What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-04-30 compared with 2025-11-04 · 112 added, 161 removed, 264 unchanged (51% of the section changed)

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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.

Total Revenue

Management and the Board use total revenue, which is calculated in accordance with GAAP, to evaluate the performance of employees (including members of management) and the Company as a whole, as well as to allocate resources.

Refer to the section titled “Results of Operations—Revenue” for additional information.

End-of-Period Recurring Monthly Revenue (“RMR”)

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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.

Total Revenue

Refer to the section titled “Results of Operations—Revenue” for additional information.

Adjusted EPS (from continuing operations) is a non-GAAP measure.

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The information 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.

As of September 30, 2025, we served approximately 6.3 million security monitoring service subscribers (including approximately 200 thousand subscribers associated with the Multifamily business that was divested on October 1, 2025).

As of March 31, 2026, we served approximately 6.1 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 (RMR) generated from our monitoring services and other subscriber-based offerings.

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A portion of our recurring subscriber base can be expected to cancel its service each year for a variety of reasons, including relocation, cost, loss to competition, or service issues, or we may disconnect service due to non-payment.

For example, a 1% change in customer attrition typically has approximately a $40 million impact on recurring revenue on an annualized basis.

As of September 30, 2025, gross customer revenue attrition was 13.0%, as compared to 12.8% in the prior year, driven by higher non-payment and voluntary disconnects partially offset by fewer relocations.

A 100 basis point change in customer attrition typically has approximately a $40 million impact on recurring revenue on an annualized basis.

As of March 31, 2026, gross customer revenue attrition was 13.1%, as compared to 12.6% in the prior year, driven by higher non-payment disconnects slightly offset by fewer relocations and voluntary disconnects.

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

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For example, 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, as discussed in Note 2 “Revenue and Receivables.” Historically, the majority of professional installation transactions occurred under a Company-owned model.

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

During the nine months ended September 30, 2025, we have experienced an increase in both security installation, product, and other revenue and related costs due to the transition to our ADT+ platform, in which the equipment is sold outright to the customer.

Currently, approximately 25% of new direct subscribers are outright sales.

As we continue to roll out ADT+ to additional subscribers including add-ons, upgrades, and resales, build our partnership with Google, introduce additional Google products into our offerings, launch new or enhance our current offerings, and refine our go-to-market approach, we expect outright sales to continue to be an increasing proportion of our direct channel transactions in future periods, which is expected to result in an increase in security installation, product, and other revenue and cost of revenue recognized in the statements of operations.

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

As a result, we have continued to experience an increase in both security installation, product, and other revenue and related costs due to the transition to our ADT+ platform, in which the equipment is sold outright to the customer.

Currently, approximately 30% of new subscribers are outright sales.

In early 2026, the Company refined its go-to-market approach for certain non-ADT+ residential transactions and transitioned such transactions to an outright sales model where equipment will be customer owned, which aligns with the equipment ownership model for ADT+ transactions.

Accordingly, we expect this to continue to result in an increase in security installation, product, and other revenue and cost of revenue recognized in the statements of operations in subsequent periods.

The mix of professional installation solutions versus self set-up solutions may impact our results in future periods, as professional installation solutions typically have higher contractual fees than our self set-up solutions as a result of differences in pricing, offer tactics, and level of products and services.

As we refine our go-to-market approach and explore additional sales channels, we may experience an increase in the proportion of ADT self set-up customers, which are considered outright sales.

Although the DIY market typically has lower monthly recurring fees than our professional installations, we believe this approach will allow us to grow our subscriber base.

Changes in our recurring revenue base, including subscriber count, price escalations, or change in offerings, can also impact our results.

As of September 30, 2025, RMR was $362 million, as compared to $359 million in the prior year, driven by an increase in average prices.

Additionally, the mix of professional installation solutions versus self set-up solutions may impact our results in future periods, as professional installation solutions typically have higher contractual fees than our self set-up solutions as a result of differences in pricing, offer tactics, and level of products and services.

We currently expect that the majority of our sales will continue to be professional installation solutions.

As of March 31, 2026, RMR was $359 million, as compared to $360 million in the prior year period, primarily reflecting lower recurring monthly revenue due to the sale of our multifamily business in October 2025 (the “Multifamily Divestiture”), partially offset by an increase in average prices.

Macroeconomic and Other Trends and Uncertainties

We may also experience an increase in other 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;

(iii) replacing or upgrading certain system components due to technological advancements, cybersecurity upgrades, software or hardware end-of-life 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;

(v) inflationary pressures on costs such as materials, labor, and fuel including those related to the ongoing conflict in the Middle East;

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

Macroeconomic and Other Trends and Uncertainties

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.

We are currently monitoring, and will continue to monitor, macroeconomic trends and uncertainties such as the ongoing global memory chip shortage, potential supply chain disruptions and fuel shortages stemming from the ongoing conflict in the Middle East, 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.

In February 2026, the U.S.

Supreme Court ruled that certain tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were unauthorized.

However, the ruling did not establish a process or timing for any potential refunds.

We have not recorded a receivable for any refund of IEEPA tariffs, and the amount of IEEPA tariff refunds that we ultimately recover may differ from the full amount we previously paid.

In addition, subsequent actions by the U.S.

government to impose tariffs under alternative authorities, along with the possibility of further changes in trade policy, continue to create uncertainty in the global trade environment.

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

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.

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While we have experienced some increase in costs as a result of inflation, we have, for the most part, been able to offset the rising costs through 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 nine months ended September 30, 2025, we did not experience any material losses related to natural disasters.

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 Internal Revenue Code) 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 in 2025 to cash taxes.

We are currently evaluating the impact of the OBBBA on future periods.

Origin AI Acquisition

In February 2026, we acquired Origin AI, a provider of patented AI‑enabled presence detection and ambient sensing technology.

Origin AI’s technology uses artificial intelligence and proprietary algorithms to analyze ubiquitous radio frequency signals to detect and classify human presence and activity within the home or other premises without the use of cameras, audio, or wearable devices.

This technology is expected to enhance our ability to improve alarm verification, reduce false alarms, and support new intelligent security and smart home use cases over time.

Total consideration transferred in connection with the Origin AI Acquisition was $164 million, of which we recognized $114 million of goodwill.

The Company does not expect a material impact to revenue or cost of revenue from the Origin AI Acquisition during 2026.

RESULTS OF OPERATIONS

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

Three Months Ended March 31,

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

2025 2024 $ Change 2025 2024 $ Change

2026 2025 $ Change

Monitoring and related services $ 1,080,476 $ 1,083,104 $ (2,628)

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Gross customer revenue attrition (percent) (2)

13.0% 12.8% N/A* 13.0% 12.8% N/A*

13.1% 12.6% N/A*

Adjusted EPS (3)

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(2) Refer to the “—Factors Affecting Operating Results” section for additional details and comparison of current to prior period results.

(3) Includes approximately $2.6 million of RMR as of September 30, 2025, associated with the Multifamily business that was divested on October 1, 2025.

(3) 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.

The three and nine months ended September 30, 2025, as compared to the prior year periods, primarily reflects:

Period‑over‑period changes in income (loss) from continuing operations, including on a per share basis, are discussed through the analysis of the underlying GAAP components below:

The three months ended March 31, 2026, as compared to the prior year period, primarily reflects:

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

higher recurring revenue of $15 million and $47 million, respectively, primarily driven by an increase in average prices of $27 million and $85 million, respectively, partially offset by a decrease in volume of $9 million and $33 million, respectively.

(i) lower recurring revenue of $7 million primarily driven by a decrease in volume, including the Multifamily Divestiture, of $28 million, partially offset by an increase in price of $20 million, and (ii) higher revenue of $4 million primarily attributable to an increase in time and materials billings.

• Security installation, product, and other revenue :

higher installation revenue of $32 million and $141 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.

higher installation revenue of $12 million primarily driven by a higher mix of professionally installed systems under the outright sales model in connection with our refined equipment ownership go-to-market approach.

Cost of Revenue

The three and nine months ended September 30, 2025, as compared to the prior year periods, primarily reflects:

The three months ended March 31, 2026, as compared to the prior year period, primarily reflects:

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

an increase in M&S Costs of $7 million and $21 million, respectively, primarily due to higher interactive fees.

a decrease in M&S Costs of $2 million primarily due to lower customer service and maintenance costs of $4 million partially offset by higher interactive fees of $2 million.

• Security installation, product, and other costs :

an increase in installation and product costs of $22 million and $107 million, respectively, primarily due to a higher mix of professionally installed outright sales transactions.

an increase in installation and product costs of $5 million primarily due to a higher mix of professionally installed systems under the outright sales model discussed above.

Selling, General, and Administrative Expenses

The three months ended September 30, 2025, as compared to the prior year period, primarily reflects:

• goodwill impairment of $12 million associated with the Multifamily Divestiture,

• an increase in the allowance for credit losses of $9 million primarily as a result of an increase in outright sales revenue and customer delinquencies, and

• an increase in the amortization of deferred subscriber acquisition costs of $8 million partially offset by

• a decrease in general and administrative expenses of $14 million primarily as a result of cost savings initiatives.

The nine months ended September 30, 2025, as compared to the prior year period, primarily reflects:

• a decrease in general and administrative costs of $55 million primarily as a result of $20 million related to a legal settlement in the prior year, as well as cost savings initiatives, partially offset by

• an increase in the allowance for credit losses of $25 million primarily as a result of an increase in outright sales revenue and customer delinquencies and

• an increase in the amortization of deferred subscriber acquisition costs of $21 million.

The three months ended March 31, 2026, as compared to the prior year period, primarily reflects:

• a decrease in general and administrative costs of $27 million primarily as a result of a loss recovery from a legal settlement during the current period, partially offset by

• an increase in the allowance for credit losses of $19 million.

Depreciation and Intangible Asset Amortization

The three and nine months ended September 30, 2025, as compared to the prior year periods, primarily reflects an increase in the amortization of acquired customer contracts of $9 million and $18 million, respectively.

The three months ended March 31, 2026, as compared to the prior year period, primarily reflects:

• an increase in the amortization of customer contracts acquired under our authorized dealer program and from other third parties of $5 million and

• an increase in the depreciation of property, plant, and equipment of $5 million, partially offset by

• a decrease in depreciation of subscriber system assets of $5 million.

Interest Expense, Net

The three months ended September 30, 2025, as compared to the prior year period, primarily reflects unrealized losses on our interest rate swaps of $11 million in the current year as compared to $58 million in the prior year.

The nine months ended September 30, 2025, as compared to the prior year period, primarily reflects a decrease in interest rates on our long-term debt.

The three months ended March 31, 2026, as compared to the prior year period, primarily reflects a decrease in unrealized losses on interest rate swaps of $17 million, with the remaining change due to lower interest rates on our long-term debt.

Other Income (Expense)

The three and nine months ended September 30, 2025, as compared to the prior year periods, primarily reflects lower Commercial TSA income of $14 million and $35 million, respectively.

The three months ended March 31, 2026, as compared to the prior year period, primarily reflects a loss on extinguishment of debt of $6 million recorded in the prior year period.

Income Tax Benefit (Expense)

The Company’s income tax expense for the three months ended September 30, 2025 was $55 million, resulting in an effective tax rate for the period of 27.7%.

The effective tax rate primarily represents the federal statutory rate of 21.0%, a state tax rate, net of federal benefits, of 5.2%, and an unfavorable impact from a non-deductible goodwill impairment charge of 1.5%.

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

The Company’s income tax expense for the three months ended March 31, 2026 was $58 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% and a state tax rate, net of federal benefits, of 4.9%.

The Company’s income tax expense for the nine months ended September 30, 2025 was $165 million, resulting in an effective tax rate for the period of 26.6%.

The effective tax rate primarily represents the federal statutory rate of 21.0%, and a state tax rate, net of federal benefits, of 5.2%.

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

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 dispositions of 1.6%.

The Company’s income tax expense for the three months ended March 31, 2025 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%.

NON-GAAP MEASURES

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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.

We believe the presentation of Adjusted EPS is useful to investors as it provides additional information about how our management evaluates the business, including the performance of employees (including members of management).

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).

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

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

2025 2024 $ Change 2025 2024 $ Change

Three Months Ended March 31,

2026 2025 $ Change

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

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Merger, restructuring, integration, and other

0.01 — 0.01 0.02 0.02 —

Goodwill impairment (1)

0.01 — 0.01 0.01 — 0.01

Interest rate swaps, net (1)

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Loss on extinguishment of debt — 0.01 (0.01)

0.01 (0.01) 0.02 0.01 (0.01) 0.02

Tax impact on adjustments (2)

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________________

(1) Represents a goodwill impairment charge associated with the Multifamily Divestiture.

Refer to Note 5 “Goodwill and Other Intangible Assets.”

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

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

During the three and nine months ended September 30, 2025, the increase in Adjusted EPS, as compared to the prior year periods, was primarily due to (i) increases of approximately $0.02 and $0.07 per share, respectively, due to increases in revenue, net of the related costs including the allowance for credit losses, (ii) increases of approximately $0.02 and $0.06 per share, respectively, due to lower general and administrative costs, and (iii) increases of approximately $0.02 and $0.05 per share, respectively, due to a decrease in our diluted weighted average shares outstanding as a result of share repurchases.

This was partially offset by decreases of approximately $0.02 and $0.05 per share, respectively, of other income (expense) primarily due to lower Commercial TSA income.

The increase in Adjusted EPS for the three months ended March 31, 2026, as compared to the prior year period, was primarily due to:

• $0.03 per share due to lower general and administrative costs and

• $0.01 per share due to a decrease in our diluted weighted average shares outstanding as a result of share repurchases, partially offset by

• $0.02 per share due to an increase in the allowance for credit losses.

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

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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) 2025 2024 $ Change 2025 2024 $ Change

Three Months Ended March 31,

(in thousands) 2026 2025 $ Change

Income (loss) from continuing operations

8 unchanged sentences

6,559 3,905 2,654

Goodwill impairment (1)

12,023 — 12,023 12,023 — 12,023

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

1 unchanged sentence

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

Other, net (3)

5,333 (5,321) 10,654 6,741 (5,727) 12,468

Adjusted EBITDA

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________________

(1) Represents a goodwill impairment charge associated with the Multifamily Divestiture.

Refer to Note 5 “Goodwill and Other Intangible Assets.”

(1) During 2026, primarily includes costs related to the Origin AI Acquisition.

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

(3) During 2025, primarily includes one-time costs associated with debt transactions.

During the three and nine months ended September 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 $22 million and $57 million, respectively,

• higher M&S Revenue, net of the associated costs, of approximately $13 million and $42 million, respectively, and

• higher installation revenue, net of the associated costs and commissions, of approximately $10 million and $38 million, respectively, partially offset by

• a decrease in Commercial TSA income of $14 million and $35 million, respectively, and

• an increase in the allowance for credit losses of $9 million and $25 million, respectively.

The increase in Adjusted EBITDA for the three months ended March 31, 2026, as compared to the prior year period, was primarily due to:

• a decrease in general and administrative costs of $27 million and

• higher installation revenue, net of the associated costs and commissions, of $5 million, partially offset by

• an increase in the allowance for credit losses of $19 million.

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

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Liquidity and capital resources primarily consisted of the following:

(in thousands) September 30, 2025

(in thousands) March 31, 2026

Cash and cash equivalents $ 119,328

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Debt Principal

As of September 30, 2025, our next 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, to redeem these notes before or at maturity.

In April 2026, we redeemed the remaining outstanding balance of our First Lien Notes due 2026.

Our next debt maturity will occur in August 2027 with respect to the remaining outstanding balance of our First Lien Notes due 2027.

We intend, and believe that we will have the ability, to refinance or redeem these notes before or at 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 were 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 allowed 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 were not obligated to repurchase any of our shares of Common Stock, and the timing and amount of any repurchases depended 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 $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).

Throughout 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).

In July 2025, we repurchased, and subsequently retired, 11 million shares of our Common Stock under the 2025 Share Repurchase Plan for $93 million (or $8.31 per share) in connection with a secondary offering of the Company’s Common Stock by Apollo.

Additionally, we repurchased, and subsequently retired, 2 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 $19 million (or $8.45 per share).

As of September 30, 2025, there were no authorized amounts remaining under the 2025 Share Repurchase Plan.

In February 2026, our Board of Directors approved the 2026 Share Repurchase Plan, pursuant to which we were authorized to repurchase, through April 30, 2029, up to a maximum aggregate amount of $1.5 billion of shares of our Common Stock.

The 2026 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 depends 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.

During the first quarter of 2026, we repurchased, and subsequently retired, 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 2026 Share Repurchase Plan in multiple transactions for a total of $116 million (or $6.57 per share).

As of March 31, 2026, there was $1.4 billion remaining under the 2026 Share Repurchase Plan.

In April 2026, we repurchased, and subsequently retired, 17 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 2026 Share Repurchase Plan in multiple transactions for a total of $114 million (or $6.92 per share).

After these repurchases, we had $1.3 billion remaining under the 2026 Share Repurchase Plan.

Other Contractual Obligations

As of September 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.

As of December 31, 2024, the remaining amount under this commitment was $172 million.

During the nine months ended September 30, 2025, purchases toward this commitment were $140 million.

As of March 31, 2026, we continue to work to meet our commitment of $200 million of aggregate purchases under the Google Cloud Agreement Addendum.

Refer to Note 12 “Commitments and Contingencies.”

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.

While we did not make any material cash payments during the three months ended March 31, 2026, we expect to make initial estimated federal and state tax payments in the second quarter of 2026, with subsequent payments scheduled for the periods they correspond to.

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

On November 4, 2025, we announced a dividend of $0.055 per share to holders of Common Stock and Class B Common Stock of record on December 11, 2025, which will be paid on January 8, 2026.

State Farm Opportunity Fund

On October 24, 2025, we repaid to State Farm substantially all of the balance of the Opportunity Fund held by us, which was classified as restricted cash as of September 30, 2025.

On April 30, 2026, we announced a dividend of $0.055 per share to holders of Common Stock and Class B Common Stock of record on June 11, 2026, which will be paid on July 7, 2026.

Long-Term Debt

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Refer to Note 6 “Debt” for additional information.

First Lien Credit Agreement

In March 2025, we amended and restated the First Lien Credit Agreement and issued $600 million aggregate principal amount of the First Lien Term Loan B-2 due 2032, and received net proceeds of $597 million.

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.

In July 2025, we further amended and restated the First Lien Credit Agreement, which provided for the issuance of $550 million of incremental borrowings under the First Lien Term Loan B-2 due 2032, and received net proceeds of $545 million.

Additionally, we used net proceeds and cash on hand to redeem $550 million of the First Lien Notes due 2026.

Debt issuance costs were not material during the period.

During the nine months ended September 30, 2025, we borrowed and repaid $198 million under the First Lien Revolving Credit Facility.

We had no amounts outstanding as of September 30, 2025.

In October 2025, we amended and restated the First Lien Credit Agreement, which provided for the issuance of $300 million of incremental borrowings under the First Lien Term Loan B-2 due 2032.

We used the proceeds to partially redeem the Second Lien Notes due 2028.

Also in October 2025, we partially redeemed $200 million of the First Lien Term Loan B due 2030 with proceeds from the Term Loan A due 2030.

Term Loan A due 2030 Issuance

In October 2025, we entered into a term loan credit agreement for an aggregate principal amount of $325 million of the Term Loan A due 2030.

We used a portion of the proceeds to redeem $200 million of the First Lien Term Loan B due 2030 and intend to use the remaining proceeds for additional debt redemption.

First Lien Notes due 2033 Issuance

In October 2025, we issued $1 billion aggregate principal amount of the First Lien Notes due 2033.

The Company used the net proceeds to redeem the majority of the Second Lien Notes due 2028.

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.

In July 2025 we redeemed $550 million of the First Lien Notes due 2026, excluding accrued and unpaid interest, for a total redemption price of $554 million, including a make-whole payment, using proceeds from the Company’s issuance of the First Lien Term Loan B-2 due 2032 and cash on hand.

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 the remaining outstanding balance of these notes before maturity.

Second Lien Notes due 2028 Redemption

In October 2025, we redeemed the Second Lien Notes due 2028, using proceeds from the First Lien Notes due 2033, incremental borrowings under the First Lien Term Loan B-2 due 2032, and cash on hand.

First Lien Notes due 2026 Redemption

In April 2026, we redeemed the remaining outstanding balance of the First Lien Notes due 2026 at maturity for a redemption price of $75 million using cash on hand.

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 September 30, 2025, the outstanding balance was $441 million.

In March 2026, we amended the agreement governing the 2020 Receivables Facility to extend the uncommitted revolving period to April 2026.

In April 2026, we amended the agreement governing the 2020 Receivables Facility to extend the uncommitted revolving period to April 2027, among other things.

Debt Covenants

As of September 30, 2025, we were in compliance with all financial covenant and other maintenance tests for all our debt obligations.

As of March 31, 2026, 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.

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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) 2026 2025 $ Change

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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 improved operating performance, 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, lower interest payments, and the benefit of lower outflows in the current year related to our former Solar Business, partially offset by an increase in cash tax payments and a higher proportion of outright sales transactions.

The increase in net cash provided by operating activities, as compared to the prior year period, was primarily due to lower interest payments and the timing of certain payroll-related payments, as well as 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 majority of the decrease in net cash used in investing activities, as compared to the prior year period, was due to a decrease in subscriber system assets expenditures of $99 million primarily due to a higher proportion of outright sales in the current year.

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

• outflows of $164 million related to the Origin AI Acquisition, partially offset by

• a decrease in subscriber system assets expenditures of $15 million primarily due to our continued transition to an outright sales model.

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 $513 million, partially offset by

• net borrowings on long-term debt of $62 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 redemptions of the First Lien Notes due 2026, as compared to net repayments of $117 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 $46 million due to timing of proceeds and the amendment in March 2025.

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

• lower share repurchases of $281 million, partially offset by

• a reduction in net borrowings on long-term debt of $137 million primarily related 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 in the prior year.

CRITICAL ACCOUNTING ESTIMATES

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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 expected favorable effect of the OBBBA on cash taxes;

the integration of strategic bulk purchases of customer accounts;

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

the expected effects of the One Big Beautiful Bill Act on cash taxes;

the anticipated changes to our internal control over financial reporting in 2026 resulting from ongoing information technology system implementations;

the integration of strategic bulk purchases of customer accounts and other acquired businesses;

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;

anticipated financial performance;

management’s plans and objectives for future operations;

the expected benefits of the Origin AI Acquisition, including the expected integration of Origin AI’s technology into the Company’s products and services;

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

the successful development, commercialization and integration of artificial intelligence (“AI”) technologies into the Company’s products, services, and operations;

business prospects;

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and other matters.

Any stated or implied outcomes with regards to the foregoing are forward-looking.

Forward-looking statements are contained principally in the sections of this report entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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.

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• 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 or commercialize products with State Farm;

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

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• 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 sell our products and services or launch new products and services, including those incorporating AI or advanced sensing capabilities, in highly competitive markets, including the home security and automation market, and to achieve market acceptance with acceptable margins;

• our ability to successfully execute and scale our DIY offerings, including customer adoption, digital acquisition, and expansion into new distribution channels such as traditional retail and e-commerce channels;

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

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• 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;

• risks related to the development, deployment, and use of AI in our products, services, and operations, 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 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;

• our ability to successfully integrate acquired businesses, including bulk acquisitions of customer accounts, technologies, and intellectual property, and to realize the anticipated benefits of such acquisitions 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;

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• 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.

• 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, the timing of any such remediation, and anticipated changes to our ICFR from ongoing system implementations, as well as the ability to maintain effective DCPs at a reasonable assurance level;

• the expected shift in our transaction mix (including increased outright equipment sales) and the related effects to the timing and mix of revenue and costs;

• the other factors that are described under the heading “Risk Factors” in our 2025 Annual Report.

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 2025 Annual Report.

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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