What changed in this filing

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Item 1. Financial Statements

2024-10-24 compared with 2024-08-01 · 129 added, 119 removed, 745 unchanged (25% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Current assets:

32 unchanged sentences

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

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

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

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

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

issued and outstanding shares of 857,250,221 and 867,432,337 as of September 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 June 30, 2024 and December 31, 2023

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

Additional paid-in capital 7,358,241 7,413,305

7 unchanged sentences

(in thousands, except per share data)

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

37 unchanged sentences

(in thousands)

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

9 unchanged sentences

(in thousands)

Three Months Ended June 30, 2024

Three Months Ended September 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

6 unchanged sentences

Ending balance 857,250 54,745 $ 8,573 $ 547 $ 7,358,241 $ ( 3,458,579 ) $ ( 11,497 ) $ 3,897,285

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

10 unchanged sentences

(in thousands)

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

8 unchanged sentences

Ending balance 857,250 54,745 $ 8,573 $ 547 $ 7,358,241 $ ( 3,458,579 ) $ ( 11,497 ) $ 3,897,285

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

11 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

19 unchanged sentences

Purchases of property and equipment ( 130,114 ) ( 130,520 )

Proceeds (payments) from sale of business, net of cash sold

Proceeds (payments) from interest rate swaps

32 unchanged sentences

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

• comprise the consolidated results of ADT Inc.

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

• are comprised of the consolidated results of ADT Inc.

and its wholly-owned subsidiaries for which 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;

9 unchanged sentences

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.

As of June 30, 2024, substantially all operations of the Solar Business had ceased, and beginning in the second quarter of 2024, the results of operations and financial position of the Solar Business are 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”).

14 unchanged sentences

Recently Adopted Accounting Pronouncements

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

Supplier Finance Program Obligations - Accounting Standards Update (“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.

17 unchanged sentences

This guidance should be applied retrospectively to all periods presented.

Early adoption is permitted.

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

9 unchanged sentences

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) June 30, 2024 December 31, 2023

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

Cash and cash equivalents $ 95,338 $ 14,621

14 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) June 30, 2024 December 31, 2023

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

Gross carrying amount $ 6,777,008 $ 6,404,479

4 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:

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

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2024 2023 2024 2023

3 unchanged sentences

Accrued Expenses and Other Current Liabilities

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

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

Accrued interest $ 57,648 $ 111,197

2 unchanged sentences

87,168 93,950

Operating lease liabilities (see Note 12 “Leases”)

19,282 13,035

Accrued dividends 50,051 32,207

6 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 June 30, 2024 and December 31, 2023, investments in money market mutual funds were $ 57 million and $ 55 million, respectively.

As of September 30, 2024 and December 31, 2023, investments in money market mutual funds were $ 98 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.

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(in thousands) Carrying

10 unchanged sentences

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

September 30, 2024 December 31, 2023

(in thousands) Carrying

6 unchanged sentences

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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

( in thousands )

6 unchanged sentences

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

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands) 2024 2023

13 unchanged sentences

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

The balance of unbilled retail installment contract receivables comprises:

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

The balance of unbilled retail installment contract receivables is comprised of:

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

Retail installment contract receivables, gross $ 685,883 $ 674,827

6 unchanged sentences

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.

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

As of September 30, 2024 and December 31, 2023, retail installment contract receivables, net, used as collateral for borrowings under the 2020 Receivables Facility were $ 599 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 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) June 30, 2024 December 31, 2023

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

The balance of contract assets for residential transactions is comprised of:

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

Contract assets, gross $ 42,147 $ 39,627

12 unchanged sentences

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.

During the three months ended September 30, 2024, aggregate exit charges incurred were not material.

During the nine months ended September 30, 2024, the Company incurred aggregate exit charges of $ 88 million, which have been recognized within income (loss) from discontinued operations, net of tax related to (i) $ 34 million, associated with the write-down and disposition of inventory and asset impairments, (ii) $ 29 million, associated with the disposition of the existing installation pipeline, (iii) $ 13 million, associated with employee separation costs, and (iv) $ 11 million, associated with contract termination and other charges.

During the nine months ended September 30, 2024, the Company paid approximately $ 21 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

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

Accounts receivable, net

20 unchanged sentences

Statements of Operations Information

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

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2024 2023 2024 2023

13 unchanged sentences

Cash Flow Information

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands) 2024 2023

1 unchanged sentence

Depreciation and intangible asset amortization $ 1,872 $ 12,330

Goodwill impairment $ — $ 422,809

Goodwill, intangible, and other asset impairments $ 13,770 $ 515,730

Cash flows from investing activities:

2 unchanged sentences

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.

At the time of closing, 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.

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).

During the three and nine months ended September 30, 2024, the Company recognized $ 14 million and $ 36 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 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

Statements of Operations Information

During the nine months ended September 30, 2024, activity, net of tax, relating to the Commercial Divestiture was approximately $ 9 million primarily related to the settlement of post-closing adjustments.

(in thousands) Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023

Revenue $ 351,400 $ 1,033,962

8 unchanged sentences

Cash Flow Information

(in thousands) Six Months Ended June 30, 2023

(in thousands) Nine Months Ended September 30, 2023

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

8 unchanged sentences

Other Intangible Assets

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(in thousands) Gross Carrying

19 unchanged sentences

Amortization ( 391,367 )

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

Balance as of September 30, 2024 $ 2,717,588

________________

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.

During the third quarter of 2024, the Company purchased customer accounts from a third party for an aggregate contractual purchase price of approximately $ 98 million, subject to reduction based on customer retention.

The Company paid initial cash at closing of approximately $ 81 million, which is included in dealer generated customer accounts and bulk account purchases on the Condensed Consolidated Statements of Cash Flows.

Definite-Lived Intangible Asset Amortization Expense

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

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2024 2023 2024 2023

4 unchanged sentences

Description Issued Maturity Interest Rate (1)

Interest Payable June 30, 2024 December 31, 2023

Interest Payable September 30, 2024 December 31, 2023

First Lien Term Loan B due 2030

24 unchanged sentences

_________________

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

(1) Interest rate as of September 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 %.

Interest on the First Lien Revolving Credit Facility is based on Term SOFR + 2.75 % + Credit Spread Adjustment (“CSA”).

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

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

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:

As of September 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 nine months ended September 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 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.

During the nine months ended September 30, 2024, the Company borrowed $ 325 million and repaid $ 325 million under the First Lien Revolving Credit Facility;

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

During the nine months ended September 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:

4 unchanged sentences

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.

• Subsequent event - In October 2024, the Company amended and restated the First Lien Credit Agreement to extend the maturity date of the First Lien Revolving Credit Facility to October 2029 (as extended, the “Extended First Lien Revolving Credit Facility”), subject to a springing maturity of 91 days prior to the maturity date of certain long-term indebtedness, and obtain an additional $ 225 million of Extended First Lien Revolving Credit Facility commitments.

After giving effect to the amendment, the aggregate amount of commitments under the Extended First Lien Revolving Credit Facility is $ 800 million.

Borrowings under the Extended First Lien Revolving Credit Facility bear interest at a rate equal to either (a) Term SOFR with a floor of zero or (b) a base rate (“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, in each case, plus an applicable margin of 2.00 % per annum for Term SOFR loans and 1.00 % per annum for Base Rate loans, subject to two step-downs based on certain specified net first lien leverage ratios.

In addition, the amendment reduced the commitment fee in respect of the Extended First Lien Revolving Credit Facility to 0.30 % per annum in respect of the unutilized commitments thereunder, subject to two step-downs based on certain specified net first lien leverage ratios.

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

13 unchanged sentences

• 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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

• 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.

As of September 30, 2024, the Company had an uncommitted available borrowing capacity under the 2020 Receivables Facility of approximately $ 127 million.

Variable Interest Entity

1 unchanged sentence

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.

4 unchanged sentences

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

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

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.

Prior to its expiration in August 2024, the Solar Receivables Financing Agreement, among other things, provided for an uncommitted revolving loan facility in the aggregate principal amount of up to $ 300 million which loans were to be secured by substantially all the assets of ADT Solar Finance (the “Solar Receivables Facility”).

The Company did not borrow any amounts under the Solar Receivable Facility prior to its expiration.

DERIVATIVE FINANCIAL INSTRUMENTS

12 unchanged sentences

Unrealized gains and losses previously recognized as a component of AOCI are immediately reclassified into interest expense, net.

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

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.

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 the Company’s existing interest rate swaps are reflected as cash flows from investing activities.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

Interest Rate Swaps

As of June 30, 2024 and December 31, 2023, the Company’s interest rate swaps consisted of the following (in thousands) :

As of September 30, 2024 and December 31, 2023, the Company’s interest rate swaps consisted of the following (in thousands) :

Execution Maturity Designation Notional Amount

9 unchanged sentences

Classification and Fair Value of Interest Rate Swaps

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

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

Prepaid expenses and other current assets $ 51,776 $ 74,974

3 unchanged sentences

Unrealized Gain (Loss) on Interest Rate Swaps

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

Three Months Ended September 30, Nine Months Ended September 30,

Statement of Operations Classification (in thousands)

5 unchanged sentences

Cash Flow Hedges Reclassifications out of AOCI

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

Three Months Ended September 30, Nine Months Ended September 30,

( in thousands )

2 unchanged sentences

Income tax (benefit) expense $ ( 471 ) $ ( 7,245 ) $ ( 1,464 ) $ ( 9,702 )

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.

As of September 30, 2024 and December 31, 2023, AOCI, net of tax, related to previously designated cash flow hedges was $ 9 million and $ 13 million, respectively.

As of September 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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unrecognized Tax Benefits

1 unchanged sentence

federal, state and local, and foreign jurisdictions.

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.

During the nine months ended September 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 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 %.

The Company’s income tax expense for the three months ended September 30, 2024 was $ 50 million, resulting in an effective tax rate for the period of 27.6 %.

The effective tax rate primarily represents the federal statutory rate of 21.0 %, a state tax rate, net of federal benefits, of 6.2 %, and an unfavorable impact from unrecognized tax benefits of 4.0 %, partially offset by a favorable impact from a prior year tax return adjustment of 4.0 %.

The Company’s income tax expense for the three months ended September 30, 2023 was $ 34 million, resulting in an effective tax rate for the period of 21.5 %.

The effective tax rate primarily represents the federal statutory tax rate of 21.0 %, and a state tax rate, net of federal benefits, of 5.1 %, partially offset by favorable impacts from dispositions of 3.1 %, and prior year tax return adjustments of 1.2 %.

The Company’s income tax expense for the nine months ended September 30, 2024 was $ 167 million, resulting in an effective tax rate for the period of 28.3 %.

The effective tax rate primarily represents the federal statutory rate of 21.0 %, a state tax rate, net of federal benefits, of 5.8 %, unfavorable impacts from dispositions of 1.6 %, and unrecognized tax benefits of 0.8 %, partially offset by a favorable impact from a prior year tax return adjustment of 1.2 %.

The Company’s income tax expense for the nine months ended September 30, 2023 was $ 120 million, resulting in an effective tax rate for the period of 25.5 %.

The effective tax rate primarily represents the federal statutory tax rate of 21.0 %, a state tax rate, net of federal benefits, of 5.8 %, and an unfavorable impact from permanent non-deductible items of 1.2 %, partially offset by a favorable impact from dispositions 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 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.

During the nine months ended September 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

2 unchanged sentences

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 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

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

There were no other share repurchases during the nine months ended September 30, 2024.

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

Subsequent event - In October 2024, the Company repurchased 5 million shares of Common Stock at a price per share of $ 6.40 for an aggregate purchase price of $ 32 million.

As a result, the Company has approximately $ 225 million remaining under the Share Repurchase Plan.

(in thousands, except per share data)

1 unchanged sentence

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

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

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

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

8/1/2024 9/13/2024 10/4/2024 0.055 47,146 0.055 3,011

Total $ 0.165 $ 141,342 $ 0.165 $ 9,033

Six Months Ended June 30, 2023

Nine Months Ended September 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

8/8/2023 9/15/2023 10/4/2023 0.035 30,405 0.035 1,916

Total $ 0.105 $ 91,003 $ 0.105 $ 5,748

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.

Subsequent Event - On October 24, 2024, the Company announced a dividend of $ 0.055 per share to holders of Common Stock and Class B Common Stock of record on December 12, 2024, which will be paid on January 9, 2025.

Accumulated Other Comprehensive Income (Loss)

There were no material reclassifications out of AOCI.

Refer to Note 6 “Derivative Financial Instruments” for AOCI reclassifications associated with cash flow hedges.

During the three and nine months ended September 30, 2024, there were no material reclassifications out of AOCI.

Refer to Note 6 “Derivative Financial Instruments” for AOCI reclassifications associated with previously designated cash flow hedges.

SHARE-BASED COMPENSATION

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The weighted-average grant date fair value for the options granted was $ 2.56 .

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company used a binomial lattice model to determine the grant date fair value for options granted and included the following assumptions:

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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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NET INCOME (LOSS) PER SHARE

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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,

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended September 30, Nine Months Ended September 30,

in thousands, except per share amounts

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_________________

(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.

(1) During the three and nine months ended September 30, 2024, 21 million and 20 million shares of Common Stock, respectively, 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 nine months ended September 30, 2023, 22 million and 18 million shares of Common Stock, respectively, that would be dilutive were excluded from the diluted earnings per share calculations because their effects would have been anti-dilutive.

AND SUBSIDIARIES

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Class B Common Stock

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

Three Months Ended September 30, Nine Months Ended September 30,

in thousands, except per share amounts

19 unchanged sentences

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.

In July 2020, the Company and Google entered into a Master Supply, Distribution, and Marketing Agreement (the “Google Commercial Agreement”), as subsequently amended, pursuant to which Google has agreed to supply the Company with certain Google devices as well as certain Google video and analytics services (“Google Devices and Services”), for sale to the Company’s customers.

The Google Commercial Agreement also specifies that each party shall contribute $ 150 million 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”).

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

During the three and nine months ended September 30, 2024, $ 7 million and $ 22 million, respectively, of the Google Success Funds were reimbursed to the Company primarily for certain joint marketing and customer acquisition expenses incurred by the Company, substantially all of which was recorded as a reduction to advertising expenses.

During the three and nine months ended September 30, 2023, the Company was reimbursed $ 28 million and $ 40 million, respectively.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

Google Cloud Agreement Addendum

In December 2023, the Company and Google entered into an addendum to the Company’s existing agreement with Google for using Google cloud services (the “Google Cloud Agreement Addendum”), pursuant to which Google has agreed to provide certain credits, discounts, and other incentives for use of the Google Cloud Platform to the Company, and the Company has committed to purchasing $ 200 million of Google Cloud Platform services over seven years (through December 2030), with $ 35 million in the first two years , $ 65 million in the next two years after that, and $ 100 million in the last three years of the commitment.

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

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

During the three and nine months ended September 30, 2024, the Company made purchases toward this commitment of $ 9 million and $ 19 million, respectively.

Other Commitments

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

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

During the three and nine months ended September 30, 2024, purchases toward this commitment were approximately $ 44 million and $ 144 million, respectively.

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

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.

As of September 30, 2024 and December 31, 2023, the Company’s guarantees primarily relate to standby letters of credit related to its insurance programs and totaled $ 74 million and $ 78 million, respectively.

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

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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 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.

As of September 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 $ 102 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.

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(in thousands)

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Presentation and Classification:

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_________________

(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,

(1) Finance lease right-of-use assets are recorded net of accumulated depreciation, which was approximately $ 61 million and $ 50 million as of September 30, 2024 and December 31, 2023, respectively.

Three Months Ended September 30, Nine Months Ended September 30,

( in thousands )

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

Six Months Ended June 30,

Nine Months Ended September 30,

( in thousands )

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

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.

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

During the nine months ended September 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.

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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.

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 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.

Amounts held by the Company in the Opportunity Fund are restricted until the Company uses the funds, as agreed upon with State Farm, in accordance with the State Farm Development Agreement.

As of September 30, 2024 and December 31, 2023, the balance in the portion of the Opportunity Fund held by the Company was $ 87 million and $ 94 million, respectively.

During the nine months ended September 30, 2024 and 2023, the Company made payments from the Opportunity Fund of $ 10 million and $ 6 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 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.

During the three and nine months ended September 30, 2023, total loans funded by Sunlight were $ 9 million and $ 71 million, respectively, and the Company incurred financing fees of $ 2 million and $ 11 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