What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2025-02-27 compared with 2024-02-28 · 585 added, 629 removed, 1759 unchanged (41% of the section changed)

13 unchanged sentences

There were no changes in our internal control over financial reporting identified in our management’s evaluation pursuant to Rules 13a-15(d) and 15d-15(d) of the Exchange Act during the three months ended December 31, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

During 2023, ADT began a multi-year IT transformation project by which we will be migrating much of ADT’s infrastructure to the cloud.

The initiative includes certain aspects of our customer relationship management and enterprise resource planning systems and will result in changes to our processes and procedures which, in turn, will result in changes to our internal control over financial reporting.

To date, the transformation efforts have not materially affected our internal control over financial reporting.

During 2023, ADT began a multi-year IT transformation project by which we are migrating much of ADT’s infrastructure to the cloud.

The initiative includes certain aspects of our customer relationship management and enterprise resource planning systems.

In 2024, we nationally launched our customer relationship management system for our residential pro-install customers, which resulted in changes to our processes and procedures as well as to our ICFR;

however, we concluded that this launch has not currently materially affected our ICFR.

In addition, we began the transition to our new enterprise resource planning system during 2024.

This transition will be completed in phases over multiple years.

OTHER INFORMATION.

19 unchanged sentences

42,127,494 $ 6.97 45,587,230

Equity compensation plans not approved by stockholders — —

Total 44,060,599 48,457,262

3 unchanged sentences

(2) Column (a) includes approximately (i) 25 million shares of Common Stock that may be issued upon the exercise of service-based stock options, (ii) 8 million shares of Common Stock that may be issued upon the exercise of performance-based stock options and (iii) 8 million shares of Common Stock that may be issued upon the vesting of service-based RSUs.

The weighted-average exercise price in column (b) is inclusive of the outstanding RSUs and RSAs, both of which can result in the issuance of shares for no consideration.

Excluding the RSUs and RSAs, the weighted-average exercise price is equal to $9.40.

The weighted-average exercise price in column (b) is inclusive of outstanding RSUs, which results in the issuance of shares for no consideration.

Excluding RSUs, the weighted-average exercise price is equal to $9.03.

Column (c) includes an additional 50 million shares that were authorized for issuance during 2024 as disclosed on Form S-8 filed with the SEC on February 14, 2025.

Apollo Margin Loan Agreement

As of October 3, 2019, certain investment funds directly or indirectly managed by Apollo (the “Apollo Funds”), the Company’s controlling stockholder, informed the Company that they have pledged all of their shares of the Company’s Common Stock, which as of the date of this Annual Report amounted to 498,300,366 shares, pursuant to a margin loan agreement and related documentation, as thereafter amended from time to time, on a non-recourse basis.

Apollo has informed the Company that the loan to value ratio of the margin loan on February 20, 2024 was equal to approximately 36.85%.

Apollo has also informed the Company that the margin loan agreement contains customary default provisions and that in the event of a default under the margin loan agreement the secured parties may foreclose upon any and all shares of the Company’s Common Stock pledged to them.

As of October 3, 2019, certain investment funds directly or indirectly managed by Apollo (the “Apollo Funds”), informed the Company that they have pledged all of their shares of the Company’s Common Stock, which as of December 31, 2024, amounted to 359,150,366 shares, pursuant to a margin loan agreement and related documentation, as thereafter amended from time to time, on a non-recourse basis.

Additionally, the loan to value ratio of the margin loan was equal to approximately 28.7%.

The margin loan agreement contains customary default provisions and that in the event of a default under the margin loan agreement the secured parties may foreclose upon any and all shares of the Company’s Common Stock pledged to them.

Certain members of the Company’s executive team and certain employees of the Company were entitled to receive their share of the margin loan proceeds (based on their share ownership of the Apollo Funds) at such times as Apollo received its proceeds.

4 unchanged sentences

Except for the foregoing, the Company is not a party to the margin loan agreement and related documentation and does not have, and will not have, any obligations thereunder.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

The information required by this Item 13 “Certain Relationships and Related Transactions and Director Independence” is incorporated herein by reference from our Proxy Statement.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information required by this Item 14 “Principal Accountant Fees and Services” is incorporated herein by reference from our Proxy Statement.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

The information required by this Item 13 “Certain Relationships and Related Transactions and Director Independence” is incorporated herein by reference from our Proxy Statement.

EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.

14 unchanged sentences

Amended and Restated Certificate of Incorporation of ADT Inc.

8-K 3.1 9/17/2020

3.1 9/17/2020

Certificate of Amendment to the Amended and Restated Certificate of Incorporation of ADT Inc.

Amended and Restated Bylaws of ADT Inc.

19 unchanged sentences

10-K 4.16 3/10/2020

Exhibit Number Incorporated by Reference

Exhibit Description Form Exhibit Filing Date

Indenture, dated as of May 2, 2016, by and between Prime Security One MS, Inc.

1 unchanged sentence

S-1 4.14 12/21/2017

Exhibit Number Incorporated by Reference

Exhibit Description Form Exhibit Filing Date

First Supplemental Indenture, dated as of May 2, 2016, by and among The ADT Corporation, the guarantors party thereto and the Wells Fargo Bank, National Association

36 unchanged sentences

10-Q 4.6 5/6/2022

Fourth Supplemental Indenture, dated as of January 7, 2022, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., Compass Solar Group, LLC, Marc Jones Construction, L.L.C., Buildpro, L.L.C., Energypro LLC and Wells Fargo Bank, National Association

10-Q 4.7 5/6/2022

Exhibit Number Incorporated by Reference

Exhibit Description Form Exhibit Filing Date

10-Q 4.7 5/6/2022

Fifth Supplemental Indenture, dated as of April 28, 2022, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., ADT Innovation LLC and Wells Fargo Bank, National Association

14 unchanged sentences

10-K 4.24 3/1/2022

Incremental Assumption and Amendment Agreement No.

11, dated as of July 2, 2021, by and among Prime Security Services Holdings, LLC, Prime Security Services Borrower, LLC, The ADT Security Corporation, the subsidiary loan parties party thereto, the lenders and issuing banks party thereto and Barclays Bank PLC, as administrative agent

8-K 10.1 7/6/2021

Subsidiary Guarantee Agreement (First Lien), dated July 1, 2015, among the Subsidiaries of Prime Security Services Borrower, LLC named therein and Credit Suisse AG, Cayman Islands Branch, as Collateral Agent

92 unchanged sentences

10-K 10.40 2/28/2023

Stockholders Agreement, dated as of December 14, 2018, by and between the ADT Inc.

Amended and Restated Stockholders Agreement, dated as of December 14, 2018, by and between the ADT Inc.

and Prime Security Services TopCo Parent, L.P.

18 unchanged sentences

and Google LLC

Form of Indemnification Agreement by and between the Company and each of its Directors and Executive Officers

10-Q 10.34 8/5/2020

Amended and Restated Employment Agreement, dated December 19, 2017, between The ADT Security Corporation (together with any of its subsidiaries and Affiliates) and Donald Young

2 unchanged sentences

10-Q 10.27 5/7/2019

Amended and Restated Employment Agreement, dated December 19, 2017, between The ADT Security Corporation (together with any of its subsidiaries and Affiliates) and Daniel M.

S-1 10.28 12/21/2017

Amended and Restated Employment Agreement, dated December 19, 2017, between ADT LLC, (together with any of its subsidiaries and Affiliates) and Jeffrey Likosar

1 unchanged sentence

Employment Offer Letter, dated February 1, 2019, between ADT LLC (with its Affiliates and Successors) and David Smail

Employment Offer Letter, dated December 8, 2022, between ADT LLC (with its Affiliates and Successors) and Wayne Thorsen

2018 Omnibus Incentive Plan

3 unchanged sentences

10-Q 10.33 8/6/2019

Second Amendment to ADT Inc.

2018 Omnibus Incentive Plan, dated May 22, 2024

Form of Restricted Stock Unit Award Agreement for use under the ADT Inc.

13 unchanged sentences

S-1/A 10.36 1/8/2018

Exhibit Number Incorporated by Reference

Exhibit Description Form Exhibit Filing Date

2018 Omnibus Incentive Plan Restricted Stock Unit Non-Employee Director Award Agreement

6 unchanged sentences

10-Q 10.48 5/7/2020

Exhibit Number Incorporated by Reference

Exhibit Description Form Exhibit Filing Date

Form of Restricted Stock Unit Award Agreement for use under the ADT Inc.

40 unchanged sentences

SC TO-I (d)(24) 9/12/2022

Form of Non-Qualified Option Award Agreement for use under the ADT Inc.

2018 Omnibus Incentive Plan, effective as of March 8, 2024

Form of Indemnification Agreement by and between the Company and each of its Directors and Executive Officers

Commitment Letter by and among Prime Security Services Borrower, LLC, The ADT Security Corporation, Deutsche Bank Securities Inc., Deutsche Bank AG New York Branch, BNP Paribas, Mizuho Bank, Ltd., MUFG Bank, Ltd., Citizens Bank, N.A., Citigroup Global Markets Inc., Morgan Stanley Senior Funding, Inc., Royal Bank of Canada, Barclays Bank PLC, ING Capital LLC and Credit Suisse AG, New York Branch, dated as of September 15, 2022

3 unchanged sentences

8-K 10.1 10/13/2022

Amended and Restated Management Investor Rights Agreement

10-K 10.39 3/15/2018

Amendment No.

1 to Amended and Restated Management Investor Rights Agreement, dated as of December 9, 2022, by Prime Security Services TopCo Parent

8-K 10.1 12/15/2022

Term L oan Credit Agreement , by and among Prime Security Services Holdings , LLC , as Holdings, Prime Security, Services Borrower, LLC and the ADT Security Corporation, as borrowers, Barclays Bank PLC, as Administrative Agent, and the lenders par ty thereto, as dated as of March 14, 2023

Amended and Restated Management Investor Rights Agreement, dated as of January 23, 2018, by and among ADT Inc., Prime Security Services TopCo Parent and the Holders party thereto

10-K 10.39 3/15/2018

Incremental Assumption and Amendment Agreement N o.1, by an d am ong Prime Security Holdings, LLC, as Holdings, Prime Security Services Borrower, LLC and the ADT security Corporation, as borrowers , the subsidiary loan parties party thereto, Barclays Bank PLC, as Administrative Agent, and the lenders party ther eto, dated as of March 14, 2023

Amendment No.1 to Amended and Restated Management Investor Rights Agreement, dated as of December 9, 2022, by and among ADT Inc., Prime Security Services TopCo Parent and the Holders party thereto

8-K 10.1 12/15/2022

Amendment Agreement No.

12, dated as of May 10, 2023, by and between Prime Security Services Borrower, LLC and Barclays Bank PLC, as administrative agent

10-Q 10.4 8/8/2023

Incremental Assumption and Amendment Agreement No.1 3 , dated as of October 13,2023, by and among Prime Security Holdings, LLC, as Holdings, Prime Security Services Borrower, LLC and the ADT security Corporation, as borrowers, the subsidiary loan parties party thereto, Barclays Bank PLC, as Administrative Agent

Amendment No.2 to Amended and Restated Management Investor Rights Agreement, dated as of August 1, 2024, by and among ADT Inc., Prime Security Services TopCo Parent and the Holders party thereto

Term Loan Credit Agreement, by and among Prime Security Services Holdings, LLC, as Holdings, Prime Security, Services Borrower, LLC and the ADT Security Corporation, as borrowers, Barclays Bank PLC, as Administrative Agent, and the lenders party thereto, as dated as of March 14, 2023

8-K 10.1 3/15/2023

Incremental Assumption and Amendment Agreement No.

18, dated as of December 4, 2024, by and among Prime Security Services Holdings, LLC, Prime Security Services Borrower, LLC, The ADT Security Corporation, the subsidiary loan parties party thereto, the lenders party thereto and Barclays Bank PLC, as administrative agent.

Receivables Financing Agreement, among Compass Solar Group, LLC, ADT Solar Finance LLC and Mizuho Bank, Ltd., dated as of August 2, 2023.

Sixth Amendment to the Receivables Financing Agreement, among ADT Finance LLC, Mizuho Bank, Ltd., ADT LLC, MUFG Bank, Ltd., Starbird Funding Corporation, and BNP Paribas, dated as of April 10, 2024

Exhibit Number Incorporated by Reference

Exhibit Description Form Exhibit Filing Date

Fourth Amendment to the Receivables Financing Agreement, among ADT Finance LLC, Mizuho Bank, Ltd., ADT LLC, MUFG Bank, Ltd., Starbird Funding Corporation, and BNP Paribas, dated as of March 29, 2023

8-K 10.1 3/30/2023

Insider Trading Policy

Subsidiaries of ADT Inc.

22 unchanged sentences

(Principal Executive Officer)

/s/ Jeffrey Likosar Chief Transformation Officer and President,

Corporate Development and Interim Chief

Financial Officer

/s/ Jeffrey Likosar President, Corporate Development and Transformation, and Chief Financial Officer

(Principal Financial Officer)

6 unchanged sentences

Marques Coleman

/s/ Stephanie Drescher Director

Stephanie Drescher

/s/ Thomas M.

Gartland Director

/s/ Tracey R.

2 unchanged sentences

Benjamin Honig

/s/ Daniel Houston Director

Daniel Houston

/s/ William M.

3 unchanged sentences

Solomon Director

/s/ Danielle Tiedt Director

Danielle Tiedt

/s/ Matthew E.

Winter Director

/s/ Suzanne Yoon Director

/s/ Sigal Zarmi Director

19 unchanged sentences

Condensed Financial Information of Registrant

Selected Quarterly Financial Data

Selected Quarterly Financial Data (Unaudited)

Report of Independent Registered Public Accounting Firm

29 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Interim Goodwill Impairment Assessments — Solar Reporting Unit

As described in Note 7 to the consolidated financial statements, the Company’s goodwill balance was $4.9 billion as of December 31, 2023, and the goodwill associated with the Solar reporting unit was zero as a result of impairments recorded during 2023.

Goodwill is tested by management 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 the fair value of a reporting unit is less than its carrying amount.

If management elects to bypass the qualitative assessment for any reporting unit, or if a qualitative assessment indicates it is more-likely-than-not that the estimated fair value of a reporting unit is less than its carrying amount, management proceeds to a quantitative approach.

Under a quantitative approach, management estimates the fair value of a reporting unit and compares 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.

As a result of triggering events during the first, second, and third quarters of 2023, management performed interim impairment quantitative assessments on the Solar reporting unit and recorded goodwill impairment charges of $242 million, $181 million, and $88 million, respectively.

These impairments were a result of continued deterioration of industry conditions and macroeconomic decline, as well as Solar’s underperformance of operating results in successive quarters relative to expectations, and during the third quarter of 2023, as a result of managements then recent plan to close a significant number of branches.

Management estimates the fair value of its reporting unit using the income approach, which discounts projected cash flows using market participant assumptions.

The income approach includes significant assumptions including forecasted revenue, operating profit margins, adjusted EBITDA margins, operating expenses, cash flows, perpetual growth rates, and discount rates.

The principal considerations for our determination that performing procedures relating to the interim goodwill impairment assessments of the Solar reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of the Solar reporting unit;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to forecasted revenue, operating profit margins, operating expenses, and discount rate;

(iii) the audit effort involved the use of professionals with specialized skill and knowledge;

and (iv) as previously disclosed by management, a material weakness existed during the year related to this matter.

Discontinued Operations – Solar Business

As described in Note 4 to the consolidated financial statements, on January 19, 2024, the Company’s board of directors approved a plan to fully exit the solar business (the “ADT Solar Exit”).

As of June 30, 2024, substantially all operations of the Solar Business had ceased, and the solar business is presented as a discontinued operation.

As a result, the Company presented total liabilities of discontinued operations of $47.7 million as of December 31, 2024 and a loss from discontinued operations, net of tax of $110.1 million for the year ended December 31, 2024.

The principal considerations for our determination that performing procedures relating to the discontinued operations of the solar business is a critical audit matter are a high degree of auditor subjectivity and effort in performing procedures and evaluating audit evidence related to management’s assessment, classification, timing and disclosure of the discontinued operations.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the valuation of the Solar reporting unit.

These procedures also included, among others (i) testing management’s process for developing the fair value estimates of the Solar reporting unit;

(ii) evaluating the appropriateness of the income approach used by management;

(iii) testing the completeness and accuracy of underlying data used in the income approach;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to forecasted revenue, operating profit margins, operating expenses, and discount rate.

Evaluating management’s assumptions related to forecasted revenue, operating profit margins, and operating expenses involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the Solar reporting unit;

(ii) the consistency with external market and industry data;

and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the income approach and (ii) the reasonableness of the discount rate assumption.

These procedures included testing the effectiveness of controls related to management’s discontinued operations assessment, including controls related to management’s classification, timing, and disclosure of the discontinued operations in the Company’s consolidated financial statements.

These procedures also included, among others, (i) evaluating management’s assessment that the ADT Solar Exit was a discontinued operation;

(ii) testing the classification of amounts included in discontinued operations, including agreeing such amounts to the Company’s historical accounting records;

(iii) evaluating the sufficiency of the disclosures in the consolidated financial statements;

and (iv) evaluating the reasonableness of the timing of management’s recognition of the discontinued operation.

Evaluating the reasonableness of the timing of the discontinued operations involved, (i) evaluating management’s plan to wind down the solar business, including the reasonableness of projected exit charges;

(ii) testing the completeness and accuracy of incurred exit charges;

and (iii) evaluating whether substantially all operations ceased as of June 30, 2024.

/s/ PricewaterhouseCoopers LLP

11 unchanged sentences

Inventories, net 196,731 201,394

Work-in-progress 6,427 11,983

Prepaid expenses and other current assets 210,613 242,192

Current assets held for sale — 469,923

Current assets of discontinued operations — 60,957

Total current assets 1,004,920 1,004,694

5 unchanged sentences

Other assets 735,319 699,231

Noncurrent assets held for sale — 885,514

Noncurrent assets of discontinued operations — 43,279

Total assets $ 16,050,957 $ 15,964,094

5 unchanged sentences

Accrued expenses and other current liabilities 634,904 556,114

Current liabilities held for sale — 298,973

Current liabilities of discontinued operations 31,763 79,611

Total current liabilities 1,263,780 1,480,208

3 unchanged sentences

Other liabilities 224,384 219,069

Noncurrent liabilities held for sale — 106,270

Noncurrent liabilities of discontinued operations 15,889 20,572

Total liabilities 12,250,156 12,175,448

20 unchanged sentences

Security installation, product, and other 604,969 473,826 328,856

Solar installation, product, and other 329,835 786,426 47,351

Total revenue 4,898,446 4,652,824 4,381,904

2 unchanged sentences

Security installation, product, and other 229,728 147,314 102,118

Solar installation, product, and other 256,784 501,710 34,758

Total cost of revenue 847,114 751,682 698,782

2 unchanged sentences

Merger, restructuring, integration, and other 24,124 38,959 9,937

Goodwill impairment 511,176 200,974 —

Operating income (loss) 1,208,064 1,178,961 725,094

56 unchanged sentences

Issuance of common stock, net of expenses 140,681 — 1,407 — 1,188,488 — — 1,189,895

Dividends, including dividends reinvested in common stock — — — — 4 ( 119,154 ) — ( 119,150 )

Repurchases of common stock ( 133,333 ) — ( 1,333 ) — ( 1,093,334 ) — — ( 1,094,667 )

Dividends — — — — — ( 127,835 ) — ( 127,835 )

Share-based compensation expense — — — — 66,566 — — 66,566

Contingent forward purchase contract — — — — ( 41,938 ) — — ( 41,938 )

Transactions related to employee share-based compensation plans and other 7,924 — 79 — ( 290 ) ( 1,817 ) — ( 2,028 )

2 unchanged sentences

Other comprehensive income (loss), net of tax — — — — — — 31,038 31,038

Issuance of common stock, net of expenses 140,681 — 1,407 — 1,188,488 — — 1,189,895

Repurchases of common stock ( 133,333 ) — ( 1,333 ) — ( 1,093,334 ) — — ( 1,094,667 )

Dividends — — — — — ( 129,025 ) — ( 129,025 )

Share-based compensation expense — — — — 51,137 — — 51,137

Contingent forward purchase contract — — — — ( 41,938 ) — — ( 41,938 )

Transactions related to employee share-based compensation plans and other 5,334 — 53 — ( 18,591 ) ( 2,123 ) — ( 20,661 )

4 unchanged sentences

Share-based compensation expense — — — — 48,613 — — 48,613

Repurchases of common stock (including excise tax) ( 36,000 ) — ( 360 ) — ( 346,576 ) — — ( 346,936 )

Transactions related to employee share-based compensation plans and other 5,158 — 52 — 1,756 ( 2,111 ) — ( 303 )

25 unchanged sentences

Inventories and work-in-progress 25,072 24,732 ( 67,391 )

Other assets ( 109,839 ) ( 29,144 ) ( 9,291 )

Accounts payable ( 109,330 ) ( 111,529 ) 8,662

10 unchanged sentences

Purchases of property and equipment ( 163,805 ) ( 176,353 ) ( 176,660 )

Acquisition of businesses, net of cash acquired — ( 13,095 ) ( 163,503 )

Sales of businesses, net of cash sold 1,609,347 26,749 1,807

Proceeds (payments) from sale of business, net of cash sold ( 17,506 ) 1,609,347 26,749

Proceeds (payments) from interest rate swaps ( 8,268 ) — —

Other investing, net 3,106 28,672 ( 26,539 )

22 unchanged sentences

Business and Organization

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

As discussed below, on October 2, 2023, the Company divested its Commercial Business (as defined below), which provided security and other solutions to commercial customers;

and in January 2024, the Company announced its exit from the residential solar business, which provided residential solar and energy storage solutions since the acquisition of ADT Solar in 2021 (the “ADT Solar Acquisition”).

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

The Company primarily conducts business under the ADT brand name.

The Company’s common stock, par value of $ 0.01 per share (“Common Stock”), trades on the New York Stock Exchange under the symbol “ADT” since its initial public offering (“IPO”) in January 2018.

was incorporated in the State of Delaware in May 2015 as a holding company with no assets or liabilities.

3 unchanged sentences

In May 2016, the Company acquired The ADT Security Corporation (formerly named The ADT Corporation) (“The ADT Corporation”) (the “ADT Acquisition”).

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

On October 2, 2023, the Company divested its Commercial Business (as defined and discussed below);

and as of June 30, 2024, substantially all operations of the Solar Business (as defined and discussed below) had ceased.

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

(“Ultimate Parent”).

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

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

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

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

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

Following a registered secondary offering of the Company’s Common Stock by certain Apollo affiliates (and the Company’s concurrent repurchase from the underwriters of 15 million shares of Common Stock that were the subject of the offering), including the exercise of the underwriters’ overallotment option which closed on March 19, 2024, Apollo beneficially owns less than 50 % of the Company’s outstanding common stock, which includes Common Stock and Class B common stock (“Class B Common Stock”) combined, and less than 50 % of the Company’s outstanding Common Stock, and the Company ceased to be a “controlled company” under the New York Stock Exchange (the “NYSE”) rules.

Refer to Note 16 “Related Party Transactions” for more information regarding all of Apollo’s registered secondary offerings of the Company’s Common Stock (collectively, the “Offerings”).

Basis of Presentation

5 unchanged sentences

and all intercompany transactions have been eliminated.

The Company uses the equity method of accounting to account for an investment in which it has the ability to exercise significant influence but does not control.

The Company used the equity method of accounting to account for an investment in which it had the ability to exercise significant influence but does not control.

This investment was disposed of during 2023.

As discussed below under the heading “Commercial Divestiture,” beginning in the third quarter of 2023, the Company presented its Commercial Business as a discontinued operation.

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

Commercial Divestiture

On August 7, 2023, ADT, Iris Buyer LLC, a Delaware limited liability company and affiliate of GTCR LLC (“GTCR”), and, solely for certain purposes set forth in the Commercial Purchase Agreement (as defined below), Fire & Security Holdings, LLC (“F&S Holdings”), a Delaware limited liability company and an indirect, wholly-owned subsidiary of ADT, entered into an Equity Purchase Agreement (the “Commercial Purchase Agreement”) pursuant to which GTCR agreed to acquire all of the issued and outstanding equity interests of F&S Holdings, which directly or indirectly held all of the issued and outstanding equity interests in the subsidiaries of ADT that operated ADT’s commercial business (the “Commercial Business”) (the “Commercial Divestiture”).

On October 2, 2023, the Company completed the Commercial Divestiture for a total purchase price of approximately $ 1,613 million in cash, subject to customary post-closing adjustments, and received net proceeds of approximately $ 1,585 million, excluding transaction costs of $ 22 million.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The change is reflected in 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.

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

Refer to Note 5 “Divestitures” for additional information.

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

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

On January 19, 2024, after a strategic review of the business and continued macroeconomic and industry pressures, the Company’s board of directors (the “Board of Directors”) 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”).

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

Use of Estimates

2 unchanged sentences

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

The Company has historically reported results for three operating and reportable segments organized based on customer type:

Consumer and Small Business (“CSB”), Commercial, and Solar.

As a result of the Commercial Divestiture, results of the Commercial Business are classified as discontinued operations and thus excluded from both continuing operations and segment results for all periods presented.

Accordingly, the Company reports its results in two operating and reportable segments, CSB and Solar, organized based on customer type, with the change reflected in all periods presented.

The Company’s segments are based on the manner in which the Company’s Chief Executive Officer, who is the chief operating decision maker (the “CODM”), evaluates performance and makes decisions about how to allocate resources.

• CSB - The CSB segment primarily includes the sale, installation, servicing, and monitoring of integrated security and automation systems and other related offerings to owners and renters of residential properties, small business operators, and other individual consumers, as well as general corporate costs and other income and expense items not included in another segment.

• Solar - The Solar segment primarily includes the sale and installation of solar systems and related solutions and services to residential homeowners who purchase solar and energy storage solutions, energy efficiency upgrades, and roofing services, as well as certain dedicated corporate and other costs.

Refer to Note 3 “Segment Information” for additional information on the Company’s segments.

Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Vintage Disclosures for Financing Receivables - ASU 2022-02, Financial Instruments — Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures , requires reporting entities to disclose current-period gross write-offs by year of origination for financing receivables, among other requirements.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

This disclosure-only guidance became effective January 1, 2023.

The impact to the Company’s consolidated financial statements was not material.

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

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

Refer to Note 3 “Segment Information.”

Discontinued Operations

The Company’s exit in 2024 from its residential solar business (the “Solar Business”) (the “ADT Solar Exit”) and the sale in 2023 of its former commercial business (the “Commercial Business”) represented strategic shifts that had major effects on the Company’s operations and financial results.

Accordingly, the results of operations and financial position of the Solar and Commercial Businesses are classified as discontinued operations in the Company’s Consolidated Statements of Operations and the Company’s Consolidated Balance Sheet for all periods presented.

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

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

Refer to Note 4 “Divestitures” for additional information.

Accounting Standards Updates (“ASU”)

Recently Adopted

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

Improvements to Reportable Segment Disclosures , improves reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

In addition, the guidance, among other requirements, enhances interim disclosures, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, and provides new segment disclosure requirements for entities with a single reportable segment.

The Company adopted this guidance effective January 1, 2024, and it was applied retrospectively to all periods presented.

Refer to Note 3 “Segment Information.”

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

Disclosure of Supplier Finance Program Obligations, requires that a reporting entity who is a buyer in a supplier finance program disclose qualitative and quantitative information about its supplier finance programs, including a roll-forward of the obligations.

The Company adopted this guidance effective January 1, 2023, except the roll-forward requirement, which will be adopted effective January 1, 2024.

The Company will apply the roll-forward guidance prospectively.

The Company does not currently have any material supplier finance programs.

Recently Issued Accounting Pronouncements

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

The Company adopted this guidance effective January 1, 2023, except the roll-forward requirement, which was adopted effective January 1, 2024.

The Company does not currently have any material supplier finance programs, and the guidance will be applied prospectively to any future material arrangements.

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

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

This guidance will be adopted effective January 1, 2024, and will be applied prospectively.

The Company is currently evaluating the impact of this guidance.

The Company adopted this guidance effective January 1, 2024.

This guidance did not impact the Company.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recently Issued

Disaggregation of Income Statement Expenses - ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses , requires additional disclosure in the footnotes at each interim and annual reporting period about specific types of expenses included in the expense captions presented on the face of the statement of operations as well as additional disclosures that also include information related to selling expenses.

The guidance is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027.

The requirements will be applied prospectively with the option for retrospective application.

Early adoption is permitted.

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

Improvements to Income Tax Disclosures - ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , focuses on improvements to income tax disclosures, primarily related to the rate reconciliation and income taxes paid information.

In addition, the update includes certain other amendments to improve the effectiveness of income tax disclosures.

The guidance is effective for annual periods beginning after December 15, 2024, and should be applied prospectively, with retrospective application also permitted.

Early adoption is permitted.

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

Disclosure Improvements - ASU 2023-06, Disclosure Improvements:

2 unchanged sentences

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

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

Improvements to Reportable Segment Disclosures , improves reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

The amendments in this guidance are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

This guidance should be applied retrospectively to all periods presented.

Early adoption is permitted.

The Company is currently evaluating the impact of this guidance.

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

Improvements to Income Tax Disclosures , focuses on improvements to income tax disclosures, primarily related to the rate reconciliation and income tax paid information.

In addition, the update includes certain other amendments to improve the effectiveness of income tax disclosures.

The guidance is effective for annual periods beginning after December 15, 2024, and should be applied prospectively, with retrospective application also a permitted option.

Early adoption is permitted.

The Company is currently evaluating the impact of this guidance.

Significant Accounting Policies

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Restricted cash and restricted cash equivalents are restricted for a specific purpose and cannot be included in the general cash and cash equivalents account.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table reconciles the amounts below reported in the Consolidated Balance Sheets to the total of the same such amounts shown in the Consolidated Statements of Cash Flows:

4 unchanged sentences

Ending balance $ 204,065 $ 129,950 $ 373,580

For 2023 and 2022, restricted cash and restricted cash equivalents includes funds received, net of payments, from State Farm Fire & Casualty Company (“State Farm”) (the “Opportunity Fund”), including accrued interest, in connection with the State Farm Strategic Investment (as defined and discussed in Note 11 “Equity”).

Restricted cash and restricted cash equivalents primarily includes funds received from State Farm Fire & Casualty Company (“State Farm”) (the “Opportunity Fund”), net of payments and inclusive of interest earned, in connection with the State Farm Strategic Investment (as defined and discussed in Note 10 “Equity”).

Amounts within the Opportunity Fund are restricted for certain qualifying spend in accordance with the development agreement between State Farm and the Company (the “State Farm Development Agreement”).

Use of the funds must be agreed to by State Farm and the Company.

The remaining amount of restricted cash relates to the Company’s uncommitted receivables securitization financing agreement (the “2020 Receivables Facility”) (refer to Note 7 “Debt”).

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplementary Cash Flow Information

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$ — $ — $ 41,938

Forward share repurchase contract (4)

$ 104,175 $ — $ —

___________________

(1) Includes finance leases and interest rate swaps.

Refer to Note 8 “Derivative Financial Instruments.”

(2) 2021 relates to the ADT Solar Acquisition and 2022 includes $ 40 million related to the Delayed Shares (as defined and discussed in Note 4 “Acquisitions”) as a result of the ADT Solar Acquisition.

(3) During 2022, the Company recorded a reduction to additional paid in capital as a result of the contingent forward purchase contract in connection with the Tender Offer (as defined and discussed in Note 11 “Equity”).

The proceeds and repayments of long-term debt on the Consolidated Statements of Cash Flows include the impact of $ 230 million from the refinancing of the First Lien Term Loan due 2026 with the First Lien Term Loan due 2030 (as defined and discussed in Note 8 “Debt”).

(2) Includes $ 40 million related to the Delayed Shares (as defined and discussed in Note 10 “Equity”) as a result of the ADT Solar Acquisition.

(3) The Company recorded a reduction to additional paid in capital as a result of the contingent forward purchase contract in connection with the Tender Offer (as defined and discussed in Note 10 “Equity”).

(4) In December 2024, the Company entered into an agreement with a non-affiliate individual to repurchase 15 million shares of Common Stock at a price per share of $ 6.95 to be settled in January 2025 (refer to Note 10 “Equity”).

The Company recorded a liability and a reduction to additional paid-in capital as of December 31, 2024.

During 2024, the proceeds and repayments of long-term borrowings on the Consolidated Statements of Cash Flows include the impact of $ 704 million from amendments to the Company’s First Lien Credit Agreement (as defined and discussed in Note 7 “Debt”).

In addition, proceeds and repayments of long-term borrowings include the impact of $ 32 million from amendments to the 2020 Receivables Facility.

During 2023, the proceeds and repayments of long-term borrowings on the Consolidated Statements of Cash Flows include the impact of $ 230 million from the refinancing of the First Lien Term Loan B due 2026 with the First Lien Term Loan B due 2030 (as defined and discussed in Note 7 “Debt”).

Prepaid Expenses and Other Current Assets

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56,164 74,974

Other receivables (1)

28,835 121,225

Other current assets 82,249 104,179

Prepaid expenses and other current assets $ 210,613 $ 242,192

___________________

(1) As of December 31, 2023 and 2022, the Company recorded a liability of $ 15 million and $ 88 million, respectively, which is reflected in accrued expenses and other current liabilities and which relates to certain loans provided to customers within the Solar business that the Company may be required to repurchase from third party lenders.

Included in other receivables is the amount that the Company expects to recover if permission to operate is achieved in the event the third party lenders do require the Company to repurchase such loans.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Inventories, net

Inventories are primarily comprised of components and parts for the Company’s security and solar systems.

Inventories, net includes finished goods and work-in-progress.

Finished goods are primarily comprised of components and parts for the Company’s security systems.

The Company records inventory at the lower of cost and net realizable value.

Inventories are presented net of an obsolescence reserve.

Work-in-Progress

Finished goods are presented net of an obsolescence reserve.

Work-in-progress is primarily comprised of certain costs incurred for installations of security system equipment sold outright to customers that have not been completed as of the balance sheet date.

Work-in-progress is not material.

Property and Equipment, net

2 unchanged sentences

Repairs and maintenance expenditures are expensed when incurred.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Useful Lives:

23 unchanged sentences

Subscriber system assets, net $ 2,981,161 $ 3,005,936

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred subscriber acquisition costs represent selling expenses (primarily commissions) that are incremental to acquiring customers.

The Company records subscriber system assets and deferred subscriber acquisition costs in the Consolidated Balance Sheets as these assets represent probable future economic benefits for the Company through the generation of future monitoring and related services revenue.

Upon customer termination, the Company may retrieve such assets.

Upon customer termination, the Company may retrieve its subscriber system assets.

Subscriber system assets and any related deferred subscriber acquisition costs are accounted for on a pooled basis based on the month and year of customer acquisition and are depreciated and amortized using an accelerated method over the estimated life of the customer relationship, which is 15 years.

In order to align the depreciation and amortization of these pooled costs to the pattern in which their economic benefits are consumed, the accelerated method utilizes an average declining balance rate of approximately 250 % and converts to straight-line methodology when the resulting charge is greater than that from the accelerated method, resulting in an average charge of approximately 55 % of the pool within the first five years, 25 % within the second five years, and 20 % within the final five years.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Depreciation of subscriber system assets and amortization of deferred subscriber acquisition costs are reflected in depreciation and intangible asset amortization and selling, general, and administrative expenses, respectively, as follows:

14 unchanged sentences

Payroll-related accruals 109,078 110,941

Operating lease liabilities (see Note 15 “Leases”)

15,979 20,741

Fair value of interest rate swaps (see Note 9 “Derivative Financial Instruments”)

Opportunity Fund (see Note 10 “Equity”) 84,516 93,950

93,950 100,802

Accrued dividends 48,918 32,207

Forward share repurchase contract liability (see Note 10 “Equity”)

Other accrued liabilities 181,101 207,819

2 unchanged sentences

Advertising costs are recognized in selling, general, and administrative expenses when incurred and were $ 105 million, $ 131 million, and $ 146 million during 2024, 2023, and 2022, respectively.

Included in advertising costs during 2023 are certain joint marketing costs and reimbursements associated with the Google Success Funds as discussed in Note 14 “Commitments and Contingencies.”

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Radio Conversion Program

During 2019, the Company commenced a program to replace the 3G and Code-Division Multiple Access (“CDMA”) cellular equipment used in many of its security systems prior to the cellular network providers retiring their 3G and CDMA networks during 2022.

The program was completed in 2023, and the Company incurred a total of $ 276 million of net radio conversion costs since the inception of the program.

Radio conversion costs and radio conversion revenue are reflected in selling, general, and administrative expenses and monitoring and related services revenue, respectively, as follows:

Years Ended December 31,

(in thousands) 2023 2022 2021

Radio conversion costs $ 1,968 $ 29,766 $ 240,902

Radio conversion revenue $ 6,664 $ 28,058 $ 39,100

Included in advertising costs during 2024 and 2023 are certain joint marketing costs and reimbursements associated with the Google Success Funds as discussed in Note 13 “Commitments and Contingencies.”

Merger, Restructuring, Integration, and Other

Merger, restructuring, integration, and other represents certain direct and incremental costs resulting from acquisitions made by the Company, integration and third-party costs as a result of those acquisitions, costs related to the Company’s restructuring efforts, as well as fair value remeasurements and impairment charges on certain strategic investments.

Significant activity included in merger, restructuring, integration, and other during the periods presented includes:

During 2023, primarily relates to 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.

During 2022, merger, restructuring, integration, and other was not material.

During 2021, primarily relates to an impairment charge in CSB due to lower than expected benefits from a developed technology intangible asset.

Concentration of Credit Risks

3 unchanged sentences

Concentration of credit risk associated with the majority of the Company’s receivables from customers is limited due to the significant size of the customer base.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value of Financial Instruments

The Company’s financial instruments primarily consist of cash and cash equivalents, restricted cash and restricted cash equivalents, accounts receivable, retail installment contract receivables, accounts payable, debt, and derivative financial instruments.

The Company’s financial instruments primarily consist of cash and cash equivalents, restricted cash and restricted cash equivalents, accounts receivable, retail installment contract receivables (“RICs”), accounts payable, debt, and derivative financial instruments.

Due to their short-term and/or liquid nature, the fair values of cash, restricted cash, accounts receivable, and accounts payable approximate their respective carrying amounts.

2 unchanged sentences

Investments in money market mutual funds were $ 90 million and $ 55 million as of December 31, 2024 and December 31, 2023, respectively.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CSB Retail Installment Contract Receivables, net - The fair values of the Company’s retail installment contract receivables are determined using a discounted cash flow model and are classified as Level 3 fair value measurements.

Retail Installment Contract Receivables, net - The fair values of the Company’s RICs are determined using a discounted cash flow model and are classified as Level 3 fair value measurements.

(in thousands) Carrying

2 unchanged sentences

Long-Term Debt Instruments - The fair values of the Company’s debt instruments are determined using broker-quoted market prices, which represent quoted prices for similar assets or liabilities as well as other observable market data, and are classified as Level 2 fair value measurements.

The carrying amounts of debt outstanding, if any, under the Company’s first lien revolving credit facility (the “First Lien Revolving Credit Facility”) and its uncommitted receivables securitization financing agreement (the “2020 Receivables Facility”) approximate their fair values, as interest rates on these borrowings approximate current market rates.

The carrying amounts of debt outstanding, if any, under the Company’s first lien revolving credit facility (the “First Lien Revolving Credit Facility”) and the 2020 Receivables Facility approximate their fair values, as interest rates on these borrowings approximate current market rates.

(in thousands) Carrying

3 unchanged sentences

________________

(1) Excludes finance leases.

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

Derivative Financial Instruments - Derivative financial instruments are reported at fair value as either assets or liabilities.

3 unchanged sentences

REVENUE AND RECEIVABLES

The Company generates 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 (referred to as “systems”).

The Company generates revenue through contractual monthly recurring fees received for monitoring and related services, as well as the sale and installation of security systems.

Revenue is recognized in the Consolidated Statements of Operations net of sales and other taxes.

1 unchanged sentence

When customers terminate a monitoring contract early, contract termination charges are assessed in accordance with the contract terms and are recognized in monitoring and related services revenue when collectability is probable.

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

For CSB, the Company’s performance obligations generally include monitoring, related services (such as maintenance agreements), and the sale and installation of a security system in outright sales transactions or a material right in transactions in which the Company retains ownership of the security system.

For Solar, the Company’s performance obligations generally include the sale and installation of a solar system and may include additional performance obligations such as roofing services or the sale and installation of additional products such as batteries.

In addition to details provided below, the Company’s disaggregated revenue is presented on the face of the Consolidated Statements of Operations, which includes monitoring and related services and security installation, product, and other revenue presented for its CSB segment, as well as Solar installation, product, and other revenue.

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(i) monitoring and related services, which are recognized when these services are provided to the customer, and (ii) a material right associated with the one-time non-refundable fees incurred in connection with the initiation of a monitoring contract which the customer will not be required to pay again upon a renewal of the contract (referred to as deferred subscriber acquisition revenue).

Deferred subscriber acquisition revenue is amortized on a pooled basis over the estimated life of the customer relationship using an accelerated method consistent with the treatment of subscriber system assets and deferred subscriber acquisition costs and is reflected in security installation, product, and other revenue.

Disaggregated Revenue

Years Ended December 31,

1 unchanged sentence

2024 2023 2022

Sources of Revenue:

Recurring monthly revenue

$ 4,177,428 $ 4,069,921 $ 3,942,567

Other related services

116,049 109,077 110,481

Monitoring and related services

4,293,477 4,178,998 4,053,048

Amortization of deferred subscriber acquisition revenue

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

Solar - The Company’s performance obligations generally include the sale and installation of a solar system.

Transactions within the Solar business may also include additional performance obligations such as roofing services or the sale and installation of additional products (such as batteries).

Revenue is recognized when control over the products and services are transferred to the customer and is reflected in solar installation, product, and other revenue.

Solar revenue was not material during 2021 subsequent to the date of the ADT Solar Acquisition.

Revenue and cost of revenue from Solar equipment was $ 154 million and $ 121 million, respectively, during 2023, and $ 451 million and $ 292 million, respectively, during 2022.

The Company enters into agreements with third-party lenders to access loan products for the Company’s Solar customers.

These lenders remit the amount of such loans, net of fees, upon installation or based on other contractual terms with the third-party lenders.

These fees are recorded as a reduction of solar installation, product, and other revenue and were $ 52 million and $ 141 million during 2023 and 2022, respectively.

346,209 301,708 235,190

Installation revenue

258,760 172,118 93,666

Security installation, product, and other 604,969 473,826 328,856

Total revenue $ 4,898,446 $ 4,652,824 $ 4,381,904

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

The Company’s performance obligations generally include monitoring, related services (such as maintenance agreements), as well as the sale and installation of a security system in outright sales transactions or a material right in transactions in which the Company retains ownership of the security system.

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

Company-Owned - In transactions in which the Company provides monitoring and related services but retains ownership of the security system (referred to as Company-owned ), the Company’s performance obligations primarily include (i) monitoring and related services, which are recognized when these services are provided to the customer, and (ii) a material right associated with the one-time non-refundable fees incurred in connection with the initiation of a monitoring contract which the customer will not be required to pay again upon a renewal of the contract (referred to as deferred subscriber acquisition revenue).

Remaining Performance Obligations

As of December 31, 2024, the remaining unsatisfied performance obligation relating to the provision of monitoring and related services is as follows (in thousands) :

2025 2026 2027 2028 Thereafter Total

$ 1,799,674 $ 999,973 $ 463,811 $ 144,877 $ 68,873 $ 3,477,208

Deferred Revenue

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These amounts are recorded as current deferred revenue, as the Company expects to satisfy any remaining performance obligations, as well as recognize the related revenue, within the next twelve months when performance obligations are satisfied.

Accordingly, the Company has applied the practical expedient regarding deferred revenue to exclude the value of remaining performance obligations if (i) the contract has an original expected term of one year or less or (ii) the Company recognizes revenue in proportion to the amount it has the right to invoice for services performed.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounts Receivable

3 unchanged sentences

The Company evaluates its allowance for credit losses on accounts receivable in pools based on customer type.

The allowance for credit losses primarily relates to residential customers.

For each customer pool, the allowance for credit losses is estimated based on the delinquency status of the underlying receivables and the related historical loss experience, as adjusted for current and expected future conditions, if applicable.

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Changes in the Allowance for Credit Losses

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________________

(1) The provision for credit losses during 2021 was impacted by adjustments related to the COVID-19 Pandemic.

(1) Recoveries were not material for the periods presented.

As such, write-offs are presented net of recoveries.

Retail Installment Contract Receivables

For security system transactions occurring under both Company-owned and customer-owned equipment models, the Company’s retail installment contract option allows qualifying residential customers to pay the fees due at installation over a 24-, 36-, or 60-month interest-free period.

Retail Installment Contract Receivables, Net

The Company’s RICs allow qualifying residential customers to pay the fees due at installation over a 12-, 24-, 36-, or 60-month interest-free period.

The financing component of retail installment contract receivables is not significant.

Upon origination of a retail installment contract, the Company utilizes external credit scores to assess customer credit quality and determine eligibility.

In addition, customers are required to enroll in the Company’s automated payment process in order to enter into a retail installment contract.

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

As of December 31, 2023, the current and delinquent billed retail installment contract receivables were not material.

The Company’s retail installment contract receivables are recorded at amortized cost less an allowance for credit losses not expected to be recovered.

Delinquent billed RICs are not material.

The Company’s RICs are recorded at amortized cost less an allowance for credit losses not expected to be recovered.

The allowance for credit losses is recognized at inception and reassessed each reporting period.

The allowance for credit losses relates to retail installment contract receivables from outright sales transactions and is not material.

The balance of unbilled retail installment contract receivables comprises:

(in thousands) 2024 2023

6 unchanged sentences

Retail installment contract receivables, net $ 669,326 $ 673,635

As of December 31, 2023 and 2022, retail installment contract receivables, net, used as collateral for borrowings under the 2020 Receivables Facility were $ 610 million and $ 506 million, respectively.

Refer to Note 8 “Debt” for further discussion regarding the 2020 Receivables Facility.

As discussed in Note 7 “Debt,” retail installment contract receivables, net, for which the Company grants a security interest as collateral for cash borrowings under the 2020 Receivables Facility were $ 575 million and $ 610 million, as of December 31, 2024 and 2023, respectively.

Contract Assets

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The contract asset is reclassified to accounts receivable as additional services are performed and billed, which is when the Company’s right to the consideration becomes unconditional.

This balance is primarily comprised of satisfied performance obligations related to the sale and installation of a system under an outright sale transaction.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has the right to bill customers as services are provided over time, which generally occurs over the course of a 24-, 36-, or 60-month period.

The financing component of contract assets is not significant.

There is no significant financing component.

The Company records an allowance for credit losses against its contract assets for amounts not expected to be recovered.

1 unchanged sentence

The allowance for credit losses on contract assets was not material for the periods presented.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Gross contract assets recognized by the Company were not material for the periods presented.

The balance of contract assets for residential transactions comprises:

(in thousands) 2024 2023

Contract assets, gross

$ 46,031 $ 39,627

Allowance for credit losses

( 5,221 ) ( 9,025 )

Contract assets, net $ 40,810 $ 30,602

1 unchanged sentence

Prepaid expenses and other current assets

Other assets 15,237 14,643

$ 19,164 $ 15,365

21,646 15,237

Contract assets, net $ 40,810 $ 30,602

SEGMENT INFORMATION

As discussed in Note 1 “Description of Business and Summary of Significant Accounting Policies,” effective in the third quarter of 2023, the Company reports results in two operating and reportable segments:

CSB and Solar.

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

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

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

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

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

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

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

• Solar - The Solar segment primarily includes (i) revenue and operating costs from the sale and installation of solar and related solutions and services;

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

and (iii) certain dedicated corporate costs and other income and expense items.

Customers in the Solar segment are comprised of residential homeowners who purchase solar and energy storage solutions, energy efficiency upgrades, and roofing services.

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

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

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

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

(v) share-based compensation expense;

(vi) merger, restructuring, integration, and other items such as separation costs;

(vii) losses on extinguishment of debt;

(viii) radio conversion costs, net;

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

(x) impairment charges;

and (xi) other income/gain or expense/loss items such as changes in fair value of certain financial instruments or financing and consent fees.

The CODM does not review the Company's assets by segment;

therefore, such information is not presented.

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

As a result of the ADT Solar Exit and Commercial Divestiture, the Company reports results in a single operating and reportable segment, which reflects the continuing operations of the Company’s former CSB segment.

The Company’s CODM is its Chairman, President, and Chief Executive Officer.

The CODM evaluates performance and allocates resources on a consolidated basis using various measures primarily through reviews of various operational performance packages, earnings releases, investor presentations, and the Company’s SEC filings, as well as through the approval of the Company’s annual budget and forecast.

The Company’s reported segment profit measure is net income (loss) as this measure is most consistent with the amounts included in the Consolidated Statements of Operations.

In addition, segment assets reviewed by the CODM are reported on the Company’s Consolidated Balance Sheets as total assets.

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

The following presents a reconciliation to the Company’s net income (loss) as reported in the Consolidated Statements of Operations and includes segment revenues, significant segment expenses that are regularly provided to or easily computed from information regularly provided to the CODM, other segment expenses, and adjustments to reconcile to net income (loss).

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Reconciliations

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

Years Ended December 31,

(in thousands) 2024 2023 2022

CSB $ 4,652,824 $ 4,381,904 $ 4,155,372

Solar 329,835 786,426 47,351

Total Revenue $ 4,982,659 $ 5,168,330 $ 4,202,723

The following table presents Adjusted EBITDA by segment and a reconciliation to consolidated income (loss) from continuing operations before income taxes and equity in net earnings (losses) of equity method investee:

Years Ended December 31,

(in thousands) 2023 2022 2021

Adjusted EBITDA by segment:

CSB $ 2,481,305 $ 2,305,032 $ 2,101,659

Solar ( 116,505 ) 5,155 5,588

Total $ 2,364,800 $ 2,310,187 $ 2,107,247

Reconciliation:

Total segment Adjusted EBITDA $ 2,364,800 $ 2,310,187 $ 2,107,247

Interest expense, net 572,150 264,265 456,825

Depreciation and intangible asset amortization 1,350,980 1,615,830 1,839,658

Total segment revenue

$ 4,898,446 $ 4,652,824 $ 4,381,904

Less significant segment expenses:

Customer service costs (1)

409,680 387,314 393,425

Maintenance costs (1)

207,706 217,054 203,239

Security installation, product, and other costs

229,728 147,314 102,118

Selling costs, including commissions (2)

185,417 196,204 190,182

Amortization of deferred subscriber acquisition costs (2)

Amortization of deferred subscriber acquisition revenue ( 301,708 ) ( 235,190 ) ( 164,180 )

Share-based compensation expense 39,438 53,497 47,111

Merger, restructuring, integration, and other (1)

224,647 188,222 154,186

Goodwill impairment (2)

Advertising costs (2)

105,366 131,133 145,904

Loss on extinguishment of debt (3)

Provision for credit losses (2)

187,361 131,962 81,727

Change in fair value of financial instruments (4)

Radio conversion costs, net (1)

Other general and administrative costs (2)

708,979 664,182 696,662

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

Share-based compensation (2)

48,745 38,626 52,945

Equity in net earnings (losses) of equity method investee 6,572 ( 4,601 ) —

Income (loss) from continuing operations before income taxes and equity in net earnings (losses) of equity method investee $ ( 66,527 ) $ 149,146 $ ( 475,834 )

Depreciation and intangible asset amortization

1,342,798 1,335,484 1,599,810

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

(2) Refer to Note 7 “Goodwill and Other Intangible Assets.”

(3) Refer to Note 8 “Debt.”

(4) Refer to Note 11 “Equity.”

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

Interest expense

450,939 586,088 277,144

Income tax expense (benefit)

195,780 160,585 87,692

Total significant segment expenses

4,297,146 4,184,168 3,985,034

Less other segment items (3)

Other items in SG&A (2)

15,831 ( 2,591 ) 26,675

( 33,921 ) 20,877 58,030

Total other segment items

( 18,090 ) 18,286 84,705

Reconciliation of profit or loss:

(Income) loss from discontinued operations, net of tax (4)

118,337 ( 12,639 ) 179,502

Net income (loss) $ 501,053 $ 463,009 $ 132,663

________________

(1) Included in monitoring and related services cost of revenue.

(2) Included in SG&A.

(3) Other segment items generally include other income and expenses and merger, restructuring, integration, and other charges as presented on the face of the Statements of Operations;

as well as certain other items included in SG&A and interest income.

Interest income is not material for all periods presented.

(4) Represents activity related to the Commercial and Solar Businesses, which are presented as discontinued operations.

Entity-Wide Disclosures

Revenue outside of the U.S.

Revenue generated from customers outside of the U.S.

is not material.

As of December 31, 2024 and 2023, substantially all of the Company’s assets were located in the U.S.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

From time to time, the Company may pursue business acquisitions that either strategically fit with the Company’s existing core business or expand the Company’s products and services into new and attractive adjacent markets.

The Company accounts for business acquisitions under 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.

Significant judgment is required in estimating the fair value of assets acquired and liabilities assumed and in assigning useful lives to certain definite-lived intangible and tangible assets.

Accordingly, the Company 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 on future expectations and assumptions deemed reasonable by management, but are inherently uncertain.

Acquisition-related expenses are recognized as incurred and are included in merger, restructuring, integration, and other and were not material during 2023, 2022, and 2021.

ADT Solar Acquisition

In December 2021, the Company acquired ADT Solar.

The acquisition expanded the Company’s offerings by entering the residential solar market.

Upon the consummation of the ADT Solar Acquisition, ADT Solar became an indirect wholly-owned subsidiary of the Company.

Total consideration was approximately $ 750 million, which consisted of cash paid of $ 142 million, net of cash acquired, and approximately 75.0 million unregistered shares of the Company’s Common Stock with a fair value of $ 569 million (the “Equity Consideration”), including $ 40 million related to approximately 5.3 million shares of the Company’s Common Stock that were issued during 2022 (“Delayed Shares”).

The total fair value of the Equity Consideration was based on the closing stock price of the Company’s Common Stock on December 8, 2021, the acquisition date, adjusted for the impact of contractual restrictions on the ability for the holders to sell their shares.

At the time of acquisition, the Company recorded goodwill to the Solar reporting unit, the majority of which was deductible for tax purposes, which reflected the expected strategic value and synergies of ADT Solar to the Company at that time.

Refer to Note 7 “Goodwill and Other Intangible Assets” for information on goodwill impairment losses recognized in the Solar reporting unit during 2022 and 2023, which resulted in a goodwill balance of zero for the Solar reporting unit.

Pro Forma Results

The following summary, prepared on a pro forma basis, presents the Company’s unaudited consolidated results of operations for 2021 as if the ADT Solar Acquisition had been completed as of January 1, 2020.

The pro forma results below include the impact of certain adjustments related to the amortization of intangible assets, acquisition-related costs incurred as of the acquisition date, and in each case, the related income tax effects, as well as certain other post-acquisition adjustments directly attributable to the acquisition.

This pro forma presentation does not include any impact of transaction synergies.

The pro forma results are not necessarily indicative of the results of operations that actually would have been achieved had the ADT Solar Acquisition been consummated as of that date:

December 31, 2021

Total revenue $ 5,905,148

Net income (loss) $ ( 328,099 )

These previously reported pro forma results have not been updated to reflect the presentation of the Commercial Business as a discontinued operation in the Company’s consolidated results used in the calculation.

From the acquisition date, December 8, 2021 through December 31, 2021, revenue and net loss of $ 47 million and $ 7 million, respectively, attributable to ADT Solar are included in the Consolidated Statements of Operations.

Other Acquisitions

There was no acquisition activity during 2023.

During 2022, total consideration for continuing and discontinued operations related to business acquisitions was $ 31 million, including $ 15 million in shares of the Company’s common stock (excluding the Delayed Shares), which resulted in the recognition of $ 20 million of goodwill.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During 2021, total consideration for continuing and discontinued operations related to business acquisitions (excluding the ADT Solar Acquisition) was $ 21 million.

The Company does not have any major customers given the high volume nature of the business.

Refer to Note 2 “Revenue and Receivables” for further information on the Company’s products and services.

The Company may decide to divest portions of its business for various reasons, including efforts to focus on its remaining businesses.

The Company presents discontinued operations for components of the business that are either disposed of through sale (or qualify as held for sale), abandonment, or spin-off if these actions also represent a strategic shift that has or will have a major effect on the Company’s financial results.

Commercial Divestiture

As discussed in Note 1 “Description of Business and Summary of Significant Accounting Policies,” as a result of the Commercial Divestiture, the disposal group met the established held for sale criteria during the third quarter of 2023.

The Commercial Divestiture supports the Company’s strategic journey and strengthens its financial profile.

Furthermore, the Commercial Divestiture represents a strategic shift that has and will continue to have a major effect on the Company’s operations and financial statements, and therefore, the results of operations of the Commercial Business are classified as discontinued operations in the Company’s Consolidated Statements of Operations for the periods presented.

As the agreed upon sale price was substantially higher than the carrying value of the Commercial Business, the Company did not record any impairments or adjustments when recognizing the disposal group at the lower of its carrying amount or fair value less cost to sell.

As discussed in Note 3 “Segment Information,” the Commercial Business was previously reflected in the Commercial reportable segment.

On October 2, 2023, the Company completed the Commercial Divestiture, and received net proceeds of approximately $ 1,585 million, subject to certain customary post-closing adjustments as set forth in the Commercial Purchase Agreement, the majority of which is presented as cash flows from investing activities from discontinued operations.

In addition, the Company recognized a pre-tax gain on sale of approximately $ 630 million, which was recognized in income (loss) from discontinued operations.

The Company used the majority of the net proceeds for debt redemption, as discussed in Note 8 “Debt.”

Refer to Note 13 “Net Income (Loss) per Share” for basic and diluted earnings per share information for discontinued operations.

The Company presents discontinued operations for components of the business that are either disposed of through

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following reconciliations represent the major classes of line items of the Commercial Business within the Consolidated Balance Sheets and Consolidated Statements of Operations and certain information within the Consolidated Statements of Cash Flows (excluding proceeds from the sale of business discussed above) for the periods presented.

sale (or qualify as held for sale), abandonment, or spin-off if these actions also represent a strategic shift that has or will have a major effect on the Company’s financial results.

Refer to Note 12 “Net Income (Loss) per Share” for basic and diluted earnings per share information associated with discontinued operations.

ADT Solar Exit

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

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

Accordingly, the Solar Business is presented as a discontinued operation in the Company’s Consolidated Statements of Operations and Consolidated Balance Sheets for the periods presented.

The Solar Business was previously reflected in the Solar reportable segment.

During the year ended December 31, 2024, the Company incurred aggregate exit charges of $ 88 million, which have been recognized within income (loss) from discontinued operations, net of tax related to (i) $ 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.

During the year ended December 31, 2024, the Company paid $ 22 million associated with the ADT Solar Exit primarily related to employee separation and other restructuring costs.

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

Balance Sheet Information

(in thousands) December 31, 2022

Accounts receivable $ 262,757

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

Accounts receivable, net $ — $ 20,270

Inventories, net — 28,714

Work-in-progress 68,782

Prepaid expenses and other current assets

Total current assets of discontinued operations held for sale

Total current assets of discontinued operations

Property and equipment, net — 29,512

Subscriber system assets, net 142,763

Intangible assets, net 164,783

Goodwill 336,589

Deferred subscriber acquisition costs, net 88,966

Other assets — 13,767

Total assets of discontinued operations held for sale $ 1,355,437

Total assets of discontinued operations

$ — $ 104,236

Current maturities of long-term debt $ 22 $ 8,551

2 unchanged sentences

Accrued expenses and other current liabilities 24,788 45,201

Total current liabilities of discontinued operations held for sale

Total current liabilities of discontinued operations

31,763 79,611

Long-term debt 32 9,893

Deferred subscriber acquisition revenue 64,605

Other liabilities 15,857 10,679

Total liabilities of discontinued operations held for sale $ 405,243

Total liabilities of discontinued operations

$ 47,652 $ 100,183

AND SUBSIDIARIES

8 unchanged sentences

Depreciation and intangible asset amortization 1,898 15,496 16,020

Merger, restructuring, integration, and other 34,000 23,213 7,292

Goodwill impairment

— 511,176 200,974

Other (income) and expense items

1,481 2,235 1,197

Income (loss) from discontinued operations before income taxes ( 149,169 ) ( 670,910 ) ( 255,312 )

Income tax benefit (expense) 39,096 156,000 50,010

Income (loss) from discontinued operations, net of tax $ ( 110,073 ) $ ( 514,910 ) $ ( 205,302 )

Cash Flow Information

Years Ended December 31,

(in thousands) 2024 2023 2022

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

Depreciation and intangible asset amortization $ 1,898 $ 15,496 $ 16,020

Goodwill, intangible, and other asset impairments $ 13,770 $ 515,730 $ 200,974

Cash flows from investing activities:

Purchases of property and equipment $ ( 80 ) $ ( 4,027 ) $ ( 9,826 )

Commercial Divestiture

The Commercial Divestiture was completed on October 2, 2023, and the Company received net proceeds of approximately $ 1,585 million at the time of closing, subject to certain customary post-closing adjustments as set forth in the Commercial Purchase Agreement.

In addition, the Company recognized a pre-tax gain on sale of approximately $ 630 million, which was recognized in income (loss) from discontinued operations during 2023.

The Company used the majority of the net proceeds for debt redemption, as discussed in Note 7 “Debt.”

Additionally, as the agreed upon sale price was substantially higher than the carrying value of the Commercial Business, the Company did not record any impairments or adjustments when recognizing the disposal group at the lower of its carrying amount or fair value less cost to sell.

During 2024, the Company paid GTCR $ 21 million related to the settlement of post-closing adjustments, which is presented in cash flows from investing activities.

The Commercial Divestiture represented a strategic shift that had a major effect on the Company’s operations and financial results.

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Commercial Business was previously reflected in the Commercial reportable segment.

The following reconciliations represent the major classes of line items of the Commercial Business within the Consolidated Statements of Operations and certain information within the Consolidated Statements of Cash Flows (excluding proceeds from the sale of business discussed above) for the periods presented.

Statements of Operations Information

During the year ended December 31, 2024, activity, net of tax, relating to the Commercial Divestiture was approximately $ 8 million primarily related to the settlement of post-closing adjustments.

Years Ended December 31,

(in thousands) 2023 2022

Revenue $ 1,035,048 $ 1,226,980

Cost of revenue

688,433 839,356

Selling, general, and administrative expenses 213,514 267,195

Depreciation and intangible asset amortization 37,691 77,745

Other income and expense items 19,174 6,016

Income (loss) from discontinued operations before gain on sale of business and income taxes

5 unchanged sentences

Income (loss) from discontinued operations, net of tax $ 527,549 $ 25,800

Other Cash Flow Information

Cash Flow Information

Years Ended December 31,

10 unchanged sentences

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

Income from the Commercial TSA was not material during 2023.

During 2024 and 2023, the Company recognized income from the Commercial TSA of $ 40 million and $ 12 million, respectively.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ADT Brand License and Intellectual Property Rights

1 unchanged sentence

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

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Other Divestitures

Other divestiture activity not reflected as discontinued operations includes:

During the three months ended September 30, 2023, the Company entered into an Asset Purchase Agreement to sell substantially all of the assets and certain specified liabilities of its Vintage Security business (the “Vintage Security Divestiture”).

As a result, the disposal group was classified as held for sale as of September 30, 2023, and the assets and liabilities of the Vintage Security business were reflected as held for sale.

In October 2023, the Company completed the sale of its Vintage Security business (the “Vintage Security Divestiture”) for net proceeds of $ 36 million, subject to certain customary post-closing adjustments, and recognized a gain on sale of $ 19 million recognized in SG&A.

The results of operations of the Vintage Security business are reflected in the CSB segment through the date of sale.

During the periods presented, other divestiture activity not reflected as discontinued operations includes:

During 2023, proceeds related to disposal activities totaled $ 36 million, resulting in a gain on sale of $ 19 million recognized in SG&A.

During 2022, proceeds related to disposal activities totaled $ 27 million, resulting in a gain on sale of $ 10 million recognized in SG&A.

EQUITY METHOD INVESTMENTS

10 unchanged sentences

The Company previously accounted for its investment in Canopy under the equity method of accounting as the Company was not the primary beneficiary, and therefore, did not consolidate Canopy’s assets, liabilities, and financial results of operations.

In connection with the Canopy Investment, the Company entered into various commercial agreements (the “Canopy Commercial Agreements”).

The Company and Canopy are also parties to a trade name licensing agreement.

These agreements will terminate effective on December 1, 2024 as a result of the Canopy Termination.

The impact to the consolidated financial statements from these agreements is not material.

In connection with the Canopy Investment, the Company entered into various commercial agreements (the “Canopy Commercial Agreements”), and the Company and Canopy are also parties to a trade name licensing agreement.

These agreements terminated on December 1, 2024 as a result of the Canopy Termination.

The impact to the consolidated financial statements from these agreements was not material.

GOODWILL AND OTHER INTANGIBLE ASSETS

There were no changes in the carrying amount of goodwill for the periods presented.

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

GOODWILL AND OTHER INTANGIBLE ASSETS

During the periods presented, changes in the carrying amount of goodwill by reportable segment were as follows:

(in thousands) CSB Solar Total

Balance as of December 31, 2021

$ 4,906,666 $ 694,726 $ 5,601,392

Acquisitions (1)

12,585 17,424 30,009

— ( 200,974 ) ( 200,974 )

Balance as of December 31, 2022 4,919,251 511,176 5,430,427

Acquisitions (1)

Impairment — ( 511,176 ) ( 511,176 )

Disposition ( 15,475 ) — ( 15,475 )

Balance as of December 31, 2023 $ 4,903,899 $ — $ 4,903,899

________________

(1) Includes the impact of measurement period adjustments, which were not material during the periods presented.

As of December 31, 2023 and December 31, 2022, accumulated goodwill impairment losses totaled $ 712 million and $ 201 million, respectively.

As of December 31, 2021, the Company had no accumulated goodwill impairment losses.

Other Intangible Assets

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The dealers in this program generate new end-user contracts with customers which the Company has the right, but not the obligation, to purchase from the dealer.

Purchases of contracts with customers under the ADT

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Authorized Dealer Program, or from other third parties, are considered asset acquisitions and are recognized based on the cost to acquire the assets, which may include cash consideration, non-cash consideration, contingent consideration, and directly-attributable transaction costs.

Purchases of contracts with customers under the ADT Authorized Dealer Program, or from other third parties, are considered asset acquisitions and are recognized based on the cost to acquire the assets, which may include cash consideration, non-cash consideration, contingent consideration, and directly-attributable transaction costs.

The Company may charge back the purchase price of any end-user contract if the contract is canceled during the charge-back period, which is generally thirteen months from the date of purchase.

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Customer relationships acquired as part of business acquisitions, which primarily originated from the Formation Transactions and the ADT Acquisition, are 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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The change in the net carrying amount of contracts and related customer relationships was as follows:

6 unchanged sentences

Ending balance $ 2,693,423 $ 2,634,211

During 2023 and 2022, the weighted-average amortization period for customer contract additions under the ADT Authorized Dealer Program and from other third parties was 15 years and 14 years, respectively.

Payments for customer contracts under the ADT Authorized Dealer Program and from other third parties are reflected as dealer generated customer accounts and bulk account purchases on the Consolidated Statements of Cash Flows.

During 2023 and 2022, the Company purchased customer accounts from certain other third parties for an aggregate contractual purchase price of $ 109 million and $ 111 million, respectively, subject to reduction based on customer retention.

The Company paid initial cash at the closings in the aggregate amounts of $ 89 million and $ 82 million, respectively, which is included in the payments for dealer generated customer accounts and bulk account purchases.

During 2024 and 2023, the weighted-average amortization period for customer contract additions under the ADT Authorized Dealer Program and from other third parties was 15 years.

During 2024 and 2023, the Company purchased customer accounts from other third parties for an aggregate contractual purchase price of $ 98 million and $ 109 million, respectively, subject to reduction based on customer retention.

The Company paid initial cash at the closings in the aggregate amounts of $ 81 million and $ 89 million, respectively, which is included in dealer generated customer accounts and bulk account purchases on the Consolidated Statements of Cash Flows.

Definite-Lived Intangible Asset Amortization Expense

5 unchanged sentences

$ 575,002 $ 493,508 $ 427,736 $ 378,363 $ 342,846 $ 1,303,644

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill and Indefinite-Lived Intangible Assets Impairment

Goodwill and indefinite-lived intangible assets 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 the fair value of a reporting unit is less than its carrying amount.

The Company may perform its impairment test for any reporting unit or indefinite-lived intangible asset through a qualitative assessment or elect to proceed directly to a quantitative impairment test, however, the Company may resume a qualitative assessment in any subsequent period if facts and circumstances permit.

The Company may perform the impairment test for its reporting unit or indefinite-lived intangible asset through a qualitative assessment or elect to proceed directly to a quantitative impairment test, however, the Company may resume a qualitative assessment in any subsequent period if facts and circumstances permit.

Under a qualitative approach, the Company assesses whether it is more-likely-than-not that a reporting unit’s fair value is less than its carrying amount.

6 unchanged sentences

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

Examples of events or circumstances that could reasonably be expected to negatively affect the underlying judgments and factors and ultimately impact the estimated fair value determinations may include such items as a prolonged downturn in the business environment, changes in economic conditions that significantly differ from the Company’s assumptions in timing or degree, volatility in equity and debt markets resulting in higher discount rates, and unexpected regulatory changes.

As a result, there are inherent uncertainties related to these judgments and factors that may ultimately impact the estimated fair value determinations.

Except as discussed below within the Solar reporting unit, the Company did not record any goodwill impairment losses during the periods presented.

CSB - Based on the results of a quantitative goodwill impairment test as of October 1, 2023, the Company concluded the fair value of the CSB reporting unit substantially exceeded its carrying value.

Commercial - As a result of the purchase price of the Commercial Divestiture being substantially in excess of the 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 Goodwill Impairment

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, and impairment charges were not material.

In addition, the Company recognized $ 201 million of goodwill impairment charges during the third quarter of 2022.

These goodwill 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 for 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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

environment, changes in economic conditions that significantly differ from the Company’s assumptions in timing or degree, volatility in equity and debt markets resulting in higher discount rates, and unexpected regulatory changes.

As a result, there are inherent uncertainties related to these judgments and factors that may ultimately impact the estimated fair value determinations.

The Company performed a qualitative goodwill impairment test as of October 1, 2024.

The Company concluded that it is more- likely-than-not that the fair value of the Company’s reporting unit exceeds its carrying value, and as a result, the Company did not perform a quantitative impairment test or record any goodwill impairment losses.

The Company did not record any goodwill impairment losses in income/(loss) from continuing operations during 2023 and 2022.

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

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If the carrying amount exceeds fair value, an impairment loss is recognized in an amount equal to that excess.

The fair value of an indefinite-lived intangible asset is determined based on the nature of the underlying asset.

The estimated fair value of an indefinite-lived intangible asset is determined using a valuation approach that is based on the nature of the underlying asset.

The Company’s only indefinite-lived intangible asset is the ADT trade name.

2 unchanged sentences

As of October 1, 2024, the Company quantitatively tested the ADT trade name for impairment.

Based on the results of the October 1, 2023 test, the Company did not record any impairment losses associated with the ADT trade name, and the estimated fair value of the trade name substantially exceeded its carrying amount.

During 2022 and 2021, the Company did not record any impairment losses on its indefinite lived intangible assets.

Based on the results of the test, the Company did not record any impairment losses as the estimated fair value of the trade name substantially exceeded its carrying amount.

During 2023 and 2022, the Company did not record any impairment losses on its indefinite lived intangible asset.

Definite-Lived Intangible Asset Impairment

Definite-lived intangible asset impairments were not material during 2024, 2023 and 2022.

During the first quarter of 2021, the Company recognized $ 18 million in impairment losses on its other definite-lived intangible assets primarily due to lower than expected benefits from the Cell Bounce developed technology intangible asset, which is included in the CSB segment, as a result of the worldwide shortages for certain electronic components at that time.

The fair value was determined using an income-based approach, and the loss is reflected in merger, restructuring, integration, and other.

AND SUBSIDIARIES

3 unchanged sentences

Debt Description Issued Maturity Interest Rate (1)

First Lien Term Loan due 2026 9/23/2019 9/23/2026 Term SOFR +2.75% Quarterly $ — $ 2,730,269

First Lien Term Loan B due 2030 10/13/2023 10/13/2030 Term SOFR +2.00% Quarterly $ 1,984,090 $ 1,375,000

First Lien Revolving Credit Facility 3/16/2018 10/1/2029 Term SOFR +2.00% Quarterly — —

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 1,300,000

First Lien Notes due 2024 4/4/2019 4/15/2024 5.250 % 2/15 and 8/15 — 99,999

2 unchanged sentences

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

ADT Notes due 2023 1/14/2013 6/15/2023 4.125 % 6/15 and 12/15 — 700,000

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

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

2 unchanged sentences

3/5/2020 11/20/2029 Various Monthly 407,901 436,004

Other debt (3)

Total debt principal, excluding finance leases 7,791,903 7,936,540

9 unchanged sentences

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

In June 2023, the Secured Overnight Financing Rate (“SOFR”) replaced the forward London Interbank Offered Rate (“LIBOR”) as the applicable benchmark rate for all applicable existing and future issuances of the Company’s debt instruments with a variable rate component.

Interest on the 2020 Receivables Facility is primarily based on SOFR + 0.95 % and Cost of Funds (“COF”) + 0.85 %.

Interest on the 2020 Receivables Facility is primarily based on the Secured Overnight Financing Rate (“SOFR”) + 1.05 % and Cost of Funds (“COF”) + 0.95 %.

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

(3) Other debt primarily consists of vehicle loans at various interest rates and maturities.

(3) Refer to Note 14 “Leases” for additional information regarding the Company’s finance leases.

First Lien Credit Agreement

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

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

Prime Security Services Holdings, LLC (“Holdings”), a Delaware limited liability company and a wholly owned indirect subsidiary of the Company, Prime Security Services Borrower, LLC (“Prime Borrower”), a Delaware limited liability company and a wholly owned direct subsidiary of Holdings, and The ADT Corporation, a Delaware corporation and a wholly owned direct subsidiary of Prime Borrower (together with Prime Borrower, the “Borrowers”), are parties to the First Lien Credit Agreement as holdings and borrowers respectively.

In October 2023, the Company redeemed approximately $ 1.3 billion of the existing term loan facility (the “First Lien Term Loan due 2026”) using net proceeds from the Commercial Divestiture.

In addition, in October 2023, the Company refinanced the remaining outstanding balance of the First Lien Term Loan due 2026 with a new $ 1,375 million 7 -year term loan B due 2030 (the “First Lien Term Loan B due 2030”).

The First Lien Term Loan B due 2030 requires scheduled quarterly amortization payments equal to 0.25 % of its outstanding principal amount at the time of the December 2024 amendment, with the remaining balance payable at maturity.

The Borrowers may make voluntary prepayments on the First Lien Term Loan B due 2030 at any time prior to maturity at par, subject to a 1.00 % prepayment premium in the event of certain specified refinancing events at any time before June 2025.

Additionally, based on certain specified net first lien leverage ratios, the Borrowers may be required to make annual prepayments on the outstanding First Lien Term Loan B due 2030 with a percentage of the Company’s excess cash flow, as defined in the First Lien Credit Agreement, if the 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, the Borrowers were not required to make an annual prepayment based on the Company’s excess cash flow.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The First Lien Term Loan B due 2030 requires scheduled quarterly amortization payments, commencing on March 31, 2024, equal to 0.25 % of the original principal amount of the First Lien Term Loan B due 2030, with the remaining balance payable at maturity.

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

As of December 31, 2023, the Borrowers were not required to make an annual prepayment based on the Company’s excess cash flow.

The First Lien Term Loan B due 2030 bears interest at a rate equal to, at the Prime Borrower’s option, either (a) a term SOFR rate (“Term SOFR”) with a floor of zero or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50 % per annum, (ii) the rate of interest per annum last quoted by The Wall Street Journal as the “Prime Rate” in the United States and (iii) the one-month adjusted term SOFR plus 1.00 % per annum (“Base Rate”), in each case, plus an applicable margin of 2.00 % per annum for Term SOFR loans and 1.00 % per annum for Base Rate loans.

Prime Borrower has elected the Term SOFR alternative to apply to borrowings of the First Lien Term Loan B due 2030.

The First Lien Term Loan due 2026 had an interest rate calculated as, at Prime Borrower’s option, either (a) SOFR determined by reference to the costs of funds for Eurodollar deposits for the interest period relevant to such borrowing, adjusted for certain additional costs (“Adjusted SOFR”) with a floor of 0.75 % or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50 % per annum;

(ii) the prime rate published by The Wall Street Journal;

and (iii) one-month adjusted SOFR plus 1.00 % per annum (“Base Rate”), in each case, plus the applicable margin of 2.75 % for Adjusted SOFR loans and 1.75 % fo r Base Rate loans and is payable on each interest payment date, at least quarterly, in arrears.

The applicable margin for borrowings under the First Lien Revolving Credit Facility is 2.75 % for Term SOFR loans (subject to a credit spread adjustment) and 1.75 % for Base Rate loans, in each case, subject to adjustment pursuant to a leverage-based pricing grid.

In addition, the Borrowers are required to pay a commitment fee between 0.375 % and 0.50 % (determined based on a net first lien leverage ratio) with respect to the unused commitments under the First Lien Revolving Credit Facility.

Indebtedness incurred under the First Lien Credit Agreement is gu aranteed, jointly and severally, on a senior secured first-priority basis, by substantially all of Prime Borrower’s wholly owned material domestic subsidiaries, and by Prime Borrower’s direct parent on a limited recourse basis, and is secured by a pledge of Prime Borrower’s capital stock directly held by its direct parent and by first-priority security interests in substantially all of the assets of Prime Borrower and the subsidiary guarantors, in each case, subject to certain permitted liens and exceptions.

The applicable margin for borrowings under the First Lien Revolving Credit Facility is 2.00 % for Term SOFR loans (subject to a credit spread adjustment) and 1.00 % for Base Rate loans, in each case, subject to adjustment pursuant to a leverage-based pricing grid, subject to two step downs to 1.75 % and 1.50 % based on a net first lien leverage ratio of 2.00 to 1.00 and 1.50 to 1.00, respectively.

In addition, the Borrowers are required to pay a commitment fee of 0.20 % to 0.30 %, with step downs to 0.25 % and 0.20 % based on a net first lien leverage ratio of 2.00 to 1.00 and 1.50 to 1.00, respectively, with respect to the unused commitments under the First Lien Revolving Credit Facility.

The First Lien Revolving Credit Facility is also 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.

Indebtedness incurred under the First Lien Credit Agreement is guaranteed, jointly and severally, on a senior secured first-priority basis, by substantially all of Prime Borrower’s wholly owned material domestic subsidiaries, and by Prime Borrower’s direct parent on a limited recourse basis, and is secured by a pledge of Prime Borrower’s capital stock directly held by its direct parent and by first-priority security interests in substantially all of the assets of Prime Borrower and the subsidiary guarantors, in each case, subject to certain permitted liens and exceptions.

Significant amendments and restatements related to the First Lien Credit Agreement during the periods presented were as follows:

• January 2021:

Refinanced the First Lien Term Loan due 2026, which reduced the applicable margin for Adjusted LIBOR loans from 3.25 % to 2.75 % and reduced the floor from 1.00 % to 0.75 %, as well as reinstated quarterly principal payments.

Extended the maturity date of the First Lien Revolving Credit Facility to June 23, 2026, subject to certain conditions, and obtained an additional $ 175 million of commitments.

• October 2023:

Refinanced the remaining outstanding balance of the First Lien Term Loan due 2026 with the First Lien Term Loan B due 2030.

Both the proceeds and repayments of long-term debt on the Consolidated Statements of Cash Flows include the impact of $ 230 million from the refinancing.

• October 2023 - The Company redeemed approximately $ 1.3 billion of the then existing term loan (the “First Lien Term Loan B due 2026”) using net proceeds from the Commercial Divestiture.

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

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

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

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

• October 2024 - The Company amended and restated the First Lien Credit Agreement to extend the maturity date of the First Lien Revolving Credit Facility to October 2029 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.

In addition, the amendment reduced the commitment fee in respect of the First Lien Revolving Credit Facility to 0.20 % 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 - The Company amended and restated the First Lien Credit Agreement, which reduced the interest rate on the First Lien Term Loan B due 2030 from Term SOFR + 2.25 % to Term SOFR + 2.00 %.

During 2024, proceeds and repayments of long-term borrowings on the Consolidated Statements of Cash Flows include the impact of $ 704 million from certain of the 2024 amendments described above.

During 2023, proceeds and repayments of long-term borrowings on the Consolidated Statements of Cash Flows include the impact of $ 230 million from the October 2023 amendment described above.

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

Subsequent event - 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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

First Lien Revolving Credit Facility

Borrowings and repayments under the First Lien Revolving Credit Facility during the periods presented were as follows:

There were no borrowings or repayments.

As discussed above, during 2024, the Company extended 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 obtained 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.

Significant borrowings and repayments under the First Lien Revolving Credit Facility during the periods presented were as follows:

The Company borrowed $ 365 million and repaid $ 365 million.

The Company borrowed $ 185 million and repaid $ 160 million in connection with the ADT Solar Acquisition.

The Company borrowed $ 550 million and repaid $ 575 million.

As of December 31, 2024, the Company had $ 800 million in available borrowing capacity under the First Lien Revolving Credit Facility.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Term Loan A Facility

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The Incremental Term Loan A Loans have the same terms as, and constitute one class with, the Closing Date Term Loan A Loans.

The Term Loan A Facility has a maturity date of March 14, 2028, subject to a springing maturity of 91 days prior to the maturity date of certain long-term indebtedness of Prime Borrower and its subsidiaries if, on such date, the aggregate principal amount of such indebtedness equals or exceeds $ 100 million.

The Term Loan A Facility requires scheduled quarterly amortization payments, which commenced on June 30, 2023, equal to 1.25 % of the original principal amount of the Term Loan A Facility, with the balance payable at maturity.

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

Borrowings under the Term Loan A Facility bear interest at a rate equal to, at Prime Borrower’s option, either (a) a term SOFR rate plus an adjustment of 0.10 % (“Term SOFR”) or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50 % per annum;

(ii) the rate of interest per annum last quoted by The Wall Street Journal as the “Prime Rate” in the U.S., and (iii) the one-month adjusted term SOFR plus 1.00 % per annum, in each case, plus an applicable margin of 2.50 % per annum for SOFR loans and 1.50 % per annum for base rate loans, subject to adjustments based on certain specified net first lien leverage ratios.

Prime Borrower has elected the Term SOFR alternative to apply to borrowings under the Term Loan A Facility.

Indebtedness incurred under the Term Loan A Facility is guaranteed, jointly and severally, on a senior secured first-priority basis, by substantially all of Prime Borrower’s wholly owned material domestic subsidiaries, and by Prime Borrower’s direct parent on a limited recourse basis, and is secured by a pledge of Prime Borrower’s capital stock directly held by its direct parent and by first-priority security interests in substantially all of the assets of Prime Borrower and the subsidiary guarantors, in each case subject to certain permitted liens and exceptions.

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 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 Company’s 6.250 % second-priority senior secured notes due 2028 (the “Second Lien Notes due 2028”) are due at maturity, and since January 15, 2023, the Second Lien Notes due 2028 may be redeemed at the Company’s 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 % as of January 15, 2024 and decreases to 100 % on or after January 15, 2025.

The Company’s obligations relating to the Second Lien Notes due 2028 are guaranteed, jointly and severally, on a senior secured second-priority basis, by substantially all of the Company’s domestic subsidiaries and are secured by second-priority security interests in substantially all of the assets of the Company’s domestic subsidiaries, subject to certain permitted liens and exceptions.

Additionally, upon the occurrence of specified change of control events, the Company 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.

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

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

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

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 Company’s 5.250 % first-priority senior secured notes due 2024 (the “First Lien Notes due 2024”) and the Company’s 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.

The First Lien Notes due 2024 and the First Lien Notes due 2026 are guaranteed, jointly and severally, on a senior secured first-priority basis, by each of the Company’s existing and future direct or indirect wholly-owned material domestic subsidiaries that guarantee the First Lien Credit Agreement.

Upon the occurrence of specified change of control events, the Company 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.

Significant activity related to the First Lien Notes due 2024 during the periods presented was as follows:

The Company 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:

The Company 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.

First Lien Notes due 2024

As of December 31, 2024, the Company 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 - The Company 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 - The Company 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 - The Company 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 Company’s 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.

The First Lien Notes due 2026 are guaranteed, jointly and severally, on a senior secured first-priority basis, by each of the Company’s existing and future direct or indirect wholly-owned material domestic subsidiaries that guarantee the First Lien Credit Agreement.

Upon the occurrence of specified change of control events, the Company 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

T he Company’s 3.375 % first-priority senior secured notes due 2027 (the “First Lien Notes due 2027”) are due at maturity and may be redeemed at the Company’s option as follows:

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In July 2021, the Company issued $ 1.0 billion aggregate principal amount of 4.125 % first-priority senior secured notes due 2029 (the “First Lien Notes due 2029”).

The First Lien Notes due 2029 will mature on August 1, 2029, with semi-annual interest payment dates of February 1 and August 1 of each year, beginning February 1, 2022, and may be redeemed at the Company’s option as follows:

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• Prior to August 1, 2028, in whole at any time or in part from time to time, at a redemption price equal to the greater of (i) 100 % of the principal amount of the First Lien Notes due 2029 to be redeemed and (ii) the sum of the present values of the aggregate principal amount of the First Lien Notes due 2029 to be redeemed and the remaining scheduled interest payments due on any date after the redemption date, to and including August 1, 2028, discounted at an adjusted treasury rate plus 50 basis points, plus, in either case accrued and unpaid interest as of, but excluding, the redemption date.

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

Second Lien Notes due 2028

The Company’s 6.250 % second-priority senior secured notes due 2028 (the “Second Lien Notes due 2028”) are due at maturity, and since January 15, 2023, the Second Lien Notes due 2028 may be redeemed at the Company’s option in whole at any time or in part from time to time, at a redemption price equal to 100 % (as of 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.

In connection with the ADT Acquisition, the Company entered into supplemental indentures to notes originally issued by The ADT Corporation (collectively, the “ADT Notes”) providing for each series of ADT Notes to benefit from (i) guarantees by substantially all of the Company’s domestic subsidiaries and (ii) first-priority senior security interests, subject to permitted liens, in substantially all of the existing and future assets of the Company’s domestic subsidiaries.

As a result, these notes remained outstanding and became obligations of the Company.

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

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.

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The indentures governing the ADT Notes also provide for customary events of default.

Significant activity related to the ADT Notes during the periods presented was as follows:

• ADT Notes due 2022:

In August 2021, the Company used the proceeds from the First Lien Notes due 2029, along with cash on hand, to (i) redeem all of the $ 1.0 billion outstanding aggregate principal amount of the Company’s 3.50 % notes due 2022 (the “ADT Notes due 2022”) for approximately $ 1.0 billion, including the related call premium of $ 28 million, plus accrued and unpaid interest, and (ii) pay related fees and expenses (the “ADT Notes due 2022 Redemption”).

• ADT Notes due 2023:

In 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.

In 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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Significant activity related to the ADT Notes due 2023 during the periods presented was as follows:

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

• June 2023 - The Company redeemed the remaining outstanding principal amount of $ 100 million for a total redemption price of $ 100 million, excluding any accrued and unpaid interest, 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’s creditors under the 2020 Receivables Facility have legal recourse to the transferred retail installment contract receivables owned by the SPE, and to the Company for certain performance and operational obligations relating to the 2020 Receivables Facility, but do not have any recourse to the Company (other than the SPE) for the payment of principal and interest on the advances under the 2020 Receivables Facility.

Significant amendments to the 2020 Receivables Facility were as follows:

• March 2021:

Extended the scheduled termination date for the uncommitted revolving period to March 2022, and reduced the spread over LIBOR payable in respect of borrowings thereunder from 1.00 % to 0.85 %, among other things.

The 2020 Receivables Facility was amended into the form of a Receivables Financing Agreement, which continued the uncommitted secured lending arrangement contemplated among the parties and, among other things, provided for certain revisions to funding, prepayment, reporting, and other provisions in preparation for a potential future syndication of the advances made under the 2020 Receivables Facility.

• October 2021:

Further amended the documentation governing the 2020 Receivables Facility in connection with the syndication of the advances thereunder to two additional lenders:

MUFG Bank, Ltd.

and Starbird Funding Corporation (a conduit lender related to BNP Paribas).

As part of the amendment, the 2020 Receivables Facility’s uncommitted lending limit was increased from $ 200 million to $ 400 million, and the scheduled termination date for the 2020 Receivable Facility’s uncommitted revolving period was extended from March 2022 to October 2022.

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.

Significant amendments to the 2020 Receivables Facility during the periods presented were as follows:

• May 2022 - 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 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.

The Company services the transferred retail installment contract receivables and is responsible for ensuring the related collections are remitted to a segregated bank account in the SPE’s name.

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The segregated account is considered restricted cash.

Proceeds and repayments from the 2020 Receivables Facility are presented on the Consolidated Statements of Cash Flows.

During 2021, both the proceeds and repayments from the 2020 Receivables Facility include the non-cash impact of approximately $ 88 million from the 2020 Receivables Facility amendment in October 2021.

The 2020 Receivables Facility did not have a material impact to the Consolidated Statements of Operations during the periods presented.

As of December 31, 2023, the Company had an uncommitted available borrowing capacity of $ 64 million under the 2020 Receivables Facility.

Proceeds and repayments from the 2020 Receivables Facility are presented in cash flows from financing activities on the Consolidated Statements of Cash Flows.

The impact to the Consolidated Statements of Operations from the 2020 Receivables Facility was primarily due to the allowance for credit losses and interest expense during the periods presented.

As of December 31, 2024, the Company had an uncommitted available borrowing capacity under the 2020 Receivables Facility of $ 142 million.

AND SUBSIDIARIES

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Variable Interest Entity

The SPE, as described above, meets the definition of a VIE for which the Company is the primary beneficiary as it has the power to direct the SPE’s activities and the obligation to absorb losses or the right to receive benefits of the SPE.

The SPE, as described above, meets the definition of a variable interest entity (“VIE”) for which the Company is the primary beneficiary as it has the power to direct the SPE’s activities and the obligation to absorb losses or the right to receive benefits of the SPE.

As such, the SPE’s assets, liabilities, and financial results of operations are consolidated in the Company’s consolidated financial statements.

As of December 31, 2023 and 2022, the SPE’s assets and liabilities primarily consisted of unbilled retail installment contract receivables, net, of $ 610 million and $ 506 million, respectively, and borrowings under the 2020 Receivables Facility as presented above.

As of December 31, 2024 and 2023, the SPE’s assets and liabilities primarily consisted of a portion of the Company’s unbilled retail installment contract receivables, net, of $ 575 million and $ 610 million, respectively, and borrowings under the 2020 Receivables Facility as presented above.

Solar Receivables Facility

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(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”).

The Solar Receivables Financing Agreement has an initial revolving period of one year (which may be extended by agreement of the parties) followed by an amortization period of 300 months to maturity where all collections on the receivables during such period will be applied to prepay the loan until reduced to zero, which will occur only if the Solar Receivables Financing Agreement is not mutually extended on a revolving basis.

The interest rate under the Solar Receivables Financing Agreement is the sum of (x) term SOFR (plus a credit adjustment spread of 0.1 %) plus (y) 1.0 % (increased to 3.5 % after the termination date) or, with respect to loans funded by a Conduit Lender (as defined in the Solar Receivables Financing Agreement), the sum of (x) the applicable rate set forth in the Receivables Financing Agreement plus (y) 1.0 % (increased to 3.5 % after the termination date).

In connection with such Solar Receivables Financing Agreement, certain other agreements relating to the transaction were entered into, including ADT Solar Finance’s limited liability company agreement;

a Receivables Sale Agreement between Compass and ADT Solar Finance, pursuant to which Compass sells such receivables from time to time to ADT Solar Finance;

a Performance Support Agreement entered into by ADT Inc., pursuant to which ADT Inc.

guaranteed certain obligations under the Solar Receivables Financing Agreement;

and related transaction documents and certain account control agreements and security agreements.

As of December 31, 2023, we have not borrowed any amounts under the Solar Receivables Facility.

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

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

Debt Covenants

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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 as of the last day of any fiscal quarter.

The Company is subject to a financial maintenance covenant under the Term Loan A Credit Agreement requiring the Term Loan A Borrowers 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, 2023, we were in compliance with all financial covenant and other maintenance tests for all our debt obligations.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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 the periods presented, loss on extinguishment of debt was as follows:

Totaled $ 17 million and was primarily due to the write-off of unamortized discount and debt issuance costs associated with the partial redemption of the First Lien Term Loan due 2026 and the refinancing of the First Lien Term Loan due 2026.

Loss on extinguishment of debt was not material.

Totaled $ 37 million and was primarily due to the call premium and write-off of unamortized fair value adjustments in connection with the ADT Notes due 2022 Redemption.

During the periods presented, significant activity related to loss on extinguishment of debt was as follows:

Totaled $ 17 million and was primarily due to the write-off of unamortized discount and debt issuance costs associated with the partial redemption of the First Lien Term Loan B due 2026 and the refinancing of the First Lien Term Loan B due 2026.

Additional fees and other costs associated with financing transactions were not material during 2024, 2023, or 2022.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2024, the aggregate annual maturities of debt, excluding finance leases, were as follows:

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Debt principal $ 170,198 $ 1,499,939 $ 1,099,518 $ 1,367,345 $ 1,019,841 $ 2,635,062 $ 7,791,903

Interest expense (excluding interest income) on the Company’s debt, including finance leases, and interest rate swap contracts presented within interest expense, net, was $ 588 million, $ 278 million, and $ 457 million during 2023, 2022, and 2021, respectively.

Interest expense presented in other income (expense) was not material during 2023.

Interest expense (excluding interest income) during 2024, 2023, and 2022 on the Company’s debt, including finance leases, and interest rate swap contracts presented within interest expense, net, was $ 451 million, $ 586 million, and $ 277 million, respectively.

DERIVATIVE FINANCIAL INSTRUMENTS

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The cash flows associated with interest rate swap contracts that were entered into with the intention of offsetting the economic overhedged position of a portion of our existing interest rate swaps are reflected as cash flows from investing activities.

As these swaps were executed during December, there were no payments during 2023.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Interest Rate Swaps

In October 2019, and in connection with the refinancing of variable-rate debt under the First Lien Credit Agreement in September 2019, the Company terminated interest rate swap contracts with an aggregate notional amount of $ 3.8 billion, of which $ 2.8 billion were designated as cash flow hedges, and concurrently entered into new LIBOR-based interest rate swap contracts, which were, at the time, designated as cash flow hedges, with an aggregate notional amount of $ 2.8 billion and maturity of September 2026.

Additionally, the new interest rate swap terms represented a blend of the current interest rate environment and the unfavorable positions of the terminated interest rate swap contracts, which resulted in an other-than-insignificant financing element at inception of the new cash flow hedges due to off-market terms.

These swaps contain an other-than-insignificant financing element due to their off-market terms at the inception of the swaps.

Beginning in March 2020, the Company's interest rate swap contracts previously designated as cash flow hedges were no longer highly effective as a result of changes in the interest rate environment.

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Unrealized losses previously recognized as a component of AOCI prior to de-designation are being reclassified into interest expense, net, in the same period in which the related interest on variable-rate debt affects earnings through the maturity dates of the interest rate swap contracts, as the forecasted cash flows are probable or reasonably possible of occurring.

During 2023, the Company recorded $ 25 million to interest expense, net associated with the reclassification from AOCI of historical losses related to the de-designated interest rate swaps for which the cash flows were probable of not occurring as a result of the partial redemption of the Company’s First Lien Term Loan due 2026.

As of December 31, 2023, AOCI associated with previously designated cash flow hedges that is estimated to be reclassified to interest expense, net, within the next twelve months is not material.

In March and April 2023, the Company entered into floating-to-fixed interest rate swaps with an aggregate notional amount of $ 300 million to partially hedge the Term Loan A Facility.

In December 2023, the Company entered into interest rate swaps with an aggregate notional amount of $ 700 million to offset the excess notional interest rate swaps as a result of the partial redemption of the First Lien Term Loan due 2026.

In March and April 2023, the Company entered into floating-to-fixed interest rate swaps with an aggregate notional amount of $ 300 million to partially hedge the Company’s then outstanding Term Loan A Facility.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The changes in fair value associated with these swaps and the excess swaps are reflected in other income (expense).

The Company’s interest rate swaps consist of the following:

Notional Amounts

(in thousands) December 31,

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Total notional amount $ 3,800,000 $ 3,800,000

Fair Value of Interest Rate Swaps:

Classification and Fair Value

Balance Sheet Classification (in thousands)

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Other liabilities $ 208 $ 1,325

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unrealized Gain (Loss) on Interest Rate Swaps:

Unrealized Gains (Losses)

Years Ended December 31,

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Balance as of December 31, 2024 $ ( 7,376 )

As of December 31, 2024, AOCI associated with previously designated cash flow hedges that is estimated to be reclassified to interest expense, net, within the next twelve months is not material.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the temporary differences between the recognition of revenue and expenses for income tax and financial reporting purposes and between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements.

The Company records the effect of a tax rate or law change on the Company’s deferred tax assets and liabilities in the period of enactment.

The amounts and related disclosures below are based on the continuing operations of the Company.

The amounts and related disclosures below are based on the continuing operations of the Company, unless otherwise noted.

Components of Income Before Taxes

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Income (loss) from continuing operations before income taxes and equity in net earnings (losses) of equity method investee $ 815,170 $ 604,383 $ 404,458

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Components of Income Tax Benefit (Expense) (1)

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Income tax benefit (expense) $ ( 154,481 ) $ ( 183,252 ) $ ( 48,550 )

___________________

(1) The components of tax benefit (expense) include both continuing and discontinued operations for all periods presented in accordance with Accounting Standards Codification (“ASC”) 740.

This presentation is to reflect the Company’s tax structure and filings.

Income tax benefit (expense) is included in the Consolidated Statements of Operations as follows:

Years Ended December 31,

(in thousands) 2024 2023 2022

Continuing operations

$ ( 195,780 ) $ ( 160,585 ) $ ( 87,692 )

Discontinued operations

41,299 ( 22,667 ) 39,142

Income tax benefit (expense) $ ( 154,481 ) $ ( 183,252 ) $ ( 48,550 )

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Effective Tax Rate Reconciliation

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Legislative changes ( 0.4 ) % 0.6 % ( 2.1 ) %

Non-deductible goodwill impairment ( 22.8 ) % 4.0 % — %

Prior year return adjustments ( 0.6 ) % ( 0.6 ) % 1.1 %

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(1) During 2022, primarily represents the impact related to the fair value adjustment of the Forward Contract.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred Tax Assets and Deferred Tax Liabilities

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Net deferred tax assets (liabilities) $ ( 1,167,213 ) $ ( 1,027,189 )

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The valuation allowance for deferred tax assets relates to the uncertainty of the utilization of certain U.S.

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Write-offs and other

2,174 14 5,478

Ending balance $ ( 12,264 ) $ ( 12,264 ) $ ( 57,715 )

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The utilization is attributable to capital gains generated in connection with the Commercial Divestiture.

As of December 31, 2023, the Company had approximately $ 242 million of U.S.

federal net operating loss (“NOL”) carryforwards with expiration periods between 2036 and 2042.

Although future utilization will depend on the Company’s actual profitability and the result of income tax audits, the Company anticipates that the majority of its U.S federal NOL carryforwards will be fully utilized prior to expiration.

Most of the Company’s U.S.

federal NOL carryforwards are subject to limitation due to “ownership changes,” which have occurred under Internal Revenue Code (“IRC”) Section 382.

The Company does not, however, expect that this limitation will impact its ability to utilize the U.S.

federal NOL carryforwards.

As of December 31, 2024, the Company has no remaining financial statement federal net operating loss (“NOL”) carryforwards.

As of December 31, 2024, the Company’s valuation allowance for deferred tax assets was primarily related to capital loss carryforwards in Canada primarily generated in connection with the sale of ADT Canada during 2019.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Tax Cuts and Jobs Act of 2017 introduced IRC Section 163(j), which limits the deductibility of interest expense and allows for the excess to be carried forward indefinitely.

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Gross increase related to prior year tax positions 9,933 517 5,063

Gross decrease related to prior year tax positions ( 5,108 ) — —

Decreases related to lapse of statute of limitation ( 29,042 ) ( 7,871 ) ( 15,107 )

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federal, state and local, and foreign jurisdictions.

Based on the current tax statutes and status of its income tax audits, the Company expects approximately $ 29 million of its unrecognized tax benefits to be resolved in the next twelve months.

Based on the current tax statutes and status of its income tax audits, the

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company does not expect unrecognized tax benefits to change significantly in the next twelve months.

Open Tax Years by Jurisdiction

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Inflation Reduction Act - The Inflation Reduction Act (the “IRA”) was signed into law in August 2022.

The IRA, among other provisions, implements (i) a 15% corporate alternative minimum tax (“CAMT”) on book income of corporations whose average annual adjusted financial statement income during the most recently-completed three-year period exceeds $1.0 billion, (ii) a 1% excise tax on net stock repurchases, and (iii) several tax incentives to promote clean energy including an extension of the

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

investment tax credit.

Both the CAMT and the excise tax provisions are effective for tax years beginning after December 31, 2022, and as of December 31, 2024, the Company does not anticipate any material impact.

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Additionally, each share of Class B Common Stock will immediately become convertible into one share of Common Stock, at the option of the holder thereof, at any time following the earlier of (i) the expiration or early termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Clearance”), required prior to such holder’s conversion of all such shares of Class B Common Stock, or (ii) to the extent HSR Clearance is not required prior to such holder’s conversion of such shares of Class B Common Stock, the date that such holder owns such shares of Class B Common Stock.

Google Investor Rights Agreement

In connection with the issuance of the Class B Common Stock, the Company and Google entered into an Investor Rights Agreement (the “Google Investor Rights Agreement”), pursuant to which Google agreed to be bound by customary transfer restrictions and drag-along rights, and be afforded customary registration rights with respect to shares of Class B Common Stock held directly by Google.

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

In December 2023, the Company and Google amended the Google Investor Rights Agreement to extend the Google Lock-up Period through June 2025, or earlier if (i) the Google Commercial Agreement (as defined in Note 14 “Commitments and Contingencies”) has been terminated under certain specified circumstances or (ii) the Google Cloud Master Agreement (as defined in Note 14 “Commitments and Contingencies”) has been validly terminated for any reason other than Google's uncured material breach.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Issuances of Common Stock

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The Company issued approximately 2 million shares of Common Stock as consideration for a business acquisition.

• December 2021 :

The Company issued approximately 70 million shares of Common Stock with a fair value of $ 529 million in connection with the ADT Solar Acquisition.

Additionally, throughout 2022, the Company issued the Delayed Shares in connection with the ADT Solar Acquisition as discussed in Note 4 “Acquisitions.”

Additionally, throughout 2022, the Company issued approximately 5.3 million shares of the Company’s Common Stock with a value of approximately $ 40 million related to the ADT Solar Acquisition (the “Delayed Shares”).

Repurchases of Common Stock

On January 24, 2024, the Company's Board of Directors announced a share repurchase plan (the “2024 Share Repurchase Plan”), pursuant to which the Company was authorized, but not obligated, to repurchase up to a maximum aggregate amount of $ 350 million of shares of the Company's Common Stock through January 29, 2025.

The 2024 Share Repurchase Plan expired in January 2025 with $ 5 million authorized repurchases remaining.

Share repurchases under the 2024 Share Repurchase Plan were as follows:

• In March 2024, the Company repurchased and retired 15 million shares at a price per share of approximately $ 6.22 for an aggregate purchase price of $ 93 million in connection with an offering of the Company’s Common Stock.

• In October 2024, the Company repurchased and retired 16 million shares at a price per share of approximately $ 7.20 for an aggregate purchase price of $ 115 million in connection with an offering of the Company’s Common Stock.

• In October 2024, the Company repurchased and retired 5 million shares of Common Stock from a non-affiliate individual at a price per share of $ 6.40 for an aggregate purchase price of $ 32 million.

Subsequent events

In December 2024, the Company entered into an agreement with a non-affiliate individual to repurchase 15 million shares of Common Stock at a price per share of $ 6.95 for an aggregate purchase price of $ 104 million.

The transaction settled in January 2025, and the Company retired the shares.

As of December 31, 2024, the Company recorded a liability related to the forward share repurchase contract and a reduction to additional paid-in capital.

In February 2025, the Company’s Board of Directors announced a share repurchase plan (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.

The 2025 Share Repurchase Plan allows the Company to purchase Common Stock from time to time in one or more open market or privately negotiated transactions, including pursuant to Rule 10b5-1 or Rule 10b-18 of the Exchange Act, or pursuant to one or more accelerated share repurchase agreements, subject to certain requirements and factors.

Google Investor Rights Agreement

In December 2023, the Company and Google amended the Google Investor Rights Agreement to extend the Google Lock-up Period through June 2025, or earlier if (i) the Google Commercial Agreement (as defined in Note 13 “Commitments and Contingencies”) has been terminated under certain specified circumstances or (ii) the Google Cloud Master Agreement (as defined in Note 13 “Commitments and Contingencies”) has been validly terminated for any reason other than Google's uncured material breach.

AND SUBSIDIARIES

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On September 5, 2022, the Company entered into a securities purchase agreement (the “State Farm Securities Purchase Agreement”) with State Farm, pursuant to which the Company agreed to issue and sell in a private placement to State Farm 133 million shares of the Company’s Common Stock (the “State Farm Shares”) at a per share price of $ 9.00 for an aggregate purchase price of $ 1.2 billion (the “State Farm Strategic Investment”).

On September 12, 2022, in connection with the State Farm Strategic Investment, the Company commenced a tender offer to purchase up to 133 million shares of the Company’s Common Stock (including shares issued upon conversion of shares of Class B Common Stock ) (the “Tender Shares”) at a price of $ 9.00 per share (the “Tender Offer”) using proceeds from the State Farm Strategic Investment.

The State Farm Strategic Investment closed on October 13, 2022 (the “Closing”), and the Company issued and sold the State Farm Shares at a price of $ 9.00 per share.

After giving effect to the State Farm Strategic Investment and the Tender Offer, State Farm owned approximately 15 % of the Company’s issued and outstanding Common Stock (assuming conversion of Class B Common Stock), and as a result, became a related party at the Closing.

The transaction closed on October 13, 2022 (the “Closing”).

Additionally, on September 12, 2022, in connection with the State Farm Strategic Investment, the Company commenced a tender offer (discussed below) to purchase up to 133 million shares of the Company’s Common Stock (including shares issued upon conversion of shares of Class B Common Stock ) (the “Tender Shares”) at a price of $ 9.00 per share (the “Tender Offer”) using proceeds from the State Farm Strategic Investment.

After the Closing and the Tender Offer, State Farm owned approximately 15 % of the Company’s issued and outstanding Common Stock (assuming conversion of Class B Common Stock) and became a related party.

Concurrently with the execution of the State Farm Securities Purchase Agreement, (i) Apollo delivered to the Company a Tender and Support Agreement, pursuant to which Apollo agreed to collectively tender (and not withdraw) no fewer than 133 million shares of Common Stock in the Tender Offer (the “Apollo Support Agreement”), and (ii) Google delivered to the Company a Support Agreement, pursuant to which Google agreed to not convert and tender any of its shares of Class B Common Stock.

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Pursuant to the terms of the State Farm Investor Rights Agreement, State Farm will also be bound by customary transfer and standstill restrictions and drag-along rights, and be afforded customary registration rights with respect to the State Farm Shares.

In particular, State Farm (a) will be prohibited, subject to certain customary exceptions, from transferring any of the State Farm Shares until the earlier of (i) the three-year anniversary of the Closing and (ii) the date on which the development agreement with State Farm (the “State Farm Development Agreement”) has been validly terminated, other than in the event of termination by the Company for a material breach thereof by State Farm, and (b) will be subject to certain standstill restrictions, including that State Farm will be restricted from acquiring additional equity securities of the Company if such acquisition would result in State Farm (and its affiliates) acquiring beneficial ownership in excess of 18 % of the issued and outstanding Common Stock, taking into account on an as-converted basis the issued and outstanding Class B Common Stock, until five days after the date that no designee of State Farm serves on the Board of Directors and State Farm has no rights (or has irrevocably waived its right) to nominate a designee to the Board of Directors.

Notwithstanding the standstill restrictions described above, State Farm

In particular, State Farm (a) will be prohibited, subject to certain customary exceptions, from transferring any of the State Farm Shares until the earlier of (i) October 13, 2025, and (ii) the date on which the development agreement with State Farm (the “State Farm Development Agreement”) has been validly terminated, other than in the event of termination by the Company for a material breach thereof by State Farm, and (b) will be subject to certain standstill restrictions, including that State Farm will be restricted from acquiring additional equity securities of the Company if such acquisition would result in State Farm (and its affiliates) acquiring beneficial ownership in excess of 18 % of the issued and outstanding Common Stock, taking into account on an as-converted basis the issued and outstanding Class B Common Stock, until five days after the date that no designee of State Farm serves on the Board of Directors and State Farm has no rights (or has irrevocably waived its right) to nominate a designee to the Board of Directors.

Notwithstanding the standstill restrictions described above, State Farm will not be restricted from acquiring shares of Common Stock or other equity securities of the Company from Prime Security Services TopCo Parent, L.P.

and its affiliates so long as State Farm and its affiliates would not, subject to certain exceptions, beneficially own in excess

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

will not be restricted from acquiring shares of Common Stock or other equity securities of the Company from Prime Security Services TopCo Parent, L.P.

and its affiliates so long as State Farm and its affiliates would not, subject to certain exceptions, beneficially own in excess of 25 % of the issued and outstanding Common Stock, taking into account on an as-converted basis the issued and outstanding Class B Common Stock, as a result of such acquisition.

of 25 % of the issued and outstanding Common Stock, taking into account on an as-converted basis the issued and outstanding Class B Common Stock, as a result of such acquisition.

In addition, under the terms of the State Farm Investor Rights Agreement, in the event that the Company proposes to issue and sell shares of Common Stock, Class B Common Stock, or other equity securities of the Company to certain homeowners’ insurance and reinsurance companies, State Farm will have a right of first refusal with respect to such proposed issuance and sale on the same terms and conditions (the “ROFR”).

4 unchanged sentences

At the Closing, the Company, ADT LLC (an indirect wholly owned subsidiary of the Company), and State Farm entered into the State Farm Development Agreement pursuant to which State Farm committed up to $ 300 million to an Opportunity Fund that will fund certain product and technology innovation, customer growth, and marketing initiatives to be agreed on between State Farm and the Company.

Additionally at the Closing, the Company received $ 100 million of the Opportunity Fund, which will be restricted until such time as the Company uses the funds in accordance with the State Farm Development Agreement.

Additionally at the Closing, the Company received $ 100 million of the Opportunity Fund, which is restricted until such time as the Company uses the funds in accordance with the State Farm Development Agreement.

The Company’s use of the funds is also subject to approval by State Farm.

The Company recorded the cash received from the Opportunity Fund as restricted cash and a corresponding liability, which is reflected in accrued expenses and other current liabilities as of December 31, 2023.

Refer to Note 17 “Related Party Transactions” or more information on the Opportunity Fund.

The Company recorded the cash received from the Opportunity Fund as restricted cash and a corresponding liability, which is reflected in accrued expenses and other current liabilities.

Refer to Note 16 “Related Party Transactions” for more information on the Opportunity Fund.

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.

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During 2022, the Company 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).

Subsequent Event - On January 24, 2024, the Company announced a dividend of $ 0.055 per share to holders of Common Stock and Class B Common Stock of record on March 14, 2024, which will be distributed on or about April 4, 2024.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Subsequent Event - On February 27, 2025, the Company 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.

Accumulated Other Comprehensive Income (Loss)

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Other changes in AOCI, which primarily relate to the Company’s defined benefit pension plans, were not material.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SHARE-BASED COMPENSATION

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The Distributed Shares also have certain other restrictions pursuant to the terms and conditions of the Company’s Amended and Restated Management Investor Rights Agreement (the “MIRA”).

The MIRA was last amended on August 1, 2024.

The IPO triggered an acceleration of vesting of the unvested Distributed Shares Service Tranche causing them to become fully vested six months from the date of the IPO, which occurred in July 2018.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes activity related to the Distributed Shares during 2023:

Performance Tranche

Number of Distributed Shares Weighted-Average Grant Fair Value

The following table summarizes activity related to the Distributed Shares Performance Tranche during 2024:

Number of Distributed Shares Weighted-Average Grant Date Fair Value

Unvested as of December 31, 2023 9,194,312 $ 13.05

( 2,509,806 ) 13.08

Forfeited — —

Unvested as of December 31, 2024 6,684,506 $ 10.44

________________________

(1) During the second quarter of 2024, certain of the Distributed Shares were modified in a manner that resulted in such awards immediately vesting.

In January 2018, the Company approved the 2018 Plan, which became effective upon consummation of the IPO.

The 2018 Plan, as amended, authorizes the issuance of no more than approximately 88 million shares of Common Stock by the exercise or vesting of granted awards, which are generally stock options and restricted stock units (“RSUs”).

During 2024, the Company amended the 2018 Plan to increase the number of authorized common shares to be issued under the 2018 Plan by 50 million shares.

As of December 31, 2024, the 2018 Plan, as amended, authorizes the issuance of no more than approximately 138 million shares of Common Stock by the exercise or vesting of granted awards, which are generally stock options and restricted stock units (“RSUs”).

The Company satisfies the exercise of options and the vesting of RSUs through the issuance of authorized but previously unissued shares of Common Stock.

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Any shares of the Company’s Common Stock acquired upon exercise of the Top-up Options will be subject to the terms of the MIRA.

Share-based compensation expense associated with the Top-up Options Performance Tranche was recognized on a straight-line basis over the derived service period of approximately three years from the IPO date and was not material during the periods presented.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes activity related to the 2018 Plan Top-up Options:

The following table summarizes activity related to the Top-up Options:

Service Tranche Performance Tranche

Number of Top-up Options Weighted-Average Exercise Price Number of Top-up Options Weighted-Average Exercise Price Aggregate Intrinsic Value (a)

Number of Top-up Options Weighted-Average Exercise Price Number of Top-up Options Weighted-Average Exercise Price Aggregate Intrinsic Value (1)

(in thousands)

Weighted-Average Remaining Contractual Term (Years)

Weighted-Average Remaining Contractual Term

Outstanding as of December 31, 2023 5,955,254 $ 13.30 5,641,244 $ 13.30

2 unchanged sentences

Outstanding as of December 31, 2024 5,955,254 $ 13.30 5,624,601 $ 13.30 — 3.0

Exercisable as of December 31, 2023 5,955,254 $ 13.30 — $ 13.30 — 4.0

Exercisable as of December 31, 2024 (b)

5,955,254 $ 13.30 1,586,252 $ 13.30 — 3.0

(a) The intrinsic value represents the amount by which the fair value of the Company’s Common Stock exceeds the option exercise price as of December 31, 2023.

________________________

(1) The intrinsic value represents the amount by which the fair value of the Company’s Common Stock exceeds the option exercise price as of December 31, 2024.

(2) During the second quarter of 2024, certain of the Top-up Options in the performance tranche were modified in a manner that resulted in such awards immediately vesting and becoming exercisable.

Options granted under the 2018 Plan are primarily service-based awards that vest over a three-year period from the date of grant, have an exercise price equal to the closing price per share of the Company’s Common Stock on the date of grant, as adjusted in accordance with 2018 Plan provisions, and have a contractual term of ten years from the date of grant.

The Company did not grant any options during the periods presented.

No options were granted under the 2018 Plan during 2023 or 2022.

The Company used a binomial lattice model to determine the grant date fair value for options granted during 2024 and included the following assumptions:

Expected exercise term (years)

Expected volatility (1)

Expected dividend yield (2)

Risk-free interest rate (3)

________________________

(1) Estimated using historical and implied stock price volatility of the Company.

(2) Calculated by taking the annual dividend run-rate and dividing by the stock price at date of grant.

(3) Based on the U.S.

Treasury yield curve.

The weighted-average grant date fair value for the options granted during 2024 was $ 2.56 .

The following table summarizes activity related to 2018 Plan options during 2024:

Number of Options Weighted-Average Exercise Price Aggregate Intrinsic Value (a)

Number of Options Weighted-Average Exercise Price Aggregate Intrinsic Value (1)

(in thousands)

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Outstanding as of December 31, 2023 16,828,305 $ 6.70

Granted 6,831,794 6.51

Exercised ( 1,907,455 ) 5.37

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________________________

(a) The intrinsic value represents the amount by which the fair value of the Company’s Common Stock exceeds the option exercise price as of December 31, 2023.

(1) The intrinsic value represents the amount by which the fair value of the Company’s Common Stock exceeds the option exercise price as of December 31, 2024.

Share-based compensation expense associated with options granted under the 2018 Plan was not material during the periods presented.

In addition, the cash flow and the intrinsic value of options exercised were not material during the periods presented.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2024, unrecognized compensation cost related to options was not material.

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The fair value is equal to the closing price per share of the Company’s Common Stock on the date of grant.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes activity related to the 2018 Plan RSUs (including DEUs) during 2024:

5 unchanged sentences

Unvested as of December 31, 2024 8,264,015 $ 7.14

Total share-based compensation expense associated with RSUs granted under the 2018 Plan was $ 47 million, $ 55 million, and $ 46 million during 2023, 2022, and 2021, respectively, the majority of which relates to the Company’s continuing operations.

The fair value of RSUs (including DEUs) that vested and converted to shares of Common Stock on their respective vesting dates was approximately $ 56 million, $ 59 million, and $ 52 million during 2023, 2022, and 2021, respectively.

As of December 31, 2023, unrecognized compensation cost related to RSUs granted under the 2018 Plan was $ 30 million, which will be recognized over a period of 1.9 years.

In June 2022, the Company granted 1.6 million performance share units (“PSUs”) in connection with a business combination that the Company will account for as share-based compensation.

These PSUs contain both service and performance vesting conditions that must be met on an annual basis with the final vesting date in October 2025.

The fair value of the PSUs is equal to the closing price per share of the Company’s Common Stock on the date of grant, which resulted in a weighted-average grant date fair value of $ 7.46 .

The PSUs are not entitled to dividend equivalent units.

The majority of these PSUs have been forfeited.

The impact from the PSUs was not material.

During 2024, 2023, and 2022, total share-based compensation expense associated with RSUs granted under the 2018 Plan was $ 25 million, $ 47 million, and $ 55 million, respectively, the majority of which relates to the Company’s continuing operations.

The weighted-average grant date fair value of RSU’s granted during 2023 and 2022 was $ 7.56 and $ 7.85 , respectively.

During 2024, 2023, and 2022, the fair value of RSUs (including DEUs) that vested and converted to shares of Common Stock on their respective vesting dates was approximately $ 34 million, $ 56 million, and $ 59 million, respectively.

As of December 31, 2024, unrecognized compensation cost related to RSUs granted under the 2018 Plan was $ 27 million, which will be recognized over a period of approximately 1.9 years.

During the second quarter of 2024, the Company modified certain share-based compensation awards and recorded additional share-based compensation expense of $ 13 million in 2024 associated with these modifications.

NET INCOME (LOSS) PER SHARE

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$ 581,980 $ 423,503 $ 293,331

Dilutive effect (including conversion of Class B Common Stock) — — —

Dilutive effect (1)

13,671 8,885 8,428

Allocation of income (loss) from continuing operations - diluted

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Allocation of income (loss) from discontinued operations, net of tax - basic $ ( 111,197 ) $ 11,885 $ ( 168,676 )

Dilutive effect (including conversion of Class B Common Stock) — — —

Dilutive effect (1)

Allocation of income (loss) from discontinued operations, net of tax - diluted $ ( 111,197 ) $ 11,885 $ ( 168,676 )

Weighted-average shares outstanding - basic 846,521 856,843 848,465

Dilutive effect (including conversion of Class B Common Stock) — — —

Dilutive effect (1)

62,179 62,306 66,604

Weighted-average shares outstanding - diluted 908,700 919,149 915,069

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$ ( 0.12 ) $ 0.01 $ ( 0.18 )

Basic weighted-average shares outstanding in 2021 includes the Delayed Shares issued in connection with the ADT Solar Acquisition as discussed in Note 4 “Acquisitions.”

During 2023, 2022, and 2021, share-based compensation awards and all shares of Class B Common Stock of approximately 62 million, 67 million, and 61 million, respectively, were excluded from the computations above.

Additionally, the basic and diluted earnings per share computations for Common Stock exclude approximately 9 million, 9 million, and 10 million unvested shares during 2023, 2022, and 2021, respectively, as their vesting is contingent upon achievement of certain performance requirements which had not been met during the respective periods.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

________________

(1) Includes conversion of Class B Common Stock.

20 million, 17 million, and 15 million potential shares of Common Stock were excluded during 2024, 2023, and 2022, respectively, from the diluted earnings per share calculations because their effects would have been anti-dilutive.

The basic and diluted earnings per share computations for Common Stock exclude approximately 7 million, 9 million, and 9 million unvested shares during 2024, 2023, and 2022, respectively, as their vesting is contingent upon achievement of certain performance requirements which had not been met during the respective periods.

Class B Common Stock

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Dilutive effect (1)

( 1,627 ) ( 1,221 ) ( 764 )

Allocation of income (loss) from continuing operations - diluted

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(1) There were no potential shares of Class B Common Stock during the periods presented.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS AND CONTINGENCIES

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The Company’s contractual obligations for goods or services 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, primarily consist of information technology services and equipment, including investments in the Company’s information technology infrastructure and telecommunication services, and direct materials.

The following table provides the Company’s contractual obligations (excluding the Google Commercial Agreement discussed below) as of December 31, 2023 (in thousands) :

The following table provides the Company’s contractual obligations (excluding the Google agreements discussed separately below) as of December 31, 2024 (in thousands) :

2025 2026 2027 2028 2029 Thereafter Total

$ 367,036 $ 111,562 $ 39,210 $ 31,515 $ 11,593 $ — $ 560,916

The table above includes a commitment with one of the Company’s vendors to purchase at least $ 190 million of security system equipment and components through March 2025.

During the fourth quarter of 2023, the Company entered into an agreement with one of its vendors to purchase at least $ 190 million of security system equipment and components through March 2025.

During 2024, the Company increased its commitment by approximately $ 180 million and extended the commitment period through December 2025.

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

Included in the table above is approximately $ 172 million remaining under this commitment as of December 31, 2024.

Google Commercial Agreement

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The Google Commercial Agreement also specifies that each party shall contribute $ 150 million towards joint marketing, customer acquisition, training of the Company’s employees, and product technology updates related to the Google Devices and Services.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

technology advancements, customer acquisition, and marketing, as mutually agreed by the Company and Google, (together with the initial amounts, the “Google Success Funds”).

During 2023, $ 40 million of the Google Success Funds were reimbursed to the Company and reflected as a reduction of advertising costs.

In August 2022, the Company and Google executed an amendment to the Google Commercial Agreement, pursuant to which Google has agreed to commit an additional $ 150 million to fund growth, data and insights, product innovation and technology advancements, customer acquisition, and marketing, as mutually agreed by the Company and Google, (together with the initial amounts, the “Google Success Funds”).

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

Google Cloud Agreement Addendum

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

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

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

As of December 31, 2024, the Company is on track to meet these commitments.

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

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

During March 2022, the Company 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 the Company 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.

Subsequent event - In February 2025, $ 21 million of the Company’s guarantees were relinquished.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Legal Proceedings

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The Company has not accrued for any contingent liabilities for which the likelihood of loss cannot be determined, is less than probable, or for which the range of potential loss cannot be reasonably estimated.

As of December 31, 2023 and 2022, the Company’s accrual for ongoing claims and lawsuits within the scope of an insurance program totaled $ 110 million and $ 90 million, respectively.

As of December 31, 2024 and 2023, the Company’s accrual for ongoing claims and lawsuits within the scope of an insurance program totaled $ 94 million and $ 110 million, respectively, including amounts related to discontinued operations.

The Company’s accrual related to ongoing claims and lawsuits not within the scope of an insurance program is not material.

Company as Lessee

As part of normal operations, the Company leases real estate, vehicles, and equipment from various counterparties with lease terms and maturities through 2034.

As part of normal operations, the Company leases real estate, vehicles, and equipment from various counterparties with lease terms and maturities through 2034, primarily through its main operating entity, ADT LLC.

For these transactions, the Company applies the practical expedient to not separate the lease and non-lease components and accounts for the combined component as a lease.

Additionally, the Company’s right-of-use assets and lease liabilities include leases with initial lease terms of 12 months or less.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s right-of-use assets and lease liabilities primarily represent lease payments that are fixed at the commencement of a lease and variable lease payments that are dependent on an index or rate.

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The Company’s subleases are not material.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Right-of-Use Assets and Lease Liabilities

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Total lease cost $ 88,821 $ 84,927 $ 88,980

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash Flow and Supplemental Information (1)

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(1) Includes both continuing and discontinued operations consistent with the presentation on the Consolidated Statements of Cash Flows.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Lease Term and Discount Rate

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The Company is a lessor in certain Company-owned transactions as the Company has identified a lease component associated with the right-of-use of the security system and a non-lease component associated with the monitoring and related services.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For transactions in which (i) the timing and pattern of transfer is the same for the lease and non-lease components, and (ii) the lease component would be classified as an operating lease if accounted for separately, the Company applies the practical expedient to aggregate the lease and non-lease components and accounts for the combined transaction based upon its predominant characteristic, which is the non-lease component.

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These multi-employer plans, including the Company’s required contributions and any underfunded liabilities under such plans, are not material to the Company’s consolidated financial statements.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Defined Benefit Plans

The Company provides a defined benefit pension plan and certain other postretirement benefits to certain employees.

These plans are frozen and are not material to the Company’s consolidated financial statements.

As of December 31, 2023 and 2022, the fair values of pension plan assets were $ 51 million and $ 49 million, respectively, and the fair values of projected benefit obligations were $ 59 million and $ 56 million, respectively.

As a result, the plans were underfunded by approximately $ 8 million and $ 7 million as of December 31, 2023 and 2022, respectively, and were recorded as a net liability.

Net periodic benefit cost associated with these plans was not material during the periods presented.

Prior to termination during 2024, the Company provided a defined benefit pension plan and certain other postretirement benefits to certain employees, which were frozen and were not material to the Company’s consolidated financial statements.

During 2023, the Company took actions to terminate the defined benefit pension plan.

The termination was effective December 31, 2023, and the wind down of the plan and distribution of assets is expected to commence in 2024.

Additionally, as of December 31, 2023, the net pension obligation was recorded in accrued expenses and other current liabilities as the Company expects to settle all future obligations during 2024.

The termination was effective December 31, 2023, and the wind down of the plan and distribution of assets occurred in the fourth quarter of 2024 through a combination of lump sum cash distributions to certain plan participants and the purchase of non-participating annuity contracts for the remainder of the plan participants, all of which resulted in the full settlement of the Company’s defined benefit pension plan obligations as of December 31, 2024.

Cash contributions of approximately $ 8 million were made to fully fund the plan and effectuate the settlement.

Charges primarily resulting from the write-off of amounts previously recorded in AOCI as well as other expenses associated with the settlement of the Company’s defined benefit pension plan were not material.

As of December 31 2023, the fair value of pension plan assets was $ 51 million and the fair value of projected benefit obligations was $ 59 million.

As a result, the plan was underfunded by approximately $ 8 million as of December 31, 2023 and was recorded as a net liability.

Net periodic benefit cost associated with these plans was not material during the periods presented.

Deferred Compensation Plan

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RELATED PARTY TRANSACTIONS

The Company’s related party transactions primarily relate to products and services received from, or monitoring and related services provided to, other entities affiliated with Apollo, as well as, from time to time, management, consulting, and transaction advisory services provided by Apollo to the Company.

There were no significant related party transactions during the periods presented other than as described below.

There were no significant related party transactions with Apollo during the periods presented.

As discussed in Note 11 “Equity,” in October 2022, State Farm became a related party in connection with the State Farm Strategic Investment.

The Company’s related party transactions primarily relate to products and services received from, or monitoring and related services provided to, other entities affiliated with Apollo, as well as, from time to time, certain transactions between the Company and Apollo and State Farm.

Other than as described below, there were no significant related party transactions during the periods presented.

Offerings and Share Repurchases

On March 6, 2024, the Company and certain entities managed by affiliates of Apollo Global Management, Inc.

(the “Selling Stockholders”) entered into an underwriting agreement (the “March 2024 Underwriting Agreement”) with Morgan Stanley & Co.

LLC and Barclays Capital Inc., as representatives of the underwriters named therein, including Apollo Global Securities, LLC, an affiliate of Apollo (collectively, the “March 2024 Underwriters”), in connection with the offer and sale by the Selling Stockholders (the “March 2024 Offering”) of 65 million shares of the Company’s Common Stock, and, at the option of the March 2024 Underwriters, up to an additional 9.75 million shares of Common Stock (the “March 2024 Underwriters’ Option”).

• As part of the March 2024 Offering, the Company purchased 15 million shares of Common Stock under its 2024 Share Repurchase Plan from the March 2024 Underwriters (the “March 2024 Share Repurchase”).

The Company paid approximately $ 93 million (or approximately $ 6.22 per share) for the March 2024 Share Repurchase, which was the same per share price paid by the March 2024 Underwriters to the Selling Stockholders.

• The March 2024 Offering and the March 2024 Share Repurchase closed on March 11, 2024.

On March 15, 2024, the March 2024 Underwriters exercised the March 2024 Underwriters’ Option in full, which subsequently closed on March 19, 2024.

The Company did not pay any underwriting fees in connection with the March 2024 Share Repurchase, including on behalf of the Selling Stockholders or otherwise.

On October 28, 2024, the Company and the Selling Stockholders entered into an underwriting agreement (the “October 2024 Underwriting Agreement”) with Barclays Capital Inc., Citigroup Global Markets Inc., and BTIG, LLC, as representatives of the underwriters named therein, (collectively, the “October 2024 Underwriters”), in connection with the offer and sale by the Selling Stockholders (the “October 2024 Offering”) of 56 million shares of the Company’s Common Stock, and, at the option of the October Underwriters, up to an additional 8.4 million shares of Common Stock (the “October 2024 Underwriters’ Option”).

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023, the balance in the Opportunity Fund was $ 94 million.

During 2023, the Company made payments to State Farm from the Opportunity Fund of $ 9 million.

Other payments and interest earned on the Opportunity fund was not material.

Beginning in 2023, State Farm customers can receive ADT home security products and professional monitoring at a reduced cost.

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

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

• As part of the October 2024 Offering, the Company purchased 16 million shares of Common Stock under its 2024 Share Repurchase Plan from the October 2024 Underwriters (the “October 2024 Share Repurchase”).

The Company paid approximately $ 115 million (or approximately $ 7.20 per share) for the October 2024 Share Repurchase, which was the same per share price paid by the October 2024 Underwriters to the Selling Stockholders.

• The October 2024 Offering and the October 2024 Share Repurchase closed on October 30, 2024.

On November 6, 2024, the October 2024 Underwriters exercised the October 2024 Underwriters’ Option in full, which subsequently closed on November 8, 2024.

The Company did not pay any underwriting fees in connection with the October 2024 Share Repurchase, including on behalf of the Selling Stockholders or otherwise.

All the shares in the Offerings were sold by the Selling Stockholders.

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

The March 2024 and October 2024 repurchases (collectively, “Repurchases”) are reflected as a reduction to additional paid-in-capital and as a financing cash outflow.

During 2023, the Company incurred fees to Apollo of $ 1 million related to Apollo’s performance of placement agent services related to the initial funding of the Term Loan A Facility.

As discussed in Note 10 “Equity,” State Farm is a related party as it owns more than 10 % of the Company’s issued and outstanding Common Stock.

As of December 31, 2024 and 2023, the balance in the portion of the Opportunity Fund held by the Company was $ 85 million and $ 94 million, respectively.

State Farm customers can receive ADT home security products and professional monitoring at a reduced cost.

In connection with this arrangement, the Company receives a subsidy from State Farm through the Opportunity Fund.

During 2024 and 2023, payments from the Opportunity Fund were $ 14 million and $ 11 million, respectively, related to marketing, the subsidy discussed above, and taxes.

Interest earned on the Opportunity fund was not material.

Prior to the Canopy Termination during 2023, Canopy was considered a related party under GAAP as the Company accounted for its investment under the equity method of accounting.

Except for the transactions described in Note 6 “Equity Method Investments,” there were no other significant related party transactions with Canopy during 2023 or 2022.

Except for as described in Note 5 “Equity Method Investments,” there were no other significant transactions with Canopy during the periods presented.

Sunlight Financial LLC

ADT Solar uses Sunlight Financial LLC (“Sunlight”), an entity affiliated with Apollo, to access certain loan products for ADT Solar customers, as discussed in Note 2 “Revenue and Receivables.” As of December 2023, Sunlight is no longer affiliated with Apollo, and as a result, is no longer a related party.

During 2023, total loans funded by Sunlight were approximately $ 78 million;

and as of December 31, 2023, the Company may be required to repurchase approximately $ 6 million of such loans.

Additionally, the Company incurred $ 13 million of financing fees for the year ended December 31, 2023.

As of December 31, 2023, net amounts due to/from Sunlight were not significant.

During 2022, total loans funded by Sunlight were approximately $ 436 million;

and the Company incurred approximately $ 54 million of financing fees.

Transactions with Sunlight were not material during 2021.

In connection with the Company’s former Solar Business, the Company used Sunlight Financial LLC (“Sunlight”), an entity affiliated with Apollo, to access certain loan products.

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

During 2023 and 2022, total loans funded by Sunlight were approximately $ 78 million and $ 436 million, respectively, and the Company incurred $ 13 million and $ 54 million, respectively, of financing fees.

During October 2020, the Company entered into a master services agreement with Rackspace US, Inc.

(“Rackspace”), an entity affiliated with Apollo, for the provision of cloud storage, equipment, and services to facilitate the implementation of the Company’s cloud migration strategy for certain applications.

The master services agreement includes a minimum purchase commitment of $ 50 million over a seven -year term, which the Company has satisfied through spend with Rackspace as well as other parties.

The master services agreement included a minimum purchase commitment of $ 50 million over a seven-year term, which the Company satisfied during 2023 through spend with Rackspace as well as other parties.

The Company incurred fees to Rackspace of $ 4 million, $ 15 million, and $ 14 million during 2024, 2023, and 2022, respectively.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Transactions

During 2023, the Company incurred fees for telephone and technology services of approximately $ 6 million with an entity affiliated with Apollo that became a related party during 2023.

There were no other material related party transactions during the periods presented.

During 2024 and 2023, the Company incurred fees for telephone and technology services of approximately $ 4 million and $ 6 million, respectively, with an entity affiliated with Apollo that became a related party during 2023.

AND SUBSIDIARIES

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Total current liabilities 155,472 33,047

Long-term debt 545,557 536,495

Debt due to subsidiaries 554,954 545,557

Other liabilities 352,472 97,411

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made non-cash contributions to subsidiaries of approximately $ 49 million and $ 51 million, respectively, primarily related to the transfer of net assets of certain subsidiaries for share-based compensation (including amounts related to discontinued operations).

During 2021, ADT Inc.

made non-cash contributions to subsidiaries of approximately $ 630 million related to the transfer of net assets of certain subsidiaries for the acquisition of ADT Solar, including $ 529 million in the issuance of shares, as well as share-based compensation.

As of December 31, 2024, current liabilities includes $ 104 million related to the December 2024 agreement with a non-affiliate to repurchase shares, in which the transaction closed in January 2025, and other liabilities includes intercompany liabilities with subsidiaries of $ 240 million related to share repurchases under the 2024 Share Repurchase Plan.

Subsequent event - In January 2025, ADT Inc.

received distributions from subsidiaries of $ 47 million to pay dividends that the Company declared in October 2024 to common shareholders.

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The Company is disclosing the following summarized quarterly financial information due to the Commercial Business being reported as a discontinued operation as a result of the Commercial Divestiture.

Refer to Note 5 “Divestitures” for additional information on the Commercial Divestiture.

The Company is disclosing the following summarized quarterly financial information for 2024 and 2023 due to the Solar and Commercial Businesses being reported as discontinued operations as a result of the ADT Solar Exit and Commercial Divestiture, respectively.

Refer to Note 4 “Divestitures” for additional information.

AND SUBSIDIARIES

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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 9A. Controls and Procedures