 million, up $128 million year-over-year.

• Dividend of $0.055 per share declared, with $94 million paid in H1 2024.

• Net income for Q2 was $92 million, flat year-over-year; Adjusted EPS was $0.17, and YTD Adjusted EPS increased 38% to $0.36.

Outlook and guidance

• 2024 guidance reaffirmed: total revenue $4.8–$5.0 billion, Adjusted EBITDA $2.525–$2.625 billion, Adjusted EPS $0.65–$0.75, and Adjusted Free Cash Flow $700–$800 million.

• Guidance reflects discontinued operations for solar and commercial segments and a focus on recurring revenue and cost controls.

• Q3 Adjusted EBITDA expected to be similar to Q1, with Adjusted Free Cash Flow in line or slightly lower due to timing of cash interest payments and higher SAC spending.

• Management expects remaining Solar exit charges to be immaterial, with $30–$50 million in additional cash outflows possible.

• 2024 is expected to be a peak year for technology investments, with a pullback anticipated in 2025.