What changed in this filing

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Item 1. Business

2025-02-27 compared with 2024-02-28 · 130 added, 146 removed, 267 unchanged (51% of the section changed)

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• Products and Services

• Our Markets

• Competition

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• Government Regulation and Other Regulatory Matters

• Human Capital and ESG

• Human Capital and Sustainability

• Available Information

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

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

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

As discussed below, on October 2, 2023, we completed the divestiture of our former Commercial Business;

and as of June 30, 2024, substantially all operations of our former Solar Business had ceased.

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

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In May 2016, we acquired The ADT Security Corporation (formerly named The ADT Corporation) (“The ADT Corporation”) (the “ADT Acquisition”), which significantly increased our market share in the security systems industry, making us one of the largest monitored security companies in the U.S.

is majority-owned by Prime Security Services TopCo (ML), L.P., which is majority-owned by Prime Security Services TopCo Parent, L.P.

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

Prior to March 11, 2024, the Company was majority-owned by Prime Security Services TopCo (ML), L.P., which is majority-owned by Prime Security Services TopCo Parent, L.P.

(“Ultimate Parent”).

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

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

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

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

and its related funds that are directly or indirectly managed by affiliates of Apollo Global Management, Inc.

(together with its subsidiaries and affiliates, “Apollo”).

Following a registered secondary offering of the Company’s Common Stock during March 2024 by certain Apollo affiliates and the Company’s concurrent share repurchases of Common Stock, the Company ceased to be a “controlled company” under the NYSE rules.

As of December 31, 2024, Apollo owned approximately 40%, State Farm owned approximately 15%, and Google owned approximately 6% of our outstanding Common Stock, including shares of Class B common stock, par value $0.01 per share (“Class B Common Stock”) (on an as-converted basis), which is owned exclusively by Google, and unvested shares of Common Stock.

KEY BUSINESS DEVELOPMENTS

ADT Solar Exit

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

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

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

In January 2024, after a strategic review of the business and continued macroeconomic and industry pressures, the Company’s board of directors (the “Board of Directors”) approved a plan to fully exit the residential Solar Business;

and as of June 30, 2024, substantially all operations of the Solar Business had ceased.

Commercial Divestiture

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

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

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

Refer to Note 7 “Debt” in the Notes to Consolidated Financial Statements in Item 15 “Exhibit and Financial Statement Schedules” for further information.

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

The change is reflected in all periods presented.

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

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

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

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

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

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

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

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

Royalty income is included in other income (expense) and was not material during 2024 and 2023.

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

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

ADT Solar Exit

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

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

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

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

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

Google Partnership

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Further, subject to certain carve-outs, the Company has agreed to exclusively sell Google Devices and Services to its customers.

In January 2024, we amended the Google Commercial Agreement to, among other things, remove exclusivity for do-it-yourself (“DIY”) products and services, limit exclusivity for do-it-for-me (“DIFM”) products and services, and restructure the commitment from the Google Success Fund to pay a portion of the remaining amount due to ADT as a quarterly marketing reimbursement (with the balance to be used towards unlocking certain opportunities).

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

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Under the terms of the Google Investor Rights Agreement, Google was prohibited, subject to certain exceptions, from transferring any shares of Class B Common Stock or any shares of Common Stock issuable upon conversion of the Class B Common Stock beneficially owned by Google until September 2023, or earlier if certain conditions occurred (the “Google Lock-up Period”).

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

In December 2023, the Company and Google amended the Google Investor Rights Agreement to extend the Google Lock-up Period through June 2025, or earlier if certain conditions occur (see Note 10 “Equity” in the Notes to Consolidated Financial Statements).

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

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

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

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

Refer to Note 13 “Commitments and Contingencies” in the Notes to Consolidated Financial Statements for more information.

State Farm Partnership

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Also in October 2022, the Tender Offer expired, and we used the proceeds from the State Farm Strategic Investment to repurchase the Tender Shares, subject to the terms and conditions described in the Offer to Purchase, dated September 12, 2022 (as amended from time to time, the “Offer to Purchase”).

