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Item 2. Management’s Discussion and Analysis

2025-04-24 compared with 2024-10-24 · 193 added, 180 removed, 182 unchanged (67% of the section changed)

9 unchanged sentences

• Cautionary Statements Regarding Forward-Looking Statements

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

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

Factors that could cause such differences are discussed in the sections of this Quarterly Report on Form 10-Q titled “Cautionary Statements Regarding Forward-Looking Statements” and Item 1A “Risk Factors.”

The discussion and analysis below focuses on significant or material items to the Company.

To obtain a more comprehensive understanding of our financial condition, changes in financial condition, and results of operations, the following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and the related notes included in our 2024 Annual Report.

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ADT (or “we,” “our,” and “us”), provides security, interactive, and smart home solutions to consumer and small business customers in the U.S.

As of September 30, 2024, we served approximately 6.4 million security monitoring service subscribers.

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

Basis of Presentation

As a result of the Commercial Divestiture and ADT Solar Exit, we currently report our results as a single operating and reportable segment, which reflects the business operations of our former CSB segment.

We report our results as a single operating and reportable segment.

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

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All intercompany transactions have been eliminated.

Results of our Solar and former Commercial businesses are presented within discontinued operations.

Business Updates

ADT Solar Exit

As discussed in Note 1 “Description of Business and Summary of Significant Accounting Policies” and Note 3 “Divestitures,” in January 2024, the Board approved a plan to fully exit the Solar Business.

Beginning in the second quarter of 2024, the results of operations and financial position of the Solar Business are classified as discontinued operations in the Company’s Condensed Consolidated Statements of Operations and Condensed Consolidated Balance Sheets, respectively, for all periods presented.

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

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

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

Additionally, during the nine months ended September 30, 2024, we paid approximately $21 million in connection with the ADT Solar Exit, primarily related to employee separation and other restructuring costs.

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

The estimated charges and cash expenditures resulting from the ADT Solar Exit could change materially due to various factors including unknown or unforeseen costs.

Our reported operating metrics, gross customer revenue attrition and recurring monthly revenue (as defined and discussed below), were not impacted by the ADT Solar Exit.

Commercial Divestiture

As discussed in Note 1 “Description of Business and Summary of Significant Accounting Policies” and Note 3 “Divestitures,” we divested our Commercial Business during the fourth quarter of 2023.

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

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

Our reported operating metrics, gross customer revenue attrition and recurring monthly revenue (as defined and discussed below), have been recast for any period prior to the sale to exclude the Commercial Business.

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

Results of our former Solar and Commercial businesses are presented within discontinued operations for current and historical periods, as applicable.

FACTORS AFFECTING OPERATING RESULTS

The factors described herein could have a material effect on our business, financial condition, results of operations, cash flows, and key performance indicators.

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

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

As of March 31, 2025, we served approximately 6.4 million security monitoring service subscribers.

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

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

Our results are impacted by the mix of transactions accounted for under a Company-owned equipment model versus a customer-owned equipment model (referred to as outright sales), as there are different accounting treatments applicable to each model.

Historically, the majority of professional installation transactions took place under a Company-owned model.

However, beginning in the second quarter of 2024, a growing number of our direct channel new customer adds are outright sales in connection with the national launch of our new ADT+ platform.

We expect outright sales to be an increasing proportion of our transactions as we continue to roll out ADT+, build our partnership with Google, introduce new or enhance our current offerings, and refine our go-to-market approach.

In addition, the mix, price, and type of offerings sold may impact our results.

For example, the volume of self set-up solutions may impact our results in future periods, as these solutions typically earn lower contractual fees than our professional installation solutions as a result of differences in pricing, offer tactics, and level of services in each channel.

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

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

A portion of our recurring customer base can be expected to cancel its service each year for a variety of reasons, including relocation, cost, loss to competition, or service issues.

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

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

We have been experiencing fewer relocation disconnects and higher non-pay disconnects largely related to housing market conditions and the weaker macroeconomic environment.

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

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

Beginning in the second quarter of 2024, a growing number of our direct channel new customer adds are outright sales.

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

We believe ADT self set-up customers sold under an outright sales model, which typically have lower monthly recurring fees than our professional installations, will allow us to grow our subscriber base through access to the fast-growing do-it-yourself (“DIY”) market.

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

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

We may experience an increase in costs associated with factors such as (i) offering a wider variety of products and services;

(ii) providing a greater mix of interactive and smart home solutions;

(iii) replacing or upgrading certain system components or technology due to technological advancements, cybersecurity upgrades, or otherwise;

(iv) supply chain disruptions;

(iv) supply chain disruptions or other impacts such as tariffs or trade restrictions;

(v) inflationary pressures on costs such as materials, labor, and fuel;

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

We are currently monitoring, and will continue to monitor, macroeconomic trends and uncertainties such as key components of inflation, the status and effects of recently implemented or threatened tariffs and other trade restrictions, as well as potential changes to these tariffs or the imposition of reciprocal or other tariffs or trade restrictions by other countries.

Any of these may have negative consequences for our supply chain due to price increases from our vendors or suppliers.

At this time, we do not anticipate material negative impacts that cannot be mitigated through arrangements with our vendors and suppliers, price increases to our customers, or other actions but there is no guarantee that we will be able to successfully mitigate the negative effects of any such macroeconomic trends and uncertainties.

We are also unable at this time to determine any future negative impacts from reduced consumer spending as a result of inflationary or other pressures or uncertainty that may result from the imposition of current or future tariffs or other trade restrictions.

As part of our response to changes or pressures in the current macroeconomic environment, we have been evaluating, and continue to evaluate, cost-saving opportunities such as leveraging technology, reducing headcount or our physical facilities footprint when appropriate, and reducing non-essential spend.

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

Hurricanes and other natural disasters may impact certain areas in which we operate and may result in service, sales, and installation disruptions to certain of our customers.

At the end of September 2024, Hurricane Helene made landfall in the southeastern part of the U.S.

We determined there were no material financial or business impacts from Hurricane Helene for the quarter ended September 30, 2024.

Subsequently, at the beginning of October 2024, Hurricane Milton made landfall in Florida.

We are currently evaluating the financial and business impacts Hurricanes Helene and Milton may have on future periods.

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

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

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

During the three months ended March 31, 2025, we did not experience any material losses related to natural disasters.

Other Tax Matters

In connection with the March 2025 Apollo secondary offering (as discussed in Note 14 “Related Party Transactions”) and our share repurchase program, an ownership change (as defined under Sections 382 and 383 of the IRC) may occur during 2025.

An ownership change imposes annual limitations on a corporation’s ability to utilize its tax attributes to offset future U.S.

taxable income.

Generally, an ownership change (as defined under Sections 382 and 383 of the IRC) occurs when the aggregate ownership of certain shareholders increases by more than 50 percentage points in total over a rolling three-year period.

Based on our analysis, we do not anticipate that a potential ownership change in 2025 will have a material adverse effect on our 2025 financial statements.

However, future adverse impacts may arise due to the limitations associated with an ownership change occurring in the current year.

KEY PERFORMANCE INDICATORS

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

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

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

Adjusted EPS is a non-GAAP measure.

Our definition of Adjusted EPS, a reconciliation of Adjusted EPS to diluted income (loss) from continuing operations per share (the most comparable GAAP measure), and additional information, including a description of the limitations relating to the use of Adjusted EPS, are provided under “Results of Operations—Non-GAAP Measures.”

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP measure.

Our definition of Adjusted EBITDA, a reconciliation of Adjusted EBITDA to income (loss) from continuing operations (the most comparable GAAP measure), and additional information, including a description of the limitations relating to the use of Adjusted EBITDA, are provided under “—Non-GAAP Measures.”

RESULTS OF OPERATIONS

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

(in thousands, except as otherwise indicated)

2024 2023 $ Change 2024 2023 $ Change

Three Months Ended March 31,

(in thousands, except per share data or as otherwise indicated)

2025 2024 $ Change

Monitoring and related services $ 1,083,104 $ 1,062,652 $ 20,452

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Depreciation and intangible asset amortization 339,517 333,002 6,515

Merger, restructuring, integration, and other 1,590 9,817 (8,227) 15,094 32,441 (17,347)

Operating income (loss) 319,252 292,149 27,103

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Other income (expense) (4,864) 15,622 (20,486)

Income (loss) from continuing operations before income taxes and equity in net earnings (losses) of equity method investee 182,255 160,374 21,881 588,601 470,350 118,251

Income (loss) from continuing operations before income taxes 193,509 220,321 (26,812)

Income tax benefit (expense) (51,032) (56,430) 5,398

Income (loss) from continuing operations before equity in net earnings (losses) of equity method investee 132,020 125,947 6,073 422,096 350,363 71,733

Equity in net earnings (losses) of equity method investee — (2,688) 2,688 — (7,103) 7,103

Income (loss) from continuing operations 142,477 163,891 (21,414)

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Net income (loss) $ 140,246 $ 91,551 $ 48,695

Diluted income (loss) from continuing operations per share of Common Stock $ 0.16 $ 0.17 $ (0.01)

Diluted weighted-average shares outstanding of Common Stock 871,312 918,394 (47,082)

Key Performance Indicators:

$ 359,534 $ 353,274 $ 6,260

Gross customer revenue attrition (percent) 12.8% 12.9% N/A* 12.8% 12.9% N/A*

Gross customer revenue attrition (percent) 12.6% 13.1% N/A*

Adjusted EPS (2)

$ 0.21 $ 0.19 $ 0.02

Adjusted EBITDA (2)

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(1) Refer to the “—Key Performance Indicators” section for the definitions of these key performance indicators.

(2) Adjusted EBITDA is a non-GAAP measure.

Refer to the “—Non-GAAP Measures” section for the definition of this term and a reconciliation to the most comparable GAAP measure.

(2) Refer to the “—Non-GAAP Measures” section for the definitions of these non-GAAP measures and reconciliations to the most comparable GAAP measures.

* Not applicable.

During the three and nine months ended September 30, 2024, revenue, as compared to the prior periods, primarily reflects:

• Monitoring and related services (“M&S Revenue”) :

higher recurring revenue of $21 million and $80 million, respectively, primarily driven by an increase in average prices.

• Security installation, product, and other :

(i) an increase in installation revenue of $29 million and $38 million, respectively, primarily driven by a higher volume of sales transactions with new customers under the outright sales model, as well as (ii) an increase in the amortization of deferred subscriber acquisition revenue of $11 million and $37 million, respectively, associated with customers under the Company-owned model.

The increase in RMR, as compared to the prior period, was primarily driven by an increase in average prices on new and existing subscribers as well as the impact of customer accounts purchased from a third party.

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

The three months ended March 31, 2025, as compared to the prior year period, primarily reflects:

• Monitoring and related services revenue (“M&S Revenue”) :

higher recurring revenue of $16 million primarily driven by an increase in average prices, partially offset by lower volume.

• Security installation, product, and other revenue :

higher installation revenue of $52 million primarily driven by a higher mix of professionally installed systems under the outright sales model at higher average prices in connection with the transition to our ADT+ platform.

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

Gross customer revenue attrition, as compared to the prior year period, decreased due to a reduction in voluntary and other disconnects partially offset by higher non-payment disconnects.

Cost of Revenue

During the three and nine months ended September 30, 2024, cost of revenue, as compared to the prior period, reflects an increase in installation and product costs of $28 million and $38 million, respectively, primarily due to a higher volume of outright sales transactions, as well as an increase in monitoring and related service costs during the nine months ended September 30, 2024 of $8 million, primarily due to higher interactive fees and other customer service initiatives.

The three months ended March 31, 2025, as compared to the prior year period, primarily reflects:

• Monitoring and related services costs (“M&S Costs”):

an increase in customer service costs of $3 million, primarily due to higher interactive fees partially offset by lower maintenance costs.

• Security installation, product, and other costs :

an increase in installation and product costs of $43 million primarily due to a higher mix of professionally installed outright sales transactions.

Selling, General, and Administrative Expenses

During the three months ended September 30, 2024, as compared to the prior period, SG&A remained relatively flat, and included increased investments in technology, partially offset by improved cost efficiencies.

The increase in SG&A during the nine months ended September 30, 2024, as compared to the prior period, was primarily driven by:

• an increase in general and administrative costs of $48 million, which includes a current year charge and prior year credit related to legal settlements in an aggregate amount of approximately $35 million,

• an increase in the allowance for credit losses of $37 million, as a result of an increase in customer delinquencies, and

• an increase in selling costs of $26 million, primarily related to the amortization of deferred subscriber acquisition costs.

The three months ended March 31, 2025, as compared to the prior year period, was flat and primarily reflects:

• a decrease in general and administrative costs of $16 million primarily as a result of cost savings initiatives and

• a decrease in advertising costs of $6 million as a result of lower media spend, partially offset by

• an increase in the allowance for credit losses of $17 million primarily as a result of an increase in revenue and customer delinquencies and

• an increase in share-based compensation of $12 million due to the modification of certain awards.

Depreciation and Intangible Asset Amortization

During the three months ended September 30, 2024, as compared to the prior period, depreciation and intangible asset amortization remained relatively flat.

During the nine months ended September 30, 2024, as compared to the prior period, depreciation and intangible asset amortization reflects a decrease in the amortization of customer relationship intangible assets of $33 million, primarily related to certain assets acquired as part of the acquisition of The ADT Security Corporation in 2016, partially offset by an increase in the amortization of acquired customer contracts of $23 million.

Merger, Restructuring, Integration, and other

During the three and nine months ended September 30, 2024, merger, restructuring, integration, and other decreased $8 million and $17 million, respectively, primarily due to third-party strategic optimization costs incurred during the prior period.

The three months ended March 31, 2025, as compared to the prior year period, primarily reflects an increase in the amortization of acquired customer contracts of $4 million.

Interest Expense, Net

During the three months ended September 30, 2024, the increase in interest expense, net, as compared to the prior year period, was primarily driven by:

• a decrease in net unrealized gains of $74 million on our interest rate swaps, partially offset by

• lower interest expense of $38 million primarily related to lower principal amounts outstanding on our First Lien Term Loan B and the redemption of our Term Loan A Facility and First Lien Notes due 2024 and,

• a non-recurring expense of $25 million recorded during the third quarter of 2023 associated with the reclassification from AOCI of historical losses related to certain interest rate swaps for which cash flows were probable of not occurring as a result of the partial redemption of our First Lien Term Loan B.

During the nine months ended September 30, 2024, the decrease in interest expense, net, as compared to the prior year period, was primarily driven by:

• lower interest expense of $103 million primarily related to lower principal amounts outstanding on our First Lien Term Loan B and the redemption of our Term Loan A Facility and First Lien Notes due 2024, as well as

• a non-recurring expense of $25 million as discussed above, partially offset by

• a decrease in net unrealized gains of $85 million on our interest rate swaps.

The three months ended March 31, 2025, as compared to the prior year period, primarily reflects an unrealized loss on our interest rate swaps of $21 million in the current year compared to an unrealized gain of $17 million in the prior year.

Other Income (Expense)

During the three and nine months ended September 30, 2024, the increases in other income (expense), as compared to the prior periods, was primarily due to income received under the Commercial TSA of $14 million and $36 million, respectively.

The three months ended March 31, 2025, as compared to the prior year period, primarily reflects lower Commercial TSA income of $11 million, as well as a loss on extinguishment of debt of $6 million in the current year.

Income Tax Benefit (Expense)

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

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

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

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

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

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

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

The effective tax rate primarily represents the federal statutory tax rate of 21.0%, a state tax rate, net of federal benefits, of 5.8%, and an unfavorable impact from permanent non-deductible items of 1.2%, partially offset by a favorable impact from dispositions of 1.0%.

Deferred Tax Assets

We have a significant amount of deferred tax assets, against which we take valuation allowances that relate to the uncertainty of our ability to utilize these deferred tax assets in future periods.

We review periodically those matters that can influence our decision as to whether or not a valuation allowance is appropriate.

Among those matters considered are pending and enacted legislation.

We will consider each quarter whether any developments to such legislation, together with the other factors we consider, require a valuation allowance.

We believe that our deferred tax assets for disallowed interest under Internal Revenue Code (“IRC”) Section 163(j) will continue to grow from their current level.

There is currently significant uncertainty in the matters we consider when determining whether it is appropriate to take additional valuation allowances.

While we have not reported any material changes to our valuation allowances since our 2023 Annual Report, we may determine to do so in subsequent periods.

Any material change to our valuation allowance would materially and adversely affect our operating results and may result in a net loss position for any given period.

Net Operating Losses

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

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

We expect to become a federal cash taxpayer in 2025 depending on future losses generated by the business, specifically with regard to the ADT Solar Exit.

During the three months ended March 31, 2025, income tax expense was $51 million, resulting in an effective tax rate for the period of 26.4%.

The effective tax rate primarily represents the federal statutory tax rate of 21.0% and a state tax rate, net of federal benefits, of 5.6%.

During the three months ended March 31, 2024, income tax expense was $56 million, resulting in an effective tax rate for the period of 25.6%.

The effective tax rate primarily represents the federal statutory tax rate of 21.0%, and a state tax rate, net of federal benefits, of 5.4%, partially offset by a favorable impact from a decrease in unrecognized tax benefits of 1.2%.

NON-GAAP MEASURES

To provide investors with additional information in connection with our results as determined in accordance with GAAP, we disclose Adjusted EBITDA as a non-GAAP measure.

This measure is not a financial measure calculated in accordance with GAAP, and it should not be considered as a substitute for net income, income (loss) from continuing operations, operating income, or any other measure calculated in accordance with GAAP, and may not be comparable to similarly titled measures reported by other companies.

To provide investors with additional information in connection with our results as determined in accordance with GAAP, we disclose the following non-GAAP measures.

These measures are not financial measures calculated in accordance with GAAP, and should not be considered as a substitute for net income, income (loss) from continuing operations, operating income, or their respective per share amounts as applicable, or any other measure calculated in accordance with GAAP, and may not be comparable to similarly titled measures reported by other companies.

We define Adjusted EPS as diluted income (loss) from continuing operations per share adjusted for the per share amounts related to (i) share-based compensation expense;

(ii) merger, restructuring, integration, and other items;

(iii) impairment

(iv) unrealized (gains) or losses on interest rate swaps;

(v) other non-cash or non-routine adjustments not necessary to operate our business;

and (vi) the impact these items have on taxes.

The diluted weighted average shares outstanding used in Adjusted EPS is equal to diluted weighted average shares outstanding of Common Stock calculated in accordance with GAAP.

We believe Adjusted EPS is a benchmark used by analysts and investors in our industry to compare our performance against the performance of other companies, although this measure may not be directly comparable to similar measures reported by other companies.

We believe the presentation of Adjusted EPS is useful to investors as it provides additional information about how our management evaluates the business.

Beginning in 2025, management and the Board also use Adjusted EPS to evaluate the performance of employees (including members of management) and the Company as a whole, as well as to allocate resources.

There are material limitations to using Adjusted EPS as it does not include certain significant items, including the adjustments discussed above, which directly affect our diluted income (loss) from continuing operations per share (the most comparable GAAP measure).

These limitations are best addressed by considering the economic effects of the excluded items independently and by considering Adjusted EPS in conjunction with diluted income (loss) from continuing operations per share as calculated in accordance with GAAP.

The table below reconciles Adjusted EPS to diluted income (loss) from continuing operations per share of Common Stock:

Three Months Ended March 31,

2025 2024 $ Change

Diluted income (loss) from continuing operations per share of Common Stock

$ 0.16 $ 0.17 $ (0.01)

Share-based compensation expense 0.02 0.01 0.01

Merger, restructuring, integration, and other

— 0.01 (0.01)

Interest rate swaps, net (1)

0.03 (0.01) 0.04

Loss on extinguishment of debt 0.01 — 0.01

Tax impact on adjustments (2)

(0.01) — (0.01)

Adjusted EPS (from continuing operations) (3)

$ 0.21 $ 0.19 $ 0.02

________________

(1) Includes unrealized gains or losses on interest rate swaps presented in interest expense, net and other income (expense).

(2) Represents the tax impact on adjustments using the federal and state blended statutory rate.

(3) Amounts may not sum in this table due to rounding.

During the three months ended March 31, 2025, the increase in Adjusted EPS, as compared to the prior year period, was primarily due to (i) an increase of approximately $0.02 per share due to an increase in revenue, net of the related costs including the allowance for credit losses, and (ii) an increase of approximately $0.01 per share due to a decrease in our diluted weighted average shares outstanding as a result of share repurchases during the period.

The factors listed above exclude amounts that are outside of our definition of Adjusted EPS.

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

Adjusted EBITDA

We believe Adjusted EBITDA is useful to investors to measure the operational strength and performance of our business.

We believe the presentation of Adjusted EBITDA is useful as it provides investors additional information about our operating profitability adjusted for certain non-cash items, non-routine items we do not expect to continue at the same level in the future, as well as other items not core to our operations.

Further, we believe Adjusted EBITDA provides a meaningful measure of operating profitability because we use it for evaluating our business performance, making budgeting decisions, and comparing our performance against other peer companies using similar measures.

We define Adjusted EBITDA as income (loss) from continuing operations adjusted for (i) interest;

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(vii) impairment charges;

and (viii) non-cash, non-routine, or other adjustments or charges not necessary to operate our business.

and (viii) other non-cash or non-routine adjustments not necessary to operate our business.

We believe Adjusted EBITDA is useful to investors to measure the operational strength and performance of our business.

There are material limitations to using Adjusted EBITDA as it does not include certain significant items, including interest, taxes, depreciation and amortization, and other adjustments which directly affect our income (loss) from continuing operations (the most comparable GAAP measure).

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The table below reconciles Adjusted EBITDA to income (loss) from continuing operations:

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

(in thousands) 2024 2023 $ Change 2024 2023 $ Change

Three Months Ended March 31,

(in thousands) 2025 2024 $ Change

Income (loss) from continuing operations

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3,905 11,653 (7,748)

Other, net (1)

Unrealized (gain) loss on interest rate swaps (1)

4,032 6,601 (2,569)

Loss on extinguishment of debt 6,443 — 6,443

508 (640) 1,148

Adjusted EBITDA (from continuing operations)

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________________

(1) During 2024, primarily includes unrealized (gains) / losses on interest rate swaps presented within other income (expense).

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

(1) Includes unrealized gains or losses on interest rate swaps presented in other income (expense).

During the three months ended March 31, 2025, the increase in Adjusted EBITDA, as compared to the prior year period, was primarily due to:

• higher M&S Revenue, net of the associated costs, of approximately $17 million,

• a decrease in general and administrative costs of $13 million, and

• higher installation revenue, net of the associated costs and commissions, of approximately $11 million, partially offset by

• an increase in the allowance for credit losses of $17 million.

The factors listed above exclude amounts that are outside of our definition of Adjusted EBITDA.

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

During the three months ended September 30, 2024, the increase in Adjusted EBITDA, as compared to the prior period, was primarily due to:

• higher M&S Revenue, net of the associated costs, of approximately $20 million, and

• improved cost efficiencies, including the benefit of $14 million of TSA income, partially offset by increased investments in technology.

During the nine months ended September 30, 2024, the increase in Adjusted EBITDA, as compared to the prior period, was primarily due to:

• higher M&S Revenue, net of the associated costs, of approximately $81 million, and

• higher other income of $51 million, which primarily includes $36 million of TSA income, partially offset by

• higher selling, general, and administrative expenses, excluding commissions of $68 million, associated with negative impacts from legal settlements of $35 million, higher provision for credit losses of $37 million, and increased investments in technology, partially offset by improved cost efficiencies.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity and capital resources primarily consisted of the following:

(in thousands) September 30, 2024

(in thousands) March 31, 2025

Cash and cash equivalents $ 3,744

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We expect our ongoing sources of liquidity to include cash generated from operations, borrowings under our credit facilities, and the issuance of equity and/or debt securities as appropriate given market conditions.

Our future cash needs are expected to include cash for operating activities including working capital, principal and interest payments on our debt, capital expenditures, potential dividend payments to our stockholders, potential share repurchases under our Share Repurchase Plan, and from time to time, strategic investments, bulk account purchases, or other initiatives that we may undertake.

Our future cash needs are expected to include cash for operating activities including working capital, principal and interest payments on our debt, income tax payments, capital expenditures, expected dividend payments to our stockholders, potential share repurchases under our 2025 Share Repurchase Plan, and other business initiatives as they arise.

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

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

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

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

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There have been no significant changes to our material cash requirements, commitments and contingencies, or off-balance sheet arrangements from those disclosed in our 2024 Annual Report, except as discussed below.

Share Repurchase Plan

On January 24, 2024, our Board of Directors announced the Share Repurchase Plan (the “Share Repurchase Plan”), pursuant to which we are authorized to repurchase, through January 29, 2025, up to a maximum aggregate amount of $350 million of shares of our Common Stock under the Share Repurchase Plan.

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

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

As a result, we have approximately $225 million remaining under the Share Repurchase Plan.

ADT Solar Exit

During the nine months ended September 30, 2024, we paid approximately $21 million associated with the ADT Solar Exit.

We do not expect the remaining cash expenditures to be material.

Debt Principal

As of March 31, 2025, our next significant debt maturity will occur in April 2026 with respect to the remaining outstanding balance of our First Lien Notes due 2026.

We intend, and believe that we will have the ability through use of our ongoing sources of liquidity, or through refinancing, to redeem these notes before maturity.

Share Repurchase Plans

In January 2024, our Board of Directors announced the 2024 Share Repurchase Plan, pursuant to which we were authorized to repurchase, through January 29, 2025, up to a maximum aggregate amount of $350 million of shares of our Common Stock.

We entered into an agreement in December 2024 to repurchase 15 million shares of Common Stock from a non-affiliate individual at a price per share of $6.95 for a total of $104 million under the 2024 Share Repurchase Plan.

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

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

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

The 2025 Share Repurchase Plan allows us 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 other factors.

We are not obligated to repurchase any of our shares of Common Stock, and the timing and amount of any repurchases will depend on legal requirements, market conditions, stock price, the availability of the safe harbor provided by Rule 10b-18 under the Exchange Act, alternative uses of capital, and other factors.

In March 2025, we repurchased, and subsequently retired, 20 million shares of our Common Stock under the 2025 Share Repurchase Plan and paid approximately $152 million (or approximately $7.62 per share) in connection with a secondary offering of our Common Stock by Apollo.

Additionally, in March 2025, we repurchased, and subsequently retired, an additional 18 million shares of our Common Stock in the open market pursuant to Rule 10b5-1 and Rule 10b-18 of the Exchange Act in multiple transactions for $140 million (or $7.79 per share).

As of March 31, 2025, we recorded a liability and reduction to additional paid-in capital of $9 million for the repurchase of 1 million shares, which settled in April 2025.

As of March 31, 2025, we have approximately $208 million remaining under the 2025 Share Repurchase Plan.

In April 2025, we repurchased.

and subsequently retired, 6 million shares (excluding the shares noted above) in the open market pursuant to Rule 10b5-1 and Rule 10b-18 of the Exchange Act in multiple transactions for a total of $52 million (or $8.04 per share).

As a result, we have $148 million remaining under the 2025 Share Repurchase Plan.

Other Contractual Obligations

As discussed in Note 11 “Commitments and Contingencies,” during the three and nine months ended September 30, 2024, we made purchases toward our $200 million commitment under the Google Cloud Agreement Addendum of $9 million and $19 million, respectively.

In addition, during the three and nine months ended September 30, 2024, purchases toward our commitment to one of our vendors to purchase at least $320 million of security system equipment and components were approximately $44 million and $144 million, respectively.

As of March 31, 2025, we continue to work to meet our commitment of $200 million of aggregate purchases under the Google Cloud Agreement Addendum.

In addition, we were party to an agreement with one of our vendors as of December 31, 2024 to purchase at least $370 million of security system equipment and components through December 2025.

During the three months ended March 31, 2025, purchases toward this commitment were $46 million.

Refer to Note 12 “Commitments and Contingencies.”

While we have historically made cash tax payments to certain states, starting in 2025, we will begin making federal cash tax payments.

Our initial estimated payments are expected to be made in the second quarter of 2025, with subsequent payments scheduled for the relevant periods they correspond to.

The specific payment amounts may fluctuate each quarter, based on our financial results and tax positions taken.

On April 24, 2025, we announced a dividend of $0.055 per share to holders of Common Stock and Class B Common Stock of record on June 12, 2025, which will be paid on July 8, 2025.

Long-Term Debt

Significant changes and activity related to our long-term debt since our 2024 Annual Report are discussed below.

Refer to Note 5 “Debt” for further discussion on our debt agreements and activity.

Refer to Note 6 “Debt.”

First Lien Credit Agreement

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

In May 2024, we amended and restated the First Lien Credit Agreement, which included the exchange of $143 million principal amount of loans under our Term Loan A Facility for its First Lien Term Loan B due 2030.

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

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

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

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

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

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

Borrowings under the Extended First Lien Revolving Credit Facility bear interest at a rate equal to either (a) Term SOFR with a floor of zero or (b) a base rate (“Base Rate”) determined by reference to the highest of (i) the federal funds rate plus 0.50% per annum, (ii) the rate of interest per annum last quoted by The Wall Street Journal as the “Prime Rate” in the United States and (iii) the one-month adjusted term SOFR plus 1.00% per annum, in each case, plus an applicable margin of 2.00% per annum for Term SOFR loans and 1.00% per annum for Base Rate loans, subject to two step-downs based on certain specified net first lien leverage ratios.

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

Term Loan A Facility Redemption

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

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

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

First Lien Notes due 2024 Redemption

In April 2024, we redeemed the remaining outstanding principal balance of $100 million of our First Lien Notes due 2024, excluding accrued and unpaid interest, using proceeds from the First Lien Revolving Credit Facility.

In March 2025, we amended and restated the First Lien Credit Agreement and issued a new $600 million first lien seven-year term loan facility (the “First Lien Term Loan B-2 due 2032”).

The First Lien Term Loan B-2 due 2032 requires scheduled quarterly amortization payments, commencing on June 30, 2025, equal to 0.25% of the original principal amount of the First Lien Term Loan B-2 due 2032, with the remaining balance payable at maturity.

Debt issuance costs were not material.

During the three months ended March 31, 2025, we borrowed $40 million under the First Lien Revolving Credit Facility, which was outstanding as of March 31, 2025.

Additionally, as of April 24, 2025, there were no amounts outstanding under the First Lien Revolving Credit Facility.

First Lien Notes due 2026 Partial Redemption

In March 2025, we redeemed $500 million of the First Lien Notes due 2026, excluding accrued and unpaid interest, for a total redemption price of $506 million, including a make-whole payment, using proceeds from the Company’s First Lien Term Loan B-2 due 2032.

Loss on extinguishment of debt was not material.

We intend, and believe that we will have the ability through use of our ongoing sources of liquidity, or through refinancing, to redeem these notes before maturity.

2020 Receivables Facility

In March 2024, we amended the agreement governing the 2020 Receivables Facility, pursuant to which the uncommitted revolving period was extended from March 2024 to April 2024.

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

In addition, proceeds and repayments of long-term borrowings include the impact of $32 million from the amendments described above.

As of September 30, 2024, the outstanding balance was $423 million.

Solar Receivables Facility

On August 2, 2023, we entered into the Solar Receivables Facility Financing Agreement to finance receivables generated by the installation of residential solar systems, which, among other things, provides for an uncommitted revolving loan facility in the aggregate principal amount of up to $300 million.

During August 2024, the Solar Receivables Facility’s uncommitted revolving period expired.

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

In March 2025, we amended the agreement governing the 2020 Receivables Facility to extend the uncommitted revolving period to March 2026, reduce the interest rate on outstanding borrowings, and increase the advance rate on pledged collateral.

Additionally, during the first quarter of 2025, we voluntarily prepaid $23 million of the remaining balance.

As of March 31, 2025, the outstanding balance was $396 million.

Debt Covenants

As of September 30, 2024, we were in compliance with all financial covenant and other maintenance tests for all our debt obligations.

As of March 31, 2025, we were in compliance with all financial covenant and other maintenance tests for all our debt obligations.

We do not believe there is a material risk of future noncompliance with our financial covenant and other maintenance tests.

During the nine months ended September 30, 2024 and 2023, we declared aggregate dividends of $141 million ($0.055 per share per quarter) and $91 million ($0.035 per share per quarter) on our Common Stock, respectively, and $9 million ($0.055 per share per quarter) and $6 million ($0.035 per share per quarter) on our Class B Common Stock, respectively.

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

Cash Flow Analysis

The amounts and discussion below include cash flows from both continuing operations and discontinued operations, as appropriate, consistent with the presentation on the Statements of Cash Flows.

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2025 2024 $ Change

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Cash Flows from Operating Activities

The increase in net cash provided by operating activities, as compared to the prior period, was primarily due to a decrease in cash interest of $130 million primarily related to reduced principal balances on our debt, the benefit of lower outflows in the current year related to our Solar business, improved operating performance, and lower employee-related payments.

increase was partially offset by the benefit received in the prior period associated with the results of the former Commercial Business as well as legal settlements during the current and prior period.

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

The increase in net cash provided by operating activities, as compared to the prior year period, was primarily due to the benefit of lower outflows in the current year related to our former Solar Business and changes in assets and liabilities due to the volume and timing of other operating cash receipts and payments with respect to when the transactions are reflected in earnings.

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

Cash Flows from Investing Activities

The increase in net cash used in investing activities, as compared to the prior period, was primarily due to:

• an increase in dealer generated customer accounts and bulk account purchases of $88 million primarily due to higher bulk account purchases from a third party, and

• a $21 million payment associated with the settlement of post-closing adjustments related to the sale of the former Commercial Business, partially offset by

• a decrease in subscriber system assets expenditures of $74 million primarily due to a higher volume of outright sales and fewer customer additions.

The decrease in net cash used in investing activities, as compared to the prior year period, was primarily due to:

• a decrease in subscriber system assets expenditures of $35 million primarily due to a higher volume of outright sales and fewer customer additions and

• a decrease in dealer generated customer accounts and bulk account purchases of $11 million primarily due to lower volume.

Cash Flows from Financing Activities

The increase in net cash used in financing activities, as compared to the prior period, was primarily due to:

• share repurchases during the current period of $93 million, and

• an increase in net repayments on our 2020 Receivables Facility of $80 million, partially offset by

• a decrease in net repayments on our long-term debt of $122 million primarily related to higher redemptions during the prior period.

• an increase in share repurchases of $303 million and

• an increase in net repayments on our 2020 Receivables Facility of $20 million primarily due to the voluntary prepayment during March 2025, partially offset by

• an increase in net borrowings on our long-term debt of $88 million primarily related to the issuance of the First Lien Term Loan B-2 due 2032 partially offset by the redemption of the First Lien Notes due 2026.

CRITICAL ACCOUNTING ESTIMATES

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the Commercial Divestiture;

the expected timetable for realizing expected benefits and synergies of the Commercial Divestiture and ADT Solar Exit including that the costs of the ADT Solar Exit may exceed our best estimates;

the expected benefits of the Commercial Divestiture and ADT Solar Exit including that the costs of the ADT Solar Exit may exceed our best estimates;

the integration of strategic bulk purchases of customer accounts;

the strategic investment by and long term partnership with State Farm;

repurchases of shares of the Company’s common stock under the authorized share repurchase program, anticipated financial performance, including the Company’s ability to achieve its stated guidance metrics and to reduce debt or improve leverage ratios, or to achieve or maintain its long-term leverage goals;

management’s plans and objectives for future operations;

any repurchases of our common stock under an authorized share repurchase plan;

anticipated financial performance, including the Company’s ability to achieve its stated guidance metrics;

our ability to refinance or reduce debt or improve leverage ratios, or to achieve or maintain our leverage goals;

anticipated financial performance, management’s plans and objectives for future operations;

the successful development, commercialization, and timing of new or joint products;

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our ability to deploy our business continuity and disaster plans and procedures to successfully respond to catastrophic events;

our strategic partnership and ongoing relationship with Google;

our strategic partnership and ongoing relationship with Google LLC (“Google”);

the expected timing of product commercialization with Google or any changes thereto;

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However, the absence of these words or similar expressions does not mean that a statement is not forward-looking.

For ADT, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward- looking statements include, without limitation:

Particular uncertainties that could cause our actual results to be materially different than those expressed in our forward- looking statements include, without limitation:

• our ability to retain and hire key personnel and to maintain relationships with customers, suppliers, and other business partners;

• risks related to the Commercial Divestiture and ADT Solar Exit, including our business becoming less diversified and the possible diversion of management’s attention from our core business operations;

• our ability to keep pace with rapid technological changes and other industry changes;

• risks related to the expansion and further development of our next-generation platform and our efforts to migrate our information technology infrastructure, including our customer relationship management and enterprise resource planning systems, to the cloud;

• our ability to effectively implement our strategic partnership with, commercialize products with, or utilize any of the amounts invested in us by State Farm or provided by State Farm for research and development or other purposes;

• our ability to keep pace with rapid technological changes, including the development of our next-generation platform, and industry changes;

• our ability to effectively implement our strategic partnership with or utilize any of the amounts invested in us by Google;

• the impact of supply chain disruptions;

• our ability to maintain and grow our existing customer base;

• our ability to maintain and grow our existing customer base and to integrate strategic bulk purchases of customer accounts;

• our ability to sell our products and services or launch new products and services in highly competitive markets, including the home security and automation market, and to achieve market acceptance with acceptable margins;

• our ability to successfully upgrade obsolete equipment installed at our customers’ premises in an efficient and cost-effective manner;

• changes in law, economic and financial conditions, including tax law changes, changes to privacy requirements, changes to telemarketing, email marketing and similar consumer protection laws, interest volatility, and trade tariffs and restrictions applicable to the products we sell;

• any changes in regulations or laws, economic and financial conditions, including labor and tax law changes or any impacts on the global economy or consumer discretionary spending due to tariffs or otherwise, changes to privacy requirements, changes to telemarketing, email marketing and similar consumer protection laws, interest volatility, and trade tariffs and restrictions applicable to the products we sell;

• any impacts from current global, economic, sovereign and political conditions and uncertainties, including the effects of, and uncertainty regarding, new or proposed tariff or trade regulations;

• any material changes to the valuation allowances we take with respect to our deferred tax assets;

• the impact of information technology, cybersecurity, or data security breaches, including the incidents disclosed in the Current Reports on Form 8-K filed with the SEC on August 8, 2024 (the “August Incident”) and October 7, 2024 (the “October Incident” and together with the August Incident, the “Cybersecurity Incidents”);

• the Company's ongoing assessments of the impacts of the Cybersecurity Incidents;

the Company's expectations regarding its ability to contain and remediate the Cybersecurity Incidents and to effectively implement counter measures intended to safeguard the Company’s information technology assets and operations; the impact of the Cybersecurity Incidents on the Company's relationships with customers, employees and regulators; the Company’s ability to coordinate effectively with its third party business partner to address the October Incident;

legal, reputational and financial risks resulting from the Cybersecurity Incidents; and that any future, or still undetected, cybersecurity

related incident, whether an attack, disruption, intrusion, denial of service, theft or other breach, including any such incident related to or arising from ADT’s business partners or other third parties, could result in unauthorized access to, or disclosure of, data, resulting in claims, costs and reputational harm that could negatively affect our actual results of operations or financial condition;

• the impact of cyber attacks or related breaches with respect to information technology systems, cybersecurity, or data security involving us, our business partners, or other third parties whose systems are interconnected with ours, including the incidents disclosed in our Current Reports on Form 8-K filed with the SEC on August 8, 2024 (the “August Incident”) and October 7, 2024 (the “October Incident” and together with the August Incident, the “Cybersecurity Incidents”) and any similar future or still undetected attacks or incidents;

• risks related to the development, deployment, and use of artificial intelligence (“AI”) in our products and services, including technological and legal uncertainties surrounding AI technologies;

• our dependence on third-party providers, suppliers, and dealers to enable us to produce and distribute our products and services in a cost-effective manner that protects our brand;

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• our ability to successfully pursue alternate business opportunities and strategies;

• our ability to integrate various companies we have acquired in an efficient and cost-effective manner;

• our ability to continue to integrate various businesses, including bulk acquisitions of customer accounts, we have acquired or will acquire in the future, in an efficient and cost-effective manner;

• the amount and timing of our cash flows and earnings, which may be impacted by customer, competitive, supplier and other dynamics and conditions;

• our ability to maintain or improve margins through business efficiencies;

• risks related to the restatement of our consolidated financial statements included in our Amendment No.

1 to our Annual Report on Form 10-K for the year ended December 31, 2022 (the “Amended 2022 Annual Report”) and in our Quarterly Reports on Form 10-Q/A for the quarters ended September 30, 2022, and March 31, 2023, each as filed with the SEC on July 27, 2023;

• any litigation or investigation related to such restatements;

• our ability to maintain effective internal control over financial reporting (“ICFR”) and disclosure controls and procedures (“DCPs”), including our ability to remediate any potential material weakness in our ICFR and the timing of any such remediation, as well as the ability to maintain effective DCPs at a reasonable assurance level;

• the other factors that are described under the heading “Risk Factors” in our last Annual Report on Form 10-K for the year ended December 31, 2024.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis