Investment Thesis
ADT demonstrates solid operational performance with strong free cash flow generation (33.3% FCF margin) and improving net income growth (+18.9% YoY). However, significant leverage (2.06x Debt/Equity, 2.8x interest coverage) and concerning liquidity metrics (0.93x current ratio) create financial stress that offsets operational strength, warranting a cautious stance.
ADT Strengths
- Strong free cash flow generation of $1.7B with 33.3% FCF margin, indicating efficient cash conversion
- Improving profitability with net income growth of +18.9% YoY despite modest revenue growth of +4.7%
- Solid operating margin of 25.5% demonstrates operational leverage in the security services sector
- Substantial operating cash flow of $1.9B provides cushion for debt service and capital needs
ADT Risks
- High financial leverage with 2.06x Debt/Equity ratio and $7.8B long-term debt representing 49% of total assets
- Weak liquidity position with current ratio of 0.93x and minimal cash reserves of $80.8M relative to debt obligations
- Modest interest coverage ratio of 2.8x leaves limited margin for operational downturns or rate increases
- Negative diluted EPS of -$0.57 indicates substantial debt service and non-operational charges despite strong net income
- Capital intensity with $175.7M capex requirements ongoing in security services business
Key Metrics to Watch
- Debt-to-EBITDA ratio and trajectory of long-term debt reduction from FCF
- Interest coverage trend and refinancing capability as debt matures
- Operating cash flow sustainability and conversion to free cash flow
- Current ratio improvement and working capital management
- Revenue growth acceleration and operating margin sustainability
ADT Financial Metrics
ADT Profitability Ratios
ADT Balance Sheet & Liquidity
ADT 5-Year Financial Trend
5-Year Trend Summary: ADT Inc.'s revenue has remained relatively flat over the 5-year period, with a 4% decline. The most recent EPS of $0.53 reflects profitable operations.
ADT Growth Metrics (YoY)
ADT Quarterly Performance
| Quarter | Revenue | Net Income | EPS |
|---|---|---|---|
| Q3 2025 | $1.2B | $127.2M | N/A |
| Q2 2025 | $1.2B | $92.4M | N/A |
| Q1 2025 | $1.2B | $91.6M | N/A |
| Q3 2024 | $1.2B | -$86.2M | N/A |
| Q2 2024 | $1.2B | -$26.6M | N/A |
| Q1 2024 | $1.2B | $91.6M | N/A |
| Q3 2023 | $1.2B | -$18.1M | N/A |
| Q2 2023 | $1.6B | -$26.6M | N/A |
Data sourced from SEC EDGAR 10-Q quarterly filings. Figures may represent quarterly or cumulative values.
ADT Capital Allocation
ADT SEC Filings
Access official SEC EDGAR filings for ADT Inc. (CIK: 0001703056)