ADT, Inc. Q1 FY2025 earnings call

• ADT Inc. ended the quarter with a record RMR of $360 million, up 2%, and gross attrition at 12.6%.
• Focused on unrivaled safety, innovative offerings, and premium customer service experience. Expanded ADT Plus platform, with increasing customers selecting it, including new direct residential customers.
• Launched ADT Trusted Neighbor and ADT Plus translator, receiving positive customer feedback. Customer satisfaction at a three-year high.
• AI efforts in customer care: 90% of customer service chats processed by AI agents, resolving many issues without live agent interaction.
• State Farm partnership showing progress, available in 17 states with innovative solutions. Executive team changes: Fawad Ahmad as Chief Operating and Customer Officer, Omar Khan as Chief Business Officer; Don Young to leave in June.

Monitoring and services revenue was up 2%, driven by a record recurring monthly revenue (RMR) balance of $360 million, also up 2%. Installation revenue was $184 million, up $57 million or 45%, driven by outright sales doubling compared to the prior year due to the transition to the ADT Plus platform. Total revenue was up 7% to $1.3 billion. Adjusted EBITDA in the first quarter was $661 million, an increase of 4%.

• Reaffirmed full-year guidance ranges: adjusted free cash flow (including interest rate swaps) up 14%, adjusted earnings per share up 8%, total revenue and adjusted EBITDA up 5%.
• Monitoring and services revenue expected to be up ~2%. Transition to outright sales pressures adjusted EBITDA margins.
• Tariffs could pressure midpoints of guidance, but company believes can manage net exposure within ranges. Second quarter revenue expected slightly higher due to more installation revenue; adjusted free cash flow similar to first quarter, adjusted EBITDA and EPS similar to or slightly lower than prior quarter due to timing items and potential tariff effects.

• Macroeconomic uncertainty affecting new subscriber ads but contributing to customer retention.
• Tariffs posing potential higher equipment costs, with mitigation plans in place including negotiating with partners, managing inventory, considering price increases.
• Uncertainty around tariff exclusions, carve-outs, and timing impacting financial results.

Q: Attrition record, room for improvement, ideal range?

A: Jim DeVries said attrition was 12.6% in quarter, 50 basis points better than last year; nonpayment cancels flat, relocation losses and voluntary losses better; NPS scores improved, call metrics improving; new initiatives like proactive with at-risk customers, white glove treatment for new customers; longer term aim to lower attrition. Jeff Likosar added ADT reports attrition on gross basis, so if considering sign-ups, closer to Jim's described ranges.

Q: Update on inflation outlook and revenue with inflation?

A: Jeff Likosar said tariffs are an avenue for material cost inflation, but overall outlook includes price escalations and richer pricing mix; no additional specific updates on inflation beyond tariff impact.