What changed in this filing

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Item 1A. Risk Factors

2023-02-28 compared with 2022-03-01 · 255 added, 219 removed, 583 unchanged (45% of the section changed)

RISK FACTORS.

In addition to risks and uncertainties in the ordinary course of business that are common to all businesses, important factors that are specific to our industry and the Company could have a material and adverse impact on our business, financial condition, results of operations, and cash flows.

In addition to risks and uncertainties in the ordinary course of business that are common to all businesses, important factors that are specific to our industry and the Company could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

You should carefully consider the risks described below and in our subsequent periodic filings with the SEC.

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Our ability to develop, alone or with third parties, or to acquire new products and services that are technologically innovative requires the investment of significant resources and can affect our competitive position.

In addition, the dynamic nature of these changes requires that throughout 2023 and in future years we simultaneously engage in significant technology developmental efforts across our operations, including platform development, sales, marketing, customer care, customer self-service, virtual service, billing, and other substantive and administrative functions.

While upgrading and implementing change to any one of our systems could present challenges, the age of our systems and architecture may present unique challenges that we have not previously encountered as we undertake these developmental efforts simultaneously across our operations.

These acquisition and development efforts divert resources from other potential investments in our businesses, and they may not lead to the development of new commercially successful technologies, products, or services on a timely basis.

For example, in July 2020, we entered into a commercial agreement with Google for the supply of certain Google devices as well as certain Google video and analytics services.

We have agreed, with certain exceptions, to exclusively provide Google end-user video and sensing analytics services and smart-home, security and safety devices to our customers, although Google can sell the same or similar devices to our competitors who may more successfully commercialize products or services that are competitive to ours, thereby materially harming our business.

If Google fails to perform or to provide products that continually meet the demands of our customers, or if we fail to sell the products that Google provides, or if we fail to develop products and services with Google that our customers find desirable, all in a timely manner, or if Google were to begin offering security products or services competitive to our own, our business, financial condition, results of operations, and cash flows will be materially, adversely impacted.

In addition, subject to customary termination rights related to breach and change of control, this commercial agreement has an initial term of seven years from the date that the Google Services are successfully integrated into our end-user security and automation platform.

For example, in July 2020, we entered into the Google Commercial Agreement, pursuant to which Google has agreed to supply us with certain Google Devices and Services for sale to our customers.

We have agreed, with certain exceptions, to exclusively provide or sell Google Devices and Services to our customers, although Google can sell the same or similar devices to our competitors who may more successfully commercialize products or services that are competitive to ours, thereby materially harming our business.

Given this exclusivity arrangement with Google, if Google fails to perform or to provide Google Devices and Services that continually meet the demands of our customers, or fails to provide continued innovation and investment in their relevant product businesses, or if we fail to provide or sell the Google Devices and Services that Google provides, or if we fail to develop products and services with Google that our customers find desirable, all in a timely manner, or if Google were to begin offering security products or services competitive to our own, our business, financial condition, results of operations, and cash flows will be materially, adversely impacted.

In addition, 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 Devices and Services are successfully integrated into our end-user security and automation platform.

Product introductions and the timing of such integration are focused on customer experience and mutually agreed upon.

If the integrated service is not launched by June 30, 2022, then Google has the contractual right to require us to offer Google Services without integration for professional installations with limited exceptions.

If this were to occur, we could experience a decrease in revenue, higher costs resulting in decreased profitability, and a degradation in customer experience which may increase attrition among new customers and negatively impact our brand and ability to acquire new customers, any of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

In November 2020, we announced the ongoing development of our ADT-owned next-generation professional security and automation technology platform.

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We may not achieve a successful platform build in a timely manner, within budget, or in a manner that enables the commercialization of products and services that meet the continually evolving demands of our customers, any of which could have a material adverse impact on our business, financial condition, results of operations, and cash flows.

In addition, as we begin to commercialize products based upon our interactive platform, we have adjusted our processes for reviewing and securing intellectual property rights.

As we begin to commercialize products based upon our interactive platform, we have adjusted our processes for reviewing and securing intellectual property rights.

Nevertheless, we may become the target of additional lawsuits alleging that we have infringed the patents or technology of third parties.

Regardless of the merits of these lawsuits and our steps taken to mitigate infringement risk, any allegations could cause us to incur significant costs to defend and resolve, and could harm our business and reputation, any of which could have a material adverse impact on our business, financial condition, results of operations, and cash flows.

Any new or enhanced products and services that we develop may not satisfy customer preferences, and potential product failures may cause customers to reject our products and services.

In September 2022, we entered into a strategic relationship with State Farm with the goal of expanding our customer base by developing integrated solutions for State Farm’s customers.

As part of the strategic relationship, in October 2022, we entered into the State Farm Development Agreement, pursuant to which State Farm committed up to $300 million to fund product and technology innovation, customer growth, and marketing initiatives with us.

Subject to the terms of the State Farm Development Agreement, we have agreed not to enter into any development, marketing, distribution or other arrangement with certain competitors of State Farm and to refrain from developing, marketing, distributing, or making available to certain competitors of State Farm any products or services developed in connection with the State Farm Development Agreement.

If we fail to successfully develop products and services that are utilized by State Farm’s customer base pursuant to the State Farm Development Agreement, we may not achieve or realize the anticipated financial, strategic and other benefits of the strategic relationship with State Farm, and our growth prospects and our business, financial condition, results of operations, and cash flows could be materially adversely affected.

Subject to termination rights related to breach and change of control, the State Farm Development Agreement has an initial term of three years from October 13, 2022.

Any new or enhanced products and services that we develop pursuant to existing or new agreements with third parties may not satisfy customer preferences, and potential product failures may cause customers to reject our products and services.

As a result, these products and services may not achieve market acceptance, and our brand image could suffer.

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If our competitors implement new technologies before we are able to implement them, those competitors may be able to provide more effective products than ours, possibly at lower prices, and experience higher adoption rates and popularity.

Any delay or failure in the introduction of new or enhanced solutions could harm our business, results of operations and financial condition.

Any delay or failure in the introduction of new or enhanced solutions could harm our business, financial condition, results of operations, and cash flows.

In addition, the markets for our products and services may not develop or grow as we anticipate.

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Several competitors offer comparable or lower installation and monitoring fees, and others may charge significantly more for installation, but in many cases, less for monitoring.

We also face significant competition in the DIY space from companies such as SimpliSafe, Apple HomeKit, and Amazon Ring, which enable customers to self-monitor and control their environments without third-party involvement through the Internet, text messages, emails, or similar communications.

Some DIY providers may also offer professional monitoring with the purchase of their systems and equipment without a contractual commitment, or offer new internet of things (“IoT”) devices and services with automated features and capabilities, which may be appealing to customers and put us at a competitive disadvantage.

In addition, in connection with our continued rollout of Google Nest products, and as our pricing model becomes more transparent to consumers and we offer more optionality with tiered pricing and pricing disaggregation as compared to our current pricing model, our competitors may be better able to underprice us in the marketplace and our customers and potential customers may determine they can achieve a lower cost solution or higher value with an alternative provider.

Changes in the transparency of our pricing may also result in new customers selecting lower cost solutions than they otherwise would have and our existing customers switching to our lower cost solutions or demanding that we lower the cost of their existing solutions, which could impact our revenue and profitability.

We also face competition in the DIY space from companies such as SimpliSafe, Apple HomeKit, and Amazon Ring, which enable customers to self-monitor and control their environments without third-party involvement through the Internet, text messages, emails, or similar communications.

Some DIY providers may also offer professional monitoring with the purchase of their systems and equipment without a contractual commitment, or offer new IoT devices and services with automated features and capabilities, which may be appealing to customers and put us at a competitive disadvantage.

In addition, certain DIY providers have a significantly broader customer base and product offering than us, allowing them to cross-sell interactive and security solutions that are competitive with our offerings to customers who are loyal to the competitor’s brand.

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Continued pricing pressure, technology improvements, competitor brand loyalty, and continuing shifts in customer preferences toward self-monitoring and DIY could adversely impact our customer base, revenue, and/or pricing structure and have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Furthermore, the new smart home standard Matter launched in 2022, with new Matter-compatible products already available in market.

The project group was launched and introduced by Amazon, Apple, Google, Comcast, and others, with about 280 members currently in the working group, including ADT.

The goal of the standard is to make all smart home devices interoperable.

That means if you buy a product that includes the Matter logo, you can use it with Amazon Alexa, Apple Home, Google Home, Samsung SmartThings, or any other ecosystem that meets the standard.

While this development is expected to benefit both consumers and smart home providers, it also presents increased risks for smart home companies, like ADT.

Specifically, as smart home devices become interoperable with multiple platforms, the cost for consumers to switch providers and smart home platforms could decline significantly, making it more difficult for ADT to retain existing subscribers.

We also face competition in the commercial fire and security markets, including competition from large, global industrial companies, which may be positioned to offer products and services at lower cost than us or which may benefit from pre-existing or highly localized relationships and knowledge.

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The solar energy industry is an emerging and constantly evolving market opportunity.

Solar energy is a new market for us, with strong competitors that could make it difficult for us to attract customers at prices we believe are appropriate, which could result in lower revenue and cash flow from operating activities.

We do not have experience in this industry and may not be as capable as our competitors in adapting our business as market needs may demand, or in realizing opportunities within this business.

The market has numerous competitors that could make it difficult for us to attract customers at prices we believe are appropriate, which could result in lower revenue and cash flow from operating activities.

Rising interest rates may make it difficult to pass along the price to consumers and may impact sales or margin negatively.

In addition, tax incentive regulations may shift consumer preference to financing options we do not undertake, such as third party owned solar arrangements in which the solar provider can claim the tax incentives.

Supply chain issues related to both equipment and labor, as well as tariffs and trade barriers, export regulations, and other governmental restrictions on equipment, could disrupt our ability to install.

We currently operate in a limited number of markets across multiple states, and we may not have the ability to successfully launch our business in additional states where competitors have or will establish their own operations.

There can be no assurance that we will be able to successfully compete against larger or more established competitors.

markets for solar energy do not develop to the size or at the rate we expect, or if we fail to compete effectively in this market, it may adversely impact our ability to meet our growth and revenue plans, which may adversely impact our business, financial condition, results of operations, and cash flows.

If the markets for solar energy do not develop to the size or at the rate we expect, or if we fail to compete effectively in this market, it may adversely impact our ability to meet our growth and revenue plans, which may adversely impact our business, financial condition, results of operations, and cash flows.

We believe the solar energy industry will still take several years to fully develop and mature, and we cannot be certain that the market will grow to the size or at the rate we expect.

Any future growth of the solar energy industry and the success of our solar offerings depend on many factors beyond our control, including recognition and acceptance of the solar market by consumers, the pricing of alternative sources of energy, a favorable regulatory environment, the continuation of expected tax benefits and other incentives, and our ability to provide our solar offerings cost-effectively, which may adversely affect our business.

Any future growth of the solar energy industry and the success of our solar offerings depend on many factors beyond our control, including recognition and acceptance of the solar market by consumers, the pricing of alternative sources of energy, a favorable regulatory environment, the continuation of expected tax benefits and other incentives, secure supply chain, and our ability to provide our solar offerings cost-effectively, which may adversely affect our business, financial condition, results of operations, and cash flows.

We face competition from traditional energy companies as well as solar and other renewable energy companies.

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We compete with these utilities primarily based on price, predictability of price, and the ease by which homeowners can switch to electricity generated by our solar offerings.

If we cannot offer compelling value to customers based on these factors, then our business and revenue will not grow.

If we cannot offer compelling value to customers based on these factors, then our solar business and revenue will not grow.

Utilities generally have substantially greater financial, technical, operational and other resources than we do.

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This is already commonplace for utility scale solar projects and commercial solar projects.

