3 unchanged sentences
(in thousands, except share and per share data)
−Removed: September 30, 2023 December 31, 2022
+Added: March 31, 2024 December 31, 2023
Current assets:
4 unchanged sentences
Inventories, net 209,765 230,108
−Removed: Work-in-progress 7,299 11,983
Prepaid expenses and other current assets 285,035 254,165
−Removed: Current assets held for sale
−Removed: 450,297 469,923
Total current assets 1,000,994 1,004,694
5 unchanged sentences
Other assets 712,308 712,998
−Removed: Noncurrent assets held for sale
−Removed: 895,379 885,514
Total assets $ 15,944,183 $ 15,964,094
5 unchanged sentences
Accrued expenses and other current liabilities 574,779 601,315
−Removed: Current liabilities held for sale
−Removed: 314,101 298,973
Total current liabilities 1,409,066 1,480,208
3 unchanged sentences
Other liabilities 217,459 229,748
−Removed: Noncurrent liabilities held for sale
−Removed: 106,960 106,270
Total liabilities 12,208,402 12,175,448
2 unchanged sentences
Preferred stock—authorized 1,000,000 shares of $ 0.01 par value;
−Removed: zero issued and outstanding as of September 30, 2023 and December 31, 2022
+Added: zero issued and outstanding as of March 31, 2024 and December 31, 2023
Common stock—authorized 3,999,000,000 shares of $ 0.01 par value;
−Removed: issued and outstanding shares of 866,793,978 and 862,098,041 as of September 30, 2023 and December 31, 2022, respectively
+Added: issued and outstanding shares of 855,629,403 and 867,432,337 as of March 31, 2024 and December 31, 2023, respectively
Class B common stock—authorized 100,000,000 shares of $ 0.01 par value;
−Removed: issued and outstanding shares of 54,744,525 as of September 30, 2023 and December 31, 2022
+Added: issued and outstanding shares of 54,744,525 as of March 31, 2024 and December 31, 2023
Additional paid-in capital 7,317,895 7,413,305
7 unchanged sentences
(in thousands, except per share data)
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
−Removed: 2023 2022 2023 2022
+Added: Three Months Ended March 31,
Monitoring and related services $ 1,062,652 $ 1,028,634
20 unchanged sentences
Income (loss) from discontinued operations, net of tax
−Removed: ( 65,572 ) 7,866 36,891 17,217
Net income (loss) $ 91,551 $ ( 118,837 )
29 unchanged sentences
(in thousands)
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
−Removed: 2023 2022 2023 2022
+Added: Three Months Ended March 31,
Net income (loss) $ 91,551 $ ( 118,837 )
8 unchanged sentences
(in thousands)
−Removed: Three Months Ended September 30, 2023
−Removed: Number of Common Shares Number of Class B Common Shares Common Stock Class B Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity
−Removed: Beginning balance 866,409 54,745 $ 8,664 $ 547 $ 7,390,269 $ ( 4,041,963 ) $ ( 39,505 ) $ 3,318,012
−Removed: Net income (loss) — — — — — ( 86,237 ) — ( 86,237 )
−Removed: Other comprehensive income (loss), net of tax — — — — — — 22,746 22,746
−Removed: Dividends — — — — — ( 32,321 ) — ( 32,321 )
−Removed: Share-based compensation expense — — — — 15,580 — — 15,580
−Removed: Transactions related to employee share-based compensation plans and other 385 — 4 — 1,315 ( 434 ) 885
−Removed: Ending balance 866,794 54,745 $ 8,668 $ 547 $ 7,407,164 $ ( 4,160,955 ) $ ( 16,759 ) $ 3,238,665
−Removed: Three Months Ended September 30, 2022
−Removed: Number of Common Shares Number of Class B Common Shares Common Stock Class B Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity
−Removed: Beginning balance 856,642 54,745 $ 8,566 $ 547 $ 7,295,665 $ ( 3,874,045 ) $ ( 51,334 ) $ 3,379,399
−Removed: Net income (loss) — — — — — ( 161,249 ) — ( 161,249 )
−Removed: Other comprehensive income (loss), net of tax — — — — — — 4,073 4,073
−Removed: Issuance of common stock, net of expenses 1,322 — 13 — ( 13 ) — — —
−Removed: Dividends — — — — — ( 32,028 ) — ( 32,028 )
−Removed: Share-based compensation expense — — — — 16,692 — — 16,692
−Removed: Contingent forward purchase contract — — — — ( 41,938 ) — — ( 41,938 )
−Removed: Transactions related to employee share-based compensation plans and other 666 — 7 — 3,095 ( 459 ) — 2,643
−Removed: Ending balance 858,630 54,745 $ 8,586 $ 547 $ 7,273,501 $ ( 4,067,781 ) $ ( 47,261 ) $ 3,167,592
−Removed: See Notes to Condensed Consolidated Financial Statements
−Removed: AND SUBSIDIARIES
−Removed: CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
−Removed: (in thousands)
−Removed: Nine Months Ended September 30, 2023
+Added: Three Months Ended March 31, 2024
Number of Common Shares Number of Class B Common Shares Common Stock Class B Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity
4 unchanged sentences
Share-based compensation expense — — — — 7,971 — — 7,971
+Added: Repurchases of common stock (including excise tax) ( 15,000 ) — ( 150 ) — ( 93,969 ) — — ( 94,119 )
Transactions related to employee share-based compensation plans and other
1 unchanged sentence
Ending balance 855,629 54,745 $ 8,556 $ 547 $ 7,317,895 $ ( 3,576,763 ) $ ( 14,454 ) $ 3,735,781
−Removed: Nine Months Ended September 30, 2022
+Added: Three Months Ended March 31, 2023
Number of Common Shares Number of Class B Common Shares Common Stock Class B Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity
2 unchanged sentences
Other comprehensive income (loss), net of tax — — — — — — 4,107 4,107
−Removed: Issuance of common stock, net of expenses 6,026 — 60 — 15,308 — — 15,368
Dividends — — — — — ( 32,258 ) — ( 32,258 )
Share-based compensation expense — — — — 15,982 — — 15,982
−Removed: Contingent forward purchase contract — — — — ( 41,938 ) — — ( 41,938 )
Transactions related to employee share-based compensation plans and other
5 unchanged sentences
(in thousands)
−Removed: Nine Months Ended September 30,
+Added: Three Months Ended March 31,
Cash flows from operating activities:
9 unchanged sentences
Unrealized (gain) loss on interest rate swap contracts ( 10,146 ) 32,516
−Removed: Change in fair value of other financial instruments — 157,550
Other non-cash items, net 20,845 28,601
−Removed: Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:
+Added: Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
Deferred subscriber acquisition costs ( 89,086 ) ( 87,161 )
6 unchanged sentences
Purchases of property and equipment ( 40,689 ) ( 59,215 )
−Removed: Acquisition of businesses, net of cash acquired — ( 13,096 )
−Removed: Proceeds from sale of business, net of cash sold — 26,729
+Added: Proceeds (payments) from interest rate swaps
Other investing, net 544 ( 1,574 )
4 unchanged sentences
Proceeds (payments) from interest rate swaps 23,908 16,322
+Added: Repurchases of common stock ( 93,356 ) —
Repayment of long-term borrowings, including call premiums ( 56,646 ) ( 607,444 )
13 unchanged sentences
Business and Organization
−Removed: ADT Inc., together with its wholly-owned subsidiaries (collectively, “ADT” or the “Company”), provides security, interactive, and smart home solutions to consumer and small business customers, as well as residential solar and energy storage solutions, in the United States (“U.S.”).
−Removed: 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.
−Removed: The Company is majority-owned by Prime Security Services TopCo (ML), L.P., which is majority-owned by Prime Security Services TopCo Parent, L.P.
+Added: ADT Inc., together with its wholly-owned subsidiaries (collectively, “ADT” or the “Company”), provides security, interactive, and smart home solutions to consumer and small business customers in the United States (“U.S.”).
+Added: Prior to March 11, 2024, the Company was majority-owned by Prime Security Services TopCo (ML), L.P., which is majority-owned by Prime Security Services TopCo Parent, L.P.
(“Ultimate Parent”).
2 unchanged sentences
(together with its subsidiaries and affiliates, “Apollo” or the “Sponsor”).
+Added: Following a registered secondary offering of the Company’s common stock (“Common Stock”) by certain Apollo affiliates (and the Company’s concurrent repurchase from the underwriters of 15 million shares of Common Stock that were the subject of the offering), including the exercise of the underwriters’ overallotment option which closed on March 19, 2024, Apollo beneficially owns less than 50 % of the Company’s outstanding common stock, which includes Common Stock and Class B common stock (“Class B Common Stock”) combined, and less than 50 % of the Company’s outstanding Common Stock, and the Company ceased to be a “controlled company” under the New York Stock Exchange (the “NYSE”) rules.
Basis of Presentation
3 unchanged sentences
and its wholly-owned subsidiaries.
−Removed: The results of companies acquired are included from the effective dates of acquisition;
−Removed: and all intercompany transactions have been eliminated.
−Removed: 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.
−Removed: As discussed below under the heading “Commercial Divestiture,” beginning in the third quarter of 2023, the Company presented its Commercial Business as discontinued operations.
−Removed: Certain prior period amounts have been reclassified to conform with the current period presentation.
+Added: The results of companies acquired (if applicable) are included from the effective dates of acquisition, and all intercompany transactions have been eliminated.
+Added: In August 2023, ADT entered into an agreement to divest its commercial business (the “Commercial Business”), which was completed in October 2023 (the “Commercial Divestiture”).
+Added: Beginning in the third quarter of 2023, the Company presented its Commercial Business as a discontinued operation.
+Added: Refer to Note 4 “Divestitures” for additional information.
+Added: Unless otherwise noted, amounts and disclosures throughout these Notes to Condensed Consolidated Financial Statements relate to the Company’s continuing operations.
+Added: The Company sold its shares in SNTNL LLC (“Canopy”) during the fourth quarter of 2023.
+Added: Prior to the sale, the Company used the equity method of accounting to account for its investment in Canopy as it had the ability to exercise significant influence but did not control.
The condensed consolidated financial statements included herein are unaudited, but in the opinion of management, such financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the Company’s financial position, results of operations, and cash flows for the interim periods presented.
2 unchanged sentences
Certain information and footnote disclosures required in the annual consolidated financial statements have been omitted as appropriate.
