What changed in this filing

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Item 9A. Controls and Procedures

2023-02-28 compared with 2022-03-01 · 917 added, 774 removed, 1267 unchanged (57% of the section changed)

10 unchanged sentences

Based on our assessment and those criteria, our management determined that our internal control over financial reporting was effective at the reasonable assurance level as of December 31, 2022.

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

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

The effectiveness of the Company's internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in Part IV of this Annual Report.

12 unchanged sentences

The following table provides information as of December 31, 2022 with respect to shares of Common Stock issuable under our equity compensation plans.

Both the 2016 Equity Incentive Plan (the “2016 Plan”) and the 2018 Omnibus Incentive Plan (the “2018 Plan”) provide for the award of stock options, restricted stock units (“RSUs”), restricted stock awards (“RSAs”), and other equity and equity-based awards to our board of directors, officers, and non-officer employees.

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

11 unchanged sentences

_________________

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

(1) Reflects the 1.681-for-1 stock split of Common Stock effective January 4, 2018.

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

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

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

(2) Column (a) includes 1,272,432 shares of Common Stock that may be issued upon the exercise of service-based stock options and 1,300,379 shares of Common Stock that may be issued upon the exercise of performance-based stock options.

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

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

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

(3) Column (a) includes (i) 21.6 million shares of Common Stock that may be issued upon the exercise of service-based stock options and 8.0 million shares of Common Stock that may be issued upon the exercise of performance-based stock options and (ii) 12.8 million shares of Common Stock that may be issued upon the vesting of service-based RSUs and 0.3 million shares of Common Stock that may be issued upon the exercise of performance-based RSUs.

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

19 unchanged sentences

All financial statement schedules called for under Regulation S‑X are omitted because either they are not required under the related instructions, are included in the consolidated financial statements or notes thereto included elsewhere in this Annual Report on Form 10‑K, or are not material.

The exhibits listed on the accompanying Exhibit Index are filed or incorporated by reference as part of this report.

Exhibits Index

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

The exhibits listed on the accompanying Index to Exhibits are filed/furnished or incorporated by reference as part of this Annual Report on Form 10-K.

Index to Exhibits

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

Exhibit Number Incorporated by Reference

3 unchanged sentences

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

10-K 2.2 3/1/2022

Amended and Restated Certificate of Incorporation of ADT Inc.

46 unchanged sentences

10-K 4.53 3/10/2020

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

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

8-K 4.1 1/28/2020

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

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

8-K 4.1 8/20/2020

1 unchanged sentence

8-K 4.1 7/29/2021

Seventeenth Supplemental Indenture, dated as of January 7, 2022, under 2012 Base Indenture, by and among The ADT Security Corporation, Compass Solar Group, LLC, Marc Jones Construction, L.L.C., Buildpro, L.L.C., Energypro LLC and Wells Fargo Bank, National Association

10-Q 4.1 5/6/2022

Eighteenth Supplemental Indenture, dated as of April 28, 2022, under 2012 Base Indenture, by and among The ADT Security Corporation, ADT Innovation LLC and Wells Fargo Bank, National Association

10-Q 4.2 5/6/2022

Eleventh Supplemental Indenture, dated as of January 7, 2022, by and among The ADT Security Corporation, Compass Solar Group, LLC, Marc Jones Construction, L.L.C., Buildpro, L.L.C., Energypro LLC and Wells Fargo Bank, National Association

10-Q 4.3 5/6/2022

Twelfth Supplemental Indenture, dated as of April 28, 2022, by and among The ADT Security Corporation, ADT Innovation LLC and Wells Fargo Bank, National Association

10-Q 4.4 5/6/2022

Third Supplemental Indenture, dated as of January 7, 2022, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., Compass Solar Group, LLC, Marc Jones Construction, L.L.C., Buildpro, L.L.C., Energypro LLC and Wells Fargo Bank, National Association

10-Q 4.5 5/6/2022

Fourth Supplemental Indenture, dated as of April 28, 2022, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., ADT Innovation LLC and Wells Fargo Bank, National Association

10-Q 4.6 5/6/2022

Fourth Supplemental Indenture, dated as of January 7, 2022, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., Compass Solar Group, LLC, Marc Jones Construction, L.L.C., Buildpro, L.L.C., Energypro LLC and Wells Fargo Bank, National Association

10-Q 4.7 5/6/2022

Exhibit Number Incorporated by Reference

Exhibit Description Form Exhibit Filing Date

Fifth Supplemental Indenture, dated as of April 28, 2022, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., ADT Innovation LLC and Wells Fargo Bank, National Association

10-Q 4.8 5/6/2022

First Supplemental Indenture, dated as of January 7, 2022, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., Compass Solar Group, LLC, Marc Jones Construction, L.L.C., Buildpro, L.L.C., Energypro LLC and Wells Fargo Bank, National Association

10-Q 4.9 5/6/2022

Second Supplemental Indenture, dated as of April 28, 2022, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., ADT Innovation LLC and Wells Fargo Bank, National Association

10-Q 4.10 5/6/2022

Second Supplemental Indenture, dated as of January 7, 2022, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., Compass Solar Group, LLC, Marc Jones Construction, L.L.C., Buildpro, L.L.C., Energypro LLC and Wells Fargo Bank, National Association

10-Q 4.11 5/6/2022

Third Supplemental Indenture, dated as of April 28, 2022, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., ADT Innovation LLC and Wells Fargo Bank, National Association

10-Q 4.12 5/6/2022

First Supplemental Indenture, dated as of January 7, 2022, by and among The ADT Security Corporation, Compass Solar Group, LLC, Marc Jones Construction, L.L.C., Buildpro, L.L.C., Energypro LLC and Wells Fargo Bank, National Association

10-Q 4.13 5/6/2022

Second Supplemental Indenture, dated as of April 28, 2022, by and among The ADT Security Corporation, ADT Innovation LLC and Wells Fargo Bank, National Association

10-Q 4.14 5/6/2022

Description of Securities

10-K 4.24 3/1/2022

Incremental Assumption and Amendment Agreement No.

21 unchanged sentences

10-K 10.59 3/11/2019

Exhibit Number Incorporated by Reference

Exhibit Description Form Exhibit Filing Date

Supplement No.

4 unchanged sentences

10-Q 10.13 5/7/2019

Supplement No.

11, dated as of January 7, 2022, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Security Services Borrower, LLC party thereto and Barclays Bank PLC, as Collateral Agent

10-Q 10.4 5/6/2022

Supplement No.

12, dated as of April 28, 2022, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Security Services Borrower, LLC party thereto and Barclays Bank PLC, as Collateral Agent

10-Q 10.5 5/6/2022

Exhibit Number Incorporated by Reference

Exhibit Description Form Exhibit Filing Date

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

25 unchanged sentences

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

10-K 10.24 3/1/2022

Bank Rate Amendment to the Receivables Financing Agreement, among ADT LLC, ADT Finance LLC and Mizuho Bank, Ltd., dated as of April 19, 2022

10-Q 10.3 5/6/2022

Third Amendment dated as of May 20, 2022, to Receivables Financing Agreement, among ADT LLC, ADT Finance LLC, and Mizuho Bank, Ltd., dated as of July 16, 2021

10-Q 10.3 8/4/2022

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

20 unchanged sentences

10-K 10.35 2/25/2021

Amendment to the ADT LLC Supplemental Savings and Retirement Plan, effective as of December 15, 2021

10-Q 10.4 8/4/2022

Amendment to the ADT LLC Supplemental Savings and Retirement Plan, effective as of January 1, 2022

10-Q 10.13 11/3/2022

Amendment to the ADT LLC Supplemental Savings and Retirement Plan, effective as of February 22, 2023

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

and Prime Security Services TopCo Parent, L.P.

10-K 10.34 3/1/2022

Registration Rights Agreement by and between the ADT Inc.

16 unchanged sentences

10-Q 10.27 5/7/2019

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

S-1 10.26 12/21/2017

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

2 unchanged sentences

S-1 10.31 12/21/2017

Employment Offer Letter, dated February 1, 2019, between ADT LLC (with its Affiliates and Successors) and David Smail

2018 Omnibus Incentive Plan

S-1/A 10.32 1/8/2018

S-1 10.32 12/21/2017

First Amendment to ADT Inc.

3 unchanged sentences

2018 Omnibus Incentive Plan

S-1/A 10.33 1/8/2018

S-1 10.33 12/21/2017

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

2018 Omnibus Incentive Plan

S-1/A 10.34 1/8/2018

S-1 10.34 12/21/2017

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

15 unchanged sentences

10-Q 10.48 5/7/2020

Exhibit Number Incorporated by Reference

Exhibit Description Form Exhibit Filing Date

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

4 unchanged sentences

10-Q 10.6 11/9/2021

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

2018 Omnibus Incentive Plan effective as of August 1, 2022

SC TO-I (d)(34) 9/12/2022

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

2018 Omnibus Incentive Plan effective as of August 1, 2022

SC TO-I (d)(35) 9/12/2022

Second Amended & Restated Employment Agreement with James D.

10-Q 10.12 11/8/2018

Exhibit Number Incorporated by Reference

Exhibit Description Form Exhibit Filing Date

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

8-K 10.2 12/3/2018

Defenders, Inc.

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

10-Q 10.60 5/5/2021

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

10-Q 10.61 5/5/2021

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

10-Q 10.62 5/5/2021

Separation of Employment Agreement and General Release, dated December 13, 2022, between ADT LLC and Keith Holmes

Annual Incentive Plan

2 unchanged sentences

and the Holders party thereto

10-K 10.63 3/1/2022

Securities Purchase Agreement, dated as of September 5, 2022, by and between ADT Inc.

and State Farm Fire & Casualty Company

8-K 10.1 9/6/2022

Tender and Support Agreement, dated as of September 5, 2022, by and between ADT Inc., Prime Security Services TopCo (ML), L.P.

and Prime Security Services TopCo (ML II), L.P

8-K 10.2 9/6/2022

Support Agreement, dated as of September 5, 2022, by and between ADT Inc.

and Google LLC

8-K 10.3 9/6/2022

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

2018 Omnibus Incentive Plan

SC TO-I (d)(20) 9/12/2022

Form of Time and Performance Vesting Non-Qualified Option Award Agreement for use under the ADT Inc.

2018 Omnibus Incentive Plan

SC TO-I (d)(21) 9/12/2022

Form of Time and Performance Vesting Restricted Stock Unit Award Agreement for use under the ADT Inc.

2018 Omnibus Incentive Plan

SC TO-I (d)(22) 9/12/2022

Form of Non-Qualified Option Award Agreement for use under the Prime Security Services Parent, Inc.

2016 Equity Incentive Plan

SC TO-I (d)(24) 9/12/2022

Commitment Letter by and among Prime Security Services Borrower, LLC, The ADT Security Corporation, Deutsche Bank Securities Inc., Deutsche Bank AG New York Branch, BNP Paribas, Mizuho Bank, Ltd., MUFG Bank, Ltd., Citizens Bank, N.A., Citigroup Global Markets Inc., Morgan Stanley Senior Funding, Inc., Royal Bank of Canada, Barclays Bank PLC, ING Capital LLC and Credit Suisse AG, New York Branch, dated as of September 15, 202 2

8-K 10.1 9/15/2022

Investor Rights Agreement, dated as of October 13, 2022, by and between ADT Inc.

and State Farm Fire & Casualty Company

8-K 10.1 10/13/2022

Amended and Restated Management Investor Rights Agreement

10-K 10.39 3/15/2018

Amendment No.

1 to Amended and Restated Management Investor Rights Agreement, dated as of December 9, 2022, by Prime Security Services TopCo Parent

8-K 10.1 12/15/2022

Subsidiaries of ADT Inc.

16 unchanged sentences

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

March 1, 2022 By:

February 28, 2023 By:

President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 1, 2022.

DeVries President, Chief Executive Officer and Director

(Principal Executive Officer)

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

/s/ Kenneth J.

Porpora Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

Jeffrey Likosar

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

/s/ Steven Burzo Vice President, Chief Accounting Officer and Controller

(Principal Accounting Officer)

Zachary Susil

Becker Director

/s/ Andrew D.

Africk Director

/s/ Stephanie Drescher Director

Stephanie Drescher

/s/ Tracey Griffin Director

Tracey Griffin

/s/ Matthew H.

Nord Director

/s/ Tracey R.

Griffin Director

/s/ Benjamin Honig Director

Benjamin Honig

/s/ William M.

Lewis, Jr Director

Press Director

Rayman Director

/s/ David Ryan Director

Smith Director

Solomon Director

4 unchanged sentences

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

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

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Operations for the years ended December 31, 2022, 2021, and 2020

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

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021, and 2020

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2022, 2021, and 2020

5 unchanged sentences

Acquisitions and Disposition

Equity Method Investments

Goodwill and Other Intangible Assets

10 unchanged sentences

We have audited the accompanying consolidated balance sheets of ADT Inc.

and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

14 unchanged sentences

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

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

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

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

Definition and Limitations of Internal Control over Financial Reporting

8 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessment -- Commercial Reporting Unit

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

Goodwill Impairment Assessments — Solar and Commercial Reporting Units

As described in Note 6 to the consolidated financial statements, the Company’s consolidated goodwill balance was $5.8 billion as of December 31, 2022, of which $562.8 million and $336.6 million relates to the Solar and Commercial reporting units, respectively.

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

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

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

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

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

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

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

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

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

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

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

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

During the third quarter of 2022, as a result of Solar’s underperformance of recent operating results in successive quarters relative to expectations, as well as current macroeconomic conditions, including the impact of increasing interest rates, management performed an interim impairment quantitative assessment on the Solar reporting unit as of September 30, 2022.

Based on the results of this interim goodwill impairment quantitative analysis, the Company recorded a goodwill impairment loss of $149 million.

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

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

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

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

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

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the fair value estimate of the Company’s Commercial reporting unit.

These procedures also included, among others, (i) testing management’s process for estimating the fair value of the reporting unit;

These procedures also included, among others, (i) testing management’s process for estimating the fair value of the reporting units;

(ii) evaluating the appropriateness of the income approach;

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

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

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

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

(iii) testing the completeness and accuracy of the underlying data used in the income approach;

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

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

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the Company’s income approach;

and (ii) the reasonableness of the discount rate assumption.

/s/ PricewaterhouseCoopers LLP

Hallandale Beach, Florida

March 1, 2022

February 28, 2023

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

4 unchanged sentences

Cash and cash equivalents $ 257,223 $ 24,453

Restricted cash and restricted cash equivalents 116,357 8,824

Accounts receivable, net of allowance for credit losses of $ 65,655 and $ 54,032 , respectively

43 unchanged sentences

Monitoring and related services $ 4,589,265 $ 4,347,713 $ 4,186,987

Installation and other 959,398 1,127,800 818,075

Security installation, product, and other 1,019,619 912,047 1,127,800

Solar installation, product, and other 786,426 47,351 —

Total revenue 6,395,310 5,307,111 5,314,787

Cost of revenue (exclusive of depreciation and amortization shown separately below) :

Monitoring and related services 918,048 912,948 789,906

Security installation, product, and other 620,090 602,467 726,622

Solar installation, product, and other 501,710 34,758 —

Total cost of revenue 2,039,848 1,550,173 1,516,528

Selling, general, and administrative expenses 1,930,021 1,789,009 1,723,644

2 unchanged sentences

Goodwill impairment 149,385 — —

Loss on sale of business — 738 61,951

Operating income (loss) 560,249 15,278 40,640

2 unchanged sentences

Other income (expense) ( 57,561 ) 8,313 8,293

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

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

Income (loss) before income taxes and equity in net earnings (losses) of equity method investee 237,403 ( 471,189 ) ( 778,919 )

Income tax benefit (expense) ( 60,184 ) 130,369 146,726

Income (loss) before equity in net earnings (losses) of equity method investee 177,219 ( 340,820 ) ( 632,193 )

Equity in net earnings (losses) of equity method investee ( 4,601 ) — —

Net income (loss) $ 172,618 $ ( 340,820 ) $ ( 632,193 )

13 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

4 unchanged sentences

Cash flow hedges 25,754 46,234 ( 58,114 )

Foreign currency translation — — 51,599

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

Other ( 3,981 ) 3,408 ( 2,125 )

Total other comprehensive income (loss), net of tax 21,773 49,642 ( 60,239 )

4 unchanged sentences

(in thousands)

Number of Common Shares Number of Class B

Common Shares Common Stock Class B

Common Stock Additional

Capital Accumulated

Deficit Accumulated

Comprehensive

Income (Loss) Total

Stockholders'

Number of Common Shares Number of Class B Common Shares Common Stock Class B Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity

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

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

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

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

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

Repurchases of common stock ( 1 ) — — — ( 4 ) — — ( 4 )

3 unchanged sentences

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

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

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

1 unchanged sentence

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

Repurchases of common stock ( 1 ) — — — ( 4 ) — — ( 4 )

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

5 unchanged sentences

Issuance of common stock, net of expenses 140,681 — 1,407 — 1,188,488 — — 1,189,895

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

Repurchases of common stock ( 133,333 ) — ( 1,333 ) — ( 1,093,334 ) — — ( 1,094,667 )

Dividends — — — — — ( 127,835 ) — ( 127,835 )

Share-based compensation expense — — — — 66,566 — — 66,566

Contingent forward purchase contract — — — — ( 41,938 ) — — ( 41,938 )

Transactions related to employee share-based compensation plans and other 7,924 — 79 — ( 290 ) ( 1,817 ) — ( 2,028 )

8 unchanged sentences

Net income (loss) $ 172,618 $ ( 340,820 ) $ ( 632,193 )

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

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and intangible asset amortization 1,693,575 1,914,779 1,913,767

5 unchanged sentences

Loss on extinguishment of debt — 37,113 119,663

Intangible and other asset impairments 19,161 — —

Goodwill impairment — — 45,482

Loss on sale of business — 738 61,951

Goodwill, intangible, and other asset impairments 154,543 19,161 —

Unrealized (gain) loss on interest rate swap contracts ( 301,851 ) ( 157,505 ) 60,363

Change in fair value of other financial instruments 63,396 — —

Other non-cash items, net 124,460 149,024 145,272

6 unchanged sentences

Deferred subscriber acquisition revenue 329,214 276,841 179,874

Long-term retail installment contracts 142,811 64,516 ( 7,479 )

Other, net ( 27,289 ) 85,541 33,476

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Proceeds from receivables facility 276,826 253,546 82,517

Proceeds from opportunity fund 100,802 — —

Repurchases of common stock ( 1,200,000 ) — ( 4 )

Repayment of long-term borrowings, including call premiums ( 605,059 ) ( 1,219,070 ) ( 3,026,842 )

1 unchanged sentence

Dividends on common stock ( 127,125 ) ( 116,348 ) ( 109,328 )

Repurchases of common stock — ( 4 ) ( 149,868 )

Deferred financing costs ( 14,316 ) ( 29,496 ) ( 54,382 )

Payments on finance leases ( 44,978 ) ( 32,123 ) ( 27,956 )

Payments on interest rate swaps ( 18,841 ) ( 56,119 ) ( 38,325 )

Other financing, net ( 5,432 ) ( 23,718 ) ( 31,392 )

Net cash provided by (used in) financing activities ( 14,833 ) ( 128,448 ) ( 70,261 )

Effect of currency translation on cash — — 838

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

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DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Business

Business and Organization

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

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

Since the acquisition of ADT Solar (the “ADT Solar Acquisition”) in December 2021, the Company also provides residential solar and energy storage solutions.

The Company primarily conducts business under the ADT brand name.

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

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In May 2016, the Company acquired The ADT Security Corporation (formerly named The ADT Corporation) (“The ADT Corporation”) (the “ADT Acquisition”).

The Company primarily conducts business under the ADT brand name.

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

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

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

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(together with its subsidiaries and affiliates, “Apollo” or the “Sponsor”).

Basis of Presentation and Significant Accounting Policies

The preparation of the consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (“GAAP”) requires the Company to select accounting policies and make estimates that affect amounts reported in the consolidated financial statements and the accompanying notes.

In January 2018, the Company completed an initial public offering (“IPO”) and its common stock, par value of $ 0.01 per share (“Common Stock”), began trading on the New York Stock Exchange under the symbol “ADT.”

Basis of Presentation

The consolidated financial statements have been prepared in U.S.

dollars in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

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

The financial statements included herein comprise the consolidated results of ADT Inc.

and its wholly-owned subsidiaries.

The results of companies acquired are included from the effective date of each acquisition;

and all intercompany transactions have been eliminated.

The Company uses the equity method of accounting to account for an investment in which it has the ability to exercise significant influence but does not control.

Use of Estimates

The preparation of the consolidated financial statements in accordance with GAAP requires the Company to select accounting policies and make estimates that affect amounts reported in the consolidated financial statements and the accompanying notes.

The Company’s estimates are based on the relevant information available at the end of each period.

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

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

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

COVID-19 Pandemic

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

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

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

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

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

Basis of Presentation and Consolidation

The consolidated financial statements include the accounts of ADT Inc.

and its wholly-owned subsidiaries, and have been prepared in U.S.

dollars in accordance with GAAP.

All intercompany transactions have been eliminated.

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

Segment Changes

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

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

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

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

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

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

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

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

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

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

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

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

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

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

and (iii) dedicated corporate and other costs.

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

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

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

and (iii) dedicated corporate and other costs.

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

The Company considered the on-going and pervasive economic impact of the coronavirus pandemic (the “COVID-19 Pandemic”) in the assessment of its financial position, results of operations, and cash flows, as well as certain accounting estimates, for the periods presented.

The impact of the COVID-19 Pandemic was not material during the periods presented.

However, the evolving and uncertain nature of the COVID-19 Pandemic, and its economic impact, as well as the evolving nature of the regulatory environment, could materially impact the Company’s estimates and financial results in future reporting periods.

The Company has three operating and reportable segments organized based on customer type:

Consumer and Small Business (“CSB”), Commercial, and Solar.

The Company’s segments are based on the manner in which the Company’s Chief Executive Officer, who is the chief operating decision maker (the “CODM”), evaluates performance and makes decisions about how to allocate resources.

• CSB - The CSB segment primarily includes the sale, installation, servicing, and monitoring of integrated security and automation systems and other related offerings to owners and renters of residential properties, small business operators, and other individual consumers, as well as general corporate costs and other income and expense items not included in another segment.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• Commercial - The Commercial segment primarily includes the sale, installation, servicing, and monitoring of integrated security and automation systems, fire detection and suppression systems, and other related offerings to larger businesses and/or multi-site operations, which often require more sophisticated integrated solutions, as well as certain dedicated corporate and other costs.

• Solar - The Solar segment primarily includes the sale and installation of solar systems and related solutions and services to residential homeowners who purchase solar and energy storage solutions, energy efficiency upgrades, and roofing services, as well as certain dedicated corporate and other costs.

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

Foreign Currency Translation and Transaction Gains and Losses

The Company’s reporting currency is the U.S.

As such, the financial statements of a foreign subsidiary are translated into U.S.

dollars using the foreign exchange rates applicable to the dates of the financial statements.

Assets and liabilities are translated using the end-of-period spot foreign exchange rate.

Revenue, expenses, and cash flows are translated at the average foreign exchange rate for each period.

Equity accounts are translated at historical foreign exchange rates.

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

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

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

Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Reference Rate Reform - Financial Accounting Standards Board Accounting Standards Update (“ASU”) 2022-06 , Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848, defers the sunset date of ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , from December 31, 2022 to December 31, 2024.

These updates provide optional guidance for a limited period of time to ease the potential burden of accounting for reference rate reform.

This guidance was effective upon issuance and did not have a material impact on the consolidated financial statements as of December 31, 2022.

The Company will continue to evaluate this guidance.

Other Accounting Pronouncements

Vintage Disclosures for Financing Receivables - ASU 2022-02, Financial Instruments — Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures , requires reporting entities to disclose current-period gross write-offs by year of origination for financing receivables, among other requirements.

This disclosure-only guidance is effective in the first quarter of 2023, and the Company will apply the guidance prospectively.

Fair Value of Equity Investments - ASU 2022-03, Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, states that an entity should not consider the contractual sale restriction when measuring the equity security’s fair value and introduces new disclosure requirements related to such equity securities.

This guidance becomes effective January 1, 2024, and should be applied prospectively with any adjustments recognized in earnings and disclosed on the date of adoption.

Early adoption is permitted.

The Company is currently evaluating this guidance.

Supplier Finance Program Obligations - ASU 2022-04, Liabilities — Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations, requires that a reporting entity who is a buyer in a supplier finance program disclose qualitative and quantitative information about its supplier finance programs, including a roll-forward of the obligations.

This guidance is effective in the first quarter of 2023, and should be applied retrospectively, except for the amendment on roll-forward information, which becomes effective January 1, 2024 (early adoption is permitted), and should be applied prospectively.

The Company is currently evaluating the impact of this guidance on its disclosures.

Significant Accounting Policies

Information on select accounting policies and methods not discussed below are included in the respective footnotes that follow.

Cash and Cash Equivalents and Restricted Cash and Restricted Cash Equivalents

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

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

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

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

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table reconciles the amounts below reported in the Consolidated Balance Sheets to the total of the same such amounts shown in the Consolidated Statements of Cash Flows:

Years Ended December 31,

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Ending balance $ 373,580 $ 33,277 $ 207,747

Included in restricted cash and restricted cash equivalents are funds received from State Farm Fire & Casualty Company (“State Farm”) of $ 101 million (the “Opportunity Fund”), including accrued interest, in connection with the State Farm Strategic Investment (as defined and discussed in Note 10 “Equity”).

Amounts within the Opportunity Fund are restricted for certain qualifying spend in accordance with the development agreement between State Farm and the Company (the “State Farm Development Agreement”).

Use of the funds must be agreed to by State Farm and the Company, and as of December 31, 2022, the Company has not used any funds.

Supplementary Cash Flow Information

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

The following table summarizes supplementary cash flow information and material non-cash investing and financing transactions, excluding leases (refer to Note 14 “Leases”):

Years Ended December 31,

(in thousands) 2022 2021 2020

Interest paid, net of interest income $ 456,509 $ 510,185 $ 545,206

Interest paid, net of interest income received (1)

$ 452,105 $ 456,509 $ 510,185

Payments (refunds) on income taxes, net $ 22,654 $ 1,877 $ 25,802

Issuance of shares in lieu of cash dividends $ 4 $ 15 $ 67,767

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

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

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

Issuance of shares for acquisition of businesses (2)

$ 55,485 $ 528,503 $ 113,841

Contingent forward purchase contract (3)

$ 41,938 $ — $ —

___________________

(1) Excludes interest on interest rate swaps presented within financing activities.

Refer to Note 8 “Derivative Financial Instruments.”

(2) During 2022, includes $ 40 million related to the Delayed Shares (as defined in Note 4 “Acquisitions and Disposition”) as a result of the ADT Solar Acquisition.

During 2021 and 2020, relates to the ADT Solar Acquisition and the Defenders Acquisition, respectively (both as defined and discussed in Note 4 “Acquisitions and Disposition”).

(3) During 2022, the Company recorded a reduction to additional paid in capital as a result of the contingent forward purchase contract in connection with the Tender Offer (as defined and discussed in Note 10 “Equity”).

Prepaid Expenses and Other Current Assets

(in thousands) 2022 2021

Prepaid expenses $ 28,648 $ 30,373

Contract assets (see Note 2 "Revenue and Receivables") 33,632 58,452

Fair value of interest rate swaps (see Note 8 "Derivative Financial Instruments") 78,110 —

Other receivables (1)

122,476 23,211

Other current assets 77,982 57,209

Prepaid expenses and other current assets $ 340,848 $ 169,245

___________________

(1) As of December 31, 2022, the Company recorded a liability of approximately $ 88 million, which is reflected in accrued expenses and other current liabilities and which relates to certain loans provided to customers within the Solar business that the Company may be required to repurchase from the third party lenders.

Included in other receivables is the amount that the Company expects to recover if permission to operate is achieved in the event the third party lenders do require the Company to repurchase such loans.

Inventories, net

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Inventories are presented net of an obsolescence reserve.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Work-in-Progress

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Property and Equipment, net

Property and equipment, net, is recorded at historical cost less accumulated depreciation, which is calculated using the straight-line method over the estimated useful lives of the related assets as follows:

Property and equipment, net, is recorded at historical cost less accumulated depreciation, which is calculated using the straight-line method over the estimated useful lives of the related assets.

Depreciation expense is reflected in depreciation and intangible asset amortization.

Repairs and maintenance expenditures are expensed when incurred.

Useful Lives:

Buildings and related improvements Up to 40 years

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Machinery, equipment, and other Up to 10 years

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

Net Carrying Amount:

(in thousands) 2022 2021

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Property and equipment, net $ 375,968 $ 364,108

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

Depreciation Expense:

Years Ended December 31,

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Depreciation expense $ 206,709 $ 197,202 $ 187,386

Repairs and maintenance expenditures are expensed when incurred.

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

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

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

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

Upon customer termination, the Company may retrieve such assets.

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

Subscriber system assets represent capitalized equipment and installation costs incurred in connection with transactions in which the Company retains ownership of the security system and are reflected in the Consolidated Balance Sheets as follows:

(in thousands) 2022 2021

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Subscriber system assets, net $ 3,061,303 $ 2,867,528

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

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

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Upon customer termination, the Company may retrieve such assets.

Subscriber system assets and any related deferred subscriber acquisition costs are accounted for on a pooled basis based on the month and year of customer acquisition and are depreciated and amortized using an accelerated method over the estimated life of the customer relationship, which is 15 years.

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

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

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

Years Ended December 31,

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Amortization of deferred subscriber acquisition costs $ 162,981 $ 126,089 $ 96,823

Long-Lived Asset Impairments

Long-Lived Assets (excluding Goodwill and Other Indefinite-Lived Intangible Assets)

The Company reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable.

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The calculation of the fair value less costs to sell of an asset group is based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates, reflecting varying degrees of perceived risk.

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

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

There were no material long-lived asset impairments during the periods presented.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following as of the periods presented:

(in thousands) 2022 2021

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Payroll-related accruals 208,111 196,165

Operating lease liabilities 37,359 30,689

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

Operating lease liabilities (see Note 14 "Leases") 28,696 37,359

Fair value of interest rate swaps (see Note 8 "Derivative Financial Instruments") — 50,360

Opportunity Fund (see Note 10 "Equity") 100,802 —

Other accrued liabilities 405,676 328,782

Accrued expenses and other current liabilities $ 899,780 $ 737,245

Advertising costs are expensed when incurred and are included in selling, general, and administrative expenses in the Consolidated Statements of Operations and were $ 239 million, $ 264 million, and $ 160 million during 2021, 2020, and 2019, respectively.

Radio Conversion Costs

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

Advertising Costs

Advertising costs are expensed when incurred.

Advertising costs included in selling, general, and administrative expenses were $ 219 million, $ 239 million, and $ 264 million during 2022, 2021, and 2020, respectively.

Radio Conversion Program

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

From inception of this program through December 31, 2022, the Company incurred $ 292 million of net radio conversion costs.

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

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Years Ended December 31,

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

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

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

There is a concentration of credit risk related to certain account balances in excess of the Federal Deposit Insurance Corporation insurance limit of $250,000 per account.

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

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

Concentration of credit risk associated with the majority of the Company’s receivables from customers is limited due to the significant size of the customer base.

Fair Value of Financial Instruments

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Due to their short-term and/or liquid nature, the fair values of cash, restricted cash, accounts receivable, and accounts payable approximate their respective carrying amounts.

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

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

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

Retail Installment Contract Receivables, net - The fair value of the Company’s retail installment contract receivables was determined using a discounted cash flow model.

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

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

Cash Equivalents - Included in cash and cash equivalents and restricted cash and restricted cash equivalents, as applicable from time to time, are investments in money market mutual funds.

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

Investments in money market mutual funds were $ 145 million as of December 31, 2022, and were not material as of December 31, 2021.

Retail Installment Contract Receivables, net - The fair values of the Company’s retail installment contract receivables are determined using a discounted cash flow model and are classified as Level 3 fair value measurements.

(in thousands) Carrying

1 unchanged sentence

Retail installment contract receivables, net $ 531,516 $ 385,114 $ 330,605 $ 255,147

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

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

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

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long-Term Debt Instruments - The fair values of the Company’s debt instruments are determined using broker-quoted market prices, which represent quoted prices for similar assets or liabilities as well as other observable market data, and are classified as Level 2 fair value measurements.

The carrying amounts of debt outstanding, if any, under the Company’s first lien revolving credit facility (the “First Lien Revolving Credit Facility”) and its uncommitted receivables securitization financing agreement (the “Receivables Facility”) approximate their fair values, as interest rates on these borrowings approximate current market rates.

(in thousands) Carrying

Value Carrying

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

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

Long-term debt instruments, excluding finance lease obligations, subject to fair value disclosures $ 9,733,700 $ 9,312,932 $ 9,599,610 $ 10,043,877

Derivative Financial Instruments - Derivative financial instruments are reported at fair value as either assets or liabilities.

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

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

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

The Company’s guarantees primarily relate to standby letters of credit related to its insurance programs and totaled $ 76 million and $ 83 million as of December 31, 2021 and 2020, respectively.

The Company does not believe such obligations will materially affect its financial position, results of operations, or cash flows.

Recently Adopted Accounting Pronouncements

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

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

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

The impact from adoption was not material.

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

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

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

However, the Company will continue to evaluate this guidance.

ASU 2021-08, Business Combinations:

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

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

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

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

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

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

Other Subsequent Events

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

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

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

Refer to Note 8 “Derivative Financial Instruments” for the fair values of the Company’s derivative financial instruments.

REVENUE AND RECEIVABLES

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

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

The Company generates revenue through contractual monthly recurring fees received for monitoring and related services provided to customers, as well as the sale and installation of security, fire, and solar systems (referred to as “systems”).

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

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

When customers terminate a monitoring contract early, contract termination charges are assessed in accordance with the contract terms and are recognized in monitoring and related services revenue when collectability is probable.

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

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

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

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

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

The following table presents the Company’s disaggregated revenue:

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Disaggregated Revenue

Years Ended December 31,

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Monitoring and related services $ 4,050,019 $ 3,873,285 $ 3,760,614

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

Security installation, product, and other 328,786 272,743 564,575

Total CSB 4,378,805 4,146,028 4,325,189

Monitoring and related services 539,246 474,428 426,373

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

Security installation, product, and other 690,833 639,304 563,225

Total Commercial 1,230,079 1,113,732 989,598

Installation and other 47,351 — —

Solar installation, product, and other 786,426 47,351 —

Total Solar 786,426 47,351 —

Total revenue $ 6,395,310 $ 5,307,111 $ 5,314,787

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

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

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

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

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

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

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

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

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

Company-Owned

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

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

The portion of the transaction price associated with the material right is deferred upon initiation of a monitoring contract (referred to as deferred subscriber acquisition revenue).

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

Years Ended December 31,

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Amortization of deferred subscriber acquisition revenue $ 244,141 $ 172,061 $ 124,804

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

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

Customer-Owned

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

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

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

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

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

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

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

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

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Solar - The Company’s performance obligations generally include the sale and installation of a solar system.

Transactions within the Solar business may also include additional performance obligations such as roofing services or the sale and installation of additional products (such as batteries).

Revenue is recognized when control over the products and services are transferred to the customer and is reflected in solar installation, product, and other revenue.

Revenue and cost of revenue from Solar equipment was approximately $ 451 million and $ 292 million, respectively, during 2022, and were not material during 2021 subsequent to the date of the ADT Solar Acquisition.

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

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

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

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

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

Product Sales

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

Years Ended December 31,

( in thousands )

2021 2020 2019

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

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

These lenders remit the amount of such loans, net of fees, upon installation or based on other contractual terms with the third-party lenders.

These fees are recorded as a reduction of solar installation, product, and other revenue and were approximately $ 141 million during 2022.

These fees were not material during 2021 subsequent to the date of the ADT Solar Acquisition.

During 2022, the Company incurred charges of approximately $ 21 million associated with (i) receivables and rebates that are not expected to be collected from a former third party lender that provided loan products to the Company’s Solar customers due to this third party lender entering a formal insolvency proceeding to effectuate the wind-down of its operations, as well as (ii) third-party loans for systems not expected to achieve permission to operate.

Deferred Revenue

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

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

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

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

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

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

Revenue Model Initiative and Equipment Ownership Model Change

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

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

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

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

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

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

Receivables and Contract Assets

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

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

Accounts Receivable

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

The Company’s accounts receivable are recorded at amortized cost less an allowance for credit losses not expected to be recovered.

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

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

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

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

Changes in the Allowance for Credit Losses:

Years Ended December 31,

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________________

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

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

The impact of adoption was not material.

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

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

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

Retail Installment Contract Receivables, net

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

(2) The provisions for credit losses during 2021 and 2020 were impacted by adjustments related to the COVID-19 Pandemic.

(3) Recoveries were not material for the periods presented.

As such, write-offs are presented net of recoveries.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Retail Installment Contract Receivables

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

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

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

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

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

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

As of December 31, 2022, the current and delinquent billed retail installment contract receivables were not material.

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

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

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

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

The balance of unbilled retail installment contract receivables comprises:

(in thousands) 2022 2021

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Retail installment contract receivables, net $ 531,516 $ 330,605

Classification:

Balance Sheet Classification:

Accounts receivable, net $ 169,242 $ 100,385

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As of December 31, 2022 and 2021, retail installment contract receivables, net, used as collateral for borrowings under the Receivables Facility were $ 506 million and $ 299 million, respectively.

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

Contract Assets, net

Contract Assets

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

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

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

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

The financing component of contract assets is not significant.

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

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

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

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

The Company recognized approximately $ 17 million, $ 26 million, and $ 183 million of gross contract assets during 2022, 2021, and 2020, respectively.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The balance of contract assets for residential transactions comprises:

(in thousands) 2022 2021

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Contract assets, net $ 48,852 $ 94,510

Classification:

Balance Sheet Classification:

Prepaid expenses and other current assets $ 33,632 $ 58,452

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Contract assets, net $ 48,852 $ 94,510

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

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

SEGMENT INFORMATION

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

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

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

As discussed in Note 1 “Description of Business and Summary of Significant Accounting Policies,” the Company reports results in three operating and reportable segments.

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

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

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

Customers in the CSB segment are comprised of owners and renters of residential properties, small business operators, and other individual consumers.

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

and (iii) certain dedicated corporate costs and other income and expense items.

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

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

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

and (iii) certain dedicated corporate costs and other income and expense items.

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

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

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

(iii) depreciation and amortization, including depreciation of subscriber system assets and other fixed assets and amortization of dealer and other intangible assets;

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(viii) radio conversion costs, net;

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

and (ix) other income/gain or expense/loss items such as changes in fair value of certain financial instruments, impairment charges, financing and consent fees, or acquisition-related adjustments.

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

therefore, such information is not presented.

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Reconciliations

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

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Total Revenue $ 6,395,310 $ 5,307,111 $ 5,314,787

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

The following table presents Adjusted EBITDA by segment and a reconciliation to consolidated income (loss) before income taxes and equity in net earnings (losses) of equity method investee:

Years Ended December 31,

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Total $ 2,446,728 $ 2,212,579 $ 2,199,237

Reconciliation to consolidated net income (loss) before taxes:

Reconciliation:

Total segment Adjusted EBITDA $ 2,446,728 $ 2,212,579 $ 2,199,237

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Merger, restructuring, integration, and other (1)

22,232 37,872 120,208

Goodwill impairment (2)

Loss on sale of business — 738 61,951

Loss on extinguishment of debt (3)

Radio conversion costs, net (1)

— 37,113 119,663

Financing and consent fees (2)

Change in fair value of financial instruments (4)

Radio conversion costs, net (5)

3,353 211,363 51,889

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35,229 12,945 438

Equity in net earnings (losses) of equity method investee ( 4,601 ) — —

( 3,935 ) ( 3,236 ) ( 4,030 )

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

Income (loss) before income taxes and equity in net earnings (losses) of equity method investee $ 237,403 $ ( 471,189 ) $ ( 778,919 )

___________________

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

(2) Represents fees expensed associated with financing transactions.

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

During 2021, primarily related to the Sunpro Solar Acquisition.

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

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

(1) Refer to Note 4 “Acquisitions and Disposition.”

(2) Represents a goodwill impairment charge associated with the Company’s Solar reporting unit (as discussed in Note 6 “Goodwill and Other Intangible Assets”).

(3) Refer to Note 7 “Debt.”

(4) Represents the change in fair value of the Forward Contract (as defined and discussed in Note 10 “Equity”).

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

(6) During 2022 and 2021, primarily represents the amortization of the customer backlog intangible asset acquired in the ADT Solar Acquisition, which was fully amortized as of March 2022.

Refer to Note 4 “Acquisitions and Disposition.”

(7) During 2022, primarily represents the gain on sale of a business.

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

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

Entity-Wide Disclosure

Revenue by geographic area for the periods presented was follows:

Years Ended December 31,

(in thousands) 2021 2020 2019

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

Canada — — 189,536

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Entity-Wide Disclosures

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

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

Revenue outside of the U.S.

is not material.

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

as of December 31, 2021 and 2020.

As of December 31, 2022 and 2021, substantially all of the Company’s assets were located in the U.S.

ACQUISITIONS AND DISPOSITION

From time to time, the Company may pursue business acquisitions that either strategically fit with the Company’s existing core business or expand the Company’s products and services in new and attractive adjacent markets.

The Company accounts for business acquisitions under the acquisition method of accounting.

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The fair value estimates are based on available information as of the acquisition date and on future expectations and assumptions deemed reasonable by management, but are inherently uncertain.

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

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

Sunpro Solar Acquisition

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

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

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

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

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

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

Acquisition-related expenses are recognized as incurred and are included in merger, restructuring, integration, and other and were not material during 2022, 2021, and 2020.

ADT Solar Acquisition

In December 2021, the Company acquired ADT Solar.

The acquisition expanded the Company’s offerings by entering the residential solar market.

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

Total consideration was approximately $ 750 million, which consisted of cash paid of $ 142 million, net of cash acquired, and approximately 75.0 million unregistered shares of the Company’s Common Stock, par value of $ 0.01 per share, with a fair value of $ 569 million (the “Equity Consideration”), including $ 40 million related to approximately 5.3 million shares of the Company’s common stock that were issued during 2022 (“Delayed Shares”).

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

Fair Value of Assets Acquired and Liabilities Assumed (in thousands):

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Total consideration transferred $ 750,429

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

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

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

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

The purchase price allocation reflects fair value estimates based on management analysis, including work performed by third-party valuation specialists, as of the date of acquisition.

Other definite-lived intangible assets is primarily comprised of a customer backlog intangible asset, which was fully recognized during the first quarter of 2022 as a reduction of solar installation, product, and other revenue.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recorded goodwill to the Solar reporting unit, the majority of which is deductible for tax purposes.

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

Refer to Note 6 “Goodwill and Other Intangible Assets” for information on a goodwill impairment loss recognized in the Solar reporting unit during the third quarter of 2022.

Pro Forma Results

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

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

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

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

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

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

Years Ended December 31,

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

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

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

Defenders Acquisition

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

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

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

Accounts receivable 15,269

Inventories 17,950

Prepaid expenses and other current assets 17,807

Property and equipment 16,486

Goodwill 252,239

Contracts and related customer relationships 17,400

Other assets 18,520

Accounts payable ( 14,937 )

Deferred revenue ( 1,170 )

Accrued expenses and other current liabilities ( 29,223 )

Deferred tax liabilities ( 7,655 )

Other liabilities ( 15,760 )

Total consideration transferred $ 290,363

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

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

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

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In connection with the Defenders Acquisition, the Company recorded a loss in the amount of $ 81 million during the first quarter of 2020 from the settlement of a pre-existing relationship with Defenders related to customer accounts purchased from Defenders prior to the Defenders Acquisition.

The Company included the loss in merger, restructuring, integration, and other in the Consolidated Statements of Operations, and the associated cash payment is reflected as cash flows from operating activities in the Consolidated Statements of Cash Flows during 2020.

The Company included the loss in merger, restructuring, integration, and other, and the associated cash payment is reflected as cash flows from operating activities for the year ended December 31, 2020.

Other Acquisitions

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

During 2022, total consideration related to business acquisitions was approximately $ 31 million, including approximately $ 15 million in shares of the Company’s common stock (excluding the Delayed Shares), which resulted in the recognition of approximately $ 20 million of goodwill.

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

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

During 2019, total consideration related to business acquisitions was approximately $ 114 million, including $ 109 million of cash, net of cash acquired.

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

Disposition of Canadian Operations

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

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

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

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

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

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

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

Additionally, the Company received $ 496 million of proceeds, net of cash sold, of approximately $ 6 million, related to the sale of ADT Canada, which is reflected in cash flows from investing activities in the Consolidated Statement of Cash Flows.

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

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

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

This resulted in the recognition of $ 24 million of goodwill, $ 13 million of contracts and related customer relationships, and $ 43 million of other intangible assets related to developed technology, on which the Company recorded an impairment loss in the first quarter of 2021 as discussed in Note 6 “Goodwill and Other Intangible Assets.”

During 2022, proceeds related to disposal activities totaled approximately $ 27 million, resulting in a gain of approximately $ 10 million recognized in selling, general, and administrative expenses.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EQUITY METHOD INVESTMENTS

The Company uses the equity method of accounting to account for an investment in which it has the ability to exercise significant influence but does not control.

The carrying amount of the investment is reflected in other assets.

The Company recognizes its proportionate share of the investee’s net income or loss in equity in net earnings (losses) of equity method investee.

The Company evaluates an equity method investment whenever events or changes in circumstances indicate the carrying amount of such investment may be impaired.

If a decline in the value of an equity method investment is determined to be other than temporary, the Company records a loss as a component of the Company’s share of earnings or losses of the equity method investee in the current period.

Canopy Investment

In April 2022, the Company and Ford Motor Company (“Ford”) formed a new entity, SNTNL LLC (“Canopy”), which combines ADT’s professional security monitoring and Ford’s AI-driven video camera technology to help customers strengthen security of new and existing vehicles across automotive brands.

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

As part of the initial funding at closing, the Company contributed cash of approximately $ 11 million (the “Initial Contribution”).

As of December 31, 2022, Canopy did not have any common stock equivalents or dilutive securities that would, if converted, exercised, or issued, significantly change the Company’s proportionate share of Canopy’s net assets or net income or loss.

Variable Interest Entity (“VIE”)

Canopy meets the definition of a VIE because the Company holds a variable interest through its 40 % investment in Canopy’s preferred class of equity (the “Canopy Investment”) and fees received under the Canopy Commercial Agreements described below.

The Company is not the primary beneficiary, and therefore, does not consolidate Canopy’s assets, liabilities, and financial results of operations.

As a result, the Company accounts for its investment in Canopy under the equity method of accounting.

The Company records its proportionate share of Canopy’s net income or loss on a one-month delay.

As of December 31, 2022, the Canopy Investment’s carrying amount was approximately $ 7 million and is presented in other assets.

The balance reflects the Initial Contribution as well as the Company’s proportionate share of Canopy’s net loss during the period.

As of December 31, 2022, Canopy’s net assets primarily consisted of cash and construction in progress.

Canopy Commercial Agreements

In connection with the Canopy Investment, the Company entered into various commercial agreements (the “Canopy Commercial Agreements”) through which it will perform various services on behalf of Canopy, including supply chain support, product engineering support, and monitoring services for Canopy customers.

The Company and Canopy are also parties to a trade name licensing agreement.

The impact to the consolidated financial statements from the Canopy Commercial Agreements was not material for the periods presented.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

GOODWILL AND OTHER INTANGIBLE ASSETS

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

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

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

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

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

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

(in thousands) As Previously Reported CSB Commercial Solar Total

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

During the periods presented, changes in the carrying amount of goodwill by reportable segment were as follows:

(in thousands) CSB Commercial Solar Total

Balance as of January 1, 2021 (1)

$ 4,906,691 $ 329,611 $ — $ 5,236,302

Acquisitions (2)(3)

Other 304 — — — 304

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

Reallocation (1)

( 25 ) 12,400 694,726 707,101

Balance as of December 31, 2021 4,906,666 342,011 694,726 5,943,403

Acquisitions (3)

Other — ( 25 ) 1,980 — 1,955

12,585 6,309 17,424 36,318

Impairment — — ( 149,385 ) ( 149,385 )

Disposition — ( 11,731 ) — ( 11,731 )

Balance as of December 31, 2022 $ 4,919,251 $ 336,589 $ 562,765 $ 5,818,605

________________

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

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

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

(1) Reflects the allocated goodwill from the reporting unit change during the fourth quarter of 2020, in which the Company reassigned a portion of goodwill on a relative fair value basis related to the Company’s commercial customers from the CSB reporting unit (previously, the U.S.

reporting unit) to the Commercial reporting unit (previously, the Red Hawk reporting unit).

Beginning in the first quarter of 2021, the Company began reporting results for two operating and reportable segments, CSB and Commercial, which comprise the CSB and Commercial reporting units, respectively.

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

(3) Includes the impact of measurement period adjustments, which were not material during the periods presented.

As of December 31, 2022, accumulated goodwill impairment losses totaled $ 149 million.

As of December 31, 2021 and 2020, the Company had no accumulated goodwill impairment losses.

Other Intangible Assets

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

December 31, 2022 December 31, 2021

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Contracts and related customer relationships (1)

$ 7,021,305 $ ( 4,262,383 ) $ 2,758,922 $ 8,719,363 $ ( 5,753,345 ) $ 2,966,018

Dealer relationships (2)

Other 263,133 ( 207,572 ) 55,561 247,536 ( 186,547 ) 60,989

1,518,020 ( 538,801 ) 979,219 1,518,020 ( 459,248 ) 1,058,772

224,783 ( 204,177 ) 20,606 263,133 ( 207,572 ) 55,561

Total definite-lived intangible assets 8,764,108 ( 5,005,361 ) 3,758,747 10,500,516 ( 6,420,165 ) 4,080,351

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Trade name (4)

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

Definite-Lived Intangible Assets

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

1,333,000 — 1,333,000 1,333,000 — 1,333,000

Intangible assets $ 10,097,108 $ ( 5,005,361 ) $ 5,091,747 $ 11,833,516 $ ( 6,420,165 ) $ 5,413,351

__________________

(1) During 2022, the Company retired $ 2.3 billion of certain customer relationship intangible assets acquired in the ADT Acquisition that became fully amortized.

(2) Originated from the Formation Transactions and the ADT Acquisition in 2015 and 2016, respectively.

Amortized primarily over 19 years on a straight-line basis based on management estimates about attrition and the longevity of the underlying dealer network that existed at the time of acquisition.

(3) Primarily relates to trade names and other technology assets.

Amortized over a period of up to 10 years on a straight-line basis.

(4) ADT trade name acquired as part of the ADT Acquisition .

Contracts and Related Customer Relationships

Contracts and related customer relationships comprise customer relationships that originated from business acquisitions as well as contracts with customers purchased under the ADT Authorized Dealer Program (as defined below) or from other third parties.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

Other definite-lived intangible assets are amortized over a period of up to 10 years on a straight-line basis.

The Company maintains a 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 (the “ADT Authorized Dealer Program”).

Additionally, the Company maintains a network of agreements with third-party independent alarm dealers who sell alarm equipment and ADT Authorized Dealer-branded monitoring and interactive services to residential end users (the “ADT Authorized Dealer Program”).

The dealers in this program generate new end-user contracts with customers which the Company has the right, but not the obligation, to purchase from the dealer.

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

Purchases of contracts with customers under the ADT Authorized Dealer Program, or from other third parties, are considered asset acquisitions and are recognized based on the cost to acquire the assets, which may include cash consideration, non-cash consideration, contingent consideration, and directly-attributable transaction costs.

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

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

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

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

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

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

The Company paid cash at closings of $ 132 million.

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

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

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

The change in the net carrying amount of contracts and related customer relationships was as follows:

Years Ended December 31,

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Amortization ( 841,899 ) ( 1,109,787 )

Other adjustments — 200

Other ( 1,639 ) —

Ending balance $ 2,758,922 $ 2,966,018

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

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

During each of 2022 and 2021, the weighted-average amortization period for customer contract additions under the ADT Authorized Dealer Program and from other third parties was 14 years.

During 2022, 2021, and 2020, the Company paid $ 622 million, $ 675 million, and $ 381 million, respectively, for customer contracts under the ADT Authorized Dealer Program and from other third parties, which is included in dealer generated customer accounts and bulk account purchases.

During 2022 and 2021, customer contract additions include customer accounts purchased from certain other third parties for an aggregate contractual purchase price of $ 111 million and $ 163 million, respectively, subject to reduction based on customer retention.

The Company paid initial cash at the closings in the aggregate amounts of $ 82 million and $ 132 million, respectively, which is included in the payments for dealer generated customer accounts and bulk account purchases discussed above.

Definite-Lived Intangible Asset Amortization Expense

Years Ended December 31,

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Definite-lived intangible asset amortization expense $ 934,700 $ 1,209,966 $ 1,222,398

As of December 31, 2021, the estimated aggregate amortization expense over the next five years is expected to be as follows:

(in thousands) 2022 2023 2024 2025 2026

Estimated definite-lived intangible asset amortization expense $ 903,235 $ 489,587 $ 393,938 $ 347,482 $ 309,846

Indefinite-Lived Intangible Assets

The Company’s indefinite-lived intangible assets as of December 31, 2021 and 2020 are solely comprised of $ 1.3 billion related to the ADT trade name acquired as part of the ADT Acquisition.

As of December 31, 2022, the estimated aggregate amortization expense on our existing intangible assets is expected to be as follows ( in thousands) :

2023 2024 2025 2026 2027 Thereafter

$ 597,695 $ 484,023 $ 422,112 $ 372,228 $ 337,209 $ 1,545,480

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill and Indefinite-Lived Intangible Assets Impairment

Goodwill and indefinite-lived intangible assets are not amortized and are tested for impairment at least annually as of the first day of the fourth quarter of each year and more often if an event occurs or circumstances change which indicate it is more-likely-than-not that fair value is less than carrying amount.

The Company may perform its impairment test for any reporting unit or indefinite-lived intangible asset through a qualitative assessment or elect to proceed directly to a quantitative impairment test, however, the Company may resume a qualitative assessment in any subsequent period.

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

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

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

The estimated fair value of a reporting unit calculated using the income approach is sensitive to changes in the underlying assumptions.

In developing these assumptions, the Company relies on various factors including operating results, business plans, economic projections, anticipated future cash flows, and other market data.

Examples of events or circumstances that could reasonably be expected to negatively affect the underlying judgments and factors and ultimately impact the estimated fair value determinations may include such items as a prolonged downturn in the business environment, changes in economic conditions that significantly differ from management assumptions in timing or degree, volatility in equity and debt markets resulting in higher discount rates, and unexpected regulatory changes.

As a result, there are inherent uncertainties related to these judgments and factors in applying them to the goodwill impairment tests.

On October 1, 2021, the Company completed its annual goodwill impairment tests by qualitatively testing the goodwill associated with the CSB reporting unit and quantitatively testing the goodwill associated with the Commercial reporting unit.

Based on the results of the qualitative testing for the CSB reporting unit, the Company concluded it is more likely than not that the fair value of the CSB reporting unit exceeds its carrying value.

Based on the results of the quantitative testing for the Commercial reporting unit, the Company concluded the fair value of the Commercial reporting unit exceeds its carrying value by approximately 20 %.

The Commercial reporting unit continues to deal with the impact of the COVID-19 pandemic, and should certain pandemic-related issues continue, the reporting unit fair value could be adversely impacted and may decline below its carrying value.

The Company did not record any impairment losses associated with its reporting units.

Additionally, the Company did not test the goodwill associated with the Solar reporting unit due to the recency of the Sunpro Solar Acquisition.

During 2020, the Company did not record any goodwill impairment losses associated with its reporting units.

During 2019, the Company recorded a goodwill impairment loss of $ 45 million related to the Canada reporting unit in connection with the sale of ADT Canada.

Examples of events or circumstances that could reasonably be expected to negatively affect the underlying judgments and factors and ultimately impact the estimated fair value determinations may include such items as a prolonged downturn in the business environment, changes in economic conditions that significantly differ from the Company’s assumptions in timing or degree, volatility in equity and debt markets resulting in higher discount rates, and unexpected regulatory changes.

As a result, there are inherent uncertainties related to these judgments and factors that may ultimately impact the estimated fair value determinations.

Except as discussed below within the Solar reporting unit, the Company did not record any goodwill impairment losses during the periods presented.

CSB - Based on the results of a qualitative goodwill impairment test as of October 1, 2022, the Company concluded it is more likely than not that the fair value of the CSB reporting unit exceeds its carrying value.

Commercial - Based on the results of a quantitative goodwill impairment test as of October 1, 2022, the Company concluded the fair value of the Commercial reporting unit exceeds its carrying value by approximately 50 %.

The reporting unit performed above expectations in 2022, thus driving an increase in projected future period growth.

Solar Goodwill Impairment

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 current macroeconomic conditions, including the impact of increasing interest rates, the Company performed an interim quantitative impairment assessment and recorded a goodwill impairment loss of $ 149 million.

Additionally, on October 1, 2022, the Company quantitatively tested the goodwill associated with the Solar reporting unit as part of its annual goodwill impairment test.

Based on the results of the quantitative test, and as the carrying value of the Solar reporting unit approximates its fair value following the impairment charge in the third quarter of 2022, the Solar reporting unit is considered at risk of future impairment.

If the Company’s assumptions are not realized, or if there are future changes in any of the assumptions due to a change in economic conditions or otherwise, it is possible that a further impairment charge may need to be recorded in the future.

Indefinite-Lived Intangible Assets

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If the Company elects to bypass the qualitative assessment for any indefinite-lived intangible asset, or if a qualitative assessment indicates it is more-likely-than-not that the estimated carrying amount of such asset exceeds its fair value, the Company proceeds to a quantitative approach.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

4 unchanged sentences

The utilization of the relief from royalty method requires the Company to make significant assumptions including revenue growth rates, the implied royalty rate, and the discount rate.

As of October 1, 2021 and 2020, the Company quantitatively tested the ADT trade name for impairment.

Based on the results of the tests, the Company did not record any impairment losses associated with the ADT trade name, and the estimated fair value of the trade name significantly exceeded its carrying amount.

Intangible Asset Impairments

During the first quarter of 2021, the Company recognized $ 18 million in impairment losses on its other definite-lived intangible assets primarily due to lower than expected benefits from the Cell Bounce developed technology intangible asset, which is included in the CSB segment, as a result of the worldwide shortages for certain electronic components.

The fair value was determined using an income-based approach, and the loss is reflected in merger, restructuring, integration, and other in the Consolidated Statements of Operations.

During 2020 and 2019, the Company did not record any impairment losses on its other definite-lived intangible assets.

As of December 31, 2021 and 2020, the Company’s debt was comprised of the following (in thousands, except as otherwise indicated):

As of October 1, 2022, the Company quantitatively tested the ADT trade name for impairment.

Based on the results of the October 1, 2022 test, the Company did not record any impairment losses associated with the ADT trade name, and the estimated fair value of the trade name significantly exceeded its carrying amount.

During 2021 and 2020, the Company did not record any impairment losses on its indefinite lived intangible assets.

Definite-Lived Intangible Asset Impairment

The fair value was determined using an income-based approach, and the loss is reflected in merger, restructuring, integration, and other.

The Company’s debt is comprised of the following (in thousands) :

Interest Payable Balance as of December 31,

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First Lien Term Loan due 2026 9/23/2019 9/23/2026 Adj.

LIBOR + 2.75% Quarterly $ 2,758,058 $ 2,778,900

First Lien Revolving Credit Facility (1)

3/16/2018 6/23/2026 Adj.

LIBOR + 2.75% Quarterly 25,000 —

LIBOR + 2.75 %

Quarterly $ 2,730,269 $ 2,758,058

First Lien Revolving Credit Facility 3/16/2018 6/23/2026 Adj.

LIBOR + 2.75 %

Quarterly — 25,000

Second Lien Notes due 2028 1/28/2020 1/15/2028 6.250 % 1/15 and 7/15 1,300,000 1,300,000

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ADT Notes due 2042 7/5/2012 7/15/2042 4.875 % 1/15 and 7/15 21,896 21,896

Receivables Facility 3/5/2020 11/20/2026 LIBOR + 0.85% Monthly 199,056 75,775

Receivables Facility 3/5/2020 11/20/2027 Adj.

Daily SOFR + 0.85 %

Monthly 354,741 199,056

Other debt (2)

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Total debt 9,828,588 9,692,690

Current maturities of long-term debt ( 117,592 ) ( 44,764 )

Current maturities of long-term debt, net of unamortized debt discount ( 871,917 ) ( 117,592 )

Long-term debt $ 8,956,671 $ 9,575,098

__________________

(1) As of December 31, 2021 and 2020, the Company had $ 550 million and $ 400 million, respectively, in available borrowing capacity under the First Lien Revolving Credit Facility.

(2) Other debt includes vehicle loans acquired in the Sunpro Solar Acquisition.

(1) LIBOR refers to the London Interbank Offered Rate.

SOFR refers to the Secured Overnight Financing Rate.

(2) Other debt primarily consists of vehicle loans at various interest rates and maturities.

(3) Refer to Note 14 “Leases” for additional information regarding the Company’s finance leases.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Lien Credit Agreement

Concurrently with the consummation of the Formation Transactions, the Company entered into a first lien credit agreement dated as of July 1, 2015 (together with subsequent amendments and restatements, the “First Lien Credit Agreement”), which includes a term loan facility (the “First Lien Term Loan due 2026”) and a first lien revolving credit facility (the “First Lien Revolving Credit Facility”).

As a result of the January 2021 amendment to the First Lien Credit Agreement as discussed below, beginning in the second quarter of 2021, the Company is required to make scheduled quarterly principal payments equal to 0.25 % of the then-outstanding aggregate principal amount of the First Lien Term Loan due 2026, with the remaining balance payable at maturity.

The Company is required to make scheduled quarterly principal payments of approximately $ 7 million, with the remaining balance payable at maturity.

The Company may make voluntary prepayments on the First Lien Term Loan due 2026 at any time prior to maturity at par.

Additionally, the Company is required to make annual prepayments on the outstanding First Lien Term Loan due 2026 with a percentage of the Company’s excess cash flow, as defined in the First Lien Credit Agreement, if the excess cash flow exceeds a

certain specified threshold.

As of December 31, 2022, the Company was not required to make an annual prepayment based on the Company’s excess cash flow.

The First Lien Term Loan due 2026 has an interest rate calculated as, at the Company’s option, either (a) London Interbank Offered Rate (“LIBOR”) determined by reference to the costs of funds for Eurodollar deposits for the interest period relevant to such borrowing, adjusted for certain additional costs (“Adjusted LIBOR”) with a floor of 0.75 % or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50 % per annum, (ii) the prime rate published by The Wall Street Journal, and (iii) one-month adjusted LIBOR plus 1.00 % per annum (“Base Rate”), in each case, plus the applicable margin of 2.75 % for Adjusted LIBOR loans and 1.75 % fo r Base Rate loans and is payable on each interest payment date, at least quarterly, in arrears.

The First Lien Term Loan due 2026 has an interest rate calculated as, at the Company’s option, either (a) LIBOR determined by reference to the costs of funds for Eurodollar deposits for the interest period relevant to such borrowing, adjusted for certain additional costs (“Adjusted LIBOR”) with a floor of 0.75 % or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50 % per annum;

(ii) the prime rate published by The Wall Street Journal;

and (iii) one-month adjusted LIBOR plus 1.00 % per annum (“Base Rate”), in each case, plus the applicable margin of 2.75 % for Adjusted LIBOR loans and 1.75 % fo r Base Rate loans and is payable on each interest payment date, at least quarterly, in arrears.

The applicable margin for borrowings under the First Lien Revolving Credit Facility is 2.75 % for Adjusted LIBOR loans and 1.75 % for Base Rate loans, in each case, subject to adjustment pursuant to a leverage-based pricing grid.

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The Company’s obligations relating to the First Lien Credit Agreement are gu aranteed, jointly and severally, on a senior secured first-priority basis, by substantially all of the Company’s domestic subsidiaries and are secured by first-priority security interests in substantially all of the assets of the Company’s domestic subsidiaries, subject to certain permitted liens and exceptions.

Significant activity related to the First Lien Credit Agreement during the presented periods were as follows:

Amendment and Restatement dated as of March 15, 2019 (effective April 4, 2019)

In April 2019, and in connection with a $ 500 million repaymen t of the First Lien Term B-1 Loan , the Company amended and restated the First Lien Credit Agreement to, among other things, (a) authorize the redemption of the outstanding principal amount of Prime Notes (as defined below), (b) authorize the incurrence of the First Lien Notes due 2024 (as defined below) and First Lien Notes due 2026 (as defined below) by amending the Net First Lien Leverage Ratio for the incurrence of pari passu indebtedness to 3.20 to 1.00 (from 2.35 to 1.00 ), (c) provide for $ 300 million of additional incremental pari passu debt capacity, and (d) increase the borrowing capacity under the First Lien Revolving Credit Facility by an additional $ 50 million, which replaced the Mizuho Bank Revolving Credit Facility (as defined below).

The Company incurred approximately $ 17 million in deferred financing costs in connection with this amendment and restatement.

Amendment and Restatement dated as of September 23, 2019

In September 2019, and in connection with an approximately $ 300 million repay ment of the First Lien Term B-1 Loan , the Company amended and restated the First Lien Credit Agreement to refinance and replace the $ 3.4 billion aggregate principal amount of the First Lien Term B-1 Loan with $ 3.1 billion aggregate principal amount of the First Lien Term Loan due 2026, which was issued at a 1.00 % discount, and make other changes to, among other things, provide the Company with additional flexibility to incur additional indebtedness and fund future distributions to stockholders.

Significant activity related to the First Lien Credit Agreement during the periods presented was as follows:

• Amendment and Restatement dated as of September 23, 2019 - In September 2019, and in connection with an approximately $ 300 million repay ment of the First Lien Term B-1 Loan , the Company amended and restated the First Lien Credit Agreement to refinance and replace the $ 3.4 billion aggregate principal amount of the First Lien Term B-1 Loan with $ 3.1 billion aggregate principal amount of the First Lien Term Loan due 2026, which was issued at a 1.00 % discount, and make other changes to, among other things, provide the Company with additional flexibility to incur additional indebtedness and fund future distributions to stockholders.

Deferred financing costs in connection with this amendment and restatement were not material.

In December 2020, the Company made a $ 300 million prepayment on the First Lien Term Loan due 2026, which was applied to the remaining required quarterly principal payments at the time.

Amendment and Restatement dated as of January 27, 2021

In January 2021, the Company amended and restated the First Lien Credit Agreement to refinance the First Lien Term Loan due 2026, which reduced the applicable margin for Adjusted LIBOR loans from 3.25 % to 2.75 % and reduced the floor from 1.00 % to 0.75 %.

• Amendment and Restatement dated as of January 27, 2021 - In January 2021, the Company amended and restated the First Lien Credit Agreement to refinance the First Lien Term Loan due 2026, which reduced the applicable margin for Adjusted LIBOR loans from 3.25 % to 2.75 % and reduced the floor from 1.00 % to 0.75 %.

This amendment also reinstated the quarterly principal payments.

Amendment and Restatement dated as of July 29, 2021

In July 2021, the Company amended and restated the First Lien Credit Agreement with respect to the First Lien Revolving Credit Facility, which extended the maturity date to June 23, 2026, subject to certain conditions, and obtained an additional $ 175 million of commitments.

After giving effect to this amendment and restatement, aggregate commitments under the First Lien Revolving Credit Facility were $ 575 million.

Additionally, in December 2021, the Company borrowed $ 185 million and repaid $ 160 million under the First Lien Revolving Credit Facility in connection with the Sunpro Solar Acquisition.

• Amendment and Restatement dated as of July 2, 2021 - In July 2021, the Company amended and restated the First Lien Credit Agreement with respect to the First Lien Revolving Credit Facility, which extended the maturity date to June 23, 2026, subject to certain conditions, and obtained an additional $ 175 million of commitments.

During 2022, the Company borrowed $ 550 million and repaid $ 575 million under its First Lien Revolving Credit Facility.

In December 2021, the Company borrowed $ 185 million and repaid $ 160 million under the First Lien Revolving Credit Facility in connection with the ADT Solar Acquisition.

As of December 31, 2022, the Company had $ 575 million in available borrowing capacity under the First Lien Revolving Credit Facility.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Term Loan A Facility

In September 2022, Prime Security Services Borrower, LLC (“Prime Borrower”), a Delaware limited liability company and a wholly owned indirect subsidiary of the Company, as borrower, and The ADT Corporation, a Delaware corporation and a wholly owned direct subsidiary of Prime Borrower (together with Prime Borrower, the “Term Loan A Facility Borrowers”), entered into a debt commitment letter (the “TLA Commitment Letter”) with various lenders, pursuant to which the lenders have committed, at the option of the Term Loan A Facility Borrowers (in their sole discretion) and subject to the satisfaction or waiver of customary conditions, to provide the Term Loan A Facility Borrowers up to an aggregate principal amount of $ 600 million of term loans under a senior secured term loan A facility (the “Term Loan A Facility”) under a term loan credit agreement (the “Term Loan A Credit Agreement”) on or before March 15, 2023 (the “TLA Commitment Termination Date”).

On or before the TLA Commitment Termination Date, the Term Loan A Facility Borrowers may, but are not required to, execute the Term Loan A Credit Agreement and incur indebtedness under the Term Loan A Facility (the “Execution Date”).

Additionally, at the option of the Term Loan A Facility Borrowers, the commitments set forth in the TLA Commitment Letter may be terminated at any time prior to the TLA Commitment Termination Date.

The proceeds of any borrowings under the Term Loan A Facility are required to be used to redeem a portion of the 4.125 % senior notes due June 15, 2023 issued by The ADT Corporation (the “ADT Notes due 2023”).

The Term Loan A Facility will have a maturity date of five years from the Execution Date, subject to a springing maturity of 91 days prior to the maturity date of certain long-term indebtedness of Prime Borrower and its subsidiaries if, on such date, the aggregate principal amount of such indebtedness equals or exceeds $ 100 million.

The Term Loan A Facility will require scheduled quarterly principal payments in annual amounts equal to 5.00 % of the original principal amount of the Term Loan A Facility, with the balance payable at maturity.

The Term Loan A Facility Borrowers may make voluntary prepayments on the Term Loan A Facility at any time prior to maturity at par.

Borrowings under the Term Loan A Facility, if any, will bear interest at a rate equal to, at Prime Borrower’s option, either (a) a term SOFR rate plus an adjustment of 0.10 % (“Adjusted SOFR”) or (b) a base rate (“TLA Base Rate”) determined by reference to the highest of (i) the federal funds rate plus 0.50 % per annum;

(ii) the prime rate published by The Wall Street Journal;

and (iii) the one-month Adjusted SOFR plus 1.00 % per annum, in each case, plus an applicable margin of 2.50 % per annum for Adjusted SOFR loans and 1.50 % per annum for TLA Base Rate loans, subject to adjustments based on certain specified net first lien leverage ratios.

Indebtedness incurred under the Term Loan A Facility will be guaranteed, jointly and severally, on a senior secured first-priority basis, by substantially all of Prime Borrower’s wholly owned material domestic subsidiaries, and by Prime Borrower’s direct parent on a limited recourse basis, and will be secured by a pledge of Prime Borrower’s capital stock directly held by its direct parent and by first-priority security interests in substantially all of the assets of Prime Borrower and the subsidiary guarantors, in each case subject to certain permitted liens and exceptions.

The Term Loan A Facility will be subject to customary mandatory prepayment provisions, covenants and restrictions, including a financial maintenance covenant requiring the Term Loan A Facility Borrowers to comply as of the last day of each fiscal quarter with a specified maximum consolidated net first lien leverage ratio.

During 2022, fees associated with the TLA Commitment Letter were not material;

and as of December 31, 2022, the Company has not incurred indebtedness pursuant to the TLA Commitment Letter.

Second Lien Notes due 2028

1 unchanged sentence

The proceeds from the Second Lien Notes due 2028, along with cash on hand and borrowings under the First Lien Revolving Credit Facility, were used to redeem the outstanding $ 1.2 billion aggregate principal amount of Prime Notes (as defined below) and pay any related fees and expenses, including the call premium.

The Second Lien Notes due 2028 will mature on January 15, 2028 with semi-annual interest payment dates of January 15 and July 15, and may be redeemed at the Company’s option as follows:

• Prior to January 15, 2023, in whole at any time or in part from time to time, (a) at a redemption price equal to 100 % of the principal amount of the Second Lien Notes due 2028 redeemed, plus a make-whole premium and accrued and unpaid interest as of, but excluding, the redemption date or (b) for up to 40 % of the original aggregate principal amount of the Second Lien Notes due 2028 and in an aggregate amount equal to the net cash proceeds of any equity offerings, at a redemption price equal to 106.250 %, plus accrued and unpaid interest, so long as at least 50 % of the original aggregate principal amount of the Second Lien Notes due 2028 shall remain outstanding after each such redemption.

• On or after January 15, 2023, in whole at any time or in part from time to time, at a redemption price equal to 103.125 % of the principal amount of the Second Lien Notes due 2028 redeemed and accrued and unpaid interest as of, but excluding, the redemption date.

The Second Lien Notes due 2028 will mature on January 15, 2028 with semi-annual interest payment dates of January 15 and July 15.

As of January 15, 2023, the Second Lien Notes due 2028 may be redeemed at the Company’s option in whole at any time or in part from time to time, at a redemption price equal to 103.125 % of the principal amount of the Second Lien Notes due 2028 redeemed and accrued and unpaid interest as of, but excluding, the redemption date.

The redemption price decreases to 101.563 % on or after January 15, 2024 and decreases to 100 % on or after January 15, 2025.

The Company’s obligations relating to the Second Lien Notes due 2028 are guaranteed, jointly and severally, on a senior secured second-priority basis, by substantially all of the Company’s domestic subsidiaries and are secured by second-priority security interests in substantially all of the assets of the Company’s domestic subsidiaries, subject to certain permitted liens and exceptions.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Additionally, upon the occurrence of specified change of control events, the Company must offer to repurchase the Second Lien Notes due 2028 at 101 % of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

The Second Lien Notes due 2028 also provide for customary events of default.

In connection with the ADT Acquisition, the Company completed the offering of $ 3.1 billion aggregate principal amount of second-priority secured notes (the “Prime Notes”).

The Prime Notes were due at maturity, however, could be redeemed prior to maturity at the Company’s option, subject to certain call premiums.

In February 2018, the Company used approximately $ 649 million of the net proceeds from the IPO to voluntarily redeem $ 594 million aggregate principal amount of the Prime Notes and pay the related call premium.

In February 2019, the Company redeemed $ 300 million aggregate principal amount of the outstanding Prime Notes for a total redemption price of approximately $ 319 million, which included the related call premium.

In April 2019, the Company repurchased and cancelled an additional $ 1.0 billion aggregate principal amount of the outstanding Prime Notes for a total repurchase price of approximately $ 1.1 billion, which included the related call premium.

In January 2020, the indenture underlying the Prime Notes was discharged, and in February 2020, the outstanding $ 1.2 billion aggregate principal amount was redeemed for a total redemption price of approximately $ 1.3 billion, which included the related call premium.

First Lien Notes

First Lien Notes due 2024 and First Lien Notes due 2026

In April 2019, the Company issued $ 750 million aggregate principal amount of 5.250 % first-priority senior secured notes due 2024 (the “First Lien Notes due 2024”) and $ 750 million aggregate principal amount of 5.750 % first-priority senior secured notes due 2026 (the “First Lien Notes due 2026”).

The proceeds from the First Lien Notes due 2024 and the First Lien Notes due 2026, along with cash on hand and borrowings under the First Lien Revolving Credit Facility, were used to (a) repurchase $ 1.0 billion aggregate principal amount of the Prime Notes, (b) repay $ 500 million aggregate principal amount of the First Lien Term B-1 Loan, and (c) pay fees and expenses associated with the foregoing, including call premiums on the Prime Notes as well as accrued and unpaid interest on the repurchased Prime Notes and repaid borrowings under the First Lien Term B-1 Loan.

The Company incurred approximately $ 25 million in deferred financing costs in connection with the issuance of the First Lien Notes due 2024 and the First Lien Notes due 2026.

In September 2019, the Company issued an additional $ 600 million aggregate principal amount of the First Lien Notes due 2026 at a 2 % premium pursuant to and with the same terms as the underlying indenture of the First Lien Notes due 2026.

The proceeds from the additional First Lien Notes due 2026, along with cash on hand, were used to (a) repay approximately $ 300 million aggregate principal amount of the First Lien Term B-1 Loan, (b) repurchase or redeem the outstanding $ 300 million aggregate principal amount of the 5.250 % notes due 2020 issued by The ADT Corporation (the “ADT Notes due 2020”), and (c) pay fees and expenses associated with the foregoing, including call premiums on the ADT Notes due 2020 as well as

accrued and unpaid interest on the First Lien Term B-1 Loan and the ADT Notes due 2020.

The Company incurred approximately $ 8 million in deferred financing costs in connection with the additional borrowings.

The First Lien Notes due 2024 and the First Lien Notes due 2026 are due at maturity, and may be redeemed, in whole or in part, at any time at a make-whole premium plus accrued and unpaid interest to, but excluding, the redemption date.

Additionally, upon the occurrence of specified change of control events, the Company must offer to repurchase the notes at 101 % of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

The Company’s 5.250 % first-priority senior secured notes due 2024 (the “First Lien Notes due 2024”) and the Company’s 5.750 % first-priority senior secured notes due 2026 (the “First Lien Notes due 2026”) are due at maturity, and may be redeemed, in whole or in part, at any time at a make-whole premium plus accrued and unpaid interest to, but excluding, the redemption date.

The First Lien Notes due 2024 and the First Lien Notes due 2026 are guaranteed, jointly and severally, on a senior secured first-priority basis, by each of the Company’s existing and future direct or indirect wholly-owned material domestic subsidiaries that guarantee the First Lien Credit Agreement.

Upon the occurrence of specified change of control events, the Company must offer to repurchase the notes at 101 % of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

First Lien Notes due 2027

7 unchanged sentences

The First Lien Notes due 2027 and the related guarantees are secured by first-priority security interests in substantially all of the tangible and intangible assets owned by the issuers and each guarantor, subject to certain permitted liens and exceptions.

Additionally, upon the occurrence of specified change of control events, the Company must offer to repurchase the First Lien Notes due 2027 at 101 % of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

The indenture governing the First Lien Notes due 2027 also provides for customary events of default.

The indenture also provides for customary events of default.

First Lien Notes due 2029

2 unchanged sentences

The First Lien Notes due 2029 will mature on August 1, 2029, with semi-annual interest payment dates of February 1 and August 1 of each year, beginning February 1, 2022, and may be redeemed at the Company’s option as follows:

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• Prior to August 1, 2028, in whole at any time or in part from time to time, at a redemption price equal to the greater of (i) 100 % of the principal amount of the First Lien Notes due 2029 to be redeemed and (ii) the sum of the present values of the aggregate principal amount of the First Lien Notes due 2029 to be redeemed and the remaining scheduled interest payments due on any date after the redemption date, to and including August 1, 2028, discounted at an adjusted treasury rate plus 50 basis points, plus, in either case accrued and unpaid interest as of, but excluding, the redemption date.

1 unchanged sentence

The Company’s obligations relating to the First Lien Notes due 2029 are guaranteed, jointly and severally, on a senior secured first-priority basis, by substantially all of the Company’s subsidiaries and are secured by first-priority security interests in substantially all of the assets of the Company’s domestic subsidiaries, subject to certain permitted liens and exceptions.

In addition, upon the occurrence of specified change of control events, the Company may be required to purchase the First Lien

Notes due 2029 at 101 % of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

Upon the occurrence of specified change of control events, the Company may be required to purchase the notes at 101 % of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

The indenture also provides for customary events of default.

1 unchanged sentence

As a result, these notes remained outstanding and became obligations of the Company.

ADT Notes due 2020

In September 2019, the Company repurchased and cancelled $ 147 million aggregate principal amount of the outstanding ADT Notes due 2020 for a total repurchase price of approximately $ 149 million, which included the related call premium.

In October 2019, the Company redeemed the remaining $ 153 million principal amount of the outstanding ADT Notes due 2020 for a total redemption price of approximately $ 155 million, which included the related call premium.

ADT Notes due 2021

In September 2020, the Company redeemed $ 1.0 billion aggregate principal amount of the ADT Notes due 2021 for a total redemption price of approximately $ 1.1 billion, which included the related call premium.

ADT Notes due 2022

In August 2021, the Company used the proceeds from the First Lien Notes due 2029, along with cash on hand, to (i) redeem all of the $ 1.0 billion outstanding aggregate principal amount of the Company’s 3.50 % notes due 2022 (the “ADT Notes due 2022”) for approximately $ 1.0 billion, including the related call premium of $ 28 million, plus accrued and unpaid interest, and (ii) pay related fees and expenses (the “ADT Notes due 2022 Redemption”).

The remaining outstanding ADT Notes are due at maturity, and may be redeemed, in whole at any time or in part from time to time, at a redemption price equal to the principal amount of the notes to be redeemed, plus a make-whole premium, plus accrued and unpaid interest as of, but excluding, the redemption date.

Additionally, upon the occurrence of specified change of control events, the Company must offer to repurchase the ADT Notes at 101 % of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

Significant activity related to the ADT Notes during the periods presented was as follows:

• ADT Notes due 2021 - In September 2020, the Company redeemed $ 1.0 billion aggregate principal amount of the ADT Notes due 2021 for a total redemption price of approximately $ 1.1 billion, which included the related call premium.

• ADT Notes due 2022 - In August 2021, the Company used the proceeds from the First Lien Notes due 2029, along with cash on hand, to (i) redeem all of the $ 1.0 billion outstanding aggregate principal amount of the Company’s 3.50 % notes due 2022 (the “ADT Notes due 2022”) for approximately $ 1.0 billion, including the related call premium of $ 28 million, plus accrued and unpaid interest, and (ii) pay related fees and expenses (the “ADT Notes due 2022 Redemption”).

• ADT Notes due 2023 - As of December 31, 2022, the Company had an outstanding balance of $ 700 million under its ADT Notes due 2023 that was classified as a current liability, net of any unamortized debt discount.

The Company is required to use borrowings under the Term Loan A Facility to redeem a portion of the ADT Notes due 2023 and pay related fees and expenses incurred in connection with the transaction.

Subsequent event - On February 10, 2023, the Company delivered the initial notice of partial redemption for the ADT Notes due 2023, which provides for the partial redemption of $ 600 million principal amount of the outstanding ADT Notes due 2023 on March 15, 2023, including accrued and unpaid interest on the ADT Notes due 2023 so redeemed.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Receivables Facility

11 unchanged sentences

As part of the amendment, the Receivables Facility’s uncommitted lending limit was increased from $ 200 million to $ 400 million, and the scheduled termination date for the Receivable Facility’s uncommitted revolving period was extended to October 28, 2022.

• In May 2022, the Company amended the Receivables Facility to change the benchmark rate from 1-month LIBOR to Daily SOFR.

In addition, the May 2022 amendment extended the scheduled termination date for the uncommitted revolving period from October 2022 to May 2023, and amended certain other terms to increase the advance rate on pledged collateral.

The Company services the transferred retail installment contract receivables and is responsible for ensuring the related collections are remitted to a segregated bank account in the SPE’s name.

On a monthly basis, the segregated account is utilized to make required principal, interest, and other payments due under the Receivables Facility.

The segregated account is considered restricted cash and is reflected in prepaid expenses and other current assets in the Company’s Consolidated Balance Sheets.

As of December 31, 2021 and 2020, the Company had an uncommitted available borrowing capacity of $ 201 million and $ 124 million, respectively, under the Receivables Facility.

During 2021 and 2020, proceeds from the Receivables Facility were $ 254 million and $ 83 million, respectively, and repayments were $ 130 million and $ 7 million, respectively, which are reflected as cash flows from financing activities in the Consolidated Statements of Cash Flows.

Both the proceeds and repayments during 2021 include the non-cash impact of approximately $ 88 million from the Receivables Facility amendment in October 2021.

The segregated account is considered restricted cash.

Proceeds and repayments from the Receivables Facility were as follows:

• During 2022, proceeds and repayments from the Receivables Facility were $ 277 million and $ 121 million, respectively.

• During 2021, proceeds and repayments were $ 254 million and $ 130 million, respectively, both of which include the non-cash impact of approximately $ 88 million from the Receivables Facility amendment in October 2021.

• During 2020, proceeds and repayments from the Receivables Facility were $ 83 million and $ 7 million, respectively.

The Receivables Facility did not have a material impact to the Consolidated Statements of Operations.

As of December 31, 2022, the Company had an uncommitted available borrowing capacity of $ 45 million under the Receivables Facility.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Variable Interest Entity

The SPE, as described above, meets the definition of a variable interest entity (“VIE”) for which the Company is the primary beneficiary as it has the power to direct the SPE’s activities and the obligation to absorb losses or the right to receive benefits of the SPE.

The SPE, as described above, meets the definition of a VIE for which the Company is the primary beneficiary as it has the power to direct the SPE’s activities and the obligation to absorb losses or the right to receive benefits of the SPE.

As such, the SPE’s assets, liabilities, and financial results of operations are consolidated in the Company’s consolidated financial statements.

16 unchanged sentences

The covenant is tested if the outstanding loans under the First Lien Revolving Credit Facility, subject to certain exceptions, exceed 30 % of the total commitments under the First Lien Revolving Credit Facility at the testing date (i.e., the last day of any fiscal quarter).

As of December 31, 2022, we were in compliance with all financial covenant and other maintenance tests for all our debt obligations.

Loss on Extinguishment of Debt

1 unchanged sentence

During 2021, loss on extinguishment of debt totaled $ 37 million and was primarily due to the call premium and write-off of unamortized fair value adjustments in connection with the ADT Notes due 2022 Redemption.

February 2020, (ii) $ 49 million associated with the call premium and write-off of unamortized fair value adjustments in connection with the $ 1.0 billion redemption of the ADT Notes due 2021 in September 2020, and (iii) $ 5 million associated with the partial write-off of unamortized deferred financing costs and discount in connection with the $ 300 million repayment of the First Lien Term Loan due 2026 in December 2020.

During 2019, loss on extinguishment of debt totaled $ 104 million and included (i) $ 22 million associated with the call premium and partial write-off of unamortized deferred financing costs in connection with the $ 300 million partial redemption of the Prime Notes in February 2019, (ii) $ 61 million associated with the call premium and partial write-off of unamortized deferred financing costs in connection with the $ 1.0 billion partial redemption of the Prime Notes in April 2019, (iii) $ 6 million associated with the partial write-off of unamortized deferred financing costs and discount in connection with the $ 500 million repayment of the First Lien Term B-1 Loan in April 2019, and (iv) $ 13 million associated with the partial write-off of unamortized deferred financing costs and discount in connection with the amendment and restatement to the First Lien Credit Agreement in September 2019.

Additional fees and costs associated with financing transactions were not material during 2021 and 2020.

During 2019, the Company incurred $ 23 million primarily related to the September 2019 amendment and restatement of the Company’s First Lien Credit Agreement.

During 2020, loss on extinguishment of debt totaled $ 120 million and included (i) $ 66 million associated with the call premium and write-off of unamortized deferred financing costs in connection with the $ 1.2 billion redemption of the remaining outstanding balance of the Company’s 9.250 % second-priority secured notes (the “Prime Notes”) in February 2020, (ii) $ 49 million associated with the call premium and write-off of unamortized fair value adjustments in connection with the $ 1.0 billion redemption of the ADT Notes due 2021 in September 2020, and (iii) $ 5 million associated with the partial write-off of unamortized deferred financing costs and discount in connection with the $ 300 million repayment of the First Lien Term Loan due 2026 in December 2020.

Additional fees and costs associated with financing transactions were not material during 2022, 2021, or 2020.

SOFR Transition

By June 2023 (the “SOFR Transition Date”), SOFR will replace the forward LIBOR as the applicable benchmark rate for all existing and future issuances of the Company’s debt instruments, including interest rate swaps, with a variable rate component.

Existing instruments under the First Lien Credit Agreement will continue to be based on LIBOR until the SOFR Transition Date, unless transitioned to SOFR prior to such date pursuant to the terms of the First Lien Credit Agreement.

In addition, any modification, such as a repricing, or any new debt issuances with a variable rate component, will utilize SOFR.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2022, the aggregate annual maturities of debt, excluding finance leases, were as follows:

1 unchanged sentence

Debt principal $ 827,145 $ 880,053 $ 108,760 $ 4,051,137 $ 1,020,362 $ 3,049,911 $ 9,937,368

Interest expense on the Company’s debt, including finance leases, and interest rate swap contracts was $ 458 million, $ 710 million, and $ 623 million during 2021, 2020, and 2019, respectively.

Interest expense (excluding interest income) on the Company’s debt, including finance leases, and interest rate swap contracts was $ 279 million, $ 458 million, and $ 710 million during 2022, 2021, and 2020, respectively.

DERIVATIVE FINANCIAL INSTRUMENTS

1 unchanged sentence

All interest rate swap contracts are reported in the Consolidated Balance Sheets at fair value.

For interest rate swap contracts not designated as cash flow hedges, unrealized gains and losses are recognized in interest expense, net, in the Consolidated Statements of Operations.

For interest rate swap contracts designated as cash flow hedges, unrealized gains and losses are recognized as a component of AOCI in the Consolidated Balance Sheets and are reclassified into interest expense, net, in the same period in which the related interest on debt affects earnings.

For interest rate swap contracts that have been de-designated as cash flow hedges and for which the forecasted cash flows are probable or reasonably possible of occurring, unrealized gains and losses previously recognized as a component of AOCI are reclassified into interest expense, net, in the same period in which the related interest on variable-rate debt affects earnings through the original maturity date of the related interest rate swap contracts.

For interest rate swap contracts that have been de-designated as cash flow hedges and for which the forecasted cash flows are probable of not occurring, unrealized gains and losses previously recognized as a component of AOCI are immediately reclassified into interest expense, net.

The cash flows associated with interest rate swap contracts that included an other-than-insignificant financing element at inception are reflected as cash flows from financing activities in the Consolidated Statements of Cash Flows.

For interest rate swap contracts that are:

• Not designated as cash flow hedges:

Unrealized gains and losses are recognized in interest expense, net.

• Designated as cash flow hedges:

Unrealized gains and losses are recognized as a component of accumulated other comprehensive income (loss) (“AOCI”) and are reclassified into interest expense, net, in the same period in which the related interest on debt affects earnings.

For interest rate swap contracts that have been de-designated as cash flow hedges and for which forecasted cash flows are:

• Probable or reasonably possible of occurring:

Unrealized gains and losses previously recognized as a component of AOCI are reclassified into interest expense, net, in the same period in which the related interest on variable-rate debt affects earnings through the original maturity date of the related interest rate swap contracts.

• Probable of not occurring:

Unrealized gains and losses previously recognized as a component of AOCI are immediately reclassified into interest expense, net.

As of December 31, 2018, the Company had interest rate swap contracts with an aggregate notional amount of $ 3.5 billion, of which $ 2.5 billion were designated as cash flow hedges, with maturities through April 2020 and April 2022.

2 unchanged sentences

As a result, the amount of the unfavorable positions recognized as a component of AOCI related to the terminated cash flow hedges are reclassified into interest expense, net, in the same period in which the related interest on variable-rate debt affects earnings through the original maturity date of the cash flow hedges of April 2022, as the forecasted cash flows are probable or reasonably possible of occurring.

Additionally, the new interest rate swap terms represented a blend of the current interest rate environment and the

unfavorable positions of the terminated interest rate swap contracts, which resulted in an other-than-insignificant financing element at inception of the new cash flow hedges due to off-market terms.

Additionally, the new interest rate swap terms represented a blend of the current interest rate environment and the unfavorable positions of the terminated interest rate swap contracts, which resulted in an other-than-insignificant financing element at inception of the new cash flow hedges due to off-market terms.

Beginning in March 2020, the Company's interest rate swap contracts designated as cash flow hedges with an aggregate notional amount of $ 3.0 billion were no longer highly effective as a result of changes in the interest rate environment.

Accordingly, the Company de-designated the cash flow hedges, and the unrealized gains and losses for the period in which these cash flow hedges were no longer highly effective were recognized in interest expense, net.

Unrealized losses previously recognized as a component of AOCI prior to de-designation will be reclassified into interest expense, net, in the same period in which the related interest on variable-rate debt affects earnings through the maturity dates of the interest rate swap contracts, as the forecasted cash flows are probable or reasonably possible of occurring.

Unrealized losses previously recognized as a component of AOCI prior to de-designation are being reclassified into interest expense, net, in the same period in which the related interest on variable-rate debt affects earnings through the maturity dates of the interest rate swap contracts, as the forecasted cash flows are probable or reasonably possible of occurring.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The impact associated with the interest rate swap contracts de-designated as cash flow hedges and for which the forecasted cash flows are no longer probable of occurring was not material during 2022, 2021, and 2020.

The Company’s interest rate swaps as of December 31, 2021 and 2020 consisted of the following (in thousands):

Execution Maturity Designation Notional Amount

Interest Rate Swaps:

(in thousands) December 31,

Execution Maturity Designation 2022 2021

January 2019 April 2022 Not designated $ — $ 125,000

2 unchanged sentences

Total notional amount $ 2,800,000 $ 3,225,000

The unrealized impact of interest rate swaps recognized in interest expense, net, in the Consolidated Statements of Operations was as follows:

Fair Value of Interest Rate Swaps:

Balance Sheet Classification (in thousands)

Prepaid expenses and other current assets $ 78,110 $ —

Other assets $ 105,405 $ —

Accrued expenses and other current liabilities $ — $ 50,360

Other liabilities $ — $ 67,976

Unrealized Gain (Loss) on Interest Rate Swaps:

Years Ended December 31,

(in thousands) 2022 2021 2020

Unrealized gain (loss) on interest rate swaps $ 157,505 $ ( 60,363 ) $ ( 8,501 )

During 2021 and 2020, the Company paid $ 56 million and $ 38 million, respectively, related to settlements on interest rate swap contracts that included an other-than-insignificant financing element at inception, which is reflected in cash flows from financing activities in the Consolidated Statement of Cash Flows.

The interest rate swap contracts did not have a material impact to the Consolidated Statements of Cash Flows during 2019.

The classification and fair value of interest rate swaps recognized in the Consolidated Balance Sheets were as follows:

Gain (loss) included in interest expense, net $ 301,851 $ 157,505 $ ( 60,363 )

Changes in AOCI:

(in thousands) Cash Flow Hedges

Balance as of December 31, 2019 $ ( 59,387 )

Pre-tax current period change ( 76,807 )

Income tax benefit (expense) 18,693

Balance as of December 31, 2020 ( 117,501 )

Pre-tax current period change 60,948

Income tax benefit (expense) ( 14,714 )

Balance as of December 31, 2021 ( 71,267 )

Pre-tax current period change 33,946

Income tax benefit (expense) ( 8,192 )

Balance as of December 31, 2022 $ ( 45,513 )

Cash Flow Hedges Reclassifications out of AOCI:

Years Ended December 31,

(in thousands) 2022 2021 2020

Accrued expenses and other current liabilities $ 50,360 $ 65,462

Other liabilities 67,976 210,378

Fair value of interest rate swaps $ 118,336 $ 275,840

Interest expense, net $ 33,946 $ 60,948 $ 54,452

Income tax (benefit) expense $ ( 8,192 ) $ ( 14,714 ) $ ( 13,254 )

There were no other material reclassifications out of AOCI during 2022, 2021, and 2020.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2022, approximately $ 19 million of AOCI associated with previously designated cash flow hedges is estimated to be reclassified to interest expense, net, within the next twelve months.

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the temporary differences between the recognition of revenue and expenses for income tax and financial reporting purposes and between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements.

The Company records the effect of a tax rate or law change on the Company’s deferred tax assets and liabilities in the period of enactment.

Significant components of income (loss) before income taxes for the periods presented were as follows:

Components of income (loss) before income taxes:

Years Ended December 31,

3 unchanged sentences

Income (loss) before income taxes $ 237,403 $ ( 471,189 ) $ ( 778,919 )

Significant components of income tax benefit for the periods presented were as follows:

Components of income tax benefit (expense):

Years Ended December 31,

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Foreign ( 691 ) ( 570 ) —

Current income tax expense ( 9,111 ) ( 26,689 ) ( 19,847 )

Current income tax benefit (expense) ( 28,975 ) ( 9,111 ) ( 26,689 )

Federal ( 52,311 ) 97,805 133,646

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Foreign ( 403 ) ( 226 ) ( 73 )

Deferred income tax benefit 139,480 173,415 117,889

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

The reconciliation between the actual effective tax rate on continuing operations and the statutory U.S.

federal income tax rate for the periods presented were as follows:

Deferred income tax benefit (expense) ( 31,209 ) 139,480 173,415

Income tax benefit (expense) $ ( 60,184 ) $ 130,369 $ 146,726

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Effective Tax Rate Reconciliation:

Reconciliations between the actual effective tax rate on continuing operations and the statutory U.S.

federal income tax rate were as follows:

Years Ended December 31,

3 unchanged sentences

Non-deductible and non-taxable charges (1)

10.5 % 0.3 % ( 3.1 ) %

Valuation allowance ( 1.0 ) % 0.5 % ( 1.5 ) %

Prior year return adjustments 1.6 % 0.4 % ( 0.3 ) %

Federal credits ( 5.1 ) % — % — %

Acquisitions ( 0.3 ) % 1.3 % 0.2 %

Legislative changes ( 3.6 ) % 0.8 % — %

Non-deductible goodwill impairment — % — % ( 2.3 ) %

Amended returns — % 0.1 % 1.9 %

Net capital losses from sale of business — % 0.4 % 6.8 %

Uncertain tax positions ( 3.8 ) % — % — %

Other ( 0.3 ) % 0.7 % ( 0.4 ) %

Effective tax rate 25.4 % 27.7 % 18.8 %

The components of the Company's net deferred tax liabilities as of December 31, 2021 and 2020 were as follows:

(in thousands) December 31, 2021 December 31, 2020

___________________

(1) During 2022, primarily represents the impact related to the fair value adjustment of the Forward Contract.

Deferred Tax Assets and Deferred Tax Liabilities

The components of the Company's net deferred tax assets (liabilities) were as follows :

(in thousands) 2022 2021

Deferred tax assets:

2 unchanged sentences

Disallowed interest carryforward 185,080 140,974

Postretirement benefits 9,273 10,221

Deferred revenue 187,766 140,604

8 unchanged sentences

Total deferred tax liabilities ( 1,899,368 ) ( 1,896,917 )

Net deferred tax liabilities $ ( 865,704 ) $ ( 989,174 )

Net deferred tax assets (liabilities) $ ( 903,532 ) $ ( 865,704 )

The valuation allowance for deferred tax assets relates to the uncertainty of the utilization of certain U.S.

federal and state deferred tax assets.

In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available positive and negative evidence, which include its past operating results, the existence of cumulative losses in the most recent years, and its forecast of future taxable income.

In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available positive and negative evidence, which includes its past operating results, the existence of cumulative losses in the most recent years, and its forecast of future taxable income.

In estimating future taxable income, the Company develops assumptions related to the amount of future pre-tax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies.

1 unchanged sentence

The Company believes that it is more-likely-than-not that it will generate sufficient future taxable income to realize its deferred tax assets, net of valuation allowance.

The changes in the valuation allowance for deferred tax assets for the periods presented were as follows:

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The changes in the valuation allowance for deferred tax assets were as follows:

Years Ended December 31,

3 unchanged sentences

Write-offs and other (1)

5,478 827 2,008

Ending balance $ ( 57,715 ) $ ( 60,157 ) $ ( 68,013 )

__________________

(1) Includes the removal of valuation allowances associated with certain tax attributes that expired during the current year.

(1) During 2021, includes the removal of valuation allowances associated with certain tax attributes that expired during the year.

Both the expired attributes and related valuation allowances were removed concurrently.

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and Canada primarily generated in connection with the sale of ADT Canada during 2019.

The remainder of the Company’s valuation allowance related to other tax attributes not expected to be realized prior to expiration or due to limitations.

The remainder of the Company’s valuation allowance is related to other tax attributes that are not expected to be realized prior to expiration or due to limitations.

The Tax Cuts and Jobs Act of 2017 introduced IRC Section 163(j), which limits the deductibility of interest expense and allows for the excess to be carried forward indefinitely.

As of December 31, 2021, the Company has not recorded a valuation

allowance against the disallowed interest carryforward as the Company believes it has sufficient sources of future taxable income to realize the related tax benefit.

As of December 31, 2022, the Company has not recorded a valuation allowance against the disallowed interest carryforward as the Company believes it has sufficient sources of future taxable income to realize the related tax benefit.

Unrecognized Tax Benefits

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Interest and penalties associated with unrecognized tax benefits were not material to the Company's consolidated financial statements for the periods presented.

The following is a rollforward of unrecognized tax benefits for the periods presented:

The following is a roll-forward of unrecognized tax benefits:

Years Ended December 31,

3 unchanged sentences

Gross decrease related to prior year tax positions — — ( 732 )

Increases related to current year tax positions — — 1,000

Increases related to acquisitions — — 400

Decreases related to dispositions — — ( 14,043 )

Decrease related to settlements with taxing authorities — — ( 3,717 )

Decreases related to lapse of statute of limitation ( 15,107 ) ( 142 ) ( 143 )

Other changes not impacting the statement of operations — — 562

Ending balance $ 56,177 $ 66,221 $ 65,990

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Based on the current tax statutes and status of its income tax audits, the Company does not expect any significant portion of its unrecognized tax benefits to be resolved in the next twelve months.

The Company files a consolidated return for its U.S.

entities and separate returns for each Canadian entity.

The income tax returns are subject to audit by the taxing authorities.

These audits may culminate in proposed assessments which may ultimately result in a change to the estimated income taxes.

The following is a summary of open tax years by jurisdiction:

Jurisdiction Years

Open to Audit

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Open Tax Years by Jurisdiction

Jurisdiction Years Open to Audit

Federal 2019 - 2021

1 unchanged sentence

Canada 2017 - 2021

COVID-19 Pandemic

The Company files a consolidated return for its U.S.

entities and, prior to the sale of ADT Canada in 2019, separate returns for each Canadian entity.

These income tax returns are subject to audit by the taxing authorities that may culminate in proposed assessments which may ultimately result in a change to the estimated income taxes.

Federal Tax Legislation

In response to the COVID-19 Pandemic, the American Rescue Plan Act of 2021 (the “2021 Rescue Act”) and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) were signed into law in March 2021 and March 2020, respectively, and included significant corporate income tax and payroll tax provisions intended to provide economic relief to address the impact of the COVID-19 Pandemic.

During 2020, the Company recognized favorable cash flow impacts related to the accelerated refund of previously generated alternative minimum tax credits, as well as from the deferral of remittance of certain 2020 payroll taxes, of which 50 % of the deferred amount was paid during the fourth quarter of 2021, and the remainder is due by the end of 2022.

During 2020, the Company recognized favorable cash flow impacts related to the accelerated refund of previously generated alternative minimum tax credits, as well as from the deferral of remittance of certain 2020 payroll taxes, of which approximately 50 % of the deferred amount was paid during the fourth quarter of 2021, and the remainder paid during January 2023.

The Company also recognized a benefit from an increase in the interest expense limitation from 30% to 50% for tax years 2019 and 2020.

During September 2020, the Company amended its articles of incorporation to authorize the issuance of 100,000,000 shares of Class B common stock, par value of $ 0.01 per share, as well as to increase the number of authorized shares of preferred stock, par value of $ 0.01 per share, to 1,000,000 .

Tax Cuts and Jobs Act - Certain changes to U.S.

federal tax law included in the Tax Cuts and Jobs Act of 2017 had a delayed effective date and have taken effect for 2022.

Under IRC Section 163(j), the limitation on net business interest expense deductions will no longer be increased by deductions for depreciation, amortization, or depletion.

Under IRC Section 174, specified research and experimentation expenditures must now be capitalized and amortized.

Inflation Reduction Act - The Inflation Reduction Act (the “IRA”) was signed into law in August 2022.

The IRA, among other provisions, implements (i) a 15% corporate alternative minimum tax (“CAMT”) on book income of corporations whose average annual adjusted financial statement income during the most recently-completed three-year period exceeds $1.0 billion, (ii) a 1% excise tax on net stock repurchases, and (iii) several tax incentives to promote clean energy including an extension of the investment tax credit.

Both the CAMT and the excise tax provisions are effective for tax years beginning after December 31, 2022, and as of December 31, 2022, the Company does not anticipate any material impact.

Common Stock and Class B Common Stock

During September 2020, the Company amended its articles of incorporation to authorize the issuance of 100,000,000 shares of Class B common stock, par value of $ 0.01 per share (“Class B Common Stock”), as well as to increase the number of authorized shares of preferred stock, par value of $ 0.01 per share, to 1,000,000 .

Accordingly, the Company has two classes of common stock, Common Stock and Class B Common Stock, both of which entitle stockholders to one vote for each share of common stock.

Each share of Class B Common Stock has equal status and rights to dividends with a share of Common Stock.

Each share of Class B Common Stock has equal status and rights to dividends as a share of Common Stock.

The holders of Class B Common Stock have one vote for each share of Class B Common Stock held of record by such holder on all matters on which stockholders are entitled to vote generally;

provided, however, that holders of Class B Common Stock, as such, are not entitled to vote on the election, appointment, or removal of directors of the Company.

Additionally, each share of Class B Common Stock will immediately become convertible into one share of Common Stock, at the option of the holder thereof, at any time following the earlier of (i) the expiration or early termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Clearance”), required prior to such holder’s conversion of all such shares of Class B Common Stock, and (ii) to the extent HSR Clearance is not required prior to such holder’s conversion of such shares of Class B Common Stock, the date that such holder owns such shares of Class B Common Stock.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

such shares of Class B Common Stock, and (ii) to the extent HSR Clearance is not required prior to such holder’s conversion of such shares of Class B Common Stock, the date that such holder owns such shares of Class B Common Stock.

Issuances of Common Stock

In December 2021, the Company issued approximately 70 million shares of Common Stock with a fair value of $ 529 million in connection with the Sunpro Solar Acquisition.

Issuances of Common Stock other than as related to the exercise or vesting of share-based compensation awards includes:

• In October 2022, the Company issued approximately 133 million shares of Common Stock for an aggregate purchase price of $ 1.2 billion as part of the State Farm Strategic Investment (as defined below).

• In June 2022, the Company issued approximately 2 million shares of Common Stock as consideration for a business acquisition.

• In December 2021, the Company issued approximately 70 million shares of Common Stock with a fair value of $ 529 million in connection with the ADT Solar Acquisition.

Additionally, during 2022, the Company issued the Delayed Shares in connection with the ADT Solar Acquisition as discussed in Note 4 “Acquisitions and Disposition.”

• In January 2020, the Company issued approximately 16 million shares of Common Stock with a fair value of $ 114 million in connection with the Defenders Acquisition.

Issuance of Class B Common Stock

As described in Note 1 “Description of Business and Summary of Significant Accounting Policies”, in September 2020, the Company issued and sold 54,744,525 shares of Class B Common Stock to Google for an aggregate purchase price of $ 450 million.

In connection with the issuance of the Class B Common Stock, the Company and Google entered into an Investor Rights Agreement (the “Investor Rights Agreement”), pursuant to which Google agreed to be bound by customary transfer restrictions and drag-along rights, and be afforded customary registration rights with respect to shares of Class B Common Stock held directly by Google.

Under the terms of the Investor Rights Agreement, Google is prohibited, subject to certain exceptions, from transferring any shares of Class B Common Stock or any shares of Common Stock issuable upon conversion of the Class B Common Stock beneficially owned by Google until the earlier of (i) the three-year anniversary of issuance, (ii) the date on which the Google Commercial Agreement (as defined in Note 12 “Commitments and Contingencies”) has been terminated under certain specified circumstances, and (iii) June 30, 2022 if the Company breaches certain of its obligations under the Google Commercial Agreement.

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

In connection with the issuance of the Class B Common Stock, the Company and Google entered into an Investor Rights Agreement (the “Google Investor Rights Agreement”), pursuant to which Google agreed to be bound by customary transfer restrictions and drag-along rights, and be afforded customary registration rights with respect to shares of Class B Common Stock held directly by Google.

Under the terms of the Google Investor Rights Agreement, Google is prohibited, subject to certain exceptions, from transferring any shares of Class B Common Stock or any shares of Common Stock issuable upon conversion of the Class B Common Stock beneficially owned by Google until the earlier of (i) the three-year anniversary of issuance, (ii) the date on which the Google Commercial Agreement (as defined in Note 13 “Commitments and Contingencies”) has been terminated under certain specified circumstances, and (iii) September 30, 2022 if the Company breaches certain of its obligations under the Google Commercial Agreement.

The Company estimated the fair value of the issued Class B Common Stock to be approximately $ 450 million, which represents a Level 3 fair value measurement.

The estimation of the fair value included the following inputs:

(i) the price per share of Common Stock, (ii) the length of the holding period restriction, (iii) an expected dividend-yield of 1.5 % during the holding period restriction, which was based on the projected dividend run-rate and dividing by the stock price, and (iv) an expected share price volatility of 30 % during the holding period restriction period, which was implied based upon an average of historical volatility of publicly traded companies in industries similar to the Company, as the Company did not have sufficient trading history to use as a basis for actual stock price volatility, as well as consideration for the Company’s debt to equity ratio.

(i) the price per share of Common Stock;

(ii) the length of the holding period restriction;

(iii) an expected dividend-yield of 1.5 % during the holding period restriction, which was based on the projected dividend run-rate and dividing by the stock price;

and (iv) an expected share price volatility of 30 % during the holding period restriction period, which was implied based upon an average of historical volatility of publicly traded companies in industries similar to the Company, as the Company did not have sufficient trading history to use as a basis for actual stock price volatility, as well as consideration for the Company’s debt-to-equity ratio.

The intrinsic value of the contingently exercisable beneficial conversion feature related to the ability to convert Class B Common Stock to Common Stock as well as the fair value of Google’s option to purchase additional shares of Class B Common Stock were not material.

State Farm Strategic Investment and Tender Offer

State Farm Strategic Investment

On September 5, 2022, the Company entered into a securities purchase agreement (the “State Farm Securities Purchase Agreement”) with State Farm, pursuant to which the Company agreed to issue and sell in a private placement to State Farm 133 million shares of the Company’s Common Stock (the “State Farm Shares”) at a per share price of $ 9.00 for an aggregate purchase price of $ 1.2 billion (the “State Farm Strategic Investment”).

On September 12, 2022, in connection with the State Farm Strategic Investment, the Company commenced a tender offer to purchase up to 133 million shares of the Company’s Common Stock (including shares issued upon conversion of shares of Class B Common Stock ) (the “Tender Shares”) at a price of $ 9.00 per share (the “Tender Offer”) using proceeds from the State Farm Strategic Investment.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The State Farm Strategic Investment closed on October 13, 2022 (the “Closing”), and the Company issued and sold the State Farm Shares at a price of $ 9.00 per share.

After giving effect to the State Farm Strategic Investment and the Tender Offer, State Farm owned approximately 15 % of the Company’s issued and outstanding Common Stock (assuming conversion of Class B Common Stock), and as a result, became a related party at the Closing.

Concurrently with the execution of the State Farm Securities Purchase Agreement, (i) Apollo delivered to the Company a Tender and Support Agreement, pursuant to which Apollo agreed to collectively tender (and not withdraw) no fewer than 133 million shares of Common Stock in the Tender Offer (the “Apollo Support Agreement”), and (ii) Google delivered to the Company a Support Agreement, pursuant to which Google agreed to not convert and tender any of its shares of Class B Common Stock.

The Tender Offer was considered a contingent forward purchase contract (the “Forward Contract”), which was recorded at fair value in the Consolidated Balance Sheet.

The fair value of the Forward Contract was estimated as the difference between the present value of the cash consideration to be paid and the value of the Company’s Common Stock to be tendered.

At the commencement of the Tender Offer, the Company recorded a liability and a reduction to additional paid in capital of $ 42 million.

The change in fair value from inception through December 31, 2022 recognized in other income (expense) was a net loss of $ 63 million.

Fees associated with the Tender Offer were not material for the year ended December 31, 2022.

The Tender Offer expired on October 20, 2022.

On October 26, 2022, the Company used proceeds from the State Farm Strategic Investment to repurchase an aggregate of 133 million shares of the Company’s Common Stock at a purchase price of $ 9.00 per share for an aggregate purchase price of $ 1.2 billion, excluding fees and expenses, subject to the terms and conditions described in the Offer to Purchase dated September 12, 2022 (as amended from time to time, the “Offer to Purchase”).

The Tender Shares were subject to the “odd lot” priority and proration provisions described in the Offer to Purchase as the Tender Offer was substantially over-subscribed.

No shares of Class B Common Stock were converted and tendered in the Tender Offer.

State Farm Investor Rights Agreement

At the Closing, the Company and State Farm entered into an Investor Rights Agreement (the “State Farm Investor Rights Agreement”), pursuant to which the Board of Directors of the Company (the “Board”) increased its size by one director and appointed a designee of State Farm as a member of the Board.

Pursuant to the terms of the State Farm Investor Rights Agreement, State Farm will also be bound by customary transfer and standstill restrictions and drag-along rights, and be afforded customary registration rights with respect to the State Farm Shares.

In particular, State Farm (a) will be prohibited, subject to certain customary exceptions, from transferring any of the State Farm Shares until the earlier of (i) the three-year anniversary of the Closing and (ii) the date on which the State Farm Development Agreement has been validly terminated, other than in the event of termination by the Company for a material breach thereof by State Farm, and (b) will be subject to certain standstill restrictions, including that State Farm will be restricted from acquiring additional equity securities of the Company if such acquisition would result in State Farm (and its affiliates) acquiring beneficial ownership in excess of 18 % of the issued and outstanding Common Stock, taking into account on an as-converted basis the issued and outstanding Class B Common Stock, until five (5) days after the date that no designee of State Farm serves on the Board and State Farm has no rights (or has irrevocably waived its right) to nominate a designee to the Board.

Notwithstanding the standstill restrictions described above, State Farm will not be restricted from acquiring shares of Common Stock or other equity securities of the Company from Prime Security Services TopCo Parent, L.P.

and its affiliates so long as State Farm and its affiliates would not, subject to certain exceptions, beneficially own in excess of 25 % of the issued and outstanding Common Stock, taking into account on an as-converted basis the issued and outstanding Class B Common Stock, as a result of such acquisition.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In addition, under the terms of the State Farm Investor Rights Agreement, in the event that the Company proposes to issue and sell shares of Common Stock, Class B Common Stock, or other equity securities of the Company to certain homeowners’ insurance and reinsurance companies, State Farm will have a right of first refusal with respect to such proposed issuance and sale on the same terms and conditions (the “ROFR”).

The ROFR will terminate upon the earliest to occur of (i) State Farm and its permitted transferees no longer collectively owning shares of Common Stock equal to at least 50 % of the State Farm Shares;

(ii) the termination of the State Farm Development Agreement by the Company for a material breach by State Farm;

and (iii) to the extent that the State Farm Development Agreement does not remain in effect on such date, the five (5) year anniversary of the Closing.

State Farm Development Agreement

At the Closing, the Company, ADT LLC (an indirect wholly owned subsidiary of the Company), and State Farm entered into the State Farm Development Agreement pursuant to which State Farm committed up to $ 300 million to an Opportunity Fund that will fund certain product and technology innovation, customer growth, and marketing initiatives to be agreed on between State Farm and the Company.

Additionally at the Closing, the Company received $ 100 million of the Opportunity Fund, which will be restricted until such time as the Company uses the funds in accordance with the State Farm Development Agreement.

The Company’s use of the funds is also subject to approval by State Farm.

The Company recorded the cash received from the Opportunity Fund as restricted cash and a corresponding liability, which is reflected in accrued expenses and other current liabilities as of December 31, 2022.

Stockholders are entitled to receive dividends when, as, and if declared by the Company’s board of directors out of funds legally available for that purpose.

In February 2019, the Company approved a dividend reinvestment plan (the “DRIP”), which allowed stockholders to designate all or a portion of the cash dividends on their shares of common stock for reinvestment in additional shares of the Company’s Common Stock.

The Company recorded a liability for the full amount of the dividends when declared, and then upon settlement, the Company reduced the liability and recorded an increase in Common Stock par value and additional paid-in

capital for the portion of dividends settled in shares of common stock under the DRIP.

The DRIP terminated in accordance with its terms on February 27, 2021.

Dividends declared on common stock during the periods presented were as follows:

(in thousands, except per share data)

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Declaration Date Record Date Payment Date Per Share Aggregate Per Share Aggregate

February 25, 2021 March 18, 2021 April 1, 2021 $ 0.035 $ 27,220 $ 0.035 $ 1,916

May 5, 2021 June 17, 2018 July 1, 2021 0.035 27,268 0.035 1,916

August 4, 2021 September 16, 2021 October 5, 2021 0.035 27,270 0.035 1,916

November 9, 2021 December 16, 2021 January 4, 2022 0.035 29,732 0.035 1,916

Total for Year Ended December 31, 2021 $ 0.140 $ 111,490 $ 0.140 $ 7,664

March 5, 2020 March 19, 2020 April 2, 2020 $ 0.035 $ 27,117 $ — $ —

May 7, 2020 June 18, 2020 July 2, 2020 0.035 26,767 — —

August 5, 2020 September 18, 2020 October 2, 2020 0.035 27,047 0.035 1,916

November 5, 2020 December 21, 2020 January 4, 2021 0.035 27,105 0.035 1,916

Total for Year Ended December 31, 2020 $ 0.140 $ 108,036 $ 0.070 $ 3,832

During 2019, the Company declared aggregate dividends of $ 0.84 per share on Common Stock ($ 633 million), which included quarterly dividends of $ 0.035 per share and a special dividend of $ 0.70 per share of Common Stock (“2019 Special Dividend”).

The amount of dividends settled in shares of Common Stock was approximately $ 68 million, which resulted in the issuance of 11 million shares of Common Stock.

On March 1, 2022, the Company announced a dividend of $ 0.035 per share to holders of Common Stock and Class B Common Stock of record on March 17, 2022, which will be distributed on April 4, 2022.

Share Repurchase Program

In February 2019, the Company approved a share repurchase program (the “Share Repurchase Program”), which authorized the Company to repurchase shares of the Company’s Common Stock (up to a certain amount).

The Share Repurchase Program terminated in accordance with its terms on March 23, 2021.

During 2021 and 2020, there were no material repurchases of shares of Common Stock under the Share Repurchase Program.

During 2019, the Company repurchased 24 million shares of Common Stock for approximately $ 150 million under the Share Repurchase Program.

All of the shares repurchased were treated as retirements and reduced the number of shares issued and outstanding.

In addition, the Company recorded the excess of the purchase price over the par value per share as a reduction to additional paid-in capital.

Year Ended December 31, 2022

3/1/22 3/17/22 4/4/22 $ 0.035 $ 29,842 $ 0.035 $ 1,916

5/5/22 6/16/22 7/5/22 0.035 30,028 0.035 1,916

8/4/22 9/15/22 10/4/22 0.035 30,112 0.035 1,916

11/3/22 12/15/22 1/4/23 0.035 30,189 0.035 1,916

Total $ 0.140 $ 120,171 $ 0.140 $ 7,664

Year Ended December 31, 2021

2/25/21 3/18/21 4/1/21 $ 0.035 $ 27,220 $ 0.035 $ 1,916

5/5/21 6/17/21 7/1/21 0.035 27,268 0.035 1,916

8/4/21 9/16/21 10/5/21 0.035 27,270 0.035 1,916

11/9/21 12/16/21 1/4/22 0.035 29,732 0.035 1,916

Total $ 0.140 $ 111,490 $ 0.140 $ 7,664

During 2020, the Company declared aggregate dividends of $ 0.14 per share on Common Stock ($ 108 million) and $ 0.07 per share on Class B Common Stock ($ 4 million).

The amount of dividends settled in shares of Common Stock was not material.

Subsequent Event - On February 28, 2023, the Company announced a dividend of $ 0.035 per share to holders of Common Stock and Class B Common Stock of record on March 16, 2023, which will be distributed on April 4, 2023.

Accumulated Other Comprehensive Income (Loss)

The changes in AOCI during the periods presented were as follows:

(in thousands) Cash Flow Hedges Foreign Currency Translation Defined Benefit Pension Plans Total AOCI

Balance as of December 31, 2018 $ ( 21,284 ) $ ( 51,599 ) $ 1,104 $ ( 71,779 )

Pre-tax current period change ( 52,093 ) 59,541 ( 247 ) 7,201

Income tax benefit (expense) 13,990 ( 7,942 ) 154 6,202

Balance as of December 31, 2019 ( 59,387 ) — 1,011 ( 58,376 )

Pre-tax current period change ( 76,807 ) — ( 2,844 ) ( 79,651 )

Income tax benefit (expense) 18,693 — 719 19,412

Balance as of December 31, 2020 ( 117,501 ) — ( 1,114 ) ( 118,615 )

Pre-tax current period change 60,948 — 4,552 65,500

Income tax benefit (expense) ( 14,714 ) — ( 1,144 ) ( 15,858 )

Balance as of December 31, 2021 $ ( 71,267 ) $ — $ 2,294 $ ( 68,973 )

Amounts reclassified out of AOCI associated with cash flow hedges were as follows:

Years Ended December 31,

(in thousands) 2021 2020 2019

Reclassifications to interest expense, net $ 60,948 $ 54,452 $ 2,777

Reclassifications to income tax benefit $ ( 14,714 ) $ ( 13,254 ) $ ( 746 )

Additionally, during 2019, the Company reclassified $ 39 million and $ 4 million of AOCI related to foreign currency translation to loss on sale of business and income tax benefit, respectively, as a result of the sale of ADT Canada.

There were no other material reclassifications of AOCI during 2021, 2020, and 2019.

As of December 31, 2021, approximately $ 34 million of AOCI related to accumulated unrealized losses of interest rate swap contracts that have been de-designated as cash flow hedges is estimated to be reclassified to interest expense, net, within the next twelve months.

Refer to Note 8 “Derivative Financial Instruments” for AOCI reclassifications associated with cash flow hedges.

Other changes in AOCI, which primarily relate to the Company’s defined benefit pension plans, were not material.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SHARE-BASED COMPENSATION

The Company grants share-based compensation awards to participants under the 2016 Equity Incentive Plan (the “2016 Plan”) and the 2018 Omnibus Incentive Plan (the “2018 Plan”).

Share-based compensation expense is included in selling, general, and administrative expenses in the Consolidated Statements of Operations and was as follows:

Share-based compensation expense recognized in selling, general, and administrative expenses was as follows:

Years Ended December 31,

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The Company recorded share-based compensation expense on the Distributed Shares Performance Tranche on a straight-line basis over the derived service period of app roximately three years from the IPO date, as the vesting conditions were deemed probable following the consummation of the IPO.

Share-based compensation expense associated with the Distributed Shares Performance Tranche was not material during 2021 and was $ 32 million and $ 47 million during 2020 and 2019, respectively.

Share-based compensation expense associated with the Distributed Shares Performance Tranche during 2022, 2021, and 2020 was not material.

The following table summarizes activity related to the Distributed Shares during 2022:

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Unvested as of December 31, 2022 9,323,486 $ 13.05

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In January 2018, the Company approved the 2018 Plan, which became effective upon consummation of the IPO.

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DEUs are charged against accumulated deficit when dividends are paid.

In December 2019, the exercise price of all options granted under the 2018 Plan prior to the payment of the 2019 Special Dividend were adjusted downward by $ 0.70 in accordance with plan provisions, which allow for adjustments to the exercise price of options upon the occurrence of certain events, such as changes in capital or operating structure.

In December 2019, the exercise price of all options under the 2018 Plan that were granted prior to the payment of a special dividend in 2019 were adjusted downward by $ 0.70 in accordance with plan provisions, which allow for adjustments to the exercise price of options upon the occurrence of certain events, such as changes in capital or operating structure.

Top-up Options

In connection with the Class B Unit Redemption in 2018, the Company granted 12.7 million options to holders of Class B Units (the “Top-up Options”).

The Top-up Options have an exercise price equal to the initial public offering price per share of the Company’s Common Stock, as adjusted in accordance with 2018 Plan provisions, and a contractual term of ten years from the grant date.

The Top-up Options have an exercise price equal to the IPO price per share of the Company’s Common Stock, as adjusted in accordance with 2018 Plan provisions, and a contractual term of ten years from the grant date.

Similar to the vesting conditions outlined above for the Distributed Shares, the Top-up Options contain a tranche subject to service-based vesting (the “Top-up Options Service Tranche”) and a tranche subject to vesting based upon the achievement of certain investment return thresholds by Apollo (the “Top-up Options Performance Tranche”).

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The Company recorded share-based compensation expense associated with the Top-up Options Service Tranche on a straight-line basis over the requisite service period of six months from the IPO.

Share-based compensation expense associated with the Top-up Options Performance Tranche is recognized on a straight-line basis over the derived service period of approximately three years from the IPO date and was not material during 2021, 2020, and 2019.

Share-based compensation expense associated with the Top-up Options Performance Tranche was recognized on a straight-line basis over the derived service period of approximately three years from the IPO date and was not material during the periods presented.

The following table summarizes activity related to the 2018 Plan Top-up Options:

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(a) The intrinsic value represents the amount by which the fair value of the Company’s Common Stock exceeds the option exercise price as of December 31, 2022.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Options granted under the 2018 Plan are primarily service-based awards that vest over a three-year period from the date of grant, have an exercise price equal to the closing price per share of the Company’s Common Stock on the date of grant, as adjusted in accordance with 2018 Plan provisions, and have a contractual term of ten years from the date of grant.

The Company did not grant any options during 2021.

During 2020 and 2019, the grant date fair values of options granted under the 2018 Plan were determined using the Black-Scholes valuation approach with the following assumptions:

Years Ended December 31,

The Company did not grant any options during 2022 and 2021.

During 2020, the grant date fair values of options granted under the 2018 Plan were determined using the Black-Scholes valuation approach with the following assumptions:

Risk-free interest rate 0.51 % - 1.40 %

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The stock price volatility was implied based upon an average of historical volatility of publicly traded companies in industries similar to the Company, as the Company did not have sufficient trading history to use as a basis for actual stock price volatility, as well as consideration for the Company’s debt-to-equity ratio.

The weighted-average grant date fair values of options granted during 2020 and 2019 were $ 1.77 and $ 2.20 , respectively.

The weighted-average grant date fair values of options granted during 2020 was $ 1.77 .

The following table summarizes activity related to 2018 Plan options during 2022:

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The fair value is equal to the closing price per share of the Company’s Common Stock on the date of grant.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes activity related to the 2018 Plan RSUs (including DEUs) during 2022:

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Share-based compensation expense associated with RSUs granted under the 2018 Plan was $ 55 million, $ 46 million, and $ 39 million during 2022, 2021, and 2020, respectively.

The fair value of RSUs (including DEUs) that vested and converted to shares of Common Stock was approximately $ 52 million on the respective vesting dates during 2021 and was not material during 2020 and 2019.

The fair value of RSUs (including DEUs) that vested and converted to shares of Common Stock on their respective vesting dates was approximately $ 59 million and $ 52 million during 2022 and 2021, respectively, and was not material during 2020.

As of December 31, 2022, unrecognized compensation cost related to RSUs granted under the 2018 Plan was $ 38 million, which will be recognized over a period of 1.7 years.

In June 2022, the Company granted 1.6 million performance share units (“PSUs”) in connection with a business combination that the Company will account for as share-based compensation.

These PSUs contain both service and performance vesting conditions that must be met on an annual basis with the final vesting date in October 2025.

The fair value of the PSUs is equal to the closing price per share of the Company’s Common Stock on the date of grant, which resulted in a weighted-average grant date fair value of $ 7.46 .

The PSUs are not entitled to dividend equivalent units.

The impact from the PSUs was not material during 2022.

NET INCOME (LOSS) PER SHARE

The Company applies the two-class method for computing and presenting net income (loss) per share for each class of common stock.

The two-class method allocates current period net income (loss) to each class of common stock and participating securities based on (i) dividends declared and (ii) participation rights in the remaining undistributed earnings (losses).

Basic net income (loss) per share is computed by dividing the net income (loss) allocated to each class of common stock using the two-class method by the related weighted-average number of shares outstanding during the period.

Additionally, basic weighted-average shares outstanding for the year ended December 31, 2021 includes approximately 5 million shares of Common Stock to be issued during 2022 in connection with the Sunpro Solar Acquisition.

Diluted net loss per share gives effect to all securities representing potential common shares that were dilutive and outstanding during the period for each class of common stock.

Potential shares of Common Stock include (i) incremental shares of Common Stock calculated using the treasury stock method for share-based compensation awards, (ii) incremental shares of Common Stock issuable upon the conversion of Class B Common Stock, and (iii) incremental shares of Common Stock calculated using the treasury stock method for warrants to purchase additional shares of Common Stock that were issued in connection with a business combination.

Potential shares of Class B Common Stock include (i) incremental shares of Class B Common Stock calculated using the treasury stock method for the period in which the Securities Purchase Agreement was outstanding prior to closing and (ii) incremental shares of Class B Common Stock calculated using the treasury stock method for Google’s option to purchase additional shares of Class B Common Stock prior to closing.

For purposes of the diluted net income (loss) per share of Common Stock computation, all potential shares of Common Stock that would be dilutive were excluded because their effect would be anti-dilutive.

As a result, basic net income (loss) per share of Common Stock is equal to diluted net income (loss) per share of Common Stock for the periods presented .

Accordingly, the potential shares of Common Stock that were excluded from the computation of diluted income (loss) per share of Common Stock were (i) share-based compensation awards of approximately 61 million, 66 million, and 50 million during 2021, 2020, and 2019, respectively;

(ii) shares of Class B Common Stock of 55 million during 2020;

and (iii) warrants to purchase additional shares of Common Stock of approximately 0.2 million during 2021.

The computations of basic and diluted net income (loss) per share for each class of common stock for the periods presented are as follows:

The Company applies the two-class method for computing and presenting net income (loss) per share for each class of common stock, which allocates current period net income (loss) to each class of common stock and participating securities based on dividends declared and participation rights in the remaining undistributed earnings or losses.

Basic net income (loss) per share is computed by dividing the net income (loss) allocated to each class of common stock by the related weighted-average number of shares outstanding during the period.

Diluted net income (loss) per share gives effect to all securities representing potential common shares that were dilutive and outstanding during the period for each class of common stock and excludes potentially dilutive securities whose effect would have been anti-dilutive.

Common Stock:

Potential shares of Common Stock include (i) incremental shares related to the vesting or exercise of share-based compensation awards, warrants, and other options to purchase additional shares of the Company’s Common Stock calculated using the treasury stock method and (ii) incremental shares of Common Stock issuable upon the conversion of Class B Common Stock.

Additionally, basic weighted-average shares outstanding for the year ended December 31, 2021 includes the Delayed Shares issued in connection with the ADT Solar Acquisition as discussed in Note 4 “Acquisitions and Disposition.”

During 2021 and 2020, all potential shares of Common Stock that would be dilutive were excluded from the diluted net income (loss) per share of Common Stock computation because their effect would be anti-dilutive.

As a result, basic net income (loss) per share of Common Stock is equal to diluted net income (loss) per share of Common Stock for those periods.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31,

2021 2020 2019

(in thousands, except per share amounts) Common Stock Class B Common Stock Common Stock Class B Common Stock Common Stock Class B Common Stock

(in thousands, except per share amounts) 2022 2021 2020

Allocation of net income (loss) - basic $ 162,200 $ ( 318,062 ) $ ( 620,856 )

Dilutive effect of potential shares of Class B common stock — — — ( 1,952 ) — —

Dilutive effect (including conversion of Class B Common Stock) 7,868 — —

Allocation of net income (loss) - diluted $ 170,068 $ ( 318,062 ) $ ( 620,856 )

Weighted-average shares outstanding - basic 848,465 770,620 760,483

Dilutive potential shares of Class B common stock — — — 2,089 — —

Dilutive effect (including conversion of Class B Common Stock) 66,603 — —

Weighted-average shares outstanding - diluted 915,068 770,620 760,483

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Net income (loss) per share - diluted $ 0.19 $ ( 0.41 ) $ ( 0.82 )

During 2021 and 2020, the potential shares of Common Stock that were excluded from the computation of diluted income (loss) per share of Common Stock were share-based compensation awards of approximately 61 million and 66 million, respectively, and all shares of Class B Common Stock.

Additionally, the basic and diluted earnings per share computations for Common Stock exclude approximately 9 million, 10 million, and 10 million unvested shares during 2022, 2021, and 2020, respectively, as their vesting is contingent upon achievement of certain performance requirements which had not been met during the respective periods.

Class B Common Stock:

During 2022 and 2021, there were no potential shares of Class B Common Stock.

During 2020, potential shares of Class B Common Stock included (i) incremental shares of Class B Common Stock calculated using the treasury stock method for the period in which the Securities Purchase Agreement was outstanding prior to closing and (ii) incremental shares of Class B Common Stock calculated using the treasury stock method for Google’s option to purchase additional shares of Class B Common Stock prior to closing.

Years Ended December 31,

(in thousands, except per share amounts) 2022 2021 2020

Allocation of net income (loss) - basic $ 10,418 $ ( 22,758 ) $ ( 11,337 )

Dilutive effect ( 188 ) — ( 1,952 )

Allocation of net income (loss) - diluted $ 10,230 $ ( 22,758 ) $ ( 13,289 )

Weighted-average shares outstanding - basic 54,745 54,745 15,855

Dilutive effect — — 2,089

Weighted-average shares outstanding - diluted 54,745 54,745 17,944

Net income (loss) per share - basic $ 0.19 $ ( 0.41 ) $ ( 0.72 )

Net income (loss) per share - diluted $ 0.19 $ ( 0.41 ) $ ( 0.74 )

COMMITMENTS AND CONTINGENCIES

Contractual Obligations

The Company’s contractual obligations for goods or services entered into in the ordinary course of business, including agreements that are enforceable and legally binding and have a remaining term in excess of one year, primarily consist of information technology services and equipment, including investments in our information technology infrastructure and telecommunication services.

The Company’s contractual obligations for goods or services entered into in the ordinary course of business, including agreements that are enforceable and legally binding and have a remaining term in excess of one year, primarily consist of information technology services and equipment, including investments in the Company’s information technology infrastructure and telecommunication services.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides the Company’s contractual obligations as of December 31, 2022 (in thousands) :

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$ 175,861 $ 67,286 $ 43,386 $ 24,826 $ 412 $ — $ 311,771

Other Obligations

In 2021, the Company entered into agreements for potential future customer account purchases from two distinct third parties, assuming certain conditions are met, over the course of those agreements.

As of December 31, 2021, remaining commitments for those potential future customer account purchases could total approximately $ 100 million through January 2023.

Google Commercial Agreement

The Company and Google entered into a Master Supply, Distribution, and Marketing Agreement (the “Google Commercial Agreement”), pursuant to which Google has agreed to supply the Company with certain Google devices as well as certain Google video and analytics services (“Google Services”), for sale to the Company’s customers.

Subject to customary termination rights related to breach and change of control, the Google Commercial Agreement has an initial term of seven years from the date that the Google Services are successfully integrated into the Company’s end-user security and automation platform.

If the integrated service is not launched by June 30, 2022, then Google has the contractual right to require the Company to offer Google Services without integration for professional installations except for existing customers who already have ADT Pulse or ADT Control interactive services until such integration has been made.

Further, subject to certain carve-outs, the Company has agreed to exclusively sell Google Services and smart-home, security, and safety devices to the Company’s customers.

The exclusivity restriction does not apply to, among others, sales of Blue by ADT DIY products and services, providing services to customers on certain of the Company’s legacy platforms, sales to large commercial customers, and sales of certain devices that Google does not supply to the Company.

The Google Commercial Agreement also contains customary termination rights for both parties.

In addition, Google has rights to terminate the Google Commercial Agreement if (i) the Company divests any part of its direct to consumer business and the acquiring entity does not agree to assume all obligations under the Google Commercial Agreement, or (ii) the Company

breaches certain provisions of the Google Commercial Agreement and does not cure such breaches.

In the event that the Company breaches the Google Commercial Agreement in a manner reasonably likely to result in a material adverse effect on Google’s business or brand, or the Company breaches certain data security and privacy obligations under the Google Commercial Agreement, the Company must suspend the sale of Google Services and certain devices during the applicable cure period.

Upon termination of the Google Commercial Agreement, the Company will no longer have rights to sell the Google Services or devices to new customers, subject to an applicable transition period.

In addition, the Google Services may not be accessible by the Company’s customers through its integrated end-user application during any cure period for the Company’s breach of certain data security and privacy provisions of the Google Commercial Agreement or upon termination of the agreement for a breach of such provisions.

The Google Commercial Agreement specifies that each party will contribute $ 150 million towards the joint marketing of devices and services;

In July 2020, the Company and Google entered into a Master Supply, Distribution, and Marketing Agreement (the “Google Commercial Agreement”), pursuant to which Google has agreed to supply the Company with certain Google devices as well as certain Google video and analytics services (“Google Devices and Services”), for sale to the Company’s customers.

Subject to customary termination rights related to breach and change of control, the Google Commercial Agreement has an initial term of seven years from the date that the Google Devices and Services are successfully integrated into the Company’s end-user security and automation platform.

Further, subject to certain carve-outs, the Company has agreed to exclusively sell Google Devices and Services to its customers.

In June 2022, the Company amended the Google Commercial Agreement to extend the date for the launch of the integrated Google Devices and Services until September 30, 2022.

As of September 30, 2022, Google has the contractual right to require the Company, with certain exceptions, until such integration, to exclusively offer Google Devices and Services without integration for all new professional installations and for existing customers who do not have ADT Pulse or ADT Control interactive services.

The Company has already begun providing Google video services and devices and will continue to do so on a non-integrated basis, and is working closely with Google toward an integrated solution.

The Google Commercial Agreement also specifies that each party shall contribute $ 150 million towards the joint marketing of devices and services;

customer acquisition;

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The Company expects to contribute the majority of these amounts by the end of 2025, however, the timing of these contributions is still uncertain.

In August 2022, the Company and Google further amended the Google Commercial Agreement (the “Google Commercial Agreement Amendment”), pursuant to which Google has agreed to commit an additional $ 150 million to fund growth, data and insights, product innovation and technology advancements, customer acquisition, and marketing, as mutually agreed by the Company and Google.

The additional success funds will be funded in three equal tranches, subject to the attainment of certain milestones.

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

The Company’s guarantees primarily relate to standby letters of credit related to its insurance programs and totaled $ 93 million and $ 76 million as of December 31, 2022 and 2021, respectively.

The Company does not believe such obligations will materially affect its financial position, results of operations, or cash flows.

During March 2022, the Company entered into an unsecured Credit Agreement with Goldman Sachs Mortgage Company, as administrative agent and issuing lender (the “Issuing Lender”), together with other lenders party thereto, pursuant to which the Company may request the Issuing Lender to issue one or more letters of credit for its own account or the account of its subsidiaries, in an aggregate face amount not to exceed $ 75 million at any one time.

Legal Proceedings

The Company is subject to various claims and lawsuits in the ordinary course of business, which include contractual disputes;

worker’s compensation;

employment matters;

product, general, and auto liability claims;

claims that the Company has infringed on the intellectual property rights of others;

claims related to alleged security system failures;

and consumer and employment class actions.

The Company is subject to various claims and lawsuits in the ordinary course of business, which include among other things commercial general liability claims, automobile liability claims, contractual disputes, worker’s compensation claims, labor law and employment claims, claims related to alleged alarm system failures, claims that the Company infringed on the intellectual property of others, and consumer and employment class actions.

The Company is also subject to regulatory and governmental examinations, information requests and subpoenas, inquiries, investigations, and threatened legal actions and proceedings.

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The Company records accruals for losses that are probable and reasonably estimable.

These accruals are based on a variety of factors such as judgment, probability of loss, opinions of internal and external legal counsel, and actuarially determined estimates of claims incurred but not yet reported based upon historical claims experience.

These accruals are based on a variety of factors such as judgment, probability of loss, opinions of internal and external legal counsel, and actuarially determined

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

estimates of claims incurred but not yet reported based upon historical claims experience.

Legal costs in connection with claims and lawsuits in the ordinary course of business are expensed as incurred.

Additionally, the Company records insurance recovery receivables from third-party insurers when recovery has been determined to be probable.

The Company has not accrued for any losses for which the likelihood of loss cannot be assessed or the range of possible loss cannot be estimated.

As of December 31, 2021 and 2020, the Company’s accrual related to ongoing claims and lawsuits not within the scope of an insurance program was not material.

As of December 31, 2021 and 2020, the Company’s accrual for ongoing claims and lawsuits within the scope of an insurance program totaled $ 90 million and $ 89 million, respectively.

Environmental Matters

In October 2013, the Company was notified by subpoena that the Office of the Attorney General of California, in conjunction with the Alameda County District Attorney, is investigating whether the Company’s electronic waste disposal policies, procedures, and practices are in violation of the California Business and Professions Code and the California Health and Safety Code.

During 2016, Protection One, Inc.

was also notified by the same parties that it was subject to a similar investigation.

The investigations have been inactive since December 2016 other than a status conference conducted in May 2019.

The Company is coordinating joint handling of both investigations and continues to fully cooperate with the respective authorities.

Shareholder Litigation

Five substantially similar shareholder class action lawsuits related to the IPO in January 2018 were filed in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida in March, April, and May 2018 and were consolidated for discovery and trial and entitled In re ADT Inc.

Shareholder Litigation .

The consolidated complaint in that action asserts claims on behalf of a putative class of shareholder plaintiffs and sought to represent a class of similarly situated shareholders for alleged violations of the Securities Act of 1933, as amended (the “Securities Act”).

The complaint alleges that the Company defendants violated the Securities Act because the registration statement and prospectus used to effectuate the IPO were false and misleading in that they allegedly misled investors with respect to litigation involving the Company, the Company’s efforts to protect its intellectual property, and the competitive pressures faced by the Company.

A similar shareholder class action lawsuit entitled Perdomo v ADT Inc., also related to the IPO in January 2018, was filed in the U.S.

District Court for the Southern District of Florida in May 2018.

In September 2019, the parties reached an agreement in principle to settle both the state court and the federal court actions.

In connection with the agreement, the plaintiffs in the Perdomo action voluntarily dismissed the action without prejudice in October 2019.

The parties agreed to a Stipulation of Settlement in September 2020.

January 2021, the State Court entered an order granting final approval of the settlement.

The settlement has been administered and the matter is now concluded.

California Independent Contractor Litigation

In August 2017, Jabra Shuheiber filed civil litigation in Marin County Superior Court on behalf of himself and two other individuals asserting wage and hour violations against the Company.

The action is entitled Jabra Shuheiber v.

ADT, LLC (Case Number CV 1702912, Superior Court, Marin County).

Shuheiber was the owner/operator of a sub-contractor, Maximum Protection, Inc.

(“MPI”), who employed the other two plaintiffs in the litigation.

In August 2018, in response to the California Supreme Court’s decision in Dynamex Operations West, Inc.

Superior Court of Los Angeles County , counsel for Mr.

Shuheiber provided the Company with a proposed amended complaint that modified the wage and hour claims such that they were brought on a class basis.

The proposed class is not clearly defined but appears to be composed of two groups of individuals:

1) individual owners of sub-contractors who performed services for the sub-contractor;

and 2) individuals with no ownership interest in a sub-contractor who were employed by the sub-contractor and provided services pursuant to a contract between the sub-contractor and the Company.

In October 2018, the Company answered the plaintiffs’ first amended complaint and filed a cross-complaint against the plaintiffs’ sub-contracting company for indemnification pursuant to the term of ADT’s sub-contract.

In November 2019, the parties reached a settlement agreement in principle.

The settlement was documented and received preliminary approval from the court in July 2020.

The court granted final approval of the settlement in January 2021.

The settlement has been administered and the matter is now concluded.

Los Angeles Alarm Permit Class Action

In June 2013, the Company was served with a class action complaint in California State Court entitled Villegas v.

In this complaint, the plaintiff asserted that the Company violated certain provisions of the California Alarm Act and the Los Angeles Municipal Alarm Ordinance for its alleged failures to obtain alarm permits for its Los Angeles customers and disclose the alarm permit fee in its customer contracts.

The plaintiff seeks to recover damages for putative class members who were required to pay enhanced false alarm fines as a result of the Company not obtaining a valid alarm permit at the time of alarm system installation.

The case was initially dismissed by the trial court and judgment was entered in the Company’s favor in October 2014, which the plaintiff appealed.

In September 2016, the California Appellate Court reversed and remanded the case back to the trial court.

In November 2018, the trial court granted the plaintiff’s motion for class certification and certified four subclasses of customers who received fines from the City of Los Angeles.

The case settled in January 2020.

The settlement received preliminary approval from the court in February 2021 and final approval in August 2021.

The settlement has been administered and the court has set a case review for July 8, 2022 and the matter is expected to be concluded at that time.

Wage and Hour Class Action

In January 2020, the Company acquired Defenders, which was defending against litigation brought by Teddy Archer and seven other security advisors who claim unpaid overtime under the Fair Labor Standards Act (the “FLSA”), breach of contract under state law in all states, and a violation of state wage-hour laws in California, New Jersey, New York, and Washington.

The lawsuit was originally filed in March 2018 in the United States District Court for the District of Delaware.

During 2018, the court conditionally certified the case as an FLSA collective action.

The plaintiffs seek to represent a nationwide class for unpaid wages.

During March 2021, Defenders was merged with and into the Company’s ADT LLC subsidiary, which is now defending the suit.

In November 2021, the Company moved to decertify the collective action.

Plaintiffs moved to certify a class for state law claims.

The motions remain pending.

The Company has not accrued for any contingent liabilities for which the likelihood of loss cannot be determined, is less than probable, or for which the range of potential loss cannot be reasonably estimated.

As of December 31, 2022 and 2021, the Company’s accrual for ongoing claims and lawsuits within the scope of an insurance program totaled approximately $ 90 million for both periods respectively.

The Company’s accrual related to ongoing claims and lawsuits not within the scope of an insurance program is not material.

Unauthorized Access by a Former Technician

In April 2020, after investigating a customer inquiry, the Company self-disclosed that a former technician based in Dallas, Texas had, during service visits, added his personal email address to approximately 200 of the Company’s customers’ accounts, which provided this employee with varying levels of unauthorized personal access to such customers’ in-home security systems.

In response, the Company initiated an affirmative outreach effort to notify all customers affected by this activity and to address their concerns.

Since the disclosure, seven lawsuits have been filed against the Company, and the Company intervened in an eighth lawsuit filed against the former technician.

Four of these lawsuits were originally filed as putative class actions and four as individual claims.

One of the individual claims and one of the putative class actions subsequently settled.

In May 2020, the Company was served with a class action complaint in a case captioned Shana Doty v.

ADT LLC and filed in the U.S.

District Court for the Southern District of Florida.

By an amended complaint, the plaintiff asserted causes of action on behalf of herself and other Company customers similarly situated, and sought to recover damages for breach of contract, negligence, intrusion upon seclusion, violation of the Computer Fraud and Abuse Act, negligent hiring, supervision and retention, and intentional infliction of emotional distress.

The Company moved to dismiss the plaintiff’s amended complaint.

In December 2020, the federal district court dismissed the causes of action for intrusion upon seclusion and violation of the Computer Fraud and Abuse Act, and further ruled that plaintiff may not seek to hold the Company vicariously liable for any intentional torts committed by the former technician.

The Company’s motion was denied on plaintiff’s other claims.

In January 2022, plaintiff filed a notice withdrawing motion for class certification and dismissing class allegations.

The case will now proceed as an individual action and is in discovery.

In June 2020, the Company was served with a class action complaint in a case captioned Alexia Preddy v.

ADT LLC and filed in the U.S.

District Court for the Southern District of Florida.

By an amended complaint, the plaintiff asserted causes of action on behalf of herself and others similarly situated as individuals residing in homes of Company customers, and sought to recover damages for negligence, intrusion upon seclusion, violation of the Computer Fraud and Abuse Act, negligent hiring, supervision and retention, and intentional infliction of emotional distress.

The Company moved to dismiss the plaintiff’s amended complaint and to compel arbitration.

In December 2020, the federal district court granted the Company’s motion to compel arbitration.

The case is stayed and administratively closed and is proceeding in arbitration as an individual claim.

In April 2021, the Company accepted service of a new class action complaint filed in the U.S.

District Court for the Southern District of Florida on behalf of Randy Doty, the husband of the plaintiff in Shana Doty v.

The claims alleged in the new complaint are substantially similar to the claims asserted in Alexa Preddy v.

ADT LLC, the case which has been stayed pending arbitration.

In July 2021, the federal district court dismissed the claim for intrusion upon seclusion and ruled that the plaintiff cannot proceed on theories of vicarious liability for the technician’s intentional torts.

As with the Shana Doty matter, plaintiff filed a notice withdrawing motion for class certification and dismissing class allegations.

The case will now proceed as an individual action and is in discovery.

Following the November 2021 abandonment of their class action allegations, the lawyers in the Doty and Preddy cases filed a new complaint in the U.S.

District Court for the Southern District of Florida on behalf of seven different customers and fourteen members of their respective households.

The case is captioned Stefanie Bryant, et al.

The claims alleged in the new complaint are substantially similar to the claims asserted in Alexa Preddy v.

ADT LLC, Shana Doty v.

ADT LLC, and Randy Doty v.

The Company may also be subject to future legal claims.

Company as Lessor

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

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

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

For transactions that do not qualify for the practical expedient as the lease component represents a sales-type lease, the Company accounts for the lease and non-lease components separately.

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

In April 2020, after investigating a customer inquiry, the Company self-disclosed that a former technician based in Dallas, Texas had, during service visits, added his personal email address to certain of the Company’s customers’ accounts, which provided this employee with varying levels of unauthorized personal access to such customers’ in-home security systems.

As of December 31, 2022, the Company and its insurers had settled all material pending lawsuits, arbitrations, and demands arising from this incident.

All such pending settlements and agreements are for monetary amounts within the Company’s insured levels.

Company as Lessee

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

The Company’s right-of-use assets and lease liabilities primarily represent lease payments fixed at the commencement of a lease and variable lease payments dependent on an index or rate.

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

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

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Lease payments that are neither fixed nor dependent on an index or rate and vary because of changes in usage or other factors are included in variable lease costs.

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

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

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

The Company’s subleases are not material.

Leases recognized in the Consolidated Balance Sheets were as follows (in thousands):

Presentation Classification 2021 2020

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Right-of-Use Assets and Lease Liabilities:

(in thousands) December 31,

Presentation and Classification:

Operating Current Prepaid expenses and other current assets $ 210 $ 230

Operating Non-current Other assets 128,455 125,945

Finance Non-current Property and equipment, net (a)

Finance Non-current Property and equipment, net (1)

93,013 88,962

6 unchanged sentences

_________________

(a) Finance right-of-use assets are recorded net of accumulated depreciation of approximately $ 78 million and $ 67 million as of December 31, 2021 and 2020, respectively.

The components of total lease cost reflected in the Consolidated Statements of Operations were as follows:

(1) Finance right-of-use assets are recorded net of accumulated depreciation of approximately $ 106 million and $ 78 million as of December 31, 2022 and 2021, respectively.

Years Ended December 31,

Lease Cost ( in thousands )

( in thousands )

2022 2021 2020

Operating lease cost $ 47,047 $ 48,078 $ 56,680

$ 48,078 $ 56,680 $ 58,579

Finance lease cost:

3 unchanged sentences

Total lease cost $ 185,025 $ 152,537 $ 131,324

The following table presents cash flow and supplemental information associated with the Company’s leases:

Cash Flow and Supplemental Information:

Years Ended December 31,

Other information ( in thousands )

( in thousands )

2022 2021 2020

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows - operating leases $ 50,721 $ 56,235 $ 57,212

Operating cash flows - finance leases $ 2,823 $ 3,122 $ 3,770

Financing cash flows - finance leases $ 32,123 $ 27,956 $ 24,918

Operating leases:

Operating cash flows $ 47,708 $ 50,721 $ 56,235

Finance Leases:

Operating cash flows $ 3,680 $ 2,823 $ 3,122

Financing cash flows $ 44,978 $ 32,123 $ 27,956

Right-of-use assets obtained in exchange for lease obligations:

1 unchanged sentence

Finance leases $ 48,439 $ 46,920 $ 15,326

The following table presents the weighted-average lease term and discount rate for operating and finance leases:

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Lease Term and Discount Rate:

5 unchanged sentences

Finance leases 4.5 % 3.7 %

The following table presents a maturity analysis related to the Company’s operating and finance leases, including interest, as of December 31, 2021:

Maturity of Lease Liabilities ( in thousands )

Maturity of Lease Liabilities:

December 31, 2022

( in thousands )

Operating Leases Finance Leases

8 unchanged sentences

Total $ 145,519 $ 94,888

Company as Lessor

For transactions that do not qualify for the practical expedient as the lease component represents a sales-type lease, the Company accounts for the lease and non-lease components separately.

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

RETIREMENT PLANS

Defined Contribution Plans

The Company maintains qualified defined contribution plans, which include 401(k) matching programs in the U.S., as well as similar matching programs in Canada prior to the sale of ADT Canada in 2019.

The Company maintains qualified defined contribution plans, which include 401(k) matching programs.

Expense for the defined contribution plans is computed as a percentage of participants’ compensation and was $ 47 million, $ 45 million, and $ 40 million during 2022, 2021, and 2020, respectively.

1 unchanged sentence

The Company participates in certain multi-employer union pension plans, which provide benefits for a group of the Company’s unionized employees.

The Company does not believe these multi-employer plans, including the Company’s required contributions and any underfunding liabilities under such plans, are material to the Company’s consolidated financial statements.

The Company does not believe these multi-employer plans, including the Company’s required contributions and any underfunded liabilities under such plans, are material to the Company’s consolidated financial statements.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Defined Benefit Plans

2 unchanged sentences

As of December 31, 2022 and 2021, the fair values of pension plan assets were $ 49 million and $ 71 million, respectively, and the fair values of projected benefit obligations were $ 56 million and $ 75 million, respectively.

As a result, the plans were underfunded by approximately $ 4 million and $ 12 million as of December 31, 2021 and 2020, respectively, and were recorded as a net liability in the Consolidated Balance Sheets.

As a result, the plans were underfunded by approximately $ 7 million and $ 4 million as of December 31, 2022 and 2021, respectively, and were recorded as a net liability.

Net periodic benefit cost associated with these plans was not material during 2022, 2021, and 2020.

2 unchanged sentences

The Company maintains a non-qualified supplemental savings and retirement plan, which permits eligible employees to defer a portion of their compensation.

Deferred compensation liabilities were $ 32 million and $ 28 million as of December 31, 2021 and 2020, respectively, and were recorded in other liabilities in the Consolidated Balance Sheets.

Deferred compensation liabilities are reflected in other liabilities and were $ 27 million and $ 32 million as of December 31, 2022 and 2021, respectively.

Deferred compensation expense was not material during 2022, 2021, and 2020.

RELATED PARTY TRANSACTIONS

The Company’s related party transactions primarily relate to products and services received from, or monitoring and related services provided to, other entities controlled by Apollo, as well as management, consulting, and transaction advisory services provided by Apollo to the Company.

The following discussion is related to the Company’s significant related party transactions.

There were no significant related party transactions with Apollo during 2021 and 2020.

During 2019, the Company incurred fees to Apollo of approximately $ 5 million related to the Company’s financing transactions.

During October 2020, the Company entered into a master services agreement with Rackspace US, Inc., a related party controlled by Apollo, for the provision of cloud storage, equipment, and services to facilitate the implementation of the Company’s cloud migration strategy for certain applications.

The master services agreement includes a minimum purchase commitment of $ 50 million over a seven -year term.

Purchases under this agreement were approximately $ 6 million and $ 0.5 million during 2021 and 2020, respectively.

ADT Solar uses Sunlight Financial LLC (“Sunlight”), a related party controlled by Apollo, to provide financing alternatives to certain ADT Solar customers.

Amounts paid to Sunlight since the Sunpro Solar Acquisition were not material.

The Company’s related party transactions primarily relate to products and services received from, or monitoring and related services provided to, other entities affiliated with Apollo, as well as, from time to time, management, consulting, and transaction advisory services provided by Apollo to the Company.

There were no significant related party transactions during the periods presented other than as described below.

There were no significant related party transactions with Apollo during 2022, 2021, and 2020, respectively.

Upon initial funding of the Term Loan A Facility, the Company will owe fees to Apollo, which are not expected to be material, related to Apollo’s performance of placement agent services related to such debt.

As discussed in Note 10 “Equity,” in October 2022, State Farm became a related party in connection with the State Farm Strategic Investment.

Other than as related to the State Farm Strategic Investment and State Farm Development Agreement, there were no significant related party transactions with State Farm during 2022.

Canopy is considered a related party under GAAP, as the Company accounts for its investment under the equity method of accounting.

Except for the transactions described in Note 5 “Equity Method Investments,” there were no other significant related party transactions with Canopy during 2022.

Sunlight Financial LLC

ADT Solar uses Sunlight Financial LLC (“Sunlight”), an entity affiliated with Apollo, to access certain loan products for ADT Solar customers, as discussed in Note 2 “Revenue and Receivables.”

Total loans funded by Sunlight were approximately $ 436 million for the year ended December 31, 2022.

As of December 31, 2022, the Company may be required to repurchase approximately $ 56 million of such loans.

Additionally, the Company incurred $ 54 million of financing fees for the year ended December 31, 2022.

As of December 31, 2022, net amounts due to/from Sunlight were not significant.

Amounts paid to Sunlight were not material for the year ended December 31, 2021.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During October 2020, the Company entered into a master services agreement with Rackspace US, Inc.

(“Rackspace”), an entity affiliated with Apollo, for the provision of cloud storage, equipment, and services to facilitate the implementation of the Company’s cloud migration strategy for certain applications.

The master services agreement includes a minimum purchase commitment of $ 50 million over a seven year term, which can be satisfied through spend with other parties.

As of December 31, 2022, total purchases towards the satisfaction of this commitment were approximately $ 24 million since inception.

The Company incurred fees to Rackspace of $ 14 million, $ 6 million, and $ 0.5 million during 2022, 2021, and 2020, respectively.

Other Transactions

During 2022, the Company incurred fees with certain entities affiliated with Apollo including (i) $ 3.0 million for a digital customer experience partner;

(ii) $ 2.7 million for certain technical services encompassing the purchase and support of IT equipment;

and (iii) $ 2.2 million for certain technology and communications services.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

2 unchanged sentences

(in thousands)

2021 December 31,

Current assets:

13 unchanged sentences

The accompanying notes are an integral part of these condensed financial statements

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(PARENT COMPANY ONLY)

7 unchanged sentences

Interest expense, net ( 8,086 ) ( 8,743 ) ( 8,342 )

Equity in net loss of subsidiaries ( 333,404 ) ( 618,512 ) ( 423,332 )

Other income (expense) ( 63,394 ) — —

Equity in net income (loss) of subsidiaries 240,670 ( 333,404 ) ( 618,512 )

Net income (loss) 172,618 ( 340,820 ) ( 632,193 )

14 unchanged sentences

The accompanying notes are an integral part of these condensed financial statements

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(PARENT COMPANY ONLY)

5 unchanged sentences

Net income (loss) $ 172,618 $ ( 340,820 ) $ ( 632,193 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Equity in net loss of subsidiaries 333,404 618,512 423,332

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Equity in net (income) loss of subsidiaries ( 240,670 ) 333,404 618,512

Change in fair value of other financial instruments 63,396 — —

Other, net 49,470 24,391 30,687

7 unchanged sentences

Cash flows from financing activities:

Proceeds from issuance of common stock, net of related expenses — 447,811 —

Proceeds from long-term borrowings — — 509,460

Proceeds from issuance of common stock, net of expenses 1,180,000 — 447,811

Dividends on common stock ( 127,125 ) ( 116,348 ) ( 109,328 )

7 unchanged sentences

Supplementary cash flow information:

Issuance of shares in lieu of cash dividends $ 4 $ 15 $ 67,767

Issuance of shares for acquisition of business $ 55,485 $ 528,503 $ 113,841

The accompanying notes are an integral part of these condensed financial statements

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Notes to Condensed Financial Statements (Parent Company Only)

5 unchanged sentences

The condensed financial statements of ADT Inc.

have been prepared using the same accounting principles and policies described in Note 1 “Description of Business and Summary of Significant Accounting Policies” with the only exception being that the parent company accounts for its subsidiaries using the equity method of accounting.

have been prepared using the same accounting principles and policies described in the other notes to the consolidated financial statements with the only exception being that the parent company accounts for its subsidiaries using the equity method of accounting.

These condensed financial statements should be read in conjunction with the Company’s consolidated financial statements and related notes thereto.

Transactions with Subsidiaries

The majority of ADT Inc.’s transactions with its subsidiaries are related to (i) the receipt of distributions from subsidiaries in order to fund equity transactions, such as the payment of dividends and the repurchase of Common Stock, (ii) the contribution to subsidiaries of proceeds received from equity transactions, or (iii) the integration of business acquisitions into the Company’s organizational structure.

(ii) the contribution to subsidiaries of proceeds received from equity transactions;

or (iii) the integration of business acquisitions into the Company’s organizational structure.

During 2022, ADT Inc.

made non-cash contributions to subsidiaries of approximately $ 630 million related to the transfer of net assets of certain subsidiaries for the acquisition of Sunpro Solar, including $ 529 million in the issuance of shares, as well as, share-based compensation.

made non-cash contributions to subsidiaries of approximately $ 82 million primarily related to the transfer of net assets of certain subsidiaries for share-based compensation.

During 2021, ADT Inc.

made non-cash contributions to subsidiaries of approximately $ 630 million related to the transfer of net assets of certain subsidiaries for the acquisition of ADT Solar, including $ 529 million in the issuance of shares, as well as, share-based compensation.

During 2020, ADT Inc.

acquired Defenders and Cell Bounce.

1 unchanged sentence

received a non-cash distribution of $ 43 million related to intangible assets from a subsidiary and made non-cash contributions to subsidiaries of approximately $ 434 million related to the transfer of net assets of certain subsidiaries and share-based compensation.

During 2019, ADT Inc.

entered into an intercompany loan with a subsidiary in connection with the sale of ADT Canada.

also received non-cash distributions from subsidiaries of $ 891 million primarily related to the distribution of net assets and intercompany loans in connection with the sale of ADT Canada.

In addition, ADT Inc.

made non-cash contributions to subsidiaries of approximately $ 146 million primarily related to share-based compensation and intercompany loans in connection with the sale of ADT Canada.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures