Company Quick10K Filing
ADT Inc
Price6.16 EPS-1
Shares750 P/E-9
MCap4,620 P/FCF3
Net Debt9,690 EBIT-538
TEV14,311 TEV/EBIT-27
TTM 2019-09-30, in MM, except price, ratios
10-Q 2021-03-31 Filed 2021-05-05
10-K 2020-12-31 Filed 2021-02-25
10-Q 2020-09-30 Filed 2020-11-05
10-Q 2020-06-30 Filed 2020-08-05
10-Q 2020-03-31 Filed 2020-05-07
10-K 2019-12-31 Filed 2020-03-10
10-Q 2019-09-30 Filed 2019-11-12
10-Q 2019-06-30 Filed 2019-08-06
10-Q 2019-03-31 Filed 2019-05-07
10-K 2018-12-31 Filed 2019-03-11
10-Q 2018-09-30 Filed 2018-11-08
10-Q 2018-06-30 Filed 2018-08-09
10-Q 2018-03-31 Filed 2018-05-09
10-K 2017-12-31 Filed 2018-03-15
8-K 2021-01-27
8-K 2021-01-19
8-K 2021-01-15
8-K 2020-12-09
8-K 2020-12-04
8-K 2020-11-05
8-K 2020-09-17
8-K 2020-09-16
8-K 2020-08-21
8-K 2020-08-20
8-K 2020-08-06
8-K 2020-08-06
8-K 2020-08-05
8-K 2020-07-31
8-K 2020-07-22
8-K 2020-05-29
8-K 2020-05-07
8-K 2020-04-09
8-K 2020-03-23
8-K 2020-03-13
8-K 2020-03-05
8-K 2020-01-28
8-K 2020-01-16
8-K 2020-01-16
8-K 2020-01-07
8-K 2019-11-12
8-K 2019-11-06
8-K 2019-11-05
8-K 2019-10-23
8-K 2019-10-11
8-K 2019-09-30
8-K 2019-09-23
8-K 2019-09-13
8-K 2019-09-12
8-K 2019-09-05
8-K 2019-09-04
8-K 2019-09-03
8-K 2019-08-06
8-K 2019-06-13
8-K 2019-06-03
8-K 2019-05-07
8-K 2019-04-11
8-K 2019-04-04
8-K 2019-04-01
8-K 2019-03-22
8-K 2019-03-21
8-K 2019-03-15
8-K 2019-03-12
8-K 2019-03-12
8-K 2019-03-11
8-K 2019-03-11
8-K 2019-02-15
8-K 2019-02-05
8-K 2019-02-01
8-K 2019-01-02
8-K 2018-12-03
8-K 2018-11-13
8-K 2018-11-09
8-K 2018-11-07
8-K 2018-10-24
8-K 2018-09-21
8-K 2018-09-12
8-K 2018-09-04
8-K 2018-08-08
8-K 2018-07-30
8-K 2018-07-25
8-K 2018-07-02
8-K 2018-05-09
8-K 2018-03-16
8-K 2018-03-15
8-K 2018-03-06
8-K 2018-02-21

ADT 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II. Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-10.26 mizuho-adtxfourthagreeme.htm
EX-10.60 jamesboycechangeincontro.htm
EX-10.61 amendmenttoexecutivechan.htm
EX-10.62 acceptedofferletterforja.htm
EX-31.1 adtincq1202110-qex31x1.htm
EX-31.2 adtincq1202110-qex31x2.htm
EX-32.1 adtincq1202110-qex32x1.htm
EX-32.2 adtincq1202110-qex32x2.htm

ADT Inc Earnings 2021-03-31

Balance SheetIncome StatementCash Flow
2016128402016201720182020
Assets, Equity
1.41.10.70.40.0-0.32016201720182020
Rev, G Profit, Net Income
0.80.50.1-0.2-0.6-0.92016201720182020
Ops, Inv, Fin

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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, 2021
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-20210331_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, 2021, there were 765,375,520 shares outstanding (excluding 9,573,053 unvested shares of common stock) 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, 2021December 31, 2020
Assets
Current assets:
Cash and cash equivalents$122,554 $204,998 
Accounts receivable, net of allowance for credit losses of $66,830 and $68,342, respectively
331,698 336,033 
Inventories, net181,404 174,839 
Work-in-progress43,235 41,312 
Prepaid expenses and other current assets188,930 210,212 
Total current assets867,821 967,394 
Property and equipment, net326,657 325,716 
Subscriber system assets, net2,695,466 2,663,228 
Intangible assets, net5,809,295 5,906,690 
Goodwill5,242,973 5,236,302 
Deferred subscriber acquisition costs, net692,505 654,019 
Other assets376,931 363,587 
Total assets$16,011,648 $16,116,936 
Liabilities and stockholders' equity
Current liabilities:
Current maturities of long-term debt$80,170 $44,764 
Accounts payable348,441 321,595 
Deferred revenue355,773 345,582 
Accrued expenses and other current liabilities530,572 584,151 
Total current liabilities1,314,956 1,296,092 
Long-term debt9,445,820 9,447,780 
Deferred subscriber acquisition revenue900,458 832,166 
Deferred tax liabilities973,163 990,899 
Other liabilities399,341 510,663 
Total liabilities13,033,738 13,077,600 
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, 2021 and December 31, 2020.