−Removed: For a more comprehensive understanding of the Company and its interim results, these condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its Amended 2022 Annual Report (as defined and discussed below).
−Removed: As disclosed in the Company’s Current Report on Form 8-K filed with the U.S.
−Removed: Securities and Exchange Commission (the “SEC”) on July 10, 2023, in connection with the preparation of the Company’s second quarter 2023 condensed consolidated financial statements, the Company identified errors in the non-cash goodwill impairment losses associated with its Solar reporting unit and related tax impacts recognized during the third quarter of 2022 and the first quarter of 2023 as a result of the Company not applying the simultaneous equation method prescribed by Accounting Standards Update 2017-04, Intangibles – Goodwill and Other (Topic 350):
−Removed: Simplifying the Test for Goodwill Impairment (“ASU 2017-04”).
−Removed: As a result, on July 27, 2023, the Company filed an Amendment No.
−Removed: 1 to its Annual Report on Form 10-K for the year ended December 31, 2022 (the “Amended 2022 Annual Report”), which was originally filed with the SEC on February 28, 2023 (the “Original 2022 Annual Report”).
−Removed: The Company also restated its Quarterly Reports on Form 10-Q for the quarters ended September 30, 2022, and March 31, 2023, by filing amendments to the respective original Quarterly Reports on Form 10-Q with the SEC on July 27, 2023.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Commercial Divestiture
−Removed: 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”).
−Removed: On October 2, 2023, the Company completed the previously announced 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.
−Removed: 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.
−Removed: The change is reflected in all periods presented.
−Removed: Additionally, the cash flows and comprehensive income (loss) of the Commercial Business have not been segregated and are included in the interim Condensed Consolidated Statements of Cash Flows and Condensed Consolidated Statements of Comprehensive Income (Loss), respectively, for all periods presented.
−Removed: Unless otherwise noted, amounts and disclosures throughout these Notes to Condensed Consolidated Financial Statements relate to the Company’s continuing operations.
−Removed: Refer to Note 5 “Divestitures” for additional information.
+Added: For a more comprehensive understanding of the Company and its interim results, these condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”).
+Added: Certain prior period amounts have been reclassified to conform with the current period presentation.
Use of Estimates
2 unchanged sentences
Actual results could differ materially from these estimates under different assumptions or market conditions.
−Removed: The Company considered recent impacts from macroeconomic conditions such as inflationary pressures, rising interest rates, the uncertainty and volatility in the financial markets, and supply chain disruptions, as well as any on-going impacts from the COVID-19 Pandemic (as defined below), in the assessment of its financial position, results of operations, and cash flows, as well as certain accounting estimates, as of and for the periods presented.
−Removed: COVID-19 Pandemic - During March 2020, the World Health Organization declared the outbreak of a novel coronavirus as a pandemic (the “COVID-19 Pandemic”).
−Removed: As of September 30, 2023, the impact to the Company, as well as its response plan, has not materially changed from that described in the Amended 2022 Annual Report.
−Removed: The Company has historically reported results for three operating and reportable segments organized based on customer type:
−Removed: Consumer and Small Business (“CSB”), Commercial, and Solar.
−Removed: 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.
−Removed: Accordingly, the Company now reports its results in two operating and reportable segments, CSB and Solar, with the change reflected in all periods presented.
+Added: AND SUBSIDIARIES
+Added: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
+Added: The Company reports its results in two operating and reportable segments, Consumer and Small Business (“CSB”) and Solar.
Prior to the third quarter of 2023, the Commercial Business was reflected in the Commercial reportable segment.
1 unchanged sentence
Refer to Note 3 “Segment Information” for additional information.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Accounting Pronouncements
Recently Adopted Accounting Pronouncements
−Removed: Vintage Disclosures for Financing Receivables - ASU 2022-02, Financial Instruments — Credit Losses (Topic 326):
−Removed: 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.
−Removed: This disclosure-only guidance became effective January 1, 2023.
−Removed: The impact to the Company’s condensed 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.
−Removed: The Company adopted this guidance effective January 1, 2023, except the roll-forward requirement, which becomes effective January 1, 2024 (early adoption is permitted), and should be applied prospectively.
−Removed: The Company does not currently have any material supplier finance programs.
−Removed: Recently Issued Accounting Pronouncements
+Added: The Company adopted the roll-forward requirement effective January 1, 2024.
+Added: The Company does not currently have any material supplier finance programs, and the guidance will be applied prospectively to any future arrangements.
Fair Value of Equity Investments - ASU 2022-03, Fair Value Measurement (Topic 820):
−Removed: Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, states 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.
−Removed: 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.
+Added: 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.
+Added: The Company adopted this guidance effective January 1, 2024.
+Added: This guidance did not impact the Company.
+Added: Recently Issued Accounting Pronouncements
+Added: Disclosure Improvements - ASU 2023-06, Disclosure Improvements:
+Added: 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.
+Added: 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.
+Added: The Company is currently evaluating the potential impact of this guidance on its financial statements and disclosures.
+Added: Segment Reporting - ASU 2023-07, Segment Reporting (Topic 280):
+Added: Improvements to Reportable Segment Disclosures , improves reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.
+Added: 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.
+Added: 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.
+Added: This guidance should be applied retrospectively to all periods presented.
Early adoption is permitted.
−Removed: The Company is monitoring any potential impact.
+Added: The Company is currently evaluating the impact of this guidance.
+Added: Income Taxes - ASU 2023-09, Income Taxes (Topic 740):
+Added: Improvements to Income Tax Disclosures , focuses on improvements to income tax disclosures, primarily related to the rate reconciliation and income tax paid information.
+Added: In addition, the update includes certain other amendments to improve the effectiveness of income tax disclosures.
+Added: The guidance is effective for annual periods beginning after December 15, 2024, and should be applied prospectively, with retrospective application also a permitted option.
+Added: Early adoption is permitted.
+Added: The Company is currently evaluating the impact of this guidance.
Significant Accounting Policies
−Removed: Unless otherwise noted, the Company’s accounting policies discussed below, or included within the respective footnotes herein, do not materially differ from those disclosed in the Amended 2022 Annual Report.
+Added: Unless otherwise noted, the Company’s accounting policies discussed below, or included within the respective footnotes herein, do not materially differ from those disclosed in the 2023 Annual Report.
+Added: AND SUBSIDIARIES
+Added: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Cash and Cash Equivalents and Restricted Cash and Restricted Cash Equivalents
The following table reconciles the amounts below reported in the Condensed Consolidated Balance Sheets to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows:
−Removed: (in thousands) September 30, 2023 December 31, 2022
+Added: (in thousands) March 31, 2024 December 31, 2023
Cash and cash equivalents $ 4,041 $ 14,621
3 unchanged sentences
________________
−Removed: (1) Primarily includes amounts received from State Farm Fire & Casualty Company (“State Farm”), inclusive of accrued interest, in connection with the State Farm Development Agreement (as defined and discussed in Note 16 “Related Party Transactions”).
+Added: (1) Primarily includes funds received, net of payments, from State Farm Fire & Casualty Company (“State Farm”), inclusive of accrued interest, in connection with the State Farm Development Agreement (as defined and discussed in Note 14 “Related Party Transactions”).
+Added: The remaining amount of restricted cash relates to the Company’s uncommitted receivables securitization financing agreement (the “ 2020 Receivables Facility”).
+Added: Refer to Note 6 “Debt.”
+Added: Inventories, net
+Added: Inventories, net includes finished goods and work-in-progress.
+Added: Work-in-progress is not material.
Subscriber System Assets, net and Deferred Subscriber Acquisition Costs, net
−Removed: Subscriber system assets represent capitalized equipment and installation costs incurred in connection with transactions in which the Company retains ownership of the security system, which the Company may retrieve upon termination of the contract with the customer.
+Added: Subscriber system assets represent capitalized equipment and installation costs incurred in connection with transactions in which the Company retains ownership of the security system, and which the Company may retrieve upon termination of the contract with the customer.
Deferred subscriber acquisition costs represent selling expenses (primarily commissions) that are incremental to acquiring customers.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Subscriber system assets and any related deferred subscriber acquisition costs are accounted for on a pooled basis based on the month and year of customer acquisition.
The Company depreciates and amortizes these pooled costs using an accelerated method over the estimated life of the customer relationship, which is 15 years.
−Removed: (in thousands) September 30, 2023 December 31, 2022
+Added: (in thousands) March 31, 2024 December 31, 2023
Gross carrying amount $ 6,534,535 $ 6,404,479
2 unchanged sentences
Depreciation of subscriber system assets and amortization of deferred subscriber acquisition costs are reflected in depreciation and intangible asset amortization and selling, general, and administrative expenses (“SG&A”), respectively, as follows:
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
+Added: Three Months Ended March 31,
(in thousands) 2024 2023
3 unchanged sentences
Accrued Expenses and Other Current Liabilities
−Removed: (in thousands) September 30, 2023 December 31, 2022
+Added: (in thousands) March 31, 2024 December 31, 2023
Accrued interest $ 85,514 $ 111,204
4 unchanged sentences
16,672 15,979
+Added: Accrued dividends 49,965 32,207
Other accrued liabilities 259,577 229,480
Accrued expenses and other current liabilities $ 574,779 $ 601,315
+Added: AND SUBSIDIARIES
+Added: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Merger, Restructuring, Integration, and Other
−Removed: 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.
+Added: Merger, restructuring, integration, and other represents certain direct and incremental costs resulting from acquisitions made by the Company, integration and optimization 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.
Fair Value of Financial Instruments
3 unchanged sentences
These investments are generally classified as Level 1 fair value measurements, which represent unadjusted quoted prices in active markets for identical assets or liabilities.
−Removed: As of September 30, 2023 and December 31, 2022, investments in money market mutual funds were $ 263 million and $ 145 million, respectively.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
+Added: As of March 31, 2024 and December 31, 2023, investments in money market mutual funds were $ 41 million and $ 55 million, respectively.
Long-Term Debt Instruments - The fair values of the Company’s long-term 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.
−Removed: The carrying amounts of debt outstanding, if any, under the Company’s first lien revolving credit facility (the “First Lien Revolving Credit Facility”) and its uncommitted receivables securitization financing agreement (the “2020 Receivables Facility”) approximate their fair values as interest rates on these borrowings approximate current market rates.
−Removed: September 30, 2023 December 31, 2022
+Added: The carrying amounts of debt outstanding, if any, under the Company’s first lien revolving credit facility (the “First Lien Revolving Credit Facility”) and the 2020 Receivables Facility approximate their fair values as interest rates on these borrowings approximate current market rates.
