Every fiscal quarter ADT Corp.’s Pulse home automation system continues impress, and the result is higher revenue, higher profit and lower attrition for the security giant.
According to the company’s recent Q3 2014 financial report, ADT Pulse had a take rate of nearly half (49 percent) of all new residential subscribers. That is compared to a 28 percent take rate last year. Pulse is ADT’s entry-level home automation system that offers limited lighting control, energy management/HVAC control, and video surveillance piggybacked on a security intrusion system.
Meanwhile, existing customers are also upgrading to Pulse. ADT reported 20,000 of its existing subscribers upgraded during the quarter… that is 77 percent increase versus a year ago. In total, ADT Pulse subscribers now account for 14 percent (875,000) of the security giant’s entire subscriber base of 6.4 million customers. And just as importantly, ADT (NYSE: ADT) is crediting the home automation system with reducing its overall net attrition rate to 13.5 percent.
Those strong numbers helped the security giant achieve quarterly revenues of $849 million (up 1.9 percent) with net income of $82 million. The company now has recurring monthly revenue totaling $785 million.
And the good news just keeps on coming, as Pulse sales among those affiliates in the ADT dealer program also rose. The take rate among customers in the dealer channel was 43 percent, up from a paltry 15 percent one year ago. (The take rate among ADT Direct customers is 56 percent.) But Pulse is not just drawing clients on the residential side. Indeed, ADT reports that 39 percent of new small business commercial subscribers in Q3 purchased Pulse systems.
“Our results in the quarter reflect the progress we are making against the initiatives we identified at the beginning of the year and provide a glimpse of where we are driving the business in the future,” said Naren Gursahaney, ADT’s chief executive officer. “This quarter, we saw visible evidence of our efforts to solidify our core leadership position and reposition the business for growth and greater profitability. We drove sequential growth in gross additions in both channels and reduced our attrition consistent with our guidance. Stronger operational performance and our continued commitment to cost efficiency drove healthy increases in EBITDA before special items and bottom line results.”
So where does it end? Admittedly, ADT knows the Pulse adoption rate will hit a ceiling at some point. That’s why the company, which is the No. 3 company in the CE Pro 100, introduced the new ADT Pulse Voice Application that allows customers to interact with their Pulse system using voice commands. The idea is that the new feature will continue to spur adoption.
Lastly, Pulse is helping increase the average revenue per user (ARPU). “In the quarter, new and resale ARPU was $47.04, an increase of 6 percent over the prior year. ARPU of our overall customer base for Q3 was $41.85, an increase of 4 percent year-over-year. The ARPU for new Pulse customers continues to be about 25 percent higher than non-Pulse customers, providing a long-term tailwind for the company as our customers adopt Pulse,” says Michael Geltzeiler, ADT’s chief financial officer.