What changed in this filing

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Item 1. Financial Statements

2024-08-01 compared with 2024-04-25 · 254 added, 255 removed, 610 unchanged (45% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Current assets:

5 unchanged sentences

Prepaid expenses and other current assets 240,928 242,192

Current assets of discontinued operations 6,190 60,957

Total current assets 985,541 1,004,694

5 unchanged sentences

Other assets 727,023 699,231

Noncurrent assets of discontinued operations 2,563 43,279

Total assets $ 15,985,822 $ 15,964,094

5 unchanged sentences

Accrued expenses and other current liabilities 604,897 556,114

Current liabilities of discontinued operations 48,702 79,611

Total current liabilities 1,315,346 1,480,208

3 unchanged sentences

Other liabilities 199,713 219,069

Noncurrent liabilities of discontinued operations 15,541 20,572

Total liabilities 12,177,612 12,175,448

2 unchanged sentences

Preferred stock—authorized 1,000,000 shares of $ 0.01 par value;

zero issued and outstanding as of March 31, 2024 and December 31, 2023

zero issued and outstanding as of June 30, 2024 and December 31, 2023

Common stock—authorized 3,999,000,000 shares of $ 0.01 par value;

issued and outstanding shares of 855,629,403 and 867,432,337 as of March 31, 2024 and December 31, 2023, respectively

issued and outstanding shares of 857,052,617 and 867,432,337 as of June 30, 2024 and December 31, 2023, respectively

Class B common stock—authorized 100,000,000 shares of $ 0.01 par value;

issued and outstanding shares of 54,744,525 as of March 31, 2024 and December 31, 2023

issued and outstanding shares of 54,744,525 as of June 30, 2024 and December 31, 2023

Additional paid-in capital 7,347,061 7,413,305

7 unchanged sentences

(in thousands, except per share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Monitoring and related services $ 1,068,065 $ 1,043,255 $ 2,130,717 $ 2,071,888

Security installation, product, and other 136,494 124,822 263,514 228,665

Solar installation, product, and other 19,639 144,835

Total revenue 1,204,559 1,168,077 2,394,231 2,300,553

2 unchanged sentences

Security installation, product, and other 45,042 45,222 84,634 75,058

Solar installation, product, and other 41,522 98,344

Total cost of revenue 196,234 187,710 390,539 379,334

2 unchanged sentences

Merger, restructuring, integration, and other 1,851 8,325 13,504 22,624

Goodwill impairment — 241,630

Operating income (loss) 284,175 332,098 576,324 565,058

10 unchanged sentences

Income (loss) from continuing operations per share - basic $ 0.14 $ 0.20 $ 0.32 $ 0.24

$ 0.10 $ ( 0.14 )

Income (loss) from continuing operations per share - diluted $ 0.13 $ 0.19 $ 0.30 $ 0.23

$ 0.10 $ ( 0.14 )

Net income (loss) per share - basic $ 0.10 $ 0.10 $ 0.20 $ ( 0.03 )

$ 0.10 $ ( 0.13 )

Net income (loss) per share - diluted $ 0.10 $ 0.09 $ 0.19 $ ( 0.03 )

$ 0.10 $ ( 0.13 )

Weighted-average shares outstanding - basic 848,273 857,581 852,083 855,949

855,893 854,299

Weighted-average shares outstanding - diluted 909,128 916,859 913,475 919,220

918,394 854,299

Class B Common Stock:

Income (loss) from continuing operations per share - basic $ 0.14 $ 0.20 $ 0.32 $ 0.24

$ 0.10 $ ( 0.14 )

Income (loss) from continuing operations per share - diluted $ 0.13 $ 0.19 $ 0.30 $ 0.23

$ 0.10 $ ( 0.14 )

Net income (loss) per share - basic $ 0.10 $ 0.10 $ 0.20 $ ( 0.03 )

$ 0.10 $ ( 0.13 )

Net income (loss) per share - diluted $ 0.10 $ 0.09 $ 0.19 $ ( 0.03 )

$ 0.10 $ ( 0.13 )

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

54,745 54,745

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

54,745 54,745

See Notes to Condensed Consolidated Financial Statements

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net income (loss) $ 92,394 $ 92,211 $ 183,945 $ ( 26,626 )

8 unchanged sentences

(in thousands)

Three Months Ended March 31, 2024

Three Months Ended June 30, 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 — — — — 21,416 — — 21,416

Transactions related to employee share-based compensation plans and other 1,424 — 15 — 7,750 ( 525 ) — 7,240

Ending balance 857,053 54,745 $ 8,571 $ 547 $ 7,347,061 $ ( 3,535,042 ) $ ( 12,927 ) $ 3,808,210

Three Months Ended June 30, 2023

Beginning balance 866,917 54,745 $ 8,668 $ 547 $ 7,380,867 $ ( 4,101,557 ) $ ( 43,093 ) $ 3,245,432