+Added: March 31, 2024 December 31, 2023
(in thousands) Carrying
7 unchanged sentences
Refer to Note 7 “Derivative Financial Instruments” for the fair values of the Company’s derivative financial instruments.
−Removed: Retail Installment Contract Receivables - 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.
−Removed: September 30, 2023 December 31, 2022
+Added: CSB Retail Installment Contract Receivables - The fair values of the Company’s CSB retail installment contract receivables are determined using a discounted cash flow model and are classified as Level 3 fair value measurements.
+Added: March 31, 2024 December 31, 2023
(in thousands) Carrying
2 unchanged sentences
REVENUE AND RECEIVABLES
−Removed: Disaggregated Revenue
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
−Removed: (in thousands) 2023 2022 2023 2022
−Removed: Monitoring and related services $ 1,053,456 $ 1,021,811 $ 3,125,344 $ 3,029,309
−Removed: Security installation, product, and other 126,417 88,829 355,082 235,506
−Removed: Total CSB 1,179,873 1,110,640 3,480,426 3,264,815
−Removed: Solar installation, product, and other 57,611 179,153 279,978 586,189
−Removed: Total Solar 57,611 179,153 279,978 586,189
−Removed: Total revenue $ 1,237,484 $ 1,289,793 $ 3,760,404 $ 3,851,004
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.
1 unchanged sentence
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: 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 (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 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).
+Added: In addition to details provided below, the Company’s disaggregated revenue is presented on the face of the Condensed 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.
+Added: 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 (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 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.
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
+Added: Three Months Ended March 31,
( in thousands )
−Removed: 2023 2022 2023 2022
Amortization of deferred subscriber acquisition revenue $ 83,376 $ 69,698
−Removed: 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.
−Removed: Solar - The Company enters into agreements with third-party lenders in order to access loan products for the Company’s Solar customers.
−Removed: Fees incurred under these agreements are recorded as a reduction of solar installation, product, and other revenue.
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
−Removed: ( in thousands )
−Removed: 2023 2022 2023 2022
−Removed: Third-party lender financing fees
−Removed: $ 11,596 $ 28,933 $ 40,066 $ 107,005
−Removed: Revenue and cost of revenue from the sale of solar equipment are reflected in the statements of operations as follows:
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
−Removed: ( in thousands )
−Removed: 2023 2022 2023 2022
−Removed: Solar installation, product, and other revenue $ 24,955 $ 93,387 $ 133,466 $ 339,760
−Removed: Solar installation, product, and other cost of revenue $ 22,076 $ 64,283 $ 102,919 $ 224,425
+Added: 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.
+Added: Solar - As discussed in Note 4 “Divestitures,” the Company began exiting the residential solar business in January 2024.
+Added: During the three months ended March 31, 2024, revenue and cost of revenue from the sale of solar equipment was not material.
+Added: During the three months ended March 31, 2023, revenue and cost of revenue from the sale of solar equipment was approximately $ 75 million and $ 52 million, respectively.
Allowance for Credit Losses
2 unchanged sentences
The allowance for credit losses is not material for the individual pools of customers.
−Removed: Nine Months Ended September 30,
+Added: Three Months Ended March 31,
(in thousands) 2024 2023
7 unchanged sentences
As such, the Company presented write-offs, net of recoveries.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Retail Installment Contract Receivables, Net
2 unchanged sentences
Subsequent to origination, the Company monitors the delinquency status of retail installment contract receivables as the key credit quality indicator.
+Added: AND SUBSIDIARIES
+Added: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The balance of unbilled retail installment contract receivables comprises:
−Removed: (in thousands) September 30, 2023 December 31, 2022
+Added: (in thousands) March 31, 2024 December 31, 2023
Retail installment contract receivables, gross $ 676,367 $ 674,827
5 unchanged sentences
Retail installment contract receivables, net $ 673,813 $ 673,635
−Removed: The allowance for credit losses relates to retail installment contract receivables from outright sales transactions.
−Removed: As of September 30, 2023, the current and delinquent billed retail installment contract receivables were not material.
−Removed: As of September 30, 2023 and December 31, 2022, retail installment contract receivables, net, used as collateral for borrowings under the 2020 Receivables Facility were $ 594 million and $ 506 million, respectively.
+Added: The allowance for credit losses relates to retail installment contract receivables from CSB outright sales transactions.
+Added: As of March 31, 2024, the current and delinquent billed retail installment contract receivables were not material.
+Added: As of March 31, 2024 and December 31, 2023, retail installment contract receivables, net, used as collateral for borrowings under the 2020 Receivables Facility were $ 619 million and $ 610 million, respectively.
Refer to Note 6 “Debt” for further discussion regarding the 2020 Receivables Facility.
2 unchanged sentences
The contract asset is reclassified to accounts receivable when the Company’s right to the consideration becomes unconditional, which generally occurs over the course of a 24-, 36-, or 60-month period as additional services are performed and billed.
−Removed: The financing component of contract assets is not significant.
−Removed: During the nine months ended September 30, 2023 and 2022, contract assets recognized were not material.
+Added: There is no significant financing component.
+Added: During the three months ended March 31, 2024 and 2023, contract assets recognized were not material.
The balance of contract assets for residential transactions comprises:
−Removed: (in thousands) September 30, 2023 December 31, 2022
+Added: (in thousands) March 31, 2024 December 31, 2023
Contract assets, gross $ 39,787 $ 39,627
5 unchanged sentences
Contract assets, net $ 34,733 $ 30,602
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEGMENT INFORMATION
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.
−Removed: 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:
+Added: As discussed in Note 1 “Description of Business and Summary of Significant Accounting Policies,” the Company reports results in two operating and reportable segments:
CSB and Solar.
−Removed: Prior to the third quarter of 2023, the Commercial Business was reflected in the Commercial reportable segment.
−Removed: 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.
−Removed: There have been no other changes to the Company’s segments from that disclosed in the Amended 2022 Annual Report.
The Company organizes its segments based on customer type as follows:
−Removed: • CSB - Customers in the CSB segment are comprised of owners and renters of residential properties, small business operators, and other individual consumers.
+Added: • CSB - Customers in the CSB segment comprise owners and renters of residential properties, small business operators, and other individual consumers.
The CSB segment includes the sale, installation, servicing, and monitoring of integrated security and automation systems and other related offerings.
−Removed: • Solar - Customers in the Solar segment are comprised of residential homeowners.
+Added: • Solar - Customers in the Solar segment comprise residential homeowners.
The Solar segment includes the sale and installation of solar systems, energy storage solutions, roofing services, and other related offerings.
+Added: AND SUBSIDIARIES
+Added: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The CSB and Solar segments include the respective revenue and operating costs related to the activities noted above, other operating costs associated with support functions related to these operations, and certain dedicated corporate costs and other income and expense items.
1 unchanged sentence
The CODM uses Adjusted EBITDA from continuing operations (“Adjusted EBITDA”), which is the Company’s segment profit measure, to evaluate segment performance.
−Removed: Adjusted EBITDA is defined as income or loss from continuing operations adjusted for (i) interest;
+Added: 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;
1 unchanged sentence
(v) share-based compensation expense;
−Removed: (vi) merger, restructuring, integration, and other items such as separation costs;
−Removed: (vii) losses on extinguishment of debt;
−Removed: (viii) radio conversion costs, net;
−Removed: (ix) adjustments related to acquisitions, such as contingent consideration and purchase accounting adjustments, or dispositions;
−Removed: (x) impairment charges;
−Removed: and (xi) other income/gain or expense/loss items such as changes in fair value of certain financial instruments or financing and consent fees.
+Added: (vi) merger, restructuring, integration, and other items;
+Added: (vii) impairment charges;
+Added: and (viii) non-cash, non-routine, or other adjustments or charges not necessary to operate our business.
The CODM does not review the Company's assets by segment;
2 unchanged sentences
The following table presents total revenue by segment and a reconciliation to consolidated total revenue:
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
+Added: Three Months Ended March 31,
(in thousands) 2024 2023
5 unchanged sentences
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:
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
+Added: Three Months Ended March 31,
(in thousands) 2024 2023
14 unchanged sentences
Goodwill impairment (2)
−Removed: 88,367 200,974 511,176 200,974
−Removed: Change in fair value of financial instruments (3)
−Removed: — 157,550 — 157,550
−Removed: Non-cash acquisition-related adjustments and other, net (4)
−Removed: ( 705 ) ( 4,682 ) 2,003 33,452
+Added: Other solar exit costs (3)
+Added: Other, net (4)
Equity in net earnings (losses) of equity method investee — ( 2,677 )
1 unchanged sentence
________________
−Removed: (1) During 2023, includes 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.
+Added: (1) During 2024, primarily includes $ 37 million of charges related to asset impairments and other write-offs, employee separation costs, and other charges related to the ADT Solar Exit (Refer to Note 4 “Divestitures”).
+Added: During 2023, primarily includes restructuring costs primarily related to certain facility exits, as well as integration and third-party costs related to the strategic optimization of the solar business operations following the ADT Solar acquisition.
(2) Represents impairment charges associated with the Company’s Solar reporting unit.
Refer to Note 5 “Goodwill and Other Intangible Assets.”
−Removed: (3) Represents the change in fair value of the Forward Contract associated with the State Farm Transaction.
−Removed: (4) Nine months ended September 30, 2022 primarily includes customer backlog intangible asset amortization related to the ADT Solar Acquisition of $ 30 million, which was fully amortized as of March 2022.
−Removed: The remaining balance primarily included ADT Solar purchase accounting adjustments and net radio conversion costs, offset by gain on sale of a business.
−Removed: There was no acquisition activity during the nine months ended September 30, 2023.
−Removed: During the nine months ended September 30, 2022, total consideration for continuing and discontinued operations related to acquisitions was approximately $ 31 million, including approximately $ 15 million in shares of the Company’s common stock.
−Removed: This resulted in the recognition of approximately $ 24 million of goodwill.
−Removed: The Company may decide to divest a portion of its business for various reasons, including efforts to focus on its other businesses.
+Added: (3) Includes other costs associated with the ADT Solar Exit, including charges of $ 19 million primarily associated with the disposition of the existing installation pipeline and $ 15 million associated with the write-down and disposition of inventory on hand.
+Added: Refer to Note 4 “Divestitures.”
+Added: (4) During 2024, primarily includes unrealized (gains) / losses on interest rate swaps presented within other income (expense).
+Added: Refer to Note 7 “Derivative Financial Instruments.”
+Added: The Company may decide to divest or exit a portion of its business for various reasons, including efforts to focus on its other 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.
−Removed: Commercial Divestiture
−Removed: 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, and the Company classified the assets and
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: liabilities related to the Commercial Business as held for sale in the Condensed Consolidated Balance Sheets for the periods presented.
−Removed: The Commercial Divestiture supports the Company’s strategic journey and strengthens its financial profile.
−Removed: 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 Condensed Consolidated Statements of Operations for the periods presented.
−Removed: As the agreed upon sale price was substantially higher than the carrying value of the Commercial Business, the Company did not record any impairment or adjustments when recognizing the disposal group at the lower of its carrying amount or fair value less cost to sell.
−Removed: As discussed in Note 3 “Segment Information,” the Commercial Business was previously reflected in the Commercial reportable segment.
−Removed: 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.
−Removed: In addition, the Company will recognize a significant gain on sale, which will be recognized in income (loss) from discontinued operations during the fourth quarter of 2023.
−Removed: The Company used a portion of the net proceeds to redeem approximately $ 1.3 billion of the Company’s first lien term loan facility due 2026 (the “First Lien Term Loan due 2026”).
−Removed: The Company intends to use the remaining net proceeds and cash on hand to redeem $ 500 million of the Company’s outstanding 5.250 % First-Priority Senior Secured Notes due 2024 (the “First Lien Notes due 2024”) during the Company’s fourth quarter of 2023.
−Removed: Refer to Note 8 “Debt” for further discussion.
−Removed: Refer to Note 13 “Net Income (Loss) per Share” for basic and diluted earnings per share information for discontinued operations.
+Added: ADT Solar Exit
+Added: 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.
+Added: As part of this plan, the Company closed a significant number of branches that operated the solar business along with making associated headcount reductions.
+Added: 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” or the “Board”) approved a plan to fully exit the residential solar business (the “ADT Solar Exit”).
+Added: The solar business is currently reflected in the solar operating and reportable segment.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: The following reconciliations represent the major classes of line items of the Commercial Business within the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations and certain information within the Condensed Consolidated Statements of Cash Flows for the periods presented.
−Removed: Balance Sheet Information
−Removed: (in thousands) September 30, 2023 December 31, 2022
−Removed: Accounts receivable, net
+Added: During the three months ended March 31, 2024, the Company incurred aggregate charges (in thousands) which have been recognized within their respective line items as follows:
+Added: Solar Installation, Product, and Other Cost of Revenue
+Added: Selling, general, and administrative expenses
+Added: Merger, restructuring, integration, and other Total
+Added: Employee separation costs
$ — $ — $ 10,933 $ 10,933
−Removed: Inventories, net 102,927 104,139
−Removed: Work-in-progress 48,106 68,782
−Removed: Prepaid expenses and other current assets
+Added: Asset impairments and write-offs (1)
— 3,124 17,244 20,368
−Removed: Total current assets of discontinued operations held for sale
+Added: Contract termination charges
1,404 — 3,797 5,201
−Removed: Property and equipment, net 76,843 69,777
−Removed: Subscriber system assets, net 138,087 142,763
−Removed: Intangible assets, net 151,287 164,783
−Removed: Goodwill 336,589 336,589
−Removed: Deferred subscriber acquisition costs, net 89,762 88,966
−Removed: Other assets 82,196 82,636
−Removed: Total assets of discontinued operations held for sale
+Added: Write-down and disposition of inventory
14,574 — — 14,574
−Removed: Current maturities of long-term debt $ 18,372 $ 14,293
−Removed: Accounts payable 77,631 68,855
−Removed: Deferred revenue 108,123 92,784
−Removed: Accrued expenses and other current liabilities 107,535 123,041
−Removed: Total current liabilities of discontinued operations held for sale
4,950 14,318 5,012 24,280
−Removed: Long-term debt 11,418 9,952
−Removed: Deferred subscriber acquisition revenue 63,075 64,605
−Removed: Other liabilities 32,468 31,713
−Removed: Total liabilities of discontinued operations held for sale
$ 20,928 $ 17,442 $ 36,986 $ 75,356
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
+Added: ________________
+Added: (1) Primarily relates to long-lived asset impairments and write-off of deferred implementation costs associated with cloud computing arrangements.
+Added: (2) Primarily relates to charges associated with the disposition of the existing installation pipeline.
+Added: During the three months ended March 31, 2024, the Company paid approximately $ 11 million primarily related to employee separation costs associated with the ADT Solar Exit.
+Added: Commercial Divestiture
+Added: On October 2, 2023, the Company completed the Commercial Divestiture for a total purchase price of approximately $ 1,613 million and received net proceeds of approximately $ 1,585 million, subject to certain customary post-closing adjustments as set forth in the purchase agreement.
+Added: The results of the Commercial Business are classified as a discontinued operation in the Company’s Condensed Consolidated Statements of Operations for the historical periods presented.
+Added: Additionally, for periods prior to the Commercial Divestiture, the cash flows and comprehensive income (loss) of the Commercial Business have not been segregated and are included in the Condensed Consolidated Statements of Cash Flows and Condensed Consolidated Statements of Comprehensive Income (Loss), respectively, for any period presented prior to the Commercial Divestiture.
+Added: Refer to Note 11 “Net Income (Loss) per Share” for basic and diluted earnings per share information for discontinued operations.
+Added: The following reconciliations represent the major classes of line items of the Commercial Business presented as discontinued operations within the Condensed Consolidated Statements of Operations and certain information within the Condensed Consolidated Statements of Cash Flows for any period presented prior to the Commercial Divestiture.
Statements of Operations Information
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
−Removed: (in thousands) 2023 2022 2023 2022
+Added: During the three months ended March 31, 2024, activity relating to the Commercial Divestiture was not material.
+Added: (in thousands) Three Months Ended March 31, 2023
Revenue $ 335,043
Cost of revenue
−Removed: 233,204 215,665 688,305 616,644
Selling, general, and administrative expenses 68,855
4 unchanged sentences
Income (loss) from discontinued operations, net of tax $ 7,944
+Added: AND SUBSIDIARIES
+Added: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Cash Flow Information
−Removed: Nine Months Ended September 30,
−Removed: (in thousands) 2023 2022
+Added: (in thousands) Three Months Ended March 31, 2023
+Added: Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and intangible asset amortization $ 20,704
Share-based compensation expense $ 3,208
+Added: Cash flows from investing activities:
Subscriber system asset expenditures $ ( 3,676 )
1 unchanged sentence
Transition Services Agreement
−Removed: In connection with the Commercial Divestiture, the Company entered into a Transition Services Agreement (the “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.
−Removed: 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.
−Removed: Income from the TSA will be recognized in other income (expense), and expenses incurred by the Company to support the transition will be recorded based on the nature of the expense.
−Removed: ADT Brand License and Intellectual Property (“IP”) Rights
−Removed: 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”).
−Removed: The Company has also agreed to a covenant not to assert a claim against GTCR for infringement of Company's patents as of the Commercial Divestiture for products and services that were used in the Commercial Business prior to the Commercial Divestiture, and has provided GTCR with a paid-up, irrevocable, non-assignable (with limited exceptions) license to continue to use certain software and other Company IP in the same manner.
−Removed: Other Divestitures
−Removed: 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”).
−Removed: 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 the Condensed Consolidated Balance Sheet as of September 30, 2023.
−Removed: The results of operations of the Vintage Security business are reflected in the CSB segment and did not meet the criteria to be presented as a discontinued operation.
−Removed: On October 2, 2023, the Company completed the Vintage Security Divestiture for net proceeds of approximately $ 36 million, subject to certain customary post-closing adjustments.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: During the nine months ended September 30, 2022, proceeds related to disposal activities totaled approximately $ 27 million, resulting in a gain on sale of approximately $ 10 million recognized in SG&A.
−Removed: EQUITY METHOD INVESTMENTS
−Removed: Canopy Investment
−Removed: In April 2022, the Company and Ford Motor Company (“Ford”) formed the entity, SNTNL LLC (“Canopy”).
−Removed: Canopy meets the definition of a variable interest entity (“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 various commercial agreements between the Company and Canopy.
−Removed: The Company is not the primary beneficiary, and therefore, does not consolidate Canopy’s assets, liabilities, and financial results of operations.
−Removed: As a result, the Company accounts for its investment in Canopy under the equity method of accounting.
−Removed: The impact to the Company’s condensed consolidated financial statements as a result of the Canopy Investment or the commercial agreements was not material during the periods presented.
−Removed: As of September 30, 2023 and December 31, 2022, the Canopy Investment’s carrying amount was approximately $ 5 million and $ 7 million, respectively, and is presented in other assets.
−Removed: The balance primarily reflects the initial contribution, plus an additional investment of approximately $ 5 million during the first quarter of 2023, as well as the Company’s proportionate share of Canopy’s cumulative net earnings or losses.
−Removed: Subsequent event - In October 2023, the Company began discussions with Ford to sell its shares in Canopy, in accordance with the terms of the agreement between the Company and Ford, which includes a put right under which the Company is entitled to recover its full equity investment in Canopy plus a premium.
−Removed: The sale of ADT’s equity investment in Canopy is expected to close by the first quarter of 2024, after which the Company will no longer hold an investment in Canopy.
+Added: In connection with the Commercial Divestiture, the Company entered into a Transition Services Agreement (the “Commercial TSA”).
+Added: During the three months ended March 31, 2024, the Company recognized $ 12 million of income from the Commercial TSA, which is reflected in other income (expense).
GOODWILL AND OTHER INTANGIBLE ASSETS
−Removed: Changes in the carrying amounts of goodwill by reportable segment were as follows:
−Removed: (in thousands) CSB Solar Total
−Removed: Balance as of December 31, 2022 $ 4,919,251 $ 511,176 $ 5,430,427
−Removed: Acquisitions (1)
−Removed: Impairment — ( 511,176 ) ( 511,176 )
−Removed: Reclassification to held for sale (2)
−Removed: ( 15,475 ) — ( 15,475 )
−Removed: Balance as of September 30, 2023 $ 4,903,899 $ — $ 4,903,899
−Removed: ________________
−Removed: (1) Includes the impact of measurement period adjustments which were not material during the nine months ended September 30, 2023.
−Removed: (2) Relates to the presentation of Vintage Security as held for sale as discussed in Note 5 “Divestitures.”
−Removed: As of September 30, 2023 and December 31, 2022, the Company had accumulated goodwill impairment losses of $ 712 million and $ 201 million, respectively, associated with the Company’s Solar reporting unit.
−Removed: Solar Goodwill Impairment
−Removed: During the first and second 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 and June 30, 2023 and recorded goodwill impairment charges of $ 242 million and $ 181 million during the first and second quarters of 2023, respectively.
−Removed: These triggering events resulted from the then-current macroeconomic conditions, including the impact of rising interest rates, as well as ADT Solar’s continued underperformance of operating results in each quarter relative to expectations.
−Removed: As a result and as previously disclosed, the Solar reporting unit was considered at risk for future impairment following the impairments in the first and second quarters of 2023.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: In addition, the Company concluded there was a triggering event as of September 30, 2023, related to its Solar reporting unit as a result of continued deterioration of industry conditions and macroeconomic decline, as well as the Company’s recent plan to significantly reduce the footprint of its Solar reporting unit, including certain existing underperforming branches and related headcount reductions.
−Removed: As a result, the Company determined that the remaining balance of goodwill was not recoverable and recorded a goodwill impairment charge of $ 88 million in the third quarter of 2023.
−Removed: Following the impairments during 2023, the balance of goodwill in the Solar reporting unit was zero .
−Removed: The Company also assessed the recoverability of other long-lived assets related to its Solar business, and impairment charges recorded were not material.
−Removed: The fair value of the Solar reporting unit is estimated using the income approach, which includes significant assumptions such as forecasted revenue, Adjusted EBITDA margins, and discount rates, as well as other assumptions including operating expenses and cash flows.
−Removed: In developing these assumptions, the Company relies on various factors including operating results, business plans, economic projections, anticipated future cash flows, and other market data.
−Removed: Examples of events or circumstances that could reasonably be expected to negatively affect the underlying judgments and factors may include such items as a prolonged downturn in the business environment, changes in economic conditions that significantly differ from the Company’s assumptions in timing or degree, volatility in equity and debt markets resulting in higher discount rates, and unexpected regulatory changes.
−Removed: There are inherent uncertainties related to these judgments and factors that may ultimately impact the estimated fair value determinations.
+Added: There were no changes in the carrying amounts of goodwill since December 31, 2023.
+Added: As of March 31, 2024 and December 31, 2023, the Company had accumulated goodwill impairment losses of $ 712 million associated with the Company’s Solar reporting unit, and as of December 31, 2023, the balance of goodwill in the Solar reporting unit was zero .
+Added: During the three months ended March 31, 2023, the Company recorded goodwill impairment charges of $ 242 million in its Solar reporting unit.
Other Intangible Assets
−Removed: September 30, 2023 December 31, 2022
+Added: March 31, 2024 December 31, 2023
(in thousands) Gross Carrying
12 unchanged sentences
Intangible assets $ 8,749,539 $ ( 3,905,553 ) $ 4,843,986 $ 8,632,249 $ ( 3,754,756 ) $ 4,877,493
+Added: AND SUBSIDIARIES
+Added: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The change in the net carrying amount of contracts and related customer relationships during the period was as follows:
3 unchanged sentences
Amortization ( 130,168 )
−Removed: Balance as of September 30, 2023 $ 2,558,285
+Added: Balance as of March 31, 2024 $ 2,621,434
________________
1 unchanged sentence
Payments for customer contract additions under the Company’s authorized dealer program and from other third parties are reflected as dealer generated customer accounts and bulk account purchases on the Condensed Consolidated Statements of Cash Flows.
−Removed: Additionally, during the first quarter of 2023, the Company retired approximately $ 1.7 billion of customer relationship intangible assets that became fully amortized.
−Removed: These assets were originally acquired as part of the 2016 acquisition of The ADT Security Corporation (formerly named The ADT Corporation) (“The ADT Corporation”) (the “ADT Acquisition”).
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Definite-Lived Intangible Asset Amortization Expense
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
+Added: Three Months Ended March 31,
(in thousands) 2024 2023
Definite-lived intangible asset amortization expense $ 150,898 $ 177,480
+Added: AND SUBSIDIARIES
+Added: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company’s debt is comprised of the following (in thousands) :
Description Issued Maturity Interest Rate (1)
−Removed: Interest Payable September 30, 2023 December 31, 2022
−Removed: First Lien Term Loan due 2026 9/23/2019 9/23/2026 Term SOFR + 2.75 %
+Added: Interest Payable March 31, 2024 December 31, 2023
+Added: First Lien Term Loan B due 2030
+Added: 10/13/2023 10/13/2030 Term SOFR + 2.50 %
Quarterly $ 1,371,563 $ 1,375,000
+Added: First Lien Revolving Credit Facility
+Added: 3/16/2018 6/23/2026 Term SOFR + 2.75 %
Term Loan A Facility 3/14/2023 3/14/2028 Term SOFR + 2.25 %
6 unchanged sentences
ADT Notes due 2042 7/5/2012 7/15/2042 4.875 % 1/15 and 7/15 21,896 21,896
−Removed: ADT Notes due 2042 7/5/2012 7/15/2042 4.875 % 1/15 and 7/15 21,896 21,896
Second Lien Notes due 2028 1/28/2020 1/15/2028 6.250 % 1/15 and 7/15 1,300,000 1,300,000
12 unchanged sentences
_________________
−Removed: (1) Interest rate as of September 30, 2023 .
−Removed: During June 2023, the Secured Overnight Financing Rate (“SOFR”) replaced the forward London Interbank Offered Rate (“LIBOR”) as the applicable benchmark rate for all remaining existing and future issuances of the Company’s debt instruments with a variable rate component.
−Removed: Interest on the 2020 Receivables Facility is primarily based on SOFR + 0.95 % and Cost of Funds (“COF”) + 0.85 %.
+Added: (1) Interest rate as of March 31, 2024 .
+Added: Interest on the 2020 Receivables Facility is primarily based on the Secured Overnight Financing Rate (“SOFR”) + 0.95 % and Cost of Funds (“COF”) + 0.85 %.
+Added: (2) Maturity date for the 2020 Receivables Facility represents the final maturity 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 13 “Leases” for additional information regarding the Company’s finance leases.
−Removed: As of September 30, 2023, the Company was in compliance with all financial covenant and other maintenance tests for all of its debt obligations.
−Removed: Significant changes in the Company’s debt during the nine months ended September 30, 2023 were as follows:
+Added: As of March 31, 2024, the Company was in compliance with all financial covenant and other maintenance tests for all of its debt obligations.
+Added: Significant changes in the Company’s debt during the three months ended March 31, 2024 were as follows:
First Lien Credit Agreement
−Removed: The Company’s first lien credit agreement, dated as of July 1, 2015 (together with subsequent amendments and restatements, the “First Lien Credit Agreement”), contains the First Lien Term Loan due 2026 and the First Lien Revolving Credit Facility.
−Removed: During the nine months ended September 30, 2023, there were no borrowings under the First Lien Revolving Credit Facility;
−Removed: and as of September 30, 2023, the Company had $ 575 million in available borrowing capacity.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: During the nine months ended September 30, 2022, the Company borrowed $ 480 million and repaid $ 505 million under its First Lien Revolving Credit Facility.
−Removed: Subsequent Event - In October 2023, the Company redeemed approximately $ 1.3 billion of the First Lien Term Loan due 2026 using net proceeds from the Commercial Divestiture.
−Removed: Further, 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”) through an amendment to the existing First Lien Credit Agreement.
−Removed: 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.
−Removed: The Company 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.
−Removed: The First Lien Term Loan B due 2030 bears interest at a rate equal to, at the Company’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.
−Removed: The Company has elected the Term SOFR alternative to apply to borrowings of the First Lien Term Loan B due 2030.
−Removed: Other than as described above, the First Lien Term Loan B due 2030 continues to have the same terms as provided under the existing First Lien Credit Agreement.
−Removed: Term Loan A Facility
−Removed: On March 14, 2023, Prime Security Services Holdings, LLC (“Holdings”), a Delaware limited liability company and a wholly owned direct 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 “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”).
−Removed: 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 Company’s 4.125 % senior notes due June 15, 2023 (the “ADT Notes due 2023”).
−Removed: On June 15, 2023, the Company borrowed the Incremental Term Loan A Loans and used the proceeds to complete the redemption of approximately $ 50 million of the ADT Notes due 2023.
−Removed: The Incremental Term Loan A Loans have the same terms as, and constitutes one class with, the Closing Date Term Loan A Loans.
−Removed: 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.
−Removed: The Term Loan A Facility requires scheduled amortization payments in annual amounts equal to 5.00 % of the original principal amount of the Term Loan A Facility, payable quarterly, with the balance payable at maturity.
−Removed: The Term Loan A Borrowers may make voluntary prepayments under the Term Loan A Facility at any time prior to maturity at par.
−Removed: 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
+Added: The Company’s first lien credit agreement, dated as of July 1, 2015 (together with subsequent amendments and restatements, the “First Lien Credit Agreement”), contains a term loan (the “First Lien Term Loan B due 2030”) and the First Lien Revolving Credit Facility.
+Added: During the three months ended March 31, 2024, the Company borrowed $ 95 million and repaid $ 45 million under the First Lien Revolving Credit Facility;
+Added: and as of March 31, 2024, the available borrowing capacity was $ 525 million.
+Added: During the three months ended March 31, 2023, there were no borrowings or repayments under the First Lien Revolving Credit Facility.
+Added: Subsequent Event - The Company amended and restated the First Lien Credit Agreement, which reduced the interest rate on the First Lien Term Loan B due 2030 from Term SOFR + 2.50 % to Term SOFR + 2.25 %.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: net first lien leverage ratios.
−Removed: Prime Borrower has elected the Term SOFR alternative to apply to borrowings under the Term Loan A Facility.
−Removed: Indebtedness incurred under the Term Loan A Facility is guaranteed, jointly and severally, on a senior secured first-priority basis, by Holdings, on a limited recourse basis, and by substantially all of Prime Borrower’s wholly owned material domestic subsidiaries, and is secured by a pledge of Prime Borrower’s capital stock directly held by Holdings 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.
−Removed: 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 Facility Borrowers to comply as of the last day of each fiscal quarter with a specified maximum consolidated net first lien leverage ratio.
−Removed: Fees associated with the Term Loan A Facility were not material during the periods presented.
−Removed: ADT Notes due 2023 Redemption
−Removed: On March 15, 2023, the Company used the proceeds from the Closing Date Term Loan A Loans to redeem approximately $ 600 million of the ADT Notes due 2023 (the “2023 Notes Partial Redemption”) for a total redemption price of approximately $ 600 million, excluding any accrued and unpaid interest.
−Removed: Loss on extinguishment of debt was not material.
−Removed: On June 15, 2023, the Company redeemed the remaining outstanding balance of approximately $ 100 million of the ADT Notes due 2023 using $ 50 million of proceeds from the Incremental Term Loan A Loans and cash on hand.
−Removed: First Lien Notes due 2024 Partial Redemption
−Removed: On May 2, 2023, the Company redeemed $ 150 million principal amount of the $ 750 million outstanding First Lien Notes due 2024 for a redemption price of $ 150 million, excluding accrued and unpaid interest, using cash on hand.
−Removed: Loss on extinguishment of debt was not material.
−Removed: Subsequent Event - In October 2023, the Company issued a notice of redemption to redeem approximately $ 500 million principal amount of the outstanding First Lien Notes due 2024 by the end of 2023 using remaining net proceeds from the Commercial Divestiture and cash on hand.
+Added: Other than as described above, the loans under the amended and restated First Lien Credit Agreement continue to have the same terms as provided under the existing First Lien Credit Agreement and the parties to the amended and restated First Lien Credit Agreement continue to have the same obligations set forth in the existing First Lien Credit Agreement.
+Added: First Lien Notes due 2024 Redemption
+Added: Subsequent Event - In April 2024, the Company redeemed the remaining outstanding principal balance of $ 100 million of the First Lien Notes due 2024, excluding accrued and unpaid interest, using proceeds from the Company’s First Lien Revolving Credit Facility.
2020 Receivables Facility
−Removed: Under the 2020 Receivables Facility, the Company obtains financing by selling or contributing certain retail installment contract receivables to the Company’s wholly-owned consolidated bankruptcy-remote special purpose entity (“SPE”), which then grants a security interest in those retail installment contract receivables as collateral for cash borrowings.
−Removed: In March 2023, the Company amended the agreement governing the 2020 Receivables Facility, pursuant to which, among other things, the borrowing capacity was increased from $ 400 million to $ 500 million and the uncommitted revolving period was extended from May 2023 to March 2024.
−Removed: As of September 30, 2023, the Company had an uncommitted available borrowing capacity under the 2020 Receivables Facility of approximately $ 77 million.
−Removed: The 2020 Receivables Facility did not have a material impact to the Condensed Consolidated Statements of Operations during the periods presented.
+Added: Under the 2020 Receivables Facility, the Company obtains financing by selling or contributing certain retail installment contract receivables to the Company’s wholly-owned consolidated bankruptcy-remote special purpose entity (the “SPE”), which then grants a security interest in those retail installment contract receivables as collateral for cash borrowings.
+Added: In March 2024, the Company amended the agreement governing the 2020 Receivables Facility, pursuant to which the uncommitted revolving period was extended from March 2024 to April 2024.
+Added: As of March 31, 2024, the Company had an uncommitted available borrowing capacity under the 2020 Receivables Facility of approximately $ 56 million.
+Added: Subsequent Event - In April 2024, the Company amended the agreement governing the 2020 Receivables Facility, pursuant to which, among other things, the borrowing capacity was increased from $ 500 million to $ 550 million and the uncommitted revolving period was extended from April 2024 to April 2025.
Variable Interest Entity
−Removed: The SPE meets the definition of a VIE for which the Company is the primary beneficiary as it has the power to direct the SPE’s activities and the obligation to absorb losses or the right to receive benefits of the SPE.
+Added: The SPE meets the definition of a variable interest entity (“VIE”) for which the Company is the primary beneficiary as it has the power to direct the SPE’s activities and the obligation to absorb losses or the right to receive benefits of the SPE.
As such, the Company consolidates the SPE’s assets, liabilities, and financial results of operations.
The SPE’s assets and liabilities primarily consist of a portion of the Company’s unbilled retail installment contract receivables, net, as discussed in Note 2 “Revenue and Receivables,” and borrowings under the 2020 Receivables Facility, as presented above.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
+Added: The 2020 Receivables Facility did not have a material impact to the Condensed Consolidated Statements of Operations during the periods presented.
Solar Receivables Facility
3 unchanged sentences
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”).
−Removed: 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.
−Removed: 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).
−Removed: 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.
−Removed: guaranteed certain obligations under the Solar Receivables Financing Agreement and related transaction documents and certain account control agreements and security agreements, were also entered into.
−Removed: As of September 30, 2023, we have not borrowed any amounts under the Solar Receivable Facility.
+Added: As of March 31, 2024, the Company has not borrowed any amounts under the Solar Receivable Facility, and given the ADT Solar Exit, the Company does not expect to borrow any amounts under the Solar Receivables Facility.
+Added: The Solar Receivables Facility’s uncommitted revolving period will expire in August 2024, unless terminated beforehand.
DERIVATIVE FINANCIAL INSTRUMENTS
2 unchanged sentences
All interest rate swap contracts are reported in the Condensed Consolidated Balance Sheets at fair value.
+Added: AND SUBSIDIARIES
+Added: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For interest rate swap contracts that are:
• Not designated as cash flow hedges:
−Removed: Unrealized gains and losses are recognized in interest expense, net.
+Added: 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:
6 unchanged sentences
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.
+Added: 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.
Interest Rate Swaps
−Removed: During the nine months ended September 30, 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.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: As of September 30, 2023, the Company’s interest rate swaps consisted of the following (in thousands) :
+Added: As of March 31, 2024 and December 31, 2023, the Company’s interest rate swaps consisted of the following (in thousands) :
Execution Maturity Designation Notional Amount
October 2019 September 2026 Not designated $ 2,800,000
−Removed: March 2023 March 2028 Not designated $ 100,000
−Removed: April 2023 March 2028 Not designated $ 200,000
+Added: March 2023 (1)
+Added: March 2028 Not designated 100,000
+Added: April 2023 (1)
+Added: March 2028 Not designated 200,000
+Added: December 2023 (2)
+Added: September 2026 Not designated 700,000
+Added: Total notional amount $ 3,800,000
+Added: _________________
+Added: (1) Interest rate swaps entered into to partially hedge the Term Loan A Facility.
+Added: (2) Interest rate swaps entered into to offset the excess notional interest rate swaps as a result of the partial redemption of the First Lien Term Loan due 2026.
+Added: The changes in fair value associated with these swaps and the over-hedged swaps are reflected in other income (expense).
Classification and Fair Value of Interest Rate Swaps
−Removed: (in thousands) September 30, 2023 December 31, 2022
+Added: (in thousands) March 31, 2024 December 31, 2023
Prepaid expenses and other current assets $ 82,423 $ 74,974
Other assets $ 88,996 $ 76,493
−Removed: Fair value of interest rate swaps - net asset (liability) $ 221,992 $ 183,515
+Added: Accrued expenses and other current liabilities $ 7,266 $ 5,312
+Added: Other liabilities $ 256 $ 1,325
Unrealized Gain (Loss) on Interest Rate Swaps
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
−Removed: (in thousands) 2023 2022 2023 2022
−Removed: Gain (loss) included in interest expense, net $ 16,380 $ 108,041 $ 38,477 $ 312,603
+Added: Three Months Ended March 31,
+Added: Statement of Operations Classification (in thousands)
+Added: Interest expense, net
+Added: $ 16,747 $ ( 32,516 )
+Added: Other income (expense)
+Added: $ ( 6,601 ) $ —
+Added: AND SUBSIDIARIES
+Added: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Cash Flow Hedges Reclassifications out of AOCI
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
+Added: Three Months Ended March 31,
( in thousands )
−Removed: 2023 2022 2023 2022
Interest expense, net $ 2,129 $ 5,449
Income tax (benefit) expense $ ( 512 ) $ ( 1,314 )
−Removed: During the nine months ended September 30, 2023, the Company recorded an additional $ 25 million to interest expense, net associated with the reclassification from AOCI of historical losses related to certain interest rate swaps for which the Company previously applied hedge accounting but for which the cash flows are probable of not occurring as a result of the partial redemption of the Company’s First Lien Term Loan due 2026 in October 2023, as discussed in Note 8 “Debt”.
−Removed: As of September 30, 2023 and December 31, 2022, AOCI, net of tax, related to previously designated cash flow hedges was $ 15 million and $ 46 million, respectively.
−Removed: As of September 30, 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.
+Added: As of March 31, 2024 and December 31, 2023, AOCI, net of tax, related to previously designated cash flow hedges was $ 12 million and $ 13 million, respectively.
+Added: As of March 31, 2024, 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.
Unrecognized Tax Benefits
1 unchanged sentence
federal, state and local, and foreign jurisdictions.
−Removed: During the nine months ended September 30, 2023, the Company did not have a material change to its unrecognized tax benefits.
−Removed: Based on the current status of its income tax audits, the Company does not believe a significant portion of its unrecognized tax benefits will be resolved in the next twelve months.
+Added: During the three months ended March 31, 2024, the Company did not have a material change to its unrecognized tax benefits from those disclosed in the 2023 Annual Report.
+Added: Based on the current status of its income tax audits, the Company expects approximately $ 29 million of its unrecognized tax benefits will be resolved in the next twelve months.
Effective Tax Rate
1 unchanged sentence
The discussion below is based on the continuing operations of the Company.
+Added: The Company’s income tax expense for the three months ended March 31, 2024 was $ 31 million, resulting in an effective tax rate for the period of 25.1 %.
+Added: The effective tax rate primarily represents the federal statutory rate of 21.0 %, a state tax rate, net of federal benefits, of 5.5 %, partially offset by a favorable impact of 2.1 % related to a decrease in unrecognized tax benefits related to prior years.
+Added: The Company’s income tax benefit for the three months ended March 31, 2023 was $ 74 million, resulting in an effective tax rate for the period of 37.3 %.
+Added: The effective tax rate primarily represents the federal statutory tax rate of 21.0 %, a state tax rate, net of federal benefits, of 8.9 % and unfavorable impacts of 5.6 % related to the Solar goodwill impairment, partially offset by favorable impacts of 5.0 % from federal tax credits.
+Added: Common Stock and Class B Common Stock
+Added: The Company has two classes of common stock, including Common Stock and Class B Common Stock.
+Added: During the three months ended March 31, 2024, shares issued resulted from the vesting of restricted stock units (“RSUs”) and stock option exercises related to share-based compensation awards.
+Added: Share Repurchase Plan
+Added: On January 24, 2024, the Company's Board of Director's announced a share repurchase plan (the “Share Repurchase Plan”), pursuant to which the Company is authorized to repurchase, through January 29, 2025, up to a maximum aggregate amount of $ 350 million of shares of the Company's Common Stock under this Share Repurchase Plan.
+Added: The Company may effect these repurchases pursuant to one or more open market or private transactions, including pursuant to a plan that qualifies for the affirmative defense provided by Rule 10b5‐1 under the Exchange Act, or pursuant to one or more accelerated share repurchase agreements.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: The Company’s income tax benefit (expense) for the three months ended September 30, 2023 was $( 39 ) million, resulting in an effective tax rate for the period of 186.5 %.
−Removed: The effective tax rate primarily represents the federal statutory rate of 21.0 %, a state statutory tax rate, net of federal benefits, of 34.0 %, and unfavorable impacts related to the Solar goodwill impairment, non-deductible executive compensation, non-U.S.
−Removed: earnings, and other items, partially offset by favorable impacts from federal tax credits, impacts from dispositions and acquisitions, and losses from equity method investee and other items.
−Removed: The Company’s income tax benefit (expense) for the three months ended September 30, 2022 was $ 16 million, resulting in an effective tax rate for the period of 8.6 %.
−Removed: The effective tax rate primarily represents the federal statutory rate of 21.0 %, a state statutory tax rate, net of federal benefits, of 6.0 %, and favorable impacts from research and development (“R&D”) credits and other items, partially offset by an unfavorable impact related to the fair value adjustment of the Forward Contract.
−Removed: The Company’s income tax benefit (expense) for the nine months ended September 30, 2023 was $ 12 million, resulting in an effective tax rate for the period of 8.0 %.
−Removed: The effective tax rate primarily represents the federal statutory rate of 21.0 %, a state statutory tax rate, net of federal benefits, of 21.4 %, and unfavorable impacts related to the Solar goodwill impairment, non-deductible executive compensation, and non-U.S.
−Removed: earnings and other items, partially offset by favorable impacts from federal tax credits, losses from equity method investee, impacts from dispositions and acquisitions and other items.
−Removed: The Company’s income tax benefit (expense) for the nine months ended September 30, 2022 was $( 38 ) million, resulting in an effective tax rate for the period of 749.5 %.
−Removed: The effective tax rate primarily represents the federal statutory tax rate of 21.0 %, a state statutory tax rate, net of federal benefits, of 5.1 %, as well as unfavorable impacts related to the fair value adjustment of the Forward Contract, prior year return adjustments, and other items, partially offset by favorable impacts from R&D credits, changes in the Company’s valuation allowances, legislative changes, and other items.
−Removed: Common Stock and Class B Common Stock
−Removed: The Company has two classes of common stock, including common stock (“Common Stock”) and Class B common stock (“Class B Common Stock”).
−Removed: During the nine months ended September 30, 2023, shares issued resulted from the vesting of restricted stock units (“RSUs”) and stock option exercises related to share-based compensation awards.
+Added: The Company is not obligated to repurchase any of its shares of Common Stock, and the timing and amount of any repurchases will depend on legal requirements, market conditions, stock price, the availability of the safe harbor provided by Rule 10b-18 under the Exchange Act, alternative uses of capital, and other factors.
+Added: During the three months ended March 31, 2024, the Company repurchased and retired 15 million shares of its Common Stock under the Share Repurchase Plan and paid approximately $ 93 million (or approximately $ 6.22 per share).
+Added: As of March 31, 2024, the Company had approximately $ 257 million remaining under the Share Repurchase Plan.
+Added: Refer to Note 14 “Related Party Transactions” for further information.
(in thousands, except per share data)
1 unchanged sentence
Declaration Date Record Date Payment Date Per Share Aggregate Per Share Aggregate
−Removed: Nine Months Ended September 30, 2023
−Removed: 2/28/2023 3/16/2023 4/4/2023 $ 0.035 $ 30,342 $ 0.035 $ 1,916
−Removed: 5/2/2023 6/15/2023 7/6/2023 0.035 30,256 0.035 1,916
−Removed: 8/8/2023 9/15/2023 10/4/2023 0.035 30,405 0.035 1,916
−Removed: Total $ 0.105 $ 91,003 $ 0.105 $ 5,748
−Removed: Nine Months Ended September 30, 2022
−Removed: 3/1/2022 3/17/2022 4/4/2022 $ 0.035 $ 29,842 $ 0.035 $ 1,916
+Added: Three Months Ended March 31, 2024
1/24/2024 3/14/2024 4/4/2024 $ 0.055 $ 47,059 $ 0.055 $ 3,011
+Added: Three Months Ended March 31, 2023
2/28/2023 3/16/2023 4/4/2023 $ 0.035 $ 30,342 $ 0.035 $ 1,916
−Removed: Total $ 0.105 $ 89,982 $ 0.105 $ 5,748
−Removed: Subsequent Event - On November 2, 2023, the Company announced a dividend of $ 0.035 per share to holders of Common Stock and Class B Common Stock of record on December 14, 2023, which will be paid on January 9, 2024.
+Added: Subsequent Event - On April 25, 2024, the Company announced a dividend of $ 0.055 per share to holders of Common Stock and Class B Common Stock of record on June 13, 2024, which will be paid on July 9, 2024.
Accumulated Other Comprehensive Income (Loss)
+Added: There were no material reclassifications out of AOCI.
Refer to Note 7 “Derivative Financial Instruments” for AOCI reclassifications associated with cash flow hedges.
−Removed: There were no other material reclassifications out of AOCI.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SHARE-BASED COMPENSATION
−Removed: During the first quarter of 2023, the Company completed its annual long-term incentive plan equity award to employees and granted approximately 6.6 million RSUs under its 2018 Omnibus Incentive Plan, as amended (the “2018 Plan”) with a weighted-average grant date fair value of $ 7.60 equal to the closing price per share of the Company’s Common Stock on the date of grant.
+Added: During the first quarter of 2024, the Company completed its annual long-term incentive plan equity award to employees and granted approximately 3.9 million RSUs under its 2018 Omnibus Incentive Plan, as amended (the “2018 Plan”) with a grant date fair value of $ 6.51 equal to the closing price per share of the Company’s Common Stock on the date of grant.
These RSUs are service-based awards with a three-year graded vesting period from the date of grant.
−Removed: Share-based compensation expense included in discontinued operations was approximately $ 6 million and $ 12 million during the three and nine months ended September 30, 2023, respectively, and approximately $ 3 million and $ 10 million during the three and nine months ended September 30, 2022, respectively.
+Added: During the first quarter of 2024, the Company granted approximately 6.8 million options under the 2018 Plan.
+Added: These options are service-based awards with a three -year graded vesting period from the date of grant and have an exercise price of $ 6.51 , which is equal to the closing price per share of the Company’s common stock on the date of grant, and a contractual term of ten years from the grant date.
+Added: The weighted-average grant date fair value for the options granted was $ 2.56 .
+Added: The Company used a binomial lattice model to determine the grant date fair value for options granted and included the following assumptions:
+Added: Expected exercise term (years)
+Added: Expected volatility (1)
+Added: Expected dividend yield (2)
+Added: Risk-free interest rate (3)
+Added: _________________
+Added: (1) Estimated using historical and implied stock price volatility of the Company.
+Added: (2) Calculated by taking the annual dividend run-rate and dividing by the stock price at date of grant.
+Added: (3) Based on the U.S.
+Added: Treasury yield curve.
+Added: AND SUBSIDIARIES
+Added: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NET INCOME (LOSS) PER SHARE
2 unchanged sentences
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.
−Removed: 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, the basic and diluted earnings per share computations for Common Stock exclude approximately 9 million unvested shares as their vesting is contingent upon achievement of certain performance requirements.
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
+Added: Three Months Ended March 31,
in thousands, except per share amounts
−Removed: 2023 2022 2023 2022
Allocation of income (loss) from continuing operations - basic
$ 86,041 $ ( 119,130 )
−Removed: Dilutive effect (including conversion of Class B Common Stock) — — — —
+Added: Dilutive effect
Allocation of income (loss) from continuing operations - diluted
1 unchanged sentence
Allocation of income (loss) from discontinued operations, net of tax - basic $ 18 $ 7,466
−Removed: Dilutive effect (including conversion of Class B Common Stock) — — — —
+Added: Dilutive effect
Allocation of income (loss) from discontinued operations, net of tax - diluted $ 18 $ 7,466
Weighted-average shares outstanding - basic 855,893 854,299
−Removed: Dilutive effect (including conversion of Class B Common Stock) (1)
+Added: Dilutive effect (1)
Weighted-average shares outstanding - diluted 918,394 854,299
4 unchanged sentences
Income (loss) per share from discontinued operations, net of tax - basic
−Removed: $ ( 0.07 ) $ 0.01 $ 0.04 $ 0.02
Income (loss) per share from discontinued operations, net of tax - diluted
_________________
−Removed: _________________
−Removed: (1) During the three and nine months ended September 30, 2023 and September 30, 2022, all potential shares of Common Stock that would be dilutive were excluded from the diluted earnings per share calculations because their effects would have been anti-dilutive.
+Added: (1) During the three months ended March 31, 2024, 17 million shares of Common Stock that would be dilutive were excluded from the diluted earnings per share calculations because their effects would have been anti-dilutive.
+Added: During the three months ended March 31, 2023, all potential shares of Common Stock that would be dilutive were excluded from the diluted earnings per share calculations because their effects would have been anti-dilutive.
AND SUBSIDIARIES
1 unchanged sentence
Class B Common Stock
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
+Added: Three Months Ended March 31,
in thousands, except per share amounts
−Removed: 2023 2022 2023 2022
Allocation of net income (loss) from continuing operations - basic
14 unchanged sentences
Income (loss) per share from discontinued operations, net of tax - basic
−Removed: $ ( 0.07 ) $ 0.01 $ 0.04 $ 0.02
Income (loss) per share from discontinued operations, net of tax - diluted
________________
−Removed: ________________
(1) There were no potential shares of Class B Common Stock during the periods presented.
2 unchanged sentences
There have been no significant changes to the Company’s contractual obligations as compared to December 31, 2023, except as discussed below:
−Removed: Repurchase of Solar Loans
−Removed: As of September 30, 2023, the liability related to certain loans provided to customers within the Company’s Solar business that the Company may be required to repurchase from third party lenders was approximately $ 16 million.
−Removed: This liability is partially offset by a net receivable of $ 6 million related to the amount the Company ultimately expects to recover from any loans required to be repurchased, either through ongoing loan payments from the customer or proceeds from subsequent resale of the loans.
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.
−Removed: 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.
+Added: The Google Commercial Agreement also specifies that each party shall contribute $ 150 million toward 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 technology advancements, customer acquisition, and marketing, as mutually agreed by the Company and Google, (together with the initial amounts, the “Google Success Funds”).
−Removed: During the three and nine months ended September 30, 2023, $ 27.5 million and $ 40 million, respectively, of the Google Success Funds were reimbursed to the Company for certain joint marketing expenses incurred by the Company.
+Added: During the three months ended March 31, 2024 and 2023, $ 7.4 million and $ 12.5 million, respectively, of the Google Success Funds were approved for reimbursement to the Company for certain joint marketing and customer acquisition expenses incurred by the Company.
+Added: Google Cloud Agreement Addendum
+Added: 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
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
+Added: $ 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.
+Added: 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.
+Added: During the three months ended March 31, 2024, the Company made purchases toward this commitment of $ 5 million.
+Added: Other Commitments
+Added: During the fourth quarter of 2023, the Company entered into an agreement with one of its vendors to purchase at least $ 190 million of security system equipment and components through March 2025.
+Added: This commitment is also satisfied through purchases made by the Company’s dealer network.
+Added: During the three months ended March 31, 2024, purchases toward this commitment were $ 43 million.
In the normal course of business, the Company is liable for contract completion and product performance.
−Removed: The Company’s guarantees primarily relate to standby letters of credit related to its insurance programs and totaled $ 79 million and $ 93 million as of September 30, 2023 and December 31, 2022, respectively.
+Added: As of March 31, 2024 and December 31, 2023, the Company’s guarantees primarily relate to standby letters of credit related to its insurance programs and totaled $ 78 million for both periods, respectively.
The Company does not believe such obligations will materially affect its financial position, results of operations, or cash flows.
3 unchanged sentences
In connection with such formal and informal inquiries, the Company receives numerous requests, subpoenas, and orders for documents, testimony, and information in connection with various aspects of its activities.
−Removed: There have been no material changes to these matters from those disclosed in the Amended 2022 Annual Report.
+Added: There have been no material changes to these matters from those disclosed in the 2023 Annual Report.
The Company records accruals for losses that are probable and reasonably estimable.
3 unchanged sentences
The Company has not accrued for any losses for which the likelihood of loss cannot be assessed, is less than probable, or the range of possible loss cannot be estimated.
−Removed: As of September 30, 2023 and December 31, 2022, the Company’s accrual for ongoing claims and lawsuits within the scope of an insurance program totaled $ 110 million and $ 90 million, respectively.
+Added: As of March 31, 2024 and December 31, 2023, the Company’s accrual for ongoing claims and lawsuits within the scope of an insurance program totaled $ 104 million and $ 110 million, respectively.
The Company’s accrual related to ongoing claims and lawsuits not within the scope of an insurance program is not material.
+Added: AND SUBSIDIARIES
+Added: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Company as Lessee
2 unchanged sentences
(in thousands)
−Removed: September 30, 2023 December 31, 2022
+Added: March 31, 2024 December 31, 2023
Presentation and Classification:
10 unchanged sentences
_________________
−Removed: (1) Finance right-of-use assets are recorded net of accumulated depreciation, which was approximately $ 68 million and $ 61 million as of September 30, 2023 and December 31, 2022, respectively.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
+Added: (1) Finance right-of-use assets are recorded net of accumulated depreciation, which was approximately $ 57 million and $ 60 million as of March 31, 2024 and December 31, 2023, respectively.
+Added: Three Months Ended March 31,
( in thousands )
−Removed: 2023 2022 2023 2022
Operating lease cost $ 6,728 $ 8,102
5 unchanged sentences
Right-of-Use Assets Obtained in Exchange for Lease Obligations (1)
−Removed: Nine Months Ended September 30,
+Added: Three Months Ended March 31,
( in thousands )
5 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.
+Added: AND SUBSIDIARIES
+Added: NOTES TO CONDENSED 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.
3 unchanged sentences
There were no notable related party transactions during the periods presented other than as described below.
−Removed: Upon initial funding of the Term Loan A Facility in March 2023, the Company incurred fees to Apollo of $ 1 million related to Apollo’s performance of placement agent services related to such debt.
−Removed: On October 13, 2022 (the “Closing”), the Company issued and sold in a private placement to State Farm 133,333,333 shares of the Company’s Common Stock at a per share price of $ 9.00 for an aggregate purchase price of $ 1.2 billion (the “State Farm Strategic Investment”) pursuant to a securities purchase agreement dated September 5, 2022.
−Removed: State Farm owns approximately 15 % of the Company’s issued and outstanding Common Stock (assuming conversion of Class B Common Stock), and as a result, is a related party.
−Removed: At the Closing, the Company, ADT LLC (an indirect wholly owned subsidiary of the Company), and State Farm entered into a Development Agreement (the “State Farm Development Agreement”) pursuant to which State Farm committed up to $ 300 million to fund certain initiatives as agreed to between the Company and State Farm related to the partnership (the “Opportunity Fund”).
+Added: Offering and Share Repurchase
+Added: On March 6, 2024, the Company and certain entities managed by affiliates of Apollo Global Management, Inc.
+Added: (the “Selling Stockholders”) entered into an underwriting agreement (the “Underwriting Agreement”) with Morgan Stanley & Co.
+Added: LLC and Barclays Capital Inc., as representatives of the underwriters named therein, including Apollo Global Securities, LLC, an affiliate of Apollo (collectively, the “Underwriters”), in connection with the offer and sale by the Selling Stockholders (the “Offering”) of 65 million shares of the Company’s Common Stock, and, at the option of the Underwriters, up to an additional 9.75 million shares of Common Stock (the “Underwriters’ Option”).
+Added: As part of the Offering, the Company purchased 15 million shares of Common Stock under its Share Repurchase Plan from the Underwriters (the “Share Repurchase”).
+Added: The Company paid approximately $ 93 million (or approximately $ 6.22 per share) for the Share Repurchase, which was the same per share price paid by the Underwriters to the Selling Stockholders.
+Added: The repurchase is reflected as a reduction to additional paid-in-capital and as a financing cash outflow.
+Added: The Offering and the Share Repurchase closed on March 11, 2024.
+Added: On March 15, 2024, the Underwriters exercised the Underwriters’ Option in full, which subsequently closed on March 19, 2024.
+Added: The Company did not pay any underwriting fees in connection with the Share Repurchase, including on behalf of the Selling Stockholders or otherwise.
+Added: All the shares in the Offering were sold by the Selling Stockholders.
+Added: The Company did not receive any of the proceeds from the sale of shares by the Selling Stockholders in the Offering.
+Added: During the three months ended March 31, 2023, the Company incurred fees to Apollo of $ 1 million related to Apollo’s performance of placement agent services related to the initial funding of the Term Loan A Facility.
+Added: State Farm owns approximately 15 % of the Company’s issued and outstanding common stock, and as a result, is a related party.
+Added: In October 2022, the Company, ADT LLC (an indirect wholly owned subsidiary of the Company), and State Farm entered into a development agreement (the “State Farm Development Agreement”) in connection with State Farm’s strategic investment in ADT.
+Added: Pursuant to the State Farm Development Agreement, State Farm committed up to $ 300 million to fund certain initiatives as agreed to between the Company and State Farm related to the partnership (the “Opportunity Fund”), of which the Company has received $ 100 million.
+Added: Amounts held by the Company in the Opportunity Fund will be restricted until the Company uses the funds, as agreed upon with State Farm, in accordance with the State Farm Development Agreement.
+Added: As of March 31, 2024 and December 31, 2023, the balance in the portion of the Opportunity Fund held by the Company was $ 92 million and $ 94 million, respectively.
+Added: During the three months ended March 31, 2024 and 2023, the Company made payments from the Opportunity Fund of $ 3 million and $ 2 million, respectively.
+Added: Interest earned on the Opportunity Fund was not material.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Additionally at the Closing, the Company received $ 100 million of the Opportunity Fund, which will be restricted until such time as the Company uses the funds in accordance with the State Farm Development Agreement.
−Removed: The Company’s use of the funds is also subject to approval by State Farm.
−Removed: As of September 30, 2023 and December 31, 2022, the balance in the Opportunity Fund was approximately $ 97 million and $ 101 million, respectively, and includes payments of $ 6 million partially offset by interest earned during 2023.
Sunlight Financial LLC
−Removed: 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.”
−Removed: During the three and nine months ended September 30, 2023, total loans funded by Sunlight were approximately $ 9 million and $ 71 million, respectively, and the Company incurred financing fees of approximately $ 2 million and $ 11 million, respectively.
−Removed: During the three and nine months ended September 30, 2022, total loans funded by Sunlight were approximately $ 116 million and $ 359 million, respectively, and the Company incurred financing fees of approximately $ 14 million and $ 44 million, respectively.
−Removed: As of September 30, 2023, the Company may be required to repurchase loans previously funded by Sunlight in the amount of approximately $ 10 million.
−Removed: During October 2020, the Company entered into a master services agreement with Rackspace US, Inc.
−Removed: (“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.
−Removed: The master services agreement included a minimum purchase commitment of $ 50 million over a seven year term, which the Company has met through spend with Rackspace as well as other parties.
−Removed: During the nine months ended September 30, 2023 and 2022, fees incurred to Rackspace were not material.
−Removed: Canopy is considered a related party under GAAP as the Company accounts for its investment in Canopy under the equity method of accounting.
−Removed: During the first quarter of 2023, the Company made an additional equity investment of approximately $ 5 million in Canopy.
+Added: ADT Solar used Sunlight Financial LLC (“Sunlight”), an entity previously affiliated with Apollo, to access certain loan products for ADT Solar customers.
+Added: As of December 2023, Sunlight was no longer affiliated with Apollo, and as a result, was no longer a related party.
+Added: During the three months ended March 31, 2023, total loans funded by Sunlight were $ 45 million, and the Company incurred financing fees of $ 6 million.
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.