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What changed in ADT Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ADT Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+585 added−597 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-28)

Top changes in ADT Inc.'s 2024 10-K

585 paragraphs added · 597 removed · 458 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

84 edited+30 added−23 removed72 unchanged
Biggest changeIn December 2023, the Company and Google entered into an addendum to the Company’s existing agreement for using Google cloud services (the “Google Cloud Agreement Addendum”), pursuant to which Google has agreed to provide certain credits, discounts, and other incentives for use of the Google Cloud Platform to the Company, and the Company has committed to purchasing $200 million of Google Cloud Platform services over seven years (through December 2030), as discussed in Note 14 “Commitments and Contingencies” in the Notes to Consolidated Financial Statements. 7 State Farm Partnership In September 2022, we entered into a Securities Purchase Agreement, dated as of September 5, 2022, with State Farm (the “State Farm Securities Purchase Agreement”), pursuant to which we agreed to issue and sell in a private placement to State Farm, 133,333,333 shares of our Common Stock (the “State Farm Shares”) at a per share price of $9.00 for an aggregate purchase price of $1.2 billion (the “State Farm Strategic Investment”).
Biggest changeRefer to Note 13 “Commitments and Contingencies” in the Notes to Consolidated Financial Statements for more information. 7 State Farm Partnership In September 2022, we entered into a Securities Purchase Agreement, dated as of September 5, 2022, with State Farm (the “State Farm Securities Purchase Agreement”), pursuant to which we agreed to issue and sell in a private placement to State Farm, 133,333,333 shares of our Common Stock (the “State Farm Shares”) at a per share price of $9.00 for an aggregate purchase price of $1.2 billion (the “State Farm Strategic Investment”).
We offer our employees competitive compensation, benefits, and health and wellness programs, as well as training, networking, development resources, performance feedback, and coaching. In addition, our long-term equity compensation plans are intended to align management interests with those of our stockholders and to encourage the creation of long-term value.
We offer our employees competitive compensation, benefits, and health and wellness programs, as well as training, networking, development resources, coaching, and performance feedback. In addition, our long-term equity compensation plans are intended to align management interests with those of our stockholders and to encourage the creation of long-term value.
Sales and Distribution Channels We utilize a complementary mix of direct and indirect sales and distribution channels: • Direct Channel Our direct channel CSB customers are generated by direct response and other marketing efforts, general brand awareness, customer referrals, door-to-door activities, along with lead generation partners, and are supported by our internal sales force located in our national sales call centers as well as our nationwide network of field sales and service offices.
Sales and Distribution Channels We utilize a complementary mix of direct and indirect sales and distribution channels: • Direct Channel Our direct channel customers are generated by direct response and other marketing efforts, general brand awareness, customer referrals, door-to-door activities, along with lead generation partners, and are supported by our internal sales force located in our national sales call centers as well as our nationwide network of field sales and service offices.
Our monitoring centers are fully redundant, which means all monitoring operations can be automatically transferred to another monitoring center in case of an emergency such as fire, tornado, major interruption in telephone or computer service, or any other event affecting the functionality of one of our centers.
Our monitoring centers are fully redundant, which means all monitoring operations can be transferred to another monitoring center in case of an emergency such as fire, tornado, major interruption in telephone or computer service, or any other event affecting the functionality of one of our centers.
We are continuously monitoring global supply chain disruptions, and we do not currently anticipate any major interruptions in our supply chain in the near term. Intellectual Property Patents, trademarks, copyrights, and other proprietary rights are important to our business, and we continuously refine our intellectual property strategy to maintain and improve our competitive position.
We are continuously monitoring global supply chain disruptions, and we do not currently anticipate any major interruptions in our supply chain in the near term. 12 Intellectual Property Patents, trademarks, copyrights, and other proprietary rights are important to our business, and we continuously refine our intellectual property strategy to maintain and improve our competitive position.
KEY BUSINESS DEVELOPMENTS Commercial Divestiture On August 7, 2023, ADT, Iris Buyer LLC (“Iris Buyer”), a Delaware limited liability company and affiliate of GTCR, and, solely for certain purposes set forth in the Commercial Purchase Agreement (as defined below), Fire & Security Holdings, LLC (“F&S Holdings”), a Delaware limited liability company and an indirect, wholly owned subsidiary of ADT, entered into an Equity Purchase Agreement (the “Commercial Purchase Agreement”) pursuant to which GTCR agreed to acquire all of the issued and outstanding equity interests of F&S Holdings, which directly or indirectly held all of the issued and outstanding equity interests in the subsidiaries of ADT that operated ADT’s commercial business (the “Commercial Business”) (previously defined as the “Commercial Divestiture”).
Commercial Divestiture On August 7, 2023, ADT, Iris Buyer LLC (“Iris Buyer”), a Delaware limited liability company and affiliate of GTCR, and, solely for certain purposes set forth in the Commercial Purchase Agreement (as defined below), Fire & Security Holdings, LLC (“F&S Holdings”), a Delaware limited liability company and an indirect, wholly owned subsidiary of ADT, entered into an Equity Purchase Agreement (the “Commercial Purchase Agreement”) pursuant to which GTCR agreed to acquire all of the issued and outstanding equity interests of F&S Holdings, which directly or indirectly held all of the issued and outstanding equity interests in the subsidiaries of ADT that operated ADT’s commercial business (the “Commercial Business”) (previously defined as the “Commercial Divestiture”).
Our comprehensive interactive technology platform is intended to provide customers with a seamless experience through a common application across security, life safety, automation, and analytics, and integrate the user experience, customer service experience, and back-end support.
Our comprehensive 8 interactive technology platform is intended to provide customers with a seamless experience through a common application across security, life safety, automation, and analytics, and integrate the user experience, customer service experience, and back-end support.
We believe we are well positioned to compete with traditional and new competitors due to our focus on safety, security, convenience, and pricing; our nationwide team of sales consultants; our solid reputation for and expertise in providing reliable 12 security and monitoring services through our in-house network of redundant monitoring centers; our reliable product solutions; our highly skilled installation and service organization; and our partnerships with companies such as Google and State Farm.
We believe we are well positioned to compete with traditional and new competitors due to our focus on safety, security, and convenience; our nationwide team of sales consultants; our solid reputation for and expertise in providing reliable security and monitoring services through our in-house network of redundant monitoring centers; our reliable product solutions; our highly skilled installation and service organization; and our partnerships with companies such as Google and State Farm.
At the time of initial equipment installation, our CSB customers typically contract for both monitoring and maintenance services, which are generally governed by multi-year contracts.
At the time of initial equipment installation, our customers typically contract for both monitoring and maintenance services, which are generally governed by multi-year contracts.
The strength of our brand is based upon a long-standing record of delivering high-quality, reliable products and services; expertise in system sales, installation, and monitoring; and superior customer care, all driven by our industry-leading experience and knowledge. As of December 31, 2023, we had approximately 6.4 million security monitoring service subscribers.
The strength of our brand is based upon a long-standing record of delivering high-quality, reliable products and services; expertise in system sales, installation, and monitoring; and superior customer care, all driven by our industry-leading experience and knowledge. As of December 31, 2024, we had approximately 6.4 million security monitoring service subscribers.
Royalty income is included in other income (expense) and was not material during 2023. In addition, the Company and Iris Buyer agreed to customary employee non-solicitation and no-hire restrictions with respect to the other party’s employees for a period of two years from the closing.
Royalty income is included in other income (expense) and was not material during 2024 and 2023. 6 In addition, the Company and Iris Buyer agreed to customary employee non-solicitation and no-hire restrictions with respect to the other party’s employees for a period of two years from the closing.
Our business is also subject to requirements, codes, and standards imposed by local government jurisdictions, as well as various insurance, approval and listing, and standards organizations. We maintain the relevant and necessary licenses related to the provision of installation of security and solar systems and related services in the jurisdictions in which we operate.
Our business is also subject to requirements, codes, and standards imposed by local government jurisdictions, as well as various insurance, approval and listing, and standards organizations. We maintain the 13 relevant and necessary licenses related to the provision of installation of security systems and related services in the jurisdictions in which we operate.
As previously disclosed, in November 2023, we announced a plan to streamline the solar business to focus on the top performing markets and rationalize the overhead and infrastructure of the business. As part of this plan, we closed a significant number of branches that operated the solar business along with making associated headcount reductions.
In November 2023, we announced a plan to streamline the Solar Business to focus on the top performing markets and rationalize the overhead and infrastructure of the business. As part of this plan, we closed a significant number of branches that operated the Solar Business along with making associated headcount reductions.
OUR MARKETS CSB The residential and small business security and automation market primarily consists of owners and renters of single-family homes or apartments and small businesses owners. The market is generally characterized by a large and homogeneous customer base with less complex system installations.
OUR MARKET The residential and small business security and automation market primarily consists of owners and renters of single-family homes or apartments and small businesses owners. The market is generally characterized by a large and homogeneous customer base with less complex system installations.
TABLE OF CONTENTS • Company Overview • Key Business Developments • Segment and Geographic Information • Products and Services • Our Markets • Competition • Resources Material to our Business • Seasonality • Government Regulation and Other Regulatory Matters • Human Capital and ESG • Available Information COMPANY OVERVIEW Our Business ADT Inc., together with its wholly-owned subsidiaries (collectively, the “Company”, “we”, “our”, “us”, and “ADT”), is a leading provider of security, interactive, and smart home solutions serving residential and small business customers in the United States (“U.S.”).
TABLE OF CONTENTS • Company Overview • Key Business Developments • Segment and Geographic Information • Products and Services • Our Market • Competition • Resources Material to our Business • Seasonality • Government Regulation and Other Regulatory Matters • Human Capital and Sustainability • Available Information COMPANY OVERVIEW Our Business ADT Inc., together with its wholly-owned subsidiaries (collectively, the “Company”, “we”, “our”, “us”, and “ADT”), is a leading provider of security, interactive, and smart home solutions serving residential and small business customers in the United States (“U.S.”).
In the first quarter of 2023, we launched our proprietary ADT+ app for our self setup line of DIY smart home security products, including Google Nest offerings, which allows customers to easily access and control their ADT devices through an intuitive app experience.
In the first quarter of 2023, we launched our proprietary ADT+ app for our self set-up line of DIY smart home security products, including Google Nest offerings, which allows customers to easily access and control their ADT devices through an intuitive app experience.
We believe our principal competitors are: Residential (Pro-Installation) Residential (Self-Installation) Small Business Vivint Smart Home, Inc (a subsidiary of NRG) Ring Smart Security System by Amazon Vivint Smart Home, Inc (a subsidiary of NRG) Xfinity Home Security (a division of Comcast Corporation) SimpliSafe Home Security Systems Ring Smart Security System by Amazon Brinks Home Security (operating brand of Monitronics International, Inc.) HomeKit by Apple SimpliSafe Home Security Systems We also compete with point solutions (products with one intended application) and home automation-only systems.
We believe our principal competitors are: Residential (Pro-Installation) Residential (Self-Installation) Small Business Vivint Smart Home, Inc (a subsidiary of NRG) Ring Smart Security System by Amazon Vivint Smart Home, Inc (a subsidiary of NRG) Xfinity Home Security (a division of Comcast Corporation) SimpliSafe Home Security Systems Ring Smart Security System by Amazon Brinks Home Security (operating brand of Monitronics International, Inc.) Wyze Home Monitoring SimpliSafe Home Security Systems We also compete with point solutions (products with one intended application) and home automation-only systems.
Our collection and use of personal information and communications with current and potential customers are regulated by federal and state laws, which include restrictions on the use of telemarketing, auto-dialing technology, email marketing, and text communications; restrictions on the sale, sharing, and use of personal information; as well as requirements for the protection of thereof and actions to be taken in the event of a loss with respect thereto.
Our collection and use of personal information and communications with current and potential customers are regulated by federal and state laws, which include restrictions on the use of telemarketing, auto-dialing technology, email marketing, and text communications; restrictions on the sale, sharing, and use of personal information; as well as requirements for the protection thereof and actions to be taken in the event of a breach of personal information.
Additionally, we rely extensively on telecommunications service providers, which are regulated in the U.S. by the Federal Communications Commission (“FCC”) and state public utilities commissions, to communicate signals as part of the functionality and monitoring of security and solar systems. Our security business is subject to various state and local measures aimed at reducing false alarms.
Additionally, we rely extensively on telecommunications service providers, which are regulated in the U.S. by the Federal Communications Commission (“FCC”), to communicate signals as part of the functionality and monitoring of security systems. Our security business is subject to various state and local measures aimed at reducing false alarms.
In December 2023, the Company and Google amended the Google Investor Rights Agreement to extend the Google Lock-up Period through June 2025, or earlier if certain conditions occur (see Note 11 “Equity” to our Notes to Consolidated Financial Statements).
In December 2023, the Company and Google amended the Google Investor Rights Agreement to extend the Google Lock-up Period through June 2025, or earlier if certain conditions occur (see Note 10 “Equity” in the Notes to Consolidated Financial Statements).
Our security offerings are 8 designed to detect intrusion; control access; sense movement, smoke, fire, carbon monoxide, flooding, temperature, and other environmental conditions and hazards; and address personal medical emergencies such as injuries or unanticipated falls.
Our security offerings are designed to detect intrusion; control access; sense movement, smoke, fire, carbon monoxide, leaks, temperature, and other environmental conditions and hazards; and address personal medical emergencies such as injuries or unanticipated falls.
We have seen an increase in interest in smart home offerings and other mobile technology applications, which we believe is attributable to a variety of factors, including advancements in technology, younger generations of consumers, and shifts to de-urbanization.
We have seen increased interest in smart home offerings and other mobile technology applications, which we believe is attributable to a variety of factors, including advancements in technology, younger generations of consumers, and shifts to de-urbanization.
We also have several affinity partnerships with organizations that promote our services to their customer bases. In addition, we market through social media influencers and celebrity spokespersons representing the ADT brand. In addition to Google and State Farm, our strategic partnerships and alliances include home builders, property management firms, homeowners’ associations, financial institutions, retailers, public utilities, and software service providers.
We also have several affinity partnerships with organizations that promote our services to their customer bases, and we market through social media influencers and celebrity spokespersons representing the ADT brand. In addition to Google and State Farm, our strategic partnerships and alliances include dealers, home builders, property management firms, homeowners’ associations, financial institutions, retailers, first responders, and software service providers.
We typically utilize a highly structured sales approach, which includes, in addition to the structured model sales call, daily monitoring of sales activity and effectiveness metrics and regular coaching by our sales management teams. • Indirect Channel Our indirect channel CSB customers are generated mainly through our network of agreements with third-party independent dealers who sell and install equipment and ADT Authorized Dealer-branded monitoring, interactive, and other services to residential end users (the “ADT Authorized Dealer Program”).
We generally utilize a highly structured sales approach, which includes a structured model sales call, daily monitoring of sales activity and effectiveness metrics, and regular coaching by our sales management teams. 10 • Indirect Channel Our indirect channel customers are generated mainly through our network of agreements with third-party independent dealers who sell and install equipment and ADT Authorized Dealer-branded monitoring, interactive, and other services to residential end users (the “ADT Authorized Dealer Program”).
Changes in laws and regulations can positively and negatively affect our operations and impact the manner in which we conduct our business. Licensing and Permitting Most states in which we operate have employee and/or business licensing laws directed specifically toward professional installation and monitoring of security devices, as well as solar installations.
Changes in laws and regulations can positively and negatively affect our operations and impact the manner in which we conduct our business. Licensing and Permitting Most states in which we operate have employee and/or business licensing laws directed specifically toward professional installation and monitoring of security devices.
However, other factors such as the level of marketing expense, relevant promotional offers, and timing of third-party account purchases can impact these trends. Further, we may see increased servicing costs related to more alarm signals and customer service requests as a result of inclement weather-related incidents.
However, other factors such as the level of marketing expense, relevant promotional offers, and timing of third-party account purchases can impact these trends. Further, we may see increased servicing costs or reductions in revenue related to more alarm signals, customer service requests, and customer credits as a result of inclement weather-related incidents.
Additionally, our System Monitoring and Response Technology (“SMART”) monitoring solution differentiates our offerings, aims to result in faster and higher-quality responses, and is expected to reduce annual false alarms and customer care calls. ADT SMART monitoring can deliver alarms to connected and participating 911 centers faster than traditional voice handling speeds.
Additionally, our System Monitoring and Response Technology (“SMART”) monitoring solution aims to result in faster and higher-quality alarm responses and is expected to reduce annual false alarms and customer care calls. Our SMART monitoring differentiates our offerings by delivering alarms to connected and participating 911 centers faster than traditional voice handling speeds.
Occupational Safety and Health Act (“OSHA”) and equivalent state laws. Failure to comply with applicable OSHA regulations or other federal, state, and local laws and regulations, even if no work-related serious injury or death occurs, may result in civil or criminal enforcement and substantial penalties, significant capital expenditures, or suspension or limitation of operations.
Failure to comply with applicable OSHA regulations or other federal, state, and local laws and regulations, even if no work-related serious injury or death occurs, may result in civil or criminal enforcement and substantial penalties, significant capital expenditures, or suspension or limitation of operations.
The Commercial Divestiture supports our strategic vision and strengthens our financial profile, and we used net proceeds of approximately $1,518 million to reduce our debt. Refer to Note 8 “Debt” in the Notes to Consolidated Financial Statements in Item 15 “Exhibit and Financial Statement Schedules” for further information.
The Commercial Divestiture supported our strategic vision and strengthened our financial profile, and we used net proceeds of approximately $1,518 million to reduce our debt. Refer to Note 7 “Debt” in the Notes to Consolidated Financial Statements in Item 15 “Exhibit and Financial Statement Schedules” for further information.
Upon the Closing, we received $100 million of such commitment from State Farm, which is restricted until we use the funds for investment, as agreed upon with State Farm, in accordance with the State Farm Development Agreement (the “Opportunity Fund”), of which we used approximately $11 million during 2023.
Upon the Closing, we received $100 million of such commitment from State Farm, which is restricted until we use the funds for investment, as agreed upon with State Farm, in accordance with the State Farm Development Agreement (the “Opportunity Fund”).
The Company and GTCR entered into an agreement granting GTCR a license to continue to use the ADT brand and other Company trademarks for a period of twelve months to transition from Company branding (the “Brand License”).
The Company and GTCR entered into an agreement granting GTCR a license to continue to use the ADT brand and other Company trademarks for a period of twelve months to transition from Company branding (the “Brand License”), which expired during the fourth quarter of 2024.
The Company and Iris Buyer also agreed to a non-competition period of five years from the closing whereby, subject to certain exceptions, (a) ADT and its subsidiaries will not directly or indirectly sell or service in the United States (or any of its territories): (i) security, building automation, access control, retail store performance, electronic article surveillance, or cash processing/ATM security equipment or services for non-residential premises over 10,000 square feet, (ii) nurse call solutions, or (iii) fire detection or fire suppression products or services for non-residential premises of any size; and (b) F&S Holdings and its subsidiaries will not directly or indirectly sell or service in the United States (or any of its territories) or Canada, among other items: (i) security, building automation or access control products or services for any non-residential premises under 10,000 square feet or any residential premises, (ii) personal emergency response systems or mobile safety solutions (other than nurse call solutions), or (iii) fire detection products or services for residential premises. 6 ADT Solar Exit In December 2021, we entered the residential solar market with the ADT Solar acquisition, which allowed us to provide customers with solar and energy storage solutions, energy efficiency upgrades, and roofing services.
The Company and Iris Buyer also agreed to a non-competition period of five years from the closing whereby, subject to certain exceptions, (a) ADT and its subsidiaries will not directly or indirectly sell or service in the United States (or any of its territories): (i) security, building automation, access control, retail store performance, electronic article surveillance, or cash processing/ATM security equipment or services for non-residential premises over 10,000 square feet, (ii) nurse call solutions, or (iii) fire detection or fire suppression products or services for non-residential premises of any size; and (b) F&S Holdings and its subsidiaries will not directly or indirectly sell or service in the United States (or any of its territories) or Canada, among other items: (i) security, building automation or access control products or services for any non-residential premises under 10,000 square feet or any residential premises, (ii) personal emergency response systems or mobile safety solutions (other than nurse call solutions), or (iii) fire detection products or services for residential premises.
Additionally, with our recent focus on DIY offerings such as our ADT Self Setup product suite, we may face additional competition in the DIY space as we position ourselves to grow our market share.
Additionally, with our recent focus on DIY offerings, we may face additional competition in the DIY space as we position ourselves to grow our market share.
As previously disclosed, in January 2024, we announced that we are exiting the residential solar market. 9 Monitoring Centers As of December 31, 2023, we operated six monitoring centers located throughout the U.S. and listed by Underwriters Laboratories (“UL”) in order to provide 24/7 year-round professional monitoring services to our customers, including our monitoring centers that also provide outsourced monitoring services for other security companies.
Monitoring Centers As of December 31, 2024, we operated six monitoring centers located throughout the U.S. and listed by Underwriters Laboratories (“UL”) in order to provide 24/7 year-round professional monitoring services to our customers, including our monitoring centers that also provide outsourced monitoring services for other security companies.
During 2023, we also launched an Alarm Scoring pilot, which offers a uniform and reliable approach for categorizing alarm severity levels, enhances the accuracy of assessing potential life or property threats, and gives first responders precise and crucial alarm data for improved emergency responses.
Additionally, our alarm scoring program, which offers a uniform and reliable approach for categorizing alarm severity levels, enhances the accuracy of assessing potential life or property threats and gives first responders precise and crucial alarm data for improved emergency responses.
Monitoring services are typically billed monthly or quarterly in advance, and more than 80% of our residential customers pay us these fees through automated payment methods, with new residential customers generally opting for these payment methods.
Customers are also generally obligated to make monthly payments for monitoring services for the remainder of the initial contract term. Monitoring services are typically billed monthly or quarterly in advance, and more than 80% of our residential customers pay us these fees through automated payment methods, with new residential customers generally opting for these payment methods.
The traditional residential and small business security markets in the U.S. remain highly competitive and fragmented, with a low number of major companies and thousands of smaller regional and local companies, which is primarily the result of relatively low barriers to entry in local geographies and the availability of companies providing outsourced monitoring services but not maintaining the customer relationship.
Traditional residential and small business security markets in the U.S. remain highly competitive and fragmented, with several major companies; many smaller national, local, and regional companies; and an increasing number of new entrants, which is primarily the result of relatively low barriers to entry and the availability of companies providing outsourced monitoring services without maintaining the customer relationship.
We have also agreed to a covenant not to assert a claim against the Commercial Business for infringement of the Company's patents as of the Commercial Divestiture for products and services that were used in the Commercial Business prior to the Commercial Divestiture, and has provided the Commercial Business with a paid-up, irrevocable, non-assignable (with limited exceptions) license to continue to use certain software and other Company intellectual property in the same manner. 13 SEASONALITY Our residential security and home automation business has historically experienced a certain level of seasonality primarily as a result of fluctuations in the housing market.
We have also agreed to a covenant not to assert a claim against the Commercial Business for infringement of the Company's patents as of the Commercial Divestiture for products and services that were used in the Commercial Business prior to the Commercial Divestiture, and have provided the Commercial Business with a paid-up, irrevocable, non-assignable (with limited exceptions) license to continue to use certain software and other Company intellectual property in the same manner.
As opportunities arise, we have in the past engaged, and we may continue to engage, in selective third-party account purchases, which typically involve the purchase of a set of customer accounts from other security service providers. As of December 31, 2023, our network of authorized dealers consisted of approximately 130 authorized dealers operating across the U.S.
As opportunities arise, we may engage in selective third-party account purchases, which typically involve the bulk purchase of customer accounts from other security service providers. As of December 31, 2024, our network of authorized dealers consisted of approximately 140 authorized dealers operating across the U.S.
Our BERGs also participate in various business initiatives; and executives and officers from across the Company leverage their time, networks, and resources to support BERG initiatives and projects. To support BERG community advocacy and outreach, each BERG is granted a small budget to donate to nonprofit organizations that align with their missions.
Executives and officers from across the Company leverage their time, networks, and resources to support BERG initiatives and projects. To support BERG community advocacy and outreach, each BERG is granted a small budget to donate to nonprofit organizations that align with their mission and our corporate social responsibility efforts.
In addition, we granted the Commercial Business a license to continue to use the ADT brand and other Company trademarks for a period of twelve months to transition from Company branding (the “Brand License”).
In connection with the Commercial Divestiture, we granted the Commercial Business a license to continue to use the ADT brand and other Company trademarks for a period of twelve months to transition from Company branding (the “Brand License”), which expired during the fourth quarter of 2024.
The use of credit reporting and scoring and offering financing options to our residential customers is subject to federal and state laws, including the federal Fair Credit Reporting Act, which limit the use of consumer credit reports, prohibit discrimination against protected classes when offering or granting credit, and require certain disclosures to customers in the event that we take an adverse action based on a consumer credit report. 14 We provide some residential customers the option of paying us up-front charges in installments and certain other customers the option of using third-party financing arrangements, all of which are subject to federal and state laws regulating consumer finance.
The use of credit reporting and scoring and offering financing options to our residential customers is subject to federal and state laws, including the federal Fair Credit Reporting Act, which limit the use of consumer credit reports, prohibit discrimination against protected classes when offering or granting credit, and require certain disclosures to customers in the event that we take an adverse action based on a consumer credit report.
Many of our residential and small business customers are driven to purchase monitored security and automation services as a result of moving to a new location; a perceived or actual increase in crime or life safety concerns in their neighborhood; significant events such as the birth of a child or the opening of a new business; or incentives provided by insurance carriers that may offer lower insurance premium rates if a security system is installed or may require that a system be installed as a condition of coverage. 11 We also seek opportunities to leverage our brand name, our experience in security and smart home solutions, and our high degree of trust among our customer base to pursue new customers in complementary markets such as personal on-the-go security and safety.
Many of our residential and small business customers are driven to purchase monitored security and automation services as a result of moving to a new location; a perceived or actual increase in crime or life safety concerns in their neighborhood; significant events such as the birth of a child or the opening of a new business; or incentives provided by insurance carriers that may offer lower insurance premium rates if a security system is installed or may require that a system be installed as a condition of coverage.
Further, we expanded our talent management review practice in 2023 with leadership and advancement evaluations, as well as succession planning for our Executive Leadership Team (“ELT”) roles reporting to the CEO. Inclusive Diversity and Belonging (“IDB”) We are committed to building and sustaining a culture of inclusive diversity and deliberately advancing the maturity and effectiveness of our practices.
Our annual leadership talent management review practice assesses overall performance and potential and includes succession planning for our Executive Leadership Team (“ELT”) roles reporting to the CEO. Inclusive Diversity and Belonging (“IDB”) We are committed to building and sustaining a culture of inclusive diversity and deliberately advancing the maturity and effectiveness of our practices.
Further, subject to certain carve-outs, the Company has agreed to exclusively sell Google Devices and Services to its customers. In September 2020, we issued and sold 54,744,525 shares of Class B Common Stock, for an aggregate purchase price of $450 million, to Google in a private placement pursuant to a securities purchase agreement dated July 31, 2020.
In September 2020, we issued and sold 54,744,525 shares of Class B Common Stock, for an aggregate purchase price of $450 million, to Google in a private placement pursuant to a securities purchase agreement dated July 31, 2020.
Our EHS management system includes expectations for compliance, accountability, sustainability, and continuous improvement to foster a culture of safety that enables our employees to minimize risk and to understand and follow safety rules, as well as to identify, avoid, and correct unsafe actions, behaviors, or situations. 16 Environmental We are committed to reducing our environmental impact by promoting environmental stewardship throughout our organization, and we continuously strive to improve our carbon footprint.
Our EHS management system includes expectations for compliance, accountability, sustainability, and continuous improvement to foster a culture of safety that enables our employees to minimize risk and to understand and follow safety rules, as well as to identify, avoid, and correct unsafe actions, behaviors, or situations.
ADT Inc. is majority-owned by Prime Security Services TopCo (ML), L.P., which is majority-owned by Prime Security Services TopCo Parent, L.P. (“Ultimate Parent”). Ultimate Parent is ultimately majority-owned by Apollo Investment Fund VIII, L.P. and its related funds that are directly or indirectly managed by affiliates of Apollo.
(“Ultimate Parent”). Ultimate Parent is ultimately majority-owned by Apollo Investment Fund VIII, L.P. and its related funds that are directly or indirectly managed by affiliates of Apollo Global Management, Inc. (together with its subsidiaries and affiliates, “Apollo”).
Our goal is to maximize customer lifetime value for both new and existing customers by (i) continuing to evaluate our pricing and product offerings; (ii) managing costs and service strategies to provide enhanced value; (iii) upgrading existing customers to our interactive services, internet protocol (“IP”) video solutions, or other upgraded solutions where desirable; (iv) offering various cross-selling and bundling initiatives; and (v) achieving long customer tenure.
Our goal is to maximize customer lifetime value for both new and existing customers by (i) continuing to evaluate our pricing and product offerings; (ii) managing costs and service strategies to provide enhanced value; (iii) upgrading existing customers to our interactive services, internet protocol (“IP”) video solutions, or other upgraded solutions where desirable; (iv) offering various bundling initiatives; and (v) achieving long customer tenure. 11 COMPETITION Our approach to competition is to emphasize the quality and reputation of our offerings and industry-leading brand, our superior customer service, unique product and service offerings, our network of customer support and monitoring centers, commitment to consumer privacy, and knowledge of customer needs.
These laws require certain mandatory consumer disclosures and, in some cases, limit our ability to impose certain fees and charges. In addition, some jurisdictions require us to register or obtain licenses in order to make installment contract or third-party financing options available to our customers. Labor and Employment Our operations are subject to regulation under the U.S.
In addition, some jurisdictions require us to register or obtain licenses in order to make installment contract or third-party financing options available to our customers. Labor and Employment Our operations are subject to regulation under the U.S. Occupational Safety and Health Act (“OSHA”) and equivalent state laws.
Many jurisdictions have laws requiring that security systems for certain buildings be monitored by UL-listed centers, and in some instances, a UL listing is required by insurers of certain customers as a condition of insurance coverage. In addition, we implemented certain work from home actions, including for a majority of our monitoring center professionals, in compliance with UL work-from-home standards.
Many jurisdictions have laws requiring that security systems for certain buildings be monitored by UL-listed centers, and in some instances, a UL listing is required by insurers of certain customers as a condition of insurance 9 coverage.
Field solution advisors complete comprehensive centralized training prior to conducting customer sales presentations, as well as participate in ongoing training in support of new offerings.
Our field solution advisors typically undergo an in-depth screening process prior to hire, complete comprehensive centralized training prior to conducting customer sales presentations, and participate in ongoing training in support of new offerings.
Sales to most CSB customers typically require us to make an upfront investment related to installation costs (such as labor, commissions, equipment, and overhead), which we recover through upfront fees charged at the time of installation and recurring monthly revenue generated in future years.
Generally, a significant upfront investment is required to acquire new subscribers related to installation costs (such as labor, commissions, equipment, and overhead), which we recover through upfront fees charged at the time of installation and recurring monthly revenue generated in future years.
Each of the $150 million segments of the Google Success Funds will be triggered in three equal tranches, respectively, subject to the attainment of certain milestones. During 2023, we received approximately $40 million of the Google Success Funds for certain joint marketing expenses incurred by the Company.
Each of the $150 million segments of the Google Success Funds will be triggered in three equal tranches, respectively, subject to the attainment of certain milestones.
Our innovative virtual support program (the “Virtual Assistance Program”), which delivers a scalable, cost-efficient means of servicing our CSB customers through live video streaming with our skilled technicians to troubleshoot and resolve service issues.
Our innovative remote assistance program (the “Remote Assistance Program”) delivers a scalable, cost-efficient means of servicing our customers through live video streaming with our skilled technicians to troubleshoot and resolve service issues as well as remote programming and installation support for new DIY systems, add-ons, and resale reactivations.
We are committed to working to ensure all ADT employees uphold our core Company values of trust, collaboration, service, and innovation. This begins with the Code which describes our commitment to our customers, investors, communities, and each other. The Code outlines employee expectations and helps foster a culture of integrity.
This begins with the Code, which describes our commitment to our customers, investors, communities, and each other. The Code outlines employee expectations and helps foster a culture of integrity.
Through financial contributions and in-kind product donations of smart security systems, ADT can make a difference for these organizations. In addition, ADT employees volunteer for activities in their communities such as for block-beautification events and mentoring programs. ADT also supports a variety of nonprofits through volunteerism, corporate philanthropy, and in-kind product donations.
In addition, ADT employees volunteer for activities in their communities such as for block-beautification events and mentoring programs. ADT also supports a variety of nonprofits through volunteerism, corporate philanthropy, and in-kind product donations. Governance ADT prioritizes strong corporate governance, believing that this is the foundation for financial integrity and superior performance.
During the fourth quarter of 2023, we began our phased rollout of our ADT+ app for professional installation along with a new interactive and hardware lineup.
During the fourth quarter of 2023, we began our phased rollout of our ADT+ app for professional installation along with a new interactive and hardware lineup. During 2024, the Company continued its phased rollout of the ADT+ platform across the country. Customers can now take advantage of next generation hardware and technology through our proprietary app.
Talent diversity starts with the recruitment and hiring process and continues through the learning, development, advancement, and retention of employees with wide-ranging backgrounds and experiences. We highly value our employees’ diversity; and we aim to promote diversity awareness in all our talent management processes.
Our culture aims to recognize and embrace all forms of diversity in order to drive innovation and growth. Talent diversity starts with the recruitment and hiring process and continues through the learning, development, advancement, and retention of employees with wide-ranging backgrounds and experiences.
We employ waste recycling and diversion programs and continue to monitor waste levels and reduce unnecessary trash hauls. We also continually explore methods to reduce greenhouse gases from our motor vehicle fleet, including through the purchase of newer vehicle models having greater fuel efficiency, the use of hybrid vehicles, and virtual service and installation.
We also continually explore methods to reduce greenhouse gases from our motor vehicle fleet, including through the purchase of newer vehicle models having greater fuel efficiency, the use of hybrid vehicles, and our Remote Assistance Program that reduces truck rolls.
Talent Recruitment and Management Our success in attracting, retaining, and developing a strong, dedicated, and diverse workforce depends in large part on our hiring and retaining top talent across the entire organization, especially regarding our management team and employees who interface directly with our customers, who make up most of our organization.
Talent Recruitment and Management Our success in attracting, retaining, and developing a strong, dedicated, and diverse workforce largely depends on the hiring and retaining of top talent across the entire organization, specifically our senior management team, technology and product talent, and customer-facing employees.
Commercial TSA fees charged to the Commercial Business represent charges for internal labor as well as certain third-party costs identified in connection with providing such services. Income from the Commercial TSA is recognized in other income (expense), and expenses incurred by the Company to support the transition are recorded based on the nature of the expense.
Commercial TSA fees charged to the Commercial Business represent charges for internal labor as well as certain third-party costs identified in connection with providing such services.
Social Our Corporate Social Responsibility program is evolving to better align with our corporate strategy of offering safe, smart, and sustainable solutions. To that end, we are focusing on community programs that aim to create spaces where people feel safe. By supporting ‘safe places,’ we are helping provide preventative solutions with a broad impact.
To that end, we are focusing on community programs that aim to create spaces where people feel safe. By supporting ‘safe places,’ we are helping provide preventative solutions with a broad impact. Through financial contributions and in-kind product donations of smart security systems, ADT can make a difference for these organizations.
Employees enrolled in our self-insured medical plan are eligible for cash incentives by completing certain well-being activities. Our Environmental, Health, and Safety (“EHS”) vision is to build a culture that promotes safe behaviors on each task, every day, to achieve zero incidents and enhance employee wellness, and to minimize our environmental impact.
In 2024, we enhanced our financial well-being programs through our vendor partners, including money coaching, identity protection, and mortgage referral programs. Our Environmental, Health, and Safety (“EHS”) vision is to build a culture that promotes safe behaviors on each task, every day, to achieve zero incidents and enhance employee wellness, and to minimize our environmental impact.
In January 2018, we completed an initial public offering (“IPO”), and our common stock, par value $0.01 per share (“Common Stock”), began trading on the New York Stock Exchange (“NYSE”) under the symbol “ADT.” 5 As of December 31, 2023, Apollo owned approximately 54%, State Farm owned approximately 14%, and Google owned approximately 6% of our outstanding common stock, including shares of Class B common stock, par value $0.01 per share (“Class B Common Stock”) (on an as-converted basis) and unvested shares of common stock.
As of December 31, 2024, Apollo owned approximately 40%, State Farm owned approximately 15%, and Google owned approximately 6% of our outstanding Common Stock, including shares of Class B common stock, par value $0.01 per share (“Class B Common Stock”) (on an as-converted basis), which is owned exclusively by Google, and unvested shares of Common Stock.
Amounts are paid through the Opportunity Fund and were not material during 2023. SEGMENT AND GEOGRAPHIC INFORMATION We evaluate and report our segment information based on the manner in which our Chief Executive Officer (“CEO”), who is the chief operating decision maker, evaluates performance and allocates resources.
Refer to Note 10 “Equity” and Note 16 “Related Party Transactions” in the Notes to Consolidated Financial Statements for more information. SEGMENT AND GEOGRAPHIC INFORMATION We evaluate and report our segment information based on the manner in which our Chief Executive Officer (“CEO”), who is the chief operating decision maker (“CODM”), evaluates performance and allocates resources.
Field and Call Center Operations Our field and call center operations comprise a nationwide network of sales and service offices, call centers, and support facilities across the U.S. We provide ongoing training to our field and call center employees, as well as our authorized dealers, and we continually measure and monitor customer satisfaction-oriented metrics across each customer touch point.
We provide ongoing training to our field and call center employees, as well as our authorized dealers, and we continually measure and monitor customer satisfaction-oriented metrics across each customer touch point. Our objective is to provide a differentiated service experience by resolving customer issues remotely whenever possible and scheduling installation and service visits at times convenient for the customer.
In some cases, customers believe that these offerings replace the need for full-scale security systems. While we continue to see a shift toward self-installation offerings, certain third-party professional installers also offer professional installation alternatives.
In some cases, customers believe that these offerings replace the need for full-scale security systems. Further, third-party installation companies often partner with device providers to offer professional installation alternatives for these point solutions and other DIY systems.
We are also assessing environmental risk on our operations as one aspect of our enterprise risk management review process and plan to continue to do so on an ongoing basis. We have implemented our ADT Environmental Absolutes framework, which represents our focus on complying with environmental requirements, addressing proper disposal of waste streams, and promoting recycling of materials.
We have implemented our ADT Environmental Absolutes framework, which represents our focus on complying with environmental requirements, addressing proper disposal of waste streams, and promoting recycling of materials. We employ waste recycling and diversion programs and continue to monitor waste levels and reduce unnecessary trash hauls.
Our Virtual Assistance Program aims to lower our carbon footprint by avoiding thousands of vehicle trips each day. In addition, we have focused on efficiency improvements in lighting, air handling, and data operations while continuing to rationalize our real estate portfolio and through the utilization of renewable energy.
In addition, we have focused on efficiency improvements in lighting, air handling, and data operations as well as through the utilization of renewable energy while continuing to rationalize our real estate portfolio. Social Our Corporate Social Responsibility program is evolving to better align with our corporate strategy of offering safe, smart, and sustainable solutions.
These offerings provide customers with more options for receiving certain services that best fit their lifestyles while reducing the cost for us to provide these services and lowering our carbon footprint by avoiding thousands of vehicle trips each day.
These offerings provide customers with more options for receiving services that best fit their lifestyles while reducing the cost for us to provide these services and lowering our carbon footprint through the reduction of truck rolls. Our customer care agents provide support 24 hours a day on a year-round basis to ensure service requests are handled promptly and professionally.
Driven by consumer preferences, we also market to customers through retail and e-commerce channels, and we have been supplementing existing channels to meet consumers where they prefer to shop. 10 Our direct channel Solar customers are generated primarily through third-party lead partners, owned media, an internal sales force, and referrals from our customers, which are supported by our internal call center and field sales consultants.
Driven by consumer preferences, we also market to customers through retail and e-commerce channels, and we have been supplementing existing channels to meet consumers where they prefer to shop.
On January 19, 2024, after a strategic review of the business and continued macroeconomic and industry pressures, the Company’s Board of Directors (as defined below) approved a plan to fully exit the residential solar business, which may include the transition of components of the business to other parties. The ADT Solar Exit is expected to be completed during 2024.
In January 2024, after a strategic review of the business and continued macroeconomic and industry pressures, the Company’s board of directors (the “Board of Directors”) approved a plan to fully exit the residential Solar Business; and as of June 30, 2024, substantially all operations of the Solar Business had ceased.
The standard contract terms for CSB customers are two, three, or five years, with automatic renewals for successive 30-day periods, unless canceled by either party. Customers are typically charged an upfront fee, which qualifying customers can pay over the course of the contract.
The standard contract terms are two, three, or five years, with automatic renewals for successive 30-day periods for residential customers and annual periods for small business customers, unless canceled by either party. We may also offer month-to-month contracts depending on the circumstance.
In 2023, we introduced the ADT WiFi Fix app, which allows virtual customer service agents to diagnose and address any WiFi issues impacting customers’ ADT equipment or other devices.
We are also exploring and implementing AI tools that are aimed to improve and automate certain processes for our call center agents and customers. Additionally, our ADT WiFi Fix app allows remote customer service agents to diagnose and address any WiFi issues impacting customers’ ADT equipment or other devices.
Deliberate growth and development of our BERGs is central to engaging and educating our employees about IDB. Employee Well-being, Health, and Safety We devote significant resources to team members’ wellness, health, and safety. We continue to provide an annual well-being program available to all team members, which includes a variety of education and coaching programs.
Deliberate growth and development of our BERGs is central to the engagement, retention, and development of our employees. Employee Well-being, Health, and Safety We devote significant resources to employees’ wellness, health, and safety.
We continue to deploy talent using a mix of hybrid, remote, and in-person work arrangements (based on role) to support talent attraction and retention in alignment with business 15 needs. We made significant enhancements to our employee listening platform in 2023, designed to help ensure our environment promotes high levels of employee engagement and retention.
We continue to deploy talent using a mix of hybrid, remote, and in-person work arrangements, based on the nature of the role, to support talent attraction and retention in alignment with business needs. At our headquarters, we implemented a hybrid on-site work model requiring employees covered under this model to work in-office a minimum number of days per week.
Governance ADT prioritizes strong corporate governance, believing that this is the foundation for financial integrity and superior performance. Our board of directors (the “Board of Directors”) is responsible for the oversight of our business and approves our operating values which are reflected in our Code of Conduct (the “Code”).
Our Board of Directors is responsible for the oversight of our business and approves our operating values which are reflected in our Code of Conduct (the “Code”). 16 We are committed to working to ensure all ADT employees uphold our core Company values of trust, collaboration, service, and innovation.
As discussed below, on October 2, 2023, we completed the divestiture of our Commercial Business, which provided security and other solutions to commercial customers; and in January 2024, we announced our exit from the residential solar business, which provided residential solar and energy storage solutions since the acquisition of ADT Solar in 2021.
As discussed below, on October 2, 2023, we completed the divestiture of our former Commercial Business; and as of June 30, 2024, substantially all operations of our former Solar Business had ceased.
We staff our sales and service offices with qualified field solution advisors and installation and service technicians, and we utilize third-party subcontract labor when appropriate to assist with these efforts. Our objective is to provide a differentiated service experience by resolving customer issues remotely whenever possible and scheduling installation and service visits at times convenient for the customer.
Field and Call Center Operations Our field and call center operations comprise a nationwide network of sales and service offices, call centers, and support facilities. We staff our sales and service offices with qualified field solution advisors and installation and service technicians, and we utilize third-party subcontract labor when appropriate.
Executive racial and ethnic diversity also improved from the prior year. ADT’s Inclusive Diversity and Belonging Council (the “AIDBC”) and its ten Business Employee Resource Groups (“BERG”) are central to our ability to execute our IDB priorities.
We highly value our employees’ diversity and aim to promote diversity awareness in all of our talent management processes. Our Inclusive Diversity and Belonging Operating Team (the “IDB Team”) and its ten Business Employee Resource Groups (“BERGs”) are central to our ability to execute our IDB priorities.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe development, adoption, and use for generative AI technology remains in early stages and ineffective or inadequate AI or generative AI development or deployment practices by us or third parties could result in unintended consequences. For example, AI algorithms that we use may be flawed or may be based on datasets that are biased or insufficient.
Biggest changeAs with many new and emerging technologies, AI presents numerous risks and challenges that could adversely affect its further development, adoption, or use, and therefore our business. The development, deployment, and use of generative AI technology remains in early stages and ineffective or inadequate AI development or application practices by us or third parties could result in unintended consequences.
These companies: (i) may have existing access to and relationships with customers, as well as highly recognized brands, which may drive increased awareness of their security/automation offerings relative to ours; (ii) may have access to greater capital and resources than us; and (iii) may spend significantly more on advertising, marketing, and promotional resources, as well as the acquisition of other companies with home automation solution offerings, any of which 19 could have a material adverse effect on our ability to drive awareness and demand for our products and services.
These companies: (i) may have existing access to and relationships with customers, as well as highly recognized brands, which may drive increased awareness of their security/automation offerings relative to ours; (ii) may have access to greater capital and resources than us; and (iii) may spend significantly more on advertising, marketing, and 19 promotional resources, as well as the acquisition of other companies with home automation solution offerings, any of which could have a material adverse effect on our ability to drive awareness and demand for our products and services.
An event causing a disruption in the ability of our monitoring facilities or customer care resources, including work from home operations, to operate could materially adversely affect our business. A disruption in our ability to provide security monitoring services or otherwise provide ongoing customer care to our customers could have a material adverse effect on our business.
An event causing a disruption in the ability of our monitoring facilities or customer care resources to operate, including work from home operations, could materially adversely affect our business. A disruption in our ability to provide security monitoring services or otherwise provide ongoing customer care to our customers could have a material adverse effect on our business.
If the Commercial Business is unable to satisfy its obligations under the Commercial TSA, or if the transition of services covered by the Commercial TSA takes longer to complete than expected, it could have a material and adverse effect on our business, financial condition, and results of operations.
If the Commercial Business is unable to satisfy its obligations under the Commercial TSA, or if the transition of services covered by the Commercial TSA takes longer to complete than expected, it could have a material adverse effect on our business, financial condition, and results of operations.
If we are unable to eliminate some of these costs or effectively work with our supplies to reduce the costs associated with fewer employees or customers, it could have a material and adverse effect on our business, financial condition, and results of operations.
If we are unable to eliminate some of these costs or effectively work with our supplies to reduce the costs associated with fewer employees or customers, it could have a material adverse effect on our business, financial condition, and results of operations.
Macroeconomic headwinds or changes in consumer preferences could have a greater impact on our business following the Commercial Divestiture and the ADT Solar Exit which could have a material adverse effect on our business, results of operations, and financial condition.
Macroeconomic headwinds or changes in consumer preferences could have a greater impact on our business following the Commercial Divestiture and the ADT Solar Exit which could have a material adverse effect on our business, financial condition, and results of operations.
In addition, rising interest rates, as we have experienced during 2022 and 2023 and which we may continue to experience, could increase the financing costs of our products and services substantially. Any such result could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
In addition, rising interest rates, as we experienced during 2022 and 2023 and which we may continue to experience, could increase the financing costs of our products and services substantially. Any such result could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred securities could affect the residual value of the common stock. We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long-term shareholder value.
Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred securities could affect the residual value of our Common Stock. We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long-term shareholder value.
These provisions include: • providing that our Board of Directors will be divided into three classes, with each class of directors serving staggered three-year terms; • providing for the removal of directors only for cause and only upon the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class, if less than 50.1% of our outstanding common stock is beneficially owned by funds affiliated with Apollo; • empowering only the Board of Directors to fill any vacancy on our Board of Directors (other than in respect of a director designated by Apollo or other investors in our indirect parent entities), whether such vacancy occurs as a result of an increase in the number of directors or otherwise; • authorizing the issuance of “blank check” preferred stock with all terms established by the Board of Directors in its sole discretion without any need for action by stockholders, which could delay or prevent a change in control of the company; • prohibiting stockholders from acting by written consent if less than 50.1% of our outstanding common stock is beneficially owned by funds affiliated with Apollo; • to the extent permitted by law, prohibiting stockholders from calling a special meeting of stockholders if less than 50.1% of our outstanding common stock is beneficially owned by funds affiliated with Apollo; and • establishing advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted on by stockholders at stockholder meetings.
These provisions include: • providing that our Board of Directors will be divided into three classes, with each class of directors serving staggered three-year terms; • providing for the removal of directors only for cause and only upon the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class, if less than 50.1% of our outstanding Common Stock is beneficially owned by funds affiliated with Apollo; • empowering only the Board of Directors to fill any vacancy on our Board of Directors (other than in respect of a director designated by Apollo or other investors in our indirect parent entities), whether such vacancy occurs as a result of an increase in the number of directors or otherwise; 44 • authorizing the issuance of “blank check” preferred stock with all terms established by the Board of Directors in its sole discretion without any need for action by stockholders, which could delay or prevent a change in control of the Company; • prohibiting stockholders from acting by written consent if less than 50.1% of our outstanding Common Stock is beneficially owned by funds affiliated with Apollo; • to the extent permitted by law, prohibiting stockholders from calling a special meeting of stockholders if less than 50.1% of our outstanding Common Stock is beneficially owned by funds affiliated with Apollo; and • establishing advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted on by stockholders at stockholder meetings.
Our debt agreements contain, and any future indebtedness of ours would likely contain, a number of covenants that impose significant operating and financial restrictions on us, including restrictions on our and our subsidiaries’ ability to, among other things: • incur additional debt, guarantee indebtedness, or issue certain preferred equity interests; • pay dividends on or make distributions in respect of, or repurchase or redeem, our capital stock, or make other restricted payments; • prepay, redeem, or repurchase certain debt; • make loans or certain investments; • sell certain assets; • create liens on certain assets; • consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets; • enter into certain transactions with our affiliates; • alter the businesses we conduct; • enter into agreements restricting our subsidiaries’ ability to pay dividends; and • designate our subsidiaries as unrestricted subsidiaries.
Our debt agreements contain, and any future indebtedness of ours would likely contain, a number of covenants that impose significant operating and financial restrictions on us, including restrictions on our and our subsidiaries’ ability to, among other things: • incur additional debt, guarantee indebtedness, or issue certain preferred equity interests; • pay dividends on or make distributions in respect of, or repurchase or redeem, our capital stock, or make other restricted payments; • prepay, redeem, or repurchase certain debt; • make loans or certain investments; • sell certain assets; • create liens on certain assets; • consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets; • enter into certain transactions with our affiliates; • alter the businesses we conduct; 42 • enter into agreements restricting our subsidiaries’ ability to pay dividends; and • designate our subsidiaries as unrestricted subsidiaries.
A significant actual or perceived (whether or not valid) theft, loss, fraudulent use or misuse of customer, employee, or other personally identifiable data, whether by us, our partners and vendors, or other third parties, or as a result of employee error or malfeasance or otherwise, non-compliance with applicable industry standards or our contractual or other legal obligations regarding such data, or a violation of our privacy and information security policies with respect to such data, could result in significant remediation costs, administrative fines, litigation or other claims by third parties, or regulatory actions against us.
A significant actual or perceived (whether or not valid) theft, loss, fraudulent use or misuse of customer, employee, or other personally identifiable or other sensitive data, whether by us, our partners and vendors, or other third parties, or as a result of employee error or malfeasance or otherwise, non-compliance with applicable industry standards or our contractual or other legal obligations regarding such data, or a violation of our privacy and information security policies with respect to such data, could result in significant remediation costs, administrative fines, litigation or other claims by third parties, or regulatory actions against us.
Because a number of our products and services incorporate technology developed and maintained by third parties, we are, to a certain extent, dependent upon such third parties’ ability to update, maintain, or enhance their current products and services; to ensure that their products are free of defects or security vulnerabilities; to develop new products and services on a timely and cost-effective basis; and to respond to emerging industry standards, customer preferences, and other technological changes.
Because a number of our products and services incorporate technology developed and maintained by third parties, we are, to a certain extent, dependent upon such third parties’ ability to update, maintain, or enhance their current products and services; to ensure that their products are free of defects, security vulnerabilities, and compromise; to develop new products and services on a timely and cost-effective basis; and to respond to emerging industry standards, customer preferences, and other technological changes.
To the extent that Internet service providers implement usage-based pricing, including meaningful bandwidth caps, or otherwise try to monetize access to their networks, we could incur greater operating expenses and customer acquisition and retention could be negatively impacted, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
To the extent that Internet Service Providers (“ISPs”) implement usage-based pricing, including meaningful bandwidth caps, or otherwise try to monetize access to their networks, we could incur greater operating expenses and customer acquisition and retention could be negatively impacted, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Although we generally withhold specified amounts from the acquisition cost paid to dealers for alarm monitoring contracts (“holdback”), which may be used to satisfy or offset these and other applicable dealer obligations under the alarm monitoring contract acquisition agreements, there can be no guarantee that these amounts will be sufficient to satisfy or offset the full extent of the default by a dealer of its obligations under its agreement.
Although we generally withhold specified amounts from the acquisition cost paid to dealers for alarm monitoring contracts (“holdback”), which may be used to satisfy or offset these and other applicable dealer obligations under the alarm monitoring contract acquisition agreements, there can be no guarantee that these amounts will be sufficient to satisfy 40 or offset the full extent of the default by a dealer of its obligations under its agreement.
In addition, any new business partner may not agree to the terms and conditions or limitations on liability that we typically impose upon third parties. Acquisitions in recent years have also significantly expanded our risk profile. For example, in December 2021 we acquired ADT Solar although our core business was not then extended to the residential solar market.
In addition, any new business partner may not agree to the terms and conditions or limitations on liability that we typically impose upon third parties. Acquisitions in recent years have also significantly expanded our risk profile. For example, in December 2021 we acquired the Solar Business although our core business was not then extended to the residential solar market.
Furthermore, even if we obtain licenses to alternative software products or services that provide the functionality we need, we may be required to replace hardware installed at our monitoring centers, work from home environments, and at our customers’ sites, including security system control panels and 26 peripherals, in order to execute our integration of or migration to alternative software products.
Furthermore, even if we obtain licenses to alternative software products or services that provide the functionality we need, we may be required to replace hardware installed at our monitoring centers, work from home environments, and at our customers’ sites, including security system control panels and peripherals, in order to execute our integration of or migration to alternative software products.
For example, during 2023 and 2022, we recorded cumulative goodwill impairment charges of $712 million related to our Solar reporting unit due to continued deterioration of industry conditions, general macroeconomic decline, underperformance of the reporting unit’s operating results relative to expectations, and, during the third quarter of 2023, our decision to close a significant number of branches and reduce headcount.
For example, during 2023 and 2022, we recorded cumulative goodwill impairment charges of $712 million related to our former Solar reporting unit due to continued deterioration of industry conditions, general macroeconomic decline, underperformance of the former reporting unit’s operating results relative to expectations, and, during the third quarter of 2023, our decision to close a significant number of branches and reduce headcount.
Although we have developed policies and procedures designed to assist in compliance with these statues, regulations, and consent decree, we can provide no assurance that we, our authorized dealers or other third parties that we rely on for telemarketing, email marketing, and other lead generation activities will be in compliance with all applicable regulations at all times.
Although we have developed policies and procedures designed to assist in compliance with these statues, regulations, and consent decree, we can provide no assurance that we, our authorized dealers or other third parties that we rely on for telemarketing, email marketing, and other lead generation activities will be in compliance with all applicable laws and regulations at all times.
Recoveries in the housing market increase the occurrence of relocations, which may lead to customers disconnecting service and not contracting with us in their new homes. 38 The demand for our products and services is also dependent, in part, on national, regional, and local economic conditions, as well as our customers’ level of discretionary income.
Recoveries in the housing market increase the occurrence of relocations, which may lead to customers disconnecting service and not contracting with us in their new homes. The demand for our products and services is also dependent, in part, on national, regional, and local economic conditions, as well as our customers’ level of discretionary income.
Although we plan to conduct design validations and user testing, these may cause delays in transacting our business due to system challenges, limitations in functionality, inadequate management or process deficiencies in the development and use of our systems. Difficulties in implementing or an inability to effectively implement our migration plans could disrupt our operations and harm our business.
Although we conduct design validations and user testing, these may cause delays in transacting our business due to system challenges, limitations in functionality, inadequate management or process deficiencies in the development and use of our systems. Difficulties in implementing or an inability to effectively implement our migration plans could disrupt our operations and harm our business.
Certain third party lenders also have the contractual right to require us to repurchase loans if we fail 39 to achieve certain contractual milestones with respect to customer installations. If any of our third party lenders invokes such a right, the necessary repurchases could have a material, adverse effect on our cash flow for the quarter in which they occur.
Certain third party lenders also have the contractual right to require us to repurchase loans if we fail to achieve certain contractual milestones with respect to customer installations. If any of our third party lenders invokes such a right, the necessary repurchases could have a material, adverse effect on our cash flow for the quarter in which they occur.
Additionally, we may experience difficulties as we manage these changes and transition our technology infrastructure to the public cloud, including loss or corruption of data, interruptions in service and downtime, increased cyber threats and activity, delayed financial reporting, unanticipated expenses including increased costs of implementation and of conducting business, and lost revenue.
Additionally, we may experience difficulties as we manage these changes and transition our technology infrastructure to the cloud, including loss or corruption of data, interruptions in service and downtime, increased cyber threats and activity, delayed financial reporting, unanticipated expenses including increased costs of implementation and of conducting business, and lost revenue.
Our business also requires us to share confidential information with suppliers and other third parties. Third parties, including our partners and vendors, could also be a source of security risk to us, or cause disruptions to our normal operations, in the event of a failure of their own products, components, networks, security systems, and infrastructure.
Our business also requires us to share confidential information with suppliers and other third parties. Third parties, including our partners and vendors, could also be a source of cybersecurity risk to us, or cause disruptions to our normal operations, in the event of a failure of their own products, components, networks, security systems, and infrastructure.
These telecommunications providers and signal processing centers could deprioritize or fail to transmit or communicate these signals to the monitoring facilities and work from home environment for many reasons, including disruptions from fire, natural disasters, weather, and the effects of climate change (such as sea level rise, drought, flooding, wildfires, and increased storm severity), health epidemics or pandemics, transmission interruption, extended power outages, human or other error, malicious acts, including cyber attacks, provider preferences regarding the signals that get transmitted, government actions, war, terrorism, sabotage, or other conflicts, or as a result of disruptions to internal and external networks or third party transmission lines.
These telecommunications providers and signal processing centers could deprioritize or fail to transmit or communicate these signals to the monitoring facilities and work from home environment for many reasons, including disruptions from fire, natural disasters, weather-related incidents, and the effects of climate change (such as sea level rise, drought, flooding, wildfires, and increased storm severity), health epidemics or pandemics, transmission interruption, extended power outages, human or other error, malicious acts, including cyber attacks, provider preferences regarding the signals that get transmitted, government actions, war, terrorism, sabotage, or other conflicts, or as a result of disruptions to internal and external networks or third party transmission lines.
If we are unable to upgrade cellular equipment at customer sites to meet new network standards or to respond to other changes carriers are making or may make to their networks in a timely and cost-effective manner, whether due to an insufficient supply of electronic components or parts, an insufficient skilled labor force, or due to any other reason, or if we are sued by one or more customers due to our inability to provide certain services, or due to any loss incurred while we are not able to provide certain services, or due to any continuous billing for services after a prior or future transition date, our business, financial condition, results of operations, and cash flows, could be materially adversely affected.
If we are unable to upgrade cellular equipment at customer sites to meet future carrier network standards or to respond to other changes carriers are making or may make to their networks in a timely and cost-effective manner, whether due to an insufficient supply of electronic components or parts, an insufficient skilled labor force, or due to any other reason, or if we are sued by one or more customers due to our inability to provide certain services, or due to any loss incurred while we are not able to provide certain services, or due to any continuous billing for services after a prior or future transition date, our business, financial condition, results of operations, and cash flows, could be materially adversely affected.
In addition, some of the products we sell and provide services for are categorized as IoT and may become targets for cybercriminals and other actors attempting to gain unauthorized access. The significant increase in the number of our employees working from home further exposes us to security risks.
In addition, some of the products we sell and provide services for are categorized as IoT and may become targets for cybercriminals and other actors, including for actors attempting to gain unauthorized access. The significant increase in the number of our employees working from home further exposes us to security risks.
Any of these factors could materially adversely affect our business, financial condition, results of operations, and cash flows. 28 We continue to integrate our acquisitions, as well as to separate certain shared services following the Commercial Divestiture, which may divert management’s attention from our ongoing operations.
Any of these factors could materially adversely affect our business, financial condition, results of operations, and cash flows. We continue to integrate our acquisitions, as well as to separate certain shared services following the Commercial Divestiture, which may divert management’s attention from our ongoing operations.
Our ability to analyze this data to provide the customer with an improved user experience is a valuable component of our services, but we 32 cannot provide assurance that the data we require will be available from these sources in the future or that the cost of such data will not increase.
Our ability to analyze this data to provide the customer with an improved user experience is a valuable component of our services, but we cannot provide assurance that the data we require will be available from these sources in the future or that the cost of such data will not increase.
We have also recently become aware that one or more telecom carriers are beginning the process to retire their time-division multiplexing (“TDM”) nodes that service toll-free numbers, which could require us to further upgrade certain of our customer equipment.
We have also become aware that one or more telecom carriers are beginning the process to retire their time-division multiplexing (“TDM”) nodes that service toll-free numbers, which could require us to further upgrade certain of our customer equipment.
Our success depends in part on our continued ability to use trademarks to capitalize on our brands’ name-recognition and to further develop our brands in the U.S, as well as in other international markets should we choose to expand and continue to grow our business outside of the U.S. in the future.
Our success depends in part on our continued ability to use trademarks to capitalize on our brands’ name-recognition and to further develop our brands in the U.S, as well as in other international markets should we choose to expand and grow our business outside of the U.S. in the future.
This federal government ban implemented in August 2019, and the ban on use of certain covered equipment by federal contractors implemented in August 2020, has required us to find new sources of end-user products, which has resulted in higher costs and disruption to our business.
This 38 federal government ban implemented in August 2019, and the ban on use of certain covered equipment by federal contractors implemented in August 2020, has required us to find new sources of end-user products, which has resulted in higher costs and disruption to our business.
Any increase in those fees or costs will have an adverse impact on our ability to offer attractive pricing to customers, which could negatively impact our sales and profitability, or increase the cost to us upon the sale of our aggregated customer loans.
Any increase in those fees or costs will have an adverse impact on our ability to offer attractive pricing to customers, which could negatively impact our sales and profitability, or increase the cost to us upon the sale of our aggregated customer 39 loans.
These 30 organizations may require us to pay higher fees to them, decrease our pricing for their members, introduce additional competitive options, or otherwise alter the terms of our participation in their marketing programs in ways that are unfavorable to us.
These organizations may require us to pay higher fees to them, decrease our pricing for their members, introduce additional competitive options, or otherwise alter the terms of our participation in their marketing programs in ways that are unfavorable to us.
Existing or new tariffs and other trade restrictions imposed on imports from China or other countries where much of our end-user equipment is manufactured, or any counter-measures taken in response, may harm our business and results of operations.
Existing or new tariffs and other trade restrictions imposed on imports from China, Mexico, or other countries where much of our end-user equipment is manufactured, or any counter-measures taken in response, may harm our business and results of operations.
An element of our business strategy is the generation of new customer accounts through third parties, including our authorized dealers, and future operating results depend in large part on our ability to continue to manage this business generation strategy effectively.
An element of our business strategy is the generation of new customer accounts through third parties, including our authorized dealers, and future operating results depend in large part on our ability to continue to manage this business generation strategy 30 effectively.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.
A material weakness is a deficiency, or 32 a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Furthermore, to the extent network operators were to create tiers of Internet access service and either charge us for or prohibit our services from being available to our 36 customers through these tiers, our business could be negatively impacted.
Furthermore, to the extent network operators were to create tiers of Internet access service and either charge us for or prohibit our services from being available to our customers through these tiers, our business could be negatively impacted.
If any of our outstanding indebtedness were to be accelerated, there can be no assurance that our assets would be sufficient to repay such indebtedness in full. 42 Risks Related to the Ownership of Our Common Stock Our stock price may fluctuate significantly.
If any of our outstanding indebtedness were to be accelerated, there can be no assurance that our assets would be sufficient to repay such indebtedness in full. Risks Related to the Ownership of Our Common Stock Our stock price may fluctuate significantly.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Chancery Court of the State of Delaware shall be, to the fullest extent permitted by law, the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf; (b) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or stockholders; (c) any action asserting a claim arising pursuant to any provision of the DGCL or of our amended and restated certificate of incorporation or our amended and restated bylaws; or (d) any action asserting a claim against us or any of our directors or officers governed by the internal affairs doctrine.
Our Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Chancery Court of the State of Delaware shall be, to the fullest extent permitted by law, the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf; (b) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or stockholders; (c) any action asserting a claim arising pursuant to any provision of the DGCL or of our Certificate of Incorporation or our Bylaws; or (d) any action asserting a claim against us or any of our directors or officers governed by the internal affairs doctrine.
If we are unable to provide sufficient and accurate disclosures about our ESG practices, or if we fail to establish and achieve the objectives of our ESG program, which could include targets or commitments, consistent with investor, customer, employee, or other stakeholder expectations, we may not be viewed as an attractive investment, service provider, workplace, or business and we may be exposed to potential liability or litigation, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
If we are unable to provide sufficient and accurate disclosures about our sustainability practices, or if we fail to establish and achieve the objectives of our sustainability program, which could include targets or commitments, consistent with investor, customer, employee, or other stakeholder expectations, we may not be viewed as an attractive investment, service provider, workplace, or business and we may be exposed to potential liability or litigation, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Although our contractual arrangements with our authorized dealers, affinity marketing partners, and other third parties generally require them to comply with all such regulations and to indemnify us for damages arising from their failure to do so, we can provide no 34 assurance that the FTC and FCC, private litigants, or others will not attempt to hold us responsible for any unlawful acts conducted by our authorized dealers, affinity marketing partners and other third parties or that we could successfully enforce or collect upon any indemnities.
Although our contractual arrangements with our authorized dealers, affinity marketing partners, and other third parties generally require them to comply with all such laws and regulations and to indemnify us for damages arising from their failure to do so, we can provide no assurance that the FTC and FCC, private litigants, or others will not attempt to hold us responsible for any unlawful acts conducted by our authorized dealers, affinity marketing partners and other third parties or that we could successfully enforce or collect upon any indemnities.
There can be no assurance that our continued investments in new and emerging technology and other solutions to protect our network and information systems will prevent any of the risks described herein.
There can be no assurance that our continued investments in new and emerging technology and other solutions to protect our network and information systems will prevent any of the risks 25 described herein.
For example, the outbreak of the coronavirus pandemic in 2020 contributed to consumer unease and decreased discretionary spending. In order to maintain our operations, we had to implement measures to protect the health of our 27 employees and our customers.
For example, the outbreak of the coronavirus pandemic in 2020 contributed to consumer unease and decreased discretionary spending. In order to maintain our operations, we had to implement measures to protect the health of our employees and our customers.
Although we believe the Commercial Divestiture and the ADT Solar Exit will place us in a better position to prioritize investments in our core business where we intend to drive profitable, capital-efficient revenue growth for the long-term, there can be no assurance that we will achieve such benefits, which could have a material adverse impact on our business, financial condition, results of operations, and cash flows.
Although we believe the Commercial Divestiture and the ADT Solar Exit will place us in a better position to prioritize investments in our core business where we intend to drive profitable, capital-efficient revenue growth for the long-term, there can be no assurance that we will achieve such benefits, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
It is also possible additional tariffs will be imposed on imports of equipment that we install in end-user premises, or that our business will be impacted by retaliatory trade measures taken by China or other countries, causing us to raise our prices or make changes to our business, any of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
It is also possible new or additional tariffs will be imposed on imports of equipment that we install in end-user premises, or that our business will be impacted by retaliatory trade measures taken by China, Mexico, or other countries, causing us to raise our prices or make changes to our business, any of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
This requires that we minimize our rate of customer disconnects, or attrition, which can increase as a result of factors such as customer relocations, problems experienced with our product or service quality, customer service, increased interoperability of smart home devices now or in the future, customer non-pay, unfavorable general economic conditions, and the preference for lower pricing of competitors’ products and services over ours.
This requires that we minimize our rate of customer disconnects, or attrition, which can increase as a result of factors such as customer relocations, problems with our product or service quality, customer service challenges, increased interoperability of smart home devices now or in the future, customer non-pay, unfavorable general economic conditions, and the preference for lower pricing of competitors’ products and services over ours.
If we fail to establish and achieve the objectives of our ESG program, or if we fail to report on such ESG matters, consistent with investor, customer, employee, or other stakeholder expectations, and in compliance with legal and regulatory requirements, we may not be viewed as an attractive investment, service provider, workplace, or business, which could have a negative effect on our Company.
If we fail to establish and achieve the objectives of our sustainability program, or if we fail to report on such sustainability matters, consistent with investor, customer, employee, or other stakeholder expectations, and in compliance with legal and regulatory requirements, we may not be viewed as an attractive investment, service provider, workplace, or business, which could have a negative effect on our company.
These organizations may also terminate their relationships with us if we fail to meet contract service levels and/ or member satisfaction standards, among other things.
These organizations may also terminate their relationships with us if we fail to meet contract service levels or member satisfaction standards, among other things.
In addition, in November 2021, President Biden signed the Secure Equipment Law into effect, and in November 2022, the FCC adopted rules stating that they will no longer review or give licenses to the equipment that makes use of radio frequencies manufactured by companies believed to pose a national security threat, including Huawei, ZTE, Dahua, and Hikvision.
In addition, in November 2021, President Biden signed the Secure Equipment Act into effect, and in November 2022, the FCC adopted rules stating that they will no longer review or give licenses to the equipment that makes use of radio frequencies manufactured by companies believed to pose a national security threat, including Huawei, ZTE, Dahua, and Hikvision.
However, we cannot guarantee that these plans and procedures will prevent or efficiently mitigate the impact of all catastrophic events, especially those which are inherently unpredictable and beyond our anticipated thresholds or impact tolerances. Such events may impact macroeconomic conditions, consumer behavior, labor availability, or damage our facilities and our ability to provide our products and services to customers.
However, we cannot guarantee that these plans and procedures will prevent or efficiently mitigate the impact of such events, especially those which are inherently unpredictable and beyond our anticipated thresholds or impact tolerances. Such events may impact macroeconomic conditions, consumer behavior, labor availability, or damage our facilities and our ability to provide our products and services to customers.
Our amended and restated certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred securities having such powers; designations; preferences; limitations; and relative, participating, optional, or other rights, including preferences over our common stock with respect to dividends and other distributions, as our Board of Directors may determine.
Our Certificate of Incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred securities having such powers; designations; preferences; limitations; and relative, participating, optional, or other rights, including preferences over our Common Stock with respect to dividends and other distributions, as our Board of Directors may determine.
In purchasing accounts, we have relied on management’s knowledge of the industry, due diligence procedures, and representations and warranties of bulk account sellers.
In purchasing accounts, we have relied on 31 management’s knowledge of the industry, due diligence procedures, and representations and warranties of bulk account sellers.
Regardless of the merits of these lawsuits and any steps we take to mitigate infringement risk, any allegations could cause us to incur significant costs to defend and resolve, and could harm our business and reputation, any of which could have a material adverse impact on our business, financial condition, results of operations, and cash flows.
Regardless of the merits of these lawsuits and any steps we take to mitigate infringement risk, any allegations could cause us to incur significant costs to defend and resolve, and could harm our business and reputation, any of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
However, we can provide no assurance that our business will generate sufficient cash flow from operations to service or repay our debt, or that we will have the ability to issue new debt, draw on our revolving credit facility or fund other alternative sources of funds to satisfy our obligations.
However, we can provide no assurance that our business will generate sufficient cash flow from operations to service or repay our debt, or that we will have the ability to issue new debt, draw on our revolving credit facility or find other alternative sources of funds to satisfy our obligations.
Upgrading and implementing changes to any one of our systems could present challenges, including potential interruptions to system operations as changes are made, which could disrupt or reduce their efficiency in the short term and temporarily affect the quality of the products and services offered to customers.
Upgrading and implementing changes to any one of our systems presents challenges, including potential interruptions to system operations as changes are made, which could disrupt or reduce their efficiency in the short term and temporarily affect the quality of the products and services offered to customers.
Our business operates in a regulated environment and any new, or changes to existing, laws or regulations, or our failure to comply with any such rules or regulations could be costly to us, harm our business and operations, and impede our ability to grow our existing business, any new businesses that we acquire, or investment opportunities that we pursue.
Our business operates in a regulated environment and any new, changes to existing, or uncertainty regarding laws or regulations, or our failure to comply with any such rules or regulations, could be costly to us, harm our business and operations, and impede our ability to grow our existing business, any new businesses that we acquire, or investment opportunities that we pursue.
Although our transition and migration to the public cloud may increase our risk of liability and cause us to incur significant technical, legal or other costs, we may have limited remedies against third-party providers in connection with such liabilities.
Our transition and migration to the cloud may increase our risk of liability and cause us to incur significant technical, legal or other costs, and we may have limited remedies against third-party providers in connection with such liabilities.
A failure to effectively transition these customers away from retired networks will result in a loss of signal to the systems and certain services we provide, which may impact our ability to bill and 20 collect for services provided.
A failure to effectively transition these remaining customers away from retired networks will result in a loss of signal to the systems and certain services we provide, which may impact our ability to bill and collect for services provided.
Although customers are contractually obligated to pay amounts due under an alarm monitoring contract and are generally contractually obligated to pay cancellation fees if they prematurely cancel the contract during its initial term (typically between two and five years), customers’ payment obligations are unsecured, which could impair our ability to collect any unpaid amounts from our customers.
Although customers are contractually obligated to pay amounts due under an alarm monitoring or other service contract and are generally contractually obligated to pay cancellation fees if they prematurely cancel the contract during its initial term (typically between two and five years), customers’ payment obligations are unsecured, which could impair our ability to collect any unpaid amounts from our customers.
Our debt agreements contain restrictions that limit our flexibility and limit the manner in which we conduct our business and finance future operations or capital needs, which would have a material adverse effect on our business and financial condition.
Our debt agreements contain restrictions that limit our flexibility and limit the manner in which we conduct our business and finance future operations or capital needs, which could have a material adverse effect on our business and financial condition.
There are inherent costs and risks associated with integrating, replacing, and changing these systems and implementing new systems, including potential disruptions in our sales, operations, and customer service functions which may reduce their efficiency in the short term; loss of customers’ confidential or other information; potential negative reception from customers; potential disruption of our internal control structure; substantial capital expenditures; additional administration and operating expenses; retention of sufficiently skilled personnel to integrate, implement, and operate the new systems and an increase in human capital costs; demands on management time; challenges securing our systems along with dependent processes from cybersecurity threats; and other risks and costs of delays or difficulties in transitioning to new systems or of integrating new systems into our current systems. 23 If we do not effectively implement our plans to migrate our technology infrastructure to the cloud, we could experience significant disruptions in our operations, which could have a material adverse effect on our results of operations and financial condition.
There are inherent costs and risks associated with integrating, replacing, and changing these systems and implementing new systems, including potential disruptions in our sales, operations, and customer service functions which may reduce their efficiency in the short term; loss of customers’ confidential or other information; potential negative reception from customers; potential disruption of our internal control structure; substantial capital expenditures; additional administration and operating expenses; retention of sufficiently skilled personnel to integrate, implement, and operate the new systems and an increase in human capital costs; the use of third-party personnel resources, including offshore vendors, to supplement our internal personnel demands; demands on management time; challenges securing our systems along with dependent processes from cybersecurity threats; and other risks and costs of delays or difficulties in transitioning to new systems or of integrating new systems into our current systems. 23 If we do not effectively implement our plans to migrate our technology infrastructure to the cloud, we could experience significant disruptions in our operations, which could have a material adverse effect on our results of operations and financial condition.
