ADT 2015 Annual Report Download - page 1

January 22, 2016
Dear ADT Stockholder,
Fiscal Year 2015 was a pivotal year for ADT. We met or exceeded all of our major financial and operational goals, and made significant progress
against our key strategic initiatives. With three years behind us and a bright future ahead of us as a new public company, we have a talented
management team that is executing well and focused on delivering profitable growth.
The smart home industry continues to be an exciting, fast-growing space, and I am frequently asked how ADT stacks up against new entrants,
both large and small. Our strong operational results speak to the strength of our position in a competitive environment: in 2015, we increased
gross customer additions, excluding bulk account purchases, by approximately 6%; increased new and resale revenue per user by nearly 4%;
and drove net revenue and unit attrition down to 12.2%, which is the lowest level we’ve achieved since ADT became a standalone public
company. We increased the Pulse customer base by 50%, reaching 1.5 million customers. If Pulse was a stand-alone company, it would be the
second largest residential security company in North America, only behind ADT. Our partnerships with smart home device-makers make Pulse
even more attractive as consumers look to make their smart home also a safe home.
Based on our strong operating performance, we delivered solid financial results and met our guidance commitments to shareholders. After
adjusting for currency, we drove a 6.5%(1) improvement in recurring revenue versus the prior year, improved EDITDA(1), and grew steady-state
free cash flow to more than one billion dollars(1). We expect Fiscal 2016 to be another year of improved operating metrics and financial growth
driven by an ever greater focus on customer retention. With better data analytics and selling tools, we are able to be more targeted in our
customer acquisition efforts, which gives us confidence in our ability to further improve retention, increase profitability and drive higher levelsof
free cash flow.
We continue to make strides in our strategy to create shareholder value, which is focused on three areas: growing our traditional residential
business; selectively expanding into near adjacencies, including the mid-size commercial security market and the mobile Personal Emergency
Response business; and partnering with “internet of things” device makers to target the non-traditional residential market. In total, we expect our
addressable market to nearly triple over the next 5 years to more than 70 million potential customers.
We are coupling these growth activities with our strong balance sheet and a focus on optimizing our capital structure and capital allocation. We
will continue to reinvest cash to support organic growth, and remain disciplined in our strategic M&A activities, while returning excess capital to
our shareholders via dividends and opportunistic share buybacks.
Needless to say, this is an exciting time for ADT as we work hard to build on our leadership position and continue to execute on our strategies to
deliver profitable growth. I am proud of what we have accomplished and I am confident that our best years are ahead of us. Thank you for your
continued support and partnership as we forge ahead.
Regards,
Naren Gursahaney
President & Chief Executive Officer
The ADT Corporation
(1) Amounts are before special items and are at constant currency. For a definition of non-GAAP financial measures and a reconciliation to GAAP measures, see
“Reconciliation of Non-GAAP Measures to GAAP Measures and Selected Definitions” on page 53 of the Proxy Statement.