  
Common stock—authorized 3,999,000,000 shares of $0.01 par value; issued and outstanding shares of 774,884,351 and 771,013,638 as of March 31, 2021 and December 31, 2020, respectively.
7,749 7,710 
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, 2021 and December 31, 2020.
547 547 
Additional paid-in capital6,644,332 6,640,763 
Accumulated deficit(3,568,615)(3,491,069)
Accumulated other comprehensive loss(106,103)(118,615)
Total stockholders' equity2,977,910 3,039,336 
Total liabilities and stockholders' equity$16,011,648 $16,116,936 
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, 2021March 31, 2020
Monitoring and related services$1,062,766 $1,045,957 
Installation and other241,938 323,795 
Total revenue1,304,704 1,369,752 
Cost of revenue (exclusive of depreciation and amortization shown separately below)381,166 407,986 
Selling, general and administrative expenses449,602 453,304 
Depreciation and intangible asset amortization469,809 489,024 
Merger, restructuring, integration, and other20,507 108,794 
Operating loss(16,380)(89,356)
Interest expense, net(47,724)(225,367)
Loss on extinguishment of debt(156)(65,843)
Other income1,803 2,309 
Loss before income taxes(62,457)(378,257)
Income tax benefit14,563 77,964 
Net loss$(47,894)$(300,293)
Net loss per share - basic and diluted:
Common stock$(0.06)$(0.40)
Class B common stock$(0.06)$ 
Weighted-average shares outstanding - basic and diluted:
Common stock762,704 759,092 
Class B common stock54,745  
See Notes to Condensed Consolidated Financial Statements
2



ADT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(in thousands)
Three Months Ended
March 31, 2021March 31, 2020
Net loss$(47,894)$(300,293)
Other comprehensive income (loss), net of tax:
Cash flow hedges11,666 (96,063)
Defined benefit pension plans846 7 
Total other comprehensive income (loss), net of tax 12,512 (96,056)
Comprehensive loss$(35,382)$(396,349)
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, 2021
Number of Common SharesNumber of Class B Common SharesCommon StockClass B Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders' Equity
Balances at beginning of period771,014 54,745 $7,710 $547 $6,640,763 $(3,491,069)$(118,615)$3,039,336 
Net loss— — — — — (47,894)— (47,894)
Other comprehensive income, 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 other3,870  39  (12,454)(516)(12,931)
Balances at end of period774,884 54,745 $7,749 $547 $6,644,332 $(3,568,615)$(106,103)$2,977,910 
Three Months Ended March 31, 2020
Number of Common SharesNumber of Class B Common SharesCommon StockClass B Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders' Equity
Balances at beginning of period753,622 — $7,536 $— $5,977,402 $(2,742,193)$(58,376)$3,184,369 
Adoption of accounting standard, net of tax— — — — — (2,157)— (2,157)
Net loss— — — — — (300,293)— (300,293)
Other comprehensive loss, net of tax— — — — — — (96,056)(96,056)
Issuance of common stock16,279 — 163 — 113,678 — — 113,841 
Dividends, including dividends reinvested in common stock —  — 3 (27,117)— (27,114)
Share-based compensation expense — — — 23,499 — — 23,499 
Transactions related to employee share-based compensation plans and other247 — 2 — (173)(1,092)— (1,263)
Balances at end of period770,148 — $7,701 $— $6,114,409 $(3,072,852)$(154,432)$2,894,826 
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, 2021March 31, 2020
Cash flows from operating activities:
Net loss$(47,894)$(300,293)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and intangible asset amortization469,809 489,024 
Amortization of deferred subscriber acquisition costs28,642 22,627 
Amortization of deferred subscriber acquisition revenue(37,159)(29,477)
Share-based compensation expense16,019 23,499 
Deferred income taxes(21,815)(82,507)
Provision for losses on receivables and inventory14,250 45,692 
Loss on extinguishment of debt156 65,843 
Intangible asset impairments17,883  
Unrealized (gain) loss on interest rate swap contracts(106,517)69,563 
Other non-cash items, net38,815 48,656 
Changes in operating assets and liabilities, net of the effects of acquisitions:
Deferred subscriber acquisition costs(67,402)(48,194)
Deferred subscriber acquisition revenue58,170 39,714 
Other, net(3,623)(93,918)
Net cash provided by operating activities359,334 250,229 
Cash flows from investing activities:
Dealer generated customer accounts and bulk account purchases(198,761)(62,247)
Subscriber system asset expenditures(144,345)(64,830)
Purchases of property and equipment(41,505)(34,571)
Acquisition of businesses, net of cash acquired(15,909)(179,569)
Other investing, net1,408 2,782 
Net cash used in investing activities(399,112)(338,435)
Cash flows from financing activities:
Proceeds from long-term borrowings10,729 1,640,000 
Proceeds from receivables facility29,670  
Repayment of long-term borrowings, including call premiums(17,937)(1,438,044)
Repayment of receivables facility(7,367) 
Dividends on common stock(28,980)(26,291)
Deferred financing costs(114)(14,139)
Other financing, net(26,686)(3,915)
Net cash (used in) provided by financing activities(40,685)157,611 
Net (decrease) increase in cash and cash equivalents and restricted cash and restricted cash equivalents (80,463)69,405 
Cash and cash equivalents and restricted cash and restricted cash equivalents at beginning of period207,747 48,736 
Cash and cash equivalents and restricted cash and restricted cash equivalents at end of period$127,284 $118,141 
Supplemental schedule of non-cash investing and financing activities:
Issuance of shares for acquisition of business$ $113,841 
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
Organization and Business
ADT Inc., together with its wholly-owned subsidiaries (collectively, the “Company”), is a leading provider of security, automation, and smart home solutions serving consumers and businesses in the United States (“U.S.”). 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 primarily conducts business under the ADT brand name.
In January 2018, the Company completed an initial public offering (“IPO”) and its common stock (“Common Stock”) began trading on the New York Stock Exchange under the symbol “ADT.”
In September 2020, the Company issued and sold 54,744,525 shares of Class B common stock, par value of $0.01 per share (“Class B Common Stock”), for an aggregate purchase price of $450 million to Google LLC (“Google”) in a private placement pursuant to a securities purchase agreement dated July 31, 2020 (the “Securities Purchase Agreement”).
The Company 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 and Significant Accounting Policies
The preparation of the condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (“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.
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 in these condensed consolidated financial statements should not be taken as indicative of results that may be expected for future interim periods or the full year. 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, 2020 (the “2020 Annual Report”), which was filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 25, 2021. The Company’s accounting policies used in the preparation of these condensed consolidated financial statements do not differ from those used in the annual consolidated financial statements, unless otherwise noted.
The Condensed Consolidated Balance Sheet as of December 31, 2020 included herein was derived from the audited consolidated financial statements as of that date but does not include all the footnote disclosures from the annual consolidated financial statements.
The condensed consolidated financial statements include the accounts of ADT Inc. and its wholly-owned subsidiaries and have been prepared in U.S. dollars in accordance with GAAP. All intercompany transactions have been eliminated. Certain prior period amounts have been reclassified to conform with the current period presentation.
Segment Change
Effective in the first quarter of 2021, 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 changed. Therefore, the Company now reports results in two operating and reportable segments, Consumer and Small Business (“CSB”) and Commercial, rather than a single operating and reportable segment. Where applicable, prior periods have been retrospectively adjusted to reflect the new operating and reportable segment structure.
6


The accounting policies of the Company’s reportable segments are the same as those for the consolidated financial statements.
The Company organizes its segments based on customer type as follows:
Consumer and Small Business (CSB) - Customers in the CSB segment are comprised of residential homeowners, small business operators, and other individual consumers. 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 offerings such as mobile security and home health solutions; (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 segment.
Results for the Company’s Canadian operations prior to its sale in the fourth quarter of 2019 are included in the CSB segment based on the primary customer market served in Canada.
Commercial - 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. 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 of these operations; and (iii) dedicated corporate and other costs.
Refer to Note 13 “Segment Information” for additional information on the Company’s segments.
COVID-19 Pandemic
During March 2020, the World Health Organization declared the outbreak of a novel coronavirus as a pandemic (the “COVID-19 Pandemic”), which has become widespread in the U.S. Containment efforts and responses to the COVID-19 Pandemic have varied by individuals, businesses, and state and local municipalities, and in certain areas of the U.S., initial and precautionary measures helped mitigate the spread of the coronavirus, while subsequent easing of such measures has resulted in the re-emergence of the coronavirus. The COVID-19 Pandemic has had a notable adverse impact on general economic conditions, including the temporary closures of many businesses, increased governmental regulations, and reduced consumer spending due to significant unemployment and other effects attributable to the COVID-19 Pandemic. In order to continue to both protect its employees and serve its customers, the Company has adjusted and is continuously evolving certain aspects of its operations, which includes (i) detailed protocols for infectious disease safety for employees, (ii) daily wellness checks for employees, 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 its assessment of its financial position, results of operations, cash flows, and certain accounting estimates as of and for the three months ended March 31, 2021. Due to the evolving and uncertain nature of the COVID-19 Pandemic, it is possible that the effects of the COVID-19 Pandemic could materially impact the Company’s estimates and condensed consolidated financial statements in future reporting periods.
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 included in 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.
The following table presents a reconciliation of the amount of cash and cash equivalents and restricted cash and restricted cash equivalents reported in the Condensed Consolidated Balance Sheets to the total of the same of such amounts shown in the Condensed Consolidated Statements of Cash Flows:
(in thousands)March 31, 2021December 31, 2020
Cash and cash equivalents$122,554 $204,998 
Restricted cash and restricted cash equivalents4,730 2,749 
Cash and cash equivalents and restricted cash and restricted cash equivalents at end of period$127,284 $207,747 
7


Subscriber System Assets, net and Deferred Subscriber Acquisition Costs, net
The Company capitalizes certain costs associated with transactions in which the Company retains ownership of the security system as well as incremental selling expenses related to acquiring customers. These costs include equipment, installation costs, and other incremental costs and are recorded in subscriber system assets, net, and deferred subscriber acquisition costs, net, in the Condensed Consolidated Balance Sheets. These assets embody a probable future economic benefit as they contribute to the generation of future monitoring and related services revenue for the Company.
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 customer termination, the Company may retrieve such assets. Depreciation expense relating to subscriber system assets, which is included in depreciation and intangible asset amortization in the Condensed Consolidated Statements of Operations, was $123 million and $134 million for the three months ended March 31, 2021 and 2020, respectively.
The following table presents the gross carrying amount, accumulated depreciation, and net carrying amount of subscriber system assets:
(in thousands)March 31, 2021December 31, 2020
Gross carrying amount$4,964,620 $4,815,286 
Accumulated depreciation(2,269,154)(2,152,058)
Subscriber system assets, net$2,695,466 $2,663,228 
Deferred subscriber acquisition costs represent incremental selling expenses (primarily commissions) related to acquiring customers. Amortization expense relating to deferred subscriber acquisition costs included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations was $29 million and $23 million for the three months ended March 31, 2021 and 2020, respectively.
Subscriber system assets and any related deferred subscriber acquisition costs resulting from customer acquisitions are accounted for on a pooled basis based on the month and year of acquisition. The Company depreciates and amortizes its pooled subscriber system assets and related deferred subscriber acquisition costs using an accelerated method over the estimated life of the customer relationship, which is 15 years.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
(in thousands)March 31, 2021December 31, 2020
Accrued interest$71,011 $123,935 
Payroll-related accruals103,453 99,771 
Operating lease liabilities31,104 30,689 
Fair value of interest rate swaps64,864 65,462 
Other accrued liabilities260,140 264,294 
Accrued expenses and other current liabilities$530,572 $584,151 
Radio Conversion Costs
During 2019, the Company commenced a program to replace the 3G and Code-Division Multiple Access (“CDMA”) cellular equipment used in many of its security systems as a result of the 3G and CDMA cellular network providers notifying the Company that they will be retiring their 3G and CDMA networks during 2022. The Company continues to estimate the range of net costs over the course of this program at $225 million to $300 million, which consists of costs, net of any revenue the Company collects from customers, associated with these radio replacements and cellular network conversions. From inception of this program through March 31, 2021, the Company has incurred $136 million of net costs, of which $59 million has been incurred during the three months ended March 31, 2021.
The Company seeks to minimize these costs by converting customers during routine service visits whenever possible. The replacement program and pace of replacement are subject to change and may be influenced by the Company’s ability to access customer sites due to the COVID-19 Pandemic; cost-sharing opportunities with suppliers, carriers, and customers; and the extent to which the Company is able to implement its Cell Bounce solution, as described below. Given the current network retirement dates, the Company expects most of the remaining net costs to be incurred during 2021 and expects to continue collecting a portion of the incremental revenue thereafter.
8


During November 2020, the Company acquired Cell Bounce, a technology company with proprietary radio conversion technology in the form of a user-installable device, which was intended to facilitate the transition of customers on 3G networks in a cost efficient and timely manner. However, as a result of recent worldwide shortages for certain electronic components, the Company may be unable to produce the expected volume of Cell Bounce product in order to achieve the expected benefits. As a result, the Company expects to continue to replace 3G radios primarily using traditional methods and to utilize Cell Bounce for any customers the Company is unable to upgrade through these traditional methods to the extent possible.
During the three months ended March 31, 2021 and 2020, the Company incurred radio conversion costs associated with these replacement programs and cellular network conversions of $70 million and $16 million, respectively, and recognized incremental radio conversion revenue of $11 million and $9 million, respectively. Radio conversion costs are included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. Radio conversion revenue is included in monitoring and related services revenue in the Condensed Consolidated Statement of Operations.
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 are investments in money market mutual funds, which totaled $41 million and $143 million as of March 31, 2021 and December 31, 2020, respectively. These investments are classified as Level 1 fair value measurements, which represent unadjusted quoted prices in active markets for identical assets or liabilities.
Retail Installment Contract Receivables, net - The fair value of the Company’s retail installment contract receivables was determined using a discounted cash flow model. The resulting fair value is classified as a Level 3 fair value measurement.
The following table presents the net carrying amount and fair value of retail installment contract receivables:
March 31, 2021December 31, 2020
(in thousands)Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Retail installment contract receivables, net$174,870 $136,400 $141,591 $112,676 
Long-Term Debt Instruments - The fair value of the Company’s debt instruments was determined using broker-quoted market prices, which represent prices based on quoted prices for similar assets or liabilities as well as other observable market data. 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 resulting fair values are classified as Level 2 fair value measurements.
The following table presents the carrying amount and fair value of the Company’s long-term debt instruments subject to fair value disclosures:
March 31, 2021December 31, 2020
(in thousands)Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Long-term debt instruments, excluding finance lease obligations$9,463,947 $9,971,382 $9,431,216 $10,127,291 
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 that utilize 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 value is classified as a Level 2 fair value measurement.
Guarantees
In the normal course of business, the Company is liable for contract completion and product performance. The Company’s guarantees primarily relate to standby letters of credit related to its insurance programs and totaled $76 million and $83 million as of March 31, 2021 and December 31, 2020, respectively. The Company does not believe such obligations will materially affect its financial position, results of operations, or cash flows.
9


Recently Adopted Accounting Pronouncements
Financial Accounting Standards Board Accounting Standards Update (“ASU”) 2020-06, Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in Entity’s Own Equity, provides guidance to ease the potential burden of accounting for convertible instruments, derivatives related to an entity’s own equity, and the related earnings per share considerations. The Company early adopted the guidance as of January 1, 2021. The impact from adoption was not material.
ASU 2021-01, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting amends ASU 2020-04, which was disclosed in the Company’s 2020 Annual Report. ASU 2021-01 clarifies the scope and guidance of Topic 848 and allows 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, 2021, this guidance had no impact on the Condensed Consolidated Financial Statements. The Company will continue to evaluate this guidance.
2. Revenue and Receivables
The Company generates revenue primarily through contractual monthly recurring fees received for monitoring and related services provided to customers. In transactions in which the Company provides monitoring and related services but retains ownership of the security system, the Company’s performance obligations primarily include monitoring, related services (such as maintenance agreements), and a material right associated with the one-time non-refundable fees received in connection with the initiation of a monitoring contract that the customer will not be required to pay again upon a renewal of the contract, which is referred to as deferred subscriber acquisition revenue. The portion of the transaction price associated with monitoring and related services revenue is recognized when the services are provided to the customer and is reflected in monitoring and related services revenue in the Condensed Consolidated Statements of Operations.
Deferred subscriber acquisition revenue is deferred and recorded as deferred subscriber acquisition revenue in the Condensed Consolidated Balance Sheets upon initiation of a monitoring contract. Deferred subscriber acquisition revenue is amortized on a pooled basis into installation and other revenue in the Condensed Consolidated Statements of Operations over the estimated life of the customer relationship using an accelerated method consistent with the amortization of subscriber system assets and deferred subscriber acquisition costs associated with the transaction. Amortization of deferred subscriber acquisition revenue was $37 million and $29 million for the three months ended March 31, 2021 and 2020, respectively.
In transactions involving a security or fire safety system that is sold outright to the customer, the Company’s performance obligations generally include the sale and installation of the system as well as any monitoring and related services. For such arrangements, the Company allocates a portion of the transaction price to each performance obligation based on relative standalone selling price, which is determined using observable internal or external pricing and profitability metrics. Revenue 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 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 that drives revenue recognition for contracts where revenue is recognized over time 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. The portion of the transaction price associated with monitoring and related services revenue 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.
Revenue from product sales related to the sale and installation of security and fire safety systems was $203 million and $293 million for the three months ended March 31, 2021 and 2020, respectively. Cost of revenue from product sales related to the sale and installation of security and fire safety systems was $160 million and $212 million for the three months ended March 31, 2021 and 2020, respectively.
Early termination of the contract by the customer results in a termination charge in accordance with the terms of the contract. Contract termination charges are recognized in revenue when collectability is probable and are reflected in monitoring and related services revenue in the Condensed Consolidated Statements of Operations. The Company records revenue 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.
Customer billings for services not yet rendered are deferred and recognized as revenue as services are provided. These fees 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. Accordingly, the Company has applied the practical expedient regarding deferred revenue to exclude the value of remaining performance
10


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.
The following table presents the Company’s disaggregated revenue:
Three Months Ended
(in thousands)March 31, 2021March 31, 2020
CSB:
Monitoring and related services$951,248 $938,032
Installation and other87,357 173,135
Total CSB1,038,605 1,111,167
Commercial:
Monitoring and related services111,518 107,925
Installation and other (1)
154,581 150,660
Total Commercial266,099 258,585
Total revenue$1,304,704 $1,369,752
________________
(1)Approximately half of installation and other revenue generated by the Commercial segment is recognized over time.
Revenue Model Initiative and Equipment Ownership Model Change
During February 2020, the Company launched a new revenue model initiative for certain residential customers, which (i) revised the amount and nature of fees due at installation, (ii) introduced a 60-month monitoring contract option, and (iii) introduced a new retail installment contract option that allows qualifying residential customers to repay the fees due at installation over a 24-, 36-, or 60-month interest-free period. Due to the requirements of the Company’s initial third-party consumer financing program, the Company also transitioned its security system ownership model from a predominately Company-owned model to a predominately customer-owned model (the “Equipment Ownership Model Change”).
During March 2020, the Company entered into an uncommitted receivables securitization financing agreement (the “Receivables Facility”), which allowed the Company to receive financing secured by retail installment contract receivables from transactions under a customer-owned model. During April 2020, the Company amended the Receivables Facility to also permit financing secured by retail installment contract receivables from transactions occurring under a Company-owned model. As a result, the Company started to transition its security system ownership model to a predominately Company-owned model in May 2020. Refer to Note 6 “Debt” for further discussion regarding the Receivables Facility.
Accounts Receivable, net
Accounts receivable represent unconditional rights to consideration due from customers in the ordinary course of business and are generally due in one year or less. Accounts receivable are recorded at amortized cost less an allowance for credit losses that are not expected to be recovered. The allowance for credit losses is recognized at inception and is reassessed each reporting period.
The Company’s allowance for credit losses is evaluated on a pooled basis based on customer type. For each pool of customers, 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 the individual pools of customers was not material.
During the three months ended March 31, 2021, the provision for credit losses, write-offs, and recoveries were not material.
Retail Installment Contract Receivables, net
During February 2020, the Company introduced a new retail installment contract option that allows qualifying residential customers to repay the fees due at installation over a 24-, 36-, or 60-month interest-free period. The financing component of the Company’s retail installment contract receivables is not significant.
11


Retail installment contracts are available for residential transactions occurring under both Company-owned and customer-owned models. When originating a retail installment contract, the Company utilizes external credit scores to assess credit quality of a customer and to determine eligibility for the retail installment contract. In addition, a customer is 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, 2021, the current and delinquent billed retail installment contract receivables were not material.
Retail installment contract receivables are recorded at amortized cost less an allowance for credit losses that are not expected to be recovered. The allowance for credit losses is recognized at inception and reassessed each reporting period. The allowance for credit losses on retail installment contract receivables was not material for the periods presented.
The following table presents unbilled retail installment contract receivables, net, recognized in the Condensed Consolidated Balance Sheets:
(in thousands)March 31, 2021December 31, 2020
Retail installment contract receivables, gross$178,077 $145,957 
Allowance for credit losses(3,207)(4,366)
Retail installment contract receivables, net$174,870 $141,591 
Classification:
Accounts receivable, net$55,091 $47,023 
Other assets119,779 94,568 
Retail installment contract receivables, net$174,870 $141,591 
As of March 31, 2021 and December 31, 2020, retail installment contract receivables, net, used as collateral for borrowings under the Receivables Facility were $143 million and $109 million, respectively.
Contract Assets, net
Contract assets are recorded when the Company has transferred goods or services to the customer in the ordinary course of business but does not have an unconditional right to such consideration. The contract asset is reclassified to accounts receivable as services are performed and billed, which results in the Company’s unconditional right to the consideration. The Company has the right to bill the customer as service is 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 expected credit losses that are not expected to be recovered. The allowance for credit losses 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.
The following table presents contract assets, net, related to residential transactions recognized in the Condensed Consolidated Balance Sheets:
(in thousands)March 31, 2021December 31, 2020
Contract assets, gross$161,672 $161,563 
Allowance for credit losses(27,143)(29,558)
Contract assets, net$134,529 $132,005 
Classification:
Prepaid expenses and other current assets$65,881 $59,382 
Other assets68,648 72,623 
Contract assets, net$134,529 $132,005 
The Company recognized approximately $20 million and $65 million of contract assets during the three months ended March 31, 2021 and 2020, respectively.
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3. Leases
Company as Lessor
The Company is a lessor in certain transactions in which the Company provides monitoring and related services but retains ownership of the security system as the Company has identified a lease component associated with the right-of-use of the security system and a non-lease component associated with monitoring and related services. For transactions in which (i) the timing and pattern of transfer is the same for the lease and non-lease components, and (ii) the lease component would be classified as an operating lease if accounted for separately, the Company applies the practical expedient to aggregate the lease and non-lease components and accounts for the combined transaction based upon its predominant characteristic, which is the non-lease component. As a result, the Company accounts for the combined component as a single performance obligation under the applicable revenue guidance and the underlying assets are reflected within subscriber system assets, net, in the Condensed Consolidated Balance Sheets.
Certain of the Company’s transactions do not qualify for the practical expedient as the lease component represents a sales-type lease, and as such, the Company accounts for the lease and non-lease components separately. The Company’s sales-type leases are not material.
Company as Lessee
The Company leases real estate, vehicles, and equipment with various lease terms and maturities that extend out through 2030 from various counterparties as part of normal operations. The Company applies the practical expedient to not separate the lease and non-lease components and accounts for the combined component as a lease. Additionally, the Company’s right-of-use assets and lease liabilities include leases with an initial lease term of 12 months or less.
The Company’s right-of-use assets and lease liabilities primarily represent (a) lease payments that are fixed at the commencement of a lease and (b) variable lease payments that depend on an index or rate. Lease payments are recognized as lease cost on a straight-line basis over the lease term, which is determined as the non-cancelable period, periods in which termination options are reasonably certain of not being exercised, and periods in which renewal options are reasonably certain of being exercised. The discount rate for a lease is determined using the Company’s incremental borrowing rate that coincides with the lease term at the commencement of a lease. The incremental borrowing rate is estimated based on publicly available data for the Company’s debt instruments and other instruments with similar characteristics.
Lease payments that are not fixed or that are not dependent on an index or rate and vary because of changes in usage or other factors are included in variable lease costs. Variable lease costs are recorded in the period in which the obligation is incurred and primarily relate to fuel, repair, and maintenance payments that vary based on the usage of leased vehicles.
The Company’s leases do not contain material residual value guarantees or restrictive covenants. The Company’s subleases are not material.
The following table presents operating and finance leases recognized in the Condensed Consolidated Balance Sheets:
Leases (in thousands)
PresentationClassificationMarch 31, 2021December 31, 2020
Assets:
OperatingCurrentPrepaid expenses and other current assets$647 $684 
OperatingNon-currentOther assets129,238 138,408 
FinanceNon-current
Property and equipment, net(1)
56,018 54,414 
Total right-of-use assets$185,903 $193,506 
Liabilities:
OperatingCurrentAccrued expenses and other current liabilities$31,104 $30,689 
FinanceCurrentCurrent maturities of long-term debt29,138 26,955 
OperatingNon-currentOther liabilities106,938 115,694 
FinanceNon-currentLong-term debt32,905 34,373 
Total lease liabilities$200,085 $207,711 
_________________
(1)Finance right-of-use assets are recorded net of accumulated depreciation of approximately $72 million and $67 million as of March 31, 2021 and December 31, 2020, respectively.
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The following table presents the components of total lease cost:
Three Months Ended
Lease Cost (in thousands)
March 31, 2021March 31, 2020
Operating lease cost$12,893 $14,600 
Finance lease cost
Amortization of right-of-use assets6,311 6,077 
Interest on lease liabilities695 833 
Variable lease costs12,978 12,798 
Total lease cost $32,877 $34,308 
The following table presents cash flow and supplemental information associated with the Company’s leases:
Three Months Ended
Other information (in thousands)
March 31, 2021March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$12,539 $14,213 
Operating cash flows from finance leases$695 $833 
Financing cash flows from finance leases$7,208 $6,642 
Right-of-use assets obtained in exchange for new:
Operating lease liabilities$2,187 $15,999 
Finance lease liabilities$8,072 $4,627 
4. Acquisitions
During the three months ended March 31, 2021, total consideration related to business acquisitions was $16 million.
In January 2020, the Company acquired its largest independent dealer, Defender Holdings, Inc. (“Defenders”) (the “Defenders Acquisition”) for total consideration of approximately $290 million, which consisted of cash paid of $173 million, net of cash acquired, and the issuance of approximately 16 million shares of the Company’s Common Stock with a fair value of $114 million. During the three months ended March 31, 2020, other business acquisitions were not material.
5. Goodwill and Other Intangible Assets
Goodwill
During the fourth quarter of 2020, the Company changed its reporting units, which included the reassignment of assets, liabilities, and financial operating results, as well as an applicable portion of goodwill based on a relative fair value approach, related to the Company’s commercial customers from the U.S. reporting unit (now referred to as CSB) into the former Red Hawk reporting unit (now referred to as Commercial).
As discussed in Note 1 “Description of Business and Summary of Significant Accounting Policies,” effective in the first quarter of 2021, the Company’s operating and reportable segments are CSB, which is now comprised of the CSB reporting unit, and Commercial, which is now comprised of the Commercial reporting unit. Both of the Company’s reporting units were previously included in a single operating and reportable segment. The change in reportable segments did not further impact the Company’s reporting units.
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The following table presents changes in the carrying amount of goodwill by reportable segment during the three months ended March 31, 2021:
(in thousands)CSBCommercialTotal Goodwill
Beginning balance, as previously reportedN/AN/A$5,236,302 
Beginning balance, after change in reportable segments$4,915,857 $320,445 $5,236,302 
Acquisitions 6,279 6,279 
Other(25)417 392 
Ending balance$4,915,832 $327,141 $5,242,973 
_________________
N/A—Not applicable.
The Company had no accumulated goodwill impairment losses as of March 31, 2021 and December 31, 2020.
There were no material measurement period adjustments to purchase price allocations during the three months ended March 31, 2021.
Other Intangible Assets
The following table summarizes the gross carrying amounts, accumulated amortization, and net carrying amounts of the Company’s other intangible assets:
March 31, 2021December 31, 2020
(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$8,236,971 $(4,916,344)$3,320,627 $8,306,746 $(4,932,590)$3,374,156 
Dealer relationships1,518,020 (399,440)1,118,580 1,518,020 (379,475)1,138,545 
Other225,963 (188,875)37,088 247,536 (186,547)60,989 
Total definite-lived intangible assets9,980,954 (5,504,659)4,476,295 10,072,302 (5,498,612)4,573,690 
Indefinite-lived intangible assets:
Trade name1,333,000 — 1,333,000 1,333,000 — 1,333,000 
Intangible assets$11,313,954 $(5,504,659)$5,809,295 $11,405,302 $(5,498,612)$5,906,690 
The following table presents changes in the net carrying amount of contracts and related customer relationships during the three months ended March 31, 2021:
(in thousands)
Beginning balance$3,374,156 
Acquisition of customer relationships5,601 
Customer contract additions, net of dealer charge-backs213,624 
Amortization(272,754)
Ending balance$3,320,627 
During the three months ended March 31, 2021, the Company paid $199 million to purchase contracts with customers under the ADT Authorized Dealer Program and from other third parties. The weighted-average amortization period for contracts with customers purchased under the ADT Authorized Dealer Program and from other third parties was 12 years during the three months ended March 31, 2021.
Contracts and related customer relationships includes the purchase of customer accounts from a third-party in February 2021 for a total contractual purchase price of $91 million, subject to reduction based on customer retention. The Company paid cash at closing of $73 million, which is included in dealer generated customer accounts and bulk account purchases on the Condensed Consolidated Statements of Cash Flows.
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The following table presents amortization expense for definite-lived intangible assets:
Three Months Ended
(in thousands)March 31, 2021March 31, 2020
Definite-lived intangible asset amortization expense$299,327 $306,956 
Intangible Asset Impairments
During the three months ended March 31, 2021, the Company recognized $