ADT Reports Solid Q3 Results Despite Attrition

ADT (NYSE: ADT) delivered strong cash flow and earnings performance in its third quarter of fiscal 2025, with adjusted free cash flow reaching $709 million year-to-date — up 36% — while total revenue grew 4% to $1.3 billion. The company’s focus on operational efficiency and disciplined capital deployment enabled adjusted earnings per share of $0.23, up 15% year-over-year, even as it navigated elevated attrition and a cautious consumer environment.

During an earnings call with investors Nov. 4, CEO Jim DeVries emphasized the resilience of the business model. “I’m very pleased to report that ADT delivered another quarter of solid revenue growth, robust cash flow and very strong earnings per share, collectively reflecting the resilience of our business model and our team’s continued execution of our 2025 strategy.”

ADT+ platform drives installation revenue growth

The company’s ADT+ platform continued gaining momentum, now representing approximately 25% of new customer installations in 2025. DeVries noted the platform’s impact on revenue mix. “Many of these customers are opting for larger, more comprehensive ADT systems, leading to increased installation revenue, and we anticipate contributing to even stronger retention over time.”

Installation revenue surged 21% to $200 million in the quarter, reflecting the shift toward outright sales at higher average prices as more customers adopt ADT+ offerings. The platform received several enhancements during Q3, including the ADT+ Alarm Range Extender for larger or more complex homes with 24-hour battery backup and tamper alerts.

The company also launched new automation and AI-driven testing capabilities to accelerate app development. DeVries indicated the product roadmap remains robust. “We expect to continue expanding our suite of unrivaled offering every quarter to continue to gain share within the smart home,” he said.

ADT expanded its hardware portfolio by introducing five new Google Nest camera models effective October 15, reflecting the continued expansion of its strategic partnership with Google. Management views hardware optimization as “a meaningful source of savings going into 2026,” though not material in 2025.

AI initiatives delivering cost savings in customer service

ADT’s artificial intelligence (AI) initiatives are beginning to materialize tangible benefits, particularly in customer care operations. DeVries provided specific metrics: “We’re now expanding into some sales applications, employee productivity...chat volumes now 100% AI containments right around 50%. Voice is we’re probably in the neighborhood of half of our calls have virtual agent of our voice calls containments flat at just below 20%.”

The company’s AI-driven approach focuses on improving both customer experience and operational efficiency. “AI-driven cost savings are beginning to materialize, particularly in our call center operations and we expect to provide more quantitative detail as these benefits scale,” DeVries stated.

Beyond customer service, ADT’s remote assistance program has eliminated approximately half of in-home service calls, reducing truck rolls and field service costs. DeVries noted the program has plateaued at this level but maintains strong customer satisfaction scores: “The NPS and customer sat scores are very good with remote service.”

Attrition ticks up but improvement expected

After achieving record low attrition levels earlier in 2025, ADT’s attrition rate increased to 13% in Q3, up 13 basis points sequentially and above budget. DeVries identified the specific drivers: “The pressure on the quarter came from a couple of areas nonpayment cancels were higher than last year. Voluntary losses were worse than last year and relocation losses were modestly lower than last year.”

However, management expressed optimism about near-term improvement based on several initiatives. “Team stability continues to improve, and more tenured employees perform at higher productivity rates, our customer experience metrics virtually across the board. NPS, customer sat, digital self-service, are all improving,” DeVries explained.

The company expects attrition improvements to materialize in Q1-Q2 2026. DeVries indicated voluntary losses should improve first, while process improvements in collections — including increased contact rates with delinquent customers — should help address nonpayment cancels. CFO Jeff Likosar added that underwriting process adjustments made earlier in the year “will have some benefit, but it also takes a few months to work its way through the system.”

Subscriber growth impacted by disciplined approach

ADT ended Q3 with recurring monthly revenue of $362 million, up 1% year-over-year but below expectations. Gross subscriber additions totaled 210,000 accounts, adding $12.5 million in RMR. The year-over-year decline was driven primarily by fewer bulk account purchases — approximately 15,000 accounts in Q3 2025 versus 49,000 in Q3 2024.

DeVries noted some positive trends within the mix: “Our direct organic residential adds were actually up 1% year-over-year, dealer adds were down modestly. DIY, it’s a small number, but DIY for us was up 13% year-over-year.”

The company completed a small bulk account purchase of 15,000 accounts for $24 million during the quarter and has additional bulk opportunities under evaluation for Q4. However, management emphasized discipline. “We won’t chase these bulks. We don’t want ads just for the sake of ads. So if we can’t get to the economics that we target, we won’t pursue them,” DeVries stated.

Strategic pivot on State Farm partnership

ADT provided an update on its State Farm partnership, which concluded its original three-year term in October 2025. DeVries acknowledged disappointing results: “Volume has been below what we expected from the partnership...program to date, we’re at around 33,000 subscribers.”

The company is now pivoting to explore a digital relocation-focused approach. “This is effectively directed at relocating consumers...an advantage is that it’s in the potential buy flow. And so there’s not a reliance on agent execution as there is in the traditional path,” DeVries explained. The companies also continue their data sharing program where, with customer consent, ADT shares alarm activity with State Farm.

Strong balance sheet enables capital returns

ADT demonstrated significant financial flexibility, returning $746 million to shareholders year-to-date through share repurchases of 78 million shares and quarterly dividends. The company ended Q3 with leverage at 2.8x adjusted EBITDA and net debt of $7.5 billion.

Likosar detailed recent debt management activities: “In October, we closed on a new 8-year $1 billion bond and a $300 million add-on to our 2032 Term Loan B. We used the proceeds to fully repay our $1.3 billion 2025 Second Lien Notes, which was our most expensive debt.” Together with other transactions, ADT has extended almost $2.5 billion of upcoming maturities and lowered its borrowing cost to 4.3%.

The company also divested its multifamily business on October 1 for $56 million, representing approximately 200,000 subscribers and $2.6 million in RMR. Management characterized this portfolio as generating “meaningfully lower EBITDA and cash flow margins than our core residential subscriber base.”

Outlook and guidance

ADT tightened and adjusted its full-year guidance ranges while maintaining confidence in delivering results. The company now expects total revenue between $5.075 billion and $5.175 billion, adjusted EPS of $0.85 to $0.89 (slightly higher midpoint), and adjusted EBITDA of $2.665 billion to $2.715 billion. The adjusted free cash flow guidance remains at $800 million to $900 million, with the wider range reflecting potential Q4 bulk account purchases.

Management noted it is working with suppliers to mitigate tariff exposure, which is not expected to be material in 2025. Likosar emphasized the team’s ability to navigate uncertainty: “Despite some of these uncertainties, our teams have done a really good job managing the puts and takes this year.”

*This article was created with the help of generative AI tools and edited by our content team for clarity and accuracy.