When will ADT+ adoption be large enough to measurably improve attrition, service costs, and customer lifetime value, especially with dealer rollout?

ADT+ rollout to dealers began this month, starting with the West region, and will be a 3-4 quarter migration. Benefits will phase in over the next 9-12 months. Initial dealer feedback is positive. The company is also seeing short-term improvements in NPS, customer service metrics, and lower employee turnover in retention, along with tightened credit standards and process changes, which are expected to help attrition. “We've launched our West region. We're in the process of actually launching our Eastern region. The initial feedback, George, from the dealer community has been very positive, both from the training and uptake as well as the installation progress on ADT+. It's going to be about a 3 to 4 quarter migration of the dealer community across the board.”

What is the initial feedback on ADT Blue, and how do ARPU and SAC compare to traditional channels?

ADT Blue is very early, with ARPU lower (plans starting at $10/month for video only). However, initial data shows a majority of customers choosing the fully monitored security package (around $35/month and above), which is higher than the general market for DIY. The goal is to attract entry-level customers and move them up the value chain. The economics are similar to traditional channels due to much lower subscriber acquisition costs. “The ARPU is obviously lower because we have plans starting at around $10 per month for video only, but we're encouraged with the initial results. And it's going to play out over time as we expand our channels, but the initial results show a majority of customers adopting and engaging with us in the fully monitored security package, which tends to obviously price higher at $34.99 and above.”

Can you unpack attrition trends, including non-pay cancellations, and any benefits from new initiatives?

Attrition was 13.1%, flat sequentially and flat year-over-year for the last three months. Relocation losses were flat. Non-payment cancellations were modestly higher than last year, but voluntary cancels were better. Small business attrition was flat at ~14%, with non-pay cancels slightly better. While overall attrition is flat, canceled demand is down modestly, and leading indicators like team stability and customer service metrics are improving. “Relocation losses were flat. There was modest pressure from nonpayment cancellations. They were higher than last year, but only modestly so. Voluntary cancels were better than last year.”

ADT

ADT (ADT) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Industrials· Jul 30, 2026

Source: earnings call transcript

Executive summary

ADT Q2 FY26 — Strong Cash Flow and Strategic Investments Drive Modestly Raised Outlook

ADT delivered a solid second quarter, marked by exceptionally strong cash generation that supported significant share repurchases and a modestly raised full-year outlook. The company is actively transitioning its go-to-market strategy, focusing on lower-cost customer acquisition channels and leveraging AI to enhance service efficiency and product capabilities. While gross additions saw a temporary impact from reduced bulk purchases and dealer channel softness, core organic growth remains robust, and the ADT+ ecosystem continues to expand with new offerings like ADT Blue and present sensing technology.

Highlights

Adjusted free cash flow, including interest rate swaps, was up $133 million or 48% year-over-year to $406 million.
Year-to-date adjusted free cash flow reached $820 million, up over $300 million or 64% versus prior year.
Repurchased 89 million shares year-to-date, including 29 million shares in connection with Apollo's secondary offering, with $885 million remaining under authorization.
Total revenue grew 2% to $1.3 billion, with installation revenue up 17%.
Direct DIFM residential adds were up high single digits and SMB adds were up mid-single digits for the quarter.

Concerns

Gross RMR additions fell 17% year-over-year and gross unit additions declined 22%, largely due to fewer bulk account purchases and softness in the dealer channel.
Trailing 12-month attrition remained flat at approximately 13.1%, with modest pressure from non-payment cancellations.
Expect higher cash taxes and cash interest in FY27, estimated at $50 million to $100 million each as headwinds.

Guidance & targets

Category	Target	Timeline	Confidence
Total Revenue Growth	approximately 2% high materiality	FY26	High
Adjusted EPS Growth	2% high materiality	FY26	High
Adjusted Free Cash Flow Growth	approximately 30% high materiality	FY26	High
Q4 Income vs Q3	somewhat higher low materiality	Q4 · FY26	Medium
Q3 and Q4 Revenue and Cash	similar low materiality	Q3 FY26 and Q4 FY26	Medium
Leverage Target	2.5x medium materiality	Long-term	High

ADT operating KPIs by quarter

ADT operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Dec 2025 Q4 FY25	This call Jun 2026 Q2 FY26	Change vs prior quarter
Attrition rate	13.1% Attrition ended at 13.1%, behind our record level from earlier in 2025 due mainly to elevated nonpaid disconnects. Source: earnings call transcript	13.1% Attrition was 13.1%, flat to last quarter with revenue payback also holding at 2.3 years. Source: earnings call transcript	0 pt

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline
ADT Blue	launch	Q2 FY26
Present Sensing Offering (WiFi-based smart plug)	roadmap	customer pilots Fall 2026, planned launch early 2027
Origin AI features (motion intelligence, alarm event intelligence, zone-based intelligence, video analytics)	roadmap	starting H1 2027

Deals & partnerships

Apollo Secondary offering of remaining holdings

Apollo sold its remaining holdings in a secondary offering and is now no longer an ADT shareholder. ADT repurchased 29 million shares in connection with this offering.

Risks & headwinds

Softness in dealer channel and fewer bulk account purchases Q2 FY26

Gross RMR additions fell 17% YoY; gross unit additions declined 22% YoY; 10,000 bulk units purchased in Q2 FY26 vs. 50,000 in Q2 FY25.

Mitigation:Offset by growth in direct subscriber and RMR additions; optimizing long-term economics by rationalizing spend in highest cost channels; focusing on organic growth.

Modest pressure from non-payment cancellations Q2 FY26

Non-payment cancellations were modestly higher than last year.

Mitigation:Tightened credit standards; process changes around proactive save offers.

Higher cash taxes in 2027 FY27

Expected $50 million to $100 million headwind in FY27; FY25 cash taxes were $142 million.

Mitigation:Always working to optimize and minimize cash taxes.

Higher cash interest in 2027 FY27

Expected $50 million to $100 million headwind in FY27; current weighted average cost of debt approximately 4.3%; upcoming refinancing at 3.375% unlikely to be matched.

Mitigation:Working to optimize and find other ways to generate strong cash.

What to watch in Q3 FY26

ADT Blue volume growth

Q3 and Q4 FY26

Current Early stages, Amazon-only launch

Target Volumes begin to grow

Why it matters

Indicates success of new low-cost acquisition channel and expansion into DIY market segment.

During the second half of the year, we will scale our presence on Amazon and build ADT Blue momentum through additional advertising. We expect volumes to begin to grow in the third and fourth quarters.

Find out whether ADT delivers this. Inve re-checks your case every morning.

Q&A highlights

How much of the decline in gross RMR and unit additions is intentional strategy vs. market demand, and what's the path to growth?

The decline is primarily due to fewer bulk account purchases (10k this quarter vs. 50k last year) and intentional dialing back of expensive affiliate channels, along with some dealer channel softness. Core direct organic business (DIFM) is up high single digits for residential and mid-single digits for SMB. The company is focused on strong economics and expects new growth initiatives to contribute later this year and next.

“You're correct on the biggest difference between this quarter and Q2 of last year being related to unit bulks. We completed a 10,000 unit bulk this quarter, 50,000 bulk in Q2 of last year.”

asked by Keen Fai Tong · answered by James DeVries

2 min read 6 chapters

Detailed narrative

Strategic Priorities and Execution

ADT continues to focus on three key strategic areas: product technology, service excellence, and customer acquisition efficiency. Investments in product technology include expanding the ADT+ ecosystem, launching ADT Blue for DIY customers, and advancing a new privacy-preserving presence sensing offering for security and aging-in-place use cases, with customer pilots expected in Fall 2026 and a launch in early 2027.

AI Initiatives for Efficiency and Customer Experience

The company is seeing good momentum from AI initiatives, particularly in call centers, where AI-driven call routing and virtual AI agents have led to nearly 20% fewer customer contacts through human agents and a similar reduction in service tickets, while improving customer satisfaction.

Future AI expansions include transcribing and analyzing sales/service calls, SMS engagement with virtual agents, and AI-enabled fleet safety technology, aiming for meaningful contributions to growth and margin expansion.

Customer Acquisition Strategy and ADT Blue Launch

ADT is migrating to lower-cost sales tactics and channels, including rationalizing spend in highest-cost channels, which may temporarily affect subscriber additions but is designed to improve long-term returns. The launch of ADT Blue, a lower-cost self-installed security solution, broadens reach to value-conscious and DIY-oriented customers, with initial positive customer receptiveness.

The company plans to scale its presence on Amazon and build momentum through additional advertising in H2 2026.

Dealer Channel Transition and Organic Growth

The third-party dealer network, historically representing over one-third of gross additions, is transitioning to the ADT+ platform in phases over the next year. While this transition and reduced bulk purchases have impacted gross additions, the core direct 'do-it-for-me' (DIFM) business remains strong, with residential adds up high single digits and SMB adds up mid-single digits for the quarter.

The company aims to replace volume from affiliate and dealer softness with organic muscle and new initiatives.

Capital Allocation and Financial Structure

ADT maintains a strong capital structure and liquidity, with an undrawn $800 million revolving credit facility. The company deployed $684 million to shareholders in H1 2026, including $594 million for share repurchases and $90 million in dividends. Net debt stands at approximately $7.4 billion, with leverage at 2.8x adjusted EBITDA and a weighted average cost of debt around 4.3%.

The objective is to further reduce leverage to 2.5x.

Working Capital Management and Future Cash Flow

Strong cash generation in H1 2026 was significantly driven by tax planning progress and working capital management, including a discrete item related to payroll timing and tight management of inventory and payables. While working capital is expected to be less of a benefit in H2 2026, the company will continue to optimize it.

Higher cash taxes and interest are anticipated in 2027, with cash taxes potentially increasing from $142 million in the prior year and interest rates for refinancing expected to be higher than the current 3.375%.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.