ADT Inc. Q2 FY2025 earnings call

• Strong financial results: Record recurring monthly revenue of $363 million (+2% YOY), total revenue up 7%, adjusted earnings per diluted share $0.23 (+35%), adjusted free cash flow including interest rate swaps $500 million through first half (+38%).
• Strategic priorities: Focus on optimizing and rolling out new capabilities, investing in core monitoring, product and experience ecosystem, and customer service. Completed a strategic customer portfolio acquisition of ~50,000 subscribers for $89 million.
• Customer metrics: Customer retention attrition at 12.8% (down 0.1 point YOY), customer satisfaction at 3-year high, NPS record in June.
• Partnerships: State Farm partnership has ~33,000 subscribers; working on new approach for prospective movers. Google Nest Aware subscriber base >1 million.
• AI efforts: ~90% of customer service chats processed by AI agents, starting AI agents for voice calls; half of service calls use remote alternatives.

Monitoring and services revenue was up 2%, driven by a record $363 million RMR balance (also up 2%). Installation revenue was $197 million, up $60 million, driven by the shift to the ADT+ platform and equipment sales. Revenue contribution: Monitoring and services had a 2% year-over-year growth with RMR at $363 million, and installation revenue was $197 million.

• Reaffirmed full-year guidance ranges for total revenue, adjusted EBITDA, and adjusted free cash flow.
• Increased adjusted earnings per share range by $0.04 to $0.81 to $0.89 per share, reflecting lower diluted share count.
• Third quarter adjusted EBITDA and EPS expected to be similar to or slightly lower than second quarter due to timing of marketing expenses, working capital flows, cash interest, and potential tariffs.

• Macro environment impacts: Relocation trends affecting gross adds and attrition; nonpayment cancellations modestly higher YOY.
• Tariff pressures: Need to manage tariff exposure within full-year guidance.
• Operational risks: Uncertainty in macroeconomic conditions affecting customer behavior and payments.

Q: Can you talk more about the bulk account purchase and appetite for future bulk purchases?

A: 50,000 accounts acquired in Q2 with high density, good credit scores; bulk pipeline strong, will review bulk as option for incremental subscribers.

Q: Update on State Farm partnership?

A: ~33,000 subscribers; designing new approach focused on movers, fresh tactic to gain traction.

Q: Update on Trusted Neighbor?

A: Represents >10% of do-it-for-me installations, customer response positive, average install revenue >$2,500 above overall average.

Q: Views on macro environment and client behavior?

A: Business resilient; nonpay cancellations modestly higher, watching tariff pressures; most revenue recurring, able to adjust business accordingly.

Q: Subscriber growth and market share?

A: Bullish on core DIFM, tightening DIY go-to-market, focusing on small business channel; bulk acquisitions supplemented dealer channel decline.