What changed in this filing

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Item 1. Business

2024-02-28 compared with 2023-02-28 · 209 added, 248 removed, 204 unchanged (69% of the section changed)

• Company Overview

• Key Business Developments and Recent Initiatives

• Key Business Developments

• Segment and Geographic Information

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COMPANY OVERVIEW

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

and since the acquisition of ADT Solar in December 2021, we have provided residential solar and energy storage solutions.

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

As discussed below, on October 2, 2023, we completed the divestiture of our Commercial Business, which provided security and other solutions to commercial customers;

and in January 2024, we announced our exit from the residential solar business, which provided residential solar and energy storage solutions since the acquisition of ADT Solar in 2021.

Our mission is to empower people to protect and connect what matters most with safe, smart, and sustainable solutions, delivered through innovative offerings, unrivaled safety, and a premium experience because we believe that everyone deserves to feel safe.

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and superior customer care, all driven by our industry-leading experience and knowledge.

We serve our customers through our nationwide sales and service offices;

monitoring and support centers;

and a large network of security, home-automation, and solar-installation professionals.

As of December 31, 2022, we had approximately 6.7 million recurring revenue customers.

As of December 31, 2023, we had approximately 6.4 million security monitoring service subscribers.

We serve our customers through our nationwide sales and service offices, monitoring and support centers, and large network of installation and service professionals.

Formation and Organization

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(“Ultimate Parent”).

Ultimate Parent is majority-owned by Apollo Investment Fund VIII, L.P.

Ultimate Parent is ultimately majority-owned by Apollo Investment Fund VIII, L.P.

and its related funds that are directly or indirectly managed by affiliates of Apollo.

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

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

In September 2022, we entered into a Securities Purchase Agreement, dated as of September 5, 2022, with State Farm (the “State Farm Securities Purchase Agreement”), pursuant to which we agreed to issue and sell in a private placement to State Farm 133,333,333 shares of our Common Stock (the “State Farm Shares”) at a per share price of $9.00 for an aggregate purchase price of $1.2 billion (the “State Farm Strategic Investment”).

Also in September 2022, in connection with the State Farm Strategic Investment, we commenced a tender offer to purchase up to 133,333,333 shares of our Common Stock (including shares issued upon conversion of Class B Common Stock) (the “Tender Shares”) at a per share price of $9.00 (the “Tender Offer”).

Concurrently with the execution of the State Farm Securities Purchase Agreement, Apollo delivered to us a Tender and Support Agreement, pursuant to which Apollo agreed to collectively tender (and not withdraw) no fewer than 133,133,333 shares of Common Stock in the Tender Offer (the “Apollo Support Agreement”) and Google delivered to us a Support Agreement, pursuant to which Google agreed to not convert and tender any of its shares of Class B Common Stock.

In October 2022, the State Farm Strategic Investment closed, and we issued and sold the State Farm Shares to State Farm pursuant to the State Farm Securities Purchase Agreement.

Also in October 2022, the Tender Offer expired, and we used the proceeds from the State Farm Strategic Investment to repurchase the Tender Shares, 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.

As of December 31, 2022, Apollo owned approximately 55%, State Farm owned approximately 15%, and Google owned approximately 6% of our outstanding common stock, including Class B Common Stock (on an as-converted basis) and unvested shares of common stock.

KEY BUSINESS DEVELOPMENTS AND RECENT INITIATIVES

The following highlights key updates to our business over the past three years:

• January 2020 - We acquired Defender Holdings, Inc.

(“Defenders”), our largest independent dealer at the time providing home security and automation products and services (the “Defenders Acquisition”), which represented approximately 55% of our indirect channel at the time of acquisition.

• February 2020 - We 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.

• July 2020 - We entered into a Master Supply, Distribution, and Marketing Agreement (the “Google Commercial Agreement”) with Google pursuant to which Google has agreed to supply us with certain Google devices as well as certain Google video and analytics services for sale to our customers.

• November 2020 - We announced the ongoing development of our ADT-owned next-generation professional security and automation technology platform as part of our partnership with Google (as discussed below).

• July 2021 - We introduced our Virtual Assistance Program, which delivers a scalable, cost-efficient means of servicing our customers through live video streaming with our skilled technicians to troubleshoot and resolve service issues.

This provides customers with more options for receiving certain services that best fit their lifestyles while reducing the cost for us to provide these services and lowering our carbon footprint by eliminating thousands of vehicle trips each day.

• December 2021 - We entered the residential solar market with the ADT Solar Acquisition, which leverages our brand awareness and trust among consumers to provide customers with solar and energy storage solutions, energy efficiency upgrades, and roofing services.

• October 2022 - The State Farm Strategic Investment closed, and we completed the Tender Offer, both as described above.

In connection with the State Farm Strategic Investment, we entered into a development agreement with State Farm (the “State Farm Development Agreement”), pursuant to which State Farm committed up to $300 million to fund product and technology innovation, customer growth, and marketing initiatives.

Upon the closing of the State Farm Strategic Investment, we received $100 million of such commitment from State Farm, which is restricted until we use the funds for investment, as agreed upon with State Farm, in accordance with the State Farm Development Agreement.

• February 2023 - Released our new ADT+ app for our self setup line of DIY smart home security products, including Google Nest offerings, which allows customers to easily access and control their ADT devices through an intuitive app experience.

Google Partnership Update

Pursuant to the Google Commercial Agreement, Google has agreed to supply us with certain Google devices as well as certain Google video and analytics services (“Google Devices and Services”) for sale to our customers.

As of December 31, 2023, Apollo owned approximately 54%, State Farm owned approximately 14%, and Google owned approximately 6% of our outstanding common stock, including shares of Class B common stock, par value $0.01 per share (“Class B Common Stock”) (on an as-converted basis) and unvested shares of common stock.

KEY BUSINESS DEVELOPMENTS

Commercial Divestiture

On August 7, 2023, ADT, Iris Buyer LLC (“Iris Buyer”), a Delaware limited liability company and affiliate of GTCR, and, solely for certain purposes set forth in the Commercial Purchase Agreement (as defined below), Fire & Security Holdings, LLC (“F&S Holdings”), a Delaware limited liability company and an indirect, wholly owned subsidiary of ADT, entered into an Equity Purchase Agreement (the “Commercial Purchase Agreement”) pursuant to which GTCR agreed to acquire all of the issued and outstanding equity interests of F&S Holdings, which directly or indirectly held all of the issued and outstanding equity interests in the subsidiaries of ADT that operated ADT’s commercial business (the “Commercial Business”) (previously defined as the “Commercial Divestiture”).

On October 2, 2023, we completed the Commercial Divestiture for a total purchase price of approximately $1,613 million in cash, subject to customary post-closing adjustments, and received net proceeds of approximately $1,585 million, excluding transaction costs.

The Commercial Divestiture supports our strategic vision and strengthens our financial profile, and we used net proceeds of approximately $1,518 million to reduce our debt.

Refer to Note 8 “Debt” in the Notes to Consolidated Financial Statements in Item 15 “Exhibit and Financial Statement Schedules” for further information.

Beginning in the third quarter of 2023, we presented its Commercial Business as a discontinued operation as the Commercial Divestiture met all of the held for sale criteria for the disposal group and represented a strategic shift that has and will continue to have a major effect on the Company’s operations and financial statements.

The change is reflected in all periods presented.

Unless otherwise noted, amounts and disclosures below are reflective of the Company’s continuing operations.

Prior to the third quarter of 2023, the Commercial Business was reflected in the Commercial reportable segment.

In connection with the Commercial Divestiture, we entered into a Transition Services Agreement (the “Commercial TSA”), pursuant to which the Company and the Commercial Business will provide certain transitional services relating to ongoing support and other administrative functions to each other for a transitional period of up to 24 months after the closing of the Commercial Divestiture.

Commercial TSA fees charged to the Commercial Business represent charges for internal labor as well as certain third-party costs identified in connection with providing such services.

Income from the Commercial TSA is recognized in other income (expense), and expenses incurred by the Company to support the transition are recorded based on the nature of the expense.

The Company and GTCR entered into an agreement granting GTCR a license to continue to use the ADT brand and other Company trademarks for a period of twelve months to transition from Company branding (the “Brand License”).

The Company has also agreed to a covenant not to assert a claim against GTCR for infringement of Company's patents as of the Commercial Divestiture for products and services that were used in the Commercial Business prior to the Commercial Divestiture, and has provided GTCR with a paid-up, irrevocable, non-assignable (with limited exceptions) license to continue to use certain software and other Company IP in the same manner.

Royalty income is included in other income (expense) and was not material during 2023.

In addition, the Company and Iris Buyer agreed to customary employee non-solicitation and no-hire restrictions with respect to the other party’s employees for a period of two years from the closing.

The Company and Iris Buyer also agreed to a non-competition period of five years from the closing whereby, subject to certain exceptions, (a) ADT and its subsidiaries will not directly or indirectly sell or service in the United States (or any of its territories):

(i) security, building automation, access control, retail store performance, electronic article surveillance, or cash processing/ATM security equipment or services for non-residential premises over 10,000 square feet, (ii) nurse call solutions, or (iii) fire detection or fire suppression products or services for non-residential premises of any size;

and (b) F&S Holdings and its subsidiaries will not directly or indirectly sell or service in the United States (or any of its territories) or Canada, among other items:

(i) security, building automation or access control products or services for any non-residential premises under 10,000 square feet or any residential premises, (ii) personal emergency response systems or mobile safety solutions (other than nurse call solutions), or (iii) fire detection products or services for residential premises.

ADT Solar Exit

In December 2021, we entered the residential solar market with the ADT Solar acquisition, which allowed us to provide customers with solar and energy storage solutions, energy efficiency upgrades, and roofing services.

As previously disclosed, in November 2023, we announced a plan to streamline the solar business to focus on the top performing markets and rationalize the overhead and infrastructure of the business.

As part of this plan, we closed a significant number of branches that operated the solar business along with making associated headcount reductions.

On January 19, 2024, after a strategic review of the business and continued macroeconomic and industry pressures, the Company’s Board of Directors (as defined below) approved a plan to fully exit the residential solar business, which may include the transition of components of the business to other parties.

The ADT Solar Exit is expected to be completed during 2024.

Google Partnership

In July 2020, we entered into a Master Supply, Distribution, and Marketing Agreement with Google (as amended, the “Google Commercial Agreement”) pursuant to which Google has agreed to supply us with certain Google devices as well as certain Google video and analytics services (the “Google Devices and Services”) for sale to our 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, we amended the Google Commercial Agreement to extend the date for the launch of the integrated Google Devices and Services until September 30, 2022.

Although we currently offer Google video products for all new professional installs, with limited exceptions, we have not launched the integrated Google Devices and Services, and therefore Google has the contractual right to require us, with certain exceptions, until such integration, to exclusively offer Google Devices and Services without integration for all new professional installations and, with limited exceptions, for existing customers who do not have ADT Pulse or ADT Control interactive services.

We are working closely with Google toward an integrated solution.

In September 2020, we issued and sold 54,744,525 shares of Class B Common Stock, for an aggregate purchase price of $450 million, to Google in a private placement pursuant to a securities purchase agreement dated July 31, 2020.

In 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 was 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 September 2023, or earlier if certain conditions occurred (the “Google Lock-up Period”).

In December 2023, the Company and Google amended the Google Investor Rights Agreement to extend the Google Lock-up Period through June 2025, or earlier if certain conditions occur (see Note 11 “Equity” to our Notes to Consolidated Financial Statements).

Our partnership with Google represents the combination of the leading security and smart home brand and the leading technology brand joining forces to introduce the next-generation smart and helpful home.

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and technology updates for products included in such offerings.

In addition, in August 2022, the Company and Google executed an amendment to the Google Commercial Agreement, 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.

Co-branded offerings are and will continue to be available in the form of both professionally installed and self setup, or do-it-yourself (“DIY”), solutions and will include the integration of leading Google devices paired with Google video and analytics services initially through our current technology platform and the Google Home platform.

We launched the Google Nest doorbell during the first quarter of 2022, rolled out mesh Wi-Fi during the second quarter of 2022, and launched Google indoor and outdoor cameras in the third quarter of 2022.

In the first quarter of 2023, we introduced our own new ADT+ app for our self setup line of DIY smart home security products, including Google Nest offerings.

Our comprehensive interactive technology platform is intended to provide customers with a seamless experience through a common application across security, life safety, automation, and analytics and integrate the user experience, customer service experience, and back-end support.

We expect to introduce this platform for professional installation by the end of 2023.

COVID-19 Pandemic Update

The COVID-19 Pandemic, including subsequent variants, caused certain notable adverse impacts on general economic conditions, including temporary and permanent closures of many businesses, increased governmental regulations, supply chain disruptions, and changes in consumer spending.

Our employees are susceptible to COVID-19 in the ordinary course of their work.

In order to continue to both protect our employees and serve our customers, we have implemented and are continuously monitoring and evolving certain measures as necessary, 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 our call center professionals.

We continue to monitor the impact of the COVID-19 Pandemic on our business, including with regard to the health and safety of our employees and customers, the continuing supply chain impacts and availability and pricing of key products, and our ability to continue to operate all aspects of our business.

In addition, in August 2022, the Company and Google executed an amendment to the Google Commercial Agreement, pursuant to which Google has agreed to commit an additional $150 million (together with the initial amounts, the “Google Success Funds”) to fund growth, data and insights, product innovation and technology advancements, customer acquisition, and marketing, as mutually agreed by the Company and Google.

Each of the $150 million segments of the Google Success Funds will be triggered in three equal tranches, respectively, subject to the attainment of certain milestones.

During 2023, we received approximately $40 million of the Google Success Funds for certain joint marketing expenses incurred by the Company.

In December 2023, the Company and Google entered into an addendum to the Company’s existing agreement for using Google cloud services (the “Google Cloud Agreement Addendum”), pursuant to which Google has agreed to provide certain credits, discounts, and other incentives for use of the Google Cloud Platform to the Company, and the Company has committed to purchasing $200 million of Google Cloud Platform services over seven years (through December 2030), as discussed in Note 14 “Commitments and Contingencies” in the Notes to Consolidated Financial Statements.

State Farm Partnership

In September 2022, we entered into a Securities Purchase Agreement, dated as of September 5, 2022, with State Farm (the “State Farm Securities Purchase Agreement”), pursuant to which we agreed to issue and sell in a private placement to State Farm, 133,333,333 shares of our Common Stock (the “State Farm Shares”) at a per share price of $9.00 for an aggregate purchase price of $1.2 billion (the “State Farm Strategic Investment”).

In October 2022, the State Farm Strategic Investment closed, and we issued and sold the State Farm Shares to State Farm pursuant to the State Farm Securities Purchase Agreement (the “Closing”).

In addition, we entered into a development agreement with State Farm (the “State Farm Development Agreement”), pursuant to which State Farm committed up to $300 million to fund product and technology innovation, customer growth, and marketing initiatives.

Upon the Closing, we received $100 million of such commitment from State Farm, which is restricted until we use the funds for investment, as agreed upon with State Farm, in accordance with the State Farm Development Agreement (the “Opportunity Fund”), of which we used approximately $11 million during 2023.

Beginning in 2023, certain State Farm customers were able to receive ADT home security products and professional monitoring at a reduced cost as part of the partnership between ADT and State Farm.

In connection with this arrangement, the Company receives a subsidy from State Farm for each system.

Amounts are paid through the Opportunity Fund and were not material during 2023.

SEGMENT AND GEOGRAPHIC INFORMATION

We evaluate and report our segment information based on the manner in which our Chief Executive Officer, who is the chief operating decision maker, evaluates performance and allocates resources.

We report results in three operating and reportable segments, Consumer and Small Business (“CSB”), Commercial, and Solar.

We evaluate and report our segment information based on the manner in which our Chief Executive Officer (“CEO”), who is the chief operating decision maker, evaluates performance and allocates resources.

As a result of the Commercial Divestiture, we report results in two operating and reportable segments, CSB and Solar.

Prior to the third quarter of 2023, the Commercial Business was reflected in the Commercial reportable segment.

Certain allocated shared costs that were previously included in the Commercial reportable segment that did not qualify to be presented within discontinued operations are now reflected in the CSB reportable segment consistent with other unallocated corporate and other costs as discussed below.

Where applicable, prior periods have been retrospectively adjusted to reflect our current operating and reportable segment structure.

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

Revenue outside of the U.S.

is not material.

We organize our segments based primarily on customer type as follows:

• CSB - The CSB segment primarily includes (i) revenue and operating costs from the sale, installation, servicing, and monitoring of integrated security, interactive, 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 primarily comprised of owners and renters of residential properties, small business operators, and other individual consumers.

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

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

The CSB segment includes (i) revenue and operating costs from the sale, installation, servicing, and monitoring of integrated security, interactive, and automation systems and other related offerings;

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

and (iii) certain 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 sale and installation of solar systems, energy storage solutions, and other related solutions and services;

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

• Solar - Customers in the Solar segment are comprised of residential homeowners.

The Solar segment primarily includes (i) revenue and operating costs from the sale and installation of solar systems, energy storage solutions, roofing services, and other related solutions and services;

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

and (iii) certain dedicated corporate and other costs.

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

Revenue outside of the U.S.

is not material.

PRODUCTS AND SERVICES

Our Security and Automation Offerings

Our core security offerings include burglar and life safety alarms, smart security cameras, smart home automation systems, fire detection and suppression systems, video surveillance systems, and access control systems (referred to collectively as security systems, solutions, or offerings).

Our security offerings are designed to detect intrusion;

Security and Automation Offerings

Our core security offerings include burglar and life safety alarms, smart security cameras, smart home automation systems, and video surveillance systems (referred to collectively as security systems, solutions, or offerings).

Our security offerings are

designed to detect intrusion;

control access;

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We offer our customers routine maintenance and the installation of upgraded or additional equipment, which provide additional value to the customer and generate incremental recurring monthly revenue.

Additionally, our personal emergency response system products and services utilize our security monitoring infrastructure to provide customers with solutions that help to sustain independent living, detect when a fall occurs, and provide protection while on the go.

In our Commercial business, we also sell, install, integrate, maintain, and inspect commercial building safety and management technologies.

The vast majority of new residential customers choose our automation and smart home solutions, which provide customers the ability to remotely monitor and manage their environments through our customized web portal via web-enabled devices (such as smart phones) or through touchscreen panels in their homes.

During 2022, as part of our partnership with Google, we launched the Google Nest doorbell, rolled out mesh Wi-Fi, and launched Google indoor and outdoor cameras as part of our product offerings.

In the first quarter of 2023, we launched our proprietary ADT+ app for our self setup line of DIY smart home security products, including Google Nest offerings, which allows customers to easily access and control their ADT devices through an intuitive app experience.

Our comprehensive interactive technology platform is intended to provide customers with a seamless experience through a common application across security, life safety, automation, and analytics, and integrate the user experience, customer service experience, and back-end support.

During the fourth quarter of 2023, we began our phased rollout of our ADT+ app for professional installation along with a new interactive and hardware lineup.

Our automation and smart home solutions allow customers to:

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• automate custom schedules for these connected devices.

Sales to most CSB and certain Commercial customers typically require us to make an upfront investment related to installation costs (such as labor, commissions, equipment, and overhead), which we partially recover through upfront fees charged at the time of installation.

While the economics of an installation can vary depending on the customer acquisition channel and offering, we generally achieve revenue break-even in less than two and a half years.

Sales to most CSB customers typically require us to make an upfront investment related to installation costs (such as labor, commissions, equipment, and overhead), which we recover through upfront fees charged at the time of installation and recurring monthly revenue generated in future years.

While the economics of an installation can vary depending on the customer acquisition channel and offering, we generally achieve revenue break-even in approximately two years.

Our ability to increase our average prices for individual customers depends on a number of factors, including the type and complexity of service, the quality of our service, the introduction of additional features and offerings that increase the value to the customer, and the competitive environments in which we operate.

At the time of initial equipment installation, our CSB and Commercial customers typically contract for both monitoring and maintenance services, which are generally governed by multi-year contracts.

At the time of initial equipment installation, our CSB customers typically contract for both monitoring and maintenance services, which are generally governed by multi-year contracts.

If a customer cancels or is otherwise in default under a monitoring contract prior to the end of the initial contract term, we have the right under the contract to receive a termination payment from the customer in an amount equal to a designated percentage of all remaining monthly payments.

CSB - The standard contract terms for CSB customers are two, three, or five years, with automatic renewals for successive 30-day periods, unless canceled by either party.

Customers are typically charged an upfront fee, which qualifying residential customers can pay over the course of the contract.

The standard contract terms for CSB customers are two, three, or five years, with automatic renewals for successive 30-day periods, unless canceled by either party.

Customers are typically charged an upfront fee, which qualifying customers can pay over the course of the contract.

We may then use these retail installment contract receivables as collateral for borrowings under our uncommitted receivables securitization financing agreement (the “2020 Receivables Facility”).

Residential customers are also generally obligated to make monthly payments for monitoring services for the remainder of the initial contract term.

Customers are also generally obligated to make monthly payments for monitoring services for the remainder of the initial contract term.

Monitoring services are typically billed monthly or quarterly in advance, and more than 80% of our residential customers pay us these fees through automated payment methods, with new residential customers generally opting for these payment methods.

Commercial - The standard contract term for Commercial customers is typically five years with automatic renewals ranging from 30-day periods to one year.

In some arrangements, we may install a system without an on-going contractual monitoring or maintenance service relationship.

Solar Offerings

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Additionally, a substantial portion of sales are financed by third parties.

As previously disclosed, in January 2024, we announced that we are exiting the residential solar market.

Monitoring Centers

As of December 31, 2022, we operated nine monitoring centers located throughout the U.S.

As of December 31, 2023, we operated six monitoring centers located throughout the U.S.

and listed by Underwriters Laboratories (“UL”) in order to provide 24/7 year-round professional monitoring services to our customers, including our monitoring centers that also provide outsourced monitoring services for other security companies.

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Many jurisdictions have laws requiring that security systems for certain buildings be monitored by UL-listed centers, and in some instances, a UL listing is required by insurers of certain customers as a condition of insurance coverage.

In addition, we implemented certain work from home actions as a result of the COVID-19 Pandemic, including for a majority of our monitoring center professionals in compliance with UL work-from-home standards.

Upon the occurrence of certain initiating events, our monitored security systems send event-specific signals to personnel at our monitoring centers who then relay appropriate information, based on the customer’s contract and preferences, to first responders, such as local police, fire departments, or medical emergency response centers;

the customer;

or others on the customer’s emergency contact list.

In addition, we implemented certain work from home actions, including for a majority of our monitoring center professionals, in compliance with UL work-from-home standards.

Upon the occurrence of certain initiating events, our monitored security systems send event-specific signals to our monitoring personnel who then relay appropriate information, based on the customer’s contract and preferences, to first responders, such as local police, fire departments, or medical emergency response centers and the customer or others on the customer’s emergency contact list.

We continue to focus on our alarm verification technologies and partner with industry associations and various first responder agencies to help prioritize response events, enhance response policies, and develop processes that allow us to send data to emergency response centers directly.

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ADT SMART monitoring can deliver alarms to connected and participating 911 centers faster than traditional voice handling speeds.

During 2023, we also launched an Alarm Scoring pilot, which offers a uniform and reliable approach for categorizing alarm severity levels, enhances the accuracy of assessing potential life or property threats, and gives first responders precise and crucial alarm data for improved emergency responses.

Field and Call Center Operations

Our field and call center operations comprise a nationwide network of sales and service offices, call centers, and support facilities across the U.S.

We provide ongoing training to our field and call center employees across all business segments, as well as our authorized dealers, and we continually measure and monitor customer satisfaction-oriented metrics across each customer touch point.

We staff our sales and service offices with qualified individuals who make sales calls, install security and solar systems, and provide service and support to our customers, and we utilize third-party subcontract labor when appropriate to assist with these efforts.

We provide ongoing training to our field and call center employees, as well as our authorized dealers, and we continually measure and monitor customer satisfaction-oriented metrics across each customer touch point.

We staff our sales and service offices with qualified field solution advisors and installation and service technicians, and we utilize third-party subcontract labor when appropriate to assist with these efforts.

Our objective is to provide a differentiated service experience by resolving customer issues remotely whenever possible and scheduling installation and service visits at times convenient for the customer.

Additionally, we implemented our Virtual Assistance Program in July 2021 for our residential security and automation customers, which enables our technicians to live stream with certain customers to resolve service issues or assist with installations while reducing some of the costs of in-home visits.

Our CSB and Commercial call center operations provide support 24 hours a day on a year-round basis, and all requests are routed through our customer contact centers to ensure technical service requests are handled promptly and professionally.

Our innovative virtual support program (the “Virtual Assistance Program”), which delivers a scalable, cost-efficient means of servicing our CSB customers through live video streaming with our skilled technicians to troubleshoot and resolve service issues.

In 2023, we introduced the ADT WiFi Fix app, which allows virtual customer service agents to diagnose and address any WiFi issues impacting customers’ ADT equipment or other devices.

These offerings provide customers with more options for receiving certain services that best fit their lifestyles while reducing the cost for us to provide these services and lowering our carbon footprint by avoiding thousands of vehicle trips each day.

Our call center operations provide support 24 hours a day on a year-round basis, and all requests are routed through our customer care agents to ensure technical service requests are handled promptly and professionally.

In many cases, customer care specialists can remotely resolve non-emergency inquiries regarding service, billing, and alarm testing and support.

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In addition, we use a network of external vendors, both domestic and outside of the U.S., to supplement our internal call center resources as needed.

We serve our largest Commercial multi-site customers from our National Accounts Operation Center (“NAOC”) in Irving, Texas, which allows the customer to call one location to resolve all support issues, including billing, installations, service calls, upgrades, or other service-related issues.

Additionally, our Network Operations Center (“NOC”) houses a group of highly-experienced, certified engineers, system administrators, and network analysts capable of designing, provisioning, and maintaining security-only networks for our Commercial customers.

The NOC also provides other managed services to support and enhance our customer’s security systems.

Employees in our NOC hold a multitude of vendor certifications in addition to classic Cisco and Cisco Meraki Certifications.

Our NOC was one of the first security integrators to earn the Cisco Cloud and Managed Services Express Partner Certification and remains one of the few in our industry to hold this specialized certification.

Sales and Distribution Channels

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• Direct Channel

Our direct channel CSB and Commercial customers are generated by direct response and other marketing efforts, general brand awareness, customer referrals, and lead generation partners, and are supported by our internal sales force located in our national sales call centers as well as our nationwide network of sales and service offices.

Our direct channel CSB customers are generated by direct response and other marketing efforts, general brand awareness, customer referrals, door-to-door activities, along with lead generation partners, and are supported by our internal sales force located in our national sales call centers as well as our nationwide network of field sales and service offices.

In many scenarios, we close the sale of a basic system over the phone and allow our field force to augment the system at the time of installation.

In other cases, field sales consultants work directly with the customer to select an ideal system.

Driven by consumer preferences, we also market to customers through retail and e-commerce channels, which are expected to grow in the next few years, and we have been supplementing existing channels to meet consumers where they prefer to shop.

In other cases, field solution advisors work directly with the customer to select an ideal system.

Driven by consumer preferences, we also market to customers through retail and e-commerce channels, and we have been supplementing existing channels to meet consumers where they prefer to shop.

Our direct channel Solar customers are generated primarily through third-party lead partners, owned media, an internal sales force, and referrals from our customers, which are supported by our internal call center and field sales consultants.

In most cases, our field sales consultants work with the customer during the in-person presentation and customize the system to fit their needs.

Across our organization, our field sales consultants typically undergo an in-depth screening process prior to hire.

Field sales consultants complete comprehensive centralized training prior to conducting customer sales presentations, as well as participate in ongoing training in support of new offerings.

Across our organization, our field solution advisors typically undergo an in-depth screening process prior to hire.

Field solution advisors complete comprehensive centralized training prior to conducting customer sales presentations, as well as participate in ongoing training in support of new offerings.

We typically utilize a highly structured sales approach, which includes, in addition to the structured model sales call, daily monitoring of sales activity and effectiveness metrics and regular coaching by our sales management teams.

• Indirect Channel

Our indirect channel CSB and Commercial customers are generated mainly through our network of agreements with third-party independent dealers who sell equipment and ADT Authorized Dealer-branded monitoring, interactive, and other services to residential end users (the “ADT Authorized Dealer Program”).

Our indirect channel CSB customers are generated mainly through our network of agreements with third-party independent dealers who sell and install equipment and ADT Authorized Dealer-branded monitoring, interactive, and other services to residential end users (the “ADT Authorized Dealer Program”).

As opportunities arise, we have in the past engaged, and we may continue to engage, in selective third-party account purchases, which typically involve the purchase of a set of customer accounts from other security service providers.

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We monitor each authorized dealer’s financial stability, use of sound and ethical business practices, and delivery of reliable and consistent high-quality sales and installation methods.

Our Marketing Strategy

Marketing Strategy

We focus on driving revenue by increasing consumer awareness and preference, improving consumer purchasing flexibility, and optimizing our go-to-market approach.

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In addition, we market through social media influencers and celebrity spokespersons representing the ADT brand.

Our strategic partnerships and alliances include home builders, property management firms, homeowners’ associations, insurance companies, financial institutions, retailers, public utilities, and software service providers.

For example, we have existing partnerships with national leaders in home construction and ride sharing, and we believe there is a healthy pipeline of future partnership and alliance opportunities.

Our goal is to maximize customer lifetime value for both new and existing customers by (i) continuing to evaluate our pricing and product offerings;

(ii) managing costs and service strategies to provide enhanced value;

(iii) upgrading existing customers to our interactive services, internet protocol (“IP”) video solutions, or other upgraded solutions where desirable;

(iv) offering various cross-selling and bundling initiatives;

and (v) achieving long customer tenure.

We serve our customers in the following three primary markets that align to our segments, Consumer and Small Business, Commercial, and Solar.

We also seek opportunities to leverage our brand name, our core focus on security and smart home solutions, and our high degree of trust among our customer base to pursue new customers in complementary markets such as personal on-the-go security and safety.

We have seen an increase in interest in smart home offerings and other mobile technology applications, which we believe is attributable to a variety of factors, including advancements in technology, younger generations of consumers, and shifts to de-urbanization.

We believe our strategic initiatives will help us satisfy consumer and commercial demands in light of these macro-level dynamics and position us for sustainable growth for years to come.

In addition to Google and State Farm, our strategic partnerships and alliances include home builders, property management firms, homeowners’ associations, financial institutions, retailers, public utilities, and software service providers.

The residential and small business security and automation market primarily consists of owners and renters of single-family homes or apartments and small businesses owners.

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or incentives provided by insurance carriers that may offer lower insurance premium rates if a security system is installed or may require that a system be installed as a condition of coverage.

The commercial market ranges from large single-site commercial facilities to multi-site national companies.

The market is characterized by higher penetration rates, driven in part by fire and building codes and insurance requirements, and by a higher degree of complexity with respect to system installations.

Most business customers require a basic security system for insurance purposes, and certain commercial premises are required to install and maintain fire alarm, and sometimes fire suppression, systems to meet the requirements under applicable building codes and insurance policies.

Additionally, businesses may also leverage our IP video solutions for operational purposes such as employee safety, theft prevention, and inventory management.

The solar market consists primarily of residential property owners, and sales are typically financed by third party financing institutions.

The market is highly fragmented, under-penetrated, and has a longer lag between sale/contract and installation than our residential security market.

With the shift in consumer preference toward clean energy and the solar tax credit incentives included in the Inflation Reduction Act of 2022 (the “IRA”), we believe the market is poised to expand and our brand recognition provides opportunities to increase market share within the solar industry.

Additionally, we believe there is a large cross-selling and bundling opportunity with our CSB markets as consumers adopt smart home automation.

Our approach to competition is to emphasize the quality and reputation of our offerings, as well as our superior customer service, industry-leading brand, network of customer support and monitoring centers, commitment to consumer privacy, and knowledge of customer needs.

We also seek opportunities to leverage our brand name, our experience in security and smart home solutions, and our high degree of trust among our customer base to pursue new customers in complementary markets such as personal on-the-go security and safety.

We believe our strategic initiatives will help us satisfy consumer demands in light of these macro-level dynamics and position us for sustainable growth for years to come.

Our goal is to maximize customer lifetime value for both new and existing customers by (i) continuing to evaluate our pricing and product offerings;

(ii) managing costs and service strategies to provide enhanced value;

(iii) upgrading existing customers to our interactive services, internet protocol (“IP”) video solutions, or other upgraded solutions where desirable;

(iv) offering various cross-selling and bundling initiatives;

and (v) achieving long customer tenure.

As previously disclosed, in January 2024, we announced that we are exiting the residential solar market.

Our approach to competition is to emphasize the quality and reputation of our offerings, our superior customer service, industry-leading brand, network of customer support and monitoring centers, commitment to consumer privacy, and knowledge of customer needs.

Success in acquiring new customers depends on a variety of factors such as brand and reputation, market visibility, the ability to identify and sell to prospective customers, offering capabilities, and the quality and prices of our products and services.

We are focused on extending our leadership position in the traditional residential and small business security and smart home markets.

In addition, we continue to add new features and functionalities to further differentiate our offerings and support a pricing premium.

We believe a combination of technology advancements along with a growing customer interest in lifestyle and business productivity solutions will support the increasing market penetration.

The traditional residential and small business security markets in the U.S.

remain highly competitive and fragmented, with a low number of major companies and thousands of smaller regional and local companies, which is primarily the result of relatively low barriers to entry in local geographies and the availability of companies providing outsourced monitoring services but not maintaining the customer relationship.

Technology trends and innovation have also created significant change in our industries, providing many new opportunities while also lowering the barriers to entry for automation, interactive, and smart home solutions.

As a result, new business models and competitors have emerged.

We are focused on extending our leadership position in the traditional residential and commercial security and smart home markets while also growing our share of the solar market, as well as entering into emerging and adjacent markets.

In addition, we continue to add new features and functionalities to further differentiate our offerings, including the potential benefits of offering security and solar solutions together, and support a pricing premium.

We believe a combination of technology advancements along with a growing customer interest in lifestyle and business productivity solutions will support the increasing penetration of automation, interactive, smart home, and solar solutions.

Security and Automation Markets

The traditional residential and commercial security markets in the U.S.

Additionally, with our recent focus on DIY offerings such as our ADT Self Setup product suite, including our partnership with Google, we may face additional competition in the DIY space as we position ourselves to grow our market share.

Additionally, with our recent focus on DIY offerings such as our ADT Self Setup product suite, we may face additional competition in the DIY space as we position ourselves to grow our market share.

We believe our principal competitors are:

Residential DIY Commercial

Vivint Smart Home, Inc SimpliSafe Home Security Systems Johnson Controls International plc.

Brinks Home Security (operating brand of Monitronics International, Inc.) HomeKit by Apple Convergint Technologies

Xfinity Home Security (a division of Comcast Corporation) Ring Smart Security System by Amazon Securitas Technology

(Pro-Installation)

(Self-Installation)

Small Business

Vivint Smart Home, Inc

(a subsidiary of NRG)

Ring Smart Security System by Amazon

Vivint Smart Home, Inc

(a subsidiary of NRG)

Xfinity Home Security

(a division of Comcast Corporation)

SimpliSafe Home Security Systems

Ring Smart Security System by Amazon

Brinks Home Security

(operating brand of Monitronics International, Inc.)

HomeKit by Apple

SimpliSafe Home Security Systems

We also compete with point solutions (products with one intended application) and home automation-only systems.

In some cases, customers believe that these offerings replace the need for full-scale security systems.

Additionally, while we continue to see a shift toward self-installation offerings, certain third-party professional installers such as Best Buy’s Geek Squad, OnTech, and Angi offer professional installation alternatives.

Also, some self-monitored solutions do not require a monthly fee for home automation services, which allows for no-cost alternatives to the professionally monitored (monthly fee-based) solutions that we provide.

While we continue to see a shift toward self-installation offerings, certain third-party professional installers also offer professional installation alternatives.

In addition, some self-monitored solutions do not require a monthly fee for home automation services, which allows for no-cost alternatives to the professionally monitored (monthly fee-based) solutions that we provide.

Although self-monitored solutions do not replace the need for professionally monitored solutions, as more features and functionality are built into these self-monitored solutions, the demand for some customers to opt for more expensive, professionally monitored options could be reduced.

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our nationwide team of sales consultants;

our solid reputation for and expertise in providing reliable security and monitoring services through our in-house network of redundant monitoring centers;

our solid reputation for and expertise in providing reliable

security and monitoring services through our in-house network of redundant monitoring centers;

our reliable product solutions;

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and our partnerships with companies such as Google and State Farm.

The Solar market is highly fragmented and relatively new in many respects, which we believe provides us with greater opportunity for growth.

ADT Solar faces competition from companies that offer solar solutions as stand-alone offerings, companies that offer solar solutions in addition to their core business, and traditional utilities that supply electricity to potential residential customers.

We believe our principal competitors are:

Sunnova Energy International, Inc.

Titan Solar Power

SunPower Corporation Trinity Solar, Inc.

Freedom Forever

We believe we are well positioned to compete in the solar market by leveraging the ADT brand, focusing on providing safe, smart, and sustainable solutions for our customers, as well as focusing on cross-selling opportunities with our security businesses.

RESOURCES MATERIAL TO OUR BUSINESS

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We also maintain inventory of certain equipment and components at our field offices and in technicians’ vehicles.

Additionally, third-party distributors generally keep a minimum stocking level of certain key items to have coverage for certain situations, including supply chain disruptions.

We also rely on various information technology and telecommunications service providers as part of the functionality and monitoring of our systems.

While we have only experienced minimal impact in our Commercial operations and in the development of new products due to supply chain disruptions in recent years, we could experience a material impact to our sales and revenue, operating results, cash flows, and ability to commercialize new products in the future.

Third-party distributors generally keep a minimum stocking level of certain key items to have coverage for certain situations, including supply chain disruptions.

In addition, we rely on various information technology and telecommunications service providers as part of the functionality and monitoring of our systems.

We are continuously monitoring global supply chain disruptions, and we do not currently anticipate any major interruptions in our supply chain in the near term.

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We typically enter into confidentiality agreements to further protect our intellectual property.

We own a portfolio of patents that relate to a variety of monitored security and automation technologies utilized in our business, including security panels and sensors, video and information management solutions, and our SMART monitoring solution that aims to reduce false alarms and improve response effectiveness.

We also own a portfolio of trademarks, including ADT, ADT Pulse, Protection 1, ADT Commercial, and ADT Solar.

In addition, we are a licensee of intellectual property, including from our third-party suppliers and technology partners.

Patents extend for limited periods of time in the various countries where patent protection is obtained.

Trademark rights may potentially extend for longer periods of time and are typically dependent upon the use of the trademarks.

We also own a portfolio of trademarks, including ADT, ADT Pulse, and ADT+.

In addition, we are a licensee of intellectual property, including from our third-party suppliers and technology partners.

Certain trademarks associated with the ADT brand that we own within the U.S.

and Canada are owned outside of the U.S.

and Canada by Johnson Controls (as successor to Tyco International Ltd., “Tyco”).

and Canada by Johnson Controls International PLC (as successor to Tyco International Ltd., “Tyco”).

In certain instances, such trademarks are licensed in certain territories outside the U.S.

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and Canada, we do not have the right to use the ADT brand to promote our products and services.

In connection with the sale of our Canadian operations in 2019, we entered into a non-competition and non-solicitation agreement with TELUS Corporation (“TELUS”) pursuant to which we 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 from the date of sale.

In connection with the sale of our Canadian operations in 2019, we entered into a non-competition and non-solicitation agreement with TELUS Corporation (“TELUS”) pursuant to which we will not have any operations in Canada, subject to limited exceptions, for a period of seven years from the date of sale.

Additionally, we entered into a patent and trademark license agreement with TELUS granting (i) the use of our patents in Canada for a period of seven years, and (ii) exclusive use of our trademarks in Canada for a period of five years and non-exclusive use for an additional two years thereafter.

In addition, we granted the Commercial Business a license to continue to use the ADT brand and other Company trademarks for a period of twelve months to transition from Company branding (the “Brand License”).

We have also agreed to a covenant not to assert a claim against the Commercial Business for infringement of the Company's patents as of the Commercial Divestiture for products and services that were used in the Commercial Business prior to the Commercial Divestiture, and has provided the Commercial Business with a paid-up, irrevocable, non-assignable (with limited exceptions) license to continue to use certain software and other Company intellectual property in the same manner.

Our residential security and home automation business has historically experienced a certain level of seasonality primarily as a result of fluctuations in the housing market.

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We believe the COVID-19 Pandemic affected some of these seasonal trends beginning in 2020 as we experienced a lower volume of customer relocations, which was followed by a slight increase during 2021 as the number of household moves increased.

During 2022, we have seen favorable trends in gross customer revenue attrition primarily as a result of a lower volume of customer relocations, partially offset by an increase in non-payment disconnects.

Since 2022, we have seen fewer relocations related to housing market conditions and higher non-payment disconnects largely related to the weaker macroeconomic environment.

We are currently unable to determine whether there will be any ongoing impact on our seasonality, and we may continue to experience fluctuations in certain trends, such as relocations, in the future.

While our Commercial segment doesn’t typically experience the same level of seasonality as the CSB segment, it may experience fluctuations related to inclement weather-related incidents, which may result in fewer installations during the first calendar quarter of the year.

Additionally, the timing of general construction schedules and school sessions tend to result in increased productivity in the second and third calendar quarters of the year.

In our Solar segment, seasonality may be impacted by regional weather patterns, as well as customers’ desires to obtain tax credits toward the end of the year.

While sales may increase during the last calendar quarter of the year, other factors such as backlog, permitting, and weather patterns may impact the timing of installations during the first and fourth calendar quarters.

GOVERNMENT REGULATION AND OTHER REGULATORY MATTERS

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Federal Trade Commission (“FTC”) and state and consumer protection laws, which may include restrictions on the manner in which we promote the sale of our products and services and require us to provide most consumers with three-day or longer rescission rights.

Our communications with current and potential customers are regulated by federal and state laws, which include restrictions on the use of telemarketing, auto-dialing technology, email marketing, and text communications.

Our collection and use of personal information and communications with current and potential customers are regulated by federal and state laws, which include restrictions on the use of telemarketing, auto-dialing technology, email marketing, and text communications;

restrictions on the sale, sharing, and use of personal information;

as well as requirements for the protection of thereof and actions to be taken in the event of a loss with respect thereto.

We use credit scoring to qualify our residential customers for certain offers and financing options.

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We continue to monitor emerging developments regarding environmental protection laws.

At this time, we do not believe that federal, state, and local laws and regulations relating to the discharge of materials into the environment, or otherwise relating to the protection of the environment, or any existing or pending climate change legislation, regulation, or international treaties or accords are reasonably likely to have a material negative effect in the foreseeable future on our business.

HUMAN CAPITAL AND ESG

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Human Capital Management

As of December 31, 2022, we employed approximately 22,000 people, including approximately 3,300 direct field sales consultants;

The discussion below excludes individuals no longer employed by ADT as a result of the Commercial Divestiture.

As of December 31, 2023, we employed approximately 14,300 people, including approximately 2,400 direct field solution advisors;

3,300 installation and service technicians;

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and 900 phone sales representatives.

During 2023, we made significant reductions to our workforce in our Solar segment as part of our overall branch rationalization and restructuring announced in November 2023.

Approximately 6% of our employees are covered by collective bargaining agreements;

and we believe our relations with our employees and labor unions have generally been positive.

In December 2021, we acquired ADT Solar and are continuing to integrate it into our human capital programs.

Performance Culture

ADT defines a Performance Culture as our shared values, priorities, and principles that shape beliefs and drive behaviors and decision-making to achieve high levels of performance at an individual, team, and organizational level.

We are committed to fostering a culture and environment where every team member feels valued and empowered to collaborate and achieve business results.

Performance differentiation for 2021 was reinforced through pay differentiation in 2022 via the merit pay process, the annual incentive plan, and the long-term incentive plan subject to team member eligibility.

In addition, we enhanced talent management by modifying the performance rating scale and process to enhance differentiation for the future and completed a talent management review for key positions.

We are committed to fostering a culture and environment where every team member feels valued and empowered to collaborate and contribute to the achievement of business results as well as their individual career goals.

We placed additional focus on differentiating individual employee performance for the 2022 performance year, which was reinforced through performance-based pay differentiation in 2023 via the merit pay process, the annual incentive plan, and the long-term incentive plan, subject to team member eligibility.

In addition, we recently enhanced our annual performance rating scale to improve differentiation.

Talent Recruitment and Management

We are committed to attracting, retaining, and developing a strong, dedicated, and diverse workforce.

Our success depends in large part on our hiring and retaining top talent across the entire organization, with primary emphasis placed on our management team and employees who interface directly with our customers (such as sales representatives, installation and service technicians, and call center personnel), who make up the majority of our organization.

We focus on having a diverse, inclusive, and safe workplace, while offering competitive compensation, benefits, and health and wellness programs.

We provide training and learning opportunities, rotational assignment opportunities, and continuous performance feedback and coaching to further our employee development.

In addition, our long-term equity compensation is intended to align management interests with those of our stockholders and to encourage the creation of long-term value.

We continue to deploy talent using a mix of hybrid, remote, and in-person work arrangements (based on role) to support talent attraction and retention.

We offer our employees a variety of learning opportunities, tuition reimbursement, and opportunities for employee mobility by supporting internal promotions to fill open positions, all of which are designed to allow employees to be successful throughout their careers.

Our success in attracting, retaining, and developing a strong, dedicated, and diverse workforce depends in large part on our hiring and retaining top talent across the entire organization, especially regarding our management team and employees who interface directly with our customers, who make up most of our organization.

We offer our employees competitive compensation, benefits, and health and wellness programs, as well as training, networking, development resources, performance feedback, and coaching.

In addition, our long-term equity compensation plans are intended to align management interests with those of our stockholders and to encourage the creation of long-term value.

We continue to deploy talent using a mix of hybrid, remote, and in-person work arrangements (based on role) to support talent attraction and retention in alignment with business

We made significant enhancements to our employee listening platform in 2023, designed to help ensure our environment promotes high levels of employee engagement and retention.

Further, we expanded our talent management review practice in 2023 with leadership and advancement evaluations, as well as succession planning for our Executive Leadership Team (“ELT”) roles reporting to the CEO.

Inclusive Diversity and Belonging (“IDB”)

We are committed to building a culture of inclusive diversity for our employees and deliberately advancing the maturity and effectiveness of our practices.

We believe our employees should reflect the communities where we live and serve, and we strive to hire and retain a workforce that is truly representative of our markets.

We track our workforce composition data over time to determine if we are making appropriate progress in advancing gender, racial, and ethnic representation within our employee demographics.

As of December 31, 2022, overall diversity representation remained stable versus the prior year, with approximately half of our workforce comprised of racially and ethnically diverse employees and approximately one-third comprised of female employees.

Executive diversity representation for female and ethnically or racially diverse employees improved from the prior year.

ADT’s Inclusive Diversity and Belonging Council (the “AIDBC”) and its nine Business Employee Resource Groups (“BERG”) are central to our ability to execute our IDB priorities.

The AIDBC, established in 2020, represents a broad cross section of our organization, including executive and senior management, and focuses on driving IDB commitments and priorities by identifying and prioritizing action, taking accountability for achieving results, and ensuring timely updates are provided to our Chief Executive Officer.

ADT’s IDB “North Star,” which states that everyone deserves to feel safe and to succeed, is the central organizing framework of our efforts defined by four strategic pillars:

We are committed to building and sustaining a culture of inclusive diversity and deliberately advancing the maturity and effectiveness of our practices.

Talent diversity starts with the recruitment and hiring process and continues through the learning, development, advancement, and retention of employees with wide-ranging backgrounds and experiences.

We highly value our employees’ diversity;

and we aim to promote diversity awareness in all our talent management processes.

We also monitor our talent diversity to understand our position relative to external benchmarks and the labor market.

As of December 31, 2023, overall diversity representation improved versus the prior year, with about half of our workforce comprised of racially and ethnically diverse employees and over 35% comprised of female employees.

Executive racial and ethnic diversity also improved from the prior year.

ADT’s Inclusive Diversity and Belonging Council (the “AIDBC”) and its ten Business Employee Resource Groups (“BERG”) are central to our ability to execute our IDB priorities.

The AIDBC represents a broad cross section of our organization, including executive and senior management, that focuses on driving IDB commitments and priorities by identifying and prioritizing action, taking accountability for achieving results, and informing updates made to our CEO.

Our IDB “North Star,” which states that everyone deserves to feel safe, is defined by four strategic pillars:

Inclusion, Diversity, Growth, and Unity (Community).

In 2022, the AIDBC created an initial five-year strategic roadmap identifying future priorities and aspirations.

We continue to focus on creating engaging workplaces that encourage the sharing of diverse ideas, celebrating differences, seeing value in diversity, and providing the resources, space, and opportunity for employees to thrive and succeed.

Numerous IDB priorities were implemented in 2022, and learning from past results and continuously improving our IDB practices are a high priority.

Each AIDBC council member partnered with their human resources leaders and respective business executives to establish commitments and action plans focused on attracting, growing, and developing talent through participation in business-sponsored IDB initiatives and community work, which will continue in 2023 with additional focus on action planning, execution, and measurement.

The AIDBC partners with human resources leaders and business executives to establish commitments and action plans focused on attracting, growing, and developing talent through participation in business-sponsored IDB initiatives and community work.

ADT’s diversity-recruiting approach is built around four key strategies:

diverse pipelines for critical talent, relationship building with diverse organizations, fostering an internal cultural of diversity champions, and ensuring recruiters and hiring managers are committed to diversity.

In 2022, ADT made an aspirational commitment to continuously improve our ability to present diverse candidates for Director and above roles;

this practice will expand into 2023 for Manager and above roles.

A comprehensive suite of on-demand reference material, resources, and eLearning solutions were designed in 2022, including the integration of unconscious bias awareness into our performance management practices.

Employee and people leader IDB education and awareness continue to be a high priority focus area.

Deliberate growth and development of our BERGs is central to engaging and educating our employees about IDB.

The Young Professionals BERG launched in 2022, bringing the total number of ADT BERGs to nine.

Employee membership also increased in 2022, with over 9% of our employees participating in BERGs.

IDB learning and education is supported by a comprehensive suite of on-demand resources;

and IDB education and awareness continues to be a high-priority.

We continue to encourage the sharing of diverse ideas;

celebrate differences;

value diversity;

and provide the resources, space, and opportunity for employees to thrive and succeed.

BERGs offer our employees specific opportunities to partner and collaborate through learning and networking, volunteer projects, and mentoring.

Our BERGs also participate in various business initiatives, and executives and officers from across the Company leverage their time, networks, and resources to support BERG initiatives and projects.

To support BERG community advocacy and outreach, each BERG was granted $9 thousand in 2022 to donate to nonprofit organizations that align with their missions.

Employee Well-being and Health & Safety

We show our commitment to caring for our employees’ well-being by devoting significant resources to team members’ wellness, health, and safety.

We continue to provide an annual well-being program available to all team members, which includes a variety of education and coaching programs, as well as monthly and quarterly well-being sessions.

More than 6,800 employees are registered for the well-being portal, with more than 6,300 employees and spouses/domestic partners completing a health assessment.

Our BERGs also participate in various business initiatives;

and executives and officers from across the Company leverage their time, networks, and resources to support BERG initiatives and projects.

To support BERG community advocacy and outreach, each BERG is granted a small budget to donate to nonprofit organizations that align with their missions.

Deliberate growth and development of our BERGs is central to engaging and educating our employees about IDB.

Employee Well-being, Health, and Safety

We devote significant resources to team members’ wellness, health, and safety.

We continue to provide an annual well-being program available to all team members, which includes a variety of education and coaching programs.

Employees enrolled in our self-insured medical plan are eligible for cash incentives by completing certain well-being activities.

Our Environmental, Health, and Safety (“EHS”) vision is to build a culture that promotes safe behaviors on each task, every day, to achieve zero incidents and enhance employee wellness, and to minimize our environmental impact.

In order to achieve our vision, we strive to incorporate our values of people, prevention, and accountability into our business and the decisions we make each day.

We believe that all occupational injuries and illnesses, as well as environmental incidents, are generally preventable, and we focus on compliance with all applicable EHS requirements.

We have implemented an EHS management system that includes expectations for compliance, accountability, sustainability, and continuous improvement to foster a culture of safety that enables our employees to minimize risk and to understand and follow safety rules, as well as to identify, avoid, and correct unsafe actions, behaviors, or situations.

In order to achieve our vision, we strive to incorporate our values of people, prevention, and accountability into our business.

We focus on compliance with all applicable EHS requirements, and we believe that all occupational injuries and illnesses, as well as environmental incidents, are generally preventable.

For example, we continue to institute fleet safety initiatives on our vehicles, including installing and maintaining collision warning and auto-braking technologies.

Our EHS management system includes expectations for compliance, accountability, sustainability, and continuous improvement to foster a culture of safety that enables our employees to minimize risk and to understand and follow safety rules, as well as to identify, avoid, and correct unsafe actions, behaviors, or situations.

Environmental

We are committed to reducing our impact on the environment by promoting environmental stewardship throughout our organization.

We are committed to reducing our environmental impact by promoting environmental stewardship throughout our organization, and we continuously strive to improve our carbon footprint.

We are also assessing environmental risk on our operations as one aspect of our enterprise risk management review process and plan to continue to do so on an ongoing basis.

We have implemented our ADT Environmental Absolutes framework, which represents our focus on complying with environmental requirements, addressing proper disposal of waste streams, and promoting recycling of materials.

We invest significant time and resources to reduce our greenhouse gas emissions and have focused on efficiency improvements in lighting, air handling, and data operations.

We continually explore methods to reduce greenhouse gases from our motor vehicle fleet, including through the purchase of newer vehicle models having greater fuel efficiency and the use of hybrid vehicles.

In addition, we introduced our Virtual Assistance Program in 2021, which delivers a scalable, cost-efficient means of servicing our customers through live video streaming with our skilled technicians to troubleshoot and resolve service issues.

We employ waste recycling and diversion programs and continue to evolve new initiatives such as the placement of sensors inside our trash dumpsters to monitor waste levels and reduce unnecessary trash hauls.

We will continue to look for new, and to improve existing, initiatives that reduce our carbon footprint.

We are also assessing the impact of climate change on our operations and supply chain as one aspect of our enterprise risk management review process and will continue to do so on an ongoing basis.

As ADT shifts toward a strategy of being more safe, smart, and sustainable, our Corporate Social Responsibility program is also evolving.

We are committing to community programs that create spaces where people can feel safe.

By supporting safe places, we can help provide preventative solutions with a broader impact.

For instance, numerous studies show that the renovation of houses, buildings, and public spaces in historically underserved communities significantly reduces crime.

Through financial contributions as well as in-kind product donations of smart security systems and rooftop solar solutions, ADT can make a difference.

We can also galvanize employees to volunteer for block-beautification events and provide residents with pathways for employment through mentoring.

Once a neighborhood is successfully revitalized, the whole community can benefit.

In 2022, ADT supported a variety of nonprofits through volunteerism, corporate philanthropy, and in-kind product donations.

ADT also launched a partnership with the Requity Foundation to renovate vacant row houses in Baltimore.

Additionally, ADT volunteers built Habitat for Humanity homes for deserving families in Florida, Colorado, Louisiana, Washington, and Nevada.

In each of these instances, ADT contributed funds along with smart security systems and rooftop solar solutions.

We employ waste recycling and diversion programs and continue to monitor waste levels and reduce unnecessary trash hauls.

We also continually explore methods to reduce greenhouse gases from our motor vehicle fleet, including through the purchase of newer vehicle models having greater fuel efficiency, the use of hybrid vehicles, and virtual service and installation.

Our Virtual Assistance Program aims to lower our carbon footprint by avoiding thousands of vehicle trips each day.

In addition, we have focused on efficiency improvements in lighting, air handling, and data operations while continuing to rationalize our real estate portfolio and through the utilization of renewable energy.

Our Corporate Social Responsibility program is evolving to better align with our corporate strategy of offering safe, smart, and sustainable solutions.

To that end, we are focusing on community programs that aim to create spaces where people feel safe.

By supporting ‘safe places,’ we are helping provide preventative solutions with a broad impact.

Through financial contributions and in-kind product donations of smart security systems, ADT can make a difference for these organizations.

In addition, ADT employees volunteer for activities in their communities such as for block-beautification events and mentoring programs.

ADT also supports a variety of nonprofits through volunteerism, corporate philanthropy, and in-kind product donations.

ADT prioritizes strong corporate governance, believing that this is the foundation for financial integrity and superior performance.

Our Board of Directors (the “Board”) is responsible for the oversight of our business and approves our operating values which are reflected in our Code of Conduct (the “Code”).

The Board also oversees the principal risks of our business and makes sure practical procedures are in place to effectively monitor, manage, and mitigate those risks.

The Board maintains four standing committees, each of which reports on their activities to the full Board:

Compensation;

Nominating and Corporate Governance;

The Audit Committee, which is comprised of independent directors, oversees financial risks, and monitors the management of the principal risks that could impact our financial reporting, including cybersecurity and privacy risks.

It also oversees, reviews, and periodically discusses the implementation and effectiveness of our compliance and ethics programs with management.

The Audit Committee is responsible for our ESG strategy, policies, and public disclosures.

We have also established an ESG working group comprised of representatives from legal, government affairs, human resources, environment, health and safety, public relations, marketing, internal audit, and investor relations, which provides periodic updates to the Audit Committee.

In February 2022, we adopted the following ESG Commitment Statement:

Our commitment to respect the environment, promote social responsibility, and lead with responsible governance is fundamental to who we are and guides our safe, smart, and sustainable business practices.

As we continue to progress our ESG program, we will focus our initiatives in one or more of the following areas, which we believe are important to our stakeholders:

(i) data privacy and cyber security, (ii) inclusive diversity and belonging, (iii) employee well-being and development, (iv) customer and community health and safety, (v) environmental management, (vi) climate change risk management, (vii) responsible governance, and (viii) product safety and quality.

We are committed to ensuring all ADT employees uphold our core Company values of trust, collaboration, service, and innovation.

Our board of directors (the “Board of Directors”) is responsible for the oversight of our business and approves our operating values which are reflected in our Code of Conduct (the “Code”).

We are committed to working to ensure all ADT employees uphold our core Company values of trust, collaboration, service, and innovation.

This begins with the Code which describes our commitment to our customers, investors, communities, and each other.

The Code outlines employee expectations and helps foster a culture of integrity.

The ADT Ethics Office oversees the employee ethics hotline as well as ethics training programs including an introduction, overview, and summary of the Code.

The Code is supplemented by a variety of additional policies applicable to all team members, including non-retaliation;

equal employment opportunity;

anti-harassment;

information technology security;

personal data protection and privacy;

conflicts of interest;

intellectual property and the protection of confidential information;

insider trading;

anti-bribery and corruption;

and the approval of transactions with related persons.

We also believe that the safety, security, and privacy of our customers are fundamental to the services we provide.

Our policies guide us as we continuously enhance methods, best practices, and technologies to better monitor and protect customer data and inform and enable customers to make choices about their data privacy.

We carefully consider data privacy when developing our own products and when incorporating products provided by our business partners, also known as “privacy by design.” We conduct privacy impact assessments and empower our employees to effectuate these privacy considerations on an ongoing basis.

All ADT team members are required to complete and acknowledge annual training to raise awareness of current security risks and behavior, and around our Information Security and Privacy policies.

Additional education and training are also required for specific groups based on their roles within the organization.

We do not own or operate any manufacturing facilities and therefore rely on suppliers and distributors to create and deliver our products.

Our standard terms for agreements with our suppliers require product suppliers and distributors to adhere to and comply with our Guide to Supplier Social Responsibility, which covers human rights, child and forced labor, worker welfare, corruption, and bribery policies as well as environmental sustainability and diversity.

We adhere to the governance requirements established by federal and state law, the SEC, and the NYSE;

and we strive to establish appropriate risk management methods and control procedures to adequately manage and monitor the major risks we may face day to day.

Additional information about our corporate responsibility priorities and approach and related reports are available on our website.

The contents of our website and these reports are referenced for general information only and are not incorporated into this Annual Report.

AVAILABLE INFORMATION

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Item 1. Business