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Item 9A. Controls and Procedures

2022-03-01 compared with 2021-02-25 · 1031 added, 871 removed, 1010 unchanged (65% of the section changed)

2 unchanged sentences

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report.

Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2020, our disclosure controls and procedures were effective in recording, processing, summarizing, and reporting, within the time periods specified in the SEC’s rules and forms, information required to be disclosed in the reports that we file or submit under the Exchange Act, and that such information was accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2021, our disclosure controls and procedures were effective at a reasonable assurance level in ensuring information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Management’s Report on Internal Control over Financial Reporting

4 unchanged sentences

Our management performed an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2021 based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on our assessment and those criteria, our management determined that our internal control over financial reporting was effective as of December 31, 2020.

Our independent registered public accounting firm, PricewaterhouseCoopers LLP, has issued an audit report on our internal control over financial reporting as of December 31, 2020 as set forth in its Report of Independent Registered Public Accounting Firm included in Part IV of this Annual Report.

Based on our assessment and those criteria, our management determined that our internal control over financial reporting was effective at the reasonable assurance level as of December 31, 2021.

We excluded Compass Solar Group, LLC from our assessment of internal control over financial reporting as of December 31, 2021, because it was acquired by the Company in a purchase business combination during December 2021.

The total assets and total revenues of Compass Solar Group, LLC, a wholly-owned subsidiary, represented approximately 5% and less than 1% respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2021.

The effectiveness of the Company's internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in Part IV of this Annual Report.

Changes in Internal Control over Financial Reporting

1 unchanged sentence

OTHER INFORMATION.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not Applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information required by this Item 10.

“Directors, Executive Officers and Corporate Governance” is incorporated herein by reference from our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days after our fiscal year end of December 31, 2020 (the “Proxy Statement”).

The information required by this Item 10 “Directors, Executive Officers and Corporate Governance” is incorporated herein by reference from our Proxy Statement for the 2022 Annual Meeting of Stockholders (the “Proxy Statement”) to be filed with the SEC within 120 days after our fiscal year end of December 31, 2021.

EXECUTIVE COMPENSATION.

The information required by this Item 11.

“Executive Compensation” is incorporated herein by reference from our Proxy Statement.

The information required by this Item 11 “Executive Compensation” is incorporated herein by reference from our Proxy Statement.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required by this Item 12.

“Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” other than the information regarding an Apollo margin loan agreement set forth below required by Item 403(c) of Regulation S-K, is incorporated herein by reference from our Proxy Statement.

Also, incorporated herein by reference is information concerning compensation plans under which our equity securities are authorized for issuance which is found in Item 5.

“Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities” of this Annual Report under the caption "Securities Authorized for Issuance Under Equity Compensation Plans."

The information required by this Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” other than as set forth below as required by Item 201(d) and Item 403(c) of Regulation S-K, is incorporated herein by reference from our Proxy Statement.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information as of December 31, 2021 with respect to shares of Common Stock issuable under our equity compensation plans.

There are no shares of Class B Common Stock issuable under our equity compensation plans.

Equity Compensation Plans (1)

Plan Category Number of securities to be issued upon exercise of outstanding options, warrants, and rights

(a) Weighted-average exercise price of outstanding options, warrants, and rights

(b) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

Equity compensation plans approved by stockholders:

2016 Equity Incentive Plan (2)

2,872,890 $ 6.07 1,930,247

2018 Omnibus Incentive Plan (3)

48,835,582 $ 6.14 27,932,373

Equity compensation plans not approved by stockholders — —

Total 51,708,472 29,862,620

_________________

(1) All numbers in the table above are presented after giving effect to the 1.681-for-1 stock split of Common Stock effective January 4, 2018.

In addition, the exercise prices of outstanding stock options granted prior to the payment of a special dividend on December 23, 2019, were reduced by $0.70 in accordance with the provisions of both compensation plans.

(2) The 2016 Equity Incentive Plan (the “2016 Plan”) provides for the award of stock options, restricted stock units (“RSUs”), restricted stock awards (“RSAs”), and other equity and equity-based awards to our board of directors, officers, and non-officer employees.

Amount shown in the column denoted by (a) includes 1,402,010 of shares of Common Stock that may be issued upon the exercise of service-based stock options and 1,470,880 of shares of Common Stock that may be issued upon the exercise of performance-based stock options.

We do not expect to issue additional share-based compensation awards under the 2016 Plan.

(3) The 2018 Omnibus Incentive Plan (the “2018 Plan”) provides for the award of stock options, RSUs, RSAs, and other equity and equity-based awards to our board of directors, officers, and non-officer employees.

Amount shown in the column denoted by (a) includes shares of common stock that may be issued upon the exercise of service-based and performance-based stock options totaling 24.7 million and 8.6 million shares, respectively, as well as shares of common stock that may be issued upon the vesting of service-based and performance-based RSUs totaling 14.9 million and 0.6 million shares, respectively.

The weighted-average exercise price in column (b) is inclusive of the outstanding RSUs and RSAs, both of which can result in the issuance of shares for no consideration.

Excluding the RSUs and RSAs, the weighted-average exercise price is equal to $9.00.

Apollo Margin Loan Agreement

As of October 3, 2019, certain investment funds directly or indirectly managed by Apollo (the “Apollo Funds”), the Company’s controlling stockholder, informed the Company that they have pledged all of their shares of the Company’s Common Stock, which as of the date of this Annual Report amounted to 608,927,822 shares, pursuant to a margin loan agreement and related documentation on a non-recourse basis.

Apollo has informed the Company that the loan to value ratio of the margin loan on February 16, 2022 was equal to approximately 23.90%.

Apollo has also informed the Company that the margin loan agreement contains customary default provisions and that in the event of a default under the margin loan agreement the secured parties may foreclose upon any and all shares of the Company’s Common Stock pledged to them.

Certain members of the Company’s executive team and certain employees of the Company were entitled to receive their share of the margin loan proceeds (based on their share ownership of the Apollo Funds).

Such persons had the option to either (a) receive such proceeds as distributed or (b) to defer receipt of such proceeds until their attributable share of the obligations under the margin loan have been satisfied in full.

1 unchanged sentence

The Company has not independently verified the foregoing disclosure.

When the margin loan agreement was entered into, the Company delivered customary letter agreements to the secured parties in which it has, among other things, agreed, subject to applicable law and stock exchange rules, not to take any actions that are intended to hinder or delay the exercise of any remedies by the secured parties under the margin loan agreement and related documentation.

When the margin loan agreement was entered into, and as requested when amended, the Company delivered customary letter agreements to the secured parties in which it has, among other things, agreed, subject to applicable law and stock exchange rules, not to take any actions that are intended to hinder or delay the exercise of any remedies by the secured parties under the margin loan agreement and related documentation, as amended.

Except for the foregoing, the Company is not a party to the margin loan agreement and related documentation and does not have, and will not have, any obligations thereunder.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

The information required by this Item 13.

“Certain Relationships and Related Transactions and Director Independence” is incorporated herein by reference from our Proxy Statement.

PRINCIPAL ACCOUNTING FEES AND SERVICES.

The information required by this Item 14.

“Principal Accounting Fees and Services” is incorporated herein by reference from our Proxy Statement.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

The information required by this Item 13 “Certain Relationships and Related Transactions and Director Independence” is incorporated herein by reference from our Proxy Statement.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information required by this Item 14 “Principal Accountant Fees and Services” is incorporated herein by reference from our Proxy Statement.

EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.

Financial Statements

5 unchanged sentences

The information required by this Item is set forth on the exhibit index.

Exhibit Number Exhibit Description

Exhibit Number Incorporated by Reference

Exhibit Description Form Exhibit Filing Date

Share Purchase Agreement, dated September 30, 2019, among ADT Security Holdings Canada Ltd., ADT Inc., and TELUS Communications Inc.

8-K 2.1 10/1/2019

Purchase Agreement, dated November 8, 2021, by and among The ADT Security Corporation, Compass Solar Group, LLC, MGG SPV VIII LLC, MGG SPV VII LLC, Compass Group Management, LLC, the Company Members party thereto, the Blocker Members party thereto, and ADT Inc.

Amended and Restated Certificate of Incorporation of ADT Inc.

8-K 3.1 9/17/2020

Amended and Restated Bylaws of ADT Inc.

10-K 3.2 3/15/2018

Indenture, dated as of July 5, 2012, by and between The ADT Corporation and Wells Fargo Bank, National Association

First Supplemental Indenture, dated as of July 5, 2012, by and among The ADT Corporation, Tyco International Ltd.

and Wells Fargo Bank, National Association

Second Supplemental Indenture, dated as of July 5, 2012, by and among The ADT Corporation, Tyco International Ltd.

and Wells Fargo Bank, National Association

S-1 4.1 12/21/2017

Third Supplemental Indenture, dated as of July 5, 2012, by and among The ADT Corporation, Tyco International Ltd.

and Wells Fargo Bank, National Association

S-1 4.4 12/21/2017

Fourth Supplemental Indenture, dated as of January 14, 2013, by and between The ADT Corporation and Wells Fargo Bank, National Association

Fifth Supplemental Indenture, dated as of October 1, 2013, by and between The ADT Corporation and Wells Fargo Bank, National Association

S-1 4.5 12/21/2017

Sixth Supplemental Indenture, dated as of April 8, 2016, under 2012 Base Indenture, by and among The ADT Corporation, the guarantors party thereto and the Wells Fargo Bank, National Association

S-1 4.7 12/21/2017

Seventh Supplemental Indenture, dated as of April 22, 2016, under 2012 Base Indenture, by and among The ADT Corporation, the guarantors party thereto and the Wells Fargo Bank, National Association

S-1 4.8 12/21/2017

Eighth Supplemental Indenture, dated as of May 2, 2016, under 2012 Base Indenture, by and among Prime Finance, Inc., The ADT Corporation and the Wells Fargo Bank, National Association

S-1 4.9 12/21/2017

Ninth Supplemental Indenture, dated as of November 15, 2017, under 2012 Base Indenture, by and among The ADT Security Corporation, DataShield, LLC and Wells Fargo Bank, National Association

Tenth Supplemental Indenture, dated as of April 18, 2018, under 2012 Base Indenture, by and among The ADT Security Corporation, the guarantors party thereto and Wells Fargo Bank, National Association

Eleventh Supplemental Indenture, dated as of August 17, 2018, by and among The ADT Security Corporation, MSA Systems Integration, Inc.

and Wells Fargo Bank, National Association

10-K 4.10 3/11/2019

Twelfth Supplemental Indenture, dated as of January 7, 2019, under 2012 Base Indenture, by and among The ADT Security Corporation, the guarantors party thereto and Wells Fargo Bank, National Association

Thirteenth Supplemental Indenture, dated as of January 30, 2019, under 2012 Base Indenture, by and among The ADT Corporation, Advanced Cabling Systems, LLC and Wells Fargo Bank, National Association

Fourteenth Supplemental Indenture, dated as of March 12, 2019, under 2012 Base Indenture, by and among The ADT Corporation, LifeShield, LLC, LifeShield Security LLC and Wells Fargo Bank, National Association

10-K 4.13 3/11/2019

Fifteenth Supplemental Indenture, dated as of November 14, 2019, under 2012 Base Indenture, by and among The ADT Security Corporation, I-View Now LLC and Wells Fargo Bank, National Association

Sixteenth Supplemental Indenture, dated as of January 31, 2020, under 2012 Base Indenture, by and among The ADT Security Corporation, Defender Security Canada, Inc., ADT MS2 LLC, DPL Two LLC, Defenders LLC, Home Defender, Inc.

and Wells Fargo Bank, National Association

10-K 4.16 3/10/2020

Indenture, dated as of May 2, 2016, by and between Prime Security One MS, Inc.

and the Wells Fargo Bank, National Association

S-1 4.14 12/21/2017

First Supplemental Indenture, dated as of May 2, 2016, by and among The ADT Corporation, the guarantors party thereto and the Wells Fargo Bank, National Association

S-1 4.15 12/21/2017

Exhibit Number Incorporated by Reference

Exhibit Description Form Exhibit Filing Date

Second Supplemental Indenture, dated as of August 9, 2016, by and between The ADT Corporation, the Notes Guarantors and Wells Fargo Bank, National Association

S-1 4.18 12/21/2017

Third Supplemental Indenture, dated as of November 15, 2017, by and among The ADT Security Corporation, DataShield, LLC and Wells Fargo Bank, National Association

Fourth Supplemental Indenture, dated as of April 18, 2018, by and among The ADT Security Corporation, the guarantors party thereto and Wells Fargo Bank, National Association

Fifth Supplemental Indenture, dated as of August 17, 2018, by and among The ADT Security Corporation, MSA Systems Integration, Inc.

and Wells Fargo Bank, National Association

10-K 4.27 3/11/2019

Sixth Supplemental Indenture, dated as of January 7, 2019, by and among The ADT Security Corporation, the guarantors party thereto and Wells Fargo Bank, National Association

Seventh Supplemental Indenture, dated as of January 30, 2019 by and among the ADT Security Corporation, Advanced Cabling Systems, LLC and Wells Fargo Bank, National Association

Eighth Supplemental Indenture, dated as of March 12, 2019 by and among the ADT Corporation, LifeShield, LLC, LifeShield Security LLC and Wells Fargo Bank, National Association

10-K 4.30 3/11/2019

Ninth Supplemental Indenture, dated as of November 14, 2019, by and among The ADT Security Corporation, I-View Now LLC and Wells Fargo Bank, National Association

Tenth Supplemental Indenture, dated as of January 31, 2020, by and among The ADT Security Corporation, Defender Security Canada, Inc., ADT MS2 LLC, DPL Two LLC, Defenders LLC, Home Defender, Inc.

and Wells Fargo Bank, National Association

Second Lien Notes Indenture, dated as of May 2, 2016, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., Prime Guarantors and Wells Fargo Bank, National Association

Second Lien Notes Supplemental Indenture, dated as of May 2, 2016, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., Prime Guarantors and ADT Guarantors

Second Lien Notes Second Supplemental Indenture, dated as of November 15, 2017, by and among Prime Security Services Borrower, LLC, Prime Finance Inc., DataShield, LLC and Wells Fargo Bank, National Association

Second Lien Notes Third Supplemental Indenture, dated as of April 18, 2018, by and among Prime Security Services Borrower, LLC, Prime Finance Inc., the guarantors party thereto and Wells Fargo Bank, National Association

Second Lien Notes Fourth Supplemental Indenture, dated as of August 17, 2018, by and among Prime Security Services Borrower, LLC, Prime Finance Inc., MSA Systems Integration, Inc.

and Wells Fargo Bank, National Association

Second Lien Notes Fifth Supplemental Indenture, dated as of January 7, 2019, by and among Prime Security Services Borrower, LLC, Prime Finance Inc., the guarantors party thereto and Wells Fargo Bank, National Association

Second Lien Notes Sixth Supplemental Indenture, dated as of January 30, 2019, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., Advanced Cabling Systems, LLC and Wells Fargo Bank, National Association

Second Lien Notes Seventh Supplemental Indenture, dated as of March 12, 2019, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., LifeShield, LLC, LifeShield Security LLC and Wells Fargo Bank, National Association

Second Lien Notes Eighth Supplemental Indenture, dated as of November 14, 2019, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., I-View Now LLC and Wells Fargo Bank, National Association

10-K 4.37 3/10/2020

Indenture, dated as of April 4, 2019, by and among Prime Security Services Borrower, LLC, Prime Finance Inc., the guarantors party thereto from time to time, and Wells Fargo Bank, National Association, as trustee, relating to the $750 million aggregate principal amount of 5.250% first-priority senior secured notes due 2024.

8-K 4.1 4/4/2019

First Supplemental Indenture, dated as of November 14, 2019, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., I-View Now LLC and Wells Fargo Bank, National Association

Second Supplemental Indenture, dated as of January 31, 2020, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc.

, Defender Security Canada, Inc., ADT MS2 LLC, DPL Two LLC, Defenders LLC, Home Defender, Inc.

and Wells Fargo Bank, National Association

10-K 4.49 3/10/2020

8-K 4.20 4/4/2019

First Supplemental Indenture, dated as of September 23, 2019, by and among Prime Security Services Borrower, LLC, Prime Finance Inc., the guarantors party thereto, and Wells Fargo Bank, National Association, as trustee, relating to the $600 million aggregate principal amount of 5.750% first-priority senior secured notes due 2026

8-K 4.1 9/24/2019

Second Supplemental Indenture, dated as of November 14, 2019, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., I-View Now LLC and Wells Fargo Bank, National Association

Third Supplemental Indenture, dated as of January 31, 2020, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc.

, Defender Security Canada, Inc., ADT MS2 LLC, DPL Two LLC, Defenders LLC, Home Defender, Inc.

and Wells Fargo Bank, National Association

10-K 4.53 3/10/2020

Indenture, dated as of January 28, 2020, by and among Prime Security Services Borrower, LLC, Prime Finance Inc., the guarantors party thereto from time to time and Wells Fargo Bank, National Association, as trustee, relating to the $1,300 6.250% Second-Priority Senior Secured Notes due 2028

First Supplemental Indenture, dated as of January 31, 2020, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., Defender Security Canada, Inc., ADT MS2 LLC, DPL Two LLC, Defenders LLC, Home Defender, Inc.

and Wells Fargo Bank, National Association

8-K 4.1 1/28/2020

Indenture, dated as of August 20, 2020, by and among Prime Security Services Borrower, LLC, Prime Finance Inc., the guarantors party hereto from time to time, and Wells Fargo Bank, National Association, as trustee, relating to $1,000 million aggregate principle amount of 3.375% first-priority senior secured notes due 2027

8-K 4.1 8/20/2020

First-Priority Senior Secured Notes Indenture, dated as of July 29, 2021, by and among The ADT Security Corporation, Prime Security Services Borrower, LLC, the guarantors party thereto, and Wells Fargo Bank, National Association, as trustee and collateral agent

8-K 4.1 7/29/2021

Description of Securities

Fifth Amended and Restated First Lien Credit Agreement, dated July 1, 2015, as amended and restated as of May 2, 2016, as further amended and restated as of June 23, 2016, December 28, 2016, February 13, 2017 and June 29, 2017, among Prime Security Services Holdings, LLC, as Holdings, Prime Security Services Borrower, LLC, as Borrower, the Lenders Party thereto and Barclays Bank PLC, as Administrative Agent

Incremental Assumption and Amendment Agreement No.

6, dated as of March 16, 2018, by and among Prime Security Services Borrower, LLC, Prime Security Services Holdings, LLC, the lenders party thereto, Barclays Bank PLC and the other parties party thereto

Incremental Assumption and Amendment Agreement No.

7, dated as of December 3, 2018, by and among Prime Security Services Borrower, LLC, Prime Security Services Holdings, LLC, certain of Prime Security Services Borrower’s subsidiaries, the lenders party thereto, Barclays Bank PLC, as administrative agent and the other parties party thereto.

Incremental Assumption and Amendment Agreement No.

8, dated as of March 15, 2019, by and among Prime Security Services Borrower, LLC, Prime Security Services Holdings, LLC, certain of Prime Security Services Borrower’s subsidiaries, the lenders party thereto, Barclays Bank PLC, as administrative agent and the other parties party thereto.

Incremental Assumption and Amendment Agreement No.

9, dated as of September 23, 2019, by and among Prime Security Services Holdings, LLC, Prime Security Services Borrower, LLC, the lenders party thereto, Barclays Bank PLC, as administrative agent and the other parties party thereto.

Incremental Assumption and Amendment Agreement No.

10, dated as of January 27, 2021, by and among Prime Security Services Holdings, LLC, Prime Security Services Borrower, LLC, the lenders party thereto and Barclays Bank PLC, as administrative agent.

11, dated as of July 2, 2021, by and among Prime Security Services Holdings, LLC, Prime Security Services Borrower, LLC, The ADT Security Corporation, the subsidiary loan parties party thereto, the lenders and issuing banks party thereto and Barclays Bank PLC, as administrative agent

8-K 10.1 7/6/2021

Subsidiary Guarantee Agreement (First Lien), dated July 1, 2015, among the Subsidiaries of Prime Security Services Borrower, LLC named therein and Credit Suisse AG, Cayman Islands Branch, as Collateral Agent

S-1 10.2 12/21/2017

Supplement No.

1, dated as of May 2, 2016, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Securities Services Borrower, LLC and Barclays Bank PLC, as Collateral Agent

S-1 10.6 12/21/2017

Supplement No.

2, dated as of October 31, 2017, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Security Services Borrower, LLC party thereto and Barclays Bank PLC, as Collateral Agent

10-K 10.55 3/11/2019

Supplement No.

3, dated as of January 22, 2018, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Security Services Borrower, LLC party thereto and Barclays Bank PLC, as Collateral Agent

10-K 10.56 3/11/2019

Supplement No.

4, dated as of February 28, 2018, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Security Services Borrower, LLC party thereto and Barclays Bank PLC, as Collateral Agent

10-K 10.57 3/11/2019

Supplement No.

5, dated as of August 17, 2018, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Security Services Borrower, LLC party thereto and Barclays Bank PLC, as Collateral Agent

10-K 10.58 3/11/2019

Supplement No.

6, dated as of January 2, 2019, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Security Services Borrower, LLC party thereto and Barclays Bank PLC, as Collateral Agent

10-K 10.59 3/11/2019

Exhibit Number Incorporated by Reference

Exhibit Description Form Exhibit Filing Date

Supplement No.

7, dated as of January 30, 2019, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Security Services Borrower, LLC party thereto and Barclays Bank PLC, as Collateral Agent

10-K 10.60 3/11/2019

Supplement No.

8, dated as of March 11, 2019, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Security Services Borrower, LLC party thereto and Barclays Bank PLC, as Collateral Agent

10-Q 10.13 5/7/2019

Holdings Guarantee and Pledge Agreement (First Lien), dated and effective as of July 1, 2015, between Prime Security Services Holdings, LLC, as Holdings, and Credit Suisse AG, Cayman Islands Branch, as Collateral Agent

S-1 10.4 12/21/2017

Collateral Agreement (First Lien), dated as of July 1, 2015 among Prime Security Services Borrower, LLC, each Subsidiary of Prime Security Services Borrower, LLC from time to time identified therein as a party and Barclays Bank PLC, as collateral agent

Collateral Agreement (Second Lien), dated as of May 2, 2016, among Prime Security Services Borrower, LLC, as Issuer, Prime Finance Inc., as Co-Issuer, each Subsidiary Guarantor party thereto and Wells Fargo Bank, National Association, as Collateral Agent

S-1 10.5 12/21/2017

Collateral Agreement (Second Lien), dated as of January 28, 2020, among Prime Security Services Borrower LLC, as Issuer, Prime Finance, Inc., as Co-Issuer, each Subsidiary Guarantor party thereto and Wells Fargo Bank, National Association, as Collateral Agent

8-K 10.1 1/28/2020

First Lien/First Lien Intercreditor Agreement, dated as of May 2, 2016 among Barclays Bank PLC, as Collateral Agent, Barclays Bank PLC, as Authorized Representative under the Credit Agreement, Wells Fargo Bank, National Association, as the Initial Other Authorized Representative, and each additional Authorized Representative from time to time party hereto relating to Prime Security Services Borrower, LLC

S-1 10.8 12/21/2017

First Lien/Second Lien Intercreditor Agreement, dated as of July 1, 2015, between Credit Suisse AG, Cayman Islands Branch, as First Lien Facility Agent and Applicable First Lien Agent, and Credit Suisse AG, Cayman Islands Branch, as Second Lien Facility Agent and Applicable Second Lien Agent relating to Prime Security Services Borrower, LLC

S-1 10.9 12/21/2017

Receivables Purchase Agreement, dated as of March 5, 2020, among ADT LLC, individually and as servicer, ADT Finance LLC, as seller, various purchasers and purchaser agents from time to time party thereto, and Mizuho Bank, LTD., as Administrative Agent, Arranger, Collateral Agent and Structuring Agent

10-K 10.21 3/10/2020

Agreement of Amendment to Receivables Purchase Agreement, dated as of April 17, 2020, among ADT LLC, individually and as servicer, ADT Finance LLC, as seller, various purchasers and purchaser agents from time to time party thereto, and Mizuho Bank, LTD., as Administrative Agent, Arranger, Collateral Agent and Structuring Agent

10-Q 10.22 5/7/2020

Second Agreement of Amendment to Receivables Purchase Agreement, dated September 17, 2020, among ADT LLC, individually and as servicer, ADT Finance LLC, as seller, various purchasers and purchaser agents from time to time party thereto, and Mizuho Bank, LTD., as Administrative Agent, Arranger, Collateral Agent and Structuring Agent

10-Q 10.23 11/5/2020

Third Agreement of Amendment to Receivables Purchase Agreement, dated January 29, 2021, among ADT LLC, individually and as servicer, ADT Finance LLC, as seller, various purchasers and purchaser agents from time to time party thereto, and Mizuho Bank, LTD., as Administrative Agent, Arranger, Collateral Agent and Structuring Agent

10-K 10.25 2/25/2021

Fourth Agreement of Amendment to Receivables Purchase Agreement, dated March 5, 2021, among ADT LLC, individually and as servicer, ADT Finance LLC, as seller, various purchasers and purchaser agents from time to time party thereto, and Mizuho Bank, LTD., as Administrative Agent, Arranger, Collateral Agent and Structuring Agent

10-Q 10.26 5/5/2021

Receivables Sale and Contribution Agreement, dated as of April 17, 2020, between ADT LLC, as Originator and Servicer and ADT Finance Inc., as Buyer

10-Q 10.23 5/7/2020

Receivables Financing Agreement, among ADT LLC, ADT Finance LLC and Mizuho Bank, Ltd., dated as of July 16, 2021

8-K 10.1 7/19/2021

First Amendment and Joinder to the Receivables Financing Agreement and the Receivables Sale and Contribution Agreement, among ADT LLC, ADT Finance LLC, Mizuho Bank, Ltd., MUFG Bank, Ltd., BNP Paribas, and Starbird Funding Corporation, dated as of October 29, 2021

8-K 10.1 10/29/2021

Second Amendment to the Receivables Financing Agreement, among ADT LLC, ADT Finance LLC and Mizuho Bank, LTD., dated as of December 10, 2021

Trademark Agreement, dated as of September 25, 2012, by and among ADT Services GmbH, ADT US Holdings, Inc., Tyco International Ltd.

and The ADT Corporation

S-1 10.19 12/21/2017

Patent Agreement, dated as of September 26, 2012, by and between Tyco International Ltd.

and The ADT Corporation

S-1 10.20 12/21/2017

Separation and Distribution Agreement, dated September 26, 2012 by and among Tyco International Ltd., Tyco International Finance S.A., The ADT Corporation and ADT LLC

S-1 10.21 12/21/2017

ADT LLC Supplemental Savings and Retirement Plan, effective as of April 1, 2017

S-1 10.22 12/21/2017

Amendment to the ADT LLC Supplemental Savings and Retirement Plan, effective as of December 18, 2017

10-K 10.31 2/25/2021

Exhibit Number Incorporated by Reference

Exhibit Description Form Exhibit Filing Date

Amendment to the ADT LLC Supplemental Savings and Retirement Plan, effective as of December 24, 2018

10-K 10.32 2/25/2021

Amendment to the ADT LLC Supplemental Savings and Retirement Plan, effective as of December 31, 2018

10-K 10.33 2/25/2021

Amendment to the ADT LLC Supplemental Savings and Retirement Plan, effective as of February 8, 2019

10-K 10.34 2/25/2021

Amendment to the ADT LLC Supplemental Savings and Retirement Plan, effective as of July 29, 2019

Stockholders Agreement by and between the ADT Inc.

and Prime Securities Services TopCo, LP

10-K 10.35 2/25/2021

Stockholders Agreement, dated as of December 14, 2018, by and between the ADT Inc.

and Prime Security Services TopCo Parent, L.P.

Registration Rights Agreement by and between the ADT Inc.

and Prime Securities Services TopCo, LP

10-K 10.24 3/15/2018

Amendment to the Registration Rights Agreement between ADT Inc.

and Prime Security Services TopCo Parent, L.P.

10-Q 10.1 8/9/2018

Securities Purchase Agreement, dated as of July 31, 2020, by and between ADT Inc.

and Google LLC

8-K 10.1 8/3/2020

Investor Rights Agreement, dated as of September 17, 2020 , by and between ADT Inc.

and Google LLC

8-K 10.1 9/17/2020

Form of Indemnification Agreement by and between the Company and each of its Directors and Executive Officers

10-Q 10.34 8/5/2020

Amended and Restated Employment Agreement, dated December 19, 2017, between The ADT Security Corporation (together with any of its subsidiaries and Affiliates) and Donald Young

S-1 10.25 12/21/2017

Amendment to Amended and Restated Employment Agreement, dated May 3, 2019, between The ADT Security Corporation (together with any of its subsidiaries and Affiliates) and Donald Young

10-Q 10.29 5/7/2019

Amended and Restated Employment Agreement, dated December 19, 2017, between The ADT Security Corporation (together with any of its subsidiaries and Affiliates) and Jamie Haenggi

S-1 10.26 12/21/2017

Amended and Restated Employment Agreement, dated December 19, 2017, between The ADT Security Corporation (together with any of its subsidiaries and Affiliates) and Daniel M.

Amended and Restated Employment Agreement, dated December 19, 2017, between ADT LLC, (together with any of its subsidiaries and Affiliates) and James D.

S-1 10.28 12/21/2017

Amended and Restated Employment Agreement, dated December 19, 2017, between ADT LLC, (together with any of its subsidiaries and Affiliates) and Jeffrey Likosar

S-1 10.31 12/21/2017

2018 Omnibus Incentive Plan

S-1/A 10.32 1/8/2018

First Amendment to ADT Inc.

2018 Omnibus Incentive Plan dated April 25, 2019

10-Q 10.33 8/6/2019

Form of Restricted Stock Unit Award Agreement for use under the ADT Inc.

2018 Omnibus Incentive Plan

S-1/A 10.33 1/8/2018

Form of Non-Qualified Option Award Agreement for use under the ADT Inc.

2018 Omnibus Incentive Plan

S-1/A 10.34 1/8/2018

Form of Non-Qualified Option Award Agreement for use under the ADT Inc.

2018 Omnibus Incentive Plan (Class B Unit Redemption)

S-1/A 10.35 1/8/2018

Form of Amendment to Non-Qualified Award Agreement for use under ADT Inc.

2018 Omnibus Incentive Plan (Class B Unit Redemption)

10-Q 10.37 8/6/2019

Form of Common Stock Award Agreement for use under the ADT Inc.

2018 Omnibus Incentive Plan

S-1/A 10.36 1/8/2018

2018 Omnibus Incentive Plan Restricted Stock Unit Non-Employee Director Award Agreement

10-Q 10.9 8/9/2018

Form of Restricted Stock Unit Special Equity Award Agreement for use under the ADT Inc.

2018 Omnibus Incentive Plan

10-Q 10.47 5/7/2020

Form of Non-Qualified Option Special Equity Award Agreement for use under the ADT Inc.

2018 Omnibus Incentive Plan

10-Q 10.48 5/7/2020

Form of Restricted Stock Unit Award Agreement for use under the ADT Inc.

2018 Omnibus Incentive Plan effective as of January 1, 2022

10-Q 10.5 11/9/2021

Form of Non-Qualified Option Award Agreement for use under the ADT Inc.

2018 Omnibus Incentive Plan effective as of January 1, 2022

10-Q 10.6 11/9/2021

Second Amended & Restated Employment Agreement with James D.

10-Q 10.12 11/8/2018

Exhibit Number Incorporated by Reference

Exhibit Description Form Exhibit Filing Date

Amendment to Second Amended & Restated Employment Agreement of James D.

8-K 10.2 12/3/2018

Defenders, Inc.

Executive Change in Control Severance Plan with James Boyce, dated April 24, 2017

10-Q 10.60 5/5/2021

Amendment to Executive Change in Control Severance Plan with James Boyce, dated January 29, 2020

10-Q 10.61 5/5/2021

Offer Letter dated February 3, 2020 by and between James Boyce and ADT Inc.

10-Q 10.62 5/5/2021

Annual Incentive Plan

8-K 10.1 7/29/2021

Investor Rights Agreement, dated December 8, 2021, by and among ADT Inc.

and the Holders party thereto

Subsidiaries of ADT Inc.

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^ Confidential treatment requested.

Confidential portions of this Exhibit 2.1 have been omitted.

Confidential portions of this exhibit have been removed.

* Filed herewith.

** Furnished herewith

+ Management contract or compensatory plan or arrangement.

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

February 25, 2021 By:

March 1, 2022 By:

President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 25, 2021.

DeVries President, Chief Executive Officer and Director

(Principal Executive Officer)

/s/ Jeffrey Likosar Executive Vice President, Chief Financial Officer and Treasurer

/s/ Jeffrey Likosar Chief Financial Officer and President, Corporate Development

(Principal Financial Officer)

Jeffrey Likosar

/s/ Zachary Susil Vice President, Chief Accounting Officer and Controller

/s/ Zachary Susil Senior Vice President, Chief Accounting Officer, Controller, and Chief Financial Officer, ADT Solar

(Principal Accounting Officer)

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Winter Director

/s/ Sigal Zarmi Director

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2 020 and 2019

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

Consolidated Balance Sheets as of December 31, 2021 a nd 2020

Consolidated Statements of Operations for the years ended December 31, 2021, 2020, and 2019

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Notes to Consolidated Financial Statements

Description of Business and Summary of Significant Accounting Policies

Revenue and Receivables

Segment Information

Acquisitions and Disposition

Goodwill and Other Intangible Assets

Derivative Financial Instruments

Share-Based Compensation

Net Income (Loss) per Share

Commitments and Contingencies

Retirement Plans

Related Party Transactions

Condensed Financial Information of Registrant

Report of Independent Registered Public Accounting Firm

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 3 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Compass Solar Group, LLC from its assessment of internal control over financial reporting as of December 31, 2021, because it was acquired by the Company in a purchase business combination during 2021.

We have also excluded Compass Solar Group, LLC from our audit of internal control over financial reporting.

Compass Solar Group, LLC is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent approximately 5% and less than 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2021.

Definition and Limitations of Internal Control over Financial Reporting

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Goodwill Impairment Assessment -- Commercial Reporting Unit

As described in Note 5 to the consolidated financial statements, the Company’s consolidated goodwill balance was $5.2 billion as of December 31, 2020.

Management tests goodwill for impairment at least annually as of the first day of the fourth quarter of each year and more often if an event occurs or circumstances change which indicate it is more-likely-than-not that the estimated fair value of a reporting unit is less than its carrying amount.

Under a qualitative approach, the impairment test for goodwill consists of an assessment of whether it is more-likely-than-not that a reporting unit’s estimated fair value is less than its carrying amount.

If management elects to bypass the qualitative assessment for any reporting unit, or if a qualitative assessment indicates it is more-likely-than-not that the estimated fair value of a reporting unit is less than its carrying amount, management proceeds to a quantitative approach.

Under a quantitative approach, management estimates the fair value of a reporting unit and compares it to its carrying amount.

If the carrying amount exceeds fair value, an impairment loss is recognized in an amount equal to that excess.

Management estimates the fair values of its reporting units using the income approach, which discounts projected cash flows using market participant assumptions.

As described in Note 5 to the consolidated financial statements, the Company’s consolidated goodwill balance was $ 5.9 billion as of December 31, 2021, of which $332.8 million relates to the commercial reporting unit.

Under a qualitative approach, the Company assesses whether it is more-likely-than-not that a reporting unit’s fair value is less than its carrying amount.

If the Company elects to bypass the qualitative assessment for any reporting unit, or if a qualitative assessment indicates it is more-likely-than-not that the estimated fair value of a reporting unit is less than its carrying amount, the Company proceeds to a quantitative approach.

Under a quantitative approach, the Company estimates the fair value of a reporting unit and compares it to its carrying amount.

If the carrying amount of a reporting unit exceeds fair value, an impairment loss is recognized in an amount equal to that excess.

The Company estimates the fair values of its reporting units using the income approach, which discounts projected cash flows using market participant assumptions.

The income approach includes significant assumptions including, but not limited to, forecasted revenue, operating profit margins, operating expenses, cash flows, perpetual growth rates, and discount rates.

Subsequent to the annual goodwill impairment tests in the fourth quarter, the Company’s reporting units changed and now consist of U.S.

and Commercial.

Management also reallocated a portion of goodwill from the former U.S.

reporting unit to the Commercial reporting unit on a relative fair value basis using a market approach that consisted of the application of earnings before interest, taxes, depreciation and amortization (EBITDA) multiples from a selected peer group of publicly-traded companies to arrive at the estimated fair values.

Management qualitatively tested the goodwill associated with the U.S.

and former Red Hawk reporting units immediately prior to the change and quantitatively tested the goodwill associated with the U.S.

and Commercial reporting units immediately following the change.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Commercial reporting unit is a critical audit matter are (i) the significant judgment by management when estimating the fair value of the reporting unit;

(ii) a high degree of auditor judgment, subjectivity, and audit effort in performing procedures and evaluating management’s significant assumptions related to forecasted revenue, operating profit margins, and operating expenses;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

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(iii) testing the completeness and accuracy of the underlying data used in the discounted cash flow model;

and (iv) evaluating the significant assumptions used by management related to forecasted revenue, operating profit margins, and operating expenses.

Evaluating management’s assumptions related to forecasted revenue, operating profit margins, and operating expenses involved evaluating whether the assumptions used by

management were reasonable considering (i) the current and past performance of the reporting units (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

and (iv) evaluating the significant assumptions used by management related to forecasted revenue, operating profit margins, operating expenses, and discount rate.

Evaluating management’s assumptions related to forecasted revenue, operating profit margins, operating expenses, and discount rate involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting units (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow model.

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Hallandale Beach, Florida

February 25, 2021

March 1, 2022

We have served as the Company’s auditor since 2010.

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(in thousands, except share and per share data)

December 31, 2020 December 31, 2019

Current assets:

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Stockholders' equity:

Preferred stock—authorized 1,000,000 and 250,000 shares of $ 0.01 par value as of December 31, 2020 and 2019, respectively;

zero issued and outstanding

Preferred stock—authorized 1,000,000 shares of $ 0.01 par value;

zero issued and outstanding as of December 31, 2021 and 2020.

Common stock—authorized 3,999,000,000 shares of $ 0.01 par value;

issued and outstanding shares of 846,825,868 and 771,013,638 as of December 31, 2021 and 2020, respectively.

Class B common stock—authorized 100,000,000 and zero shares of $ 0.01 par value as of December 31, 2020 and 2019, respectively;

issued and outstanding shares of 54,744,525 and zero as of December 31, 2020 and 2019, respectively.

Class B common stock—authorized 100,000,000 shares of $ 0.01 par value;

issued and outstanding shares of 54,744,525 as of December 31, 2021 and 2020.

Additional paid-in capital 7,261,267 6,640,763

Accumulated deficit ( 3,952,590 ) ( 3,491,069 )

Accumulated other comprehensive loss ( 118,615 ) ( 58,376 )

Accumulated other comprehensive income (loss) ( 68,973 ) ( 118,615 )

Total stockholders' equity 3,248,719 3,039,336

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Loss on sale of business — 738 61,951

Operating income 40,640 196,444 277,840

Operating income (loss) 15,278 40,640 196,444

Interest expense, net ( 457,667 ) ( 708,189 ) ( 619,573 )

Loss on extinguishment of debt ( 37,113 ) ( 119,663 ) ( 104,075 )

Other income 8,293 5,012 27,582

Loss before income taxes ( 778,919 ) ( 522,192 ) ( 632,618 )

Other income (expense) 8,313 8,293 5,012

Income (loss) before income taxes ( 471,189 ) ( 778,919 ) ( 522,192 )

Income tax benefit 130,369 146,726 98,042

Net loss $ ( 632,193 ) $ ( 424,150 ) $ ( 609,155 )

Net loss per share - basic:

Net income (loss) $ ( 340,820 ) $ ( 632,193 ) $ ( 424,150 )

Net income (loss) per share - basic:

Common stock $ ( 0.41 ) $ ( 0.82 ) $ ( 0.57 )

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Class B common stock 54,745 15,855 —

Net loss per share - diluted:

Net income (loss) per share - diluted:

Common stock $ ( 0.41 ) $ ( 0.82 ) $ ( 0.57 )

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2021 2020 2019

Net loss $ ( 632,193 ) $ ( 424,150 ) $ ( 609,155 )

Other comprehensive (loss) income, net of tax:

Net income (loss) $ ( 340,820 ) $ ( 632,193 ) $ ( 424,150 )

Other comprehensive income (loss), net of tax:

Cash flow hedges 46,234 ( 58,114 ) ( 38,103 )

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Defined benefit pension plans 3,408 ( 2,125 ) ( 93 )

Total other comprehensive (loss) income, net of tax ( 60,239 ) 13,403 ( 67,772 )

Comprehensive loss $ ( 692,432 ) $ ( 410,747 ) $ ( 676,927 )

Total other comprehensive income (loss), net of tax 49,642 ( 60,239 ) 13,403

Comprehensive income (loss) $ ( 291,178 ) $ ( 692,432 ) $ ( 410,747 )

See Notes to Consolidated Financial Statements

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Comprehensive

Income (Loss) Total

Stockholders'

Balance as of December 31, 2018 766,881 — $ 7,669 $ — $ 5,969,347 $ ( 1,680,432 ) $ ( 71,779 ) $ 4,224,805

Adoption of accounting standard, net of tax — — — — — 34,430 — 34,430

Net loss — — — — — ( 609,155 ) — ( 609,155 )

Other comprehensive loss, net of tax — — — — — — ( 67,772 ) ( 67,772 )

Issuance of common stock, net of expenses 105,000 — 1,050 — 1,405,678 — — 1,406,728

Dividends — — — — — ( 107,355 ) — ( 107,355 )

Share-based compensation expense 20,756 — — — 135,012 — — 135,012

Other 6 — 6,617 — ( 6,672 ) ( 140 ) — ( 195 )

Balance as of December 31, 2018 766,881 — $ 7,669 $ — $ 5,969,347 $ ( 1,680,432 ) $ ( 71,779 ) $ 4,224,805

Net loss — — — — — ( 424,150 ) — ( 424,150 )

Other comprehensive income, net of tax — — — — — — 13,403 13,403

Net income (loss) — — — — — ( 424,150 ) — ( 424,150 )

Other comprehensive income (loss), net of tax — — — — — — 13,403 13,403

Repurchases of common stock ( 23,883 ) — ( 239 ) — ( 149,629 ) — — ( 149,868 )

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Share-based compensation expense — — — — 85,626 — — 85,626

Other ( 120 ) — ( 1 ) — 4,398 ( 4,388 ) — 9

Transactions related to employee share-based compensation plans and other ( 120 ) — ( 1 ) — 4,398 ( 4,388 ) — 9

Balance as of December 31, 2019 753,622 — $ 7,536 $ — $ 5,977,402 $ ( 2,742,193 ) $ ( 58,376 ) $ 3,184,369

Adoption of accounting standard, net of tax — — — — — ( 2,341 ) — ( 2,341 )

Net loss — — — — — ( 632,193 ) — ( 632,193 )

Other comprehensive income, net of tax — — — — — — ( 60,239 ) ( 60,239 )

Net income (loss) — — — — — ( 632,193 ) — ( 632,193 )

Other comprehensive income (loss), net of tax — — — — — — ( 60,239 ) ( 60,239 )

Issuance of common stock, net of expenses 16,279 54,745 163 547 560,871 — — 561,581

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Share-based compensation expense — — — — 96,013 — — 96,013

Other 1,112 — 11 — 6,466 ( 2,474 ) — 4,003

Transactions related to employee share-based compensation plans and other 1,112 — 11 — 6,466 ( 2,474 ) — 4,003

Balance as of December 31, 2020 771,014 54,745 $ 7,710 $ 547 $ 6,640,763 $ ( 3,491,069 ) $ ( 118,615 ) $ 3,039,336

Net income (loss) — — — — — ( 340,820 ) — ( 340,820 )

Other comprehensive income (loss), net of tax — — — — — — 49,642 49,642

Issuance of common stock, net of expenses 69,667 — 697 — 567,912 — — 568,609

Dividends, including dividends reinvested in common stock — — — — 4 ( 119,154 ) — ( 119,150 )

Share-based compensation expense — — — — 61,237 — — 61,237

Transactions related to employee share-based compensation plans and other 6,145 — 61 — ( 8,649 ) ( 1,547 ) — ( 10,135 )

Balance as of December 31, 2021 846,826 54,745 $ 8,468 $ 547 $ 7,261,267 $ ( 3,952,590 ) $ ( 68,973 ) $ 3,248,719

See Notes to Consolidated Financial Statements

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Cash flows from operating activities:

Net loss $ ( 632,193 ) $ ( 424,150 ) $ ( 609,155 )

Net income (loss) $ ( 340,820 ) $ ( 632,193 ) $ ( 424,150 )

Adjustments to reconcile net loss to net cash provided by operating activities:

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Loss on extinguishment of debt 37,113 119,663 104,075

Intangible and other asset impairments 19,161 — —

Goodwill impairment — — 45,482

Loss on sale of business — 738 61,951

Unrealized loss (gain) on interest rate swap contracts 60,363 8,501 ( 3,226 )

Unrealized (gain) loss on interest rate swap contracts ( 157,505 ) 60,363 8,501

Other non-cash items, net 149,024 144,534 129,275

Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions:

Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:

Accounts receivable, net ( 50,214 ) ( 84,050 ) ( 94,449 )

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Other, net 150,057 25,997 1,530

Net cash provided by operating activities 1,366,749 1,873,117 1,787,607

Net cash provided by (used in) operating activities 1,649,723 1,366,749 1,873,117

Cash flows from investing activities:

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Other investing, net 3,991 45,850 4,975

Net cash used in investing activities ( 1,137,477 ) ( 978,177 ) ( 1,738,210 )

Net cash provided by (used in) investing activities ( 1,695,745 ) ( 1,137,477 ) ( 978,177 )

Cash flows from financing activities:

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Repayment of long-term borrowings, including call premiums ( 1,251,193 ) ( 3,054,798 ) ( 3,845,195 )

Repayment of mandatorily redeemable preferred securities, including redemption premium — — ( 852,769 )

Repayment of receivables facility ( 130,345 ) ( 6,742 ) —

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Other financing, net ( 65,521 ) ( 40,221 ) ( 3,014 )

Net cash (used in) provided by financing activities ( 70,261 ) ( 1,214,204 ) 193,001

Net cash provided by (used in) financing activities ( 128,448 ) ( 70,261 ) ( 1,214,204 )

Effect of currency translation on cash — — 838

Net increase (decrease) in cash and cash equivalents and restricted cash and restricted cash equivalents 159,011 ( 318,426 ) 240,380

Cash and cash equivalents and restricted cash and restricted cash equivalents at beginning of period 48,736 367,162 126,782

Cash and cash equivalents and restricted cash and restricted cash equivalents at end of period $ 207,747 $ 48,736 $ 367,162

Cash and cash equivalents and restricted cash and restricted cash equivalents:

Net increase (decrease) during the period ( 174,470 ) 159,011 ( 318,426 )

Beginning balance 207,747 48,736 367,162

Ending balance $ 33,277 $ 207,747 $ 48,736

See Notes to Consolidated Financial Statements

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Organization and Business

ADT Inc., together with its wholly-owned subsidiaries (collectively, the “Company”), is a leading provider of security, automation, and smart home solutions serving consumer and business customers in the United States (“U.S.”).

ADT Inc., together with its wholly-owned subsidiaries (collectively, the “Company”), is a leading provider of security, interactive, and smart home solutions serving consumer, small business, and commercial customers in the United States (“U.S.”).

With the acquisition of Compass Solar Group, LLC (“Sunpro Solar”) (the “Sunpro Solar Acquisition”) in December 2021, the Company is now also a leading provider of residential solar and energy storage solutions.

was incorporated in the State of Delaware in May 2015 as a holding company with no assets or liabilities.

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The Company primarily conducts business under the ADT brand name.

In January 2018, the Company completed an initial public offering (“IPO”) and its common stock began trading on the New York Stock Exchange under the symbol “ADT.”

The Company is majority-owned by Prime Security Services TopCo Parent, L.P.

In January 2018, the Company completed an initial public offering (“IPO”) and its common stock (“Common Stock”) began trading on the New York Stock Exchange under the symbol “ADT.”

In September 2020, the Company issued and sold 54,744,525 shares of Class B common stock, par value of $ 0.01 per share (“Class B Common Stock”), for an aggregate purchase price of $ 450 million to Google LLC (“Google”) in a private placement pursuant to a securities purchase agreement dated July 31, 2020 (the “Securities Purchase Agreement”).

The Company 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”).

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Actual results could differ materially from these estimates under different assumptions or market conditions.

Information on accounting policies and methods related to revenue, leases, acquisitions and dispositions, goodwill and other intangible assets, debt, mandatorily redeemable preferred securities, derivatives, equity, share-based compensation, net loss per share, income taxes, retirement plans, and loss contingencies is included in the respective footnotes that follow.

Information on accounting policies and methods related to revenue, segments, acquisitions and dispositions, goodwill and other intangible assets, debt, derivatives, income taxes, equity, share-based compensation, net income (loss) per share, loss contingencies, leases, and retirement plans is included in the respective footnotes that follow.

Below is a discussion of accounting policies and methods used in the consolidated financial statements that are not presented in other footnotes.

COVID-19 Pandemic

During March 2020, the World Health Organization declared the outbreak of a novel coronavirus as a pandemic (the “COVID-19 Pandemic”), which has become increasingly widespread in the U.S.

Containment efforts and responses to the COVID-19 Pandemic have varied by individuals, businesses, and state and local municipalities, and in certain areas of the U.S., initial and precautionary measures helped mitigate the spread of the coronavirus.

However, subsequent easing of such measures resulted in the re-emergence of the coronavirus.

The COVID-19 Pandemic has had a notable adverse impact on general economic conditions, including the temporary closures of many businesses, increased governmental regulations, and reduced consumer spending due to significant unemployment and other effects attributable to the COVID-19 Pandemic.

In order to continue to both protect its employees and serve its customers, the Company has adjusted and is continuously evolving certain aspects of its operations, which includes (i) detailed protocols for infectious disease safety for employees, (ii) daily wellness checks for employees, and (iii) certain work from home actions, including for the majority of the Company’s call center professionals.

The Company considered the emergence and pervasive economic impact of the COVID-19 Pandemic in its assessment of its financial position, results of operations, cash flows, and certain accounting estimates as of and for the year ended December 31, 2020.

Additional information on the impacted estimates is included in the respective footnotes that follow.

Due to the evolving and uncertain nature of the COVID-19 Pandemic, it is possible that the effects of the COVID-19 Pandemic could materially impact the Company’s estimates and consolidated financial statements in future reporting periods.

During March 2020, the World Health Organization declared the outbreak of a novel coronavirus as a pandemic (the “COVID-19 Pandemic”).

While responses have varied by individuals, businesses, and state and local municipalities, the COVID-19 Pandemic has had notable adverse impacts on general economic conditions, including the temporary and permanent closures of many businesses, increased governmental regulations, supply chain disruptions, and changes in consumer spending due to significant unemployment and other effects attributable to the COVID-19 Pandemic.

To protect its employees and serve its customers, the Company implemented and is continuously evolving measures, such as (i) detailed protocols for infectious disease safety for employees, (ii) employee daily wellness checks, and (iii) certain work from home actions, including for the majority of the Company’s call center professionals.

As such, the Company considered the on-going and pervasive economic impact of the COVID-19 Pandemic in the assessment of its financial position, results of operations, cash flows, and certain accounting estimates as of and for the years ended December 31, 2021 and 2020.

However, the evolving and uncertain nature of the COVID-19 Pandemic, as well as the evolving nature of the regulatory environment which may require vaccine mandates or other actions that could impact the Company’s employee base or impose additional costs on the business, could materially impact the Company’s estimates and financial results in future reporting periods.

Basis of Presentation and Consolidation

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Certain prior period amounts have been reclassified to conform with the current period presentation.

The Company has a single operating and reportable segment based on the manner in which the Chief Executive Officer, who is the chief operating decision maker (“CODM”), evaluates performance and makes decisions about how to allocate resources.

On January 4, 2018, the board of directors of the Company declared a 1.681 -for-1 stock split (the “Stock Split”) of the Company’s common stock issued and outstanding as of January 4, 2018.

Unless otherwise noted, all share and per-share data included in these consolidated financial statements have been adjusted to give effect to the Stock Split.

In addition, the number of shares subject to, and the exercise price of, the Company’s outstanding options were adjusted to reflect the Stock Split.

Segment Changes

As of December 31, 2020, the Company had a single operating and reportable segment.

Effective in the first quarter of 2021, the manner in which the Company’s Chief Executive Officer, who is the chief operating decision maker (the “CODM”), evaluates performance and makes decisions about how to allocate resources changed, and the Company reported results in two operating and reportable segments, Consumer and Small Business (“CSB”) and Commercial.

In connection with the Sunpro Solar Acquisition in the fourth quarter of 2021, the Company began reporting results for a third operating and reportable segment, Solar, related to the ADT Solar business.

There were no further changes to the Company’s CSB and Commercial segmen ts.

Where applicable, prior periods have been retrospectively adjusted to reflect the Company’s current operating and reportable segment structure.

The accounting policies of the Company’s reportable segments are the same as those of the Company.

The Company organizes its segments based on customer type and offering as follows:

• CSB - The CSB segment primarily includes (i) revenue and operating costs from the sale, installation, servicing, and monitoring of integrated security and automation systems, as well as other offerings such as mobile security and home health solutions;

(ii) other operating costs associated with support functions related to these operations;

and (iii) general corporate costs and other income and expense items not included in the Commercial or Solar segments.

Customers in the CSB segment are comprised of residential homeowners, small business operators, and other individual consumers of security and automation systems.

Where applicable, results for the Company’s Canadian operations prior to its sale in the fourth quarter of 2019 are included in the CSB segment based on the primary customer market served in Canada.

• Commercial - The Commercial segment primarily includes (i) revenue and operating costs from the sale, installation, servicing, and monitoring of integrated security and automation systems, fire detection and suppression systems, and other related offerings;

(ii) other operating costs associated with support functions related to these operations;

and (iii) dedicated corporate and other costs.

Customers in the Commercial segment are comprised of larger businesses with more expansive facilities (typically larger than 10,000 square feet) and multi-site operations, which often require more sophisticated integrated solutions.

• Solar - The Solar segment primarily includes (i) revenue and operating costs from the design and installation of solar and related solutions and services;

(ii) other operating costs associated with support functions related to these operations;

and (iii) dedicated corporate and other costs.

Customers in the Solar segment are comprised of residential homeowners who purchase solar and energy storage solutions, energy efficiency upgrades, and roofing services.

Refer to Note 3 “Segment Information” for additional information on the Company’s segments.

Foreign Currency Translation and Transaction Gains and Losses

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Equity accounts are translated at historical foreign exchange rates.

The effects of these translation adjustments are reported as a component of accumulated other comprehensive (loss) income (“AOCI”) in the Consolidated Balance Sheets.

The effects of these translation adjustments are reported as a component of accumulated other comprehensive income (loss) (“AOCI”) in the Consolidated Balance Sheets.

In addition, translation adjustments related to intercompany loans denominated in a foreign currency that are determined to be of a long-term investment nature are reported as a component of AOCI in the Consolidated Balance Sheets.

For any transaction that is denominated in a currency different from the entity’s functional currency, a gain or loss is recognized in the Consolidated Statements of Operations based on the difference between the foreign exchange rate at the transaction date and the foreign exchange rate at the transaction settlement date (or rate at period end, if unsettled).

For transactions denominated in a currency different from the entity’s functional currency, gains or losses are recognized in the Consolidated Statements of Operations based on the difference between the foreign exchange rate at each transaction date and the foreign exchange rate at the transaction settlement date (or rate at period end, if unsettled).

Cash and Cash Equivalents and Restricted Cash and Restricted Cash Equivalents

All highly liquid investments with original maturities of three months or less from the time of purchase are considered to be cash equivalents.

Restricted cash and restricted cash equivalents are cash and cash equivalents that are restricted for a specific purpose and cannot be included in the general cash and cash equivalents account.

Restricted cash and restricted cash equivalents are cash and cash equivalents, which are restricted for a specific purpose and cannot be included in the general cash and cash equivalents account.

Restricted cash and restricted cash equivalents are reflected in prepaid expenses and other current assets in the Consolidated Balance Sheets.

The following table provides a reconciliation of the amount of cash and cash equivalents and restricted cash and restricted cash equivalents reported in the Consolidated Balance Sheets to the total of the same of such amounts shown in the Consolidated Statements of Cash Flows:

The amount of cash and cash equivalents and restricted cash and restricted cash equivalents reported in the Consolidated Balance Sheets as reconciled to the amounts shown in the Consolidated Statements of Cash Flows is as follows:

Years Ended December 31,

(in thousands) 2021 2020 2019

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Restricted cash and restricted cash equivalents 8,824 2,749 —

Cash and cash equivalents and restricted cash and restricted cash equivalents at end of period $ 207,747 $ 48,736 $ 367,162

Ending balance $ 33,277 $ 207,747 $ 48,736

Supplementary Cash Flow Information

The following is a summary of supplementary cash flow information and material non-cash investing and financing transactions, excluding leases, for the periods presented:

The following table summarizes supplementary cash flow information and material non-cash investing and financing transactions, excluding leases:

Years Ended December 31,

(in thousands) 2021 2020 2019

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Issuance of shares for acquisition of business $ 528,503 $ 113,841 $ —

As discussed in Note 4 “Acquisitions and Disposition,” in addition to the issuance of shares for acquisition of business above for 2021, total consideration related to the Sunpro Solar Acquisition included approximately $ 40 million related to 5 million shares of the Company’s Common Stock to be issued in various increments over the twelve-month period subsequent to the acquisition date.

Refer to Note 13 “Leases” for cash flows and supplemental information associated with the Company’s leases.

Inventories, net

Inventories are primarily comprised of security system components and parts.

Inventories are primarily comprised of components and parts for the Company’s security and solar systems.

The Company records inventory at the lower of cost and net realizable value.

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Work-in-Progress

Work-in-progress includes certain costs incurred for customer installations of security system equipment sold outright to customers that have not yet been completed.

Work-in-progress is primarily comprised of certain costs incurred for installations of security system equipment sold outright to customers that have not yet been completed.

Property and Equipment, net

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Machinery, equipment, and other Up to 10 years

Depreciation expense is included in depreciation and intangible asset amortization in the Consolidated Statements of Operations and was $ 187 million, $ 187 million, and $ 166 million during 2020, 2019, and 2018, respectively.

Repairs and maintenance expenditures are expensed when incurred.

The gross carrying amount, accumulated depreciation, and net carrying amount of property and equipment, net, as of the periods presented were as follows:

The gross carrying amount, accumulated depreciation, and net carrying amount of property and equipment were as follows:

(in thousands) 2021 2020

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Property and equipment, net $ 364,108 $ 325,716

Depreciation expense is reflected in depreciation and intangible asset amortization in the Consolidated Statements of Operations as follows:

Years Ended December 31,

(in thousands) 2021 2020 2019

Depreciation expense $ 197,202 $ 187,386 $ 187,397

Repairs and maintenance expenditures are expensed when incurred.

Subscriber System Assets, net and Deferred Subscriber Acquisition Costs, net

The Company capitalizes certain costs associated with transactions in which the Company retains ownership of the security system as well as incremental selling expenses related to acquiring customers.

These costs include equipment, installation costs, and other incremental costs and are recorded in subscriber system assets, net, and deferred subscriber acquisition costs, net, in the Consolidated Balance Sheets.

These assets embody a probable future economic benefit as they contribute to the generation of future monitoring and related services revenue for the Company.

Subscriber system assets represent capitalized equipment and installation costs incurred in connection with transactions in which the Company retains ownership of the security system.

Deferred subscriber acquisition costs represent selling expenses (primarily commissions) that are incremental to acquiring customers.

The Company records subscriber system assets and deferred subscriber acquisition costs in the Consolidated Balance Sheets as these assets embody a probable future economic benefit for the Company through the generation of future monitoring and related services revenue.

Upon customer termination, the Company may retrieve such assets.

Depreciation expense relating to subscriber system assets is included in depreciation and intangible asset amortization in the Consolidated Statements of Operations and was $ 502 million, $ 558 million, and $ 549 million during 2020, 2019, and 2018, respectively.

The gross carrying amount, accumulated depreciation, and net carrying amount of subscriber system assets as of the periods presented were as follows:

Subscriber system assets, net reflected in the Consolidated Balance Sheets was as follows:

(in thousands) 2021 2020

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Subscriber system assets, net $ 2,867,528 $ 2,663,228

Deferred subscriber acquisition costs represent incremental selling expenses (primarily commissions) related to acquiring customers.

Amortization expense relating to deferred subscriber acquisition costs included in selling, general and administrative expenses in the Consolidated Statements of Operations was $ 97 million, $ 80 million, and $ 60 million during 2020, 2019, and 2018, respectively.

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.

The Company depreciates and amortizes its pooled subscriber system assets and related deferred subscriber acquisition costs using an accelerated method over the estimated life of the customer relationship, which is 15 years.

In order to align the depreciation and amortization of subscriber system assets and related deferred costs to the pattern in which their economic benefits are consumed, the accelerated method utilizes an average declining balance rate of approximately 250% and converts to straight-line methodology when the resulting charge is greater than that from the accelerated method, resulting in an average charge of approximately 55% of the pool within the first five years, 25% within the second five years, and 20% within the final five years.

Subscriber system assets and any related deferred subscriber acquisition costs are accounted for on a pooled basis based on the month and year of customer acquisition.

The Company depreciates and amortizes these pooled costs using an accelerated method over the estimated life of the customer relationship, which is 15 years.

In order to align the depreciation and amortization of these pooled costs to the pattern in which their economic benefits are consumed, the accelerated method utilizes an average declining balance rate of approximately 250 % and converts to straight-line methodology when the resulting charge is greater than that from the accelerated method, resulting in an average charge of approximately 55 % of the pool within the first five years, 25 % within the second five years, and 20 % within the final five years.

Depreciation and amortization of subscriber system assets and deferred subscriber acquisition costs are reflected in depreciation and intangible asset amortization and selling, general, and administrative expenses, respectively, in the Consolidated Statements of Operations as follows:

Years Ended December 31,

(in thousands) 2021 2020 2019

Depreciation of subscriber system assets $ 506,568 $ 501,669 $ 558,111

Amortization of deferred subscriber acquisition costs $ 126,089 $ 96,823 $ 80,128

Long-Lived Asset Impairments

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There were no material long-lived asset impairments during 2021, 2020, or 2019.

Refer to Note 5 “Goodwill and Other Intangible Assets” for discussion of intangible asset impairments.

Accrued Expenses and Other Current Liabilities

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Payroll-related accruals 196,165 99,771

Operating lease liabilities 37,359 30,689

Fair value of interest rate swaps 50,360 65,462

Other accrued liabilities 328,782 264,294

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Radio Conversion Costs

During 2018, the Company completed a program to replace 2G cellular technology used in many of its security systems.

In 2019, the providers of 3G and Code-Division Multiple Access (“CDMA”) cellular networks notified the Company that they will be retiring their 3G and CDMA networks during 2022.

Accordingly, during 2019, the Company commenced a program to replace the 3G and CDMA cellular equipment used in many of its security systems.

The Company estimates the range of net costs for this replacement program at $ 225 million to $ 300 million through 2022.

The Company expects to incur approximately $ 145 million to $ 220 million of net costs during 2021.

These ranges are net of any revenue the Company collects from customers associated with these radio replacements and cellular network conversions.

The Company seeks to minimize these costs by converting customers during routine service visits whenever possible.

During November 2020, the Company acquired Cell Bounce, a technology company with proprietary radio conversion technology in the form of a user-installable device, which is expected to allow for the transition of customers on 3G networks in a cost efficient and timely manner.

The replacement program and pace of replacement are subject to change and may be influenced by the Company’s ability to access customer sites due to the COVID-19 Pandemic;

cost-sharing opportunities with suppliers, carriers, and customers;

and new and innovative technologies.

Radio conversion revenue associated with the replacement program is included in monitoring and related services revenue in the Consolidated Statements of Operations, while radio conversion costs are included in selling, general and administrative expenses in the Consolidated Statements of Operations.

The Company incurred $ 89 million, $ 30 million, and $ 5 million of radio conversion costs during 2020, 2019, and 2018, respectively.

The Company recognized $ 37 million and $ 5 million of incremental radio conversion revenue during 2020 and 2019, respectively.

The Company did not recognize incremental radio conversion revenue during 2018.

During 2019, the Company commenced a program to replace the 3G and Code-Division Multiple Access (“CDMA”) cellular equipment used in many of its security systems as a result of the cellular network providers notifying the Company they will be retiring their 3G and CDMA networks during 2022.

From inception of this program through December 31, 2021, the Company incurred $ 288 million of net radio conversion costs.

The estimated remaining radio conversion costs and related incremental revenue are not expected to be material.

Radio conversion costs and radio conversion revenue are reflected in selling, general, and administrative expenses and monitoring and related services revenue, respectively, in the Consolidated Statements of Operations as follows:

Years Ended December 31,

(in thousands) 2021 2020 2019

Radio conversion costs $ 250,490 $ 88,709 $ 30,038

Radio conversion revenue $ 39,127 $ 36,820 $ 5,055

Merger, Restructuring, Integration, and Other

Merger, restructuring, integration, and other represents certain direct and incremental costs resulting from acquisitions made by the Company, integration costs as a result of those acquisitions, costs related to the Company’s restructuring efforts, as well as fair value remeasurements and impairment charges on certain strategic investments.

Other income was not material during 2020 and 2019.

During 2018, other income primarily included $ 22 million of licensing fees as well as a gain of $ 7.5 million from the sale of equity in a third-party that the Company received as part of a non-recurring settlement.

Concentration of Credit Risks

The majority of the Company’s cash and cash equivalents and restricted cash and restricted cash equivalents are held at major financial institutions.

Certain account balances exceed the Federal Deposit Insurance Corporation insurance limits of $250,000 per account, as a result, there is a concentration of credit risk related to amounts in excess of the insurance limits.

The Company regularly monitors the financial stability of these financial institutions and believes that there is no exposure to any significant credit risk in cash and cash equivalents and restricted cash and restricted cash equivalents.

The Company’s risk due to the concentration of credit risk associated with accounts receivable is limited due to the significant size of the Company’s customer base.

There is a concentration of credit risk related to certain account balances in excess of the Federal Deposit

Insurance Corporation insurance limit of $250,000 per account.

The Company regularly monitors the financial stability of these financial institutions and believes there is no exposure to any significant credit risk for its cash and cash equivalents and restricted cash and restricted cash equivalents.

Concentration of credit risk associated with the Company’s accounts receivable is limited due to the significant size of the customer base.

Fair Value of Financial Instruments

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Cash Equivalents - Included in cash and cash equivalents are investments in money market mutual funds.

Cash equivalents totaled $ 143 million as of December 31, 2020.

The Company had no cash equivalents as of December 31, 2019.

The Company had no material investments in money market mutual funds as of December 31, 2021 and $ 143 million of such investments as of December 31, 2020.

These investments are classified as Level 1 fair value measurements, which represent unadjusted quoted prices in active markets for identical assets or liabilities.

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The resulting fair value is classified as a Level 3 fair value measurement.

The following table presents the net carrying amount and fair value of retail installment contract receivables as of the periods presented:

December 31, 2020 January 1, 2020 (1)

The total carrying amount and fair value of retail installment contract receivables were as follows:

(in thousands) Carrying

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Retail installment contract receivables, net $ 330,605 $ 255,147 $ 141,591 $ 112,676

_________________

(1) Balances reflected are subsequent to the adoption of CECL (as defined below) on January 1, 2020.

Long-Term Debt Instruments - The fair value of the Company’s debt instruments was determined using broker-quoted market prices, which represent prices based on quoted prices for similar assets or liabilities as well as other observable market data.

The carrying amounts of debt outstanding, if any, under the Company’s revolving credit facility and receivables facility approximate fair value as interest rates on these borrowings approximate current market rates.

The resulting fair value is classified as a Level 2 fair value measurement.

The following table presents the carrying amount and fair value of the Company’s long-term debt instruments that are subject to fair value disclosures as of the periods presented:

Long-Term Debt Instruments - The fair values of the Company’s debt instruments were determined using broker-quoted market prices, which represent quoted prices for similar assets or liabilities as well as other observable market data.

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.

The resulting fair values are classified as Level 2 fair value measurements.

The total carrying amount and fair value of long-term debt instruments subject to fair value disclosures were as follows:

(in thousands) Carrying

Value Carrying

Debt instruments, excluding finance lease obligations $ 9,431,216 $ 10,127,291 $ 9,617,491 $ 10,177,751

Long-term debt instruments, excluding finance lease obligations $ 9,599,610 $ 10,043,877 $ 9,431,216 $ 10,127,291

Derivative Financial Instruments - Derivative financial instruments are reported at fair value as either assets or liabilities in the Consolidated Balance Sheets.

These fair values are primarily calculated using discounted cash flow models that utilize observable inputs, such as quoted forward interest rates, and incorporate credit risk adjustments to reflect the risk of default by the counterparty or the Company.

The resulting fair value is classified as a Level 2 fair value measurement.

These fair values are primarily calculated using discounted cash flow models utilizing observable inputs, such as quoted forward interest rates, and incorporate credit risk adjustments to reflect the risk of default by the counterparty or the Company.

The resulting fair values are classified as Level 2 fair value measurements.

In the normal course of business, the Company is liable for contract completion and product performance.

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Recently Adopted Accounting Pronouncements

Financial Accounting Standards Board Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instrument , and related amendments, introduces new guidance which makes substantive changes to the accounting for credit losses.

This guidance introduces the current expected credit losses model (“CECL”) which applies to financial assets subject to credit losses and measured at amortized cost, as well as certain off-balance sheet credit exposures.

The CECL model requires an entity to estimate credit losses expected over the life of an exposure, considering information about historical events, current conditions, and reasonable and supportable forecasts and is generally expected to result in earlier recognition of credit losses.

The Company adopted this guidance as of January 1, 2020 using the modified retrospective approach and recognized a cumulative effect adjustment to the opening balance of accumulated deficit with no restatement of comparative periods.

The impact of adoption was not material.

ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract , aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is classified as a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The Company adopted the guidance as of January 1, 2020 on a prospective basis, which will result in capitalized implementation costs being classified in the same line item as the fees associated with the cloud computing service agreement in the Consolidated Balance Sheets, Statements of Operations, and Statements of Cash Flows.

ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting , provides optional guidance for a limited period of time to ease the potential burden of accounting for reference rate reform.

The guidance was effective for the Company beginning on March 12, 2020, and the Company will apply the amendments prospectively through December 31, 2022.

Recently Issued Accounting Pronouncements

ASU 2020-06, Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in Entity’s Own Equity , provides guidance to ease the potential burden of accounting for convertible instruments, derivatives related to an entity’s own equity, and the related earnings per share considerations.

Financial Accounting Standards Board Accounting Standards Update (“ASU”) 2020-06, Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in Entity’s Own Equity , provides guidance to ease the potential burden of

accounting for convertible instruments, derivatives related to an entity’s own equity, and the related earnings per share considerations.

The Company early adopted the guidance as of January 1, 2021.

The impact from adoption was not material.

ASU 2021-01, Reference Rate Reform (Topic 848) amends ASU 2020-04 and clarifies the scope and guidance of Topic 848 to allow derivatives impacted by the reference rate reform to qualify for certain optional expedients and exceptions for contract modifications and hedge accounting.

The guidance is optional and is effective for a limited period of time through December 31, 2022.

As of December 31, 2021, this guidance had no impact on the consolidated financial statements.

However, the Company will continue to evaluate this guidance.

ASU 2021-08, Business Combinations:

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, as if the acquiring entity had originated the related revenue contracts.

Early adoption is permitted, including interim periods within those fiscal years.

An entity that early adopts this guidance in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application.

This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

The Company intends to early adopt this guidance in the first quarter of 2021, and the impact of adoption is not anticipated to be material.

The Company early adopted the guidance during the fourth quarter of 2021.

As of December 31, 2021, this guidance did not have a material impact on the consolidated financial statements.

Other Subsequent Events

In January 2022, the Company announced that together with Ford Motor Company (“Ford”), the Company will be forming a new entity, Canopy, which will combine ADT’s professional security monitoring and Ford’s AI-driven video camera technology to help customers strengthen security of new and existing vehicles across automotive brands.

Ford and ADT’s investment in Canopy is subject to certain conditions, including regulatory approvals, and initial funding is expected to close in the second quarter of 2022.

ADT and Ford expect to invest approximately $ 100 million collectively during the next three years , of which ADT will contribute 40 %.

Revenue and Receivables

The Company generates revenue primarily through contractual monthly recurring fees received for monitoring and related services provided to customers.

In transactions in which the Company provides monitoring and related services but retains ownership of the security system, the Company’s performance obligations primarily include monitoring, related services (such as maintenance agreements), and a material right associated with the one-time non-refundable fees received in connection with the initiation of a monitoring contract that the customer will not be required to pay again upon a renewal of the contract, which is referred to as deferred subscriber acquisition revenue.

The portion of the transaction price associated with monitoring and related services revenue is recognized when the services are provided to the customer and is reflected in monitoring and related services revenue in the Consolidated Statements of Operations.

Deferred subscriber acquisition revenue is deferred and recorded as deferred subscriber acquisition revenue in the Consolidated Balance Sheets upon initiation of a monitoring contract.

Deferred subscriber acquisition revenue is amortized on a pooled basis into installation and other revenue in the Consolidated Statements of Operations over the estimated life of the customer relationship using an accelerated method consistent with the amortization of subscriber system assets and deferred subscriber acquisition costs associated with the transaction.

Amortization of deferred subscriber acquisition revenue was $ 125 million, $ 107 million, and $ 79 million in 2020, 2019, and 2018, respectively.

In transactions involving a security system that is sold outright to the customer, the Company’s performance obligations generally include monitoring, related services, and the sale and installation of the security system.

For such arrangements, the Company allocates a portion of the transaction price to each performance obligation based on relative standalone selling price, which is determined using observable internal or external pricing and profitability metrics.

Revenue associated with the sale and installation of a security system is recognized either at a point in time or over time based upon the nature of the transaction and contractual terms and is reflected in installation and other revenue in the Consolidated Statements of Operations.

For revenue recognized over time, progress toward complete satisfaction of the performance obligation is primarily measured using a cost-to-cost measure of progress method.

The cost input is based primarily on contract cost incurred to date compared to total estimated contract cost.

This measure of progress method includes forecasts based on the best information available and reflects the Company’s judgment to faithfully depict the value of the services transferred to the customer.

Revenue from product sales related to the sale and installation of security systems was $ 998 million, $ 709 million, and $ 393 million during 2020, 2019, and 2018, respectively.

Cost of revenue from product sales related to the sale and installation of security systems was $ 727 million, $ 574 million, and $ 318 million during 2020, 2019, and 2018, respectively.

Early termination of the contract by the customer results in a termination charge in accordance with the contract terms.

Contract termination charges are recognized in revenue when collectability is probable and are reflected in monitoring and related services revenue in the Consolidated Statements of Operations.

The Company records revenue in the Consolidated Statements of Operations net of sales and other taxes.

Amounts collected from customers for sales and other taxes are reported as a liability net of the related amounts remitted.

Customer billings for services not yet rendered are deferred and recognized as revenue as services are provided.

These fees are recorded as current deferred revenue in the Consolidated Balance Sheets as the Company expects to satisfy any remaining performance obligations, as well as recognize the related revenue, within the next twelve months.

Accordingly, the Company has applied the practical expedient regarding deferred revenue to exclude the value of remaining performance obligations if (i) the contract has an original expected term of one year or less or (ii) the Company recognizes revenue in proportion to the amount it has the right to invoice for services performed.

The following table sets forth the Company’s revenue disaggregated by source for the periods presented:

For CSB and Commercial, the Company’s performance obligations generally include monitoring, related services (such as maintenance agreements), and the sale and installation of a security system or a material right in transactions in which the Company retains ownership of the security system (as discussed below).

For Solar, the Company’s performance obligations generally include the sale and installation of a solar system, and may include additional performance obligations such as roofing services or the sale and installation of additional products such as batteries.

The transaction price is allocated to each performance obligation based on relative standalone selling price, which is determined using observable internal and external pricing, profitability, and operational metrics.

The following table presents the Company’s disaggregated revenue:

Years Ended December 31,

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Installation and other 272,743 564,575 189,272

Total CSB 4,146,028 4,325,189 4,080,347

Monitoring and related services 474,428 426,373 416,507

Installation and other 639,304 563,225 628,803

Total Commercial 1,113,732 989,598 1,045,310

Installation and other 47,351 — —

Total Solar 47,351 — —

Total revenue $ 5,307,111 $ 5,314,787 $ 5,125,657

On January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers , using the modified retrospective transition method, whereby the cumulative effect of initially applying the new standard was recognized as an adjustment to the opening balance of stockholders’ equity.

Accordingly, the Company recorded a net increase to the opening balance of stockholders’ equity of $ 34 million, which is net of tax of $ 12 million.

Equipment Ownership Model Change

During February 2020, the Company launched a new revenue model initiative for certain residential customers, which (i) revised the amount and nature of fees due at installation, (ii) introduced a 60 month monitoring contract option, and (iii) introduced a new retail installment contract which allows qualifying residential customers to repay the fees due at installation over the course of a 24, 36, or 60 month interest-free period.

Due to the requirements of the Company’s initial third-party consumer financing program, the Company also transitioned its security system ownership model from a predominately Company-owned model to a predominately customer-owned model (the “Equipment Ownership Model Change”).

During May 2020, the Company started to transition its security system ownership model to a predominately Company-owned model as a result of an amendment to its uncommitted receivables securitization financing agreement (the “Receivables Facility”).

Revenue is recognized in the Consolidated Statements of Operations, net of sales and other taxes.

Amounts collected from customers for sales and other taxes are reported as a liability net of the related amounts remitted.

Termination charges are assessed in accordance with the terms of the contract when customers terminate a contract early.

Contract termination charges are recognized in revenue when collectability is probable and are reflected in monitoring and related services revenue in the Consolidated Statements of Operations.

Company-Owned - In transactions in which the Company provides monitoring and related services but retains ownership of the security system (referred to as Company-owned transactions), the Company’s performance obligations primarily include monitoring and related services, as well as a material right associated with the one-time non-refundable fees in connection with the initiation of a monitoring contract which the customer will not be required to pay again upon a renewal of the contract (referred to as deferred subscriber acquisition revenue).

The portion of the transaction price associated with monitoring and related services is recognized when the services are provided to the customer and is reflected in monitoring and related services revenue in the Consolidated Statements of Operations.

The portion of the transaction price associated with the material right is deferred upon initiation of a monitoring contract and reflected as deferred subscriber acquisition revenue in the Consolidated Balance Sheets.

Deferred subscriber acquisition revenue is amortized on a pooled basis over the estimated life of the customer relationship using an accelerated method consistent with the treatment of subscriber system assets and deferred subscriber acquisition costs.

Amortization of deferred subscriber acquisition revenue is reflected in installation and other revenue in the Consolidated Statements of Operations as follows:

Years Ended December 31,

( in thousands )

2021 2020 2019

Amortization of deferred subscriber acquisition revenue $ 172,061 $ 124,804 $ 107,284

Customer-Owned - In transactions involving security systems sold outright to the customer (referred to as outright sales), the Company’s performance obligations generally include the sale and installation of the system as well as any monitoring and related services.

The portion of the transaction price associated with the sale and installation of a system is recognized either at a point in time or over time based upon the nature of the transaction and contractual terms and is reflected in installation and other revenue in the Consolidated Statements of Operations.

For revenue recognized over time, progress toward complete satisfaction of the performance obligation is primarily measured using a cost-to-cost measure of progress method.

The cost input driving revenue recognition for contracts where revenue is recognized over time is based primarily on contract cost incurred to date compared to total estimated contract cost.

Approximately half of installation and other revenue generated by the Commercial segment is recognized over time.

The portion of the transaction price associated with monitoring and related services is recognized when services are provided to the customer and is reflected in monitoring and related services revenue in the Consolidated Statements of Operations.

Solar - In transactions within our Solar business, the Company’s performance obligations generally include the sale and installation of a solar system, and may include additional performance obligations such as roofing services or the sale and installation of additional products such as batteries.

Revenue is recognized when control over the products and services are transferred to the customer and is reflected in installation and other revenue in the Consolidated Statements of Operations.

The Company also enters into agreements with third-party lenders in order to access loan products for the Company’s Solar customers.

The lender has the exclusive right to determine if a loan application will be accepted or rejected, and the Company is not a party to the loan agreement.

There are no guarantees related to the repayment of the loan, and as such, there is no liability associated with these arrangements.

Once a loan is approved, the lender will pay the Company the loan amount upfront or upon installation, net of fees.

These fees are recorded as a reduction of installation and other revenue and were not material during 2021.

Product Sales

Revenue and cost of revenue from products in outright sales were as follows:

Years Ended December 31,

( in thousands )

2021 2020 2019

Revenue from product sales $ 777,611 $ 997,876 $ 709,242

Cost of revenue from product sales $ 635,518 $ 726,622 $ 573,691

Deferred Revenue

Deferred revenue represents customer billings for services not yet rendered and is primarily related to recurring monitoring and related services.

In addition, payments received for the installation of a solar system after the agreement is signed but before performance obligations are satisfied are recorded as deferred revenue.

These fees are recorded as current deferred revenue in the Consolidated Balance Sheets, as the Company expects to satisfy any remaining performance obligations, as well as recognize the related revenue, within the next twelve months when performance obligations are satisfied.

Revenue Model Initiative and Equipment Ownership Model Change

In February 2020, the Company launched a new revenue model initiative for certain residential customers, which (i) revised the amount and nature of fees due at installation, (ii) introduced a 60-month monitoring contract option, and (iii) introduced a new retail installment contract option (as discussed below).

Due to the requirements of the Company’s initial third-party consumer financing program, the Company transitioned its security system ownership model from a predominately Company-owned model to a predominately customer-owned model in February 2020.

In March 2020, the Company entered into an uncommitted receivables securitization financing agreement (the “Receivables Facility”), which allowed the Company to receive financing secured by its retail installment contract receivables from transactions under a customer-owned model.

In April 2020, the Company further amended the Receivables Facility to also permit financing secured by retail installment contract receivables from transactions occurring under a Company-owned model, and as a result, the Company began transitioning to a predominately Company-owned model in May 2020.

Substantially all new CSB transactions since March 2021 take place under a Company-owned model.

Refer to Note 6 “Debt” for further discussion regarding the Receivables Facility.

Accounts Receivable, net

Accounts receivable represent unconditional rights to consideration due from customers in the ordinary course of business and are generally due in one year or less.

Accounts receivable are recorded at amortized cost less an allowance for credit losses that are not expected to be recovered.

The allowance for credit losses is recognized at inception and is reassessed each reporting period.

The Company’s allowance for credit losses is evaluated on a pooled basis based on customer type.

For each pool of customers, the allowance for credit losses is estimated based on the delinquency status of the underlying receivables and the related historical loss experience, as adjusted for current and expected future conditions, if applicable.

The allowance for credit losses was not material for the individual pools of customers for the periods presented.

The changes in the allowance for credit losses during the periods presented were as follows:

Receivables and Contract Assets

The Company’s accounts receivable, retail installment contract receivables, and contract assets are recorded at amortized cost less an allowance for credit losses not expected to be recovered.

The allowance for credit losses is recognized at inception and reassessed each reporting period.

Accounts Receivable

Accounts receivable represent unconditional rights to consideration from customers in the ordinary course of business and are generally due in one year or less.

The Company evaluates its allowance for credit losses on accounts receivable in pools based on customer type.

For each customer pool, the allowance for credit losses is estimated based on the delinquency status of the underlying receivables and the related historical loss experience, as adjusted for current and expected future conditions, if applicable.

The allowance for credit losses is not material for the individual pools of customers.

Changes in the allowance for credit losses on accounts receivable were as follows:

Years Ended December 31,

1 unchanged sentence

Beginning balance $ 68,342 $ 42,960 $ 39,765

Adoption of CECL ( 1,377 ) — —

Provision for credit losses (2)

51,877 81,713 56,060

Write-offs, net of recoveries (3)

2 unchanged sentences

________________

(1) The amount of recoveries was not material for the periods presented, as such, the Company presented write-offs, net of recoveries.

(1) Beginning balance reflected is subsequent to the adoption of ASU 2016-13, Measurement of Credit Losses on Financial Instruments, and related amendments on January 1, 2020.

The impact of adoption was not material.

(2) The provision for credit losses during 2020 includes an increase related to the COVID-19 Pandemic.

(3) The amount of recoveries was not material for the periods presented.

As such, the Company presented write-offs, net of recoveries.

Retail Installment Contract Receivables, net

During February 2020, the Company launched a new retail installment contract program, which allows qualifying residential customers to repay the fees due at installation over a 24, 36, or 60 month interest-free period.

The financing component of the Company’s retail installment contract receivables is not significant.

Retail installment contracts are available for residential transactions occurring under either a Company-owned model or a customer-owned model.

When originating a retail installment contract, the Company utilizes external credit scores to assess credit quality of a customer and to determine eligibility for the retail installment contract.

In addition, a customer is required to enroll in the Company’s automated payment process in order to enter into a retail installment contract.

