ADT today announced it will be exiting its residential solar business. The company will remain focused on cash flow generation and capital-efficient growth within its core security and smart home business. As part of this continued focus, ADT is also advancing its capital allocation strategy, including a cash dividend increase and authorization of a new share repurchase program.
“The decision to exit solar operations was made after careful deliberation, and we expect this strategic action to drive substantial operational and financial benefits to ADT,” said Jim DeVries, ADT Chairman, President and CEO. “We want to acknowledge and thank our employees, partners and customers as we work through this transition.”
Over the first nine months of 2023, ADT’s core business exhibited strong performance, while the solar business faced challenges, including operational difficulties and macroeconomic headwinds causing deterioration of conditions industrywide. As a result of these challenges, the solar segment generated an Adjusted EBITDA loss of $89 million during this period. Following the previously announced restructuring of its solar footprint and a detailed strategic review, ADT’s Board of Directors has approved the exit of this segment, which may include the transfer of components of the business to other parties.
The company expects to incur certain one-time exit charges and cash expenditures with potential offsets from asset sales or reduced tax expenses. As previously disclosed, as of Sept. 30, 2023, the goodwill balance for the solar reporting unit was zero. At this time, the company is still analyzing the estimated net amount or range of amounts expected to be incurred in connection with this plan.
Supported by ADT’s confidence in the strong cash flow generation of its core business, today the company is also announcing the following:
- Dividend increase: The company’s Board of Directors has declared a quarterly cash dividend of $0.055 per share, payable on April 4, 2024, to shareholders of record at the close of business on March 14, 2024. The quarterly dividend represents a 57% increase over the previous quarterly dividend.
- Share repurchase authorization: ADT’s Board of Directors has authorized a $350 million share repurchase program. As the company executes share repurchases, the board will periodically review the remaining authorization as part of its capital allocation strategy.
- Balance sheet fortification: Consistent with the plan from its third-quarter earnings announcement, on Dec. 29, 2023, the company repaid $500 million of First Lien Senior Secured Notes due 2024, completing an overall 2023 reduction of ADT’s total debt by approximately $2 billion. Further, following two corporate rating upgrades in 2023, the company improved borrowing costs and extended debt maturities and in 2024, will have only $150 million of maturities and amortization payments. The company remains focused on achieving its targeted net leverage ratio of less than 3.0x.
- Core investment: On Dec. 20, 2023, ADT closed on a strategic bulk purchase of approximately 57,000 customer accounts for $89 million cash with attractive returns. This portfolio of customers is concentrated in a few key geographies, all of which align with existing platforms, enabling strong economies of scale upon integration. This transaction was not included in prior cash flow guidance.
More details and an update on the business will be provided when ADT releases its fourth-quarter and full-year 2023 results on Feb. 28, 2024. Following the release, management will host a conference call at 10 a.m. ET to discuss the financial results and lead a question-and-answer session.