ADT Stock Gains On Solid Q3 Results, Sunpro Solar Acquisition

ADT Inc ADT reported third-quarter sales of $1.32 billion, increasing 1% year-over-year, beating the consensus of $1.29 billion.
Adjusted EBITDA was $554 million (-1.8% Y/Y), and margin contracted by 135 bps to 42.1%.
Adjusted EPS loss improved to $(0.07) from $(0.08) in 3Q20.
Commercial performance improves with revenue growing 18% Y/Y. Gross recurring monthly revenue (RMR) additions grew 7% in the quarter and 19% year-to-date.
ADT generated cash from operating activities year-to-date of $1.16 billion, compared to $933 million a year ago. Adjusted Free cash flow of $289 million (-45.7% Y/Y) was down due to higher subscriber acquisition costs associated with customer growth and 19% gross RMR additions growth year-to-date.
The operating income decreased by 63.5% Y/Y to $23 million, and the margin contracted by 310 bps to 1.75%.
Additionally, the company agreed to acquire Sunpro Solar, a provider of residential solar installation, for a total enterprise value of $825 million, comprised of $160 million cash and ~77.8 million shares of ADT common stock. The transaction is expected to close by year-end 2021.
ADT will rebrand Sunpro to "ADT Solar" and enter the rooftop solar business to offer ADT customers a protected, connected, and now powered home.
ADT declared a cash dividend of $0.035 per share, payable January 4, 2022, to the holders of common stock and Class B common stock having record as of December 16, 2021.
FY21 Outlook: ADT expects revenue of $5.2 billion - $5.25 billion (prior expectation $5.05 billion - $5.25 billion), versus the consensus of $5.22 billion.
Adjusted EBITDA of $2.15 billion - $2.2 billion (prior $2.1 billion - $2.2 billion) and Adjusted Free Cash Flow of $450 million - $500 million (prior expectation $450 million - $550 million).
Price Action: ADT shares are trading higher by 7.78% at $9.7 on the last check Tuesday.

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