ADT Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2024, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined under Exchange Act Rules 13a-15(f) and 15d-15(f)). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management performed an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2024 based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our assessment and those criteria, our management determined that our internal control over financial reporting was effective as of December 31, 2024. The effectiveness of our internal control over financial reporting as of December 31, 2024 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in Part IV of this Annual Report. Changes in Internal Control over Financial Reporting 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 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. ITEM 9B. OTHER INFORMATION. During the quarter ended December 31, 2024, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K. 71 ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not Applicable. 72 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. The information required by this Item 10 “Directors, Executive Officers and Corporate Governance” is incorporated herein by reference from our Proxy Statement for the 2025 Annual Meeting of Stockholders (the “Proxy Statement”) to be filed with the SEC within 120 days after our fiscal year end of December 31, 2024. ITEM 11. EXECUTIVE COMPENSATION. The information required by this Item 11 “Executive Compensation” is incorporated herein by reference from our Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The information required by this Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” other than as set forth below as required by Item 201(d) and Item 403(c) of Regulation S-K, is incorporated herein by reference from our Proxy Statement. Securities Authorized for Issuance Under Equity Compensation Plans The following table provides information as of December 31, 2024 with respect to shares of Common Stock issuable under our equity compensation plans. Both the 2016 Equity Incentive Plan (the “2016 Plan”) and the 2018 Omnibus Incentive Plan (the “2018 Plan”) provide for the award of stock options, restricted stock units (“RSUs”), restricted stock awards (“RSAs”), and other equity and equity-based awards to our Board of Directors, officers, and non-officer employees. There are no shares of Class B Common Stock issuable under our equity compensation plans. Equity Compensation Plans Plan Category Number of securities to be issued upon exercise of outstanding options, warrants, and rights Weighted-average exercise price of outstanding options, warrants, and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (a) (b) (c) Equity compensation plans approved by stockholders: 2016 Equity Incentive Plan (1) 1,933,105 $ 6.05 2,870,032 2018 Omnibus Incentive Plan (2) 42,127,494 $ 6.97 45,587,230 Total 44,060,599 48,457,262 _________________ (1) Column (a) includes approximately 1 million shares of Common Stock that may be issued upon the exercise of service-based stock options and 1 million shares of Common Stock that may be issued upon the exercise of performance-based stock options. We do not expect to issue additional share-based compensation awards under the 2016 Plan. (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 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. 73 Apollo Margin Loan Agreement 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. Such persons had the option to either (a) receive such proceeds as distributed or (b) to defer receipt of such proceeds until their attributable share of the obligations under the margin loan have been satisfied in full. In the case of elections to receive such proceeds as distributed, such proceeds remain subject to recall until such time as all obligations under the margin loan agreement and related documentation are satisfied in full. The Company has not independently verified the foregoing disclosure. When the margin loan agreement was entered into, and as requested when amended, the Company delivered customary letter agreements to the secured parties in which it has, among other things, agreed, subject to applicable law and stock exchange rules, not to take any actions that are intended to hinder or delay the exercise of any remedies by the secured parties under the margin loan agreement and related documentation, as amended. 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. ITEM 14. 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. ITEM 13. 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. 74 PART IV ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES. 1. Financial Statements See Index to Consolidated Financial Statements appearing on page F-1. 2. Financial Statement Schedules All financial statement schedules called for under Regulation S‑X are omitted because either they are not required under the related instructions, are included in the consolidated financial statements or notes thereto included elsewhere in this Annual Report on Form 10‑K, or are not material. 3. Exhibits The exhibits listed on the accompanying Index to Exhibits are filed/furnished or incorporated by reference as part of this Annual Report on Form 10-K. Index to Exhibits The information required by this Item is set forth on the exhibit index below. Exhibit Number Incorporated by Reference Exhibit Description Form Exhibit Filing Date 2.1^ Share Purchase Agreement, dated September 30, 2019, among ADT Security Holdings Canada Ltd., ADT Inc., and TELUS Communications Inc. 8-K 2.1 10/1/2019 2.2 Purchase Agreement, dated November 8, 2021, by and among The ADT Security Corporation, Compass Solar Group, LLC, MGG SPV VIII LLC, MGG SPV VII LLC, Compass Group Management, LLC, the Company Members party thereto, the Blocker Members party thereto, and ADT Inc. 10-K 2.2 3/1/2022 2.3 Equity Purchase Agreement, dated as of August 7, 2023, among ADT Inc., Iris Buyer LLC and Fire & Security Holdings, LLC 8-K 2.1 8/8/2023 3.1 Amended and Restated Certificate of Incorporation of ADT Inc. 8-K 3.1 9/17/2020 3.2 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of ADT Inc. 10-Q 3.1 8/1/2024 3.3 Amended and Restated Bylaws of ADT Inc. 8-K 3.1 9/18/2023 4.1 Indenture, dated as of July 5, 2012, by and between The ADT Corporation and Wells Fargo Bank, National Association S-1 4.1 12/21/2017 4.2 Third Supplemental Indenture, dated as of July 5, 2012, by and among The ADT Corporation, Tyco International Ltd. and Wells Fargo Bank, National Association S-1 4.4 12/21/2017 4.3 Fourth Supplemental Indenture, dated as of January 14, 2013, by and between The ADT Corporation and Wells Fargo Bank, National Association S-1 4.5 12/21/2017 4.4 Sixth Supplemental Indenture, dated as of April 8, 2016, under 2012 Base Indenture, by and among The ADT Corporation, the guarantors party thereto and the Wells Fargo Bank, National Association S-1 4.7 12/21/2017 4.5 Seventh Supplemental Indenture, dated as of April 22, 2016, under 2012 Base Indenture, by and among The ADT Corporation, the guarantors party thereto and the Wells Fargo Bank, National Association S-1 4.8 12/21/2017 4.6 Eighth Supplemental Indenture, dated as of May 2, 2016, under 2012 Base Indenture, by and among Prime Finance, Inc., The ADT Corporation and the Wells Fargo Bank, National Association S-1 4.9 12/21/2017 4.7 Ninth Supplemental Indenture, dated as of November 15, 2017, under 2012 Base Indenture, by and among The ADT Security Corporation, DataShield, LLC and Wells Fargo Bank, National Association 10-K 4.10 3/11/2019 4.8 Twelfth Supplemental Indenture, dated as of January 7, 2019, under 2012 Base Indenture, by and among The ADT Security Corporation, the guarantors party thereto and Wells Fargo Bank, National Association 10-K 4.13 3/11/2019 4.9 Fifteenth Supplemental Indenture, dated as of November 14, 2019, under 2012 Base Indenture, by and among The ADT Security Corporation, I-View Now LLC and Wells Fargo Bank, National Association 10-K 4.16 3/10/2020 75 Exhibit Number Incorporated by Reference Exhibit Description Form Exhibit Filing Date 4.10 Indenture, dated as of May 2, 2016, by and between Prime Security One MS, Inc. and the Wells Fargo Bank, National Association S-1 4.14 12/21/2017 4.11 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 S-1 4.15 12/21/2017 4.12 Second Supplemental Indenture, dated as of August 9, 2016, by and between The ADT Corporation, the Notes Guarantors and Wells Fargo Bank, National Association S-1 4.18 12/21/2017 4.13 Third Supplemental Indenture, dated as of November 15, 2017, by and among The ADT Security Corporation, DataShield, LLC and Wells Fargo Bank, National Association 10-K 4.27 3/11/2019 4.14 Sixth Supplemental Indenture, dated as of January 7, 2019, by and among The ADT Security Corporation, the guarantors party thereto and Wells Fargo Bank, National Association 10-K 4.30 3/11/2019 4.15 Ninth Supplemental Indenture, dated as of November 14, 2019, by and among The ADT Security Corporation, I-View Now LLC and Wells Fargo Bank, National Association 10-K 4.37 3/10/2020 4.16 Indenture, dated as of April 4, 2019, by and among Prime Security Services Borrower, LLC, Prime Finance Inc., the guarantors party thereto from time to time, and Wells Fargo Bank, National Association, as trustee, relating to the $750 million aggregate principal amount of 5.250% first-priority senior secured notes due 2024 8-K 4.1 4/4/2019 4.17 First Supplemental Indenture, dated as of November 14, 2019, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., I-View Now LLC and Wells Fargo Bank, National Association 10-K 4.49 3/10/2020 4.18 Indenture, dated as of April 4, 2019, by and among Prime Security Services Borrower, LLC, Prime Finance Inc., the guarantors party thereto from time to time, and Wells Fargo Bank, National Association, as trustee, relating to the $750 million aggregate principal amount of 5.750% first-priority senior secured notes due 2026. 8-K 4.2 4/4/2019 4.19 First Supplemental Indenture, dated as of September 23, 2019, by and among Prime Security Services Borrower, LLC, Prime Finance Inc., the guarantors party thereto, and Wells Fargo Bank, National Association, as trustee, relating to the $600 million aggregate principal amount of 5.750% first-priority senior secured notes due 2026 8-K 4.1 9/24/2019 4.20 Second Supplemental Indenture, dated as of November 14, 2019, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., I-View Now LLC and Wells Fargo Bank, National Association 10-K 4.53 3/10/2020 4.21 Indenture, dated as of January 28, 2020, by and among Prime Security Services Borrower, LLC, Prime Finance Inc., the guarantors party thereto from time to time and Wells Fargo Bank, National Association, as trustee, relating to the $1,300 million aggregate principal amount of 6.250% Second-Priority Senior Secured Notes due 2028 8-K 4.1 1/28/2020 4.22 Indenture, dated as of August 20, 2020, by and among Prime Security Services Borrower, LLC, Prime Finance Inc., the guarantors party hereto from time to time, and Wells Fargo Bank, National Association, as trustee, relating to $1,000 million aggregate principal amount of 3.375% first-priority senior secured notes due 2027 8-K 4.1 8/20/2020 4.23 First-Priority Senior Secured Notes Indenture, dated as of July 29, 2021, by and among The ADT Security Corporation, Prime Security Services Borrower, LLC, the guarantors party thereto, and Wells Fargo Bank, National Association, as trustee and collateral agent 8-K 4.1 7/29/2021 4.24 Seventeenth Supplemental Indenture, dated as of January 7, 2022, under 2012 Base Indenture, by and among The ADT Security Corporation, Compass Solar Group, LLC, Marc Jones Construction, L.L.C., Buildpro, L.L.C., Energypro LLC and Wells Fargo Bank, National Association 10-Q 4.1 5/6/2022 4.25 Eighteenth Supplemental Indenture, dated as of April 28, 2022, under 2012 Base Indenture, by and among The ADT Security Corporation, ADT Innovation LLC and Wells Fargo Bank, National Association 10-Q 4.2 5/6/2022 4.26 Eleventh Supplemental Indenture, dated as of January 7, 2022, by and among The ADT Security Corporation, Compass Solar Group, LLC, Marc Jones Construction, L.L.C., Buildpro, L.L.C., Energypro LLC and Wells Fargo Bank, National Association 10-Q 4.3 5/6/2022 4.27 Twelfth Supplemental Indenture, dated as of April 28, 2022, by and among The ADT Security Corporation, ADT Innovation LLC and Wells Fargo Bank, National Association 10-Q 4.4 5/6/2022 4.28 Third 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 4.5 5/6/2022 4.29 Fourth 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 10-Q 4.6 5/6/2022 76 Exhibit Number Incorporated by Reference Exhibit Description Form Exhibit Filing Date 4.30 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 4.31 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 10-Q 4.8 5/6/2022 4.32 First 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 4.9 5/6/2022 4.33 Second 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 10-Q 4.10 5/6/2022 4.34 Second 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 4.11 5/6/2022 4.35 Third 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 10-Q 4.12 5/6/2022 4.36 First Supplemental Indenture, dated as of January 7, 2022, by and among The ADT Security Corporation, Compass Solar Group, LLC, Marc Jones Construction, L.L.C., Buildpro, L.L.C., Energypro LLC and Wells Fargo Bank, National Association 10-Q 4.13 5/6/2022 4.37 Second Supplemental Indenture, dated as of April 28, 2022, by and among The ADT Security Corporation, ADT Innovation LLC and Wells Fargo Bank, National Association 10-Q 4.14 5/6/2022 4.38 Description of Securities 10-K 4.24 3/1/2022 10.1 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 S-1 10.2 12/21/2017 10.2 Supplement No. 1, dated as of May 2, 2016, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Securities Services Borrower, LLC and Barclays Bank PLC, as Collateral Agent S-1 10.6 12/21/2017 10.3 Supplement No. 2, dated as of October 31, 2017, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Security Services Borrower, LLC party thereto and Barclays Bank PLC, as Collateral Agent 10-K 10.55 3/11/2019 10.4 Supplement No. 3, dated as of January 22, 2018, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Security Services Borrower, LLC party thereto and Barclays Bank PLC, as Collateral Agent 10-K 10.56 3/11/2019 10.5 Supplement No. 4, dated as of February 28, 2018, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Security Services Borrower, LLC party thereto and Barclays Bank PLC, as Collateral Agent 10-K 10.57 3/11/2019 10.6 Supplement No. 5, dated as of August 17, 2018, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Security Services Borrower, LLC party thereto and Barclays Bank PLC, as Collateral Agent 10-K 10.58 3/11/2019 10.7 Supplement No. 6, dated as of January 2, 2019, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Security Services Borrower, LLC party thereto and Barclays Bank PLC, as Collateral Agent 10-K 10.59 3/11/2019 10.8 Supplement No. 7, dated as of January 30, 2019, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Security Services Borrower, LLC party thereto and Barclays Bank PLC, as Collateral Agent 10-K 10.60 3/11/2019 10.9 Supplement No. 8, dated as of March 11, 2019, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Security Services Borrower, LLC party thereto and Barclays Bank PLC, as Collateral Agent 10-Q 10.13 5/7/2019 10.10 Supplement No. 11, dated as of January 7, 2022, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Security Services Borrower, LLC party thereto and Barclays Bank PLC, as Collateral Agent 10-Q 10.4 5/6/2022 10.11 Supplement No. 12, dated as of April 28, 2022, to the Subsidiary Guarantee Agreement (First Lien) dated as of July 1, 2015, by each subsidiary of Prime Security Services Borrower, LLC party thereto and Barclays Bank PLC, as Collateral Agent 10-Q 10.5 5/6/2022 77 Exhibit Number Incorporated by Reference Exhibit Description Form Exhibit Filing Date 10.12 Holdings Guarantee and Pledge Agreement (First Lien), dated and effective as of July 1, 2015, between Prime Security Services Holdings, LLC, as Holdings, and Credit Suisse AG, Cayman Islands Branch, as Collateral Agent S-1 10.4 12/21/2017 10.13 Collateral Agreement (First Lien), dated as of July 1, 2015 among Prime Security Services Borrower, LLC, each Subsidiary of Prime Security Services Borrower, LLC from time to time identified therein as a party and Barclays Bank PLC, as collateral agent S-1 10.5 12/21/2017 10.14 Collateral Agreement (Second Lien), dated as of January 28, 2020, among Prime Security Services Borrower LLC, as Issuer, Prime Finance, Inc., as Co-Issuer, each Subsidiary Guarantor party thereto and Wells Fargo Bank, National Association, as Collateral Agent 8-K 10.1 1/28/2020 10.15 First Lien/First Lien Intercreditor Agreement, dated as of May 2, 2016 among Barclays Bank PLC, as Collateral Agent, Barclays Bank PLC, as Authorized Representative under the Credit Agreement, Wells Fargo Bank, National Association, as the Initial Other Authorized Representative, and each additional Authorized Representative from time to time party hereto relating to Prime Security Services Borrower, LLC S-1 10.8 12/21/2017 10.16 First Lien/Second Lien Intercreditor Agreement, dated as of July 1, 2015, between Credit Suisse AG, Cayman Islands Branch, as First Lien Facility Agent and Applicable First Lien Agent, and Credit Suisse AG, Cayman Islands Branch, as Second Lien Facility Agent and Applicable Second Lien Agent relating to Prime Security Services Borrower, LLC S-1 10.9 12/21/2017 10.17 Receivables Purchase Agreement, dated as of March 5, 2020, among ADT LLC, individually and as servicer, ADT Finance LLC, as seller, various purchasers and purchaser agents from time to time party thereto, and Mizuho Bank, LTD., as Administrative Agent, Arranger, Collateral Agent and Structuring Agent 10-K 10.21 3/10/2020 10.18 Agreement of Amendment to Receivables Purchase Agreement, dated as of April 17, 2020, among ADT LLC, individually and as servicer, ADT Finance LLC, as seller, various purchasers and purchaser agents from time to time party thereto, and Mizuho Bank, LTD., as Administrative Agent, Arranger, Collateral Agent and Structuring Agent 10-Q 10.22 5/7/2020 10.19 Second Agreement of Amendment to Receivables Purchase Agreement, dated September 17, 2020, among ADT LLC, individually and as servicer, ADT Finance LLC, as seller, various purchasers and purchaser agents from time to time party thereto, and Mizuho Bank, LTD., as Administrative Agent, Arranger, Collateral Agent and Structuring Agent 10-Q 10.23 11/5/2020 10.20 Third Agreement of Amendment to Receivables Purchase Agreement, dated January 29, 2021, among ADT LLC, individually and as servicer, ADT Finance LLC, as seller, various purchasers and purchaser agents from time to time party thereto, and Mizuho Bank, LTD., as Administrative Agent, Arranger, Collateral Agent and Structuring Agent 10-K 10.25 2/25/2021 10.21 Fourth Agreement of Amendment to Receivables Purchase Agreement, dated March 5, 2021, among ADT LLC, individually and as servicer, ADT Finance LLC, as seller, various purchasers and purchaser agents from time to time party thereto, and Mizuho Bank, LTD., as Administrative Agent, Arranger, Collateral Agent and Structuring Agent 10-Q 10.26 5/5/2021 10.22 Receivables Sale and Contribution Agreement, dated as of April 17, 2020, between ADT LLC, as Originator and Servicer and ADT Finance Inc., as Buyer 10-Q 10.23 5/7/2020 10.23^ Receivables Financing Agreement, among ADT LLC, ADT Finance LLC and Mizuho Bank, Ltd., dated as of July 16, 2021 8-K 10.1 7/19/2021 10.24^ First Amendment and Joinder to the Receivables Financing Agreement and the Receivables Sale and Contribution Agreement, among ADT LLC, ADT Finance LLC, Mizuho Bank, Ltd., MUFG Bank, Ltd., BNP Paribas, and Starbird Funding Corporation, dated as of October 29, 2021 8-K 10.1 10/29/2021 10.25 Second Amendment to the Receivables Financing Agreement, among ADT LLC, ADT Finance LLC and Mizuho Bank, LTD., dated as of December 10, 2021 10-K 10.24 3/1/2022 10.26 Bank Rate Amendment to the Receivables Financing Agreement, among ADT LLC, ADT Finance LLC and Mizuho Bank, Ltd., dated as of April 20, 2022 10-Q 10.3 5/6/2022 10.27 Third Amendment dated as of May 20, 2022, to Receivables Financing Agreement, among ADT LLC, ADT Finance LLC, and Mizuho Bank, Ltd., dated as of July 16, 2021 10-Q 10.3 8/4/2022 10.28 Trademark Agreement, dated as of September 25, 2012, by and among ADT Services GmbH, ADT US Holdings, Inc., Tyco International Ltd. and The ADT Corporation S-1 10.19 12/21/2017 10.29 Patent Agreement, dated as of September 26, 2012, by and between Tyco International Ltd. and The ADT Corporation S-1 10.20 12/21/2017 10.30 Separation and Distribution Agreement, dated September 26, 2012 by and among Tyco International Ltd., Tyco International Finance S.A., The ADT Corporation and ADT LLC S-1 10.21 12/21/2017 10.31 ADT LLC Supplemental Savings and Retirement Plan, effective as of April 1, 2017 S-1 10.22 12/21/2017 10.32 Amendment to the ADT LLC Supplemental Savings and Retirement Plan, effective as of December 18, 2017 10-K 10.31 2/25/2021 78 Exhibit Number Incorporated by Reference Exhibit Description Form Exhibit Filing Date 10.33 Amendment to the ADT LLC Supplemental Savings and Retirement Plan, effective as of December 24, 2018 10-K 10.32 2/25/2021 10.34 Amendment to the ADT LLC Supplemental Savings and Retirement Plan, effective as of December 31, 2018 10-K 10.33 2/25/2021 10.35 Amendment to the ADT LLC Supplemental Savings and Retirement Plan, effective as of February 8, 2019 10-K 10.34 2/25/2021 10.36 Amendment to the ADT LLC Supplemental Savings and Retirement Plan, effective as of July 29, 2019 10-K 10.35 2/25/2021 10.37 Amendment to the ADT LLC Supplemental Savings and Retirement Plan, effective as of December 15, 2021 10-Q 10.4 8/4/2022 10.38 Amendment to the ADT LLC Supplemental Savings and Retirement Plan, effective as of January 1, 2022 10-Q 10.13 11/3/2022 10.39 Amendment to the ADT LLC Supplemental Savings and Retirement Plan, effective as of February 22, 2023 10-K 10.40 2/28/2023 10.40 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. 10-K 10.34 3/1/2022 10.41 Registration Rights Agreement by and between the ADT Inc. and Prime Securities Services TopCo, LP 10-K 10.24 3/15/2018 10.42 Amendment to the Registration Rights Agreement between ADT Inc. and Prime Security Services TopCo Parent, L.P. 10-Q 10.10 8/9/2018 10.43 Securities Purchase Agreement, dated as of July 31, 2020, by and between ADT Inc. and Google LLC 8-K 10.1 8/3/2020 10.44 Investor Rights Agreement, dated as of September 17, 2020, by and between ADT Inc. and Google LLC 8-K 10.1 9/17/2020 10.45 Amendment No. 1 to Investor Rights Agreement, dated as of September 5, 2022, by and between ADT Inc. and Google LLC 10-K 10.46 2/28/2024 10.46 Amendment No. 2 to Investor Rights Agreement, dated as of December 29, 2023, by and between ADT Inc. and Google LLC 10-K 10.47 2/28/2024 10.47+ 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 S-1 10.25 12/21/2017 10.48+ Amendment to Amended and Restated Employment Agreement, dated May 3, 2019, between The ADT Security Corporation (together with any of its subsidiaries and Affiliates) and Donald Young 10-Q 10.27 5/7/2019 10.49+ Amended and Restated Employment Agreement, dated December 19, 2017, between ADT LLC, (together with any of its subsidiaries and Affiliates) and Jeffrey Likosar S-1 10.31 12/21/2017 10.50+ Employment Offer Letter, dated February 1, 2019, between ADT LLC (with its Affiliates and Successors) and David Smail 10-K 10.51 2/28/2023 10.51+ ADT Inc. 2018 Omnibus Incentive Plan S-1 10.32 12/21/2017 10.52+ First Amendment to ADT Inc. 2018 Omnibus Incentive Plan dated April 25, 2019 10-Q 10.33 8/6/2019 10.53+ Second Amendment to ADT Inc. 2018 Omnibus Incentive Plan, dated May 22, 2024 10.Q 10.5 8/1/2024 10.54+ Form of Restricted Stock Unit Award Agreement for use under the ADT Inc. 2018 Omnibus Incentive Plan S-1 10.33 12/21/2017 10.55+ Form of Non-Qualified Option Award Agreement for use under the ADT Inc. 2018 Omnibus Incentive Plan S-1 10.34 12/21/2017 10.56+ Form of Non-Qualified Option Award Agreement for use under the ADT Inc. 2018 Omnibus Incentive Plan (Class B Unit Redemption) S-1/A 10.35 1/8/2018 10.57+ Form of Amendment to Non-Qualified Award Agreement for use under ADT Inc. 2018 Omnibus Incentive Plan (Class B Unit Redemption) 10-Q 10.37 8/6/2019 10.58+ Form of Common Stock Award Agreement for use under the ADT Inc. 2018 Omnibus Incentive Plan S-1/A 10.36 1/8/2018 10.59+ ADT Inc. 2018 Omnibus Incentive Plan Restricted Stock Unit Non-Employee Director Award Agreement 10-Q 10.9 8/9/2018 10.60+ Form of Restricted Stock Unit Special Equity Award Agreement for use under the ADT Inc. 2018 Omnibus Incentive Plan 10-Q 10.47 5/7/2020 10.61+ Form of Non-Qualified Option Special Equity Award Agreement for use under the ADT Inc. 2018 Omnibus Incentive Plan 10-Q 10.48 5/7/2020 79 Exhibit Number Incorporated by Reference Exhibit Description Form Exhibit Filing Date 10.62+ Form of Restricted Stock Unit Award Agreement for use under the ADT Inc. 2018 Omnibus Incentive Plan effective as of January 1, 2022 10-Q 10.5 11/9/2021 10.63+ Form of Non-Qualified Option Award Agreement for use under the ADT Inc. 2018 Omnibus Incentive Plan effective as of January 1, 2022 10-Q 10.6 11/9/2021 10.64+ Form of Restricted Stock Unit Award Agreement for use under the ADT Inc. 2018 Omnibus Incentive Plan effective as of August 1, 2022 SC TO-I (d)(34) 9/12/2022 10.65+ Form of Non-Qualified Option Award Agreement for use under the ADT Inc. 2018 Omnibus Incentive Plan effective as of August 1, 2022 SC TO-I (d)(35) 9/12/2022 10.66+ Second Amended & Restated Employment Agreement with James D. DeVries 10-Q 10.12 11/8/2018 10.67+ Amendment to Second Amended & Restated Employment Agreement of James D. DeVries 8-K 10.2 12/3/2018 10.68+ ADT Inc. Annual Incentive Plan 8-K 10.1 7/29/2021 10.69 Investor Rights Agreement, dated December 8, 2021, by and among ADT Inc. and the Holders party thereto 10-K 10.63 3/1/2022 10.70 Securities Purchase Agreement, dated as of September 5, 2022, by and between ADT Inc. and State Farm Fire & Casualty Company 8-K 10.1 9/6/2022 10.71 Tender and Support Agreement, dated as of September 5, 2022, by and between ADT Inc., Prime Security Services TopCo (ML), L.P. and Prime Security Services TopCo (ML II), L.P 8-K 10.2 9/6/2022 10.72 Support Agreement, dated as of September 5, 2022, by and between ADT Inc. and Google LLC 8-K 10.3 9/6/2022 10.73+ Form of Performance Unit Award Agreement for use under the ADT Inc. 2018 Omnibus Incentive Plan SC TO-I (d)(20) 9/12/2022 10.74+ Form of Time and Performance Vesting Non-Qualified Option Award Agreement for use under the ADT Inc. 2018 Omnibus Incentive Plan SC TO-I (d)(21) 9/12/2022 10.75+ Form of Time and Performance Vesting Restricted Stock Unit Award Agreement for use under the ADT Inc. 2018 Omnibus Incentive Plan SC TO-I (d)(22) 9/12/2022 10.76+ Form of Non-Qualified Option Award Agreement for use under the Prime Security Services Parent, Inc. 2016 Equity Incentive Plan SC TO-I (d)(24) 9/12/2022 10.77+ Form of Non-Qualified Option Award Agreement for use under the ADT Inc. 2018 Omnibus Incentive Plan, effective as of March 8, 2024 10-Q 10.2 4/25/2024 10.78+ Form of Indemnification Agreement by and between the Company and each of its Directors and Executive Officers 10-Q 10.3 10/24/2024 10.79 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 8-K 10.1 9/15/2022 10.80 Investor Rights Agreement, dated as of October 13, 2022, by and between ADT Inc. and State Farm Fire & Casualty Company 8-K 10.1 10/13/2022 10.81+ 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 10.82+ 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 10.83+^ 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 10-Q 10.6 8/1/2024 10.84 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 10.85 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. 8-K 10.1 12/04/2024 10.86 Receivables Financing Agreement, among Compass Solar Group, LLC, ADT Solar Finance LLC and Mizuho Bank, Ltd., dated as of August 2, 2023. 10-Q 10.2 11/02/2023 10.87 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 8-K 10.1 4/12/2024 80 Exhibit Number Incorporated by Reference Exhibit Description Form Exhibit Filing Date 1 9* A DT Inc. Insider Trading Policy 21* Subsidiaries of ADT Inc. 23* Consent of Independent Registered Public Accounting Firm 31.1* Certification of CEO, pursuant to SEC Rule 13a-14(a) and 15d-14(a) 31.2* Certification of CFO, pursuant to SEC Rule 13a-14(a) and 15d-14(a) 32.1** Certification by the CEO, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2** Certification by the CFO, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 97.1 Policy Relating to Incentive Compensation Clawback 10-K 97.1 2/28/2024 101 XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 104 Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document _________________________ ^ Confidential treatment requested. Confidential portions of this exhibit have been removed. * Filed herewith. ** Furnished herewith. + Management contract or compensatory plan or arrangement. ITEM 16. FORM 10-K SUMMARY. None. 81 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ADT Inc. Date: February 27, 2025 By: /s/ James D. DeVries Name: James D. DeVries Title: Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 27, 2025. Name Title /s/ James D. DeVries Chairman, President and Chief Executive Officer (Principal Executive Officer) James D. DeVries /s/ Jeffrey Likosar President, Corporate Development and Transformation, and Chief Financial Officer (Principal Financial Officer) Jeffrey Likosar /s/ Steven Burzo Vice President, Chief Accounting Officer and Controller (Principal Accounting Officer) Steven Burzo /s/ Nicole Bonsignore Director Nicole Bonsignore /s/ Marques Coleman Director Marques Coleman /s/ Thomas M. Gartland Director Thomas M. Gartland /s/ Tracey R. Griffin Director Tracey R. Griffin /s/ Benjamin Honig Director Benjamin Honig /s/ Daniel Houston Director Daniel Houston /s/ William M. Lewis, Jr Director William M. Lewis, Jr /s/ Reed B. Rayman Director Reed B. Rayman /s/ Paul J. Smith Director Paul J. Smith /s/ Lee J. Solomon Director Lee J. Solomon /s/ Danielle Tiedt Director Danielle Tiedt /s/ Matthew E. Winter Director Matthew E. Winter /s/ Suzanne Yoon Director Suzanne Yoon /s/ Sigal Zarmi Director Sigal Zarmi 82 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) F- 2 Consolidated Balance Sheets as of December 31, 2024 and 2023 F- 4 Consolidated Statements of Operations for the years ended December 31, 2024, 2023, and 2022 F- 5 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2024, 2023, and 2022 F- 6 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2024, 2023, and 2022 F- 7 Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023, and 2022 F- 8 Notes to Consolidated Financial Statements F-9 1. Description of Business and Summary of Significant Accounting Policies F- 9 2. Revenue and Receivables F- 15 3. Segment Information F- 18 4 . Divestitures F-2 0 5 . Equity Method Investments F- 23 6. Goodwill and Other Intangible Assets F- 23 7. Debt F- 27 8. Derivative Financial Instruments F- 34 9. Income Taxes F- 36 1 0 . Equity F- 39 1 1 . Share-Based Compensation F- 43 1 2 . Net Income (Loss) per Share F- 46 1 3 . Commitments and Contingencies F- 48 1 4 . Leases F- 49 1 5 . Retirement Plans F- 51 1 6 . Related Party Transactions F- 52 1 7 . Condensed Financial Information of Registrant F- 55 18. Selected Quarterly Financial Data (Unaudited) F-58 F-1 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of ADT Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of ADT Inc. and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. F-2 Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. 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. 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 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 Miami, Florida February 27, 2025 We have served as the Company’s auditor since 2010. F-3 ADT INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) December 31, 2024 2023 Assets Current assets: Cash and cash equivalents $ 96,212 $ 14,621 Restricted cash and restricted cash equivalents 107,853 115,329 Accounts receivable, net of allowance for credit losses of $ 57,795 and $ 46,850 , respectively 393,511 370,201 Inventories, net 196,731 201,394 Prepaid expenses and other current assets 210,613 242,192 Current assets of discontinued operations — 60,957 Total current assets 1,004,920 1,004,694 Property and equipment, net 247,183 253,658 Subscriber system assets, net 2,981,161 3,005,936 Intangible assets, net 4,854,099 4,877,493 Goodwill 4,903,899 4,903,899 Deferred subscriber acquisition costs, net 1,324,376 1,175,904 Other assets 735,319 699,231 Noncurrent assets of discontinued operations — 43,279 Total assets $ 16,050,957 $ 15,964,094 Liabilities and stockholders' equity Current liabilities: Current maturities of long-term debt $ 195,791 $ 312,061 Accounts payable 153,537 277,201 Deferred revenue 247,785 255,221 Accrued expenses and other current liabilities 634,904 556,114 Current liabilities of discontinued operations 31,763 79,611 Total current liabilities 1,263,780 1,480,208 Long-term debt 7,511,282 7,513,456 Deferred subscriber acquisition revenue 2,067,608 1,914,954 Deferred tax liabilities 1,167,213 1,027,189 Other liabilities 224,384 219,069 Noncurrent liabilities of discontinued operations 15,889 20,572 Total liabilities 12,250,156 12,175,448 Commitments and contingencies (See Note 13) Stockholders' equity: Preferred stock—authorized 1,000,000 shares of $ 0.01 par value; zero issued and outstanding as of December 31, 2024 and 2023 — — Common stock—authorized 3,999,000,000 shares of $ 0.01 par value; issued and outstanding shares of 836,589,761 and 867,432,337 as of December 31, 2024 and 2023, respectively 8,366 8,674 Class B common stock—authorized 100,000,000 shares of $ 0.01 par value; issued and outstanding shares of 54,744,525 as of December 31, 2024 and 2023 547 547 Additional paid-in capital 7,117,098 7,413,305 Accumulated deficit ( 3,318,174 ) ( 3,617,718 ) Accumulated other comprehensive income (loss) ( 7,036 ) ( 16,162 ) Total stockholders' equity 3,800,801 3,788,646 Total liabilities and stockholders' equity $ 16,050,957 $ 15,964,094 See Notes to Consolidated Financial Statements F-4 ADT INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Years Ended December 31, 2024 2023 2022 Revenue: Monitoring and related services $ 4,293,477 $ 4,178,998 $ 4,053,048 Security installation, product, and other 604,969 473,826 328,856 Total revenue 4,898,446 4,652,824 4,381,904 Cost of revenue (exclusive of depreciation and amortization shown separately below) : Monitoring and related services 617,386 604,368 596,664 Security installation, product, and other 229,728 147,314 102,118 Total cost of revenue 847,114 751,682 698,782 Selling, general, and administrative expenses 1,476,346 1,347,738 1,348,281 Depreciation and intangible asset amortization 1,342,798 1,335,484 1,599,810 Merger, restructuring, integration, and other 24,124 38,959 9,937 Operating income (loss) 1,208,064 1,178,961 725,094 Interest expense, net ( 441,031 ) ( 569,915 ) ( 263,068 ) Loss on extinguishment of debt ( 4,802 ) ( 16,621 ) — Other income (expense) 52,939 11,958 ( 57,568 ) Income (loss) from continuing operations before income taxes and equity in net earnings (losses) of equity method investee 815,170 604,383 404,458 Income tax benefit (expense) ( 195,780 ) ( 160,585 ) ( 87,692 ) Income (loss) from continuing operations before equity in net earnings (losses) of equity method investee 619,390 443,798 316,766 Equity in net earnings (losses) of equity method investee — 6,572 ( 4,601 ) Income (loss) from continuing operations 619,390 450,370 312,165 Income (loss) from discontinued operations, net of tax ( 118,337 ) 12,639 ( 179,502 ) Net income (loss) $ 501,053 $ 463,009 $ 132,663 Common Stock: Income (loss) from continuing operations per share - basic $ 0.69 $ 0.49 $ 0.35 Income (loss) from continuing operations per share - diluted $ 0.66 $ 0.47 $ 0.33 Net income (loss) per share - basic $ 0.56 $ 0.51 $ 0.15 Net income (loss) per share - diluted $ 0.52 $ 0.48 $ 0.14 Weighted-average shares outstanding - basic 846,521 856,843 848,465 Weighted-average shares outstanding - diluted 908,700 919,149 915,069 Class B Common Stock: Income (loss) from continuing operations per share - basic $ 0.69 $ 0.49 $ 0.35 Income (loss) from continuing operations per share - diluted $ 0.66 $ 0.47 $ 0.33 Net income (loss) per share - basic $ 0.56 $ 0.51 $ 0.15 Net income (loss) per share - diluted $ 0.52 $ 0.48 $ 0.14 Weighted-average shares outstanding - basic 54,745 54,745 54,745 Weighted-average shares outstanding - diluted 54,745 54,745 54,745 See Notes to Consolidated Financial Statements F-5 ADT INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Years Ended December 31, 2024 2023 2022 Net income (loss) $ 501,053 $ 463,009 $ 132,663 Other comprehensive income (loss), net of tax: Cash flow hedges 6,008 32,129 25,754 Other 3,118 ( 1,091 ) ( 3,981 ) Total other comprehensive income (loss), net of tax 9,126 31,038 21,773 Comprehensive income (loss) $ 510,179 $ 494,047 $ 154,436 See Notes to Consolidated Financial Statements F-6 ADT INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) Number of Common Shares Number of Class B Common Shares Common Stock Class B Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity Balance as of December 31, 2021 846,826 54,745 $ 8,468 $ 547 $ 7,261,267 $ ( 3,952,590 ) $ ( 68,973 ) $ 3,248,719 Net income (loss) — — — — — 132,663 — 132,663 Other comprehensive income (loss), net of tax — — — — — — 21,773 21,773 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 — — — — — ( 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 ) Balance as of December 31, 2022 862,098 54,745 $ 8,621 $ 547 $ 7,380,759 $ ( 3,949,579 ) $ ( 47,200 ) $ 3,393,148 Net income (loss) — — — — — 463,009 — 463,009 Other comprehensive income (loss), net of tax — — — — — — 31,038 31,038 Dividends — — — — — ( 129,025 ) — ( 129,025 ) Share-based compensation expense — — — — 51,137 — — 51,137 Transactions related to employee share-based compensation plans and other 5,334 — 53 — ( 18,591 ) ( 2,123 ) — ( 20,661 ) Balance as of December 31, 2023 867,432 54,745 $ 8,674 $ 547 $ 7,413,305 $ ( 3,617,718 ) $ ( 16,162 ) $ 3,788,646 Net income (loss) — — — — — 501,053 — 501,053 Other comprehensive income (loss), net of tax — — — — — — 9,126 9,126 Dividends — — — — — ( 199,398 ) — ( 199,398 ) 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 ) Balance as of December 31, 2024 836,590 54,745 $ 8,366 $ 547 $ 7,117,098 $ ( 3,318,174 ) $ ( 7,036 ) $ 3,800,801 See Notes to Consolidated Financial Statements F-7 ADT INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2024 2023 2022 Cash flows from operating activities: Net income (loss) $ 501,053 $ 463,009 $ 132,663 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and intangible asset amortization 1,344,696 1,388,671 1,693,575 Amortization of deferred subscriber acquisition costs 224,647 195,794 162,981 Amortization of deferred subscriber acquisition revenue ( 346,209 ) ( 308,604 ) ( 244,141 ) Share-based compensation expense 48,613 51,137 66,566 Deferred income taxes 139,583 125,235 19,575 Provision for losses on receivables and inventory 214,802 151,065 113,869 Loss on extinguishment of debt 4,802 16,621 — Goodwill, intangible, and other asset impairments 24,313 528,556 206,132 (Gain) loss on sales of businesses 9,557 ( 649,095 ) ( 10,066 ) Unrealized (gain) loss on interest rate swap contracts 45,160 38,497 ( 301,851 ) Change in fair value of other financial instruments — — 63,396 Other non-cash items, net ( 34,089 ) 100,087 134,526 Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: Accounts receivable, net ( 146,134 ) ( 107,464 ) ( 178,258 ) Long-term retail installment contracts 211,731 184,925 142,811 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 Accrued interest ( 88,860 ) ( 128,042 ) 50,758 Accrued and other liabilities 40,944 ( 83,041 ) ( 42,023 ) Deferred subscriber acquisition costs ( 365,841 ) ( 386,518 ) ( 393,861 ) Deferred subscriber acquisition revenue 252,274 289,534 329,214 Other, net ( 2,046 ) ( 96,700 ) 10,074 Net cash provided by (used in) operating activities 1,884,899 1,657,726 1,887,920 Cash flows from investing activities: Dealer generated customer accounts and bulk account purchases ( 585,809 ) ( 588,638 ) ( 621,695 ) Subscriber system asset expenditures ( 523,146 ) ( 630,535 ) ( 734,639 ) Purchases of property and equipment ( 163,805 ) ( 176,353 ) ( 176,660 ) 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 ) Net cash provided by (used in) investing activities ( 1,295,428 ) 242,493 ( 1,532,784 ) Cash flows from financing activities: Proceeds from issuance of common stock, net of expenses — — 1,180,000 Proceeds from long-term borrowings 1,068,907 867,178 550,035 Proceeds from receivables facility 228,569 281,647 276,826 Repurchases of common stock ( 240,556 ) — ( 1,200,000 ) Repayment of long-term borrowings, including call premiums ( 1,186,045 ) ( 2,961,798 ) ( 605,059 ) Repayment of receivables facility ( 256,672 ) ( 200,385 ) ( 121,061 ) Dividends on common stock ( 182,266 ) ( 128,587 ) ( 127,125 ) Payments on finance leases ( 29,023 ) ( 43,733 ) ( 44,978 ) Proceeds (payments) from opportunity fund ( 6,895 ) ( 8,746 ) 100,802 Proceeds (payments) from interest rate swaps 93,040 82,750 ( 18,841 ) Other financing, net ( 4,415 ) ( 32,175 ) ( 5,432 ) Net cash provided by (used in) financing activities ( 515,356 ) ( 2,143,849 ) ( 14,833 ) Cash and cash equivalents and restricted cash and restricted cash equivalents: Net increase (decrease) during the period 74,115 ( 243,630 ) 340,303 Beginning balance 129,950 373,580 33,277 Ending balance $ 204,065 $ 129,950 $ 373,580 See Notes to Consolidated Financial Statements F-8 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business and Organization 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. ADT Inc. was incorporated in the State of Delaware in May 2015 as a holding company with no assets or liabilities. In July 2015, the Company acquired Protection One, Inc. and ASG Intermediate Holding Corp. (collectively, the “Formation Transactions”), which were instrumental in the commencement of the Company’s operations. In May 2016, the Company acquired The ADT Security Corporation (formerly named The ADT Corporation) (“The ADT Corporation”) (the “ADT Acquisition”). 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 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”). 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 The consolidated financial statements have been prepared in U.S. dollars in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The financial statements included herein comprise the consolidated results of ADT Inc. and its wholly-owned subsidiaries. The results of companies acquired are included from the effective date of each acquisition; and all intercompany transactions have been eliminated. 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. Certain prior period amounts have been reclassified to conform with the current period presentation. Use of Estimates The preparation of the consolidated financial statements in accordance with GAAP requires the Company to select accounting policies and make estimates that affect amounts reported in the consolidated financial statements and the accompanying notes. The Company’s estimates are based on the relevant information available at the end of each period. Actual results could differ materially from these estimates under different assumptions or market conditions. F-9 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Segments 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 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. The Company adopted this guidance effective January 1, 2024. This guidance did not impact the Company. F-10 ADT INC. 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: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, represents changes to clarify or improve disclosure and presentation requirements of a variety of topics. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company is currently evaluating the potential impact of this guidance on its financial statements and disclosures. Significant Accounting Policies Information on select accounting policies and methods not discussed below are included in the respective footnotes that follow. Cash and Cash Equivalents and Restricted Cash and Restricted Cash Equivalents All highly liquid investments with original maturities of three months or less from the time of purchase are considered to be cash equivalents. Restricted cash and restricted cash equivalents are restricted for a specific purpose and cannot be included in the general cash and cash equivalents account. 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: Years Ended December 31, (in thousands) 2024 2023 2022 Cash and cash equivalents $ 96,212 $ 14,621 $ 257,223 Restricted cash and restricted cash equivalents 107,853 115,329 116,357 Ending balance $ 204,065 $ 129,950 $ 373,580 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”). F-11 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Supplementary Cash Flow Information The following table summarizes supplementary cash flow information and material non-cash investing and financing transactions, excluding leases (refer to Note 14 “Leases”): Years Ended December 31, (in thousands) 2024 2023 2022 Interest paid, net of interest income received (1) $ 372,036 $ 522,775 $ 470,947 Payments (refunds) on income taxes, net $ 21,700 $ 60,296 $ 22,654 Issuance of shares for acquisition of businesses (2) $ — $ — $ 55,485 Contingent forward purchase contract (3) $ — $ — $ 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) 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 December 31, (in thousands) 2024 2023 Prepaid expenses $ 53,036 $ 47,674 Contract assets (see Note 2 “Revenue and Receivables”) 19,164 15,365 Fair value of interest rate swaps (see Note 8 “Derivative Financial Instruments”) 56,164 74,974 Other current assets 82,249 104,179 Prepaid expenses and other current assets $ 210,613 $ 242,192 Inventories, net 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. 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 Property and equipment, net, is recorded at historical cost less accumulated depreciation, which is calculated using the straight-line method over the estimated useful lives of the related assets. Depreciation expense is reflected in depreciation and intangible asset amortization. Repairs and maintenance expenditures are expensed when incurred. F-12 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Useful Lives: Buildings and related improvements Up to 40 years Leasehold improvements Lesser of remaining term of the lease or economic useful life Capitalized software 3 to 10 years Machinery, equipment, and other Up to 10 years Net Carrying Amount: December 31, (in thousands) 2024 2023 Land $ 9,773 $ 10,313 Buildings and leasehold improvements 97,263 95,003 Capitalized software 574,644 518,850 Machinery, equipment, and other 162,631 158,086 Construction in progress 22,106 30,121 Finance leases 127,956 114,997 Accumulated depreciation ( 747,190 ) ( 673,712 ) Property and equipment, net $ 247,183 $ 253,658 Depreciation Expense: Years Ended December 31, (in thousands) 2024 2023 2022 Depreciation expense $ 174,850 $ 176,407 $ 159,339 Subscriber System Assets, net and Deferred Subscriber Acquisition Costs, net Subscriber system assets represent capitalized equipment and installation costs incurred in connection with transactions in which the Company retains ownership of the security system and are reflected in the Consolidated Balance Sheets as follows: December 31, (in thousands) 2024 2023 Gross carrying amount $ 6,878,490 $ 6,404,479 Accumulated depreciation ( 3,897,329 ) ( 3,398,543 ) Subscriber system assets, net $ 2,981,161 $ 3,005,936 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 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. F-13 ADT INC. 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: Years Ended December 31, (in thousands) 2024 2023 2022 Depreciation of subscriber system assets $ 557,226 $ 545,041 $ 531,013 Amortization of deferred subscriber acquisition costs $ 224,647 $ 188,222 $ 154,186 Long-Lived Assets (excluding Goodwill and Indefinite-Lived Intangible Assets) The Company reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. The Company groups assets at the lowest level for which cash flows are separately identifiable. Recoverability is measured by a comparison of the carrying amount of the asset group to its expected future undiscounted cash flows. If the expected future undiscounted cash flows of the asset group are less than its carrying amount, an impairment loss is recognized based on the amount by which the carrying amount exceeds the fair value less costs to sell. The calculation of the fair value less costs to sell of an asset group is based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates, reflecting varying degrees of perceived risk. There were no material long-lived asset impairments during the periods presented. Accrued Expenses and Other Current Liabilities December 31, (in thousands) 2024 2023 Accrued interest $ 107,116 $ 111,197 Payroll-related accruals 109,078 110,941 Opportunity Fund (see Note 10 “Equity”) 84,516 93,950 Accrued dividends 48,918 32,207 Forward share repurchase contract liability (see Note 10 “Equity”) 104,175 — Other accrued liabilities 181,101 207,819 Accrued expenses and other current liabilities $ 634,904 $ 556,114 Advertising Costs 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 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. Concentration of Credit Risks The majority of the Company’s cash and cash equivalents and restricted cash and restricted cash equivalents are held at major financial institutions. There is a concentration of credit risk related to certain account balances in excess of the Federal Deposit Insurance Corporation insurance limit of $250,000 per account. The Company regularly monitors the financial stability of these financial institutions and believes there is no exposure to any significant credit risk for its cash and cash equivalents and restricted cash and restricted cash equivalents. 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. F-14 ADT INC. 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 (“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. Cash Equivalents - Included in cash and cash equivalents and restricted cash and restricted cash equivalents, as applicable from time to time, are investments in money market mutual funds. These investments are generally classified as Level 1 fair value measurements, which represent unadjusted quoted prices in active markets for identical assets or liabilities. Investments in money market mutual funds were $ 90 million and $ 55 million as of December 31, 2024 and December 31, 2023, respectively. 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. December 31, 2024 2023 (in thousands) Carrying Amount Fair Value Carrying Amount Fair Value Retail installment contract receivables, net $ 669,326 $ 495,259 $ 673,635 $ 487,685 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 the 2020 Receivables Facility approximate their fair values, as interest rates on these borrowings approximate current market rates. December 31, 2024 2023 (in thousands) Carrying Amount Fair Value Carrying Amount Fair Value Long-term debt instruments subject to fair value disclosures (1) $ 7,637,631 $ 7,589,677 $ 7,756,049 $ 7,731,408 ________________ (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. These fair values are primarily calculated using discounted cash flow models utilizing observable inputs, such as quoted forward interest rates, and incorporate credit risk adjustments to reflect the risk of default by the counterparty or the Company. The resulting fair values are classified as Level 2 fair value measurements. Refer to Note 8 “Derivative Financial Instruments” for the fair values of the Company’s derivative financial instruments. 2. REVENUE AND RECEIVABLES Revenue 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. Amounts collected from customers for sales and other taxes are reported as a liability net of the related amounts remitted. 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. F-15 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Disaggregated Revenue Years Ended December 31, ( in thousands ) 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 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). 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. 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 Deferred revenue represents customer billings for services not yet rendered and is primarily related to recurring monitoring and related services. In addition, payments received for the sale and installation of a system after the agreement is signed but before performance obligations are satisfied are recorded as deferred revenue. 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. F-16 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Accounts Receivable Accounts receivable represent unconditional rights to consideration from customers in the ordinary course of business and are generally due in one year or less. The Company’s accounts receivable 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 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. Changes in the Allowance for Credit Losses Years Ended December 31, (in thousands) 2024 2023 2022 Beginning balance $ 46,850 $ 27,815 $ 22,030 Provision for credit losses 158,346 130,407 83,047 Write-offs, net of recoveries (1) ( 147,401 ) ( 111,372 ) ( 77,262 ) Ending balance $ 57,795 $ 46,850 $ 27,815 ________________ (1) Recoveries were not material for the periods presented. As such, write-offs are presented net of recoveries. 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. Subsequent to origination, the Company monitors the delinquency status of retail installment contract receivables as the key credit quality indicator. 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. December 31, (in thousands) 2024 2023 Retail installment contract receivables, gross $ 678,174 $ 674,827 Allowance for credit losses ( 8,848 ) ( 1,192 ) Retail installment contract receivables, net $ 669,326 $ 673,635 Balance Sheet Classification: Accounts receivable, net $ 260,224 $ 238,961 Other assets 409,102 434,674 Retail installment contract receivables, net $ 669,326 $ 673,635 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 Contract assets represent the Company’s right to consideration in exchange for goods or services transferred to the customer. 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. F-17 ADT INC. AND SUBSIDIARIES 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. 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. The allowance is recognized at inception and is reassessed each reporting period. The allowance for credit losses on contract assets was not material for the periods presented. Gross contract assets recognized by the Company were not material for the periods presented. December 31, (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 Balance Sheet Classification: Prepaid expenses and other current assets $ 19,164 $ 15,365 Other assets 21,646 15,237 Contract assets, net $ 40,810 $ 30,602 3. SEGMENT INFORMATION 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). F-18 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, (in thousands) 2024 2023 2022 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) 224,647 188,222 154,186 Advertising costs (2) 105,366 131,133 145,904 Provision for credit losses (2) 187,361 131,962 81,727 Other general and administrative costs (2) 708,979 664,182 696,662 Share-based compensation (2) 48,745 38,626 52,945 Depreciation and intangible asset amortization 1,342,798 1,335,484 1,599,810 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 Other, net ( 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 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. 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. 4. DIVESTITURES 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 F-19 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 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 Solar Business. 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, 2024 December 31, 2023 Assets Accounts receivable, net $ — $ 20,270 Inventories, net — 28,714 Prepaid expenses and other current assets — 11,973 Total current assets of discontinued operations — 60,957 Property and equipment, net — 29,512 Other assets — 13,767 Total assets of discontinued operations $ — $ 104,236 Liabilities Current maturities of long-term debt $ 22 $ 8,551 Accounts payable 6,953 16,682 Deferred revenue — 9,177 Accrued expenses and other current liabilities 24,788 45,201 Total current liabilities of discontinued operations 31,763 79,611 Long-term debt 32 9,893 Other liabilities 15,857 10,679 Total liabilities of discontinued operations $ 47,652 $ 100,183 F-20 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Statements of Operations Information Years Ended December 31, (in thousands) 2024 2023 2022 Revenue $ 21,254 $ 329,835 $ 786,426 Cost of revenue 65,678 256,784 501,710 Selling, general, and administrative expenses 67,366 191,841 314,545 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 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”). 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. F-21 ADT INC. 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 76,236 36,668 Gain on sale of business 629,980 — Income (loss) from discontinued operations before income taxes 706,216 36,668 Income tax benefit (expense) ( 178,667 ) ( 10,868 ) Income (loss) from discontinued operations, net of tax $ 527,549 $ 25,800 Cash Flow Information Years Ended December 31, (in thousands) 2023 2022 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and intangible asset amortization $ 37,691 $ 77,745 Share-based compensation expense $ 11,699 $ 13,069 Cash flows from investing activities: Subscriber system asset expenditures $ ( 8,902 ) $ ( 29,230 ) Purchases of property and equipment $ ( 4,399 ) $ ( 6,885 ) Transition Services Agreement In connection with the Commercial Divestiture, the Company entered into a Transition Services Agreement (the “Commercial TSA”), pursuant to which the Company and the Commercial Business will provide certain transitional services relating to ongoing support and other administrative functions to each other for a transitional period of up to 24 months after the closing of the Commercial Divestiture. Commercial TSA fees charged to the Commercial Business represent charges for internal labor as well as certain third-party costs identified in connection with providing such services. Income from the Commercial TSA is recognized in other income (expense), and expenses incurred by the Company to support the transition are recorded based on the nature of the expense. During 2024 and 2023, the Company recognized income from the Commercial TSA of $ 40 million and $ 12 million, respectively. F-22 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ADT Brand License and Intellectual Property Rights The Company and GTCR entered into an agreement granting GTCR a license to continue to use the ADT brand and other Company trademarks for a period of twelve months to transition from Company branding (the “Brand License”). The Company has also agreed to a covenant not to assert a claim against GTCR for infringement of 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 2024 and 2023. Other Divestitures 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. 5. EQUITY METHOD INVESTMENTS 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 recognizes its proportionate share of the investee’s net income or loss in equity in net earnings (losses) of equity method investee. The Company evaluates an equity method investment whenever events or changes in circumstances indicate the carrying amount of such investment may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, the Company records a loss as a component of the Company’s share of earnings or losses of the equity method investee in the current period. Canopy Investment In April 2022, the Company and Ford Motor Company (“Ford”) formed a new entity, SNTNL LLC (“Canopy”), and the Company contributed cash of $ 11 million (the “Initial Contribution”). Since the Initial Contribution, the Company contributed $ 7 million. During the fourth quarter of 2023, the Company sold its shares in Canopy and received $ 21 million in accordance with the terms of the agreement between the Company and Ford, which included a put right under which the Company recovered its full equity investment in Canopy plus a premium (“Canopy Termination”). In addition, the Company recognized a gain of $ 15 million, which is reflected in equity in net earnings (losses) of equity method investees. The Company no longer holds an investment in Canopy. 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”), 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. 6. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill 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. F-23 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Other Intangible Assets December 31, 2024 December 31, 2023 (in thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Definite-lived intangible assets: Contracts and related customer relationships (1) $ 6,158,349 $ ( 3,464,926 ) $ 2,693,423 $ 5,571,456 $ ( 2,937,245 ) $ 2,634,211 Dealer relationships (2) 1,518,020 ( 697,324 ) 820,696 1,518,020 ( 618,154 ) 899,866 Other (3) 209,773 ( 202,793 ) 6,980 209,773 ( 199,357 ) 10,416 Total definite-lived intangible assets 7,886,142 ( 4,365,043 ) 3,521,099 7,299,249 ( 3,754,756 ) 3,544,493 Indefinite-lived intangible assets: Trade name (4) 1,333,000 — 1,333,000 1,333,000 — 1,333,000 Intangible assets $ 9,219,142 $ ( 4,365,043 ) $ 4,854,099 $ 8,632,249 $ ( 3,754,756 ) $ 4,877,493 __________________ (1) During 2023, the Company retired $ 1.7 billion of certain customer relationship intangible assets acquired in the ADT Acquisition that became fully amortized. (2) Originated from the Formation Transactions and the ADT Acquisition in 2015 and 2016, respectively. Amortized primarily over 19 years on a straight-line basis based on management estimates about attrition and the longevity of the underlying dealer network that existed at the time of acquisition. (3) Primarily relates to trade names and other technology assets. Amortized over a period of up to 10 years on a straight-line basis. (4) ADT trade name acquired as part of the ADT Acquisition. Contracts and Related Customer Relationships Contracts and related customer relationships comprise contracts with customers purchased under the ADT Authorized Dealer Program (as defined below) or from other third parties as well as customer relationships that originated from business acquisitions. Additionally, the Company maintains a network of agreements with third-party independent alarm dealers who sell alarm equipment and ADT Authorized Dealer-branded monitoring and interactive services to residential end users (the “ADT Authorized Dealer Program”). 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 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. The Company records the amount of the charge back as a reduction to the purchase price. Purchases of contracts with customers under the ADT Authorized Dealer Program, or from other third parties, are accounted for on a pooled basis based on the month and year of acquisition. The Company amortizes its pooled contracts with customers using an accelerated method over the estimated life of the customer relationship, which is 15 years. The accelerated method for amortizing these contracts utilizes an average declining balance rate of approximately 300 % and converts to straight-line methodology when the resulting amortization charge is greater than that from the accelerated method, resulting in an average amortization of approximately 65 % of the pool within the first five years, 25 % within the second five years, and 10 % within the final five years. 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. F-24 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The change in the net carrying amount of contracts and related customer relationships was as follows: Years Ended December 31, (in thousands) 2024 2023 Beginning balance $ 2,634,211 $ 2,595,535 Customer contract additions, net of dealer charge-backs 586,994 564,652 Amortization ( 527,782 ) ( 525,676 ) Other — ( 300 ) Ending balance $ 2,693,423 $ 2,634,211 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 Years Ended December 31, (in thousands) 2024 2023 2022 Definite-lived intangible asset amortization expense $ 610,389 $ 613,679 $ 909,059 As of December 31, 2024, the estimated aggregate amortization expense on our existing intangible assets is expected to be as follows ( in thousands) : 2025 2026 2027 2028 2029 Thereafter $ 575,002 $ 493,508 $ 427,736 $ 378,363 $ 342,846 $ 1,303,644 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 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. Goodwill 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. If the Company 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, the Company proceeds to a quantitative approach. Under a quantitative approach, the Company 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. The Company estimates the fair values of its reporting units using the income approach, which discounts projected cash flows using market participant assumptions. The income approach includes significant assumptions including, but not limited to, forecasted revenue, operating profit margins, Adjusted EBITDA margins, operating expenses, cash flows, perpetual growth rates, and discount rates. The estimated fair value of a reporting unit calculated using the income approach is sensitive to changes in the underlying assumptions. 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 F-25 ADT INC. 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 Under a qualitative approach, the impairment test for an indefinite-lived intangible asset consists of an assessment of whether it is more-likely-than-not that an asset’s fair value is less than its carrying amount. If the Company elects to bypass the qualitative assessment for any indefinite-lived intangible asset, or if a qualitative assessment indicates it is more-likely-than-not that the estimated carrying amount of such asset exceeds its fair value, the Company proceeds to a quantitative approach. Under a quantitative approach, the Company estimates the fair value of an asset and compares it to its carrying amount. If the carrying amount exceeds fair value, an impairment loss is recognized in an amount equal to that excess. 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. The fair value of the ADT trade name is determined under a relief from royalty method, which is an income approach that estimates the cost savings that accrue to the Company that it would otherwise have to pay in the form of royalties or license fees on revenue earned through the use of the asset. The utilization of the relief from royalty method requires the Company to make significant assumptions including revenue growth rates, the implied royalty rate, and the discount rate. As of October 1, 2024, the Company quantitatively tested the ADT trade name for impairment. 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. F-26 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. DEBT The Company’s debt is comprised of the following (in thousands) : Interest Payable Balance as of December 31, Debt Description Issued Maturity Interest Rate (1) 2024 2023 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 First Lien Notes due 2024 4/4/2019 4/15/2024 5.250 % 2/15 and 8/15 — 99,999 First Lien Notes due 2026 4/4/2019 4/15/2026 5.750 % 3/15 and 9/15 1,350,000 1,350,000 First Lien Notes due 2027 8/20/2020 8/31/2027 3.375 % 6/15 and 12/15 1,000,000 1,000,000 First Lien Notes due 2029 7/29/2021 8/1/2029 4.125 % 2/1 and 8/1 1,000,000 1,000,000 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 ADT Notes due 2042 7/5/2012 7/15/2042 4.875 % 1/15 and 7/15 21,896 21,896 2020 Receivables Facility (2) 3/5/2020 11/20/2029 Various Monthly 407,901 436,004 Total debt principal, excluding finance leases 7,791,903 7,936,540 Plus: Finance lease obligations (3) 69,442 69,468 Less: Unamortized debt discount, net ( 12,081 ) ( 15,005 ) Less: Unamortized deferred financing costs ( 26,990 ) ( 39,620 ) Less: Unamortized purchase accounting fair value adjustment and other ( 115,201 ) ( 125,866 ) Total debt 7,707,073 7,825,517 Less: Current maturities of long-term debt, net of unamortized debt discount ( 195,791 ) ( 312,061 ) Long-term debt $ 7,511,282 $ 7,513,456 __________________ (1) Interest rate as of December 31, 2024 . 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) 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 (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. 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. F-27 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 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: • 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 F-28 ADT INC. 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 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: • 2024: The Company borrowed $ 365 million and repaid $ 365 million. • 2022: 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. Term Loan A Facility On March 14, 2023, Holdings, Prime Borrower, and The ADT Corporation (Prime Borrower and The ADT Corporation in such capacity, the “Term Loan A Borrowers”), entered into a term loan credit agreement (the “Term Loan A Credit Agreement”) with Barclays Bank PLC, as administrative agent, and the lenders party thereto, pursuant to which such lenders provided the Term Loan A Borrowers with an aggregate principal amount of $ 600 million of term loans (the “Closing Date Term Loan A Loans”) under a senior secured term loan A facility (the “Term Loan A Facility”). The Company used the proceeds from the Closing Date Term Loan A Loans to redeem $ 600 million outstanding principal amount of the Company’s 4.125 % senior notes due June 15, 2023 (the “ADT Notes due 2023”). Also on March 14, 2023, Holdings, the Term Loan A Borrowers, the subsidiary loan parties thereto, Barclays Bank PLC, and the lender party thereto entered into an amendment to the Term Loan A Credit Agreement, pursuant to which the lender party thereto agreed, at the option of the Term Loan A Borrowers and subject to the satisfaction or waiver of customary conditions, to provide the Term Loan A Borrowers with an aggregate principal amount of $ 50 million of incremental term loans (the “Incremental Term Loan A Loans”) under the Term Loan A Facility on or before the scheduled maturity date of the ADT Notes due 2023. On June 15, 2023, the Company borrowed the Incremental Term Loan A Loans and used the proceeds to complete the redemption of $ 50 million of the ADT Notes due 2023. The Incremental Term Loan A Loans have the same terms as, and constitute one class with, the Closing Date Term Loan A Loans. 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. F-29 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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: • Prior to August 31, 2026, in whole at any time or in part from time to time, at a make-whole premium plus accrued and unpaid interest, if any, thereon to the redemption date. • On or after August 31, 2026, in whole at any time or in part from time to time, at a redemption price equal to 100 % of the principal amount of the First Lien Notes due 2027 redeemed plus accrued and unpaid interest, if any, thereon to the redemption date. The Company’s obligations relating to the First Lien Notes due 2027 are guaranteed, jointly and severally, on a senior secured first-priority basis, by each of the Company’s domestic subsidiaries that guarantees its First Lien Credit Agreement and by each of the Company’s future domestic subsidiaries that guarantees certain of the Company’s debt. The First Lien Notes due 2027 and the related guarantees are secured by first-priority security interests in substantially all of the tangible and intangible assets owned by the issuers and each guarantor, subject to certain permitted liens and exceptions. 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 indenture governing the First Lien Notes due 2027 also provides for customary events of default. First Lien Notes due 2029 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”). F-30 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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: • 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. • On or after August 1, 2028, in whole at any time or in part from time to time, at a redemption price equal to 100 % of the principal amount of the First Lien Notes due 2029 to be redeemed and accrued and unpaid interest as of, but excluding, the redemption date. The Company’s obligations relating to the First Lien Notes due 2029 are guaranteed, jointly and severally, on a senior secured first-priority basis, by substantially all of the Company’s subsidiaries and are secured by first-priority security interests in substantially all of the assets of the Company’s domestic subsidiaries, subject to certain permitted liens and exceptions. Upon the occurrence of specified change of control events, the Company may be required to purchase the notes 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 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 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. The indenture governing the Second Lien Notes due 2028 also provides for customary events of default. ADT Notes 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. Additionally, upon the occurrence of specified change of control events, the Company must offer to repurchase the ADT Notes at 101 % of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date. The indentures governing the ADT Notes also provide for customary events of default. F-31 ADT INC. 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 During March 2020, the Company entered into the 2020 Receivables Facility, as amended, whereby the Company obtains financing by selling or contributing certain retail installment contract receivables to the Company’s wholly-owned consolidated bankruptcy-remote special purpose entity (“SPE”). The SPE grants a security interest in those retail installment contract receivables as collateral for cash borrowings under the 2020 Receivables Facility. The SPE borrower under the 2020 Receivables Facility is a separate legal entity with its own creditors who will be entitled, prior to and upon the liquidation of the SPE, to be satisfied out of the SPE’s assets prior to any assets of the SPE becoming available to the Company (other than the SPE). Accordingly, the assets of the SPE are not available to pay creditors of the Company (other than the SPE), although collections from the transferred retail installment contract receivables in excess of amounts required to repay amounts then due and payable to the SPE’s creditors may be released to the Company and subsequently used by the Company (including to pay other creditors). 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 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. On a monthly basis, the segregated account is utilized to make required principal, interest, and other payments due under the 2020 Receivables Facility. The segregated account is considered restricted cash. 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. F-32 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Variable Interest Entity 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, 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 On August 2, 2023, Compass Solar Group, LLC (“Compass”) and ADT Solar Finance LLC (“ADT Solar Finance”), each an indirect wholly-owned subsidiary of ADT Inc. entered into a Receivables Financing Agreement with Mizuho Bank, Ltd. (the “Solar Receivables Financing Agreement”) to finance receivables generated by the installation of residential solar systems. 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 Our credit agreements and indentures associated with the borrowings above contain certain covenants and restrictions that limit the Company’s ability to, among other things: (a) incur additional debt or issue certain preferred equity interests; (b) create liens on certain assets; (c) make certain loans or investments (including acquisitions); (d) pay dividends on or make distributions in respect of the capital stock or make other restricted payments; (e) consolidate, merge, sell, or otherwise dispose of all or substantially all of the Company’s assets; (f) sell assets; (g) enter into certain transactions with affiliates; (h) enter into sale-leaseback transactions; (i) restrict dividends from the Company’s subsidiaries or restrict liens; (j) change the Company’s fiscal year; and (k) modify the terms of certain debt or organizational agreements. Our credit agreements and indentures associated with the borrowings above also provide for customary events of default. The Company is subject to a springing financial maintenance covenant under the First Lien Credit Agreement, which requires the Company to not exceed a specified first lien leverage ratio at the end of each fiscal quarter if the testing conditions are satisfied. 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. 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, significant activity related to loss on extinguishment of debt was as follows: • 2023: 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. F-33 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Other As of December 31, 2024, the aggregate annual maturities of debt, excluding finance leases, were as follows: (in thousands) 2025 2026 2027 2028 2029 Thereafter Total 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) 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. 8. DERIVATIVE FINANCIAL INSTRUMENTS The Company's derivative financial instruments primarily consist of SOFR-based interest rate swap contracts, which were entered into with the objective of managing exposure to variability in interest rates on the Company's debt and interest rate swaps. All interest rate swap contracts are reported in the Consolidated Balance Sheets at fair value. For interest rate swap contracts that are: • Not designated as cash flow hedges: Unrealized gains and losses are recognized in interest expense, net, and other income (expense) depending on the nature of the underlying that the swaps are economically hedging. • Designated as cash flow hedges: Unrealized gains and losses are recognized as a component of accumulated other comprehensive income (loss) (“AOCI”) and are reclassified into interest expense, net, in the same period in which the related interest on debt affects earnings. For interest rate swap contracts that have been de-designated as cash flow hedges and for which forecasted cash flows are: • Probable or reasonably possible of occurring: Unrealized gains and losses previously recognized as a component of AOCI are reclassified into interest expense, net, in the same period in which the related interest on variable-rate debt affects earnings through the original maturity date of the related interest rate swap contracts. • Probable of not occurring: Unrealized gains and losses previously recognized as a component of AOCI are immediately reclassified into interest expense, net. The cash flows associated with interest rate swap contracts that contain an other-than-insignificant financing element at inception are reflected as cash flows from financing activities. The cash flows associated with interest rate swap contracts that were entered into with the intention of offsetting the economic overhedged position of a portion of our existing interest rate swaps are reflected as cash flows from investing activities. 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. 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. Accordingly, the Company de-designated the cash flow hedges, and the unrealized gains and losses for the period in which these cash flow hedges were no longer highly effective were recognized in interest expense, net. 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. 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. F-34 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 B due 2026. The changes in fair value associated with these swaps and the excess swaps are reflected in other income (expense). Notional Amounts (in thousands) December 31, Execution Maturity Designation 2024 2023 October 2019 September 2026 Not designated $ 2,800,000 $ 2,800,000 March 2023 March 2028 Not designated 100,000 100,000 April 2023 March 2028 Not designated 200,000 200,000 December 2023 September 2026 Not designated 700,000 700,000 Total notional amount $ 3,800,000 $ 3,800,000 Classification and Fair Value December 31, Balance Sheet Classification (in thousands) 2024 2023 Prepaid expenses and other current assets $ 56,164 $ 74,974 Other assets $ 54,102 $ 76,493 Accrued expenses and other current liabilities $ 1,466 $ 5,312 Other liabilities $ 208 $ 1,325 Unrealized Gains (Losses) Years Ended December 31, Statement of Operations Classification (in thousands) 2024 2023 2022 Interest expense, net $ ( 27,164 ) $ ( 22,174 ) $ 301,851 Other income (expense) $ ( 17,996 ) $ ( 16,511 ) $ — Changes in and Reclassifications out of AOCI (in thousands) Cash Flow Hedges Balance as of December 31, 2021 $ ( 71,267 ) Pre-tax current period change 33,946 Income tax benefit (expense) ( 8,192 ) Balance as of December 31, 2022 ( 45,513 ) Pre-tax current period change 42,295 Income tax benefit (expense) ( 10,166 ) Balance as of December 31, 2023 ( 13,384 ) Pre-tax current period change 7,921 Income tax benefit (expense) ( 1,913 ) Balance as of December 31, 2024 $ ( 7,376 ) 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 then outstanding First Lien Term Loan B due 2026. 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. F-35 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. INCOME TAXES 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, unless otherwise noted. Components of Income Before Taxes Years Ended December 31, (in thousands) 2024 2023 2022 United States $ 808,476 $ 601,370 $ 401,746 Foreign 6,694 3,013 2,712 Income (loss) from continuing operations before income taxes and equity in net earnings (losses) of equity method investee $ 815,170 $ 604,383 $ 404,458 Components of Income Tax Benefit (Expense) (1) Years Ended December 31, (in thousands) 2024 2023 2022 Current: Federal $ 1,027 $ ( 358 ) $ ( 184 ) State ( 13,829 ) ( 57,024 ) ( 28,100 ) Foreign ( 2,096 ) ( 923 ) ( 691 ) Current income tax benefit (expense) ( 14,898 ) ( 58,305 ) ( 28,975 ) Deferred: Federal ( 105,711 ) ( 136,457 ) ( 43,203 ) State ( 33,702 ) 11,704 24,029 Foreign ( 170 ) ( 194 ) ( 401 ) Deferred income tax benefit (expense) ( 139,583 ) ( 124,947 ) ( 19,575 ) 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 ) F-36 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Effective Tax Rate Reconciliation Reconciliations between the actual effective tax rate on continuing operations and the statutory U.S. federal income tax rate were as follows: Years Ended December 31, 2024 2023 2022 Statutory federal tax rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal benefits 5.4 % 6.1 % 3.0 % Non-U.S. tax 0.3 % 0.2 % 0.3 % Non-deductible and non-taxable charges (1) 0.8 % 1.0 % 5.1 % Valuation allowance — % — % ( 0.6 ) % Unrecognized tax benefits ( 4.0 ) % ( 1.0 ) % ( 2.3 ) % Share-based compensation 0.1 % — % ( 0.6 ) % Non-deductible goodwill on dispositions — % 0.7 % — % Federal credits 0.1 % ( 0.6 ) % ( 2.9 ) % Acquisitions and dispositions 1.2 % ( 0.9 ) % ( 0.2 ) % Legislative changes ( 0.4 ) % 0.6 % ( 2.1 ) % Prior year return adjustments ( 0.6 ) % ( 0.6 ) % 1.1 % Other 0.1 % 0.1 % ( 0.1 ) % Effective tax rate 24.0 % 26.6 % 21.7 % ___________________ (1) During 2022, primarily represents the impact related to the fair value adjustment of the Forward Contract. Deferred Tax Assets and Deferred Tax Liabilities The components of the Company's net deferred tax assets (liabilities) were as follows: December 31, (in thousands) 2024 2023 Deferred tax assets: Accrued liabilities and reserves $ 94,084 $ 90,351 Tax loss and credit carryforwards 75,927 132,230 Disallowed interest carryforward 230,048 150,492 Deferred revenue 218,639 225,499 Other 91,892 112,194 Total deferred tax assets 710,590 710,766 Valuation allowance ( 12,264 ) ( 12,264 ) Deferred tax assets, net of valuation allowance $ 698,326 $ 698,502 Deferred tax liabilities: Subscriber system assets $ ( 757,046 ) $ ( 761,203 ) Intangible assets ( 1,051,499 ) ( 893,292 ) Other ( 56,994 ) ( 71,196 ) Total deferred tax liabilities ( 1,865,539 ) ( 1,725,691 ) Net deferred tax assets (liabilities) $ ( 1,167,213 ) $ ( 1,027,189 ) F-37 ADT INC. 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. federal and state deferred tax assets. In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available positive and negative evidence, which includes its past operating results, the existence of cumulative losses in the most recent years, and its forecast of future taxable income. In estimating future taxable income, the Company develops assumptions related to the amount of future pre-tax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates the Company is using to manage its underlying businesses. The Company believes that it is more-likely-than-not that it will generate sufficient future taxable income to realize its deferred tax assets, net of valuation allowance. The changes in the valuation allowance for deferred tax assets were as follows: Years Ended December 31, (in thousands) 2024 2023 2022 Beginning balance $ ( 12,264 ) $ ( 57,715 ) $ ( 60,157 ) Income tax benefit (expense) (1) — 43,277 2,428 Write-offs and other — 2,174 14 Ending balance $ ( 12,264 ) $ ( 12,264 ) $ ( 57,715 ) __________________ (1) During 2023, the change is primarily related to the utilization of capital loss carryforwards against which a valuation allowance was previously recorded. The utilization is attributable to capital gains generated in connection with the Commercial Divestiture. 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. 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. As of December 31, 2024, the Company has not recorded a valuation allowance against the disallowed interest carryforward as the Company believes it has sufficient sources of future taxable income to realize the related tax benefit. Unrecognized Tax Benefits The Company recognizes positions taken or expected to be taken in a tax return in the consolidated financial statements when it is more-likely-than-not (i.e., a likelihood of more than 50%) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit with greater than 50% likelihood of being realized upon ultimate settlement. The Company records liabilities for positions that have been taken but do not meet the more-likely-than-not recognition threshold. The Company adjusts the liabilities for unrecognized tax benefits in light of changing facts and circumstances; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a change to the estimated liabilities. The Company includes interest and penalties associated with unrecognized tax benefits as income tax expense and as a component of the recorded balance of unrecognized tax benefits, which is reflected in other liabilities, or net of related tax loss carryforwards in the Consolidated Balance Sheets. Interest and penalties associated with unrecognized tax benefits were not material to the Company's consolidated financial statements for the periods presented. The following is a roll-forward of unrecognized tax benefits: Years Ended December 31, (in thousands) 2024 2023 2022 Beginning balance $ 48,823 $ 56,177 $ 66,221 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 ) Ending balance $ 24,606 $ 48,823 $ 56,177 The Company’s unrecognized tax benefits relate to tax years that are subject to audit by the taxing authorities in the U.S. federal, state and local, and foreign jurisdictions. Based on the current tax statutes and status of its income tax audits, the F-38 ADT INC. 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 Jurisdiction Years Open to Audit Federal 2021 - 2023 State 2019 - 2023 Canada 2020 - 2023 The Company files a consolidated return for its U.S. entities and separate returns for each Canadian entity. These income tax returns are subject to audit by the taxing authorities that may culminate in proposed assessments which may ultimately result in a change to the estimated income taxes. Federal Tax Legislation Tax Cuts and Jobs Act - Certain changes to U.S. federal tax law included in the Tax Cuts and Jobs Act of 2017 had a delayed effective date and have taken effect for 2022. Under IRC Section 163(j), the limitation on net business interest expense deductions will no longer be increased by deductions for depreciation, amortization, or depletion. Under IRC Section 174, specified research and experimentation expenditures must now be capitalized and amortized. 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 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. 10. EQUITY Common Stock and Class B Common Stock During September 2020, the Company amended its articles of incorporation to authorize the issuance of 100,000,000 shares of Class B common stock, par value of $ 0.01 per share (“Class B Common Stock”), as well as to increase the number of authorized shares of preferred stock, par value of $ 0.01 per share, to 1,000,000 . In September 2020, the Company issued and sold 54,744,525 shares of Class B Common Stock for an aggregate purchase price of $ 450 million to Google LLC (“Google”) in a private placement pursuant to a securities purchase agreement dated July 31, 2020 (the “Securities Purchase Agreement”). Accordingly, the Company has two classes of common stock, Common Stock and Class B Common Stock, both of which entitle stockholders to one vote for each share of Common Stock. Each share of Class B Common Stock has equal status and rights to dividends as a share of Common Stock. The holders of Class B Common Stock have one vote for each share of Class B Common Stock held of record by such holder on all matters on which stockholders are entitled to vote generally; provided, however, that holders of Class B Common Stock, as such, are not entitled to vote on the election, appointment, or removal of directors of the Company. 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. F-39 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Issuances of Common Stock During the periods presented, issuances of Common Stock other than as related to the exercise or vesting of share-based compensation awards includes: • October 2022 : The Company issued approximately 133 million shares of Common Stock for an aggregate purchase price of $ 1.2 billion as part of the State Farm Strategic Investment (as defined below). • June 2022 : The Company issued approximately 2 million shares of Common Stock as consideration for a business acquisition. 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 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 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. F-40 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS State Farm Transaction State Farm Strategic Investment 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”). 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. Tender Offer 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. The Tender Offer expired on October 20, 2022. On October 26, 2022, the Company used proceeds from the State Farm Strategic Investment to repurchase an aggregate of 133 million shares of the Company’s Common Stock at a purchase price of $ 9.00 per share for an aggregate purchase price of $ 1.2 billion, excluding fees and expenses, subject to the terms and conditions described in the Offer to Purchase dated September 12, 2022 (as amended from time to time, the “Offer to Purchase”). The Tender Shares were subject to the “odd lot” priority and proration provisions described in the Offer to Purchase as the Tender Offer was substantially over-subscribed. No shares of Class B Common Stock were converted and tendered in the Tender Offer. The Tender Offer was considered a contingent forward purchase contract (the “Forward Contract”), which was recorded at fair value in the Consolidated Balance Sheet. The fair value of the Forward Contract was estimated as the difference between the present value of the cash consideration to be paid and the value of the Company’s Common Stock to be tendered. At the commencement of the Tender Offer, the Company recorded a liability and a reduction to additional paid in capital of $ 42 million. During 2022, the change in fair value recognized in other income (expense) was a net loss of $ 63 million. Fees associated with the Tender Offer were not material. State Farm Investor Rights Agreement At the Closing, the Company and State Farm entered into an Investor Rights Agreement (the “State Farm Investor Rights Agreement”), pursuant to which the Board of Directors of the Company increased its size by one director and appointed a designee of State Farm as a member of the Board of Directors. 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) 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 F-41 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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”). The ROFR will terminate upon the earliest to occur of (i) State Farm and its permitted transferees no longer collectively owning shares of Common Stock equal to at least 50 % of the State Farm Shares; (ii) the termination of the State Farm Development Agreement by the Company for a material breach by State Farm; and (iii) to the extent that the State Farm Development Agreement does not remain in effect on such date, the five (5) year anniversary of the Closing. State Farm Development Agreement 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 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. Refer to Note 16 “Related Party Transactions” for more information on the Opportunity Fund. Dividends Stockholders are entitled to receive dividends when, as, and if declared by the Company’s Board of Directors out of funds legally available for that purpose. (in thousands, except per share data) Common Stock Class B Common Stock Declaration Date Record Date Payment Date Per Share Aggregate Per Share Aggregate Year Ended December 31, 2024 1/24/24 3/14/24 4/4/24 $ 0.055 $ 47,059 $ 0.055 $ 3,011 4/25/24 6/13/24 7/9/24 0.055 47,137 0.055 3,011 8/1/24 9/13/24 10/4/24 0.055 47,146 0.055 3,011 10/24/24 12/12/24 1/9/25 0.055 46,012 0.055 3,011 Total $ 0.220 $ 187,354 $ 0.220 $ 12,044 Year Ended December 31, 2023 2/28/23 3/16/23 4/4/23 $ 0.035 $ 30,342 $ 0.035 $ 1,916 5/2/23 6/15/23 7/6/23 0.035 30,256 0.035 1,916 8/8/23 9/15/23 10/4/23 0.035 30,405 0.035 1,916 11/2/23 12/14/23 1/9/24 0.035 30,358 0.035 1,916 Total $ 0.140 $ 121,361 $ 0.140 $ 7,664 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 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) Refer to Note 8 “Derivative Financial Instruments” for AOCI reclassifications associated with cash flow hedges. Other changes in AOCI, which primarily relate to the Company’s defined benefit pension plans, were not material. F-42 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. SHARE-BASED COMPENSATION The Company grants share-based compensation awards to participants under the 2016 Equity Incentive Plan (the “2016 Plan”) and the 2018 Omnibus Incentive Plan (the “2018 Plan”). Share-based compensation expense is recognized in the Consolidated Statements of Operations as follows: Years Ended December 31, ( in thousands ) 2024 2023 2022 Selling, general, and administrative expenses $ 48,745 $ 38,626 $ 52,945 Income (loss) from discontinued operations, net of tax ( 132 ) 12,511 13,621 Total share-based compensation expense $ 48,613 $ 51,137 $ 66,566 The following discussion of the Company’s share-based compensation awards includes awards related to continuing and discontinued operations, unless otherwise noted. 2016 Plan As of December 31, 2024, the Company is authorized to issue no more than approximately 5 million shares of Common Stock by the exercise or vesting of granted awards under the 2016 Plan. The Company does not expect to issue additional awards under the 2016 Plan. Unrecognized share-based compensation expense as of December 31, 2024 and share-based compensation expense for awards granted under the 2016 Plan were not material during the periods presented. Distributed Shares and Class B Unit Redemption In connection with the IPO, each holder of Class B awards (“Class B Units”), which were issued to certain participants by Ultimate Parent prior to the IPO, had their entire Class B interest in Ultimate Parent redeemed for the number of shares of the Company’s Common Stock (the “Distributed Shares”) that would have been distributed to such holder under the terms of Ultimate Parent’s operating agreement in a hypothetical liquidation on the date and price of the IPO (the “Class B Unit Redemption”). The Class B Unit Redemption resulted in a modification of the Class B Units, whereby each holder received both vested and unvested Distributed Shares in the same proportion as the holder’s vested and unvested Class B Units held immediately prior to the IPO. As a result of the Class B Unit Redemption, holders of Class B Units received a total of 20.6 million shares of the Company’s Common Stock, of which 50 % were subject to the same vesting conditions under the Class B Unit Service Tranche (the “Distributed Shares Service Tranche”), which were subject to ratable service-based vesting over a five-year period, and 50 % were subject to the same vesting conditions under the Class B Unit Performance Tranche (the “Distributed Shares Performance Tranche”), which were based on the achievement of certain investment return thresholds by Apollo. 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. The Company recorded share-based compensation expense on the Distributed Shares Performance Tranche on a straight-line basis over the derived service period of app roximately three years from the IPO date, as the vesting conditions were deemed probable following the consummation of the IPO. F-43 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 Vested (1) ( 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. 2018 Plan In January 2018, the Company approved the 2018 Plan, which became effective upon consummation of the IPO. 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. Awards issued under the 2018 Plan include retirement provisions that allow awards to continue to vest in accordance with the granted terms in its entirety or on a pro-rata basis when a participant reaches retirement eligibility, as long as 12 months of service have been provided since the date of grant. Accordingly, share-based compensation expense for service-based awards is recognized on a straight-line basis over the vesting period, or on an accelerated basis for retirement-eligible participants where applicable. The Company accounts for forfeitures as they occur. Additionally, RSUs entitle the holder to dividend equivalent units (“DEUs”), which are granted as additional RSUs and are subject to the same vesting and forfeiture conditions as the underlying RSUs. DEUs are charged against accumulated deficit when dividends are paid. Top-up Options In connection with the Class B Unit Redemption in 2018, the Company granted 12.7 million options to holders of Class B Units (the “Top-up Options”). The Top-up Options have an exercise price equal to the IPO price per share of the Company’s Common Stock, as adjusted in accordance with 2018 Plan provisions, and a contractual term of ten years from the grant date. Similar to the vesting conditions outlined above for the Distributed Shares, the Top-up Options contain a tranche subject to service-based vesting (the “Top-up Options Service Tranche”) and a tranche subject to vesting based upon the achievement of certain investment return thresholds by Apollo (the “Top-up Options Performance Tranche”). Recipients of the Top-up Options received both vested and unvested Top-up Options in the same proportion as the vested and unvested Class B Units held immediately prior to the IPO and Class B Unit Redemption. The Top-up Options vesting conditions are the same as those attributable to the Distributed Shares, including the condition that accelerated vesting of the unvested options in the Top-up Options Service Tranche causing them to become fully vested six months from the IPO. 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. F-44 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 (1) (in thousands) Weighted-Average Remaining Contractual Term (Years) Outstanding as of December 31, 2023 5,955,254 $ 13.30 5,641,244 $ 13.30 Exercised — — — — Forfeited — — ( 16,643 ) 13.30 Outstanding as of December 31, 2024 5,955,254 $ 13.30 5,624,601 $ 13.30 — 3.0 Exercisable as of December 31, 2024 (b) 5,955,254 $ 13.30 1,586,252 $ 13.30 — 3.0 ________________________ (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 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. 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) 7 Expected volatility (1) 49.9 % Expected dividend yield (2) 3.4 % Risk-free interest rate (3) 4.0 % ________________________ (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 (1) (in thousands) Weighted-Average Remaining Contractual Term (Years) Outstanding as of December 31, 2023 16,828,305 $ 6.70 Granted 6,831,794 6.51 Exercised ( 1,907,455 ) 5.37 Forfeited ( 502,934 ) 6.49 Outstanding as of December 31, 2024 21,249,710 $ 6.77 $ 18,048 5.9 Exercisable as of December 31, 2024 14,568,776 $ 7.83 $ 14,322 4.1 ________________________ (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. F-45 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2024, unrecognized compensation cost related to options was not material. Restricted Stock Units RSUs granted under the 2018 Plan are primarily service-based awards with a three-year graded vesting period from the date of grant. The fair value is equal to the closing price per share of the Company’s Common Stock on the date of grant. The following table summarizes activity related to the 2018 Plan RSUs (including DEUs) during 2024: Number of RSUs Weighted-Average Grant Date Fair Value Unvested as of December 31, 2023 9,237,384 $ 7.66 Granted 5,155,150 6.65 Vested ( 4,792,066 ) 7.72 Forfeited ( 1,336,453 ) 6.96 Unvested as of December 31, 2024 8,264,015 $ 7.14 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. Other 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. 12. NET INCOME (LOSS) PER SHARE The Company applies the two-class method for computing and presenting net income (loss) per share for each class of common stock, which allocates current period net income (loss) to each class of common stock and participating securities based on dividends declared and participation rights in the remaining undistributed earnings or losses. Basic net income (loss) per share is computed by dividing the net income (loss) allocated to each class of common stock by the related weighted-average number of shares outstanding during the period. Diluted net income (loss) per share gives effect to all securities representing potential common shares that were dilutive and outstanding during the period for each class of common stock and excludes potentially dilutive securities whose effect would have been anti-dilutive. Common Stock Potential shares of Common Stock include (i) incremental shares related to the vesting or exercise of share-based compensation awards, warrants, and other options to purchase additional shares of the Company’s Common Stock calculated using the treasury stock method and (ii) incremental shares of Common Stock issuable upon the conversion of Class B Common Stock. F-46 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, (in thousands, except per share amounts) 2024 2023 2022 Allocation of income (loss) from continuing operations - basic $ 581,980 $ 423,503 $ 293,331 Dilutive effect (1) 13,671 8,885 8,428 Allocation of income (loss) from continuing operations - diluted $ 595,651 $ 432,388 $ 301,759 Allocation of income (loss) from discontinued operations, net of tax - basic $ ( 111,197 ) $ 11,885 $ ( 168,676 ) 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 (1) 62,179 62,306 66,604 Weighted-average shares outstanding - diluted 908,700 919,149 915,069 Income (loss) from continuing operations per share - basic $ 0.69 $ 0.49 $ 0.35 Income (loss) from continuing operations per share - diluted $ 0.66 $ 0.47 $ 0.33 Income (loss) from discontinued operations, net of tax, per share - basic $ ( 0.13 ) $ 0.01 $ ( 0.20 ) Income (loss) from discontinued operations, net of tax, per share - diluted $ ( 0.12 ) $ 0.01 $ ( 0.18 ) ________________ (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 Years Ended December 31, (in thousands, except per share amounts) 2024 2023 2022 Allocation of income (loss) from continuing operations - basic $ 37,410 $ 26,867 $ 18,834 Dilutive effect (1) ( 1,627 ) ( 1,221 ) ( 764 ) Allocation of income (loss) from continuing operations - diluted $ 35,783 $ 25,646 $ 18,070 Allocation of income (loss) from discontinued operations, net of tax - basic $ ( 7,140 ) $ 754 $ ( 10,826 ) Dilutive effect (1) — — — Allocation of income (loss) from discontinued operations, net of tax - diluted $ ( 7,140 ) $ 754 $ ( 10,826 ) Weighted-average shares outstanding - basic 54,745 54,745 54,745 Dilutive effect (1) — — — Weighted-average shares outstanding - diluted 54,745 54,745 54,745 Income (loss) from continuing operations per share - basic $ 0.69 $ 0.49 $ 0.35 Income (loss) from continuing operations per share - diluted $ 0.66 $ 0.47 $ 0.33 Income (loss) from discontinued operations, net of tax, per share - basic $ ( 0.13 ) $ 0.01 $ ( 0.20 ) Income (loss) from discontinued operations, net of tax, per share - diluted $ ( 0.12 ) $ 0.01 $ ( 0.18 ) ________________ (1) There were no potential shares of Class B Common Stock during the periods presented. F-47 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. COMMITMENTS AND CONTINGENCIES Contractual Obligations 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 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 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 In July 2020, the Company and Google entered into a Master Supply, Distribution, and Marketing Agreement (as amended, the “Google Commercial Agreement”), pursuant to which Google has agreed to supply the Company with certain Google devices, as well as certain Google video and analytics services (“Google Devices and Services”), for sale to the Company’s customers. 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. 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 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. Guarantees In the normal course of business, the Company is liable for contract completion and product performance. The Company’s guarantees primarily relate to standby letters of credit related to its insurance programs and totaled $ 74 million and $ 78 million as of December 31, 2024 and 2023, respectively. The Company does not believe such obligations will materially affect its financial position, results of operations, or cash flows. Subsequent event - In February 2025, $ 21 million of the Company’s guarantees were relinquished. F-48 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Legal Proceedings The Company is subject to various claims and lawsuits in the ordinary course of business, which include among other things commercial general liability claims, automobile liability claims, contractual disputes, worker’s compensation claims, labor law and employment claims, claims related to alleged alarm system failures, claims that the Company infringed on the intellectual property of others, and consumer and employment class actions. The Company is also subject to regulatory and governmental examinations, information requests and subpoenas, inquiries, investigations, and threatened legal actions and proceedings. In connection with such formal and informal inquiries, the Company receives numerous requests, subpoenas, and orders for documents, testimony, and information in connection with various aspects of its activities. The Company records accruals for losses that are probable and reasonably estimable. These accruals are based on a variety of factors such as judgment, probability of loss, opinions of internal and external legal counsel, and actuarially determined estimates of claims incurred but not yet reported based upon historical claims experience. Legal costs in connection with claims and lawsuits in the ordinary course of business are expensed as incurred. Additionally, the Company records insurance recovery receivables from third-party insurers when recovery has been determined to be probable. 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, 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. 14. LEASES 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, 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. 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. Lease payments are recognized as lease cost on a straight-line basis over the lease term, which is determined as the non-cancelable period, including periods in which termination options are reasonably certain of not being exercised and periods in which renewal options are reasonably certain of being exercised. The discount rate is determined using the Company’s incremental borrowing rate coinciding with the lease term at the commencement of a lease. The incremental borrowing rate is estimated based on publicly available data for the Company’s debt instruments and other instruments with similar characteristics. Lease payments that are neither fixed nor dependent on an index or rate and vary because of changes in usage or other factors are included in variable lease costs. Variable lease costs are recorded in the period in which the obligation is incurred and primarily relate to fuel, repair, and maintenance payments as they vary based on the usage of leased vehicles and buildings. The Company’s leases do not contain material residual value guarantees or restrictive covenants. The Company’s subleases are not material. F-49 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Right-of-Use Assets and Lease Liabilities (in thousands) December 31, Presentation and Classification: 2024 2023 Operating Current Prepaid expenses and other current assets $ 80 $ 68 Operating Non-current Other assets 80,768 85,649 Finance Non-current Property and equipment, net (1) 61,827 65,368 Total right-of-use assets $ 142,675 $ 151,085 Operating Current Accrued expenses and other current liabilities $ 18,811 $ 13,035 Finance Current Current maturities of long-term debt 25,593 25,741 Operating Non-current Other liabilities 77,884 80,189 Finance Non-current Long-term debt 43,849 43,727 Total lease liabilities $ 166,137 $ 162,692 _________________ (1) Finance right-of-use assets are recorded net of accumulated depreciation of approximately $ 66 million and $ 50 million as of December 31, 2024 and 2023, respectively. Lease Cost Years Ended December 31, ( in thousands ) 2024 2023 2022 Operating lease cost $ 27,615 $ 31,756 $ 33,574 Finance lease cost: Amortization of right-of-use assets 21,661 14,432 10,818 Interest on lease liabilities 4,528 2,466 1,689 Variable lease costs 35,017 36,273 42,899 Total lease cost $ 88,821 $ 84,927 $ 88,980 Cash Flow and Supplemental Information (1) Years Ended December 31, ( in thousands ) 2024 2023 2022 Cash paid for amounts included in the measurement of lease liabilities Operating leases: Operating cash flows $ 23,574 $ 42,883 $ 47,708 Finance Leases: Operating cash flows $ 4,686 $ 4,940 $ 3,680 Financing cash flows $ 29,023 $ 43,733 $ 44,978 Right-of-use assets obtained in exchange for lease obligations Operating leases $ 20,127 $ 41,338 $ 49,193 Finance leases $ 35,451 $ 79,273 $ 48,439 __________________ (1) Includes both continuing and discontinued operations consistent with the presentation on the Consolidated Statements of Cash Flows. F-50 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Lease Term and Discount Rate December 31, 2024 2023 Weighted-average remaining lease term (years): Operating leases 5.4 5.9 Finance leases 2.7 3.2 Weighted-average discount rate: Operating leases 6.2 % 6.1 % Finance leases 6.1 % 5.9 % Maturity of Lease Liabilities December 31, 2024 ( in thousands ) Operating Leases Finance Leases 2025 $ 20,443 $ 33,369 2026 24,658 22,529 2027 20,975 16,195 2028 16,255 2,809 2029 11,276 1 Thereafter 23,422 — Total lease payments (including interest) $ 117,029 $ 74,903 Less interest 20,334 5,461 Total $ 96,695 $ 69,442 Company as Lessor 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. 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. The Company accounts for the combined component as a single performance obligation under the applicable revenue guidance, and recognizes the underlying assets within subscriber system assets, net, in the Consolidated Balance Sheets. 15. RETIREMENT PLANS Defined Contribution Plans The Company maintains qualified defined contribution plans, which include 401(k) matching programs. Expense for the defined contribution plans is computed as a percentage of participants’ compensation and was $ 29 million, $ 30 million, and $ 31 million during 2024, 2023, and 2022, respectively. Multi-employer Plans The Company participates in certain multi-employer union pension plans, which provide benefits for a group of the Company’s unionized employees. 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. F-51 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Defined Benefit Plans 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 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 The Company maintains a non-qualified supplemental savings and retirement plan, which permits eligible employees to defer a portion of their compensation. Deferred compensation liabilities are reflected in other liabilities and were $ 34 million and $ 31 million as of December 31, 2024 and 2023, respectively. Deferred compensation expense was not material during the periods presented. 16. 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, 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. Apollo 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”). F-52 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS • 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. Other 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. State Farm 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. Canopy 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 as described in Note 5 “Equity Method Investments,” there were no other significant transactions with Canopy during the periods presented. Sunlight Financial LLC 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. Rackspace 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 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. F-53 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Other Transactions 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. F-54 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 17. CONDENSED FINANCIAL INFORMATION OF REGISTRANT ADT INC. (PARENT COMPANY ONLY) CONDENSED BALANCE SHEETS (in thousands) December 31, 2024 2023 Assets Current assets: Cash and cash equivalents $ 1,861 $ 1,118 Total current assets 1,861 1,118 Investment in subsidiaries and other assets 4,861,838 4,463,543 Total assets $ 4,863,699 $ 4,464,661 Liabilities and stockholders' equity Current liabilities: Dividends payable and other current liabilities $ 155,472 $ 33,047 Total current liabilities 155,472 33,047 Debt due to subsidiaries 554,954 545,557 Other liabilities 352,472 97,411 Total liabilities 1,062,898 676,015 Total stockholders' equity 3,800,801 3,788,646 Total liabilities and stockholders' equity $ 4,863,699 $ 4,464,661 The accompanying notes are an integral part of these condensed financial statements F-55 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ADT INC. (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (in thousands, except per share data) Years Ended December 31, 2024 2023 2022 Selling, general, and administrative expenses $ 988 $ 520 $ 2,583 Merger, restructuring, integration, and other ( 5 ) ( 1,993 ) ( 6,011 ) Operating income (loss) ( 983 ) 1,473 3,428 Interest expense, net ( 9,135 ) ( 8,984 ) ( 8,086 ) Other income (expense) — — ( 63,394 ) Equity in net income (loss) of subsidiaries 511,171 470,520 200,715 Net income (loss) 501,053 463,009 132,663 Other comprehensive income (loss), net of tax 9,126 31,038 21,773 Comprehensive income (loss) $ 510,179 $ 494,047 $ 154,436 Net income (loss) per share - basic: Common stock $ 0.56 $ 0.51 $ 0.15 Class B common stock $ 0.56 $ 0.51 $ 0.15 Weighted-average shares outstanding - basic: Common stock 846,521 856,843 848,465 Class B common stock 54,745 54,745 54,745 Net income (loss) per share - diluted: Common stock $ 0.52 $ 0.48 $ 0.14 Class B common stock $ 0.52 $ 0.48 $ 0.14 Weighted-average shares outstanding - diluted: Common stock 908,700 919,149 915,069 Class B common stock 54,745 54,745 54,745 The accompanying notes are an integral part of these condensed financial statements F-56 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ADT INC. (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2024 2023 2022 Cash flows from operating activities: Net income (loss) $ 501,053 $ 463,009 $ 132,663 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Equity in net (income) loss of subsidiaries ( 511,171 ) ( 470,520 ) ( 200,715 ) Change in fair value of other financial instruments — — 63,396 Other, net 22,815 28,757 49,470 Net cash provided by (used in) operating activities 12,697 21,246 44,814 Cash flows from investing activities: Contributions to subsidiaries — — — Distributions from subsidiaries 170,620 108,783 118,200 Net cash provided by (used in) investing activities 170,620 108,783 118,200 Cash flows from financing activities: Proceeds from issuance of common stock, net of expenses — — 1,180,000 Dividends on common stock ( 182,266 ) ( 128,587 ) ( 127,125 ) Repurchases of common stock — — ( 1,200,000 ) Other financing, net ( 308 ) ( 14,963 ) ( 3,197 ) Net cash provided by (used in) financing activities ( 182,574 ) ( 143,550 ) ( 150,322 ) Cash and cash equivalents and restricted cash and restricted cash equivalents: Net increase (decrease) during the period 743 ( 13,521 ) 12,692 Beginning balance 1,118 14,639 1,947 Ending balance $ 1,861 $ 1,118 $ 14,639 Supplementary cash flow information: Issuance of shares for acquisition of business $ — $ — $ 55,485 The accompanying notes are an integral part of these condensed financial statements F-57 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes to Condensed Financial Statements (Parent Company Only) 1. Basis of Presentation The condensed financial statements of ADT Inc. have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X, as the restricted net assets of the subsidiaries of ADT Inc. (as defined in Rule 4-08(e)(3) of Regulation S-X) exceed 25% of the consolidated net assets of the Company. The ability of ADT Inc.’s operating subsidiaries to pay dividends may be restricted due to the terms of the subsidiaries’ First Lien Credit Agreement and the indentures governing other borrowings. The condensed financial statements of ADT Inc. have been prepared using the same accounting principles and policies described in the other notes to the consolidated financial statements with the only exception being that the parent company accounts for its subsidiaries using the equity method of accounting. These condensed financial statements should be read in conjunction with the Company’s consolidated financial statements and related notes thereto. 2. Transactions with Subsidiaries The majority of ADT Inc.’s transactions with its subsidiaries are related to (i) the receipt of distributions from subsidiaries in order to fund equity transactions, such as the payment of dividends and the repurchase of Common Stock; (ii) the contribution to subsidiaries of proceeds received from equity transactions; or (iii) the integration of business acquisitions into the Company’s organizational structure. During 2024 and 2023, ADT Inc. 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). 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. 18. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) 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. F-58 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share data) March 31, 2024 June 30, 2024 September 30, 2024 December 31, 2024 Revenue $ 1,189,672 $ 1,204,559 $ 1,243,836 $ 1,260,379 Operating income (loss) $ 292,149 $ 284,175 $ 326,350 $ 305,390 Income (loss) from continuing operations $ 163,891 $ 126,185 $ 132,020 $ 197,294 Income (loss) from discontinued operations, net of tax $ ( 72,340 ) $ ( 33,791 ) $ ( 4,869 ) $ ( 7,337 ) Net income (loss) $ 91,551 $ 92,394 $ 127,151 $ 189,957 Common Stock Basic: Weighted average shares outstanding 855,893 848,273 850,462 831,575 Income (loss) from continuing operations per share $ 0.18 $ 0.14 $ 0.15 $ 0.22 Income (loss) from discontinued operations, net of tax, per share $ ( 0.08 ) $ ( 0.04 ) $ ( 0.01 ) $ ( 0.01 ) Net income (loss) $ 0.10 $ 0.10 $ 0.14 $ 0.21 Diluted: Weighted average shares outstanding 918,394 909,128 912,861 895,035 Income (loss) from continuing operations per share $ 0.17 $ 0.13 $ 0.14 $ 0.21 Income (loss) from discontinued operations, net of tax, per share $ ( 0.07 ) $ ( 0.03 ) $ ( 0.01 ) $ ( 0.01 ) Net income (loss) $ 0.09 $ 0.10 $ 0.13 $ 0.20 Class B Common Stock Basic: Weighted average shares outstanding 54,745 54,745 54,745 54,745 Income (loss) from continuing operations per share $ 0.18 $ 0.14 $ 0.15 $ 0.22 Income (loss) from discontinued operations, net of tax, per share $ ( 0.08 ) $ ( 0.04 ) $ ( 0.01 ) $ ( 0.01 ) Net income (loss) $ 0.10 $ 0.10 $ 0.14 $ 0.21 Diluted: Weighted average shares outstanding 54,745 54,745 54,745 54,745 Income (loss) from continuing operations per share $ 0.17 $ 0.13 $ 0.14 $ 0.21 Income (loss) from discontinued operations, net of tax, per share $ ( 0.07 ) $ ( 0.03 ) $ ( 0.01 ) $ ( 0.01 ) Net income (loss) $ 0.09 $ 0.10 $ 0.13 $ 0.20 F-59 ADT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share data) March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 Revenue $ 1,132,476 $ 1,168,077 $ 1,179,873 $ 1,172,398 Operating income (loss) $ 232,960 $ 332,098 $ 306,563 $ 307,340 Income (loss) from continuing operations $ 39,563 $ 180,438 $ 123,259 $ 107,110 Income (loss) from discontinued operations, net of tax $ ( 158,400 ) $ ( 88,227 ) $ ( 209,496 ) $ 468,762 Net income (loss) $ ( 118,837 ) $ 92,211 $ ( 86,237 ) $ 575,872 Common Stock Basic: Weighted average shares outstanding 854,299 857,581 857,423 858,094 Income (loss) from continuing operations per share $ 0.04 $ 0.20 $ 0.13 $ 0.12 Income (loss) from discontinued operations, net of tax, per share $ ( 0.17 ) $ ( 0.10 ) $ ( 0.23 ) $ 0.51 Net income (loss) $ ( 0.13 ) $ 0.10 $ ( 0.09 ) $ 0.63 Diluted: Weighted average shares outstanding 921,606 916,859 917,774 919,397 Income (loss) from continuing operations per share $ 0.04 $ 0.19 $ 0.13 $ 0.11 Income (loss) from discontinued operations, net of tax, per share $ ( 0.16 ) $ ( 0.09 ) $ ( 0.21 ) $ 0.48 Net income (loss) $ ( 0.12 ) $ 0.09 $ ( 0.09 ) $ 0.59 Class B Common Stock Basic: Weighted average shares outstanding 54,745 54,745 54,745 54,745 Income (loss) from continuing operations per share $ 0.04 $ 0.20 $ 0.13 $ 0.12 Income (loss) from discontinued operations, net of tax, per share $ ( 0.17 ) $ ( 0.10 ) $ ( 0.23 ) $ 0.51 Net income (loss) $ ( 0.13 ) $ 0.10 $ ( 0.09 ) $ 0.63 Diluted: Weighted average shares outstanding 54,745 54,745 54,745 54,745 Income (loss) from continuing operations per share $ 0.04 $ 0.19 $ 0.13 $ 0.11 Income (loss) from discontinued operations, net of tax, per share $ ( 0.16 ) $ ( 0.09 ) $ ( 0.21 ) $ 0.48 Net income (loss) $ ( 0.12 ) $ 0.09 $ ( 0.09 ) $ 0.59 F-60