Jim DeVries, ADT

ADT Inc. has reported a net loss of $US300 million in its first quarter, compared to $66 million during the same period the prior year, though the company increased Q1 revenues 10 per cent to $1.37 billion year-on-year.

ADT Inc. is arguably the largest alarms provider in the world and its performance during this challenging period in global economics is a bellwether for the resilience of the electronic security market, particularly given its U.S. exposure, where COVID-19 continues to batter the economy.

Adjusted EBITDA of $539 million was down from $621 compared to the prior-year period. The decline was primarily attributed to expenses related to the Defenders acquisition, along with the sale of the company’s Canadian operations in Q4 2019, which previously amounted to approximately 4 per cent of total revenue and adjusted EBITDA.

CFO Jeffrey Likosar said another factor creating downward pressure on adjusted EBITDA was the launch of the company’ consumer financing program and the transitioning of many residential transactions to outright sales.

“Defenders transactions are also of an outright sales nature,” he explained. “This differs from ADT’s historical ADT-owned model and therefore, leads to the recognition of higher installation revenue and the associated costs.”

Meanwhile, ADT president and CEO, Jim DeVries, who is recovering from COVID-19 after contracting the infection early April, said the company had a strong first quarter adding new customers, with more subscribers at the end of Q1 than at the beginning of the year.

“This is the first net adds in any quarter for ADT since 2015,” DeVries said. “Along with unit-adds, our recurring revenue, or RMR additions, were also strong and brought our quarter-end RMR balance to $339 million, up over $6 million sequentially from the fourth quarter,” he said.

In the face of COVID-19 residential sales remained “reasonably resilient” through April and early May, DeVries said.

“While we obviously see a lower number of leads, we’ve witnessed a significantly higher sales conversion rate, reflecting strong intent to buy security,” he explained. “It’s more of a qualitative observation, but our sense is that shelter-in-place consumers are more aware than ever of the value of ADT security and automation systems in their homes,” he said. “The brand is strong and trusted. And in the truest sense of the word, our service is considered essential.”

ADT’s small business and commercial channels represent 17 per cent of its RMR balance and 29 per cent of its total revenue. DeVries said these two segments have been more impacted than residential, with many businesses forced to temporarily close.

“We started the strong year in commercial with a 10 per cent organic growth rate through February before declining in March as COVID-19 effects came into play, and we ended the quarter with 6 per cent organic growth,” he said.

“While it’s still early, we expect the new commercial sales impact to be more pronounced than with our residential sales and the pressure are expected commercial installation revenues on a year-over-year basis.”

ADT said it expects full-year revenue in the range of $5 billion to $5.3 billion.