Is this a “beat” in your world?
How do you miss the high end of guidance on your first Q when the guidance was given after the quarter closed?
Wimpy results. We had moved to the sidelines for a quarter in which we saw b-t-e results + guidance, but unless they revive Superman on the 830a call, that will end up not being a great tactical move.
ADT reported 4Q17 Revenue of $1,106m, up 5% y/y, above Street at $1,092m but below our # of $1,132m. Our number reflected the high end of guidance. Recall that the guidance was given in 2018, after 4Q17 had already closed.
The company reported churn of 13.7%, a 200bp improvement sequentially, but again below the high end of guidance and a slowdown in the rate of improvement relative to the first three quarters of the year.
Operating Cash Flow was in line at $330m (Street $338m). No gusher there. FCF really wimpy at $22m x-items. By the way, a company with huge debt, now promising a dividend, and valuation that will be FCF based does not get a pass on x-items for valuation sake especially when said items are recurring in nature.
Non-GAAP EPS basically up 0.01 y/y, below Street at $0.10.
Really nothing to get excited about.
Wrong dividend strategy. The company only has ~$127m gross cash on the balance sheet but they just announced ~$115m dividend program. What’s the point? It amounts to a 1.4% dividend yield. No one will buy the stock for that yield, and there goes $115m per year that could have been good for paying down debt.
Topline guidance for 2018 implies 4% growth at the mid-point, and is slightly ahead of street at $500m versus $475m. Blah.
FCF guidance is $500m for 2018, above Street at $485m, but that is x-items which means it isn’t real FCF. In 2017, for example, they had $180m of special items…a bunch of which clearly recur into 2018.
We will have more after the call and there is a good deal of analysis we need to still do, but it doesn’t look like its worth much, especially given we are now only ~4 months away from the Apollo lockup.
