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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 FORM 10-Q
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2022
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number: 001-38352
adt-20220331_g1.jpg
ADT Inc.
(Exact name of registrant as specified in its charter)
Delaware47-4116383
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer
Identification No.)
1501 Yamato Road
Boca Raton, Florida 33431
(561) 988-3600
(Address of principal executive offices, including zip code, Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.01 per shareADTNew York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x   No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes x  No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of April 28, 2022, there were 851,573,227 shares outstanding of the registrant’s common stock, $0.01 par value per share, and 54,744,525 shares outstanding of the registrant’s Class B common stock, $0.01 par value per share.



TABLE OF CONTENTS
Page



PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.

ADT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share data) 
March 31, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$17,404 $24,453 
Accounts receivable, net of allowance for credit losses of $55,727 and $54,032, respectively
453,823 442,158 
Inventories, net304,835 277,323 
Work-in-progress75,930 70,528 
Prepaid expenses and other current assets215,412 178,069 
Total current assets1,067,404 992,531 
Property and equipment, net362,071 364,108 
Subscriber system assets, net2,919,362 2,867,528 
Intangible assets, net5,285,664 5,413,351 
Goodwill5,940,758 5,943,403 
Deferred subscriber acquisition costs, net905,323 850,489 
Other assets534,199 462,941 
Total assets$17,014,781 $16,894,351 
Liabilities and stockholders' equity
Current liabilities:
Current maturities of long-term debt$126,363 $117,592 
Accounts payable449,542 474,976 
Deferred revenue373,863 373,532 
Accrued expenses and other current liabilities629,223 737,245 
Total current liabilities1,578,991 1,703,345 
Long-term debt9,735,304 9,575,098 
Deferred subscriber acquisition revenue1,308,260 1,199,293 
Deferred tax liabilities887,909 867,203 
Other liabilities224,050 300,693 
Total liabilities13,734,514 13,645,632 
Commitments and contingencies (See Note 12)
Stockholders' equity:
Preferred stock—authorized 1,000,000 shares of $0.01 par value; zero issued and outstanding as of March 31, 2022 and December 31, 2021.
  
Common stock—authorized 3,999,000,000 shares of $0.01 par value; issued and outstanding shares of 851,323,652 and 846,825,868 as of March 31, 2022 and December 31, 2021, respectively.
8,513 8,468 
Class B common stock—authorized 100,000,000 shares of $0.01 par value; issued and outstanding shares of 54,744,525 as of March 31, 2022 and December 31, 2021.
547 547 
Additional paid-in capital7,262,237 7,261,267 
Accumulated deficit(3,933,140)(3,952,590)
Accumulated other comprehensive loss(57,890)(68,973)
Total stockholders' equity3,280,267 3,248,719 
Total liabilities and stockholders' equity$17,014,781 $16,894,351 
See Notes to Condensed Consolidated Financial Statements
1



ADT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
Three Months Ended March 31,
20222021
Monitoring and related services$1,121,296 $1,062,766 
Installation, product, and other423,451 241,938 
Total revenue1,544,747 1,304,704 
Cost of revenue (exclusive of depreciation and amortization shown separately below)509,768 381,166 
Selling, general, and administrative expenses482,348 449,602 
Depreciation and intangible asset amortization476,123 469,809 
Merger, restructuring, integration, and other528 20,507 
Operating income (loss)75,980 (16,380)
Interest expense, net(6,307)(47,724)
Loss on extinguishment of debt (156)
Other income (expense)1,496 1,803 
Income (loss) before income taxes71,169 (62,457)
Income tax benefit (expense)(19,524)14,563 
Net income (loss)$51,645 $(47,894)
Net income (loss) per share - basic:
Common stock$0.06 $(0.06)
Class B common stock$0.06 $(0.06)
Weighted-average shares outstanding - basic:
Common stock843,830 762,704 
Class B common stock54,745 54,745 
Net income (loss) per share - diluted:
Common stock$0.06 $(0.06)
Class B common stock$0.06 $(0.06)
Weighted-average shares outstanding - diluted:
Common stock911,313 762,704 
Class B common stock54,745 54,745 
See Notes to Condensed Consolidated Financial Statements
2



ADT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands)
Three Months Ended March 31,
20222021
Net income (loss)$51,645 $(47,894)
Other comprehensive income (loss), net of tax:
Cash flow hedges11,092 11,666 
Defined benefit pension plans(9)846 
Total other comprehensive income (loss), net of tax 11,083 12,512 
Comprehensive income (loss)$62,728 $(35,382)
See Notes to Condensed Consolidated Financial Statements
3



ADT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(in thousands)

Three Months Ended March 31, 2022
Number of Common SharesNumber of Class B Common SharesCommon StockClass B Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
Beginning balance846,826 54,745 $8,468 $547 $7,261,267 $(3,952,590)$(68,973)$3,248,719 
Net income (loss)— — — — — 51,645 — 51,645 
Other comprehensive income (loss), net of tax— — — — — — 11,083 11,083 
Dividends— — — — — (31,758)— (31,758)
Share-based compensation expense— — — — 16,020 — — 16,020 
Transactions related to employee
share-based compensation plans and other
4,498 — 45 — (15,050)(437)— (15,442)
Ending balance851,324 54,745 $8,513 $547 $7,262,237 $(3,933,140)$(57,890)$3,280,267 
Three Months Ended March 31, 2021
Number of Common SharesNumber of Class B Common SharesCommon StockClass B Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
Beginning balance771,014 54,745 $7,710 $547 $6,640,763 $(3,491,069)$(118,615)$3,039,336 
Net income (loss)— — — — — (47,894)— (47,894)
Other comprehensive income (loss), net of tax— — — — — — 12,512 12,512 
Dividends, including dividends reinvested in
common stock
— — — — 4 (29,136)— (29,132)
Share-based compensation expense— — — — 16,019 — — 16,019 
Transactions related to employee
share-based compensation plans and other
3,870 — 39 — (12,454)(516)— (12,931)
Ending balance774,884 54,745 $7,749 $547 $6,644,332 $(3,568,615)$(106,103)$2,977,910 
See Notes to Condensed Consolidated Financial Statements
4



ADT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended March 31,
20222021
Cash flows from operating activities:
Net income (loss)$51,645 $(47,894)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and intangible asset amortization476,123 469,809 
Amortization of deferred subscriber acquisition costs36,939 28,642 
Amortization of deferred subscriber acquisition revenue(53,423)(37,159)
Share-based compensation expense16,020 16,019 
Deferred income taxes16,172 (21,815)
Provision for losses on receivables and inventory19,314 14,250 
Loss on extinguishment of debt 156 
Intangible asset impairments 17,883 
Unrealized (gain) loss on interest rate swap contracts(145,289)(106,517)
Other non-cash items, net65,445 38,815 
Changes in operating assets and liabilities, net of effects of acquisitions:
Deferred subscriber acquisition costs(92,837)(67,402)
Deferred subscriber acquisition revenue81,073 58,170 
Other, net(163,110)(3,623)
Net cash provided by (used in) operating activities308,072 359,334 
Cash flows from investing activities:
Dealer generated customer accounts and bulk account purchases(185,070)(198,761)
Subscriber system asset expenditures(182,141)(144,345)
Purchases of property and equipment(38,317)(41,505)
Acquisition of businesses, net of cash acquired32 (15,909)
Other investing, net373 1,408 
Net cash provided by (used in) investing activities(405,123)(399,112)
Cash flows from financing activities:
Proceeds from long-term borrowings280,000 10,729 
Proceeds from receivables facility 46,876 29,670 
Repayment of long-term borrowings, including call premiums(153,269)(17,937)
Repayment of receivables facility(20,876)(7,367)
Dividends on common stock(31,596)(28,980)
Deferred financing costs(172)(114)
Other financing, net(29,118)(26,686)
Net cash provided by (used in) financing activities91,845 (40,685)
Cash and cash equivalents and restricted cash and restricted cash equivalents:
Net increase (decrease) during the period(5,206)(80,463)
Beginning balance33,277 207,747 
Ending balance$28,071 $127,284 
See Notes to Condensed Consolidated Financial Statements

5


ADT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.     DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Organization
ADT Inc., together with its wholly-owned subsidiaries (collectively, the “Company”), is a leading provider of security, interactive, and smart home solutions serving consumer, small business, and commercial customers in the United States (“U.S.”). With the acquisition of Compass Solar Group, LLC (now named ADT Solar LLC) (“ADT Solar”) (the “ADT Solar Acquisition”) in December 2021, the Company is now also a leading provider of residential solar and energy storage solutions. The Company primarily conducts business under the ADT brand name.
ADT Inc. was incorporated in the State of Delaware in May 2015 as a holding company with no assets or liabilities. In July 2015, the Company acquired Protection One, Inc. and ASG Intermediate Holding Corp. (collectively, the “Formation Transactions”), which were instrumental in the commencement of the Company’s operations. In May 2016, the Company acquired The ADT Security Corporation (formerly named The ADT Corporation) (“The ADT Corporation”) (the “ADT Acquisition”).
The Company is majority-owned by Prime Security Services TopCo (ML), L.P., which is majority-owned by Prime Security Services TopCo Parent, L.P. (“Ultimate Parent”). Ultimate Parent is majority-owned by Apollo Investment Fund VIII, L.P. and its related funds that are directly or indirectly managed by affiliates of Apollo Global Management, Inc. (together with its subsidiaries and affiliates, “Apollo” or the “Sponsor”).
Basis of Presentation
The condensed consolidated financial statements include the consolidated results of ADT Inc. and its wholly-owned subsidiaries and have been prepared in U.S. dollars in accordance with generally accepted accounting principles in the United States of America (“GAAP”). All intercompany transactions have been eliminated. The results of companies acquired are included in the condensed consolidated financial statements from the effective date of acquisition. Certain prior period amounts have been reclassified to conform with the current period presentation.
The condensed consolidated financial statements included herein are unaudited, but in the opinion of management, such financial statements include all adjustments, consisting of normal recurring adjustments, necessary to summarize fairly the Company’s financial position, results of operations, and cash flows for the interim periods presented. The interim results reported herein should not be taken as indicative of results that may be expected for future interim periods or the full year.
The Condensed Consolidated Balance Sheet as of December 31, 2021 included herein was derived from the audited consolidated financial statements as of that date but does not include all the footnote disclosures required in the annual consolidated financial statements. For a more comprehensive understanding of the Company and its interim results, these condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”), which was filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 1, 2022.
Segments
The Company organizes its segments based on customer type and reports results in three operating and reportable segments, which are Consumer and Small Business (“CSB”), Commercial, and Solar, based on the manner in which the Company’s Chief Executive Officer, who is the chief operating decision maker (the “CODM”), evaluates performance and makes decisions about how to allocate resources. The accounting policies of the Company’s reportable segments are the same as those of the Company.
Refer to Note 3 “Segment Information” for additional information on the Company’s segments.
Use of Estimates
The preparation of the condensed consolidated financial statements in accordance with GAAP requires the Company to select accounting policies and make estimates that affect amounts reported in the condensed consolidated financial statements and the accompanying notes. The Company’s estimates are based on the relevant information available at the end of each period. Actual results could differ materially from these estimates under different assumptions or market conditions.
6


ADT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
COVID-19 Pandemic
During March 2020, the World Health Organization declared the outbreak of a novel coronavirus as a pandemic (the “COVID-19 Pandemic”). While responses have varied by individuals, businesses, and state and local governments, the COVID-19 Pandemic, including recent variants, caused certain notable impacts on general economic conditions, including temporary and permanent closures of many businesses, increased governmental regulations, supply chain disruptions, and changes in consumer spending. To protect its employees and serve its customers, the Company implemented and is continuously evolving certain measures, such as (i) detailed protocols for infectious disease safety for employees, (ii) employee daily wellness checks, and (iii) certain work from home actions, including for the majority of the Company’s call center professionals.
The Company considered the on-going and pervasive economic impact of the COVID-19 Pandemic in the assessment of its financial position, results of operations, and cash flows, as well as certain accounting estimates, as of and for the periods presented. However, the evolving and uncertain nature of the COVID-19 Pandemic, as well as the evolving nature of the regulatory environment which may require vaccines or vaccine boosters or other actions that could impact the Company’s employee base or impose additional costs on the business, could materially impact the Company’s estimates and financial results in future reporting periods.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2021-01, Reference Rate Reform (Topic 848): Scope, amends ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and clarifies the scope and guidance of Topic 848 to allow derivatives impacted by the reference rate reform to qualify for certain optional expedients and exceptions for contract modifications and hedge accounting. The guidance is optional and is effective for a limited period of time through December 31, 2022. As of March 31, 2022, this guidance had no impact on the condensed consolidated financial statements. However, the Company will continue to evaluate this guidance in subsequent periods.
Recently Issued Accounting Pronouncements
ASU 2022-02, Financial Instruments — Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), eliminates the accounting guidance for troubled debt restructurings by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. ASU 2022-02 also requires public business entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases. This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. It should also be applied prospectively, with an option to apply a modified retrospective transition method in relation to the recognition and measurement of troubled debt restructurings, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. Early adoption is permitted, including adoption in an interim period, in which case the guidance should be applied as of the beginning of the fiscal year that includes the interim period. The Company is currently evaluating the impact of this guidance.
Summary of Significant Accounting Policies
Unless otherwise noted, the Company’s accounting policies used in the preparation of these condensed consolidated financial statements as discussed below, or included within the respective footnotes herein, do not materially differ from those disclosed in the 2021 Annual Report.
Cash and Cash Equivalents and Restricted Cash and Restricted Cash Equivalents
All highly liquid investments with original maturities of three months or less from the time of purchase are considered to be cash equivalents. Restricted cash and restricted cash equivalents are cash and cash equivalents that are restricted for a specific purpose and cannot be presented within the general cash and cash equivalents account. Restricted cash and restricted cash equivalents are reflected in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets.
7


ADT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Cash and cash equivalents and restricted cash and restricted cash equivalents as reported in the Condensed Consolidated Balance Sheets reconcile to the amounts shown in the Condensed Consolidated Statements of Cash Flows as follows:
(in thousands)March 31, 2022December 31, 2021
Cash and cash equivalents$17,404 $24,453 
Restricted cash and restricted cash equivalents10,667 8,824 
Ending balance$28,071 $33,277 
Subscriber System Assets and Deferred Subscriber Acquisition Costs
Subscriber system assets represent capitalized equipment and installation costs incurred in connection with transactions in which the Company retains ownership of the security system. Upon termination of the contract with the customer, the Company may retrieve such assets. Deferred subscriber acquisition costs represent selling expenses (primarily commissions) that are incremental to acquiring customers.
The Company records subscriber system assets and deferred subscriber acquisition costs in the Condensed Consolidated Balance Sheets, as these assets embody a probable future economic benefit for the Company through the generation of future monitoring and related services revenue.
Subscriber system assets and any related deferred subscriber acquisition costs are accounted for on a pooled basis based on the month and year of customer acquisition. The Company depreciates and amortizes these pooled costs using an accelerated method over the estimated life of the customer relationship, which is 15 years.
Subscriber system assets reflected in the Condensed Consolidated Balance Sheets includes:
(in thousands)March 31, 2022December 31, 2021
Gross carrying amount$5,676,138 $5,499,703 
Accumulated depreciation(2,756,776)(2,632,175)
Subscriber system assets, net$2,919,362 $2,867,528 
Depreciation and amortization of subscriber system assets and deferred subscriber acquisition costs are reflected in depreciation and intangible asset amortization and selling, general, and administrative expenses, respectively, in the Condensed Consolidated Statements of Operations as follows:
Three Months Ended March 31,
(in thousands)20222021
Depreciation of subscriber system assets$133,122 $122,994 
Amortization of deferred subscriber acquisition costs
$36,939 $28,642 
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities includes:
(in thousands)March 31, 2022December 31, 2021
Accrued interest$83,288 $124,579 
Payroll-related accruals144,069 196,165 
Operating lease liabilities38,469 37,359 
Fair value of interest rate swaps13,995 50,360 
Other accrued liabilities349,402 328,782 
Accrued expenses and other current liabilities$629,223 $737,245 
8


ADT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Radio Conversion Costs
The Company commenced a program in 2019 to replace the 3G and Code-Division Multiple Access (“CDMA”) cellular equipment used in many of its security systems to prepare for the retirement of the 3G and CDMA networks during 2022. From inception of this program through March 31, 2022, the Company incurred $298 million of radio conversion costs, net of related incremental radio conversion revenue.
Radio conversion costs and radio conversion revenue are reflected in selling, general, and administrative expenses and monitoring and related services revenue, respectively, in the Condensed Consolidated Statements of Operations as follows:
Three Months Ended March 31,
(in thousands)20222021
Radio conversion costs$18,133 $69,669 
Radio conversion revenue
$8,193 $10,940 
Fair Value of Financial Instruments
The Company’s financial instruments primarily consist of cash and cash equivalents, restricted cash and restricted cash equivalents, accounts receivable, retail installment contract receivables, accounts payable, debt, and derivative financial instruments. Due to their short-term and/or liquid nature, the fair values of cash, restricted cash, accounts receivable, and accounts payable approximate their respective carrying amounts.
Cash Equivalents - Included in cash and cash equivalents as applicable from time to time are investments in money market mutual funds. These investments are classified as Level 1 fair value measurements, which represent unadjusted quoted prices in active markets for identical assets or liabilities.
The Company had no material investments in money market mutual funds as of March 31, 2022, or December 31, 2021.
Long-Term Debt Instruments - The fair values of the Company’s long-term debt instruments were determined using broker-quoted market prices, which represent quoted prices for similar assets or liabilities as well as other observable market data. The resulting fair values are classified as Level 2 fair value measurements. The carrying amounts of debt outstanding, if any, under the Company’s revolving credit facility and receivables facility approximate fair values as interest rates on these borrowings approximate current market rates.
The total carrying amount and fair value of long-term debt instruments subject to fair value disclosures were as follows:
March 31, 2022December 31, 2021
(in thousands)Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Long-term debt instruments, excluding finance lease obligations$9,771,351 $9,802,804 $9,599,610 $10,043,877 
Derivative Financial Instruments - Derivative financial instruments are reported at fair value as either assets or liabilities in the Condensed Consolidated Balance Sheets. These fair values are primarily calculated using discounted cash flow models utilizing observable inputs, such as quoted forward interest rates, and incorporate credit risk adjustments to reflect the risk of default by the counterparty or the Company. The resulting fair values are classified as Level 2 fair value measurements.
Refer to Note 7 “Derivative Financial Instruments” for the fair values of the Company’s derivative financial instruments included in the Condensed Consolidated Balance Sheets.
9


ADT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Retail Installment Contract Receivables - The fair values of the Company’s retail installment contract receivables were determined using a discounted cash flow model. The resulting fair values are classified as Level 3 fair value measurements.
The total carrying amount and fair value of retail installment contract receivables were as follows:
March 31, 2022December 31, 2021
(in thousands)Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Retail installment contract receivables, net$384,345 $297,201 $330,605 $255,147 
Subsequent Event - Canopy Investment
In April 2022, the Company closed on its previously announced transaction with Ford Motor Company (“Ford”) to form a new entity, Canopy, which will combine ADT’s professional security monitoring and Ford’s AI-driven video camera technology to help customers strengthen security of new and existing vehicles across automotive brands. ADT and Ford expect to invest approximately $100 million collectively during the next three years, of which ADT will contribute 40%. As part of the initial funding at closing, the Company’s initial contribution totaled approximately $11 million.
2.     REVENUE AND RECEIVABLES
Revenue
The Company allocates transaction price to each performance obligation based on relative standalone selling price, which is determined using observable internal and external pricing, profitability, and operational metrics.
The following table presents the Company’s disaggregated revenue:
Three Months Ended March 31,
(in thousands)20222021
CSB:
Monitoring and related services$993,028 $951,248
Installation, product, and other69,561 87,357
Total CSB1,062,589 1,038,605
Commercial:
Monitoring and related services128,268 111,518
Installation, product, and other161,909 154,581
Total Commercial290,177 266,099
Solar:
Installation, product, and other191,981 
Total Solar191,981 
Total revenue$1,544,747 $1,304,704
Revenue is recognized in the Condensed Consolidated Statements of Operations net of sales and other taxes. Amounts collected from customers for sales and other taxes are reported as a liability net of the related amounts remitted.
10


ADT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Contract termination charges are assessed in accordance with the terms of the contract when customers terminate a contract early and are recognized in monitoring and related services revenue in the Condensed Consolidated Statements of Operations when collectability is probable.
Company-Owned - In transactions in which the Company provides monitoring and related services but retains ownership of the security system (referred to as Company-owned transactions), the Company’s performance obligations primarily include (i) monitoring and related services and (ii) a material right associated with the one-time non-refundable fees in connection with the initiation of a monitoring contract which the customer will not be required to pay again upon a renewal of the contract (referred to as deferred subscriber acquisition revenue). Since March 2021, substantially all new CSB transactions have taken place under a Company-owned model.
The portion of the transaction price associated with monitoring and related services is recognized when these services are provided to the customer and is reflected in monitoring and related services revenue in the Condensed Consolidated Statements of Operations.
The portion of the transaction price associated with the material right is deferred upon initiation of a monitoring contract and reflected as deferred subscriber acquisition revenue in the Condensed Consolidated Balance Sheets. Deferred subscriber acquisition revenue is amortized on a pooled basis over the estimated life of the customer relationship using an accelerated method consistent with the treatment of subscriber system assets and deferred subscriber acquisition costs.
Amortization of deferred subscriber acquisition revenue is reflected in installation, product, and other revenue in the Condensed Consolidated Statements of Operations as follows:
Three Months Ended March 31,
(in thousands)
20222021
Amortization of deferred subscriber acquisition revenue$53,423 $37,159 
Customer-Owned - In transactions involving security systems sold outright to the customer (referred to as outright sales), the Company’s performance obligations generally include the sale and installation of the system and any monitoring and related services.
The portion of the transaction price associated with the sale and installation of a system is recognized either at a point in time or over time based upon the nature of the transaction and contractual terms and is reflected in installation, product, and other revenue in the Condensed Consolidated Statements of Operations. For revenue recognized over time, progress toward complete satisfaction of the performance obligation is primarily measured using a cost-to-cost measure of progress method. The cost input driving revenue recognition for these contracts is based primarily on contract cost incurred to date compared to total estimated contract cost. This measure of progress method includes forecasts based on the best information available and reflects the Company’s judgment to faithfully depict the value of the services transferred to the customer. Approximately half of installation, product, and other revenue generated by the Commercial segment is recognized over time.
The portion of the transaction price associated with monitoring and related services is recognized when services are provided to the customer and is reflected in monitoring and related services revenue in the Condensed Consolidated Statements of Operations.
Solar - In transactions within our Solar business, the Company’s performance obligations generally include the sale and installation of a solar system, and may also include additional performance obligations such as roofing services or the sale and installation of additional products such as batteries. Revenue is recognized when control over the products and services are transferred to the customer and is reflected in installation, product, and other revenue in the Condensed Consolidated Statements of Operations.
The Company also enters into agreements with third-party lenders in order to access loan products for the Company’s Solar customers. These lenders have the exclusive right to determine if a loan application will be accepted or rejected, and the Company is not a party to the loan agreement. There are no guarantees related to the repayment of the loan, and as such, there is no liability associated with these arrangements.
These lenders remit the loan amount, net of fees related to obtaining favorable interest rates for customers, to the Company once the loan is approved or upon installation. These fees are recorded as a reduction of installation, product, and other revenue and were approximately $38 million during the three months ended March 31, 2022.
11


ADT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Product Sales
Revenue and cost of revenue from product and system sales included in the Condensed Consolidated Statements of Operations were as follows:
Three Months Ended March 31,
(in thousands)
20222021
Installation, product, and other$300,850 $202,746 
Cost of revenue (exclusive of depreciation and amortization shown separately below)$220,565 $160,186 
Deferred Revenue
Deferred revenue represents customer billings for services not yet rendered and is primarily related to recurring monitoring and related services. In addition, payments received for the sale and installation of a system after the agreement is signed but before performance obligations are satisfied are recorded as deferred revenue.
These amounts are recorded as current deferred revenue in the Condensed Consolidated Balance Sheets as the Company expects to satisfy any remaining performance obligations, as well as recognize the related revenue, within the next twelve months when performance obligations are satisfied. Accordingly, the Company has applied the practical expedient regarding deferred revenue to exclude the value of remaining performance obligations if (i) the contract has an original expected term of one year or less or (ii) the Company recognizes revenue in proportion to the amount it has the right to invoice for services performed.
Accounts Receivable
Accounts receivable represent unconditional rights to consideration from customers in the ordinary course of business and are generally due in one year or less. The Company’s accounts receivable are recorded at amortized cost less an allowance for credit losses not expected to be recovered. The allowance for credit losses is recognized at inception and reassessed each reporting period.
The Company evaluates its allowance for credit losses on accounts receivable in pools based on customer type. For each customer pool, the allowance for credit losses is estimated based on the delinquency status of the underlying receivables and the related historical loss experience, as adjusted for current and expected future conditions, if applicable. The allowance for credit losses is not material for the individual pools of customers.
Changes in the allowance for credit losses on accounts receivable were as follows:
Three Months Ended March 31,
(in thousands)20222021
Beginning balance$54,032 $68,342 
Provision for credit losses20,457 14,322 
Write-offs, net of recoveries (1)
(18,762)(15,834)
Ending balance$55,727 $66,830 
________________
(1)Recoveries were not material for the periods presented. As such, the Company presented write-offs, net of recoveries.
Retail Installment Contract Receivables
The Company’s retail installment contract option allows qualifying residential customers to pay the fees due at installation over a 24-, 36-, or 60-month interest-free period and is available for security system transactions occurring under both Company-owned and customer-owned models. The financing component of retail installment contract receivables is not significant.
The Company’s retail installment contract receivables are recorded at amortized cost less an allowance for credit losses not expected to be recovered. The allowance for credit losses is recognized at inception and reassessed each reporting period. The allowance for credit losses relates to retail installment contract receivables from outright sales transactions and is not material.
12


ADT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Upon origination of a retail installment contract, the Company utilizes external credit scores to assess customer credit quality and determine eligibility. In addition, customers are required to enroll in the Company’s automated payment process in order to enter into a retail installment contract.
Subsequent to origination, the Company monitors the delinquency status of retail installment contract receivables as the key credit quality indicator. As of March 31, 2022, the current and delinquent billed retail installment contract receivables were not material.
Unbilled retail installment contract receivables reflected in the Condensed Consolidated Balance Sheets includes:
(in thousands)March 31, 2022December 31, 2021
Retail installment contract receivables, gross$385,086 $331,512 
Allowance for credit losses(741)(907)
Retail installment contract receivables, net$384,345 $330,605 
Classification:
Accounts receivable, net$119,035 $100,385 
Other assets265,310 230,220 
Retail installment contract receivables, net$384,345 $330,605 
As of March 31, 2022 and December 31, 2021, retail installment contract receivables, net, used as collateral for borrowings under the Company’s uncommitted receivables securitization financing agreement (the “Receivables Facility”) were $341 million and $299 million, respectively. Refer to Note 6 “Debt” for further discussion regarding the Receivables Facility.
Contract Assets
Contract assets represent the Company’s right to consideration in exchange for goods or services transferred to the customer. The contract asset is reclassified to accounts receivable when the Company’s right to the consideration becomes unconditional as additional services are performed and billed. The Company has the right to bill customers as services are provided over time, which generally occurs over the course of a 24-, 36-, or 60-month period. The financing component of contract assets is not significant.
The Company records an allowance for credit losses against its contract assets for amounts not expected to be recovered. The allowance is recognized at inception and is reassessed each reporting period. The allowance for credit losses on contract assets was not material for the periods presented.
Contract assets for residential transactions reflected in the Condensed Consolidated Balance Sheets includes:
(in thousands)March 31, 2022December 31, 2021
Contract assets, gross$90,038 $106,810 
Allowance for credit losses(9,281)(12,300)
Contract assets, net$80,757 $94,510 
Classification:
Prepaid expenses and other current assets$54,173 $58,452 
Other assets26,584 36,058 
Contract assets, net$80,757 $94,510 
During the three months ended March 31, 2022 and 2021, contract assets recognized were not material.
13


ADT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3.     SEGMENT INFORMATION
As discussed in Note 1 “Description of Business and Summary of Significant Accounting Policies,” the Company reports results in three operating and reportable segments based on the manner in which the CODM evaluates performance and makes decisions about how to allocate resources.
The Company organizes its segments based on customer type as follows:
CSB - The CSB segment primarily includes (i) revenue and operating costs from the sale, installation, servicing, and monitoring of integrated security and automation systems, as well as other related offerings; (ii) other operating costs associated with support functions related to these operations; and (iii) general corporate costs and other income and expense items not included in the Commercial and Solar segments. Customers in the CSB segment are comprised of residential homeowners, small business operators, and other individual consumers.
Commercial - The Commercial segment primarily includes (i) revenue and operating costs from the sale, installation, servicing, and monitoring of integrated security and automation systems, fire detection and suppression systems, and other related offerings; (ii) other operating costs associated with support functions related to these operations; and (iii) dedicated corporate costs and other income and expense items. Customers in the Commercial segment are comprised of larger businesses with more expansive facilities (typically larger than 10,000 square feet) and/or multi-site operations, which often require more sophisticated integrated solutions.
Solar - The Solar segment primarily includes (i) revenue and operating costs from the design and installation of solar and related solutions and services; (ii) other operating costs associated with support functions related to these operations; and (iii) dedicated corporate costs and other income and expense items. Customers in the Solar segment are comprised of residential homeowners who purchase solar and energy storage solutions, energy efficiency upgrades, and roofing services.
The CODM uses Adjusted EBITDA, which is the segment profit measure, to evaluate segment performance. Adjusted EBITDA is defined as net income or loss 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; (vii) losses on extinguishment of debt; (viii) radio conversion costs, net; and (ix) other income/gain or expense/loss items such as impairment charges, financing and consent fees, or acquisition-related adjustments.
The CODM does not review the Company's assets by segment; therefore, such information is not presented.
The following table presents total revenue by segment and a reconciliation to consolidated total revenue:
Three Months Ended March 31,
(in thousands)20222021
CSB$1,062,589 $1,038,605 
Commercial290,177 266,099 
Solar191,981  
Total Revenue$1,544,747 $1,304,704 
14


ADT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents Adjusted EBITDA by segment and a reconciliation to consolidated net income (loss) before taxes:
Three Months Ended March 31,
(in thousands)20222021
Adjusted EBITDA by segment:
CSB$560,545 $519,478 
Commercial23,630 22,653 
Solar16,822  
Total$600,997 $542,131 
Reconciliation to consolidated net income (loss) before taxes:
Total segment Adjusted EBITDA$600,997 $542,131 
Less:
Interest expense, net6,307 47,724 
Depreciation and intangible asset amortization476,123 469,809 
Amortization of deferred subscriber acquisition costs36,939 28,642 
Amortization of deferred subscriber acquisition revenue(53,423)(37,159)
Share-based compensation expense16,020 16,019 
Merger, restructuring, integration, and other528 20,507 
Loss on extinguishment of debt 156 
Radio conversion costs, net9,940 58,729 
Acquisition related adjustments(1)
36,295 (248)
Other1,099 409 
Net income (loss) before taxes$71,169 $(62,457)
________________
(1)    During 2022, primarily includes the amortization of the customer backlog intangible asset acquired in the ADT Solar Acquisition, which was fully amortized as of March 2022.
4.     ACQUISITIONS
During the three months ended March 31, 2022, total consideration related to business acquisitions was not material.
ADT Solar Acquisition
In December 2021, the Company acquired ADT Solar, a leading solar installer in the U.S.
Total consideration was approximately $750 million, which consisted of cash paid of $142 million, net of cash acquired, and approximately 75 million unregistered shares of the Company’s common stock, par value of $0.01 per share, with a fair value of $569 million, including $40 million related to approximately 5 million shares of the Company’s common stock to be issued in various increments over the twelve-month period subsequent to the acquisition date. The total fair value of $569 million was based on the closing stock price of the Company’s common stock on December 8, 2021, the acquisition date, adjusted for the impact of contractual restrictions on the ability for the holders to sell their shares.
There were no material adjustments to the preliminary purchase price allocation during the three months ended March 31, 2022.
15


ADT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5.     GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
Changes in the carrying amounts of goodwill by reportable segment were as follows:
(in thousands)CSBCommercialSolarTotal
Balance as of December 31, 2021$4,915,832 $332,845 $694,726 $5,943,403 
Acquisitions(1)
 180 8,906 9,086 
Reclassification to held for sale (11,731) (11,731)
Balance as of March 31, 2022$4,915,832 $321,294 $703,632 $5,940,758 
________________
(1)     Includes the impact of measurement period adjustments. During the three months ended March 31, 2022, measurement period adjustments were not material.
The Company had no accumulated goodwill impairment losses as of March 31, 2022 or December 31, 2021.
Other Intangible Assets
Other intangible assets reflected in the Condensed Consolidated Balance Sheets consisted of the following:
March 31, 2022December 31, 2021
(in thousands)Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Definite-lived intangible assets:
Contracts and related customer relationships$8,913,868 $(6,020,281)$2,893,587 $8,719,363 $(5,753,345)$2,966,018 
Dealer relationships1,518,020 (479,156)1,038,864 1,518,020 (459,248)1,058,772 
Other253,783 (233,570)20,213 263,133 (207,572)55,561 
Total definite-lived intangible assets10,685,671 (6,733,007)3,952,664 10,500,516 (6,420,165)4,080,351 
Indefinite-lived intangible assets:
Trade name1,333,000 — 1,333,000 1,333,000 — 1,333,000 
Intangible assets$12,018,671 $(6,733,007)$5,285,664 $11,833,516 $(6,420,165)$5,413,351 
The change in the net carrying amount of contracts and related customer relationships during the period was as follows:
(in thousands)
Balance as of December 31, 2021$2,966,018 
Customer contract additions, net of dealer charge-backs(1)
197,605 
Amortization(268,698)
Other(1,338)
Balance as of March 31, 2022$2,893,587 
________________
(1)     The weighted-average amortization period for customer contract additions was 13 years.
During the three months ended March 31, 2022, the Company paid $185 million related to customer contract additions under the ADT Authorized Dealer Program and from other third parties, which is included in dealer generated customer accounts and bulk account purchases on the Condensed Consolidated Statements of Cash Flows.
In addition, contracts and related customer relationships includes customer accounts purchased from certain other third parties during the three months ended March 31, 2022 for an aggregate contractual purchase price of $68 million, subject to reduction based on customer retention. The Company paid initial cash at the closings in the aggregate amount of $55 million, which is included in the payments for dealer generated customer accounts and bulk account purchases described above.
16


ADT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Definite-lived intangible asset amortization expense reflected in the Condensed Consolidated Statements of Operations was as follows:
Three Months Ended March 31,
(in thousands)20222021
Definite-lived intangible asset amortization expense$291,947 $299,327 
6.     DEBT
The Company’s debt is comprised of the following (in thousands, except as otherwise indicated):
DescriptionIssuedMaturityInterest RateInterest PayableMarch 31, 2022December 31, 2021
First Lien Term Loan due 20269/23/20199/23/2026
Adj. LIBOR +2.75%
Quarterly$2,751,111 $2,758,058 
First Lien Revolving Credit Facility3/16/20186/23/2026
Adj. LIBOR +2.75%
Quarterly170,000 25,000 
Second Lien Notes due 20281/28/20201/15/20286.250%1/15 and 7/151,300,000 1,300,000 
First Lien Notes due 20244/4/20194/15/20245.250%2/15 and 8/15750,000 750,000 
First Lien Notes due 20264/4/20194/15/20265.750%3/15 and 9/151,350,000 1,350,000 
First Lien Notes due 20278/20/20208/31/20273.375%6/15 and 12/151,000,000 1,000,000 
First Lien Notes due 20297/29/20218/1/20294.125%2/1 and 8/11,000,000 1,000,000 
ADT Notes due 20231/14/20136/15/20234.125%6/15 and 12/15700,000 700,000 
ADT Notes due 20325/2/20167/15/20324.875%1/15 and 7/15728,016 728,016 
ADT Notes due 20427/5/20127/15/20424.875%1/15 and 7/1521,896 21,896 
Receivables Facility3/5/20202/20/2027
LIBOR +0.85%
Monthly224,976 199,056 
Other debt(1)
4,113 4,732 
Total debt principal, excluding finance leases10,000,112 9,836,758 
Plus: Finance lease liabilities(2)
90,316 93,080 
Less: Unamortized debt discount, net(15,882)(16,678)
Less: Unamortized deferred financing costs(60,654)(64,014)
Less: Unamortized purchase accounting fair value adjustment and other(152,225)(156,456)
Total debt9,861,667 9,692,690 
Less: Current maturities of long-term debt(126,363)(117,592)
Long-term debt$9,735,304 $9,575,098 
_________________
(1)     Other debt includes vehicle loans attributable to ADT Solar and were not material during the periods presented.
(2)     Refer to Note 13 “Leases” for additional information regarding the Company’s finance leases.
Significant changes in the Company’s debt during the three months ended March 31, 2022 were as follows:
First Lien Credit Agreement
The Company’s first lien credit agreement, dated as of July 1, 2015 (together with subsequent amendments and restatements, the “First Lien Credit Agreement”), contains a first lien term loan facility (the “First Lien Term Loan due 2026”) and a first lien revolving credit facility (the “First Lien Revolving Credit Facility”). As of March 31, 2022 and December 31, 2021, the Company had $405 million and $550 million, respectively, in available borrowing capacity under the First Lien Revolving Credit Facility.
During the three months ended March 31, 2021, the Company borrowed $280 million and repaid $135 million under its First Lien Revolving Credit Facility.
Loss on Extinguishment of Debt
Loss on extinguishment of debt was not material during the three months ended March 31, 2022 or 2021.
17


ADT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Receivables Facility
Under the Receivables Facility, the Company obtains financing by selling or contributing certain retail installment contract receivables to the Company’s wholly-owned consolidated bankruptcy-remote special purpose entity (“SPE”), which then grants a security interest in those retail installment contract receivables as collateral for cash borrowings.
The Receivables Facility permits up to $400 million of uncommitted financing secured by the Company’s retail installment contract receivables owned by the SPE and has a scheduled termination date for the uncommitted revolving period of October 2022.
The Company services the transferred retail installment contract receivables and is responsible for ensuring the related collections are remitted to a segregated bank account in the name of the SPE. On a monthly basis, the segregated account is utilized to make required principal, interest, and other payments due under the Receivables Facility. The segregated account is considered restricted cash, and any outstanding balance is reflected in prepaid expenses and other current assets in the Company’s Condensed Consolidated Balance Sheets.
During the three months ended March 31, 2022, the Company received proceeds of $47 million under the Receivables Facility and repaid $21 million, which are reflected as cash flows from financing activities in the Condensed Consolidated Statements of Cash Flows.
As of March 31, 2022 and December 31, 2021, the Company had an uncommitted available borrowing capacity under the Receivables Facility of $175 million and $201 million, respectively.
The Receivables Facility did not have a material impact to the Condensed Consolidated Statements of Operations during the three months ended March 31, 2022 and 2021.
Variable Interest Entity
The SPE borrower under the Receivables Facility is a separate legal entity with its own creditors who will be entitled, prior to and upon the liquidation of the SPE, to be satisfied out of the SPE’s assets prior to any assets of the SPE becoming available to the Company (other than the SPE). Accordingly, the assets of the SPE are not available to pay creditors of the Company (other than the SPE), although collections from the transferred retail installment contract receivables in excess of amounts required to repay amounts then due and payable to the SPE’s creditors may be released to the Company and subsequently used by the Company (including to pay other creditors). The SPE’s creditors under the Receivables Facility have legal recourse to the transferred retail installment contract receivables owned by the SPE, and to the Company for certain performance and operational obligations relating to the Receivables Facility, but do not have any recourse to the Company (other than the SPE) for the payment of principal and interest on the advances under the Receivables Facility.
The SPE meets the definition of a variable interest entity (“VIE”) for which the Company is the primary beneficiary as it has the power to direct the SPE’s activities and the obligation to absorb losses or the right to receive benefits of the SPE. As such, the SPE’s assets, liabilities, and financial results of operations are consolidated in the Company’s condensed consolidated financial statements.
As of March 31, 2022 and December 31, 2021, the SPE’s assets and liabilities primarily consisted of unbilled retail installment contract receivables, net, as discussed in Note 2 “Revenue and Receivables,” of $341 million and $299 million, respectively, and borrowings under the Receivables Facility, as presented above.
SOFR Transition
By June 2023, LIBOR will be replaced with the Secured Overnight Financing Rate (“SOFR”) (the “SOFR Transition Date”), at which point the applicable benchmark for all existing and new issuances with a variable rate debt component will be based on SOFR. The First Lien Term Loan due 2026 and First Lien Revolving Credit Facility are and will continue to be based on LIBOR until the SOFR Transition Date. However, any modification, such as a repricing entered into after December 31, 2021, will require transition to SOFR. Additionally, any new issuances with a variable rate debt component entered into after December 31, 2021 will utilize SOFR per the terms of the credit agreement.
In April 2022, the Receivables Facility was amended to provide for an interim early transition to SOFR for the period beginning April 2022.