Additionally, pursuant to the State Farm Securities Purchase Agreement, at the Closing, we entered into an Investor Rights Agreement, dated as of October 13, 2022, with State Farm (the “State Farm Investor Rights Agreement”), pursuant to which State Farm agreed to be bound by customary transfer and standstill restrictions and drag-along rights, and be afforded customary registration rights with respect to the State Farm Shares.

In particular, State Farm is prohibited, subject to certain customary exceptions, from transferring any State Farm Shares until the earlier of (i) October 13, 2025 and (ii) the date on which the State Farm Development Agreement (as defined below) has been validly terminated, other than in the event of a termination by the Company for a material breach thereof by State Farm.

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

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

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

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

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

Refer to Note 10 “Equity” and Note 16 “Related Party Transactions” in the Notes to Consolidated Financial Statements for more information.

SEGMENT AND GEOGRAPHIC INFORMATION

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

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

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

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

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

The CODM manages the business on a consolidated basis, and as such, we report results in a single operating and reportable segment which reflects the business operations of the Company’s former Consumer and Small Business (“CSB”) segment.

For further information, refer to Note 3 “Segment Information” in the Notes to Consolidated Financial Statements.

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

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

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

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

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

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

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

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

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

and (iii) certain dedicated corporate and other costs.

Revenue outside of the U.S.

Revenue generated by customers outside of the U.S.

is not material.

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

Our security offerings are

designed to detect intrusion;

Our security offerings are designed to detect intrusion;

control access;

sense movement, smoke, fire, carbon monoxide, flooding, temperature, and other environmental conditions and hazards;

sense movement, smoke, fire, carbon monoxide, leaks, temperature, and other environmental conditions and hazards;

and address personal medical emergencies such as injuries or unanticipated falls.

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

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

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

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

Our comprehensive

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

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

During 2024, the Company continued its phased rollout of the ADT+ platform across the country.

Customers can now take advantage of next generation hardware and technology through our proprietary app.

In addition, we launched Trusted Neighbor TM across the U.S.

This new offering allows customers to grant secure, temporary access to their homes through the ADT+ app, enhancing security and convenience.

Enabled by deep integration of the ADT+ app, Google Nest Doorbell’s Familiar Faces technology, and Yale locks, select customers can use the Auto-Unlock feature to automatically verify a trusted individual.

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

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• automate custom schedules for these connected devices.

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

Generally, a significant upfront investment is required to acquire new subscribers related to installation costs (such as labor, commissions, equipment, and overhead), which we recover through upfront fees charged at the time of installation and recurring monthly revenue generated in future years.

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

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

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

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

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

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

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

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

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

We may also offer month-to-month contracts depending on the circumstance.

Qualifying customers can pay any upfront fees over the course of the contract (referred to as retail installment contracts).

A security interest is granted in the retail installment contract receivables as collateral for cash borrowings under our uncommitted receivables securitization financing agreement (the “2020 Receivables Facility”).

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

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

Solar Offerings

We design, install, and sell custom residential solar systems and energy storage solutions, energy efficiency upgrades, and roofing services through dedicated and specialized in-house sales and marketing, design and engineering, and installation teams.

The standard contract for solar customers varies based on specifics of the job and generally covers the time from signing of the agreement to completion of installation, with certain warranties and guarantees covering workmanship and system performance.

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

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

Monitoring Centers

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

Our monitoring centers are fully redundant, which means all monitoring operations can be automatically transferred to another monitoring center in case of an emergency such as fire, tornado, major interruption in telephone or computer service, or any other event affecting the functionality of one of our centers.

Our monitoring centers are fully redundant, which means all monitoring operations can be transferred to another monitoring center in case of an emergency such as fire, tornado, major interruption in telephone or computer service, or any other event affecting the functionality of one of our centers.

To obtain and maintain a UL listing, a security systems monitoring center must be located in a building meeting UL’s structural requirements, have back-up computer and power systems, and meet UL specifications for staffing and standard operating procedures.

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

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

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

Additionally, our System Monitoring and Response Technology (“SMART”) monitoring solution differentiates our offerings, aims to result in faster and higher-quality responses, and is expected to reduce annual false alarms and customer care calls.

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

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

Additionally, our System Monitoring and Response Technology (“SMART”) monitoring solution aims to result in faster and higher-quality alarm responses and is expected to reduce annual false alarms and customer care calls.

Our SMART monitoring differentiates our offerings by delivering alarms to connected and participating 911 centers faster than traditional voice handling speeds.

Additionally, our alarm scoring program, which offers a uniform and reliable approach for categorizing alarm severity levels, enhances the accuracy of assessing potential life or property threats and gives first responders precise and crucial alarm data for improved emergency responses.

Field and Call Center Operations

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

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

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

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

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

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

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

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

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

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

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

Our innovative remote assistance program (the “Remote Assistance Program”) delivers a scalable, cost-efficient means of servicing our customers through live video streaming with our skilled technicians to troubleshoot and resolve service issues as well as remote programming and installation support for new DIY systems, add-ons, and resale reactivations.

We are also exploring and implementing AI tools that are aimed to improve and automate certain processes for our call center agents and customers.

Additionally, our ADT WiFi Fix app allows remote customer service agents to diagnose and address any WiFi issues impacting customers’ ADT equipment or other devices.

These offerings provide customers with more options for receiving services that best fit their lifestyles while reducing the cost for us to provide these services and lowering our carbon footprint through the reduction of truck rolls.

Our customer care agents provide support 24 hours a day on a year-round basis to ensure service requests are handled promptly and professionally.

Approximately 80% of these requests are resolved during the initial interaction.

However, in the event these requests cannot be resolved, they are routed to a remote assist agent or a field technician for further support.

In many cases, customer care agents can remotely resolve emergency and non-emergency inquiries regarding ongoing alarms, service, billing, and system and product troubleshooting.

We continue to offer customers additional choices in managing their services through customer-facing self-service tools via interactive voice response systems and the Internet.

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

Our support facilities also provide administrative assistance to our local service offices and customer care centers, which includes scheduling and ordering, drop-shipping, and physically distributing system components for installations.

Sales and Distribution Channels

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• Direct Channel

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

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

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

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

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

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

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

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

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

Our field solution advisors typically undergo an in-depth screening process prior to hire, complete comprehensive centralized training prior to conducting customer sales presentations, and participate in ongoing training in support of new offerings.

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

• Indirect Channel

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

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

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

As opportunities arise, we may engage in selective third-party account purchases, which typically involve the bulk purchase of customer accounts from other security service providers.

As of December 31, 2024, our network of authorized dealers consisted of approximately 140 authorized dealers operating across the U.S.

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We market our offerings through national television, radio, and direct mail advertisements, as well as through Internet advertising, which includes national search engine marketing, email, online video, local search, and social media.

We also have several affinity partnerships with organizations that promote our services to their customer bases.

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

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

We also have several affinity partnerships with organizations that promote our services to their customer bases, and we market through social media influencers and celebrity spokespersons representing the ADT brand.

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

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

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

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

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

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

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

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

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

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

(iv) offering various bundling initiatives;

and (v) achieving long customer tenure.

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

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

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

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

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

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

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

Traditional residential and small business security markets in the U.S.

remain highly competitive and fragmented, with several major companies;

many smaller national, local, and regional companies;

and an increasing number of new entrants, which is primarily the result of relatively low barriers to entry and the availability of companies providing outsourced monitoring services without maintaining the customer relationship.

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

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

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

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

We believe our principal competitors are:

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(operating brand of Monitronics International, Inc.)

HomeKit by Apple

Wyze Home Monitoring

SimpliSafe Home Security Systems

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

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

Further, third-party installation companies often partner with device providers to offer professional installation alternatives for these point solutions and other DIY systems.

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

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

We believe we are well positioned to compete with traditional and new competitors due to our focus on safety, security, convenience, and pricing;

We believe we are well positioned to compete with traditional and new competitors due to our focus on safety, security, and convenience;

our nationwide team of sales consultants;

our solid reputation for and expertise in providing reliable

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

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

our reliable product solutions;

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

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

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

In connection with the Commercial Divestiture, we granted the Commercial Business a license to continue to use the ADT brand and other Company trademarks for a period of twelve months to transition from Company branding (the “Brand License”), which expired during the fourth quarter of 2024.

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

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

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However, other factors such as the level of marketing expense, relevant promotional offers, and timing of third-party account purchases can impact these trends.

Further, we may see increased servicing costs related to more alarm signals and customer service requests as a result of inclement weather-related incidents.

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

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

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

Further, we may see increased servicing costs or reductions in revenue related to more alarm signals, customer service requests, and customer credits as a result of inclement weather-related incidents.

GOVERNMENT REGULATION AND OTHER REGULATORY MATTERS

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Licensing and Permitting

Most states in which we operate have employee and/or business licensing laws directed specifically toward professional installation and monitoring of security devices, as well as solar installations.

Most states in which we operate have employee and/or business licensing laws directed specifically toward professional installation and monitoring of security devices.

Our business is also subject to requirements, codes, and standards imposed by local government jurisdictions, as well as various insurance, approval and listing, and standards organizations.

We maintain the relevant and necessary licenses related to the provision of installation of security and solar systems and related services in the jurisdictions in which we operate.

We maintain the

relevant and necessary licenses related to the provision of installation of security systems and related services in the jurisdictions in which we operate.

Additionally, we rely extensively on telecommunications service providers, which are regulated in the U.S.

by the Federal Communications Commission (“FCC”) and state public utilities commissions, to communicate signals as part of the functionality and monitoring of security and solar systems.

by the Federal Communications Commission (“FCC”), to communicate signals as part of the functionality and monitoring of security systems.

Our security business is subject to various state and local measures aimed at reducing false alarms.

Such measures include requiring permits for individual alarm systems, revoking such permits following a specified number of false alarms, imposing fines on customers or alarm monitoring companies for false alarms, limiting the number of times police will respond to alarms at a particular location after a specified number of false alarms, requiring additional verification of an alarm signal before the police respond, or providing no response to residential system alarms.

Our solar business is exposed to federal, state, and local government regulations and policies concerning the electric utility industry, as well as internal policies of the electric utility companies, including with respect to electricity pricing, tax credits and other incentives, and the interconnection of customer-owned electricity generation.

Consumer Protection and Privacy

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

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

as well as requirements for the protection thereof and actions to be taken in the event of a breach of personal information.

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

The use of credit reporting and scoring and offering financing options to our residential customers is subject to federal and state laws, including the federal Fair Credit Reporting Act, which limit the use of consumer credit reports, prohibit discrimination against protected classes when offering or granting credit, and require certain disclosures to customers in the event that we take an adverse action based on a consumer credit report.

We provide some residential customers the option of paying us up-front charges in installments and certain other customers the option of using third-party financing arrangements, all of which are subject to federal and state laws regulating consumer finance.

We provide some residential customers the option to pay up-front charges in installments and certain other customers the option of using third-party financing arrangements, all of which are subject to federal and state laws regulating consumer finance.

These laws require certain mandatory consumer disclosures and, in some cases, limit our ability to impose certain fees and charges.

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

HUMAN CAPITAL AND ESG

As we seek to accomplish our corporate mission and execute on our strategic initiatives, our activities both directly and indirectly impact our customer base, our employees, and the communities we serve.

We place a strong emphasis on environmental, social, and governance issues, and we believe such emphasis enhances our corporate performance, while enabling us to hire and retain top talent who share these values and passion about our organization.

Artificial Intelligence

The recent rapid development and use of AI, including generative AI, has resulted in increased scrutiny by state and federal governments in the U.S.

We are closely monitoring laws regulating the development and deployment of AI and similar technologies at the state and federal level and assessing their potential impact on our current, planned, and potential use of AI in our business.

At this time, we do not believe that federal, state, and local laws and regulations relating to the use of AI have a material adverse effect on our business.

However, developments in AI technology and laws and regulations affecting how we propose to use AI may limit or restrict our ability to use such technology.

We are currently assessing and piloting AI solutions for basic customer interactions to improve service quality and response times.

We are also exploring how we can use AI in our product and service offerings to expand our capabilities and drive efficiencies.

HUMAN CAPITAL AND SUSTAINABILITY

We believe focusing on human capital management and sustainability enhances our corporate performance, while enabling us to hire and retain top talent who share our values and passion about our organization.

Human Capital Management

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

As of December 31, 2024, we employed approximately 12,800 people, including approximately 1,700 direct field solution advisors;

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and 600 phone sales representatives.

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

Approximately 7% of our employees are covered by collective bargaining agreements;

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

Performance Culture

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

A Culture of High Performance

The shared values, priorities, and principles that shape beliefs and drive behaviors and decision-making to achieve high performance at every level is critical to our innovation and long-term sustainable success.

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

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

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

In 2024, we redesigned and refreshed our cultural markers to BLUE:

Bold, Lead, Unite, and Elevate, which represent our guiding principles that unite and empower us with purpose and passion.

Additionally, we significantly increased the frequency that employees receive performance and development coaching and feedback to help ensure all employees are clearly focused on critical business outcomes and development opportunities.

Our total compensation programs are designed to differentiate rewards and recognize high performance via the merit pay process, the annual incentive plan, and the long-term incentive plan, subject to team member eligibility.

Talent Recruitment and Management

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

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

Our success in attracting, retaining, and developing a strong, dedicated, and diverse workforce largely depends on the hiring and retaining of top talent across the entire organization, specifically our senior management team, technology and product talent, and customer-facing employees.

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

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

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

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

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

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

At our headquarters, we implemented a hybrid on-site work model requiring employees covered under this model to work in-office a minimum number of days per week.

Our comprehensive employee listening program collects feedback and sentiment at every stage of the employee experience, including an annual sentiment survey.

The annual sentiment survey was completed by approximately two thirds of employees, up from the prior year, and showed favorable results for most topics.

Our annual leadership talent management review practice assesses overall performance and potential and includes succession planning for our Executive Leadership Team (“ELT”) roles reporting to the CEO.

Inclusive Diversity and Belonging (“IDB”)

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

Our culture aims to recognize and embrace all forms of diversity in order to drive innovation and growth.

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

We highly value our employees’ diversity;

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

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

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

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

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

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

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

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

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

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

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

We highly value our employees’ diversity and aim to promote diversity awareness in all of our talent management processes.

Our Inclusive Diversity and Belonging Operating Team (the “IDB Team”) and its ten Business Employee Resource Groups (“BERGs”) are central to our ability to execute our IDB priorities.

The IDB Team is a diverse group of business leaders from across the organization, including executive and senior management, that focuses on continuous improvement of our IDB practices and effectiveness.

Our commitment to inclusion is also integrated into our cultural markers which reinforces our focus

on fostering a collaborative and supportive environment.

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

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

We continue to encourage the sharing of diverse ideas;

celebrate differences;

value diversity;

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

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

Our BERGs also participate in various business initiatives.

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

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

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

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

To support BERG community advocacy and outreach, each BERG is granted a small budget to donate to nonprofit organizations that align with their mission and our corporate social responsibility efforts.

Deliberate growth and development of our BERGs is central to the engagement, retention, and development of our employees.

Employee Well-being, Health, and Safety

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

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

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

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

We continue to provide to all employees ADT Balance, which is an annual well-being program that offers a robust variety of features, including biometric screenings, team fitness challenges, webinars, group coaching, and self-guided resources.

Employees enrolled in our self-insured medical plan may earn a discount on medical payroll contributions for themselves and/or their enrolled spouses or domestic partners by completing the annual preventative exam and an online health assessment.

Additionally, cash incentives can be earned by completing certain well-being activities.

In 2024, we enhanced our financial well-being programs through our vendor partners, including money coaching, identity protection, and mortgage referral programs.

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

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

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

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

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

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

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

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

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

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

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

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

What changed 10-K

Item 1. Business