Takeaway: If you are going within 100 feet of this IPO I recommend hearing our side of it

CALL DETAILS:

Call Date and Time: Tuesday, January 16, 2018 at 2PM EST

Event webcast and slides: CLICK HERE

Toll Free:

Toll:

UK: 0

Confirmation Number: 13675298

ADT | Adding to Best Ideas Short | Folksy Management vs. Tough Realities - 1 16 2018 7 33 00 AM 

It isn’t about competition (only), it isn’t about leverage (only), nor is it about the valuation (only).

It is about CHURN. Wait, you are reminding yourself, isn’t churn the bull case? We highly recommend you take a look at our work to see if changes in churn = the bull case or the pull-the-wool-over-investors’-eyes case.

The entire bull case rests on current management’s folksy attributes to managing the business better than previous management. The evidence, they note, is the declining churn rate.

We will show you that declining churn rates have almost nothing to do with management’s effusive charm, nor their Business 101 turnaround.

There are too many missing pieces in the story. Come hear the parts they left out. Make sure you are not surprised when cash flow goes to M&A to keep the clock ticking, when that M&A is nothing more than un-strategic revenue filler, and don’t be surprised if you can’t get paid back buying an old, highly levered company, with a limited path forward, trading at ~25+x unlevered FCF (hint: don't start with their #).

ADT | Adding to Best Ideas Short | Folksy Management vs. Tough Realities - 1 16 2018 7 33 50 AM

Key points you will hear from us on our call:

Point 1:  Inflection in churn has been more artifice of changing the denominator than the hard work of improving the business

Point 2:  There is some real churn improvement just starting to show through in 4Q17 with LTM acquired revenue higher than churned revenue that helps set up 1H18 as peak growth rate

Point 3: Higher prices on the retained revenue base is also a factor in driving lower churn, rather than operational change

Point 4: Double-digit churn % is likely a permanent part of the equation for this ‘life-saving’ service. 75% of that churn is a reflection of customers expressing that the service isn’t worth it. Why? Start with 95% false positives, the cost to the customer (and to ADT) of false positives, and you will understand why points of scale in ADT’s favor will erode.