About ADT

ADT Inc., together with its wholly owned subsidiaries, operates as a provider of security, automation, and smart home solutions serving consumer and business customers in the United States (U.S.). The company primarily conducts business under the ADT brand. The company serves its customers through its nationwide sales and service offices; monitoring and support centers; and a large network of security, home-automation, and solar-installation professionals. Segments The company operates through three segments: Consumer and Small Business (CSB), Commercial, and Solar. CSB The CSB segment primarily engages in the sale, installation, servicing, and monitoring of integrated security, interactive, and automation systems, as well as other offerings, such as mobile security and home health solutions. Customers in the CSB segment are primarily comprised of owners and renters of residential properties, small business operators, and other individual consumers. Commercial The Commercial segment primarily engages in the sale, installation, servicing, and monitoring of integrated security, interactive, and automation systems, fire detection and suppression systems, and other related offerings. Customers in the Commercial segment are comprised of larger businesses with more expansive facilities (typically larger than 10,000 square feet) and multi-site operations, which often require more sophisticated integrated solutions. Solar The Solar segment primarily engages in the sale and installation of solar systems, energy storage solutions, and other related solutions and services. Customers in the Solar segment are primarily consists of residential homeowners who purchase solar systems and energy storage solutions, energy efficiency upgrades, and roofing services. Products and Services Security and Automation Offerings The company’s core security offerings include burglar and life safety alarms, smart security cameras, smart home automation systems, fire detection and suppression systems, video surveillance systems, and access control systems (referred to collectively as security systems, solutions, or offerings). The company’s security offerings are designed to detect intrusion; control access; sense movement, smoke, fire, carbon monoxide, flooding, temperature, and other environmental conditions and hazards; and address personal medical emergencies such as injuries or unanticipated falls. The company offers its customers routine maintenance and the installation of upgraded or additional equipment, which provide additional value to the customer and generate incremental recurring monthly revenue. Additionally, the company’s personal emergency response system products and services utilize its security monitoring infrastructure to provide customers with solutions that help to sustain independent living, detect when a fall occurs, and provide protection while on the go. In its Commercial business, the company also sells, installs, integrates, maintains, and inspects commercial building safety and management technologies. The vast majority of new residential customers choose the company’s automation and smart home solutions, which provide customers the ability to remotely monitor and manage their environments through its customized web portal via web-enabled devices (such as smart phones) or through touchscreen panels in their homes. The company’s automation and smart home solutions allow customers to remotely arm and disarm their security systems; record and view real-time video; program their systems to react to defined events; integrate their systems with various third-party connected devices such as cameras, lights, thermostats, appliances, and garage doors; and automate custom schedules for these connected devices. Sales to most CSB and certain Commercial customers typically require the company to make an upfront investment related to installation costs (such as labor, commissions, equipment, and overhead), which it partially recovers through upfront fees charged at the time of installation. At the time of initial equipment installation, the company’s CSB and Commercial customers typically contract for both monitoring and maintenance services, which are generally governed by multi-year contracts. CSB - The standard contract terms for CSB customers are two, three, or five years, with automatic renewals for successive 30-day periods, unless canceled by either party. Customers are typically charged an upfront fee, which qualifying residential customers can pay over the course of the contract. The company may then use these retail installment contract receivables as collateral for borrowings under its uncommitted receivables securitization financing agreement (the Receivables Facility). Residential customers are also generally obligated to make monthly payments for monitoring services for the remainder of the initial contract term. Monitoring services are typically billed monthly or quarterly in advance, and more than 80% of the company’s residential customers pay it these fees through automated payment methods, with new residential customers generally opting for these payment methods. Commercial - The standard contract term for Commercial customers is typically five years with automatic renewals ranging from 30-day periods to one year. In some arrangements, it may install a system without an on-going contractual monitoring or maintenance service relationship. Solar Offerings The company designs, installs, and sells custom residential solar systems and energy storage solutions, energy efficiency upgrades, and roofing services through dedicated and specialized in-house sales and marketing, design and engineering, and installation teams. Monitoring Centers As of December 31, 2022, the company operated nine monitoring centers located throughout the U.S. and listed by Underwriters Laboratories (UL) in order to provide 24/7 year-round professional monitoring services to its customers, including its monitoring centers that also provides outsourced monitoring services for other security companies. The company’s monitoring centers are fully redundant, which means all monitoring operations can be automatically transferred to another monitoring center in case of an emergency such as fire, tornado, major interruption in telephone or computer service, or any other event affecting the functionality of one of its centers. Upon the occurrence of certain initiating events, the company’s monitored security systems send event-specific signals to personnel at its monitoring centers who then relay appropriate information, based on the customer’s contract and preferences, to first responders, such as local police, fire departments, or medical emergency response centers; the customer; or others on the customer’s emergency contact list. The company continues to focus on its alarm verification technologies and partner with industry associations and various first responder agencies to help prioritize response events, enhance response policies, and develop processes that allow it to send data to emergency response centers directly. Additionally, the company’s System Monitoring and Response Technology (SMART) monitoring solution differentiates its offerings, aims to result in faster and higher-quality responses, and is expected to reduce annual false alarms and customer care calls. ADT SMART Monitoring can deliver alarms to connected and participating 911 centers faster than traditional voice handling speeds. Field and Call Center Operations The company’s field and call center operations comprise a nationwide network of sales and service offices, call centers, and support facilities across the U.S. The company provides ongoing training to its field and call center employees across all business segments, as well as its authorized dealers, and it continually measures and monitors customer satisfaction-oriented metrics across each customer touch point. The company staffs its sales and service offices with qualified individuals who make sales calls, install security and solar systems, and provide service and support to its customers, and it utilizes third-party subcontract labor when appropriate to assist with these efforts. The company’s CSB and Commercial call center operations provide support 24 hours a day on a year-round basis, and all requests are routed through its customer contact centers to ensure technical service requests are handled promptly and professionally. In many cases, customer care specialists can remotely resolve non-emergency inquiries regarding service, billing, and alarm testing and support. The company continues to offer customers additional choices in managing their services through customer-facing self-service tools via interactive voice response systems and the Internet. In addition, the company uses a network of external vendors, both domestic and outside of the U.S., to supplement its internal call center resources as needed. The company serves its largest Commercial multi-site customers from its National Accounts Operation Center (NAOC) in Irving, Texas, which allows the customer to call one location to resolve all support issues, including billing, installations, service calls, upgrades, or other service-related issues. Additionally, the company’s Network Operations Center (NOC) houses a group of highly-experienced, certified engineers, system administrators, and network analysts capable of designing, provisioning, and maintaining security-only networks for its Commercial customers. The NOC also provides other managed services to support and enhance its customer’s security systems. Employees in the company’s NOC hold a multitude of vendor certifications in addition to classic Cisco and Cisco Meraki Certifications. The company’s NOC was one of the first security integrators to earn the Cisco Cloud and Managed Services Express Partner Certification and remains one of the few in its industry to hold this specialized certification. Sales and Distribution Channels The company utilizes a complementary mix of direct and indirect sales and distribution channels: Direct Channel The company’s direct channel CSB and Commercial customers are generated by direct response and other marketing efforts, general brand awareness, customer referrals, and lead generation partners, and are supported by its internal sales force located in its national sales call centers, as well as its nationwide network of sales and service offices. In many scenarios, the company closes the sale of a basic system over the phone and allow its field force to augment the system at the time of installation. In other cases, field sales consultants work directly with the customer to select an ideal system. Driven by consumer preferences, the company also markets to customers through retail and e-commerce channels, which are expected to grow in the next few years, and it has been supplementing existing channels to meet consumers where they prefer to shop. The company’s direct channel Solar customers are generated primarily through third-party lead partners, owned media, an internal sales force, and referrals from its customers, which are supported by its internal call center and field sales consultants. In most cases, the company’s field sales consultants work with the customer during the in-person presentation and customize the system to fit their needs. The company typically utilizes a highly structured sales approach, which includes, in addition to the structured model sales call, daily monitoring of sales activity and effectiveness metrics and regular coaching by its sales management teams. Indirect Channel The company’s indirect channel CSB and Commercial customers are generated mainly through its network of agreements with third-party independent dealers who sell equipment and ADT Authorized Dealer-branded monitoring, interactive, and other services to residential end users (the ADT Authorized Dealer Program). As of December 31, 2022, the company’s network of authorized dealers consisted of approximately 150 authorized dealers operating across the U.S. The company’s authorized dealers are contractually obligated to offer exclusively to it all qualified monitored accounts they generate, but it is not obligated to accept these accounts. Markets The company serves its customers in the following three primary markets that align to its segments, Consumer and Small Business, Commercial, and Solar. CSB Many of the company’s residential and small business customers are driven to purchase monitored security and automation services as a result of moving to a new location; a perceived or actual increase in crime or life safety concerns in their neighborhood; significant events, such as the birth of a child or the opening of a new business; or incentives provided by insurance carriers that may offer lower insurance premium rates if a security system is installed or may require that a system be installed as a condition of coverage.. Commercial The commercial market ranges from large single-site commercial facilities to multi-site national companies. The market is characterized by higher penetration rates, driven in part by fire and building codes and insurance requirements, and by a higher degree of complexity with respect to system installations. Most business customers require a basic security system for insurance purposes, and certain commercial premises are required to install and maintain fire alarm, and sometimes fire suppression, systems to meet the requirements under applicable building codes and insurance policies. Solar The solar market consists primarily of residential property owners, and sales are typically financed by third party financing institutions. The market is highly fragmented, under-penetrated, and has a longer lag between sale/contract and installation than the company’s residential security market. Intellectual Property The company owns a portfolio of patents that relate to a variety of monitored security and automation technologies utilized in its business, including security panels and sensors, video and information management solutions, and its SMART monitoring solution that aims to reduce false alarms and improve response effectiveness. The company also owns a portfolio of trademarks, including ADT, ADT Pulse, Protection 1, ADT Commercial, and ADT Solar. In addition, the company is a licensee of intellectual property, including from its third-party suppliers and technology partners. Certain trademarks associated with the ADT brand that the company owns within the U.S. and Canada are owned outside of the U.S. and Canada by Johnson Controls (as successor to Tyco International Ltd., Tyco). In certain instances, such trademarks are licensed in certain territories outside the U.S. and Canada by Johnson Controls to certain third parties. Pursuant to the Tyco Trademark Agreement entered into between The ADT Corporation and Tyco in connection with the separation of The ADT Corporation from Tyco in 2012, the company is generally prohibited from registering, attempting to register, or using the ADT brand outside the U.S. and its territories and Canada. Seasonality CSB The company’s residential security and home automation business has historically experienced a certain level of seasonality primarily as a result of fluctuations in the housing market. Since more household moves typically take place during the second and third calendar quarters of each year, its disconnect rate, new customer additions and installation volume, and related cash subscriber acquisition costs are historically higher in these quarters than in the first and fourth calendar quarters (year ended December 31, 2022). Government Regulation and Other Regulatory Matters Additionally, the company relies extensively on telecommunications service providers, which are regulated in the U.S. by the Federal Communications Commission (FCC) and state public utilities commissions, to communicate signals as part of the functionality and monitoring of security and solar systems. The company’s advertising and sales practices are regulated by the U.S. Federal Trade Commission (FTC) and state and consumer protection laws, which may include restrictions on the manner in which it promotes the sale of its products and services and require it to provide most consumers with three-day or longer rescission rights. The company’s operations are subject to regulation under the U.S. Occupational Safety and Health Act (OSHA) and equivalent state laws. History The company was founded in 1874. It was incorporated in 2015. The company was formerly known as Prime Security Services Parent, Inc. and changed its name to ADT Inc. in 2017.