While few utilities to date have received regulatory permission to rate-base residential solar or storage, our competitiveness would be significantly harmed should more utilities receive such permission because we do not receive guaranteed profits for our solar service offerings.

Our competitiveness would be significantly harmed should more utilities receive regulatory permission to rate-base

residential solar or storage because we do not receive guaranteed profits for our solar service offerings.

Utilities also control the process by which our solar customers connect to the grid.

These sometimes lengthy processes can involve inspections that are scheduled at the utility’s discretion and slow interconnection application processing times that can delay customers’ systems from becoming operational.

In some cases, customers who have financed the purchase of their solar system may have to begin making their monthly loan payments before their system becomes operational due to these delays, which may lead to customer dissatisfaction.

This dependency on utilities for interconnection may negatively impact our sales or increase our costs.

We also face competition from other residential solar service providers.

Some of these competitors have a higher degree of brand name recognition, differing business and pricing strategies, may have greater capital resources than we have, as well as extensive knowledge of our target markets.

If we are unable to establish or maintain a consumer brand that resonates with customers, maintain high customer satisfaction, or compete with the pricing offered by our competitors, our sales and market share position may be adversely affected, as our growth is dependent on originating new customers.

We also face competitive pressure from companies that may offer lower-priced consumer offerings than we do.

Some of these competitors have a higher degree of brand name recognition, differing business and pricing strategies, offer products and services that we do not, may be able to better capitalize on tax credits or other incentive programs, may have greater capital resources than we have, as well as extensive knowledge of our target markets.

If we are unable to establish or maintain a consumer brand that resonates with customers, maintain high customer satisfaction, or compete with the pricing and products offered by our competitors, our sales and market share position may be adversely affected, as our growth is dependent on originating new customers.

We also face competitive pressure from companies that may offer lower-priced consumer offerings than we do, and from companies who have solar offerings that we do not, such as solar leases and power purchase agreements.

In addition, we compete with companies that are not regulated like traditional utilities but that have access to the traditional utility electricity transmission and distribution infrastructure.

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In addition, local installers that might otherwise be viewed as potential solar partners may gain market share by being able to be the first providers in new local markets.

Some of these competitors may provide energy at lower costs than we do.

As the solar industry grows and evolves, we will continue to face existing competitors as well as new competitors who are not currently in the market (including those resulting from the consolidation of existing competitors) that achieve significant developments in alternative technologies or new products such as storage solutions, loan products, or other programs related to third-party ownership.

As the solar industry grows and evolves, we expect to continue to face existing competitors as well as new competitors who are not currently in the market (including those resulting from the consolidation of existing competitors) that achieve significant developments in alternative technologies or new products such as storage solutions, loan products, or other programs related to third-party ownership.

Our failure to adapt to changing market conditions, to compete successfully with existing or new competitors, and to adopt new or enhanced technologies could limit our growth and have a material adverse effect on our business, financial condition, results of operations, and cash flows.

The retirement of older telecommunications technology such as 3G and CDMA by telecommunications providers and limitations on our customers’ options of telecommunications services and equipment could materially adversely affect our business, increase customer attrition, and require significant capital expenditures.

If the insurance industry changes its practice of providing incentives to homeowners for the use of alarm monitoring services, we may experience a reduction in new customer growth or an increase in our customer attrition rate.

It has been common practice in the insurance industry to provide a reduction in rates for policies written on homes that have monitored security systems.

This practice benefits our business.

There can be no assurance that insurance companies will continue to offer these rate reductions.

In addition, as a result of our strategic relationship with State Farm, other insurance companies may favor our competitors or otherwise modify their practices.

If these incentives are reduced or eliminated, new homeowners who otherwise might not feel the need for monitored security services would have to be acquired through our standard sales and marketing processes, which could be at a higher cost of acquisition, and existing customers may choose to disconnect or not renew their service contracts, which could increase our attrition rates.

In each case, our growth prospects and our business, financial condition, results of operations, and cash flows could be materially adversely affected.

The retirement of older telecommunications technology by telecommunications providers and limitations on our customers’ options of telecommunications services and equipment could materially adversely affect our business, increase customer attrition, and require significant capital expenditures.

Certain elements of our operating model have historically relied on our customers’ continued selection and use of traditional copper wireline telecommunications service to transmit alarm signals to our monitoring centers.

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This could increase our customer revenue attrition, as was the case when we sought to migrate certain customers off of the earlier 2G networks, and slow new customer generation.

In February 2022, a major provider of 3G cellular networks began to retire this network and a major provider of Code-Division Multiple Access (“CDMA”) is scheduled to do so in December 2022.

Of our customers impacted by the February 2022 network retirements, we transitioned, or provided our customers with the means to transition, all but a relatively small number of customer accounts.

None of these remaining customers have responded to our multiple requests to upgrade their systems and therefore we could not transition them prior to the initial February 2022 transition date.

Similarly, only a relatively small number of customers remain to be transitioned prior to the December 2022 CDMA network transition date, and we will be unable to transition them if they do not reply to our outreach.

A failure to effectively transition these customers away from retiring networks before they are sunset will result in a loss of signal to the systems and certain services we provide, which may impact our ability to bill and collect for services provided.

Implementation of additional service charges in connection with our transition plans may cause customers to view such charges unfavorably, which could increase our customer attrition.

In February 2022, a major provider of 3G cellular networks began to retire this network and a major provider of Code-Division Multiple Access (“CDMA”) began to do so in December 2022.

Of our customers impacted by these retirements, we transitioned, or provided our customers with the means to transition, all but a relatively small number of customer accounts.

None of these remaining customers have responded to our multiple requests to upgrade their systems and therefore we could not transition them prior to the relevant transition dates.

A failure to effectively transition these customers away from retired networks will result in a loss of signal to the systems and certain services we provide, which may impact our ability to bill and collect for services provided.

Implementation of additional service charges in connection with these transitions may cause customers to view such charges unfavorably, which could increase our customer attrition.

We cannot know the full impact of network retirement on our customers and therefore on our business until sometime after all such retirements have occurred.

If we are unable to upgrade cellular equipment at customer sites to meet new network standards resulting from the retirement of 3G and CDMA networks, or to respond to other changes carriers are making or may make to their networks in a timely and cost-effective manner, whether due to an insufficient supply of electronic components or parts, an insufficient skilled labor force, or due to any other reason, or if we are sued by one or more customers due to our inability to provide certain services, or due to any loss incurred while we are not able to provide certain services, or due to any continuous billing for services after a transition date, our business, financial condition, results of operations, and cash flows, could be materially adversely affected.

If we are unable to upgrade cellular equipment at customer sites to meet new network standards or to respond to other changes carriers are making or may make to their networks in a timely and cost-effective manner, whether due to an insufficient supply of electronic components or parts, an insufficient skilled labor force, or due to any other reason, or if we are sued by one or more customers due to our inability to provide certain services, or due to any loss incurred while we are not able to provide certain services, or due to any continuous billing for services after a prior or future transition date, our business, financial condition, results of operations, and cash flows, could be materially adversely affected.

We have also recently become aware that one or more telecom carriers are beginning the process to retire their time-division multiplexing (“TDM”) nodes that service toll-free numbers, which could require us to further upgrade certain of our customer equipment.

We do not currently know the timing or impact of such actions.

In November 2017, as part of the FCC’s efforts to facilitate the transition from traditional copper-based wireline networks to IP-based fiber broadband networks, the FCC repealed its rules requiring telecommunications carriers to provide direct advanced public notice to consumers of the retirement of copper-based wireline networks.

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As utilization rates and penetration of these services increase, the need for increased network capacity might necessitate incurring additional capital or operational expenditures to avoid service disruptions as well as ensure a seamless video experience for our customers, which could materially adversely impact our business, financial condition, results of operations, and cash flows.

Police departments could refuse to respond to calls from monitored security service companies.

Police and fire departments could refuse to respond to calls from monitored security service companies.

Police departments in certain jurisdictions do not respond to calls from monitored security service companies unless certain conditions are met, such as video or other verification or eyewitness accounts of suspicious activities, either as a matter of policy or by local ordinance.

We offer video verification or the option to receive a response from private guard companies in certain jurisdictions, which increases the cost of some security systems and may increase the cost to customers.

If more police

departments refuse to respond or are prohibited from responding to calls from monitored security service companies unless certain conditions are met, such as video or other verification or eyewitness accounts of suspicious activities, our ability to attract and retain customers could be negatively impacted, and our business, financial condition, results of operations, and cash flows could be materially adversely affected.

If more police and fire departments refuse to respond or are prohibited from responding to calls from monitored security service companies unless certain conditions, such as those mentioned above, are met, our ability to attract and retain customers could be negatively impacted, and our business, financial condition, results of operations, and cash flows could be materially adversely affected.

Our reputation as a service provider of high-quality security offerings may be materially adversely affected by product defects or shortfalls in customer service.

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Customers generally judge our performance through their interactions with staff at our monitoring and customer care centers, dealers, and field installation and service technicians, as well as their day-to-day interactions with our products and mobile applications.

Any failure to meet customers’ expectations in such customer service areas could cause an increase in attrition rates or make it difficult to recruit new customers.

Any failure to meet customers’ expectations in such customer service areas could cause an increase in attrition rates or make it difficult to obtain new customers.

Any harm to our reputation or customer relationships caused by the actions of our dealers, personnel, or third-party product or service providers or any other factors could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

It has been common practice in the insurance industry to provide a reduction in rates for policies written on homes that have monitored security systems.

There can be no assurance that insurance companies will continue to offer these rate reductions.

If these incentives are reduced or eliminated, new homeowners who otherwise might not feel the need for monitored security services would be removed from our potential customer pool, which could hinder the growth of our business, and existing customers may choose to disconnect or not renew their service contracts, which could increase our attrition rates.

In either case, our growth prospects and our business, financial condition, results of operations, and cash flows could be materially adversely affected.

In addition, we have attempted to control the operating costs of certain of our customer care operations through the use of lower cost labor in certain foreign countries that may be subject to relatively higher degrees of political and social instability and may lack the infrastructure to withstand political unrest or natural disasters.

The occurrence of natural disasters, pandemics, political or economic instability, or other activities in such countries could result in the sudden and continued closure of operations that in turn could cause our failure to maintain our existing level and quality of customer care.

The practice of utilizing labor based in foreign countries has come under increased scrutiny in the United States.

Governmental authorities could seek to limit or penalize our operations, and our customers may not value the services provided by such operations.

In addition, we are subject to applicable anti-corruption laws and regulations, such as The Foreign Corrupt Practices Act, that prohibit certain types of payments and which could expose us to significant penalties, fines, settlements, costs and consent orders that may curtail or restrict our business.

Any such outcome could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Unauthorized use of our brand names by third parties, and the expenses incurred in developing and preserving the value of our brand names, may materially adversely affect our business.

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Rights in trademarks are generally territorial in nature and are obtained on a country-by-country basis by the first person to obtain protection through use or registration in that country in connection with specified products and services.

Some countries’ laws do not protect unregistered trademarks at all, or make them more difficult to enforce, and third parties may have filed for “ADT,” “PROTECTION ONE,” “SUNPRO,” or similar marks in countries where we have not registered these brands as trademarks.

Some countries’ laws do not protect unregistered trademarks at all, or make them more difficult to enforce, and third parties may have filed for “ADT,” “PROTECTION ONE,” or similar marks in countries where we have not registered these brands as trademarks.

Accordingly, we may not be able to adequately protect our brands everywhere in the world and use of such brands may result in liability for trademark infringement, trademark dilution, or unfair competition.

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(including Puerto Rico and the US Virgin Islands) and Canada, and we may not challenge Tyco’s rights in such trademarks outside the U.S.

Additionally, under the Tyco Trademark Agreement, we and Tyco each has the right to propose new secondary source indicators (e.g., “Pulse”) to become designated source indicators of such party.

Additionally,

under the Tyco Trademark Agreement, we and Tyco each has the right to propose new secondary source indicators (e.g., “Pulse”) to become designated source indicators of such party.

