ADT to Acquire Canadian Security Provider Protectron for $500M
ADT’s acquisition of Canadian monitoring company Protectron brings in 400,000 residential and customer customers and $11 million in recurring monthly revenue.
ADT made several big announcements Wednesday, including its acquisition of a Canadian monitoring company and the release of its second quarter 2014 earnings report.
The Boca Raton, Fla.-based ADT has acquired Canada’s Reliance Protectron Security Services, a subsidiary of Reliance Comfort Limited Partnership, a portfolio company of investment funds managed by Alinda Capital Partners.
Total cash consideration for the purchase is of CAD $555 million (approximately USD $500 million).
The acquisition brings ADT 400,000 residential and commercial customers including 31,000 contract monitoring accounts, and CAD $12 million (approximately USD $11 million) in associated recurring monthly revenue. According to ADT, Protectron has a “highly satisfied customer base with greater levels of customer retention than other major players in the North American electronic security industry.”
Another reason Protectron appealed to ADT was is its extensive dealer network and effective sales force, which has enabled the company to generate significant subscriber growth at attractive cost levels, ADT CEO Naren Gurshaney says.
“Protectron has also begun a concerted effort to sell home automation products and services, which will be accelerated by ADT’s considerable strengths in this area,” he explains. “The creation of a strong, standalone business in Canada with a dedicated management team will position us to accelerate our growth in this important and attractive market.”
Protectron will keep its brand and will continue to be headquartered in Montreal under ADT’s ownership.
In other news, ADT Pulse interactive security and home automation service is taking hold… and in a big way.
According to ADT’s recent Q2 2014 financial filing, ADT Pulse clients now make up 12 percent of the company’s total customer base.
In addition, the take rate (the percentage of security customers that opt for the advanced service) for new customers last quarter alone accounted for nearly half of the overall take rate, at 44 percent of new customers. That represents a 23 percent surge in the take rate over previous quarters. Meanwhile, upgrades to Pulse from standard security systems among existing customers also rose 38 percent.
In total, the company reported total revenue of $837 million in quarterly revenue, up 1.9 percent for the quarter. Its earnings, or EBITDA, was $431 million, up $22 million or 5.4 percent. Recurring revenue, which made up 92 percent of total revenue in the quarter, was $773 million, up 2.2 percent compared to the same period last year.
The average recurring revenue per customer rose to $41.05 per month, up 3.2 percent. Revenue attrition was flat at 14.2 percent for the quarter sequentially and unit attrition for residential and small business was 13.7 percent, up 10 basis points sequentially primarily due to higher attrition in small business. ADT closed the quarter with 6.4 million customer accounts.
“We drove improvements in our financial results, stabilized revenue attrition sequentially and made significant progress on our initiatives during the quarter,” says Gursahaney. “We grew EBITDA, generated substantially more free cash flow, and delivered better bottom-line results.”
ADT says it will continue to invest in Pulse and capture the opportunities in interactive services and home automation.
The company also says it is taking steps to expand its dealer channel. The dealer channel drove a 36 percent take rate in ADT Pulse units in the quarter, up from 11 percent in the comparable period last year. Although total dealer channel sales production for the quarter was below last year, gross additions were up nearly 5 percent versus the first quarter of 2014.
The company is on track to launch the ADT Pulse Voice Control and the Remote Garage Door Control solutions in the second half of 2014. ADT also recently announced a PC security service and an integrated automotive app for FordSync.
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