We are down to the wire for investors trying to make a decision regarding the ADT IPO. We have two new analysis pieces to help you.
First, we have gotten the question many times regarding ADT's standalone organic forward growth rate. Here it is.
The seller is trying to imply that organic growth rates are ~7% for the industry. The sellside is modeling what they are told (3-5%). But the company has really only managed to grow 0.8% organically since FY11.
Second, we have had many questions about our fundamental discovery on the churn rate. Management wants to imply that churn has been really bad and they are making the world a sunnier place. They are charming, and they sell well. But the truth is that the denominator changed once, temporarily, and each quarter that the company does business as usual in terms of new customer contract additions just simply adds back to the denominator, thus harmonizing the churn rate over time. For reference, go and see the FOOTNOTE on Definite-Lived Intangible Assets which shows the balance sheet value of customer contracts. The last time the company disclosed this #, pre going private, the # was $8.3b. Now it is $6.0bn plus $1.6b in DEALER RELATIONSHIPS broken out next to it. Now you see what really happened:
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