BOCA RATON, Fla. — ADT (NYSE: ADT) reported a fourth-quarter loss of $149 million late on Monday, compared to net income of $638 million. For the full year, the company reported a net loss of $609 million, or 81 cents a share, compared to net income of $343 million, or 53 cents a share.
ADT’s shares fell more than 10% in after-hours trading Monday. Shares had been gaining 2.7% during regular trading hours ahead of the quarterly results announcement.
For its fourth quarter ending Dec. 31, ADT reported total revenue of $1.19 billion, a 7% increase from the same period a year ago or $80 million year-over-year. This includes incremental revenue associated with acquisitions.
The net loss was attributed primarily to the prior year’s income tax benefit of $725 million related to U.S. tax reform, and a goodwill impairment loss of $88 million in 2018 due to underperformance of the company’s Canadian business.
Monitoring and related services revenue (M&S), which comprised $1.04 billion of total revenue, increased 3% over the same period last year. The growth in M&S revenue was due to an increase in recurring monthly revenue (RMR), which resulted from the addition of new customers and improvements in average pricing, partially offset by customer attrition.
Gross customer revenue attrition on a trailing 12-month basis was 13.3%, reflecting a 40-basis-point improvement over the same quarter last year.
In addition to M&S revenue, installation and other revenue increased an additional $52 million from last year. This was primarily driven by commercial revenues and a commercial growth strategy that included the acquisition of Red Hawk Fire & Security in December.
RMR ticked up by 2%, or 4% including Red Hawk, in the quarter over the same period last year. Net growth in ADT’s core U.S. residential and commercial operations was offset by a decline in RMR attributable to its Canadian business.
ADT said it expects 2019 revenue in a range of $4.9 billion to $5.1 billion, largely below the consensus forecast of $4.92 billion.
The company’s full-year earnings before interest, tax, depreciation and amortization (EBITDA) outlook of between $2.46 billion and $2.5 billion was also below analyst expectations of $2.56 billion.
During an earnings call Monday, ADT CFO Jeff Likosar said the company expects free cash flow before special items to be in a range of $570 million to $610 million. The range includes continued progress in the company’s underlying core business, combined with having Red Hawk in its portfolio for the full-year to generate EBITDA growth in the range of $100 million year-over-year, he said.
Likosar said this growth is partially offset by investments totaling about $40 million that the company intends to allocate to growing its DIY market share, as well as growing the commercial business. In February, the company acquired DIY pioneer LifeShield.
“First, we will invest to establish a leading commercial platform as we integrate Red Hawk and further build out our organic sales engine. Second, we will take the platform we have acquired in LifeShield and position it to grow in the expanding DIY market for 2020 and beyond,” he said. “In addition, we will make selective brand investments as we continue to solidify ADT’s position as the leader in home automation and security.”
During the earnings call, ADT President and CEO Jim DeVries provided an update to the company’s relationship with Amazon. In short, the audio-detection technology roll out spawning from the collaboration hasn’t come to fruition as initially envisioned.
In September, ADT announced it had expanded its relationship with Amazon by supporting the integration of the Alexa Guard feature with the ADT Pulse security system. The intent is Alexa Guard will turn the Echo and Dot voice assistants into audio sensors that can be integrated with the Pulse system. ADT’s professional installation and monitoring solutions are expected to be offered to customers through the Alexa Guard website and Amazon mobile app.
“We’re working with Amazon to refine the go-to-market strategy. They have been strong partners to us, but the full launch will be made when Amazon and ADT are ready, and we don’t yet have a date for that,” DeVries said. “We have a very high bar. As you would expect, this is life safety for us. And when our standards are met and fully tested, as well as Amazon’s, they also have a high bar, we’ll be ready to launch, but we’re not quite there yet.”
