ADT Inc. (ADT)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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Table of Contents

•Introduction

•Business and Basis of Presentation

•Factors Affecting Operating Results

•Key Performance Indicators

•Results of Operations

•Non-GAAP Measures

•Liquidity and Capital Resources

•Critical Accounting Estimates

•Accounting Pronouncements

INTRODUCTION

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report. This section is intended to (i) provide material information relevant to the assessment of our results of operations and cash flows; (ii) enhance the understanding of our financial condition, changes in financial condition, and results of operations; and (iii) discuss material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be necessarily indicative of future performance or of future financial condition.

Included below are year-over-year comparisons between 2024 and 2023. The classification of the Solar Business as a discontinued operation during 2024 did not materially change the reported disclosures in the 2023 Annual Report with regard to year-over-year comparisons between 2023 and 2022, except with regard to income tax benefit (expense), as such discussions generally included analysis specific to activities within the Solar segment. For information on year-over-year comparisons between 2023 and 2022, refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2023 Annual Report, which was filed with the SEC on February 28, 2024.

The following discussion and analysis contains forward-looking statements about our business, operations, and financial performance based on current plans and estimates involving risks, uncertainties, and assumptions, which could differ materially from actual results. Factors that could cause such differences are discussed in the sections of this Annual Report titled Item 1A “Risk Factors” and “Cautionary Statements Regarding Forward-Looking Statements.”

Unless otherwise noted, the discussions below relate to our continuing operations.

BUSINESS AND BASIS OF PRESENTATION

ADT is a leading provider of security, interactive, and smart home solutions serving residential and small business customers in the U.S. Our mission is to empower people to protect and connect what matters most with safe, smart, and sustainable solutions, delivered through innovative offerings, unrivaled safety, and a premium experience because we believe that everyone deserves to feel safe.

As discussed below, on October 2, 2023, we completed the divestiture of our Commercial Business, and as of June 30, 2024, substantially all operations of the Solar Business had ceased.

All financial information presented in this section has been prepared in U.S. dollars and in accordance with generally accepted accounting principles in the United States of America (“GAAP”), excluding our Non-GAAP measures, and includes the accounts of ADT Inc. and its subsidiaries. All intercompany transactions have been eliminated. As a result of the Commercial Divestiture and ADT Solar Exit, unless otherwise noted, we report current and historical financial and operating information for our one remaining segment.

For a more detailed discussion of our business and basis of presentation, refer to Item 1 “Business” and Note 1 “Description of Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Item 15 “Exhibit and Financial Statement Schedules.”

FACTORS AFFECTING OPERATING RESULTS

The factors described herein could have a material adverse effect on our business, financial condition, results of operations, cash flows, and/or key performance indicators.

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As of December 31, 2024, we served approximately 6.4 million security monitoring service subscribers. Generally, a significant upfront investment is required to acquire new subscribers, that in turn provide ongoing and predictable recurring revenue generated from our monitoring services and other subscriber-based offerings. Although the economics of an installation may vary depending on the customer type, acquisition channel, and product offering, we generally achieve revenue break-even in approximately two years.

Our results are impacted by the mix of transactions under a Company-owned equipment model versus a customer-owned equipment model (referred to as outright sales), as there are different accounting treatments applicable to each model, as well as the mix, price, and type of offerings sold (see Note 2 “Revenue and Receivables”). The majority of professional installation transactions take place under a Company-owned model, however, beginning in the second quarter of 2024, a growing number of our direct channel new customer adds are outright sales in connection with the national launch of our new ADT+ platform.

As we continue to build our partnership with Google, introduce new or enhance current offerings, and refine our go-to-market approach, we expect to continue to see a shift toward an increasing proportion of outright sales transactions, which will impact results in future periods when those changes occur. In addition, self set-up solutions typically earn lower contractual fees than our professional installation solutions as a result of differences in pricing, offer tactics, and level of services in each channel. However, we believe self set-up customers will allow us to grow our subscriber base through access to the fast-growing DIY market.

The prices we are able to charge for our products and services are impacted by the type and complexity of the offerings that we provide, quality of our products and services; the introduction of additional features and offerings that increase value to the customer; and the microeconomic and macroeconomic environments in which we operate.

Demand for our offerings may be impacted by the (i) overall economic conditions in the geographies in which we operate; (ii) type, price and quality of our offerings compared to those of our competitors; (iii) changes in competition such as from the acquisition, disposition, or exiting of similar businesses by us or our competitors; (iv) overall state of the housing market; (v) perceived threat of crime; (vi) occurrence of significant life events such as the birth of a child or opening of a new business; and (vii) availability of financial incentives provided by insurance carriers.

New customer additions and customer attrition have a direct impact on our financial results, including revenue, operating income, and cash flows. A portion of our recurring customer base can be expected to cancel services each year as customers may choose to terminate or not to renew their contracts for a variety of reasons including, but not limited to, relocation, loss to competition, cost, or service issues. Relocations are sensitive to changes in the residential housing market, and fewer relocations generally lead to improvements in gross customer revenue attrition but fewer new customer additions. Additionally, non-payment disconnects generally increase in a weaker macroeconomic environment. We may experience fluctuations in these or other trends in the future as changes in the general macroeconomic environment or housing market develop.

We have made significant progress toward increasing the variety of our offerings to accommodate increased consumer interest in automated security and other mobile technology applications due to advancements in technology, younger generations of consumers, and shifts to de-urbanization. Advances in technology are also helping us to improve our offerings and reduce certain costs. For example, our Remote Assistance Program provides our customers the ability to troubleshoot and resolve certain service issues, as well as other functions, through a live video stream with our skilled technicians. This provides customers with more options for receiving certain services that best fit their lifestyles while reducing our costs and eliminating thousands of vehicle trips.

We may experience an increase in costs associated with factors, including but not limited to (i) offering a wider variety of products and services; (ii) providing a greater mix of interactive and smart home solutions; (iii) replacing or upgrading certain system components due to technological advancements, cybersecurity upgrades, or otherwise; (iv) supply chain disruptions; (v) inflationary pressures on costs such as materials, labor, and fuel; and (vi) other changes in prices, interest rates, or terms from our suppliers or vendors, or third party lenders. We aim to continuously evaluate and respond to changes in the above to drive efficiencies and meet customer demands.

As part of our response to changes or pressures in the current macroeconomic environment, we have been evaluating, and continue to evaluate, cost-saving opportunities such as reducing headcount or our physical facilities footprint when appropriate, and reducing non-essential spend. While we have experienced some increase in costs as a result of inflation, we have, for the most part, been able to offset the rising costs through price increases to our customers, as well as cost-saving opportunities.

In addition, hurricanes, wildfires, and other natural disasters impacting certain areas in which we operate may result in service, sales, and installation disruptions to certain of our customers. As such, we evaluate the financial and business impacts these events have or may have in the future. During 2024, we did not experience any material losses related to natural disasters. However, we are currently evaluating any material impacts as a result of the California fires that started in January 2025.

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Divestitures

Unless otherwise noted, our results of operations discussed below relate to continuing operations. Refer to Note 4 “Divestitures” in the Notes to Consolidated Financial Statements in Item 15 “Exhibit and Financial Statement Schedules” for further information regarding the ADT Solar Exit and Commercial Divestiture.

ADT Solar Exit

In January 2024, after a strategic review of the business and continued macroeconomic and industry pressures, our Board of Directors approved a plan to fully exit the Solar Business. As of June 30, 2024, substantially all operations of the Solar Business had ceased.

The results of operations and financial position of the Solar Business are classified as discontinued operations in the Company’s Consolidated Statements of Operations and Consolidated Balance Sheets, respectively, for all periods presented. Additionally, the cash flows and comprehensive income (loss) of the Solar Business have not been segregated and are included in the Consolidated Statements of Cash Flows and Consolidated Statements of Comprehensive Income (Loss), respectively.

During the year ended December 31, 2024, we incurred aggregate exit charges of $88 million, which have been recognized within income (loss) from discontinued operations, net of tax, related to (i) $33 million associated with the write-down and disposition of inventory and asset impairments, (ii) $29 million associated with the disposition of the existing installation pipeline, (iii) $13 million associated with employee separation costs, and (iv) $12 million associated with contract termination and other charges.

Additionally, during the year ended December 31, 2024, we paid approximately $22 million in connection with the ADT Solar Exit, primarily related to employee separation and other restructuring costs.

We do not expect the remaining estimated charges and cash expenditures to be material; however, various factors including unknown or unforeseen costs may cause additional charges or cash expenditures to be incurred.

Commercial Divestiture

In October 2023, we divested the Commercial Business and received net proceeds of approximately $1,585 million. We recognized a gain on the sale of approximately $630 million, which is reflected in income (loss) from discontinued operations, net of tax in 2023. During 2024, we paid $21 million related to the settlement of post-closing adjustments.

As applicable, the results of the Commercial Business are reported as a discontinued operation for all periods presented. Additionally, the cash flows and comprehensive income (loss) of the Commercial Business have not been segregated and are included in the Consolidated Statements of Cash Flows and Consolidated Statements of Comprehensive Income (Loss), respectively, for all periods presented.

During 2024, we recorded income associated with the Commercial TSA of $40 million, which is recognized in other income (expense). We do not expect any material income under the Commercial TSA in future periods.

Tax Matters

During 2023, we utilized a significant portion of our net operating losses (“NOLs”) to offset the gain generated from the sale of the Commercial Business. In 2024, we utilized the remaining NOLs and anticipate becoming a federal cash taxpayer in 2025. However, the amounts and timing of payments are uncertain.

Federal Tax Legislation

Certain changes to U.S. federal tax law included in the Tax Cuts and Jobs Act of 2017 had a delayed effective date until 2022. Under IRC Section 163(j), the limitation on net business interest expense deductions are no longer increased by deductions for depreciation, amortization, or depletion. Under IRC Section 174, specified research and experimentation expenditures are now capitalized and amortized. These items have resulted in increased taxable income and an acceleration of our net operating loss utilization.

Potential for Future Valuation Allowance

The valuation allowance for deferred tax assets relates to the uncertainty of the utilization of certain U.S. federal and state deferred tax assets. In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available

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positive and negative evidence, including enacted legislation such as the updates described above, which impact our assessment of whether a valuation allowance is needed.

We believe that our deferred tax asset for disallowed interest under IRC Section 163(j) will continue to grow from its current level. There is currently significant uncertainty in the matters we consider when evaluating our valuation allowance needs. Any material change to our valuation allowance in subsequent periods could materially and adversely impact our operating results.

Other Updates

Google Partnership

During 2023, we launched and began the phased rollout of our proprietary ADT+ app for our self set-up line of DIY smart home security products, including integrated Google Nest offerings. During 2024, we continued the phased rollout of our ADT+ platform across the country, making our next generation hardware and technology available to customers through our proprietary app.

During 2024 and 2023, we were reimbursed $30 million and $40 million, respectively, of the Google Success Funds primarily for certain joint marketing and customer acquisition expenses we incurred.

Refer to Note 13 “Commitments and Contingencies” in the Notes to Consolidated Financial Statements.

State Farm Partnership

Beginning in 2023, certain State Farm customers were able to receive ADT home security products and professional monitoring at a reduced cost as part of the partnership between ADT and State Farm. In addition, through this program, ADT has access to certain State Farm customers, which provide opportunities to reach additional markets.

As of December 31, 2024, the State Farm partnership operated in 17 states in the U.S.

During 2024 and 2023, we used approximately $14 million and $11 million, respectively, of the Opportunity Fund for project initiatives and other costs.

Refer to Note 10 “Equity” and Note 16 “Related Party Transactions” in the Notes to Consolidated Financial Statements.

KEY PERFORMANCE INDICATORS

We evaluate our results using certain key performance indicators, including the operating metrics end-of-period recurring monthly revenue (“RMR”) and gross customer revenue attrition, as well as the non-GAAP measure Adjusted EBITDA. Computations of our key performance indicators may not be comparable to other similarly titled measures reported by other companies.

Certain operating metrics are approximated, as there may be variations to reported results due to certain adjustments we might make in connection with the integration over several periods of acquired companies that calculated these metrics differently or periodic reassessments and refinements in the ordinary course of business, including changes due to system conversions or historical methodology differences in legacy systems.

RMR and gross customer revenue attrition, as discussed below, have been recast for prior periods to exclude the former Commercial Business. The definition of these metrics has historically excluded activity related to the Solar Business and as such, these metrics were not impacted by the presentation of the Solar Business as a discontinued operation. Adjusted EBITDA reflects our continuing operations for all periods presented.

RMR

RMR is generated by contractual recurring fees for monitoring and other recurring services provided to our customers, including contracts monitored but not owned.

We use RMR to evaluate our overall sales, installation, and retention performance. Additionally, we believe the presentation of RMR is useful to investors because it measures the volume of revenue under contract at a given point in time, which is a useful measure for forecasting future revenue performance as the majority of our revenue comes from recurring sources.

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Gross Customer Revenue Attrition

Gross customer revenue attrition is defined as RMR lost as a result of customer attrition, net of dealer charge-backs and reinstated customers, excluding contracts monitored but not owned and self-setup/DIY customers. Customer sites are considered canceled when all services are terminated. Dealer charge-backs represent customer cancellations charged back to the dealers because the customer canceled service during the charge-back period, which is generally thirteen months.

Gross customer revenue attrition is calculated on a trailing twelve-month basis, the numerator of which is the RMR lost during the period due to attrition, net of dealer charge-backs and reinstated customers, and the denominator of which is total annualized RMR based on an average of RMR under contract at the beginning of each month during the period, in each case, excluding contracts monitored but not owned and self set-up/DIY customers.

We use gross customer revenue attrition to evaluate our retention and customer satisfaction performance, as well as evaluate subscriber trends by vintage year. Additionally, we believe the presentation of gross customer revenue attrition is useful to investors as it provides a means to evaluate drivers of customer attrition and the impact of retention initiatives.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP measure. Our definition of Adjusted EBITDA, a reconciliation of Adjusted EBITDA to income (loss) from continuing operations (the most comparable GAAP measure), and additional information, including a description of the limitations relating to the use of Adjusted EBITDA, are provided under “—Non-GAAP Measures.”

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RESULTS OF OPERATIONS

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(1)Refer to the “Key Performance Indicators” section for the definitions of these key performance indicators.

(2)Adjusted EBITDA is a non-GAAP measure. Refer to the “Non-GAAP Measures” section for the definition of this term and reconciliation to the most comparable GAAP measure.

N/A—Not applicable.

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Revenue

Monitoring and related services revenue (“M&S Revenue”) primarily comprises revenue generated from providing recurring monthly monitoring and other services, as well as revenue from time and materials billings. Security installation, product, and other revenue comprises installation revenue from the sale and installation of our security systems sold under a customer-owned model, as well as the recognition of revenue that is deferred upon initiation of a monitoring contract in transactions occurring under a Company-owned model (amortization of deferred subscriber acquisition revenue).

Revenue, as compared to the prior period, primarily reflects:

•M&S Revenue: higher recurring revenue of $108 million primarily driven by an increase in average prices.

•Security installation, product, and other: (i) an increase in installation revenue of $87 million primarily driven by a higher mix of professionally installed systems at higher average prices in connection with the transition to our ADT+ platform, as well as (ii) an increase in the amortization of deferred subscriber acquisition revenue of $45 million associated with customers under a Company-owned model.

The increase in RMR, as compared to the prior period, was primarily driven by an increase in average prices on new and existing subscribers.

The decrease in gross customer revenue attrition, as compared to the prior period, was primarily driven by a decrease in voluntary and other disconnects, partially offset by higher non-payment disconnects.

Cost of Revenue

Monitoring and related services costs (“M&S Costs”) primarily includes field service and call center costs incurred from providing recurring monthly monitoring and other services. Security installation, product, and other costs primarily includes costs incurred from the installation of our security systems sold in outright sales transactions.

The increase in cost of revenue, as compared to the prior period, primarily reflects an increase in installation and product costs of $82 million primarily due to a higher volume of outright sales transactions as well as an increase in M&S Costs of $13 million primarily due to higher interactive fees and other customer service initiatives, partially offset by lower maintenance costs primarily as a result of the continued growth of our Remote Assistance Program.

Selling, General, and Administrative Expenses (“SG&A”)

The increase in SG&A, as compared to the prior period, was primarily driven by:

•an increase in the allowance for credit losses of $55 million as a result of an increase in customer delinquencies,

•an increase in general and administrative costs of $43 million, which includes a current year charge and a prior year benefit related to legal settlements in an aggregate amount of approximately $37 million, and

•an increase in the amortization of deferred subscriber acquisition costs of $36 million, partially offset by

•a decrease in advertising costs of $26 million as a result of lower media spend.

Depreciation and Intangible Asset Amortization (“D&A”)

D&A remained relatively flat, as compared to the prior period, and included an increase of $35 million in the amortization of customer contracts acquired under our authorized dealer program and from other third parties, partially offset by a decrease of $33 million in the amortization of customer relationship intangible assets primarily related to certain assets acquired as part of the ADT Acquisition that became fully amortized during the first quarter of 2023.

Merger, Restructuring, Integration, and Other

Merger, restructuring, integration, and other varies year over year and generally represents certain direct and incremental costs resulting from acquisitions, integration and optimization costs as a result of those acquisitions, costs related to restructuring efforts, as well as fair value remeasurements and impairment charges on certain strategic investments.

The decrease in merger, restructuring, integration, and other, as compared to the prior period, was primarily due to third-party strategic optimization costs incurred during the prior period.

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Interest Expense, net

During 2024, the decrease in interest expense, net, as compared to the prior year period, was primarily driven by lower interest expense of $114 million primarily related to lower principal amounts outstanding on our First Lien Term Loan B and the redemption of our First Lien Notes due 2024.

Other Income (Expense)

During 2024, the increase in other income (expense) was primarily due to higher income from the Commercial TSA of $28 million, with the remainder of the change primarily due to the realized gain (loss) on interest rate swaps.

Income Tax Benefit (Expense)

Income tax expense during 2024 was $196 million, resulting in an effective tax rate for the period of 24.0%. The effective tax rate primarily represents the federal statutory rate of 21.0%, state income taxes, net of federal benefits, of 5.4%, and unfavorable impacts from dispositions of 1.2% and permanently non-deductible items of 0.8%, partially offset by favorable impacts from a decrease in unrecognized tax benefits of 4.0%.

Income tax expense during 2023 was $161 million, resulting in an effective tax rate for the period of 26.6%. The effective tax rate primarily represents the federal statutory rate of 21.0%, state income taxes, net of federal benefits, of 6.1%, and an unfavorable impact from permanently non-deductible items of 1.0%, partially offset by favorable impacts from a decrease in unrecognized tax benefits of 1.0% and dispositions of 0.9%.

Income tax expense during 2022 was $88 million, resulting in an effective tax rate for the period of 21.7%. The effective tax rate primarily represents the federal statutory rate of 21.0%, state income taxes, net of federal benefits, of 3.0%, and an unfavorable impact from permanently non-deductible items of 5.1%, partially offset by favorable impacts from federal credits of 2.9%, a decrease in unrecognized tax benefits of 2.3%, and legislative changes of 2.1%.

Refer to Note 9 “Income Taxes” for details on our effective tax rate.

NON-GAAP MEASURES

To provide investors with additional information in connection with our results as determined in accordance with GAAP, we disclose Adjusted EBITDA as a non-GAAP measure. This measure is not a financial measure calculated in accordance with GAAP, and it should not be considered as a substitute for net income, operating income, or any other measure calculated in accordance with GAAP, and may not be comparable to similarly titled measures reported by other companies.

Adjusted EBITDA

We believe Adjusted EBITDA is useful to investors to measure the operational strength and performance of our business. We believe the presentation of Adjusted EBITDA is useful as it provides investors additional information about our operating profitability adjusted for certain non-cash items, non-routine items we do not expect to continue at the same level in the future, as well as other items not core to our operations. Further, we believe Adjusted EBITDA provides a meaningful measure of operating profitability because we use it for evaluating our business performance, making budgeting decisions, and comparing our performance against other peer companies using similar measures.

We define Adjusted EBITDA as income (loss) from continuing operations 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; (ix) adjustments related to acquisitions, such as contingent consideration and purchase accounting adjustments, or dispositions; (x) impairment charges; and (xi) other income/gain or expense/loss items such as changes in fair value of certain financial instruments or financing and consent fees.

There are material limitations to using Adjusted EBITDA. Adjusted EBITDA does not take into account certain significant items, including depreciation and amortization, interest, taxes, and other adjustments which directly affect our income (loss) from continuing operations. These limitations are best addressed by considering the economic effects of the excluded items independently and by considering Adjusted EBITDA in conjunction with income (loss) from continuing operations as calculated in accordance with GAAP.

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The table below reconciles Adjusted EBITDA to income (loss) from continuing operations:

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(1)During 2024 and 2022, primarily relates to restructuring costs. During 2023, primarily includes integration and third-party strategic optimization costs, as well as restructuring costs.

(2)Includes the unrealized gain or loss on interest rate swaps presented in other income (expense).

(3)During 2022, represents the change in fair value of the Forward Contract (refer to Note 10 “Equity”).

(4)During 2023, primarily represents the gain on sale of a business and other investment, partially offset by loss on extinguishment of debt.

The drivers listed below exclude amounts that are outside of our definition of Adjusted EBITDA. Refer to the discussions above under “—Results of Operations” for further details.

The increase was primarily due to:

•higher M&S Revenue, net of the associated costs, of $108 million,

•higher other income of $43 million primarily due to higher income from the Commercial TSA, and

•lower advertising costs of $26 million, partially offset by

•higher provision for credit losses of $55 million and negative impacts from legal settlements of $37 million.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity and capital resources, along with our outstanding debt, primarily consist of the following:

Liquidity

We expect our ongoing sources of liquidity to include cash generated from operations, borrowings under our first lien revolving credit facility (the “First Lien Revolving Credit Facility”) and the 2020 Receivables Facility, and the issuance of equity and/or debt securities as appropriate given market conditions. Our future cash needs are expected to include cash for operating activities, working capital, capital expenditures, principal and interest payments on our debt, expected dividend payments to our stockholders, potential share repurchases under a share repurchase plan, and other business initiatives as they arise.

Our principal liquidity requirements are to finance current operations, invest in acquiring and retaining customers, purchase property and equipment, service our debt, invest in our information technology infrastructure, and return money to shareholders through dividends and share repurchases.

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Our liquidity requirements are primarily funded by our cash flows from operations. Cash inflows primarily include cash received from customers related to monthly recurring revenue from providing monitoring and other services, as well as cash from the sale and installation of our security systems. Cash outflows primarily relate to providing services to our customers, general and administrative costs, certain costs associated with acquiring new customers, interest payments, and taxes.

We are a highly leveraged company with significant debt service requirements and have both fixed-rate and variable-rate debt. We also entered into interest rate swaps to manage interest on our debt.

We may periodically seek to repay, redeem, repurchase, or refinance our indebtedness, or seek to retire or purchase our outstanding securities through cash purchases in the open market, privately negotiated transactions, a 10b5-1 repurchase plan, or otherwise, and any such transactions may involve material amounts. Cash outflows for interest payments are not consistent between quarters, with larger outflows occurring in the first and third quarters, and may vary as a result of our variable rate debt.

We are closely monitoring the impact of any inflationary pressures and changes in interest rates on our cash position. However, we believe our cash position, borrowing capacity available under our First Lien Revolving Credit Facility and 2020 Receivables Facility, and cash provided by operating activities are, and will continue to be, adequate to meet our operational and business needs in the next twelve months, as well as our long-term liquidity needs.

In addition, in 2023, we entered into a Receivables Financing Agreement with Mizuho Bank, Ltd. (the “Solar Receivables Financing Agreement”), which, among other things, provided for an uncommitted revolving loan facility in the aggregate principal amount of up to $300 million, which loans are secured by substantially all the assets of ADT Solar Finance LLC (“ADT Solar Finance”) (the “Solar Receivables Facility”). The Solar Receivables Facility expired in August 2024 with no amounts borrowed.

Material Cash Requirements

Our cash requirements within the next twelve months primarily include current maturities and interest on our long-term debt and leases, accounts payable and other current liabilities, purchase commitments and other obligations entered into in the ordinary course of business, and dividends on our common stock.

As of December 31, 2024, our significant short-term and long-term cash requirements, excluding cash required for operations, under our various contractual obligations and commitments primarily included:

•Debt principal – As of December 31, 2024, our expected future debt principal payments, excluding finance leases, totaled approximately $7.8 billion, with $170 million due in 2025 primarily related to payments on our 2020 Receivables Facility and the required quarterly principal payments on our First Lien Term Loan B due 2030.

As of December 31, 2024, our next debt maturity will occur in April 2026 with respect to the remaining outstanding balance of $1.35 billion of our First Lien Notes due 2026. On February 7, 2025, we issued a notice of partial redemption for $500 million of the First Lien Notes due 2026.

Refer to Note 7 “Debt” for further details of our debt and the timing of expected future principal payments.

•Interest payments – Future interest payments on our fixed-rate debt are based on the contractual terms. Future interest payments on our variable-rate debt and the effects of our interest rate swaps are based on SOFR, plus the applicable margin in effect as of December 31, 2024.

During 2024, we paid net cash interest of $372 million, including interest on interest rate swaps presented outside of operating activities. As of December 31, 2024, our expected future interest payments related to our debt and interest rate swap contracts totaled approximately $1.6 billion, with approximately $354 million due in 2025. Additionally, we expect to incur annual interest payments of approximately $310 - $325 million during each of the years 2026 - 2027 and approximately $195 - $240 million during each of the years 2028 and thereafter.

•Leases – As of December 31, 2024, our expected future operating and finance lease payments, including interest, totaled $192 million, with $54 million due in 2025.

Refer to Note 14 “Leases” for further details of our obligations and the timing of expected future payments.

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•Purchase obligations – Our material cash requirements for purchases of goods or services entered into in the ordinary course of business, including purchase orders and contractual obligations, primarily consist of information technology services and equipment, including investments in our information technology infrastructure, direct materials, and telecommunication services. Our future purchase obligations may be impacted by changes in our business or other internal or external factors. As our business continues to grow organically or through acquisitions, our obligations may grow as well.

As of December 31, 2024, our contractual obligations entered into in the ordinary course of business, including agreements that are enforceable and legally binding and have a remaining term in excess of one year, totaled approximately $561 million, with approximately $367 million expected to be paid in 2025.

These amounts include a commitment with one of our vendors to purchase at least $172 million of security system equipment and components through December 2025. This commitment is also satisfied through purchases made by the Company’s dealer network.

In addition, as of December 31, 2024, we had outstanding purchase orders of approximately $143 million primarily related to direct materials and information technology and marketing services, which are expected to be materially satisfied in 2025.

Refer to Note 13 “Commitments and Contingencies” for the amounts and timing of such payments.

•Google agreements – The Google Commercial Agreement requires us and Google to each contribute $150 million toward certain joint commercial efforts. Additionally, during 2022 we entered into the Google Commercial Agreement Amendment in which Google agreed to commit an additional $150 million. While the timing of these contributions is still uncertain, we expect to contribute the majority of our $150 million commitment under the Google Commercial Agreement by the end of 2026. During 2024 and 2023, $30 million and $40 million, respectively, of the Google Success Funds were reimbursed to the Company primarily for certain joint marketing expenses and customer acquisition costs incurred by the Company, substantially all of which was reflected as a reduction of advertising costs.

In addition, under the Google Cloud Agreement Addendum, the Company is obligated to make purchases from Google totaling $200 million over a seven-year period (through December 2030), with an aggregate of $35 million in the first two years, an aggregate of $65 million in the next two years after that, and an aggregate of $100 million in the last three years of the commitment. As of December 31, 2024, we are on track to meet these commitments.

•State Farm Opportunity Fund – Pursuant to the State Farm Development Agreement, State Farm committed up to $300 million to fund product and technology innovation, customer growth, and marketing initiatives. Upon the Closing of the State Farm Strategic Investment, we received $100 million of such commitment from State Farm, which is restricted until we use the funds for investment, as agreed upon with State Farm, in accordance with the State Farm Development Agreement. During 2024 and 2023, payments made from the Opportunity Fund were $14 million and $11 million, respectively.

•Customer account purchases – Our indirect channel customers are generated mainly through our ADT Authorized Dealer Program. As opportunities arise, we may engage in selective third-party account purchases, which typically involve the purchase of a set of customer accounts from other security service providers. For example, we paid initial cash at closings of $81 million and $89 million for customer accounts from third parties during 2024 and 2023, respectively.

•Taxes – During 2025, we expect to become a federal cash taxpayer. However, we are currently unable to determine the exact amount or timing of these payments.

In addition, we have $25 million of unrecognized tax benefits, excluding interest and penalties, related to various tax positions we have taken. These liabilities may increase or decrease over time primarily as a result of tax examinations, and given the status of the examinations, we cannot reliably estimate the period of any cash settlement with the respective taxing authorities.

Refer to Note 9 “Income Taxes” for further details.

•Dividends – Stockholders are entitled to receive dividends when, as, and if declared by our Board of Directors out of funds legally available for that purpose. On February 27, 2025, we announced a dividend of $0.055 per share to holders of Common Stock and Class B Common Stock of record on March 13, 2025, which will be distributed on or about April 3, 2025.

Refer to Note 10 “Equity” for further details on dividends declared and paid during 2024 and 2023.

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•Share repurchases – In February 2025, our Board of Directors announced the 2025 Share Repurchase Plan, pursuant to which the Company is authorized to repurchase, through April 30, 2026, up to a maximum aggregate amount of $500 million of shares of Common Stock.

As of the date of this 2024 Annual Report, the Company has not made any repurchases under the 2025 Share Repurchase Plan.

•Off-balance sheet arrangements – As of December 31, 2024, we had guarantees primarily related to standby letters of credit on our insurance programs totaling $74 million.

In February 2025, $21 million of our guarantees were relinquished.

We do not have any other arrangements giving rise to material obligations that are not reported in our consolidated balance sheets, as described in Item 303 of SEC Regulation S-K.

Cash Flow Analysis

The following table is a summary of our cash flow activity for the periods presented:

The discussion below includes cash flows from both continuing operations and discontinued operations consistent with the presentation on the Statements of Cash Flows.

Cash Flows from Operating Activities

The increase in net cash provided by operating activities for 2024 compared to 2023 was primarily due to a decrease in cash interest of $149 million primarily related to reduced principal balances on our debt, the benefit of lower outflows in the current year related to our former Solar Business, and improved operating performance. This increase was partially offset by the benefit received in the prior period associated with the results of the former Commercial Business as well as a current year outflow and prior year inflow related to legal settlements.

The remainder of the activity related to changes in assets and liabilities due to the volume and timing of other operating cash receipts and payments with respect to when the transactions are reflected in earnings. Refer to the discussions above under “—Results of Operations” for further details.

Cash Flows from Investing Activities

The change in net cash used in investing activities for 2024 compared to 2023 was primarily due to sales of businesses in the amount of $1,627 million, primarily related to the Commercial Divestiture in 2023. In addition, subscriber system assets expenditures decreased by $107 million due to a lower volume of transactions including those under a Company-owned model.

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Cash Flows from Financing Activities

The decrease in net cash used in financing activities for 2024 compared to 2023 was primarily due to:

•lower net repayments of $1,977 million primarily related to the partial redemptions in 2023 of our First Lien Term Loan B due 2026 and ADT Notes due 2024,

•share repurchases during 2024 of $241 million,

•a decrease in net proceeds under the 2020 Receivables Facility of $109 million primarily due to net repayments during 2024 as compared to net proceeds in 2023, and

•an increase in dividend payments of $54 million due to an increase in our quarterly dividend during 2024.

During 2024, both the proceeds and repayments of long-term borrowings on the Consolidated Statements of Cash Flows include the impact of $704 million from the refinancings of the First Lien Term Loan B due 2026.

During 2023, both the proceeds and repayments of long-term borrowings on the Consolidated Statements of Cash Flows include the impact of $230 million from the October refinancing of the First Lien Term Loan B due 2026.

Long-Term Debt

As of December 31, 2024, our debt (excluding finance leases and any deferred financing costs, discounts, premiums, or fair value adjustments) consisted of the following (in thousands):

Refer to Note 7 “Debt” for further details of our debt agreements, including interest rates, covenants, and other descriptions of these agreements.

First Lien Credit Agreement

Our first lien credit agreement dated as of July 1, 2015 (together with subsequent amendments and restatements, the “First Lien Credit Agreement”) consists of a term loan facility (the “First Lien Term Loan B due 2030,” and prior to October 2023, the “First Lien Term Loan B due 2026”) and a first lien revolving credit facility (the “First Lien Revolving Credit Facility”).

Below is a summary of key events related to the First Lien Credit Agreement since 2023:

•October 2023 - We redeemed approximately $1.3 billion of the First Lien Term Loan B due 2026 using net proceeds from the Commercial Divestiture.

•October 2023 - We amended and restated the First Lien Credit Agreement to refinance the remaining outstanding balance of the First Lien Term Loan B due 2026 with a new $1,375 million 7-year term First Lien Term Loan B due 2030.

•April 2024 - We amended and restated the First Lien Credit Agreement, which reduced the interest rate on the First Lien Term Loan B due 2030 from Term SOFR +2.50% to Term SOFR +2.25%.

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•May 2024 - We amended and restated the First Lien Credit Agreement, which included the exchange of $143 million principal amount of loans under the Company’s Term Loan A Facility for its First Lien Term Loan B due 2030. In addition, later that month, the Company further amended and restated the First Lien Credit Agreement, pursuant to which the Company incurred an additional $474 million of outstanding principal under the First Lien Term Loan B due 2030 with the proceeds used to pay off the remaining outstanding balance of the Company’s Term Loan A Facility.

•October 2024 - We amended and restated the First Lien Credit Agreement to extend the maturity date of the First Lien Revolving Credit Facility to October 2029, subject to a springing maturity of 91 days prior to the maturity date of certain long-term indebtedness if, as of such date, the outstanding principal amount of such indebtedness exceeds $350 million, and obtain an additional $225 million of First Lien Revolving Credit Facility commitments. After giving effect to the amendment, the aggregate amount of commitments under the First Lien Revolving Credit Facility is $800 million. Borrowings under the First Lien Revolving Credit Facility bear interest at a rate equal to either (a) Term SOFR with a floor of zero or (b) a base rate (“Base Rate”) determined by reference to the highest of (i) the federal funds rate plus 0.50% per annum, (ii) the rate of interest per annum last quoted by The Wall Street Journal as the “Prime Rate” in the United States and (iii) the one-month adjusted term SOFR plus 1.00% per annum, in each case, plus an applicable margin of 2.00% per annum for Term SOFR loans and 1.00% per annum for Base Rate loans, subject to two step-downs based on certain specified net first lien leverage ratios. In addition, the amendment reduced the commitment fee in respect of the First Lien Revolving Credit Facility to 0.30% per annum in respect of the unutilized commitments thereunder, subject to two step-downs based on certain specified net first lien leverage ratios.

•December 2024 - We amended and restated the First Lien Credit Agreement, which reduced the interest rate on the First Lien Term Loan B due 2030 from Term SOFR +2.25% to Term SOFR +2.00%.

In addition, during 2024, we borrowed and repaid $365 million under the First Lien Revolving Credit Facility.

We are required to make scheduled quarterly principal payments on the First Lien Term Loan B due 2030, with the remaining balance payable at maturity. We may make voluntary prepayments on the First Lien Term Loan B due 2030 at any time prior to maturity at par. Additionally, based on certain specified net first lien leverage ratios, we may be required to make annual prepayments on the outstanding First Lien Term Loan B due 2030 with a percentage of our excess cash flow, as defined in the First Lien Credit Agreement, if our excess cash flow exceeds a certain specified threshold, which is 0% if our net first lien leverage ratio is less than or equal to 2.20 to 1.00. As of December 31, 2024, we were not required to make any annual prepayments based on our excess cash flow.

In addition, we are required to pay a commitment fee between 0.20% and 0.30% (determined based on a net first lien leverage ratio) with respect to the unused commitments under the First Lien Revolving Credit Facility.

On February 7, 2025, the Company issued a notice of partial redemption for $500 million of the First Lien Notes due 2026, which will be redeemed on March 9, 2025. Prior to the issuance of such notice, certain lenders provided commitments that they will fund a new $600 million first lien seven-year term loan facility. The closing of this new facility, which remains subject to market and other customary conditions, is expected to occur on or around March 7, 2025. The Company intends to use proceeds of this new facility for the partial redemption of the First Lien Notes due 2026 among other general corporate purposes.

Term Loan A Facility

In March and June 2023, we borrowed aggregate principal amounts of $600 million and $50 million, respectively, of term loans under a senior secured term loan A facility (the “Term Loan A Facility”) and used the proceeds to redeem $650 million of the ADT Notes due 2023 (defined below).

In May 2024, we exchanged $143 million of loans under our Term Loan A Facility for our First Lien Term Loan B due 2030. In addition, later that month, we redeemed the remaining outstanding principal balance of $474 million of our Term Loan A Facility, excluding accrued and unpaid interest, using proceeds under the First Lien Term Loan B due 2030, as discussed above. As a result, the Term Loan A Facility has been terminated.

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First Lien Notes due 2024

As of December 31, 2024, we had fully redeemed the 5.250% first-priority senior secured notes due 2024 (the “First Lien Notes due 2024”) as a result of the following transactions:

•May 2023 - We redeemed $150 million principal amount of the outstanding First Lien Notes due 2024 for a redemption price of $150 million, excluding accrued and unpaid interest, using cash on hand.

•December 2023 - We redeemed $500 million principal amount of the outstanding First Lien Notes due 2024 for a redemption price of $500 million, excluding accrued and unpaid interest, using remaining net proceeds from the Commercial Divestiture and cash on hand.

•April 2024 - We redeemed the remaining outstanding principal balance of $100 million of the First Lien Notes due 2024 for a redemption price of $100 million, excluding accrued and unpaid interest, using proceeds from the Company’s First Lien Revolving Credit Facility.

First Lien Notes due 2026

The 5.750% first-priority senior secured notes due 2026 (the “First Lien Notes due 2026”) are due at maturity, and may be redeemed, in whole or in part, at any time at a make-whole premium plus accrued and unpaid interest to, but excluding, the redemption date.

Additionally, upon the occurrence of specified change of control events, we must offer to repurchase the First Lien Notes due 2026 at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

The indenture governing the First Lien Notes due 2026 also provides for customary events of default.

As discussed above, on February 7, 2025, the Company issued a notice of partial redemption for $500 million of the First Lien Notes due 2026, which will be redeemed on March 9, 2025.

First Lien Notes due 2027

The 3.375% first-priority senior secured notes due 2027 (the “First Lien Notes due 2027”) are due at maturity and may be redeemed at our option as follows:

•Prior to August 31, 2026, in whole at any time or in part from time to time, at a make-whole premium plus accrued and unpaid interest, if any, thereon to the redemption date.

•On or after August 31, 2026, in whole at any time or in part from time to time, at a redemption price equal to 100% of the principal amount of the First Lien Notes due 2027 redeemed plus accrued and unpaid interest, if any, thereon to the redemption date.

Additionally, upon the occurrence of specified change of control events, we must offer to repurchase the First Lien Notes due 2027 at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

The indenture governing the First Lien Notes due 2027 also provides for customary events of default.

First Lien Notes due 2029

The 4.125% first-priority senior secured notes due 2029 (the “First Lien Notes due 2029”) are due at maturity and may be redeemed at our option as follows:

•Prior to August 1, 2028, in whole at any time or in part from time to time, at a redemption price equal to the greater of (i) 100% of the principal amount of the First Lien Notes due 2029 to be redeemed and (ii) the sum of the present values of the aggregate principal amount of the First Lien Notes due 2029 to be redeemed and the remaining scheduled interest payments due on any date after the redemption date, to and including August 1, 2028, discounted at an adjusted treasury rate plus 50 basis points, plus, in either case accrued and unpaid interest as of, but excluding, the redemption date.

•On or after August 1, 2028, in whole at any time or in part from time to time, at a redemption price equal to 100% of the principal amount of the First Lien Notes due 2029 to be redeemed and accrued and unpaid interest as of, but excluding, the redemption date.

Additionally, upon the occurrence of specified change of control events, we may be required to purchase the First Lien Notes due 2029 at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

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The indenture governing the First Lien Notes due 2029 also provides for customary events of default.

Second Lien Notes due 2028

The 6.250% second-priority senior secured notes due 2028 (the “Second Lien Notes due 2028”) are due at maturity and may be redeemed at our option, in whole at any time or in part from time to time, at a redemption price equal to 100% (after January 15, 2025) of the principal amount of the Second Lien Notes due 2028 redeemed and accrued and unpaid interest as of, but excluding, the redemption date.

Additionally, upon the occurrence of specified change of control events, we must offer to repurchase the Second Lien Notes due 2028 at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

The indenture governing the Second Lien Notes due 2028 also provides for customary events of default.

ADT Notes

During 2023, the Company redeemed the then outstanding ADT Notes due 2023. The remaining outstanding ADT Notes due 2032 and ADT Notes due 2042 (collectively, the “ADT Notes”) are due at maturity, and may be redeemed, in whole at any time or in part from time to time, at a redemption price equal to the principal amount of the notes to be redeemed, plus a make-whole premium, plus accrued and unpaid interest as of, but excluding, the redemption date.

Additionally, upon the occurrence of specified change of control events, the Company must offer to repurchase the ADT Notes at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

The indentures governing the ADT Notes also provide for customary events of default.

Below is a summary of key events related to the ADT Notes due 2023 since 2023:

•March 2023 - The Company used the proceeds from the Closing Date Term Loan A Loans to redeem $600 million outstanding principal amount of the ADT Notes due 2023 for a total redemption price of $600 million, excluding any accrued and unpaid interest.

•June 2023 - The Company redeemed the remaining outstanding principal amount of $100 million for a total redemption price of $100 million using $50 million of proceeds from the Incremental Term Loan A Loans and the remaining from cash on hand.

2020 Receivables Facility

The 2020 Receivables Facility allows us to obtain financing by selling or contributing certain retail installment contract receivables to our wholly-owned consolidated bankruptcy-remote special purpose entity (“SPE”). The SPE grants a security interest in those retail installment contract receivables as collateral for cash borrowings under the 2020 Receivables Facility. The SPE borrower under the 2020 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 us (other than the SPE). Accordingly, the assets of the SPE are not available to pay our creditors (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 us and subsequently used by us (including to pay other creditors). The SPE’s creditors under the 2020 Receivables Facility have legal recourse to the transferred retail installment contract receivables owned by the SPE, and to us for certain performance and operational obligations relating to the 2020 Receivables Facility, but do not have any recourse to us (other than the SPE) for the payment of principal and interest on the advances under the 2020 Receivables Facility.

Below is a summary of significant amendments to the 2020 Receivables Facility since 2023:

•March 2023 - Increased the borrowing capacity from $400 million to $500 million and extended the uncommitted revolving period from May 2023 to March 2024, among other things.

•March 2024 - The Company amended the agreement governing the 2020 Receivables Facility, pursuant to which the uncommitted revolving period was extended from March 2024 to April 2024.

•April 2024 - The Company further amended the agreement governing the 2020 Receivables Facility, pursuant to which, among other things, the borrowing capacity was increased from $500 million to $550 million and the uncommitted revolving period was extended from April 2024 to April 2025. In addition, proceeds and repayments from the receivables facility include the impact of $32 million from the amendments described above.

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We service the transferred retail installment contract receivables and are responsible for ensuring related collections are remitted to a segregated account in the SPE’s name. On a monthly basis, the segregated bank account is utilized to make required principal, interest, and other payments due under the 2020 Receivables Facility. The segregated account is considered restricted cash in our Consolidated Balance Sheets.

Proceeds and repayments under the 2020 Receivables Facility since 2023 were as follows:

•2024: Proceeds of $229 million and repayments of $257 million.

•2023: Proceeds of $282 million and repayments of $200 million.

Debt Covenants

Our credit agreements and indentures associated with the borrowings above contain certain covenants and restrictions that limit our ability to, among other things, incur additional debt or issue certain preferred equity interests; create liens on certain assets; make certain loans or investments (including acquisitions); pay dividends on or make distributions in respect of the capital stock or make other restricted payments; consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets; sell assets; enter into certain transactions with affiliates; enter into sale-leaseback transactions; restrict dividends from our subsidiaries or restrict liens; change our fiscal year; and modify the terms of certain debt or organizational agreements.

We are also subject to a springing financial maintenance covenant under the First Lien Credit Agreement, which requires us to not exceed a specified first lien leverage ratio at the end of each fiscal quarter if the testing conditions are satisfied. The covenant is tested if the outstanding loans under the First Lien Revolving Credit Facility, subject to certain exceptions, exceed 30% of the total commitments under the First Lien Revolving Credit Facility at the testing date (i.e., the last day of any fiscal quarter).

As of December 31, 2024, we were in compliance with all financial covenant and other maintenance tests for all our debt obligations, and we do not believe there is a material risk of future noncompliance with our financial covenant and other maintenance tests.

CRITICAL ACCOUNTING ESTIMATES

The accompanying consolidated financial statements are prepared in accordance with GAAP, which requires us to select accounting policies and make estimates that affect amounts reported in the financial statements and the accompanying notes. Management’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 following discussion includes estimates prepared in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations, and are based on, among other things, estimates, assumptions, and judgments made by management that include inherent risks and uncertainties. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

Refer to the Notes to Consolidated Financial Statements included in this Annual Report for further discussion of our significant accounting policies and the effect on our financial statements.

Revenue Recognition

We generate revenue through contractual monthly recurring fees received for monitoring and related services provided to customers as well as the sale and installation of security systems. Prior to the ADT Solar Exit, we also generated revenue through the sale and installation of solar systems. We allocate the transaction price to each performance obligation in contracts with our customers using estimates of standalone selling price. We use judgment to determine the standalone selling prices for our performance obligations. If a standalone selling price is not directly observable, we may use other observable internal and external pricing, profitability, and certain operational metrics.

Estimated Life of Customer Relationships

A significant portion of our depreciation and amortization is based on the expected life of our customer relationships. We periodically perform lifing studies to (i) estimate the expected life of our customer relationships and the attrition pattern of our customers; (ii) establish the amortization rates of our customer account pools discussed below in order to reflect the pattern of future economic benefit; and (iii) assess the continued reasonableness of our existing depreciation and amortization policies.

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The results of the lifing studies are based on historical customer terminations. The lifing studies indicate that we can expect attrition to be the greatest in the initial years of asset life. Therefore, to align our depreciation and amortization to the pattern in which the related economic benefits are consumed, we use an accelerated method that best matches the future amortization cost with the estimated revenue stream from these customer pools.

Subscriber System Assets and Deferred Subscriber Acquisition Costs - Subscriber system assets and any related deferred subscriber acquisition costs are accounted for on a pooled basis based on the month and year of acquisition. We depreciate and amortize these assets using an accelerated method over the estimated life of the customer relationship, which is 15 years, using an average declining balance rate of approximately 250% that converts to straight-line methodology when the resulting charge is greater than that from the accelerated method. This results in an average charge of approximately 55% of the pool within the first five years, 25% within the second five years, and 20% within the final five years.

Customer Account Purchases - Purchases of contracts with customers under the ADT Authorized Dealer Program, or from other third parties, are considered asset acquisitions and are recognized based on the cost to acquire the assets, which may include cash consideration, non-cash consideration, contingent consideration, and directly-attributable transaction costs. These assets are accounted for on a pooled basis based on the month and year of acquisition. Based on the results of our lifing studies, we amortize our pooled contracts with customers using an accelerated method over the estimated life of the customer relationship, which is generally 15 years using an average declining balance rate of approximately 300% that converts to straight-line methodology when the resulting amortization charge is greater than that from the accelerated method. This results in an average amortization of approximately 65% of the pool within the first five years, 25% within the second five years, and 10% within the final five years.

The accelerated methods and estimated lives used to calculate depreciation and amortization expense have not changed during the periods presented. Additionally, these estimates remain relatively consistent year over year due to the large and homogenous nature of our customer pools. Significant changes in our business model, such as a reduction in the number of customers under multi-year contracts, or a prolonged shift in our attrition patterns, could impact the expected life of our customer relationships.

Goodwill

Goodwill and indefinite-lived intangible assets (as discussed below) are not amortized and are tested for impairment at least annually as of the first day of the fourth quarter of each year and more often if an event occurs or circumstances change which indicate it is more-likely-than-not that fair value is less than carrying amount. Under a qualitative approach, we assess whether it is more-likely-than-not that a reporting unit’s fair value is less than its carrying amount. Under a quantitative approach, we estimate the fair value of a reporting unit and compare it to its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized.

On October 1, 2024, we completed our annual goodwill impairment test by qualitatively testing the goodwill assigned to the Company’s reporting unit. Based on the results of the qualitative test, we concluded that it is more likely than not that the fair value of the Company’s reporting unit exceeds its carrying value and no impairment was recognized.

In prior years’ quantitative impairment tests, we estimated the fair value of the reporting unit using the income approach, which discounts projected cash flows using market participant assumptions. The income approach includes significant assumptions including, but not limited to, forecasted revenue, operating profit margins, Adjusted EBITDA margins, operating expenses, cash flows, perpetual growth rates, and discount rates. In developing these assumptions, we rely on various factors including operating results, business plans, economic projections, anticipated future cash flows, and other market data.

The estimated fair value of a reporting unit calculated using the income approach is sensitive to changes in the underlying assumptions. Examples of events or circumstances that could reasonably be expected to negatively affect the underlying judgments and factors and ultimately impact the estimated fair value determinations may include such items as a prolonged downturn in the business environment, changes in economic conditions that significantly differ from our assumptions in timing or degree, volatility in equity and debt markets resulting in higher discount rates, and unexpected regulatory changes. As a result, there are inherent uncertainties related to these judgments and factors in applying them to the goodwill impairment tests.

The Company previously recorded goodwill impairment charges associated with the Solar reporting unit, which are now presented in income (loss) from discontinued operations, net of tax.

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Indefinite-Lived Intangible Assets

As of December 31, 2024, our only indefinite-lived intangible asset is the ADT trade name, which has a carrying value of $1.3 billion. The ADT trade name was acquired in connection with the ADT Acquisition in May 2016. When performing a quantitative impairment test, the fair value of the ADT trade name is determined using a relief from royalty method, which is an income approach that estimates the cost savings that accrue to us that we would otherwise have to pay in the form of royalties or license fees on revenue earned through the use of the asset. The utilization of the relief from royalty method requires us to make significant assumptions including revenue growth rates, the implied royalty rate, and the discount rate.

We performed a quantitative impairment test over the ADT trade name as of October 1, 2024 and 2023, and the fair value of the ADT trade name substantially exceeded its carrying value as of each testing date. In connection with our quantitative impairment test, we perform a sensitivity analysis on the key assumptions used to determine the fair value of the ADT trade name. During the periods presented, the results of our sensitivity analysis did not have a material impact on the conclusions reached.

We may, in future periods, perform a qualitative testing approach, where we assess whether it is more-likely-than-not that the ADT trade name’s fair value is less than its carrying amount.

Business Combinations

We account for the acquisitions of businesses using the acquisition method of accounting. The assets acquired and liabilities assumed in connection with business acquisitions are recorded at the date of acquisition at their estimated fair values, with any excess of the purchase price over the estimated fair values of the net assets acquired recorded as goodwill.

We use various methods to determine fair value depending on the type of assets acquired and liabilities assumed. We make estimates and assumptions about projected future cash flows including, but not limited to, forecasted revenue, Adjusted EBITDA margins, operating expenses, cash flows, perpetual growth rates, and discount rates.

Significant judgment is required in estimating the fair value of assets acquired and liabilities assumed and in assigning useful lives to certain definite-lived intangible and tangible assets. Accordingly, we may engage third-party valuation specialists to assist in these determinations. The fair value estimates are based on information available as of the acquisition date and assumptions deemed reasonable by management but are inherently uncertain.

Customer Relationships - Customer relationships acquired as part of business acquisitions are generally amortized over a period of up to 15 years based on management estimates about the amounts and timing of estimated future revenue from customer accounts and average customer account life that existed at the time of the related business acquisition. The majority of our customer relationships acquired in business combinations that originated from the Formation Transactions and the ADT Acquisition were fully amortized during 2023.

Dealer Relationships - Dealer relationships originated from the Formation Transactions and the ADT Acquisition and are primarily amortized on a straight-line basis over 19 years based on management estimates about the longevity of the underlying dealer network and the attrition of those respective dealers that existed at the time of the related business acquisition.

During 2024, 2023, and 2022, other definite-lived intangible assets acquired in business acquisitions were not material, and we have not recorded any material measurement period adjustments to purchase price allocations.

Income Taxes

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the temporary differences between the recognition of revenue and expenses for income tax and financial reporting purposes and between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements. We record the effect of a tax rate or law change on our deferred tax assets and liabilities in the period of enactment. Future tax rate or law changes could have a material effect on our results of operations, financial condition, or cash flows.

In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence, including our past operating results, the existence of cumulative losses in the most recent years, and our forecast of future taxable income. In estimating future taxable income, we develop assumptions related to the amount of future pre-tax operating income, the timing and amount of the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage our underlying businesses.

We recognize positions taken or expected to be taken in a tax return in the consolidated financial statements when it is more-likely-than-not that the position would be sustained upon examination by tax authorities. A recognized tax position is then

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measured at the largest amount of benefit with greater than 50% likelihood of being realized upon ultimate settlement. We record liabilities for positions that have been taken but do not meet the more-likely-than-not recognition threshold. We adjust the liabilities for unrecognized tax benefits in light of changing facts and circumstances; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a change to the estimated liabilities, along with impacts to the effective tax rate and cash tax.

Refer to Note 9 “Income Taxes” for details on our valuation allowances and unrecognized tax benefits.

ACCOUNTING PRONOUNCEMENTS

Refer to Note 1 “Description of Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Item 15 for further discussion about recent accounting pronouncements.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Table of Contents

•Introduction

•Business and Basis of Presentation

•Factors Affecting Operating Results

•Key Performance Indicators

•Results of Operations

•Non-GAAP Measures

•Liquidity and Capital Resources

•Critical Accounting Estimates

•Accounting Pronouncements

INTRODUCTION

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report. This section is intended to (i) provide material information relevant to the assessment of our results of operations and cash flows; (ii) enhance the understanding of our financial condition, changes in financial condition, and results of operations; and (iii) discuss material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be necessarily indicative of future performance or of future financial condition.

Included below are year-over-year comparisons between 2023 and 2022. The Company is including a year-over-year comparison between 2022 and 2021, under such headings, for selling, general, and administrative expenses and Adjusted EBITDA, which were impacted by the Commercial Divestiture and classification of the Commercial Business as a discontinued

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operation. The classification of the Commercial Business as a discontinued operation did not impact the remaining discussions on results of operations. Such discussions generally included analysis specific to activities within a certain business segment, and therefore, the explanations did not materially change as a result of such classification. For further information on year-over-year comparisons between 2022 and 2021 not impacted by the Commercial Divestiture, refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Amended 2022 Annual Report, which was filed with the SEC on July 27, 2023.

The following discussion and analysis contains forward-looking statements about our business, operations, and financial performance based on current plans and estimates involving risks, uncertainties, and assumptions, which could differ materially from actual results. Factors that could cause such differences are discussed in the sections of this Annual Report titled Item 1A “Risk Factors” and “Cautionary Statements Regarding Forward-Looking Statements.”

Unless otherwise noted, the discussions below relate to the Company’s continuing operations.

BUSINESS AND BASIS OF PRESENTATION

ADT Inc. is a leading provider of security, interactive, and smart home solutions serving residential and small business customers in the U.S. Our mission is to empower people to protect and connect what matters most with safe, smart, and sustainable solutions, delivered through innovative offerings, unrivaled safety, and a premium experience because we believe that everyone deserves to feel safe.

As discussed below, on October 2, 2023, we completed the divestiture of our Commercial Business, which provided security and other solutions to commercial customers; and in January 2024, we announced our plans to exit the residential solar business.

All financial information presented in this section has been prepared in U.S. dollars and in accordance with GAAP, excluding our Non-GAAP measures, and includes the accounts of ADT Inc. and its subsidiaries. All intercompany transactions have been eliminated. Since the Commercial Divestiture, we report current and historical financial and operating information for our two remaining segments, CSB and Solar.

For a more detailed discussion of our business, segments, and basis of presentation, refer to Item 1 “Business” and Note 1 “Description of Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Item 15 “Exhibit and Financial Statement Schedules.”

FACTORS AFFECTING OPERATING RESULTS

The factors described herein could have a material adverse effect on our business, financial condition, results of operations, cash flows, and/or key performance indicators.

As of December 31, 2023, we served approximately 6.4 million security monitoring service subscribers. Generally, a significant upfront investment is required to acquire new subscribers, that in turn provide ongoing and predictable recurring revenue. Although the economics of an installation may vary depending on the customer type, acquisition channel, and product offering, we generally achieve revenue break-even in approximately two years.

Our CSB results are impacted by the mix of transactions under a Company-owned equipment model versus a customer-owned equipment model (referred to as outright sales), as there are different accounting treatments applicable to each model, as well as the mix, price, and type of offerings sold (see Note 2 “Revenue and Receivables”). Since March 2021, substantially all new professionally installed CSB transactions have taken place under a Company-owned model. As we continue to build our partnership with Google, introduce new or enhance current offerings, and refine our go-to-market approach, we expect to see a shift toward an increasing proportion of outright sales transactions, which will impact results in future periods when those changes occur. We have experienced, and expect to continue to experience, an increase in the proportion of ADT self set-up customers, which are considered outright sales and typically have lower monthly recurring fees than our professional installations, but we believe will allow us to grow our subscriber base through access to the fast-growing do-it-yourself (“DIY”) market.

The prices we are able to charge for our products and services are impacted by the type, quality, and complexity of the offerings that we provide; the introduction of additional features and offerings that increase value to the customer; and the competitive and macroeconomic environments in which we operate.

Demand for our offerings may be impacted by the overall economic conditions in the geographies in which we operate, the price and quality of our offerings compared to those of our competitors, as well as changes in competition such as from the acquisition or disposition of similar businesses by us or our competitors. Growth in our CSB segment can be impacted by the

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overall state of the housing market, the perceived threat of crime, the occurrence of significant life events such as the birth of a child or opening of a new business, or the availability of financial incentives provided by insurance carriers.

New customer additions and customer attrition have a direct impact on our financial results, including revenue, operating income, and cash flows. A portion of our CSB recurring customer base can be expected to cancel service each year as customers may choose to terminate or not to renew their contracts for a variety of reasons including, but not limited to, relocation, loss to competition, cost, or service issues. Relocations are sensitive to changes in the residential housing market, and fewer relocations generally lead to improvements in gross customer revenue attrition but less new customer additions. Additionally, non-payment disconnects generally increase in a weaker macroeconomic environment.

For example, during 2022 and 2023, we experienced fewer relocation disconnects and higher non-pay disconnects largely related to housing market conditions and the weaker macroeconomic environment. As a result of continued changes in the macroeconomic environment, we are currently unable to determine whether there will be any ongoing or further impacts on these trends, and we may continue to experience fluctuations in these or other trends in the future.

Seasonality and weather-related incidents or natural disasters such as hurricanes and winter storms may impact certain areas in which we operate resulting in power outages and service disruptions to certain of our customers. Depending on the severity and nature of the event, material impacts may occur as a result of these incidents.

We have made significant progress toward increasing the variety of our offerings to accommodate increased consumer interest in automated security and other mobile technology applications due to advancements in technology, younger generations of consumers, and shifts to de-urbanization. Advances in technology are also helping us to improve our offerings and reduce certain costs. For example, our Virtual Assistance Program provides our customers the ability to troubleshoot and resolve certain service issues, as well as other functions, through a live video stream with our skilled technicians. This provides customers with more options for receiving certain services that best fit their lifestyles while reducing our costs and eliminating thousands of vehicle trips each day.

We may experience an increase in costs associated with factors, including but not limited to (i) offering a wider variety of products and services; (ii) providing a greater mix of interactive and smart home solutions; (iii) replacing or upgrading certain system components due to technological advancements, cybersecurity upgrades, or otherwise; (iv) supply chain disruptions; (v) inflationary pressures on costs such as materials, labor, and fuel; and (vi) other changes in prices, interest rates, or terms from our suppliers or vendors, or third party lenders. Changes in interest rates or terms from third-party lenders or our other financing partners are impacted by factors such as increases in the benchmark interest rate or other developments in the financial markets. We aim to continuously evaluate and respond to changes in the above to drive efficiencies and meet customer demands.

As part of our response to changes or pressures in the current macroeconomic environment, we have been evaluating, and continue to evaluate, cost-saving opportunities such as reducing headcount or our physical facilities footprint when appropriate, and reducing non-essential spend. While we have experienced some increase in costs as a result of inflation, we have, for the most part, been able to offset the rising costs through price increases to our customers, as well as cost-saving opportunities.

Commercial Divestiture

As discussed in Note 1 “Description of Business and Summary of Significant Accounting Policies” and Note 5 “Divestitures,” on October 2, 2023, GTCR acquired all of the issued and outstanding equity interests of the entities comprising our Commercial Business for a total purchase price of approximately $1,613 million in cash, subject to certain customary adjustments as set forth in the Commercial Purchase Agreement. We received net proceeds of approximately $1,585 million, excluding transaction costs of $22 million, and recognized a gain on the sale of approximately $630 million, which is reflected in income (loss) from discontinued operations, net of tax. We used the majority of the net proceeds from the Commercial Divestiture for debt reduction (see Note 8 “Debt”).

The results of the Commercial Business through the date of sale are reported as a discontinued operation for current and historical periods. Additionally, the cash flows and comprehensive income (loss) of the Commercial Business through the date of sale have not been segregated and are included in the Consolidated Statements of Cash Flows and Consolidated Statements of Comprehensive Income (Loss), respectively, for all periods presented.

Gross customer revenue attrition and recurring monthly revenue (as defined and discussed below) have been presented for the current period, and recast for prior periods, to reflect only the CSB segment.

During the fourth quarter of 2023, we began recording income associated with the Commercial TSA, which is recognized in other income (expense) and was not material during 2023. However, the Commercial TSA is expected to be material in future periods during the transitional period of up to 24 months after the closing of the Commercial Divestiture.

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During 2023, we utilized a significant portion of our net operating losses (“NOLs”) to offset the gain generated from the sale of the Commercial Business. As of December 31, 2023, we expect to utilize our remaining NOLs during 2024. The Company expects to become a federal cash taxpayer in 2024 or 2025 depending on future losses generated by the business, specifically with regard to the closure of the Solar business.

Unless otherwise noted, our results of operations discussed below relate to continuing operations and will be impacted by the Commercial Divestiture.

ADT Solar Exit

As previously disclosed, in November 2023, we announced a plan to streamline the solar business to focus on the top performing markets and rationalize the overhead and infrastructure of the business. As part of this plan, we closed a significant number of branches that operate the solar business along with making associated headcount reductions.

On January 19, 2024, after a strategic review of the business and continued macroeconomic and industry pressures, the Company’s Board of Directors approved a plan to fully exit the residential solar business, which may include the transition of components of the business to other parties. The ADT Solar Exit is expected to be completed during 2024.

As of December 31, 2023, charges and cash expenditures related to the ADT Solar Exit have not been material.

In connection with the ADT Solar Exit, we currently expect to incur additional aggregate charges of approximately $70 million - $110 million, related to (a) employee separation costs of approximately $7 million - $10 million, (b) long-lived asset impairments and write-off of deferred implementation costs associated with cloud computing arrangements of approximately $16 million - $20 million, (c) contract termination charges of approximately $6 million - $10 million, (d) the write-down and disposition of inventory on hand of approximately $15 million - $22 million, and (e) other charges of approximately $26 million - $48 million, which primarily relates to the impact associated with the disposition of the existing installation pipeline.

We expect to incur future aggregate cash expenditures associated with the ADT Solar Exit of approximately $50 million - $70 million.

The ADT Solar Exit is expected to be completed during 2024.

The estimated charges and cash expenditures resulting from these actions could change materially, including that the Company may incur additional charges and cash expenditures due to various factors including unknown or unforeseen costs as part of these actions.

Google Partnership Update

The Google Commercial Agreement specifies each party shall contribute $150 million toward the joint marketing of devices and services; customer acquisition; employee training; and technology updates. Each party is required to contribute such funds in three equal tranches, subject to the attainment of certain milestones. In August 2022, we amended the Google Commercial Agreement, pursuant to which Google has agreed to commit an additional $150 million to further fund, as mutually agreed to by us and Google, growth, data and insights, product innovation and technology advancements, customer acquisition, and marketing. The additional funds will be contributed in three equal tranches, subject to the attainment of certain milestones.

During 2023, we were reimbursed $40 million for certain joint marketing expenses we incurred.

In December 2023, the Company and Google entered into the Google Cloud Agreement Addendum, pursuant to which Google has agreed to provide certain credits, discounts, and other incentives for use of the Google Cloud Platform to the Company, and the Company has committed to purchasing $200 million of Google Cloud Platform services over seven years (through December 2030), as discussed in Note 14 “Commitments and Contingencies” in the Notes to Consolidated Financial Statements.

Additionally, during 2023, we launched our proprietary ADT+ app for our self setup line of DIY smart home security products, including Google Nest offerings. During the fourth quarter of 2023, we began our phased rollout of our ADT+ app for professional installation along with a new interactive and hardware lineup.

Tax Matters

Federal Tax Legislation

Certain changes to U.S. federal tax law included in the Tax Cuts and Jobs Act of 2017 had a delayed effective date until 2022. Under IRC Section 163(j), the limitation on net business interest expense deductions are no longer increased by deductions for depreciation, amortization, or depletion. Under IRC Section 174, specified research and experimentation expenditures are now

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capitalized and amortized. These items have resulted in increased taxable income and an acceleration of our net operating loss utilization.

Potential for Future Valuation Allowance

The valuation allowance for deferred tax assets relates to the uncertainty of the utilization of certain U.S. federal and state deferred tax assets. In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available positive and negative evidence, including enacted legislation such as the updates described above, which impact our assessment of whether a valuation allowance is needed.

We believe that our deferred tax asset for disallowed interest under IRC Section 163(j) will continue to grow from its current level. There is currently significant uncertainty in the matters we consider when evaluating our valuation allowance needs. Any material change to our valuation allowance in subsequent periods could materially and adversely impact our operating results.

Other Updates

State Farm Partnership

Beginning in 2023, certain State Farm customers were able to receive ADT home security products and professional monitoring at a reduced cost as part of the partnership between ADT and State Farm. In addition, through this program, ADT has access to certain State Farm customers, which provide opportunities to reach additional markets. As of December 31, 2023, the State Farm partnership operated in 13 states in the U.S. During 2023, we used approximately $9 million of the Opportunity Fund for project initiatives.

Refer to Note 11 “Equity” in the Notes to Consolidated Financial Statements for further information.

Radio Conversion Program

During 2019, we commenced a program to replace the 3G and CDMA cellular equipment used in many of our security systems as a result of the cellular network providers retiring their 3G and CDMA networks by the end of 2022. The program was completed in 2023, and we incurred a total of $276 million net radio conversion costs throughout the program, the majority of which was incurred in 2021.

For those customers who did not transition prior to or have not transitioned since the applicable network sunset, the loss of signal to our security systems and certain services we provide may impact our ability to bill and/or collect from these customers in the future and may impact our attrition. This impact has not been, and is not expected to be, material.

KEY PERFORMANCE INDICATORS

We evaluate our results using certain key performance indicators, including the operating metrics recurring monthly revenue (“RMR”) and gross customer revenue attrition, as well as the non-GAAP measure Adjusted EBITDA. Computations of our key performance indicators may not be comparable to other similarly titled measures reported by other companies.

Certain operating metrics are approximated, as there may be variations to reported results due to certain adjustments we might make in connection with the integration over several periods of acquired companies that calculated these metrics differently or periodic reassessments and refinements in the ordinary course of business, including changes due to system conversions or historical methodology differences in legacy systems.

RMR

RMR is generated by contractual recurring fees for monitoring and other recurring services provided to our CSB customers, including contracts monitored but not owned.

We use RMR to evaluate our overall sales, installation, and retention performance. Additionally, we believe the presentation of RMR is useful to investors because it measures the volume of revenue under contract at a given point in time, which is a useful measure for forecasting future revenue performance as the majority of our revenue comes from recurring sources.

Gross Customer Revenue Attrition

Gross customer revenue attrition for our CSB segment is defined as RMR lost as a result of customer attrition, net of dealer charge-backs and reinstated customers, excluding contracts monitored but not owned and self-setup/DIY customers. Customer

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sites are considered canceled when all services are terminated. Dealer charge-backs represent customer cancellations charged back to the dealers because the customer canceled service during the charge-back period, which is generally thirteen months.

Gross customer revenue attrition is calculated on a trailing twelve-month basis, the numerator of which is the RMR lost during the period due to attrition, net of dealer charge-backs and reinstated customers, and the denominator of which is total annualized RMR based on an average of RMR under contract at the beginning of each month during the period, in each case, excluding contracts monitored but not owned and self-setup/DIY customers.

We use gross customer revenue attrition to evaluate our CSB retention and customer satisfaction performance, as well as evaluate subscriber trends by vintage year. Additionally, we believe the presentation of gross customer revenue attrition is useful to investors as it provides a means to evaluate drivers of customer attrition and the impact of retention initiatives.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP measure. Our definition of Adjusted EBITDA, a reconciliation of Adjusted EBITDA to income (loss) from continuing operations (the most comparable GAAP measure), and additional information, including a description of the limitations relating to the use of Adjusted EBITDA, are provided under “—Non-GAAP Measures.”

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RESULTS OF OPERATIONS

_______________________

(1)Refer to the “Key Performance Indicators” section for the definitions of these key performance indicators.

(2)Adjusted EBITDA is a non-GAAP measure. Refer to the “Non-GAAP Measures” section for the definition of this term and reconciliation to the most comparable GAAP measure.

N/A—Not applicable.

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2023 Compared to 2022

Revenue

Monitoring and related services revenue (“M&S Revenue”) primarily comprises revenue generated from providing recurring monthly monitoring and other services, as well as revenue from time and materials billings. Security installation, product, and other revenue comprises installation revenue from the sale and installation of our security systems sold under a customer-owned model, as well as the recognition of revenue that is deferred upon initiation of a monitoring contract in transactions occurring under a Company-owned model (amortization of deferred subscriber acquisition revenue). Solar installation, product, and other revenue comprises revenue from the sale and installation of our solar systems and energy-storage solutions.

Revenue, as compared to the prior period, primarily reflects:

•CSB M&S Revenue: higher recurring revenue of $127 million primarily driven by an increase in average prices.

•CSB Security installation, product, and other: (i) an increase in installation revenue of $78 million primarily driven by a higher volume of outright sales transactions and higher installation revenue per unit associated with new customers under the outright sales transaction model, as well as (ii) an increase of $67 million in the amortization of deferred subscriber acquisition revenue associated with customers under a Company-owned model.

•Solar installation, product, and other: fewer sales and installations as a result of impacts from macroeconomic conditions, including higher interest rates.

The increase in RMR, as compared to the prior period, was primarily due to an increase in average prices on new and existing subscribers.

Gross customer revenue attrition, as compared to the prior period, remained relatively flat, reflecting higher non-payment and other disconnects, primarily offset by a decrease in relocations.

Cost of Revenue

Monitoring and related services costs (“M&S Costs”) primarily comprises field service and call center costs incurred from providing recurring monthly monitoring and other services. Security and solar installation, product, and other costs comprise costs incurred from the installation of our security and solar systems, respectively.

Cost of revenue, as compared to the prior period, primarily reflects:

•CSB Security installation, product, and other: an increase in installation costs due to a higher volume of outright sales transactions, partially offset by a lower volume of in-person service tickets as a result of our Virtual Assistance Program.

•Solar installation, product, and other: a decrease in installation costs due to fewer sales and installations as discussed above.

Selling, General, and Administrative Expenses (“SG&A”)

The decrease in SG&A, as compared to the prior period, was primarily due to a decrease in our Solar segment of $123 million.

CSB remained relatively flat, and primarily included:

•a decrease of $39 million in general and administrative expenses, including a legal settlement earned in 2023,

•a decrease of $28 million in radio conversion costs due to the wind down of the replacement program,

•a decrease of $15 million in advertising costs, primarily due to the receipt of the Google Success Funds, partially offset by increased advertising spend and

•a decrease of $14 million in stock-based compensation as a result of grants that became fully vested in March 2023 associated with one-time grants from 2020, offset by:

•an increase of $50 million in the allowance for credit losses primarily related to residential customers and

•an increase of $47 million in selling costs primarily related to the amortization of deferred subscriber acquisition costs and commissions.

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Depreciation and Intangible Asset Amortization (“D&A”)

The decrease in D&A was primarily driven by a decrease in the amortization of customer relationship intangible assets of $309 million, primarily related to certain assets acquired as part of the ADT Acquisition, which became fully amortized during the first quarter of 2023. This decrease was partially offset by an increase in the amortization of customer contracts acquired under our authorized dealer program and from other third parties of $15 million, as well as an increase in the depreciation of subscriber system assets of $14 million.

Merger, Restructuring, Integration, and Other

Merger, restructuring, integration, and other varies year over year and generally represents certain direct and incremental costs resulting from acquisitions, integration and optimization costs as a result of those acquisitions, costs related to restructuring efforts, as well as fair value remeasurements and impairment charges on certain strategic investments.

During 2023, the increase in merger, restructuring, integration, and other, as compared to the prior year period, was driven by increases in restructuring costs of $20 million primarily related to severance benefits and facility exits and third-party costs of $16 million primarily related to the strategic optimization of our Solar segment.

Goodwill Impairment

During 2023 and 2022, we recorded goodwill impairment charges of $511 million and $201 million, respectively, associated with our Solar reporting unit. Following the impairments during 2023, the balance of goodwill in the Solar reporting unit was zero. Refer to Note 7 “Goodwill and Other Intangible Assets” and the section “—Critical Accounting Estimates” below for further discussion.

Interest Expense, net

During 2023, the increase in interest expense, net, as compared to the prior year period, was primarily driven by:

•a decrease in net unrealized gains of $324 million on our interest rate swaps not designated as cash flow hedges,

•higher interest expense of $59 million related to the term loan under our First Lien Credit Agreement, and

•$25 million of expense recorded during 2023 associated with the reclassification from AOCI of historical losses related to certain interest rate swaps as those cash flows are probable of not occurring as a result of the partial redemption of our First Lien Term Loan due 2026 in October 2023, partially offset by

•a decrease of $96 million related to settlements on our interest rate swaps.

Loss on Extinguishment of Debt

Loss on extinguishment of debt includes the payment of call and redemption premiums, the write-off of unamortized deferred financing costs and discounts, and certain other expenses associated with extinguishment of debt.

During 2023, loss on extinguishment of debt totaled $17 million and was primarily due to the write-off of unamortized discount and debt issuance costs associated with the partial redemption and refinancing of the First Lien Term Loan due 2026.

Other Income (Expense)

During 2023, other income (expense) primarily included income from the Commercial TSA.

During 2022, other income (expense) primarily included a net loss of $63 million in connection with the Tender Offer as a result of the change in fair value of the Forward Contract.

Income Tax Benefit (Expense)

Our income tax benefit (expense) during 2023 was $(5) million, resulting in an effective tax rate for the period of (6.9)%. The effective tax rate primarily represents the federal statutory rate of 21.0%, state income taxes, net of federal benefits of (9.4)%, an 8.7% favorable impact related to a decrease in unrecognized tax benefits, an 8.0% favorable impact from the net impact of acquisitions and dispositions related to the revaluation of our net deferred tax liability, offset by a (9.5)% unfavorable impact from permanently non-deductible items, a (22.8)% unfavorable impact related to non-deductible solar goodwill impairment

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charges, and a (5.9)% unfavorable impact related to non-deductible goodwill on dispositions, primarily related to the sale of the Commercial business.

Our income tax benefit (expense) during 2022 was $(38) million, resulting in an effective tax rate for the period of 25.3%. The effective tax rate primarily represents the federal statutory rate of 21.0%, state income taxes, net of federal benefits of 6.8%, a (6.1)% favorable impact from a decrease in unrecognized tax benefits, a (5.7)% favorable impact from legislative changes, an (8.0)% favorable impact from federal credits, offset by a 13.3% unfavorable impact from permanently non-deductible items, primarily related to the fair value adjustment of the Forward Contract, and a 4.0% unfavorable impact from non-deductible solar goodwill impairment charges.

Refer to Note 10 “Income Taxes” for details on our effective tax rate.

Equity in Net Earnings (Losses) of Equity Method Investee

During the fourth quarter of 2023, we sold our shares in Canopy. As a result, we received $21 million of recovered proceeds and recognized a net gain on sale of our equity method investment of $15 million. Refer to Note 6 “Equity Method Investments” for further details.

2022 compared to 2021

Selling, General, and Administrative Expenses (“SG&A”)

The increase in SG&A, as compared to the prior period, was primarily driven by incremental expenses of $296 million as a result of the ADT Solar Acquisition in December 2021.

The decrease in CSB, as compared to the prior period, primarily included:

•a decrease in radio conversion costs of $211 million, primarily due to a decrease in the number of conversions and

•a decrease in advertising costs of $83 million, primarily due to our efforts to optimize our advertising model, partially offset by

•an increase in the provision for credit losses of $42 million, primarily due to lower provision in the prior year associated with impacts from the COVID-19 Pandemic,

•an increase in selling costs of $39 million, primarily due to additional amortization of deferred subscriber acquisition costs, and

•an increase in general and administrative costs of $36 million, primarily due to investments in our information technology infrastructure and other operational costs.

NON-GAAP MEASURES

To provide investors with additional information in connection with our results as determined in accordance with GAAP, we disclose Adjusted EBITDA as a non-GAAP measure. This measure is not a financial measure calculated in accordance with GAAP, and it should not be considered as a substitute for net income, operating income, or any other measure calculated in accordance with GAAP, and may not be comparable to similarly titled measures reported by other companies.

Adjusted EBITDA

We believe Adjusted EBITDA is useful to investors to measure the operational strength and performance of our business. We believe the presentation of Adjusted EBITDA is useful as it provides investors additional information about our operating profitability adjusted for certain non-cash items, non-routine items we do not expect to continue at the same level in the future, as well as other items not core to our operations. Further, we believe Adjusted EBITDA provides a meaningful measure of operating profitability because we use it for evaluating our business performance, making budgeting decisions, and comparing our performance against other peer companies using similar measures.

We define Adjusted EBITDA as income (loss) from continuing operations 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; (ix) adjustments related to acquisitions, such as contingent consideration and purchase accounting

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adjustments, or dispositions; (x) impairment charges; and (xi) other income/gain or expense/loss items such as changes in fair value of certain financial instruments or financing and consent fees.

There are material limitations to using Adjusted EBITDA. Adjusted EBITDA does not take into account certain significant items, including depreciation and amortization, interest, taxes, and other adjustments which directly affect our income (loss) from continuing operations. These limitations are best addressed by considering the economic effects of the excluded items independently and by considering Adjusted EBITDA in conjunction with income (loss) from continuing operations as calculated in accordance with GAAP.

The table below reconciles Adjusted EBITDA to income (loss) from continuing operations:

___________________

(1)During 2023, includes integration and third-party costs related to the strategic optimization of the Solar business operations following the ADT Solar acquisition, as well as restructuring costs. Refer to the discussion above under “- Results of Operations.”

(2)During 2022 and 2023, represents goodwill impairment charges associated with our Solar reporting unit (refer to Note 7 “Goodwill and Other Intangible Assets” and the discussion above under “- Results of Operations.”

(3)During 2022, represents the change in fair value of the Forward Contract (refer to Note 11 “Equity”).

(4)Refer to Note 1 “Description of Business and Summary of Significant Accounting Policies” for further details.

(5)During 2023, primarily represents the gain on sale of a business and other investment partially offset by financing fees and interest rate swaps included in other income (expense). During 2022, also includes the gain on sale of a business. During 2022 and 2021, primarily represents the amortization of the customer backlog intangible asset acquired in the ADT Solar Acquisition, which was fully amortized as of March 2022 (refer to Note 4 “Acquisitions”).

Adjusted EBITDA in total and by segment were as follows:

The drivers listed below exclude amounts that are outside of our definition of Adjusted EBITDA. Refer to the discussions above under “—Results of Operations” for further details.

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2023 compared to 2022

CSB:

The increase was primarily due to:

•higher M&S Revenue, net of the associated costs, of $140 million,

•lower general and administrative expenses of $39 million,

•higher installation revenue, net of the associated costs and commissions, of $23 million, and

•lower advertising costs of $15 million, partially offset by

•higher provision for credit losses of $50 million.

Solar:

The decrease was primarily due to:

•lower installation revenue, net of the associated costs and commissions, of $213 million, partially offset by

•lower general and administrative expenses of $84 million.

2022 compared to 2021

CSB:

The increase was primarily due to:

•higher M&S Revenue, net of the associated costs, of $215 million and

•lower advertising costs of $83 million, partially offset by

•higher provision for credit losses of $42 million

•and higher general and administrative expenses of $36 million.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity and capital resources, along with our outstanding debt, primarily consist of the following:

Liquidity

We expect our ongoing sources of liquidity to include cash generated from operations, borrowings under our first lien revolving credit facility (the “First Lien Revolving Credit Facility”) and the 2020 Receivables Facility, and the issuance of equity and/or debt securities as appropriate given market conditions. Our future cash needs are expected to include cash for operating activities, working capital, capital expenditures, principal and interest payments on our debt, expected dividend payments to our stockholders, potential share repurchases under our Share Repurchase Plan, and strategic investments.

Our principal liquidity requirements are to finance current operations, invest in acquiring and retaining customers, purchase property and equipment, service our debt, invest in our information technology infrastructure, and return money to shareholders through dividends.

Our liquidity requirements are primarily funded by our cash flows from operations, which include cash received from customers related to monthly recurring revenue from providing monitoring and other services, as well as cash from the sale and installation of our security and, prior to the exit from our solar business, solar systems (including cash received from third-party lenders who provide loan products for customers), less cash costs to provide services to our customers, general and administrative costs, certain costs associated with acquiring new customers, and interest payments.

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We are a highly leveraged company with significant debt service requirements and have both fixed-rate and variable-rate debt. As of December 31, 2023, our next debt maturity will occur in April 2024 with respect to the remaining outstanding balance of $100 million of our First Lien Notes due 2024.

We may periodically seek to repay, redeem, repurchase, or refinance our indebtedness, or seek to retire or purchase our outstanding securities through cash purchases in the open market, privately negotiated transactions, a 10b5-1 repurchase plan, or otherwise, and any such transactions may involve material amounts. Cash outflows for interest payments are not consistent between quarters, with larger outflows occurring in the first and third quarters, and may vary as a result of our variable rate debt.

We are closely monitoring the impact of recent inflationary pressures and changes in interest rates on our cash position. However, we believe our cash position, borrowing capacity available under our First Lien Revolving Credit Facility and 2020 Receivables Facility, and cash provided by operating activities are, and will continue to be, adequate to meet our operational and business needs in the next twelve months, as well as our long-term liquidity needs.

In addition, in 2023, we entered into a Receivables Financing Agreement with Mizuho Bank, Ltd. (the “Solar Receivables Financing Agreement”) to finance receivables generated by the installation of residential solar systems. The Solar Receivables Financing Agreement, among other things, provides for an uncommitted revolving loan facility in the aggregate principal amount of up to $300 million, which loans are secured by substantially all the assets of ADT Solar Finance (the “Solar Receivables Facility”). As of December 31, 2023, we have not borrowed any amounts under the Solar Receivables Facility, and given the decision to exit the residential solar business, we do not expect to borrow any amounts under the Solar Receivables Facility. The Solar Receivables Facility’s uncommitted revolving period will expire in August 2024, unless terminated beforehand.

Material Cash Requirements

Our cash requirements within the next twelve months primarily include current maturities and interest on our long-term debt and leases, accounts payable and other current liabilities, purchase commitments and other obligations entered into in the ordinary course of business, and dividends on our common stock.

As of December 31, 2023, our significant short-term and long-term cash requirements, excluding cash required for operations, under our various contractual obligations and commitments primarily included:

•Debt principal – As of December 31, 2023, our expected future debt principal payments, excluding finance leases, totaled approximately $7.9 billion, with $287 million due in 2024 primarily related to the $100 million outstanding ADT Notes due 2024 (defined below) and repayments on the 2020 Receivables Facility, and including required quarterly principal payments on our First Lien Term Loan due 2030 and Term Loan A Facility totaling approximately $46 million.

Refer to Note 8 “Debt” for further details of our debt and the timing of expected future principal payments.

•Interest payments – Future interest payments on our fixed-rate debt are based on the contractual terms. Future interest payments on our variable-rate debt and the effects of our interest rate swaps are based on SOFR, plus the applicable margin in effect as of December 31, 2023.

During 2023, we paid net cash interest of $523 million, including interest on interest rate swaps presented outside of operating activities. As of December 31, 2023, our expected future interest payments related to our debt and interest rate swap contracts totaled approximately $1.9 billion, with approximately $369 million due in 2024. Additionally, we expect to incur annual interest payments of approximately $325 - $360 million during each of the years 2025 - 2026 and approximately $200 - $300 million during each of the years 2027 and 2028.

•Operating and finance leases – As of December 31, 2023, our expected future lease payments, including interest, totaled $221 million, with $54 million due in 2024.

Refer to Note 15 “Leases” for further details of our obligations and the timing of expected future payments.

•Purchase obligations – Our material cash requirements for purchases of goods or services entered into in the ordinary course of business, including purchase orders and contractual obligations, primarily consist of information technology services and equipment, including investments in our information technology infrastructure, direct materials, and telecommunication services. Our future purchase obligations may be impacted by changes in our business or other internal or external factors. As our business continues to grow organically or through acquisitions, our obligations may grow as well.

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As of December 31, 2023, our contractual obligations entered into in the ordinary course of business, including agreements that are enforceable and legally binding and have a remaining term in excess of one year, totaled approximately $482 million, with approximately $323 million expected to be paid in 2024.

These amounts include a commitment with one of our vendors to purchase at least $190 million of security system equipment and components through March 2025. This commitment is also satisfied through purchases made by the Company’s dealer network.

Refer to Note 14 “Commitments and Contingencies” for the amounts and timing of such payments.

In addition, as of December 31, 2023, we had outstanding purchase orders of approximately $129 million primarily related to direct materials and information technology and marketing services, which are expected to be materially satisfied in 2024.

•Google Commercial Agreement – The Google Commercial Agreement requires us and Google to each contribute $150 million toward certain joint commercial efforts. Additionally, during 2022 we entered into the Google Commercial Agreement Amendment in which Google agreed to commit an additional $150 million. While the timing of these contributions is still uncertain, we expect to contribute the majority of our $150 million commitment under the Google Commercial Agreement by the end of 2026. During 2023, $40 million of the Google Success Funds were reimbursed to the Company for our share of joint marketing expenses incurred and reflected as a reduction of advertising costs.

In addition, under the Google Cloud Agreement Addendum, the Company is obligated to make purchases from Google totaling $200 million over a seven-year period (through December 2030), with $35 million in the first two years, $65 million in the next two years after that, and $100 million in the last three years of the commitment.

•State Farm Opportunity Fund – Pursuant to the State Farm Development Agreement, State Farm committed up to $300 million to fund product and technology innovation, customer growth, and marketing initiatives. Upon the Closing of the State Farm Strategic Investment, we received $100 million of such commitment from State Farm, which is restricted until we use the funds for investment, as agreed upon with State Farm, in accordance with the State Farm Development Agreement. During 2023, payments made from the Opportunity Fund were $11 million.

•Customer account purchases – Our indirect channel customers are generated mainly through our ADT Authorized Dealer Program. As opportunities arise, we have in the past engaged, and we may continue to engage, in selective third-party account purchases, which typically involve the purchase of a set of customer accounts from other security service providers. For example, in December 2023, we purchased customer accounts from a third party for $89 million in cash.

•ADT Solar Exit and Repurchase of Solar loans – As of December 31, 2023, we recognized a liability of $15 million related to certain loans provided to customers within our Solar business that we may be required to repurchase from our third-party lenders. In addition, we expect to incur cash expenditures of approximately $50 million - $70 million associated with the exit from our solar business. Additional expenditures could occur with our third-party lenders in connection with the ADT Solar Exit.

•Unrecognized tax benefits – We have $49 million of unrecognized tax benefits, excluding interest and penalties, related to various tax positions we have taken. These liabilities may increase or decrease over time primarily as a result of tax examinations, and given the status of the examinations, we cannot reliably estimate the period of any cash settlement with the respective taxing authorities.

Refer to Note 10 “Income Taxes” for further details.

•Off-balance sheet arrangements – As of December 31, 2023, we had guarantees primarily related to standby letters of credit on our insurance programs totaling $78 million.

During March 2022, we entered into an unsecured Credit Agreement with Goldman Sachs Mortgage Company, as administrative agent and issuing lender (the “Issuing Lender”), together with other lenders party thereto, pursuant to which we may request the Issuing Lender to issue one or more letters of credit for its own account or the account of its subsidiaries, in an aggregate face amount not to exceed $75 million at any one time, through December 2026.

We do not have any other arrangements giving rise to material obligations that are not reported in our consolidated balance sheets, as described in Item 303 of SEC Regulation S-K.

•Dividends – Stockholders are entitled to receive dividends when, as, and if declared by the Company’s Board of Directors out of funds legally available for that purpose. On January 24, 2024, we announced a 57% increase to our

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quarterly dividend to $0.055 per share to holders of Common Stock and Class B Common Stock of record on March 14, 2024, which will be distributed on or about April 4, 2024.

During 2023, we declared aggregate dividends of $0.14 per share on Common Stock ($121 million) and $0.14 per share on Class B Common Stock ($8 million).

During 2022, we declared aggregate dividends of $0.14 per share on Common Stock ($120 million) and $0.14 per share on Class B Common Stock ($8 million).

Refer to Note 11 “Equity” for further details.

•Share Repurchase Plan – On January 24, 2024, the Company's Board of Director's announced the Share Repurchase Plan, pursuant to which the Company is authorized to repurchase, through late January 2025, up to a maximum aggregate amount of $350 million of shares of the Company's common stock under this Share Repurchase Plan.

As of the date of this 2023 Annual Report, the Company has not made any repurchases under the Share Repurchase Plan.

Cash Flow Analysis

The following table is a summary of our cash flow activity for the periods presented:

The discussion below includes cash flows from both continuing operations and discontinued operations consistent with the presentation on the Statements of Cash Flows.

Cash Flows from Operating Activities

The decrease in net cash provided by operating activities for 2023 compared to 2022 was primarily due to:

•an increase in cash interest of $153 million,

•an increase in payroll tax payments of $26 million primarily related to deferrals of such payments in 2020 under the CARES Act, partially offset by

•$40 million of the Google Success Funds,

•$19 million related to a legal settlement, and

•an increase in receipts related to our radio conversion program of $9 million.

The decrease in net cash provided by operating activities also includes negative impacts from the solar business. The remainder of the activity related to changes in assets and liabilities due to the volume and timing of other operating cash receipts and payments with respect to when the transactions are reflected in earnings.

Refer to the discussions above under “—Results of Operations” for further details.

Cash Flows from Investing Activities

The change in net cash from investing activities for 2023 compared to 2022 was primarily due to:

•an increase in the proceeds from the sales of businesses of $1,583 million primarily related to the Commercial Divestiture in 2023,

•a decrease in net outflows of $104 million related to subscriber system assets expenditures due to lower volume, and

•an increase in other investing activities of $42 million primarily related to the 2023 sale of our equity method investment we made in 2022.

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Cash Flows from Financing Activities

The increase in net cash used in financing activities for 2023 compared to 2022 was primarily due to:

•an increase in net debt payments of $2,040 million primarily related to the partial redemptions in 2023 of our First Lien Term Loan due 2026 and ADT Notes due 2024,

•a decrease in net proceeds under the 2020 Receivables Facility of $75 million primarily due to higher repayments during 2023 as compared to 2022, and

•Opportunity fund proceeds of $101 million during 2022 as compared to net payments of $9 million during 2023, partially offset by

•proceeds on our interest rate swaps of $83 million during 2023 as compared to payments of $19 million during 2022.

During 2023, both the proceeds and repayments of long-term debt on the Consolidated Statements of Cash Flows include the impact of $230 million from the October refinancing of the First Lien Term Loan due 2026.

Net cash used in financing activities during 2022 also included the $1.2 billion issuance of State Farm shares and corresponding repurchase of $1.2 billion related to the Tender Shares.

Long-Term Debt

As of December 31, 2023, our debt (excluding finance leases and any deferred financing costs, discounts, premiums, or fair value adjustments) consisted of the following (in thousands):

Refer to Note 8 “Debt” for further details of our debt agreements, including interest rates, covenants, and other descriptions of these agreements.

First Lien Credit Agreement

Our first lien credit agreement dated as of July 1, 2015 (together with subsequent amendments and restatements, the “First Lien Credit Agreement”) consists of a term loan facility (the “First Lien Term Loan due 2030,” and prior to October 2023, the “First Lien Term Loan due 2026”) and a first lien revolving credit facility (the “First Lien Revolving Credit Facility”).

Below is a summary of key events related to the First Lien Credit Agreement since 2022:

•During 2022, we borrowed $550 million and repaid $575 million under the First Lien Revolving Credit Facility.

•In October 2023, we redeemed approximately $1.3 billion of the First Lien Term Loan due 2026 using net proceeds from the Commercial Divestiture.

•In October 2023, we amended and restated the First Lien Credit Agreement to refinance the remaining outstanding balance of the First Lien Term Loan due 2026 with a new $1,375 million 7-year term First Lien Term Loan B due 2030, among other things.

We did not borrow or repay any funds under the First Lien Revolving Credit Facility during 2023.

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We are required to make scheduled quarterly principal payments on the First Lien Term Loan due 2030, with the remaining balance payable at maturity. We may make voluntary prepayments on the First Lien Term Loan due 2030 at any time prior to maturity at par. Additionally, we are required to make annual prepayments on the outstanding First Lien Term Loan due 2030 with a percentage of our excess cash flow, as defined in the First Lien Credit Agreement, if our excess cash flow exceeds a certain specified threshold. As of December 31, 2023, we were not required to make any annual prepayments based on our excess cash flow.

In addition, we are required to pay a commitment fee between 0.375% and 0.50% (determined based on a net first lien leverage ratio) with respect to the unused commitments under the First Lien Revolving Credit Facility.

Term Loan A Facility

In March and June 2023, we borrowed aggregate principal amounts of $600 million and $50 million, respectively, of term loans under a senior secured term loan A facility (the “Term Loan A Facility”) and used the proceeds to redeem $650 million of the ADT Notes due 2023 (defined below).

We are required to make scheduled quarterly principal payments on the Term Loan A Facility, with the remaining balance payable at maturity. We may make voluntary prepayments on the Term Loan A Facility at any time prior to maturity at par.

The Term Loan A Facility is subject to customary mandatory prepayment provisions, covenants, and restrictions, including a financial maintenance covenant requiring the Term Loan A Facility Borrowers to comply as of the last day of each fiscal quarter with a specified maximum consolidated net first lien leverage ratio.

Second Lien Notes due 2028

The 6.250% second-priority senior secured notes due 2028 (the “Second Lien Notes due 2028”) are due at maturity and may be redeemed at our option, in whole at any time or in part from time to time, at a redemption price equal to 103.125% of the principal amount of the Second Lien Notes due 2028 redeemed and accrued and unpaid interest as of, but excluding, the redemption date. The redemption price decreased to 101.563% on or after January 15, 2024 and decreases to 100% on or after January 15, 2025.

Additionally, upon the occurrence of specified change of control events, we must offer to repurchase the Second Lien Notes due 2028 at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

The indenture governing the Second Lien Notes due 2028 also provides for customary events of default.

First Lien Notes due 2024 and First Lien Notes due 2026

The 5.250% first-priority senior secured notes due 2024 (the “First Lien Notes due 2024”) and the 5.750% first-priority senior secured notes due 2026 (the “First Lien Notes due 2026”) are due at maturity, and may be redeemed, in whole or in part, at any time at a make-whole premium plus accrued and unpaid interest to, but excluding, the redemption date.

Additionally, upon the occurrence of specified change of control events, we must offer to repurchase the notes at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

The indentures governing the First Lien Notes due 2024 and First Lien Notes due 2026 also provide for customary events of default.

Below is a summary of significant activity related to the First Lien Notes due 2024 since 2022:

•May 2023: We redeemed $150 million principal amount of the outstanding First Lien Notes due 2024 for a redemption price of $150 million, excluding accrued and unpaid interest, using cash on hand.

•December 2023: We redeemed $500 million principal amount of the outstanding First Lien Notes due 2024 for a redemption price of $500 million, excluding accrued and unpaid interest, using remaining net proceeds from the Commercial Divestiture and cash on hand.

First Lien Notes due 2027

The 3.375% first-priority senior secured notes due 2027 (the “First Lien Notes due 2027”) are due at maturity and may be redeemed at our option as follows:

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•Prior to August 31, 2026, in whole at any time or in part from time to time, at a make-whole premium plus accrued and unpaid interest, if any, thereon to the redemption date.

•On or after August 31, 2026, in whole at any time or in part from time to time, at a redemption price equal to 100% of the principal amount of the First Lien Notes due 2027 redeemed plus accrued and unpaid interest, if any, thereon to the redemption date.

Additionally, upon the occurrence of specified change of control events, we must offer to repurchase the First Lien Notes due 2027 at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

The indenture governing the First Lien Notes due 2027 also provides for customary events of default.

First Lien Notes due 2029

The 4.125% first-priority senior secured notes due 2029 (the “First Lien Notes due 2029”) are due at maturity and may be redeemed at our option as follows:

•Prior to August 1, 2028, in whole at any time or in part from time to time, at a redemption price equal to the greater of (i) 100% of the principal amount of the First Lien Notes due 2029 to be redeemed and (ii) the sum of the present values of the aggregate principal amount of the First Lien Notes due 2029 to be redeemed and the remaining scheduled interest payments due on any date after the redemption date, to and including August 1, 2028, discounted at an adjusted treasury rate plus 50 basis points, plus, in either case accrued and unpaid interest as of, but excluding, the redemption date.

•On or after August 1, 2028, in whole at any time or in part from time to time, at a redemption price equal to 100% of the principal amount of the First Lien Notes due 2029 to be redeemed and accrued and unpaid interest as of, but excluding, the redemption date.

Additionally, upon the occurrence of specified change of control events, we may be required to purchase the First Lien Notes due 2029 at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

The indenture governing the First Lien Notes due 2029 also provides for customary events of default.

ADT Notes

The remaining outstanding ADT Notes are due at maturity, and may be redeemed, in whole at any time or in part from time to time, at a redemption price equal to the principal amount of the notes to be redeemed, plus a make-whole premium, plus accrued and unpaid interest as of, but excluding, the redemption date.

Additionally, upon the occurrence of specified change of control events, the Company must offer to repurchase the ADT Notes at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

The indentures governing the ADT Notes also provide for customary events of default.

Below is a summary of key events related to the ADT Notes due 2023 since 2022:

•March 2023: The Company used the proceeds from the Closing Date Term Loan A Loans to redeem $600 million outstanding principal amount of the ADT Notes due 2023 for a total redemption price of $600 million, excluding any accrued and unpaid interest.

•June 2023: The Company redeemed the remaining outstanding principal amount of $100 million for a total redemption price of $100 million using $50 million of proceeds from the Incremental Term Loan A Loans and the remaining from cash on hand.

2020 Receivables Facility

The 2020 Receivables Facility allows us to obtain financing by selling or contributing certain retail installment contract receivables to our wholly-owned consolidated bankruptcy-remote special purpose entity (“SPE”). The SPE grants a security interest in those retail installment contract receivables as collateral for cash borrowings under the 2020 Receivables Facility. The SPE borrower under the 2020 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 us (other than the SPE). Accordingly, the assets of the SPE are not available to pay our creditors (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 us and subsequently used by us (including to pay other

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creditors). The SPE’s creditors under the 2020 Receivables Facility have legal recourse to the transferred retail installment contract receivables owned by the SPE, and to us for certain performance and operational obligations relating to the 2020 Receivables Facility, but do not have any recourse to us (other than the SPE) for the payment of principal and interest on the advances under the 2020 Receivables Facility.

Below is a summary of significant amendments to the 2020 Receivables Facility since 2022:

•May 2022: Changed the benchmark rate from 1-month LIBOR to Daily SOFR, extended the scheduled termination date for the uncommitted revolving period from October 2022 to May 2023, and amended certain other terms to increase the advance rate on pledged collateral.

•March 2023: Increased the borrowing capacity from $400 million to $500 million and extended the uncommitted revolving period from May 2023 to March 2024, among other things.

We service the transferred retail installment contract receivables and are responsible for ensuring related collections are remitted to a segregated account in the SPE’s name. On a monthly basis, the segregated bank account is utilized to make required principal, interest, and other payments due under the 2020 Receivables Facility. The segregated account is considered restricted cash in our Consolidated Balance Sheets.

Proceeds and repayments under the 2020 Receivables Facility since 2022 were as follows:

•2023: Proceeds of $282 million and repayments of $200 million.

•2022: Proceeds of $277 million and repayments of $121 million.

Debt Covenants

Our credit agreements and indentures associated with the borrowings above contain certain covenants and restrictions that limit our ability to, among other things, incur additional debt or issue certain preferred equity interests; create liens on certain assets; make certain loans or investments (including acquisitions); pay dividends on or make distributions in respect of the capital stock or make other restricted payments; consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets; sell assets; enter into certain transactions with affiliates; enter into sale-leaseback transactions; restrict dividends from our subsidiaries or restrict liens; change our fiscal year; and modify the terms of certain debt or organizational agreements.

We are also subject to a springing financial maintenance covenant under the First Lien Credit Agreement, which requires us to not exceed a specified first lien leverage ratio at the end of each fiscal quarter if the testing conditions are satisfied. The covenant is tested if the outstanding loans under the First Lien Revolving Credit Facility, subject to certain exceptions, exceed 30% of the total commitments under the First Lien Revolving Credit Facility at the testing date (i.e., the last day of any fiscal quarter).

We are also subject to a financial maintenance covenant under the Term Loan A Facility credit agreement, which requires the borrowers under Term Loan A Facility to comply as of the last day of each fiscal quarter with a specified maximum consolidated net first lien leverage ratio.

As of December 31, 2023, we were in compliance with all financial covenant and other maintenance tests for all our debt obligations, and we do not believe there is a material risk of future noncompliance with our financial covenant and other maintenance tests.

CRITICAL ACCOUNTING ESTIMATES

The accompanying consolidated financial statements are prepared in accordance with GAAP, which requires us to select accounting policies and make estimates that affect amounts reported in the financial statements and the accompanying notes. Management’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 following discussion includes estimates prepared in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations, and are based on, among other things, estimates, assumptions, and judgments made by management that include inherent risks and uncertainties. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

Refer to the Notes to Consolidated Financial Statements included in this Annual Report for further discussion of our significant accounting policies and the effect on our financial statements.

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Revenue Recognition

We generate revenue through contractual monthly recurring fees received for monitoring and related services provided to customers as well as the sale and installation of security and solar systems. We allocate transaction price to each performance obligation based on relative standalone selling price, which is determined using observable internal and external pricing, profitability, and certain operational metrics.

Estimated Life of Customer Relationships

A significant portion of our depreciation and intangible asset amortization is based on the expected life of our customer relationships. We periodically perform lifing studies to (i) estimate the expected life of our customer relationships and the attrition pattern of our customers; (ii) establish the amortization rates of our customer account pools discussed below in order to reflect the pattern of future benefit; and (iii) assess the continued reasonableness of our existing depreciation and amortization policies.

The results of the lifing studies are based on historical customer terminations. The lifing studies indicate that we can expect attrition to be the greatest in the initial years of asset life. Therefore, to align our depreciation and amortization to the pattern in which the related economic benefits are consumed, we use an accelerated method that best matches the future amortization cost with the estimated revenue stream from these customer pools.

Subscriber System Assets and Deferred Subscriber Acquisition Costs - 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. We depreciate and amortize these assets using an accelerated method over the estimated life of the customer relationship, which is 15 years, using an average declining balance rate of approximately 250% that converts to straight-line methodology when the resulting charge is greater than that from the accelerated method. This results in an average charge of approximately 55% of the pool within the first five years, 25% within the second five years, and 20% within the final five years.

Customer Account Purchases - Purchases of contracts with customers under the ADT Authorized Dealer Program, or from other third parties, are considered asset acquisitions and are recognized based on the cost to acquire the assets, which may include cash consideration, non-cash consideration, contingent consideration, and directly-attributable transaction costs. These assets are accounted for on a pooled basis based on the month and year of acquisition. Based on the results of our lifing studies, we amortize our pooled contracts with customers using an accelerated method over the estimated life of the customer relationship, which is generally 15 years. The accelerated method for amortizing these contracts utilizes an average declining balance rate of approximately 300% and converts to straight-line methodology when the resulting amortization charge is greater than that from the accelerated method, resulting in an average amortization of approximately 65% of the pool within the first five years, 25% within the second five years, and 10% within the final five years.

The accelerated methods and estimated lives used to calculate depreciation and amortization expense have not changed during the periods presented. Additionally, these estimates remain relatively consistent year over year due to the large and homogenous nature of our customer pools. Significant changes in our business model, such as a reduction in the number of customers under multi-year contracts, or a prolonged shift in our attrition patterns, could impact the expected life of our customer pools.

There were no material impacts to these accelerated methods and estimated lives as a result of the Commercial Divestiture.

Goodwill

Goodwill and indefinite-lived intangible assets (as discussed below) are not amortized and are tested for impairment at least annually as of the first day of the fourth quarter of each year and more often if an event occurs or circumstances change which indicate it is more-likely-than-not that fair value is less than carrying amount. Under a qualitative approach, we assess whether it is more-likely-than-not that a reporting unit’s fair value is less than its carrying amount. Under a quantitative approach, we estimate the fair value of a reporting unit and compare it to its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

CSB - On October 1, 2023, we completed our annual goodwill impairment test by quantitatively testing the goodwill assigned to the CSB reporting unit. Based on the results of the quantitative test, we concluded that the fair value of the CSB reporting unit substantially exceeds its carrying value.

We estimated the fair value of our CSB reporting unit using the income approach, which discounts projected cash flows using market participant assumptions. The income approach includes significant assumptions including, but not limited to, forecasted revenue, operating profit margins, Adjusted EBITDA margins, operating expenses, cash flows, perpetual growth rates, and

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discount rates. In developing these assumptions, we rely on various factors including operating results, business plans, economic projections, anticipated future cash flows, and other market data.

The estimated fair value of a reporting unit calculated using the income approach is sensitive to changes in the underlying assumptions. Examples of events or circumstances that could reasonably be expected to negatively affect the underlying judgments and factors and ultimately impact the estimated fair value determinations may include such items as a prolonged downturn in the business environment, changes in economic conditions that significantly differ from our assumptions in timing or degree, volatility in equity and debt markets resulting in higher discount rates, and unexpected regulatory changes. As a result, there are inherent uncertainties related to these judgments and factors in applying them to the goodwill impairment tests.

Commercial - As a result of the purchase price of the Commercial Divestiture being substantially in excess of carrying value of the net assets divested, the Company concluded it is more likely than not that the fair value of the Commercial reporting unit exceeded its carrying value as of October 1, 2023, and the Commercial Divestiture closed on October 2, 2023.

Solar - During the first, second, and third quarters of 2023, the Company performed interim impairment quantitative assessments on the Solar reporting unit as a result of triggering events as of March 31, 2023, June 30, 2023, and September 30, 2023, and recorded goodwill impairment charges of $242 million, $181 million, and $88 million during the first, second, and third quarters of 2023, respectively. Following the impairments during 2023, the balance of goodwill in the Solar reporting unit was zero. The Company also assessed the recoverability of other long-lived assets related to its Solar business in connection with these impairments, and impairment charges were not material.

These impairments were a result of continued deterioration of industry conditions and macroeconomic decline as well as ADT Solar’s underperformance of operating results in successive quarters relative to expectations, and during the third quarter of 2023, as a result of the Company’s then recent plan to close a significant number of branches that operated the Solar business along with the associated headcount reductions.

Indefinite-Lived Intangible Assets

As of December 31, 2023, our only indefinite-lived intangible asset is the ADT trade name, which has a carrying value of $1.3 billion and was recognized in connection with the ADT Acquisition in May 2016. When performing a quantitative assessment, the fair value of the ADT trade name is determined under a relief from royalty method, which is an income approach that estimates the cost savings that accrue to us that we would otherwise have to pay in the form of royalties or license fees on revenue earned through the use of the asset. The utilization of the relief from royalty method requires us to make significant assumptions including revenue growth rates, the implied royalty rate, and the discount rate.

We performed a quantitative impairment test over the ADT trade name as of October 1, 2023 and 2022, and the fair value of the ADT trade name substantially exceeded its carrying value as of each testing date. In connection with our quantitative impairment test, we perform a sensitivity analysis on the key assumptions used to determine the fair value of the ADT trade name. During the periods presented, the results of our sensitivity analysis did not have a material impact on the conclusions reached.

We may, in future periods, perform a qualitative testing approach, where we assess whether it is more-likely-than-not that the ADT trade name’s fair value is less than its carrying amount.

Business Combinations

We account for business acquisitions under the acquisition method of accounting. The assets acquired and liabilities assumed in connection with business acquisitions are recorded at the date of acquisition at their estimated fair values, with any excess of the purchase price over the estimated fair values of the net assets acquired recorded as goodwill.

We use various methods to determine fair value depending on the type of assets acquired and liabilities assumed. We make estimates and assumptions about projected future cash flows including, but not limited to, forecasted revenue, Adjusted EBITDA margins, operating expenses, cash flows, perpetual growth rates, and discount rates.

Significant judgment is required in estimating the fair value of assets acquired and liabilities assumed and in assigning useful lives to certain definite-lived intangible and tangible assets. Accordingly, we may engage third-party valuation specialists to assist in these determinations. The fair value estimates are based on available information as of the acquisition date and assumptions deemed reasonable by management but are inherently uncertain.

Customer Relationships - Customer relationships acquired as part of business acquisitions are generally amortized over a period of up to 15 years based on management estimates about the amounts and timing of estimated future revenue from customer accounts and average customer account life that existed at the time of the related business acquisition. The majority of our

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customer relationships acquired in business combinations that originated from the Formation Transactions and the ADT Acquisition were fully amortized during 2023.

Dealer Relationships - Dealer relationships originated from the Formation Transactions and the ADT Acquisition and are primarily amortized on a straight-line basis over 19 years based on management estimates about the longevity of the underlying dealer network and the attrition of those respective dealers that existed at the time of the related business acquisition.

During 2023, 2022, and 2021, other definite-lived intangible assets acquired in business acquisitions were not material, and we have not recorded any material measurement period adjustments to purchase price allocations.

Income Taxes

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the temporary differences between the recognition of revenue and expenses for income tax and financial reporting purposes and between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements. We record the effect of a tax rate or law change on our deferred tax assets and liabilities in the period of enactment. Future tax rate or law changes could have a material effect on our results of operations, financial condition, or cash flows.

In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence, including our past operating results, the existence of cumulative losses in the most recent years, and our forecast of future taxable income. In estimating future taxable income, we develop assumptions related to the amount of future pre-tax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage our underlying businesses.

We recognize positions taken or expected to be taken in a tax return in the consolidated financial statements when it is more-likely-than-not (i.e., a likelihood of more than 50%) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit with greater than 50% likelihood of being realized upon ultimate settlement. We record liabilities for positions that have been taken but do not meet the more-likely-than-not recognition threshold. We adjust the liabilities for unrecognized tax benefits in light of changing facts and circumstances; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a change to the estimated liabilities, along with impacts to the effective tax rate and cash tax.

Refer to Note 10 “Income Taxes” for details on our valuation allowances and unrecognized tax benefits.

ACCOUNTING PRONOUNCEMENTS

Refer to Note 1 “Description of Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Item 15 for further discussion about recent accounting pronouncements.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

INTRODUCTION

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report. This section is intended to (i) provide material information relevant to the assessment of our results of operations and cash flows; (ii) enhance the understanding of our financial condition, changes in financial condition, and results of operations; and (iii) discuss material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be necessarily indicative of future performance or of future financial condition.

Included below are year-over-year comparisons between 2022 and 2021. For information on year-over-year comparisons between 2021 and 2020, refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report for the year ended December 31, 2021, which was filed with the SEC on March 1, 2022.

The following discussion and analysis contains forward-looking statements about our business, operations, and financial performance based on current plans and estimates involving risks, uncertainties, and assumptions, which could differ materially from actual results. Factors that could cause such differences are discussed in the sections of this Annual Report titled Item 1A “Risk Factors” and “Cautionary Statements Regarding Forward-Looking Statements.”

Table of Contents

•Business and Basis of Presentation

•Factors Affecting Operating Results

•Key Performance Indicators

•Results of Operations

•Non-GAAP Measures

•Liquidity and Capital Resources

•Critical Accounting Estimates

•Accounting Pronouncements

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BUSINESS AND BASIS OF PRESENTATION

ADT Inc. is a leading provider of security, interactive, and smart home solutions serving residential, small business, and commercial customers in the U.S. Since the acquisition of ADT Solar in December 2021, we also provide residential solar and energy storage solutions. We believe solar is a logical extension of our offerings as it enhances our ability to deliver an integrated home experience.

Our mission is to empower people to protect and connect what matters most with safe, smart, and sustainable solutions, delivered through innovative offerings, unrivaled safety, and a premium experience because we believe that everyone deserves to feel safe.

All financial information presented in this section has been prepared in U.S. dollars in accordance with GAAP, excluding our Non-GAAP measures, and includes the accounts of ADT Inc. and its subsidiaries. All intercompany transactions have been eliminated. We report financial and operating information in the following three segments: CSB, Commercial, and Solar.

For a more detailed discussion of our business, segments, and basis of presentation, refer to Item 1 “Business” and Note 1 “Description of Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Item 15 “Exhibit and Financial Statement Schedules”.

FACTORS AFFECTING OPERATING RESULTS

The factors described herein could have a material adverse effect on our business, financial condition, results of operations, cash flows, and key performance indicators.

As of December 31, 2022, we served approximately 6.7 million security monitoring service subscribers. Generally, a significant upfront investment is required to acquire new subscribers, that in turn provide ongoing and predictable recurring revenue generated from our monitoring services and other subscriber-based offerings. Although the economics of an installation may vary depending on the customer type, acquisition channel, and product offering, we generally achieve revenue break-even in less than two and a half years.

For our subscriber-based offerings, our results are impacted by the mix of transactions under a Company-owned equipment model versus a customer-owned equipment model (referred to as outright sales), as there are different accounting treatments applicable to each model, as discussed in Note 2 “Revenue and Receivables.” Previous changes to our equipment ownership model impacted results during 2021 and 2020, and substantially all new CSB transactions since March 2021 take place under a Company-owned model. As we continue to build our partnership with Google, introduce new or enhance current offerings, and refine our go-to-market approach, including, for example, transitioning our DIY/self setup business to an outright sales model, we expect to see a shift toward an increasing proportion of outright sales transactions in our CSB and Commercial segments, which will impact results in future periods when these changes occur.

Our ability to increase our average prices for individual customers depends on a number of factors, including the type and complexity of service, the quality of our service, the introduction of additional features and offerings that increase the value to the customer, and the competitive and macroeconomic environments in which we operate.

Attrition also has a direct impact on our financial results, including revenue, operating income, and cash flows. Each year, a portion of our recurring customer base can be expected to cancel or may choose not to renew service for a variety of reasons such as relocation, loss to competition, cost, or service issues. We experienced a lower volume of customer relocations during 2020 primarily as a result of the COVID-19 Pandemic, followed by a slight increase during 2021. During 2022, we saw favorable trends in gross customer revenue attrition primarily as a result of a lower volume of customer relocations, partially offset by an increase in non-payment disconnects. As a result of continued changes in the macroeconomic environment, we are currently unable to determine whether there will be any ongoing or further impacts on these trends and we may continue to experience fluctuations in these or other trends in the future.

The overall demand for our products and services is driven by a number of external factors such as the overall economic conditions in the geographies in which we operate, the price and quality of our products and services compared to those of our competitors, as well as changes in competition such as from the acquisition or disposition of similar businesses by us or our competitors. Our ability to add new customers and grow our businesses is also impacted by the following:

•Growth in our residential and small business customer base can be impacted the overall state of the housing market, the perceived threat of crime, the occurrence of significant life events such as the birth of a child or opening of a new business, or the availability of financial incentives provided by insurance carriers.

•Growth in our commercial customer base can be impacted by the rate at which new businesses begin operations or existing businesses grow, as well as applicable building codes and insurance policies.

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•Growth in our solar customer base can be impacted by the availability of certain rebates, tax credits, and other financial incentives; the availability and costs of consumer financing options; and traditional energy prices and grid reliability.

We may also be impacted by seasonality and weather-related incidents or natural disasters. Hurricanes Fiona and Ian during the third quarter of 2022 and winter storms during the fourth quarter of 2022 impacted certain areas in which we operate resulting in power outages and service disruptions to certain of our customers. We did not experience any material impacts from these incidents.

We believe advancements in technology, younger generations of consumers, and shifts to de-urbanization have increased consumer interest in automated security and other mobile technology applications; and we have made significant progress toward increasing the variety of our offerings to accommodate these changing interests. Advances in technology are also helping us to improve our products and services and reduce certain costs. For example, our innovative virtual support program (the “Virtual Assistance Program”), which launched for our residential customers in July 2021, provides our customers the ability to troubleshoot and resolve certain service issues through a live video stream with our skilled technicians. This provides customers with more options for receiving certain services that best fit their lifestyles while reducing the cost for us to provide these services and lowering our carbon footprint by eliminating thousands of vehicle trips each day.

Factors that may impact the overall costs required to serve our current and potential customers include (i) offering a wider variety of products and services; (ii) providing a greater mix of interactive and smart home solutions; (iii) replacing or upgrading certain system components due to technological advancements or otherwise; (iv) supply chain disruptions; (v) inflationary pressures on costs such as materials, labor, and fuel; and (vi) other changes in prices, interest rates, or terms from our suppliers, vendors, or third party lenders. Changes in interest rates or terms from third-party lenders or our other financing partners, including those that provide loan products to our Solar customers, are impacted by factors such as increases in the benchmark interest rate. As part of our response to changes or pressures in the macroeconomic environment, we may evaluate cost saving opportunities such as reducing headcount or our physical facilities footprint when appropriate. While we have experienced some increase in costs as a result of inflation, we have, for the most part, been able to offset the rising costs through price increases to our customers, as well as cost saving opportunities. For example, in our Solar business, we were able to drive efficiencies in the current year through job eliminations, intentional slowed hiring, and organic turnover. In addition, as a portion of our employees continue to work from home, and with the expansion and success of our Virtual Assistance Program, we are evaluating the changing needs of our physical locations, while keeping our customers’ needs and safety a top priority.

We believe we are building a strong platform for growth through our strategic partnerships discussed below, as well as through focusing on improving customer satisfaction and retention, increasing our recurring monthly revenue through subscriber acquisition and the introduction of new products and services, increasing the rate at which new subscribers opt for our interactive services, and reducing our revenue payback period.

Strategic Partnerships and Acquisitions

Google Commercial Agreement

In July 2020, we entered into the Google Commercial Agreement, pursuant to which Google has agreed to supply us with certain Google Devices and Services for sale to our customers. Subject to customary termination rights related to breach and change of control, the Google Commercial Agreement has an initial term of seven years from the date that the Google Devices and Services are successfully integrated into our end-user security and automation platform. Further, subject to certain carve-outs, we have agreed to exclusively sell Google Devices and Services to our customers.

In June 2022, we amended the Google Commercial Agreement to extend the date for the launch of the integrated Google Devices and Services until September 30, 2022. Since September 30, 2022, Google has the contractual right to require us, with certain exceptions, until such integration, to exclusively offer Google Devices and Services without integration for all new professional installations and for existing customer who do not have ADT Pulse or ADT Control interactive services. We have already begun providing Google Devices and Services, and we will continue to do so on a non-integrated basis, as we work closely with Google toward an integrated solution. We launched the Google Nest doorbell during the first quarter of 2022, rolled out mesh Wi-Fi during the second quarter of 2022, and launched Google indoor and outdoor cameras during the third quarter of 2022.

During the first quarter of 2023, we introduced our own new ADT+ app for our self setup line of DIY smart home security products, including Google Nest offerings, which we expect to introduce for professional installations by the end of 2023.

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The Google Commercial Agreement further specifies each party shall contribute $150 million toward the joint marketing of devices and services; customer acquisition; training of our employees on the sales, installation, customer service, and maintenance of the product and service offerings; and technology updates for products included in such offerings. Each party is required to contribute such funds in three equal tranches, subject to the attainment of certain milestones.

In August 2022, we amended the Google Commercial Agreement, pursuant to which Google has agreed to commit an additional $150 million to further fund growth, data and insights, product innovation and technology advancements, customer acquisition, and marketing, as mutually agreed to by us and Google. The additional funds will be contributed in three equal tranches, subject to the attainment of certain milestones.

ADT Solar Acquisition

In December 2021, we acquired ADT Solar, a leading solar installer in the United States, for total consideration of approximately $750 million, which consisted of cash paid of $142 million, net of cash acquired, and approximately 75 million shares of our Common Stock with a fair value of $569 million at closing. This acquisition establishes ADT in the residential solar market and leverages our brand awareness and trust among consumers to provide solar and energy storage solutions, energy efficiency upgrades, and roofing services to consumers.

Refer to Note 4 “Acquisitions and Disposition” in the Notes to Consolidated Financial Statements for further information.

Canopy Investment

In April 2022, together with Ford, we formed a new entity, Canopy, which combines ADT’s professional security monitoring and Ford’s AI-driven video camera technology, to help customers strengthen the security of new and existing vehicles across various automotive brands. ADT and Ford expect to invest approximately $100 million collectively during the next three years, of which we will contribute 40%. In addition, we entered into several commercial agreements (the “Canopy Commercial Agreements”), which are discussed in Note 5 “Equity Method Investments.”

State Farm Strategic Investment and Tender Offer

On September 5, 2022, we entered into the State Farm Securities Purchase Agreement, pursuant to which we agreed to issue and sell in a private placement to State Farm 133,333,333 shares of our Common Stock (State Farm Shares) at a per share price of $9.00 for an aggregate purchase price of $1.2 billion.

In connection with the State Farm Strategic Investment, we commenced the Tender Offer to purchase up to 133,333,333 shares of our Common Stock (including shares issued upon conversion of Class B Common Stock) (Tender Shares) at a price of $9.00 per share.

Concurrently with the execution of the State Farm Securities Purchase Agreement, (i) Apollo delivered to us the Apollo Support Agreement, pursuant to which Apollo agreed to collectively tender (and not withdraw) no fewer than 133,333,333 shares of Common Stock in the Tender Offer and (ii) Google delivered to us a Support Agreement, pursuant to which Google agreed to not convert and tender any of its shares of Class B Common Stock.

In October 2022, we issued and sold the State Farm shares at a per share price of $9.00 and received $1.2 billion (the “Closing”). The Tender Offer expired on October 20, 2022 (the “Tender Expiration Date”), and on October 26, 2022, we used proceeds from the State Farm Strategic Investment to repurchase an aggregate of 133,333,333 shares of our Common Stock at a purchase price of $9.00 per share, subject to the terms and conditions described in the Offer to Purchase dated September 12, 2022. The Tender Shares were subject to the “odd lot” priority and proration provisions described in the Offer to Purchase as the Tender Offer was substantially over-subscribed. No shares of Class B Common Stock were converted and tendered in the Tender Offer.

Additionally, we entered into the State Farm Development Agreement, pursuant to which State Farm committed up to $300 million to fund product and technology innovation, customer growth, and marketing initiatives. Upon the Closing, we received $100 million of such commitment from State Farm, which is restricted until we use the funds in accordance with the State Farm Development Agreement. Our use of the funds is also subject to the approval by State Farm.

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Other Events and Updates

Radio Conversion Program

During 2019, we commenced a program to replace the 3G and CDMA cellular equipment used in many of our security systems as a result of the cellular network providers retiring their 3G and CDMA networks beginning in 2022. For those customers who did not transition prior to or have not transitioned since the applicable network sunset, the loss of signal to our security systems and certain services we provide may impact our ability to bill and/or collect from these customers in the future and may impact our attrition, which we cannot estimate until some time after the retirements have occurred.

From inception of this program through December 31, 2022, we incurred approximately $292 million of net radio conversion costs, the majority of which was incurred in 2021 prior to the network sunset dates. We do not expect the remaining radio conversion costs and related incremental revenue to be material.

COVID-19 Pandemic Update

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 and other habits. While we have incurred additional costs associated with providing personal protective equipment for our employees and in response to supply chain constraints, as well as rising costs due to inflation, we believe our recurring revenue and highly variable subscriber acquisition cost model continues to provide a solid financial foundation for strong cash flow generation. Accordingly, we anticipate maintaining sufficient liquidity and capital resources to continue providing essential services, satisfying our debt requirements, and having the ability to return capital to our stockholders in the form of a regular quarterly dividend during this challenging macroeconomic environment.

We continue to consider the on-going and pervasive economic impact of the COVID-19 Pandemic in our assessment of our 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 any related economic or regulatory impacts, could materially impact our estimates and financial results in future reporting periods.

Tax Legislation

Federal Tax Legislation

Certain changes to U.S. federal tax law included in the Tax Cuts and Jobs Act of 2017 had a delayed effective date and have taken effect for 2022. Under IRC Section 163(j), the limitation on net business interest expense deductions will no longer be increased by deductions for depreciation, amortization, or depletion. Under IRC Section 174, specified research and experimentation expenditures must now be capitalized and amortized. These items will result in increased taxable income and acceleration of net operating loss utilization, which could impact our tax expense and ultimately, our net income (loss).

The IRA was signed into law in August 2022. The IRA, among other provisions, implements (i) a 15% corporate alternative minimum tax (the “CAMT”) on book income for corporations whose annual adjusted financial statement income during the most recently completed three-year period exceeds $1 billion, (ii) a 1% excise tax on net stock repurchases, and (iii) several tax incentives to promote clean energy including an extension of the ITC. Both the CAMT and the excise tax provisions are effective for tax years beginning after December 31, 2022. We do not anticipate any material impacts in the short-term at this time.

Under the IRA, the ITC was extended until 2032 to allow a qualifying homeowner to deduct 30% of the cost of installing residential solar systems from their U.S. federal income taxes. Under the current terms, the ITC will remain at 30% through the end of 2032 and be further reduced in increments down to 0.0% after the end of 2034, unless extended. We believe this incentive will be favorable for our Solar business.

Potential for Future Valuation Allowance

As of December 31, 2022, we had a significant amount of deferred tax assets, against which we take valuation allowances that relate to the uncertainty of our ability to utilize these deferred tax assets in future periods. We periodically review matters, including pending and enacted legislation such as the updates described above, that can influence our decision as to whether or not a valuation allowance is appropriate; and we consider whether any developments to such legislation, together with other factors, require a valuation allowance.

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We believe that our deferred tax assets for disallowed interest under IRC Section 163(j) will continue to grow from their current level. There is currently significant uncertainty in the matters we consider when determining whether it is appropriate to take additional valuation allowances. Any material change to our valuation allowance in subsequent periods would materially and adversely affect our operating results and may result in a net loss position for any given period.

KEY PERFORMANCE INDICATORS

We evaluate our results using certain key performance indicators, including the operating metrics recurring monthly revenue (“RMR”) and gross customer revenue attrition, as well as the non-GAAP measure Adjusted EBITDA. Computations of our key performance indicators may not be comparable to other similarly titled measures reported by other companies.

Certain operating metrics are approximated, as there may be variations to reported results due to certain adjustments we might make in connection with the integration over several periods of acquired companies that calculated these metrics differently or periodic reassessments and refinements in the ordinary course of business, including changes due to system conversions or historical methodology differences in legacy systems.

RMR

RMR is generated by contractual recurring fees for monitoring and other recurring services provided to our customers.

We use RMR to evaluate our overall sales, installation, and retention performance. Additionally, we believe the presentation of RMR is useful to investors because it measures the volume of revenue under contract at a given point in time, which is a useful measure for forecasting future revenue performance as the majority of our revenue comes from recurring sources.

Gross Customer Revenue Attrition

Gross customer revenue attrition is defined as RMR lost as a result of customer attrition, net of dealer charge-backs and reinstated customers, excluding contracts monitored but not owned and DIY customers. Customer sites are considered canceled when all services are terminated. Dealer charge-backs represent customer cancellations charged back to the dealers because the customer canceled service during the charge-back period, which is generally thirteen months.

Gross customer revenue attrition is calculated on a trailing twelve-month basis, the numerator of which is the RMR lost during the period due to attrition, net of dealer charge-backs and reinstated customers, and the denominator of which is total annualized RMR based on an average of RMR under contract at the beginning of each month during the period, in each case, excluding contracts monitored but not owned and DIY customers.

We use gross customer revenue attrition to evaluate our retention and customer satisfaction performance, as well as evaluate subscriber trends by vintage year. Additionally, we believe the presentation of gross customer revenue attrition is useful to investors as it provides a means to evaluate drivers of customer attrition and the impact of retention initiatives.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP measure. Our definition of Adjusted EBITDA, a reconciliation of Adjusted EBITDA to net income (loss) (the most comparable GAAP measure), and additional information, including a description of the limitations relating to the use of Adjusted EBITDA, are provided under “—Non-GAAP Measures.”

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RESULTS OF OPERATIONS

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(1)Refer to the “Key Performance Indicators” section for the definitions of these key performance indicators.

(2)Adjusted EBITDA is a non-GAAP measure. Refer to the “Non-GAAP Measures” section for the definition of this term and reconciliation to the most comparable GAAP measure.

N/A—Not applicable.

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Revenue:

Monitoring and related services revenue (“M&S Revenue”) primarily comprises revenue generated from providing recurring monthly monitoring and other services, as well as revenue from time and materials billings. Security installation, product, and other revenue comprises installation revenue from the sale and installation of our security systems sold under a customer-owned model, as well as the recognition of revenue that is deferred upon initiation of a monitoring contract in transactions occurring under a Company-owned model (amortization of deferred subscriber acquisition revenue). Solar installation, product, and other revenue comprises revenue from the sale and installation of our solar systems and energy-storage solutions.

CSB:

During 2022, the increases in CSB revenue included:

•M&S Revenue: (i) higher recurring revenue of $156 million, reflecting approximately $100 million related to the estimated impact from an increase in average prices and approximately $70 million related to the estimated impact from an increase in subscribers, partially offset by a decrease of $14 million in other revenue primarily due to radio conversion revenue, as well as (ii) higher revenue of $21 million primarily related to time and materials billings.

•Security installation, product, and other: an increase in the amortization of deferred subscriber acquisition revenue of $71 million as a result of a higher population of existing customers under a Company-owned model as compared to the prior year, partially offset by a decrease in installation revenue of $15 million related to a lower volume of outright sales transactions primarily as a result of our transition to a predominately Company-owned model in the first quarter of 2021.

Commercial:

During 2022, the increases in Commercial revenue included:

•M&S Revenue: higher revenue from time and materials billings of $43 million driven by higher revenue per service call, as well as higher recurring revenue of $22 million driven by improvements in average revenue per subscriber.

•Security installation, product, and other: higher installation revenue related to strong sales performance, despite supply chain delays.

Solar:

The increase in Solar revenue during 2022, as compared to the prior year period, was primarily due to a full year compared to a partial month of revenue from Solar installations, as a result of the ADT Solar Acquisition in December 2021. During 2022 and 2021, solar installation, product, and other revenue included approximately $30 million and $10 million, respectively, from the amortization of purchase accounting adjustments related to a customer backlog intangible asset.

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RMR and Gross Customer Revenue Attrition:

As of December 31, 2022, our ending RMR balance was $374 million, up $15 million or 4% compared to the prior year, primarily driven by our CSB segment and included the following:

•an increase in average revenue per subscriber of 3%, as new and existing customers selected higher priced interactive and other services, and

•an increase in our subscriber base of 1% primarily due to subscriber growth initiatives and improvements in customer retention.

Gross customer revenue attrition was 12.5% as of December 31, 2022 compared to 13.1% as of December 31, 2021. The improvement in gross customer revenue attrition was driven by a decrease in relocations, partially offset by higher non-payment disconnects.

Cost of Revenue:

Monitoring and related services costs primarily comprises field service and call center costs incurred from providing recurring monthly monitoring and other services in our CSB and Commercial segments. Security and solar installation, product, and other costs comprise costs incurred from the installation of our security and solar systems, respectively.

CSB:

During 2022, the decrease in CSB monitoring and related services costs was primarily attributable to a decrease in field service and call center costs driven by a lower volume of in-person service tickets as a result of our Virtual Assistance Program.

Commercial:

During 2022, the increase in Commercial cost of revenue was primarily attributable to an increase in installations and services performed in connection with strong sales performance as discussed above and reflects higher prices for materials, labor, and fuel.

Solar:

The increase in total cost of revenue during 2022, as compared to the prior year period, was primarily due to a full year compared to a partial month as a result of the ADT Solar Acquisition in December 2021.

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Selling, General, and Administrative Expenses:

During 2022, the increase in selling, general, and administrative expenses (“SG&A”), as compared to the prior year period, was primarily driven by incremental expenses of approximately $296 million as a result of the ADT Solar Acquisition in December 2021, as well as the following which exclude ADT Solar:

•an increase in the provision for credit losses of approximately $54 million, primarily in our CSB segment due to lower provision in the prior year associated with impacts from the COVID-19 Pandemic,

•an increase in selling costs of approximately $51 million, primarily in our CSB segment due to additional amortization of deferred subscriber acquisition costs, and

•an increase in general and administrative costs of approximately $40 million primarily in our CSB segment due to investments in our information technology infrastructure and other operational costs.

These increases were partially offset by:

•a decrease in radio conversion costs of $219 million, primarily due to a decrease in the number of conversions, and

•a decrease in advertising costs of approximately $82 million, primarily due to our efforts to optimize our advertising model.

Depreciation and Intangible Asset Amortization:

During 2022, the decrease in depreciation and intangible asset amortization, as compared to the prior year period, was primarily driven by a decrease in the amortization of customer relationship intangible assets of $320 million, which was primarily due to certain assets acquired as part of the ADT Acquisition becoming fully amortized beginning with the fourth quarter of 2021. The remaining customer relationship intangible assets acquired as part of the ADT Acquisition will be fully amortized during the first quarter of 2023.

The decrease was partially offset by investments in subscriber growth resulting in:

•an increase in the amortization of customer contracts acquired under our authorized dealer program and from other third parties of $53 million, and

•an increase in the depreciation of subscriber system assets of $45 million.

Merger, Restructuring, Integration, and Other:

Merger, restructuring, integration, and other varies year over year and generally represents certain direct and incremental costs resulting from acquisitions, integration costs as a result of those acquisitions, costs related to restructuring efforts, as well as fair value remeasurements and impairment charges on certain strategic investments.

During 2022, the decrease in merger, restructuring, integration, and other, as compared to the prior year period, primarily resulted from an $18 million impairment charge in CSB during 2021 due to lower than expected benefits from the developed technology intangible asset acquired during November 2020.

Goodwill Impairment:

We recorded a goodwill impairment charge of $149 million associated with our Solar reporting unit during the third quarter of 2022. Refer to Note 6 “Goodwill and Other Intangible Assets” for further discussion.

Interest Expense, net:

During 2022, the decrease in interest expense, net, as compared to the prior year period, was driven by higher unrealized gains of $144 million, as well as a decrease of approximately $53 million related to settlements on our interest rate swaps partially offset by higher interest expense of $28 million on our First Lien Term Loan due 2026. These changes were primarily due to fluctuations in the forward LIBOR.

Loss on Extinguishment of Debt:

During 2021, loss on extinguishment of debt totaled $37 million and was primarily due to the call premium and write-off of unamortized fair value adjustments in connection with the $1.0 billion redemption of the 3.50% notes due 2022 (“ADT Notes due 2022”) in August 2021 (“ADT Notes due 2022 Redemption”).

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Other Income (Expense):

During 2022, in connection with the Tender Offer, we recorded a net loss of $63 million associated with the change in fair value of the Forward Contract. In October 2022, upon closing of the State Farm Strategic Investment, the contingency associated with the Forward Contract was resolved, and the Forward Contract was settled upon closing of the Tender Offer.

Income Tax Benefit (Expense):

Our income tax expense during 2022 was $60 million, resulting in an effective tax rate for the period of 25.4%. The effective tax rate primarily represents the federal statutory rate of 21.0%, a state statutory tax rate, net of federal benefits and legislative changes, of 2.8%, and unfavorable impacts related to the fair value adjustment of the Forward Contract, goodwill impairment, and other items, partially offset by favorable impacts from research and development credits, as well as uncertain tax positions and other items.

Our income tax benefit during 2021 was $130 million, resulting in an effective tax rate for the period of 27.7%. The effective tax rate primarily represents the federal income tax rate of 21.0%, a state statutory tax rate, net of federal benefits and legislative changes, of 3.5%, and a 1.3% favorable impact related to the revaluation of our deferred tax liabilities in connection with our 2021 acquisitions.

NON-GAAP MEASURES

To provide investors with additional information in connection with our results as determined in accordance with GAAP, we disclose Adjusted EBITDA as a non-GAAP measure. This measure is not a financial measure calculated in accordance with GAAP, and it should not be considered as a substitute for net income, operating income, or any other measure calculated in accordance with GAAP, and may not be comparable to similarly titled measures reported by other companies.

Adjusted EBITDA

We believe Adjusted EBITDA is useful to investors to measure the operational strength and performance of our business. We believe the presentation of Adjusted EBITDA is useful as it provides investors additional information about our operating profitability adjusted for certain non-cash items, non-routine items we do not expect to continue at the same level in the future, as well as other items not core to our operations. Further, we believe Adjusted EBITDA provides a meaningful measure of operating profitability because we use it for evaluating our business performance, making budgeting decisions, and comparing our performance against other peer companies using similar measures.

We define Adjusted EBITDA as net income (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 changes in fair value of certain financial instruments, impairment charges, financing and consent fees, or acquisition-related adjustments.

There are material limitations to using Adjusted EBITDA. Adjusted EBITDA does not take into account certain significant items, including depreciation and amortization, interest, taxes, and other adjustments which directly affect our net income (loss). These limitations are best addressed by considering the economic effects of the excluded items independently and by considering Adjusted EBITDA in conjunction with net income (loss) as calculated in accordance with GAAP.

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The table below reconciles Adjusted EBITDA to net income (loss):

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(1)During 2020, primarily included losses of $81 million in CSB associated with the settlement of a pre-existing relationship in connection with the Defenders Acquisition. Refer to Note 4 “Acquisitions and Disposition.”

(2)During 2022, represents a goodwill impairment charge associated with our Solar reporting unit. Refer to Note 6 “Goodwill and Other Intangible Assets.”

(3)During 2020, primarily includes $66 million associated with the redemption of the Prime Notes in February 2020 and $49 million associated with the redemption of the ADT Notes due 2021 in September 2020. Refer to Note 7 “Debt.”

(4)During 2022, represents the change in fair value of the Forward Contract. Refer to Note 10 “Equity.”

(5)Refer to Note 1 “Description of Business and Summary of Significant Accounting Policies” for further details.

(6)During 2022 and 2021, primarily represents the amortization of the customer backlog intangible asset acquired in the ADT Solar Acquisition, which was fully amortized as of March 2022. Refer to Note 4 “Acquisitions and Disposition.”

(7)During 2022, primarily represents the gain on sale of a business. During 2020, included recoveries of $10 million associated with notes receivable from a former strategic investment.

Adjusted EBITDA in total and by segment were as follows:

The drivers listed below exclude amounts that are outside of our definition of Adjusted EBITDA. Refer to the discussions above under “—Results of Operations” for further details.

CSB:

During 2022, the increase was primarily due to higher M&S Revenue of $188 million, lower advertising costs of $83 million, and lower field service and call center costs of $28 million, partially offset by higher provision for credit losses of $42 million. The remainder of the change was primarily due to higher general and administrative expenses of $36 million.

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Commercial:

During 2022, the increase was primarily due to higher M&S Revenue of $65 million and higher installation revenue, net of the associated installation costs, of $25 million, partially offset by higher field service and call center costs of $32 million and higher provision for credit losses of $12 million. The remainder of the change was primarily due to higher selling expenses.

Solar:

During 2022, Solar Adjusted EBITDA was impacted by installation delays and lower install throughput and reflects cost-reduction efforts and other initiatives to improve long-term operational efficiencies, and included approximately $21 million of charges associated with (i) receivables and rebates that are not expected to be collected from a former third party lender entering a formal insolvency proceeding to effectuate the wind-down of its operations, as well as (ii) third party loans for systems not expected to achieve permission to operate.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity and capital resources primarily consisted of the following:

Liquidity

We expect our ongoing sources of liquidity to include cash generated from operations, borrowings under our first lien revolving credit facility (the “First Lien Revolving Credit Facility”) and the Receivables Facility, and the issuance of equity and/or debt securities as appropriate given market conditions. Our future cash needs are expected to include cash for operating activities, working capital, capital expenditures, strategic investments, principal and interest payments on our debt, and potential dividend payments to our stockholders.

Our principal liquidity requirements are to finance current operations, invest in acquiring and retaining customers, purchase property and equipment, service our debt, invest in our information technology infrastructure, and finance potential mergers and acquisitions.

Our liquidity requirements are primarily funded by our cash flows from operations, which include cash received from customers related to monthly recurring revenue from providing monitoring and other services, as well as cash from the sale and installation of our security and solar systems (including cash received from third-party lenders who provide loan products for customers), less cash costs to provide services to our customers, including general and administrative costs, certain costs associated with acquiring new customers, and interest payments. In addition to cash generated from operations, we expect our ongoing sources of liquidity to include borrowings under our revolving credit facility and Receivables Facility, as well as the issuance of equity and/or debt securities as appropriate given market conditions.

We are a highly leveraged company with significant debt service requirements and have both fixed-rate and variable-rate debt. We may periodically seek to repay, redeem, repurchase, or refinance our indebtedness, or seek to retire or purchase our outstanding securities through cash purchases in the open market, privately negotiated transactions, a 10b5-1 repurchase plan, or otherwise, and any such transactions may involve material amounts. Cash outflows for interest payments are not consistent between quarters, with larger outflows occurring in the first and third quarters, and may vary as a result of our variable rate debt.

Certain of our variable rate debt instruments are currently based on LIBOR. The SOFR will replace the forward LIBOR as the applicable benchmark rate for all existing and future issuances of our debt instruments, including our interest rate swaps, with a variable rate component (the “SOFR Transition”) by June 2023 (the “SOFR Transition Date”). Existing instruments under the First Lien Credit Agreement will continue to be based on LIBOR until the SOFR Transition Date, unless transitioned to SOFR prior to such date pursuant to the terms of the First Lien Credit Agreement. As of December 31, 2022, we do not anticipate any material impacts from the SOFR Transition.

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We are closely monitoring the impact of recent inflationary pressures and changes in interest rates on our cash position. However, we believe our cash position, borrowing capacity available under our First Lien Revolving Credit Facility and Receivables Facility, and cash provided by operating activities are, and will continue to be, adequate to meet our operational and business needs in the next twelve months, as well as our long-term liquidity needs.

Material Cash Requirements

Our cash requirements within the next twelve months primarily include current maturities of long-term debt and leases, accounts payable and other current liabilities, and purchase commitments and other obligations entered into in the ordinary course of business.

As of December 31, 2022, our significant short-term and long-term cash requirements, excluding cash required for operations, under our various contractual obligations and commitments primarily included:

•Debt principal – As of December 31, 2022, our expected future debt principal payments, excluding finance leases, totaled approximately $9.9 billion, with approximately $827 million due in 2023 primarily related to the ADT Notes due 2023 (defined below).

In addition, we are required to make scheduled quarterly principal payments of approximately $7 million on our First Lien Term Loan due 2026, as well as repay amounts due under our Receivables Facility.

In addition, upon funding of the Term Loan A Facility during the first quarter of 2023, we expect to make scheduled quarterly principal payments of approximately $8 million with the remaining balance due at maturity.

Refer to Note 7 “Debt” for further details of our debt and the timing of expected future principal payments.

•Interest payments – Future interest payments on our fixed-rate debt are based on the contractual terms. Future interest payments on our variable-rate debt and the effects of our interest rate swaps (including interest rate swaps presented within financing activities), are based on the forward LIBOR curve, except for our Receivables Facility, which is based on SOFR, plus the applicable margin in effect as of December 31, 2022.

During 2022, we paid net cash interest of approximately $471 million, including interest on interest rate swaps presented within financing activities. Our expected future interest payments related to our debt and interest rate swap contracts as of December 31, 2022, including interest related to the Term Loan A Facility described below, totaled approximately $2.3 billion, with approximately $510 million due in 2023. Additionally, we expect to incur annual interest payments of approximately $370 - $480 million during each of the years 2024 - 2026.

•Operating and finance leases – As of December 31, 2022, our expected future lease payments, including interest, totaled approximately $275 million, with approximately $78 million due in 2023.

Refer to Note 14 “Leases” for further details of our obligations and the timing of expected future payments.

•Purchase obligations – Our material cash requirements for purchases of goods or services entered into in the ordinary course of business, including purchase orders and contractual obligations, primarily consist of information technology services and equipment, including investments in our information technology infrastructure, direct materials, and telecommunication services. Our future purchase obligations may be impacted by changes in our business or other internal or external factors. As our business continues to grow organically or through acquisitions, our obligations may grow as well.

As of December 31, 2022, our contractual obligations entered into in the ordinary course of business, including agreements that are enforceable and legally binding and have a remaining term in excess of one year, totaled approximately $312 million, with approximately $176 million expected to be paid in 2023.

Refer to Note 13 “Commitments and Contingencies” for the amounts and timing of such payments.

In addition, as of December 31, 2022, we had outstanding purchase orders of approximately $150 million primarily related to direct materials and information technology and marketing services, which are expected to be materially satisfied in 2023.

•Google Commercial Agreement – The Google Commercial Agreement requires us and Google to each contribute $150 million toward certain joint commercial efforts. Additionally, during 2022 we entered into the Google Commercial Agreement Amendment in which Google agreed to commit an additional $150 million. While the timing of these contributions is still uncertain, we expect to contribute the majority of our $150 million commitment under the Google Commercial Agreement by the end of 2025.

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•State Farm Opportunity Fund – Pursuant to the State Farm Development Agreement, State Farm committed up to $300 million to fund product and technology innovation, customer growth, and marketing initiatives. Upon the Closing of the State Farm Strategic Investment, we received $100 million of such commitment from State Farm, which is restricted until we use the funds for investment, as agreed upon with State Farm, in accordance with the State Farm Development Agreement.

•Customer account purchases – Our indirect channel customers are generated mainly through our ADT Authorized Dealer Program. As opportunities arise, we have in the past engaged, and we may continue to engage, in selective third-party account purchases, which typically involve the purchase of a set of customer accounts from other security service providers.

•Repurchase of Solar loans – As of December 31, 2022, we recognized a liability of approximately $88 million related to certain loans provided to customers within our Solar business that we may be required to repurchase from our third party lenders. We recorded a receivable related to the amount we expect to recover if permission to operate is achieved in the event the third party lenders do require us to repurchase such loans.

•Sunlight Financial LLC (“Sunlight”) – We use Sunlight, a related party controlled by Apollo, to provide financing alternatives to certain ADT Solar customers. We incurred $54 million of financing fees during 2022, and future amounts due to Sunlight will be based on the volume of loans provided.

•Unrecognized tax benefits – We have approximately $56 million of unrecognized tax benefits, excluding interest and penalties, related to various tax positions we have taken. These liabilities may increase or decrease over time primarily as a result of tax examinations, and given the status of the examinations, we cannot reliably estimate the period of any cash settlement with the respective taxing authorities.

Refer to Note 9 “Income Taxes” for further details.

•Off-balance sheet arrangements – We have guarantees primarily related to standby letters of credit on our insurance programs totaling $93 million.

During March 2022, we entered into an unsecured Credit Agreement with Goldman Sachs Mortgage Company, as administrative agent and issuing lender (the “Issuing Lender”), together with other lenders party thereto, pursuant to which we may request the Issuing Lender to issue one or more letters of credit for its own account or the account of its subsidiaries, in an aggregate face amount not to exceed $75 million at any one time.

We do not have any other arrangements giving rise to material obligations that are not reported in our consolidated balance sheets, as described in Item 303 of SEC Regulation S-K.

•Dividends – Stockholders are entitled to receive dividends when, as, and if declared by the Company’s board of directors out of funds legally available for that purpose. On February 28, 2023, we announced a dividend of $0.035 per share to holders of Common Stock and Class B Common Stock of record on March 16, 2023, which will be distributed on April 4, 2023.

During 2022, we declared aggregate dividends of $0.14 per share on Common Stock ($120 million) and $0.14 per share on Class B Common Stock ($8 million).

During 2021, we declared aggregate dividends of $0.14 per share on Common Stock ($111 million) and $0.14 per share on Class B Common Stock ($8 million).

Refer to Note 10 “Equity” for further details.

Cash Flow Analysis

The following table is a summary of our cash flow activity for the periods presented:

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Cash Flows from Operating Activities

The increase in net cash provided by operating activities for 2022 compared to 2021 was primarily due to:

•a decrease in payments related to radio conversion costs, net of the related incremental revenue, of $194 million, partially offset by

•an increase in payments related to our annual incentive compensation plan of $49 million due to a partial payment in the prior year, and

•timing of payments to and receipts from vendors primarily related to accounts payable and inventory.

The remainder of the activity related to changes in assets and liabilities due to the volume and timing of other operating cash receipts and payments with respect to when the transactions are reflected in earnings.

Refer to the discussions above under “—Results of Operations” for further details.

Cash Flows from Investing Activities

The decrease in net cash used in investing activities for 2022 compared to 2021 was primarily due to:

•a decrease in net outflows of $150 million related to acquisitions as a result of the ADT Solar acquisition during 2021 and

•a decrease in net outflows of $53 million related to dealer generated customer account and bulk account purchases, partially offset by

•an increase in net outflows of $40 million related to subscriber system assets expenditures as a result of more Company-owned transactions and our growth initiatives.

Cash Flows from Financing Activities

During 2022, net cash used in financing activities primarily consisted of:

•$1.2 billion issuance of State Farm shares and corresponding repurchase of $1.2 billion related to the Tender Shares, as well as Opportunity fund proceeds of $101 million related to the State Farm Development Agreement,

•dividend payments of $127 million, and

•net debt payments of $55 million, finance lease payments of $45 million, and interest rate swap payments of $19 million, partially offset by

•net proceeds under the Receivables Facility of $156 million.

During 2021, net cash used in financing activities primarily consisted of:

•dividend payments of $116 million, and

•interest rate swap payments of $56 million, finance leases payments of $32 million, and net debt payments of $23 million; partially offset by

•net proceeds under the Receivables Facility of $123 million.

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Long-Term Debt

As of December 31, 2022, our debt (excluding finance leases and any deferred financing costs, discounts, premiums, or fair value adjustments) consisted of the following (in thousands):