To the extent customer payment defaults under alarm monitoring contracts are greater than anticipated, our business, financial condition, results of operations, and cash flows could be materially adversely affected.
To the extent customer payment defaults under alarm monitoring and other service contracts are greater than anticipated, our business, financial condition, results of operations, and cash flows could be materially adversely affected.
Examples of certain requirements we face include those with respect to the Health Insurance Portability Act, the California Consumer Privacy Act, the California Privacy Rights Act, the Colorado Privacy Act, the Virginia Consumer Data Protection Act, and the General Data Protection Regulation.
Examples of certain requirements we face include those with respect to the Health Insurance Portability Act, the California Consumer Privacy Act, the California Privacy Rights Act, the Colorado Privacy Act, the Virginia Consumer Data Protection Act, and the European Union’s General Data Protection Regulation.
As of December 31, 2023, we had a carrying value of goodwill and other identifiable intangible assets of approximately $9.8 billion. We review goodwill and indefinite lived intangible assets for impairment at least annually.
As of December 31, 2024, we had a carrying value of goodwill and other identifiable intangible assets of approximately $9.8 billion. We review goodwill and indefinite lived intangible assets for impairment at least annually.
In addition, our amended and restated certificate of incorporation also provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
In addition, our Certificate of Incorporation also provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
The loss, incapacity, or unavailability for any reason of sufficient personnel at any level of our organization, higher than expected payroll and other 31 costs associated with the hiring and retention of sufficient talent at all levels of our organization, or the inability or delay in hiring new employees, whether in management, sales, installation and service technicians, or call center personnel, could materially and adversely affect our business financial condition, results of operations, and cash flows.
The loss, incapacity, or unavailability for any reason of sufficient personnel at any level of our organization, higher than expected payroll and other costs associated with the hiring and retention of sufficient talent at all levels of our organization, or the inability or delay in hiring new employees, whether in management, sales, technology, product development, installation and service technicians, or call center personnel, could materially adversely affect our business financial condition, results of operations, and cash flows.
We rely on trademark law, company brand name protection policies, and agreements with our employees, customers, business partners, and others to protect the value of our brand names. Despite our precautions, we cannot provide assurance that those procedures are sufficiently effective to protect against unauthorized third-party use of our brand names.
We rely on trademark law, company brand name protection policies, and agreements with our employees, customers, business partners, and others to protect the value of our brand names. Despite our precautions, we cannot provide assurance that those procedures are sufficient to protect against unauthorized third-party use of our brand names.
Pursuant to a trademark agreement entered into between The ADT Corporation and Tyco (the “Tyco Trademark Agreement”) in connection with the separation of The ADT Corporation from Tyco in 2012, which endures in perpetuity, we are prohibited from ever registering, attempting to register or using such trademarks outside the U.S.
Pursuant to a trademark agreement entered into between The ADT Corporation and Tyco (the “Tyco Trademark Agreement”) in connection with the separation of The ADT Corporation from Tyco in 2012, which endures in perpetuity, we are prohibited from ever registering, attempting to register or using such trademarks outside the U.S. (including Puerto Rico and the U.S.
Because our ability to fully utilize the NOL carryforwards of our entities is subject to the limitations under Section 382 of the IRC, it is also possible that future changes in the direct or indirect ownership in our equity might result in additional ownership changes that may trigger the imposition of additional limitations under Section 382 of the IRC with respect to these tax attributes.
Because our ability to fully utilize our tax attributes is subject to the limitations under Section 382 of the IRC, it is also possible that future changes in the direct or indirect ownership in our equity might result in additional ownership changes that may trigger the imposition of additional limitations under Section 382 of the IRC with respect to these tax attributes.
The terms of one or more classes or series of preferred securities could adversely impact the voting power or value of our common stock. For example, we might grant holders of preferred securities the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified 45 transactions.
The terms of one or more classes or series of preferred securities could adversely affect the voting power or value of our Common Stock. For example, we might grant holders of preferred securities the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions.
When our customers’ discretionary income is reduced (such as by higher housing, energy, interest, operating or other costs, or where the actual or perceived wealth of customers has decreased as a result of circumstances such as lower real estate values, increased foreclosure rates, inflation, increased tax rates, or other economic disruptions), we could experience increased attrition rates and reduced customer demand in home automation systems.
When our customers’ discretionary income is reduced (such as by higher housing, energy, interest, operating or other costs, or where the actual or perceived wealth of customers has decreased as a result of circumstances such as lower real estate values, increased foreclosure rates, inflation, increased tax rates, or other economic disruptions), we could experience increased attrition rates and reduced customer demand.
In addition, the dynamic nature of these changes requires that we simultaneously engage in significant technology developmental efforts across our operations, including platform development, sales, marketing, customer care, customer self-service, virtual service, billing, and other substantive and administrative functions.
In addition, the dynamic nature of these changes requires that we simultaneously engage in significant technology developmental efforts across our operations, including platform development, sales, marketing, customer care, customer self-service, remote assistance, billing, and other substantive and administrative functions.
In addition, audits by the U.S. Internal Revenue Service (“IRS”) as well as state, territorial, provincial, and local tax authorities could reduce our tax attributes and/or subject us to tax liabilities if tax authorities make adverse determinations with respect to our NOL or tax credits carryforwards.
In addition, audits by the U.S. Internal Revenue Service (“IRS”) as well as state, territorial, provincial, and local tax authorities could reduce our tax attributes and/or subject us to tax liabilities if tax authorities make adverse determinations with respect to our tax attributes.
We have begun to accumulate a significant deferred tax asset related to this disallowed interest carryforward. However, there is a risk that we will not recognize the benefit of this deferred tax asset in the foreseeable future due to our annual interest expense exceeding the imposed limitation.
We have accumulated a significant deferred tax asset related to this disallowed interest carryforward. However, there is a risk that we will not recognize the benefit of this deferred tax asset in the foreseeable future due to our annual interest expense exceeding the imposed limitation.
As we implement the transition of our technology infrastructure to the cloud, we may need to divert resources away from other important business operations, including management attention.
As we transition our technology infrastructure to the cloud, we may need to divert resources, including management attention, away from other important business operations.
A substantial part of our revenue is derived from the recurring monthly revenue due from customers under alarm monitoring contracts. Therefore, we are dependent on our customers’ ability and willingness to pay amounts due under alarm monitoring contracts in a timely manner.
A substantial part of our revenue is derived from the recurring monthly revenue due from customers under alarm monitoring and other service contracts. Therefore, we are dependent on our customers’ ability and willingness to pay amounts due under alarm monitoring or other service contracts in a timely manner.
A disruption could occur for many reasons, including fire, natural disasters, weather, and the effects of climate change (such as sea level rise, drought, flooding, wildfires, and increased storm severity), health epidemics or pandemics, transmission interruption, extended power outages, human or other error, malicious acts, provider preferences regarding the signals that get transmitted, government actions, war, terrorism, sabotage, or other conflicts, or as a result of disruptions to internal and external networks or third party transmission lines.
A disruption could occur for many reasons, including fire, natural disasters, including hurricanes, weather-related incidents, and the effects of climate change (such as sea level rise, drought, flooding, wildfires, and increased storm severity), health epidemics or pandemics, transmission interruption, extended power 27 outages, human or other error, malicious acts, including cyber attacks, provider preferences regarding the signals that get transmitted, government actions, war, terrorism, sabotage, or other conflicts, or as a result of disruptions to internal and external networks or third party transmission lines.
In addition, if we fail to keep our customers for a sufficiently long period of time, or our attrition rates increase, our profitability, business, financial condition, results of operations, and cash flows could be materially adversely affected.
In addition, if we fail to keep our customers for a sufficient period of time, or our attrition rates increase, our profitability, business, financial condition, results of operations, and cash flows could be materially adversely affected.
The ADT Solar Exit may also involve continued financial involvement in the discontinued operations, such as by causing us to continue to incur expenses to maintain services for completed installations and to complete those installations which have not yet been completed, or through continuing guarantees, indemnities or other financial obligations, such as a requirement by lenders that we repay outstanding loan amounts for jobs that have not achieved permission to operate in a timely manner or that we are otherwise required to repurchase pursuant to existing loan agreements.
The ADT Solar Exit may also involve continued financial involvement while being reported in discontinued operations, such as by causing us to continue to incur expenses to maintain services for completed installations and to complete those installations which have not yet been completed, or through continuing guarantees, indemnities or other financial obligations, such as minimum solar panel performance guarantees, and a requirement by lenders that we repay outstanding loan amounts for jobs that have not achieved permission to operate in a timely manner or that we are otherwise required to repurchase pursuant to existing loan agreements.
The exclusive forum provision in our amended and restated certificate of incorporation does not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
The exclusive forum provision in our Certificate of Incorporation does not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAs part of this process, ADT uses the following tools and procedures: • utilizing “SecurityScorecard” (a third-party information security company that rates cybersecurity postures of corporate entities for the purposes of third-party management and information technology (“IT”) risk management), which provides an independent external enterprise view of ADT’s security posture with a focus on publicly exposed systems; • assessing, and continuously developing and executing on our preventative and detective controls aligned with the National Institute of Standards and Technology (“NIST”) cybersecurity framework, including an annual audit of these internal controls; • conducting third-party penetration testing; • performing attack and breach simulations; and • working with our cybersecurity vendors to ensure tooling and processes are fully adopted to provide the highest levels of protection.
Biggest changeWe leverage recognized cybersecurity frameworks to drive strategic direction and maturity improvement and engage third-party security experts as needed for risk assessments, risk mitigation actions, vulnerability identification, and program enhancements, as appropriate. 46 As part of this process, we use the following tools and procedures: • utilizing “SecurityScorecard” (a third-party information security company that rates cybersecurity postures of corporate entities for the purposes of third-party management and information technology risk management), which provides an independent external enterprise view of our security posture with a focus on public-facing systems; • assessing, regularly developing, and executing on our preventative and detective controls, which we seek to align with current standards and best practices, including the incorporation of recommendations published by the National Institute of Standards and Technology in its cybersecurity framework, such as an annual audit of these internal controls; • performing attack and breach simulations; and • working with our cybersecurity vendors to adopt tooling and processes to provide high levels of protection.
We believe that the safety, security, and privacy of our customers are fundamental to the services we provide. Our cybersecurity policies guide us as we strive to continuously enhance methods, best practices, and technologies to better monitor and protect customer data and inform and enable customers to make choices about their data privacy.
We believe that the safety, security, and privacy of our customers and employees are fundamental to the services we provide. Our cybersecurity policies guide us as we strive to continuously enhance methods, best practices, and technologies to better monitor and protect customer data and inform and enable customers to make choices about their data privacy.
ITEM 1C. CYBERSECURITY. We view cybersecurity as the prevention and timely detection and correction of any unauthorized occurrence or series of related unauthorized occurrences that are on or conducted through ADT’s information systems and that jeopardizes the confidentiality, integrity, or availability of ADT’s systems or any information residing therein.
ITEM 1C. CYBERSECURITY. We view cybersecurity as the prevention and timely detection and correction of any unauthorized occurrence or series of related unauthorized occurrences that are on or conducted through our information systems and that jeopardizes the confidentiality, integrity, or availability of our systems or any information residing therein.
For additional information regarding how cybersecurity threats have materially affected or are reasonably likely to materially affect our business strategy, results of operations or financial condition, see “ Risk Factors— ”: • “— Delays, costs, and disruptions that result from upgrading, integrating, and maintaining the security of our information and technology networks and systems could materially adversely affect us ” • “— If we do not effectively implement our plans to migrate our technology infrastructure to the cloud, we could experience significant disruptions in our operations, which could have a material adverse effect on our results of operations and financial condition ” • “— Cybersecurity breaches or threats or other unauthorized access or attempts to access to our systems could compromise the security of our systems and otherwise disrupt our normal operations which could have a material adverse effect on our business, results of operations and financial condition, ” and • “— Our independent, third-party authorized dealers may not be able to mitigate certain risks such as information technology breaches, data security breaches, product liability, errors and omissions, and marketing compliance ”.
For additional information regarding how cybersecurity threats have materially affected or are reasonably likely to materially affect our business strategy, results of operations or financial condition, see “ Risk Factors— ”: • “— Delays, costs, and disruptions that result from upgrading, integrating, and maintaining the security of our information and technology networks and systems could materially adversely affect us, ” • “— If we do not effectively implement our plans to migrate our technology infrastructure to the cloud, we could experience significant disruptions in our operations, which could have a material adverse effect on our results of operations and financial condition, ” • “— Cybersecurity attacks or threats or other unauthorized access or attempts to access to our systems, or those of third parties, have in the past, and may in the future, compromise the security of our systems and otherwise disrupt our normal operations, which could have a material adverse effect on our reputation, business, financial condition, results of operations and cash flows, ” and • “— Our independent, third-party authorized dealers may not be able to mitigate certain risks such as information technology and data security breaches, product liability, errors and omissions, and compliance with applicable laws and regulations. ”
Governance Cybersecurity Management Team and Board Oversight ADT’s Board of Directors, through its Audit Committee, has primary responsibility for overseeing cybersecurity risk management and receives at least annual updates on the status of ADT’s cybersecurity program from our CISO.
Governance Cybersecurity Management and Board Oversight Our Board of Directors, through its Audit Committee, has primary responsibility for overseeing cybersecurity risk management and receives updates on the status of our cybersecurity program from our CISO.
We carefully consider data privacy when developing our own products and when incorporating products provided by our business partners. Risk Management and Strategy As part of our Enterprise Risk Management program, ADT identifies, assesses, and develops risk mitigation plans for the company, including those relating to cybersecurity risks.
We carefully consider data privacy when developing our own products and when incorporating products provided by our business partners. Risk Management and Strategy We identify, assess, and manage cybersecurity risk as part of our company-wide enterprise risk management program.
Additionally, the Audit Committee will receive and discuss reports from management with the purpose of identifying threats and vulnerabilities, and it will monitor the effectiveness and progress of the actions and initiatives undertaken to mitigate such threats. ADT’s Cybersecurity Incident Response Plan has been approved by the Audit Committee.
Additionally, the Audit Committee receives and discusses reports from management with the purpose of identifying threats and vulnerabilities, and it monitors the effectiveness and progress of the actions and initiatives undertaken to mitigate such threats. Our cybersecurity program team is led by our CISO (who ultimately reports to the Chief Operating Officer).
As part of our alignment with these frameworks we have a Cybersecurity Incident Response Plan that outlines actions to be taken after identifying a suspected information security breach and the people responsible for managing those actions. Additionally, this plan outlines communication responsibilities during incidents of all severity levels.
As part of our alignment efforts with these frameworks, we maintain the IRP, which outlines the actions to be taken after identifying an incident that affects or could potentially affect our information systems and the people responsible for managing and overseeing those actions.
This update is provided in a special Audit Committee session and includes reports on ADT’s security posture and SecurityScorecard 46 assessment (rating and benchmarking), incident response, and vulnerability management. The Audit Committee reviews and discusses with management the Company’s cybersecurity threats, vulnerabilities, defenses, and planned responses.
These updates are provided at least once per year, and often multiple times per year, in a special Audit Committee session and includes reports on our security posture and SecurityScorecard assessment (rating and benchmarking), incident response, and vulnerability management.
Additional education and training are also required for specific groups based on their roles within the organization. Incident Response and Assessment Policies and Procedures ADT aligns with industry-standard cybersecurity frameworks designed to protect the company and customer data from unintentional disclosure, cybersecurity events, and other threats of all severity levels.
Incident Response Plan and Cybersecurity Incident Materiality Assessment Policy We seek to align with industry-standard cybersecurity frameworks designed to protect our information systems and both Company and customer data from unintentional disclosure, cybersecurity incidents, events, and other threats of varying severity levels.
The Company’s Chief Information Security Officer (“CISO”), who is designated as a Certified Information Systems Security Professional (“CISSP”), is responsible for developing and implementing plans and strategies to mitigate these risks. The CISO also leads the Company’s cybersecurity risk assessment, which includes security posture scoring, vulnerability assessments, process maturity, and tooling coverage.
Our CISO also leads our cybersecurity risk assessment, which includes security posture scoring, vulnerability assessments, process maturity, and tooling coverage. We log cybersecurity risks into our cybersecurity risk register and track such risks for treatment. Management then discusses these cybersecurity risks for resolution planning and escalation.
In addition, the Audit Committee participates in ADT’s annual Cybersecurity Incident Tabletop exercises and event simulations. Our cybersecurity management governance structure is led by a CISO (reporting into the Chief Information Officer) with the support of an established Information Security (“InfoSec”) function that is responsible for maintaining and monitoring ADT’s cybersecurity infrastructure.
The cybersecurity leadership team (“CSLT”), which is chaired by our Chief Operating Officer and includes our Chief Financial Officer, Chief Legal Officer, Chief Information Officer, CISO, and Chief Privacy Officer, among others, collaborates with enterprise risk professionals and is supported by an established Information Security (“InfoSec”) function responsible for certain aspects of maintaining and monitoring our cybersecurity infrastructure.
Removed
ADT also has a Data Privacy Officer (reporting into the Chief Legal Officer) whose role is to ensure ADT’s processes and protections over sensitive data comply with applicable data protection rules and regulations.
Added
Our Chief Information Security Officer (“CISO”), Tim Rains, has more than 30 years of experience as an IT professional, with over 20 of those years spent in cybersecurity roles. Mr. Rains has held senior cybersecurity advisor roles at both Amazon Web Services and Microsoft. Mr.
Removed
In addition to the activities described above under “Risk Management and Strategy,” we have a cybersecurity council (composed of ADT management with expertise in IT security, compliance, and communications) that meets quarterly to review and discuss compliance, cybersecurity risk, and preventive programs.
Added
Rains has experience across multiple cybersecurity disciplines including vulnerability management, incident response, crisis communications, threat intelligence, cybersecurity architecture and operations, governance, risk, and compliance. Mr. Rains is designated as a Certified Information Systems Security Professional and is responsible for developing and implementing plans and strategies to mitigate cybersecurity risks.
Removed
ADT also conducts privacy impact assessments and empowers its employees to effectuate these privacy considerations on an ongoing basis. All ADT team members are required to complete and acknowledge annual training to raise awareness of current security risks and behavior and around our Information Security and Privacy policies.
Added
The Audit Committee reviews and discusses with management our cybersecurity threats, vulnerabilities, defenses, and planned responses, including updates to our cybersecurity incident response plan (“IRP”), which has been approved by the Audit Committee.
Removed
If a materiality assessment is required, the CISO will report such incident to the Chief Legal Officer who will then determine in consultation with other persons as appropriate, without unreasonable delay, whether the incident is material to the Company.
Added
In addition, our Chief Privacy Officer, who reports to our Chief Legal Officer, manages processes and protections around our sensitive data and facilitates compliance with applicable data protection laws, rules, and regulations. Our Chief Privacy Officer has over 20 years of experience overseeing corporate data privacy and intellectual property policies and procedures.
Removed
The incident materiality determination will be made by considering all relevant quantitative and qualitative factors, on an individual basis and in the aggregate for multiple and/or a series of incidents.
Added
To maintain high levels of awareness and aptitude, all of our employees are required to complete annual trainings regarding current security risks and our InfoSec and privacy policies. Additional education and training are also required for specific groups based on their roles and access within the organization.
Removed
While ADT has not experienced a material direct data breach within its infrastructure, a material breach would likely be the result of external and/or internal threats and vulnerabilities to data, systems, websites, and/or products, including ransomware threats, email fraud, phishing attacks, data breaches, and customer product compromises including the theft of data and/or funds.
Added
Under the IRP, cybersecurity incidents are generally addressed by our Cybersecurity Incident Response Team (“CSIRT”), consisting of our CISO, deputy CISO, director of security operations, senior manager of incident response, and members of the security operations team. Incidents of higher severity are elevated to the CSLT.
Added
Under the IRP, if an incident requires the involvement of the CSLT, the CSIRT will regularly update the CSLT on the status of the incident response process. Members of the CSLT primarily, the Chief Operating Officer and CISO, will be responsible for updating the Chief Executive Officer, Audit Committee, and the lead independent director of our Board of Directors.
Added
Members of the CSIRT and CSLT, along with the Chief Executive Officer, Audit Committee, and the lead independent director of our Board of Directors regularly participate in cybersecurity incident tabletop exercises and event simulations.
Added
If a materiality assessment is required, an assessment committee consisting of the Chief Financial Officer, Chief Operating Officer, Chief Legal Officer, CISO, and Chief Accounting Officer (and/or their designee) (collectively, the “Assessment Committee”) will consult with the CSIRT and CSLT, as appropriate.
Added
The Assessment Committee is responsible for assessing, without unreasonable delay, the materiality of cybersecurity incidents reported to it, determining materiality and any necessary disclosures, and informing our disclosure committee of such determinations.
Added
In assessing materiality, the Assessment 47 Committee will consult with internal and external advisors, as appropriate, and evaluate quantitative and qualitative factors to assess the impact and/or reasonably likely impacts of the cybersecurity incident.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe regularly evaluate the suitability, adequacy, productive capacity, and utilization of our existing principal physical properties. A portion of our employees continue to work from home under both permanent and temporary arrangements.
Biggest changeWe also own 350 thousand square feet of space in the U.S.; however, approximately 100 thousand square feet of that space is currently listed for sale. We regularly evaluate the suitability, adequacy, productive capacity, and utilization of our existing principal physical properties. A portion of our employees continue to work from home under both permanent and temporary arrangements.
Other initiatives, such as our Virtual Assistance Program, may also impact our physical property needs in the future as we are able to service more of our customers remotely. We continue to believe our properties are adequately maintained and are suitable for our business as presently conducted.
Other initiatives, such as our Remote Assistance Program, may also impact our physical property needs in the future as we are able to service more of our customers remotely. We continue to believe our properties are adequately maintained and are suitable for our business as presently conducted.
As of December 31, 2023, we leased 2.3 million square feet of space in the U.S. primarily under long-term operating leases with third parties, including 100 thousand square feet for our corporate headquarters in Boca Raton, Florida, which we renewed during 2023. We also own 386 thousand square feet of space in the U.S.
As of December 31, 2024, we leased 1.8 million square feet of space in the U.S. primarily under long-term operating leases with third parties, including 100 thousand square feet for our corporate headquarters in Boca Raton, Florida, which we renewed during 2023 that extended the lease through 2034.
As of December 31, 2023, we owned or leased approximately 180 sales and service offices, including 38 in our Solar segment, that are supported by our regional distribution centers, as well as our nationwide network of multi-use sales, customer, and field support locations housing our six UL-listed monitoring centers.
ITEM 2. PROPERTIES. We primarily lease our properties through our main operating entity, ADT LLC. As of December 31, 2024, we owned or leased approximately 140 sales and service offices, that are supported by our regional distribution centers, as well as our nationwide network of multi-use sales, customer, and field support locations housing our six UL-listed monitoring centers.
Removed
ITEM 2. PROPERTIES. The discussion below excludes certain properties that no longer belong to ADT as a result of the Commercial Divestiture. In addition, ADT will charge rent to the Commercial Business for certain shared properties that are leased by ADT wherein the Commercial Business will continue its operations for an agreed upon period of time.
Removed
Approximately half of the Solar offices were closed prior to December 31, 2023. 47 We lease our properties through our main operating entities, ADT LLC and ADT Solar LLC, which generally correspond with our operating segments, CSB and Solar, respectively.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAdditional information in response to this Item is included in Note 14 “Commitments and Contingencies” in the Notes to Consolidated Financial Statements and is incorporated by reference into Part I of this Annual Report.
Biggest changeAdditional information in response to this Item is included in Note 13 “Commitments and Contingencies” in the Notes to Consolidated Financial Statements and is incorporated by reference into Part I of this Annual Report.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe Company may effect these repurchases pursuant to one or more open market or private transactions, including pursuant to a plan that qualifies for the affirmative defense provided by Rule 10b5‐1 under the Exchange Act, or pursuant to one or more accelerated share repurchase agreements.
Biggest changeThe 2025 Share Repurchase Plan allows the Company to purchase Common Stock from time to time in one or more open market or privately negotiated transactions, including pursuant to Rule 10b5-1 or Rule 10b-18 of the Exchange Act, or pursuant to one or more accelerated share repurchase agreements, subject to certain requirements and other factors. ITEM 6. RESERVED.
Common Stock - Our Common Stock is listed on the NYSE under the symbol “ADT.” As of February 20, 2024, the number of stockholders of record of Common Stock was 242, which does not include the number of stockholders who hold our Common Stock through banks, brokers, and other financial institutions.
Common Stock - Our Common Stock is listed on the NYSE under the symbol “ADT.” As of February 20, 2025, the number of stockholders of record of Common Stock was 258, which does not include the number of stockholders who hold our Common Stock through banks, brokers, and other financial institutions.
Share Repurchase Plan On January 24, 2024, the Company's Board of Director's announced a share repurchase plan (the “Share Repurchase Plan”), pursuant to which the Company is authorized to repurchase, through late January 2025, up to a maximum aggregate amount of $350 million of shares of the Company's common stock under this Share Repurchase Plan.
Share Repurchase Plan On January 24, 2024, our Board of Directors announced a share repurchase plan (the “2024 Share Repurchase Plan”), pursuant to which the Company was authorized to repurchase, through late January 2025, up to a maximum aggregate amount of $350 million of shares of the Company's Common Stock under this plan.
S&P 500 Index S&P North America Consumer Services Index 12/31/2019 $146 $131 $127 12/31/2020 $147 $156 $136 12/31/2021 $160 $200 $156 12/31/2022 $176 $164 $129 12/31/2023 $135 $207 $169 The information contained in this section shall not be deemed “soliciting material” or to be “filed” with the SEC or incorporated by reference in future filings with the SEC, or otherwise subject to the liabilities under Section 18 of the Exchange Act, except to the extent we specifically incorporate it by reference into such filing. 49 Recent Sales of Unregistered Equity Securities There were no sales of unregistered equity securities during the three months ended December 31, 2023.
S&P 500 Index S&P North America Consumer Services Index 12/31/2020 $101 $118 $107 12/31/2021 $110 $152 $122 12/31/2022 $121 $125 $101 12/31/2023 $93 $158 $133 12/31/2024 $97 $197 $155 The information contained in this section shall not be deemed “soliciting material” or to be “filed” with the SEC or incorporated by reference in future filings with the SEC, or otherwise subject to the liabilities under Section 18 of the Exchange Act, except to the extent we specifically incorporate it by reference into such filing. 49 Recent Sales of Unregistered Equity Securities There were no sales of unregistered equity securities during the three months ended December 31, 2024.
Use of Proceeds from Registered Equity Securities We did not receive any proceeds from sales of registered equity securities during the three months ended December 31, 2023. Issuer Purchases of Equity Securities There were no repurchases of any shares of our Common Stock during the three months ended December 31, 2023.
Use of Proceeds from Registered Equity Securities We did not receive any proceeds from sales of registered equity securities during the three months ended December 31, 2024.
Removed
The Company is not obligated to repurchase any of its shares of common stock, and the timing and amount of any repurchases will depend on legal requirements, market conditions, stock price, the availability of the safe harbor provided by Rule 10b-18 under the Exchange Act, alternative uses of capital, and other factors.
Added
Issuer Purchases of Equity Securities The following table presents repurchases of shares of the Company’s Common Stock during the three months ended December 31, 2024 (in thousands, except per share data) : Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs October 1, 2024 - October 31, 2024 21,000 $ 7.01 21,000 $ 109,444 November 1, 2024 - November 30, 2024 — $ — — $ 109,444 December 1, 2024 - December 31, 2024 — $ — — $ 109,444 Total 21,000 $ — 21,000 $ 109,444 _________________ (1) On October 4, 2024, the Company repurchased and retired 5 million shares of Common Stock at a price per share of $6.40 for an aggregate purchase price of $32 million.
Removed
As of the date of this 2023 Annual Report, the Company has not made any repurchases under the Share Repurchase Plan. ITEM 6. RESERVED.
Added
On October 30th, 2024, the Company repurchased and retired 16 million shares of Common Stock at a price per share of $7.20 for an aggregate purchase price of $115 million.
Added
Additionally, in December 2024, the Company entered into an agreement to repurchase 15 million shares of Common Stock at a price per share of $6.95 for a total of $104 million. The transaction settled in January 2025, and the Company retired the shares.
Added
The 2024 Share Repurchase Plan expired in January 2025. In February 2025, our Board of Directors announced the 2025 Share Repurchase Plan, pursuant to which the Company is authorized to repurchase, through April 30, 2026, up to a maximum aggregate amount of $500 million of shares of Common Stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCash Flows from Investing Activities The change in net cash from investing activities for 2023 compared to 2022 was primarily due to: • an increase in the proceeds from the sales of businesses of $1,583 million primarily related to the Commercial Divestiture in 2023, • a decrease in net outflows of $104 million related to subscriber system assets expenditures due to lower volume, and • an increase in other investing activities of $42 million primarily related to the 2023 sale of our equity method investment we made in 2022. 64 Cash Flows from Financing Activities The increase in net cash used in financing activities for 2023 compared to 2022 was primarily due to: • an increase in net debt payments of $2,040 million primarily related to the partial redemptions in 2023 of our First Lien Term Loan due 2026 and ADT Notes due 2024, • a decrease in net proceeds under the 2020 Receivables Facility of $75 million primarily due to higher repayments during 2023 as compared to 2022, and • Opportunity fund proceeds of $101 million during 2022 as compared to net payments of $9 million during 2023, partially offset by • proceeds on our interest rate swaps of $83 million during 2023 as compared to payments of $19 million during 2022.
Biggest changeIn addition, subscriber system assets expenditures decreased by $107 million due to a lower volume of transactions including those under a Company-owned model. 62 Cash Flows from Financing Activities The decrease in net cash used in financing activities for 2024 compared to 2023 was primarily due to: • lower net repayments of $1,977 million primarily related to the partial redemptions in 2023 of our First Lien Term Loan B due 2026 and ADT Notes due 2024, • share repurchases during 2024 of $241 million, • a decrease in net proceeds under the 2020 Receivables Facility of $109 million primarily due to net repayments during 2024 as compared to net proceeds in 2023, and • an increase in dividend payments of $54 million due to an increase in our quarterly dividend during 2024.
As we continue to build our partnership with Google, introduce new or enhance current offerings, and refine our go-to-market approach, we expect to see a shift toward an increasing proportion of outright sales transactions, which will impact results in future periods when those changes occur.
As we continue to build our partnership with Google, introduce new or enhance current offerings, and refine our go-to-market approach, we expect to continue to see a shift toward an increasing proportion of outright sales transactions, which will impact results in future periods when those changes occur.
The fair value estimates are based on available information as of the acquisition date and assumptions deemed reasonable by management but are inherently uncertain.
The fair value estimates are based on information available as of the acquisition date and assumptions deemed reasonable by management but are inherently uncertain.
We define Adjusted EBITDA as income (loss) from continuing operations adjusted for (i) interest; (ii) taxes; (iii) depreciation and amortization, including depreciation of subscriber system assets and other fixed assets and amortization of dealer and other intangible assets; (iv) amortization of deferred costs and deferred revenue associated with subscriber acquisitions; (v) share-based compensation expense; (vi) merger, restructuring, integration, and other; (vii) losses on extinguishment of debt; (viii) radio conversion costs, net; (ix) adjustments related to acquisitions, such as contingent consideration and purchase accounting 59 adjustments, or dispositions; (x) impairment charges; and (xi) other income/gain or expense/loss items such as changes in fair value of certain financial instruments or financing and consent fees.
We define Adjusted EBITDA as income (loss) from continuing operations adjusted for (i) interest; (ii) taxes; (iii) depreciation and amortization, including depreciation of subscriber system assets and other fixed assets and amortization of dealer and other intangible assets; (iv) amortization of deferred costs and deferred revenue associated with subscriber acquisitions; (v) share-based compensation expense; (vi) merger, restructuring, integration, and other; (vii) losses on extinguishment of debt; (viii) radio conversion costs, net; (ix) adjustments related to acquisitions, such as contingent consideration and purchase accounting adjustments, or dispositions; (x) impairment charges; and (xi) other income/gain or expense/loss items such as changes in fair value of certain financial instruments or financing and consent fees.
Below is a summary of key events related to the ADT Notes due 2023 since 2022: • March 2023: The Company used the proceeds from the Closing Date Term Loan A Loans to redeem $600 million outstanding principal amount of the ADT Notes due 2023 for a total redemption price of $600 million, excluding any accrued and unpaid interest. • June 2023: The Company redeemed the remaining outstanding principal amount of $100 million for a total redemption price of $100 million using $50 million of proceeds from the Incremental Term Loan A Loans and the remaining from cash on hand. 2020 Receivables Facility The 2020 Receivables Facility allows us to obtain financing by selling or contributing certain retail installment contract receivables to our wholly-owned consolidated bankruptcy-remote special purpose entity (“SPE”).
Below is a summary of key events related to the ADT Notes due 2023 since 2023: • March 2023 - The Company used the proceeds from the Closing Date Term Loan A Loans to redeem $600 million outstanding principal amount of the ADT Notes due 2023 for a total redemption price of $600 million, excluding any accrued and unpaid interest. • June 2023 - The Company redeemed the remaining outstanding principal amount of $100 million for a total redemption price of $100 million using $50 million of proceeds from the Incremental Term Loan A Loans and the remaining from cash on hand. 2020 Receivables Facility The 2020 Receivables Facility allows us to obtain financing by selling or contributing certain retail installment contract receivables to our wholly-owned consolidated bankruptcy-remote special purpose entity (“SPE”).
First Lien Notes due 2027 The 3.375% first-priority senior secured notes due 2027 (the “First Lien Notes due 2027”) are due at maturity and may be redeemed at our option as follows: 66 • Prior to August 31, 2026, in whole at any time or in part from time to time, at a make-whole premium plus accrued and unpaid interest, if any, thereon to the redemption date. • On or after August 31, 2026, in whole at any time or in part from time to time, at a redemption price equal to 100% of the principal amount of the First Lien Notes due 2027 redeemed plus accrued and unpaid interest, if any, thereon to the redemption date.
First Lien Notes due 2027 The 3.375% first-priority senior secured notes due 2027 (the “First Lien Notes due 2027”) are due at maturity and may be redeemed at our option as follows: • Prior to August 31, 2026, in whole at any time or in part from time to time, at a make-whole premium plus accrued and unpaid interest, if any, thereon to the redemption date. • On or after August 31, 2026, in whole at any time or in part from time to time, at a redemption price equal to 100% of the principal amount of the First Lien Notes due 2027 redeemed plus accrued and unpaid interest, if any, thereon to the redemption date.
Under IRC Section 174, specified research and experimentation expenditures are now 53 capitalized and amortized. These items have resulted in increased taxable income and an acceleration of our net operating loss utilization. Potential for Future Valuation Allowance The valuation allowance for deferred tax assets relates to the uncertainty of the utilization of certain U.S. federal and state deferred tax assets.
Under IRC Section 174, specified research and experimentation expenditures are now capitalized and amortized. These items have resulted in increased taxable income and an acceleration of our net operating loss utilization. Potential for Future Valuation Allowance The valuation allowance for deferred tax assets relates to the uncertainty of the utilization of certain U.S. federal and state deferred tax assets.
Additionally, upon the occurrence of specified change of control events, we may be required to purchase the First Lien Notes due 2029 at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date. The indenture governing the First Lien Notes due 2029 also provides for customary events of default.
Additionally, upon the occurrence of specified change of control events, we may be required to purchase the First Lien Notes due 2029 at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date. 65 The indenture governing the First Lien Notes due 2029 also provides for customary events of default.
Accordingly, the assets of the SPE are not available to pay our creditors (other than the SPE), although collections from the transferred retail installment contract receivables in excess of amounts required to repay amounts then due and payable to the SPE’s creditors may be released to us and subsequently used by us (including to pay other 67 creditors).
Accordingly, the assets of the SPE are not available to pay our creditors (other than the SPE), although collections from the transferred retail installment contract receivables in excess of amounts required to repay amounts then due and payable to the SPE’s creditors may be released to us and subsequently used by us (including to pay other creditors).
Our CSB results are impacted by the mix of transactions under a Company-owned equipment model versus a customer-owned equipment model (referred to as outright sales), as there are different accounting treatments applicable to each model, as well as the mix, price, and type of offerings sold (see Note 2 “Revenue and Receivables”).
Our results are impacted by the mix of transactions under a Company-owned equipment model versus a customer-owned equipment model (referred to as outright sales), as there are different accounting treatments applicable to each model, as well as the mix, price, and type of offerings sold (see Note 2 “Revenue and Receivables”).
In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available positive and negative evidence, including enacted legislation such as the updates described above, which impact our assessment of whether a valuation allowance is needed.
In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available 53 positive and negative evidence, including enacted legislation such as the updates described above, which impact our assessment of whether a valuation allowance is needed.
We use gross customer revenue attrition to evaluate our CSB retention and customer satisfaction performance, as well as evaluate subscriber trends by vintage year. Additionally, we believe the presentation of gross customer revenue attrition is useful to investors as it provides a means to evaluate drivers of customer attrition and the impact of retention initiatives.
We use gross customer revenue attrition to evaluate our retention and customer satisfaction performance, as well as evaluate subscriber trends by vintage year. Additionally, we believe the presentation of gross customer revenue attrition is useful to investors as it provides a means to evaluate drivers of customer attrition and the impact of retention initiatives.
First Lien Credit Agreement Our first lien credit agreement dated as of July 1, 2015 (together with subsequent amendments and restatements, the “First Lien Credit Agreement”) consists of a term loan facility (the “First Lien Term Loan due 2030,” and prior to October 2023, the “First Lien Term Loan due 2026”) and a first lien revolving credit facility (the “First Lien Revolving Credit Facility”).
First Lien Credit Agreement Our first lien credit agreement dated as of July 1, 2015 (together with subsequent amendments and restatements, the “First Lien Credit Agreement”) consists of a term loan facility (the “First Lien Term Loan B due 2030,” and prior to October 2023, the “First Lien Term Loan B due 2026”) and a first lien revolving credit facility (the “First Lien Revolving Credit Facility”).
BUSINESS AND BASIS OF PRESENTATION ADT Inc. is a leading provider of security, interactive, and smart home solutions serving residential and small business customers in the U.S.
BUSINESS AND BASIS OF PRESENTATION ADT is a leading provider of security, interactive, and smart home solutions serving residential and small business customers in the U.S.
The majority of our 70 customer relationships acquired in business combinations that originated from the Formation Transactions and the ADT Acquisition were fully amortized during 2023.
The majority of our customer relationships acquired in business combinations that originated from the Formation Transactions and the ADT Acquisition were fully amortized during 2023.
We may make voluntary prepayments on the First Lien Term Loan due 2030 at any time prior to maturity at par.
We may make voluntary prepayments on the First Lien Term Loan B due 2030 at any time prior to maturity at par.
Cash outflows for interest payments are not consistent between quarters, with larger outflows occurring in the first and third quarters, and may vary as a result of our variable rate debt. We are closely monitoring the impact of recent inflationary pressures and changes in interest rates on our cash position.
Cash outflows for interest payments are not consistent between quarters, with larger outflows occurring in the first and third quarters, and may vary as a result of our variable rate debt. We are closely monitoring the impact of any inflationary pressures and changes in interest rates on our cash position.
Factors that could cause such differences are discussed in the sections of this Annual Report titled Item 1A “Risk Factors” and “Cautionary Statements Regarding Forward-Looking Statements.” Unless otherwise noted, the discussions below relate to the Company’s continuing operations.
Factors that could cause such differences are discussed in the sections of this Annual Report titled Item 1A “Risk Factors” and “Cautionary Statements Regarding Forward-Looking Statements.” Unless otherwise noted, the discussions below relate to our continuing operations.
A portion of our CSB recurring customer base can be expected to cancel service each year as customers may choose to terminate or not to renew their contracts for a variety of reasons including, but not limited to, relocation, loss to competition, cost, or service issues.
A portion of our recurring customer base can be expected to cancel services each year as customers may choose to terminate or not to renew their contracts for a variety of reasons including, but not limited to, relocation, loss to competition, cost, or service issues.
Refer to Note 10 “Income Taxes” for details on our valuation allowances and unrecognized tax benefits. ACCOUNTING PRONOUNCEMENTS Refer to Note 1 “Description of Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Item 15 for further discussion about recent accounting pronouncements.
Refer to Note 9 “Income Taxes” for details on our valuation allowances and unrecognized tax benefits. ACCOUNTING PRONOUNCEMENTS Refer to Note 1 “Description of Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Item 15 for further discussion about recent accounting pronouncements.
Gross customer revenue attrition is calculated on a trailing twelve-month basis, the numerator of which is the RMR lost during the period due to attrition, net of dealer charge-backs and reinstated customers, and the denominator of which is total annualized RMR based on an average of RMR under contract at the beginning of each month during the period, in each case, excluding contracts monitored but not owned and self-setup/DIY customers.
Gross customer revenue attrition is calculated on a trailing twelve-month basis, the numerator of which is the RMR lost during the period due to attrition, net of dealer charge-backs and reinstated customers, and the denominator of which is total annualized RMR based on an average of RMR under contract at the beginning of each month during the period, in each case, excluding contracts monitored but not owned and self set-up/DIY customers.
Table of Contents • Introduction • Business and Basis of Presentation • Factors Affecting Operating Results • Key Performance Indicators • Results of Operations • Non-GAAP Measures • Liquidity and Capital Resources • Critical Accounting Estimates • Accounting Pronouncements INTRODUCTION The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 50 Table of Contents • Introduction • Business and Basis of Presentation • Factors Affecting Operating Results • Key Performance Indicators • Results of Operations • Non-GAAP Measures • Liquidity and Capital Resources • Critical Accounting Estimates • Accounting Pronouncements INTRODUCTION The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report.
The prices we are able to charge for our products and services are impacted by the type, quality, and complexity of the offerings that we provide; the introduction of additional features and offerings that increase value to the customer; and the competitive and macroeconomic environments in which we operate.
The prices we are able to charge for our products and services are impacted by the type and complexity of the offerings that we provide, quality of our products and services; the introduction of additional features and offerings that increase value to the customer; and the microeconomic and macroeconomic environments in which we operate.
As of December 31, 2023, we were in compliance with all financial covenant and other maintenance tests for all our debt obligations, and we do not believe there is a material risk of future noncompliance with our financial covenant and other maintenance tests.
As of December 31, 2024, we were in compliance with all financial covenant and other maintenance tests for all our debt obligations, and we do not believe there is a material risk of future noncompliance with our financial covenant and other maintenance tests.
Refer to Note 15 “Leases” for further details of our obligations and the timing of expected future payments. • Purchase obligations – Our material cash requirements for purchases of goods or services entered into in the ordinary course of business, including purchase orders and contractual obligations, primarily consist of information technology services and equipment, including investments in our information technology infrastructure, direct materials, and telecommunication services.
Refer to Note 14 “Leases” for further details of our obligations and the timing of expected future payments. 60 • Purchase obligations – Our material cash requirements for purchases of goods or services entered into in the ordinary course of business, including purchase orders and contractual obligations, primarily consist of information technology services and equipment, including investments in our information technology infrastructure, direct materials, and telecommunication services.
During 2023, 2022, and 2021, other definite-lived intangible assets acquired in business acquisitions were not material, and we have not recorded any material measurement period adjustments to purchase price allocations.
During 2024, 2023, and 2022, other definite-lived intangible assets acquired in business acquisitions were not material, and we have not recorded any material measurement period adjustments to purchase price allocations.
We performed a quantitative impairment test over the ADT trade name as of October 1, 2023 and 2022, and the fair value of the ADT trade name substantially exceeded its carrying value as of each testing date.
We performed a quantitative impairment test over the ADT trade name as of October 1, 2024 and 2023, and the fair value of the ADT trade name substantially exceeded its carrying value as of each testing date.
We may, in future periods, perform a qualitative testing approach, where we assess whether it is more-likely-than-not that the ADT trade name’s fair value is less than its carrying amount. Business Combinations We account for business acquisitions under the acquisition method of accounting.
We may, in future periods, perform a qualitative testing approach, where we assess whether it is more-likely-than-not that the ADT trade name’s fair value is less than its carrying amount. Business Combinations We account for the acquisitions of businesses using the acquisition method of accounting.
First Lien Notes due 2024 and First Lien Notes due 2026 The 5.250% first-priority senior secured notes due 2024 (the “First Lien Notes due 2024”) and the 5.750% first-priority senior secured notes due 2026 (the “First Lien Notes due 2026”) are due at maturity, and may be redeemed, in whole or in part, at any time at a make-whole premium plus accrued and unpaid interest to, but excluding, the redemption date.
First Lien Notes due 2026 The 5.750% first-priority senior secured notes due 2026 (the “First Lien Notes due 2026”) are due at maturity, and may be redeemed, in whole or in part, at any time at a make-whole premium plus accrued and unpaid interest to, but excluding, the redemption date.
Refer to Note 8 “Debt” for further details of our debt and the timing of expected future principal payments. • Interest payments – Future interest payments on our fixed-rate debt are based on the contractual terms.
Refer to Note 7 “Debt” for further details of our debt and the timing of expected future principal payments. • Interest payments – Future interest payments on our fixed-rate debt are based on the contractual terms.
For example, our Virtual Assistance Program provides our customers the ability to troubleshoot and resolve certain service issues, as well as other functions, through a live video stream with our skilled technicians. This provides customers with more options for receiving certain services that best fit their lifestyles while reducing our costs and eliminating thousands of vehicle trips each day.
For example, our Remote Assistance Program provides our customers the ability to troubleshoot and resolve certain service issues, as well as other functions, through a live video stream with our skilled technicians. This provides customers with more options for receiving certain services that best fit their lifestyles while reducing our costs and eliminating thousands of vehicle trips.
During 2023, both the proceeds and repayments of long-term debt on the Consolidated Statements of Cash Flows include the impact of $230 million from the October refinancing of the First Lien Term Loan due 2026.
During 2023, both the proceeds and repayments of long-term borrowings on the Consolidated Statements of Cash Flows include the impact of $230 million from the October refinancing of the First Lien Term Loan B due 2026.
When performing a quantitative assessment, the fair value of the ADT trade name is determined under a relief from royalty method, which is an income approach that estimates the cost savings that accrue to us that we would otherwise have to pay in the form of royalties or license fees on revenue earned through the use of the asset.
When performing a quantitative impairment test, the fair value of the ADT trade name is determined using a relief from royalty method, which is an income approach that estimates the cost savings that accrue to us that we would otherwise have to pay in the form of royalties or license fees on revenue earned through the use of the asset.
Future interest payments on our variable-rate debt and the effects of our interest rate swaps are based on SOFR, plus the applicable margin in effect as of December 31, 2023. During 2023, we paid net cash interest of $523 million, including interest on interest rate swaps presented outside of operating activities.
Future interest payments on our variable-rate debt and the effects of our interest rate swaps are based on SOFR, plus the applicable margin in effect as of December 31, 2024. During 2024, we paid net cash interest of $372 million, including interest on interest rate swaps presented outside of operating activities.
Additionally, upon the occurrence of specified change of control events, we must offer to repurchase the notes at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date. The indentures governing the First Lien Notes due 2024 and First Lien Notes due 2026 also provide for customary events of default.
Additionally, upon the occurrence of specified change of control events, we must offer to repurchase the First Lien Notes due 2026 at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date. The indenture governing the First Lien Notes due 2026 also provides for customary events of default.
Tax Matters Federal Tax Legislation Certain changes to U.S. federal tax law included in the Tax Cuts and Jobs Act of 2017 had a delayed effective date until 2022. Under IRC Section 163(j), the limitation on net business interest expense deductions are no longer increased by deductions for depreciation, amortization, or depletion.
However, the amounts and timing of payments are uncertain. Federal Tax Legislation Certain changes to U.S. federal tax law included in the Tax Cuts and Jobs Act of 2017 had a delayed effective date until 2022. Under IRC Section 163(j), the limitation on net business interest expense deductions are no longer increased by deductions for depreciation, amortization, or depletion.
ADT Notes The remaining outstanding ADT Notes are due at maturity, and may be redeemed, in whole at any time or in part from time to time, at a redemption price equal to the principal amount of the notes to be redeemed, plus a make-whole premium, plus accrued and unpaid interest as of, but excluding, the redemption date.
The remaining outstanding ADT Notes due 2032 and ADT Notes due 2042 (collectively, the “ADT Notes”) are due at maturity, and may be redeemed, in whole at any time or in part from time to time, at a redemption price equal to the principal amount of the notes to be redeemed, plus a make-whole premium, plus accrued and unpaid interest as of, but excluding, the redemption date.
As of December 31, 2023, we were not required to make any annual prepayments based on our excess cash flow. In addition, we are required to pay a commitment fee between 0.375% and 0.50% (determined based on a net first lien leverage ratio) with respect to the unused commitments under the First Lien Revolving Credit Facility.
As of December 31, 2024, we were not required to make any annual prepayments based on our excess cash flow. In addition, we are required to pay a commitment fee between 0.20% and 0.30% (determined based on a net first lien leverage ratio) with respect to the unused commitments under the First Lien Revolving Credit Facility.
During 2023, payments made from the Opportunity Fund were $11 million. • Customer account purchases – Our indirect channel customers are generated mainly through our ADT Authorized Dealer Program.
During 2024 and 2023, payments made from the Opportunity Fund were $14 million and $11 million, respectively. • Customer account purchases – Our indirect channel customers are generated mainly through our ADT Authorized Dealer Program.
Second Lien Notes due 2028 The 6.250% second-priority senior secured notes due 2028 (the “Second Lien Notes due 2028”) are due at maturity and may be redeemed at our option, in whole at any time or in part from time to time, at a redemption price equal to 103.125% of the principal amount of the Second Lien Notes due 2028 redeemed and accrued and unpaid interest as of, but excluding, the redemption date.
Second Lien Notes due 2028 The 6.250% second-priority senior secured notes due 2028 (the “Second Lien Notes due 2028”) are due at maturity and may be redeemed at our option, in whole at any time or in part from time to time, at a redemption price equal to 100% (after January 15, 2025) of the principal amount of the Second Lien Notes due 2028 redeemed and accrued and unpaid interest as of, but excluding, the redemption date.
Long-Term Debt As of December 31, 2023, our debt (excluding finance leases and any deferred financing costs, discounts, premiums, or fair value adjustments) consisted of the following (in thousands) : Debt Description Issued Maturity Interest Rate Interest Payable Principal First Lien Term Loan B due 2030 10/13/2023 10/13/2030 Term SOFR +2.50% Quarterly $ 1,375,000 Term Loan A Facility 3/14/2023 3/14/2028 Term SOFR +2.25% Quarterly 625,625 Second Lien Notes due 2028 1/28/2020 1/15/2028 6.250% 1/15 and 7/15 1,300,000 First Lien Notes due 2024 4/4/2019 4/15/2024 5.250% 2/15 and 8/15 99,999 First Lien Notes due 2026 4/4/2019 4/15/2026 5.750% 3/15 and 9/15 1,350,000 First Lien Notes due 2027 8/20/2020 8/31/2027 3.375% 6/15 and 12/15 1,000,000 First Lien Notes due 2029 7/29/2021 8/1/2029 4.125% 2/1 and 8/1 1,000,000 ADT Notes due 2032 5/2/2016 7/15/2032 4.875% 1/15 and 7/15 728,016 ADT Notes due 2042 7/5/2012 7/15/2042 4.875% 1/15 and 7/15 21,896 2020 Receivables Facility 3/5/2020 11/20/2028 Various Monthly 436,004 Other debt 751 Total $ 7,937,291 Refer to Note 8 “Debt” for further details of our debt agreements, including interest rates, covenants, and other descriptions of these agreements.
Long-Term Debt As of December 31, 2024, our debt (excluding finance leases and any deferred financing costs, discounts, premiums, or fair value adjustments) consisted of the following (in thousands) : Debt Description Issued Maturity Interest Rate Interest Payable Principal First Lien Term Loan B due 2030 10/13/2023 10/13/2030 Term SOFR +2.00% Quarterly $ 1,984,090 First Lien Notes due 2026 4/4/2019 4/15/2026 5.750% 3/15 and 9/15 1,350,000 First Lien Notes due 2027 8/20/2020 8/31/2027 3.375% 6/15 and 12/15 1,000,000 First Lien Notes due 2029 7/29/2021 8/1/2029 4.125% 2/1 and 8/1 1,000,000 Second Lien Notes due 2028 1/28/2020 1/15/2028 6.250% 1/15 and 7/15 1,300,000 ADT Notes due 2032 5/2/2016 7/15/2032 4.875% 1/15 and 7/15 728,016 ADT Notes due 2042 7/5/2012 7/15/2042 4.875% 1/15 and 7/15 21,896 2020 Receivables Facility 3/5/2020 11/20/2029 Various Monthly 407,901 Total $ 7,791,903 Refer to Note 7 “Debt” for further details of our debt agreements, including interest rates, covenants, and other descriptions of these agreements.
Subscriber System Assets and Deferred Subscriber Acquisition Costs - Subscriber system assets and any related deferred subscriber acquisition costs resulting from customer acquisitions are accounted for on a pooled basis based on the month and year of acquisition.
Subscriber System Assets and Deferred Subscriber Acquisition Costs - Subscriber system assets and any related deferred subscriber acquisition costs are accounted for on a pooled basis based on the month and year of acquisition.
Under a qualitative approach, we assess whether it is more-likely-than-not that a reporting unit’s fair value is less than its carrying amount. Under a quantitative approach, we estimate the fair value of a reporting unit and compare it to its carrying amount.
Under a qualitative approach, we assess whether it is more-likely-than-not that a reporting unit’s fair value is less than its carrying amount. Under a quantitative approach, we estimate the fair value of a reporting unit and compare it to its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized.
We periodically perform lifing studies to (i) estimate the expected life of our customer relationships and the attrition pattern of our customers; (ii) establish the amortization rates of our customer account pools discussed below in order to reflect the pattern of future benefit; and (iii) assess the continued reasonableness of our existing depreciation and amortization policies.
We periodically perform lifing studies to (i) estimate the expected life of our customer relationships and the attrition pattern of our customers; (ii) establish the amortization rates of our customer account pools discussed below in order to reflect the pattern of future economic benefit; and (iii) assess the continued reasonableness of our existing depreciation and amortization policies. 67 The results of the lifing studies are based on historical customer terminations.
As opportunities arise, we have in the past engaged, and we may continue to engage, in selective third-party account purchases, which typically involve the purchase of a set of customer accounts from other security service providers.
As opportunities arise, we may engage in selective third-party account purchases, which typically involve the purchase of a set of customer accounts from other security service providers.
As of December 31, 2023, our expected future interest payments related to our debt and interest rate swap contracts totaled approximately $1.9 billion, with approximately $369 million due in 2024.
As of December 31, 2024, our expected future interest payments related to our debt and interest rate swap contracts totaled approximately $1.6 billion, with approximately $354 million due in 2025.
As part of our response to changes or pressures in the current macroeconomic environment, we have been evaluating, and continue to evaluate, cost-saving opportunities such as reducing headcount or our physical facilities footprint when appropriate, and reducing non-essential spend.
We aim to continuously evaluate and respond to changes in the above to drive efficiencies and meet customer demands. As part of our response to changes or pressures in the current macroeconomic environment, we have been evaluating, and continue to evaluate, cost-saving opportunities such as reducing headcount or our physical facilities footprint when appropriate, and reducing non-essential spend.
Additionally, we expect to incur annual interest payments of approximately $325 - $360 million during each of the years 2025 - 2026 and approximately $200 - $300 million during each of the years 2027 and 2028. • Operating and finance leases – As of December 31, 2023, our expected future lease payments, including interest, totaled $221 million, with $54 million due in 2024.
Additionally, we expect to incur annual interest payments of approximately $310 - $325 million during each of the years 2026 - 2027 and approximately $195 - $240 million during each of the years 2028 and thereafter. • Leases – As of December 31, 2024, our expected future operating and finance lease payments, including interest, totaled $192 million, with $54 million due in 2025.
The increase in RMR, as compared to the prior period, was primarily due to an increase in average prices on new and existing subscribers. Gross customer revenue attrition, as compared to the prior period, remained relatively flat, reflecting higher non-payment and other disconnects, primarily offset by a decrease in relocations.
The increase in RMR, as compared to the prior period, was primarily driven by an increase in average prices on new and existing subscribers. The decrease in gross customer revenue attrition, as compared to the prior period, was primarily driven by a decrease in voluntary and other disconnects, partially offset by higher non-payment disconnects.
RMR RMR is generated by contractual recurring fees for monitoring and other recurring services provided to our CSB customers, including contracts monitored but not owned. We use RMR to evaluate our overall sales, installation, and retention performance.
Adjusted EBITDA reflects our continuing operations for all periods presented. RMR RMR is generated by contractual recurring fees for monitoring and other recurring services provided to our customers, including contracts monitored but not owned. We use RMR to evaluate our overall sales, installation, and retention performance.
For a more detailed discussion of our business, segments, and basis of presentation, refer to Item 1 “Business” and Note 1 “Description of Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Item 15 “Exhibit and Financial Statement Schedules.” FACTORS AFFECTING OPERATING RESULTS The factors described herein could have a material adverse effect on our business, financial condition, results of operations, cash flows, and/or key performance indicators.
For a more detailed discussion of our business and basis of presentation, refer to Item 1 “Business” and Note 1 “Description of Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Item 15 “Exhibit and Financial Statement Schedules.” FACTORS AFFECTING OPERATING RESULTS The factors described herein could have a material adverse effect on our business, financial condition, results of operations, cash flows, and/or key performance indicators. 51 As of December 31, 2024, we served approximately 6.4 million security monitoring service subscribers.
Our future cash needs are expected to include cash for operating activities, working capital, capital expenditures, principal and interest payments on our debt, expected dividend payments to our stockholders, potential share repurchases under our Share Repurchase Plan, and strategic investments.
Our future cash needs are expected to include cash for operating activities, working capital, capital expenditures, principal and interest payments on our debt, expected dividend payments to our stockholders, potential share repurchases under a share repurchase plan, and other business initiatives as they arise.
Our principal liquidity requirements are to finance current operations, invest in acquiring and retaining customers, purchase property and equipment, service our debt, invest in our information technology infrastructure, and return money to shareholders through dividends.
Our principal liquidity requirements are to finance current operations, invest in acquiring and retaining customers, purchase property and equipment, service our debt, invest in our information technology infrastructure, and return money to shareholders through dividends and share repurchases. 59 Our liquidity requirements are primarily funded by our cash flows from operations.
Dealer charge-backs represent customer cancellations charged back to the dealers because the customer canceled service during the charge-back period, which is generally thirteen months.
Customer sites are considered canceled when all services are terminated. Dealer charge-backs represent customer cancellations charged back to the dealers because the customer canceled service during the charge-back period, which is generally thirteen months.
LIQUIDITY AND CAPITAL RESOURCES Liquidity and capital resources, along with our outstanding debt, primarily consist of the following: (in thousands) December 31, 2023 Cash and cash equivalents $ 14,621 Restricted cash and restricted cash equivalents $ 115,329 Availability under First Lien Revolving Credit Facility $ 575,000 Uncommitted available borrowing capacity under 2020 Receivables Facility $ 63,996 Carrying amount of total debt outstanding $ 7,843,961 Liquidity We expect our ongoing sources of liquidity to include cash generated from operations, borrowings under our first lien revolving credit facility (the “First Lien Revolving Credit Facility”) and the 2020 Receivables Facility, and the issuance of equity and/or debt securities as appropriate given market conditions.
LIQUIDITY AND CAPITAL RESOURCES Liquidity and capital resources, along with our outstanding debt, primarily consist of the following: (in thousands) December 31, 2024 Cash and cash equivalents $ 96,212 Restricted cash and restricted cash equivalents $ 107,853 Availability under First Lien Revolving Credit Facility $ 800,000 Uncommitted available borrowing capacity under 2020 Receivables Facility $ 142,099 Carrying amount of total debt outstanding $ 7,707,073 Liquidity We expect our ongoing sources of liquidity to include cash generated from operations, borrowings under our first lien revolving credit facility (the “First Lien Revolving Credit Facility”) and the 2020 Receivables Facility, and the issuance of equity and/or debt securities as appropriate given market conditions.
As of December 31, 2023, our significant short-term and long-term cash requirements, excluding cash required for operations, under our various contractual obligations and commitments primarily included: • Debt principal – As of December 31, 2023, our expected future debt principal payments, excluding finance leases, totaled approximately $7.9 billion, with $287 million due in 2024 primarily related to the $100 million outstanding ADT Notes due 2024 (defined below) and repayments on the 2020 Receivables Facility, and including required quarterly principal payments on our First Lien Term Loan due 2030 and Term Loan A Facility totaling approximately $46 million.
As of December 31, 2024, our significant short-term and long-term cash requirements, excluding cash required for operations, under our various contractual obligations and commitments primarily included: • Debt principal – As of December 31, 2024, our expected future debt principal payments, excluding finance leases, totaled approximately $7.8 billion, with $170 million due in 2025 primarily related to payments on our 2020 Receivables Facility and the required quarterly principal payments on our First Lien Term Loan B due 2030.
Cost of Revenue Monitoring and related services costs (“M&S Costs”) primarily comprises field service and call center costs incurred from providing recurring monthly monitoring and other services. Security and solar installation, product, and other costs comprise costs incurred from the installation of our security and solar systems, respectively.
Cost of Revenue Monitoring and related services costs (“M&S Costs”) primarily includes field service and call center costs incurred from providing recurring monthly monitoring and other services. Security installation, product, and other costs primarily includes costs incurred from the installation of our security systems sold in outright sales transactions.
Cash Flow Analysis The following table is a summary of our cash flow activity for the periods presented: Years Ended December 31, $ Change (in thousands) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Net cash provided by (used in): Operating activities $ 1,657,726 $ 1,887,920 $ 1,649,723 $ (230,194) $ 238,197 Investing activities $ 242,493 $ (1,532,784) $ (1,695,745) $ 1,775,277 $ 162,961 Financing activities $ (2,143,849) $ (14,833) $ (128,448) $ (2,129,016) $ 113,615 The discussion below includes cash flows from both continuing operations and discontinued operations consistent with the presentation on the Statements of Cash Flows.
Cash Flow Analysis The following table is a summary of our cash flow activity for the periods presented: Years Ended December 31, $ Change (in thousands) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Net cash provided by (used in): Operating activities $ 1,884,899 $ 1,657,726 $ 1,887,920 $ 227,173 $ (230,194) Investing activities $ (1,295,428) $ 242,493 $ (1,532,784) $ (1,537,921) $ 1,775,277 Financing activities $ (515,356) $ (2,143,849) $ (14,833) $ 1,628,493 $ (2,129,016) The discussion below includes cash flows from both continuing operations and discontinued operations consistent with the presentation on the Statements of Cash Flows.
Therefore, to align our depreciation and amortization to the pattern in which the related economic benefits are consumed, we use an accelerated method that best matches the future amortization cost with the estimated revenue stream from these customer pools.
The lifing studies indicate that we can expect attrition to be the greatest in the initial years of asset life. Therefore, to align our depreciation and amortization to the pattern in which the related economic benefits are consumed, we use an accelerated method that best matches the future amortization cost with the estimated revenue stream from these customer pools.
These amounts include a commitment with one of our vendors to purchase at least $190 million of security system equipment and components through March 2025. This commitment is also satisfied through purchases made by the Company’s dealer network. Refer to Note 14 “Commitments and Contingencies” for the amounts and timing of such payments.
These amounts include a commitment with one of our vendors to purchase at least $172 million of security system equipment and components through December 2025. This commitment is also satisfied through purchases made by the Company’s dealer network.
As our business continues to grow organically or through acquisitions, our obligations may grow as well. 62 As of December 31, 2023, our contractual obligations entered into in the ordinary course of business, including agreements that are enforceable and legally binding and have a remaining term in excess of one year, totaled approximately $482 million, with approximately $323 million expected to be paid in 2024.
As of December 31, 2024, our contractual obligations entered into in the ordinary course of business, including agreements that are enforceable and legally binding and have a remaining term in excess of one year, totaled approximately $561 million, with approximately $367 million expected to be paid in 2025.
The Solar Receivables Financing Agreement, among other things, provides for an uncommitted revolving loan facility in the aggregate principal amount of up to $300 million, which loans are secured by substantially all the assets of ADT Solar Finance (the “Solar Receivables Facility”).
(the “Solar Receivables Financing Agreement”), which, among other things, provided for an uncommitted revolving loan facility in the aggregate principal amount of up to $300 million, which loans are secured by substantially all the assets of ADT Solar Finance LLC (“ADT Solar Finance”) (the “Solar Receivables Facility”). The Solar Receivables Facility expired in August 2024 with no amounts borrowed.
For further information on year-over-year comparisons between 2022 and 2021 not impacted by the Commercial Divestiture, refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Amended 2022 Annual Report, which was filed with the SEC on July 27, 2023.
For information on year-over-year comparisons between 2023 and 2022, refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2023 Annual Report, which was filed with the SEC on February 28, 2024.
Relocations are sensitive to changes in the residential housing market, and fewer relocations generally lead to improvements in gross customer revenue attrition but less new customer additions. Additionally, non-payment disconnects generally increase in a weaker macroeconomic environment.
Relocations are sensitive to changes in the residential housing market, and fewer relocations generally lead to improvements in gross customer revenue attrition but fewer new customer additions. Additionally, non-payment disconnects generally increase in a weaker macroeconomic environment. We may experience fluctuations in these or other trends in the future as changes in the general macroeconomic environment or housing market develop.
In addition, under the Google Cloud Agreement Addendum, the Company is obligated to make purchases from Google totaling $200 million over a seven-year period (through December 2030), with $35 million in the first two years, $65 million in the next two years after that, and $100 million in the last three years of the commitment. • State Farm Opportunity Fund – Pursuant to the State Farm Development Agreement, State Farm committed up to $300 million to fund product and technology innovation, customer growth, and marketing initiatives.
In addition, under the Google Cloud Agreement Addendum, the Company is obligated to make purchases from Google totaling $200 million over a seven-year period (through December 2030), with an aggregate of $35 million in the first two years, an aggregate of $65 million in the next two years after that, and an aggregate of $100 million in the last three years of the commitment.
Additionally, the cash flows and comprehensive income (loss) of the Commercial Business through the date of sale have not been segregated and are included in the Consolidated Statements of Cash Flows and Consolidated Statements of Comprehensive Income (Loss), respectively, for all periods presented.
Additionally, the cash flows and comprehensive income (loss) of the Solar Business have not been segregated and are included in the Consolidated Statements of Cash Flows and Consolidated Statements of Comprehensive Income (Loss), respectively.
We recognize positions taken or expected to be taken in a tax return in the consolidated financial statements when it is more-likely-than-not (i.e., a likelihood of more than 50%) that the position would be sustained upon examination by tax authorities.
We recognize positions taken or expected to be taken in a tax return in the consolidated financial statements when it is more-likely-than-not that the position would be sustained upon examination by tax authorities. A recognized tax position is then 69 measured at the largest amount of benefit with greater than 50% likelihood of being realized upon ultimate settlement.
Additionally, during 2022 we entered into the Google Commercial Agreement Amendment in which Google agreed to commit an additional $150 million. While the timing of these contributions is still uncertain, we expect to contribute the majority of our $150 million commitment under the Google Commercial Agreement by the end of 2026.
While the timing of these contributions is still uncertain, we expect to contribute the majority of our $150 million commitment under the Google Commercial Agreement by the end of 2026.
These liabilities may increase or decrease over time primarily as a result of tax examinations, and given the status of the examinations, we cannot reliably estimate the period of any cash settlement with the respective taxing authorities.
In addition, we have $25 million of unrecognized tax benefits, excluding interest and penalties, related to various tax positions we have taken. These liabilities may increase or decrease over time primarily as a result of tax examinations, and given the status of the examinations, we cannot reliably estimate the period of any cash settlement with the respective taxing authorities.
Our income tax benefit (expense) during 2022 was $(38) million, resulting in an effective tax rate for the period of 25.3%.
Income tax expense during 2022 was $88 million, resulting in an effective tax rate for the period of 21.7%.
NON-GAAP MEASURES To provide investors with additional information in connection with our results as determined in accordance with GAAP, we disclose Adjusted EBITDA as a non-GAAP measure.
Refer to Note 9 “Income Taxes” for details on our effective tax rate. NON-GAAP MEASURES To provide investors with additional information in connection with our results as determined in accordance with GAAP, we disclose Adjusted EBITDA as a non-GAAP measure.
Our future purchase obligations may be impacted by changes in our business or other internal or external factors.
Our future purchase obligations may be impacted by changes in our business or other internal or external factors. As our business continues to grow organically or through acquisitions, our obligations may grow as well.
The effective tax rate primarily represents the federal statutory rate of 21.0%, state income taxes, net of federal benefits of 6.8%, a (6.1)% favorable impact from a decrease in unrecognized tax benefits, a (5.7)% favorable impact from legislative changes, an (8.0)% favorable impact from federal credits, offset by a 13.3% unfavorable impact from permanently non-deductible items, primarily related to the fair value adjustment of the Forward Contract, and a 4.0% unfavorable impact from non-deductible solar goodwill impairment charges.
The effective tax rate primarily represents the federal statutory rate of 21.0%, state income taxes, net of federal benefits, of 3.0%, and an unfavorable impact from permanently non-deductible items of 5.1%, partially offset by favorable impacts from federal credits of 2.9%, a decrease in unrecognized tax benefits of 2.3%, and legislative changes of 2.1%.
During 2023, $40 million of the Google Success Funds were reimbursed to the Company for our share of joint marketing expenses incurred and reflected as a reduction of advertising costs.
During 2024 and 2023, $30 million and $40 million, respectively, of the Google Success Funds were reimbursed to the Company primarily for certain joint marketing expenses and customer acquisition costs incurred by the Company, substantially all of which was reflected as a reduction of advertising costs.
In addition, as of December 31, 2023, we had outstanding purchase orders of approximately $129 million primarily related to direct materials and information technology and marketing services, which are expected to be materially satisfied in 2024. • Google Commercial Agreement – The Google Commercial Agreement requires us and Google to each contribute $150 million toward certain joint commercial efforts.
In addition, as of December 31, 2024, we had outstanding purchase orders of approximately $143 million primarily related to direct materials and information technology and marketing services, which are expected to be materially satisfied in 2025.
On January 24, 2024, we announced a 57% increase to our 63 quarterly dividend to $0.055 per share to holders of Common Stock and Class B Common Stock of record on March 14, 2024, which will be distributed on or about April 4, 2024.
On February 27, 2025, we announced a dividend of $0.055 per share to holders of Common Stock and Class B Common Stock of record on March 13, 2025, which will be distributed on or about April 3, 2025.
Additionally, we are required to make annual prepayments on the outstanding First Lien Term Loan due 2030 with a percentage of our excess cash flow, as defined in the First Lien Credit Agreement, if our excess cash flow exceeds a certain specified threshold.
Additionally, based on certain specified net first lien leverage ratios, we may be required to make annual prepayments on the outstanding First Lien Term Loan B due 2030 with a percentage of our excess cash flow, as defined in the First Lien Credit Agreement, if our excess cash flow exceeds a certain specified threshold, which is 0% if our net first lien leverage ratio is less than or equal to 2.20 to 1.00.
Additionally, we believe the presentation of RMR is useful to investors because it measures the volume of revenue under contract at a given point in time, which is a useful measure for forecasting future revenue performance as the majority of our revenue comes from recurring sources.
Additionally, we believe the presentation of RMR is useful to investors because it measures the volume of revenue under contract at a given point in time, which is a useful measure for forecasting future revenue performance as the majority of our revenue comes from recurring sources. 54 Gross Customer Revenue Attrition Gross customer revenue attrition is defined as RMR lost as a result of customer attrition, net of dealer charge-backs and reinstated customers, excluding contracts monitored but not owned and self-setup/DIY customers.
In estimating future taxable income, we develop assumptions related to the amount of future pre-tax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage our underlying businesses.
These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage our underlying businesses.
We did not borrow or repay any funds under the First Lien Revolving Credit Facility during 2023. 65 We are required to make scheduled quarterly principal payments on the First Lien Term Loan due 2030, with the remaining balance payable at maturity.
In addition, during 2024, we borrowed and repaid $365 million under the First Lien Revolving Credit Facility. We are required to make scheduled quarterly principal payments on the First Lien Term Loan B due 2030, with the remaining balance payable at maturity.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of December 31, 2022, certain of our variable-rate debt instruments were subject to a SOFR-based floor on interest payments of 0.75%, while our interest rate swap contracts were not subject to the same floor. 71 The impact of a hypothetical 10% change in interest rates on the fair value of our long-term debt (excluding finance leases) and interest rate swap contracts would be: As of December 31, 2023 2022 Long-term debt (excluding finance leases): Carrying amount $ 7.8 billion $ 9.7 billion Fair value (1) $ 7.7 billion $ 9.3 billion Fair value impact of hypothetical 10% change in interest rates $ 193 million $ 241 million Interest rate swap contracts: Notional value $ 3.8 billion $ 2.8 billion Fair value - net asset / liability (2) $ 145 million $ 184 million Fair value impact of hypothetical 10% change in interest rates $ 33 million $ 38 million __________________ (1) Fair value of long-term debt is based on the implied yield from broker-quoted market prices.
Biggest changeThe impact of a hypothetical 10% change in interest rates on the fair value of our long-term debt (excluding finance leases) and interest rate swap contracts would be: As of December 31, 2024 2023 Long-term debt (excluding finance leases): Carrying amount $ 7.6 billion $ 7.8 billion Fair value (1) $ 7.6 billion $ 7.7 billion Fair value impact of hypothetical 10% change in interest rates $ 156 million $ 193 million Interest rate swap contracts: Notional value $ 3.8 billion $ 3.8 billion Fair value - net asset / liability (2) $ 109 million $ 145 million Fair value impact of hypothetical 10% change in interest rates $ 18 million $ 33 million __________________ (1) Fair value of long-term debt is based on the implied yield from broker-quoted market prices.
The carrying amounts of debt outstanding, if any, under the Company’s revolving credit facility and receivables facility approximate fair values as interest rates on these borrowings approximate current market rates. (2) Fair value of interest rate swaps contracts is based on discounted cash flow analyses and was in a net asset position as of December 31, 2023 and 2022.
The carrying amounts of debt outstanding, if any, under the Company’s revolving credit facility and receivables facility approximate fair values as interest rates on these borrowings approximate current market rates. (2) Fair value of interest rate swaps contracts is based on discounted cash flow analyses and was in a net asset position as of December 31, 2024 and 2023.
As of December 31, 2023, the principal balance of our debt, excluding finance leases, that was subject to a variable-rate was approximately 0% (including the impact of interest rate swaps) and approximately 30% (excluding the impact of interest rate swaps) of the total carrying amount of our debt.
As of December 31, 2024, the principal balance of our debt, excluding finance leases, that was subject to a variable-rate was approximately 0% (including the impact of interest rate swaps) and approximately 30% (excluding the impact of interest rate swaps) of the total carrying amount of our debt.
As of December 31, 2023, we are no longer subject to a SOFR-based floor. If current SOFR increases or decreases, the increase or decrease in our debt service obligations on the majority of our variable rate indebtedness will be materially neutralized as our interest rate swaps hedge any increase or decrease in current SOFR.
If current SOFR increases or decreases, the increase or decrease in our debt service obligations on the majority of our variable rate indebtedness will be materially neutralized as our interest rate swaps hedge any increase or decrease in current SOFR.
There were no material impacts as a result of the transition during 2023 to SOFR as the applicable benchmark rate for our debt instruments with a variable rate component, including our interest rate swap contracts. Refer to Note 8 “Debt” and Note 9 “Derivative Financial Instruments” for details on our debt and interest rate swaps, respectively.
Refer to Note 7 “Debt” and Note 8 “Derivative Financial Instruments” for details on our debt and interest rate swaps, respectively.

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