Q2 2023 ADT Inc Earnings Call

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Greetings and welcome to today's call at this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation, if you'd like to ask a question. During this time simply prestige Starkey followed by the number one on your telephone keypad.

You'd like to withdraw your question Press Star one once again.

As a reminder, this conference is being recorded it is now my pleasure to introduce your host Elizabeth Lippitt Landers Senior director of Investor Relations. Thank you you may begin.

Thanks, operator, and good morning, everyone. We appreciate you joining today's call to discuss Adt's second quarter 2023 earnings and the transaction, we announced this morning to sell our commercial business.

Speaking on today's call will be Adt's, President and CEO , Jim Devries, and our E. D. P. M CFO Ken before following the prepared remarks, we will take analyst questions also joining us for Q&A are Don Young EVP, and Chief operating officer, and Wayne sourcing EVP and Chief business Officer.

Earlier. This morning, we issued our earnings press release in a separate press release on the sale of our commercial business as well as an accompanying slide presentation. These materials are available on our website at Investor got ATT Dot com before.

Before we start I do need to mention that today's remarks include forward looking statements that represent our beliefs or expectations about future events. These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially.

Some of the factors that may cause differences are described in our SEC filings. We'll also discuss non-GAAP financial measures on the call. The most directly comparable GAAP measures along with a reconciliation to those measures can be found on our earnings slide presentation on the ADT Investor Relations website, and with that I'm excited to turn the call over to Jim.

Thanks, Elizabeth Good morning, and thank you to everyone for joining us today I'll begin the call talking about the announcement, we made pre market to divest adt's commercial business. I'll then share some perspective about the exciting road ahead, and finally I'll share some comments about our second quarter results.

I'll, then turn the call over to Ken for poor offer details on our second quarter financial results a bit more on the divestiture and our 2023 outlook. This morning, ADT announced it entered into a definitive agreement to divest our commercial security fire and life safety.

Business unit two G. T C R. A leading private equity firm for a purchase price of just over $1.6 billion. The transaction was approved by our board of directors and is expected to close in the fourth quarter of this year subject to customary closing conditions, including regulatory approvals.

<unk> there are five key benefits of this transaction that will significantly unlock shareholder value first the divestment enables more focus for ADT to facilitate the pursuit of significant residential and small business growth opportunities in the smart home.

Home and solar markets second.

The sale price represents an attractive enterprise value and at just over $1.6 billion is equivalent to a multiple of 11.2 times. The commercial trailing 12 months adjusted EBITDA, including an estimated allocation of corporate costs.

Third eight.

<unk> will have a meaningfully lower leverage profile following the close of the transaction the entirety of the net proceeds will be used to pay down debt, reducing our net leverage ratio from the current level of 3.7 down to three three times accelerating the achievement of our debt reduction goal.

By two years for the transaction strengthens Adt's financial profile, we expect higher adjusted EBITDA margins and cash interest savings from debt pay down to offset the impact of divesting the commercial business, we will be better positioned to prioritize investments that will.

Drive profitable capital efficient revenue growth for the long term and finally, the commercial divestiture clearly monetize value from the business transformation. The valuation is a testament to ADT commercial strong growth in revenue healthy sales backlog and improving <unk>.

Adjusted EBITDA margins to conclude beyond these five key benefits. We're confident this is the right time and a great price to maximize the value for our shareholders.

I'd like to take a moment to thank Dan browsing him, Mike Mcwilliams and the entire ADT commercial team for their dedication support and service excellence. The culture you built inside the commercial business and your overall commitment has led the business to where it has grown today.

Now turning to our road ahead, the total addressable U S market for residential and small business security Smart home and residential solar is approximately $75 billion today and is expected to grow at a combined 10% CAGR through 2027 to capitalize.

We're expanding our sales channels to include retail and convenient E. Commerce. In addition to our exceptional in home consultation.

Adt's commitment to customer choice is driving new innovation and pricing product and installation options to continue to position us as the preferred provider for more people seeking the peace of mind and convenience of Adt's Smart home security consumers.

Consumers are already experiencing a transformed ADT and refreshed advertising campaigns that increase awareness and differentiate our capabilities further driving customer demand.

There are a number of growth catalysts, driving our transformation product development and innovation have accelerated in the past few years and with the development of our ADT plus platform and smart monitoring emerging as unique differentiators, our partnership with Google distinguishes our hardware.

Products with premium Ness devices powered by industry, leading AI, Google products have enabled us to increase the number of devices in the home expanding our share of wallet and representing a key variable correlated to higher customer engagement and retention.

These larger more connected home systems translate to higher device take rates and help to increase our installation revenue per home, which is up 17% over the prior year period.

In the second quarter, we continued to see attachment rates on NES door bells of approximately 50% and video take rates remain impressive in our integrated experience through ADT plus for new DIY customers.

We anticipate our Google partnership to accelerate even more when we introduced an integrated pro install solution.

We also anticipate that our state farm partnership will broaden our reach into new customer markets and lower subscriber acquisition costs.

We expect our offering in partnership with state farm to be available the policyholders and up to 13 states. This year.

Though it's early in the opportunity we continue to be excited about the runway for future capital efficient subscriber growth I'd like to now turn to the second quarter I'm pleased to share we continued to deliver solid results with year over year growth in adjusted EBITDA adjusted free cash flows.

And adjusted EPS total revenue was approximately $1.6 billion with revenue in consumer and small business and commercial increasing by 7% and 17% respectively. Adjusted net income was $148 million or 16 cents per diluted.

Sure and we posted improved adjusted EBITDA up 9% year over year, we ended the quarter with a record recurring monthly revenue balance of $382 million. Our revenue payback now stands at a record low of 1.9 years down from two point.

Two a year ago with gross attrition remaining at a record low 12, 5% the combination of greater retention and lower sac per sub translates to a rate of return on new subs that is more attractive than anytime previously these.

These factors continue to drive better capital efficiency, producing adjusted free cash flow, including interest rate swaps up 27% versus second quarter last year.

The consumer market for Smart home security remains resilient evidenced by our high customer retention and continued growth in ending recurring monthly revenue.

And the commercial segment continued to deliver with robust revenue and impressive double digit margin performance. We continue to see pressure in our solar division, partially driven by consumer price sensitivity related to higher interest rates, while we're not pleased with the financial results we are in.

Courage by the progress on the operation side of the house the backlog issues shared in previous calls are steadily improving.

With the stabilization and improvement in operations. We've now turned our focus to sales growth. We've had good success hiring and training sales reps and we've partnered with two of our key smart home dealers to sell ADT solar as well.

We've just added additional financing alternatives to help diversify our offerings ADT solar customers, who want to switch to renewable solar energy can now access loan financing from our banking providers and are expected soon to have a lease option as well.

The attractiveness of the options depends on a variety of factors, including utility costs and the customer's location last week, we announced an agreement in principle to enter into a leasing partnership with Sunpower financial.

Portions of the market have shifted from loan to lease and offering. This alternative to customers is an important development. We feel very good about both the leadership team and capability of Sunpower financial too.

To diversify our loan programs. We also just announced our receivables facility through Mizuho to allow for in house financing with access to the ABS capital markets. Finally, just last week, we began to cross sell solar to smart home customers and we're monitoring this.

Regress closely we're investing in the solar business not with a blind eye to realities, but with focus on the long term versus the next several quarters.

Even with much improved cycle time, the sale to install cycle is still several months. So we expect pressure on revenue and adjusted EBITDA in the second half.

In summary, we're excited about our growth catalysts in smart home security as well as capturing more share in residential rooftop solar we are positioned to provide innovative premium experiences for our customers in the residential small business and multifamily markets as our.

Our penetration in the smart home and residential solar markets grows our flywheel continues to accelerate we continue to see significant upside opportunity in these markets and we're confident they will serve us well over the long term.

Finally, 80 team's resilience and positive results reflect the dedication and determination of our 20000 plus employees and dealer partners I want to thank them for all they do to take care of our customers every day I will now turn the call over to our CFO Ken <unk>.

Thank you, Jim and thanks to everyone for joining our call today to begin I want to Echo Jim sentiment on our agreement to divest the commercial division. We are excited about the strategic and financial benefits This transaction unlocks.

First focus on our second quarter financials, then shift to add color on the commercial divestment and and that our outlook for the year, we're off to a solid first half of the year with improved earnings strong free cash flow and a continued decline in our net leverage ratio illustrating the continued resiliency of our business total company revenue was 1.6 billion for the.

Quarter, and recurring monthly revenue or RMR from our subscriber base was up 4% year over year to $382 million, a company record and an outcome of our strong customer retention and higher average pricing.

Within the growing RMR balance gross attrition remained at a record low at 12.5% gross RMR additions were about flat year on year, excluding our residential account bulk buy we did last year and pricing Escalations continue to slightly outpace inflation adjusted EBITDA was $651 million up now.

Percent versus prior year with outstanding margins in both C. S B and commercial offsetting some of the near term loss in solar adjusted net income for the quarter was $148 million or 16 cents per share our fifth consecutive quarter of positive adjusted net income our net leverage ratio improved sequentially and is now three.

Seven times down from three nine times at year end 2022.

We are pleased to receive a corporate credit rating upgraded by S&P in recognition of our durable business model and continued progress towards our debt reduction goals shifting to segment highlights for the quarter, our consumer and small business or C. S. P segment delivered total revenue of $1.2 billion in the second quarter up 7% versus prior year.

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CSB adjusted EBITDA increased by about $63 million or 11% for the quarter driven by increased revenue, coupled our cost efficiency programs and some in period legal settlements.

C S be posted an adjusted EBITDA margin of 55% an improvement of 200 basis points versus prior year. We are continuing to see strong demand for Google nest products, which have accelerated our sac efficiency and are driving a record revenue payback of 2.1 years within CSP and improvement from 2.3 years, just a year ago residential.

Insulation revenue per unit for pro install is up 17% year over year to approximately 1400 and $50 and new subscribers are signing up for additional services with over four dollar higher RP, you and existing customer averages ADT self setup integrating our internally developed ADT plus app with Google's nest products was.

Earlier in the year and is building up a growing base for subscribers choosing to self install.

As we mentioned last quarter, we are driving awareness of our integrated product offerings with our no worries marketing campaign, which is being supported in part by contributions from our Google success funds.

We have received $25 million so far in 2023 in success funds and I'm, putting these funds to work.

We also have some early momentum on the state farm offering and as Jim said, we are looking forward to further geographic expansion later this year.

We expect these partnerships to be catalysts for future growth. Additionally, we are making great progress on the cost efficiency efforts I shared last quarter, which are contributing to adjusted EBITDA margin improvement in C. S. B by the end of this year, we'll have over $75 million in cost reduction that will pay dividends for years to come.

And to complement the cost reduction efforts the benefits of Adt's virtual assistance program remain a huge win for both customers and our cost to serve with roughly 50% of all customer service request satisfied virtually since the program launched in July of 2021, we have completed more than 1.6 million serve.

This request virtually.

Turning to the commercial segment.

We delivered total revenue of $348 million in the quarter up 17% versus prior year with strength in both sales and installation revenue.

This strong revenue performance drove commercial adjusted EBITDA of $45 million up 43% versus prior year and margin expansion up 200 basis points to 13%. Our solar segment continues to address pressures and shifting the trajectory of this business remains a key focus.

ADT solar posted revenue of $78 million in the quarter with an adjusted EBITDA loss of $37 million.

As previously disclosed we took a noncash goodwill impairment charge of $181 million in the quarter associated with the solar segment. A result of current macroeconomic conditions and operating results relative to our previous expectations also as previously disclosed we identified errors in tax impacts related to noncash goodwill impairments associated with the solar segment.

We restated the related quarterly and annual filings to adjust for this correction.

These statements did not have any impact to our historically reported non-GAAP measures, including adjusted EBITDA adjusted free cash flow and adjusted EPS.

Turning to cash flow and the balance sheet adjusted free cash flow, including swaps was $221 million up 27% in the quarter versus prior year with many of the adjusted EBITDA benefits flowing through to free cash flow plus the improvement in Sac efficiency from the record low one nine times.

The new payback.

Higher cash interest expense, partially offset these year over year improvements in adjusted free cash flow as a reminder, less than 5% of our debt is subject to variable rates given our timely interest rate swaps with the primary benefit of these swaps reported in the financing section of our cash flow statement, which is why we folk.

On free cash flow, including the swap impacts.

In the quarter, we redeem the approximately $100 million remaining outstanding balance of notes due in 2023 using proceeds from our term loan borrowings and cash on hand.

We currently have no meaningful maturities left this year, we also redeemed $150 million of the $750 million 2024 notes with cash on hand during the second quarter, our cash generation along with other actions reduced our net leverage ratio to three seven times and the commercial Divesture will springboard our plans.

I'll now pivot to add some color on the commercial Divesture as Jim mentioned the transaction represents a number of key benefits and unlock significant shareholder value.

The 11.2 times enterprise value to commercial adjusted EBITDA multiple is very attractive it allows us to redeploy those proceeds quickly and efficiently accelerating our debt reduction goals.

Following the anticipated close in the fourth quarter of 2023, we expect to deploy the net sale proceeds against that reduction.

We expect post divesture leverage multiples closer to 80 stated goal of sub three times net leverage.

With this significant debt reduction interest savings fully offsetting loss cash flows in the commercial business and very limited variable interest rate exposure, we're quickly advancing to the leverage sweet spot.

Given the news of the commercial transaction I wanted to reiterate Adt's investment proposition in a new medium term target framework, including revenue growth in line with market growth with mix adjusted for our lines of business adjusted.

Adjusted EBITDA and adjusted free cash flow growth exceeding revenue growth.

Internal rate of return for new C S be subscribers of 20% plus.

Net leverage ratio of less than three times.

Annual adjusted free cash flow with interest swaps of approximately $1 billion by year end 2025.

Our capital allocation priorities are unchanged, including funding growth and capex to yield attractive returns sustaining our dividend and continuing to pay down debt to achieve optimal net leverage ratio.

And finally, turning to our outlook for the remainder of the year.

While we expect the commercial segment to be reported as discontinued operations starting in the third quarter of 2023, we are updating our full year 2023 guidance on an as is basis, including commercial and expect to update the guidance, reflecting discontinued ops on our next earnings call.

I will however share the estimated full year impact on the key measures for the commercial divestiture to help reconcile while current market conditions are driving a reduction to revenue in our solar business the strength of our CSB and commercial segments allows us to maintain adjusted EBITDA adjusted free cash flow adjusted free cash flow, including swaps and E. P. S.

Guidance.

We now expect total 2023 revenue of $6 3 billion to $6 5 billion from our previous guide of 6.6 to $6 eight 5 billion with the full year reduction stemming solely from the solar business.

Included in our full year 2023 range is approximately 1.35 billion in revenue and approximately $150 million and adjusted EBITDA. After estimated allocation of corporate costs for the commercial business unit.

Now I'll turn it back over to Jim for some closing comments. Thanks, Ken in closing ADT is poised for future growth and I'm extremely excited for the opportunities that lie ahead. Our investment thesis is compelling when coupled with the medium term target framework that Ken just shared.

ADT is serving a large and expanding addressable market with total expected market growth of approximately 10% through 2027 80.

ADT is a growing business with industry, leading scale positioned to benefit from secular tailwind. The ADT brand is a powerful one and with 98% brand awareness, we are synonymous with safety and peace of mind, where the most trusted brand the most considered brand and two times.

The most preferred brand relative to the closest competitor.

ADT has a large and unique opportunity with two world class strategic partnerships and solar in early stages.

ADT has compelling unit economics that support increased investment for growth.

ADT has a resilient cash flow profile with a stable and predictable recurring revenue base with over 6 million customers and a growing RMR base with improving operating margins.

And with the commercial divestiture ADT will have an attractive debt profile with a disciplined capital allocation framework.

I'll now turn the call over to our operator for Q&A.

Thank you at this time I'd like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we will take our first question from George Tong with Goldman Sachs. Your line is now open.

Hi, Thanks, good morning.

It sounds like the full year guide was updated primarily to reflect the softness on the solar side of the business can you describe initiatives internally that you're adopting to help improve execution within solar and when you would expect with the improved performance.

Yeah. Thanks for the question George It's Jim.

With regard to solar were clearly not pleased with the financial results.

As you're aware, we intentionally slowed down growth to address some deep rooted customer and operational issues. Those have improved however, returning growth back on is proving to be slow slower than we anticipated with the principal headwind being higher interest rate.

I would say I'm encouraged by the progress on the operation side of the house the backlog issues are being addressed cycle times improved and we're now focused on turning our focus to sale and so to more directly answer your question.

The.

The priority now is turning the sales engine back on with.

We've partnered with two of our key smart home dealers to sell solar we've had very good success hiring sales reps were getting them up to speed and productive quickly last week, we signed a partnership PPA deal of lease deal with Sunpower.

The market has shifted from loan the lease pretty quickly and getting this alternative in the market isn't as important for us and should be done in September .

And then just this last week, we started cross selling ADT.

Smart home customers and were obviously monitoring that progress closely.

Very helpful. Thank.

Thank you on on the residential side it looks like trends. They were relatively strong can you discuss where perhaps you saw upside in the quarter that relative to your initial expectations and how the state farm ramp is currently reflected in the full year guide in terms of the number of seats you expect to.

<unk> launched products. Thank you.

Yeah, you bet George I'll I'll offer a couple of comments on state farm and then Ken will share some perspective on our growth in the quarter.

State farm the the partnership the companies are aligned on the transformation vision, we've had a great deal of regulatory and compliance work that's been accomplished.

We're being very methodical with our with the start and launch of the program are incredibly customer focused.

And we're rolling out to.

Two seven states in Q3, I think 13 states by the end of the year.

There's been a lot of work in product development, we feel very good on that front and we started turning on marketing just in July so.

Main long term bullish the start of the launch as I said Super customer focus.

And and methodical doing a lot of work on the regulatory side.

As I started with customer B at State Farm organization had been terrific partners and the company is aligned with them on the vision.

And George to add ons to tender on the overall momentum we had in the CSP business, specifically residential like the RMR growth. We mentioned up 4% you saw the margins are up 200 bps year over year, and the EBITDA margins attrition record low sac efficiency at one nine times overall another record lassi.

Starting to see the momentum builders in the existing business and then Jim just talked about the state farm catalyst and the additional catalysts that we see as we launch more product innovation, whether its Google related to our own.

ADT platforms as well so we're really setting the foundation of putting up some pretty impressive results in the near term as well.

Very helpful. Thank you.

Next we'll go to our money if patnaik with Barclays. Your line is now open.

Hi, Good morning, how are you. This is roni Kennedy on for Manav. Thank you for taking my questions.

You articulated the five benefits of the divestiture of commercial including you know the financial with the proceeds.

The E V to pay down debt, but can you just help us better understand the cut because it was regarded to be a strong business in terms of it being lower capital efficiency and therefore better returns. So just more of the overall considerations from a financial standpoint also how it played into the flywheel, what the impacts will be without in the flywheel and also the impacts to some of.

The kpis such as that payback because I think it was also lower than CSP. So just more.

Of your assessment on full consideration of the financials.

Yeah Ronan thanks for the question I'll offer some perspective, and then like the last question and hand, it over to Ken to share some more detail.

I start with the operating benefit we think that there is an advantage to the transaction and that it enables us to focus we've got a lot going on and.

They have our time and talent focused on the residential.

In small business opportunities available to US. We think is helpful. We continue to be incredibly excited about the core business the returns cash generation some product enhancements.

That are upcoming.

And of course, our partnerships are.

Turning directly to your question about the commercial segment.

It represents about 5% of our total EBITDA.

After the Covid challenges the business to your point was growing nicely in 'twenty, one and 'twenty two both the bottom and top line.

But.

As you know, we believe our stock valuation at approximately <unk> EBITDA.

It doesn't reflect the intrinsic value of the company and we had an opportunity where the purchase price of $1 $6 billion.

Using the Standalone costs.

The EBITDA multiple was 11, two so there's an arbitrage.

Value unlocked or ADT versus where the stock is trading today.

And then lastly, I'd say it.

Let's say getting to our leverage ratio objective.

Much much more quickly Sn.

Essentially we received rolling in a very good price for the asset and able to reduce our debt and we think that's important especially in this market.

And ronen, it's Ken to add onto a bit to what Jim just said based on the multiple upgraded on 11 and the fact that we look we view it as cash flow or free cash flow neutral. The fact that that the leverage ratio is going down. So significantly is the biggest unlock that we see in the near term as.

As far as your mix of business and commercial obviously, the EBITDA margins were lower in that business, all while improving they were still lower than the overall portfolio. The attrition was a bit lower as once we pull that out it will spike up a tiny bit.

And then also the revenue payback, a little bit lower but you'll see in our prepared slides and the accompanying deck. We did break out the CSB and kind of remaining business to give you. Some color on how that would look but overall fantastic transaction for us we think the the leverage ratio move.

And how it accelerates our debt payback is pretty substantial.

That's very helpful. Thank you and then can I confirm in addition to what you just discussed obviously the strategic and operational.

Benefits, the operational focus et cetera anything else.

And because the business trends were strong anything else you were seeing that makes you know to answer that kind of why now question and then off the back of that for solar.

Have the long term expectations for the business changed since the time of acquisition.

On commercial ronen in terms of process I would say with some consistency in the last couple of years, we've received inbound inquiries about the commercial business.

After a couple of inbound inquiries earlier this year, we opened up the process a little more broadly.

And considered several buyers we were able to reach the agreement with G. T C. R.

As you may have read they've been invested in commercial businesses in the past they've got a great team.

They gave us a very good price and.

And we decided now was the right time.

Especially using all of our net proceeds to pay down debt and then the underscore I think an important comment that Ken just add from a free cash flow perspective.

The interest rate expense saving from Delevering.

Essentially offset the cash flow anticipated from the commercial business.

Thank you I appreciate it.

Yeah.

I'd like to remind everyone. If you have a question Thats star one on your telephone keypad and next we'll go to Toni Kaplan with Morgan Stanley . Your line is open thanks.

Thanks, so much.

To start off on on sort of portfolio actions. So after now selling commercial would you are you considering additional portfolio actions from here.

There is nothing today that we're considering.

Actively Tony.

The commercial business was at a bit of an inflection point potentially needing incremental capital that we think was better deployed in our larger core business.

And as I as I said earlier, the opportunity to Delever and largely replace the cash flow sort of instigated the commercial rationale but.

Outside of that there there is nothing contemplated today.

Okay, and Tony it's Ken if I could just broaden it.

Reason, we shared some of that market growth and our penetration rates that we it's really a double down play for US we think the pure play in the CSP business has tremendous opportunity.

The assets that we now have in place we want to ride that that future growth and we think we have the arsenal in the catalyst to do so so being able to divest delever and focus our efforts on growing that business, where we see a substantial opportunity given where the market is growing and <unk>.

How we are participating in that market.

Okay.

And then on solar.

I know you just signed a new financing partnership at maybe you could talk about kind of what you're expecting in terms of quantifying benefits from that.

And any any comments on maybe the macro.

Anything getting.

I got better or worse I know you mentioned the high interest rates has been a barrier.

To some of the new sales.

But.

How should we think of that the market with regard to sell there are you.

You know it.

How that's changed over the last you know.

Maybe a few weeks or months.

Yes.

Thanks, Tony It's Jim I'll offer a couple of comments on macro and then and then ask Ken to talk talk or elaborate on your question.

Generally that I talked to a number.

Number of people the the growth rate estimates for this year are all over the place that you know you have some people estimating 15% growth saw a modest decline our sense is that there's probably a modest decline much of that driven by the interest rate environment, because when our customers are doing.

Compares.

With higher interest rates in many of these sales being a loan product. It just drives the cost of solar up which is one of the reasons why it's so important for us to get this PPA product in market.

Something in the neighborhood of.

At the beginning of the year something in the neighborhood of 20% of sales where lease and exiting the year, it's probably closer to 50%. So we feel good about the partnership as I said earlier with Sunpower and getting that lease product.

In market long term, we're bullish bullish about renewable energy.

And bullish bullish about the residential solar market.

And Tony that you had the the theme here for us on the on the options was diversification, we talked about that a couple of quarters ago said now customers have the option to finance either through alone they could pay upfront. They now have a lease option and within that loan option. We have banking partners and we also have in house financing, which will tap.

<unk> securitization and eventually the ABS market as well so.

Again, the theme of diversification, we've now executed on that and will provide customers more options the option to become different.

From the attractiveness standpoint, depending on where you are geographically.

So on the utilities side those different options, whether it's a loan or lease really depends on where you are in the U S and what the going rates are.

Thank you.

Yeah.

Okay.

Sure we have no further questions at this time I'll now turn the call back over to Jim Devries for any additional or closing remarks.

Thank you David as you heard this morning.

We are growing effectively driving a lot of innovation building brand loyalty are we feel good about the momentum in the business.

And feel good about the key benefits from our divestiture of commercial we have an exciting road ahead.

I'd like to extend my appreciation as I do each quarter to our ADT employees as dealers. Thanks for your outstanding results and a good quarter. Thanks, everybody for joining the call today and have a great day.

This concludes today's conference call you may now disconnect.

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