Subsequent to

origination, the Company monitors the delinquency status of retail installment contract receivables as the key credit quality indicator.

The Company’s retail installment contract option allows qualifying residential customers to pay the fees due at installation over a 24-, 36-, or 60-month interest-free period and is available for transactions occurring under both Company-owned and customer-owned models.

The financing component of retail installment contract receivables is not significant.

Upon origination of a retail installment contract, the Company utilizes external credit scores to assess customer credit quality and determine eligibility.

Subsequent to origination, the Company monitors the delinquency status of retail installment contract receivables as the key credit quality indicator.

In addition, customers are required to enroll in the Company’s automated payment process in order to enter into a retail installment contract.

As of December 31, 2021, the current and delinquent billed retail installment contract receivables were not material.

Retail installment contract receivables are recorded at amortized cost less an allowance for credit losses that are not expected to be recovered.

The allowance for credit losses is recognized at inception and reassessed each reporting period.

The allowance for credit losses on retail installment contract receivables was not material for the periods presented.

The following is a summary of unbilled retail installment contract receivables, net, recognized in the Consolidated Balance Sheets as of the periods presented below:

(in thousands) December 31, 2020 January 1, 2020 (1)

Unbilled retail installment contract receivables reflected in the Consolidated Balance Sheets were as follows:

(in thousands) 2021 2020

Retail installment contract receivables, gross $ 331,512 $ 145,957

5 unchanged sentences

Retail installment contract receivables, net $ 330,605 $ 141,591

________________

(1) Balances reflected are subsequent to the adoption of CECL on January 1, 2020.

As of December 31, 2020, $ 109 million of the Company’s retail installment contract receivables, net, were used as collateral for borrowings under the Receivables Facility.

As of December 31, 2021, and 2020, retail installment contract receivables, net, used as collateral for borrowings under the Receivables Facility were $ 299 million and $ 109 million, respectively.

The allowance for credit losses relates to retail installment contract receivables from outright sales transactions and is not material.

Contract Assets, net

Contract assets represent rights to consideration in which the Company has transferred goods or services to the customer in the ordinary course of business, however, the Company does not have an unconditional right to such consideration.

The contract asset is reclassified to accounts receivable as services are performed and billed, which results in the Company’s unconditional right to the consideration.

The Company has the right to bill the customer as service is provided over time, which generally occurs over the course of a 24, 36, or 60 month period.

Contract assets represent the Company’s right to consideration in exchange for goods or services transferred to the customer.

The contract asset is reclassified to accounts receivable when the Company has an unconditional right to the consideration as additional services are performed and billed.

The Company has the right to bill customers as services are provided over time, which generally occurs over the course of a 24-, 36-, or 60-month period.

The financing component of contract assets is not significant.

The Company records an allowance for credit losses against its contract assets for expected credit losses that are not expected to be recovered.

The allowance for credit losses is recognized at inception and is reassessed each reporting period.

The allowance for credit losses on contract assets was not material for the periods presented.

The following is a summary of contract assets, net, related to residential transactions recognized in the Consolidated Balance Sheets as of the periods presented below:

(in thousands) December 31, 2020 January 1, 2020 (1)

Contract assets for residential transactions reflected in the Consolidated Balance Sheets were as follows:

(in thousands) 2021 2020

Contract assets, gross $ 106,810 $ 161,563

5 unchanged sentences

Contract assets, net $ 94,510 $ 132,005

________________

(1) Balances reflected are subsequent to the adoption of CECL on January 1, 2020.

The Company recognized approximately $ 183 million of gross contract assets during 2020.

Contract assets recognized during 2019 and 2018 were not material.

On January 1, 2019, the Company adopted ASU 2016-02, Leases , and related amendments, which requires lessees to recognize a right-of-use asset and a lease liability for substantially all leases and to disclose key information about leasing arrangements and aligns certain underlying principles of the lessor model with the revenue standard.

The Company adopted this guidance using the optional transition method, which allows entities to apply the guidance at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings, if any, in the period of adoption with no restatement of comparative periods.

As part of the adoption, the Company elected to apply the package of transitional practical expedients under which the Company did not reassess prior conclusions about lease identification, lease classification, and initial direct costs of existing leases as of the date of adoption.

Additionally, the Company elected lessee and lessor practical expedients to not separate non-lease components from lease components.

The Company did not elect to apply the hindsight transitional practical expedient to reassess the lease terms of existing lease arrangements as of the date of adoption or the short-term lease recognition exemption.

The adoption did not have a material effect on the Consolidated Statements of Operations or Cash Flows.

Company as Lessor

The Company is a lessor in certain transactions in which the Company provides monitoring and related services but retains ownership of the security system as the Company has identified a lease component associated with the right-of-use of the security system and a non-lease component associated with monitoring and related services.

For transactions in which the timing and pattern of transfer is the same for the lease and non-lease components, and the lease component would be classified as an operating lease if accounted for separately, the Company applies the practical expedient to aggregate the lease and non-lease components and accounts for the combined component based upon its predominant characteristic, which is the non-lease component.

As a result, the Company accounts for the combined component as a single performance obligation under the applicable revenue guidance, and the underlying assets are reflected within subscriber system assets, net, in the Consolidated Balance Sheets.

Certain of the Company’s transactions do not qualify for the practical expedient as the lease component represents a sales-type lease, and as such, the Company separately accounts for the lease component and non-lease component.

The Company’s sales-type leases are not material.

Company as Lessee

The Company leases real estate, vehicles, and equipment with various lease terms and maturities that extend out through 2030 from various counterparties as part of normal operations.

The Company applies the practical expedient to not separate the lease and non-lease components and accounts for the combined component as a lease.

Additionally, the Company’s right-of-use assets and lease liabilities include leases with an initial lease term of 12 months or less.

The Company’s right-of-use assets and lease liabilities primarily represent (a) lease payments that are fixed at the commencement of a lease and (b) variable lease payments that depend on an index or rate.

Lease payments are recognized as lease cost on a straight-line basis over the lease term, which is determined as the non-cancelable period, periods in which termination options are reasonably certain of not being exercised, and periods in which renewal options are reasonably certain of being exercised.

The discount rate for a lease is determined using the Company’s incremental borrowing rate that coincides with the lease term at the commencement of a lease.

The incremental borrowing rate is estimated based on publicly available data for the Company’s debt instruments and other instruments with similar characteristics.

Lease payments that are not fixed or that are not dependent on an index or rate and vary because of changes in usage or other factors are included in variable lease costs.

Variable lease costs, which primarily relate to fuel, repair, and maintenance payments that vary based on the usage of leased vehicles, are recorded in the period in which the obligation is incurred.

The Company’s leases do not contain material residual value guarantees or restrictive covenants.

The Company’s subleases are not material.

The following table presents the amounts reported in the Company’s Consolidated Balance Sheets related to operating and finance leases as of the periods presented below:

Leases (in thousands)

Classification December 31, 2020 December 31, 2019

Operating Prepaid expenses and other current assets $ 684 $ 1,191

Operating Other assets 138,408 122,464

Finance Property and equipment, net (a)

54,414 66,001

Total right-of-use assets $ 193,506 $ 189,656

Operating Accrued expenses and other current liabilities $ 30,689 $ 29,745

Finance Current maturities of long-term debt 26,955 26,949

Operating Other liabilities 115,694 99,999

Finance Long-term debt 34,373 47,835

Total lease liabilities $ 207,711 $ 204,528

_________________

(a) Finance right-of-use assets are recorded net of accumulated depreciation of approximately $ 67 million and $ 44 million as of December 31, 2020 and 2019, respectively.

The following is a summary of the Company’s lease cost for the presented periods:

The Company recognized approximately $ 26 million, $ 183 million, and $ 27 million of gross contract assets during 2021, 2020, and 2019, respectively.

The allowance for credit losses on contract assets is not material.

Segment Information

As discussed in Note 1 “Description of Business and Summary of Significant Accounting Policies,” the Company reports results in three operating and reportable segments, CSB, Commercial, and Solar based on the manner in which the CODM evaluates performance and makes decisions about how to allocate resources.

The CODM uses Adjusted EBITDA, which is the segment profit measure, to evaluate segment performance.

Adjusted EBITDA is defined as net income or loss adjusted for (i) interest;

(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;

and (ix) other income/gain or expense/loss items such as impairment charges, financing and consent fees, or acquisition-related adjustments.

The CODM does not review the Company's assets by segment;

therefore, such information is not presented.

The following table presents total revenue by segment and a reconciliation to consolidated total revenue:

Years Ended December 31,

Lease Cost ( in thousands )

Operating lease cost $ 56,680 $ 58,579

Finance lease cost

Amortization of right-of-use assets 24,509 22,957

Interest on lease liabilities 3,122 3,770

Variable lease costs 47,013 48,325

Total lease cost $ 131,324 $ 133,631

The following is a summary of the cash flows and supplemental information associated with the Company’s leases for the presented periods:

(in thousands) 2021 2020 2019

CSB $ 4,146,028 $ 4,325,189 $ 4,080,347

Commercial 1,113,732 989,598 1,045,310

Solar 47,351 — —

Total Revenue $ 5,307,111 $ 5,314,787 $ 5,125,657

The following table presents Adjusted EBITDA by segment and a reconciliation to consolidated net income (loss) before taxes:

Years Ended December 31,

Other information ( in thousands )

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases $ 56,235 $ 57,212

Operating cash flows from finance leases 3,122 3,770

Financing cash flows from finance leases 27,956 24,918

Right-of-use assets obtained in exchange for new:

Operating lease liabilities 47,870 51,909

Finance lease liabilities $ 15,326 $ 52,611

The following is a summary of the weighted-average lease term and discount rate for operating and finance leases as of the presented periods:

Lease Term and Discount Rate December 31, 2020 December 31, 2019

Weighted-average remaining lease term (years)

Operating leases 4.8 5.0

Finance leases 2.5 3.0

Weighted-average discount rate

Operating leases 5.4 % 6.1 %

Finance leases 4.8 % 5.0 %

The following is a maturity analysis related to the Company’s operating and finance leases as of December 31, 2020:

Maturity of Lease Liabilities ( in thousands )

Operating Leases Finance Leases

(in thousands) 2021 2020 2019

Adjusted EBITDA by segment:

CSB $ 2,110,879 $ 2,153,899 $ 2,374,165

Commercial 96,112 45,338 109,045

Solar 5,588 — —

Total $ 2,212,579 $ 2,199,237 $ 2,483,210

Reconciliation to consolidated net income (loss) before taxes:

Total segment Adjusted EBITDA $ 2,212,579 $ 2,199,237 $ 2,483,210

Interest expense, net 457,667 708,189 619,573

Depreciation and intangible asset amortization 1,914,779 1,913,767 1,989,082

Amortization of deferred subscriber acquisition costs 126,089 96,823 80,128

Amortization of deferred subscriber acquisition revenue ( 172,061 ) ( 124,804 ) ( 107,284 )

Share-based compensation expense 61,237 96,013 85,626

Merger, restructuring, integration, and other 37,872 120,208 35,882

Goodwill impairment — — 45,482

Loss on sale of business — 738 61,951

Loss on extinguishment of debt 37,113 119,663 104,075

Radio conversion costs, net (1)

211,363 51,889 24,983

Financing and consent fees (2)

3,672 5,263 23,250

Acquisition related adjustments (3)

12,945 438 22,285

( 6,908 ) ( 10,031 ) 20,369

Net income (loss) before taxes $ ( 471,189 ) $ ( 778,919 ) $ ( 522,192 )

___________________

Thereafter 21,518 —

Total lease payments $ 166,524 $ 64,689

Less interest 20,141 3,361

Total $ 146,383 $ 61,328

(1) Refer to Note 1 “Description of Business and Summary of Significant Accounting Policies” for further details.

(2) Represents fees expensed associated with financing transactions.

(3) Represents amortization of purchase accounting adjustments and compensation arrangements related to acquisitions.

During 2021, primarily related to the Sunpro Solar Acquisition.

During 2019, primarily related to compensation arrangements as a result of Commercial acquisitions.

(4) Represents other charges and non-cash items.

During 2020, included recoveries of $ 10 million associated with notes receivable from a former strategic investment.

During 2019, included losses of $ 10 million associated with notes receivable from a former strategic investment and $ 6 million associated with an estimated legal settlement, net of insurance.

Entity-Wide Disclosure

Revenue by geographic area for the periods presented was follows:

Years Ended December 31,

(in thousands) 2021 2020 2019

United States $ 5,307,111 $ 5,314,787 $ 4,936,121

Canada — — 189,536

Total revenue $ 5,307,111 $ 5,314,787 $ 5,125,657

Revenue is attributed to individual countries based upon the operating entity that records the transaction.

Since the sale of ADT Canada in 2019, revenue outside of the U.S.

is not material.

As a result of the sale of ADT Canada in 2019, substantially all of the Company’s assets are located in the U.S.

as of December 31, 2021 and 2020.

Acquisitions and Disposition

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The consolidated financial statements reflect the results of operations of an acquired business starting from the effective date of the acquisition.

Expenses related to business acquisitions are recognized as incurred and are included in merger, restructuring, integration, and other in the Consolidated Statements of Operations and were not material during 2020, 2019, and 2018.

Red Hawk Acquisition

In December 2018, the Company acquired all of the issued and outstanding capital stock of Fire & Security Holdings, LLC (“Red Hawk”) (the “Red Hawk Acquisition”), a leader in commercial fire, life safety, and security services, for total consideration of approximately $ 316 million, which included the assumption of finance lease liabilities of $ 16 million and cash paid of approximately $ 299 million, net of cash acquired.

The Company funded the Red Hawk Acquisition from a combination of debt financing and cash on hand.

This acquisition accelerated the Company's growth in the commercial security market and expanded the Company’s product portfolio with the introduction of commercial fire safety related solutions.

As a result of the Red Hawk Acquisition, the Company recognized approximately $ 122 million of goodwill, the majority of which is deductible for tax purposes, and assigned it to the Red Hawk reporting unit at the time of acquisition.

In addition, the Company recognized $ 110 million of contracts and related customer relationships.

Acquisition-related expenses are recognized as incurred and are included in merger, restructuring, integration, and other in the Consolidated Statements of Operations and were not material during 2021, 2020, and 2019.

Sunpro Solar Acquisition

In December 2021, the Company acquired Sunpro Solar, a leading solar installer in the U.S.

The acquisition is intended to expand the Company’s offerings by entering the residential solar market.

Upon the consummation of the Sunpro Solar Acquisition, Sunpro Solar became an indirect wholly-owned subsidiary of the Company.

Total consideration was approximately $ 750 million, which consisted of cash paid of $ 142 million, net of cash acquired, and approximately 75 million unregistered shares of the Company’s Common Stock, par value of $ 0.01 per share, with a fair value of $ 569 million, of which approximately 5 million shares will be issued throughout 2022.

The total fair value of $ 569 million was based on the closing stock price of the Company’s Common Stock on December 8, 2021, the acquisition date, adjusted for the impact of contractual restrictions on the ability for the holders to sell their shares.

The following table summarizes the purchase price allocation of the estimated fair values as of the date of acquisition of the assets acquired and liabilities assumed:

Fair value of assets acquired and liabilities assumed (in thousands) :

Cash $ 38,493

Accounts receivable 35,998

Inventories 49,480

Prepaid expenses and other current assets 17,388

Property and equipment 12,826

Goodwill 694,726

Other definite-lived intangible assets 42,100

Other assets 27,201

Accounts payable ( 53,753 )

Deferred revenue ( 39,227 )

Accrued expenses and other current liabilities ( 44,088 )

Current maturities of long-term debt ( 7,643 )

Other liabilities ( 7,960 )

Long-term debt ( 15,112 )

Total consideration transferred $ 750,429

The purchase price allocation reflects preliminary fair value estimates based on management analysis, including work performed by third-party valuation specialists.

Other definite-lived intangible assets is primarily comprised of a customer backlog intangible asset, which will be recognized as a reduction of installation and other revenue over a useful life of three months from the date of acquisition.

The Company recorded $ 695 million of goodwill as a result of the Sunpro Solar Acquisition, the majority of which is deductible for tax purposes, and allocated the goodwill to the Solar reporting unit at the time of acquisition.

The goodwill recognized as a result of the Sunpro Solar Acquisition reflects the strategic value and expected synergies of Sunpro Solar to the Company.

Pro Forma Results

The following summary, prepared on a pro forma basis, presents the Company’s unaudited consolidated results of operations for 2021 and 2020 as if the Sunpro Solar Acquisition had been completed as of January 1, 2020.

The pro forma results below include the impact of certain adjustments related to the amortization of intangible assets, acquisition-related costs incurred as of the acquisition date, and in each case, the related income tax effects, as well as certain other post-acquisition adjustments directly attributable to the acquisition.

This pro forma presentation does not include any impact of transaction synergies.

The pro forma results are not necessarily indicative of the results of operations that actually would have been achieved had the Sunpro Solar Acquisition been consummated as of that date:

Years Ended December 31,

( in thousands )

Total revenue $ 5,905,148 $ 5,590,880

Net income (loss) $ ( 328,099 ) $ ( 680,992 )

Revenue and net loss attributable to ADT Solar of $ 47 million and $ 7 million, respectively, are included in the Consolidated Statements of Operations from the acquisition date, December 8, 2021 through December 31, 2021.

Defenders Acquisition

In January 2020, the Company acquired its largest independent dealer, Defender Holdings, Inc.

(“Defenders”) (the “Defenders Acquisition”), for total consideration of approximately $ 290 million, which consisted of cash paid of $ 173 million, net of cash acquired, and the issuance of approximately 16 million shares of the Company’s common stock, par value of $ 0.01 per share, (“Common Stock”) with a fair value of $ 114 million.

(“Defenders”) (the “Defenders Acquisition”), for total consideration of approximately $ 290 million, which consisted of cash paid of $ 173 million, net of cash acquired, and the issuance of approximately 16 million shares of the Company’s Common Stock, par value of $ 0.01 per share, with a fair value of $ 114 million.

The following table summarizes the purchase price allocation of the estimated fair values as of the date of acquisition of the assets acquired and liabilities assumed:

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The acquired contracts and related customer relationships are amortized over 14 years.

Company recorded $ 252 million of goodwill as a result of the Defenders Acquisition, none of which is deductible for tax purposes, and allocated the goodwill to the U.S.

reporting unit at the time of acquisition.

The Company recorded $ 252 million of goodwill as a result of the Defenders Acquisition, none of which is deductible for tax purposes, and allocated the goodwill to the CSB reporting unit at the time of acquisition.

The goodwill recognized as a result of the Defenders Acquisition reflects the strategic value and expected synergies of Defenders to the Company.

2 unchanged sentences

Other Acquisitions

During 2020, excluding the Defenders Acquisition, total consideration related to business acquisitions was approximately $ 80 million, including $ 52 million of cash, net of cash acquired.

During 2021, total consideration related to business acquisitions (excluding the Sunpro Solar Acquisition) was approximately $ 21 million.

During 2020, total consideration related to business acquisitions (excluding the Defenders Acquisition) was approximately $ 80 million, including $ 52 million of cash, net of cash acquired.

This resulted in the recognition of $ 24 million of goodwill, $ 13 million of contracts and related customer relationships, and $ 43 million of other intangible assets related to developed technology.

1 unchanged sentence

This resulted in the recognition of $ 47 million of goodwill and $ 39 million of contracts and related customer relationships.

During 2018, excluding the Red Hawk Acquisition, total consideration related to business acquisitions was approximately $ 54 million, including $ 49 million of cash, net of cash acquired.

This resulted in the recognition of $ 24 million of goodwill and $ 20 million of contracts and related customer relationships.

Disposition of Canadian Operations

During November 2019, the Company sold ADT Security Services Canada, Inc.

In November 2019, the Company sold ADT Security Services Canada, Inc.

(“ADT Canada”) to TELUS Corporation (“TELUS”) for a selling price of $ 514 million (CAD $ 676 million).

In connection with the sale of ADT Canada, the Company and TELUS entered into a transition services agreement whereby the Company provides certain post-closing services to TELUS related to the business of ADT Canada.

The sale of ADT Canada did not represent a strategic shift that will have a major effect on the Company’s operations and financial results, and therefore, did not meet the criteria to be reported as discontinued operations.

In connection with the sale, the Company and TELUS entered into a transition services agreement whereby the Company provides certain post-closing services to TELUS related to the business of ADT Canada.

Additionally, the Company and TELUS entered into a non-competition and non-solicitation agreement pursuant to which the Company will not have any operations in Canada, subject to limited exceptions for cross-border commercial customers and mobile safety applications, for a period of seven years.

Finally, the Company and TELUS entered into a patent and trademark license agreement granting (i) the use of the Company’s patents in Canada to TELUS for a period of seven years, and (ii) exclusive use of the Company’s trademarks in Canada for a period of five years and non-exclusive use for an additional two years thereafter.

During 2019, the Company recorded a loss on sale of business of $ 62 million, which included the reclassification of foreign currency translation from AOCI of approximately $ 39 million.

1 unchanged sentence

The Company allocated approximately $ 10 million of proceeds to the patent and trademark license agreement, which is reflected in cash flows from operating activities in the Consolidated Statement of Cash Flows.

The impact in connection with the sale of ADT Canada was not material during 2020.

The following represents ADT Canada’s loss before income taxes for the periods presented:

Years Ended December 31,

(in thousands) 2019 2018

Loss before income taxes $ ( 39,326 ) $ ( 91,760 )

The impact in connection with the sale of ADT Canada was not material during 2021 or 2020.

ADT Canada’s loss before income taxes for the year ended December 31, 2019 was $ 39 million.

Goodwill and Other Intangible Assets

During the fourth quarter of 2020, the Company changed its reporting units, which included the reassignment of assets, liabilities, and financial operating results related to the Company’s commercial customers, as well as an applicable portion of goodwill based on a relative fair value approach, from the U.S.

reporting unit (now referred to as CSB) to the Red Hawk reporting unit (now referred to as Commercial).

As discussed in Note 1 “Description of Business and Summary of Significant Accounting Policies,” beginning in the first quarter of 2021, the Company’s operating and reportable segments were CSB, which is comprised of the CSB reporting unit, and Commercial, which is comprised of the Commercial reporting unit.

The change in reportable segments did not further impact the Company’s reporting units.

Upon consummation of the Sunpro Solar Acquisition in the fourth quarter of 2021, the Company began reporting results for a third operating and reportable segment related to the ADT Solar business, which is comprised of the Solar reporting unit.

Changes in the carrying amount of goodwill during the periods presented were as follows:

Years Ended December 31,

(in thousands) 2020 2019

Beginning balance $ 4,959,658 $ 5,081,887

(in thousands) As Previously Reported CSB Commercial Solar Total

Balance as of December 31, 2019 $ 4,959,658 $ — $ — $ — $ 4,959,658

Acquisitions 276,340 — — — 276,340

Goodwill impairment — ( 45,482 )

Disposition — ( 161,652 )

Currency translation and other 304 37,709

Ending balance $ 5,236,302 $ 4,959,658

As a result of the sale of ADT Canada during 2019, the Company had no accumulated goodwill impairment losses as of December 31, 2020 and 2019.

There were no material measurement period adjustments to purchase price allocations during 2020 or 2019.

Other 304 — — — 304

Balance as of December 31, 2020 $ 5,236,302 $ — $ — $ — $ 5,236,302

Reallocation (1)

( 5,236,302 ) 4,915,857 320,445 — —

Acquisitions — — 10,420 694,726 705,146

Other — ( 25 ) 1,980 — 1,955

Balance as of December 31, 2021 $ — $ 4,915,832 $ 332,845 $ 694,726 $ 5,943,403

________________

(1) Relates to the change in the Company’s reportable segments in the first quarter of 2021.

The Company had no accumulated goodwill impairment losses as of December 31, 2021 and 2020.

There were no material measurement period adjustments to purchase price allocations during 2021, 2020, and 2019.

Other Intangible Assets

The gross carrying amounts, accumulated amortization, and net carrying amounts of the Company’s other intangible assets as of December 31, 2020 and 2019 were as follows:

Other intangible assets reflected in the Consolidated Balance Sheets consisted of the following:

December 31, 2021 December 31, 2020

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Trade name 1,333,000 — 1,333,000 1,333,000 — 1,333,000

Intangible assets $ 11,405,302 $ ( 5,498,612 ) $ 5,906,690 $ 10,951,659 $ ( 4,282,014 ) $ 6,669,645

Total Intangible assets $ 11,833,516 $ ( 6,420,165 ) $ 5,413,351 $ 11,405,302 $ ( 5,498,612 ) $ 5,906,690

Definite-Lived Intangible Assets

Definite-lived intangible assets relate to customer relationships, dealer relationships, and other definite-lived intangible assets that originated from business acquisitions as well as contracts with customers purchased under the ADT Authorized Dealer Program or from other third parties.

Customer relationships, which primarily originated from the Formation Transactions and the ADT Acquisition, are amortized over a period of up to 20 years based on management estimates about the amounts and timing of estimated future revenue from customer accounts and average customer account life that existed at the time of the related business acquisition.

Customer relationships acquired as part of business acquisitions, which primarily originated from the Formation Transactions and the ADT Acquisition, are amortized over a period of up to 20 years based on management estimates about the amounts and timing of estimated future revenue from customer accounts and average customer account life that existed at the time of the related business acquisition.

Dealer relationships originated from the Formation Transactions and the ADT Acquisition and are primarily amortized over 19 years based on management estimates about the longevity of the underlying dealer network and the attrition of those respective dealers that existed at the time of the related business acquisition.

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Purchases of contracts with customers under the ADT Authorized Dealer Program, or from other third parties, are considered asset acquisitions and are recorded at their contractually determined purchase price.

The Company may charge back the purchase price of any end-user contract if the contract is canceled during the charge-back

period, which is generally thirteen months from the date of purchase.

The Company may charge back the purchase price of any end-user contract if the contract is canceled during the charge-back period, which is generally thirteen months from the date of purchase.

The Company records the amount of the charge back as a reduction to the purchase price.

The Company paid $ 675 million, $ 381 million, and $ 670 million for contracts with customers under the ADT Authorized Dealer Program and from other third parties during 2021, 2020, and 2019, respectively.

In 2020, in connection with the Defenders Acquisition, the Company received an advance payment of $ 39 million for the estimated future dealer charge-backs related to accounts purchased from Defenders prior to the Defenders Acquisition.

This amount is included in dealer generated customer accounts and bulk account purchases in the Consolidated Statement of Cash Flows, and it has been materially realized in 2020 as a reduction to contracts and related customer relationships over the course of a 13-month charge-back period.

In connection with the Defenders Acquisition, the Company received an advance payment of $ 39 million in January 2020 for the estimated future dealer charge-backs related to accounts purchased from Defenders prior to the Defenders Acquisition.

This amount is included in dealer gener ated customer accounts and bulk account purchases in the Consolidated Statement of Cash Flows, and it was materially realized in 2020 as a reduction to contracts and related customer relationships over the course of a 13 -month charge-back period.

In addition, contracts and related customer relationships includes customer accounts purchased from third parties in 2021 for an aggregate contractual purchase price of $ 163 million subject to reduction based on customer retention.

The Company paid cash at closings of $ 132 million.

Purchases of contracts with customers under the ADT Authorized Dealer Program, or from other third parties, are accounted for on a pooled basis based on the month and year of acquisition.

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The accelerated method for amortizing these contracts utilizes an average declining balance rate of approximately 300 % and converts to straight-line methodology when the resulting amortization charge is greater than that from the accelerated method, resulting in an average amortization of approximately 65 % of the pool within the first five years, 25 % within the second five years, and 10 % within the final five years.

Changes in the net carrying amount of contracts and related customer relationships for the periods presented were as follows:

Changes in the net carrying amount of contracts and related customer relationships were as follows:

Years Ended December 31,

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Amortization ( 1,109,787 ) ( 1,134,271 )

Disposition — ( 208,688 )

Currency translation and other 200 ( 13,906 )

Other adjustments — 200

Ending balance $ 2,966,018 $ 3,374,156

The weighted-average amortization period for contracts and related customer relationships purchased under the ADT Authorized Dealer Program and from other third parties was 15 years in 2020 and 2019.

In February 2021, the Company purchased customer accounts from a third-party for a total purchase price of $ 91 million, subject to adjustment based on customer retention, and paid initial cash at closing of $ 73 million.

Amortization expense for definite-lived intangible assets for the periods presented were as follows:

The weighted-average amortization period for contracts and related customer relationships purchased under the ADT Authorized Dealer Program and from other third parties was 14 years and 15 years in 2021 and 2020, respectively.

Amortization expense reflected in the Consolidated Statements of Operations was as follows:

Years Ended December 31,

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Definite-lived intangible asset amortization expense $ 1,209,966 $ 1,222,398 $ 1,238,064

As of December 31, 2020, the estimated aggregate amortization expense for definite-lived intangible assets over the next five years is expected to be as follows:

As of December 31, 2021, the estimated aggregate amortization expense over the next five years is expected to be as follows:

(in thousands) 2022 2023 2024 2025 2026

2021 $ 1,147,773

2025 $ 283,667

Estimated definite-lived intangible asset amortization expense $ 903,235 $ 489,587 $ 393,938 $ 347,482 $ 309,846

Indefinite-Lived Intangible Assets

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Goodwill and indefinite-lived intangible assets are not amortized and are tested for impairment at least annually as of the first day of the fourth quarter of each year and more often if an event occurs or circumstances change which indicate it is more-likely-than-not that fair value is less than carrying amount.

The annual impairment tests of goodwill and indefinite-lived intangible assets may be completed through qualitative assessments.

The Company may elect to bypass the qualitative assessment and proceed directly to a quantitative impairment test for any reporting unit or indefinite-lived intangible asset in any period.

The Company may resume the qualitative assessment for any reporting unit or indefinite-lived intangible asset in any subsequent period.

Under a qualitative approach, the impairment test for goodwill consists of an assessment of whether it is more-likely-than-not that a reporting unit’s fair value is less than its carrying amount.

The Company may perform its impairment test for any reporting unit or indefinite-lived intangible asset through a qualitative assessment or elect to proceed directly to a quantitative impairment test, however, the Company may resume a qualitative assessment in any subsequent period.

Under a qualitative approach, the Company assesses whether it is more-likely-than-not that a reporting unit’s fair value is less than its carrying amount.

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As a result, there are inherent uncertainties related to these judgments and factors in applying them to the goodwill impairment tests.

As a result of the macroeconomic decline due to the ongoing COVID-19 Pandemic, the Company quantitatively tested the goodwill associated with its U.S and Red Hawk reporting units for impairment as of March 31, 2020.

Based on the results of these tests, the Company did not record any goodwill impairment losses associated with its reporting units.

On October 1, 2020, the Company completed its annual goodwill impairment tests by qualitatively testing the goodwill associated with the U.S.

and Red Hawk reporting units.

Based on the results of these tests, the Company did not record any impairment losses associated with the U.S.

and Red Hawk reporting units.

Subsequent to the annual goodwill impairment tests, the Company’s reporting units changed in connection with the recent integration of Red Hawk and other commercial acquisitions and now consist of U.S.

and Commercial.

The change in reporting units reflects the finalization and integration of financial information and internal reporting structure, as well as changes in the review and availability of discrete financial information.

The Commercial reporting unit is comprised of the former Red Hawk reporting unit as well as assets and liabilities and accompanying financial results related to operations associated with commercial customers that were previously assigned to the U.S.

reporting unit.

The Company also reallocated a portion of goodwill from the former U.S.

reporting unit to the Commercial reporting unit on a relative fair value basis using a market approach that consisted of the application of earnings before interest, taxes, depreciation, and amortization (“EBITDA”) multiples from a selected peer group of publicly-traded companies to arrive at the estimated fair values.

During the fourth quarter, the Company qualitatively tested the goodwill associated with the U.S.

and former Red Hawk reporting units immediately prior to the change and quantitatively tested the goodwill associated with the U.S.

and Commercial reporting units immediately following the change.

Based on the results of these tests, the Company did not record any goodwill impairment losses associated with its reporting units.

Following the quantitative impairment tests performed as a result of the reporting unit change, the fair values of the new reporting units exceeded their respective carrying amounts, and the Company does not deem there to be a risk of impairment associated with the new reporting units.

The CODM’s evaluation of performance and allocation of resources on a company-wide basis did not change as a result of the change in reporting units during the fourth quarter of 2020.

On October 1, 2021, the Company completed its annual goodwill impairment tests by qualitatively testing the goodwill associated with the CSB reporting unit and quantitatively testing the goodwill associated with the Commercial reporting unit.

Based on the results of the qualitative testing for the CSB reporting unit, the Company concluded it is more likely than not that the fair value of the CSB reporting unit exceeds its carrying value.

Based on the results of the quantitative testing for the Commercial reporting unit, the Company concluded the fair value of the Commercial reporting unit exceeds its carrying value by approximately 20 %.

The Commercial reporting unit continues to deal with the impact of the COVID-19 pandemic, and should certain pandemic-related issues continue, the reporting unit fair value could be adversely impacted and may decline below its carrying value.

The Company did not record any impairment losses associated with its reporting units.

Additionally, the Company did not test the goodwill associated with the Solar reporting unit due to the recency of the Sunpro Solar Acquisition.

During 2020, the Company did not record any goodwill impairment losses associated with its reporting units.

During 2019, the Company recorded a goodwill impairment loss of $ 45 million related to the Canada reporting unit in connection with the sale of ADT Canada.

During 2018, the Company recorded a goodwill impairment loss of $ 88 million due to the underperformance of the Canada reporting unit relative to expectations as part of the annual goodwill impairment test.

Indefinite-Lived Intangible Assets

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Based on the results of the tests, the Company did not record any impairment losses associated with the ADT trade name, and the estimated fair value of the trade name significantly exceeded its carrying amount.

Debt as of December 31, 2020 and 2019 was comprised of the following:

(in thousands) Balance as of December 31,

Debt Description Issued Maturity Interest Rate Interest Payable 2020 2019

Intangible Asset Impairments

During the first quarter of 2021, the Company recognized $ 18 million in impairment losses on its other definite-lived intangible assets primarily due to lower than expected benefits from the Cell Bounce developed technology intangible asset, which is included in the CSB segment, as a result of the worldwide shortages for certain electronic components.

The fair value was determined using an income-based approach, and the loss is reflected in merger, restructuring, integration, and other in the Consolidated Statements of Operations.

During 2020 and 2019, the Company did not record any impairment losses on its other definite-lived intangible assets.

As of December 31, 2021 and 2020, the Company’s debt was comprised of the following (in thousands, except as otherwise indicated):

Interest Payable Balance as of December 31,

Debt Description Issued Maturity Interest Rate 2021 2020

First Lien Term Loan due 2026 9/23/2019 9/23/2026 Adj.

LIBOR + 2.75% Quarterly $ 2,758,058 $ 2,778,900

First Lien Revolving Credit Facility (1)

3/16/2018 6/23/2026 Adj.

LIBOR + 2.75% Quarterly 25,000 —

Second Lien Notes due 2028 1/28/2020 1/15/2028 6.250 % 1/15 and 7/15 1,300,000 1,300,000

Prime Notes 5/2/2016 5/15/2023 9.250 % 5/15 and 11/15 — 1,246,000

First Lien Notes due 2024 4/4/2019 4/15/2024 5.250 % 2/15 and 8/15 750,000 750,000

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First Lien Notes due 2027 8/20/2020 8/31/2027 3.375 % 6/15 and 12/15 1,000,000 1,000,000

ADT Notes due 2021 10/1/2013 10/15/2021 6.250 % 4/15 and 10/15 — 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 2022 7/5/2012 7/15/2022 3.500 % 1/15 and 7/15 — 1,000,000

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Receivables Facility 3/5/2020 11/20/2026 LIBOR + 0.85% Monthly 199,056 75,775

Finance lease obligations N/A N/A N/A N/A 61,328 74,784

Other debt (2)

Total debt principal, excluding finance leases 9,836,758 9,704,587

Finance lease obligations (3)

93,080 61,328

Unamortized debt discount, net ( 16,678 ) ( 19,993 )

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__________________

N/A—Not applicable

(1) As of December 31, 2021 and 2020, the Company had $ 550 million and $ 400 million, respectively, in available borrowing capacity under the First Lien Revolving Credit Facility.

(2) Other debt includes vehicle loans acquired in the Sunpro Solar Acquisition.

(3) Refer to Note 13 “Leases” for additional information regarding the Company’s finance leases.

First Lien Credit Agreement

Concurrently with the consummation of the Formation Transactions, the Company entered into a first lien credit agreement dated as of July 1, 2015 (together with subsequent amendments and restatements, the “First Lien Credit Agreement”), which includes a term loan facility (the “First Lien Term Loan due 2026”) and a first lien revolving credit facility (the “First Lien Revolving Credit Facility”).

The Company was required to make scheduled quarterly payments equal to 0.25 % of the aggregate outstanding principal amount of the First Lien Term Loan due 2026, or approximately $ 8 million per quarter, with the remaining balance payable at maturity.

As a result of the January 2021 amendment to the First Lien Credit Agreement as discussed below, beginning in the second quarter of 2021, the Company is required to make scheduled quarterly principal payments equal to 0.25 % of the then-outstanding aggregate principal amount of the First Lien Term Loan due 2026, with the remaining balance payable at maturity.

The Company may make voluntary prepayments on the First Lien Term Loan due 2026 at any time prior to maturity at par.

In December 2020, the Company made a $ 300 million prepayment on the First Lien Term Loan due 2026, which was applied to the remaining required quarterly principal payments.

Additionally, the Company is required to make annual prepayments on the outstanding First Lien Term Loan due 2026 with a percentage of the Company’s excess cash flow, as defined in the First Lien Credit Agreement, if the excess cash flow exceeds a certain specified threshold.

certain specified threshold.

As of December 31, 2021, the Company was not required to make an annual prepayment based on the Company’s excess cash flow.

The First Lien Term Loan due 2026 has an interest rate calculated as, at the Company’s option, either (a) LIBOR determined by reference to the costs of funds for Eurodollar deposits for the interest period relevant to such borrowing, adjusted for certain additional costs (“Adjusted LIBOR”) with a floor of 1.00 % or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50% per annum, (ii) the prime rate published by The Wall Street Journal, and (iii) one-month adjusted LIBOR plus 1.00% per annum (“Base Rate”), in each case, plus the applicable margin of 3.25 % for Adjusted LIBOR loans and 2.25 % for Base Rate loans and is payable on each interest payment date, at least quarterly, in arrears.

The First Lien Term Loan due 2026 has an interest rate calculated as, at the Company’s option, either (a) London Interbank Offered Rate (“LIBOR”) determined by reference to the costs of funds for Eurodollar deposits for the interest period relevant to such borrowing, adjusted for certain additional costs (“Adjusted LIBOR”) with a floor of 0.75 % or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50 % per annum, (ii) the prime rate published by The Wall Street Journal, and (iii) one-month adjusted LIBOR plus 1.00 % per annum (“Base Rate”), in each case, plus the applicable margin of 2.75 % for Adjusted LIBOR loans and 1.75 % fo r Base Rate loans and is payable on each interest payment date, at least quarterly, in arrears.

The applicable margin for borrowings under the First Lien Revolving Credit Facility is 2.75 % for Adjusted LIBOR loans and 1.75 % for Base Rate loans, in each case, subject to adjustment pursuant to a leverage-based pricing grid.

As of December 31, 2020 and 2019, the Company had $ 400 million in available borrowing capacity under the First Lien Revolving Credit Facility.

In addition, the Company is 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.

The Company’s obligations relating to the First Lien Credit Agreement are gu aranteed, jointly and severally, on a senior secured first-priority basis, by substantially all of the Company’s domestic subsidiaries and are secured by first-priority security interests in substantially all of the assets of the Company’s domestic subsidiaries, subject to certain permitted liens and exceptions.

Significant terms of the First Lien Credit Agreement that were in effect during the presented periods were as follows:

Amendment and Restatement dated as of June 29, 2017

In June 2017, the applicable margin utilized in the calculation of interest for the then outstanding $ 3.4 billion term loan (the “First Lien Term B-1 Loan,” which was replaced in September 2019 by the First Lien Term Loan due 2026 as discussed below) was decreased from 3.25 % to 2.75 % for Adjusted LIBOR loans and 2.25 % to 1.75 % for Base Rate loans, and the applicable margin with respect to borrowings under the Revolving Credit Facilities remained at 4.50 % for Adjusted LIBOR loans and 3.50 % for Base Rate loans, in each case, subject to adjustment pursuant to a leverage-based pricing grid.

Amendment and Restatement dated as of March 16, 2018

In March 2018, certain existing revolving credit facilities with an aggregate capacity of $350 million were replaced with the First Lien Revolving Credit Facility, which had an aggregate commitment of up to $ 350 million maturing on March 16, 2023, subject to the repayment, extension, or refinancing with longer maturity debt of certain of the Company’s other indebtedness.

Borrowings under the First Lien Revolving Credit Facility bear interest at a rate equal to, at the Company’s option, either (a) Adjusted LIBOR or (b) the Base Rate, plus the applicable margin of 2.75 % for Adjusted LIBOR loans and 1.75 % for Base Rate loans.

The applicable margin for borrowings under the First Lien Revolving Credit Facility were subject to one step-down based on a certain specified net first lien leverage ratio.

In addition, the amendment required the Company 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.

Amendment and Restatement dated as of December 3, 2018

In December 2018, the Company borrowed an incremental aggregate principal amount of $ 425 million of the First Lien Term B-1 Loan.

The Company used part of the proceeds and available cash on hand to fund the Red Hawk Acquisition.

The remainder of the proceeds were used to fund the $ 300 million partial redemption of aggregate principal amount of the Prime Notes (as defined below) and pay the associated fees in February 2019.

Significant activity related to the First Lien Credit Agreement during the presented periods were as follows:

Amendment and Restatement dated as of March 15, 2019 (effective April 4, 2019)

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Deferred financing costs in connection with this amendment and restatement were not material.

Subsequent Event:

In December 2020, the Company made a $ 300 million prepayment on the First Lien Term Loan due 2026, which was applied to the remaining required quarterly principal payments at the time.

Amendment and Restatement dated as of January 27, 2021

In January 2021, the Company amended the First Lien Credit Agreement to refinance the First Lien Term Loan due 2026, which reduced the applicable margin for Adjusted LIBOR loans from 3.25 % to 2.75 % and reduced the floor from 1.00 % to 0.75 %.

Additionally, the amendment requires the Company to make quarterly payments equal to 0.25 % of the aggregate outstanding principal amount of the First Lien Term Loan due 2026, or approximately $ 7 million per quarter.

The Company may make voluntary prepayments on the First Lien Term Loan due 2026 at any time prior to maturity at par, subject to a 1.00 % prepayment premium in the event of certain specified events at any time during the six months after the closing date of the amendment.

Mizuho Bank Revolving Credit Facility

In February 2019, the Company entered into a first lien revolving credit agreement with an aggregate available commitment of up to $ 50 million maturing in March 2023 (the “Mizuho Bank Revolving Credit Facility”).

The Mizuho Bank Revolving Credit Facility was terminated and replaced as part of the amendment and restatement to the First Lien Credit Agreement in April 2019.

In January 2021, the Company amended and restated the First Lien Credit Agreement to refinance the First Lien Term Loan due 2026, which reduced the applicable margin for Adjusted LIBOR loans from 3.25 % to 2.75 % and reduced the floor from 1.00 % to 0.75 %.

This amendment also reinstated the quarterly principal payments.

Amendment and Restatement dated as of July 29, 2021

In July 2021, the Company amended and restated the First Lien Credit Agreement with respect to the First Lien Revolving Credit Facility, which extended the maturity date to June 23, 2026, subject to certain conditions, and obtained an additional $ 175 million of commitments.

After giving effect to this amendment and restatement, aggregate commitments under the First Lien Revolving Credit Facility were $ 575 million.

Additionally, in December 2021, the Company borrowed $ 185 million and repaid $ 160 million under the First Lien Revolving Credit Facility in connection with the Sunpro Solar Acquisition.

Second Lien Notes due 2028

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In September 2019, the Company issued an additional $ 600 million aggregate principal amount of the First Lien Notes due 2026 at a 2 % premium pursuant to and with the same terms as the underlying indenture of the First Lien Notes due 2026.

The proceeds from the additional First Lien Notes due 2026, along with cash on hand, were used to (a) repay approximately $ 300 million aggregate principal amount of the First Lien Term B-1 Loan, (b) repurchase or redeem the outstanding $ 300 million aggregate principal amount of the 5.250 % notes due 2020 issued by The ADT Corporation (the “ADT Notes due 2020”), and (c) pay fees and expenses associated with the foregoing, including call premiums on the ADT Notes due 2020 as well as accrued and unpaid interest on the First Lien Term B-1 Loan and the ADT Notes due 2020.

accrued and unpaid interest on the First Lien Term B-1 Loan and the ADT Notes due 2020.

The Company incurred approximately $ 8 million in deferred financing costs in connection with the additional borrowings.

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First Lien Notes due 2027

Durin g August 2020, the Company issued $ 1 billion aggregate principal amount of 3.375 % first-priority senior secured notes due 2027 (the “First Lien Notes due 2027”).

In August 2020, the Company issued $ 1.0 billion aggregate principal amount of 3.375 % first-priority senior secured notes due 2027 (the “First Lien Notes due 2027”).

The proceeds from the First Lien Notes due 2027, along with cash on hand, were used to redeem the outstanding $ 1.0 billion aggregate principal amount of the 6.250 % notes due 2021 issued by The ADT Corporation (the “ADT Notes due 2021”), pay accrued and unpaid interest on the ADT Notes due 2021, and pay any related fees and expenses, including the call premium on the ADT Notes due 2021.

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The indenture governing the First Lien Notes due 2027 also provides for customary events of default.

First Lien Notes due 2029

In July 2021, the Company issued $ 1.0 billion aggregate principal amount of 4.125 % first-priority senior secured notes due 2029 (the “First Lien Notes due 2029”).

The related deferred financing costs were not material.

The First Lien Notes due 2029 will mature on August 1, 2029, with semi-annual interest payment dates of February 1 and August 1 of each year, beginning February 1, 2022, and may be redeemed at the Company’s option as follows:

• Prior to August 1, 2028, in whole at any time or in part from time to time, at a redemption price equal to the greater of (i) 100 % of the principal amount of the First Lien Notes due 2029 to be redeemed and (ii) the sum of the present values of the aggregate principal amount of the First Lien Notes due 2029 to be redeemed and the remaining scheduled interest payments due on any date after the redemption date, to and including August 1, 2028, discounted at an adjusted treasury rate plus 50 basis points, plus, in either case accrued and unpaid interest as of, but excluding, the redemption date.

• On or after August 1, 2028, 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 2029 to be redeemed and accrued and unpaid interest as of, but excluding, the redemption date.

The Company’s obligations relating to the First Lien Notes due 2029 are guaranteed, jointly and severally, on a senior secured first-priority basis, by substantially all of the Company’s subsidiaries and are secured by first-priority security interests in substantially all of the assets of the Company’s domestic subsidiaries, subject to certain permitted liens and exceptions.

In addition, upon the occurrence of specified change of control events, the Company 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 also provides for customary events of default.

In connection with the ADT Acquisition, the Company entered into supplemental indentures to notes originally issued by The ADT Corporation (collectively, the “ADT Notes”) providing for each series of ADT Notes to benefit from (i) guarantees by substantially all of the Company’s domestic subsidiaries and (ii) first-priority senior security interests, subject to permitted liens, in substantially all of the existing and future assets of the Company’s domestic subsidiaries.

As a result, these notes remained outstanding and became obligations of the Company.

ADT Notes due 2020

In September 2019, the Company repurchased and cancelled $ 147 million aggregate principal amount of the outstanding ADT Notes due 2020 for a total repurchase price of approximately $ 149 million, which included the related call premium.

In October 2019, the Company redeemed the remaining $ 153 million principal amount of the outstanding ADT Notes due 2020 for a total redemption price of approximately $ 155 million, which included the related call premium.

In September 2020, the Company redeemed $ 1 billion aggregate principal amount of the ADT Notes due 2021 for a total repurchase price of approximately $ 1.1 billion, which included the related call premium.

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.

ADT Notes due 2021

In September 2020, the Company redeemed $ 1.0 billion aggregate principal amount of the ADT Notes due 2021 for a total redemption price of approximately $ 1.1 billion, which included the related call premium.

ADT Notes due 2022

In August 2021, the Company used the proceeds from the First Lien Notes due 2029, along with cash on hand, to (i) redeem all of the $ 1.0 billion outstanding aggregate principal amount of the Company’s 3.50 % notes due 2022 (the “ADT Notes due 2022”) for approximately $ 1.0 billion, including the related call premium of $ 28 million, plus accrued and unpaid interest, and (ii) pay related fees and expenses (the “ADT Notes due 2022 Redemption”).

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.

Additionally, upon the occurrence of specified change of control events, the Company must offer to repurchase the ADT Notes at 101 % of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

Receivables Facility

During March 2020, the Company entered into the Receivables Facility.

Under the terms of the Receivables Facility, the Company may receive up to $ 200 million of financing secured by retail installment contract receivables from transactions involving security systems that were sold under a customer-owned model.

During April 2020, the Company amended the Receivables Facility to also permit financing secured by retail installment contract receivables from transactions occurring under a Company-owned model.

The Receivables Facility has a one year revolving period until March 5, 2021, which may be extended, and bears interest at a variable rate.

If the revolving period is not extended, the Company is required to repay the Receivables Facility in a manner consistent with the contractual collections of the underlying retail installment contract receivables.

The Company may make voluntary prepayments on the Receivables Facility at any time prior to maturity at par.

The Company obtains financing by selling or contributing certain retail installment contract receivables to the Company’s wholly-owned consolidated bankruptcy-remote special purpose entity (the “SPE”), which, pursuant to the Receivables Facility, borrows funds secured by the transferred retail installment contract receivables.

The SPE is a separate legal entity with its own creditors who will be entitled, prior to and upon the liquidation of the SPE, to be satisfied out of the SPE’s assets prior to any assets in the SPE becoming available to the Company (other than the SPE).

Accordingly, the assets of the SPE are not available to pay creditors of the Company (other than the SPE), although collections from the transferred retail installment contract receivables in excess of amounts required to repay the SPE’s creditors may be remitted to the Company during and after the term of the Receivables Facility.

The SPE’s creditors have legal recourse to the transferred retail installment contract receivables owned by the SPE, but do not have any recourse to the Company (other than the SPE) for the payment of principal and interest on the SPE’s financing.

The Company services the transferred retail installment contract receivables and is responsible for ensuring that amounts collected from the transferred retail installment contract receivables are remitted to the SPE.

The Company is required to deposit payments received from the transferred retail installment contract receivables into a segregated account subject to the control of the creditors under the Receivables Facility.

During March 2020, the Company entered into the Receivables Facility, as amended, whereby the Company obtains financing by selling or contributing certain retail installment contract receivables to the Company’s wholly-owned consolidated bankruptcy-remote special purpose entity (“SPE”).

The SPE grants a security interest in those retail installment contract receivables as collateral for cash borrowings under the Receivables Facility.

The SPE borrower under the Receivables Facility is a separate legal entity with its own creditors who will be entitled, prior to and upon the liquidation of the SPE, to be satisfied out of the SPE’s assets prior to any assets of the SPE becoming available to the Company (other than the SPE).

Accordingly, the assets of the SPE are not available to pay creditors of the Company (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 the Company and subsequently used by the Company (including to pay other creditors).

The SPE’s creditors under the Receivables Facility have legal recourse to the transferred retail installment contract receivables owned by the SPE, and to the Company for certain performance and operational obligations relating to the Receivables Facility, but do not have any recourse to the Company (other than the SPE) for the payment of principal and interest on the advances under the Receivables Facility.

Significant amendments to the Receivables Facility were as follows:

• In March 2021, the Receivables Facility was amended to, among other things, extend the scheduled termination date for the uncommitted revolving period to March 4, 2022, and reduce the spread over LIBOR payable in respect of borrowings thereunder from 1.00 % to 0.85 %.

• In July 2021, the Receivables Facility was amended into the form of a Receivables Financing Agreement, which continued the uncommitted secured lending arrangement contemplated among the parties and, among other things, provided for certain revisions to funding, prepayment, reporting, and other provisions in preparation for a potential future syndication of the advances made under the Receivables Facility.

• In October 2021, the Company further amended the documentation governing the Receivables Facility in connection with the syndication of the advances thereunder to two additional lenders:

MUFG Bank, Ltd.

and Starbird Funding Corporation (a conduit lender related to BNP Paribas).

As part of the amendment, the Receivables Facility’s uncommitted lending limit was increased from $ 200 million to $ 400 million, and the scheduled termination date for the Receivable Facility’s uncommitted revolving period was extended to October 28, 2022.

The Company services the transferred retail installment contract receivables and is responsible for ensuring the related collections are remitted to a segregated bank account in the SPE’s name.

On a monthly basis, the segregated account is utilized to make required principal, interest, and other payments due under the Receivables Facility.

The segregated account is considered restricted cash and is reflected in prepaid expenses and other current assets in the Company’s Consolidated Balance Sheets.

Borrowings under the Receivables Facility along with the transferred retail installment contract receivables are included in the Consolidated Balance Sheets.

Borrowings and repayments under the Receivables Facility are reflected as cash flows from financing activities in the Consolidated Statements of Cash Flows.

During 2020, the Company received proceeds of $ 83 million under the Receivables Facility and repaid $ 7 million.

As of December 31, 2020, the Company had an outstanding balance of $ 76 million and an uncommitted available borrowing capacity of $ 124 million under the Receivables Facility.

As of December 31, 2021 and 2020, the Company had an uncommitted available borrowing capacity of $ 201 million and $ 124 million, respectively, under the Receivables Facility.

During 2021 and 2020, proceeds from the Receivables Facility were $ 254 million and $ 83 million, respectively, and repayments were $ 130 million and $ 7 million, respectively, which are reflected as cash flows from financing activities in the Consolidated Statements of Cash Flows.

Both the proceeds and repayments during 2021 include the non-cash impact of approximately $ 88 million from the Receivables Facility amendment in October 2021.

The Receivables Facility did not have a material impact to the Consolidated Statements of Operations.

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The SPE, as described above, meets the definition of a variable interest entity (“VIE”) for which the Company is the primary beneficiary as it has the power to direct the SPE’s activities and the obligation to absorb losses or the right to receive benefits of the SPE.

As such, the assets, liabilities, and financial results of operations of the SPE are consolidated in the Company’s consolidated financial statements.

As of December 31, 2020, the SPE’s assets and liabilities primarily consisted of unbilled retail installment contract receivables, net, of $ 109 million and borrowings under the Receivables Facility of $ 76 million.

As such, the SPE’s assets, liabilities, and financial results of operations are consolidated in the Company’s consolidated financial statements.

As of December 31, 2021 and 2020, the SPE’s assets and liabilities primarily consisted of unbilled retail installment contract receivables, net, of $ 299 million and $ 109 million, respectively, and borrowings under the Receivables Facility as presented above.

Debt Covenants

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Loss on extinguishment of debt includes the payment of call and redemption premiums, the write-off of unamortized deferred financing costs and discounts, and certain other expenses associated with extinguishment of debt.

During 2020, loss on extinguishment of debt totaled $ 120 million and included (i) $ 66 million associated with the call premium and write-off of unamortized deferred financing costs in connection with the $ 1.2 billion redemption of the Prime Notes in February 2020, (ii) $ 49 million associated with the call premium and write-off of unamortized fair value adjustments in connection with the $ 1 billion redemption of the ADT Notes due 2021 in September 2020, and (iii) $ 5 million associated with the partial write-off of unamortized deferred financing costs and discount in connection with the $ 300 million repayment of the First Lien Term Loan due 2026 in December 2020.

During 2021, loss on extinguishment of debt totaled $ 37 million and was primarily due to the call premium and write-off of unamortized fair value adjustments in connection with the ADT Notes due 2022 Redemption.

February 2020, (ii) $ 49 million associated with the call premium and write-off of unamortized fair value adjustments in connection with the $ 1.0 billion redemption of the ADT Notes due 2021 in September 2020, and (iii) $ 5 million associated with the partial write-off of unamortized deferred financing costs and discount in connection with the $ 300 million repayment of the First Lien Term Loan due 2026 in December 2020.

During 2019, loss on extinguishment of debt totaled $ 104 million and included (i) $ 22 million associated with the call premium and partial write-off of unamortized deferred financing costs in connection with the $ 300 million partial redemption of the Prime Notes in February 2019, (ii) $ 61 million associated with the call premium and partial write-off of unamortized deferred financing costs in connection with the $ 1.0 billion partial redemption of the Prime Notes in April 2019, (iii) $ 6 million associated with the partial write-off of unamortized deferred financing costs and discount in connection with the $ 500 million repayment of the First Lien Term B-1 Loan in April 2019, and (iv) $ 13 million associated with the partial write-off of unamortized deferred financing costs and discount in connection with the amendment and restatement to the First Lien Credit Agreement in September 2019.

During 2018, loss on extinguishment of debt included $ 62 million primarily associated with the partial redemption of the Prime Notes in February 2018.

Additional fees and costs associated with financing transactions include (i) $ 5 million in 2020 primarily related to the February 2020 redemption of the Prime Notes, (ii) $ 23 million in 2019 primarily related to the September 2019 amendment and restatement of the Company’s First Lien Credit Agreement, (iii) and $ 9 million in 2018 related to the 2018 amendments and restatements of the Company’s First Lien Credit Agreement.

As of December 31, 2020, the aggregate annual maturities of debt, including finance lease obligations, were as follows:

(in thousands)

2021 $ 46,983

2022 1,041,725

Thereafter 7,178,812

Total maturities of debt 9,769,276

Unamortized debt discount, net ( 19,993 )

Unamortized deferred financing costs ( 64,638 )

Unamortized purchase accounting fair value adjustment and other ( 188,740 )

Amount representing interest on finance leases ( 3,361 )

Total debt 9,492,544

Current maturities of long-term debt ( 44,764 )

Long-term debt $ 9,447,780

Interest expense on the Company’s debt and interest rate swap contracts was $ 710 million, $ 623 million, and $ 620 million during 2020, 2019, and 2018, respectively.

Mandatorily Redeemable Preferred Securities

In May 2016, and in connection with the ADT Acquisition, the Company issued 750,000 shares of mandatorily redeemable preferred securities at a stated value of $ 1,000 per share and par value of $ 0.01 per share, and Ultimate Parent issued warrants to Koch Industries, Inc.

(the” Koch Investor”) for an aggregate amount of $ 750 million.

The Company allocated $ 659 million to the mandatorily redeemable preferred securities and reflected this amount net of issuance costs of $ 27 million, as a liability in the Consolidated Balance Sheet as these securities had a mandatory redemption feature that required repayment at 100 % of the stated value, adjusted for any declared but unpaid dividends, in May 2030.

The Company allocated the remaining $ 91 million in proceeds to the related warrants, which was contributed by Ultimate Parent in the form of common equity to the Company, net of $ 4 million in issuance costs.

In July 2018, the Company redeemed in full the original stated value of $ 750 million of the mandatorily redeemable preferred securities for total consideration of approximately $ 949 million, which included approximately $ 103 million related to the redemption premium and tax reimbursements, as well as $ 96 million related to the accumulated dividend obligation.

The redemption was funded with proceeds from the IPO and cash on hand.

As a result of this redemption, the Company recognized a loss on extinguishment of debt of $ 213 million in 2018 associated with the payment of the redemption premium, including tax reimbursements, and the write-off of unamortized discount and deferred financing costs.

Prior to redemption, the mandatorily redeemable preferred securities accrued and accumulated preferential cumulative dividends in arrears on their then current stated value.

In the event that dividends for any quarter were not paid in cash, they would be added to the then current stated value of the mandatorily redeemable preferred securities.

Beginning in the third quarter of 2017, in lieu of declaring and paying the dividend obligation on the mandatorily redeemable preferred securities, the Company elected to increase the accumulated stated value of such securities.

Prior to redemption, the reported balance of mandatorily redeemable preferred securities on the Consolidated Balance Sheet reflected approximately $ 96 million associated with the related dividend obligation, of which approximately $ 51 million related to 2018 and $ 45 million related to 2017.

The quarterly dividend obligation on these securities was reflected in interest expense, net in the Consolidated Statements of Operations and totaled $ 51 million in 2018.

Additional fees and costs associated with financing transactions were not material during 2021 and 2020.

During 2019, the Company incurred $ 23 million primarily related to the September 2019 amendment and restatement of the Company’s First Lien Credit Agreement.

As of December 31, 2021, the aggregate annual maturities of debt, excluding finance leases, were as follows:

(in thousands) 2022 2023 2024 2025 2026 Thereafter Total

Debt principal $ 78,863 $ 783,298 $ 825,006 $ 63,115 $ 4,036,565 $ 4,049,911 $ 9,836,758

Interest expense on the Company’s debt, including finance leases, and interest rate swap contracts was $ 458 million, $ 710 million, and $ 623 million during 2021, 2020, and 2019, respectively.

Derivative Financial Instruments

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All interest rate swap contracts are reported in the Consolidated Balance Sheets at fair value.

For the interest rate swap contracts that are not designated as cash flow hedges, unrealized gains and losses are recognized in interest expense, net, in the Consolidated Statements of Operations.

For the interest rate swap contracts that are designated as cash flow hedges, unrealized gains and losses are recognized as a component of AOCI in the Consolidated Balance Sheets and are reclassified into interest expense, net, in the same period in which the related interest on debt affects earnings.

For interest rate swap contracts not designated as cash flow hedges, unrealized gains and losses are recognized in interest expense, net, in the Consolidated Statements of Operations.

For interest rate swap contracts designated as cash flow hedges, unrealized gains and losses are recognized as a component of AOCI in the Consolidated Balance Sheets and are reclassified into interest expense, net, in the same period in which the related interest on debt affects earnings.

For interest rate swap contracts that have been de-designated as cash flow hedges and for which the forecasted cash flows are probable or reasonably possible of occurring, unrealized gains and losses previously recognized as a component of AOCI are reclassified into interest expense, net, in the same period in which the related interest on variable-rate debt affects earnings through the original maturity date of the related interest rate swap contracts.

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As a result, the amount of the unfavorable positions recognized as a component of AOCI related to the terminated cash flow hedges are reclassified into interest expense, net, in the same period in which the related interest on variable-rate debt affects earnings through the original maturity date of the cash flow hedges of April 2022, as the forecasted cash flows are probable or reasonably possible of occurring.

Additionally, the new interest rate swap terms represented a blend of the current interest rate environment and the unfavorable positions of the terminated interest rate swap contracts, which resulted in an other-than-insignificant financing element at inception of the new cash flow hedges due to off-market terms.

As of December 31, 2019, the Company had interest rate swap contracts with an aggregate notional amount of $ 3.2 billion, of which $ 3 billion were designated as cash flow hedges.

As a result of recent changes in the interest rate environment, the Company's interest rate swap contracts designated as cash flow hedges with an aggregate notional amount of $ 3 billion were no longer highly effective beginning in March 2020.

Additionally, the new interest rate swap terms represented a blend of the current interest rate environment and the

unfavorable positions of the terminated interest rate swap contracts, which resulted in an other-than-insignificant financing element at inception of the new cash flow hedges due to off-market terms.

Beginning in March 2020, the Company's interest rate swap contracts designated as cash flow hedges with an aggregate notional amount of $ 3.0 billion were no longer highly effective as a result of changes in the interest rate environment.

Accordingly, the Company de-designated the cash flow hedges, and the unrealized gains and losses for the period in which these cash flow hedges were no longer highly effective were recognized in interest expense, net.

Unrealized losses previously recognized as a component of AOCI prior to de-designation will be reclassified into interest expense, net, in the same period in which the related interest on variable-rate debt affects earnings through the maturity dates of the interest rate swap contracts, as the forecasted cash flows are probable or reasonably possible of occurring.

The impact associated with interest rate swap contracts that have been de-designated as cash flow hedges and for which the forecasted cash flows are no longer probable of occurring was not material during 2020, 2019, and 2018.

Below is a summary of the Company’s interest rate swap contracts as of December 31, 2020 (in thousands):

The impact associated with the interest rate swap contracts de-designated as cash flow hedges and for which the forecasted cash flows are no longer probable of occurring was not material during 2021, 2020, and 2019.

The Company’s interest rate swaps as of December 31, 2021 and 2020 consisted of the following (in thousands):

Execution Maturity Designation Notional Amount

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Total notional amount $ 3,225,000

The unrealized impact of interest rate swap contracts recognized in interest expense, net, in the Consolidated Statements of Operations was a loss of $ 60 million and $ 9 million during 2020 and 2019, respectively, and a gain of $ 3 million during 2018.

During 2020, the Company paid $ 38 million related to settlements on interest rate swap contracts that included an other-than-insignificant financing element at inception, which is reflected in cash flows from financing activities in the Consolidated Statement of Cash Flows.

The interest rate swap contracts did not have a material impact to the Consolidated Statements of Cash Flows during 2019 and 2018.

The fair value of the Company’s interest rate swap contracts and related classification in the Consolidated Balance Sheets for the periods presented were as follows:

(in thousands) December 31,

2020 December 31,

The unrealized impact of interest rate swaps recognized in interest expense, net, in the Consolidated Statements of Operations was as follows:

Years Ended December 31,

(in thousands) 2021 2020 2019

Unrealized gain (loss) on interest rate swaps $ 157,505 $ ( 60,363 ) $ ( 8,501 )

During 2021 and 2020, the Company paid $ 56 million and $ 38 million, respectively, related to settlements on interest rate swap contracts that included an other-than-insignificant financing element at inception, which is reflected in cash flows from financing activities in the Consolidated Statement of Cash Flows.

The interest rate swap contracts did not have a material impact to the Consolidated Statements of Cash Flows during 2019.

The classification and fair value of interest rate swaps recognized in the Consolidated Balance Sheets were as follows:

(in thousands) 2021 2020

Accrued expenses and other current liabilities $ 50,360 $ 65,462

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Fair value of interest rate swaps $ 118,336 $ 275,840

During September 2020, the Company amended its articles of incorporation to authorize the issuance of 100,000,000 shares of Class B common stock, par value of $ 0.01 per share, (“Class B Common Stock”) as well as to increase the number of authorized shares of preferred stock, par value of $ 0.01 per share, to 1,000,000 .

Accordingly, the Company has two classes of common stock, Common Stock and Class B Common Stock, both of which entitle stockholders to one vote for each share of common stock.

Each share of Class B Common Stock has equal status and rights to dividends with a share of Common Stock.

The holders of Class B Common Stock have one vote for each share of Class B Common Stock held of record by such holder on all matters on which stockholders are entitled to vote generally;

provided, however, that holders of Class B Common Stock, as such, are not entitled to vote on the election, appointment, or removal of directors of the Company.

Additionally, each share of Class B Common Stock will immediately become convertible into one share of Common Stock, at the option of the holder thereof, at any time following the earlier of (i) the expiration or early termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Clearance”), required prior to such holder’s conversion of all such shares of Class B Common Stock, and (ii) to the extent HSR Clearance is not required prior to such holder’s conversion of such shares of Class B Common Stock, the date that such holder owns such shares of Class B Common Stock.

Issuance of Common Stock

During January 2020, the Company issued approximately 16 million shares of Common Stock with a fair value of $ 114 million in connection with the Defenders Acquisition.

During January 2018, the Company completed an IPO in which the Company issued and sold 105,000,000 shares of Common Stock at an IPO price of $ 14.00 per share.

The Company received net proceeds of $ 1.4 billion from the sale of its shares in the IPO after deducting underwriting discounts, commissions, and offering expenses.

Issuance of Class B Common Stock

During September 2020, the Company issued and sold 54,744,525 shares of Class B Common Stock for an aggregate purchase price of $ 450 million to Google LLC (“Google”) in a private placement pursuant to a securities purchase agreement dated July 31, 2020 (the “Securities Purchase Agreement”).

As of the date of closing, Google held approximately 6.6 % of the issued and outstanding Common Stock of the Company on an as-converted basis.

Prior to closing, the Securities Purchase Agreement provided Google with the option to purchase additional shares of Class B Common Stock, for the same price per share, up to 9.9 % of the issued and outstanding Common Stock of the Company on an as-converted basis.

Google did not exercise this option.

In connection with the issuance of the Class B Common Stock, the Company and Google entered into an Investor Rights Agreement (the “Investor Rights Agreement”), pursuant to which Google agreed to be bound by customary transfer restrictions and drag-along rights, and be afforded customary registration rights with respect to shares of Class B Common Stock held directly by Google.

Under the terms of the Investor Rights Agreement, Google is prohibited, subject to certain exceptions, from transferring any shares of Class B Common Stock or any shares of Common Stock issuable upon conversion of the Class B Common Stock beneficially owned by Google until the earlier of (i) the three-year anniversary of issuance, (ii) the date on which the Commercial Agreement (as defined below) has been terminated under certain specified circumstances, and (iii) June 30, 2022 if the Company breaches certain of its obligations under the Commercial Agreement.

The Company estimated the fair value of the issued Class B Common Stock to be approximately $ 450 million, which represents a Level 3 fair value measurement.

The estimation of the fair value included the following inputs:

(i) the price per share of Common Stock, (ii) the length of the holding period restriction, (iii) an expected dividend-yield of 1.5 % during the holding period restriction, which was based on the projected dividend run-rate and dividing by the stock price, and (iv) an expected share price volatility of 30 % during the holding period restriction period, which was implied based upon an average of historical volatility of publicly traded companies in industries similar to the Company, as the Company did not have sufficient trading history to use as a basis for actual stock price volatility, as well as consideration for the Company’s debt to equity ratio.

The intrinsic value of the contingently exercisable beneficial conversion feature related to the ability to convert Class B Common Stock to Common Stock as well as the fair value of Google’s option to purchase additional shares of Class B Common Stock were not material.

Commercial Agreement

In addition to the issuance and sale of Class B Common Stock to Google, the Company and Google entered into a Master Supply, Distribution, and Marketing Agreement (the “Commercial Agreement”), pursuant to which Google has agreed to supply the Company with certain Google devices as well as certain Google video and analytics services (“Google Services”), for sale to the Company’s customers.

Subject to customary termination rights related to breach and change of control, the Commercial Agreement has an initial term of seven years from the date that the Google Service is successfully integrated into the Company’s end-user security and automation platform, which is targeted for no later than June 30, 2022.

Further, subject to certain carve-outs, the Company has agreed to exclusively sell Google end‐user video and sensing analytics services and smart-home, security and safety devices to the Company’s customers.

The exclusivity restriction does not apply to, among others, sales of Blue by ADT DIY products and services, providing services to customers on certain of the Company’s legacy platforms, sales to large commercial customers, and sales of certain devices that Google does not supply to the Company.

The Commercial Agreement specifies that each party will contribute $ 150 million towards the joint marketing of devices and services, customer acquisition, training of the Company’s employees for the sales, installation, customer service, and maintenance for the product and service offerings, and technology updates for products included in such offerings.

Each party is required to contribute such funds in three equal tranches, subject to the attainment of certain milestones.

Stockholders are entitled to receive dividends when, as, and if declared by the Company’s board of directors out of funds legally available for that purpose.

During February 2019, the Company approved a dividend reinvestment plan (the “DRIP”), which allows stockholders to designate all or a portion of the cash dividends on their shares of common stock for reinvestment in additional shares of the Company’s Common Stock.

The number of shares issued is determined based on the volume weighted average closing price per share of the Company’s Common Stock for the five trading days preceding the dividend payment and adjusted for any discounts, as applicable.

The DRIP will terminate in accordance with its terms on February 27, 2021.

When dividends are declared, the Company records a liability for the full amount of the dividends.

When dividends are settled, the Company reduces the liability and records an increase in Common Stock par value and additional paid-in capital for the portion of dividends settled in shares of common stock under the DRIP.

The Company declared the following cash dividends on common stock during 2020, 2019, and 2018:

Declared Date Record Date Payment Date Common Stock Dividend per Share Class B Common Stock Dividend per Share

March 15, 2018 March 26, 2018 April 5, 2018 $ 0.035 $ —

May 9, 2018 June 25, 2018 July 10, 2018 $ 0.035 $ —

August 8, 2018 September 18, 2018 October 2, 2018 $ 0.035 $ —

November 7, 2018 December 14, 2018 January 4, 2019 $ 0.035 $ —

March 11, 2019 April 2, 2019 April 12, 2019 $ 0.035 $ —

May 7, 2019 June 11, 2019 July 2, 2019 $ 0.035 $ —

August 6, 2019 September 11, 2019 October 2, 2019 $ 0.035 $ —

November 12, 2019 December 13, 2019 December 23, 2019 $ 0.700 $ —

November 12, 2019 December 13, 2019 January 3, 2020 $ 0.035 $ —

March 5, 2020 March 19, 2020 April 2, 2020 $ 0.035 $ —

May 7, 2020 June 18, 2020 July 2, 2020 $ 0.035 $ —

August 5, 2020 September 18, 2020 October 2, 2020 $ 0.035 $ 0.035

November 5, 2020 December 21, 2020 January 4, 2021 $ 0.035 $ 0.035

Apollo elected to discontinue participation in the DRIP with respect to dividends on the Company’s Common Stock subsequent to the October 2, 2019 dividend payment.

On February 25, 2021, the Company announced a dividend of $ 0.035 per share to holders of Common Stock and Class B Common Stock of record on March 18, 2021, which will be distributed on April 1, 2021.

During 2020, the Company declared aggregate dividends of $ 0.14 per share on Common Stock ($ 108 million) and $ 0.07 per share on Class B Common Stock ($ 4 million).

The amount of dividends settled in shares of Common Stock was not material.

During 2019, the Company declared aggregate dividends of $ 0.84 per share on Common Stock ($ 633 million), which included a special dividend of $ 0.70 per share on Common Stock.

The amount of dividends settled in shares of Common Stock was approximately $ 68 million, which resulted in the issuance of 11 million shares of Common Stock.

During 2018, the Company declared aggregate dividends of $ 0.14 per share on Common Stock ($ 107 million).

Share Repurchase Program

During February 2019, the Company approved a share repurchase program (the “Share Repurchase Program”), which authorized the Company to repurchase up to $ 150 million of the Company’s shares of Common Stock through February 27, 2021.

During March 2020, the Company approved an increase to $ 75 million, inclusive of the amount then remaining under the Share Repurchase Program, in the authorized repurchase amount and an extension of the Share Repurchase Program through March 23, 2021.

The Company may effect these repurchases pursuant to one or more trading plans to be adopted in accordance with Rule 10b5-1 (each, a “10b5-1 plan”) under the Securities Exchange Act of 1934 (the “Exchange Act”), in privately negotiated transactions, in open market transactions, or pursuant to an accelerated share repurchase program.

The Company intends to conduct the Share Repurchase Program in accordance with Rule 10b-18 under the Exchange Act.

During 2020, there were no material repurchases of shares of Common Stock under the Share Repurchase Program.

As of December 31, 2020, the Company had approximately $ 75 million remaining under the Share Repurchase Program.

During 2019, the Company repurchased 24 million shares of Common Stock for approximately $ 150 million under the Share Repurchase Program.

All of the shares repurchased were treated as retirements and reduced the number of shares issued and outstanding.

In addition, the Company recorded the excess of the purchase price over the par value per share as a reduction to additional paid-in capital.

Accumulated Other Comprehensive Loss

The changes in AOCI during the periods presented were as follows :

(in thousands) Cash Flow Hedges Foreign Currency Translation Defined Benefit Pension Plans Accumulated Other Comprehensive Loss

Balance as of December 31, 2017 $ — $ ( 6,943 ) $ 2,936 $ ( 4,007 )

Pre-tax current period change ( 28,030 ) ( 51,502 ) ( 2,478 ) ( 82,010 )

Income tax benefit 6,746 6,846 646 14,238

Balance as of December 31, 2018 ( 21,284 ) ( 51,599 ) 1,104 ( 71,779 )

Pre-tax current period change ( 52,093 ) 59,541 ( 247 ) 7,201

Income tax benefit (expense) 13,990 ( 7,942 ) 154 6,202

Balance as of December 31, 2019 ( 59,387 ) — 1,011 ( 58,376 )

Pre-tax current period change ( 76,807 ) — ( 2,844 ) ( 79,651 )

Income tax benefit 18,693 — 719 19,412

Balance as of December 31, 2020 $ ( 117,501 ) $ — $ ( 1,114 ) $ ( 118,615 )

During 2020, the Company reclassified $ 54 million and $ 13 million of AOCI related to accumulated unrealized losses of interest rate swap contracts that have been de-designated as cash flow hedges to interest expense, net, and income tax benefit, respectively.

During 2019, the Company reclassified $ 39 million and $ 4 million of AOCI related to foreign currency translation to loss on sale of business and income tax benefit, respectively, as a result of the sale of ADT Canada.

There were no other material reclassifications of AOCI during 2020, 2019, and 2018.

As of December 31, 2020, approximately $ 61 million of AOCI related to accumulated unrealized losses of interest rate swap contracts that have been de-designated as cash flow hedges is estimated to be reclassified to interest expense, net, within the next twelve months.

Share-Based Compensation

The Company grants share-based compensation awards to participants under the 2016 Equity Incentive Plan (the “2016 Plan”) and the 2018 Omnibus Incentive Plan (the “2018 Plan”).

Prior to the IPO, Class B Unit awards (“Class B Units”) were issued to certain participants by Ultimate Parent.

Share-based compensation expense is included in selling, general and administrative expenses in the Consolidated Statements of Operations and totaled $ 96 million, $ 86 million, and $ 135 million during 2020, 2019, and 2018, respectively.

As of December 31, 2020, the Company is authorized to issue no more than approximately 5 million shares of Common Stock by the exercise or vesting of granted awards under the 2016 Plan.

The Company does not expect to issue additional awards under the 2016 Plan.

Unrecognized share-based compensation expense as of December 31, 2020 and share-based compensation expense during 2020, 2019, and 2018 for awards granted under the 2016 Plan were not material.

Class B Units

Ultimate Parent authorized the issuance of a total of 25 million Class B Units, which represented the right to share a portion of the value appreciation on the initial member capital contribution.

Prior to the redemption of the Class B Units in connection with the IPO as discussed below, the Class B Units were subject to service-based and performance-based vesting conditions, with half of the Class B Units issued subject to ratable service-based vesting over a five-year period (the “Class B Unit Service Tranche”), and the other half subject to the achievement of certain investment return thresholds by Apollo (the “Class B Unit Performance Tranche”).

The fair value of the Class B Units was measured at the grant date and was recognized as share-based compensation expense over the requisite service period.

The Company did not record any share-based compensation expense related to the Class B Unit Performance Tranche as the achievement of certain vesting conditions was not deemed probable.

There were no issuances of Class B Units during 2018.

Prior to redemption of the Class B Units in connection with the IPO, the share-based compensation expense associated with the Class B Units was not material during 2018.

Class B Unit Redemption

In connection with the IPO, each holder of Class B Units in Ultimate Parent had their entire Class B interest in Ultimate Parent redeemed for the number of shares of the Company’s Common Stock (the “Distributed Shares”) that would have been distributed to such holder under the terms of Ultimate Parent’s operating agreement in a hypothetical liquidation on the date and price of the IPO (the “Class B Unit Redemption”).

All vesting conditions for the Distributed Shares are the same as the vesting conditions that existed under the terms of the Class B Units.

The Distributed Shares also have certain other restrictions pursuant to the terms and conditions of the Company’s Amended and Restated Management Investor Rights Agreement (the “MIRA”).

Furthermore, as part of the Class B Unit Redemption, each holder received both vested and unvested Distributed Shares in the same proportion as the holder’s vested and unvested Class B Units held immediately prior to the IPO.

As a result of the Class B Unit Redemption, holders of Class B Units received a total of 20.6 million shares of the Company’s Common Stock ( 17.8 million of which were unvested at the time of redemption).

Of the Distributed Shares issued upon the Class B Unit Redemption, 50 % were subject to the vesting conditions that existed for the Class B Unit Service Tranche (the “Distributed Shares Service Tranche”) and 50 % were subject to the vesting conditions that existed for the Class B Unit Performance Tranche (the “Distributed Shares Performance Tranche”).

The Class B Unit Redemption resulted in a modification of the Class B Units.

In connection with the modification, the Company utilized a Monte Carlo simulation to estimate the fair value of the Distributed Shares, as well as the derived service period for the Distributed Shares Performance Tranche.

Significant assumptions included in the simulation were the risk-free interest rate and the expected volatility of the Company’s stock price.

The Company selected a risk-free interest rate of 2.43 %, which was based on a five-year U.S.

Treasury with a zero-coupon rate.

The Company selected a stock price volatility of 30 %, which was implied based upon an average of historical volatilities of publicly traded companies in industries similar to the Company, as the Company did not have sufficient history to use as a basis for actual stock price volatility.

Additionally, because holders of unvested Distributed Shares are entitled to receive previously declared accrued dividends once the shares vest, a dividend yield assumption was not included in the simulation.

The Class B Unit Redemption resulted in weighted-average fair values of $ 14.00 and $ 12.97 for the Distributed Shares Service Tranche and the Distributed Shares Performance Tranche, respectively.

The fair values also incorporate the estimated impact of post-vesting selling restrictions pursuant to the MIRA.

In connection with the Class B Unit Redemption, the Company began recording share-based compensation expense on the Distributed Shares Performance Tranche on a straight-line basis over the derived service period of approximately three years from the IPO date, as the vesting conditions were deemed probable

following the consummation of the IPO.

For the Distributed Shares Service Tranche, incremental compensation expense recorded as a result of the modification was not material.

Additionally, the IPO triggered an acceleration of vesting of the unvested shares in the Distributed Shares Service Tranche, causing such Distributed Shares to become fully vested six months from the date of the IPO, which occurred in July 2018.

The following table summarizes activity related to the Distributed Shares during 2020:

Performance Tranche

Number of Distributed Shares Weighted-Average Grant Fair Value

Unvested as of December 31, 2019 9,988,582 $ 13.11

Forfeited ( 404,828 ) 13.21

Unvested as of December 31, 2020 9,583,754 $ 13.10

Share-based compensation expense associated with the Distributed Shares Service Tranche was $ 28 million during 2018.

Share-based compensation expense associated with the Distributed Shares Performance Tranche was $ 32 million, $ 47 million, and $ 46 million during 2020, 2019, and 2018, respectively.

As of December 31, 2020, unrecognized compensation cost related to the Distributed Shares Performance Tranche was not material.

In January 2018, the Company approved the 2018 Plan, which became effective upon consummation of the IPO.

The 2018 Plan authorizes the issuance of no more than approximately 38 million shares of Common Stock by the exercise or vesting of granted awards, which are generally stock options and restricted stock units (“RSUs”).

During 2019, the Company amended the 2018 Plan to increase the number of authorized shares of Common Stock to be issued under the 2018 Plan to approximately 88 million shares.

Awards issued under the 2018 Plan include retirement provisions that allow awards to continue to vest in accordance with the granted terms in its entirety or on a pro-rata basis when a participant reaches retirement eligibility, as long as 12 months of service have been provided since the date of grant.

Accordingly, share-based compensation expense for service-based awards is recognized on a straight-line basis over the vesting period, or on an accelerated basis for retirement-eligible participants where applicable.

The Company accounts for forfeitures as they occur.

Under the terms of the 2018 Plan, RSUs are entitled to dividend equivalent units (“DEUs”), which are granted as additional RSUs and are subject to the same vesting and forfeiture conditions as the underlying RSUs.

DEUs are charged against accumulated deficit when dividends are paid.

The 2018 Plan’s provisions allow for adjustments to the exercise price of options upon the occurrence of certain events, such as changes in capital or operating structure.

On December 23, 2019, the Company paid a special dividend of $ 0.70 per share of Common Stock.

The exercise price of all options granted under the 2018 Plan prior to the payment of the special dividend were adjusted downward by $ 0.70 in accordance with plan provisions.

The Company satisfies the exercise of options and the vesting of RSUs through the issuance of authorized but previously unissued shares of Common Stock.

Top-up Options

In connection with the Class B Unit Redemption, the Company granted 12.7 million options to holders of Class B Units (the “Top-up Options”).

The Top-up Options have an exercise price equal to the initial public offering price per share of the Company’s Common Stock, as adjusted in accordance with 2018 Plan provisions, and a contractual term of ten years from the grant date.

Similar to the vesting conditions outlined above for the Distributed Shares, the Top-up Options contain a tranche subject to service-based vesting (the “Top-up Options Service Tranche”) and a tranche subject to vesting based upon the achievement of certain investment return thresholds by Apollo (the “Top-up Options Performance Tranche”).

Recipients of the Top-up Options received both vested and unvested Top-up Options in the same proportion as the vested and unvested Class B Units held immediately prior to the IPO and Class B Unit Redemption.

These vesting conditions are the same vesting conditions as those attributable to the Distributed Shares, including the condition that accelerated vesting of the unvested options in the Top-up Options Service Tranche, causing such options to become fully vested six months from the date of the

IPO, which occurred in July 2018.

Any shares of the Company’s Common Stock acquired upon exercise of the Top-up Options will be subject to the terms of the MIRA.

The Company used a Monte Carlo simulation to estimate the fair value of the Top-up Options, as well as the derived service period for the Top-up Options Performance Tranche.

Significant assumptions included in the simulation were the risk-free interest rate, the expected volatility, and the expected dividend yield.

The Company selected a risk-free interest rate of 2.43 %, which was based on a five-year U.S.

Treasury with a zero-coupon rate.

The Company selected a stock price volatility of 30 %, which was implied based upon an average of historical volatilities of publicly traded companies in industries similar to the Company, as the Company did not have sufficient trading history to use as a basis for actual stock price volatility.

The Company also assumed a 1 % dividend yield.

The expected average exercise term was derived based on an average of the outcomes of various scenarios performed under the Monte Carlo simulation.

The weighted-average grant date fair values of the Top-up Options Service Tranche and Top-up Options Performance Tranche were $ 5.02 and $ 5.04 , respectively.

The fair values also incorporate the estimated impact of post-vesting selling restrictions pursuant to the MIRA.

The Company recorded share-based compensation expense associated with the Top-up Options Service Tranche on a straight-line basis over the requisite service period of six months from the IPO date.

The Company records share-based compensation expense associated with the Top-up Options Performance Tranche on a straight-line basis over the derived service period of approximately three years from the IPO date.

The following table summarizes activity related to the Top-up Options granted under the 2018 Plan during 2020:

Service Tranche Performance Tranche

Number of Top-up Options Weighted-Average Exercise Price Number of Top-up Options Weighted-Average Exercise Price Aggregate Intrinsic Value (a)

Weighted-Average Remaining Contractual Term (Years)

Outstanding as of December 31, 2019 5,974,369 $ 13.30 6,165,146 $ 13.30

Granted — — — —

Exercised — — — —

Forfeited — — ( 241,173 ) 13.30

Outstanding as of December 31, 2020 5,974,369 $ 13.30 5,923,973 $ 13.30 — 7.0

Exercisable as of December 31, 2020 5,974,369 $ 13.30 — $ — — 7.0

________________________

(a) The intrinsic value represents the amount by which the fair value of the Company’s Common Stock exceeds the option exercise price as of December 31, 2020.

Share-based compensation expense associated with the Top-up Options Service Tranche was $ 32 million during 2018.

Share-based compensation expense associated with the Top-up Options Performance Tranche was $ 7 million, $ 11 million, and $ 11 million during 2020, 2019, and 2018, respectively.

As of December 31, 2020, unrecognized compensation cost related to the Top-up Options Performance Tranche was not material.

Options granted under the 2018 Plan are primarily service-based awards that vest over a three-year period from the date of grant, have an exercise price equal to the closing price per share of the Company’s Common Stock on the date of grant, as adjusted in accordance with 2018 Plan provisions, and have a contractual term of ten years from the date of grant.

The grant date fair values of options granted under the 2018 Plan were determined using the Black-Scholes valuation approach with the following assumptions:

Years Ended December 31,

2020 2019 2018

Risk-free interest rate 0.51% - 1.40% 1.58% - 2.51% 2.52% - 2.85%

Expected exercise term (years) 6 6.0 - 6.5 6.5

Expected dividend yield 2.2% - 2.7% 2.0% - 2.7% 1.0% - 2.1%

Expected volatility 45% - 46% 41% - 42% 30% - 39%

The risk-free interest rate was based on U.S.

Treasury bonds with a zero-coupon rate.

The Company did not have sufficient historical exercise data, and, as such, the Company estimated the expected exercise term based on factors such as vesting period, contractual period, and other share-based compensation awards with similar terms and conditions.

The dividend yield was calculated by taking the annual dividend run-rate and dividing by the stock price at date of grant.

The stock price volatility was implied based upon an average of historical volatility of publicly traded companies in industries similar to the Company, as the Company did not have sufficient trading history to use as a basis for actual stock price volatility, as well as consideration for the Company’s debt to equity ratio.

The weighted-average grant date fair values of options granted during 2020, 2019, and 2018 were $ 1.77 , $ 2.20 , and $ 3.92 , respectively.

The following table summarizes activity related to options granted under the 2018 Plan during 2020:

Number of Options Weighted-Average Exercise Price Aggregate Intrinsic Value (a)

Weighted-Average Remaining Contractual Term (Years)

Outstanding as of December 31, 2019 16,511,587 $ 7.28

Granted 8,576,746 5.31

Exercised ( 349,287 ) 5.55

Forfeited ( 547,926 ) 7.83

Outstanding as of December 31, 2020 24,191,120 $ 6.60 $ 45,935 8.4

Exercisable as of December 31, 2020 2,771,380 $ 5.82 $ 5,742 8.1

________________________

(a) The intrinsic value represents the amount by which the fair value of the Company’s Common Stock exceeds the option exercise price as of December 31, 2020.

Amounts are presented in thousands.

Share-based compensation expense associated with options granted under the 2018 Plan was $ 16 million, $ 12 million, and $ 7 million during 2020, 2019, and 2018, respectively.

The cash flow and the intrinsic value of options exercised were not material during 2020, 2019, and 2018.

As of December 31, 2020, unrecognized compensation cost related to options granted under the 2018 Plan was $ 23 million, which will be recognized over a period of 2.0 years.

Restricted Stock Units

RSUs granted under the 2018 Plan are primarily service-based awards that vest over a three-year period from the date of grant and have a fair value equal to the closing price per share of the Company’s Common Stock on the date of grant.

The following table summarizes activity related to RSUs (including DEUs) granted under the 2018 Plan during 2020:

Number of RSUs Weighted-Average Grant Date Fair Value

Unvested as of December 31, 2019 7,259,086 $ 7.51

Granted 12,321,542 5.97

Vested ( 1,759,331 ) 6.55

Forfeited ( 1,058,023 ) 6.18

Unvested as of December 31, 2020 16,763,274 $ 6.56

Share-based compensation expense associated with RSUs granted under the 2018 Plan was $ 39 million, $ 14 million, and $ 6 million during 2020, 2019, and 2018, respectively.

The fair value of RSUs that vested and converted to shares of Common Stock was not material during 2020, 2019, and 2018.

As of December 31, 2020, unrecognized compensation cost related to RSUs granted under the 2018 Plan was $ 57 million, which will be recognized over a period of 2.1 years.

Net Loss per Share

The Company applies the two-class method for computing and presenting net loss per share for each class of common stock.

The two-class method allocates current period net loss to each class of common stock and participating securities based on (i) dividends declared and (ii) participation rights in the remaining undistributed losses.

Basic net loss per share is computed by dividing the net loss allocated to each class of common stock using the two-class method by the related weighted-average number of shares outstanding during the period.

Diluted net loss per share gives effect to all securities representing potential common shares that were dilutive and outstanding during the period for each class of common stock.

Potential shares of Common Stock include (i) incremental shares of Common Stock calculated using the treasury stock method for share-based compensation awards, (ii) incremental shares of Common Stock issuable upon the conversion of Class B Common Stock, and (iii) incremental shares of Common Stock calculated using the treasury stock method for warrants to purchase additional shares of Common Stock that were issued in connection with a business combination.

Potential shares of Class B Common Stock include (i) incremental shares of Class B Common Stock calculated using the treasury stock method for the period in which the Securities Purchase Agreement was outstanding prior to closing and (ii) incremental shares of Class B Common Stock calculated using the treasury stock method for Google’s option to purchase additional shares of Class B Common Stock prior to closing.

For purposes of the diluted net loss per share of Common Stock computation, all potential shares of Common Stock that would be dilutive were excluded because their effect would be anti-dilutive.

As a result, basic net loss per share of Common Stock is equal to diluted net loss per share of Common Stock for the periods presented .

Accordingly, the potential shares of Common Stock that were excluded from the computation of diluted loss per share of Common Stock were (i) share-based compensation awards of approximately 66 million, 50 million, and 33 million during 2020, 2019, and 2018, respectively, (ii) shares of Class B Common Stock of 55 million during 2020, and (iii) warrants to purchase additional shares of Common Stock of 2 million during 2020.

The computations of basic and diluted net loss per share for each class of common stock for the periods presented are as follows:

Years Ended December 31,

2020 2019 2018

(in thousands, except per share amounts) Common Stock Class B Common Stock Common Stock Class B Common Stock Common Stock Class B Common Stock

Allocation of net loss - basic $ ( 620,856 ) $ ( 11,337 ) $ ( 424,150 ) $ — $ ( 609,155 ) $ —

Effect of dilutive potential shares of Class B common stock on allocated net loss — ( 1,952 ) — — — —

Allocation of net loss - diluted $ ( 620,856 ) $ ( 13,289 ) $ ( 424,150 ) $ — $ ( 609,155 ) $ —

Weighted-average shares outstanding - basic 760,483 15,855 747,238 — 747,710 —

Dilutive potential shares of Class B common stock — 2,089 — — — —

Diluted weighted-average shares outstanding 760,483 17,944 747,238 — 747,710 —

Net loss per share - basic $ ( 0.82 ) $ ( 0.72 ) $ ( 0.57 ) $ — $ ( 0.81 ) $ —

Net loss per share - diluted $ ( 0.82 ) $ ( 0.74 ) $ ( 0.57 ) $ — $ ( 0.81 ) $ —

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the temporary differences between the recognition of revenue and expenses for income tax and financial reporting purposes and between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements.

The Company records the effect of a tax rate or law change on the Company’s deferred tax assets and liabilities in the period of enactment.

Significant components of loss before income taxes for the periods presented were as follows:

Significant components of income (loss) before income taxes for the periods presented were as follows:

Years Ended December 31,

2 unchanged sentences

Foreign 2,315 3,337 ( 99,518 )

Loss before income taxes $ ( 778,919 ) $ ( 522,192 ) $ ( 632,618 )

Income (loss) before income taxes $ ( 471,189 ) $ ( 778,919 ) $ ( 522,192 )

Significant components of income tax benefit for the periods presented were as follows:

18 unchanged sentences

Valuation allowance 0.5 % ( 1.5 ) % ( 9.4 ) %

Non-deductible share-based compensation ( 0.1 ) % ( 0.3 ) % ( 5.8 ) %

Prior year tax return adjustments ( 0.3 ) % ( 0.6 ) % 3.8 %

Acquisitions 1.3 % 0.2 % — %

Legislative changes 0.8 % — % ( 1.2 ) %

32 unchanged sentences

Beginning balance $ ( 68,013 ) $ ( 56,841 ) $ ( 9,558 )

Income tax (expense) benefit ( 11,999 ) ( 49,291 ) 5,696

Income tax benefit (expense) 2,378 ( 11,999 ) ( 49,291 )

Write-offs and other (1)

5,478 827 2,008

Ending balance $ ( 60,157 ) $ ( 68,013 ) $ ( 56,841 )

__________________

(1) Includes the removal of valuation allowances associated with certain tax attributes that expired during the current year.

Both the expired attributes and related valuation allowances were removed concurrently.

As of December 31, 2021, the Company had approximately $ 2.2 billion of U.S.

19 unchanged sentences

Interest and penalties associated with unrecognized tax benefits were not material to the Company's consolidated financial statements for the periods presented.

As of December 31, 2020 and 2019, the Company had unrecognized tax benefits, exclusive of interest and penalties, of $ 66 million and $ 65 million, respectively.

The following is a rollforward of unrecognized tax benefits for the periods presented:

25 unchanged sentences

COVID-19 Pandemic

In response to the COVID-19 Pandemic, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law during March 2020 and included significant corporate income tax and payroll tax provisions intended to provide economic relief to address the impact of the COVID-19 Pandemic.

The Company is continuing to assess these corporate tax provisions and has recognized favorable cash flow impacts related to the accelerated refund of previously generated alternative minimum tax credits, as well as from the deferral of remittance of certain 2020 payroll taxes, with 50% of the deferred amount due by the end of 2021, and the remainder due by the end of 2022.

In response to the COVID-19 Pandemic, the American Rescue Plan Act of 2021 (the “2021 Rescue Act”) and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) were signed into law in March 2021 and March 2020, respectively, and included significant corporate income tax and payroll tax provisions intended to provide economic relief to address the impact of the COVID-19 Pandemic.

During 2020, the Company recognized favorable cash flow impacts related to the accelerated refund of previously generated alternative minimum tax credits, as well as from the deferral of remittance of certain 2020 payroll taxes, of which 50 % of the deferred amount was paid during the fourth quarter of 2021, and the remainder is due by the end of 2022.

The Company also recognized a benefit from an increase in the interest expense limitation from 30 % to 50 % for tax years 2019 and 2020.

In addition, states have begun proposing and enacting legislation to address the unfavorable financial impacts of the COVID-19 Pandemic, which includes tax rate changes, decoupling from favorable federal legislation under the CARES Act (such as an

increased interest expense limitation from 30% to 50%), and limiting the use of NOLs.

As of December 31, 2020, there has been no material impact to the Company from these state legislative changes.

However, the Company expects the trend to continue and these changes could have material impacts to the Company’s results of operations and cash flows.

The Company will continue to assess the impacts as states finalize and enact these legislative changes.

Retirement Plans

Defined Contribution Plans

The Company maintains qualified defined contribution plans, which include 401(k) matching programs in the U.S., as well as similar matching programs in Canada prior to the sale of ADT Canada.

Expense for the defined contribution plans is computed as a percentage of participants’ compensation and was $ 40 million, $ 34 million, and $ 28 million during 2020, 2019, and 2018, respectively.

Multi-employer Plans

As a result of the Red Hawk Acquisition, the Company participates in certain multi-employer union pension plans, which provide benefits for a group of the Company’s unionized employees.

The Company does not believe these multi-employer plans, including the Company’s required contributions and any underfunding liabilities under such plans, are material to the Company’s consolidated financial statements.

Defined Benefit Plans

The Company provides a defined benefit pension plan and certain other postretirement benefits to certain employees.

These plans are frozen and are not material to the Company’s consolidated financial statements.

As of December 31, 2020 and 2019, the fair values of pension plan assets were $ 87 million and $ 72 million, respectively, and the fair values of projected benefit obligations were $ 99 million and $ 91 million, respectively.

As a result, the plans were underfunded by approximately $ 12 million and $ 18 million as of December 31, 2020 and 2019, respectively, and were recorded as a net liability in the Consolidated Balance Sheets.

Net periodic benefit cost associated with these plans was not material during 2020, 2019, and 2018.

Deferred Compensation Plan

The Company maintains a non-qualified supplemental savings and retirement plan, which permits eligible employees to defer a portion of their compensation.

Deferred compensation liabilities were $ 28 million and $ 21 million as of December 31, 2020 and 2019, respectively, and were recorded in other liabilities in the Consolidated Balance Sheets.

Deferred compensation expense was not material during 2020, 2019, and 2018.

During September 2020, the Company amended its articles of incorporation to authorize the issuance of 100,000,000 shares of Class B common stock, par value of $ 0.01 per share, as well as to increase the number of authorized shares of preferred stock, par value of $ 0.01 per share, to 1,000,000 .

Accordingly, the Company has two classes of common stock, Common Stock and Class B Common Stock, both of which entitle stockholders to one vote for each share of common stock.

Each share of Class B Common Stock has equal status and rights to dividends with a share of Common Stock.

The holders of Class B Common Stock have one vote for each share of Class B Common Stock held of record by such holder on all matters on which stockholders are entitled to vote generally;

provided, however, that holders of Class B Common Stock, as such, are not entitled to vote on the election, appointment, or removal of directors of the Company.

Issuances of Common Stock

In December 2021, the Company issued approximately 70 million shares of Common Stock with a fair value of $ 529 million in connection with the Sunpro Solar Acquisition.

In January 2020, the Company issued approximately 16 million shares of Common Stock with a fair value of $ 114 million in connection with the Defenders Acquisition.

Issuance of Class B Common Stock

As described in Note 1 “Description of Business and Summary of Significant Accounting Policies”, in September 2020, the Company issued and sold 54,744,525 shares of Class B Common Stock to Google for an aggregate purchase price of $ 450 million.

Under the terms of the Investor Rights Agreement, Google is prohibited, subject to certain exceptions, from transferring any shares of Class B Common Stock or any shares of Common Stock issuable upon conversion of the Class B Common Stock beneficially owned by Google until the earlier of (i) the three-year anniversary of issuance, (ii) the date on which the Google Commercial Agreement (as defined in Note 12 “Commitments and Contingencies”) has been terminated under certain specified circumstances, and (iii) June 30, 2022 if the Company breaches certain of its obligations under the Google Commercial Agreement.

The Company estimated the fair value of the issued Class B Common Stock to be approximately $ 450 million, which represents a Level 3 fair value measurement.

The estimation of the fair value included the following inputs:

Stockholders are entitled to receive dividends when, as, and if declared by the Company’s board of directors out of funds legally available for that purpose.

In February 2019, the Company approved a dividend reinvestment plan (the “DRIP”), which allowed stockholders to designate all or a portion of the cash dividends on their shares of common stock for reinvestment in additional shares of the Company’s Common Stock.

The Company recorded a liability for the full amount of the dividends when declared, and then upon settlement, the Company reduced the liability and recorded an increase in Common Stock par value and additional paid-in

capital for the portion of dividends settled in shares of common stock under the DRIP.

The DRIP terminated in accordance with its terms on February 27, 2021.

Dividends declared on common stock during the periods presented were as follows:

(in thousands, except per share data)

Common Stock Class B Common Stock

Declaration Date Record Date Payment Date Per Share Aggregate Per Share Aggregate

February 25, 2021 March 18, 2021 April 1, 2021 $ 0.035 $ 27,220 $ 0.035 $ 1,916

May 5, 2021 June 17, 2018 July 1, 2021 0.035 27,268 0.035 1,916

August 4, 2021 September 16, 2021 October 5, 2021 0.035 27,270 0.035 1,916

November 9, 2021 December 16, 2021 January 4, 2022 0.035 29,732 0.035 1,916

Total for Year Ended December 31, 2021 $ 0.140 $ 111,490 $ 0.140 $ 7,664

March 5, 2020 March 19, 2020 April 2, 2020 $ 0.035 $ 27,117 $ — $ —

May 7, 2020 June 18, 2020 July 2, 2020 0.035 26,767 — —

August 5, 2020 September 18, 2020 October 2, 2020 0.035 27,047 0.035 1,916

November 5, 2020 December 21, 2020 January 4, 2021 0.035 27,105 0.035 1,916

Total for Year Ended December 31, 2020 $ 0.140 $ 108,036 $ 0.070 $ 3,832

During 2019, the Company declared aggregate dividends of $ 0.84 per share on Common Stock ($ 633 million), which included quarterly dividends of $ 0.035 per share and a special dividend of $ 0.70 per share of Common Stock (“2019 Special Dividend”).

The amount of dividends settled in shares of Common Stock was approximately $ 68 million, which resulted in the issuance of 11 million shares of Common Stock.

On March 1, 2022, the Company announced a dividend of $ 0.035 per share to holders of Common Stock and Class B Common Stock of record on March 17, 2022, which will be distributed on April 4, 2022.

Share Repurchase Program

In February 2019, the Company approved a share repurchase program (the “Share Repurchase Program”), which authorized the Company to repurchase shares of the Company’s Common Stock (up to a certain amount).

The Share Repurchase Program terminated in accordance with its terms on March 23, 2021.

During 2021 and 2020, there were no material repurchases of shares of Common Stock under the Share Repurchase Program.

During 2019, the Company repurchased 24 million shares of Common Stock for approximately $ 150 million under the Share Repurchase Program.

All of the shares repurchased were treated as retirements and reduced the number of shares issued and outstanding.

In addition, the Company recorded the excess of the purchase price over the par value per share as a reduction to additional paid-in capital.

Accumulated Other Comprehensive Income (Loss)

The changes in AOCI during the periods presented were as follows:

(in thousands) Cash Flow Hedges Foreign Currency Translation Defined Benefit Pension Plans Total AOCI

Balance as of December 31, 2018 $ ( 21,284 ) $ ( 51,599 ) $ 1,104 $ ( 71,779 )

Pre-tax current period change ( 52,093 ) 59,541 ( 247 ) 7,201

Income tax benefit (expense) 13,990 ( 7,942 ) 154 6,202

Balance as of December 31, 2019 ( 59,387 ) — 1,011 ( 58,376 )

Pre-tax current period change ( 76,807 ) — ( 2,844 ) ( 79,651 )

Income tax benefit (expense) 18,693 — 719 19,412

Balance as of December 31, 2020 ( 117,501 ) — ( 1,114 ) ( 118,615 )

Pre-tax current period change 60,948 — 4,552 65,500

Income tax benefit (expense) ( 14,714 ) — ( 1,144 ) ( 15,858 )

Balance as of December 31, 2021 $ ( 71,267 ) $ — $ 2,294 $ ( 68,973 )

Amounts reclassified out of AOCI associated with cash flow hedges were as follows:

Years Ended December 31,

(in thousands) 2021 2020 2019

Reclassifications to interest expense, net $ 60,948 $ 54,452 $ 2,777

Reclassifications to income tax benefit $ ( 14,714 ) $ ( 13,254 ) $ ( 746 )

Additionally, during 2019, the Company reclassified $ 39 million and $ 4 million of AOCI related to foreign currency translation to loss on sale of business and income tax benefit, respectively, as a result of the sale of ADT Canada.

There were no other material reclassifications of AOCI during 2021, 2020, and 2019.

As of December 31, 2021, approximately $ 34 million of AOCI related to accumulated unrealized losses of interest rate swap contracts that have been de-designated as cash flow hedges is estimated to be reclassified to interest expense, net, within the next twelve months.

Share-Based Compensation

The Company grants share-based compensation awards to participants under the 2016 Equity Incentive Plan (the “2016 Plan”) and the 2018 Omnibus Incentive Plan (the “2018 Plan”).

Share-based compensation expense is included in selling, general, and administrative expenses in the Consolidated Statements of Operations and was as follows:

Years Ended December 31,

( in thousands )

2021 2020 2019

Share-based compensation expense $ 61,237 $ 96,013 $ 85,626

As of December 31, 2021, the Company is authorized to issue no more than approximately 5 million shares of Common Stock by the exercise or vesting of granted awards under the 2016 Plan.

The Company does not expect to issue additional awards under the 2016 Plan.

Unrecognized share-based compensation expense as of December 31, 2021 and share-based compensation expense during 2021, 2020, and 2019 for awards granted under the 2016 Plan were not material.

Distributed Shares and Class B Unit Redemption

In connection with the IPO, each holder of Class B awards (“Class B Units”), which were issued to certain participants by Ultimate Parent prior to the IPO, had their entire Class B interest in Ultimate Parent redeemed for the number of shares of the Company’s Common Stock (the “Distributed Shares”) that would have been distributed to such holder under the terms of Ultimate Parent’s operating agreement in a hypothetical liquidation on the date and price of the IPO (the “Class B Unit Redemption”).

The Class B Unit Redemption resulted in a modification of the Class B Units, whereby each holder received both vested and unvested Distributed Shares in the same proportion as the holder’s vested and unvested Class B Units held immediately prior to the IPO.

As a result of the Class B Unit Redemption, holders of Class B Units received a total of 20.6 million shares of the Company’s Common Stock, of which 50 % were subject to the same vesting conditions under the Class B Unit Service Tranche (the “Distributed Shares Service Tranche”), which were subject to ratable service-based vesting over a five-year period, and 50 % were subject to the same vesting conditions under the Class B Unit Performance Tranche (the “Distributed Shares Performance Tranche”), which were based on the achievement of certain investment return thresholds by Apollo.

The Distributed Shares also have certain other restrictions pursuant to the terms and conditions of the Company’s Amended and Restated Management Investor Rights Agreement (the “MIRA”).

The IPO triggered an acceleration of vesting of the unvested Distributed Shares Service Tranche causing them to become fully vested six months from the date of the IPO, which occurred in July 2018.

The Company recorded share-based compensation expense on the Distributed Shares Performance Tranche on a straight-line basis over the derived service period of app roximately three years from the IPO date, as the vesting conditions were deemed probable following the consummation of the IPO.

Share-based compensation expense associated with the Distributed Shares Performance Tranche was not material during 2021 and was $ 32 million and $ 47 million during 2020 and 2019, respectively.

The following table summarizes activity related to the Distributed Shares during 2021:

Performance Tranche

Number of Distributed Shares Weighted-Average Grant Fair Value

Unvested as of December 31, 2020 9,583,754 $ 13.10

Forfeited ( 80,086 ) 13.42

Unvested as of December 31, 2021 9,503,668 $ 13.08

In January 2018, the Company approved the 2018 Plan, which became effective upon consummation of the IPO.

During 2019, the Company amended the 2018 Plan, which increased the number of authorized shares of Common Stock to be issued to approximately 88 million shares.

The Company satisfies the exercise of options and the vesting of RSUs through the issuance of authorized but previously unissued shares of Common Stock.

The Company accounts for forfeitures as they occur.

Additionally, RSUs entitle the holder to dividend equivalent units (“DEUs”), which are granted as additional RSUs and are subject to the same vesting and forfeiture conditions as the underlying RSUs.

DEUs are charged against accumulated deficit when dividends are paid.

In December 2019, the exercise price of all options granted under the 2018 Plan prior to the payment of the 2019 Special Dividend were adjusted downward by $ 0.70 in accordance with plan provisions, which allow for adjustments to the exercise price of options upon the occurrence of certain events, such as changes in capital or operating structure.

Top-up Options

In connection with the Class B Unit Redemption in 2018, the Company granted 12.7 million options to holders of Class B Units (the “Top-up Options”).

The Top-up Options vesting conditions are the same as those attributable to the Distributed Shares, including the condition that accelerated vesting of the unvested options in the Top-up Options Service Tranche causing them to become fully vested six months from the IPO.

Any shares of the Company’s Common Stock acquired upon exercise of the Top-up Options will be subject to the terms of the MIRA.

The Company recorded share-based compensation expense associated with the Top-up Options Service Tranche on a straight-line basis over the requisite service period of six months from the IPO.

Share-based compensation expense associated with the Top-up Options Performance Tranche is recognized on a straight-line basis over the derived service period of approximately three years from the IPO date and was not material during 2021, 2020, and 2019.

The following table summarizes activity related to the 2018 Plan Top-up Options:

Service Tranche Performance Tranche

Number of Top-up Options Weighted-Average Exercise Price Number of Top-up Options Weighted-Average Exercise Price Aggregate Intrinsic Value (a)

(in thousands)

Weighted-Average Remaining Contractual Term (Years)

Outstanding as of December 31, 2020 5,974,369 $ 13.30 5,923,973 $ 13.30

Exercised — — — —

Forfeited — — ( 73,424 ) 13.30

Outstanding as of December 31, 2021 5,974,369 $ 13.30 5,850,549 $ 13.30 — 6.0

Exercisable as of December 31, 2021 5,974,369 $ 13.30 — $ 13.30 — 6.0

________________________

(a) The intrinsic value represents the amount by which the fair value of the Company’s Common Stock exceeds the option exercise price as of December 31, 2021.

The Company did not grant any options during 2021.

During 2020 and 2019, the grant date fair values of options granted under the 2018 Plan were determined using the Black-Scholes valuation approach with the following assumptions:

Years Ended December 31,

Risk-free interest rate 0.51% - 1.40% 1.58% - 2.51%

Expected exercise term (years) 6 6.0 - 6.5

Expected dividend yield 2.2% - 2.7% 2.0% - 2.7%

Expected volatility 45% - 46% 41% - 42%

The risk-free interest rate was based on U.S.

Treasury bonds with a zero-coupon rate.

The dividend yield was calculated by taking the annual dividend run-rate and dividing by the stock price at date of grant.

The weighted-average grant date fair values of options granted during 2020 and 2019 were $ 1.77 and $ 2.20 , respectively.

The following table summarizes activity related to 2018 Plan options during 2021:

Number of Options Weighted-Average Exercise Price Aggregate Intrinsic Value (a)

(in thousands)

Weighted-Average Remaining Contractual Term

Outstanding as of December 31, 2020 24,191,120 $ 6.60

Exercised ( 1,951,552 ) 5.55

Forfeited ( 773,750 ) 7.49

Outstanding as of December 31, 2021 21,465,818 $ 6.64 $ 50,657 7.2

Exercisable as of December 31, 2021 10,611,711 $ 8.33 $ 19,089 6.8

________________________

(a) The intrinsic value represents the amount by which the fair value of the Company’s Common Stock exceeds the option exercise price as of December 31, 2021.

Share-based compensation expense associated with options granted under the 2018 Plan was $ 12 million, $ 16 million, and $ 12 million during 2021, 2020, and 2019, respectively.

The cash flow and the intrinsic value of options exercised were not material during 2021, 2020, and 2019.

As of December 31, 2021, unrecognized compensation cost related to options was not material.

Restricted Stock Units

RSUs granted under the 2018 Plan are primarily service-based awards with a three-year graded vesting period from the date of grant.

The fair value is equal to the closing price per share of the Company’s Common Stock on the date of grant.

The following table summarizes activity related to the 2018 Plan RSUs (including DEUs) during 2021:

Number of RSUs Weighted-Average Grant Date Fair Value

Unvested as of December 31, 2020 16,763,274 $ 6.56

Granted 6,585,882 8.09

Vested ( 6,481,391 ) 7.14

Forfeited ( 1,322,919 ) 7.32

Unvested as of December 31, 2021 15,544,846 $ 6.90

Share-based compensation expense associated with RSUs granted under the 2018 Plan was $ 46 million, $ 39 million, and $ 14 million during 2021, 2020, and 2019, respectively.

The fair value of RSUs (including DEUs) that vested and converted to shares of Common Stock was approximately $ 52 million on the respective vesting dates during 2021 and was not material during 2020 and 2019.

As of December 31, 2021, unrecognized compensation cost related to RSUs granted under the 2018 Plan was $ 53 million, which will be recognized over a period of 1.8 years.

Net Income (Loss) per Share

The Company applies the two-class method for computing and presenting net income (loss) per share for each class of common stock.

The two-class method allocates current period net income (loss) to each class of common stock and participating securities based on (i) dividends declared and (ii) participation rights in the remaining undistributed earnings (losses).

Basic net income (loss) per share is computed by dividing the net income (loss) allocated to each class of common stock using the two-class method by the related weighted-average number of shares outstanding during the period.

Additionally, basic weighted-average shares outstanding for the year ended December 31, 2021 includes approximately 5 million shares of Common Stock to be issued during 2022 in connection with the Sunpro Solar Acquisition.

Diluted net loss per share gives effect to all securities representing potential common shares that were dilutive and outstanding during the period for each class of common stock.

For purposes of the diluted net income (loss) per share of Common Stock computation, all potential shares of Common Stock that would be dilutive were excluded because their effect would be anti-dilutive.

As a result, basic net income (loss) per share of Common Stock is equal to diluted net income (loss) per share of Common Stock for the periods presented .

Accordingly, the potential shares of Common Stock that were excluded from the computation of diluted income (loss) per share of Common Stock were (i) share-based compensation awards of approximately 61 million, 66 million, and 50 million during 2021, 2020, and 2019, respectively;

(ii) shares of Class B Common Stock of 55 million during 2020;

and (iii) warrants to purchase additional shares of Common Stock of approximately 0.2 million during 2021.

The computations of basic and diluted net income (loss) per share for each class of common stock for the periods presented are as follows:

Years Ended December 31,

2021 2020 2019

(in thousands, except per share amounts) Common Stock Class B Common Stock Common Stock Class B Common Stock Common Stock Class B Common Stock

Allocation of net income (loss) - basic $ ( 318,062 ) $ ( 22,758 ) $ ( 620,856 ) $ ( 11,337 ) $ ( 424,150 ) $ —

Dilutive effect of potential shares of Class B common stock — — — ( 1,952 ) — —

Allocation of net income (loss) - diluted $ ( 318,062 ) $ ( 22,758 ) $ ( 620,856 ) $ ( 13,289 ) $ ( 424,150 ) $ —

Weighted-average shares outstanding - basic 770,620 54,745 760,483 15,855 747,238 —

Dilutive potential shares of Class B common stock — — — 2,089 — —

Weighted-average shares outstanding - diluted 770,620 54,745 760,483 17,944 747,238 —

Net income (loss) per share - basic $ ( 0.41 ) $ ( 0.41 ) $ ( 0.82 ) $ ( 0.72 ) $ ( 0.57 ) $ —

Net income (loss) per share - diluted $ ( 0.41 ) $ ( 0.41 ) $ ( 0.82 ) $ ( 0.74 ) $ ( 0.57 ) $ —

Commitments and Contingencies

Contractual Obligations

The following table provides a schedule of commitments related to agreements to purchase certain goods and services, including purchase orders, entered into in the ordinary course of business as of December 31, 2020 (in thousands):

The Company’s contractual obligations for goods or services 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, primarily consist of information technology services and equipment, including investments in our information technology infrastructure and telecommunication services.

The following table provides the Company’s contractual obligations as of December 31, 2021 (in thousands) :

2022 2023 2024 2025 2026 Thereafter Total

$ 120,307 $ 88,637 $ 45,136 $ 36,881 $ 29,463 $ — $ 320,424

Thereafter 19,578

Total $ 333,086

In addition to the contractual obligations shown above, the Commercial Agreement with Google requires the Company and Google to each contribute $ 150 million towards certain joint commercial efforts.

Other Obligations

In 2021, the Company entered into agreements for potential future customer account purchases from two distinct third parties, assuming certain conditions are met, over the course of those agreements.

As of December 31, 2021, remaining commitments for those potential future customer account purchases could total approximately $ 100 million through January 2023.

Google Commercial Agreement

The Company and Google entered into a Master Supply, Distribution, and Marketing Agreement (the “Google Commercial Agreement”), pursuant to which Google has agreed to supply the Company with certain Google devices as well as certain Google video and analytics services (“Google Services”), for sale to the Company’s customers.

Subject to customary termination rights related to breach and change of control, the Google Commercial Agreement has an initial term of seven years from the date that the Google Services are successfully integrated into the Company’s end-user security and automation platform.

If the integrated service is not launched by June 30, 2022, then Google has the contractual right to require the Company to offer Google Services without integration for professional installations except for existing customers who already have ADT Pulse or ADT Control interactive services until such integration has been made.

Further, subject to certain carve-outs, the Company has agreed to exclusively sell Google Services and smart-home, security, and safety devices to the Company’s customers.

The Google Commercial Agreement also contains customary termination rights for both parties.

In addition, Google has rights to terminate the Google Commercial Agreement if (i) the Company divests any part of its direct to consumer business and the acquiring entity does not agree to assume all obligations under the Google Commercial Agreement, or (ii) the Company

breaches certain provisions of the Google Commercial Agreement and does not cure such breaches.

In the event that the Company breaches the Google Commercial Agreement in a manner reasonably likely to result in a material adverse effect on Google’s business or brand, or the Company breaches certain data security and privacy obligations under the Google Commercial Agreement, the Company must suspend the sale of Google Services and certain devices during the applicable cure period.

Upon termination of the Google Commercial Agreement, the Company will no longer have rights to sell the Google Services or devices to new customers, subject to an applicable transition period.

In addition, the Google Services may not be accessible by the Company’s customers through its integrated end-user application during any cure period for the Company’s breach of certain data security and privacy provisions of the Google Commercial Agreement or upon termination of the agreement for a breach of such provisions.

The Google Commercial Agreement specifies that each party will contribute $ 150 million towards the joint marketing of devices and services;

customer acquisition;

training of the Company’s employees for the sales, installation, customer service, and maintenance for the product and service offerings;

and technology updates for products included in such offerings.

Each party is required to contribute such funds in three equal tranches, subject to the attainment of certain milestones.

Refer to Note 9 “Equity” for further details.

During the first quarter of 2021, the Company entered into commitments of approximately $ 54 million to purchase certain parts used in the program to replace 3G and CDMA cellular equipment used in the Company’s security systems.

The Company expects to contribute the majority of these amounts by the end of 2024, however, the timing of these contributions is still uncertain.

Legal Proceedings

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Additionally, the Company records insurance recovery receivables from third-party insurers when recovery has been determined to be probable.

The Company’s accrual for ongoing claims and lawsuits not within scope of an insurance program was not material and in most cases the Company has not accrued for any losses as the ultimate outcome or the range of possible loss cannot be estimated.

The Company’s accrual for ongoing claims and lawsuits within scope of an insurance program totaled $ 89 million and $ 105 million as of December 31, 2020 and 2019, respectively.

The Company has not accrued for any losses for which the likelihood of loss cannot be assessed or the range of possible loss cannot be estimated.

As of December 31, 2021 and 2020, the Company’s accrual related to ongoing claims and lawsuits not within the scope of an insurance program was not material.

As of December 31, 2021 and 2020, the Company’s accrual for ongoing claims and lawsuits within the scope of an insurance program totaled $ 90 million and $ 89 million, respectively.

Environmental Matters

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The parties agreed to a Stipulation of Settlement in September 2020.

In January 2021, the State Court entered an order granting final approval of the settlement.

January 2021, the State Court entered an order granting final approval of the settlement.

The settlement has been administered and the matter is now concluded.

California Independent Contractor Litigation

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and 2) individuals with no ownership interest in a sub-contractor who were employed by the sub-contractor and provided services pursuant to a contract between the sub-contractor and the Company.

In October 2018, the Company answered the plaintiffs’ first amended complaint

and filed a cross-complaint against the plaintiffs’ sub-contracting company for indemnification pursuant to the term of ADT’s sub-contract.

In October 2018, the Company answered the plaintiffs’ first amended complaint and filed a cross-complaint against the plaintiffs’ sub-contracting company for indemnification pursuant to the term of ADT’s sub-contract.

In November 2019, the parties reached a settlement agreement in principle.

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The court granted final approval of the settlement in January 2021.

The settlement has been administered and the matter is now concluded.

Los Angeles Alarm Permit Class Action

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In November 2018, the trial court granted the plaintiff’s motion for class certification and certified four subclasses of customers who received fines from the City of Los Angeles.

The case settled in January 2020, and the settlement received preliminary approval from the court in February 2021.

The case settled in January 2020.

The settlement received preliminary approval from the court in February 2021 and final approval in August 2021.

The settlement has been administered and the court has set a case review for July 8, 2022 and the matter is expected to be concluded at that time.

Wage and Hour Class Action

In January 2020, the Company acquired Defenders, which is defending against litigation brought by Teddy Archer and seven other security advisors who claim unpaid overtime under the Fair Labor Standards Act (“FLSA”), breach of contract under state law in all states, and a violation of state wage-hour laws in California, New Jersey, New York, and Washington.

In January 2020, the Company acquired Defenders, which was defending against litigation brought by Teddy Archer and seven other security advisors who claim unpaid overtime under the Fair Labor Standards Act (the “FLSA”), breach of contract under state law in all states, and a violation of state wage-hour laws in California, New Jersey, New York, and Washington.

The lawsuit was originally filed in March 2018 in the United States District Court for the District of Delaware.

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The plaintiffs seek to represent a nationwide class for unpaid wages.

The parties are actively engaged in discovery.

During March 2021, Defenders was merged with and into the Company’s ADT LLC subsidiary, which is now defending the suit.

In November 2021, the Company moved to decertify the collective action.

Plaintiffs moved to certify a class for state law claims.

The motions remain pending.

Unauthorized Access by a Former Technician

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In response, the Company initiated an affirmative outreach effort to notify all customers affected by this activity and to address their concerns.

Since the disclosure, three lawsuits have been filed against the Company, and the Company intervened in a fourth lawsuit filed against the former technician.

Since the disclosure, seven lawsuits have been filed against the Company, and the Company intervened in an eighth lawsuit filed against the former technician.

Four of these lawsuits were originally filed as putative class actions and four as individual claims.

One of the individual claims and one of the putative class actions subsequently settled.

In May 2020, the Company was served with a class action complaint in a case captioned Shana Doty v.

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District Court for the Southern District of Florida.

By an amended complaint, the plaintiff asserts causes of action on behalf of herself and other Company customers similarly situated, and seeks to recover damages for breach of contract, negligence, intrusion upon seclusion, violation of the Computer Fraud and Abuse Act, negligent hiring, supervision and retention, and intentional infliction of emotional distress.

By an amended complaint, the plaintiff asserted causes of action on behalf of herself and other Company customers similarly situated, and sought to recover damages for breach of contract, negligence, intrusion upon seclusion, violation of the Computer Fraud and Abuse Act, negligent hiring, supervision and retention, and intentional infliction of emotional distress.

The Company moved to dismiss the plaintiff’s amended complaint.

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The Company’s motion was denied on plaintiff’s other claims.

In January 2022, plaintiff filed a notice withdrawing motion for class certification and dismissing class allegations.

The case will now proceed as an individual action and is in discovery.

In June 2020, the Company was served with a class action complaint in a case captioned Alexia Preddy v.

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District Court for the Southern District of Florida.

By an amended complaint, the plaintiff asserts causes of action on behalf of herself and others similarly situated as individuals residing in homes of Company customers, and seeks to recover damages for negligence, intrusion upon seclusion, violation of the Computer Fraud and Abuse Act, negligent hiring, supervision and retention, and intentional infliction of emotional distress.

By an amended complaint, the plaintiff asserted causes of action on behalf of herself and others similarly situated as individuals residing in homes of Company customers, and sought to recover damages for negligence, intrusion upon seclusion, violation of the Computer Fraud and Abuse Act, negligent hiring, supervision and retention, and intentional infliction of emotional distress.

The Company moved to dismiss the plaintiff’s amended complaint and to compel arbitration.

In December 2020, the federal district court granted the Company’s motion to compel arbitration.

The case is stayed and administratively closed pending arbitration.

The Company’s motion to dismiss was denied as moot.

The Company was also served with a complaint filed in Texas state court by an individual Company customer, intervened in a putative Texas state court class action filed against the former technician and may be subject to future legal claims.

Geographic Data

Revenue by geographic area for the periods presented was follows:

The case is stayed and administratively closed and is proceeding in arbitration as an individual claim.

In April 2021, the Company accepted service of a new class action complaint filed in the U.S.

District Court for the Southern District of Florida on behalf of Randy Doty, the husband of the plaintiff in Shana Doty v.

The claims alleged in the new complaint are substantially similar to the claims asserted in Alexa Preddy v.

ADT LLC, the case which has been stayed pending arbitration.

In July 2021, the federal district court dismissed the claim for intrusion upon seclusion and ruled that the plaintiff cannot proceed on theories of vicarious liability for the technician’s intentional torts.

As with the Shana Doty matter, plaintiff filed a notice withdrawing motion for class certification and dismissing class allegations.

The case will now proceed as an individual action and is in discovery.

Following the November 2021 abandonment of their class action allegations, the lawyers in the Doty and Preddy cases filed a new complaint in the U.S.

District Court for the Southern District of Florida on behalf of seven different customers and fourteen members of their respective households.

The case is captioned Stefanie Bryant, et al.

The claims alleged in the new complaint are substantially similar to the claims asserted in Alexa Preddy v.

ADT LLC, Shana Doty v.

ADT LLC, and Randy Doty v.

The Company may also be subject to future legal claims.

Company as Lessor

The Company is a lessor in certain Company-owned transactions as the Company has identified a lease component associated with the right-of-use of the security system and a non-lease component associated with the monitoring and related services.

For transactions in which (i) the timing and pattern of transfer is the same for the lease and non-lease components, and (ii) the lease component would be classified as an operating lease if accounted for separately, the Company applies the practical expedient to aggregate the lease and non-lease components and accounts for the combined transaction based upon its predominant characteristic, which is the non-lease component.

The Company accounts for the combined component as a single performance obligation under the applicable revenue guidance, and recognizes the underlying assets within subscriber system assets, net, in the Consolidated Balance Sheets.

For transactions that do not qualify for the practical expedient as the lease component represents a sales-type lease, the Company accounts for the lease and non-lease components separately.

The Company’s sales-type leases are not material.

Company as Lessee

As part of normal operations, the Company leases real estate, vehicles, and equipment from various counterparties with lease terms and maturities through 2030.

For these transactions, the Company applies the practical expedient to not separate the lease and non-lease components and accounts for the combined component as a lease.

Additionally, the Company’s right-of-use assets and lease liabilities include leases with initial lease terms of 12 months or less.

The Company’s right-of-use assets and lease liabilities primarily represent lease payments fixed at the commencement of a lease and variable lease payments dependent on an index or rate.

Lease payments are recognized as lease cost on a straight-line basis over the lease term, which is determined as the non-cancelable period, including periods in which termination options are reasonably certain of not being exercised, and periods in which renewal options are reasonably certain of being exercised.

The discount rate is determined using the Company’s incremental borrowing rate coinciding with the lease term at the commencement of a lease.

The incremental borrowing rate is estimated based on publicly available data for the Company’s debt instruments and other instruments with similar characteristics.

Lease payments that are neither fixed nor dependent on an index or rate and vary because of changes in usage or other factors are included in variable lease costs.

Variable lease costs are recorded in the period in which the obligation is incurred and primarily relate to fuel, repair, and maintenance payments as they vary based on the usage of leased vehicles.

The Company’s leases do not contain material residual value guarantees or restrictive covenants.

The Company’s subleases are not material.

Leases recognized in the Consolidated Balance Sheets were as follows (in thousands):

Presentation Classification 2021 2020

Operating Current Prepaid expenses and other current assets $ 230 $ 684

Operating Non-current Other assets 125,945 138,408

Finance Non-current Property and equipment, net (a)

88,962 54,414

Total right-of-use assets $ 215,137 $ 193,506

Operating Current Accrued expenses and other current liabilities $ 37,359 $ 30,689

Finance Current Current maturities of long-term debt 38,730 26,955

Operating Non-current Other liabilities 99,734 115,694

Finance Non-current Long-term debt 54,350 34,373

Total lease liabilities $ 230,173 $ 207,711

_________________

(a) Finance right-of-use assets are recorded net of accumulated depreciation of approximately $ 78 million and $ 67 million as of December 31, 2021 and 2020, respectively.

The components of total lease cost reflected in the Consolidated Statements of Operations were as follows:

Years Ended December 31,

(in thousands) 2020 2019 2018

United States $ 5,314,787 $ 4,936,121 $ 4,352,570

Canada — 189,536 229,103

Total revenue $ 5,314,787 $ 5,125,657 $ 4,581,673

Revenue is attributed to individual countries based upon the operating entity that records the transaction.

As a result of the sale of ADT Canada, substantially all of the Company’s assets are located in the U.S.

as of December 31, 2020 and 2019.

Lease Cost ( in thousands )

2021 2020 2019

Operating lease cost:

$ 48,078 $ 56,680 $ 58,579

Finance lease cost:

Amortization of right-of-use assets 29,269 24,509 22,957

Interest on lease liabilities 2,823 3,122 3,770

Variable lease costs 72,367 47,013 48,325

Total lease cost $ 152,537 $ 131,324 $ 133,631

The following table presents cash flow and supplemental information associated with the Company’s leases:

Years Ended December 31,

Other information ( in thousands )

2021 2020 2019

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows - operating leases $ 50,721 $ 56,235 $ 57,212

Operating cash flows - finance leases $ 2,823 $ 3,122 $ 3,770

Financing cash flows - finance leases $ 32,123 $ 27,956 $ 24,918

Right-of-use assets obtained in exchange for lease obligations:

Operating leases $ 21,203 $ 47,870 $ 51,909

Finance leases $ 46,920 $ 15,326 $ 52,611

The following table presents the weighted-average lease term and discount rate for operating and finance leases:

Lease Term and Discount Rate 2021 2020

Weighted-average remaining lease term (years)

Operating leases 4.2 4.8

Finance leases 2.8 2.5

Weighted-average discount rate

Operating leases 4.8 % 5.4 %

Finance leases 3.7 % 4.8 %

The following table presents a maturity analysis related to the Company’s operating and finance leases, including interest, as of December 31, 2021:

Maturity of Lease Liabilities ( in thousands )

Operating Leases Finance Leases

2022 $ 41,257 $ 42,871

2023 39,743 27,351

2024 26,274 18,852

2025 18,201 8,329

2026 13,149 —

Thereafter 13,239 —

Total lease payments (including interest) $ 151,863 $ 97,403

Less interest 14,770 4,323

Total $ 137,093 $ 93,080

Retirement Plans

Defined Contribution Plans

The Company maintains qualified defined contribution plans, which include 401(k) matching programs in the U.S., as well as similar matching programs in Canada prior to the sale of ADT Canada in 2019.

Expense for the defined contribution plans is computed as a percentage of participants’ compensation and was $ 45 million, $ 40 million, and $ 34 million during 2021, 2020, and 2019, respectively.

Multi-employer Plans

The Company participates in certain multi-employer union pension plans, which provide benefits for a group of the Company’s unionized employees.

Defined Benefit Plans

The Company provides a defined benefit pension plan and certain other postretirement benefits to certain employees.

These plans are frozen and are not material to the Company’s consolidated financial statements.

As of December 31, 2021 and 2020, the fair values of pension plan assets were $ 71 million and $ 87 million, respectively, and the fair values of projected benefit obligations were $ 75 million and $ 99 million, respectively.

As a result, the plans were underfunded by approximately $ 4 million and $ 12 million as of December 31, 2021 and 2020, respectively, and were recorded as a net liability in the Consolidated Balance Sheets.

Net periodic benefit cost associated with these plans was not material during 2021, 2020, and 2019.

In February 2021, the Company purchased annuity contracts for a certain class of pensioners and beneficiaries which settled a portion of the projected benefit obligation and is not material to the Company’s consolidated financial statements.

Deferred Compensation Plan

The Company maintains a non-qualified supplemental savings and retirement plan, which permits eligible employees to defer a portion of their compensation.

Deferred compensation liabilities were $ 32 million and $ 28 million as of December 31, 2021 and 2020, respectively, and were recorded in other liabilities in the Consolidated Balance Sheets.

Deferred compensation expense was not material during 2021, 2020, and 2019.

Related Party Transactions

The Company’s related party transactions primarily relate to management, consulting, and transaction advisory services provided by Apollo, as well as monitoring and related services provided to or products and services received from other entities controlled by Apollo.

The Company’s related party transactions primarily relate to products and services received from, or monitoring and related services provided to, other entities controlled by Apollo, as well as management, consulting, and transaction advisory services provided by Apollo to the Company.

The following discussion is related to the Company’s significant related party transactions.

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The master services agreement includes a minimum purchase commitment of $ 50 million over a seven -year term.

Purchases under this agreement were not material during 2020.

Quarterly Financial Data (Unaudited)

Selected unaudited quarterly financial data for the periods presented below was as follows:

For the Three Months Ended

(in thousands, except per share data)

March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020

Total revenue $ 1,369,752 $ 1,331,387 $ 1,298,924 $ 1,314,724

Operating (loss) income $ ( 89,356 ) $ 50,422 $ 62,886 $ 16,688

Net loss $ ( 300,293 ) $ ( 106,741 ) $ ( 113,098 ) $ ( 112,061 )

Net (loss) income per share - basic:

Common stock $ ( 0.40 ) $ ( 0.14 ) $ ( 0.15 ) $ ( 0.14 )

Class B common stock $ — $ — $ 0.05 $ ( 0.14 )

Net loss per share - diluted:

Common stock $ ( 0.40 ) $ ( 0.14 ) $ ( 0.15 ) $ ( 0.14 )

Class B common stock $ — $ — $ ( 0.07 ) $ ( 0.14 )

For the Three Months Ended

(in thousands, except per share data)

March 31, 2019 June 30, 2019 September 30, 2019 December 31, 2019

Total revenue $ 1,243,060 $ 1,283,744 $ 1,300,570 $ 1,298,283

Operating income (loss) $ 90,436 $ 93,137 $ ( 51,234 ) $ 64,105

Net loss $ ( 66,470 ) $ ( 104,057 ) $ ( 181,630 ) $ ( 71,993 )

Net loss per share - basic:

Common stock $ ( 0.09 ) $ ( 0.14 ) $ ( 0.25 ) $ ( 0.10 )

Net loss per share - diluted:

Common stock $ ( 0.09 ) $ ( 0.14 ) $ ( 0.25 ) $ ( 0.10 )

Revenue —Total revenue for all quarters of 2020 includes incremental revenue associated with the Defenders Acquisition.

In addition, total revenue for 2019 includes the revenue of ADT Canada up until its sale in November 2019.

Both events impact quarter over quarter and year over year comparability.

Merger, restructuring, integration, and other —Operating loss and net loss for the first quarter of 2020 were impacted by the settlement of a pre-existing relationship in connection with the Defenders Acquisition of $ 81 million, which impacts quarter over quarter and year over year comparability.

Goodwill impairment —Operating loss and net loss for the third quarter of 2019 were impacted by the recognition of a goodwill impairment loss of $ 45 million, which impacts quarter over quarter and year over year comparability.

Loss on sale of business —Operating loss and net loss for the third quarter of 2019 were impacted by the recognition of a loss on sale of business, which impacts quarter over quarter and year over year comparability.

Loss on extinguishment of debt —Net loss for the first, third, and fourth quarters of 2020 and the first three quarters of 2019 were impacted by the recognition of loss on extinguishment of debt, which impacts quarter over quarter and year over year comparability.

Purchases under this agreement were approximately $ 6 million and $ 0.5 million during 2021 and 2020, respectively.

ADT Solar uses Sunlight Financial LLC (“Sunlight”), a related party controlled by Apollo, to provide financing alternatives to certain ADT Solar customers.

Amounts paid to Sunlight since the Sunpro Solar Acquisition were not material.

Condensed Financial Information of Registrant

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(PARENT COMPANY ONLY)

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data)

3 unchanged sentences

Merger, restructuring, integration, and other ( 1,444 ) 4,532 130

Operating loss 5,339 607 515

Loss on extinguishment of debt — — ( 213,239 )

Operating income (loss) ( 1,327 ) 5,339 607

Interest expense, net ( 8,743 ) ( 8,342 ) ( 211 )

Equity in net loss of subsidiaries ( 333,404 ) ( 618,512 ) ( 423,332 )

Net loss ( 632,193 ) ( 424,150 ) ( 609,155 )

Other comprehensive (loss) income, net of tax ( 60,239 ) 13,403 ( 67,772 )

Comprehensive loss $ ( 692,432 ) $ ( 410,747 ) $ ( 676,927 )

Net loss per share - basic:

Net income (loss) ( 340,820 ) ( 632,193 ) ( 424,150 )

Other comprehensive income (loss), net of tax 49,642 ( 60,239 ) 13,403

Comprehensive income (loss) $ ( 291,178 ) $ ( 692,432 ) $ ( 410,747 )

Net income (loss) per share - basic:

Common stock $ ( 0.41 ) $ ( 0.82 ) $ ( 0.57 )

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Class B common stock 54,745 15,855 —

Net loss per share - diluted:

Net income (loss) per share - diluted:

Common stock $ ( 0.41 ) $ ( 0.82 ) $ ( 0.57 )

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Cash flows from operating activities:

Net loss $ ( 632,193 ) $ ( 424,150 ) $ ( 609,155 )

Net income (loss) $ ( 340,820 ) $ ( 632,193 ) $ ( 424,150 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Equity in net loss of subsidiaries 333,404 618,512 423,332

Loss on extinguishment of debt — — 213,239

Other, net 24,391 30,687 39,910

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Other investing, net — 750 ( 750 )

Net cash (used in) provided by investing activities ( 214,851 ) 166,453 ( 352,590 )

Net cash provided by (used in) investing activities ( 31,300 ) ( 214,851 ) 166,453

Cash flows from financing activities:

1 unchanged sentence

Proceeds from long-term borrowings — — 509,460

Repayment of mandatorily redeemable preferred securities, including redemption premium — — ( 852,769 )

Dividends on common stock ( 116,348 ) ( 109,328 ) ( 564,767 )

2 unchanged sentences

Net cash provided by (used in) financing activities ( 122,820 ) 336,583 ( 205,199 )

Net increase in cash and cash equivalents 138,738 346 8

Cash and cash equivalents at beginning of period 354 8 —

Cash and cash equivalents at end of period $ 139,092 $ 354 $ 8

Cash and cash equivalents and restricted cash and restricted cash equivalents:

Net increase (decrease) during the period ( 137,145 ) 138,738 346

Beginning balance 139,092 354 8

Ending balance $ 1,947 $ 139,092 $ 354

Supplementary cash flow information:

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Transactions with Subsidiaries

The majority of ADT Inc.’s transactions with its subsidiaries are related to (i) the receipt of distributions from subsidiaries in order to fund equity transactions, such as the payment of dividends and the repurchase of Common Stock, (ii) the contribution of proceeds received from equity transactions to subsidiaries for operating and financing purposes, or (iii) the integration of business acquisitions into the Company’s organizational structure.

The majority of ADT Inc.’s transactions with its subsidiaries are related to (i) the receipt of distributions from subsidiaries in order to fund equity transactions, such as the payment of dividends and the repurchase of Common Stock, (ii) the contribution to subsidiaries of proceeds received from equity transactions, or (iii) the integration of business acquisitions into the Company’s organizational structure.

During 2021, ADT Inc.

made non-cash contributions to subsidiaries of approximately $ 630 million related to the transfer of net assets of certain subsidiaries for the acquisition of Sunpro Solar, including $ 529 million in the issuance of shares, as well as, share-based compensation.

During 2020, ADT Inc.

acquired Defenders and Cell Bounce.

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made non-cash contributions to subsidiaries of approximately $ 146 million primarily related to share-based compensation and intercompany loans in connection with the sale of ADT Canada.

During 2018, ADT Inc.

made non-cash contributions to subsidiaries of $ 135 million related to share-based compensation.

There were no non-cash distributions from subsidiaries during 2018.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures