What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-02-28 compared with 2023-02-28 · 753 added, 549 removed, 1635 unchanged (44% of the section changed)

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

Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2022, our disclosure controls and procedures were effective at a reasonable assurance level in ensuring information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2023, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Management’s Report on Internal Control over Financial Reporting

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Our management performed an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2023 based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

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

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.

Based on our assessment and those criteria, our management determined that our internal control over financial reporting was effective as of December 31, 2023.

The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in Part IV of this Annual Report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in our management’s evaluation pursuant to Rules 13a-15(d) and 15d-15(d) of the Exchange Act during the three months ended December 31, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

During 2023, ADT began a multi-year IT transformation project by which we will be migrating much of ADT’s infrastructure to the cloud.

The initiative includes certain aspects of our customer relationship management and enterprise resource planning systems and will result in changes to our processes and procedures which, in turn, will result in changes to our internal control over financial reporting.

To date, the transformation efforts have not materially affected our internal control over financial reporting.

OTHER INFORMATION.

During the quarter ended December 31, 2023, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

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Equity Compensation Plans

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

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

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

Plan Category Number of securities to be issued upon exercise of outstanding options, warrants, and rights Weighted-average exercise price of outstanding options, warrants, and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

Equity compensation plans approved by stockholders:

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_________________

(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) 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.

(1) Column (a) includes approximately 1.1 million shares of Common Stock that may be issued upon the exercise of service-based stock options and 1.2 million 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) 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.

(2) Column (a) includes approximately (i) 21 million shares of Common Stock that may be issued upon the exercise of service-based stock options, (ii) 8 million shares of Common Stock that may be issued upon the exercise of performance-based stock options and (iii) 10 million shares of Common Stock that may be issued upon the vesting of service-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.

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10-K 2.2 3/1/2022

Equity Purchase Agreement, dated as of August 7, 2023, among ADT Inc., Iris Buyer LLC and Fire & Security Holdings, LLC

Amended and Restated Certificate of Incorporation of ADT Inc.

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S-1 4.14 12/21/2017

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

S-1 4.15 12/21/2017

Exhibit Number Incorporated by Reference

Exhibit Description Form Exhibit Filing Date

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

S-1 4.15 12/21/2017

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

150 unchanged sentences

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

10-K 10.40 2/28/2023

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

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8-K 10.1 9/17/2020

Amendment No.

1 to Investor Rights Agreement, dated as of September 5, 2022, by and between ADT Inc.

and Google LLC

Amendment No.

2 to Investor Rights Agreement, dated as of December 29, 2023, by and between ADT Inc.

and Google LLC

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

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

Employment Offer Letter, dated December 8, 2022, between ADT LLC (with its Affiliates and Successors) and Wayne Thorsen

2018 Omnibus Incentive Plan

18 unchanged sentences

S-1/A 10.36 1/8/2018

Exhibit Number Incorporated by Reference

Exhibit Description Form Exhibit Filing Date

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

6 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.

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8-K 10.2 12/3/2018

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

Annual Incentive Plan

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8-K 10.1 12/15/2022

Term L oan Credit Agreement , by and among Prime Security Services Holdings , LLC , as Holdings, Prime Security, Services Borrower, LLC and the ADT Security Corporation, as borrowers, Barclays Bank PLC, as Administrative Agent, and the lenders par ty thereto, as dated as of March 14, 2023

8-K 10.1 3/15/2023

Incremental Assumption and Amendment Agreement N o.1, by an d am ong Prime Security Holdings, LLC, as Holdings, Prime Security Services Borrower, LLC and the ADT security Corporation, as borrowers , the subsidiary loan parties party thereto, Barclays Bank PLC, as Administrative Agent, and the lenders party ther eto, dated as of March 14, 2023

8-K 10.2 3/15/2023

Amendment Agreement No.

12, dated as of May 10, 2023, by and between Prime Security Services Borrower, LLC and Barclays Bank PLC, as administrative agent

10-Q 10.4 8/8/2023

Incremental Assumption and Amendment Agreement No.1 3 , dated as of October 13,2023, by and among Prime Security Holdings, LLC, as Holdings, Prime Security Services Borrower, LLC and the ADT security Corporation, as borrowers, the subsidiary loan parties party thereto, Barclays Bank PLC, as Administrative Agent

8-K 10.1 10/13/2023

Receivables Financing Agreement, among Compass Solar Group, LLC, ADT Solar Finance LLC and Mizuho Bank, Ltd., dated as of August 2, 2023.

Exhibit Number Incorporated by Reference

Exhibit Description Form Exhibit Filing Date

Fourth Amendment to the Receivables Financing Agreement, among ADT Finance LLC, Mizuho Bank, Ltd., ADT LLC, MUFG Bank, Ltd., Starbird Funding Corporation, and BNP Paribas, dated as of March 29, 2023

8-K 10.1 3/30/2023

Subsidiaries of ADT Inc.

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Policy Relating to Incentive Compensation Clawback

101 XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

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February 28, 2024 By:

President and Chief Executive Officer

Chairman, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 28, 2024.

DeVries President, Chief Executive Officer and Director

DeVries Chairman, President and Chief Executive Officer

(Principal Executive Officer)

/s/ Kenneth J.

Porpora Executive Vice President and Chief Financial Officer

/s/ Jeffrey Likosar Chief Transformation Officer and President,

Corporate Development and Interim Chief

Financial Officer

(Principal Financial Officer)

Jeffrey Likosar

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

(Principal Accounting Officer)

Becker Director

/s/ Nicole Bonsignore Director

Nicole Bonsignore

/s/ Marques Coleman Director

Marques Coleman

/s/ Stephanie Drescher Director

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Lewis, Jr Director

Press Director

Rayman Director

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Segment Information

Acquisitions and Disposition

Equity Method Investments

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Condensed Financial Information of Registrant

Selected Quarterly Financial Data

Report of Independent Registered Public Accounting Firm

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

Interim Goodwill Impairment Assessments — Solar Reporting Unit

As described in Note 7 to the consolidated financial statements, the Company’s goodwill balance was $4.9 billion as of December 31, 2023, and the goodwill associated with the Solar reporting unit was zero as a result of impairments recorded during 2023.

Goodwill is tested by management for impairment at least annually as of the first day of the fourth quarter of each year and more often if an event occurs or circumstances change which indicate it is more-likely-than-not that the fair value of a reporting unit 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.

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.

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

As a result of triggering events during the first, second, and third quarters of 2023, management performed interim impairment quantitative assessments on the Solar reporting unit and recorded goodwill impairment charges of $242 million, $181 million, and $88 million, respectively.

These impairments were a result of continued deterioration of industry conditions and macroeconomic decline, as well as Solar’s underperformance of operating results in successive quarters relative to expectations, and during the third quarter of 2023, as a result of managements then recent plan to close a significant number of branches.

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

The income approach includes significant assumptions including 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 interim goodwill impairment assessments of the Solar reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of the Solar reporting unit;

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

and (iv) as previously disclosed by management, a material weakness existed during the year related to this matter.

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 Solar and Commercial reporting units.

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 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.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the valuation of the Solar reporting unit.

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

(ii) evaluating the appropriateness of the income approach used by management;

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

and (iv) evaluating the reasonableness of 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, and operating expenses involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the Solar reporting unit;

(ii) the consistency with external market and industry data;

and (iii) whether the 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 income approach and (ii) the reasonableness of the discount rate assumption.

/s/ PricewaterhouseCoopers LLP

Hallandale Beach, Florida

Miami, Florida

February 28, 2024

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Prepaid expenses and other current assets 254,165 306,603

Current assets held for sale — 469,923

Total current assets 1,004,694 1,721,996

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Other assets 712,998 640,932

Noncurrent assets held for sale — 885,514

Total assets $ 15,964,094 $ 17,821,236

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Accrued expenses and other current liabilities 601,315 776,739

Current liabilities held for sale — 298,973

Total current liabilities 1,480,208 2,661,103

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Other liabilities 229,748 240,129

Noncurrent liabilities held for sale — 106,270

Total liabilities 12,175,448 14,428,088

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Other income (expense) 11,958 ( 57,568 ) 8,313

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

Income (loss) from continuing operations before income taxes and equity in net earnings (losses) of equity method investee ( 66,527 ) 149,146 ( 475,834 )

Income tax benefit (expense) ( 4,585 ) ( 37,682 ) 131,657

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

Income (loss) from continuing operations before equity in net earnings (losses) of equity method investee ( 71,112 ) 111,464 ( 344,177 )

Equity in net earnings (losses) of equity method investee 6,572 ( 4,601 ) —

Income (loss) from continuing operations ( 64,540 ) 106,863 ( 344,177 )

Income (loss) from discontinued operations, net of tax 527,549 25,800 3,357

Net income (loss) $ 463,009 $ 132,663 $ ( 340,820 )

Net income (loss) per share - basic:

Common Stock:

Class B Common Stock $ 0.19 $ ( 0.41 ) $ ( 0.72 )

Income (loss) from continuing operations per share - basic

$ ( 0.07 ) $ 0.12 $ ( 0.42 )

Income (loss) from continuing operations per share - diluted

$ ( 0.07 ) $ 0.12 $ ( 0.42 )

Net income (loss) per share - basic

$ 0.51 $ 0.15 $ ( 0.41 )

Net income (loss) per share - diluted

$ 0.51 $ 0.15 $ ( 0.41 )

Weighted-average shares outstanding - basic

Common Stock 848,465 770,620 760,483

856,843 848,465 770,620

Weighted-average shares outstanding - diluted

856,843 848,465 770,620

Class B Common Stock:

Income (loss) from continuing operations per share - basic

$ ( 0.07 ) $ 0.12 $ ( 0.42 )

Income (loss) from continuing operations per share - diluted

$ ( 0.07 ) $ 0.12 $ ( 0.42 )

Net income (loss) per share - basic

$ 0.51 $ 0.15 $ ( 0.41 )

Net income (loss) per share - diluted

Common Stock $ 0.19 $ ( 0.41 ) $ ( 0.82 )

Class B Common Stock $ 0.19 $ ( 0.41 ) $ ( 0.74 )

$ 0.51 $ 0.15 $ ( 0.41 )

Weighted-average shares outstanding - basic

54,745 54,745 54,745

Weighted-average shares outstanding - diluted

Common Stock 915,068 770,620 760,483

Class B Common Stock 54,745 54,745 17,944

54,745 54,745 54,745

See Notes to Consolidated Financial Statements

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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 )

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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 )

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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 )

2 unchanged sentences

Other comprehensive income (loss), net of tax — — — — — — 31,038 31,038

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

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

Dividends — — — — — ( 129,025 ) — ( 129,025 )

Share-based compensation expense — — — — 51,137 — — 51,137

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

Transactions related to employee share-based compensation plans and other 5,334 — 53 — ( 18,591 ) ( 2,123 ) — ( 20,661 )

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Goodwill, intangible, and other asset impairments 528,556 206,132 19,161

(Gain) loss on sales of businesses ( 649,095 ) ( 10,066 ) —

Unrealized (gain) loss on interest rate swap contracts 38,497 ( 301,851 ) ( 157,505 )

3 unchanged sentences

Accounts receivable, net ( 107,464 ) ( 178,258 ) ( 50,214 )

Contract assets, net 36,807 46,788 ( 140,920 )

Long-term retail installment contracts 184,925 142,811 64,516

Inventories and work-in-progress 24,732 ( 67,391 ) ( 84,020 )

Accounts payable ( 111,529 ) 8,662 98,123

Accrued interest

( 128,042 ) 50,758 56,700

Accrued and other liabilities ( 83,041 ) ( 42,023 ) 5,416

Deferred subscriber acquisition costs ( 386,518 ) ( 393,861 ) ( 323,602 )

Deferred subscriber acquisition revenue 289,534 329,214 276,841

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

Other, net ( 125,844 ) 783 70,213

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Acquisition of businesses, net of cash acquired — ( 13,095 ) ( 163,503 )

Sale of business, net of cash sold 26,749 1,807 ( 2,448 )

Sales of businesses, net of cash sold 1,609,347 26,749 1,807

Other investing, net 28,672 ( 13,444 ) 3,991

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Proceeds from receivables facility 281,647 276,826 253,546

Proceeds from opportunity fund 100,802 — —

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

3 unchanged sentences

Payments on finance leases ( 43,733 ) ( 44,978 ) ( 32,123 )

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

Proceeds (payments) from opportunity fund ( 8,746 ) 100,802 —

Proceeds (payments) from interest rate swaps 82,750 ( 18,841 ) ( 56,119 )

Other financing, net ( 32,175 ) ( 5,432 ) ( 23,718 )

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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.”).

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

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

As discussed below, on October 2, 2023, the Company divested its Commercial Business (as defined below), which provided security and other solutions to commercial customers;

and in January 2024, the Company announced its exit from the residential solar business, which provided residential solar and energy storage solutions since the acquisition of ADT Solar in 2021 (the “ADT Solar Acquisition”).

The Company primarily conducts business under the ADT brand name.

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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 Global Management, Inc.

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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.

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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.

This investment was disposed of during 2023.

As discussed below under the heading “Commercial Divestiture,” beginning in the third quarter of 2023, the Company presented its Commercial Business as a discontinued operation.

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

Commercial Divestiture

On August 7, 2023, ADT, Iris Buyer LLC, a Delaware limited liability company and affiliate of GTCR LLC (“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”) (the “Commercial Divestiture”).

On October 2, 2023, the Company 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 of $ 22 million.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Beginning in the third quarter of 2023, the Company 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.

Additionally, the cash flows and comprehensive income (loss) of the Commercial Business have not been segregated and are included in the Consolidated Statements of Cash Flows and Consolidated Statements of Comprehensive Income (Loss), respectively, for all periods presented.

Unless otherwise noted, amounts and disclosures throughout these Notes to Consolidated Financial Statements relate to the Company’s continuing operations.

Refer to Note 5 “Divestitures” for additional information.

As previously disclosed, in November 2023, the Company 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, the Company 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 (the “Board of Directors”) 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”).

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

Use of Estimates

2 unchanged sentences

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

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:

The Company has historically reported results for three operating and reportable segments organized based on customer type:

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

As a result of the Commercial Divestiture, results of the Commercial Business are classified as discontinued operations and thus excluded from both continuing operations and segment results for all periods presented.

Accordingly, the Company reports its results in two operating and reportable segments, CSB and Solar, organized based on customer type, with the change reflected in all periods presented.

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.

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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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

This disclosure-only guidance became effective January 1, 2023.

The impact to the Company’s consolidated financial statements was not material.

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.

The Company adopted this guidance effective January 1, 2023, except the roll-forward requirement, which will be adopted effective January 1, 2024.

The Company will apply the roll-forward guidance prospectively.

The Company does not currently have any material supplier finance programs.

Recently Issued Accounting Pronouncements

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.

This guidance will be adopted effective January 1, 2024, and will be applied prospectively.

The Company is currently evaluating the impact of this guidance.

Disclosure Improvements - ASU 2023-06, Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, represents changes to clarify or improve disclosure and presentation requirements of a variety of topics.

The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.

The Company is currently evaluating the potential impact of this guidance on its financial statements and disclosures.

Segment Reporting - ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , improves reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

In addition, the guidance, among other requirements, enhances interim disclosures, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, and provides new segment disclosure requirements for entities with a single reportable segment.

The amendments in this guidance are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

This guidance should be applied retrospectively to all periods presented.

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):

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.

The Company is currently evaluating the impact of this guidance.

Income Taxes - ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , focuses on improvements to income tax disclosures, primarily related to the rate reconciliation and income tax paid information.

In addition, the update includes certain other amendments to improve the effectiveness of income tax disclosures.

The guidance is effective for annual periods beginning after December 15, 2024, and should be applied prospectively, with retrospective application also a permitted option.

Early adoption is permitted.

The Company is currently evaluating the impact of this guidance.

Significant Accounting Policies

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Ending balance $ 129,950 $ 373,580 $ 33,277

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”).

For 2023 and 2022, restricted cash and restricted cash equivalents includes funds received, net of payments, from State Farm Fire & Casualty Company (“State Farm”) (the “Opportunity Fund”), including accrued interest, in connection with the State Farm Strategic Investment (as defined and discussed in Note 11 “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.

Use of the funds must be agreed to by State Farm and the Company.

Supplementary Cash Flow Information

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___________________

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

(1) Includes finance leases and interest rate swaps.

Refer to Note 9 “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”).

(2) 2021 relates to the ADT Solar Acquisition and 2022 includes $ 40 million related to the Delayed Shares (as defined and discussed in Note 4 “Acquisitions”) as a result of the ADT Solar Acquisition.

(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 11 “Equity”).

The proceeds and repayments of long-term debt on the Consolidated Statements of Cash Flows include the impact of $ 230 million from the refinancing of the First Lien Term Loan due 2026 with the First Lien Term Loan due 2030 (as defined and discussed in Note 8 “Debt”).

Prepaid Expenses and Other Current Assets

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Contract assets (see Note 2 “Revenue and Receivables”)

15,365 32,495

Fair value of interest rate swaps (see Note 9 “Derivative Financial Instruments”)

74,974 78,110

Other receivables (1)

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___________________

(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.

(1) As of December 31, 2023 and 2022, the Company recorded a liability of $ 15 million and $ 88 million, respectively, 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 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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Inventories, net

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Inventories are presented net of an obsolescence reserve.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Work-in-Progress

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

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

Property and Equipment, net

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Subscriber system assets, net $ 3,005,936 $ 2,918,540

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.

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 represent probable future economic benefits for the Company through the generation of future monitoring and related services revenue.

Upon customer termination, the Company may retrieve such assets.

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Amortization of deferred subscriber acquisition costs $ 188,222 $ 154,186 $ 118,162

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

Long-Lived Assets (excluding Goodwill and 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.

The Company groups assets at the lowest level for which cash flows are separately identified.

The Company groups assets at the lowest level for which cash flows are separately identifiable.

Recoverability is measured by a comparison of the carrying amount of the asset group to its expected future undiscounted cash flows.

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Operating lease liabilities (see Note 15 “Leases”)

15,979 20,741

Fair value of interest rate swaps (see Note 9 “Derivative Financial Instruments”)

Opportunity Fund (see Note 11 “Equity”)

93,950 100,802

Other accrued liabilities 256,375 358,992

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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.

Advertising costs are recognized in selling, general, and administrative expenses when incurred and were $ 165 million, $ 214 million, and $ 235 million during 2023, 2022, and 2021, respectively.

Included in advertising costs during 2023 are certain joint marketing costs and reimbursements associated with the Google Success Funds as discussed in Note 14 “Commitments and Contingencies.”

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Radio Conversion Program

The program was completed in 2023, and the Company incurred a total of $ 276 million of net radio conversion costs since the inception of the program.

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

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Merger, Restructuring, Integration, and Other

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

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

Significant activity included in merger, restructuring, integration, and other during the periods presented includes:

During 2023, primarily relates to integration and third-party costs related to the strategic optimization of the Solar business operations following the ADT Solar acquisition, as well as restructuring costs.

During 2022, merger, restructuring, integration, and other was not material.

During 2021, primarily relates to an impairment charge in CSB due to lower than expected benefits from a developed technology intangible asset.

Concentration of Credit Risks

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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.

Investments in money market mutual funds were $ 55 million and $ 145 million as of December 31, 2023 and December 31, 2022, respectively.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CSB 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

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Retail installment contract receivables, net $ 673,635 $ 487,685 $ 531,516 $ 385,114

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.

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Value Carrying

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

Long-term debt instruments subject to fair value disclosures (1)

$ 7,756,800 $ 7,732,159 $ 9,733,700 $ 9,312,932

________________

(1) Excludes finance leases.

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

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REVENUE AND RECEIVABLES

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.

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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 CSB, 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.

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.

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).

In addition to details provided below, the Company’s disaggregated revenue is presented on the face of the Consolidated Statements of Operations, which includes monitoring and related services and security installation, product, and other revenue presented for its CSB segment, as well as Solar installation, product, and other revenue.

CSB 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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Disaggregated Revenue

Years Ended December 31,

(in thousands) 2022 2021 2020

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

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

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

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

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

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.

(i) monitoring and related services, which are recognized when these services are provided to the customer, and (ii) a material right associated with the one-time non-refundable fees incurred 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).

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 and is reflected in security installation, product, and other revenue.

Years Ended December 31,

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Amortization of deferred subscriber acquisition revenue $ 301,708 $ 235,190 $ 164,180

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.

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 security installation, product, and other revenue.

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

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

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 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

CSB 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, which is primarily recognized at a point in time based upon the nature of the transaction and contractual terms, and any monitoring and related services, which are recognized when these services are provided to the customer.

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

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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.

Solar revenue was not material during 2021 subsequent to the date of the ADT Solar Acquisition.

Revenue and cost of revenue from Solar equipment was $ 154 million and $ 121 million, respectively, during 2023, and $ 451 million and $ 292 million, respectively, during 2022.

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

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.

These fees are recorded as a reduction of solar installation, product, and other revenue and were $ 52 million and $ 141 million during 2023 and 2022, respectively.

Deferred Revenue

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Changes in the Allowance for Credit Losses:

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________________

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

(1) The provision for credit losses during 2021 was impacted by adjustments related to the COVID-19 Pandemic.

(2) 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

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As of December 31, 2023 and 2022, retail installment contract receivables, net, used as collateral for borrowings under the 2020 Receivables Facility were $ 610 million and $ 506 million, respectively.

Refer to Note 8 “Debt” for further discussion regarding the 2020 Receivables Facility.

Contract Assets

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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

Gross contract assets recognized by the Company were not material for the periods presented.

The balance of contract assets for residential transactions comprises:

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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.

As discussed in Note 1 “Description of Business and Summary of Significant Accounting Policies,” effective in the third quarter of 2023, the Company reports 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 do 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.

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

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(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.

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

Customers in the CSB segment are 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 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) 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;

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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;

The CODM uses Adjusted EBITDA from continuing operations (“Adjusted EBITDA”), which is the Company’s segment profit measure, to evaluate segment performance.

Adjusted EBITDA is defined as income (loss) from continuing operations 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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(v) share-based compensation expense;

(vi) merger, restructuring, integration, and other;

(vi) merger, restructuring, integration, and other items such as separation costs;

(vii) losses on extinguishment of debt;

(viii) radio conversion costs, net;

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.

(ix) adjustments related to acquisitions, such as contingent consideration and purchase accounting adjustments, or dispositions;

(x) impairment charges;

and (xi) other income/gain or expense/loss items such as changes in fair value of certain financial instruments or financing and consent fees.

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

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CSB $ 4,652,824 $ 4,381,904 $ 4,155,372

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

Solar 329,835 786,426 47,351

Total Revenue $ 4,982,659 $ 5,168,330 $ 4,202,723

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:

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

Years Ended December 31,

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CSB $ 2,481,305 $ 2,305,032 $ 2,101,659

Commercial 126,940 96,112 45,338

Solar ( 116,505 ) 5,155 5,588

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Goodwill impairment (2)

511,176 200,974 —

Loss on extinguishment of debt (3)

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( 4,696 ) 1,708 201,802

Acquisition-related adjustments (6)

Non-cash acquisition related adjustments and other, net (5)

( 9,600 ) 29,747 7,431

Equity in net earnings (losses) of equity method investee 6,572 ( 4,601 ) —

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

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

Income (loss) from continuing operations before income taxes and equity in net earnings (losses) of equity method investee $ ( 66,527 ) $ 149,146 $ ( 475,834 )

___________________

(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”).

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

(2) Refer to Note 7 “Goodwill and Other Intangible Assets.”

(3) Refer to Note 8 “Debt.”

(4) Refer to Note 11 “Equity.”

(5) During 2023, primarily represents the gain on sale of a business and other investment partially offset by financing fees and interest rate swaps included in other income (expense).

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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Refer to Note 4 “Acquisitions.” During 2022, also includes the gain on sale of a business.

Entity-Wide Disclosures

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

Revenue outside of the U.S.

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As of December 31, 2023 and 2022, substantially all of the Company’s assets were located in the U.S.

ACQUISITIONS AND DISPOSITION

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 into new and attractive adjacent markets.

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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”).

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 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):

Cash $ 38,493

At the time of acquisition, the Company recorded goodwill to the Solar reporting unit, the majority of which was deductible for tax purposes, which reflected the expected strategic value and synergies of ADT Solar to the Company at that time.

Refer to Note 7 “Goodwill and Other Intangible Assets” for information on goodwill impairment losses recognized in the Solar reporting unit during 2022 and 2023, which resulted in a goodwill balance of zero for the Solar reporting unit.

Pro Forma Results

The following summary, prepared on a pro forma basis, presents the Company’s unaudited consolidated results of operations for 2021 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 ADT Solar Acquisition been consummated as of that date:

December 31, 2021

Total revenue $ 5,905,148

Net income (loss) $ ( 328,099 )

These previously reported pro forma results have not been updated to reflect the presentation of the Commercial Business as a discontinued operation in the Company’s consolidated results used in the calculation.

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

Other Acquisitions

There was no acquisition activity during 2023.

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During 2021, total consideration for continuing and discontinued operations related to business acquisitions (excluding the ADT Solar Acquisition) was $ 21 million.

The Company may decide to divest portions of its business for various reasons, including efforts to focus on its remaining businesses.

The Company presents discontinued operations for components of the business that are either disposed of through sale (or qualify as held for sale), abandonment, or spin-off if these actions also represent a strategic shift that has or will have a major effect on the Company’s financial results.

Commercial Divestiture

As discussed in Note 1 “Description of Business and Summary of Significant Accounting Policies,” as a result of the Commercial Divestiture, the disposal group met the established held for sale criteria during the third quarter of 2023.

The Commercial Divestiture supports the Company’s strategic journey and strengthens its financial profile.

Furthermore, the Commercial Divestiture represents a strategic shift that has and will continue to have a major effect on the Company’s operations and financial statements, and therefore, the results of operations of the Commercial Business are classified as discontinued operations in the Company’s Consolidated Statements of Operations for the periods presented.

As the agreed upon sale price was substantially higher than the carrying value of the Commercial Business, the Company did not record any impairments or adjustments when recognizing the disposal group at the lower of its carrying amount or fair value less cost to sell.

As discussed in Note 3 “Segment Information,” the Commercial Business was previously reflected in the Commercial reportable segment.

On October 2, 2023, the Company completed the Commercial Divestiture, and received net proceeds of approximately $ 1,585 million, subject to certain customary post-closing adjustments as set forth in the Commercial Purchase Agreement, the majority of which is presented as cash flows from investing activities from discontinued operations.

In addition, the Company recognized a pre-tax gain on sale of approximately $ 630 million, which was recognized in income (loss) from discontinued operations.

The Company used the majority of the net proceeds for debt redemption, as discussed in Note 8 “Debt.”

Refer to Note 13 “Net Income (Loss) per Share” for basic and diluted earnings per share information for discontinued operations.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following reconciliations represent the major classes of line items of the Commercial Business within the Consolidated Balance Sheets and Consolidated Statements of Operations and certain information within the Consolidated Statements of Cash Flows (excluding proceeds from the sale of business discussed above) for the periods presented.

Balance Sheet Information

(in thousands) December 31, 2022

Accounts receivable $ 262,757

Inventories 49,526

Inventories, net 104,139

Work-in-progress 68,782

Prepaid expenses and other current assets 34,245

Property and equipment 10,047

Total current assets of discontinued operations held for sale

Property and equipment, net 69,777

Subscriber system assets, net 142,763

Intangible assets, net 164,783

Goodwill 336,589

Other definite-lived intangible assets 41,800

Deferred subscriber acquisition costs, net 88,966

Other assets 82,636

Total assets of discontinued operations held for sale $ 1,355,437

Current maturities of long-term debt $ 14,293

Accounts payable 68,855

1 unchanged sentence

Accrued expenses and other current liabilities 123,041

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

Other liabilities ( 9,370 )

Total current liabilities of discontinued operations held for sale

Long-term debt 9,952

Total consideration transferred $ 750,429

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.

Deferred subscriber acquisition revenue 64,605

Other liabilities 31,713

Total liabilities of discontinued operations held for sale $ 405,243

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 ADT Solar Acquisition had been completed as of January 1, 2020.

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 ADT Solar Acquisition been consummated as of that date:

Statements of Operations Information

Years Ended December 31,

(in thousands) 2023 2022 2021

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

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

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

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

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

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

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

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, and the associated cash payment is reflected as cash flows from operating activities for the year ended December 31, 2020.

Other Acquisitions

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.

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.

Revenue $ 1,035,048 $ 1,226,980 $ 1,104,388

Cost of revenue

688,433 839,356 777,388

Selling, general, and administrative expenses 213,514 267,195 247,679

Depreciation and intangible asset amortization 37,691 77,745 75,121

Other income and expense items 19,174 6,016 ( 445 )

Income (loss) from discontinued operations before gain on sale of business and income taxes

76,236 36,668 4,645

Gain on sale of business

Income (loss) from discontinued operations before income taxes

706,216 36,668 4,645

Income tax benefit (expense) ( 178,667 ) ( 10,868 ) ( 1,288 )

Income (loss) from discontinued operations, net of tax $ 527,549 $ 25,800 $ 3,357

Other Cash Flow Information

Years Ended December 31,

(in thousands) 2023 2022 2021

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

Depreciation and intangible asset amortization $ 37,691 $ 77,745 $ 75,121

Share-based compensation expense $ 11,699 $ 13,069 $ 14,126

Cash flows from investing activities:

Subscriber system asset expenditures $ ( 8,902 ) $ ( 29,230 ) $ ( 42,520 )

Purchases of property and equipment $ ( 4,399 ) $ ( 6,885 ) $ ( 5,476 )

Transition Services Agreement

In connection with the Commercial Divestiture, the Company 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.

Income from the Commercial TSA was not material during 2023.

ADT Brand License and Intellectual Property Rights

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 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 GTCR 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.

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Divestitures

Other divestiture activity not reflected as discontinued operations includes:

During the three months ended September 30, 2023, the Company entered into an Asset Purchase Agreement to sell substantially all of the assets and certain specified liabilities of its Vintage Security business (the “Vintage Security Divestiture”).

As a result, the disposal group was classified as held for sale as of September 30, 2023, and the assets and liabilities of the Vintage Security business were reflected as held for sale.

In October 2023, the Company completed the sale of its Vintage Security business (the “Vintage Security Divestiture”) for net proceeds of $ 36 million, subject to certain customary post-closing adjustments, and recognized a gain on sale of $ 19 million recognized in SG&A.

The results of operations of the Vintage Security business are reflected in the CSB segment through the date of sale.

During 2022, proceeds related to disposal activities totaled $ 27 million, resulting in a gain on sale of $ 10 million recognized in SG&A.

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.

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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.

In April 2022, the Company and Ford Motor Company (“Ford”) formed a new entity, SNTNL LLC (“Canopy”), and the Company contributed cash of $ 11 million (the “Initial Contribution”).

Since the Initial Contribution, the Company contributed $ 7 million.

During the fourth quarter of 2023, the Company sold its shares in Canopy and received $ 21 million in accordance with the terms of the agreement between the Company and Ford, which included a put right under which the Company recovered its full equity investment in Canopy plus a premium (“Canopy Termination”).

In addition, the Company recognized a gain of $ 15 million, which is reflected in equity in net earnings (losses) of equity method investees.

The Company no longer holds an investment in Canopy.

The Company previously accounted for its investment in Canopy under the equity method of accounting as the Company was not the primary beneficiary, and therefore, did not consolidate Canopy’s assets, liabilities, and financial results of operations.

In connection with the Canopy Investment, the Company entered into various commercial agreements (the “Canopy Commercial Agreements”).

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.

These agreements will terminate effective on December 1, 2024 as a result of the Canopy Termination.

The impact to the consolidated financial statements from these agreements is not material.

AND SUBSIDIARIES

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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)

(in thousands) CSB Solar Total

Balance as of December 31, 2021

$ 4,906,666 $ 694,726 $ 5,601,392

1 unchanged sentence

12,585 17,424 30,009

— ( 200,974 ) ( 200,974 )

Balance as of December 31, 2022 4,919,251 511,176 5,430,427

Acquisitions (1)

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

Impairment — ( 511,176 ) ( 511,176 )

2 unchanged sentences

________________

(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.

(1) 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.

As of December 31, 2023 and December 31, 2022, accumulated goodwill impairment losses totaled $ 712 million and $ 201 million, respectively.

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

Other Intangible Assets

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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.

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

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 recognized based on the cost to acquire the assets, which may include cash consideration, non-cash consideration, contingent consideration, and directly-attributable transaction costs.

Purchases of contracts with customers under the ADT

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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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.

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 15 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.

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

2 unchanged sentences

Beginning balance $ 2,595,535 $ 2,778,922

Acquisition of customer relationships 3,000 5,333

Customer contract additions, net of dealer charge-backs 564,652 633,431

2 unchanged sentences

Ending balance $ 2,634,211 $ 2,595,535

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.

During 2023 and 2022, the weighted-average amortization period for customer contract additions under the ADT Authorized Dealer Program and from other third parties was 15 years and 14 years, respectively.

Payments for customer contracts under the ADT Authorized Dealer Program and from other third parties are reflected as dealer generated customer accounts and bulk account purchases on the Consolidated Statements of Cash Flows.

During 2023 and 2022, the Company purchased customer accounts from certain other third parties for an aggregate contractual purchase price of $ 109 million and $ 111 million, respectively, subject to reduction based on customer retention.

The Company paid initial cash at the closings in the aggregate amounts of $ 89 million and $ 82 million, respectively, which is included in the payments for dealer generated customer accounts and bulk account purchases.

Definite-Lived Intangible Asset Amortization Expense

21 unchanged sentences

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.

CSB - Based on the results of a quantitative goodwill impairment test as of October 1, 2023, the Company concluded the fair value of the CSB reporting unit substantially exceeded its carrying value.

Commercial - As a result of the purchase price of the Commercial Divestiture being substantially in excess of the carrying value of the net assets divested, the Company concluded it is more likely than not that the fair value of the Commercial reporting unit exceeded its carrying value as of October 1, 2023, and the Commercial Divestiture closed on October 2, 2023.

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.

During the first, second, and third quarters of 2023, the Company performed interim impairment quantitative assessments on the Solar reporting unit as a result of triggering events as of March 31, 2023, June 30, 2023, and September 30, 2023, and recorded goodwill impairment charges of $ 242 million, $ 181 million, and $ 88 million during the first, second, and third quarters of 2023, respectively.

Following the impairments during 2023, the balance of goodwill in the Solar reporting unit was zero .

The Company also assessed the recoverability of other long-lived assets related to its Solar business, and impairment charges were not material.

In addition, the Company recognized $ 201 million of goodwill impairment charges during the third quarter of 2022.

These goodwill impairments were a result of continued deterioration of industry conditions and macroeconomic decline as well as ADT Solar’s underperformance of operating results in successive quarters relative to expectations, and for the third quarter of 2023, as a result of the Company’s then recent plan to close a significant number of branches that operated the Solar business along with the associated headcount reductions.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Indefinite-Lived Intangible Assets

1 unchanged sentence

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.

5 unchanged sentences

As of October 1, 2023, 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.

Based on the results of the October 1, 2023 test, the Company did not record any impairment losses associated with the ADT trade name, and the estimated fair value of the trade name substantially exceeded its carrying amount.

During 2022 and 2021, the Company did not record any impairment losses on its indefinite lived intangible assets.

Definite-Lived Intangible Asset Impairment

Definite-lived intangible asset impairments were not material during 2023 and 2022.

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 at that time.

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

1 unchanged sentence

Debt Description Issued Maturity Interest Rate (1)

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

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

First Lien Term Loan due 2026 9/23/2019 9/23/2026 Term SOFR +2.75% Quarterly $ — $ 2,730,269

First Lien Term Loan B due 2030 10/13/2023 10/13/2030 Term SOFR +2.50% Quarterly 1,375,000 —

Term Loan A Facility 3/14/2023 3/14/2028 Term SOFR +2.25% Quarterly 625,625 —

Second Lien Notes due 2028 1/28/2020 1/15/2028 6.250 % 1/15 and 7/15 1,300,000 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 11/20/2027 Adj.

Daily SOFR + 0.85 %

Monthly 354,741 199,056

2020 Receivables Facility (2)

3/5/2020 11/20/2028 Various Monthly 436,004 354,741

Other debt (3)

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__________________

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

SOFR refers to the Secured Overnight Financing Rate.

(1) Interest rate as of December 31, 2023 .

In June 2023, the Secured Overnight Financing Rate (“SOFR”) replaced the forward London Interbank Offered Rate (“LIBOR”) as the applicable benchmark rate for all applicable existing and future issuances of the Company’s debt instruments with a variable rate component.

Interest on the 2020 Receivables Facility is primarily based on SOFR + 0.95 % and Cost of Funds (“COF”) + 0.85 %.

(2) Maturity date for the 2020 Receivables Facility represents the final maturity of date of current loans borrowed under the facility.

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

(4) Refer to Note 15 “Leases” for additional information regarding the Company’s finance leases.

First Lien Credit Agreement

The Company’s first lien credit agreement dated as of July 1, 2015 (together with subsequent amendments and restatements, the “First Lien Credit Agreement”) includes a term loan facility and the First Lien Revolving Credit Facility.

Prime Security Services Holdings, LLC (“Holdings”), a Delaware limited liability company and a wholly owned indirect subsidiary of the Company, Prime Security Services Borrower, LLC (“Prime Borrower”), a Delaware limited liability company and a wholly owned direct subsidiary of Holdings, and The ADT Corporation, a Delaware corporation and a wholly owned direct subsidiary of Prime Borrower (together with Prime Borrower, the “Borrowers”), are parties to the First Lien Credit Agreement as holdings and borrowers respectively.

In October 2023, the Company redeemed approximately $ 1.3 billion of the existing term loan facility (the “First Lien Term Loan due 2026”) using net proceeds from the Commercial Divestiture.

In addition, in October 2023, the Company refinanced the remaining outstanding balance of the First Lien Term Loan due 2026 with a new $ 1,375 million 7 -year term loan B due 2030 (the “First Lien Term Loan B due 2030”).

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 the First Lien Revolving Credit Facility.

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) 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;

The First Lien Term Loan B due 2030 requires scheduled quarterly amortization payments, commencing on March 31, 2024, equal to 0.25 % of the original principal amount of the First Lien Term Loan B due 2030, with the remaining balance payable at maturity.

The Borrowers may make voluntary prepayments on the First Lien Term Loan B due 2030 at any time prior to maturity at par, subject to a 1.00 % prepayment premium in the event of certain specified refinancing events at any time during the first six months after the Closing Date.

Additionally, the Borrowers are required to make annual prepayments on the outstanding First Lien Term Loan due 2030 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, 2023, the Borrowers were not required to make an annual prepayment based on the Company’s excess cash flow.

The First Lien Term Loan B due 2030 bears interest at a rate equal to, at the Prime Borrower’s option, either (a) a term SOFR rate (“Term SOFR”) with a floor of zero or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50 % per annum, (ii) the rate of interest per annum last quoted by The Wall Street Journal as the “Prime Rate” in the United States and (iii) the one-month adjusted term SOFR plus 1.00 % per annum (“Base Rate”), in each case, plus an applicable margin of 2.50 % per annum for Term SOFR loans and 1.50 % per annum for Base Rate loans.

Prime Borrower has elected the Term SOFR alternative to apply to borrowings of the First Lien Term Loan B due 2030.

The First Lien Term Loan due 2026 had an interest rate calculated as, at Prime Borrower’s option, either (a) SOFR 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 SOFR”) 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.

In addition, the Company is required to pay a commitment fee between 0.375 % and 0.50 % (determined based on a net first lien leverage ratio) with respect to the unused commitments under the First Lien Revolving Credit Facility.

The Company’s obligations relating to the First Lien Credit Agreement are gu aranteed, jointly and severally, on a senior secured first-priority basis, by substantially all of the Company’s domestic subsidiaries and are secured by first-priority security interests in substantially all of the assets of the Company’s domestic subsidiaries, subject to certain permitted liens and exceptions.

Significant 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 %.

This amendment also reinstated the quarterly principal payments.

• 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.

and (iii) one-month adjusted SOFR plus 1.00 % per annum (“Base Rate”), in each case, plus the applicable margin of 2.75 % for Adjusted SOFR 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 Term SOFR loans (subject to a credit spread adjustment) and 1.75 % for Base Rate loans, in each case, subject to adjustment pursuant to a leverage-based pricing grid.

In addition, the Borrowers are required to pay a commitment fee between 0.375 % and 0.50 % (determined based on a net first lien leverage ratio) with respect to the unused commitments under the First Lien Revolving Credit Facility.

Indebtedness incurred under the First Lien Credit Agreement is gu aranteed, 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 is 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.

Significant amendments and restatements related to the First Lien Credit Agreement during the periods presented were as follows:

• January 2021:

Refinanced 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 %, as well as reinstated quarterly principal payments.

Extended the maturity date of the First Lien Revolving Credit Facility to June 23, 2026, subject to certain conditions, and obtained an additional $ 175 million of commitments.

• October 2023:

Refinanced the remaining outstanding balance of the First Lien Term Loan due 2026 with the First Lien Term Loan B due 2030.

Both the proceeds and repayments of long-term debt on the Consolidated Statements of Cash Flows include the impact of $ 230 million from the refinancing.

First Lien Revolving Credit Facility

Borrowings and repayments under the First Lien Revolving Credit Facility during the periods presented were as follows:

There were no borrowings or repayments.

The Company borrowed $ 550 million and repaid $ 575 million.

The Company borrowed $ 185 million and repaid $ 160 million in connection with the ADT Solar Acquisition.

As of December 31, 2023, the Company had $ 575 million in available borrowing capacity under the First Lien Revolving Credit Facility.

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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.

On March 14, 2023, Holdings, Prime Borrower, and The ADT Corporation (Prime Borrower and The ADT Corporation in such capacity, the “Term Loan A Borrowers”), entered into a term loan credit agreement (the “Term Loan A Credit Agreement”) with Barclays Bank PLC, as administrative agent, and the lenders party thereto, pursuant to which such lenders provided the Term Loan A Borrowers with an aggregate principal amount of $ 600 million of term loans (the “Closing Date Term Loan A Loans”) under a senior secured term loan A facility (the “Term Loan A Facility”).

The Company used the proceeds from the Closing Date Term Loan A Loans to redeem $ 600 million outstanding principal amount of the Company’s 4.125 % senior notes due June 15, 2023 (the “ADT Notes due 2023”).

Also on March 14, 2023, Holdings, the Term Loan A Borrowers, the subsidiary loan parties thereto, Barclays Bank PLC, and the lender party thereto entered into an amendment to the Term Loan A Credit Agreement, pursuant to which the lender party thereto agreed, at the option of the Term Loan A Borrowers and subject to the satisfaction or waiver of customary conditions, to provide the Term Loan A Borrowers with an aggregate principal amount of $ 50 million of incremental term loans (the “Incremental Term Loan A Loans”) under the Term Loan A Facility on or before the scheduled maturity date of the ADT Notes due 2023.

On June 15, 2023, the Company borrowed the Incremental Term Loan A Loans and used the proceeds to complete the redemption of $ 50 million of the ADT Notes due 2023.

The Incremental Term Loan A Loans have the same terms as, and constitute one class with, the Closing Date Term Loan A Loans.

The Term Loan A Facility has a maturity date of March 14, 2028, 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 requires scheduled quarterly amortization payments, which commenced on June 30, 2023, equal to 1.25 % of the original principal amount of the Term Loan A Facility, with the balance payable at maturity.

The Term Loan A 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 bear interest at a rate equal to, at Prime Borrower’s option, either (a) a term SOFR rate plus an adjustment of 0.10 % (“Term SOFR”) or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50 % per annum;

(ii) the rate of interest per annum last quoted by The Wall Street Journal as the “Prime Rate” in the U.S., and (iii) the one-month adjusted term SOFR plus 1.00 % per annum, in each case, plus an applicable margin of 2.50 % per annum for SOFR loans and 1.50 % per annum for base rate loans, subject to adjustments based on certain specified net first lien leverage ratios.

Prime Borrower has elected the Term SOFR alternative to apply to borrowings under the Term Loan A Facility.

Indebtedness incurred under the Term Loan A Facility is 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 is 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 is subject to customary mandatory prepayment provisions, covenants, and restrictions, including a financial maintenance covenant requiring the Term Loan A Borrowers to comply as of the last day of each fiscal quarter with a specified maximum consolidated net first lien leverage ratio.

Second Lien Notes due 2028

In January 2020, the Company issued $ 1.3 billion aggregate principal amount of 6.250 % second-priority senior secured notes due 2028 (the “Second Lien Notes due 2028”).

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.

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

The Company’s 6.250 % second-priority senior secured notes due 2028 (the “Second Lien Notes due 2028”) are due at maturity, and since 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 decreased to 101.563 % as of January 15, 2024 and decreases to 100 % on or after January 15, 2025.

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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Second Lien Notes due 2028 also provide for customary events of default.

First Lien Notes

The indenture governing the Second Lien Notes due 2028 also provides for customary events of default.

First Lien Notes due 2024 and First Lien Notes due 2026

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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 indentures governing the First Lien Notes due 2024 and First Lien Notes due 2026 also provide for customary events of default.

Significant activity related to the First Lien Notes due 2024 during the periods presented was as follows:

The Company redeemed $ 150 million principal amount of the outstanding First Lien Notes due 2024 for a redemption price of $ 150 million, excluding accrued and unpaid interest, using cash on hand.

• December 2023:

The Company redeemed $ 500 million principal amount of the outstanding First Lien Notes due 2024 for a redemption price of $ 500 million, excluding accrued and unpaid interest, using remaining net proceeds from the Commercial Divestiture and cash on hand.

First Lien Notes due 2027

In August 2020, the Company issued $ 1.0 billion aggregate principal amount of 3.375 % first-priority senior secured notes due 2027 (the “First Lien Notes due 2027”).

The proceeds from the First Lien Notes due 2027, along with cash on hand, were used to redeem the outstanding $ 1.0 billion aggregate principal amount of the 6.250 % notes due 2021 issued by The ADT Corporation (the “ADT Notes due 2021”), pay accrued and unpaid interest on the ADT Notes due 2021, and pay any related fees and expenses, including the call premium on the ADT Notes due 2021.

The deferred financing costs incurred in connection with the issuance of the First Lien Notes due 2027 were not material.

The First Lien Notes due 2027 are due at maturity and may be redeemed at the Company’s option as follows:

T he Company’s 3.375 % first-priority senior secured notes due 2027 (the “First Lien Notes due 2027”) are due at maturity and may be redeemed at the Company’s option as follows:

• Prior to August 31, 2026, in whole at any time or in part from time to time, at a make-whole premium plus accrued and unpaid interest, if any, thereon to the redemption date.

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The indenture also provides for customary events of default.

The indenture governing the First Lien Notes due 2027 also provides for customary events of default.

First Lien Notes due 2029

In July 2021, the Company issued $ 1.0 billion aggregate principal amount of 4.125 % first-priority senior secured notes due 2029 (the “First Lien Notes due 2029”).

The related deferred financing costs were not material.

The First Lien Notes due 2029 will mature on August 1, 2029, with semi-annual interest payment dates of February 1 and August 1 of each year, beginning February 1, 2022, and may be redeemed at the Company’s option as follows:

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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.

The indenture governing the First Lien Notes due 2029 also provides for customary events of default.

In connection with the ADT Acquisition, the Company entered into supplemental indentures to notes originally issued by The ADT Corporation (collectively, the “ADT Notes”) providing for each series of ADT Notes to benefit from (i) guarantees by substantially all of the Company’s domestic subsidiaries and (ii) first-priority senior security interests, subject to permitted liens, in substantially all of the existing and future assets of the Company’s domestic subsidiaries.

2 unchanged sentences

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.

The indentures governing the ADT Notes also provide for customary events of default.

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.

• 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:

In March 2023, the Company used the proceeds from the Closing Date Term Loan A Loans to redeem $ 600 million outstanding principal amount of the ADT Notes due 2023 for a total redemption price of $ 600 million, excluding any accrued and unpaid interest.

In June 2023, the Company redeemed the remaining outstanding principal amount of $ 100 million for a total redemption price of $ 100 million using $ 50 million of proceeds from the Incremental Term Loan A Loans and the remaining from cash on hand.

AND SUBSIDIARIES

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Significant amendments to the 2020 Receivables Facility were as follows:

• In March 2021, the Receivables Facility was amended to, among other things, extend the scheduled termination date for the uncommitted revolving period to March 4, 2022, and reduce the spread over LIBOR payable in respect of borrowings thereunder from 1.00 % to 0.85 %.

• In July 2021, the Receivables Facility was amended into the form of a Receivables Financing Agreement, which continued the uncommitted secured lending arrangement contemplated among the parties and, among other things, provided for certain revisions to funding, prepayment, reporting, and other provisions in preparation for a potential future syndication of the advances made under the Receivables Facility.

• In October 2021, the Company further amended the documentation governing the Receivables Facility in connection with the syndication of the advances thereunder to two additional lenders:

• March 2021:

Extended the scheduled termination date for the uncommitted revolving period to March 2022, and reduced the spread over LIBOR payable in respect of borrowings thereunder from 1.00 % to 0.85 %, among other things.

The 2020 Receivables Facility was amended into the form of a Receivables Financing Agreement, which continued the uncommitted secured lending arrangement contemplated among the parties and, among other things, provided for certain revisions to funding, prepayment, reporting, and other provisions in preparation for a potential future syndication of the advances made under the 2020 Receivables Facility.

• October 2021:

Further amended the documentation governing the 2020 Receivables Facility in connection with the syndication of the advances thereunder to two additional lenders:

MUFG Bank, Ltd.

and Starbird Funding Corporation (a conduit lender related to BNP Paribas).

As part of the amendment, the Receivables Facility’s uncommitted lending limit was increased from $ 200 million to $ 400 million, and the scheduled termination date for the Receivable Facility’s uncommitted revolving period was extended to October 28, 2022.

• 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.

As part of the amendment, the 2020 Receivables Facility’s uncommitted lending limit was increased from $ 200 million to $ 400 million, and the scheduled termination date for the 2020 Receivable Facility’s uncommitted revolving period was extended from March 2022 to October 2022.

Changed the benchmark rate from 1-month LIBOR to Daily SOFR, 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.

• March 2023:

Increased the borrowing capacity from $ 400 million to $ 500 million and extended the uncommitted revolving period from May 2023 to March 2024, among other things.

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.

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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.

Proceeds and repayments from the 2020 Receivables Facility are presented on the Consolidated Statements of Cash Flows.

During 2021, both the proceeds and repayments from the 2020 Receivables Facility include the non-cash impact of approximately $ 88 million from the 2020 Receivables Facility amendment in October 2021.

The 2020 Receivables Facility did not have a material impact to the Consolidated Statements of Operations during the periods presented.

As of December 31, 2023, the Company had an uncommitted available borrowing capacity of $ 64 million under the 2020 Receivables Facility.

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As of December 31, 2023 and 2022, the SPE’s assets and liabilities primarily consisted of unbilled retail installment contract receivables, net, of $ 610 million and $ 506 million, respectively, and borrowings under the 2020 Receivables Facility as presented above.

Solar Receivables Facility

On August 2, 2023, Compass Solar Group, LLC (“Compass”) and ADT Solar Finance LLC (“ADT Solar Finance”), each an indirect wholly-owned subsidiary of ADT Inc.

entered into a Receivables Financing Agreement with Mizuho Bank, Ltd.

(the “Solar Receivables Financing Agreement”) to finance receivables generated by the installation of residential solar systems.

The Solar Receivables Financing Agreement, among other things, provides for an uncommitted revolving loan facility in the aggregate principal amount of up to $ 300 million, which loans are secured by substantially all the assets of ADT Solar Finance (the “Solar Receivables Facility”).

The Solar Receivables Financing Agreement has an initial revolving period of one year (which may be extended by agreement of the parties) followed by an amortization period of 300 months to maturity where all collections on the receivables during such period will be applied to prepay the loan until reduced to zero, which will occur only if the Solar Receivables Financing Agreement is not mutually extended on a revolving basis.

The interest rate under the Solar Receivables Financing Agreement is the sum of (x) term SOFR (plus a credit adjustment spread of 0.1 %) plus (y) 1.0 % (increased to 3.5 % after the termination date) or, with respect to loans funded by a Conduit Lender (as defined in the Solar Receivables Financing Agreement), the sum of (x) the applicable rate set forth in the Receivables Financing Agreement plus (y) 1.0 % (increased to 3.5 % after the termination date).

In connection with such Solar Receivables Financing Agreement, certain other agreements relating to the transaction were entered into, including ADT Solar Finance’s limited liability company agreement;

a Receivables Sale Agreement between Compass and ADT Solar Finance, pursuant to which Compass sells such receivables from time to time to ADT Solar Finance;

a Performance Support Agreement entered into by ADT Inc., pursuant to which ADT Inc.

guaranteed certain obligations under the Solar Receivables Financing Agreement;

and related transaction documents and certain account control agreements and security agreements.

As of December 31, 2023, we have not borrowed any amounts under the Solar Receivables Facility.

Debt Covenants

The First Lien Credit Agreement and indentures associated with the borrowings above contain certain covenants and restrictions that limit the Company’s ability to, among other things:

Our credit agreements and indentures associated with the borrowings above contain certain covenants and restrictions that limit the Company’s ability to, among other things:

(a) incur additional debt or issue certain preferred equity interests;

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and (k) modify the terms of certain debt or organizational agreements.

