ADT Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Table of Contents • Introduction • Business and Basis of Presentation • Factors Affecting Operating Results • Key Performance Indicators • Results of Operations • Non-GAAP Measures • Liquidity and Capital Resources • Critical Accounting Estimates • Cautionary Statements Regarding Forward-Looking Statements INTRODUCTION 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. BUSINESS AND BASIS OF PRESENTATION Our Business ADT (or “we,” “our,” and “us”), provides security, interactive, and smart home solutions to consumer and small business customers in the U.S. Our mission is to empower people to protect and connect what matters most with safe, smart, and sustainable solutions, delivered through innovative offerings, unrivaled safety, and a premium experience because we believe that everyone deserves to feel safe. Basis of Presentation We report our results as a single operating and reportable segment. All financial information presented in this section has been prepared in U.S. dollars in accordance with GAAP, excluding any non-GAAP measures, and includes the accounts of ADT Inc. and its wholly-owned subsidiaries. All intercompany transactions have been eliminated. 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. 30 As of June 30, 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 mix of professional installation solutions versus self set-up solutions may impact our results in future periods, as self set-up solutions typically earn lower contractual fees than our professional installation solutions as a result of differences in pricing, offer tactics, and level of services in each channel. 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 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 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 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 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 six months ended June 30, 2025, we did not experience any material losses related to natural disasters. 31 Other Tax Matters As a result of Apollo selling shares of our Common Stock (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) occurred during the second quarter of 2025. Generally, an ownership change occurs when the aggregate ownership of certain shareholders shifts, for federal income tax purposes, by more than 50 percentage points in total over a rolling three-year period. An ownership change imposes annual limitations on a corporation’s ability to utilize its tax attributes to offset future U.S. taxable income. Our tax attributes that are subject to the limitations primarily consist of disallowed interest carryforwards. However, the limitation as a result of the ownership change significantly exceeded the value of these attributes. As such, we currently do not expect a material impact to our results from this ownership change. On July 4, 2025, the OBBBA was signed into law, which includes a broad range of tax reform provisions, some of which we expect may be favorable to our results. We are currently evaluating the impact of the bill. 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 measures Adjusted Earnings per Share (“Adjusted EPS”) and Adjusted EBITDA, both from continuing operations. Computations of our key performance indicators may not be comparable to other similarly titled measures reported by other companies. Certain operating metrics are approximated, as there may be variations to reported results due to certain adjustments we might make in connection with the integration over several periods of acquired companies that calculated these metrics differently or periodic reassessments and refinements in the ordinary course of business, including changes due to system conversions or historical methodology differences in legacy systems. End-of-Period Recurring Monthly Revenue (“RMR”) RMR is generated by contractual recurring fees for monitoring and other recurring services provided to our customers, including contracts monitored but not owned. We use RMR to evaluate our overall sales, installation, and retention performance. Additionally, we believe the presentation of RMR is useful to investors because it measures the volume of revenue under contract at a given point in time, which is useful for forecasting future revenue performance as the majority of our revenue comes from recurring sources. Gross Customer Revenue Attrition Gross customer revenue attrition is defined as RMR lost as a result of customer attrition, net of dealer charge-backs and reinstated customers, excluding contracts monitored but not owned and self set-up/DIY customers. Customer sites are considered canceled when all services are terminated. Dealer charge-backs represent customer cancellations charged back to the dealers because the customer canceled service during the charge-back period, which is generally thirteen months. Gross customer revenue attrition is calculated on a trailing twelve-month basis, the numerator of which is the RMR lost during the period due to attrition, net of dealer charge-backs and reinstated customers, and the denominator of which is total annualized RMR based on an average of RMR under contract at the beginning of each month during the period, in each case, excluding contracts monitored but not owned and self set-up/DIY customers. We use gross customer revenue attrition to evaluate our retention and customer satisfaction performance, as well as evaluate subscriber trends by vintage year. Additionally, we believe the presentation of gross customer revenue attrition is useful to investors as it provides a means to evaluate drivers of customer attrition and the impact of retention initiatives. Adjusted EPS 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.” 32 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 “Results of Operations—Non-GAAP Measures.” RESULTS OF OPERATIONS Three Months Ended June 30, Six Months Ended June 30, (in thousands, except per share data or as otherwise indicated) 2025 2024 $ Change 2025 2024 $ Change Revenue: Monitoring and related services $ 1,090,241 $ 1,068,065 $ 22,176 $ 2,173,345 $ 2,130,717 $ 42,628 Security installation, product, and other 196,794 136,494 60,300 381,181 263,514 117,667 Total revenue 1,287,035 1,204,559 82,476 2,554,526 2,394,231 160,295 Cost of revenue (exclusive of depreciation and amortization shown separately below) : Monitoring and related services 161,928 151,192 10,736 319,778 305,905 13,873 Security installation, product, and other 88,258 45,042 43,216 170,530 84,634 85,896 Total cost of revenue 250,186 196,234 53,952 490,308 390,539 99,769 Selling, general, and administrative expenses 356,138 390,291 (34,153) 724,738 760,507 (35,769) Depreciation and intangible asset amortization 338,734 333,859 4,875 678,251 666,861 11,390 Operating income (loss) 341,977 284,175 57,802 661,229 576,324 84,905 Interest expense, net (115,798) (109,700) (6,098) (236,677) (197,150) (39,527) Other income (expense) 803 11,550 (10,747) (4,061) 27,172 (31,233) Income (loss) from continuing operations before income taxes 226,982 186,025 40,957 420,491 406,346 14,145 Income tax benefit (expense) (58,749) (59,840) 1,091 (109,781) (116,270) 6,489 Income (loss) from continuing operations 168,233 126,185 42,048 310,710 290,076 20,634 Income (loss) from discontinued operations, net of tax (3,054) (33,791) 30,737 (5,285) (106,131) 100,846 Net income (loss) $ 165,179 $ 92,394 $ 72,785 $ 305,425 $ 183,945 $ 121,480 Diluted income (loss) from continuing operations per share of Common Stock $ 0.19 $ 0.13 $ 0.06 $ 0.35 $ 0.30 $ 0.05 Diluted weighted-average shares outstanding of Common Stock 839,951 909,128 (69,177) 855,559 913,475 (57,916) Key Performance Indicators: (1) RMR $ 362,750 $ 355,179 $ 7,571 $ 362,750 $ 355,179 $ 7,571 Gross customer revenue attrition (percent) 12.8% 12.9% N/A* 12.8% 12.9% N/A* Adjusted EPS (2) $ 0.23 $ 0.17 $ 0.06 $ 0.44 $ 0.36 $ 0.08 Adjusted EBITDA (2) $ 673,624 $ 629,287 $ 44,337 $ 1,334,425 $ 1,266,978 $ 67,447 _______________________ (1) Refer to the “—Key Performance Indicators” section for the definitions of these key performance indicators. (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. 33 Revenue The three and six months ended June 30, 2025, as compared to the prior year periods, primarily reflects: • Monitoring and related services revenue (“M&S Revenue”) : higher recurring revenue of $16 million and $32 million, respectively, primarily driven by an increase in average prices. • Security installation, product, and other revenue : higher installation revenue of $57 million and $109 million, respectively, 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 periods, was primarily driven by an increase in average prices on new and existing subscribers. Gross customer revenue attrition, as compared to the prior year periods, was relatively flat and included a reduction in voluntary and other disconnects as well as relocations, partially offset by higher non-payment disconnects. Cost of Revenue The three and six months ended June 30, 2025, as compared to the prior year periods, primarily reflects: • Monitoring and related services costs (“M&S Costs”): an increase in M&S Costs of $11 million and $14 million, respectively, primarily due to higher interactive fees. • Security installation, product, and other costs : an increase in installation and product costs of $43 million and $86 million, respectively, primarily due to a higher mix of professionally installed outright sales transactions. Selling, General, and Administrative Expenses The three months ended June 30, 2025, as compared to the prior year period, primarily reflects: • a decrease in general and administrative costs of $23 million primarily as a result of $20 million related to a legal settlement in the prior year, as well as cost savings initiatives, and • a decrease in share-based compensation of $10 million due to the modification of certain awards in the prior period. The six months ended June 30, 2025, as compared to the prior year period, primarily reflects: • a decrease in general and administrative costs of $39 million primarily as a result of $20 million related to a legal settlement in the prior year, as well as cost savings initiatives, and • a decrease in advertising costs of $12 million as a result of lower media spend, partially offset by • an increase in the allowance for credit losses of $15 million primarily as a result of an increase in revenue and customer delinquencies. Depreciation and Intangible Asset Amortization The three and six months ended June 30, 2025, as compared to the prior year periods, primarily reflects an increase in the amortization of acquired customer contracts of $4 million and $8 million, respectively. Interest Expense, Net The three months ended June 30, 2025, as compared to the prior year period, primarily reflects unrealized losses on our interest rate swaps of $13 million in the current year as compared to $5 million in the prior year. The six months ended June 30, 2025, as compared to the prior year period, primarily reflects an unrealized loss on our interest rate swaps of $34 million in the current year as compared to an unrealized gain of $12 million in the prior year. 34 Other Income (Expense) The three and six months ended June 30, 2025, as compared to the prior year periods, primarily reflects lower Commercial TSA income of $10 million and $21 million, respectively. Income Tax Benefit (Expense) The Company’s income tax expense for the three months ended June 30, 2025 was $59 million, resulting in an effective tax rate for the period of 25.9%. The effective tax rate primarily represents the federal statutory rate of 21.0%, and a state tax rate, net of federal benefits, of 4.9%. The Company’s income tax expense for the three months ended June 30, 2024 was $60 million, resulting in an effective tax rate for the period of 32.2%. The effective tax rate primarily represents the federal statutory tax rate of 21.0%, and a state tax rate, net of federal benefits, of 5.9%, and an unfavorable impact from dispositions of 5.0%. The Company’s income tax expense for the six months ended June 30, 2025 was $110 million, resulting in an effective tax rate for the period of 26.1%. The effective tax rate primarily represents the federal statutory rate of 21.0%, and a state tax rate, net of federal benefits, of 5.2%. The Company’s income tax expense for the six months ended June 30, 2024 was $116 million, resulting in an effective tax rate for the period of 28.6%. The effective tax rate primarily represents the federal statutory tax rate of 21.0%, and a state tax rate, net of federal benefits, of 5.6%, and an unfavorable impact from dispositions of 2.3%. NON-GAAP MEASURES 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. Adjusted EPS 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 charges; (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. 35 The table below reconciles Adjusted EPS to diluted income (loss) from continuing operations per share of Common Stock: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 $ Change 2025 2024 $ Change Diluted income (loss) from continuing operations per share of Common Stock $ 0.19 $ 0.13 $ 0.06 $ 0.35 $ 0.30 $ 0.05 Share-based compensation expense 0.01 0.02 (0.01) 0.04 0.03 0.01 Merger, restructuring, integration, and other — — — 0.01 0.01 — Interest rate swaps, net (1) 0.02 0.01 0.01 0.05 — 0.05 Loss on extinguishment of debt — — — 0.01 — 0.01 Other, net — — — — — — Tax impact on adjustments (2) (0.01) (0.01) — (0.03) (0.01) (0.02) Adjusted EPS (from continuing operations) (3) $ 0.23 $ 0.17 $ 0.06 $ 0.44 $ 0.36 $ 0.08 ________________ (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 and six months ended June 30, 2025, the increase in Adjusted EPS, as compared to the prior year periods, was primarily due to (i) an increase of approximately $0.04 and $0.05 per share, respectively, due to an increase in revenue, net of the related costs including the allowance for credit losses, an increase of approximately $0.02 and $0.04 per share, respectively, due to lower general and administrative costs, and (ii) an increase of approximately $0.02 and $0.03 per share, respectively, due to a decrease in our diluted weighted average shares outstanding as a result of share repurchases during the period. This was partially offset by a decrease of approximately $0.01 and $0.02 per share, respectively, due to lower Commercial TSA income. 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 define Adjusted EBITDA as income (loss) from continuing operations adjusted for (i) interest; (ii) taxes; (iii) depreciation and amortization, including depreciation of subscriber system assets and other fixed assets and amortization of dealer and other intangible assets; (iv) amortization of deferred costs and deferred revenue associated with subscriber acquisitions; (v) share-based compensation expense; (vi) merger, restructuring, integration, and other items; (vii) impairment charges; 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. 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, although this measure may not be directly comparable to similar measures reported by other companies. 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). These limitations are best addressed by considering the economic effects of the excluded items independently and by considering Adjusted EBITDA in conjunction with income (loss) from continuing operations as calculated in accordance with GAAP. 36 The table below reconciles Adjusted EBITDA to income (loss) from continuing operations: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2025 2024 $ Change 2025 2024 $ Change Income (loss) from continuing operations $ 168,233 $ 126,185 $ 42,048 $ 310,710 $ 290,076 $ 20,634 Interest expense, net 115,798 109,700 6,098 236,677 197,150 39,527 Income tax expense (benefit) 58,749 59,840 (1,091) 109,781 116,270 (6,489) Depreciation and intangible asset amortization 338,734 333,859 4,875 678,251 666,861 11,390 Amortization of deferred subscriber acquisition costs 62,149 54,730 7,419 122,507 109,335 13,172 Amortization of deferred subscriber acquisition revenue (89,618) (86,182) (3,436) (178,489) (169,558) (8,931) Share-based compensation expense 11,649 21,284 (9,635) 32,170 29,359 2,811 Merger, restructuring, integration, and other 3,217 1,851 1,366 7,122 13,504 (6,382) Unrealized (gain) loss on interest rate swaps (1) 3,813 3,277 536 7,845 9,878 (2,033) Loss on extinguishment of debt — 4,509 (4,509) 6,443 4,509 1,934 Other, net 900 234 666 1,408 (406) 1,814 Adjusted EBITDA (from continuing operations) $ 673,624 $ 629,287 $ 44,337 $ 1,334,425 $ 1,266,978 $ 67,447 ________________ (1) Includes unrealized gains or losses on interest rate swaps presented in other income (expense). During the three and six months ended June 30, 2025, the increase in Adjusted EBITDA, as compared to the prior year periods, was primarily due to: • a decrease in general and administrative costs of $20 million and $33 million, respectively, • higher M&S Revenue, net of the associated costs, of approximately $11 million and $29 million, respectively, and • higher installation revenue, net of the associated costs and commissions, of approximately $17 million and $28 million, respectively, partially offset by • a decrease in Commercial TSA income of $10 million and $21 million, respectively, and • an increase in the allowance for credit losses of $15 million during the six months ended June 30, 2025. 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. LIQUIDITY AND CAPITAL RESOURCES Liquidity and capital resources primarily consisted of the following: (in thousands) June 30, 2025 Cash and cash equivalents $ 45,195 Restricted cash and restricted cash equivalents $ 107,247 Availability under First Lien Revolving Credit Facility $ 800,000 Uncommitted available borrowing capacity under 2020 Receivables Facility $ 110,228 Carrying amount of total debt outstanding, including finance leases $ 7,815,392 Liquidity 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, income tax payments, capital expenditures, expected dividend payments to our stockholders, potential share repurchases, and other business initiatives as they arise. 37 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 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. We believe our cash position, available borrowing capacity under our credit agreements, and cash provided by operating activities are, and will continue to be, adequate to meet our operational and business needs in the next twelve months, as well as our long-term liquidity needs. Material Cash Requirements 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. Debt Principal As of June 30, 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, and through the refinancing transaction to be closed in July 2025 discussed above, 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 in 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 under the 2025 Share Repurchase Plan in multiple transactions for a total of $140 million (or $7.79 per share). During the second quarter of 2025, we repurchased. and subsequently retired, 12 million shares of our Common Stock in the open market pursuant to Rule 10b5-1 and Rule 10b-18 of the Exchange Act under the 2025 Share Repurchase Plan in multiple transactions for a total of $96 million (or $8.14 per share). As of June 30, 2025, we have approximately $112 million remaining under the 2025 Share Repurchase Plan. During July 2025, we repurchased, and subsequently retired, 2 million shares in the open market pursuant to Rule 10b5-1 and Rule 10b-18 of the Exchange Act under the 2025 Share Repurchase Plan in multiple transactions for a total of $16 million (or $8.45 per share). As of July 22, 2025, we had approximately $96 million remaining under the 2025 Share Repurchase Plan. 38 Other Contractual Obligations As of June 30, 2025, we continue to work to meet our commitment of $200 million of aggregate purchases under the Google Cloud Agreement Addendum. In addition, we are party to an agreement with one of our vendors to purchase at least $370 million of security system equipment and components through December 2025. During the six months ended June 30, 2025, purchases toward this commitment were $91 million. Refer to Note 12 “Commitments and Contingencies.” Cash Taxes While we have historically made cash tax payments to certain states, starting in the second quarter of 2025, we began making federal cash tax payments. The specific payment amounts may fluctuate each quarter based on our financial results and tax positions taken. Dividends On July 24, 2025, we announced a dividend of $0.055 per share to holders of Common Stock and Class B Common Stock of record on September 11, 2025, which will be paid on October 2, 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 6 “Debt.” First Lien Credit Agreement In March 2025, we amended and restated the First Lien Credit Agreement and issued 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 six months ended June 30, 2025, we borrowed and repaid $133 million under the First Lien Revolving Credit Facility. We had no amounts outstanding as of June 30, 2025. In June 2025, certain lenders provided commitments to fund an additional $550 million of term loans as part of the First Lien Term Loan B-2 due 2032. The closing of this transaction, which remains subject to market and other customary conditions, is expected to occur on or around July 25, 2025. Also in June 2025, we issued a notice of partial redemption for $550 million of the First Lien Notes due 2026, which will be redeemed on July 27, 2025. We intend to use proceeds from the First Lien Term Loan B-2 due 2032 for the partial redemption of the First Lien Notes due 2026. First Lien Notes due 2026 Partial Redemptions 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. In June 2025 we issued a notice of partial redemption for $550 million of the First Lien Notes due 2026, which will be redeemed on July 27, 2025. We intend, and believe that we will have the ability through use of our ongoing sources of liquidity, or through refinancing, to redeem the remaining outstanding balance of these notes before maturity. 2020 Receivables Facility 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. As of June 30, 2025, the outstanding balance was $440 million. 39 Debt Covenants As of June 30, 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. 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. Six Months Ended June 30, (in thousands) 2025 2024 $ Change Net cash provided by (used in): Operating activities $ 1,030,525 $ 927,005 $ 103,520 Investing activities $ (622,559) $ (632,693) $ 10,134 Financing activities $ (459,589) $ (275,345) $ (184,244) Cash Flows from Operating Activities 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, improved operating performance, 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, partially offset by an increase in cash tax payments and a higher proportion of outright sales transactions. Refer to the discussions above under “—Results of Operations” for further details. Cash Flows from Investing Activities 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 $75 million primarily due to a higher proportion of outright sales partially offset by • an increase in dealer generated customer accounts and bulk account purchases of $71 million primarily due to bulk account purchases during the second quarter of 2025. Cash Flows from Financing Activities The increase in net cash used in financing activities, as compared to the prior period, was primarily due to: • higher share repurchases of $402 million, partially offset by • net borrowings on long-term debt of $80 million during the current period primarily due to the issuance of the First Lien Term Loan B-2 due 2032, partially offset by the partial redemption of the First Lien Notes due 2026, as compared to net repayments of $112 million during the prior period primarily due to the repayment of the First Lien Notes due 2024, and • an increase in net borrowings on our 2020 Receivables Facility of $44 million. CRITICAL ACCOUNTING ESTIMATES We disclosed our critical accounting estimates in our 2024 Annual Report, which include estimates prepared in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations. Critical accounting estimates are based on, among other things, estimates, assumptions, and judgments made by management that include inherent risks and uncertainties. Our estimates are based on relevant information available at the end of each period. Actual results could differ materially from these estimates under different assumptions or market conditions. There have been no material changes to our critical accounting estimates as disclosed in our 2024 Annual Report. 40 CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains certain information that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are made in reliance on the safe harbor protections provided thereunder. While we have specifically identified certain information as being forward-looking in the context of its presentation, we caution you that all statements contained in this Form 10-Q that are not clearly historical in nature, including statements regarding the ADT Solar Exit and the expected costs and benefits of such exit; the Commercial Divestiture; 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; 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; the expected timing of product commercialization with State Farm or any changes thereto, including the ADT home security program for State Farm; business prospects; outcomes of regulatory proceedings; market conditions; 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; the expected timing of product commercialization with Google or any changes thereto; the successful internal development, commercialization, and timing of our next generation platform and innovative offerings; the successful conversion of customers who continue to utilize outdated technology; the current and future market size for existing, new, or joint products; any stated or implied outcomes with regards to the foregoing; and other matters. Any stated or implied outcomes with regards to the foregoing are forward-looking. Without limiting the generality of the preceding sentences, any time we use the words “ongoing,” “expects,” “intends,” “will,” “anticipates,” “believes,” “confident,” “continue,” “propose,” “seeks,” “could,” “may,” “should,” “estimates,” “forecasts,” “might,” “goals,” “objectives,” “targets,” “planned,” “projects,” and, in each case, their negative or other various or comparable terminology, and similar expressions, we intend to clearly express that the information deals with possible future events and is forward-looking in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. 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 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 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; • 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; 41 • 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 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; • our ability to successfully implement an equipment ownership model that best satisfies the needs of our customers and to successfully implement and maintain our receivables securitization financing agreement or similar arrangements; • our ability to successfully pursue alternate business opportunities and strategies; • 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; and • 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. Forward-looking statements and information involve risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied in, or reasonably inferred from, such statements, including without limitation, the risks and uncertainties disclosed or referenced under the heading “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A in our 2024 Annual Report. Therefore, caution should be taken not to place undue reliance on any such forward-looking statements. Much of the information in this report that looks toward future performance is based on various factors and important assumptions about future events that may or may not actually occur. As a result, our operations and financial results in the future could differ materially and substantially from those we have discussed in the forward-looking statements included in this Quarterly Report on Form 10-Q. Any forward-looking statement made in this Quarterly Report on Form 10-Q speaks only as of the date on which it is made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise unless required by law.