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x
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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¨
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Delaware
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47-4116383
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
¨
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Accelerated filer
¨
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Non-accelerated filer
x
(Do not check if a smaller reporting company)
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Smaller reporting company
¨
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Emerging growth company
¨
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Page
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June 30, 2018
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December 31, 2017
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||||
Assets
|
|
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|
||||
Current Assets:
|
|
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|
||||
Cash and cash equivalents
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$
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344,288
|
|
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$
|
122,899
|
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Restricted cash and cash equivalents
|
753,883
|
|
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3,883
|
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||
Accounts receivable trade, less allowance for doubtful accounts of $36,059 and $34,042, respectively
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148,882
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148,822
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||
Inventories
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78,134
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85,672
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Work-in-progress
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30,194
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21,252
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Prepaid expenses and other current assets
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95,491
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73,358
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Total current assets
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1,450,872
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455,886
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Property and equipment, net
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318,827
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332,445
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Subscriber system assets, net
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2,894,096
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2,892,683
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Intangible assets, net
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7,568,606
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7,856,775
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Goodwill
|
5,075,681
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5,070,586
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Deferred subscriber acquisition costs, net
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371,700
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282,478
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Other assets
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135,850
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123,967
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Total Assets
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$
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17,815,632
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$
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17,014,820
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||||
Liabilities and Stockholders' Equity
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||||
Current Liabilities:
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||||
Current maturities of long-term debt
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$
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48,319
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$
|
48,060
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Current maturities of mandatorily redeemable preferred securities
|
735,661
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|
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—
|
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Accounts payable
|
196,920
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187,695
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Deferred revenue
|
316,249
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309,157
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Accrued expenses and other current liabilities
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374,130
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351,340
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Total current liabilities
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1,671,279
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896,252
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Long-term debt
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9,522,457
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10,121,126
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Mandatorily redeemable preferred securities—authorized 1,000,000 shares Series A of $0.01 par value; issued and outstanding 750,000 shares as of June 30, 2018 and December 31, 2017
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—
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682,449
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Deferred subscriber acquisition revenue
|
460,307
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368,669
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Deferred tax liabilities
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1,374,455
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1,376,708
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Other liabilities
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125,292
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136,504
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Total Liabilities
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13,153,790
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13,581,708
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Commitments and contingencies (See Note 8)
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Stockholders' Equity:
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Common stock—authorized 3,999,000,000 shares of $0.01 par value; issued and outstanding shares of 766,795,086 and 641,118,571 as of June 30, 2018 and December 31, 2017, respectively
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1,052
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2
|
|
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Additional paid-in capital
|
5,935,377
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4,435,329
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Accumulated deficit
|
(1,241,639
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)
|
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(998,212
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)
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Accumulated other comprehensive loss
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(32,948
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)
|
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(4,007
|
)
|
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Total Stockholders' Equity
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4,661,842
|
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3,433,112
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Total Liabilities and Stockholders' Equity
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$
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17,815,632
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$
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17,014,820
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For the Quarters Ended
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For the Six Months Ended
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||||||||||||
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June 30, 2018
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June 30, 2017
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June 30, 2018
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June 30, 2017
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||||||||
Monitoring and related services
|
$
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1,023,126
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$
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1,007,086
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$
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2,040,418
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|
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$
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2,004,734
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Installation and other
|
108,333
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60,694
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207,489
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122,274
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Total revenue
|
1,131,459
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1,067,780
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2,247,907
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2,127,008
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Cost of revenue (exclusive of depreciation and amortization shown separately below)
|
246,225
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215,250
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494,619
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|
433,955
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|
||||
Selling, general and administrative expenses
|
322,538
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285,656
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627,508
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|
638,911
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|
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Depreciation and intangible asset amortization
|
488,320
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458,387
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|
971,996
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919,316
|
|
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Merger, restructuring, integration, and other costs
|
455
|
|
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18,860
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8,478
|
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|
39,665
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|
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Operating income
|
73,921
|
|
|
89,627
|
|
|
145,306
|
|
|
95,161
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|
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Interest expense, net
|
(174,479
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)
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(188,099
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)
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(348,812
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)
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(369,160
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)
|
||||
Loss on extinguishment of debt
|
—
|
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(3,431
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)
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(61,597
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)
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(4,331
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)
|
||||
Other income
|
29,282
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|
9,018
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|
|
28,822
|
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|
13,005
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|
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Loss before income taxes
|
(71,276
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)
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(92,885
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)
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(236,281
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)
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(265,325
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)
|
||||
Income tax benefit
|
4,571
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|
|
229
|
|
|
12,139
|
|
|
31,794
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|
||||
Net loss
|
$
|
(66,705
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)
|
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$
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(92,656
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)
|
|
$
|
(224,142
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)
|
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$
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(233,531
|
)
|
|
|
|
|
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|
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|
||||||||
Net loss per share:
|
|
|
|
|
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|
||||||||
Basic and diluted
|
$
|
(0.09
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
(0.36
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average number of shares:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
750,009
|
|
|
641,048
|
|
|
739,354
|
|
|
641,048
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Cash dividends declared per common share
|
$
|
0.035
|
|
|
$
|
0.312
|
|
|
$
|
0.070
|
|
|
$
|
1.170
|
|
|
For the Quarters Ended
|
|
For the Six Months Ended
|
||||||||||||
|
June 30,
2018 |
|
June 30,
2017 |
|
June 30,
2018 |
|
June 30,
2017 |
||||||||
Net loss
|
$
|
(66,705
|
)
|
|
$
|
(92,656
|
)
|
|
$
|
(224,142
|
)
|
|
$
|
(233,531
|
)
|
Other comprehensive (loss) income, net of tax:
|
|
|
|
|
|
|
|
||||||||
Change in unrealized loss on cash flow hedges
|
(2,289
|
)
|
|
—
|
|
|
(2,289
|
)
|
|
—
|
|
||||
Foreign currency translation and other
|
(10,925
|
)
|
|
10,219
|
|
|
(26,652
|
)
|
|
13,588
|
|
||||
Total other comprehensive (loss) income, net of tax
|
(13,214
|
)
|
|
10,219
|
|
|
(28,941
|
)
|
|
13,588
|
|
||||
Comprehensive loss
|
$
|
(79,919
|
)
|
|
$
|
(82,437
|
)
|
|
$
|
(253,083
|
)
|
|
$
|
(219,943
|
)
|
|
Number of Common Shares
|
|
Common Stock
|
|
Additional
Paid-In Capital |
|
Accumulated
Deficit |
|
Accumulated
Other Comprehensive Loss |
|
Total
Stockholders' Equity |
|||||||||||
Balance as of December 31, 2017
|
641,119
|
|
|
$
|
2
|
|
|
$
|
4,435,329
|
|
|
$
|
(998,212
|
)
|
|
$
|
(4,007
|
)
|
|
$
|
3,433,112
|
|
Adoption of accounting standard, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
34,430
|
|
|
—
|
|
|
34,430
|
|
|||||
Common stock issued for initial public offering proceeds, net of related fees
|
105,000
|
|
|
1,050
|
|
|
1,404,969
|
|
|
—
|
|
|
—
|
|
|
1,406,019
|
|
|||||
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(28,941
|
)
|
|
(28,941
|
)
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(224,142
|
)
|
|
—
|
|
|
(224,142
|
)
|
|||||
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(53,715
|
)
|
|
—
|
|
|
(53,715
|
)
|
|||||
Share-based compensation expense
|
20,676
|
|
|
—
|
|
|
95,102
|
|
|
—
|
|
|
—
|
|
|
95,102
|
|
|||||
Other
|
—
|
|
|
—
|
|
|
(23
|
)
|
|
—
|
|
|
—
|
|
|
(23
|
)
|
|||||
Balance as of June 30, 2018
|
766,795
|
|
|
$
|
1,052
|
|
|
$
|
5,935,377
|
|
|
$
|
(1,241,639
|
)
|
|
$
|
(32,948
|
)
|
|
$
|
4,661,842
|
|
|
For the Six Months Ended
|
||||||
|
June 30, 2018
|
|
June 30, 2017
|
||||
Cash Flows from Operating Activities:
|
|
|
|
||||
Net loss
|
$
|
(224,142
|
)
|
|
$
|
(233,531
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and intangible asset amortization
|
971,996
|
|
|
919,316
|
|
||
Amortization of deferred subscriber acquisition costs
|
27,152
|
|
|
21,608
|
|
||
Amortization of deferred subscriber acquisition revenue
|
(35,555
|
)
|
|
(18,646
|
)
|
||
Share-based compensation expense
|
95,102
|
|
|
4,889
|
|
||
Deferred income taxes
|
(9,778
|
)
|
|
(39,042
|
)
|
||
Provision for losses on accounts receivable and inventory
|
27,531
|
|
|
28,616
|
|
||
Loss on extinguishment of debt
|
61,597
|
|
|
4,331
|
|
||
Other non-cash items, net
|
2,427
|
|
|
24,624
|
|
||
Changes in operating assets and liabilities, net of the effects of acquisitions:
|
|
|
|
||||
Deferred subscriber acquisition costs
|
(88,810
|
)
|
|
(81,814
|
)
|
||
Deferred subscriber acquisition revenue
|
127,973
|
|
|
123,387
|
|
||
Other, net
|
7,269
|
|
|
(10,326
|
)
|
||
Net cash provided by operating activities
|
962,762
|
|
|
743,412
|
|
||
Cash Flows from Investing Activities:
|
|
|
|
||||
Dealer generated customer accounts and bulk account purchases
|
(327,553
|
)
|
|
(306,304
|
)
|
||
Subscriber system assets
|
(280,720
|
)
|
|
(298,923
|
)
|
||
Capital expenditures
|
(65,212
|
)
|
|
(69,435
|
)
|
||
Acquisition of businesses, net of cash acquired
|
(36,214
|
)
|
|
—
|
|
||
Other investing
|
13,552
|
|
|
25,464
|
|
||
Net cash used in investing activities
|
(696,147
|
)
|
|
(649,198
|
)
|
||
Cash Flows from Financing Activities:
|
|
|
|
||||
Proceeds from initial public offering, net of fees
|
1,406,019
|
|
|
—
|
|
||
Proceeds from long-term borrowings
|
—
|
|
|
1,344,126
|
|
||
Repayment of long-term borrowings, including call premiums
|
(673,928
|
)
|
|
(700,306
|
)
|
||
Dividends on common stock
|
(26,265
|
)
|
|
(749,999
|
)
|
||
Other financing
|
(416
|
)
|
|
(1,048
|
)
|
||
Net cash provided by (used in) financing activities
|
705,410
|
|
|
(107,227
|
)
|
||
|
|
|
|
||||
Effect of currency translation on cash
|
(636
|
)
|
|
42
|
|
||
|
|
|
|
||||
Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents
|
971,389
|
|
|
(12,971
|
)
|
||
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period
|
126,782
|
|
|
90,893
|
|
||
Cash and cash equivalents and restricted cash and cash equivalents at end of period
|
$
|
1,098,171
|
|
|
$
|
77,922
|
|
(in thousands)
|
June 30,
2018 |
|
December 31,
2017 |
||||
Gross carrying amount
|
$
|
4,023,821
|
|
|
$
|
3,762,905
|
|
Accumulated depreciation
|
(1,129,725
|
)
|
|
(870,222
|
)
|
||
Subscriber system assets, net
|
$
|
2,894,096
|
|
|
$
|
2,892,683
|
|
|
For the Quarters Ended
|
|
For the Six Months Ended
|
||||||||||||
(in thousands)
|
June 30,
2018 |
|
June 30,
2017 |
|
June 30,
2018 |
|
June 30,
2017 |
||||||||
Subscriber system assets depreciation expense
|
$
|
136,618
|
|
|
$
|
133,622
|
|
|
$
|
272,748
|
|
|
$
|
266,220
|
|
(in thousands)
|
June 30,
2018 |
|
December 31,
2017 |
||||
Accrued interest
|
$
|
85,472
|
|
|
$
|
91,592
|
|
Payroll-related accruals
|
74,993
|
|
|
94,501
|
|
||
Other accrued liabilities
|
213,665
|
|
|
165,247
|
|
||
Total accrued expenses and other current liabilities
|
$
|
374,130
|
|
|
$
|
351,340
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||||||||||
(in thousands)
|
Carrying
Value |
|
Fair
Value |
|
Carrying
Value |
|
Fair
Value |
||||||||
Debt instruments, excluding capital lease obligations
|
$
|
9,535,185
|
|
|
$
|
9,754,374
|
|
|
$
|
10,128,020
|
|
|
$
|
10,868,626
|
|
Koch Preferred Securities
|
$
|
735,661
|
|
|
$
|
948,900
|
|
|
$
|
682,449
|
|
|
$
|
924,700
|
|
|
|
Balance at
December 31, 2017
|
|
Revenue Standard Adoption Adjustment
|
|
Balance at
January 1, 2018
|
||||||
(in thousands)
|
|
|
|
|||||||||
Assets
|
|
|
|
|
|
|
||||||
Prepaid expenses and other current assets
|
|
$
|
73,358
|
|
|
$
|
6,615
|
|
|
$
|
79,973
|
|
Deferred subscriber acquisition costs, net
|
|
282,478
|
|
|
33,380
|
|
|
315,858
|
|
|||
Other assets
|
|
123,967
|
|
|
6,321
|
|
|
130,288
|
|
|||
|
|
|
|
|
|
|
||||||
Liabilities
|
|
|
|
|
|
|
||||||
Deferred tax liabilities
|
|
1,376,708
|
|
|
11,886
|
|
|
1,388,594
|
|
|||
|
|
|
|
|
|
|
||||||
Stockholders' Equity
|
|
|
|
|
|
|
||||||
Accumulated deficit
|
|
(998,212
|
)
|
|
34,430
|
|
|
(963,782
|
)
|
(in thousands)
|
June 30, 2018
|
|
December 31, 2017
|
||||
Cash and cash equivalents
|
$
|
344,288
|
|
|
$
|
122,899
|
|
Restricted cash and cash equivalents
|
753,883
|
|
|
3,883
|
|
||
Total cash and cash equivalents and restricted cash and cash equivalents at end of period
|
$
|
1,098,171
|
|
|
$
|
126,782
|
|
|
|
For the Quarter Ended June 30, 2018
|
|
For the Six Months Ended June 30, 2018
|
||||||||||||||||||||
|
|
|
|
Balances without Adoption of Standard
|
|
Effect of Adoption
Increase / (Decrease) |
|
|
|
Balances without Adoption of Standard
|
|
Effect of Adoption
Increase / (Decrease) |
||||||||||||
Statements of Operations
(in thousands)
|
|
As Reported
|
|
|
|
As Reported
|
|
|
||||||||||||||||
Monitoring and related services
|
|
$
|
1,023,126
|
|
|
$
|
1,024,604
|
|
|
$
|
(1,478
|
)
|
|
$
|
2,040,418
|
|
|
$
|
2,043,254
|
|
|
$
|
(2,836
|
)
|
Installation and other
|
|
108,333
|
|
|
106,070
|
|
|
2,263
|
|
|
207,489
|
|
|
203,347
|
|
|
4,142
|
|
||||||
Total revenue
|
|
1,131,459
|
|
|
1,130,674
|
|
|
785
|
|
|
2,247,907
|
|
|
2,246,601
|
|
|
1,306
|
|
||||||
Cost of revenue (exclusive of depreciation and amortization shown separately below)
|
|
246,225
|
|
|
246,225
|
|
|
—
|
|
|
494,619
|
|
|
494,619
|
|
|
—
|
|
||||||
Selling, general and administrative expenses
(1)
|
|
322,538
|
|
|
329,760
|
|
|
(7,222
|
)
|
|
627,508
|
|
|
640,971
|
|
|
(13,463
|
)
|
||||||
Depreciation and intangible asset amortization
|
|
488,320
|
|
|
488,320
|
|
|
—
|
|
|
971,996
|
|
|
971,996
|
|
|
—
|
|
||||||
Merger, restructuring, integration, and other costs
|
|
455
|
|
|
455
|
|
|
—
|
|
|
8,478
|
|
|
8,478
|
|
|
—
|
|
||||||
Operating income
|
|
73,921
|
|
|
65,914
|
|
|
8,007
|
|
|
145,306
|
|
|
130,537
|
|
|
14,769
|
|
||||||
Interest expense, net
|
|
(174,479
|
)
|
|
(174,479
|
)
|
|
—
|
|
|
(348,812
|
)
|
|
(348,812
|
)
|
|
—
|
|
||||||
Loss on extinguishment of debt
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(61,597
|
)
|
|
(61,597
|
)
|
|
—
|
|
||||||
Other income
|
|
29,282
|
|
|
29,282
|
|
|
—
|
|
|
28,822
|
|
|
28,822
|
|
|
—
|
|
||||||
Loss before income taxes
|
|
(71,276
|
)
|
|
(79,283
|
)
|
|
8,007
|
|
|
(236,281
|
)
|
|
(251,050
|
)
|
|
14,769
|
|
||||||
Income tax benefit
|
|
4,571
|
|
|
6,355
|
|
|
(1,784
|
)
|
|
12,139
|
|
|
15,580
|
|
|
(3,441
|
)
|
||||||
Net loss
|
|
$
|
(66,705
|
)
|
|
$
|
(72,928
|
)
|
|
$
|
6,223
|
|
|
$
|
(224,142
|
)
|
|
$
|
(235,470
|
)
|
|
$
|
11,328
|
|
(1)
|
For the quarter and
six months ended
June 30, 2018
, the effect of adoption includes approximately
$5 million
and
$10 million
, respectively, associated with non-cash amortization expense of deferred subscriber acquisition costs.
|
|
|
As Reported
|
|
Balances without
Adoption of Standard |
|
Effect of Adoption
Increase / (Decrease) |
||||||
Balance Sheet
(in thousands)
|
|
|
|
|||||||||
Assets
|
|
|
|
|
|
|
||||||
Prepaid expenses and other current assets
|
|
$
|
95,491
|
|
|
$
|
87,536
|
|
|
$
|
7,955
|
|
Deferred subscriber acquisition costs, net
|
|
371,700
|
|
|
324,078
|
|
|
47,622
|
|
|||
Other assets
|
|
135,850
|
|
|
130,342
|
|
|
5,508
|
|
|||
|
|
|
|
|
|
|
||||||
Liabilities
|
|
|
|
|
|
|
||||||
Deferred tax liabilities
|
|
1,374,455
|
|
|
1,359,128
|
|
|
15,327
|
|
|||
|
|
|
|
|
|
|
||||||
Stockholders' Equity
|
|
|
|
|
|
|
||||||
Accumulated deficit
|
|
(1,241,639
|
)
|
|
(1,287,397
|
)
|
|
45,758
|
|
(in thousands)
|
|
For the Quarter Ended June 30, 2018
|
|
For the Six Months Ended June 30, 2018
|
||||
Monitoring and related services
|
|
$
|
1,023,126
|
|
|
$
|
2,040,418
|
|
Installation and other
|
|
108,333
|
|
|
207,489
|
|
||
Total revenue
|
|
$
|
1,131,459
|
|
|
$
|
2,247,907
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||||||||||
(in thousands)
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
||||||||
Definite-lived intangible assets:
|
|
|
|
|
|
|
|
||||||||
Contracts and related customer relationships
|
$
|
7,070,540
|
|
|
$
|
(2,271,994
|
)
|
|
$
|
6,748,355
|
|
|
$
|
(1,749,327
|
)
|
Dealer relationships
|
1,602,142
|
|
|
(188,505
|
)
|
|
1,605,910
|
|
|
(146,299
|
)
|
||||
Other
|
196,738
|
|
|
(173,315
|
)
|
|
195,363
|
|
|
(130,227
|
)
|
||||
Total amortizable intangible assets
|
8,869,420
|
|
|
(2,633,814
|
)
|
|
8,549,628
|
|
|
(2,025,853
|
)
|
||||
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
||||||||
Trade name
|
1,333,000
|
|
|
—
|
|
|
1,333,000
|
|
|
—
|
|
||||
Total intangible assets
|
$
|
10,202,420
|
|
|
$
|
(2,633,814
|
)
|
|
$
|
9,882,628
|
|
|
$
|
(2,025,853
|
)
|
|
For the Quarters Ended
|
|
For the Six Months Ended
|
||||||||||||
(in thousands)
|
June 30,
2018 |
|
June 30,
2017 |
|
June 30,
2018 |
|
June 30,
2017 |
||||||||
Definite-lived intangible asset amortization expense
|
$
|
308,721
|
|
|
$
|
284,602
|
|
|
$
|
612,698
|
|
|
$
|
572,895
|
|
Declared Date
|
|
Dividend per Share
|
|
Record Date
|
|
Payment Date
|
March 15, 2018
|
|
$0.035
|
|
March 26, 2018
|
|
April 5, 2018
|
May 9, 2018
|
|
$0.035
|
|
June 25, 2018
|
|
July 10, 2018
|
|
For the Quarters Ended
|
|
For the Six Months Ended
|
||||||||||||
(in thousands, except per share amounts)
|
June 30,
2018 |
|
June 30,
2017 |
|
June 30,
2018 |
|
June 30,
2017 |
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net loss
|
$
|
(66,705
|
)
|
|
$
|
(92,656
|
)
|
|
$
|
(224,142
|
)
|
|
$
|
(233,531
|
)
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted-average number of shares outstanding,
basic and diluted |
750,009
|
|
|
641,048
|
|
|
739,354
|
|
|
641,048
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
$
|
(0.09
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
(0.36
|
)
|
|
For the Quarters Ended
|
||||||
(in thousands, except as otherwise indicated)
|
June 30, 2018
|
|
June 30, 2017
|
||||
Results of Operations:
|
|
|
|
||||
Monitoring and related services
|
$
|
1,023,126
|
|
|
$
|
1,007,086
|
|
Installation and other
|
108,333
|
|
|
60,694
|
|
||
Total revenue
|
1,131,459
|
|
|
1,067,780
|
|
||
Cost of revenue (exclusive of depreciation and amortization shown separately below)
|
246,225
|
|
|
215,250
|
|
||
Selling, general and administrative expenses
|
322,538
|
|
|
285,656
|
|
||
Depreciation and intangible asset amortization
|
488,320
|
|
|
458,387
|
|
||
Merger, restructuring, integration, and other costs
|
455
|
|
|
18,860
|
|
||
Operating income
|
73,921
|
|
|
89,627
|
|
||
Interest expense, net
|
(174,479
|
)
|
|
(188,099
|
)
|
||
Loss on extinguishment of debt
|
—
|
|
|
(3,431
|
)
|
||
Other income
|
29,282
|
|
|
9,018
|
|
||
Loss before income taxes
|
(71,276
|
)
|
|
(92,885
|
)
|
||
Income tax benefit
|
4,571
|
|
|
229
|
|
||
Net loss
|
$
|
(66,705
|
)
|
|
$
|
(92,656
|
)
|
|
|
|
|
||||
Key Performance Indicators:
(1)
|
|
|
|
||||
RMR
|
$
|
338,078
|
|
|
$
|
332,127
|
|
Gross customer revenue attrition (percent)
|
13.6
|
%
|
|
14.1
|
%
|
||
Adjusted EBITDA
(2)
|
$
|
610,387
|
|
|
$
|
582,909
|
|
(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.
|
|
For the Six Months Ended
|
||||||
(in thousands, except as otherwise indicated)
|
June 30, 2018
|
|
June 30, 2017
|
||||
Results of Operations:
|
|
|
|
||||
Monitoring and related services
|
$
|
2,040,418
|
|
|
$
|
2,004,734
|
|
Installation and other
|
207,489
|
|
|
122,274
|
|
||
Total revenue
|
2,247,907
|
|
|
2,127,008
|
|
||
Cost of revenue (exclusive of depreciation and amortization shown separately below)
|
494,619
|
|
|
433,955
|
|
||
Selling, general and administrative expenses
|
627,508
|
|
|
638,911
|
|
||
Depreciation and intangible asset amortization
|
971,996
|
|
|
919,316
|
|
||
Merger, restructuring, integration, and other costs
|
8,478
|
|
|
39,665
|
|
||
Operating income
|
145,306
|
|
|
95,161
|
|
||
Interest expense, net
|
(348,812
|
)
|
|
(369,160
|
)
|
||
Loss on extinguishment of debt
|
(61,597
|
)
|
|
(4,331
|
)
|
||
Other income
|
28,822
|
|
|
13,005
|
|
||
Loss before income taxes
|
(236,281
|
)
|
|
(265,325
|
)
|
||
Income tax benefit
|
12,139
|
|
|
31,794
|
|
||
Net loss
|
$
|
(224,142
|
)
|
|
$
|
(233,531
|
)
|
|
|
|
|
||||
Summary Cash Flow Data:
|
|
|
|
||||
Net cash provided by operating activities
|
$
|
962,762
|
|
|
$
|
743,412
|
|
Net cash used in investing activities
|
$
|
(696,147
|
)
|
|
$
|
(649,198
|
)
|
Net cash provided by (used in) financing activities
|
$
|
705,410
|
|
|
$
|
(107,227
|
)
|
|
|
|
|
||||
Key Performance Indicators:
(1)
|
|
|
|
||||
RMR
|
$
|
338,078
|
|
|
$
|
332,127
|
|
Gross customer revenue attrition (percent)
|
13.6
|
%
|
|
14.1
|
%
|
||
Adjusted EBITDA
(2)
|
$
|
1,230,154
|
|
|
$
|
1,159,930
|
|
Free Cash Flow
(2)
|
$
|
289,277
|
|
|
$
|
68,750
|
|
(1)
|
Refer to the “—Key Performance Indicators” section for the definitions of these key performance indicators.
|
(2)
|
Adjusted EBITDA and Free Cash Flow are non-GAAP measures. Refer to the “—Non-GAAP Measures” section for the definitions of these terms and reconciliations to the most comparable GAAP measures.
|
|
For the Quarters Ended
|
|
For the Six Months Ended
|
||||||||||||
(in thousands)
|
June 30, 2018
|
|
June 30, 2017
|
|
June 30, 2018
|
|
June 30, 2017
|
||||||||
Net loss
|
$
|
(66,705
|
)
|
|
$
|
(92,656
|
)
|
|
$
|
(224,142
|
)
|
|
$
|
(233,531
|
)
|
Interest expense, net
|
174,479
|
|
|
188,099
|
|
|
348,812
|
|
|
369,160
|
|
||||
Income tax benefit
(1)
|
(4,571
|
)
|
|
(229
|
)
|
|
(12,139
|
)
|
|
(31,794
|
)
|
||||
Depreciation and intangible asset amortization
|
488,320
|
|
|
458,387
|
|
|
971,996
|
|
|
919,316
|
|
||||
Merger, restructuring, integration, and other costs
(2)
|
455
|
|
|
18,860
|
|
|
8,478
|
|
|
39,665
|
|
||||
Financing and consent fees
(3)
|
—
|
|
|
2,021
|
|
|
—
|
|
|
63,593
|
|
||||
Foreign currency losses/(gains)
(4)
|
719
|
|
|
(9,233
|
)
|
|
1,739
|
|
|
(12,657
|
)
|
||||
Loss on extinguishment of debt
(5)
|
—
|
|
|
3,431
|
|
|
61,597
|
|
|
4,331
|
|
||||
Other non-cash items
(6)
|
242
|
|
|
895
|
|
|
574
|
|
|
13,794
|
|
||||
Radio conversion costs
(7)
|
1,675
|
|
|
2,673
|
|
|
3,026
|
|
|
6,591
|
|
||||
Amortization of deferred subscriber acquisition costs
(8)
|
14,305
|
|
|
11,768
|
|
|
27,152
|
|
|
21,608
|
|
||||
Amortization of deferred subscriber acquisition revenue
(9)
|
(18,790
|
)
|
|
(10,007
|
)
|
|
(35,555
|
)
|
|
(18,646
|
)
|
||||
Share-based compensation expense
(10)
|
45,814
|
|
|
2,464
|
|
|
95,102
|
|
|
4,889
|
|
||||
Management fees and other charges
(11)
|
(25,556
|
)
|
|
6,436
|
|
|
(16,486
|
)
|
|
13,611
|
|
||||
Adjusted EBITDA
|
$
|
610,387
|
|
|
$
|
582,909
|
|
|
$
|
1,230,154
|
|
|
$
|
1,159,930
|
|
(1)
|
For
2018
, reflects the impact of Tax Reform. Refer to
Note 7
“
Income Taxes
” to the condensed consolidated financial statements for further discussion.
|
(2)
|
Represents direct and incremental costs resulting from acquisitions made by us and certain related restructuring and integration efforts as a result of those acquisitions, as well as certain asset impairment charges related to our strategic investments.
|
(3)
|
For
2017
, includes fees incurred in connection with the Special Dividend, 2017 First Lien Credit Facilities Amendments, and the 2017 Incremental Term B-1 Loan.
|
(4)
|
Relates to the translation of monetary assets and liabilities that are denominated in Canadian dollars due to intercompany loans. In the first quarter of 2018, we designated certain of these intercompany loans to be of a long-term-investment nature, and are reflecting foreign currency losses/(gains) on these loans in accumulated other comprehensive loss in the Condensed Consolidated Balance Sheet.
|
(5)
|
For
2018
, loss on extinguishment of debt primarily relates to the payment of the call premium and the write-off of a portion of the unamortized debt issuance costs associated with the paydown of $594 million of the Prime Notes in connection with our IPO. For
2017
, loss on extinguishment of debt relates to the write-off of a portion of the debt discount and issuance costs associated with the amendments and restatements to our First Lien Credit Facilities.
|
(6)
|
For
2017
, primarily represents non-cash asset write-downs associated with our strategic investments.
|
(7)
|
Represents costs associated with upgrading cellular technology used in many of our security systems.
|
(8)
|
Represents non-cash amortization expense associated with certain incremental contract costs that are deferred (referred to as deferred subscriber acquisition costs) including selling expenses (primarily commissions) related to acquiring customers.
|
(9)
|
Represents non-cash amortization expense associated with non-refundable fees that are deferred (referred to as deferred subscriber acquisition revenue) received in connection with the initiation of a monitoring contract.
|
(10)
|
Represents compensation expense associated with our equity compensation plans. Refer to
Note 10
“
Share-based Compensation
” to the condensed consolidated financial statements for further discussion.
|
(11)
|
In
2018
, primarily includes income of approximately
$22 million
of one-time licensing fees, as well as gains of
$7.5 million
from equity in a third party that we received as part of a settlement. Refer to
Note 1
“
Basis of Presentation and Summary of Significant Accounting Policies
” for further discussion. In
2017
, primarily represents fees under a management consulting agreement, which was terminated in connection with the consummation of the IPO.
|
|
For the Six Months Ended
|
||||||
(in thousands)
|
June 30, 2018
|
|
June 30, 2017
|
||||
Net cash provided by operating activities
|
$
|
962,762
|
|
|
$
|
743,412
|
|
Dealer generated customer accounts and bulk account purchases
|
(327,553
|
)
|
|
(306,304
|
)
|
||
Subscriber system assets
|
(280,720
|
)
|
|
(298,923
|
)
|
||
Capital expenditures
|
(65,212
|
)
|
|
(69,435
|
)
|
||
Free Cash Flow
|
$
|
289,277
|
|
|
$
|
68,750
|
|
Declared Date
|
|
Dividend per Share
|
|
Record Date
|
|
Payment Date
|
March 15, 2018
|
|
$0.035
|
|
March 26, 2018
|
|
April 5, 2018
|
May 9, 2018
|
|
$0.035
|
|
June 25, 2018
|
|
July 10, 2018
|
|
For the Six Months Ended
|
||||||
(in thousands)
|
June 30, 2018
|
|
June 30, 2017
|
||||
Net cash provided by operating activities
|
$
|
962,762
|
|
|
$
|
743,412
|
|
Net cash used in investing activities
|
$
|
(696,147
|
)
|
|
$
|
(649,198
|
)
|
Net cash provided by (used in) financing activities
|
$
|
705,410
|
|
|
$
|
(107,227
|
)
|
•
|
On January 4, 2018, we effected a stock split whereby our issued and outstanding shares of common stock were reclassified as 641,118,571 shares of our common stock.
|
•
|
On January 22, 2018, we issued 20,636,766 shares of common stock to Ultimate Parent.
|
•
|
On January 25, 2018, we issued 147,620 shares of common stock to an executive officer of the Company to satisfy the Company’s obligations under a retention agreement. The retention grant was fully vested upon issuance.
|
Period
|
|
Total Number of Shares Purchased
|
|
Average Price
Paid Per Share |
|||
April 1, 2018 - April 30, 20
18
|
|
—
|
|
|
$
|
—
|
|
May 1, 2018 - May 31, 2018
|
|
—
|
|
|
$
|
—
|
|
June 1, 2018 - June 30,
2018
|
|
—
|
|
|
$
|
—
|
|
Total
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Incorporated
by Reference
|
||||
Exhibit Number
|
|
Exhibit Description
|
|
Form
|
|
Exhibit
|
|
Filing Date
|
|
|
8-K
|
|
10.1
|
|
03/19/2018
|
||
|
|
10-Q
|
|
10.2
|
|
05/09/2018
|
||
|
|
10-Q
|
|
10.3
|
|
05/09/2018
|
||
|
|
S-1/A
|
|
10.32
|
|
01/08/2018
|
||
|
|
S-1/A
|
|
10.33
|
|
01/08/2018
|
||
|
|
S-1/A
|
|
10.34
|
|
01/08/2018
|
||
|
|
S-1/A
|
|
10.35
|
|
01/08/2018
|
||
|
|
S-1/A
|
|
10.36
|
|
01/08/2018
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
101*
|
|
Financial statements from the quarterly report on Form 10-Q of ADT Inc. for the quarter and six months ended June 30, 2018 formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) the Condensed Consolidated Statement of Stockholders' Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to Condensed Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
ADT Inc.
|
|
|
|
|
|
Date:
|
August 9, 2018
|
By:
|
/s/ Jeffrey Likosar
|
|
|
Name:
|
Jeffrey Likosar
|
|
|
Title:
|
Chief Financial Officer
(Principal Financial and Accounting Officer) |
|
|
|
1.
|
Grant of Restricted Stock Units.
|
8.
|
Miscellaneous.
|
|
|
By: /s/ Timothy J. Whall
|
|
|
Name: Timothy J. Whall
|
|
|
Title: Chief Executive Officer
|
|
|
By: /s/ Timothy J. Whall
|
|
|
Name: Timothy J. Whall
|
|
|
Title: Chief Executive Officer
|
|
|
By: /s/ Timothy J. Whall
|
|
|
Name: Timothy J. Whall
|
|
|
Title: Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form
10-Q
of ADT Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Omitted pursuant to SEC Release No. 34-54942
;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
|
/s/ Timothy J. Whall
|
|
|
Timothy J. Whall
|
|
|
Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form
10-Q
of ADT Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Omitted pursuant to SEC Release No. 34-54942
;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
|
/s/ Jeffrey Likosar
|
|
|
Jeffrey Likosar
|
|
|
Chief Financial Officer
|
/s/ Timothy J. Whall
|
|
|
Timothy J. Whall
|
|
|
Chief Executive Officer
|
|
|
August 9, 2018
|
|
|
/s/ Jeffrey Likosar
|
|
|
Jeffrey Likosar
|
|
|
Chief Financial Officer
|
|
|
August 9, 2018
|
|
|