To qualify as a designated source indicator, certain specified criteria must be met, including that the indicator has not been used as a material indicator by the non-proposing party or its affiliates over the previous seven years.

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and Canada, whether alone or in connection with an ADT brand.

Any dilution, infringement, or customer confusion with respect to our brand or use of trade names could materially adversely affect our reputation, business, financial condition, results of operations, and cash flows.

Any dilution, infringement, or customer confusion with respect to our brand or use of trade names, or the inability to use such names as we expand our existing and create new strategic relationships, could materially adversely affect our reputation, business, financial condition, results of operations, and cash flows.

In addition, in November 2019, we sold all of our shares of ADT Canada to TELUS and, among other things, entered into a non-competition and non-solicitation agreement with TELUS pursuant to which we agreed not to directly or indirectly engage in a business competitive with ADT Canada, subject to limited exceptions for cross-border commercial customers and mobile safety applications, for a period of seven years.

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Risks Related to Our Operations

The COVID-19 Pandemic has had and could continue to have a significant negative impact on our employees, our customers, our suppliers, and our ability to carry on our normal operations, including those operations now conducted in a work from home environment, any of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

The outbreak of a novel strain of coronavirus, COVID-19, that became a global pandemic in 2020 has contributed to consumer unease and decreased discretionary spending.

Variants of COVID-19, such as Delta and Omicron, continue to do the same.

We cannot predict the ultimate effects of the outbreak of COVID-19 or any resulting social, political, and economic conditions that result therefrom.

Neither can we predict the effectiveness and distribution of vaccines nor the government response to the pandemic.

We continue to monitor the impact of the COVID-19 Pandemic on all aspects of our business.

This includes the health of our employees, the protection of our customers, and our ability to continue to operate all aspects of our operations.

Our employees are susceptible to COVID-19 in the ordinary course of their work, and we cannot be certain that additional employees will not contract COVID-19, be required to quarantine as a result of coming in contact with others who have the disease, or be unable to work in order to care for someone with the disease.

Any such instances, could result in legal claims and have a material adverse effect on our business, financial condition, results of operations, and cash flows.

The health and safety of our customers is also a top priority and we similarly take precautions to protect their health and well-being.

The refusal of customers to allow us to enter their residences, premises, or businesses due to the fear of COVID-19 could have a material impact on our business, and the spreading of the disease between our customers and our employees could interrupt our operations, result in legal claims and damage our brand.

Any such result could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We rely on monitoring centers and customer care centers as an integral part of our ongoing business operations and we have deployed hybrid and remote working options and will continue this model in 2022.

The closure of any site or the widespread illness of the employees remaining in any such site could result in a material disruption to our business.

Because the majority of employees who staff these operations currently conduct their jobs from home, our work from home environment could subject us to the failure of the communications networks serving our employees which we no longer control and who may not have sufficient back up capabilities.

In addition, this work from home environment results in more home access points that are susceptible to cybersecurity attacks, such as computer hacking, computer viruses, worms or other malicious software or malicious activities.

In addition, our monitoring centers are listed by UL and must meet certain requirements to maintain that listing.

UL has adopted a temporary standard that enables our operators to work from home while remaining within the listing requirements and we must ensure that each such home environment continues to meet all such requirements as well as the UL permanent requirements, which have been established by UL, but not yet implemented.

Our employees who work from home may also experience a decrease in the quality of job performance, whether immediate or over time.

Any such impact with

respect to our employees who are working from home could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Any continued or renewed growth in infections could also result in additional, or the re-institution of prior, travel restrictions or “shelter-in-place” mandates that further impact the ability of our employees to reach our operations, be available to install new or repair existing systems within residential homes or commercial operations, or to enter such homes or commercial operations.

In addition, the continuation of infections has resulted, and could continue to result, in a change in policy of emergency responders in certain jurisdictions who have declined, and may continue temporarily or permanently to decline, to respond to certain verified or non-verified burglar alarm calls from our monitoring centers or from our employees who are working from home, and restrictions on business operations may continue, or be re-instituted, or expand in certain jurisdictions with only limited exceptions.

In some jurisdictions, ADT Solar has been considered essential service exempt from “shelter-in-place” and similar mandates, which allowed the company to continue installation and field service operations.

However, in 2020 certain jurisdictions temporarily enacted restrictions that prevented field sales and installations, and it is possible that other jurisdictions could enact similar restrictions or curtail the scope of currently permitted operations.

Such restrictions, which could impact us directly should we fail to fall within a permissible exception, and which could also result in future sustained business closures among our customer and potential customer bases, would magnify the negative impact already experienced across our operations and, most significantly, within our commercial operations.

Any of the foregoing impacts on our employees, first responders, customers, operations, or business generally, could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Our dealers and suppliers have been and may continue to be negatively impacted by the COVID-19 Pandemic.

Our indirect channel customers are generated mainly through our network of agreements with third-party independent alarm dealers who sell alarm equipment and ADT Authorized Dealer-branded monitoring and interactive services to end users.

Our dealers face many of the same challenges we face due to the COVID-19 Pandemic, and may experience a similar impact on their respective employees, customers, and operations.

These dealers may not have sufficient financial strength or operational diversity to enable them to maintain their operations throughout the COVID-19 Pandemic.

We may also find that it is difficult or impossible to receive equipment from our suppliers or that we have an impaired ability to deliver products and services to customers, or to even make repairs, on a timely basis.

If we experience such disruptions, we may experience customer dissatisfaction and potential loss of confidence, and liabilities to customers or other third parties, each of which could harm our reputation and impact future revenues from these customers.

We could also be subject to claims or litigation with respect to losses caused by such disruptions.

Our property and business interruption insurance and our cyber liability insurance may not be sufficient to fully cover these losses, or any of the other losses we may experience as a result of the COVID-19 Pandemic, many of which we may not even be able to contemplate or quantify at this time, and such insurance may not cover a particular event at all.

Any of these outcomes could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

In addition, on November 5, 2021, the U.S.

Department of Labor’s OSHA issued an emergency temporary standard (“OSHA ETS”) requiring all employers with at least 100 employees (“Covered Employers”) to implement a COVID-19 vaccination policy that requires their employees be fully vaccinated or tested weekly.

Under the OSHA ETS, each Covered Employer must require its employees to be vaccinated or to undergo weekly COVID-19 testing and wear a face covering at work.

Covered Employers, such as the Company, will be required to provide paid time off to workers to get vaccinated and allow for paid leave to recover from any side effects.

The OSHA ETS also requires Covered Employers to (i) determine the vaccination status of each employee, (ii) obtain acceptable proof of vaccination status from vaccinated employees and maintain records of such vaccinations, and (iii) require employees to provide prompt notice when they test positive for COVID-19 diagnosis or receive a COVID-19 diagnosis.

Following the issuance of a stay by the U.S.

Supreme Court preventing the implementation of the OSHA ETS, OSHA withdrew the OSHA ETS, but did not withdraw it as a proposed rule.

We anticipate further litigation if OSHA attempts to implement any rule similar in nature to the OSHA ETS.

Any future OSHA rule or similar mandatory vaccination or testing requirements that may become applicable to our employees may result in employee attrition, including attrition of critically skilled labor, difficulty in obtaining services, parts, components and equipment from impacted suppliers, and increased costs which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

The COVID-19 Pandemic may also exacerbate the other risks noted in this Item 1A “Risk Factors.”

We rely on a significant number of our customers remaining with us as customers for long periods of time.

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Accordingly, our long-term profitability is dependent on long customer tenure.

This requires that we minimize our rate of customer disconnects, or attrition, which can increase as a result of factors such as customer relocations, problems experienced with our product or service quality, customer service, customer non-pay, unfavorable general economic conditions, and the

preference for lower pricing of competitors’ products and services over ours.

If attrition rates were to rise significantly, we may be required to accelerate the depreciation and amortization expense for, or to impair, certain of our assets, which would cause a material adverse effect on our financial condition and results of operations.

In addition, if we fail to keep our customers for a sufficiently long period of time, our profitability, business, financial condition, results of operations, and cash flows could be materially adversely affected.

Delays, costs, and disruptions that result from upgrading, integrating, and maintaining the security of our information and technology networks could materially adversely affect us.

If attrition rates were to rise significantly, we may be required to accelerate the depreciation and amortization expense for, or to impair, certain of our assets, including with respect to subscriber and customer relationships, which would cause a material adverse effect on our financial condition and results of operations.

In addition, if we fail to keep our customers for a sufficiently long period of time, or our attrition rates increase, our profitability, business, financial condition, results of operations, and cash flows could be materially adversely affected.

Delays, costs, and disruptions that result from upgrading, integrating, and maintaining the security of our information and technology networks and systems could materially adversely affect us.

We are dependent on information technology networks and systems, including Internet and Internet-based or “cloud” computing services, to collect, process, transmit, and store electronic information.

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We are currently implementing modifications and upgrades to our information technology systems and also integrating systems from our various acquisitions, including making changes to legacy systems, replacing legacy systems with successor systems with new functionality, and implementing new systems.

The dynamic nature of these and other changes we are undertaking require that throughout 2023 and in future years we simultaneously engage in significant technology developmental efforts across our operations, including platform development, sales, marketing, customer care, customer self-service, virtual service, billing, and other substantive and administrative functions.

Any delay in making such changes or replacements or in purchasing new systems could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

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In addition, our information technology system implementations may not result in productivity improvements at a level that outweighs the costs of implementation, or at all.

The implementation of or delay in implementing new information technology systems may also cause disruptions in our business operations, and impede our ability to comply with constantly evolving laws, regulations and industry standards addressing information and technology networks, privacy and data security, any of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

standards addressing information and technology networks, privacy and data security, any of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Due to the ever-changing threat landscape, our products may be subject to potential vulnerabilities of wireless and IoT devices;

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Attacks may come from phishing, malware, ransomware, or other methods.

While we implement security measures within our products, services, operations, and other actors’ systems, those measures may not prevent cybersecurity breaches;

the access, capture, or alteration of information by criminals;

While we implement security measures within our products, services, operations, and other actors’ systems, those measures may not prevent:

cybersecurity breaches;

the unauthorized access, capture, or alteration of information;

the exposure or exploitation of potential security vulnerabilities;

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computer viruses;

or misplaced data or data loss that could be detrimental to our reputation, business, financial condition, results of operations, and cash flows.

or misplaced data or data loss that could materially adversely impact our reputation, business, financial condition, results of operations, and cash flows.

We are the target of a number of these forms of attack each year.

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In addition, some of the products we sell and provide services for are categorized as IoT and may become targets for cybercriminals and other actors attempting an attack.

Our need to adapt many of our employees to working from home environment due to the COVID-19 Pandemic may also further expose us to security risks.

The significant increase in the number of our employees working from home further exposes us to security risks.

We cannot be certain that advances in criminal capabilities, new discoveries in the field of cryptography, or other developments will not compromise or breach the technology protecting the networks that access our products and services.

A significant actual or perceived (whether or not valid) theft, loss, fraudulent use or misuse of customer, employee, or other personally identifiable data, whether by us, our partners and vendors, or other third parties, or as a result of employee error or malfeasance or otherwise, non-compliance with applicable industry standards or our contractual or other legal obligations regarding such data, or a violation of our privacy and information security policies with respect to such data, could result in costs, fines, litigation, or regulatory actions against us.

Such an event could additionally result in unfavorable publicity and therefore materially and adversely affect the market’s perception of the security and reliability of our services and our credibility and reputation with our customers, which may lead to customer dissatisfaction and could result in lost sales and increased customer revenue attrition.

Such an event could additionally result in unfavorable publicity and therefore materially and adversely affect the market’s perception of the security and reliability of our products and services and our credibility and reputation with our customers, which may lead to customer dissatisfaction and could result in lost sales and increased customer revenue attrition.

In addition, we depend on our information technology infrastructure for business-to-business and business-to-consumer electronic commerce.

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Increasingly, our products and services are accessed through the Internet, and security breaches in connection with the delivery of our services via the Internet may affect us and could be detrimental to our reputation, business, financial condition, results of operations, and cash flows.

There can be no assurance that our continued investments in new and emerging technology and other solutions to protect our network and information systems will prevent any of the risks described above.

In addition, any delay in making such investments due to conflicting budget priorities or otherwise could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

There can be no assurance that our cyber liability insurance will be sufficient to protect against all of our losses from any future disruptions or breaches of our systems or other event as described above.

There can be no assurance that our insurance will be sufficient to protect against all of our losses from any future disruptions or breaches of our systems or other events as described herein.

We depend on third-party providers and suppliers for components of our security, automation and solar systems, third-party software licenses for our products and services, and third-party providers to transmit signals to our monitoring facilities and provide other services to our customers.

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We are therefore susceptible to interruptions in supply and to the receipt of components that do not meet our standards.

Our suppliers may be susceptible to disruptions from fire, natural disasters, weather and the effects of climate change (such as sea level rise, drought, flooding, wildfires, and increased storm severity), pandemics, malicious acts, terrorism, government action, or other concerns impacting their local workforce or operations, all of which are beyond our and their control.

Our suppliers may be susceptible to disruptions from fire, natural disasters, weather and the effects of climate change (such as sea level rise, drought, flooding, wildfires, and increased storm severity), health epidemics and pandemics, transmission interruptions, extended power outages, human or other error, malicious acts, terrorism, war, sabotage, government actions, or other concerns impacting their local workforce or operations, all of which are beyond our and their control.

Any financial or other difficulties our providers face may have negative effects on our business.

We exercise no control over our suppliers, which increases our vulnerability to problems with the products and services they provide or to their choice of which companies they will allow to sell their products.

We are also aware that there exists a worldwide shortage of electronic components, that lead times for such components is increasing, and that existing commitments by certain manufacturers are being extended and, in certain cases, allocations are being made.

We exercise limited control over our suppliers, which increases our vulnerability to problems with the products and services they provide or to their choice of which companies they will allow to sell their products.

There also has been a recent worldwide shortage of electronic components, causing lead times for such components’ manufacture and delivery to increase, and existing commitments by certain manufacturers to be extended and, in certain cases, allocations to be made.

While a single cause of the shortages has not been identified, it is believed that among other reasons, there has been a surge in demand for such components and major growth in certain sectors which rely on such components, and these trends may continue and increase.

Certain of our key suppliers have seen this impact their ability to obtain certain components which could present challenges to our ability to obtain the inventory necessary to meet the demands of our new and existing customers, and to complete crucial initiatives such as the upgrading of cellular equipment at customer sites to meet new network standards prior to the retirement of 3G and CDMA networks.

We are also subject to supply chain disruption should we learn that any of our suppliers is in violation of legislation which bans the import of goods based on their method of production, such as through the use of forced labor or otherwise.

Our efforts to minimize the risk of a disruption from a single supplier may not be effective, and we have begun to experience some disruptions in our supply chain during 2021 and 2022 to date.

Our efforts to minimize the risk of a disruption from a single supplier may not be effective, and we have experienced some disruptions in our supply chain during each of 2021 and 2022.

Any continued or more significant interruption in supply could cause significant delays in installations and repairs and the loss of current and potential customers.

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If one or more of our suppliers ceases or reduces production, we may be unable to quickly identify alternate suppliers or to qualify alternative products on commercially reasonable terms.

For example, in February 2022, our primary supplier of solar panels announced that it is exiting the solar module business.

Any failure to find replacement providers in a timely manner or that can provide the same quality of solar panels at similar price points could, among other things, result in our inability to complete existing installations in a timely manner, accept new engagements, achieve margins that are acceptable to us and consistent with past performance, and maintain our reputation as a provider of high quality solar solutions.

For example, in February 2022, our primary supplier of solar panels announced that it was exiting the solar module business.

Any failure to find replacement providers in a timely manner when we lose a supplier, experience a reduction in the quality of a supplier, or experience a price increase, could, among other things, result in our inability to complete existing installations in a timely manner, accept new engagements, achieve margins that are acceptable to us and consistent with past performance, and maintain our reputation as a provider of high quality solar solutions.

There have also been periods of industry-wide shortages of key components, including solar panels, in times of rapid industry growth.

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Our business, financial condition, results of operations, and cash flows may be harmed not only as a result of any increases in costs associated with our solar offerings but also any failure of these costs to decline.

do not reduce our cost structure in the future, our ability to continue to be profitable may be impaired.

If we do not reduce our cost structure in the future, our ability to continue to be profitable may be impaired.

Declining costs related to raw materials, manufacturing and the sale and installation of our solar service offerings have been a key driver in the pricing of our solar service offerings and, more broadly, customer adoption of solar energy.

While historically the prices of solar panels and raw materials have declined, the cost of solar panels and raw materials could increase in the future, and such products’ availability could decrease, due to a variety of factors, including restrictions stemming from the COVID-19 pandemic, tariffs and trade barriers, export regulations, regulatory or contractual limitations, industry market requirements, and changes in technology and industry standards.

While historically the prices of solar panels and raw materials have declined, the cost of solar panels and raw materials could increase in the future, and such products’ availability could decrease, due to a variety of factors, including restrictions stemming from the COVID-19 pandemic or any re-emergence thereof, tariffs and trade barriers, export regulations, regulatory or contractual limitations, industry market requirements, and changes in technology and industry standards.

Any decline in the exchange rate of the U.S.

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For example, we license the software platform for our monitoring operations from third parties.

Because a number of our products and services incorporate technology developed and maintained by third parties, we are, to a certain extent, dependent upon such third parties’ ability to update, maintain, or enhance their current products and services;

to ensure that their products are free of defects or security vulnerabilities;

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If our agreements with third-party vendors are not renewed or the third-party software becomes obsolete, is incompatible with future versions of our products or services, or otherwise fails to address our needs, we cannot provide assurance that we would be able to replace the functionality provided by the third-party software with technology from alternative providers.

Furthermore, even if we obtain licenses to alternative software products or services that provide the functionality we need, we may be required to replace hardware installed at our monitoring centers and at our customers’ sites, including security system control panels and peripherals, in order to execute our integration of or migration to alternative software products.

Furthermore, even if we obtain licenses to alternative software products or services that provide the functionality we need, we may be required to replace hardware installed at our monitoring centers, work from home environments, and at our customers’ sites, including security system control panels and peripherals, in order to execute our integration of or migration to alternative software products.

Any of these factors could materially adversely affect our business, financial condition, results of operations, and cash flows.

We also rely on various third-party telecommunications providers and signal processing centers to transmit and communicate signals to our monitoring facility in a timely and consistent manner.

These telecommunications providers and signal processing centers could deprioritize or fail to transmit or communicate these signals to the monitoring facility for many reasons, including disruptions from fire, natural disasters, pandemics, weather and the effects of climate change (such as flooding, wildfires, and increased storm severity), transmission interruption, malicious acts, provider preference, government action, or terrorism.

The failure of one or more of these telecommunications providers or signal processing centers to transmit and communicate signals to the monitoring facility in a timely manner could affect our ability to provide alarm monitoring, home automation, and interactive services to our customers.

We also rely on various third-party telecommunications providers and signal processing centers to transmit and communicate signals to our monitoring facilities and work from home environments in a timely and consistent manner.

These telecommunications providers and signal processing centers could deprioritize or fail to transmit or communicate these signals to the monitoring facilities and work from home environment for many reasons, including disruptions from fire, natural disasters, weather, and the effects of climate change (such as sea level rise, drought, flooding, wildfires, and increased storm severity), health epidemics or pandemics, transmission interruption, extended power outages, human or other error, malicious acts, provider preferences regarding the signals that get transmitted, government actions, war, terrorism, sabotage, or other conflicts, or as a result of disruptions to internal and external networks or third party transmission lines.

The failure of one or more of these telecommunications providers or signal processing centers to transmit and communicate signals to our monitoring facilities and work from home environments in a timely manner could affect our ability to provide alarm monitoring, home automation, and interactive services to our customers.

We also rely on third-party technology companies to provide automation and interactive services to our customers.

These technology companies could fail to provide these services consistently, or at all, which could result in our inability to meet customer demand and damage our reputation.

There can be no assurance that third-party telecommunications providers, signal processing centers, and other technology companies will continue to transmit and communicate signals to the monitoring facility or provide home automation and interactive services to customers without disruption.

There can be no assurance that third-party telecommunications providers, signal processing centers, and other technology companies will continue to transmit and communicate signals to our monitoring facilities and work from home environments or provide home automation and interactive services to customers without disruption.

Any such failure or disruption, particularly one of a prolonged duration, could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

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A disruption in our ability to provide security monitoring services or otherwise provide ongoing customer care to our customers could have a material adverse effect on our business.

health epidemics or pandemics;

transportation interruption;

extended power outages;

human or other error, war, terrorism, sabotage, or other conflicts;

or as a result of disruptions to internal and external networks or third party transmission lines.

A disruption could occur for many reasons, including fire, natural disasters, weather, and the effects of climate change (such as sea level rise, drought, flooding, wildfires, and increased storm severity), health epidemics or pandemics, transmission interruption, extended power outages, human or other error, malicious acts, provider preferences regarding the signals that get transmitted, government actions, war, terrorism, sabotage, or other conflicts, or as a result of disruptions to internal and external networks or third party transmission lines.

Monitoring and customer care could also be disrupted by information systems and network-related events or cybersecurity attacks, such as computer hacking, computer viruses, worms, or other malicious software, distributed denial of service attacks, malicious social engineering, or other destructive or disruptive activities that could also cause damage to our properties, equipment, and data.

A failure of our redundant back-up procedures or a disruption affecting multiple monitoring facilities or work from home environment could disrupt our ability to provide security monitoring or customer care services to

our customers.

A failure of our redundant back-up procedures or a disruption affecting multiple monitoring facilities or work from home environments could disrupt our ability to provide security monitoring or customer care services to our customers.

We could also be subject to claims or litigation with respect to losses caused by such disruptions.

Our property and business interruption insurance and our cyber liability insurance may not be sufficient to fully cover our losses or may not cover a particular event at all.

Our insurance may not be sufficient to fully cover our losses or may not cover a particular event at all.

Any such disruptions or outcomes could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

The outbreak of a novel strain of coronavirus, COVID-19, that became a global pandemic in 2020, and subsequent variants, have contributed to consumer unease and decreased discretionary spending.

We cannot predict the ultimate effects of the outbreak or any resurgence of COVID-19 or any resulting social, political, and economic conditions that result therefrom.

Neither can we predict the effectiveness and distribution of vaccines nor the government response to the pandemic.

We continue to monitor the impact of the COVID-19 Pandemic on all aspects of our business.

This includes the health of our

employees, the protection of our customers, and our ability to continue to operate all aspects of our operations.

Any such instances, could result in legal claims and have a material adverse effect on our business, financial condition, results of operations, and cash flows.

The health and safety of our customers is also a top priority and we similarly take precautions to protect their health and well-being.

Any such result could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We rely on monitoring centers and customer care centers as an integral part of our ongoing business operations and we have deployed hybrid and remote working options.

The closure of any site or the widespread illness of the employees remaining in any such site could result in a material disruption to our business.

In addition, our monitoring centers are listed by UL and must meet certain requirements to maintain that listing.

Our employees who work from home may also experience a decrease in the quality of job performance, whether immediate or over time.

Any such impact with respect to our employees who are working from home could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We also have been negatively impacted by, and may in the future be negatively impacted by, travel restrictions or “shelter-in-place” mandates that impact the ability of our employees to reach our operations and to reach or be permitted access to our customer sites, changes in policies of emergency responders in certain jurisdictions who have declined to respond to certain verified or non-verified burglar alarm calls, restrictions on business operations, and the ability of our dealers and suppliers to operate in conditions resulting from the COVID-19 Pandemic.

We could also be subject to claims or litigation with respect to losses caused by such disruptions.

Our insurance may not be sufficient to fully cover these losses, or any of the other losses we may have experienced or will experience as a result of the COVID-19 Pandemic.

In addition, the imposition of any mandatory vaccination or testing requirements that may become applicable to our employees should there be a resurgence of COVID-19 may result in employee attrition, including attrition of critically skilled labor, difficulty in obtaining services, parts, components and equipment from impacted suppliers, and increased costs.

Any of these or other negative impacts on our employees, first responders, customers, operations, dealers, suppliers, or business generally, or any lack of insurance coverage for a related claim or loss, could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Our independent, third-party authorized dealers may not be able to mitigate certain risks such as information technology breaches, data security breaches, product liability, errors and omissions, and marketing compliance.

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We can provide no assurance that any such business opportunities or investments will prove to be successful.

Among other negative effects, our pursuit of such business opportunities could cause our cost of investment in new customers to grow at a faster rate than our recurring revenue and fees collected at the time of installation.

Among other negative effects, our pursuit of such business opportunities could cause our cost of investment in new customers to grow at a faster rate than our recurring revenue

and fees collected at the time of installation.

In addition, any new business partner may not agree to the terms and conditions or limitations on liability that we typically impose upon third parties.

Acquisitions in recent years have also significantly expanded our risk profile.

For example, we have acquired companies which provide cybersecurity services for business customers and as companies are under increasing attack by cybercriminals around the world, a breach by such cybercriminals of our customers’ systems or operations could result in claims and lawsuits against us and result in damage to our brand and reputation.

We have also acquired several companies that sell and service fire and integrated security systems to business customers, which significantly expanded our commercial fire and security capabilities, reach, and customer base.

For example, we have in the past acquired several companies that sell and service fire and integrated security systems to business customers, which significantly expanded our commercial fire and security capabilities, reach, and customer base.

In addition, as we expand our products and services to larger commercial installations, we may have customers who experience large commercial losses that result in claims and lawsuits against us and result in damage to our brand and reputation.

In addition, in December 2021 we acquired Sunpro Solar although solar was not then a part of our core business, and in January 2022, we announced that together with Ford, we will be forming a new entity, Canopy, which represents our entry into the automotive space.

We are also currently exploring the option of offering certain of our monitoring and cybersecurity services under non-ADT brands to international markets outside of the U.S.

In addition, in December 2021 we acquired ADT Solar although our core business was not then extended to the residential solar market.

In January 2022, we announced that together with Ford, we would be forming a new entity, Canopy, which represents our entry into the automotive space, and in September 2022, we announced a strategic relationship with State Farm and our intention to develop products and services to satisfy certain needs of State Farm’s property and casualty customers which represents a significant entry point into the insurance industry.

We are also currently exploring the option of offering certain of our monitoring services under non-ADT brands to international markets outside of the U.S.

Additionally, any new alliances or customer acquisition channels could require large investments of capital to develop such business, or have higher cost structures than our current arrangements, which could reduce operating margins and require more working capital.

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We may also experience capital loss on some or all of our investments, insufficient revenue from such investments to offset new liabilities assumed and expenses associated with these new investments, distraction of management from current operations, and issues not identified during pre-investment planning and due diligence that could cause us to fail to realize the anticipated benefits of such investments and incur unanticipated liabilities.

In recent years, for example, we have recorded losses with respect to our acquisitions of ADT Solar and Cell Bounce.

Any of these factors could materially adversely affect our business, financial condition, results of operations, and cash flows.

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Our acquisitions require the integration of many separate companies that have previously operated independently.

The continued integration of operations, products, and personnel from our acquisitions will continue to require the attention of our management and place demands on other internal resources if they are to be successful.

The continued integration of operations, systems, products, and personnel from our acquisitions will continue to require the attention of our management and place demands on other internal resources if they are to be successful.

The diversion of management’s attention, and any difficulties encountered in the transition and integration process, could materially adversely affect our business, financial condition, results of operations, and cash flows.

In addition, the overall continued integration of our acquired

businesses may result in material unanticipated problems, expenses, liabilities, competitive responses, and loss of customer relationships.

In addition, the overall continued integration of our acquired businesses may result in material unanticipated problems, expenses, liabilities, competitive responses, and loss of customer relationships.

The difficulties of combining the operations of the companies may generally include, among others:

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• challenges in gaining acceptance of the acquisition within the investment community;

• challenges in attracting and retaining key personnel;

• challenges in attracting and retaining key personnel and in establishing and maintaining an integrated human capital framework;

• challenges in ensuring the sales practices of acquired businesses conform to the regulatory environment within which we operate, including, among others, with respect to marketing and sales practices;

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If our dealers engage in marketing practices that are not in compliance with local laws and regulations, we may be in breach of such laws and regulations, which may result in regulatory proceedings and potential penalties that could materially adversely impact our business, financial condition, results of operations, and cash flows.

In addition, unauthorized activities in connection with sales efforts by employees, independent contractors, and other agents or our dealers, including calling consumers in violation of the Telephone Consumer Protection Act, predatory door-to-door sales tactics, and fraudulent misrepresentations, could subject us to governmental investigations and class action lawsuits for, among others, false advertising and deceptive trade practice damage claims, against

which we will be required to defend.

In addition, unauthorized activities in connection with sales efforts by employees, independent contractors, and other agents of our dealers, including calling consumers in violation of the Telephone Consumer Protection Act, predatory door-to-door sales tactics, and fraudulent misrepresentations, could subject us to governmental investigations and class action lawsuits for, among others, false advertising and deceptive trade practice damage claims, against which we will be required to defend.

Such defense efforts are costly and time-consuming, and there can be no assurance that such defense efforts will be successful, all of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

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In connection with the promotion of ADT’s brand by influencers and celebrities, ADT is also subject to a twenty-year FTC consent decree from 2014 which requires adherence to a robust internal compliance process.

In addition, influencers and celebrities who are associated with ADT may engage in behavior that is unrelated to ADT but that causes damage to our brand because of these associations.

Any such activities or behaviors of the social media influencers or celebrities we engage, or our failure to adhere to the compliance processes as required by the FTC consent decree, could have a material adverse effect on our business, financial condition, results of operations, and cash flows, or on our reputation.

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An element of our business strategy may involve the bulk acquisition of customer accounts.

Acquisitions of customer accounts involve a number of special risks, including the possibility of unexpectedly high rates of attrition and unanticipated deficiencies in the accounts and systems acquired despite our investigations prior to acquisition.

Acquisitions of customer accounts involve a number of risks, including the possibility of unexpectedly high rates of attrition and unanticipated deficiencies in the accounts and systems acquired despite our investigations and diligence prior to acquisition.

We face competition from other alarm monitoring companies, including companies that may offer higher prices and more favorable terms for customer accounts purchased, and/or lower minimum financial or operational qualification or requirements for purchased accounts.

This competition could reduce the acquisition opportunities available to us, slowing our rate of growth, and/or increase the price we pay for such account acquisitions, thus reducing our return on investment and negatively impacting our revenue and results of operations.

This competition could reduce the acquisition opportunities available to us, slowing our rate of growth, and/or increasing the price we pay for such account acquisitions, thus reducing our return on investment and negatively impacting our revenue and results of operations.

We can provide no assurance that we will continue to be able to purchase customer accounts on favorable terms or at all in the future.

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However, our success could be impacted adversely by the competitive labor environment and require us to incur wages and benefits in excess of our planned expenditure.

Labor shortages in 2021 made talent recruitment particularly challenging and competitive.

Labor shortages in recent years made talent recruitment particularly challenging and competitive.

In addition, we acquire businesses from time to time that have rates of employee attrition significantly higher than our own and we may experience difficulty or delay in hiring to fill positions due to these higher rates or in bringing the employee attrition rate of such acquired businesses to a level consistent with our own.

The loss, incapacity, or unavailability for any reason of sufficient personnel at any level of our organization, higher than expected payroll and other costs associated with the hiring and retention of sufficient talent at all levels of our organization and the inability or delay in hiring new employees, whether in management, sales, installation and service technicians, or call center personnel, could materially adversely affect our business financial condition, results of operations, and cash flows.

The loss, incapacity, or unavailability for any reason of sufficient personnel at any level of our organization, higher than expected payroll and other costs associated with the hiring and retention of sufficient talent at all levels of our organization or the inability or delay in hiring new employees, whether in management, sales, installation and service technicians, or call center personnel, could materially adversely affect our business financial condition, results of operations, and cash flows.

The loss of or changes to our senior management could disrupt our business.

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DeVries’, ability, along with the ability of other senior management and key employees, to effectively implement our business strategies and to continue to identify and grow talent through our annual strategic talent planning process.

In addition, the success of our newly acquired subsidiary, ADT Solar, partly depends on our Executive Vice President, Solar, Mr.

Marc Jones, who is the founder of Sunpro Solar, as well as its management team.

In addition, the success of each of our segments depends on a highly qualified leader with relevant industry and operational experience, as well as its entire management team.

The unexpected loss of any member of our senior management team and the related loss of their knowledge of products, offerings, and industry experience, and the difficulty of quickly finding qualified senior management talent to replace any such loss, could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Adverse developments in our collective bargaining agreements or other agreements with some employees could materially and adversely affect our business, results of operations, and financial condition.

Adverse developments in our collective bargaining agreements or other agreements with some employees could materially and adversely affect our business, financial condition, results of operations, and cash flows.

As of December 31, 2022, approximately 1,100 of our employees at various sites, or approximately 5% of our total workforce, were represented by unions and covered by collective bargaining agreements.

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A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

If material weaknesses in our internal controls are discovered, they may adversely affect our ability to record, process, summarize and report financial information timely and accurately and, as a result, our financial statements may contain material misstatements or omissions.

If material weaknesses in our internal controls over financial reporting are discovered, they may adversely affect our ability to record, process, summarize and report financial information timely and accurately and, as a result, our financial statements may contain material misstatements or omissions.

In addition, it is possible that control deficiencies could be identified by our management or by our independent registered public accounting firm in the future or may occur without being identified.

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Risks Related to Regulations and Litigation

If we fail to comply with constantly evolving laws, regulations, and industry standards addressing information and technology networks, privacy, and data security, we could face substantial penalties, liability, and reputational harm, and our business, operations, and financial condition could be materially adversely affected.

If we fail to comply with constantly evolving laws, regulations, and industry standards addressing information and technology networks, privacy, and data security, we could face substantial penalties, liability, and reputational harm, and our business, financial condition, results of operations, and cash flows could be materially adversely affected.

Along with our own confidential data and information retained in the normal course of our business, we or our partners collect and retain significant volumes of third party data, some of which is subject to certain laws and regulations.

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In the event of a breach of personal information that we hold or that is held by third parties on our behalf, we may be subject to governmental fines, individual and class action claims, remediation expenses, and/or harm to our reputation.

In 2020, we disclosed that a Company technician had secured unauthorized personal access to certain customers’ in-home security systems, resulting in legal claims against us, which have and may continue to arise either as individual claims or as class actions.

In 2020, we disclosed that a Company technician had secured unauthorized personal access to certain customers’ in-home security systems, resulting in individual and class action legal claims against us.

We could incur significant legal costs in defending existing or new claims or in the ultimate resolution of such claims, and we may suffer reputational harm and damage to our brand as a result of such claims or any related publicity.

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or if our third-party service providers, partners, or vendors fail to do any of the foregoing with respect to data and information assessed, used, stored, or collected on our behalf;

or if we fail to successfully defend against any matters that may arise as a result of the rogue conduct of the technician as described above or should we fail to prevent future rogue actors from undertaking similar actions, our business, reputation, financial condition, results of operations, and cash flows could be materially adversely affected.

or should we fail to

prevent future rogue actors from undertaking actions similar to those described above, our reputation and our business, financial condition, results of operations, and cash flows could be materially adversely affected.

Examples of certain requirements we face include those with respect to the Health Insurance Portability Act, the California Consumer Privacy Act, the California Privacy Rights Act, the Colorado Privacy Act, the Virginia Consumer Data Protection Act, and the General Data Protection Regulation.

These laws and regulations are examples of our need to comply with costly and complex requirements at state, federal, and international levels.

As these requirements continue to evolve, and expand to additional jurisdictions, we may incur or be required to incur costs or change our business practices in a manner adverse to our business and failure to comply could result in significant penalties that may materially adversely affect our business, reputation, financial condition, results of operations, and cash flows.

As these requirements continue to evolve, and expand to additional jurisdictions, we may incur or be required to incur costs or change our business practices in a manner adverse to our business and failure to comply could result in significant penalties that may materially adversely affect our reputation and our business, financial condition, results of operations, and cash flows.

Infringement of our intellectual property rights could negatively affect us.

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We cannot guarantee, however, that the steps we have taken to protect our intellectual property rights will be adequate to prevent infringement of our rights or misappropriation of our intellectual property or technology.

Adverse events affecting the use of our trademarks could affect our use of those trademarks and negatively impact our brands.

Adverse events affecting the use of our trademarks could also negatively impact our brands.

In addition, if we expand our business outside of the U.S.

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Furthermore, our confidentiality agreements with certain of our employees and third parties to protect our intellectual property could be breached or otherwise may not provide meaningful protection for our confidential information, trade secrets, and know-how related to the design, manufacture, or operation of our products and services.

In 2021, we initiated certain litigation to protect our intellectual property rights.

These litigation actions may continue for long periods of time, may not be successful, or may result in impairment of certain of our intellectual property rights, and our need to continue to bring claims may be significant and may be indefinite.

Any future proceedings on these or other matters could be burdensome and costly, and we may not prevail.

In 2021, we initiated certain litigation to protect our intellectual property rights, which has now been resolved.

These types of litigation actions may continue for long periods of time, may not be successful, or may result in impairment of certain of our intellectual property rights, and our need to continue to bring claims may be significant and may be indefinite.

Any future proceedings on any such matters could be burdensome and costly, and we may not prevail.

Further, adequate remedies may not be available in the event of an unauthorized use or disclosure of our confidential information, trade secrets, or know-how.

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These companies typically have little or no business or operations, and there are few effective deterrents available to prevent such companies from filing patent infringement lawsuits against us.

Our exposure to intellectual property infringement claims may increase as we continue to build our new proprietary platform announced in November 2020 or expand upon our existing intellectual property in the future.

Our exposure to intellectual property infringement claims may increase as we continue to build our new proprietary platform announced in November 2020 as part of our partnership with Google or expand upon our existing intellectual property in the future.

In addition, we rely on licenses and other arrangements with third parties covering intellectual property related to many of the products and services that we market.

Notwithstanding these arrangements, we could be at risk for infringement claims from third parties.

Additionally, our patent agreement with Tyco, which generally includes a covenant by Tyco not to bring an action against us alleging that the

manufacture, use, or sale of any products or services in existence as of the date of our separation from Tyco infringes any patents owned or controlled by Tyco and used by us on or prior to such date, does not protect us from infringement claims for future product or service expansions.

Additionally, our patent agreement with Tyco, which generally includes a covenant by Tyco not to bring an action against us alleging that the manufacture, use, or sale of any products or services in existence as of the date of our separation from Tyco infringes any patents owned or controlled by Tyco and used by us on or prior to such date, does not protect us from infringement claims for future product or service expansions.

In general, if a court determines that one or more of our services infringes on intellectual property rights owned by others, we may be required to cease marketing those services, to obtain licenses from the holders of the intellectual property at a material cost or on unfavorable terms, or to take other potentially costly or burdensome actions to avoid infringing third-party intellectual property rights.

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We may be subject to class actions and other lawsuits which may harm our business and results of operations.

We have and we may continue to be subject to class action litigation involving alleged violations of privacy, consumer protection laws, employment laws or other matters.

In addition, we have previously been subject to securities class actions relating to our IPO, and we may in the future be subject to additional securities litigation in connection with our IPO, in connection with issues arising subsequent to the IPO, or in connection with issues that may have arisen prior to the acquisition of what was then The ADT Corporation.

This type of litigation may be lengthy and may result in substantial costs and a diversion of management’s attention and resources.

We have been and we may continue to be subject to class action litigation involving alleged violations of privacy, consumer protection laws, employment laws or other matters.

In addition, we have previously been subject to securities class actions relating to our IPO, and we may in the future be subject to additional securities litigation that may be lengthy and may result in substantial costs and a diversion of management’s attention and resources.

Results cannot be predicted with certainty, and an adverse outcome in such litigation could result in monetary damages or injunctive relief that could materially adversely affect our business, financial condition, results of operations, and cash flows.

In addition, we are currently and may in the future become subject to legal proceedings and commercial or contractual disputes other than class actions.

These are typically claims that arise in the normal course of business including, without limitation, commercial or contractual disputes with our suppliers, intellectual property matters, third-party liability matters, which may include product liability claims, automobile negligence claims and property/casualty claims, and employment law matters.

These are typically claims that arise in the normal course of business including, without limitation, commercial general liability claims, automobile liability claims, contractual disputes, worker’s compensation claims, labor law and employment claims, and claims that we infringed on the intellectual property of others.

There is a possibility that such claims may have a material adverse effect on our business, financial condition, results of operations, and cash flows that is greater than we anticipate and/or negatively affect our reputation.

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Changes in such regulations or the interpretation thereof that further restrict such activities could result in a material reduction in the number of leads for our business and could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Our business operates in a regulated industry and any new, or changes to existing, laws or regulations, or our failure to comply with any such rules or regulations could be costly to us, harm our business and operations, and impede our ability to grow our existing business, any new businesses that we acquire, or investment opportunities that we pursue.

Our operations and employees are subject to various federal, state, and local laws and regulations in such areas as consumer protection, occupational licensing, environmental protection (including climate change regulations), labor and employment, tax, and other laws and regulations.

Most states in which we operate have licensing laws directed specifically toward the sale, installation, monitoring and maintenance of fire and security devices.

Our business operates in a regulated environment and any new, or changes to existing, laws or regulations, or our failure to comply with any such rules or regulations could be costly to us, harm our business and operations, and impede our ability to grow our existing business, any new businesses that we acquire, or investment opportunities that we pursue.

Most states in which we operate have company and employee licensing laws directed specifically toward the sale, installation, monitoring, and maintenance of fire and security devices, as well as solar systems and energy storage solutions.

Our business relies heavily upon the use of both wireline and wireless telecommunications to communicate signals, and telecommunications companies are regulated by federal, state, and local governments.

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There can be no assurance that our compliance or our efforts to improve our services or products will be successful, and there can be no assurance that proposed regulation or deregulation will not have a negative competitive impact, or that economic returns will reflect our investments in new product development.

If environmental laws or regulations are either changed or adopted and impose significant operational restrictions and compliance requirements upon our business or products, our business, financial condition, results of operations, and cash flows could be materially adversely affected.

If environmental laws or regulations are either changed or adopted and

impose significant operational restrictions and compliance requirements upon our business or products, our business, financial condition, results of operations, and cash flows could be materially adversely affected.

Federal laws restricting or banning imports of equipment or supplies from specific companies or regions of the world may limit our ability to meet customer demands or to increase prices.

In certain jurisdictions, we are required to obtain licenses or permits to comply with standards governing employee selection and training and to meet certain standards in the conduct of our business.

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For example, as a result of internal growth and through our acquisition of various commercial businesses, we are expanding commercial offerings and exploring markets outside of the U.S., and we will need to identify and comply with laws and regulations that apply to such services and our operations generally in the relevant jurisdictions.

In addition, any financing or lending activity will subject us to various rules and regulations, such as the U.S.

In addition, our financing and lending activities subject us to various rules and regulations, such as the U.S.

federal Truth in Lending Act and analogous state legislation.

Also, as we continue to expand our sales to government entities, we will be subject to additional contracting regulations, disclosure obligations, and various civil and criminal penalties, among other things, in a significant manner that we are not subject to today.

In addition, and in connection with our acquisition of Sunpro Solar, the installation of solar energy systems requires employees to work at heights with complicated and potentially dangerous systems.

In addition, and in connection with our acquisition of ADT Solar, the installation of solar energy systems requires employees to work at heights with complicated and potentially dangerous systems.

There is risk of serious injury or death if proper safety procedures are not followed.

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Changes to OSHA requirements, or stricter interpretation or enforcement of existing laws or regulations, could result in increased costs.

Failure to comply with applicable OSHA regulations or other federal, state, and local laws and regulations related to any aspect of the ADT Solar business, even if no work-related serious injury or death occurs, may result in civil or criminal enforcement and substantial penalties, significant capital expenditures, or suspension or limitation of operations.

Failure to comply with applicable OSHA regulations or other federal, state, and local laws and regulations related to any aspect of our business, even if no work-related serious injury or death occurs, may result in civil or criminal enforcement and substantial penalties, significant capital expenditures, or suspension or limitation of operations.

Any such accidents, citations, violations, injuries, or failure to comply with industry best practices may result in adverse publicity, which could damage our reputation and competitive position, and may adversely affect our business.

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These regulations and policies often relate to electricity pricing and the interconnection of customer-owned electricity generation.

In the U.S., governments and utilities continuously modify these regulations and policies.

Governments and utilities continuously modify these regulations and policies.

These regulations and policies could deter potential customers from purchasing renewable energy, including solar energy systems.

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In addition, depending on the region, electricity generated by solar energy systems competes most effectively with expensive peak-hour electricity from the electric grid rather than the less expensive average price of electricity.

Modifications to the utilities’ peak hour pricing policies or rate design, such as a flat rate, would require us to lower the price of solar energy systems to compete with the price of electricity from the electric grid.

Modifications to the utilities’ peak hour pricing policies or rate design, such as a flat rate, could require us to lower the price of solar energy systems to compete with the price of electricity from the electric grid.

Our solar sales model may rely on net metering and related policies to offer competitive pricing to customers, and changes to such policies may significantly reduce demand for our solar offerings.

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In addition, any changes to government or internal utility regulations and policies that favor electric utilities could reduce ADT Solar’s competitiveness and cause a significant reduction in demand for our products and services.

For example, certain jurisdictions have proposed assessing fees on customers purchasing energy from solar energy systems or imposing a new charge that would disproportionately impact solar energy system customers who utilize net metering, either of which would increase the cost of energy to those customers and could reduce demand for solar energy systems.

Certain jurisdictions have proposed assessing fees on customers purchasing energy from solar energy systems or imposing a new charge that would disproportionately impact solar energy system customers who utilize net metering, either of which would offset savings for those customers and could reduce demand for solar energy systems.

For example, on December 15, 2022, the California Public Utilities Commission (“CPUC”) passed “NEM 3.0”, a new net energy metering policy that substantially reduces the rate at which homeowners who submit an interconnection application after April 13, 2023 will be compensated for any excess electricity generated by their solar system that is pushed back to the utility grid.

We expect this will significantly reduce demand in the California market.

California is currently not a major market for ADT Solar, and this policy change may limit our ability to grow in that market.

Similar government or utility policies adopted in the future could reduce demand for our products and services, increase the operational burdens to install solar systems, increase the amount of time between the sale and installation of solar systems, and adversely impact growth and timing of revenue recognition.

Any such changes to existing government regulations or policies, or the imposition of new regulations and policies that increase the cost of solar systems, whether directly or indirectly, to our customers, could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Interconnection limits or circuit-level caps imposed by regulators may significantly reduce our ability to sell solar systems and energy storage solutions in certain markets or slow interconnections, harming our growth rate and customer satisfaction scores.

Interconnection limits or circuit-level caps imposed by regulators or utilities may significantly reduce our ability to sell solar systems and energy storage solutions in certain markets or slow interconnections, harming our growth rate and customer satisfaction scores.

Interconnection rules establish the circumstances in which rooftop solar will be connected to the electricity grid.

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Utilities throughout the country have different rules and regulations regarding interconnection and some utilities cap or limit the amount of solar energy that can be interconnected to the grid.

Interconnection regulations are typically heavily influenced by claims from utilities regarding the amount of solar energy that can be connected to the grid without causing grid reliability issues or requiring significant grid upgrades.

In most jurisdictions, we rely on utilities and their personnel to perform these interconnections.

Solar systems generally do not provide power to customers until they are interconnected to the grid.

Interconnection regulations are based on claims from utilities regarding the amount of solar energy that can be connected to the grid without causing grid reliability issues or requiring significant grid upgrades.

These limitations related to interconnection may reduce demand for our solar systems and energy storage solutions, increase our costs, and otherwise adversely impact our business.

The ADT Solar business may rely on the availability of rebates, tax credits, and other financial incentives.

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Specifically, future results of operations may be impacted by the potential discontinuation or material reduction or other change in the federal solar tax credit (the “ITC”).

The ITC currently allows for a qualifying homeowner to deduct 26% of the cost of installing residential solar systems from their U.S.

federal income taxes, thereby returning a material portion of the purchase price of the residential solar system to homeowners.

Congress has extended the ITC expiration date multiple times including, most recently, in December 2020.

Under the terms of the current extension, the ITC will remain at 26% through the end of 2022, reduce to 22% for 2023, and further reduce to 0.0% after the end of 2023 for residential solar systems, unless it is extended before that time.

Although the ITC has been extended several times, there is no guarantee that it will be extended beyond 2023.

In August 2022, the IRA was signed into law.

Among other things, the IRA extended the ITC until 2032 to allow a qualifying homeowner to deduct 30% of the cost of installing residential solar systems from their U.S.

federal income taxes.

Under its current terms, the ITC will remain at 30% through the end of 2032 and be further reduced in increments down to 0% after the end of 2034, unless extended.

Any changes to the IRC that decrease such benefits as currently in effect could materially adversely impact our business.

We could be assessed penalties for false alarms.

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Certain municipalities have adopted ordinances under which both permit and alarm dispatch fees are charged directly to the alarm companies.

Our alarm service contracts generally allow us to pass these charges on to customers, but we may not be able to collect these charges if customers are unwilling or unable to pay them and our customers may elect to terminate or not renew our services if assessments, fines, or penalties for false alarms become significant.

If more local governments impose assessments, fines, or penalties, or our customers refuse to reimburse us for such charges or terminate or fail to renew their services with us because of these charges, our business, financial condition, results of operations, and cash flows could be materially adversely affected.

Our alarm service contracts generally allow us to pass these charges on to customers.

If more local governments impose assessments, fines, or penalties for false alarms, or these charges become significant, or we are unable to collect these charges because customers are unwilling or unable to pay them, or our customers terminate or fail to renew their services with us because of these charges, our business, financial condition, results of operations, and cash flows could be materially adversely affected.

Adoption of statutes and governmental policies purporting to characterize certain of our charges as unlawful may adversely affect our business.

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In the absence of government regulation, these providers could take measures that affect their customers’ ability to use our products and services, such as degrading the quality of the data packets we transmit over their lines, giving our packets low priority, giving other packets higher priority than ours, blocking our packets entirely, or attempting to charge their customers more for using our products and services.

To the extent that Internet service providers implement usage-based pricing, including meaningful bandwidth caps, or otherwise try to monetize access to their networks, we could incur greater operating expenses and customer acquisition and retention could be negatively impacted, which could have a material adverse

effect on our business, financial condition, results of operations, and cash flows.

Furthermore, to the extent network operators were to create tiers of Internet access service and either charge us for or prohibit our services from being available to our customers through these tiers, our business could be negatively impacted.

Furthermore, to the extent network operators were to create tiers of Internet access service and either charge us for or prohibit our services from being available to our

customers through these tiers, our business could be negatively impacted.

Some of these providers also offer products and services that directly compete with our own offerings, which could potentially give them a competitive advantage.

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Given the nature of our business, we are exposed to greater risks of liability for employee acts or omissions or system failures than may be inherent in other businesses.

If a customer or third-party believes that it has suffered harm to person or property due to an actual or alleged act or omission of one of our authorized dealers, independent contractors, employees or other agents, or due to a security or interactive system failure, they (or their insurers) may pursue legal action against us, and the cost of defending the legal action and of any judgment against us could be substantial.

If a customer or third-party believes that it has suffered harm to person or property due to an actual or alleged act or omission of one of our authorized dealers, independent contractors, employees or other agents, or due to a security, fire, or interactive system failure, they (or their insurers) may pursue legal action against us, and the cost of defending the legal action and of any judgment against us could be substantial.

In particular, because our products and services are intended to help protect lives and real and personal property, we may have greater exposure to litigation risks than businesses that provide other commercial, consumer, and small business products and services.

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Our business would be adversely affected if certain of our independent contractors were classified as employees.

We rely on third-party independent contractors in addition to our existing workforce to perform certain tasks including installation and service of our customer alarm systems.

We rely on third-party independent contractors in addition to our existing workforce to perform certain tasks including installation and service of our customer alarm and other systems.

From time to time, we are involved in lawsuits and claims that assert that certain independent contractors should be treated as our employees.

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federal government imposed tariffs on certain alarm equipment components manufactured in China, and on other categories of electronic equipment manufactured in China that we install in our customers’ premises, such as batteries and thermostats, as well as imported solar energy equipment.

Certain of these tariffs are as high as 25% and such tariffs have increased our costs for such equipment as a result of some or all of such new tariffs being passed on to us by the sellers of such equipment.

If any or all of the costs of these tariffs continue to be passed on to us by the sellers of our end-user equipment, we may be required to raise our prices, which could result in the loss of customers and harm our business and results of operations.

Certain of these tariffs are as high as 25% and such tariffs have increased our costs for such equipment as a result of some or all of such new tariffs being passed on to us by our suppliers.

If any or all such costs continue to be passed on to us by our suppliers, we may be required to raise our prices, which could result in the loss of customers and harm our business and results of operations.

Alternatively, we may seek to find new sources of end-user products, which may result in higher costs and disruption to our business.

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federal government’s 2018 National Defense Authorization Act imposed a ban on the use of certain surveillance, telecommunications, and other equipment manufactured by certain of our suppliers based in China, to help protect critical infrastructure and other sites deemed to be sensitive for national security purposes in the U.S.

This federal government ban implemented in August 2019, and the ban on use of certain covered equipment by federal contractors implemented in August 2020, has required us to find new sources of end-user products, which may result in higher costs and disruption to our business.

This federal government ban implemented in August 2019, and the ban on use of certain covered equipment by federal contractors implemented in August 2020, has required us to find new sources of end-user products, which has resulted in higher costs and disruption to our business.

It is also possible additional tariffs will be imposed on imports of equipment that we install in end-user premises, or that our business will be impacted by retaliatory trade measures taken by China or other countries, causing us to raise our prices or make changes to our business, any of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

In addition, in November 2021, President Biden signed the Secure Equipment Law into effect, which will require the FCC to adopt rules stating that they will no longer review or give licenses to the equipment that makes use of radio frequencies manufactured by companies believed to pose a national security threat, including Huawei, ZTE, Dahua, and Hikvision.

This could impact ADT’s ability to source products compatible with a customer’s existing system, or make repairs if new, compatible equipment cannot be sourced.

In addition, in November 2021, President Biden signed the Secure Equipment Law into effect, and in November 2022, the FCC adopted rules stating that they will no longer review or give licenses to the equipment that makes use of radio frequencies manufactured by companies believed to pose a national security threat, including Huawei, ZTE, Dahua, and Hikvision.

This could impact our ability to source products compatible with a customer’s existing system, or make repairs if new, compatible equipment cannot be sourced.

In the November 2022 order, the FCC also issued an additional Notice of Proposed Rulemaking in which it asks if existing authorizations should be revoked, and if so, how.

If existing authorizations were revoked, it could limit ADT’s ability to maintain and service existing customer equipment.

It could also force some customers to replace equipment currently in service.

We are also subject to supply chain disruptions should we learn that any one of our suppliers is in violation of legislation such as the Uyghur Forced Labor Prevention Act signed into law in December 2021, which bans the import of goods based on their method of production, such as through the use of forced labor, or otherwise.

In addition, on March 28, 2022, the U.S.

Department of Commerce (the “DOC”) initiated an investigation into alleged tariff circumvention efforts involving crystalline silicon PV modules and cells from Cambodia, Malaysia, Thailand, and Vietnam at the request of Auxin Solar, which represented 65% of all module imports in 2021.

Upon initiation of the investigation, all imports of these materials from these countries were immediately subject to tariffs between 50% - 250%, causing many suppliers to halt shipments.

On June 6, 2022, President Biden invoked emergency authority to waive these tariffs for two years while the investigation continues.

On December 2, 2022, the DOC announced initial findings that some of the companies under investigation are circumventing tariffs, and the determination must now be made if the circumvention is minor or significant.

Any inability to source product, product parts, or other components required by our business in a timely and cost effective manner could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

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Downturns in the general economy, the business environment, and the housing market would reduce opportunities to make sales of our products and services.

Downturns in the rate of the sale of new and existing homes, which we believe drives a substantial portion of our new customer volume in any given year, and downturns in the rate of commercial property development, which drives demand for our commercial offerings, would reduce opportunities to make sales of new security, fire, home automation, and solar systems and services and reduce opportunities to take over existing security, fire, and home automation systems.

Downturns in the rate of the sale of new and existing homes, which we believe drives a substantial portion of our new residential customer volume in any given year, and downturns in the rate of commercial property development, which drives demand for our commercial offerings, would reduce opportunities to make sales of new security, fire, home automation, and solar systems and services and reduce opportunities to take over existing security, fire, and home automation systems.

Recoveries in the housing market increase the occurrence of relocations, which may lead to customers disconnecting service and not contracting with us in their new homes.

The demand for our products and services is also dependent, in part, on national, regional, and local economic conditions, as well as our customers’ level of discretionary income.

When our customers’ disposable income available for discretionary spending is reduced (such as by higher housing, energy, interest, operating or other costs, or where the actual or perceived wealth of customers has decreased as a result of circumstances such as lower real estate values, increased foreclosure rates, inflation, increased tax rates, or other economic disruptions), we could experience increased attrition rates and reduced customer demand.

When our customers’ discretionary income is reduced (such as by higher housing, energy, interest, operating or other costs, or where the actual or perceived wealth of customers has decreased as a result of circumstances such as lower real estate values, increased foreclosure rates, inflation, increased tax rates, or other economic disruptions), we could experience increased attrition rates and reduced customer demand.

Where levels of business activity decline, the commercial fire and security business could experience increased attrition rates and reduced demand.

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Our long-term revenue growth rate primarily depends on installations and new contracts exceeding disconnects.

If customer disconnects and defaults increase, our business, financial condition, results of operations, and cash flows could be materially adversely affected.

If customer disconnects or defaults increase, our business, financial condition, results of operations, and cash flows could be materially adversely affected.

Rising interest rates or increased consumer lender fees could adversely impact our sales, profitability, and our financing costs.

Our solar sales business model relies on customers financing the purchase price of their system through third-party lenders.

Our business model, in part, relies on customers financing the purchase price of their system through ADT or third-party lenders.

Those lenders charge us fees on the principal balance of those loans.

Rising interest rates may increase the lenders’ cost of capital and those increased costs will result in an increase in the fees charged to us.

Any increase in those fees will have an adverse impact on our ability to offer attractive pricing on our solar offerings to customers, which could negatively impact sales and profitability of our solar energy offerings.

We are subject to credit risk and other risks associated with our customers and dealers.

Rising interest rates, as we have experienced during 2022 and which we may continue to experience, may increase the lenders’ cost of capital and those increased costs will result in an increase in the fees charged to us.

In addition, where we have committed to provide financing internally, as interest rates rise, our cost of capital also gets more expensive and we may not be able to pass on such increased costs to our customers.

Any increase in those fees or costs will have an adverse impact on our ability to offer attractive pricing on our alarm, solar, and other offerings to customers, which could negatively impact sales and profitability of our consumer and small business, commercial, and solar energy offerings, or increase the cost to us upon the sale of our aggregated customer loans.

Any such outcome could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We are subject to credit risk and other risks associated with our customers, dealers, and third-party lenders.

A substantial part of our revenue is derived from the recurring monthly revenue due from customers under alarm monitoring contracts.

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These limitations may adversely affect our relationships with customers, and may subject us to risk with respect to our ability to generate current levels of cash flow should, for example, such arrangements be terminated.

Either result could have an adverse effect on our business, financial condition, results of operations, and cash flows.

In addition, rising interest rates, as we have experienced during 2022 and which we may continue to experience, could increase the costs of our products and services substantially.

Any such result could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We also place a substantial reliance on third party lenders in order to access loan products for our customers in our solar segment.

The financial difficulty or insolvency of any such third party lender has and may in the future result in a delay in customer installations, a write-off in accounts receivables, or other negative impacts on the customer experience or our financial condition.

In addition, any disruption in our relationship with a third party lender could have an adverse impact on certain customer relationships or result in liability to us.

For example, in 2022, a large third party lender notified us that it had entered insolvency proceedings.

The outcome from this insolvency proceeding could result in repayment of certain loans that did not achieve permission to operate within the required timeframe.

Certain third party lenders also have the contractual right to require us to repurchase loans if we fail to achieve certain contractual milestones with respect to customer installations.

If any of our third party lenders invokes such a right, the necessary repurchases could have a material, adverse effect on our cash flow

for the quarter in which they occur.

Industry trends could also change, for example, by third party lenders more systematically requiring the repurchase of loans, or requiring a guarantee with respect to amounts that such lenders would otherwise require be repurchased, if we fail to achieve the relevant milestones.

In February 2023, one of our largest third party lenders of loans advised us that they are implementing such policies effective during the first quarter of 2023, with additional policy changes forthcoming this year, and we are in discussions with them regarding the relevant loan portfolio.

We cannot predict the timing or extent to which the broader industry will implement such changes or the related impact on us.

Failure to maintain effective customer financing options and satisfactory relationships with third party lenders or the decision by a third party lender to require us to repurchase or guarantee loans could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Offering more commercial term and financing options, and transitions between such options, may introduce operational complexity, require the devotion of resources that could otherwise be deployed elsewhere, and may increase market valuation risks due to differences in the financial treatment of different offerings.

Such increased offerings or transitions between different offerings or equipment ownership models could also result in customer confusion or dissatisfaction, limit or remove our ability to offer “free device” promotions or other customer satisfaction programs, and may provide competitors with the opportunity to target our existing and potential clients by offering such “free device” or other promotions that we may be unable to offer under our own programs.

Any of the foregoing could adversely affect our business, financial condition, results of operations, and cash flows.

Such increased offerings or transitions between different offerings or equipment ownership models could also result in customer confusion or dissatisfaction, limit or remove our ability to offer “free device” promotions or other customer satisfaction programs, and may provide competitors with the opportunity to target our existing and potential clients by offering such “free device” promotions, or other customer satisfaction programs that we may be unable to offer.

Any of the foregoing could materially adversely affect our business, financial condition, results of operations, and cash flows.

Under the standard alarm monitoring contract acquisition agreements that we enter into with our dealers, if a customer terminates his or her service with us during the first thirteen months after we have acquired the alarm monitoring contract, the dealer is typically required to substitute with a compatible alarm monitoring contract or compensate us in an amount based on the original acquisition cost of the terminating alarm monitoring contract.

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adverse market conditions;

adverse changes in applicable laws or regulations, including changes that restrict the activities of or affect the products and services we offer;

adverse changes in applicable laws or regulations, including changes that restrict our activities or affect the products and services we offer;

challenges to the validity of certain registered intellectual property;

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and a variety of other factors.

For example, during the third quarter of 2022, as a result of ADT Solar’s underperformance of recent operating results in successive quarters relative to expectations, as well as the current macroeconomic conditions, including the impact of a continued increase in interest rates, we performed a quantitative interim impairment assessment on the Solar reporting unit as of September 30, 2022.

Based on the results of our quantitative interim goodwill impairment analysis, we recorded a non-cash goodwill impairment charge of $149 million during the third quarter of 2022.

Depending on future circumstances, it is possible that we may never realize the full value of our intangible assets.

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We may need to record a valuation allowance against this deferred tax asset in the future as the deferred tax asset grows, which may have a material adverse effect on our future financial condition and results of operations.

We expect to have NOLs available for another three to five years, after which there is a risk that the interest disallowance may have a material adverse impact on our financial condition, results of operations, and cash flows.

After the utilization of our NOLs, there is a risk that the interest disallowance may have a material adverse impact on our financial condition, results of operations, and cash flows.

Risks Related to Our Indebtedness

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• we may be required to make non-strategic divestitures to fund our debt servicing needs;

• an increase in interest rates could significantly increase the cost of our variable rate debt and make any refinancing of our current fixed rate debt significantly more costly.

• an increase in interest rates, as experienced during 2022 or as we may experience in the future, could significantly increase the cost of our variable rate debt and make any refinancing of our current fixed rate debt significantly more costly.

In addition, we have interest rate swap contracts to hedge our interest rate exposure which may not be effective.

Our variable rate debt and our interest rate swap contracts are based on the London Interbank Offered Rate (“LIBOR”).

With the phase out of LIBOR and the transition to an alternative successor reference rate such as the Secured Overnight Financing Rate (“SOFR”), we may experience a negative impact on our cost of financing;

Our variable rate debt and our interest rate swap contracts have been historically based on the London Interbank Offered Rate (“LIBOR”), and will continue to transition to the Secured Overnight Financing Rate (“SOFR”), which may result in a negative impact on our cost of financing;

• any refinancing could be on terms or with conditions that limit our ability to successfully conduct business in the future;

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We can provide no assurance that our business will generate sufficient cash flow from operations to service or repay our debt, or that we will have the ability to issue new debt, draw on our revolving credit facility or fund other alternative sources of funds to satisfy our obligations.

Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, could result in a material adverse effect on our business, financial condition, results of operations, and cash flows and could negatively impact our ability to satisfy our obligations under our indebtedness.

Our debt agreements contain restrictions that limit our flexibility.

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• designate our subsidiaries as unrestricted subsidiaries.

As a result of these covenants, we will continue to be limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We have pledged a significant portion of our assets as collateral under our debt agreements.

If any of the holders of our indebtedness accelerate the repayment of such indebtedness upon an event of default, there can be no assurance that we will have sufficient assets to repay our indebtedness.

A failure to comply with the covenants under our debt agreements or any future indebtedness could result in an event of default, which, if not cured or waived, could have a material adverse effect on our business, financial condition, and results of operations.

In the event of any such default, the lenders thereunder:

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Among others, the following factors could affect our stock price:

• our business performance and prospects, including the success of our partnership with Google and our acquisition of Sunpro Solar;

• sales of our common stock, or the perception that such sales may occur, by us or by our stockholders, including our controlling stockholder Apollo, which has already and may continue to sell shares in registered offerings pursuant to demand registrations requests, Google, or any of the recipients of our common stock upon our acquisitions of Defenders and Sunpro Solar;

• quarterly variations in the rates of growth of our operating and financial indicators, such as net income per share, net income and revenues;

• our business performance and prospects, including the success of our strategic relationship with State Farm, our partnership with Google and our acquisition of ADT Solar;

• sales of our common stock, or the perception that such sales may occur, by us or by our stockholders, including our controlling stockholder Apollo (which has already and may continue to sell shares in registered offerings pursuant to demand registration requests), State Farm, Google, or any of the recipients of our common stock upon our acquisition of ADT Solar;

• quarterly variations in the rates of growth of our operating and financial indicators, such as net income (loss) per share, net income (loss) and total revenue;

• any failure to achieve near or long term goals we have publicly disclosed for our operating and financial performance;

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Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities.

Such litigation, if instituted against us, could result in very substantial costs, divert our management’s attention and resources, and harm our business, financial condition, results of operations, and cash flows.

Such litigation, if instituted against us, could result in very substantial costs, divert our management’s attention and resources, and have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We continue to be controlled by Apollo, and Apollo’s interests may conflict with our interests and the interests of other stockholders.

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Any such investment may increase the potential for the conflicts of interest discussed in this risk factor.

So long as funds affiliated with Apollo continue to directly or indirectly own a significant amount of our equity, even if such amount is

less than 50%, Apollo and its affiliates will continue to be able to substantially influence or effectively control our ability to enter into corporate transactions.

So long as funds affiliated with Apollo continue to directly or indirectly own a significant amount of our equity, even if such amount is less than 50%, Apollo and its affiliates will continue to be able to substantially influence or effectively control our ability to enter into corporate transactions.

In addition, as long as Apollo beneficially owns a majority of our common stock, Apollo will control all matters requiring stockholder approval including the election of directors or amendments to any certificate of incorporation which would impede the ability to undertake a change in control and otherwise negatively impact our stock price.

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• the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

• there be an annual performance evaluation of the nominating and corporate governance and compensation committees.

We intend to continue utilizing these exemptions as long as we remain a controlled company.

We use, and intend to continue using, these exemptions as long as we remain a controlled company.

Accordingly, stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.

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Investors are placing a greater emphasis on non-financial factors, including ESG, when evaluating investment opportunities.

In 2021, we began to formalize our ESG program and released our first publicly-available Sustainable Accounting Standards Board (“SASB”) Index report as we continue to expand this program throughout the Company.

In 2022, we released our first publicly-available corporate ESG report which included a Sustainable Accounting Standards Board (“SASB”) Index report.

If we are unable to provide sufficient disclosure about our ESG practices, or if we fail to establish and achieve the objectives of our ESG program, which could include targets or commitments, consistent with investor, customer, employee, or other stakeholder expectations, we may not be viewed as an attractive investment, service provider, workplace, or business, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

In addition, there exists certain “anti-ESG” sentiment among some individuals and government institutions.

As we continue to establish our ESG related initiatives, we could face a negative reaction or legislation that impedes our activities or reflects poorly upon the Company, any of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Our organizational documents may impede or discourage a takeover, which could deprive our investors of the opportunity to receive a premium on their shares.

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• providing for the removal of directors only for cause and only upon the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class, if less than 50.1% of our outstanding common stock is beneficially owned by funds affiliated with Apollo;

• empowering only the board to fill any vacancy on our board of directors (other than in respect of a director designated by Apollo), whether such vacancy occurs as a result of an increase in the number of directors or otherwise;

• empowering only the board of directors to fill any vacancy on our board of directors (other than in respect of a director designated by Apollo), whether such vacancy occurs as a result of an increase in the number of directors or otherwise;

• authorizing the issuance of “blank check” preferred stock with all terms established by the board of directors in its sole discretion without any need for action by stockholders, which could delay or prevent a change in control of the company;

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Our amended and restated certificate of incorporation provides for exclusive forum provisions which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes.

Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Chancery Court of the State of Delaware shall be, to the fullest extent permitted by law, the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf;

exclusive forum for (a) any derivative action or proceeding brought on our behalf;

(b) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or stockholders;

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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 1A. Risk Factors