ADT (ADT) Q1 2026 Earnings Call Transcript

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DATE

Thursday, Apr. 30, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Jim DeVries
• President and Chief Financial Officer — Jeff Likosar
• President, ADT Smart Home — Omar Khan

ADT (NYSE:ADT) reported its first quarter 2026 results and strategic updates as summarized below.

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TAKEAWAYS

• Adjusted Free Cash Flow -- $414 million, up more than 80%, driven by lower cash interest, working capital timing, and profitability improvements.
• Adjusted Earnings Per Diluted Share -- $0.23, up 10% on reduced share count from repurchases, and improved profitability.
• Recurring monthly revenue (RMR) was flat at $359 million, as higher average pricing offset the multifamily divestiture impact.
• Gross Revenue Attrition -- 13.1%, flat, with pressure from non-pay cancellations, but improvement in voluntary cancels.
• Adjusted EBITDA -- $674 million, up 2%, reflecting high-margin revenue durability.
• Total Revenue -- $1.3 billion, up 1%, with installation revenue of $198 million, up 7% due to outright equipment sales linked to the ADT Plus platform.
• Subscriber Additions -- 161,000 gross new subscribers added, generating $10.1 million RMR, with lower cash subscriber acquisition cost (SAC).
• Share Repurchase -- 35 million shares repurchased year-to-date for $230 million, including 18 million shares for $116 million in the quarter as part of a $1.5 billion program.
• Leverage Metrics -- Net debt at $7.3 billion, and leverage at 2.7 times adjusted EBITDA; $800 million revolver, and $119 million cash available quarter-end.
• Product Adoption -- Approximately 30% of new customers adopted the proprietary ADT Plus platform in the quarter.
• Technology Investments -- Origin AI acquisition introduces privacy-first, Wi-Fi-based sensing to ADT Plus; design of a smart plug completed for integration and pilots in the next two quarters.
• AI in Operations -- All chat, and about half of phone interactions now AI-routed, with Q1 containment rates of 45% (chat) and 16% (calls), improving to 60% and 25%, respectively, by April.
• Customer Experience -- Net promoter score reached multi-year highs, with record digital self-service, and reduced field service appointments due to AI adoption.
• Marketing Efficiency -- Third-party affiliate lead fees reduced by $100 per installation, with efforts to rationalize high-cost channels continuing.
• DIY Segment Expansion -- Launch of ADT Blue e-commerce and DIY product line in late May, targeting value-conscious customers, followed by availability on Amazon and other e-tail channels in summer.
• Dealer Channel Transition -- Dealers to begin adopting the ADT Plus platform in summer; segment accounted for over one-third of gross additions last year.
• Q2 Guidance -- Revenue and EPS expected to be slightly lower than Q1, mostly due to ADT Blue advertising, and other initiative investments.
• Full-Year 2026 Outlook -- Adjusted free cash flow to grow approximately 20%; revenue and adjusted EPS expected to be approximately flat.
• Bulk Account Purchases -- No bulk acquisitions completed in the quarter as targeted returns were not met; continued ongoing engagement with sellers.

SUMMARY

Management confirmed that free cash flow, share repurchases, and technology expansions, specifically the integration of Origin AI and launch of ADT Blue, are strategic priorities benefiting long-term positioning. The company maintains a disciplined subscriber acquisition approach, focusing on higher-margin growth and operational efficiency through AI adoption, while moderating top-line expectations. Cash was allocated to shareholder returns and deleveraging, backed by liquidity from the revolving credit facility and steady RMR. Differentiation efforts are centered on new AI-enabled features in both product and service, and the company aims to capture incremental value from previously untapped DIY and e-commerce markets. Temporary impacts on gross subscriber adds are attributed to deliberate actions, including tighter credit, and reduced high-cost channel reliance.

• Origin AI’s integration will provide ambient intelligence in the core platform, adding non-camera-based sensing technology to future product launches.
• The shift to DIY and e-commerce is enabled by renegotiated supplier contracts, and custom hardware/software, expected to bring incremental subscribers and facilitate eventual conversion to higher-value service tiers.
• Omar Khan reported that over half of new software code is now generated by AI, increasing development velocity without growing engineering headcount.
• High net promoter scores, and enhanced digital engagement suggest early positive returns from technology investments in customer experience.
• Revenue payback period is 2.3 years, with long-term targets to reach 2.0 or below as efficiency efforts continue.
• Allowance for credit losses increased due to higher outright equipment sales, since earlier revenue recognition requires upfront bad debt provisioning.
• Seasonal and initiative-driven variations in Q2 free cash flow are expected, with investments in advertising, SAC, and integration costs temporarily lowering sequential results.
• Dividend or bulk acquisition activity will be governed by strict return thresholds, with no transactions accepted below target levels.

INDUSTRY GLOSSARY

• RMR (Recurring Monthly Revenue): The aggregate contracted monthly fee ADT receives from customers for ongoing security monitoring and related services.
• SAC (Subscriber Acquisition Cost): The total upfront cost to acquire a new customer, including direct marketing, and installation expenses.
• DIY (Do-It-Yourself): Segment in which customers self-install security hardware and activate services without professional assistance.
• DIFM (Do-It-For-Me): Professionally installed and managed security and automation solutions, contrasted with DIY.
• Bulk Account Purchase: Acquisition of large subscriber portfolios, typically from dealers, for a negotiated price, distinct from acquiring entire companies.

Full Conference Call Transcript

Jim DeVries: Thank you, Elizabeth. Good morning, everyone, and thank you for joining us today. I will focus my remarks this morning mainly on the key highlights from our first quarter. I will also build on the strategic update and longer-range outlook we shared on our last call in March. Then I will turn the call over to Jeff to walk through our financials and outlook. Let me start with a few key financial highlights. I am pleased to report that ADT Inc. delivered a strong start to the year. Our results were consistent with our plans, with particularly strong cash generation. Adjusted free cash flow, including swaps, was $414 million, and adjusted earnings per diluted share was $0.23, up 10% year-over-year.

Our durable recurring monthly revenue was $359 million, flat versus prior year. Gross revenue attrition remained at 13.1% and our revenue payback period was 2.3 years. Cumulatively, these results reinforce the durability of our model and progress strengthening ADT Inc.'s business to prioritize high-quality adds and more efficient acquisition channels. Turning to our key initiatives. The strategic update we shared on our last call emphasized the consistency in our overall mission. We also outlined how we are reshaping and redefining the delivery of smart home security. Our mission remains clear: to protect and connect what matters most and to provide our customers with peace of mind.

Our overall strategy remains anchored in three core differentiators: unrivaled safety, premium experience, and innovative offerings. As we described, during 2026, we are accelerating progress with investments in three key areas: product technology, service excellence, and customer acquisition. Together, these investments support our vision to deliver always-on security and convenience with split-second and proactive response, and solutions that evolve with our customers whether they are at home or away. First, on product technology. Our proprietary ADT Plus platform continues to gain traction. ADT Plus brings together professional monitoring with leading smart home devices including Google Nest and Yale products, enabling a more flexible and modern experience for customers.

In the first quarter, approximately 30% of our new customer additions included ADT Plus. We expect to continue expanding penetration of our ADT Plus ecosystem and app to more channels including, most importantly, our third-party network of dealers who will begin transitioning to ADT Plus this summer. Dealers represented more than a third of our total gross additions last year, and as they adopt ADT Plus, we expect more than two thirds of new subscribers will be on our proprietary platform. We also expanded ADT Plus features in the first quarter with the launch of two new innovations that extend the platform's capabilities.

LiveLite is the industry's first illuminated wireless yard sign that directly connects to the ADT Plus system and illuminates during an alarm event, giving first responders an immediate visual signal and letting potential intruders know a home is actively protected. MySafety is a personal mobile safety service in the ADT Plus app that provides customers with the same protection they know and trust from ADT Inc. at home, but while they are on the go, including seamless connection to ADT Inc.'s nationwide monitoring network wherever they are. We already have 35 thousand customer activations.

With innovative features such as these, ADT Inc. is improving security and demonstrating our belief that safety is not just about intrusion detection; it is about awareness, visibility, and response and, most importantly, peace of mind. As discussed on our last call, we acquired Origin AI in February, which will add AI-driven ambient intelligence technology into the ADT Plus platform, creating a new layer of home intelligence. This privacy-first Wi-Fi-based sensing technology allows customers to understand what is happening in their homes without cameras or wearables. Over time, this will become an integrated part of the ADT Plus experience, enabling richer resolution and awareness while continuing to protect our customers' privacy.

Concurrent with this acquisition, we also entered into a long-term technology licensing agreement with Barashore, reinforcing the global relevance and scalability of this platform and the practical use cases already deployed in Europe. Since closing the acquisition, we are rapidly progressing both technical development and commercialization plans, and during the first quarter, we completed the design of a smart plug that will enable integration into our core offerings. Key priorities over the next two quarters include initial manufacturing and pilots of these smart plugs, and technical development for integration into our ADT Plus platform for security and aging-in-place use cases, and integration into a third-party router.

As we deepen our plans to deploy this sensing technology and work with the team, I am even more excited about the role these capabilities will play in our evolution to proactive peace of mind. Next, our second area of investment, service excellence. ADT Inc.'s best-in-class team of employees continue to deliver outstanding service and support for our customers. Alongside the AI-enabled features in our product offering, we are also increasingly using AI to deliver better service for our customers while delivering better economics for the business.

We are deploying AI-powered virtual agents across both chat and voice interactions to improve responsiveness and consistency, enabling customers to get accurate answers faster while allowing our human teams to focus on the highest value customer interactions. As of the first quarter, all chat interactions and approximately half of our phone calls are initially routed through AI. Containment continues to improve, meaning more issues are resolved without any human intervention. These efforts are both improving the customer experience and beginning to structurally lower our cost base. Additionally, our unique combination of AI capabilities and human expertise have lifted our net promoter score.

We are also seeing record levels of customer self-service powered by an expansion of AI use cases, enabling deeper customer engagement and a significant reduction in high-cost field service appointments. Importantly, ADT Inc. employees continue to handle situations where human expertise matters most, such as during emergencies, or when an on-site highly trained service technician is the best way to resolve a customer issue. And finally, our investment in customer acquisition. While ADT Inc. already enjoys the benefits of a very strong and trusted brand in a variety of routes to market, I am excited about several areas we will advance this year.

One highlight is our expansion into e-commerce with the launch of ADT Blue, a new product line designed to appeal to more value-conscious and DIY-oriented customers. This launch includes lower-cost cameras, expanding our product portfolio and enabling lower price points to appeal to a different segment of customers. ADT Blue will debut on our own web in late May and then in additional e-tail channels, including Amazon, over the summer. We are excited to unlock these new routes to market and to begin targeting this segment of customers which we believe represents incremental TAM. We anticipate more volume from more price-conscious or DIY-oriented customers from this launch.

And while some prospective customers may choose these lower-priced DIY solutions, we also envision converting a subset of them to our more traditional professionally installed solutions. Additionally, we are continuing to drive efficiency in our overall go-to-market approach, including rationalization of our marketing spend and our highest cost channels. So far, we have lowered third-party affiliate lead fees by $100 per installation, and we are working on efficiency changes to our dealer model. As I mentioned on our last call, these changes may temporarily impact subscriber additions, but they are designed to improve long-term efficiency.

As we have shared previously, we will also continue to evaluate bulk account purchase options and potentially full acquisition opportunities in our industry at attractive economics. In closing, we remain focused on executing on these initiatives which we have outlined and positioning ADT Inc. for long-term value creation. I am confident in ADT Inc.'s outlook and our ability to deliver on our commitments for 2026 and beyond. I want to thank our employees, partners, and customers for their dedication and trust in ADT Inc. I am proud of our team's performance and excited for the opportunities ahead. With that, I will turn the call over to Jeff.

Jeff Likosar: Thanks, Jim, and good morning, everyone. I will take the next few minutes to add some detail on our first quarter results and share an update on our outlook for the rest of the year and the second quarter. I am very pleased with our start to 2026, which was consistent with our plans and the outlook we shared in March. As Jim mentioned, cash flow remains a significant highlight, and in the first quarter, we generated $414 million of adjusted free cash flow including interest rate swaps, which was up $187 million, or more than 80%, versus last year.

This result was driven primarily by lower cash interest, the timing of some payroll-related disbursements and other working capital items, and our overall profitability. We continue to enjoy a very strong capital structure and liquidity position with our $800 million revolving credit facility and $119 million of cash available at the end of the quarter. Notably, this was after funding the Origin acquisition and returning $161 million to shareholders. Earlier this year, our board authorized a $1.5 billion three-year repurchase program, and during the first quarter, we retired approximately 18 million shares at $116 million.

We do not believe our current stock price reflects the intrinsic value of our business and have therefore deployed additional capital towards share repurchases in April. Our year-to-date repurchases total approximately 35 million shares at $230 million. Turning to earnings, adjusted EBITDA for the quarter was $674 million, up 2% versus last year, and adjusted earnings per share was $0.23, up 10%. This performance reflects the durability of our high-margin revenue and our overall efficiency across the business, allowing us to deliver solid results while also investing for the future. Our first quarter results also include favorable legal settlement loss recovery partially offset by an increase in our allowance for credit losses.

In addition, earnings per share benefited from last year's share repurchases, enabled by our cash generation and our efficient capital structure. On the top line, we delivered first quarter total revenue of $1.3 billion, up 1%. Monitoring and services revenue was relatively flat with an ending RMR balance of $359 million. I will note our prior year results include the multifamily business we divested last October which represented approximately 200 thousand subscribers and $2.6 million of RMR. On a year-over-year basis, higher average pricing across our subscriber base largely offset the absence of multifamily revenue.

Installation revenue in the quarter was $198 million, up 7%, reflecting a higher mix of outright equipment sales related to our transition to the ADT Plus platform. We added 161 thousand gross new subscribers with $10.1 million of RMR on lower cash SAC. We remain focused on delivering strong subscriber economics and returns on the capital we deploy, and have consequently continued to balance SAC spending with other uses of cash. Our overall capital allocation priorities remain unchanged. We are investing in the business where returns are compelling, both organically and via periodic acquisitions; we are returning capital directly to shareholders; and we are maintaining a healthy balance sheet with an objective of further reducing leverage.

After several refinancing and repayment transactions last year, our weighted average maturity is approximately five years, and our cost of debt is currently around 4.3%. We remain very comfortable with our current leverage at 2.7 times adjusted EBITDA with net debt of $7.3 billion. Earlier this month, we repaid the remaining $75 million of our 2026 notes at maturity, with our next maturity in August. Before I conclude, I want to briefly reiterate the full year 2026 outlook we shared in March. We expect very strong adjusted free cash flow growth of approximately 20%, and revenue and adjusted EPS to be approximately flat to last year.

This outlook reflects our ongoing prioritization of cash generation, disciplined subscriber acquisition spending, and share repurchase plans. It also incorporates planned investments benefiting future periods which Jim described earlier, along with expected tariffs. For the second quarter, we expect revenue and EPS to be slightly lower than the first quarter, due primarily to higher advertising spending with the ADT Blue launch along with other initiative investments. We also expect adjusted free cash flow to be $100 million to $150 million lower sequentially due to higher seasonal SAC spending, the timing of working capital flows, and tax payments.

We are pleased with our strong start to the year and remain confident in our ability to deliver 2026 results, while also investing in initiatives that generate growth in future years. Thank you again for joining our call today and for your continued support. Operator, please open the call to questions.

Operator: Thank you. We will now open the call for questions. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star followed by the number one on your touchtone phone. If you are using a speakerphone, we kindly ask you to lift the handset before pressing any keys. Please hold for a moment while we gather questions. Our first question comes from the line of Ashish Sabadra from RBC Capital Markets. Please go ahead.

Ashish Sabadra: Thanks for taking my question. As you have improved the efficiency in the overall go-to-market approach, you talked about several things that you worked on, and also increased your upfront revenues that you are getting on these installations. How do we think about the customer acquisition cost trending over the next three to five years and the benefit to the free cash flow from that? Thanks.

Jeff Likosar: Yeah. Thanks, Ashish. It is Jeff. We think there is meaningful opportunity. We, for some time, have been focused on reducing our cost of subscriber acquisition, including especially for more installation revenue as customers buy more comprehensive systems. What we are focused on especially this year is go-to-market efficiency, and there are several things we could highlight, but one I will highlight specifically is the transition, as we launch our ADT Blue platform, to e-tail type channels, which we believe will be more efficient methods of adding subscribers.

And then the other that Jim alluded to in his prepared remarks is transitioning away from some of our highest cost lead sources and higher cost channels, and we think there is meaningful opportunity there over the coming years, which is reflected in the long-range guidance we put out where we said we were targeting getting to revenue payback more like 2.0 times or lower.

Ashish Sabadra: That is very helpful color. And maybe just on the bulk account purchases as well as potential full acquisition opportunities, can you talk about the pipeline there? Thank you.

Jim DeVries: Thanks, Ashish. I will share some perspective on the bulk front. As you know, we think about bulk acquisition and tuck-in M&A as an effective lever for growth in our business. We have executed bulks in the last six years. We did not do a bulk in Q1. We were unable to reach terms. We are looking for returns in bulk, which are generally with our dealer business, and if we cannot get those returns, we will not pursue the deal. We are almost always engaged with sellers. I expect that will continue, but for Q1, none of the opportunities we considered quite met our standards. But we are pretty consistently engaged. We are engaged now.

And it will continue to be an option for us as a lever for subscriber adds.

Ashish Sabadra: That is very helpful color. Congrats on the solid results. Thank you.

Operator: Our next question comes from the line of George Tong from Goldman Sachs. Please go ahead.

George Tong: Hi, thanks. Good morning. You shared some color now on your bulk account purchase strategy. If you look at your organic strategy for driving RMR additions, what are some of your top initiatives to fuel a return to stronger gross RMR additions growth? And then turning to free cash flow, you are guiding to 20% plus growth this year. Your multiyear framework calls for 10% plus growth. Can you elaborate a bit on what is driving the outsized growth this year and how long free cash flow growth can stay above 10%?

Jim DeVries: I will comment and give you some color more broadly, George, and then zero in on your question. Some context: candidly, I would have liked to have seen stronger adds for the quarter. Dealer was a little soft relative to last year. Our multifamily business, as you know, was sold last year. State Farm adds are not coming in. We actually tightened our credit standards a bit. And as Jeff and I have been talking about, we have continued to reduce our reliance on high-cost channels. But we are making some investments that we do not think will yield immediate results, but they are good for the long-term health of the business. I will mention three of them.

The first is around product technology. We are excited in particular about Origin and Ambient Sense and integrating that into ADT Plus, and then the subsequent commercialization of the product features associated with it. Second area is around AI investments. We are not just going to leverage AI in customer service, but begin to leverage AI in marketing and sales. And then Jeff just mentioned something that we are really excited about around new routes to market: e-tail, retail, new offerings targeted to the DIY-oriented customer. We are just in the second quarter getting started, and I think this will be an attractive opportunity for us to add subscribers.

Jeff Likosar: Yeah. So maybe I will remind a bit about our approach to the overall year, which is focused especially on really strong cash generation as we work through the deployment of all of the initiatives that we have described. And that goes with, in our overall guidance for the year, flattish revenue and EPS growth, and our guidance reflects meaningful investments in the initiatives that we expect to drive those longer-range outcomes. As a result, we are not spending as much SAC this year as we otherwise might. We also, as we get into subsequent years, will likely have a bit more tax expense.

So those are among the reasons why this year is stronger than what we have in our longer-range framework. And I will also mention, even though you did not ask specifically, the first quarter was exceptionally strong. It was largely consistent with our expectations, and that was to do with the timing of interest payments and the timing of some other working capital payments. We feel really good about our start to the year on cash flow especially and are well positioned to deliver what we suggested on a full-year basis.

Jim DeVries: Thanks, George.

Operator: Our next question comes from the line of Peter Christiansen from Citigroup. Please go ahead.

Peter Christiansen: Thanks. Good morning. Thanks for the question here. Jim, I want to dig back into the question on more organic subs, you know, RMR growth initiatives. I would imagine, particularly in this next-gen iteration of your dealer strategy, that potentially gives some avenues at least regionally. If we think a regional scope, are there areas where ADT Inc., from this organic, less dealer-reliant avenue, can lean into certain regions to help improve share and gain RMR additions? Is there an opportunity there that could help accelerate overall RMR additions?

Jim DeVries: I think so, Peter. And thanks for the question. I do not know that I would categorize any given region as particularly more attractive than others, but I would say that the opportunity for tuck-in M&A with large regional players and local players, as I was mentioning on an earlier question, is real for us in terms of adding gross subscribers. A roll-up strategy of sorts, I think, is something that is available. As you know, we have stuck with bulks and not buying complete companies, but I think the pipeline for both bulk and for M&A is an option for us, and it is available in just about every part of the country.

Peter Christiansen: That is encouraging to hear. And then on attrition, stepping into incremental non-pays here, you know, it is interesting—consumer credit is going through a bunch of changes right now. Curious if we can get to that next level, see if there are any discernible trends that you are seeing in non-pay activity. K-shaped economy, higher fuel costs—those sorts of things are now at play when people think about consumer credit going forward. Just if you could dig into a next level there, and I know you mentioned that you are lifting your FICO thresholds, which is a smart idea.

But is there anything else that you can do to navigate some of the changes that you are seeing more broadly in the consumer credit?

Jim DeVries: Great question, Peter. I will share some context around your question related to attrition, and then Jeff will address the non-pay more specifically. As you know, attrition was flat for us at 13.1%. We had modest pressure from non-pay cancellations. They were just a touch higher than last year. Relocation cancels were flat, and voluntary cancels were meaningfully better than last year. I should mention small business, which we are keeping an eye on, was also flat to last year. And the sale of multifamily was actually a modest tailwind for us.

A couple of things that are going well in the short term, and then I will mention a couple of things that are a little longer term that are reasons for optimism. Short term, NPS for us is coming in really about as high as it has been over my ten years here. All of the operating metrics—first call resolution, agency satisfaction, digital self-service—all of that going up and to the right. And so short term, I feel really good about our operations and our ability to retain customers. A couple of things longer term that are worth mentioning: you referenced the tightening of credit standards. That is in place and will bode well for us.

A little bit of pressure on gross adds, but it will bode well from a retention perspective. Longer term, better product experience, deeper, more frequent customer engagement is something that Omar and the product team are working on. We are excited about leveraging AI. In a couple of weeks here, we are going to implement AI-driven call routing and begin to implement AI for churn propensity modeling. So I think all of those will be positive for us. It is not going to be this quarter, but it will bode well for us in the longer term. In terms of non-pay specifically, Jeff, do you want to share some perspective?

Jeff Likosar: Sure. It is a topic, of course, we monitor very closely. We consider it very carefully. Fundamentally, it is part of our overall subscriber economic model. We recognize that we will suffer some nonpayment as part of that and are always looking at the right trade-off between our credit policy and the effect it might have on either (a) adds or, importantly, (b) installation revenue. So as we make refinements, the refinements we are making are both to whom we offer credit, how much credit we offer, and if we offer less, we likely, or in many cases, would still get the subscriber—just potentially with less installation revenue, which has a margin that goes with it.

So we assess that against what we think might be the credit losses, and while we are not perfect at predicting them, we have gotten pretty good and a lot better at predicting them. And as we continue to make those refinements, it is with the lens towards optimizing overall subscriber economics and overall return on invested capital. And then I will mention, just because I mentioned in my prepared remarks, that we did record some higher allowance for credit losses. Part of the reason for that is as we transition to more of our transactions being outright sales to customers, it means we are recording the revenue earlier.

And if we record the revenue earlier, under the accounting rules, we have to record an appropriate bad debt provision. So while we have seen some slightly negative trends, we think we have our arms around it and will continue to adjust to optimize both the short-term and long-term economics.

Peter Christiansen: That is helpful. I did not realize the cost method accounting there. But, Jeff, thank you for that clarification. Thank you.

Operator: Our next question comes from the line of Ronan Kennedy from Barclays. Please go ahead.

Ronan Kennedy: Hi. Good morning. This is Ronan Kennedy on for Manav. Thank you for taking our questions. If I may, a multi-part on prioritization of the high-quality adds and more efficient channels. Gross adds still declined. How much of that volume decline is intentional versus underlying demand dynamics? And how are you quantifying that high-quality add? Is it the payback, the IRR, expected lifetime value, or just the credit? And how have those thresholds changed? And then on AI routing, I think roughly half of calls and 100% of chat—are you quantifying realized cost savings today, and how much incremental margin opportunity remains there?

Jim DeVries: We will tag team this for you, Ronan. Good morning. It is Jim. I will start by reiterating just a bit on what I mentioned earlier for gross adds. I would have liked to have seen more adds in the quarter. So not all of it was intentional. Much of it was. We are about flat in direct and indirect installations. The reason why we are down tends to be mostly from dealer, and in fact one dealer in particular.

We have a little bit of tailwind on the multifamily sale, but some of the changes that we made—the tightening of credit standards, and dialing down the reliance that we have on some of our higher cost affiliates—all of that is intentional. It is hard to give you a percent on how much was intentional and how much was not. I would say something more than half of our miss versus last year was intentional. But I feel good about those changes even in this year and getting on track with our direct adds. Jeff, did you have more?

Jeff Likosar: Yeah. I would emphasize, we get the question also on attrition of parsing the individual components. It is difficult. We think of it as an overall ecosystem. And the main thing I would add or reiterate is that our first quarter was largely consistent with our plans. Our full-year revenue guidance was to be approximately flat. We were slightly better than that in the first quarter. The key driver of our revenue is monitoring and services revenue. The key driver of that is our overall RMR balance.

So you could deduce, even though we do not specifically guide to RMR, that it was a pretty consistent outcome in aggregate and overall in consideration of all things, including the adds, including the attrition, and price escalations. So we feel really good about our start to the year. And even though, as Jim mentioned, we always want to have more adds, we were out of the gate very similar to the way we expected to be out of the gate through the first three months.

Jim DeVries: I will add some context on AI, Ronan, and ask Jeff or Omar to jump in if they have more to add. There are three or four areas that we are focused on within AI right now. At the top of the list is containment and advancing our containment. Most all of the calls in the call center will be handled through AI this year. A couple of stats for you to demonstrate how quickly this is accelerating for us: our chat containment in Q1 was 45%, and by April, it is 60%. Call containment was 16% for the first quarter. By April, it is 25%.

I am not sure that it will continue to be linear like that, but we have a fantastic internal leadership team, great partners in Siera, the Google team, and expect to continue to make real significant advances on the call center side of our business. Next up for us is transcription, analysis of calls; as you know from an earlier answer, we have churn propensity modeling on the docket. And then lastly, we are not just using AI for cost reduction; we are also implementing AI into our marketing and sales motion. Outbound calls, for example, for low-converting leads will now be done principally by AI.

AI is involved in the pre-qualification process, just helping us to be much more efficient from a go-to-market standpoint.

Jeff Likosar: Yeah. And to your question about quantification, while we have not specifically shared a quantitative target, I would tell you it is in the millions—many millions, even tens of millions if I count the benefit of reducing the quantity of truck rolls. We think it is more over time, and it is among the reasons in our full-year guidance we are able to overcome the headwinds from investments and from tariffs and, with flattish revenue, still have profitability or EPS in the flattish range. So a very meaningful contributor—AI and cost discipline and cost management more generally across the business. And our teams are doing a great job executing both AI and cost more broadly.

Omar Khan: And I will add in just a couple of examples. Our product engineering group has led the adoption of co-pilot AI tools in our workflow. We have been extremely successful. As of last month, over half of our committed software code is being written by AI. So not only has that increased our velocity, it has also increased our capacity while holding our engineering headcount flat, and we anticipate that to continue as we adopt across the organization from an efficiency perspective. In addition to all the efficiency metrics that Jim, Jeff, and I are talking about, we are also using AI to engage our customers within ADT Plus.

We are going to be rolling out Gemini AI features, and as you know, Origin's AI features will start to roll out within ADT Plus as well as other standalone solutions in the next year or so.

Ronan Kennedy: That is all very helpful. Thank you very much. Appreciate it.

Jim DeVries: Thanks for the question, Ronan.

Operator: Thank you. Our last question comes from the line of Greg Parrish from Morgan Stanley. Please go ahead.

Greg Parrish: Hey. Thanks, guys, very much. Congrats on the strong result. Trying to talk about DIY and ADT Blue rolling out here. This is not a channel you have been overly assertive in historically, right? The economics, you know, are not quite as good. Maybe just help frame for investors why now. Is DIY more profitable now? Do you have more avenues to convert them to do-it-for-me? Just from a strategic perspective, why the change in approach to DIY now? And secondly, I wanted to circle back—you made some comments on second quarter. If I heard correctly, Jeff, I think you said revenue and EPS down sequentially in second quarter. You called out higher ad spending, which explains the EPS part.

I just want to double-click on the revenue part. Is there anything specific driving that? I mean, typically, second quarter is higher sequentially. Maybe there is some accounting nuance, like install recognition or something. But maybe just help us understand the revenue step down sequentially. Thanks.

Omar Khan: Yeah, so I think for the first time we, as ADT Inc., have developed a hardware and software customer experience that is purpose-built from the ground up for DIY customers in terms of both how they buy, how they activate, and how they interact with the technology. We are taking this market opportunity seriously as a significant TAM opportunity, as has been demonstrated in the market already by other DIY camera-only and security providers that are having success in that market. Think for too long, we, as ADT Inc., have ceded this market where we feel like we have a strong right to play and to win, and we are committed to a long-term roadmap of enhancements to our offering.

We are going to be bringing out additional products from a hardware feature perspective, as well as new AI features. And I think even more importantly, it is going to be one of the areas where we begin to integrate Origin AI sensing technology into the DIY offering to differentiate ourselves in the market and capture our fair share of the DIY market from a TAM perspective.

Jim DeVries: Yeah. A couple of things I would mention, Greg. The first is, historically, because of some contractual obligations that we had with some of our suppliers, we were limited in how assertive we could be in this market. And now that those contracts have been renegotiated, the economics are different for us today and give us a little more elbow room in competing in this marketplace. And as Omar just mentioned, he and his team have built from the ground up a hardware and software set ready-made to compete economically in DIY. And you are right about profitability in DIY versus DIFM, but we think we can get a good return.

Most all of the DIY subs will be incremental for us. And then, not unimportantly, part of our playbook will be to treat those DIY customers from a lifetime perspective and convert them, as their needs change or their interests change, to DIFM—to pro install customers—where the profitability is much higher.

Jeff Likosar: You know, we do not expect revenue down sequentially. We expect our cash flow down sequentially is the most significant item I would highlight, and that is because of a combination of seasonal SAC spending and the normal course flows of working capital being less beneficial in the second quarter than in the first quarter, and the timing of tax payments, as an example. And then we are accelerating most of our investments. We have Origin, for example, for the full quarter, which we did not have for the full prior quarter; the ADT Blue advertising rollout; and some other engineering work across the business.

So that is among the reasons that our EPS, along with the share count dynamics, in the first quarter on a year-over-year basis was higher than what we have said for our full-year outlook, but we do not expect revenue down quarter over quarter.

Greg Parrish: Okay. Good. Maybe I misheard. Got it wrong, so I am glad I clarified that. Okay. Thanks, guys.

Omar Khan: Thanks, Greg. Thank you.

Operator: I will now turn the call over to Jim DeVries for closing remarks.

Jim DeVries: Thank you, Janine, and thanks, everyone, for taking time to join us today. ADT Inc. delivered a solid quarter. We continue to feel good about the direction of the business. We are confident in our 2026 plans, both operational and the investments that we have been discussing and the impact that they will have for a stronger future. One last time, I would like to extend my appreciation to ADT Inc. employees and our dealer partners. Congrats on a very good start to the year. And thanks again, everyone, and have a great day.

Operator: That concludes our conference call for today. You may now disconnect.

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