What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-28 · 220 added, 296 removed, 327 unchanged (61% of the section changed)

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Included below are year-over-year comparisons between 2024 and 2023.

The Company is including a year-over-year comparison between 2022 and 2021, under such headings, for selling, general, and administrative expenses and Adjusted EBITDA, which were impacted by the Commercial Divestiture and classification of the Commercial Business as a discontinued

The classification of the Commercial Business as a discontinued operation did not impact the remaining discussions on results of operations.

Such discussions generally included analysis specific to activities within a certain business segment, and therefore, the explanations did not materially change as a result of such classification.

For further information on year-over-year comparisons between 2022 and 2021 not impacted by the Commercial Divestiture, refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Amended 2022 Annual Report, which was filed with the SEC on July 27, 2023.

The classification of the Solar Business as a discontinued operation during 2024 did not materially change the reported disclosures in the 2023 Annual Report with regard to year-over-year comparisons between 2023 and 2022, except with regard to income tax benefit (expense), as such discussions generally included analysis specific to activities within the Solar segment.

For information on year-over-year comparisons between 2023 and 2022, refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2023 Annual Report, which was filed with the SEC on February 28, 2024.

The following discussion and analysis contains forward-looking statements about our business, operations, and financial performance based on current plans and estimates involving risks, uncertainties, and assumptions, which could differ materially from actual results.

Factors that could cause such differences are discussed in the sections of this Annual Report titled Item 1A “Risk Factors” and “Cautionary Statements Regarding Forward-Looking Statements.”

Unless otherwise noted, the discussions below relate to the Company’s continuing operations.

Unless otherwise noted, the discussions below relate to our continuing operations.

BUSINESS AND BASIS OF PRESENTATION

is a leading provider of security, interactive, and smart home solutions serving residential and small business customers in the U.S.

ADT is a leading provider of security, interactive, and smart home solutions serving residential and small business customers in the U.S.

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.

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 plans to exit the residential solar business.

As discussed below, on October 2, 2023, we completed the divestiture of our Commercial Business, and as of June 30, 2024, substantially all operations of the Solar Business had ceased.

All financial information presented in this section has been prepared in U.S.

dollars and in accordance with GAAP, excluding our Non-GAAP measures, and includes the accounts of ADT Inc.

dollars and in accordance with generally accepted accounting principles in the United States of America (“GAAP”), excluding our Non-GAAP measures, and includes the accounts of ADT Inc.

and its subsidiaries.

All intercompany transactions have been eliminated.

Since the Commercial Divestiture, we report current and historical financial and operating information for our two remaining segments, CSB and Solar.

For a more detailed discussion of our business, segments, and basis of presentation, refer to Item 1 “Business” and Note 1 “Description of Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Item 15 “Exhibit and Financial Statement Schedules.”

As a result of the Commercial Divestiture and ADT Solar Exit, unless otherwise noted, we report current and historical financial and operating information for our one remaining segment.

For a more detailed discussion of our business and basis of presentation, refer to Item 1 “Business” and Note 1 “Description of Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Item 15 “Exhibit and Financial Statement Schedules.”

FACTORS AFFECTING OPERATING RESULTS

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As of December 31, 2024, we served approximately 6.4 million security monitoring service subscribers.

Generally, a significant upfront investment is required to acquire new subscribers, that in turn provide ongoing and predictable recurring revenue.

Generally, a significant upfront investment is required to acquire new subscribers, that in turn provide ongoing and predictable recurring revenue generated from our monitoring services and other subscriber-based offerings.

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

Our CSB results are impacted by the mix of transactions under a Company-owned equipment model versus a customer-owned equipment model (referred to as outright sales), as there are different accounting treatments applicable to each model, as well as the mix, price, and type of offerings sold (see Note 2 “Revenue and Receivables”).

Since March 2021, substantially all new professionally installed CSB transactions have taken place under a Company-owned model.

As we continue to build our partnership with Google, introduce new or enhance current offerings, and refine our go-to-market approach, we expect to see a shift toward an increasing proportion of outright sales transactions, which will impact results in future periods when those changes occur.

We have experienced, and expect to continue to experience, an increase in the proportion of ADT self set-up customers, which are considered outright sales and typically have lower monthly recurring fees than our professional installations, but we believe will allow us to grow our subscriber base through access to the fast-growing do-it-yourself (“DIY”) market.

The prices we are able to charge for our products and services are impacted by the type, quality, and complexity of the offerings that we provide;

Our results are impacted by the mix of transactions under a Company-owned equipment model versus a customer-owned equipment model (referred to as outright sales), as there are different accounting treatments applicable to each model, as well as the mix, price, and type of offerings sold (see Note 2 “Revenue and Receivables”).

The majority of professional installation transactions take place under a Company-owned model, however, beginning in the second quarter of 2024, a growing number of our direct channel new customer adds are outright sales in connection with the national launch of our new ADT+ platform.

As we continue to build our partnership with Google, introduce new or enhance current offerings, and refine our go-to-market approach, we expect to continue to see a shift toward an increasing proportion of outright sales transactions, which will impact results in future periods when those changes occur.

In addition, self set-up solutions typically earn lower contractual fees than our professional installation solutions as a result of differences in pricing, offer tactics, and level of services in each channel.

However, we believe self set-up customers will allow us to grow our subscriber base through access to the fast-growing DIY market.

The prices we are able to charge for our products and services are impacted by the type and complexity of the offerings that we provide, quality of our products and services;

the introduction of additional features and offerings that increase value to the customer;

and the competitive and macroeconomic environments in which we operate.

Demand for our offerings may be impacted by the overall economic conditions in the geographies in which we operate, the price and quality of our offerings compared to those of our competitors, as well as changes in competition such as from the acquisition or disposition of similar businesses by us or our competitors.

Growth in our CSB segment can be impacted by the

overall state of the housing market, the perceived threat of crime, the occurrence of significant life events such as the birth of a child or opening of a new business, or the availability of financial incentives provided by insurance carriers.

and the microeconomic and macroeconomic environments in which we operate.

Demand for our offerings may be impacted by the (i) overall economic conditions in the geographies in which we operate;

(ii) type, price and quality of our offerings compared to those of our competitors;

(iii) changes in competition such as from the acquisition, disposition, or exiting of similar businesses by us or our competitors;

(iv) overall state of the housing market;

(v) perceived threat of crime;

(vi) occurrence of significant life events such as the birth of a child or opening of a new business;

and (vii) availability of financial incentives provided by insurance carriers.

New customer additions and customer attrition have a direct impact on our financial results, including revenue, operating income, and cash flows.

A portion of our CSB recurring customer base can be expected to cancel service each year as customers may choose to terminate or not to renew their contracts for a variety of reasons including, but not limited to, relocation, loss to competition, cost, or service issues.

Relocations are sensitive to changes in the residential housing market, and fewer relocations generally lead to improvements in gross customer revenue attrition but less new customer additions.

A portion of our recurring customer base can be expected to cancel services each year as customers may choose to terminate or not to renew their contracts for a variety of reasons including, but not limited to, relocation, loss to competition, cost, or service issues.

Relocations are sensitive to changes in the residential housing market, and fewer relocations generally lead to improvements in gross customer revenue attrition but fewer new customer additions.

Additionally, non-payment disconnects generally increase in a weaker macroeconomic environment.

For example, during 2022 and 2023, we experienced fewer relocation disconnects and higher non-pay disconnects largely related to housing market conditions and the weaker macroeconomic environment.

As a result of continued changes in the macroeconomic environment, we are currently unable to determine whether there will be any ongoing or further impacts on these trends, and we may continue to experience fluctuations in these or other trends in the future.

Seasonality and weather-related incidents or natural disasters such as hurricanes and winter storms may impact certain areas in which we operate resulting in power outages and service disruptions to certain of our customers.

Depending on the severity and nature of the event, material impacts may occur as a result of these incidents.

We may experience fluctuations in these or other trends in the future as changes in the general macroeconomic environment or housing market develop.

We have made significant progress toward increasing the variety of our offerings to accommodate increased consumer interest in automated security and other mobile technology applications due to advancements in technology, younger generations of consumers, and shifts to de-urbanization.

Advances in technology are also helping us to improve our offerings and reduce certain costs.

For example, our Virtual Assistance Program provides our customers the ability to troubleshoot and resolve certain service issues, as well as other functions, through a live video stream with our skilled technicians.

This provides customers with more options for receiving certain services that best fit their lifestyles while reducing our costs and eliminating thousands of vehicle trips each day.

For example, our Remote Assistance Program provides our customers the ability to troubleshoot and resolve certain service issues, as well as other functions, through a live video stream with our skilled technicians.

This provides customers with more options for receiving certain services that best fit their lifestyles while reducing our costs and eliminating thousands of vehicle trips.

We may experience an increase in costs associated with factors, including but not limited to (i) offering a wider variety of products and services;

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and (vi) other changes in prices, interest rates, or terms from our suppliers or vendors, or third party lenders.

Changes in interest rates or terms from third-party lenders or our other financing partners are impacted by factors such as increases in the benchmark interest rate or other developments in the financial markets.

We aim to continuously evaluate and respond to changes in the above to drive efficiencies and meet customer demands.

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While we have experienced some increase in costs as a result of inflation, we have, for the most part, been able to offset the rising costs through price increases to our customers, as well as cost-saving opportunities.

In addition, hurricanes, wildfires, and other natural disasters impacting certain areas in which we operate may result in service, sales, and installation disruptions to certain of our customers.

As such, we evaluate the financial and business impacts these events have or may have in the future.

During 2024, we did not experience any material losses related to natural disasters.

However, we are currently evaluating any material impacts as a result of the California fires that started in January 2025.

Unless otherwise noted, our results of operations discussed below relate to continuing operations.

Refer to Note 4 “Divestitures” in the Notes to Consolidated Financial Statements in Item 15 “Exhibit and Financial Statement Schedules” for further information regarding the ADT Solar Exit and Commercial Divestiture .

ADT Solar Exit

In January 2024, after a strategic review of the business and continued macroeconomic and industry pressures, our Board of Directors approved a plan to fully exit the Solar Business.

A s of June 30, 2024, substantially all operations of the Solar Business had ceased.

The results of operations and financial position of the Solar Business are classified as discontinued operations in the Company’s Consolidated Statements of Operations and Consolidated Balance Sheets, respectively, for all periods presented.

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

During the year ended December 31, 2024, we incurred aggregate exit charges of $88 million , which have been recognized within income (loss) from discontinued operations, net of tax, related to (i) $33 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) $12 million associated with contract termination and other charges.

Additionally, during the year ended December 31, 2024, we paid approximately $22 million in connection with the ADT Solar Exit, primarily related to employee separation and other restructuring costs.

We do not expect the remaining estimated charges and cash expenditures to be material;

however, various factors including unknown or unforeseen costs may cause additional charges or cash expenditures to be incurred.

Commercial Divestiture

As discussed in Note 1 “Description of Business and Summary of Significant Accounting Policies” and Note 5 “Divestitures,” on October 2, 2023, GTCR acquired all of the issued and outstanding equity interests of the entities comprising our Commercial Business for a total purchase price of approximately $1,613 million in cash, subject to certain customary adjustments as set forth in the Commercial Purchase Agreement.

We received net proceeds of approximately $1,585 million, excluding transaction costs of $22 million, and recognized a gain on the sale of approximately $630 million, which is reflected in income (loss) from discontinued operations, net of tax.

We used the majority of the net proceeds from the Commercial Divestiture for debt reduction (see Note 8 “Debt”).

The results of the Commercial Business through the date of sale are reported as a discontinued operation for current and historical periods.

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

Gross customer revenue attrition and recurring monthly revenue (as defined and discussed below) have been presented for the current period, and recast for prior periods, to reflect only the CSB segment.

During the fourth quarter of 2023, we began recording income associated with the Commercial TSA, which is recognized in other income (expense) and was not material during 2023.

However, the Commercial TSA is expected to be material in future periods during the transitional period of up to 24 months after the closing of the Commercial Divestiture.

In October 2023, we divested the Commercial Business and received net proceeds of approximately $1,585 million.

We recognized a gain on the sale of approximately $630 million, which is reflected in income (loss) from discontinued operations, net of tax in 2023.

During 2024, we paid $21 million related to the settlement of post-closing adjustments.

As applicable, the results of the Commercial Business are reported as a discontinued operation for all periods presented.

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

During 2024, we recorded income associated with the Commercial TSA of $40 million, which is recognized in other income (expense).

We do not expect any material income under the Commercial TSA in future periods.

During 2023, we utilized a significant portion of our net operating losses (“NOLs”) to offset the gain generated from the sale of the Commercial Business.

As of December 31, 2023, we expect to utilize our remaining NOLs during 2024.

The Company expects to become a federal cash taxpayer in 2024 or 2025 depending on future losses generated by the business, specifically with regard to the closure of the Solar business.

Unless otherwise noted, our results of operations discussed below relate to continuing operations and will be impacted by the Commercial Divestiture.

ADT Solar Exit

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 operate 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 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.

As of December 31, 2023, charges and cash expenditures related to the ADT Solar Exit have not been material.

In connection with the ADT Solar Exit, we currently expect to incur additional aggregate charges of approximately $70 million - $110 million, related to (a) employee separation costs of approximately $7 million - $10 million, (b) long-lived asset impairments and write-off of deferred implementation costs associated with cloud computing arrangements of approximately $16 million - $20 million, (c) contract termination charges of approximately $6 million - $10 million, (d) the write-down and disposition of inventory on hand of approximately $15 million - $22 million, and (e) other charges of approximately $26 million - $48 million, which primarily relates to the impact associated with the disposition of the existing installation pipeline.

We expect to incur future aggregate cash expenditures associated with the ADT Solar Exit of approximately $50 million - $70 million.

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

The estimated charges and cash expenditures resulting from these actions could change materially, including that the Company may incur additional charges and cash expenditures due to various factors including unknown or unforeseen costs as part of these actions.

Google Partnership Update

The Google Commercial Agreement specifies each party shall contribute $150 million toward the joint marketing of devices and services;

customer acquisition;

employee training;

and technology updates.

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

In August 2022, we amended the Google Commercial Agreement, pursuant to which Google has agreed to commit an additional $150 million to further fund, as mutually agreed to by us and Google, growth, data and insights, product innovation and technology advancements, customer acquisition, and marketing.

The additional funds will be contributed in three equal tranches, subject to the attainment of certain milestones.

During 2023, we were reimbursed $40 million for certain joint marketing expenses we incurred.

In December 2023, the Company and Google entered into 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.

Additionally, during 2023, we launched our proprietary ADT+ app for our self setup line of DIY smart home security products, including Google Nest offerings.

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.

In 2024, we utilized the remaining NOLs and anticipate becoming a federal cash taxpayer in 2025.

However, the amounts and timing of payments are uncertain.

Federal Tax Legislation

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Under IRC Section 163(j), the limitation on net business interest expense deductions are no longer increased by deductions for depreciation, amortization, or depletion.

Under IRC Section 174, specified research and experimentation expenditures are now

capitalized and amortized.

Under IRC Section 174, specified research and experimentation expenditures are now capitalized and amortized.

These items have resulted in increased taxable income and an acceleration of our net operating loss utilization.

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federal and state deferred tax assets.

In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available positive and negative evidence, including enacted legislation such as the updates described above, which impact our assessment of whether a valuation allowance is needed.

In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available

positive and negative evidence, including enacted legislation such as the updates described above, which impact our assessment of whether a valuation allowance is needed.

We believe that our deferred tax asset for disallowed interest under IRC Section 163(j) will continue to grow from its current level.

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Other Updates

Google Partnership

During 2023, we launched and began the phased rollout of our proprietary ADT+ app for our self set-up line of DIY smart home security products, including integrated Google Nest offerings.

During 2024, we continued the phased rollout of our ADT+ platform across the country, making our next generation hardware and technology available to customers through our proprietary app.

During 2024 and 2023, we were reimbursed $30 million and $40 million, respectively, of the Google Success Funds primarily for certain joint marketing and customer acquisition expenses we incurred.

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

State Farm Partnership

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As of December 31, 2024, the State Farm partnership operated in 17 states in the U.S.

During 2023, we used approximately $9 million of the Opportunity Fund for project initiatives.

Refer to Note 11 “Equity” in the Notes to Consolidated Financial Statements for further information.

Radio Conversion Program

During 2019, we commenced a program to replace the 3G and CDMA cellular equipment used in many of our security systems as a result of the cellular network providers retiring their 3G and CDMA networks by the end of 2022.

The program was completed in 2023, and we incurred a total of $276 million net radio conversion costs throughout the program, the majority of which was incurred in 2021.

For those customers who did not transition prior to or have not transitioned since the applicable network sunset, the loss of signal to our security systems and certain services we provide may impact our ability to bill and/or collect from these customers in the future and may impact our attrition.

This impact has not been, and is not expected to be, material.

During 2024 and 2023, we used approximately $14 million and $11 million, respectively, of the Opportunity Fund for project initiatives and other costs.

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

KEY PERFORMANCE INDICATORS

We evaluate our results using certain key performance indicators, including the operating metrics recurring monthly revenue (“RMR”) and gross customer revenue attrition, as well as the non-GAAP measure Adjusted EBITDA.

We evaluate our results using certain key performance indicators, including the operating metrics end-of-period recurring monthly revenue (“RMR”) and gross customer revenue attrition, as well as the non-GAAP measure Adjusted EBITDA.

Computations of our key performance indicators may not be comparable to other similarly titled measures reported by other companies.

Certain operating metrics are approximated, as there may be variations to reported results due to certain adjustments we might make in connection with the integration over several periods of acquired companies that calculated these metrics differently or periodic reassessments and refinements in the ordinary course of business, including changes due to system conversions or historical methodology differences in legacy systems.

RMR is generated by contractual recurring fees for monitoring and other recurring services provided to our CSB customers, including contracts monitored but not owned.

RMR and gross customer revenue attrition, as discussed below, have been recast for prior periods to exclude the former Commercial Business.

The definition of these metrics has historically excluded activity related to the Solar Business and as such, these metrics were not impacted by the presentation of the Solar Business as a discontinued operation .

Adjusted EBITDA reflects our continuing operations for all periods presented.

RMR is generated by contractual recurring fees for monitoring and other recurring services provided to our customers, including contracts monitored but not owned.

We use RMR to evaluate our overall sales, installation, and retention performance.

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Gross Customer Revenue Attrition

Gross customer revenue attrition for our CSB segment is defined as RMR lost as a result of customer attrition, net of dealer charge-backs and reinstated customers, excluding contracts monitored but not owned and self-setup/DIY customers.

sites are considered canceled when all services are terminated.

Gross customer revenue attrition is defined as RMR lost as a result of customer attrition, net of dealer charge-backs and reinstated customers, excluding contracts monitored but not owned and self-setup/DIY customers.

Customer sites are considered canceled when all services are terminated.

Dealer charge-backs represent customer cancellations charged back to the dealers because the customer canceled service during the charge-back period, which is generally thirteen months.

Gross customer revenue attrition is calculated on a trailing twelve-month basis, the numerator of which is the RMR lost during the period due to attrition, net of dealer charge-backs and reinstated customers, and the denominator of which is total annualized RMR based on an average of RMR under contract at the beginning of each month during the period, in each case, excluding contracts monitored but not owned and self-setup/DIY customers.

We use gross customer revenue attrition to evaluate our CSB retention and customer satisfaction performance, as well as evaluate subscriber trends by vintage year.

We use gross customer revenue attrition to evaluate our retention and customer satisfaction performance, as well as evaluate subscriber trends by vintage year.

Additionally, we believe the presentation of gross customer revenue attrition is useful to investors as it provides a means to evaluate drivers of customer attrition and the impact of retention initiatives.

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Security installation, product, and other 604,969 473,826 328,856 131,143 144,970

Solar installation, product, and other 329,835 786,426 47,351 (456,591) 739,075

Total revenue 4,898,446 4,652,824 4,381,904 245,622 270,920

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Security installation, product, and other 229,728 147,314 102,118 82,414 45,196

Solar installation, product, and other 256,784 501,710 34,758 (244,926) 466,952

Total cost of revenue 847,114 751,682 698,782 95,432 52,900

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Merger, restructuring, integration, and other 24,124 38,959 9,937 (14,835) 29,022

Goodwill impairment 511,176 200,974 — 310,202 200,974

Operating income (loss) 1,208,064 1,178,961 725,094 29,103 453,867

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N/A—Not applicable.

2023 Compared to 2022

Monitoring and related services revenue (“M&S Revenue”) primarily comprises revenue generated from providing recurring monthly monitoring and other services, as well as revenue from time and materials billings.

Security installation, product, and other revenue comprises installation revenue from the sale and installation of our security systems sold under a customer-owned model, as well as the recognition of revenue that is deferred upon initiation of a monitoring contract in transactions occurring under a Company-owned model (amortization of deferred subscriber acquisition revenue).

Solar installation, product, and other revenue comprises revenue from the sale and installation of our solar systems and energy-storage solutions.

Revenue, as compared to the prior period, primarily reflects:

• CSB M&S Revenue :

• M&S Revenue :

higher recurring revenue of $108 million primarily driven by an increase in average prices.

• CSB Security installation, product, and other :

(i) an increase in installation revenue of $78 million primarily driven by a higher volume of outright sales transactions and higher installation revenue per unit associated with new customers under the outright sales transaction model, as well as (ii) an increase of $67 million in the amortization of deferred subscriber acquisition revenue associated with customers under a Company-owned model.

• Solar installation, product, and other:

fewer sales and installations as a result of impacts from macroeconomic conditions, including higher interest rates.

The increase in RMR, as compared to the prior period, was primarily due to an increase in average prices on new and existing subscribers.

Gross customer revenue attrition, as compared to the prior period, remained relatively flat, reflecting higher non-payment and other disconnects, primarily offset by a decrease in relocations.

• Security installation, product, and other :

(i) an increase in installation revenue of $87 million primarily driven by a higher mix of professionally installed systems at higher average prices in connection with the transition to our ADT+ platform, as well as (ii) an increase in the amortization of deferred subscriber acquisition revenue of $45 million associated with customers under a Company-owned model.

The increase in RMR, as compared to the prior period, was primarily driven by an increase in average prices on new and existing subscribers.

The decrease in gross customer revenue attrition, as compared to the prior period, was primarily driven by a decrease in voluntary and other disconnects, partially offset by higher non-payment disconnects.

Cost of Revenue

Monitoring and related services costs (“M&S Costs”) primarily comprises field service and call center costs incurred from providing recurring monthly monitoring and other services.

Security and solar installation, product, and other costs comprise costs incurred from the installation of our security and solar systems, respectively.

Cost of revenue, as compared to the prior period, primarily reflects:

• CSB Security installation, product, and other:

an increase in installation costs due to a higher volume of outright sales transactions, partially offset by a lower volume of in-person service tickets as a result of our Virtual Assistance Program.

• Solar installation, product, and other:

a decrease in installation costs due to fewer sales and installations as discussed above.

Monitoring and related services costs (“M&S Costs”) primarily includes field service and call center costs incurred from providing recurring monthly monitoring and other services.

Security installation, product, and other costs primarily includes costs incurred from the installation of our security systems sold in outright sales transactions.

The increase in cost of revenue, as compared to the prior period, primarily reflects an increase in installation and product costs of $82 million primarily due to a higher volume of outright sales transactions as well as an increase in M&S Costs of $13 million primarily due to higher interactive fees and other customer service initiatives, partially offset by lower maintenance costs primarily as a result of the continued growth of our Remote Assistance Program.

Selling, General, and Administrative Expenses (“SG&A”)

The decrease in SG&A, as compared to the prior period, was primarily due to a decrease in our Solar segment of $123 million.

CSB remained relatively flat, and primarily included:

• a decrease of $39 million in general and administrative expenses, including a legal settlement earned in 2023,

• a decrease of $28 million in radio conversion costs due to the wind down of the replacement program,

• a decrease of $15 million in advertising costs, primarily due to the receipt of the Google Success Funds, partially offset by increased advertising spend and

• a decrease of $14 million in stock-based compensation as a result of grants that became fully vested in March 2023 associated with one-time grants from 2020, offset by:

• an increase of $50 million in the allowance for credit losses primarily related to residential customers and

• an increase of $47 million in selling costs primarily related to the amortization of deferred subscriber acquisition costs and commissions.

The increase in SG&A, as compared to the prior period, was primarily driven by:

• an increase in the allowance for credit losses of $55 million as a result of an increase in customer delinquencies,

• an increase in general and administrative costs of $43 million, which includes a current year charge and a prior year benefit related to legal settlements in an aggregate amount of approximately $37 million, and

• an increase in the amortization of deferred subscriber acquisition costs of $36 million, partially offset by

• a decrease in advertising costs of $26 million as a result of lower media spend.

Depreciation and Intangible Asset Amortization (“D&A”)

The decrease in D&A was primarily driven by a decrease in the amortization of customer relationship intangible assets of $309 million, primarily related to certain assets acquired as part of the ADT Acquisition, which became fully amortized during the first quarter of 2023.

This decrease was partially offset by an increase in the amortization of customer contracts acquired under our authorized dealer program and from other third parties of $15 million, as well as an increase in the depreciation of subscriber system assets of $14 million.

D&A remained relatively flat, as compared to the prior period, and included an increase of $35 million in the amortization of customer contracts acquired under our authorized dealer program and from other third parties, partially offset by a decrease of $33 million in the amortization of customer relationship intangible assets primarily related to certain assets acquired as part of the ADT Acquisition that became fully amortized during the first quarter of 2023.

Merger, Restructuring, Integration, and Other

Merger, restructuring, integration, and other varies year over year and generally represents certain direct and incremental costs resulting from acquisitions, integration and optimization costs as a result of those acquisitions, costs related to restructuring efforts, as well as fair value remeasurements and impairment charges on certain strategic investments.

During 2023, the increase in merger, restructuring, integration, and other, as compared to the prior year period, was driven by increases in restructuring costs of $20 million primarily related to severance benefits and facility exits and third-party costs of $16 million primarily related to the strategic optimization of our Solar segment.

Goodwill Impairment

During 2023 and 2022, we recorded goodwill impairment charges of $511 million and $201 million, respectively, associated with our Solar reporting unit.

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

Refer to Note 7 “Goodwill and Other Intangible Assets” and the section “—Critical Accounting Estimates” below for further discussion.

The decrease in merger, restructuring, integration, and other, as compared to the prior period, was primarily due to third-party strategic optimization costs incurred during the prior period.

Interest Expense, net

During 2023, the increase in interest expense, net, as compared to the prior year period, was primarily driven by:

• a decrease in net unrealized gains of $324 million on our interest rate swaps not designated as cash flow hedges,

• higher interest expense of $59 million related to the term loan under our First Lien Credit Agreement, and

• $25 million of expense recorded during 2023 associated with the reclassification from AOCI of historical losses related to certain interest rate swaps as those cash flows are probable of not occurring as a result of the partial redemption of our First Lien Term Loan due 2026 in October 2023, partially offset by

• a decrease of $96 million related to settlements on our interest rate swaps.

Loss on Extinguishment of Debt

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

During 2023, loss on extinguishment of debt totaled $17 million and was primarily due to the write-off of unamortized discount and debt issuance costs associated with the partial redemption and refinancing of the First Lien Term Loan due 2026.

During 2024, the decrease in interest expense, net, as compared to the prior year period, was primarily driven by lower interest expense of $114 million primarily related to lower principal amounts outstanding on our First Lien Term Loan B and the redemption of our First Lien Notes due 2024.

Other Income (Expense)

During 2023, other income (expense) primarily included income from the Commercial TSA.

During 2022, other income (expense) primarily included a net loss of $63 million in connection with the Tender Offer as a result of the change in fair value of the Forward Contract.

During 2024, the increase in other income (expense) was primarily due to higher income from the Commercial TSA of $28 million, with the remainder of the change primarily due to the realized gain (loss) on interest rate swaps.

Income Tax Benefit (Expense)

Our income tax benefit (expense) during 2023 was $(5) million, resulting in an effective tax rate for the period of (6.9)%.

The effective tax rate primarily represents the federal statutory rate of 21.0%, state income taxes, net of federal benefits of (9.4)%, an 8.7% favorable impact related to a decrease in unrecognized tax benefits, an 8.0% favorable impact from the net impact of acquisitions and dispositions related to the revaluation of our net deferred tax liability, offset by a (9.5)% unfavorable impact from permanently non-deductible items, a (22.8)% unfavorable impact related to non-deductible solar goodwill impairment

charges, and a (5.9)% unfavorable impact related to non-deductible goodwill on dispositions, primarily related to the sale of the Commercial business.

Our income tax benefit (expense) during 2022 was $(38) million, resulting in an effective tax rate for the period of 25.3%.

The effective tax rate primarily represents the federal statutory rate of 21.0%, state income taxes, net of federal benefits of 6.8%, a (6.1)% favorable impact from a decrease in unrecognized tax benefits, a (5.7)% favorable impact from legislative changes, an (8.0)% favorable impact from federal credits, offset by a 13.3% unfavorable impact from permanently non-deductible items, primarily related to the fair value adjustment of the Forward Contract, and a 4.0% unfavorable impact from non-deductible solar goodwill impairment charges.

Income tax expense during 2024 was $196 million, resulting in an effective tax rate for the period of 24.0%.

The effective tax rate primarily represents the federal statutory rate of 21.0%, state income taxes, net of federal benefits, of 5.4%, and unfavorable impacts from dispositions of 1.2% and permanently non-deductible items of 0.8%, partially offset by favorable impacts from a decrease in unrecognized tax benefits of 4.0%.

Income tax expense during 2023 was $161 million, resulting in an effective tax rate for the period of 26.6%.

The effective tax rate primarily represents the federal statutory rate of 21.0%, state income taxes, net of federal benefits, of 6.1%, and an unfavorable impact from permanently non-deductible items of 1.0%, partially offset by favorable impacts from a decrease in unrecognized tax benefits of 1.0% and dispositions of 0.9%.

Income tax expense during 2022 was $88 million, resulting in an effective tax rate for the period of 21.7%.

The effective tax rate primarily represents the federal statutory rate of 21.0%, state income taxes, net of federal benefits, of 3.0%, and an unfavorable impact from permanently non-deductible items of 5.1%, partially offset by favorable impacts from federal credits of 2.9%, a decrease in unrecognized tax benefits of 2.3%, and legislative changes of 2.1%.

Refer to Note 9 “Income Taxes” for details on our effective tax rate.

Equity in Net Earnings (Losses) of Equity Method Investee

During the fourth quarter of 2023, we sold our shares in Canopy.

As a result, we received $21 million of recovered proceeds and recognized a net gain on sale of our equity method investment of $15 million.

Refer to Note 6 “Equity Method Investments” for further details.

2022 compared to 2021

Selling, General, and Administrative Expenses (“SG&A”)

The increase in SG&A, as compared to the prior period, was primarily driven by incremental expenses of $296 million as a result of the ADT Solar Acquisition in December 2021.

The decrease in CSB, as compared to the prior period, primarily included:

• a decrease in radio conversion costs of $211 million, primarily due to a decrease in the number of conversions and

• a decrease in advertising costs of $83 million, primarily due to our efforts to optimize our advertising model, partially offset by

• an increase in the provision for credit losses of $42 million, primarily due to lower provision in the prior year associated with impacts from the COVID-19 Pandemic,

• an increase in selling costs of $39 million, primarily due to additional amortization of deferred subscriber acquisition costs, and

• an increase in general and administrative costs of $36 million, primarily due to investments in our information technology infrastructure and other operational costs.

NON-GAAP MEASURES

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(viii) radio conversion costs, net;

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

adjustments, or dispositions;

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

(x) impairment charges;

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24,124 38,959 9,937 (14,835) 29,022

Goodwill impairment (2)

511,176 200,974 — 310,202 200,974

Loss on extinguishment of debt

16,621 — 37,113 16,621 (37,113)

Change in fair value of financial instruments (3)

Unrealized (gain) loss on interest rate swaps (2)

17,996 16,511 — 1,485 16,511

Radio conversion costs, net (4)

Change in fair value of other financial instruments (3)

— — 63,396 — (63,396)

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

Other, net (4)

9,893 (15,659) (2,977) 25,552 (12,682)

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___________________

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

Refer to the discussion above under “- Results of Operations.”

(2) During 2022 and 2023, represents goodwill impairment charges associated with our Solar reporting unit (refer to Note 7 “Goodwill and Other Intangible Assets” and the discussion above under “- Results of Operations.”

(1) During 2024 and 2022, primarily relates to restructuring costs.

During 2023, primarily includes integration and third-party strategic optimization costs, as well as restructuring costs.

(2) Includes the unrealized gain or loss on interest rate swaps presented in other income (expense).

(3) During 2022, represents the change in fair value of the Forward Contract (refer to Note 10 “Equity”).

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

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

During 2022, also includes the gain on sale of a business.

During 2022 and 2021, primarily represents the amortization of the customer backlog intangible asset acquired in the ADT Solar Acquisition, which was fully amortized as of March 2022 (refer to Note 4 “Acquisitions”).

Adjusted EBITDA in total and by segment were as follows:

Years Ended December 31, $ Change

(in thousands)

2023 2022 2021 2023 vs.

2022 2022 vs.

CSB $ 2,481,305 $ 2,305,032 $ 2,101,659 $ 176,273 $ 203,373

Solar (116,505) 5,155 5,588 (121,660) (433)

Adjusted EBITDA (from continuing operations)

$ 2,364,800 $ 2,310,187 $ 2,107,247 $ 54,613 $ 202,940

(4) During 2023, primarily represents the gain on sale of a business and other investment, partially offset by loss on extinguishment of debt.

The drivers listed below exclude amounts that are outside of our definition of Adjusted EBITDA.

Refer to the discussions above under “—Results of Operations” for further details.

2023 compared to 2022

The increase was primarily due to:

• higher M&S Revenue, net of the associated costs, of $108 million,

• lower general and administrative expenses of $39 million,

• higher installation revenue, net of the associated costs and commissions, of $23 million, and

• lower advertising costs of $15 million, partially offset by

• higher provision for credit losses of $50 million.

The decrease was primarily due to:

• lower installation revenue, net of the associated costs and commissions, of $213 million, partially offset by

• lower general and administrative expenses of $84 million.

2022 compared to 2021

The increase was primarily due to:

• higher M&S Revenue, net of the associated costs, of $215 million and

• higher other income of $43 million primarily due to higher income from the Commercial TSA, and

• lower advertising costs of $26 million, partially offset by

• higher provision for credit losses of $42 million

• and higher general and administrative expenses of $36 million.

• higher provision for credit losses of $55 million and negative impacts from legal settlements of $37 million.

LIQUIDITY AND CAPITAL RESOURCES

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We expect our ongoing sources of liquidity to include cash generated from operations, borrowings under our first lien revolving credit facility (the “First Lien Revolving Credit Facility”) and the 2020 Receivables Facility, and the issuance of equity and/or debt securities as appropriate given market conditions.

Our future cash needs are expected to include cash for operating activities, working capital, capital expenditures, principal and interest payments on our debt, expected dividend payments to our stockholders, potential share repurchases under our Share Repurchase Plan, and strategic investments.

Our principal liquidity requirements are to finance current operations, invest in acquiring and retaining customers, purchase property and equipment, service our debt, invest in our information technology infrastructure, and return money to shareholders through dividends.

Our liquidity requirements are primarily funded by our cash flows from operations, which include cash received from customers related to monthly recurring revenue from providing monitoring and other services, as well as cash from the sale and installation of our security and, prior to the exit from our solar business, solar systems (including cash received from third-party lenders who provide loan products for customers), less cash costs to provide services to our customers, general and administrative costs, certain costs associated with acquiring new customers, and interest payments.

Our future cash needs are expected to include cash for operating activities, working capital, capital expenditures, principal and interest payments on our debt, expected dividend payments to our stockholders, potential share repurchases under a share repurchase plan, and other business initiatives as they arise.

Our liquidity requirements are primarily funded by our cash flows from operations.

Cash inflows primarily include cash received from customers related to monthly recurring revenue from providing monitoring and other services, as well as cash from the sale and installation of our security systems.

Cash outflows primarily relate to providing services to our customers, general and administrative costs, certain costs associated with acquiring new customers, interest payments, and taxes.

We are a highly leveraged company with significant debt service requirements and have both fixed-rate and variable-rate debt.

As of December 31, 2023, our next debt maturity will occur in April 2024 with respect to the remaining outstanding balance of $100 million of our First Lien Notes due 2024.

We also entered into interest rate swaps to manage interest on our debt.

We may periodically seek to repay, redeem, repurchase, or refinance our indebtedness, or seek to retire or purchase our outstanding securities through cash purchases in the open market, privately negotiated transactions, a 10b5-1 repurchase plan, or otherwise, and any such transactions may involve material amounts.

Cash outflows for interest payments are not consistent between quarters, with larger outflows occurring in the first and third quarters, and may vary as a result of our variable rate debt.

We are closely monitoring the impact of recent inflationary pressures and changes in interest rates on our cash position.

We are closely monitoring the impact of any inflationary pressures and changes in interest rates on our cash position.

However, we believe our cash position, borrowing capacity available under our First Lien Revolving Credit Facility and 2020 Receivables Facility, and cash provided by operating activities are, and will continue to be, adequate to meet our operational and business needs in the next twelve months, as well as our long-term liquidity needs.

In addition, in 2023, we entered into a Receivables Financing Agreement with Mizuho Bank, Ltd.

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

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

As of December 31, 2023, we have not borrowed any amounts under the Solar Receivables Facility, and given the decision to exit the residential solar business, we do not expect to borrow any amounts under the Solar Receivables Facility.

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

(the “Solar Receivables Financing Agreement”), which, among other things, provided 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 LLC (“ADT Solar Finance”) (the “Solar Receivables Facility”).

The Solar Receivables Facility expired in August 2024 with no amounts borrowed.

Material Cash Requirements

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As of December 31, 2024, our significant short-term and long-term cash requirements, excluding cash required for operations, under our various contractual obligations and commitments primarily included:

• Debt principal – As of December 31, 2023, our expected future debt principal payments, excluding finance leases, totaled approximately $7.9 billion, with $287 million due in 2024 primarily related to the $100 million outstanding ADT Notes due 2024 (defined below) and repayments on the 2020 Receivables Facility, and including required quarterly principal payments on our First Lien Term Loan due 2030 and Term Loan A Facility totaling approximately $46 million.

• Debt principal – As of December 31, 2024, our expected future debt principal payments, excluding finance leases, totaled approximately $7.8 billion, with $170 million due in 2025 primarily related to payments on our 2020 Receivables Facility and the required quarterly principal payments on our First Lien Term Loan B due 2030.

As of December 31, 2024, our next debt maturity will occur in April 2026 with respect to the remaining outstanding balance of $1.35 billion of our First Lien Notes due 2026.

On February 7, 2025, we issued a notice of partial redemption for $500 million of the First Lien Notes due 2026.

Refer to Note 7 “Debt” for further details of our debt and the timing of expected future principal payments.

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As of December 31, 2024, our expected future interest payments related to our debt and interest rate swap contracts totaled approximately $1.6 billion, with approximately $354 million due in 2025.

Additionally, we expect to incur annual interest payments of approximately $325 - $360 million during each of the years 2025 - 2026 and approximately $200 - $300 million during each of the years 2027 and 2028.

• Operating and finance leases – As of December 31, 2023, our expected future lease payments, including interest, totaled $221 million, with $54 million due in 2024.

Additionally, we expect to incur annual interest payments of approximately $310 - $325 million during each of the years 2026 - 2027 and approximately $195 - $240 million during each of the years 2028 and thereafter.

• Leases – As of December 31, 2024, our expected future operating and finance lease payments, including interest, totaled $192 million, with $54 million due in 2025.

Refer to Note 14 “Leases” for further details of our obligations and the timing of expected future payments.

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As of December 31, 2024, our contractual obligations entered into in the ordinary course of business, including agreements that are enforceable and legally binding and have a remaining term in excess of one year, totaled approximately $561 million, with approximately $367 million expected to be paid in 2025.

These amounts include a commitment with one of our vendors to purchase at least $190 million of security system equipment and components through March 2025.

These amounts include a commitment with one of our vendors to purchase at least $172 million of security system equipment and components through December 2025.

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

Refer to Note 14 “Commitments and Contingencies” for the amounts and timing of such payments.

In addition, as of December 31, 2024, we had outstanding purchase orders of approximately $143 million primarily related to direct materials and information technology and marketing services, which are expected to be materially satisfied in 2025.

• Google Commercial Agreement – The Google Commercial Agreement requires us and Google to each contribute $150 million toward certain joint commercial efforts.

Refer to Note 13 “Commitments and Contingencies” for the amounts and timing of such payments.

• Google agreements – The Google Commercial Agreement requires us and Google to each contribute $150 million toward certain joint commercial efforts.

Additionally, during 2022 we entered into the Google Commercial Agreement Amendment in which Google agreed to commit an additional $150 million.

While the timing of these contributions is still uncertain, we expect to contribute the majority of our $150 million commitment under the Google Commercial Agreement by the end of 2026.

During 2023, $40 million of the Google Success Funds were reimbursed to the Company for our share of joint marketing expenses incurred and reflected as a reduction of advertising costs.

In addition, under the Google Cloud Agreement Addendum, the Company is obligated to make purchases from Google totaling $200 million over a seven-year period (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.

During 2024 and 2023, $30 million and $40 million, respectively, of the Google Success Funds were reimbursed to the Company primarily for certain joint marketing expenses and customer acquisition costs incurred by the Company, substantially all of which was reflected as a reduction of advertising costs.

In addition, under the Google Cloud Agreement Addendum, the Company is obligated to make purchases from Google totaling $200 million over a seven-year period (through December 2030), with an aggregate of $35 million in the first two years, an aggregate of $65 million in the next two years after that, and an aggregate of $100 million in the last three years of the commitment.

As of December 31, 2024, we are on track to meet these commitments.

• State Farm Opportunity Fund – Pursuant to the State Farm Development Agreement, State Farm committed up to $300 million to fund product and technology innovation, customer growth, and marketing initiatives.

Upon the Closing of the State Farm Strategic Investment, 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.

During 2023, payments made from the Opportunity Fund were $11 million.

During 2024 and 2023, payments made from the Opportunity Fund were $14 million and $11 million, respectively.

• Customer account purchases – Our indirect channel customers are generated mainly through our 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.

For example, in December 2023, we purchased customer accounts from a third party for $89 million in cash.

• ADT Solar Exit and Repurchase of Solar loans – As of December 31, 2023, we recognized a liability of $15 million related to certain loans provided to customers within our Solar business that we may be required to repurchase from our third-party lenders.

In addition, we expect to incur cash expenditures of approximately $50 million - $70 million associated with the exit from our solar business.

Additional expenditures could occur with our third-party lenders in connection with the ADT Solar Exit.

• Unrecognized tax benefits – We have $49 million of unrecognized tax benefits, excluding interest and penalties, related to various tax positions we have taken.

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

For example, we paid initial cash at closings of $81 million and $89 million for customer accounts from third parties during 2024 and 2023, respectively.

• Taxes – During 2025, we expect to become a federal cash taxpayer.

However, we are currently unable to determine the exact amount or timing of these payments.

In addition, we have $25 million of unrecognized tax benefits, excluding interest and penalties, related to various tax positions we have taken.

These liabilities may increase or decrease over time primarily as a result of tax examinations, and given the status of the examinations, we cannot reliably estimate the period of any cash settlement with the respective taxing authorities.

Refer to Note 9 “Income Taxes” for further details.

• Dividends – Stockholders are entitled to receive dividends when, as, and if declared by our Board of Directors out of funds legally available for that purpose.

On February 27, 2025, we announced a dividend of $0.055 per share to holders of Common Stock and Class B Common Stock of record on March 13, 2025, which will be distributed on or about April 3, 2025.

Refer to Note 10 “Equity” for further details on dividends declared and paid during 2024 and 2023.

• Share repurchases – In February 2025, our Board of Directors announced the 2025 Share Repurchase Plan, pursuant to which the Company is authorized to repurchase, through April 30, 2026, up to a maximum aggregate amount of $500 million of shares of Common Stock.

As of the date of this 2024 Annual Report, the Company has not made any repurchases under the 2025 Share Repurchase Plan.

• Off-balance sheet arrangements – As of December 31, 2024, we had guarantees primarily related to standby letters of credit on our insurance programs totaling $74 million.

During March 2022, we entered into an unsecured Credit Agreement with Goldman Sachs Mortgage Company, as administrative agent and issuing lender (the “Issuing Lender”), together with other lenders party thereto, pursuant to which we may request the Issuing Lender to issue one or more letters of credit for its own account or the account of its subsidiaries, in an aggregate face amount not to exceed $75 million at any one time, through December 2026.

In February 2025, $21 million of our guarantees were relinquished.

We do not have any other arrangements giving rise to material obligations that are not reported in our consolidated balance sheets, as described in Item 303 of SEC Regulation S-K.

• Dividends – Stockholders are entitled to receive dividends when, as, and if declared by the Company’s Board of Directors out of funds legally available for that purpose.

On January 24, 2024, we announced a 57% increase to our

quarterly dividend to $0.055 per share to holders of Common Stock and Class B Common Stock of record on March 14, 2024, which will be distributed on or about April 4, 2024.

During 2023, we declared aggregate dividends of $0.14 per share on Common Stock ($121 million) and $0.14 per share on Class B Common Stock ($8 million).

During 2022, we declared aggregate dividends of $0.14 per share on Common Stock ($120 million) and $0.14 per share on Class B Common Stock ($8 million).

Refer to Note 11 “Equity” for further details.

• Share Repurchase Plan – On January 24, 2024, the Company's Board of Director's announced the Share Repurchase Plan, pursuant to which the Company is authorized to repurchase, through late January 2025, up to a maximum aggregate amount of $350 million of shares of the Company's common stock under this Share Repurchase Plan.

As of the date of this 2023 Annual Report, the Company has not made any repurchases under the Share Repurchase Plan.

Cash Flow Analysis

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Cash Flows from Operating Activities

The decrease in net cash provided by operating activities for 2023 compared to 2022 was primarily due to:

• an increase in cash interest of $153 million,

• an increase in payroll tax payments of $26 million primarily related to deferrals of such payments in 2020 under the CARES Act, partially offset by

• $40 million of the Google Success Funds,

• $19 million related to a legal settlement, and

• an increase in receipts related to our radio conversion program of $9 million.

The decrease in net cash provided by operating activities also includes negative impacts from the solar business.

The increase in net cash provided by operating activities for 2024 compared to 2023 was primarily due to a decrease in cash interest of $149 million primarily related to reduced principal balances on our debt, the benefit of lower outflows in the current year related to our former Solar Business, and improved operating performance.

This increase was partially offset by the benefit received in the prior period associated with the results of the former Commercial Business as well as a current year outflow and prior year inflow related to legal settlements.

The remainder of the activity related to changes in assets and liabilities due to the volume and timing of other operating cash receipts and payments with respect to when the transactions are reflected in earnings.

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Cash Flows from Investing Activities

The change in net cash from investing activities for 2023 compared to 2022 was primarily due to:

• an increase in the proceeds from the sales of businesses of $1,583 million primarily related to the Commercial Divestiture in 2023,

• a decrease in net outflows of $104 million related to subscriber system assets expenditures due to lower volume, and

• an increase in other investing activities of $42 million primarily related to the 2023 sale of our equity method investment we made in 2022.

The change in net cash used in investing activities for 2024 compared to 2023 was primarily due to sales of businesses in the amount of $1,627 million, primarily related to the Commercial Divestiture in 2023.

In addition, subscriber system assets expenditures decreased by $107 million due to a lower volume of transactions including those under a Company-owned model.

Cash Flows from Financing Activities

The increase in net cash used in financing activities for 2023 compared to 2022 was primarily due to:

• an increase in net debt payments of $2,040 million primarily related to the partial redemptions in 2023 of our First Lien Term Loan due 2026 and ADT Notes due 2024,

• a decrease in net proceeds under the 2020 Receivables Facility of $75 million primarily due to higher repayments during 2023 as compared to 2022, and

• Opportunity fund proceeds of $101 million during 2022 as compared to net payments of $9 million during 2023, partially offset by

• proceeds on our interest rate swaps of $83 million during 2023 as compared to payments of $19 million during 2022.

During 2023, both the proceeds and repayments of long-term debt on the Consolidated Statements of Cash Flows include the impact of $230 million from the October refinancing of the First Lien Term Loan due 2026.

Net cash used in financing activities during 2022 also included the $1.2 billion issuance of State Farm shares and corresponding repurchase of $1.2 billion related to the Tender Shares.

The decrease in net cash used in financing activities for 2024 compared to 2023 was primarily due to:

• lower net repayments of $1,977 million primarily related to the partial redemptions in 2023 of our First Lien Term Loan B due 2026 and ADT Notes due 2024,

• share repurchases during 2024 of $241 million,

• a decrease in net proceeds under the 2020 Receivables Facility of $109 million primarily due to net repayments during 2024 as compared to net proceeds in 2023, and

• an increase in dividend payments of $54 million due to an increase in our quarterly dividend during 2024.

During 2024, both the proceeds and repayments of long-term borrowings on the Consolidated Statements of Cash Flows include the impact of $704 million from the refinancings of the First Lien Term Loan B due 2026.

During 2023, both the proceeds and repayments of long-term borrowings on the Consolidated Statements of Cash Flows include the impact of $230 million from the October refinancing of the First Lien Term Loan B due 2026.

Long-Term Debt

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First Lien Term Loan B due 2030 10/13/2023 10/13/2030 Term SOFR +2.00% Quarterly $ 1,984,090

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

Second Lien Notes due 2028 1/28/2020 1/15/2028 6.250% 1/15 and 7/15 1,300,000

First Lien Notes due 2026 4/4/2019 4/15/2026 5.750% 3/15 and 9/15 1,350,000

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First Lien Notes due 2029 7/29/2021 8/1/2029 4.125% 2/1 and 8/1 1,000,000

Second Lien Notes due 2028 1/28/2020 1/15/2028 6.250% 1/15 and 7/15 1,300,000

ADT Notes due 2032 5/2/2016 7/15/2032 4.875% 1/15 and 7/15 728,016

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2020 Receivables Facility 3/5/2020 11/20/2029 Various Monthly 407,901

Other debt 751

Total $ 7,791,903

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First Lien Credit Agreement

Our first lien credit agreement dated as of July 1, 2015 (together with subsequent amendments and restatements, the “First Lien Credit Agreement”) consists of a term loan facility (the “First Lien Term Loan due 2030,” and prior to October 2023, the “First Lien Term Loan due 2026”) and a first lien revolving credit facility (the “First Lien Revolving Credit Facility”).

Our first lien credit agreement dated as of July 1, 2015 (together with subsequent amendments and restatements, the “First Lien Credit Agreement”) consists of a term loan facility (the “First Lien Term Loan B due 2030,” and prior to October 2023, the “First Lien Term Loan B due 2026”) and a first lien revolving credit facility (the “First Lien Revolving Credit Facility”).

Below is a summary of key events related to the First Lien Credit Agreement since 2023:

• During 2022, we borrowed $550 million and repaid $575 million under the First Lien Revolving Credit Facility.

• In October 2023, we redeemed approximately $1.3 billion of the First Lien Term Loan due 2026 using net proceeds from the Commercial Divestiture.

• In October 2023, we amended and restated the First Lien Credit Agreement to refinance the remaining outstanding balance of the First Lien Term Loan due 2026 with a new $1,375 million 7-year term First Lien Term Loan B due 2030, among other things.

We did not borrow or repay any funds under the First Lien Revolving Credit Facility during 2023.

We are required to make scheduled quarterly principal payments on the First Lien Term Loan due 2030, with the remaining balance payable at maturity.

We may make voluntary prepayments on the First Lien Term Loan due 2030 at any time prior to maturity at par.

Additionally, we are required to make annual prepayments on the outstanding First Lien Term Loan due 2030 with a percentage of our excess cash flow, as defined in the First Lien Credit Agreement, if our excess cash flow exceeds a certain specified threshold.

• October 2023 - We redeemed approximately $1.3 billion of the First Lien Term Loan B due 2026 using net proceeds from the Commercial Divestiture.

• October 2023 - We amended and restated the First Lien Credit Agreement to refinance the remaining outstanding balance of the First Lien Term Loan B due 2026 with a new $1,375 million 7-year term First Lien Term Loan B due 2030.

• April 2024 - We amended and restated the First Lien Credit Agreement, which reduced the interest rate on the First Lien Term Loan B due 2030 from Term SOFR +2.50% to Term SOFR +2.25%.

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

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

• October 2024 - We amended and restated the First Lien Credit Agreement to extend the maturity date of the First Lien Revolving Credit Facility to October 2029, subject to a springing maturity of 91 days prior to the maturity date of certain long-term indebtedness if, as of such date, the outstanding principal amount of such indebtedness exceeds $350 million, and obtain an additional $225 million of First Lien Revolving Credit Facility commitments.

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

Borrowings under the 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 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.

• December 2024 - We amended and restated the First Lien Credit Agreement, which reduced the interest rate on the First Lien Term Loan B due 2030 from Term SOFR +2.25% to Term SOFR +2.00%.

In addition, during 2024, we borrowed and repaid $365 million under the First Lien Revolving Credit Facility.

We are required to make scheduled quarterly principal payments on the First Lien Term Loan B due 2030, with the remaining balance payable at maturity.

We may make voluntary prepayments on the First Lien Term Loan B due 2030 at any time prior to maturity at par.

Additionally, based on certain specified net first lien leverage ratios, we may be required to make annual prepayments on the outstanding First Lien Term Loan B due 2030 with a percentage of our excess cash flow, as defined in the First Lien Credit Agreement, if our excess cash flow exceeds a certain specified threshold, which is 0% if our net first lien leverage ratio is less than or equal to 2.20 to 1.00.

As of December 31, 2024, we were not required to make any annual prepayments based on our excess cash flow.

In addition, we are required to pay a commitment fee between 0.20% and 0.30% (determined based on a net first lien leverage ratio) with respect to the unused commitments under the First Lien Revolving Credit Facility.

On February 7, 2025, the Company issued a notice of partial redemption for $500 million of the First Lien Notes due 2026, which will be redeemed on March 9, 2025.

Prior to the issuance of such notice, certain lenders provided commitments that they will fund a new $600 million first lien seven-year term loan facility.

The closing of this new facility, which remains subject to market and other customary conditions, is expected to occur on or around March 7, 2025.

The Company intends to use proceeds of this new facility for the partial redemption of the First Lien Notes due 2026 among other general corporate purposes.

Term Loan A Facility

In March and June 2023, we borrowed aggregate principal amounts of $600 million and $50 million, respectively, of term loans under a senior secured term loan A facility (the “Term Loan A Facility”) and used the proceeds to redeem $650 million of the ADT Notes due 2023 (defined below).

We are required to make scheduled quarterly principal payments on the Term Loan A Facility, with the remaining balance payable at maturity.

We may make voluntary prepayments on the Term Loan A Facility at any time prior to maturity at par.

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

Second Lien Notes due 2028

The 6.250% second-priority senior secured notes due 2028 (the “Second Lien Notes due 2028”) are due at maturity and may be redeemed at our option, in whole at any time or in part from time to time, at a redemption price equal to 103.125% of the principal amount of the Second Lien Notes due 2028 redeemed and accrued and unpaid interest as of, but excluding, the redemption date.

The redemption price decreased to 101.563% on or after January 15, 2024 and decreases to 100% on or after January 15, 2025.

Additionally, upon the occurrence of specified change of control events, we must offer to repurchase the Second Lien Notes due 2028 at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

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

First Lien Notes due 2024 and First Lien Notes due 2026

The 5.250% first-priority senior secured notes due 2024 (the “First Lien Notes due 2024”) and the 5.750% first-priority senior secured notes due 2026 (the “First Lien Notes due 2026”) are due at maturity, and may be redeemed, in whole or in part, at any time at a make-whole premium plus accrued and unpaid interest to, but excluding, the redemption date.

Additionally, upon the occurrence of specified change of control events, we must offer to repurchase the notes at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

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

Below is a summary of significant activity related to the First Lien Notes due 2024 since 2022:

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

• December 2023:

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

In May 2024, we exchanged $143 million of loans under our Term Loan A Facility for our First Lien Term Loan B due 2030.

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

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

First Lien Notes due 2024

As of December 31, 2024, we had fully redeemed the 5.250% first-priority senior secured notes due 2024 (the “First Lien Notes due 2024”) as a result of the following transactions:

• May 2023 - We redeemed $150 million principal amount of the outstanding First Lien Notes due 2024 for a redemption price of $150 million, excluding accrued and unpaid interest, using cash on hand.

• December 2023 - We redeemed $500 million principal amount of the outstanding First Lien Notes due 2024 for a redemption price of $500 million, excluding accrued and unpaid interest, using remaining net proceeds from the Commercial Divestiture and cash on hand.

• April 2024 - We redeemed the remaining outstanding principal balance of $100 million of the First Lien Notes due 2024 for a redemption price of $100 million, excluding accrued and unpaid interest, using proceeds from the Company’s First Lien Revolving Credit Facility.

First Lien Notes due 2026

The 5.750% first-priority senior secured notes due 2026 (the “First Lien Notes due 2026”) are due at maturity, and may be redeemed, in whole or in part, at any time at a make-whole premium plus accrued and unpaid interest to, but excluding, the redemption date.

Additionally, upon the occurrence of specified change of control events, we must offer to repurchase the First Lien Notes due 2026 at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

The indenture governing the First Lien Notes due 2026 also provides for customary events of default.

As discussed above, on February 7, 2025, the Company issued a notice of partial redemption for $500 million of the First Lien Notes due 2026, which will be redeemed on March 9, 2025.

First Lien Notes due 2027

The 3.375% first-priority senior secured notes due 2027 (the “First Lien Notes due 2027”) are due at maturity and may be redeemed at our option as follows:

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

The remaining outstanding ADT Notes are due at maturity, and may be redeemed, in whole at any time or in part from time to time, at a redemption price equal to the principal amount of the notes to be redeemed, plus a make-whole premium, plus accrued and unpaid interest as of, but excluding, the redemption date.

Second Lien Notes due 2028

The 6.250% second-priority senior secured notes due 2028 (the “Second Lien Notes due 2028”) are due at maturity and may be redeemed at our option, in whole at any time or in part from time to time, at a redemption price equal to 100% (after January 15, 2025) of the principal amount of the Second Lien Notes due 2028 redeemed and accrued and unpaid interest as of, but excluding, the redemption date.

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

During 2023, the Company redeemed the then outstanding ADT Notes due 2023.

The remaining outstanding ADT Notes due 2032 and ADT Notes due 2042 (collectively, the “ADT Notes”) are due at maturity, and may be redeemed, in whole at any time or in part from time to time, at a redemption price equal to the principal amount of the notes to be redeemed, plus a make-whole premium, plus accrued and unpaid interest as of, but excluding, the redemption date.

Additionally, upon the occurrence of specified change of control events, the Company must offer to repurchase the ADT Notes at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

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Below is a summary of key events related to the ADT Notes due 2023 since 2023:

• March 2023:

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

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

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

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

2020 Receivables Facility

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The SPE borrower under the 2020 Receivables facility is a separate legal entity with its own creditors who will be entitled, prior to and upon the liquidation of the SPE, to be satisfied out of the SPE’s assets prior to any assets of the SPE becoming available to us (other than the SPE).

Accordingly, the assets of the SPE are not available to pay our creditors (other than the SPE), although collections from the transferred retail installment contract receivables in excess of amounts required to repay amounts then due and payable to the SPE’s creditors may be released to us and subsequently used by us (including to pay other

The SPE’s creditors under the 2020 Receivables Facility have legal recourse to the transferred retail installment contract receivables owned by the SPE, and to us for certain performance and operational obligations relating to the 2020 Receivables Facility, but do not have any recourse to us (other than the SPE) for the payment of principal and interest on the advances under the 2020 Receivables Facility.

Below is a summary of significant amendments to the 2020 Receivables Facility since 2023:

Changed the benchmark rate from 1-month LIBOR to Daily SOFR, extended the scheduled termination date for the uncommitted revolving period from October 2022 to May 2023, and amended certain other terms to increase the advance rate on pledged collateral.

• March 2023:

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

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

• March 2024 - The Company amended the agreement governing the 2020 Receivables Facility, pursuant to which the uncommitted revolving period was extended from March 2024 to April 2024.

• April 2024 - The Company further amended the agreement governing the 2020 Receivables Facility, pursuant to which, among other things, the borrowing capacity was increased from $500 million to $550 million and the uncommitted revolving period was extended from April 2024 to April 2025.

In addition, proceeds and repayments from the receivables facility include the impact of $32 million from the amendments described above.

We service the transferred retail installment contract receivables and are responsible for ensuring related collections are remitted to a segregated account in the SPE’s name.

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The covenant is tested if the outstanding loans under the First Lien Revolving Credit Facility, subject to certain exceptions, exceed 30% of the total commitments under the First Lien Revolving Credit Facility at the testing date (i.e., the last day of any fiscal quarter).

We are also subject to a financial maintenance covenant under the Term Loan A Facility credit agreement, which requires the borrowers under Term Loan A Facility to comply as of the last day of each fiscal quarter with a specified maximum consolidated net first lien leverage ratio.

As of December 31, 2024, we were in compliance with all financial covenant and other maintenance tests for all our debt obligations, and we do not believe there is a material risk of future noncompliance with our financial covenant and other maintenance tests.

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Revenue Recognition

We generate revenue through contractual monthly recurring fees received for monitoring and related services provided to customers as well as the sale and installation of security and solar systems.

We allocate transaction price to each performance obligation based on relative standalone selling price, which is determined using observable internal and external pricing, profitability, and certain operational metrics.

We generate revenue through contractual monthly recurring fees received for monitoring and related services provided to customers as well as the sale and installation of security systems.

Prior to the ADT Solar Exit, we also generated revenue through the sale and installation of solar systems.

We allocate the transaction price to each performance obligation in contracts with our customers using estimates of standalone selling price.

We use judgment to determine the standalone selling prices for our performance obligations.

If a standalone selling price is not directly observable, we may use other observable internal and external pricing, profitability, and certain operational metrics.

Estimated Life of Customer Relationships

A significant portion of our depreciation and intangible asset amortization is based on the expected life of our customer relationships.

A significant portion of our depreciation and amortization is based on the expected life of our customer relationships.

We periodically perform lifing studies to (i) estimate the expected life of our customer relationships and the attrition pattern of our customers;

(ii) establish the amortization rates of our customer account pools discussed below in order to reflect the pattern of future benefit;

(ii) establish the amortization rates of our customer account pools discussed below in order to reflect the pattern of future economic benefit;

and (iii) assess the continued reasonableness of our existing depreciation and amortization policies.

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Therefore, to align our depreciation and amortization to the pattern in which the related economic benefits are consumed, we use an accelerated method that best matches the future amortization cost with the estimated revenue stream from these customer pools.

Subscriber System Assets and Deferred Subscriber Acquisition Costs - Subscriber system assets and any related deferred subscriber acquisition costs resulting from customer acquisitions are accounted for on a pooled basis based on the month and year of acquisition.

Subscriber System Assets and Deferred Subscriber Acquisition Costs - Subscriber system assets and any related deferred subscriber acquisition costs are accounted for on a pooled basis based on the month and year of acquisition.

We depreciate and amortize these assets using an accelerated method over the estimated life of the customer relationship, which is 15 years, using an average declining balance rate of approximately 250% that converts to straight-line methodology when the resulting charge is greater than that from the accelerated method.

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These assets are accounted for on a pooled basis based on the month and year of acquisition.

The accelerated method for amortizing these contracts utilizes an average declining balance rate of approximately 300% and converts to straight-line methodology when the resulting amortization charge is greater than that from the accelerated method, resulting in an average amortization of approximately 65% of the pool within the first five years, 25% within the second five years, and 10% within the final five years.

Based on the results of our lifing studies, we amortize our pooled contracts with customers using an accelerated method over the estimated life of the customer relationship, which is generally 15 years using an average declining balance rate of approximately 300% that converts to straight-line methodology when the resulting amortization charge is greater than that from the accelerated method.

This results in an average amortization of approximately 65% of the pool within the first five years, 25% within the second five years, and 10% within the final five years.

The accelerated methods and estimated lives used to calculate depreciation and amortization expense have not changed during the periods presented.

Additionally, these estimates remain relatively consistent year over year due to the large and homogenous nature of our customer pools.

Significant changes in our business model, such as a reduction in the number of customers under multi-year contracts, or a prolonged shift in our attrition patterns, could impact the expected life of our customer pools.

There were no material impacts to these accelerated methods and estimated lives as a result of the Commercial Divestiture.

Goodwill and indefinite-lived intangible assets (as discussed below) are not amortized and are tested for impairment at least annually as of the first day of the fourth quarter of each year and more often if an event occurs or circumstances change which indicate it is more-likely-than-not that fair value is less than carrying amount.

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Under a quantitative approach, we estimate the fair value of a reporting unit and compare it to its carrying amount.

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

CSB - On October 1, 2023, we completed our annual goodwill impairment test by quantitatively testing the goodwill assigned to the CSB reporting unit.

Based on the results of the quantitative test, we concluded that the fair value of the CSB reporting unit substantially exceeds its carrying value.

We estimated the fair value of our CSB reporting unit using the income approach, which discounts projected cash flows using market participant assumptions.

The income approach includes significant assumptions including, but not limited to, forecasted revenue, operating profit margins, Adjusted EBITDA margins, operating expenses, cash flows, perpetual growth rates, and

discount rates.

If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized.

On October 1, 2024, we completed our annual goodwill impairment test by qualitatively testing the goodwill assigned to the Company’s reporting unit.

Based on the results of the qualitative test, we concluded that it is more likely than not that the fair value of the Company’s reporting unit exceeds its carrying value and no impairment was recognized.

In prior years’ quantitative impairment tests, we estimated the fair value of the reporting unit using the income approach, which discounts projected cash flows using market participant assumptions.

In developing these assumptions, we rely on various factors including operating results, business plans, economic projections, anticipated future cash flows, and other market data.

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As a result, there are inherent uncertainties related to these judgments and factors in applying them to the goodwill impairment tests.

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

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

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

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

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

The Company previously recorded goodwill impairment charges associated with the Solar reporting unit, which are now presented in income (loss) from discontinued operations, net of tax.

Indefinite-Lived Intangible Assets

As of December 31, 2023, our only indefinite-lived intangible asset is the ADT trade name, which has a carrying value of $1.3 billion and was recognized in connection with the ADT Acquisition in May 2016.

When performing a quantitative assessment, the fair value of the ADT trade name is determined under a relief from royalty method, which is an income approach that estimates the cost savings that accrue to us that we would otherwise have to pay in the form of royalties or license fees on revenue earned through the use of the asset.

As of December 31, 2024, our only indefinite-lived intangible asset is the ADT trade name, which has a carrying value of $1.3 billion.

The ADT trade name was acquired in connection with the ADT Acquisition in May 2016.

When performing a quantitative impairment test, the fair value of the ADT trade name is determined using a relief from royalty method, which is an income approach that estimates the cost savings that accrue to us that we would otherwise have to pay in the form of royalties or license fees on revenue earned through the use of the asset.

The utilization of the relief from royalty method requires us to make significant assumptions including revenue growth rates, the implied royalty rate, and the discount rate.

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Business Combinations

We account for business acquisitions under the acquisition method of accounting.

We account for the acquisitions of businesses using the acquisition method of accounting.

The assets acquired and liabilities assumed in connection with business acquisitions are recorded at the date of acquisition at their estimated fair values, with any excess of the purchase price over the estimated fair values of the net assets acquired recorded as goodwill.

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Accordingly, we may engage third-party valuation specialists to assist in these determinations.

The fair value estimates are based on available information as of the acquisition date and assumptions deemed reasonable by management but are inherently uncertain.

The fair value estimates are based on information available as of the acquisition date and assumptions deemed reasonable by management but are inherently uncertain.

Customer Relationships - Customer relationships acquired as part of business acquisitions are generally amortized over a period of up to 15 years based on management estimates about the amounts and timing of estimated future revenue from customer accounts and average customer account life that existed at the time of the related business acquisition.

The majority of our

customer relationships acquired in business combinations that originated from the Formation Transactions and the ADT Acquisition were fully amortized during 2023.

The majority of our customer relationships acquired in business combinations that originated from the Formation Transactions and the ADT Acquisition were fully amortized during 2023.

Dealer Relationships - Dealer relationships originated from the Formation Transactions and the ADT Acquisition and are primarily amortized on a straight-line basis over 19 years based on management estimates about the longevity of the underlying dealer network and the attrition of those respective dealers that existed at the time of the related business acquisition.

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In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence, including our past operating results, the existence of cumulative losses in the most recent years, and our forecast of future taxable income.

In estimating future taxable income, we develop assumptions related to the amount of future pre-tax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies.

In estimating future taxable income, we develop assumptions related to the amount of future pre-tax operating income, the timing and amount of the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies.

These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage our underlying businesses.

We recognize positions taken or expected to be taken in a tax return in the consolidated financial statements when it is more-likely-than-not (i.e., a likelihood of more than 50%) that the position would be sustained upon examination by tax authorities.

A recognized tax position is then measured at the largest amount of benefit with greater than 50% likelihood of being realized upon ultimate settlement.

We recognize positions taken or expected to be taken in a tax return in the consolidated financial statements when it is more-likely-than-not that the position would be sustained upon examination by tax authorities.

A recognized tax position is then

measured at the largest amount of benefit with greater than 50% likelihood of being realized upon ultimate settlement.

We record liabilities for positions that have been taken but do not meet the more-likely-than-not recognition threshold.

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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 7. Management’s Discussion and Analysis