In addition, the First Lien Credit Agreement and indentures associated with the borrowings above also provide for customary events of default.

The Company is also subject to a springing financial maintenance covenant under the First Lien Credit Agreement, which requires the Company to not exceed a specified first lien leverage ratio at the end of each fiscal quarter if the testing conditions are satisfied.

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).

Our credit agreements and indentures associated with the borrowings above also provide for customary events of default.

The Company is subject to a springing financial maintenance covenant under the First Lien Credit Agreement, which requires the Company to not exceed a specified first lien leverage ratio at the end of each fiscal quarter if the testing conditions are satisfied.

The Company is subject to a financial maintenance covenant under the Term Loan A Credit Agreement requiring the Term Loan A Borrowers to comply as of the last day of each fiscal quarter with a specified maximum consolidated net first lien leverage ratio.

As of December 31, 2023, we were in compliance with all financial covenant and other maintenance tests for all our debt obligations.

Loss on Extinguishment of Debt

Loss on extinguishment of debt includes the payment of call and redemption premiums, the write-off of unamortized deferred financing costs and discounts, and certain other expenses associated with extinguishment of debt.

During 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.

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

Loss on Extinguishment of Debt

During the periods presented, loss on extinguishment of debt was as follows:

Totaled $ 17 million and was primarily due to the write-off of unamortized discount and debt issuance costs associated with the partial redemption of the First Lien Term Loan due 2026 and the refinancing of the First Lien Term Loan due 2026.

Loss on extinguishment of debt was not material.

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.

Additional fees and other costs associated with financing transactions were not material during 2023, 2022, or 2021.

As of December 31, 2023, the aggregate annual maturities of debt, excluding finance leases, were as follows:

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Debt principal $ 286,678 $ 113,375 $ 2,862,193 $ 1,107,818 $ 1,817,288 $ 1,749,939 $ 7,937,291

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.

Interest expense (excluding interest income) on the Company’s debt, including finance leases, and interest rate swap contracts presented within interest expense, net, was $ 588 million, $ 278 million, and $ 457 million during 2023, 2022, and 2021, respectively.

Interest expense presented in other income (expense) was not material during 2023.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company's derivative financial instruments primarily consist of LIBOR-based interest rate swap contracts, which were entered into with the objective of managing exposure to variability in interest rates on the Company's debt.

The Company's derivative financial instruments primarily consist of SOFR-based interest rate swap contracts, which were entered into with the objective of managing exposure to variability in interest rates on the Company's debt and interest rate swaps.

All interest rate swap contracts are reported in the Consolidated Balance Sheets at fair value.

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• Not designated as cash flow hedges:

Unrealized gains and losses are recognized in interest expense, net.

Unrealized gains and losses are recognized in interest expense, net, and other income (expense) depending on the nature of the underlying that the swaps are economically hedging.

• Designated as cash flow hedges:

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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.

During January and February 2019, the Company entered into additional interest rate swap contracts, which were designated as cash flow hedges, with an aggregate notional amount of $ 725 million and a maturity of April 2022.

In October 2019, and in connection with the refinancing of variable-rate debt under the First Lien Credit Agreement in September 2019, the Company terminated interest rate swap contracts with an aggregate notional amount of $ 3.8 billion, of which $ 2.8 billion were designated as cash flow hedges, and concurrently entered into new LIBOR-based interest rate swap contracts, which were designated as cash flow hedges, with an aggregate notional amount of $ 2.8 billion and maturity of September 2026.

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.

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 and were $ 19 million, $ 56 million, and $ 38 million during 2022, 2021, and 2020, respectively.

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 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.

The cash flows associated with interest rate swap contracts that contain an other-than-insignificant financing element at inception are reflected as cash flows from financing activities.

The cash flows associated with interest rate swap contracts that were entered into with the intention of offsetting the economic overhedged position of a portion of our existing interest rate swaps are reflected as cash flows from investing activities.

As these swaps were executed during December, there were no payments during 2023.

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.

Interest Rate Swaps :

In October 2019, and in connection with the refinancing of variable-rate debt under the First Lien Credit Agreement in September 2019, the Company terminated interest rate swap contracts with an aggregate notional amount of $ 3.8 billion, of which $ 2.8 billion were designated as cash flow hedges, and concurrently entered into new LIBOR-based interest rate swap contracts, which were, at the time, designated as cash flow hedges, with an aggregate notional amount of $ 2.8 billion and maturity of September 2026.

Beginning in March 2020, the Company's interest rate swap contracts previously designated as cash flow hedges were no longer highly effective as a result of changes in the interest rate environment.

During 2023, the Company recorded $ 25 million to interest expense, net associated with the reclassification from AOCI of historical losses related to the de-designated interest rate swaps for which the cash flows were probable of not occurring as a result of the partial redemption of the Company’s First Lien Term Loan due 2026.

As of December 31, 2023, AOCI associated with previously designated cash flow hedges that is estimated to be reclassified to interest expense, net, within the next twelve months is not material.

In March and April 2023, the Company entered into floating-to-fixed interest rate swaps with an aggregate notional amount of $ 300 million to partially hedge the Term Loan A Facility.

In December 2023, the Company entered into interest rate swaps with an aggregate notional amount of $ 700 million to offset the excess notional interest rate swaps as a result of the partial redemption of the First Lien Term Loan due 2026.

The changes in fair value associated with these swaps and the excess swaps are reflected in other income (expense).

The Company’s interest rate swaps consist of the following:

(in thousands) December 31,

Execution Maturity Designation 2023 2022

January 2019 April 2022 Not designated $ — $ 125,000

February 2019 April 2022 Not designated — 300,000

October 2019 September 2026 Not designated $ 2,800,000 $ 2,800,000

March 2023 March 2028 Not designated 100,000 —

April 2023 March 2028 Not designated 200,000 —

December 2023

September 2026 Not designated 700,000 —

Total notional amount $ 3,800,000 $ 2,800,000

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Other liabilities $ 1,325 $ —

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unrealized Gain (Loss) on Interest Rate Swaps:

Years Ended December 31,

(in thousands) 2022 2021 2020

Gain (loss) included in interest expense, net $ 301,851 $ 157,505 $ ( 60,363 )

Changes in AOCI:

Statement of Operations Classification (in thousands)

2023 2022 2021

Interest expense, net

$ ( 22,174 ) $ 301,851 $ 157,505

Other income (expense)

$ ( 16,511 ) $ — $ —

Changes in and Reclassifications out of AOCI:

(in thousands) Cash Flow Hedges

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Balance as of December 31, 2023 $ ( 13,383 )

Cash Flow Hedges Reclassifications out of AOCI:

Years Ended December 31,

(in thousands) 2022 2021 2020

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.

Components of income (loss) before income taxes:

The amounts and related disclosures below are based on the continuing operations of the Company.

Components of Income Before Taxes

Years Ended December 31,

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Foreign 3,012 2,712 2,314

Income (loss) before income taxes $ 237,403 $ ( 471,189 ) $ ( 778,919 )

Income (loss) from continuing operations before income taxes and equity in net earnings (losses) of equity method investee $ ( 66,527 ) $ 149,146 $ ( 475,834 )

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Components of Income Tax Benefit (Expense)

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Income tax benefit (expense) $ ( 4,585 ) $ ( 37,682 ) $ 131,657

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Effective Tax Rate Reconciliation

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Statutory federal tax rate 21.0 % 21.0 % 21.0 %

Statutory state tax rate, net of federal benefits 6.4 % 2.7 % 2.9 %

State income taxes, net of federal benefits ( 9.4 ) % 6.8 % 2.7 %

tax ( 2.0 ) % 0.8 % ( 0.2 ) %

Non-deductible and non-taxable charges (1)

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Valuation allowance — % ( 1.6 ) % 0.5 %

Prior year return adjustments 1.6 % 0.4 % ( 0.3 ) %

Unrecognized tax benefits 8.7 % ( 6.1 ) % — %

Share-based compensation 0.2 % ( 1.7 ) % 0.6 %

Non-deductible goodwill on dispositions ( 5.9 ) % — % — %

Federal credits 5.6 % ( 8.0 ) % — %

Acquisitions ( 0.3 ) % 1.3 % 0.2 %

Acquisitions and dispositions 8.0 % ( 0.5 ) % 1.2 %

Legislative changes ( 5.1 ) % ( 5.7 ) % 0.8 %

Uncertain tax positions ( 3.8 ) % — % — %

Non-deductible goodwill impairment ( 22.8 ) % 4.0 % — %

Prior year return adjustments 5.2 % 2.9 % 0.3 %

Other ( 0.9 ) % 0.1 % 0.4 %

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(1) During 2022, primarily represents the impact related to the fair value adjustment of the Forward Contract.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred Tax Assets and Deferred Tax Liabilities

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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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The changes in the valuation allowance for deferred tax assets were as follows:

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Income tax benefit (expense) (1)

43,277 2,428 2,378

Write-offs and other

2,174 14 5,478

Ending balance $ ( 12,264 ) $ ( 57,715 ) $ ( 60,157 )

__________________

(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.

As of December 31, 2022, the Company had approximately $ 1.6 billion of U.S.

(1) During 2023, the change is primarily related to the utilization of capital loss carryforwards against which a valuation allowance was previously recorded.

The utilization is attributable to capital gains generated in connection with the Commercial Divestiture.

As of December 31, 2023, the Company had approximately $ 242 million of U.S.

federal net operating loss (“NOL”) carryforwards with expiration periods between 2036 and 2042.

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federal NOL carryforwards.

As of December 31, 2022, the Company’s valuation allowance for deferred tax assets was primarily related to capital loss carryforwards in both the U.S.

and Canada primarily generated in connection with the sale of ADT Canada during 2019.

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.

As of December 31, 2023, the Company’s valuation allowance for deferred tax assets was primarily related to capital loss carryforwards in Canada primarily generated in connection with the sale of ADT Canada during 2019.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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Gross increase related to prior year tax positions 517 5,063 373

Gross decrease related to prior year tax positions — — ( 732 )

Increases related to acquisitions — — 400

Decreases related to lapse of statute of limitation ( 7,871 ) ( 15,107 ) ( 142 )

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federal, state and local, and foreign jurisdictions.

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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Based on the current tax statutes and status of its income tax audits, the Company expects approximately $ 29 million of its unrecognized tax benefits to be resolved in the next twelve months.

Open Tax Years by Jurisdiction

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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.

entities and 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 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.

Tax Cuts and Jobs Act - Certain changes to U.S.

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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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, 2023, the Company does not anticipate any material impact.

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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 .

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”).

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.

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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, or (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.

Google Investor Rights 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 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 through 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 (i) the Google Commercial Agreement (as defined in Note 14 “Commitments and Contingencies”) has been terminated under certain specified circumstances or (ii) the Google Cloud Master Agreement (as defined in Note 14 “Commitments and Contingencies”) has been validly terminated for any reason other than Google's uncured material breach.

Issuances of Common Stock

During the periods presented, issuances of Common Stock other than as related to the exercise or vesting of share-based compensation awards includes:

• 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).

• June 2022 :

The Company issued approximately 2 million shares of Common Stock as consideration for a business acquisition.

• 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, throughout 2022, the Company issued the Delayed Shares in connection with the ADT Solar Acquisition as discussed in Note 4 “Acquisitions.”

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

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

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.

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 Transaction

State Farm Strategic Investment

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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.

1 unchanged sentence

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.

2 unchanged sentences

No shares of Class B Common Stock were converted and tendered in the Tender Offer.

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.

During 2022, the change in fair value recognized in other income (expense) was a net loss of $ 63 million.

Fees associated with the Tender Offer were not material.

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.

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 increased its size by one director and appointed a designee of State Farm as a member of the Board of Directors.

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.

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 development agreement with State Farm (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 days after the date that no designee of State Farm serves on the Board of Directors and State Farm has no rights (or has irrevocably waived its right) to nominate a designee to the Board of Directors.

Notwithstanding the standstill restrictions described above, State Farm

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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”).

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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, 2023.

Refer to Note 17 “Related Party Transactions” or more information on the Opportunity Fund.

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.

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During 2021, the Company declared aggregate dividends of $ 0.14 per share on Common Stock ($ 111 million) and $ 0.14 per share on Class B Common Stock ($ 8 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.

Subsequent Event - On January 24, 2024, the Company announced a dividend of $ 0.055 per share to holders of Common Stock and Class B Common Stock of record on March 14, 2024, which will be distributed on or about April 4, 2024.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accumulated Other Comprehensive Income (Loss)

1 unchanged sentence

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 recognized in selling, general, and administrative expenses was as follows:

Share-based compensation expense is recognized in the Consolidated Statements of Operations as follows:

Years Ended December 31,

1 unchanged sentence

2023 2022 2021

Share-based compensation expense $ 66,566 $ 61,237 $ 96,013

Selling, general, and administrative expenses

$ 39,438 $ 53,497 $ 47,111

Income (loss) from discontinued operations, net of tax

11,699 13,069 14,126

Total share-based compensation expense

$ 51,137 $ 66,566 $ 61,237

The following discussion of the Company’s share-based compensation awards includes awards related to continuing and discontinued operations, unless otherwise noted.

As of December 31, 2023, the Company is authorized to issue no more than approximately 5 million shares of Common Stock by the exercise or vesting of granted awards under the 2016 Plan.

The Company does not expect to issue additional awards under the 2016 Plan.

Unrecognized share-based compensation expense as of December 31, 2022 and share-based compensation expense during 2022, 2021, and 2020 for awards granted under the 2016 Plan were not material.

Unrecognized share-based compensation expense as of December 31, 2023 and share-based compensation expense for awards granted under the 2016 Plan were not material during the periods presented.

Distributed Shares and Class B Unit Redemption

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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 during 2022, 2021, and 2020 was not material.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes activity related to the Distributed Shares during 2023:

4 unchanged sentences

Unvested as of December 31, 2023 9,194,312 $ 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.

The 2018 Plan authorizes the issuance of no more than approximately 38 million shares of Common Stock by the exercise or vesting of granted awards, which are generally stock options and restricted stock units (“RSUs”).

During 2019, the Company amended the 2018 Plan, which increased the number of authorized shares of Common Stock to be issued to approximately 88 million shares.

The 2018 Plan, as amended, authorizes the issuance of no more than approximately 88 million shares of Common Stock by the exercise or vesting of granted awards, which are generally stock options and restricted stock units (“RSUs”).

The Company satisfies the exercise of options and the vesting of RSUs through the issuance of authorized but previously unissued shares of Common Stock.

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DEUs are charged against accumulated deficit when dividends are paid.

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

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Any shares of the Company’s Common Stock acquired upon exercise of the Top-up Options will be subject to the terms of the MIRA.

The Company recorded share-based compensation expense associated with the Top-up Options Service Tranche on a straight-line basis over the requisite service period of six months from the IPO.

Share-based compensation expense associated with the Top-up Options Performance Tranche 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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, 2023.

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 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 %

Expected exercise term (years) 6

Expected dividend yield 2.2 % - 2.7 %

Expected volatility 45 % - 46 %

The risk-free interest rate was based on U.S.

Treasury bonds with a zero-coupon rate.

The Company did not have sufficient historical exercise data, and, as such, the Company estimated the expected exercise term based on factors such as vesting period, contractual period, and other share-based compensation awards with similar terms and conditions.

The dividend yield was calculated by taking the annual dividend run-rate and dividing by the stock price at date of grant.

The stock price volatility was implied based upon an average of historical volatility of publicly traded companies in industries similar to the Company, as the Company did not have sufficient trading history to use as a basis for actual stock price volatility, as well as consideration for the Company’s debt-to-equity ratio.

The weighted-average grant date fair values of options granted during 2020 was $ 1.77 .

The Company did not grant any options during the periods presented.

The following table summarizes activity related to 2018 Plan options during 2023:

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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, 2023.

Share-based compensation expense associated with options granted under the 2018 Plan was $ 7 million, $ 12 million, and $ 16 million during 2022, 2021, and 2020, respectively.

The cash flow and the intrinsic value of options exercised were not material during 2022, 2021, and 2020.

Share-based compensation expense associated with options granted under the 2018 Plan was not material during the periods presented.

In addition, the cash flow and the intrinsic value of options exercised were not material during the periods presented.

As of December 31, 2023, unrecognized compensation cost related to options was not material.

11 unchanged sentences

Unvested as of December 31, 2023 9,237,384 $ 7.66

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 on their respective vesting dates was approximately $ 59 million and $ 52 million during 2022 and 2021, respectively, and was not material during 2020.

Total share-based compensation expense associated with RSUs granted under the 2018 Plan was $ 47 million, $ 55 million, and $ 46 million during 2023, 2022, and 2021, respectively, the majority of which relates to the Company’s continuing operations.

The fair value of RSUs (including DEUs) that vested and converted to shares of Common Stock on their respective vesting dates was approximately $ 56 million, $ 59 million, and $ 52 million during 2023, 2022, and 2021, respectively.

As of December 31, 2023, unrecognized compensation cost related to RSUs granted under the 2018 Plan was $ 30 million, which will be recognized over a period of 1.9 years.

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The PSUs are not entitled to dividend equivalent units.

The impact from the PSUs was not material during 2022.

The majority of these PSUs have been forfeited.

The impact from the PSUs was not material.

NET INCOME (LOSS) PER SHARE

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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

2 unchanged sentences

(in thousands, except per share amounts) 2023 2022 2021

Allocation of net income (loss) - basic $ 162,200 $ ( 318,062 ) $ ( 620,856 )

Allocation of income (loss) from continuing operations - basic

$ ( 60,682 ) $ 100,411 $ ( 321,155 )

Dilutive effect (including conversion of Class B Common Stock) — — —

Allocation of net income (loss) - diluted $ 170,068 $ ( 318,062 ) $ ( 620,856 )

Allocation of income (loss) from continuing operations - diluted

$ ( 60,682 ) $ 100,411 $ ( 321,155 )

Allocation of income (loss) from discontinued operations, net of tax - basic $ 496,070 $ 24,244 $ 3,134

Dilutive effect (including conversion of Class B Common Stock) — — —

Allocation of income (loss) from discontinued operations, net of tax - diluted $ 496,070 $ 24,244 $ 3,134

Weighted-average shares outstanding - basic 856,843 848,465 770,620

1 unchanged sentence

Weighted-average shares outstanding - diluted 856,843 848,465 770,620

Net income (loss) per share - basic $ 0.19 $ ( 0.41 ) $ ( 0.82 )

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.

Income (loss) from continuing operations per share - basic

$ ( 0.07 ) $ 0.12 $ ( 0.42 )

Income (loss) from continuing operations per share - diluted

$ ( 0.07 ) $ 0.12 $ ( 0.42 )

Income (loss) from discontinued operations, net of tax, per share - basic

$ 0.58 $ 0.03 $ —

Income (loss) from discontinued operations, net of tax, per share - diluted

$ 0.58 $ 0.03 $ —

Basic weighted-average shares outstanding in 2021 includes the Delayed Shares issued in connection with the ADT Solar Acquisition as discussed in Note 4 “Acquisitions.”

During 2023, 2022, and 2021, share-based compensation awards and all shares of Class B Common Stock of approximately 62 million, 67 million, and 61 million, respectively, were excluded from the computations above.

Additionally, the basic and diluted earnings per share computations for Common Stock exclude approximately 9 million, 9 million, and 10 million unvested shares during 2023, 2022, and 2021, respectively, as their vesting is contingent upon achievement of certain performance requirements which had not been met during the respective periods.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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) 2023 2022 2021

Allocation of net income (loss) - basic $ 10,418 $ ( 22,758 ) $ ( 11,337 )

Allocation of income (loss) from continuing operations - basic

$ ( 3,858 ) $ 6,452 $ ( 23,022 )

Dilutive effect — — —

Allocation of net income (loss) - diluted $ 10,230 $ ( 22,758 ) $ ( 13,289 )

Allocation of income (loss) from continuing operations - diluted

$ ( 3,858 ) $ 6,452 $ ( 23,022 )

Allocation of income (loss) from discontinued operations, net of tax - basic $ 31,479 $ 1,556 $ 223

Dilutive effect

Allocation of income (loss) from discontinued operations, net of tax - diluted

$ 31,479 $ 1,556 $ 223

Weighted-average shares outstanding - basic 54,745 54,745 54,745

1 unchanged sentence

Weighted-average shares outstanding - diluted 54,745 54,745 54,745

Net income (loss) per share - basic $ 0.19 $ ( 0.41 ) $ ( 0.72 )

Net income (loss) per share - diluted $ 0.19 $ ( 0.41 ) $ ( 0.74 )

Income (loss) from continuing operations per share - basic

$ ( 0.07 ) $ 0.12 $ ( 0.42 )

Income (loss) from continuing operations per share - diluted

$ ( 0.07 ) $ 0.12 $ ( 0.42 )

Income (loss) from discontinued operations, net of tax, per share - basic

$ 0.58 $ 0.03 $ —

Income (loss) from discontinued operations, net of tax, per share - diluted

$ 0.58 $ 0.03 $ —

________________

(1) There were no potential shares of Class B Common Stock during the periods presented.

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 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) :

The following table provides the Company’s contractual obligations (excluding the Google Commercial Agreement discussed below) as of December 31, 2023 (in thousands) :

2024 2025 2026 2027 2028 Thereafter Total

$ 323,488 $ 113,607 $ 43,957 $ 483 $ — $ — $ 481,535

The table above includes a commitment with one of the Company’s vendors to purchase at least $ 190 million of security system equipment and components through March 2025.

This commitment is also satisfied through purchases made by the Company’s dealer network.

Google Commercial Agreement

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;

training of the Company’s employees for the sales, installation, customer service, and maintenance for the product and service offerings;

and technology updates for products included in such offerings.

Each party is required to contribute such funds in three equal tranches, subject to the attainment of certain milestones.

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 July 2020, the Company and Google entered into a Master Supply, Distribution, and Marketing Agreement (as amended, 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.

The Google Commercial Agreement also specifies that each party shall contribute $ 150 million towards joint marketing, customer acquisition, training of the Company’s employees, and product technology updates related to the Google Devices and Services.

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

technology advancements, customer acquisition, and marketing, as mutually agreed by the Company and Google, (together with the initial amounts, the “Google Success Funds”).

During 2023, $ 40 million of the Google Success Funds were reimbursed to the Company and reflected as a reduction of advertising costs.

Google Cloud Agreement Addendum

In December 2023, the Company and Google entered into an addendum to the Company’s existing agreement with Google 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), with $ 35 million in the first two years , $ 65 million in the next two years after that, and $ 100 million in the last three years of the commitment.

The Company may elect to cancel the commitment in return for a cancellation fee of 30 % of the total remaining commitment amount and loss of any discounts, remaining credits, or other incentives provided under the Google Cloud Agreement Addendum.

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

1 unchanged sentence

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

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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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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.

1 unchanged sentence

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.

As of December 31, 2023 and 2022, the Company’s accrual for ongoing claims and lawsuits within the scope of an insurance program totaled $ 110 million and $ 90 million, 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 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

2 unchanged sentences

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

6 unchanged sentences

The Company’s subleases are not material.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Right-of-Use Assets and Lease Liabilities

22 unchanged sentences

Total lease cost $ 105,427 $ 118,091 $ 109,353

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash Flow and Supplemental Information (1)

11 unchanged sentences

Finance leases $ 79,273 $ 48,439 $ 46,920

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

__________________

(1) Includes both continuing and discontinued operations consistent with the presentation on the Consolidated Statements of Cash Flows.

Lease Term and Discount Rate

20 unchanged sentences

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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

RETIREMENT PLANS

4 unchanged sentences

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 underfunded liabilities under such plans, are material to the Company’s consolidated financial statements.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

These multi-employer plans, including the Company’s required contributions and any underfunded liabilities under such plans, are not material to the Company’s consolidated financial statements.

Defined Benefit Plans

3 unchanged sentences

As a result, the plans were underfunded by approximately $ 8 million and $ 7 million as of December 31, 2023 and 2022, respectively, and were recorded as a net liability.

Net periodic benefit cost associated with these plans was not material during 2022, 2021, and 2020.

In February 2021, the Company purchased annuity contracts for a certain class of pensioners and beneficiaries which settled a portion of the projected benefit obligation and is not material to the Company’s consolidated financial statements.

Net periodic benefit cost associated with these plans was not material during the periods presented.

During 2023, the Company took actions to terminate the defined benefit pension plan.

The termination was effective December 31, 2023, and the wind down of the plan and distribution of assets is expected to commence in 2024.

Additionally, as of December 31, 2023, the net pension obligation was recorded in accrued expenses and other current liabilities as the Company expects to settle all future obligations during 2024.

Deferred Compensation Plan

1 unchanged sentence

Deferred compensation liabilities are reflected in other liabilities and were $ 31 million and $ 27 million as of December 31, 2023 and 2022, respectively.

Deferred compensation expense was not material during 2022, 2021, and 2020.

Deferred compensation expense was not material during the periods presented.

RELATED PARTY TRANSACTIONS

1 unchanged sentence

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.

There were no significant related party transactions with Apollo during the periods presented.

As discussed in Note 11 “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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023, the balance in the Opportunity Fund was $ 94 million.

During 2023, the Company made payments to State Farm from the Opportunity Fund of $ 9 million.

Other payments and interest earned on the Opportunity fund was not material.

Beginning in 2023, State Farm customers can receive ADT home security products and professional monitoring at a reduced cost.

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.

Prior to the Canopy Termination during 2023, Canopy was considered a related party under GAAP as the Company accounted for its investment under the equity method of accounting.

Except for the transactions described in Note 6 “Equity Method Investments,” there were no other significant related party transactions with Canopy during 2023 or 2022.

Sunlight Financial LLC

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.

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.” As of December 2023, Sunlight is no longer affiliated with Apollo, and as a result, is no longer a related party.

During 2023, total loans funded by Sunlight were approximately $ 78 million;

and as of December 31, 2023, the Company may be required to repurchase approximately $ 6 million of such loans.

Additionally, the Company incurred $ 13 million of financing fees for the year ended December 31, 2023.

As of December 31, 2023, 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 2022, total loans funded by Sunlight were approximately $ 436 million;

and the Company incurred approximately $ 54 million of financing fees.

Transactions with Sunlight were not material during 2021.

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 master services agreement includes a minimum purchase commitment of $ 50 million over a seven -year term, which the Company has satisfied through spend with Rackspace as well as other parties.

The Company incurred fees to Rackspace of $ 15 million, $ 14 million, and $ 6 million during 2023, 2022, and 2021, 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.

During 2023, the Company incurred fees for telephone and technology services of approximately $ 6 million with an entity affiliated with Apollo that became a related party during 2023.

There were no other material related party transactions during the periods presented.

AND SUBSIDIARIES

65 unchanged sentences

Distributions from subsidiaries 108,783 118,200 8,700

Acquisition of businesses — — ( 201,453 )

Other investing, net — — 750

Net cash provided by (used in) investing activities 108,783 118,200 ( 31,300 )

27 unchanged sentences

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 $ 82 million primarily related to the transfer of net assets of certain subsidiaries for share-based compensation.

During 2023 and 2022, ADT Inc.

made non-cash contributions to subsidiaries of approximately $ 51 million and $ 82 million, respectively, primarily related to the transfer of net assets of certain subsidiaries for share-based compensation (including amounts related to discontinued operations).

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.

In addition, ADT Inc.

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.

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The Company is disclosing the following summarized quarterly financial information due to the Commercial Business being reported as a discontinued operation as a result of the Commercial Divestiture.

Refer to Note 5 “Divestitures” for additional information on the Commercial Divestiture.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

March 31, 2023 June 30,

September 30, 2023 December 31, 2023

$ 1,277,311 $ 1,245,609 $ 1,237,484 $ 1,222,255

Operating income (loss)

$ ( 25,549 ) $ 105,538 $ 167,313 $ 262,984

Income (loss) from continuing operations

$ ( 126,781 ) $ ( 2,308 ) $ ( 20,665 ) $ 85,214

Income (loss) from discontinued operations, net of tax $ 7,944 $ 94,519 $ ( 65,572 ) $ 490,658

Net income (loss) $ ( 118,837 ) $ 92,211 $ ( 86,237 ) $ 575,872

Weighted average shares outstanding

854,299 857,581 857,423 858,094

Income (loss) from continuing operations per share

$ ( 0.14 ) $ — $ ( 0.02 ) $ 0.09

Income (loss) from discontinued operations, net of tax, per share

$ 0.01 $ 0.10 $ ( 0.07 ) $ 0.53

Net income (loss) $ ( 0.13 ) $ 0.10 $ ( 0.09 ) $ 0.62

Weighted average shares outstanding

854,299 857,581 857,423 919,397

Income (loss) from continuing operations per share

$ ( 0.14 ) $ — $ ( 0.02 ) $ 0.09

Income (loss) from discontinued operations, net of tax, per share

$ 0.01 $ 0.10 $ ( 0.07 ) $ 0.50

Net income (loss) $ ( 0.13 ) $ 0.10 $ ( 0.09 ) $ 0.59

Class B Common Stock

Weighted average shares outstanding

54,745 54,745 54,745 54,745

Income (loss) from continuing operations per share

$ ( 0.14 ) $ — $ ( 0.02 ) $ 0.09

Income (loss) from discontinued operations, net of tax, per share

$ 0.01 $ 0.10 $ ( 0.07 ) $ 0.53

Net income (loss) $ ( 0.13 ) $ 0.10 $ ( 0.09 ) $ 0.62

Weighted average shares outstanding

54,745 54,745 54,745 54,745

Income (loss) from continuing operations per share

$ ( 0.14 ) $ — $ ( 0.02 ) $ 0.09

Income (loss) from discontinued operations, net of tax, per share

$ 0.01 $ 0.10 $ ( 0.07 ) $ 0.50

Net income (loss) $ ( 0.13 ) $ 0.10 $ ( 0.09 ) $ 0.59

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

March 31, 2022 June 30,

September 30, 2022 December 31, 2022

$ 1,256,897 $ 1,304,314 $ 1,289,793 $ 1,317,326

Operating income (loss)

$ 72,898 $ 200,013 $ 2,629 $ 195,439

Income (loss) from continuing operations

$ 49,279 $ 84,532 $ ( 169,115 ) $ 142,167

Income (loss) from discontinued operations, net of tax $ 2,366 $ 6,985 $ 7,866 $ 8,583

Net income (loss) $ 51,645 $ 91,517 $ ( 161,249 ) $ 150,750

Weighted average shares outstanding

843,830 848,242 850,230 851,459

Income (loss) from continuing operations per share

$ 0.05 $ 0.09 $ ( 0.19 ) $ 0.16

Income (loss) from discontinued operations, net of tax, per share

$ — $ 0.01 $ 0.01 $ 0.01

Net income (loss) $ 0.06 $ 0.10 $ ( 0.18 ) $ 0.17

Weighted average shares outstanding

911,313 910,808 850,230 921,501

Income (loss) from continuing operations per share

$ 0.05 $ 0.09 $ ( 0.19 ) $ 0.15

Income (loss) from discontinued operations, net of tax, per share

$ — $ 0.01 $ 0.01 $ 0.01

Net income (loss) $ 0.06 $ 0.10 $ ( 0.18 ) $ 0.16

Class B Common Stock

Weighted average shares outstanding

54,745 54,745 54,745 54,745

Income (loss) from continuing operations per share

$ 0.05 $ 0.09 $ ( 0.19 ) $ 0.16

Income (loss) from discontinued operations, net of tax, per share

$ — $ 0.01 $ 0.01 $ 0.01

Net income (loss) $ 0.06 $ 0.10 $ ( 0.18 ) $ 0.17

Weighted average shares outstanding

54,745 54,745 54,745 54,745

Income (loss) from continuing operations per share

$ 0.05 $ 0.09 $ ( 0.19 ) $ 0.15

Income (loss) from discontinued operations, net of tax, per share

$ — $ 0.01 $ 0.01 $ 0.01

Net income (loss) $ 0.06 $ 0.10 $ ( 0.18 ) $ 0.16

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