ADT Acquires its Largest Independent Dealer, Defenders
Exciting next step in ADT’s strategy to drive capital efficient growth; elimination of dealer margin reduces cost to acquire new customers and improves return on capital going forward
Direct control of greater portion of ecosystem accelerates rollout of innovative security and home automation services
Opportunistic transaction expected to be modestly beneficial to 2020 free cash flow before special items and to accelerate growth in subsequent years
“We’re excited to officially join forces with the impressive Defenders team after successfully partnering with them for nearly 22 years so that, as one company, we can create a unique and simplified platform,” said
Mr. DeVries continued, “Together, we will have greater marketing efficiency through unified brand messaging, enhanced control of the customer experience, and the ability to provide a full suite of innovative security and home automation products, including consumer financing, to a complementary geographic footprint. Over time, we also expect lower subscriber acquisition costs, an improved revenue payback period, and new account gains from the optimization of our combined ecosystem.”
“We have built our business by partnering with ADT to sell and install state-of-the-art security systems, helping to protect more than 2.2 million families through our best-in-class marketing team and expert knowledge of the industry,” said
“We are thrilled to join the ADT team,” said
Strategic and Financial Benefits of Transaction
- Enhances Customer Experience: Provides ability to drive a unified brand message and premium customer experience to the majority of ADT’s residential customers.
- Simplifies Operating Ecosystem: Establishes a single party focused on the customer experience and lifetime value, and reduces channel conflict and potential for customer confusion.
- Improves Marketing Prowess: Leverages Defenders’ strengths in customer acquisition to drive optimized spend across channels and enable more effective marketing messaging and customer segmentation.
- Increases Go to Market Efficiency: Significantly enhances ability to bring new initiatives to a broader customer base more quickly, including consumer financing, DIY, and innovative equipment and service offerings.
- Drives Capital Efficiency: Results in a more capital efficient ADT through the elimination of dealer “margin.” Expected to be modestly beneficial to 2020 net cash provided by operating activities and free cash flow before special items and to create synergies to further drive net cash provided by operating activities and free cash flow before special items in subsequent years.
Founded in 1998 and headquartered in
Citi served as the financial advisor to Defenders.
ADT is a leading provider of security, automation, and smart home solutions serving consumer and business customers through more than 200 locations, 9 monitoring centers, and the largest network of security professionals in
To provide investors with additional information in connection with our results as determined in accordance with generally accepted accounting principles in
Free Cash Flow
We believe that the presentation of Free Cash Flow is appropriate to provide additional information to investors about our ability to repay debt, make other investments, and pay dividends.
We define Free Cash Flow as cash flows from operating activities less cash outlays related to capital expenditures. We define capital expenditures to include purchases of property, plant, and equipment; subscriber system asset additions; and accounts purchased through our network of authorized dealers or third parties outside of our authorized dealer network. These items are subtracted from cash flows from operating activities because they represent long-term investments that are required for normal business activities.
Free Cash Flow adjusts for cash items that are ultimately within management’s discretion to direct, and therefore, may imply that there is less or more cash that is available than the most comparable GAAP measure. Free Cash Flow is not intended to represent residual cash flow for discretionary expenditures since debt repayment requirements and other non-discretionary expenditures are not deducted. These limitations are best addressed by using Free Cash Flow in combination with the cash flows as calculated in accordance with GAAP.
Free Cash Flow before special items
We define Free Cash Flow before special items as Free Cash Flow adjusted for payments related to (i) financing and consent fees, (ii) restructuring and integration, (iii) integration related capital expenditures, (iv) radio conversion costs, and (v) other payments or receipts that may mask the operating results or business trends of the Company. As a result, subject to the limitations described below, Free Cash Flow before special items is a useful measure of our cash available to repay debt, make other investments, and pay dividends.
Free Cash Flow before special items adjusts for cash items that are ultimately within management’s discretion to direct, and therefore, may imply that there is less or more cash that is available than the most comparable GAAP measure. Free Cash Flow before special items is not intended to represent residual cash flow for discretionary expenditures since debt repayment requirements and other non-discretionary expenditures are not deducted. These limitations are best addressed by using Free Cash Flow before special items in combination with the GAAP cash flow numbers.
ADT has made statements in this press release and other reports, filings, and other public written and verbal announcements that are forward-looking and therefore subject to risks and uncertainties. All statements, other than statements of historical fact, included in this document are, or could be, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are made in reliance on the safe harbor protections provided thereunder. These forward-looking statements relate to anticipated financial performance, management’s plans and objectives for future operations, business prospects, outcome of regulatory proceedings, market conditions and other matters. Any forward-looking statement made in this press release speaks only as of the date on which it is made. ADT undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. Forward-looking statements can be identified by various words such as “expects,” “intends,” “will,” “anticipates,” “believes,” “confident,” “continue,” “propose,” “seeks,” “could,” “may,” “should,” “estimates,” “forecasts,” “might,” “goals,” “objectives,” “targets,” “planned,” “projects,” and similar expressions. These forward-looking statements are based on management’s current beliefs and assumptions and on information currently available to management. ADT cautions that these statements are subject to risks and uncertainties, many of which are outside of ADT’s control, and could cause future events or results to be materially different from those stated or implied in this document, including among others, risk factors that are described in the Company’s Annual Report on Form 10-K and other filings with the
1 Based on ADT’s closing stock price of
Source: ADT Inc.