Net income (loss) — — — — — 92,211 — 92,211

Other comprehensive income (loss), net of tax — — — — — — 3,588 3,588

Dividends — — — — — ( 32,172 ) — ( 32,172 )

Share-based compensation expense — — — — 11,506 — — 11,506

Transactions related to employee share-based compensation plans and other ( 508 ) — ( 4 ) — ( 2,104 ) ( 445 ) — ( 2,553 )

Ending balance 866,409 54,745 $ 8,664 $ 547 $ 7,390,269 $ ( 4,041,963 ) $ ( 39,505 ) $ 3,318,012

See Notes to Condensed Consolidated Financial Statements

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

Six Months Ended June 30, 2024

Beginning balance 867,432 54,745 $ 8,674 $ 547 $ 7,413,305 $ ( 3,617,718 ) $ ( 16,162 ) $ 3,788,646

Net income (loss) — — — — — 183,945 — 183,945

Other comprehensive income (loss), net of tax — — — — — — 3,235 3,235

Dividends — — — — — ( 100,218 ) — ( 100,218 )

Share-based compensation expense — — — — 29,387 — — 29,387

Repurchases of common stock (including excise tax) ( 15,000 ) — ( 150 ) — ( 93,969 ) — — ( 94,119 )

2 unchanged sentences

Ending balance 857,053 54,745 $ 8,571 $ 547 $ 7,347,061 $ ( 3,535,042 ) $ ( 12,927 ) $ 3,808,210

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

11 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

50 unchanged sentences

Basis of Presentation

The condensed consolidated financial statements included herein have been prepared in U.S.

The condensed consolidated financial statements included herein:

• have been prepared in U.S.

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

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

and its wholly-owned subsidiaries.

The results of companies acquired (if applicable) are included from the effective dates of acquisition, and all intercompany transactions have been eliminated.

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”).

Beginning in the third quarter of 2023, the Company presented its Commercial Business as a discontinued operation.

Refer to Note 4 “Divestitures” for additional information.

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

The Company sold its shares in SNTNL LLC (“Canopy”) during the fourth quarter of 2023.

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.

The interim results reported herein should not be taken as indicative of results that may be expected for future interim periods or the full year.

• comprise the consolidated results of ADT Inc.

and its wholly-owned subsidiaries, and all intercompany transactions have been eliminated;

• are unaudited, but in the opinion of management, 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;

• should not be taken as indicative of results that may be expected for future interim periods or the full year.

The Condensed Consolidated Balance Sheet as of December 31, 2023 included herein was derived from the audited consolidated financial statements as of that date.

1 unchanged sentence

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”).

In addition, the results of companies acquired (if applicable) are included from the effective dates of acquisition.

Prior to the sale of its shares in SNTNL LLC (“Canopy”) during the fourth quarter of 2023, 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.

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

Discontinued Operations

In January 2024, the Company’s board of directors (the “Board of Directors” or the “Board”) approved a plan to fully exit the residential solar business (the “Solar Business”) (the “ADT Solar Exit”).

The ADT Solar Exit represents a strategic shift that had a major effect on the Company’s financial results.

As of June 30, 2024, substantially all operations of the Solar Business have ceased, with the results of operations and financial position of the Solar Business classified as discontinued operations in the Company’s Condensed Consolidated Statements of Operations and Condensed Consolidated Balance Sheets, respectively, for all periods presented.

In addition, 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”).

As a result, the Commercial Business is presented as a discontinued operation in the Company’s Condensed Consolidated Statements of Operations for all periods presented.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The cash flows and comprehensive income (loss) of discontinued operations 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 all periods presented.

Refer to Note 3 “Divestitures” for additional information on discontinued operations.

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

Use of Estimates

2 unchanged sentences

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

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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

Refer to Note 3 “Segment Information” for additional information.

Segment Update

Beginning in the second quarter of 2024, and as a result of the ADT Solar Exit, the Company currently reports its results in a single operating and reportable segment, which reflects the business operations of the Company’s former Consumer and Small Business (“CSB”) segment, 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.

Prior to the third quarter of 2023, the Commercial Business was reflected in the Commercial reportable segment, and prior to the second quarter of 2024, the Solar Business was reflected in the Solar reportable segment.

Accounting Pronouncements

5 unchanged sentences

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

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

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

The Company adopted this guidance effective January 1, 2024.

4 unchanged sentences

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

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

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

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

4 unchanged sentences

Early adoption is permitted.

The Company is currently evaluating the impact of this guidance.

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

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

3 unchanged sentences

Early adoption is permitted.

The Company is currently evaluating the impact of this guidance.

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

Significant Accounting Policies

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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unless otherwise noted, the Company’s accounting policies, including those discussed herein, do not materially differ from those disclosed in the 2023 Annual Report.

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:

(in thousands) March 31, 2024 December 31, 2023

(in thousands) June 30, 2024 December 31, 2023

Cash and cash equivalents $ 37,883 $ 14,621

3 unchanged sentences

________________

(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”).

(1) Primarily includes funds received from State Farm Fire & Casualty Company (“State Farm”), net of payments and inclusive of interest earned, in connection with the State Farm Development Agreement (as defined and discussed in Note 13 “Related Party Transactions”).

The remaining amount of restricted cash relates to the Company’s uncommitted receivables securitization financing agreement (the “ 2020 Receivables Facility”).

8 unchanged sentences

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

(in thousands) March 31, 2024 December 31, 2023

(in thousands) June 30, 2024 December 31, 2023

Gross carrying amount $ 6,665,977 $ 6,404,479

1 unchanged sentence

Subscriber system assets, net $ 3,018,746 $ 3,005,936

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2024 2023 2024 2023

3 unchanged sentences

Accrued Expenses and Other Current Liabilities

(in thousands) March 31, 2024 December 31, 2023

(in thousands) June 30, 2024 December 31, 2023

Accrued interest $ 124,457 $ 111,197

7 unchanged sentences

Accrued expenses and other current liabilities $ 604,897 $ 556,114

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Merger, Restructuring, Integration, and Other

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.

As of March 31, 2024 and December 31, 2023, investments in money market mutual funds were $ 41 million and $ 55 million, respectively.

As of June 30, 2024 and December 31, 2023, investments in money market mutual funds were $ 57 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.

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.

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in thousands) Carrying

3 unchanged sentences

________________

(1) Excludes finance leases.

(1) Excludes finance leases and certain vehicle loans reported as discontinued operations.

Derivative Financial Instruments - Derivative financial instruments are reported at fair value as either assets or liabilities that are primarily calculated using discounted cash flow models utilizing observable inputs, such as quoted forward interest rates, and incorporate credit risk adjustments to reflect the risk of default by the counterparty or the Company.

1 unchanged sentence

Refer to Note 6 “Derivative Financial Instruments” for the fair values of the Company’s derivative financial instruments.

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.

March 31, 2024 December 31, 2023

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

June 30, 2024 December 31, 2023

(in thousands) Carrying

2 unchanged sentences

REVENUE AND RECEIVABLES

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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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).

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

In addition to the details provided below, the Company’s disaggregated revenue includes monitoring and related services and security installation, product, and other revenue, which are presented on the face of the Condensed Consolidated Statements of Operations.

Company-Owned - In transactions in which the Company provides monitoring and related services but retains ownership of the security system (referred to as Company-owned transactions), the Company’s performance obligations primarily include (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.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

( in thousands )

2024 2023 2024 2023

Amortization of deferred subscriber acquisition revenue $ 86,182 $ 73,610 $ 169,558 $ 143,308

CSB Customer-Owned - In transactions involving security systems sold outright to the customer (referred to as outright sales), the Company’s performance obligations generally include the sale and installation of the system, which is primarily recognized at a point in time based upon the nature of the transaction and contractual terms, and any monitoring and related services, which are recognized when these services are provided to the customer.

Solar - As discussed in Note 4 “Divestitures,” the Company began exiting the residential solar business in January 2024.

During the three months ended March 31, 2024, revenue and cost of revenue from the sale of solar equipment was not material.

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.

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.

Allowance for Credit Losses

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

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2024 2023

7 unchanged sentences

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

AND SUBSIDIARIES

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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The balance of unbilled retail installment contract receivables comprises:

(in thousands) March 31, 2024 December 31, 2023

(in thousands) June 30, 2024 December 31, 2023

Retail installment contract receivables, gross $ 681,852 $ 674,827

5 unchanged sentences

Retail installment contract receivables, net $ 675,362 $ 673,635

The allowance for credit losses relates to retail installment contract receivables from CSB outright sales transactions.

As of March 31, 2024, the current and delinquent billed retail installment contract receivables were not material.

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.

The allowance for credit losses relates to retail installment contract receivables from outright sales transactions.

As of June 30, 2024, the current and delinquent billed retail installment contract receivables were not material.

As of June 30, 2024 and December 31, 2023, retail installment contract receivables, net, used as collateral for borrowings under the 2020 Receivables Facility were $ 611 million and $ 610 million, respectively.

Refer to Note 5 “Debt” for further discussion regarding the 2020 Receivables Facility.

3 unchanged sentences

There is no significant financing component.

During the three months ended March 31, 2024 and 2023, contract assets recognized were not material.

During the six months ended June 30, 2024 and 2023, contract assets recognized were not material.

The balance of contract assets for residential transactions comprises:

(in thousands) March 31, 2024 December 31, 2023

(in thousands) June 30, 2024 December 31, 2023

Contract assets, gross $ 40,551 $ 39,627

5 unchanged sentences

Contract assets, net $ 35,430 $ 30,602

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.

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.

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

• 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.

• 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.

AND SUBSIDIARIES

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.

The CSB segment includes general corporate costs and other income and expense items not included in the Solar segment.

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

Adjusted EBITDA is defined as income (loss) from continuing operations adjusted for (i) interest;

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

(iv) amortization of deferred costs and deferred revenue associated with subscriber acquisitions;

(v) share-based compensation expense;

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

(vii) impairment charges;

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;

therefore, such information is not presented.

Reconciliations

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

Three Months Ended March 31,

(in thousands) 2024 2023

CSB $ 1,189,672 $ 1,132,476

Solar 19,639 144,835

Total Revenue $ 1,209,311 $ 1,277,311

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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:

Three Months Ended March 31,

(in thousands) 2024 2023

Adjusted EBITDA by segment:

CSB $ 637,691 $ 590,031

Solar ( 23,501 ) ( 10,545 )

Total $ 614,190 $ 579,486

Reconciliation:

Total segment Adjusted EBITDA

$ 614,190 $ 579,486

Interest expense, net 88,931 171,302

Depreciation and intangible asset amortization 334,353 362,351

Amortization of deferred subscriber acquisition costs 54,605 44,232

Amortization of deferred subscriber acquisition revenue ( 83,376 ) ( 69,698 )

Share-based compensation expense 7,971 12,774

Merger, restructuring, integration, and other (1)

45,182 15,537

Goodwill impairment (2)

Other solar exit costs (3)

Other, net (4)

Equity in net earnings (losses) of equity method investee — ( 2,677 )

Income (loss) from continuing operations before income taxes and equity in net earnings (losses) of equity method investee $ 122,187 $ ( 198,041 )

________________

(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”).

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.”

(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.

Refer to Note 4 “Divestitures.”

(4) During 2024, primarily includes unrealized (gains) / losses on interest rate swaps presented within other income (expense).

Refer to Note 7 “Derivative Financial Instruments.”

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.

ADT Solar Exit

In November 2023, the Company announced a plan to streamline the solar business to focus on the top performing markets and rationalize the overhead and infrastructure of the business.

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

On January 19, 2024, after a strategic review of the business and continued macroeconomic and industry pressures, the Company’s board of directors (the “Board of Directors” or the “Board”) approved a plan to fully exit the residential solar business (the “ADT Solar Exit”).

The solar business is currently reflected in the solar operating and reportable segment.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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:

Solar Installation, Product, and Other Cost of Revenue

Selling, general, and administrative expenses

Merger, restructuring, integration, and other Total

Employee separation costs

Refer to Note 10 “Net Income (Loss) per Share” for basic and diluted earnings per share information for discontinued operations.

ADT Solar Exit

As discussed in Note 1 “Description of Business and Summary of Significant Accounting Policies,” as a result of the ADT Solar Exit, the Solar Business is now presented as a discontinued operation in the Company’s Condensed Consolidated Statements of Operations and Condensed Consolidated Balance Sheets for the periods presented as substantially all operations have ceased.

During the three and six months ended June 30, 2024, the Company incurred aggregate exit charges of $ 13 million and $ 89 million, respectively, which have been recognized within income (loss) from discontinued operations, net of tax related to (i) $ 1 million and $ 36 million, respectively, associated with the write-down and disposition of inventory and asset impairments, (ii) $ 10 million and $ 29 million, respectively, associated with the disposition of the existing installation pipeline, (iii) $ 1 million and $ 12 million, respectively, associated with employee separation costs, and (iv) $ 2 million and $ 12 million, respectively, associated with contract termination and other charges.

During the six months ended June 30, 2024, the Company paid $ 18 million associated with the ADT Solar Exit primarily related to employee separation and other restructuring costs.

The following reconciliations represent the major classes of line items of the Solar Business presented within discontinued operations in the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations and certain information in the Condensed Consolidated Statements of Cash Flows for the periods presented.

Balance Sheet Information

(in thousands) June 30, 2024 December 31, 2023

Accounts receivable, net

$ 1,089 $ 20,270

Asset impairments and write-offs (1)

Inventories, net 1,894 28,714

Prepaid expenses and other current assets

Total current assets of discontinued operations

Property and equipment, net 2,451 29,512

Other assets 112 13,767

Total assets of discontinued operations

$ 8,753 $ 104,236

Contract termination charges

Current maturities of long-term debt $ 476 $ 8,551

Accounts payable 7,199 16,682

Deferred revenue 461 9,177

Accrued expenses and other current liabilities 40,566 45,201

Total current liabilities of discontinued operations

48,702 79,611

Write-down and disposition of inventory

Long-term debt 2,442 9,893

Other liabilities 13,099 10,679

Total liabilities of discontinued operations

$ 64,243 $ 100,183

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Statements of Operations Information

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2024 2023 2024 2023

Revenue $ 1,656 $ 77,532 $ 21,295 $ 222,367

Cost of revenue

19,837 64,898 61,359 163,242

Selling, general, and administrative expenses 11,877 50,896 51,768 109,071

Depreciation and intangible asset amortization 466 4,939 1,817 8,896

Merger, restructuring, integration, and other 4,622 2,180 38,150 3,418

Goodwill impairment

— 181,179 — 422,809

Other (income) and expense items

( 8 ) 415 1,473 784

(1) Primarily relates to long-lived asset impairments and write-off of deferred implementation costs associated with cloud computing arrangements.

(2) Primarily relates to charges associated with the disposition of the existing installation pipeline.

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.

Income (loss) from discontinued operations before income taxes ( 35,138 ) ( 226,975 ) ( 133,272 ) ( 485,853 )

Income tax benefit (expense) 9,601 44,229 35,376 136,763

Income (loss) from discontinued operations, net of tax $ ( 25,537 ) $ ( 182,746 ) $ ( 97,896 ) $ ( 349,090 )

Cash Flow Information

Six Months Ended June 30,

(in thousands) 2024 2023

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

Depreciation and intangible asset amortization $ 1,817 $ 8,896

Goodwill impairment $ — $ 422,809

Cash flows from investing activities:

Purchases of property and equipment $ ( 80 ) $ ( 2,675 )

Commercial Divestiture

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.

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.

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.

Refer to Note 11 “Net Income (Loss) per Share” for basic and diluted earnings per share information for discontinued operations.

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.

As discussed in Note 1 “Description of Business and Summary of Significant Accounting Policies,” on October 2, 2023, the Company completed the Commercial Divestiture.

The total purchase price was approximately $ 1,613 million, and the Company received net proceeds of approximately $ 1,585 million, subject to certain customary post-closing adjustments as set forth in the purchase agreement.

Subsequent Event - In July 2024, the Company paid the purchaser of the Commercial Business $ 21 million related to the settlement of post-closing adjustments.

In connection with the Commercial Divestiture, the Company entered into a Transition Services Agreement (the “Commercial TSA”).

During the three and six months ended June 30, 2024, the Company recognized $ 11 million and $ 22 million, respectively, of income from the Commercial TSA, which is reflected in other income (expense).

The following reconciliations represent the major classes of line items of the Commercial Business presented within discontinued operations in the Condensed Consolidated Statements of Operations and certain information in the Condensed Consolidated Statements of Cash Flows for any period presented prior to the Commercial Divestiture.

Statements of Operations Information

During the three months ended March 31, 2024, activity relating to the Commercial Divestiture was not material.

(in thousands) Three Months Ended March 31, 2023

During the three and six months ended June 30, 2024, activity, net of tax, relating to the Commercial Divestiture was approximately $ 8 million.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands) Three Months Ended June 30, 2023

Six Months Ended June 30, 2023

Revenue $ 347,519 $ 682,562

Cost of revenue

231,068 455,101

Selling, general, and administrative expenses 71,657 140,512

4 unchanged sentences

Income (loss) from discontinued operations, net of tax $ 94,519 $ 102,463

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Cash Flow Information

(in thousands) Three Months Ended March 31, 2023

(in thousands) Six Months Ended June 30, 2023

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

4 unchanged sentences

Purchases of property and equipment $ ( 5,764 )

Transition Services Agreement

In connection with the Commercial Divestiture, the Company entered into a Transition Services Agreement (the “Commercial TSA”).

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

There were no changes in the carrying amounts of goodwill since December 31, 2023.

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 .

During the three months ended March 31, 2023, the Company recorded goodwill impairment charges of $ 242 million in its Solar reporting unit.

All accumulated goodwill impairment losses were associated with the Solar reporting unit, which is now presented as a discontinued operation.

Other Intangible Assets

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in thousands) Gross Carrying

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Amortization ( 260,175 )

Balance as of March 31, 2024 $ 2,621,434

Balance as of June 30, 2024 $ 2,633,894

________________

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Definite-Lived Intangible Asset Amortization Expense

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2024 2023 2024 2023

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Description Issued Maturity Interest Rate (1)

Interest Payable March 31, 2024 December 31, 2023

Interest Payable June 30, 2024 December 31, 2023

First Lien Term Loan B due 2030

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3/5/2020 5/20/2029 Various Monthly 423,855 436,004

Other debt (3)

Total debt principal, excluding finance leases 7,812,830 7,936,540

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_________________

(1) Interest rate as of March 31, 2024 .

(1) Interest rate as of June 30, 2024 .

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 %.

(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.

(3) Refer to Note 12 “Leases” for additional information regarding the Company’s finance leases.

As of March 31, 2024, the Company was in compliance with all financial covenant and other maintenance tests for all of its debt obligations.

Significant changes in the Company’s debt during the three months ended March 31, 2024 were as follows:

As of June 30, 2024, the Company was in compliance with all financial covenant and other maintenance tests for all of its debt obligations.

Significant changes in the Company’s debt during the six months ended June 30, 2024 were as follows:

First Lien Credit Agreement

The Company’s first lien credit agreement, dated as of July 1, 2015 (together with subsequent amendments and restatements, the “First Lien Credit Agreement”), contains a term loan (the “First Lien Term Loan B due 2030”) and the First Lien Revolving Credit Facility.

During the three months ended March 31, 2024, the Company borrowed $ 95 million and repaid $ 45 million under the First Lien Revolving Credit Facility;

and as of March 31, 2024, the available borrowing capacity was $ 525 million.

During the three months ended March 31, 2023, there were no borrowings or repayments under the First Lien Revolving Credit Facility.

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 %.

During the six months ended June 30, 2024, the Company borrowed $ 260 million and repaid $ 260 million under the First Lien Revolving Credit Facility;

and as of June 30, 2024, the available borrowing capacity was $ 575 million.

During the six months ended June 30, 2023, there were no borrowings or repayments under the First Lien Revolving Credit Facility.

Significant amendments to the First Lien Credit Agreement since December 31, 2023 are as follows:

• April 2024 - 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

• May 2024 - The Company amended and restated the First Lien Credit Agreement, which included the exchange of $ 143 million principal amount of loans under the Company’s Term Loan A Facility for its First Lien Term Loan B due 2030.

In addition, later that month, the Company further amended and restated the First Lien Credit Agreement, pursuant to which the Company incurred an additional $ 474 million of outstanding principal under the First Lien Term Loan B due 2030 with the proceeds used to pay off the remaining outstanding balance of the Company’s Term Loan A Facility.

Proceeds and repayments of long-term borrowings include the impact of $ 646 million from the amendments described above.

In addition, debt issuance costs, loss on extinguishment of debt, and financing and consent fees were not material as a result of these amendments.

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.

Term Loan A Facility Redemption

Significant activity since December 31, 2023 is as follows:

• May 2024 - The Company exchanged $ 143 million of loans under its Term Loan A Facility for its First Lien Term Loan B due 2030, as discussed above.

In addition, later that month, the Company redeemed the remaining outstanding principal balance of $ 474 million of its Term Loan A Facility, excluding accrued and unpaid interest, using proceeds under the First Lien Term Loan B due 2030, as discussed above.

As a result, the Term Loan A Facility has been terminated.

First Lien Notes due 2024 Redemption

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.

Significant activity since December 31, 2023 is as follows:

• 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

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.

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.

As of March 31, 2024, the Company had an uncommitted available borrowing capacity under the 2020 Receivables Facility of approximately $ 56 million.

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.

Significant activity since December 31, 2023 is as follows:

• 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.

• April 2024 - The Company further 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.

In addition, proceeds and repayments of long-term borrowings include the impact of $ 32 million from the amendments described above.

As of June 30, 2024, the Company had an uncommitted available borrowing capacity under the 2020 Receivables Facility of approximately $ 126 million.

Variable Interest Entity

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.

The SPE meets the definition of a variable interest entity 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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

5 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”).

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.

The Solar Receivables Facility’s uncommitted revolving period will expire in August 2024, unless terminated beforehand.

As of June 30, 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.

The Solar Receivables Facility’s uncommitted revolving period will expire in August 2024.

DERIVATIVE FINANCIAL INSTRUMENTS

2 unchanged sentences

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

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For interest rate swap contracts that are:

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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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Interest Rate Swaps

As of March 31, 2024 and December 31, 2023, the Company’s interest rate swaps consisted of the following (in thousands) :

As of June 30, 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

March 2023 (1)

March 2028 Not designated 100,000

April 2023 (1)

March 2028 Not designated 200,000

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_________________

(1) Interest rate swaps entered into to partially hedge the Term Loan A Facility.

(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.

(1) 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 B due 2026.

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

(in thousands) March 31, 2024 December 31, 2023

(in thousands) June 30, 2024 December 31, 2023

Prepaid expenses and other current assets $ 82,164 $ 74,974

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Unrealized Gain (Loss) on Interest Rate Swaps

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Statement of Operations Classification (in thousands)

2024 2023 2024 2023

Interest expense, net

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$ ( 3,277 ) $ — $ ( 9,878 ) $ —

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Cash Flow Hedges Reclassifications out of AOCI

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

( in thousands )

2024 2023 2024 2023

Interest expense, net $ 1,985 $ 4,729 $ 4,114 $ 10,178

Income tax (benefit) expense $ ( 481 ) $ ( 1,143 ) $ ( 993 ) $ ( 2,457 )

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.

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.

As of June 30, 2024 and December 31, 2023, AOCI, net of tax, related to previously designated cash flow hedges was $ 10 million and $ 13 million, respectively.

As of June 30, 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

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federal, state and local, and foreign jurisdictions.

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.

During the six months ended June 30, 2024, the Company did not have a material change to its unrecognized tax benefits from those disclosed in the 2023 Annual Report.

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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Effective Tax Rate

1 unchanged sentence

The discussion below is based on the continuing operations of the Company.

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 %.

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.

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 %.

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.

The Company’s income tax expense for the three months ended June 30, 2024 was $ 60 million, resulting in an effective tax rate for the period of 32.2 %.

The effective tax rate primarily represents the federal statutory rate of 21.0 %, a state tax rate, net of federal benefits, of 5.9 %, and an unfavorable impact from dispositions of 5.0 %.

The Company’s income tax expense for the three months ended June 30, 2023 was $ 67 million, resulting in an effective tax rate for the period of 26.9 %.

The effective tax rate primarily represents the federal statutory tax rate of 21.0 %, and a state tax rate, net of federal benefits, of 5.0 %.

The Company’s income tax expense for the six months ended June 30, 2024 was $ 116 million, resulting in an effective tax rate for the period of 28.6 %.

The effective tax rate primarily represents the federal statutory rate of 21.0 %, a state tax rate, net of federal benefits, of 5.6 %, and an unfavorable impact from dispositions of 2.3 %.

The Company’s income tax expense for the six months ended June 30, 2023 was $ 86 million, resulting in an effective tax rate for the period of 27.6 %.

The effective tax rate primarily represents the federal statutory tax rate of 21.0 %, a state tax rate, net of federal benefits, of 6.1 %, an unfavorable impact from permanent non-deductible items of 1.5 %, partially offset by favorable impacts from federal tax credits of 1.0 %.

Common Stock and Class B Common Stock

The Company has two classes of common stock, including Common Stock and Class B Common Stock.

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.

During the six months ended June 30, 2024, shares issued resulted from the vesting of restricted stock units (“RSUs”) and stock option exercises related to share-based compensation awards.

Share Repurchase Plan

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.

On January 24, 2024, the Company's Board of Directors 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.

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

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.

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).

As of March 31, 2024, the Company had approximately $ 257 million remaining under the Share Repurchase Plan.

During the first quarter of 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).

Refer to Note 13 “Related Party Transactions” for further information.

There were no share repurchases during the three months ended June 30, 2024.

As of June 30, 2024, the Company had approximately $ 257 million remaining under the Share Repurchase Plan.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

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Declaration Date Record Date Payment Date Per Share Aggregate Per Share Aggregate

Three Months Ended March 31, 2024

Six Months Ended June 30, 2024

1/24/2024 3/14/2024 4/4/2024 $ 0.055 $ 47,059 $ 0.055 $ 3,011

Three Months Ended March 31, 2023

4/25/2024 6/13/2024 7/9/2024 0.055 47,137 0.055 3,011

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.

Total $ 0.110 $ 94,196 $ 0.110 $ 6,022

Six Months Ended June 30, 2023

2/28/2023 3/16/2023 4/4/2023 $ 0.035 $ 30,342 $ 0.035 $ 1,916

5/2/2023 6/15/2023 7/6/2023 0.035 30,256 0.035 1,916

Total $ 0.070 $ 60,598 $ 0.070 $ 3,832

Subsequent Event - On August 1, 2024, the Company announced a dividend of $ 0.055 per share to holders of Common Stock and Class B Common Stock of record on September 13, 2024, which will be paid on October 4, 2024.

Accumulated Other Comprehensive Income (Loss)

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Treasury yield curve.

The Company modified certain share-based compensation awards during the second quarter of 2024 and recorded additional share-based compensation expense of $ 11 million associated with the modifications.

AND SUBSIDIARIES

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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.

Three Months Ended March 31,

Additionally, the basic and diluted earnings per share computations for Common Stock excludes approximately 7 million and 9 million unvested shares for the current and prior periods, respectively, as their vesting is contingent upon achievement of certain performance requirements.

Three Months Ended June 30, Six Months Ended June 30,

in thousands, except per share amounts

Allocation of income (loss) from continuing operations - basic

2024 2023 2024 2023

Allocation of income (loss) from continuing operations - basic $ 118,589 $ 169,679 $ 272,664 $ 206,807

Dilutive effect 3,299 2,452 6,739 4,440

Allocation of income (loss) from continuing operations - diluted $ 121,888 $ 172,131 $ 279,403 $ 211,247

$ 89,210 $ ( 119,130 )

Allocation of income (loss) from discontinued operations, net of tax - basic $ ( 31,756 ) $ ( 82,967 ) $ ( 99,771 ) $ ( 231,801 )

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Dilutive effect (1)

60,855 59,278 61,392 63,271

Weighted-average shares outstanding - diluted 909,128 916,859 913,475 919,220

Income (loss) from continuing operations per share - basic $ 0.14 $ 0.20 $ 0.32 $ 0.24

$ 0.10 $ ( 0.14 )

Income (loss) from continuing operations per share - diluted $ 0.13 $ 0.19 $ 0.30 $ 0.23

$ 0.10 $ ( 0.14 )

Income (loss) per share from discontinued operations, net of tax - basic $ ( 0.04 ) $ ( 0.10 ) $ ( 0.12 ) $ ( 0.27 )

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(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.

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.

(1) During the three and six months ended June 30, 2024, 22 million and 19 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.

During the three and six months ended June 30, 2023, 25 million and 18 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.

AND SUBSIDIARIES

1 unchanged sentence

Class B Common Stock

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

in thousands, except per share amounts

Allocation of net income (loss) from continuing operations - basic

2024 2023 2024 2023

Allocation of net income (loss) from continuing operations - basic $ 7,596 $ 10,759 $ 17,412 $ 13,194

Dilutive effect ( 288 ) ( 536 ) ( 717 ) ( 608 )

Allocation of net income (loss) from continuing operations - diluted $ 7,308 $ 10,223 $ 16,695 $ 12,586

$ 5,333 $ ( 7,651 )

Allocation of income (loss) from discontinued operations, net of tax - basic $ ( 2,035 ) $ ( 5,260 ) $ ( 6,360 ) $ ( 14,826 )

5 unchanged sentences

Net income (loss) from continuing operations per share - basic $ 0.14 $ 0.20 $ 0.32 $ 0.24

$ 0.10 $ ( 0.14 )

Net income (loss) from continuing operations per share - diluted $ 0.13 $ 0.19 $ 0.30 $ 0.23

$ 0.10 $ ( 0.14 )

Income (loss) per share from discontinued operations, net of tax - basic $ ( 0.04 ) $ ( 0.10 ) $ ( 0.12 ) $ ( 0.27 )

9 unchanged sentences

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”).

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.

During the six months ended June 30, 2024 and 2023, $ 15 million and $ 25 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 and primarily recorded as a reduction to advertising expenses, of which the Company received $ 15 million during the six months ended June 30, 2024.

Google Cloud Agreement Addendum

In December 2023, the Company and Google entered into an addendum to the Company’s existing agreement with Google for using Google cloud services (the “Google Cloud Agreement Addendum”), pursuant to which Google has agreed to provide certain credits, discounts, and other incentives for use of the Google Cloud Platform to the Company, and the Company has committed to purchasing $ 200 million of Google Cloud Platform services over seven years (through December 2030), with

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

$ 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.

committed to purchasing $ 200 million of Google Cloud Platform services over seven years (through December 2030), with $ 35 million in the first two years , $ 65 million in the next two years after that, and $ 100 million in the last three years of the commitment.

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

During the three months ended March 31, 2024, the Company made purchases toward this commitment of $ 5 million.

During the six months ended June 30, 2024, the Company made purchases toward this commitment of $ 10 million.

Other Commitments

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.

During the second quarter of 2024, the Company increased its commitment by approximately $ 130 million.

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

During the three months ended March 31, 2024, purchases toward this commitment were $ 43 million.

During the six months ended June 30, 2024, purchases toward this commitment were $ 100 million.

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

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.

As of June 30, 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.

7 unchanged sentences

Legal costs in connection with claims and lawsuits in the ordinary course of business are expensed as incurred.

Additionally, the Company records insurance recovery receivables from third-party insurers when recovery has been determined to be probable.

Additionally, the Company records insurance recovery receivables or other indemnifications from third-parties when recovery has been determined to be probable.

The Company has not accrued for any losses for which the likelihood of loss cannot be assessed, is less than probable, or the range of possible loss cannot be estimated.

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.

As of June 30, 2024 and December 31, 2023, the Company’s accrual for ongoing claims and lawsuits within the scope of an insurance program, including amounts related to the Solar Business, totaled $ 107 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.

2 unchanged sentences

Company as Lessee

As part of normal operations, the Company leases real estate, vehicles, and equipment.

As part of normal operations, the Company leases real estate, vehicles, and equipment primarily through its main operating entity, ADT LLC.

Right-of-Use Assets and Lease Liabilities

(in thousands)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Presentation and Classification:

10 unchanged sentences

_________________

(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.

Three Months Ended March 31,

(1) Finance right-of-use assets are recorded net of accumulated depreciation, which was approximately $ 58 million and $ 50 million as of June 30, 2024 and December 31, 2023, respectively.

Three Months Ended June 30, Six Months Ended June 30,

( in thousands )

2024 2023 2024 2023

Operating lease cost $ 6,709 $ 7,888 $ 13,578 $ 15,990

5 unchanged sentences

Right-of-Use Assets Obtained in Exchange for Lease Obligations (1)

Three Months Ended March 31,

Six Months Ended June 30,

( in thousands )

24 unchanged sentences

The Company did not receive any of the proceeds from the sale of shares by the Selling Stockholders in the Offering.

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.

State Farm owns approximately 15 % of the Company’s issued and outstanding common stock, and as a result, is a related party.

During the six months ended June 30, 2024, other fees incurred to Apollo were not material.

During the six months ended June 30, 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.

State Farm owns more than 10 % of the Company’s issued and outstanding common stock, and as a result, is a related party.

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.

1 unchanged sentence

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.

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.

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.

As of June 30, 2024 and December 31, 2023, the balance in the portion of the Opportunity Fund held by the Company was $ 89 million and $ 94 million, respectively.

During the six months ended June 30, 2024 and 2023, the Company made payments from the Opportunity Fund of $ 7 million and $ 5 million, respectively.

Interest earned on the Opportunity Fund was not material.

4 unchanged sentences

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

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.

During the three and six months ended June 30, 2023, total loans funded by Sunlight were $ 16 million and $ 61 million, respectively, and the Company incurred financing fees of $ 3 million and $ 9 million, respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements