adt-20251231
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
For the fiscal year ended December 31, 2025
or
For the transition period from __________ to __________
ADT Inc.
(Exact name of registrant as specified in its charter)
1501 Yamato Road, Boca Raton, Florida, 33431
(561)988-3600
(Address of principal executive offices, including zip code, Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, par value $0.01 per share ADT New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes☒ No ̈
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ̈No☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ̈
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ̈
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ̈
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ̈
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ̈
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐Nox
As of June 30, 2025, the aggregate market value of voting and non-voting common stock (including shares of common stock and Class B common stock, assuming all outstanding shares of Class B common stock were converted into shares of common stock) held by non-affiliates of the registrant was approximately $4.282 billion as computed by reference to the closing price of the registrant’s common stock on the New York Stock Exchange as of such date. Class B common stock is not listed for public trading on any exchange or market system; however, each share will become immediately convertible into one share of common stock, at the option of the holder, subject to certain timing and restrictions.
As of February 23, 2026, there were 765,377,312 shares outstanding of the registrant’s common stock, $0.01 par value per share, and 54,744,525 shares outstanding of the registrant’s Class B common stock, $0.01 par value per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for use in connection with its 2026 Annual Meeting of Shareholders, which is to be filed no later than 120 days after December 31, 2025, are incorporated by reference into Part III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
Page
Cautionary Statement Regarding Forward-Looking Statements 1
Summary of Principal Risk Factors 3
Part I
Item 1. Business 5
Item 1A. Risk Factors 17
Item 1B. Unresolved Staff Comments 45
Item 1C. Cybersecurity 45
Item 2. Properties 47
Item 3. Legal Proceedings 47
Item 4. Mine Safety Disclosures 47
Part II
Item 6. Reserved 49
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 69
Item 8. Financial Statements and Supplementary Data 70
Item 9A. Controls and Procedures 70
Item 9B. Other Information 71
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 71
Part III
Item 10. Directors, Executive Officers and Corporate Governance 72
Item 11. Executive Compensation 72
Item 14. Principal Accountant Fees and Services 73
Part IV
Item 15. Exhibit and Financial Statement Schedules 74
Signatures 80
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CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (“Annual Report”) contains certain information that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are made in reliance on the safe harbor protections provided thereunder. While we have specifically identified certain information as being forward-looking in the context of its presentation, we caution you that all statements contained in this Annual Report that are not clearly historical in nature, including statements regarding our exit of the residential solar business (the “Solar Business”) (the “ADT Solar Exit”); the commercial transaction between ADT and GTCR LLC (“GTCR”) (the “Commercial Divestiture”); the expected benefits of the Commercial Divestiture and ADT Solar Exit including that the costs of the ADT Solar Exit may exceed our best estimates; the expected effects of the One Big Beautiful Bill Act (the “OBBBA”) on cash taxes; the anticipated changes to our internal control over financial reporting in 2026 resulting from ongoing information technology system implementations; the integration of strategic bulk purchases of customer accounts and other acquired businesses; any repurchases of our common stock under an authorized share repurchase plan; our ability to refinance or reduce debt or improve leverage ratios, or to achieve or maintain our leverage goals; anticipated financial performance; management’s plans and objectives for future operations; the successful development, commercialization, and timing of new or joint products; business prospects; outcomes of regulatory proceedings; market conditions; our ability to deploy our business continuity and disaster plans and procedures to successfully respond to catastrophic events; our strategic partnership and ongoing relationship with Google LLC (“Google”); the expected timing of product commercialization with our external partners, including Google, or any changes thereto; the successful internal development, commercialization, and timing of our next generation platform and innovative offerings, including ADT+ and those incorporating artificial intelligence or advanced sensing capabilities; the successful conversion of customers who continue to utilize outdated technology; the current and future market size for existing, new, or joint products; any stated or implied outcomes with regards to the foregoing; and other matters. Forward-looking statements are contained principally in the sections of this report entitled “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Without limiting the generality of the preceding sentences, any time we use the words “ongoing,” “expects,” “intends,” “will,” “anticipates,” “believes,” “confident,” “continue,” “propose,” “seeks,” “could,” “may,” “should,” “estimates,” “forecasts,” “might,” “goals,” “objectives,” “targets,” “planned,” “projects,” and, in each case, their negative or other various or comparable terminology, and similar expressions, we intend to clearly express that the information deals with possible future events and is forward-looking in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include, without limitation:
•our ability to retain and hire key personnel and to maintain relationships with customers, suppliers and other business partners;
•risks related to the Commercial Divestiture and ADT Solar Exit, including our business becoming less diversified and the possible diversion of management’s attention from our core business operations;
•our ability to keep pace with rapid technological changes and other industry changes;
•risks related to the expansion and further development of our next-generation platform and our efforts to migrate our information technology infrastructure, including our customer relationship management and enterprise resource planning systems, to the cloud;
•our ability to effectively implement our strategic partnership with or utilize any of the amounts invested in us by Google;
•the impact of supply chain disruptions;
•our ability to maintain and grow our existing customer base and to integrate strategic bulk purchases of customer accounts;
•our ability to sell our products and services or launch new products and services, including those incorporating artificial intelligence or advanced sensing capabilities, in highly competitive markets, including the home security and automation market, and to achieve market acceptance with acceptable margins;
•our ability to successfully execute and scale our do‐it‐yourself (“DIY”) offerings, including customer adoption, digital acquisition, and expansion into new distribution channels such as traditional retail and e-commerce channels;
•our ability to successfully upgrade obsolete equipment installed at our customers’ premises in an efficient and cost-effective manner;
•any changes in regulations or laws, economic and financial conditions, including labor and tax law changes or any impacts on the global economy or consumer discretionary spending due to tariffs or otherwise, changes to privacy requirements, changes to telemarketing, email marketing and similar consumer protection laws, interest volatility, and trade tariffs and restrictions applicable to the products we sell;
•any impacts from current global, economic, sovereign and political conditions and uncertainties, including the effects of, and uncertainty regarding, new or proposed tariff or trade regulations;
•any material changes to the valuation allowances we take with respect to our deferred tax assets;
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•the impact of cyber attacks or related breaches with respect to information technology systems, cybersecurity, or data security involving us, our business partners, or other third parties whose systems are interconnected with ours, and any still undetected attacks or incidents;
•risks related to the development, deployment, and use of artificial intelligence (“AI”) in our products, services, and operations, including technological and legal uncertainties surrounding AI technologies;
•our dependence on third-party providers, suppliers, and dealers to enable us to produce and distribute our products and services in a cost-effective manner that protects our brand;
•our ability to successfully implement an equipment ownership model that best satisfies the needs of our customers and to successfully implement and maintain our receivables securitization financing agreement or similar arrangements;
•our ability to successfully pursue alternate business opportunities and strategies;
•our ability to successfully integrate acquired businesses, including bulk acquisitions of customer accounts, technologies, and intellectual property, and to realize the anticipated benefits of such acquisitions in an efficient and cost-effective manner;
•the amount and timing of our cash flows and earnings, which may be impacted by customer, competitive, supplier and other dynamics and conditions;
•our ability to maintain or improve margins through business efficiencies;
•risks related to the restatement of our consolidated financial statements included in our Amendment No. 1 to our Annual Report on Form 10-K for the year ended December 31, 2022 (the “Amended 2022 Annual Report”) and in our Quarterly Reports on Form 10-Q/A for the quarters ended September 30, 2022, and March 31, 2023, each as filed with the SEC on July 27, 2023;
•any litigation or investigation related to such restatements;
•our ability to maintain effective internal control over financial reporting (“ICFR”) and disclosure controls and procedures (“DCPs”), including our ability to remediate any potential material weakness in our ICFR, the timing of any such remediation, and anticipated changes to our ICFR resulting from ongoing system implementations, as well as the ability to maintain effective DCPs at a reasonable assurance level; and
•the expected shift in our transaction mix (including increased outright equipment sales) and the related effects to the timing and mix of revenue and costs.
Forward-looking statements and information involve risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied in, or reasonably inferred from, such statements, including without limitation, the risks and uncertainties disclosed or referenced in Part I, Item 1A of this Annual Report under the heading “Risk Factors.” Therefore, caution should be taken not to place undue reliance on any such forward-looking statements. Much of the information in this report that looks toward future performance is based on various factors and important assumptions about future events that may or may not actually occur. As a result, our operations and financial results in the future could differ materially and substantially from those we have discussed in the forward-looking statements included in this Annual Report on Form 10-K. Any forward-looking statement made in this Annual Report on Form 10-K speaks only as of the date on which it is made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise unless required by law.
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SUMMARY OF PRINCIPAL RISK FACTORS
This summary briefly lists the principal risks and uncertainties facing our business, which are only a select portion of those risks. A more complete discussion of those risks and uncertainties is set forth in Part I, Item 1A of this Annual Report, entitled Risk Factors. Additional risks not presently known to us or that we currently deem immaterial may also affect us. If any of these risks occur, our business, financial condition or results of operations could be materially and adversely affected. Our business is subject to the following principal risks and uncertainties:
Risks Related to Our Products and Services
•Our growth is dependent upon our ability to keep pace with rapid technological and industry changes.
•The home security and automation markets in which wesellourproductsandservicesarehighlycompetitivemarkets.
•If the insurance industry changes its practice of providing incentives to homeowners for the use of alarm monitoring services, we may experience a reduction in new customer growth or an increase in our customer attrition rate.
•The retirement of older technologies, development of new technologies incompatible with our existing offerings, and limitations on our customers’ options of telecommunications and broadband services and equipment could materially adversely affect our business, increase customer attrition, and require significant capital expenditures.
•Police and fire departments could refuse to respond to calls from monitored security service companies, which could damage consumer trust and confidence in our solutions and may damage our ability to attract and retain customers.
•Our reputation as a service provider of high-quality security offerings may be materially adversely affected by product defects or shortfalls in customer service, or by the failure of first responders to respond to calls.
•Unauthorized use of our brand names by third parties, and the expenses incurred in developing and preserving the value of our brand names, may materially adversely affect our business.
Risks Related to Our Operations
•If our attrition rate rises significantly, our profitability, business, financial condition, results of operations, and cash flows could be materially adversely affected.
•Delays, costs, and disruptions that result from upgrading, integrating, and maintaining the security of our information and technology networks and systems could materially adversely affect us.
•If we do not effectively implement our plans to migrate our technology infrastructure to the cloud, we could experience significant disruptions in our operations.
•Cybersecurity attacks or threats or other unauthorized access or attempts to access to our systems, or those of third parties, have in the past, and may in the future, compromise the security of our systems and disrupt our operations.
•Uncertainty in the development, deployment, and use of AI, including generative AI, in our products and services and across our operations could adversely affect our business, financial condition, results of operations, and reputation.
•Any failure or interruption in products or services provided by third-party providers and suppliers for components of our security and automation systems or software licenses for our products and services could harm our ability to operate.
•An event causing a disruption in the ability of our monitoring facilities or customer care resources to operate, including work from home operations, could materially adversely affect our business.
•A variety of events, including pandemics, natural disasters, and other macroeconomic events, have had and could have in the future a significant negative impact on our ability to carry on our normal operations.
•Our independent, third-party authorized dealers may not be able to mitigate certain risks such as information technology and data security breaches, product liability, errors and omissions, and compliance with applicable laws and regulations.
•We may pursue business opportunities that diverge from our current business model.
•ADT is a less diversified business following the Commercial Divestiture, the ADT Solar Exit, and the sale of our multifamily business, which may adversely affect ADT’s results of operations and financial condition.
•Our customer generation strategies through third parties, including our authorized dealer and affinity marketing programs, and our use of celebrities and social media influencers, and the competitive market for customer accounts may expose us to risk and affect our future profitability.
•We face risks in acquiring and integrating customer accounts.
•If we are unable to recruit and retain sufficient personnel at all levels of our organization, our ability to manage our business could be materially and adversely affected.
•The loss of or changes to our senior management could disrupt our business.
•Adverse developments in our collective bargaining agreements or other agreements with some employees could materially and adversely affect our business, financial condition, results of operations, and cash flows.
•If we fail to maintain effective internal control over financial reporting, we may not be able to accurately report our financial results.
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Risks Related to Regulations and Litigation
•If we fail to comply with constantly evolving laws, regulations, and industry standards addressing information and technology networks and systems, privacy, and data security, we could face substantial penalties, liability, and reputational harm.
•Infringement of our intellectual property rights could negatively affect us.
•Allegations that we have infringed upon the intellectual property rights of third parties could negatively affect us.
•We may be subject to class actions and other lawsuits which may harm our business and results of operations.
•Increasing government regulation of telemarketing, email marketing, door-to-door sales, and other marketing methods may increase our costs and restrict the operation and growth of our business.
•Any new, changes to existing, or uncertainty regarding laws or regulations, or our failure to comply with any such rules or regulations could be costly to us, harm our business and operations, and impede our ability to grow our existing business, any new businesses that we acquire, or investment opportunities that we pursue.
•We could be assessed penalties and fines for false alarms, and if these expenses become significant or we are unable to pass along the associated costs, our customers may terminate or fail to renew our services.
•Adoption of statutes and governmental policies purporting to characterize certain of our charges as unlawful may adversely affect our business.
•In the absence of net neutrality or similar regulation, certain providers of Internet access may block our services or charge their customers more for using our services, or government regulations relating to the Internet could change.
•Liability for employee acts or omissions or system failures could negatively affect our business.
•Liability for obligations of The Brink’s Company under the Coal Act or other coal-related liabilities of The Brink’s Company could negatively affect our business.
•Our business would be adversely affected if certain of our independent contractors were classified as employees.
•Existing or new tariffs and other trade restrictions imposed on imports from China, Mexico, or other countries where much of our end-user equipment is manufactured, or any counter-measures taken in response, may harm our business and results of operations.
Risks Related to Macroeconomic and Related Factors
•General economic conditions can affect our business, and we are susceptible to changes in the business economy, in the housing market, and in business and consumer discretionary income, which may inhibit our ability to grow our customer base and impact our financial condition, results of operations, and cash flows.
•Rising interest rates or increased consumer lender fees could adversely impact our sales, profitability, and financing costs.
•A substantial part of our revenue is derived from the recurring monthly revenue due from customers under alarm monitoring and other service contracts and we are subject to credit risk and other risks associated with our customers, dealers, and third-partylenders.
•Goodwill and other identifiable intangible assets represent a significant portion of our total assets, and we may never realize the full value of our intangible assets.
•We have significant deferred tax assets, and any impairments of or valuation allowances against these deferred tax assets in the future could materially adversely affect our results of operations, financial condition, and cash flows.
Risks Related to Our Indebtedness and to the Ownership of Our Common Stock
•Our substantial indebtedness limits our financial and operational flexibility.
•Our debt agreements contain restrictions that limit our flexibility and limit the manner in which we conduct our business and finance future operations or capital needs.
•Our stock price may fluctuate significantly.
•Apollo Global Management, Inc. (“Apollo”) continues to have rights under the Amended and Restated Stockholders Agreement, dated December 14, 2018, (the “Stockholders Agreement”) between the Company, Prime Security Services TopCo Parent, L.P., and the Co-Investors (as defined therein), and its interests may conflict with our interests and the interests of other stockholders and could negatively impact our ability to enter into corporate transactions.
•If we fail to establish and achieve the objectives of our sustainability program, we may not be viewed as an attractive investment, service provider, workplace, or business, which could have a negative effect on our company.
•Our organizational documents may impede or discourage a takeover, which could deprive our investors of the opportunity to receive a premium on their shares.
•Our Certificate of Incorporation provides for exclusive forum provisions which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes.
•Share repurchases or dividend payments could increase volatility in the trading price of our Common Stock, and may not result in long-term value to shareholders.
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PART I
ITEM 1. BUSINESS.
TABLE OF CONTENTS
•Company Overview
•Key Business Developments
•Segment and Geographic Information
•Products and Services
•Our Market
•Competition
•Resources Material to our Business
•Seasonality
•Government Regulation and Other Regulatory Matters
•Human Capital and Workplace Initiatives
•Available Information
COMPANY OVERVIEW
Our Business
ADT Inc., together with its wholly-owned subsidiaries (collectively, the “Company,” “we,” “our,” “us,” and “ADT”), is a leading provider of security, interactive, and smart home solutions serving residential and small business customers in the United States (“U.S.”).
Our mission is to empower people to protect and connect what matters most through innovative offerings, unrivaled safety, and a premium experience because we believe that everyone deserves to feel safe.
We are strategically evolving toward a platform-centric model focused on integrated home intelligence. Our efforts are increasingly centered on our proprietary ADT+ application, which is designed to serve as a foundational ecosystem for both professionally installed and self-installed solutions, integrating human expertise with ambient sensing capabilities.
We primarily conduct business under the ADT brand, which we believe is a key competitive advantage for us and a contributor to our success due to the importance customers place on reputation and trust when purchasing home security products and services. The strength of our brand, which first became associated with home security services in 1874, is based upon a long-standing record of delivering high-quality, reliable products and services; expertise in system sales, installation, and monitoring; and superior customer care, all driven by our industry-leading experience and knowledge.
As of December 31, 2025, we had approximately 6.1 million security monitoring service subscribers. We serve our customers through our nationwide sales and service offices (“SSOs”), monitoring and support centers, and large network of installation and service professionals.
Formation and Organization
ADT Inc. was incorporated in the State of Delaware in May 2015 as a holding company with no assets or liabilities. In July 2015, we acquired Protection One, Inc. and ASG Intermediate Holding Corp. (collectively, the “Formation Transactions”), which were instrumental in the commencement of our operations. In May 2016, we acquired The ADT Security Corporation (formerly named The ADT Corporation) (“The ADT Corporation”) (the “ADT Acquisition”), which significantly increased our market share in the security systems industry, making us one of the largest monitored security companies in the U.S.
In January 2018, we completed an initial public offering (“IPO”), and our common stock, par value $0.01 per share (“Common Stock”), began trading on the New York Stock Exchange (the “NYSE”) under the symbol “ADT.”
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As of December 31, 2025, our three largest shareholders were State Farm Fire & Casualty Company (”State Farm”), owning approximately 16%, Apollo Global Management, Inc. (“Apollo”), owning approximately 12%, and The Vanguard Group, owning approximately 8% of our outstanding Common Stock, inclusive of the Class B common stock, par value $0.01 per share (“Class B Common Stock”) (on an as-converted basis), owned exclusively by Google LLC (“Google”), and unvested shares of Common Stock.
KEY BUSINESS DEVELOPMENTS
Origin AI Acquisition
On February 20, 2026, ADT acquired Origin Wireless, Inc. (“Origin AI”), a provider of AI-enabled presence detection and ambient sensing technology (the “Origin AI Acquisition”). Origin AI’s technology uses artificial intelligence and radio frequency signals to detect and classify human presence and activity within the home without the use of cameras, audio, or wearable devices. This technology is expected to enhance our ability to deliver improved alarm verification, reduce false alarms, and support new intelligent security and smart home use cases over time.
The purchase price for the Origin AI Acquisition was $170 million in cash, subject to customary purchase price adjustments. Following the acquisition, Origin AI became an indirect wholly owned subsidiary of ADT.
We believe the acquisition of Origin AI supports our strategy to further differentiate our security and smart home offerings over time.
Google Update
On July 31, 2020, we entered into a Master Supply, Distribution, and Marketing Agreement with Google (as amended, the “Google Commercial Agreement”) with an initial term expiring on November 15, 2030. As part of our partnership with Google, each company agreed to contribute $150 million upon the achievement of certain milestones toward the joint marketing of devices and services; acquisition of customers; training of ADT employees for the sale, installation, customer service, and maintenance of the product and service offerings; and updates to technology for products included in such offerings. In August 2022, pursuant to an amendment to the Google Commercial Agreement, Google agreed to commit an additional $150 million (together with the initial amounts, the “Google Success Funds”) to fund growth, data and insights, product innovation, technology advancements, customer acquisition, and marketing, as mutually agreed by the Company and Google. The Google Commercial Agreement provided that each of the $150 million tranches of the Google Success Funds would be triggered in three equal tranches, respectively, subject to the attainment of certain milestones. From inception through December 31, 2025, the Company had incurred expenses of approximately $100 million related to the initiatives funded from the initial tranche of the Google Success Funds, and had received $90 million of reimbursement from the Google Success Funds with the remaining $10 million reimbursed during January 2026.
In January 2024, we again amended the Google Commercial Agreement to, among other things, remove exclusivity for DIY products and services, limit exclusivity for do-it-for-me (“DIFM”) products and services, and restructure the commitment from the Google Success Funds to pay a portion of the remaining amount due to ADT as a quarterly marketing reimbursement (with the balance to be used towards unlocking certain opportunities).
In September 2020, we issued and sold 54,744,525 shares of Class B Common Stock to Google in a private placement pursuant to a securities purchase agreement, dated July 31, 2020. In connection with that issuance of Class B Common Stock to Google, the Company and Google entered into an investor rights agreement (the “Google Investor Rights Agreement”), pursuant to which Google agreed to be bound by customary transfer restrictions and drag-along rights, and be afforded customary registration rights with respect to shares of Class B Common Stock held directly by Google. Under the terms of the Google Investor Rights Agreement, which was amended for the second time in December 2023, Google was prohibited, subject to certain exceptions, from transferring any shares of Class B Common Stock or any shares of Common Stock issuable upon conversion of the Class B Common Stock until June 2025. Refer to Note 10 “Equity” in the Notes to Consolidated Financial Statements.
Additionally, in December 2023, the Company and Google entered into an addendum to the Company’s existing agreement for using Google cloud services (the “Google Cloud Agreement Addendum”), pursuant to which Google has agreed to provide certain credits, discounts, and other incentives for use of the Google Cloud Platform to the Company, and the Company has committed to purchasing $200 million of Google Cloud Platform services over seven years (through December 2030) (the “Google Cloud Commitment”). Refer to Note 13 “Commitments and Contingencies” in the Notes to Consolidated Financial Statements.
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State Farm Update
In October 2022, we entered into a development agreement with State Farm (the “State Farm Development Agreement”), pursuant to which State Farm committed up to $300 million to fund product and technology innovation, customer growth, and marketing initiatives. We initially received $100 million of such commitment from State Farm, which was restricted to use for investment, as agreed upon with State Farm, in accordance with the State Farm Development Agreement (the “Opportunity Fund”). The State Farm Development Agreement expired on October 13, 2025. On October 24, 2025, we repaid to State Farm substantially all of the balance of the Opportunity Fund held by us. State Farm has no obligation to fund the Opportunity Fund in the future. In addition, we ended our State Farm partnership programs in existing states in connection with the expiration of the State Farm Development Agreement.
Pursuant to an investor rights agreement with State Farm (the “State Farm Investor Rights Agreement”), dated as of October 13, 2022, State Farm agreed to be bound by customary transfer and standstill restrictions and drag-along rights, and be afforded customary registration rights with respect to shares of our Common Stock owned by State Farm. State Farm’s contractual lock-up period restricting the transfer of the shares of Common Stock owned by State Farm terminated on October 13, 2025.
Refer to Note 16 “Related Party Transactions” in the Notes to Consolidated Financial Statements.
SEGMENT AND GEOGRAPHIC INFORMATION
We evaluate and report our segment information based on the manner in which our Chief Executive Officer (“CEO”), who is our chief operating decision maker (“CODM”), evaluates performance and allocates resources. Our CODM manages the business on a consolidated basis, and as such, we report results in a single operating and reportable segment.
For further information, refer to Note 3 “Segment Information” in the Notes to Consolidated Financial Statements.
Revenue generated by customers outside of the U.S. is not material.
PRODUCTS AND SERVICES
Security and Automation Offerings
Our core security offerings include burglar and life safety alarms, smart security cameras, smart home automation systems, and video surveillance systems (referred to collectively as security systems, solutions, or offerings). Our security offerings are designed to detect intrusion; control access; sense movement, smoke, fire, carbon monoxide, leaks, temperature, and other environmental conditions and hazards; and address personal medical emergencies such as injuries or unanticipated falls. We offer our customers routine maintenance and the installation of upgraded or additional equipment, which provide additional value to the customer and generate incremental recurring monthly revenue. Additionally, our personal emergency response system products and services utilize our security monitoring infrastructure to provide customers with solutions that help to sustain independent living, detect when a fall occurs, and provide protection while on the go with geolocation capability.
Our proprietary ADT+ app is a comprehensive interactive technology platform designed to provide customers with a seamless experience through a common application across security, life safety, automation, and analytics, and integrate the user experience, customer service experience, and back-end support. We began a phased rollout of our ADT+ app along with a new interactive and hardware lineup during the fourth quarter of 2023. During 2024 and 2025, we continued the phased rollout across the country. As part of our partnership with Google, we have also integrated certain Google devices into our offerings.
Our Trusted NeighborTM offering allows customers to verify a trusted individual and grant that individual secure, temporary access to their home through homeowner-authorized credentials, including assigned Yale lock PIN codes, biometric (fingerprint) authentication on supported devices, and the ADT+ application.
The vast majority of new residential customers choose our automation and smart home solutions, which provide customers the ability to remotely monitor and manage their spaces through our smart phone applications, customized web portal, or touchscreen panels in their homes.
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Our automation and smart home solutions allow customers to:
•remotely arm and disarm their security systems;
•receive programmed event notifications from their security systems;
•record and view real-time video;
•program their systems to react to defined events;
•integrate their systems with various third-party connected devices such as cameras, lights, thermostats, appliances, and garage doors; and
•automate custom schedules for these connected devices.
We offer both professionally installed and DIY security and smart home solutions, and we are increasingly focused on expanding and enhancing our DIY offerings as part of our growth strategy. Our DIY solutions are designed to provide customers with flexible installation, monitoring, and pricing options and to reach customer segments that may not be served by traditional professionally installed offerings. We believe our DIY offerings represent a significant opportunity to drive subscriber growth, expand our addressable market, and support increased digital engagement over time, including through expanded distribution channels and partnerships.
Additionally, we believe that consumer demand is increasingly shifting toward solutions that provide continuous, intelligent awareness of activity within the home. Advances in artificial intelligence and ambient sensing are enabling new forms of detection and insight that can enhance security, reduce false alarms, and support adjacent use cases such as aging‐in‐place and wellness monitoring. We expect these trends to influence our product roadmap and investment priorities in future periods.
Generally, a significant upfront investment is required to acquire new subscribers related to installation costs (such as labor, commissions, equipment, and overhead), which we recover through upfront fees charged at the time of installation and recurring monthly revenue generated in future years. While the economics of an installation can vary depending on the customer acquisition channel and offering, we generally achieve revenue break-even in approximately two years. Our ability to increase our average prices for individual customers depends on a number of factors, including the type and complexity of service, the quality of our service, the introduction of additional features and offerings that increase the value to the customer, and the competitive environments in which we operate.
At the time of initial equipment installation, our customers typically contract for both monitoring and maintenance services, which are generally governed by multi-year contracts. If a customer cancels or is otherwise in default under a monitoring contract prior to the end of the initial contract term, we have the right under the contract to receive a termination payment from the customer in an amount equal to a designated percentage of all remaining monthly payments.
The standard contract terms are two, three, or five years, with automatic renewals for successive 30-day periods for residential security customers and annual periods for small business customers, unless canceled by either party. We may also offer month-to-month contracts depending on the circumstance.
Qualifying customers can pay any upfront fees over the course of the contract (referred to as retail installment contracts). A security interest is granted in the retail installment contract receivables as collateral for cash borrowings under our uncommitted receivables securitization financing agreement (the “2020 Receivables Facility”). Customers are also generally obligated to make monthly payments for monitoring services for the remainder of the initial contract term. Monitoring services are typically billed monthly or quarterly in advance, and more than 80% of our residential customers pay us these fees through automated payment methods, with new residential customers generally opting for these payment methods.
Monitoring Centers
As of December 31, 2025, we operated six monitoring centers located throughout the U.S. that provide 24/7 year-round professional monitoring services to our customers, including our monitoring centers that also provide outsourced monitoring services for other security companies. Our monitoring centers are fully redundant, which means all monitoring operations can be transferred to another monitoring center in case of an event affecting the functionality of one of our centers such as weather-related incidents, natural disasters, or other interruptions in telephone or computer service. In addition, our monitoring centers are listed by Underwriters Laboratories (“UL”). Many jurisdictions have laws requiring that security systems for certain buildings be monitored by UL-listed centers, and in some instances, a UL listing is required by insurers of certain customers as a condition of insurance coverage. In addition, we are in compliance with UL work from home standards for the portion of our monitoring center professionals who work remotely.
Upon the occurrence of certain initiating events, our monitored security systems send event-specific signals to our monitoring personnel who then relay appropriate information, based on the customer’s contract and preferences, to first responders and the customer or others on the customer’s emergency contact list. We continue to focus on our alarm verification technologies and
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partner with industry associations and various first responder agencies to help prioritize response events, enhance response policies, and develop processes that allow us to send data to emergency response centers directly. Additionally, our System Monitoring and Response Technology (“SMART”) monitoring solution aims to result in faster and higher-quality alarm responses and is intended to reduce false alarms and customer care calls. Our SMART monitoring differentiates our offerings by delivering alarms to connected and participating 9-1-1 centers faster than traditional voice handling speeds. Additionally, our alarm scoring program, which offers a uniform and reliable approach for categorizing alarm severity levels, enhances the accuracy of assessing potential threats to life or property and gives first responders precise and crucial alarm data for improved emergency responses.
Field and Call Center Operations
Our field and call center operations comprise a nationwide network of SSOs, call centers, and support facilities. We staff our SSOs with qualified field solution advisors and installation and service technicians, and we utilize third-party subcontract labor when appropriate. We provide ongoing training to our field and call center employees, as well as our authorized dealers, and we continually measure and monitor customer satisfaction-oriented metrics across each customer touch point. Our objective is to provide a differentiated service experience by resolving customer issues remotely whenever possible and scheduling installation and service visits at times convenient for the customer.
Our innovative remote assistance program (the “Remote Assistance Program”) delivers a scalable, cost-efficient means of servicing our customers through live video streaming with our skilled technicians to troubleshoot and resolve service issues as well as remote programming and installation support for new DIY systems, add-ons, and resale reactivations. We are also exploring and implementing AI tools that are aimed to improve and automate certain processes for our call center agents and customers. Additionally, our ADT WiFi Fix app allows remote customer service agents to diagnose and address WiFi issues impacting customers’ ADT equipment or other devices. These offerings provide customers with more options for receiving services that best fit their lifestyles while reducing the cost for us to provide these services and lowering our carbon footprint through the reduction of truck rolls.
Our customer care agents provide support 24 hours a day on a year-round basis to ensure service requests are handled promptly and professionally. During 2025, we enhanced our technical support processes to resolve customer issues earlier in the interaction by equipping our inbound troubleshooting agents with additional capabilities, eliminating the need for customers to wait to receive a scheduled outbound call. To measure performance, we introduced a ‘remote resolution’ metric, which tracks issue resolution by both inbound and outbound agents. We are now able to generally resolve over 90% of customer technical issues remotely. We continue to offer customers additional choices in managing their services through customer-facing self-service tools via interactive voice response systems and the Internet. In addition, we use a network of external vendors, both domestic and outside of the U.S., to supplement our internal call center resources as needed.
In addition, we use AI virtual agents in our call centers to resolve certain customer issues before being transferred to a live agent. We expect that, over time, this initiative will enhance the efficiency and effectiveness of our call centers.
Our support facilities also provide administrative assistance to our local service offices and customer care centers, which includes scheduling and ordering, drop-shipping, and physically distributing system components for installations.
Sales and Distribution Channels
We utilize a complementary mix of direct and indirect sales and distribution channels:
•Direct Channel
Our direct channel customers are generated by direct response and other marketing efforts, general brand awareness, customer referrals, door-to-door activities, and lead generation partners, and are supported by our internal sales force located in our national sales call centers as well as our nationwide network of field SSOs. In many scenarios, we close the sale of a basic system over the phone and allow our field representatives to augment the system at the time of installation. In other cases, field solution advisors work directly with the customer to select an ideal system. Driven by consumer preferences, we also market to customers through retail and e-commerce channels, including our website, and we have been supplementing existing channels to meet consumers where they prefer to shop.
Our field solution advisors typically undergo an in-depth screening process prior to hire, complete comprehensive centralized training prior to conducting customer sales presentations, and participate in ongoing training in support of new offerings. We generally utilize a highly structured sales approach, which includes a structured model sales call, daily monitoring of sales activity and effectiveness metrics, and regular coaching by our sales management teams.
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•Indirect Channel
Our indirect channel customers are generated mainly through our network of agreements with third-party independent dealers who sell and install equipment and ADT Authorized Dealer-branded monitoring, interactive, and other services to residential end users (the “ADT Authorized Dealer Program”). As opportunities arise, we have in the past and may in the future bulk purchase a set of customer accounts from other third-party security service providers.
As of December 31, 2025, our network consisted of approximately 140 authorized dealers operating across the U.S. Our authorized dealers are contractually obligated to offer exclusively to us all qualified monitored accounts they generate, but we are not obligated to accept these accounts. We pay our authorized dealers for the acquisition of any qualified monitored accounts (referred to as dealer generated customer accounts) we purchase from them. Dealer generated customer account contracts typically have an initial term of three years with automatic renewals for successive 30-day periods, unless canceled by either party. If a purchased account is canceled during the charge-back period, which is generally thirteen months, the dealer is required to refund our payment of the purchase price for the canceled account. In certain instances in which we reject an account, we generally still indirectly provide monitoring services for that account through a monitoring services agreement with the authorized dealer.
Authorized dealers are required to adhere to the same high-quality standards for sales and installation as our own SSOs, and we monitor each authorized dealer’s financial stability, business practices, and sales and installation methods.
Marketing Strategy
We focus on driving revenue by increasing consumer awareness and preference, improving consumer purchasing flexibility, and optimizing our go-to-market approach. To support the growth of our customer base, improve brand awareness, and drive greater market penetration, we consider new customer channels and lead generation methods, explore opportunities to provide branded solutions, and form strategic partnerships and alliances with various third parties.
We strive to optimize our marketing spend through a lead modeling process, whereby we dynamically allocate spend based on lead flow and measured marketing channel effectiveness. We market our offerings through national television, radio, and direct mail advertisements, as well as through Internet advertising, which includes national search engine marketing, email, online video, local search, and social media. We also have several affinity partnerships with organizations that promote our services to their customer bases, and we market through social media influencers and celebrity spokespersons representing the ADT brand. In addition, our other strategic partnerships and alliances include dealers, home builders, property management firms, homeowners’ associations, financial institutions, retailers, first responders, and software service providers.
We leverage AI across marketing and communications functions— from brand governance and AI-powered sales agents to AI-driven content creation and ad platform optimization— to enhance efficiency, personalization, and performance at scale.
OUR MARKET
The residential and small business security and automation market primarily consists of owners and renters of single-family homes or apartments and small business owners. The market is generally characterized by a large and homogeneous customer base with less complex system installations. Many residential and small business customers purchase monitored security and automation services as a result of moving to a new location; a perceived or actual increase in crime or life safety concerns; significant events such as the birth of a child or the opening of a new business; or incentives provided by insurance carriers that may offer lower insurance premium rates if a security system is installed or may require that a system be installed as a condition of coverage.
We also seek opportunities to leverage our brand name, experience in security and smart home solutions, and high degree of trust among our customer base to pursue new customers in complementary markets such as personal on-the-go security and safety. We have seen increased interest in smart home offerings and other mobile technology applications, which we believe is attributable to a variety of factors, including advancements in technology, younger generations of consumers, and shifts to de-urbanization. We believe our strategic initiatives will help us satisfy consumer demands in light of these macro-level dynamics and position us for sustainable growth for years to come.
Our goal is to maximize customer lifetime value by (i) evaluating our pricing and product offerings in relation to our competition; (ii) managing costs and service strategies to provide enhanced value; (iii) upgrading existing customers to our interactive services, internet protocol (“IP”) video solutions, or other upgraded solutions where desirable; and (iv) achieving long customer tenure.
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COMPETITION
Our approach to competition is to emphasize the quality and reputation of our offerings and industry-leading brand, our superior customer service, unique product and service offerings, our network of customer support and monitoring centers, commitment to consumer privacy, and knowledge of customer needs. Success in acquiring new customers depends on a variety of factors such as brand and reputation, market visibility, the ability to identify and sell to prospective customers, offering capabilities, and the quality and prices of our products and services. We are focused on extending our leadership position in the traditional residential and small business security and smart home markets. In addition, we continue to add new features and functionalities to further differentiate our offerings and support a pricing premium. We believe a combination of technology advancements along with a growing customer interest in lifestyle and business productivity solutions will support increasing market penetration.
Traditional residential and small business security markets in the U.S. remain highly competitive and fragmented, with several major companies; many smaller national, local, and regional companies; and an increasing number of new entrants, which is primarily the result of relatively low barriers to entry and the availability of other companies providing outsourced monitoring services. Technology trends and innovation provide new opportunities while also lowering the barriers to entry for automation, interactive, and smart home solutions. As a result, new business models and competitors have and may continue to emerge, including existing companies with large customer bases that may enter the security and automation markets or market similar products and services to our customers. Additionally, we may face additional competition in the DIY space as we work to grow our market share.
We believe our principal competitors are:
•Residential (Pro-installation): SimpliSafe Home Security Systems, Xfinity Home Security (a division of Comcast Corporation), Vivint Smart Home, Inc (a subsidiary of NRG), Brinks Home Security (operating brand of Monitronics International, Inc.)
•Residential (Self-installation): Ring Smart Security System by Amazon, SimpliSafe Home Security Systems, Roku Inc., Arlo Technologies, Inc., Wyze Home Monitoring
•Small Business: Vivint Smart Home, Inc (a subsidiary of NRG), Ring Smart Security System by Amazon, SimpliSafe Home Security Systems
We also compete with point solutions (products with one intended application) and home automation-only systems. In some cases, customers believe that these offerings replace the need for full-scale security systems. Further, third-party installation companies often partner with device providers to offer professional installation alternatives for these point solutions and other DIY systems.
We also face increasing competition from technology companies, telecommunications providers, and smart home platform providers that offer or are developing ambient sensing, presence detection, and related home awareness capabilities. Some of these offerings use wireless signals, network‐based technologies, or other sensing methods to detect activity within the home and may be bundled with broadband, connectivity, or smart home services. While these solutions may differ from our current or future offerings in functionality, integration, and use cases, they may nonetheless compete for customer attention, adoption, and engagement, and could impact demand for certain security and smart home services over time.
In addition, some self-monitored solutions do not require a monthly fee for home automation services, which allows for no-cost alternatives to the professionally monitored, fee-based solutions that we provide. Although self-monitored solutions do not replace the need for professionally monitored solutions, as more features and functionality are built into these self-monitored solutions, the demand for some customers to opt for more expensive, professionally monitored options could be reduced.
We continuously monitor developments in our competitive landscape and assess new market participants, offerings, technologies, and business models to evaluate potential impacts on our operations and strategic positioning.
We believe we are well positioned to compete with traditional and new competitors due to our focus on safety, security, and convenience; our differentiated technology offerings, including our ADT+ platform and Origin AI technologies; our nationwide team of sales consultants; our solid reputation for and expertise in providing reliable security and monitoring services through our in-house network of redundant monitoring centers; our reliable product solutions; our highly skilled installation and service organization; our strategic partnerships; and our commitment to delivering high-quality customer service.
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RESOURCES MATERIAL TO OUR BUSINESS
Materials and Inventory
We purchase equipment and product components from a limited number of suppliers and distributors. To minimize the risk of a disruption from any single supplier, we utilize dual sourcing methods whenever possible. Inventory is held at supplier and distribution partner locations, as well as internal regional distribution centers, at levels we believe are sufficient to meet our current and anticipated needs. We also stock inventory of certain equipment and components at our field offices and in technicians’ vehicles. Third-party distributors generally keep a minimum stocking level of certain key items to have coverage for certain situations such as supply chain disruptions. In addition, we rely on various information technology and telecommunications service providers as part of the functionality and monitoring of our systems.
We continuously monitor global supply chain disruptions, and we do not currently anticipate any major interruptions in our supply chain in the near term, although we continue to monitor the ongoing global memory chip shortage.
Intellectual Property
Patents, trademarks, copyrights, and other proprietary rights are important to our business, and we continuously refine our intellectual property strategy to maintain and improve our competitive position. Where possible and appropriate, we seek to register or patent new intellectual property to protect our ongoing technological innovations and strengthen our brand, and we protect these rights by taking appropriate action against infringements or misappropriations of our intellectual property by others. We review third-party intellectual property rights to help avoid infringement and to identify strategic opportunities. We typically enter into confidentiality agreements to further protect our intellectual property. Patents extend for limited periods of time in the various countries where patent protection is obtained. Trademark rights may potentially extend for longer periods of time and are typically dependent upon the use of the trademarks.
We own a portfolio of patents that relate to a variety of monitored security and automation technologies utilized in our business, including security panels and sensors, video and information management solutions, and our SMART monitoring solution that aims to reduce false alarms and improve response effectiveness. We also own a portfolio of trademarks, including ADT, ADT Pulse, and ADT+. In addition, we are a licensee of intellectual property, including from our third-party suppliers and technology partners.
In February 2026, ADT expanded its intellectual property portfolio through the Origin AI Acquisition. The Origin AI Acquisition added a significant portfolio of patents and patent applications primarily related to AI‐enabled presence detection, ambient sensing, and related analytics technologies to our intellectual property portfolio.
Certain trademarks associated with the ADT brand that we own within the U.S. and Canada are owned outside of the U.S. and Canada by Johnson Controls International PLC (“Johnson Controls”) (as successor to Tyco International Ltd., “Tyco”) pursuant to a trademark agreement entered into between the ADT Corporation and Tyco (the “Tyco Trademark Agreement”). In certain instances, such trademarks are licensed in certain territories outside the U.S. and Canada by Johnson Controls to certain third parties. Pursuant to the Tyco Trademark Agreement entered into between The ADT Corporation and Tyco in connection with the separation of The ADT Corporation from Tyco in 2012, we are generally prohibited from registering, attempting to register, or using the ADT brand outside the U.S. and its territories and Canada. As a result, if we choose to sell products or services or otherwise do business outside the U.S. and Canada, we do not have the right to use the ADT brand to promote our products and services.
In connection with the sale of our Canadian operations in 2019, we entered into a non-competition and non-solicitation agreement with TELUS Corporation (“TELUS”) pursuant to which we will not have any operations in Canada, subject to limited exceptions, for a period of seven years from the date of sale. Additionally, we entered into a patent and trademark license agreement with TELUS granting (i) the use of our patents in Canada for a period of seven years, and (ii) exclusive use of our trademarks in Canada for a period of five years and non-exclusive use for an additional two years thereafter.
In connection with the Commercial Divestiture, we agreed to a covenant not to assert a claim against the Commercial Business for infringement of the Company's patents as of the Commercial Divestiture for products and services that were used in the Commercial Business prior to the Commercial Divestiture, and have provided the Commercial Business with a paid-up, irrevocable, non-assignable (with limited exceptions) license to continue to use certain software and other Company intellectual property in the same manner.
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SEASONALITY
Our residential security and home automation business has historically experienced a certain level of seasonality primarily as a result of fluctuations in the housing market. Since more household moves typically take place during the second and third calendar quarters of each year, our disconnect rate, new customer additions and installation volume, sales and installation revenue, and related cash subscriber acquisition costs are historically higher in these quarters than in the first and fourth calendar quarters. However, other factors such as the level of marketing expense, relevant promotional offers, and timing of third-party account purchases can impact these trends. Further, we may see increased servicing costs or reductions in revenue related to more alarm signals, customer service requests, and customer credits as a result of inclement weather-related incidents.
GOVERNMENT REGULATION AND OTHER REGULATORY MATTERS
Our operations are subject to numerous federal, state, and local laws and regulations related to occupational licensing, building codes, tax, and permitting, as well as consumer protection and privacy, labor and employment, and environmental protection. Changes in laws and regulations can positively and negatively affect our operations and impact the manner in which we conduct our business.
Licensing and Permitting
Most states in which we operate have employee and business licensing laws directed specifically toward sales, installation, and monitoring of security devices. Our business is also subject to requirements, codes, and standards imposed by local government jurisdictions and standards organizations. We maintain the relevant and necessary licenses related to the sale, installation, and monitoring of security systems and related services in the jurisdictions in which we operate.
Additionally, we rely extensively on telecommunications service providers, which are regulated in the U.S. by the Federal Communications Commission (“FCC”), to communicate signals as part of the functionality and monitoring of security systems.
Our security business is subject to various state and local measures aimed at reducing false alarms. Such measures include requiring permits for individual alarm systems, revoking such permits following a specified number of false alarms, imposing fines on customers or alarm monitoring companies for false alarms, limiting the number of times police will respond to alarms at a particular location after a specified number of false alarms, requiring additional verification of an alarm signal before the police respond, or providing no response to residential system alarms.
Consumer Protection and Privacy
Our advertising and sales practices are regulated by the U.S. Federal Trade Commission (“FTC”) and state and consumer protection laws, which include restrictions on the manner in which we promote the sale of our products and services and require us to make certain disclosures regarding recurring charges and cancellation rights. Further, consumer protection laws require us to provide most of our new customers with rescission rights of 3-days or more for new contracts for the purchase of our products and services.
Our collection and use of personal information and communications with current and potential customers are regulated by federal and state laws, which include restrictions on the use of telemarketing, auto-dialing technology, email marketing, and text communications; restrictions on the sale, sharing, and use of personal information; as well as requirements for the protection thereof and actions to be taken in the event of a breach of personal information.
We use credit scoring to qualify our residential customers for certain offers and financing options. The use of credit reporting and scoring and offering financing options to our residential customers is subject to federal and state laws, including the federal Fair Credit Reporting Act, which limit the use of consumer credit reports, prohibit discrimination against protected classes when offering or granting credit, and require certain disclosures to customers in the event that we take an adverse action based on a consumer credit report.
We provide some residential customers the option to pay up-front charges in installments and certain other customers the option of using third-party financing arrangements, all of which are subject to federal and state laws regulating consumer finance. These laws require certain mandatory consumer disclosures and, in some cases, limit our ability to impose certain fees and charges. In addition, some jurisdictions require us to register or obtain licenses in order to make installment contract or third-party financing options available to our customers. While these offerings are currently only for certain residential customers, we may in the future have similar offerings for our small business customers.
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Labor and Employment
Our operations are subject to regulation under the U.S. Occupational Safety and Health Act (“OSHA”) and equivalent state laws. Failure to comply with applicable OSHA regulations or other federal, state, and local laws and regulations, even if no work-related serious injury or death occurs, may result in civil or criminal enforcement and substantial penalties, significant capital expenditures, or suspension, or limitation of operations.
Additionally, in certain jurisdictions, we must obtain licenses or permits to comply with standards governing employee selection, training, and business conduct.
Environmental Protection
We continue to monitor emerging developments regarding environmental protection laws. At this time, we do not believe that federal, state, and local laws and regulations relating to the discharge of materials into the environment, or otherwise relating to the protection of the environment, or any existing or pending climate change legislation, regulation, or international treaties or accords are reasonably likely to have a material adverse effect on our business.
We are, or may become, subject to various climate disclosure regimes regulating the disclosure of greenhouse gas emissions, climate-related risks and opportunities and related information, such as California’s Climate Corporate Data Accountability Act (also known as “SB 253”) and Climate Related Financial Risk Act (also known as “SB 261”). The interpretation, timing, requirements and enforcement of such climate disclosure regime remains uncertain, and compliance may require the investment of significant resources, increase our costs, disrupt our business operations and pose reputational and other risks.
For additional information, see Part I, Item 1A, “Risk Factors” – “If we fail to establish and achieve the objectives of our sustainability program, or if we fail to report on such sustainability matters, consistent with investor, customer, employee, or other stakeholder expectations, and in compliance with changing legal and regulatory requirements, we may not be viewed as an attractive investment, service provider, workplace, or business, which could have a negative effect on the Company.”
Artificial Intelligence
The recent rapid development and use of AI, including generative AI, has resulted in increased scrutiny by state and federal governments in the U.S. We are closely monitoring laws regulating the development and deployment of AI and similar technologies at the state and federal level and assessing their potential impact on our current, planned, and potential use of AI in our business. At this time, we do not believe that federal, state, and local laws and regulations relating to the use of AI have a material adverse effect on our business. However, developments in AI technology and laws and regulations affecting how we propose to use AI may limit or restrict our ability to use such technology.
We have implemented AI solutions for various customer interactions to improve service quality and response times and continue to explore opportunities to improve customer interactions with the use of AI. We are also exploring how we can use AI in our product and service offerings to expand our capabilities and drive efficiencies.
HUMAN CAPITAL AND WORKPLACE INITIATIVES
Human Capital Management
As of December 31, 2025, we employed approximately 12,200 people, including approximately 1,600 direct field solution advisors; 3,100 installation and service technicians; 4,000 customer care professionals; and 700 phone sales representatives.
Approximately 7% of our employees are covered by collective bargaining agreements; and we believe our relations with our employees and labor unions have generally been positive.
Culture and Talent Strategy
We are committed to building a culture where every team member feels valued and empowered to collaborate, contribute to our shared success, and achieve their own career goals. Our guiding principles, represented by the acronym BLUE (Bold, Lead, Unite, and Elevate), encourage us to work together with purpose and passion.
Our ability to attract, retain, and develop a strong, dedicated, and diverse workforce is critical to our success. This depends on hiring and retaining top talent across the organization, particularly within senior management, technology, product development teams, and customer-facing roles. Employees receive frequent performance coaching and feedback to help them stay focused on key business priorities and growth opportunities.
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Our compensation programs are designed to reward and differentiate high performance through merit pay, as well as annual and long-term incentive plans, subject to team member eligibility. We offer our employees competitive compensation, benefits, and health and wellness programs, as well as training, networking, development resources, coaching, and performance feedback. In addition, our long-term equity compensation plans are intended to align management interests with those of our stockholders and to encourage the creation of long-term value.
We gather feedback and sentiment throughout the employee experience. Our annual sentiment survey, which was completed by approximately three-fourths of employees, showed favorable improvements in 13 of 14 categories. Our annual leadership talent management review evaluates both performance and potential and includes succession planning for all Executive Leadership Team (“ELT”) positions.
Inclusivity and Belonging
We are committed to fostering a culture of inclusivity and belonging and to continuously enhancing the effectiveness of our practices in order to drive innovation and growth. We define diversity broadly to encompass a wide range of backgrounds, experiences, perspectives, abilities, values, and expertise, among others. We integrate diversity and inclusion into every stage of the talent lifecycle, from recruitment and hiring through learning, development, advancement, and retention, with the goal of attracting and supporting individuals with varied backgrounds and experiences. We value the diversity and experiences of our employees and are committed to fostering an inclusive environment that provides equal opportunities to all throughout our talent management processes.
Our Inclusive Diversity and Belonging Operating Team (the “IDB Team”) and its ten Business Employee Resource Groups (“BERGs”) are central to advancing our inclusivity initiatives. The IDB Team is a diverse group of business leaders from across the organization, including executive and senior management, dedicated to continuously improving our inclusivity practices and effectiveness. Our commitment to inclusion is embedded in our cultural markers, reinforcing our goal of creating a collaborative and supportive environment for all of our employees.
BERGs provide employees opportunities for collaboration through learning, networking, volunteer projects, and mentoring, and are central to the engagement, development, and retention of our employees. Our BERGs also participate in various business initiatives. Executives and officers across the Company actively support BERG programs by leveraging their time, networks, and resources. As part of the ADT Safe Places program, each BERG receives a modest budget to donate to nonprofit organizations aligned with its mission and corporate social responsibility goals.
Employee Well-being, Health, and Safety
We devote significant resources to employees’ wellness, health, and safety. Our annual ADT Balance program offers employees biometric screenings, fitness challenges, webinars, group coaching, and various self-guided resources. We support our employees’ health and productivity through discounts on medical plan contributions for completing an annual preventative exam and an online health assessment, as well as cash incentives on other well-being activities. We also support our employees through financial well-being programs with personalized guidance from professionals with tax preparation, identity protection, and mortgage referral programs.
Our Environmental, Health, and Safety (“EHS”) vision is to create a culture in which safe behaviors are practiced on every task, every day, aiming for zero incidents, promoting employee wellness, and reducing our environmental impact. To achieve this vision, we embed our core values—people, prevention, and accountability—into all aspects of our business. We prioritize compliance with all applicable EHS requirements and believe that all occupational injuries and illnesses, as well as environmental incidents, are generally preventable. For example, our fleet safety initiatives include installing and maintaining collision warning and auto-braking technologies on our vehicles, as well as the use of in‐vehicle camera systems designed to promote safe driving practices. Our EHS management system sets expectations for compliance, accountability, sustainability, and continuous improvement. It supports a safety-focused culture that enables our employees to minimize risk; understand and follow safety rules; and identify, avoid, and correct unsafe actions, behaviors, or situations.
Corporate Governance
We prioritize strong corporate governance as the foundation for financial integrity and superior performance. Our Board of Directors oversees our strategic direction and governance and approves the operating values reflected in our Code of Conduct (the “Code”).
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We are committed to ensuring that all ADT employees uphold our core values of trust, collaboration, service, and innovation. This commitment is reflected in our Code, which defines our responsibilities to customers, investors, communities, and one another. The Code outlines employee expectations and helps foster a culture of integrity. We adhere to the governance requirements established by federal and state law, the SEC, and the NYSE; and we strive to establish appropriate risk management methods and control procedures to adequately manage and monitor major risks.
Additional information about our corporate responsibility priorities and approach and related reports are available on our website. The contents of our website and these reports are referenced for general information only and are not incorporated into this Annual Report.
Social Responsibility
ADT’s Corporate Social Responsibility (CSR) strategy is designed to align with our mission of helping protect and connect what matters most. Through our flagship program, ADT Safe Places, we focus on supporting high-impact, mission-aligned organizations that advance community safety and resilience. Our approach combines financial contributions, employee volunteerism, and in-kind donations of smart security systems to create measurable impact.
Environmental Impact
We are dedicated to reducing our environmental impact by fostering a culture of environmental stewardship and continuously working to reduce our carbon footprint. We also assess environmental risk on our operations as one aspect of our enterprise risk management review process and plan to continue to do so on an ongoing basis. We have implemented our ADT Environmental Absolutes framework, which represents our focus on complying with applicable environmental requirements, addressing proper disposal of waste streams, and promoting recycling of materials. We employ waste recycling and diversion programs and continue to monitor waste levels and reduce unnecessary trash hauls. We also continually explore methods to reduce greenhouse gases from our motor vehicle fleet, including through the purchase of newer vehicle models having greater fuel efficiency, the use of hybrid vehicles, and our Remote Assistance Program that reduces truck rolls. In addition, we have focused on efficiency improvements in lighting, air handling, and data operations as well as through the utilization of renewable energy while continuing to rationalize our real estate portfolio.
AVAILABLE INFORMATION
Availability of SEC Reports
Our website is located at https://www.adt.com. Our investor relations website is located at https://investor.adt.com. We make available free of charge on our investor relations website under “Financials” our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, reports filed pursuant to Section 16 of the Securities Exchange Act of 1934 (the “Exchange Act”), other SEC filings, and any amendments to those reports that are filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file or furnish such materials to the SEC. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding our filings at http://www.sec.gov.
Use of Website to Provide Information
From time to time, we have used, and expect in the future to use, our website as a means of disclosing material information to the public in a broad, non-exclusionary manner, including for purposes of the SEC’s Regulation Fair Disclosure (“Reg FD”). Financial and other material information regarding the Company is routinely posted on our website and accessible at https://investor.adt.com. In order to receive notifications regarding new postings to our website, investors are encouraged to enroll on our website to receive automatic email alerts. None of the information on our website is incorporated into this Annual Report.
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ITEM 1A. RISK FACTORS.
In addition to risks and uncertainties in the ordinary course of business that are common to all businesses, important factors that are specific to our industry and the Company could have a material adverse effect on our business, financial condition, results of operations, and cash flows. You should carefully consider the risks described below and in our subsequent periodic filings with the SEC. The following risk factors should be read in conjunction with Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes in this Annual Report.
Risks Related to Our Products and Services
Our growth is dependent upon our ability to keep pace with rapid technological and industry changes through a combination of partnerships with third parties, internal development, and acquisitions, in order to obtain and maintain new technologies for our products and service introductions that achieve market acceptance with acceptable margins.
Our business operates in markets that are characterized by rapidly changing technologies, evolving industry standards, potential new entrants, and changes in customer needs and expectations. Accordingly, our future success depends in part on our ability to accomplish the following: identify emerging technological trends in our target end-markets; develop, acquire, and maintain competitive products and services that capitalize on existing and emerging trends; enhance our existing products and services by adding innovative features on a timely and cost-effective basis that differentiates us from our competitors; incorporate popular third-party interactive products and services into our product and service offerings; sufficiently capture and protect intellectual property rights in new inventions and other innovations; and develop or acquire and bring products and services, including enhancements, to market quickly and cost-effectively.
Our ability to develop, alone or with third parties, or to acquire new products and services that are technologically innovative requires the investment of significant resources and can affect our competitive position or financial condition. In addition, the dynamic nature of these changes requires that we simultaneously engage in significant technological development efforts across our operations, including platform development, sales, marketing, customer care, customer self-service, remote assistance, billing, and other substantive and administrative functions. Upgrading and implementing changes to any one of our systems presents challenges, including potential interruptions to system operations as changes are made, which could disrupt or reduce their efficiency in the short term and temporarily affect the quality or availability of the products and services offered to customers. Moreover, the age of our systems and architecture may present unique challenges that we have not previously encountered as we undertake these developmental efforts simultaneously across our operations. These system updates and development efforts divert resources from other potential investments in our businesses, and they may not lead to the development of new commercially successful technologies, products, or services on a timely basis.
From time to time, we enter into strategic partnerships with third parties to broaden and develop our offerings and marketing efforts. These strategic partnerships may require us to undertake significant commitments and make substantial expenditures and there can be no assurance that the expected benefits from these partnerships will be realized. For example, in July 2020, we entered into the Google Commercial Agreement, pursuant to which Google agreed to supply us with certain Google Devices and Services for sale to our customers. We have agreed until November 2030, with certain exceptions and subject to customary termination rights related to breach and change of control, to exclusively provide or sell those Google Devices and Services to our DIFM customers, although Google can sell the same or similar devices to our competitors who may more successfully commercialize products or services that compete with ours, thereby materially harming our business. Given this exclusivity arrangement with Google, if Google fails to perform or to provide Google Devices and Services that continually meet the demands of our DIFM customers, or fails to provide continued innovation, management, and investment in their relevant product businesses, or if we fail to provide or sell the Google Devices and Services that Google provides, or if we fail to develop products and services with Google that our customers find desirable, all in a timely manner, or if Google were to begin offering security products or services that compete with ours, our business, financial condition, results of operations, and cash flows could be materially, adversely impacted. Product introductions and the timing of such integration are focused on customer experience and are mutually agreed upon.
We launched our proprietary ADT-owned next-generation professional security and automation technology platform in 2023 as ADT+. Our ADT+ platform is intended to provide customers with a seamless experience across security, life safety, automation, and analytics through a common application that integrates the user experience, the customer service experience, and back-end support. Our systems, including the ADT+ platform, may contain defects, bugs, security vulnerabilities, performance degradation, or integration issues (including with third-party devices, operating systems, and cloud services) that could cause service interruptions, impaired functionality, or a negative customer experience, and we may not achieve a successful continued rollout of the ADT+ platform, and new platform features, in a timely manner, within budget, or in a manner that enables the commercialization of products and services that meet the continually evolving demands of our
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customers, any of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows. Additionally, our DIY offerings rely heavily on digital customer journeys and our ability to deliver a consistent and reliable end-to-end experience through our platforms, mobile applications, and distribution and fulfillment capabilities. Any delays, defects, outages, or implementation challenges across these systems could negatively affect customer adoption and retention. As we continue to commercialize products based upon our interactive platform, we have adjusted processes for reviewing and securing intellectual property rights. Nevertheless, we have been, and in the future may become, the target of additional lawsuits alleging that we have infringed the patents or technology of third parties. Regardless of the merits of these lawsuits and any steps we take to mitigate infringement risk, any allegations could cause us to incur significant costs to defend and resolve, and could harm our business and reputation, any of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Any new or enhanced products and services that we develop alone or pursuant to existing or new agreements with third parties may not satisfy customer preferences or our expectations, and potential product failures may cause customers to reject our products and services. As a result, these products and services may not achieve market acceptance, and our brand image could suffer. In addition, our competitors may introduce superior products or business strategies, impairing our brand and the desirability of our products and services, which may cause customers to defer or forego purchases of our products and services, or to decline to enter into new monthly installment contracts or to cancel or fail to renew existing contracts. If our competitors implement new technologies before we can implement them, those competitors may be able to provide more effective products than ours, possibly at lower prices, and experience higher adoption rates and popularity. Any delay or failure in the introduction of new or enhanced solutions could harm our business, financial condition, results of operations, and cash flows. In addition, the markets for our products and services may not develop or grow as we anticipate, and any changes in our go-to-market approach may not be seen as favorable by customers. The failure of our technology, products, or services to gain market acceptance, the potential for product defects, or the obsolescence of our products and services could significantly reduce our revenue, increase our operating costs, or otherwise materially adversely affect our business, financial condition, results of operations, and cash flows. Further, our ability to realize the anticipated benefits of certain technology initiatives may depend on the successful completion and integration of potential acquisitions, which are subject to uncertainty and risk.
On February 20, 2026, we acquired Origin AI, a provider of AI-enabled presence detection and ambient sensing technology. Origin AI’s technology uses artificial intelligence and radio frequency signals to detect and classify human presence and activity within the home without the use of cameras, audio, or wearable devices. This technology is expected to enhance our ability to deliver improved alarm verification, reduce false alarms, and support new intelligent security and smart home use cases over time. In connection with our acquisition of Origin AI, we face risks related to the integration, development, and commercialization of Origin AI’s technology. Origin AI’s AI‐enabled presence detection and ambient sensing technology is relatively new and may require additional development, testing, and integration with our existing platforms and offerings. We may experience challenges integrating Origin AI’s technology, personnel, and operations into our business, or may be unable to achieve the anticipated benefits of the acquisition within the expected timeframes or at all. In addition, the successful commercialization of Origin AI’s technology depends on customer adoption, evolving regulatory and industry standards applicable to artificial intelligence and wireless technologies, and our ability to effectively incorporate these capabilities into our products and services. Failure to successfully integrate or commercialize Origin AI’s technology could adversely affect our business, results of operations, and financial condition.
As we continue to develop our ADT+ platform and integrate our ambient sensing technologies, we face inherent risks associated with a “software-as-a-product” model. Unforeseen software bugs, technical glitches, or latency in our cloud infrastructure could disrupt primary security and life-safety functions. Such failures could lead to significant reputational harm, customer dissatisfaction, and potential liability if a system fails to perform as intended.
The home security and automation markets in which we sell our products and services are highly competitive, and many companies, including large technology companies and other service providers have significant resources and established customer bases, which may result in pressure on our profit margins and limit our ability to maintain or increase the market share of our products and services.
We experience significant competitive pressure in both the DIFM and DIY spaces. The monitored security industry is highly fragmented and subject to significant competition and pricing pressures. We experience significant competitive pricing pressures in the DIFM space on installation, monitoring, and service fees. Several competitors offer comparable or lower installation and monitoring fees, and others may charge significantly more for installation, but in many cases, less for monitoring. We also face competition in the DIY space from companies such as SimpliSafe, Wyze Home Monitoring, and Amazon Ring, which enable customers to self-monitor and control their environments without third-party involvement through the Internet, text messages, emails, or similar communications. Our strategic expansion into traditional retail and e-commerce (“e-tail”) channels to grow our DIY market share introduces significant execution and margin risks. Entry into these high-volume consumer channels requires us to compete directly with established global consumer electronics brands that may have greater scale or lower cost structures. This shift may result in lower unit margins compared to our traditional professional installation model. Some DIY providers may also offer professional monitoring with the purchase of their systems and equipment without a contractual commitment, or offer new Internet of Things (“IoT”) devices and services with automated features and capabilities, which may be appealing to customers and put us at a competitive disadvantage. In addition, certain
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DIY providers have a significantly broader customer base and product offering than us, allowing them to cross-subsidize their offerings through their other product offerings and cross-sell interactive and security solutions that are competitive with our offerings to customers who are loyal to the competitor’s brand. Continuing expansion in customers’ options to choose systems that they can in part or fully install could increase our attrition rates over time and the risk of accelerated amortization of customer contracts resulting from a declining customer base.
In addition, cable, telecommunications, and large technology companies have expanded into the home automation and monitored security industry and are bundling their existing offerings with interactive and monitored security services, often at lower monthly monitoring rates. These companies: (i) may have existing access to and relationships with customers, as well as highly recognized brands, which may drive increased awareness of their security/automation offerings relative to ours; (ii) may have access to greater capital and resources than us; and (iii) may spend significantly more on technology development, advertising, marketing, and promotional resources, as well as the acquisition of other companies with home automation solution offerings, any of which could have a material adverse effect on our ability to drive awareness and demand for our products and services. We may also face competition for direct sales from our independent, third-party authorized dealers, who may offer installation in particular markets for considerably less than we do.
Additionally, one or more of our competitors either in the DIFM or DIY space could develop a significant technological advantage over us, allowing them to provide additional or better-quality service or lower prices, which could put us at a competitive disadvantage. Continued pricing pressure, technology developments or improvements, including the use of artificial intelligence, competitor brand loyalty, and continuing shifts in customer preferences toward self-monitoring and DIY could adversely impact our customer base, revenue, and/or pricing structure and have a material adverse effect on our business, financial condition, results of operations, and cash flows. Aggressive pricing strategies adopted by our competitors could cause us to lose market share, reduce our prices, and add significant pressure on our cost structure.
In addition, in connection with our continued rollout of Google Nest products, and as our pricing model becomes more transparent to consumers and we offer more optionality with tiered pricing and pricing disaggregation as compared to our current pricing model, our competitors may be better able to underprice us in the marketplace and our customers and potential customers may determine they can achieve a lower cost solution or higher value with an alternative provider. Changes in the transparency of our pricing may also result in new customers selecting lower cost solutions than they otherwise would have and our existing customers switching to our lower cost solutions or demanding that we lower the cost of their existing solutions, which could impact our revenue and profitability.
Furthermore, the new smart home communication protocol Matter launched in 2022, with new Matter-compatible products already available. The project group was launched and introduced by Amazon, Apple, Google, Comcast, and others, with about 280 members currently in the working group, including ADT. The goal of Matter is to make all smart home devices interoperable which presents risks for our smart home offerings because interoperable smart home offerings make it easier and less costly for consumers to switch providers, making it more difficult for ADT to retain existing subscribers.
If the insurance industry changes its practice of providing incentives to homeowners for the use of alarm monitoring services, we may experience a reduction in new customer growth or an increase in our customer attrition rate.
It has been common practice in the insurance industry to provide a reduction in rates for consumer policies written on homes that have monitored security systems. This practice benefits our business, as it makes our products more attractive and benefits customer retention, However, there can be no assurance that insurance companies will continue to offer these rate reductions.
If these incentives are reduced or eliminated, new homeowners who otherwise might not feel the need for monitored security services would have to be acquired through our standard sales and marketing processes, which could be at a higher cost of acquisition, and existing customers may choose to disconnect or not renew their service contracts, which could increase our attrition rates. In addition, other insurance companies may offer rate reduction policies that favor our competitors’ customers or may otherwise modify their practices in detriment of our customers. In each case, our growth prospects and our business, financial condition, results of operations, and cash flows could be materially adversely affected.
The retirement of older technologies, development of new technologies incompatible with our existing offerings, and limitations on our customers’ options of telecommunications and broadband services and equipment could materially adversely affect our business, increase customer attrition, and require significant capital expenditures.
Certain elements of our operating model have historically relied on our customers’ continued selection and use of traditional copper wireline telecommunications service to transmit alarm signals to our monitoring centers. There is a growing trend for customers to switch to the exclusive use of cellular or IP-based technology in their homes and businesses, as telecommunication providers discontinue their copper wireline services in favor of IP-based technology. Some of our customers’ security systems rely on technology that is not operable with newer cellular or IP-based networks, and as such, will not transmit alarm signals on these networks. The discontinuation of copper landline services, older cellular technologies, and other services by
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telecommunications providers, as well as the switch by customers to the exclusive use of cellular or IP-based technology, may require system upgrades to alternative, and potentially more expensive, alarm systems to function and transmit alarm signals properly, which could increase our customer revenue attrition. Additionally, any telecommunications technology upgrades or implementations could also result in significant additional costs and divert management and other resource attention away from customer service and sales efforts for new customers. In the future, we may not be able to successfully implement new telecommunications technologies or adapt existing telecommunications technologies to changing market demands.
For example, between 2022 and 2023, major U.S. 3G cellular networks were retired, resulting in a loss of signal to legacy systems that relied on 3G communications. Of our customers impacted by these retirements, we transitioned, or provided our customers with the means to transition, all but a relatively small number of customer accounts. None of these remaining customers have responded to our multiple requests to upgrade their systems and therefore we could not transition them prior to the relevant transition dates. A failure to effectively transition these remaining customers away from retired networks will result in a loss of signal to the systems and certain services we provide, which may impact our ability to bill and collect for services provided. Implementation of additional service charges in connection with these transitions may cause customers to view such charges unfavorably, which could increase our customer attrition.
If we are unable to upgrade cellular equipment at customer sites to meet future carrier network standards or to respond to other changes carriers are making or may make to their networks in a timely and cost-effective manner, whether due to an insufficient supply of electronic components or parts, an insufficient skilled labor force, or due to any other reason, or if we are sued by one or more customers due to our inability to provide certain services, or due to any loss incurred while we are not able to provide certain services, or due to any continuous billing for services after a prior or future transition date, our business, financial condition, results of operations, and cash flows, could be materially adversely affected. We have also become aware that one or more telecom carriers are beginning the process to retire their time-division multiplexing (“TDM”) nodes that service toll-free numbers, which could require us to further upgrade certain of our customer equipment.
Furthermore, a majority of our existing subscriber base uses legacy systems, such as ADT Pulse or non-interactive legacy burglar alarm systems, and associated hardware that are nearing or have reached the end of their supported lifecycles. Our ability to continue supporting these systems is subject to significant risk, particularly where we depend on third-party providers for software or hardware support, system updates, and bug fixes. Should these third parties designate systems as “end-of-life” or otherwise cease support, we could be forced to assume substantial costs to maintain these systems independently or accelerate their retirement. Additionally, as legacy hardware becomes obsolete, it may become susceptible to unpatchable security vulnerabilities or suffer from a lack of available replacement parts. These legacy systems are also incompatible with our ADT+ platform and features, including our planned ambient intelligence development through our acquisition of Origin AI. Migrating these subscribers to the ADT+ platform would require significant capital investment or customer-funded hardware upgrades. These customers may be at higher risk of attrition as they become more susceptible to competitors offering additional features and newer hardware at lower entry prices. If we are unable to adapt in a timely and cost-effective manner to technological obsolescence and changing technologies or customer preferences, our business, financial condition, results of operations, and cash flows could be materially adversely affected.
In addition, we use broadband Internet access service to support our product offerings, such as video monitoring and surveillance, and as a communications option for alarm monitoring and other services. Broadband connectivity is also a current requirement for our proprietary Wi-Fi sensing and ambient intelligence capabilities acquired through Origin AI. While these features are not yet commercially deployed to our ADT+ platform, our ability to successfully enable and maintain future ambient sensing functionalities, including human presence detection and activity classification, may depend on the continued availability of high-speed, reliable broadband service. Video monitoring and surveillance services, and Wi-Fi sensing, use and require significant bandwidth. As use rates and penetration of these services increase, the need for increased network capacity may necessitate additional steps or costs (such as upgrading broadband equipment or service tiers) for our customers, or additional capital or operational expenditures for us, to enable a seamless experience for our customers and avoid service disruptions. Further, if our customers continue to transition from traditional broadband Internet access services to fixed mobile Internet access services, they may encounter data limits which could negatively impact their use of video monitoring and surveillance, or future Wi-Fi sensing services, any of which could materially adversely impact our business, financial condition, results of operations, and cash flows.
Police and fire departments could refuse to respond to calls from monitored security service companies, which could damage consumer trust and confidence in our solutions and may damage our ability to attract and retain customers.
Police departments in certain jurisdictions do not respond to calls from monitored security service companies unless certain conditions are met, such as video or other verification or eyewitness accounts of suspicious activities, either as a matter of policy or by local ordinance. We offer video verification or the option to receive a response from private guard companies in certain jurisdictions, which increases the cost of some security systems and may increase the cost to customers. If additional police and fire departments refuse to respond or are prohibited from responding to calls from monitored security service
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companies unless certain conditions, such as those mentioned above, are met, consumer trust and confidence in our solutions may be damaged and our ability to attract and retain customers could be negatively impacted, and our business, financial condition, results of operations, and cash flows could be materially adversely affected.
Our reputation as a service provider of high-quality security offerings may be materially adversely affected by product defects or shortfalls in customer service.
Our business depends on our reputation and ability to maintain good relationships with our customers, dealers, suppliers, and local regulators, among others. Our reputation may be harmed either through product defects, such as the failure of one or more of our customers’ alarm systems, or shortfalls in customer service. Customers generally judge our performance through their interactions with staff at our monitoring and customer care centers, dealers, and field installation and service technicians, as well as their day-to-day interactions with our products and mobile applications. These interactions may also generate reviews and social media posts, including negative ones, that draw additional attention to our customer service. Any failure to meet customers’ expectations in such customer service areas could harm our reputation or customer relationships and cause an increase in attrition rates or make it difficult to obtain new customers or otherwise have a material adverse effect on our business, financial condition, results of operations, and cash flows.
In addition, we have attempted to control the operating costs of certain of our customer care operations using lower cost labor in certain foreign countries that may be subject to relatively higher degrees of political and social instability and may lack the infrastructure to withstand political unrest or natural disasters. The occurrence of natural disasters, pandemics, political or economic instability, or other activities in such countries has resulted in and, in the future could result in, the sudden and continued closure of operations that in turn have caused and, in the future could cause, disruptions in our operations and a failure to maintain our existing level and quality of customer care. The practice of utilizing labor based in foreign countries has come under increased scrutiny in the United States. Governmental authorities could seek to limit or penalize our operations, and our customers may not value the services provided by such operations. In addition, we are subject to applicable anti-corruption laws and regulations, such as The Foreign Corrupt Practices Act, that prohibit certain types of payments and which could expose us to significant penalties, fines, settlements, costs and consent orders that may curtail or restrict our business. Any such outcome could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Unauthorized use of our brand names by third parties, and the expenses incurred in developing and preserving the value of our brand names, may materially adversely affect our business.
Our brand names are critical to our success. Unauthorized use of our brand names by third parties may materially adversely affect our business and reputation, including the perceived quality and reliability of our products and services, as well as brand loyalty. We rely on trademark law, company brand name protection policies, and agreements with our employees, customers, business partners, and others to protect the value of our brand names. Despite our precautions, we cannot provide assurance that those procedures are sufficient to protect against unauthorized third-party use of our brand names. Various third parties have used, and may continue to use, our brand names to engage in fraudulent activities, including unauthorized telemarketing conducted in our names to induce our existing customers to switch to competing monitoring service providers, lead generation activities for competitors, and obtaining personally identifiable or personal financial information. Third parties sometimes use our names and trademarks, or other confusingly similar variations thereof, in other unauthorized contexts that may impact our brands. We may not be successful in detecting, investigating, preventing, or prosecuting all unauthorized third-party use of our brand names. Future litigation with respect to such unauthorized use could also result in substantial costs and diversion of our resources. These factors could materially adversely affect our reputation, business, financial condition, results of operations, and cash flows.
Third parties hold rights to certain of our key brand names, which could prevent us from being able to adequately protect our brands or expand into other markets.
Our success depends in part on our continued ability to use trademarks to capitalize on our brands’ name recognition and to further develop our brands in the U.S., as well as in other international markets should we choose to expand and grow our business outside of the U.S. in the future. Not all the trademarks that are used by our brands have been registered in all of the countries in which we may do business in the future, and some trademarks may never be registered in any or all of these countries. Rights in trademarks are generally territorial in nature and are obtained on a country-by-country basis by the first person to obtain protection through use or registration in that country in connection with specified products and services. Some countries’ laws do not protect unregistered trademarks at all or make them more difficult to enforce; and third parties may have filed for “ADT” or marks similar to our blue octagon logo in countries where we have not registered these brands as trademarks. Accordingly, we may not be able to adequately protect our brands everywhere in the world and use of such brands may result in liability for trademark infringement, trademark dilution, or unfair competition.
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For example, certain trademarks associated with the ADT brand, including “ADT” and the blue octagon, are owned in all territories outside of the U.S. and Canada by Johnson Controls, which acquired and merged with and into Tyco. In certain instances, such trademarks are licensed in certain territories outside the U.S. and Canada by Johnson Controls to third parties. Pursuant to a trademark agreement entered into between The ADT Corporation and Tyco (the “Tyco Trademark Agreement”) in connection with the separation of The ADT Corporation from Tyco in 2012, which endures in perpetuity, we are prohibited from ever registering, attempting to register or using such trademarks outside the U.S. (including Puerto Rico and the U.S. Virgin Islands) and Canada, and we may not challenge Tyco’s rights in such trademarks outside the U.S. and Canada. Additionally, under the Tyco Trademark Agreement, we and Tyco each have the right to propose new secondary source indicators (e.g., “Pulse”) to become designated source indicators of such party. To qualify as a designated source indicator, certain specified criteria must be met, including that the indicator has not been used as a material indicator by the non-proposing party or its affiliates over the previous seven years. If we are unable to object to Tyco’s proposal for a new designated source indicator by successfully asserting that the new indicator did not meet the requisite criteria, we would subsequently be precluded from using, registering, or attempting to register such indicator in any jurisdiction, including the U.S. and Canada, whether alone or in connection with an ADT brand. Any dilution, infringement, or customer confusion with respect to our brand or use of trade names, or the inability to use such names as we expand our existing and create new strategic relationships, could materially adversely affect our reputation, business, financial condition, results of operations, and cash flows.
In addition, in November 2019, we sold all our shares of ADT Canada to TELUS and, among other things, entered into a non-competition and non-solicitation agreement with TELUS pursuant to which we agreed not to directly or indirectly engage in a business competitive with ADT Canada, subject to limited exceptions, for a period of seven years. In connection with our sale of ADT Canada, we also entered into a patent and trademark license agreement with TELUS granting them (i) the use of our patents in Canada for a period of seven years and (ii) the exclusive rights to use our trademarks in Canada for a period of five years followed by non-exclusive use of our trademarks for an additional two years.
In addition, in October 2023, we completed the sale of our Commercial Business, and among other things, entered into a covenant agreement not to assert a claim against GTCR for infringement of the Company's patents as of the Commercial Divestiture for products and services that were used in the Commercial Business prior to the Commercial Divestiture, and provided GTCR with a paid-up, irrevocable, non-assignable (with limited exceptions) license to continue to use certain software and other Company intellectual property in the same manner.
Any violation by TELUS or GTCR of our agreements with them, or their misuse of our intellectual property or behavior by TELUS or GTCR in a manner that reflects poorly on us because of their use of our intellectual property could damage our brand and reputation and have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Risks Related to Our Operations
We rely on a significant number of our customers remaining with us as customers for long periods of time, and if our attrition rates rise significantly, our profitability, business, financial condition, results of operations, and cash flows could be materially adversely affected.
New customers require an upfront investment, and we generally achieve revenue break-even in less than two and a half years. Accordingly, our long-term profitability is dependent on long customer tenure. This requires that we minimize our rate of customer disconnects, or attrition, which can increase as a result of factors such as customer relocations, problems with our product or service quality, customer service challenges, increased interoperability of smart home devices now or in the future, customer non-payment, unfavorable general economic conditions, and the preference for lower pricing of competitors’ products and services over ours. If attrition rates were to rise significantly, we may be required to accelerate the depreciation and amortization expense for, or to impair, certain of our assets, including with respect to subscriber and customer relationships, which would cause a material adverse effect on our financial condition and results of operations. In addition, if we fail to keep our customers for a sufficient period of time, or our attrition rates increase, our profitability, business, financial condition, results of operations, and cash flows could be materially adversely affected.
Delays, costs, and disruptions that result from upgrading, integrating, and maintaining the security of our information and technology networks and systems could materially adversely affect us.
We are dependent on the capacity, reliability, and security of information technology networks and systems, including Internet and Internet-based or “cloud” computing services and the relevant personnel who operate those systems, to collect, process, transmit, and store electronic information. We have completed a significant number of acquisitions of companies that operate different technology platforms and systems. We routinely implement modifications and upgrades to our existing information technology systems to keep up with changing technology and business demands. Aiming to provide a seamless customer
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experience, we are also integrating systems from our various bulk account acquisitions, making changes to legacy systems, replacing legacy systems with successor systems with new functionality, and implementing new systems.
The dynamic nature of these and other changes we are undertaking require that we simultaneously engage in significant technology development efforts across our operations, including platform development, sales, marketing, customer care, customer self-service, remote assistance, billing, and other substantive and administrative functions. Upgrading and implementing changes to our systems have presented, and could continue to present, challenges. Any delay in making such changes or replacements or in purchasing new systems could have a material adverse effect on our business, financial condition, results of operations, and cash flows. There are inherent costs and risks associated with integrating, replacing, and changing these systems and implementing new systems, including potential disruptions in our sales, operations, and customer service functions which may reduce their efficiency in the short term; loss of customers’ confidential or other information; potential negative reception from customers; potential disruption of our internal control structure; substantial capital expenditures; additional administration and operating expenses; retention of sufficiently skilled personnel to integrate, implement, and operate the new systems and an increase in human capital costs; the use of third-party personnel resources, including offshore vendors, to supplement our internal personnel demands; demands on management time; challenges securing our systems along with dependent processes from cybersecurity threats; and other risks and costs of delays or difficulties in transitioning to new systems or of integrating new systems into our current systems.
If we do not effectively implement our plans to migrate our technology infrastructure to the cloud, we could experience significant disruptions in our operations, which could have a material adverse effect on our results of operations and financial condition.
We are in the process of migrating our technology infrastructure to the cloud. This initiative is a major undertaking as we migrate and reconfigure our current system processes, transactions, data and controls to new cloud-based platforms. This transition could have a significant impact on our business processes, financial reporting, information systems, and internal controls.
As we transition our technology infrastructure to the cloud, we may need to divert resources, including management attention, away from other important business operations. Additionally, we may experience difficulties as we manage these changes and transition our technology infrastructure to the cloud, including loss or corruption of data, interruptions in service and downtime, increased cyber threats and activity, delayed financial reporting, unanticipated expenses including increased costs of implementation and of conducting business, and lost revenue. Although we conduct design validations and user testing, these may cause delays in transacting our business due to system challenges, limitations in functionality, inadequate management or process deficiencies in the development and use of our systems. Difficulties in implementing or an inability to effectively implement our migration plans could disrupt our operations and harm our business.
As we increase our reliance on cloud infrastructure, our products and services will become increasingly reliant on continued access to, and the continued stability, reliability, and flexibility of third-party cloud services. We have limited control over third-party cloud operations and facilities that currently host our technology infrastructure and will likely have limited control over those that we may use in the future. Any changes in third-party service levels or any disruptions or delays from errors, defects, cyber attacks, security breaches, computer viruses, DDoS attacks, bad acts, performance problems, or other disruptions resulting from our increased reliance on cloud infrastructure could harm our reputation, damage our small business customers’ businesses, and harm our business. Our third-party cloud providers are also vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, war, public health crises, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures and similar events. Our transition and migration to the cloud may increase our risk of liability and cause us to incur significant technical, legal or other costs, and we may have limited remedies against third-party providers in connection with such liabilities.
Additionally, our third-party cloud providers may not be able to effectively manage existing traffic levels or increased demand in capacity requirements, especially to cover peak levels or spikes in traffic, and as a result, our customers may experience delays in accessing our solutions or encounter slower performance in our solutions, which could increase our attrition rates, negatively impact our sales, and significantly harm the operations of our small business customers. Interruptions in our services might reduce our revenue, cause us to issue credits to customers, subject us to potential liability, and cause customers to terminate their subscriptions or harm our renewal rates. Finally, we may in the future be unable to secure additional cloud hosting capacity on commercially reasonable terms or at all. If any of our third-party cloud providers increase pricing terms, terminate or seek to terminate our contractual relationship or change or interpret their terms of service or policies in a manner that is unfavorable, we may be required to transfer to another provider and may incur significant costs and experience service interruptions.
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Cybersecurity attacks or threats or other unauthorized access or attempts to access to our systems, or those of third parties, have in the past, and may in the future, compromise the security of our systems and otherwise disrupt our normal operations, which could have a material adverse effect on our reputation, business, financial condition, results of operations, and cash flows.
We collect, process, transmit, and store sensitive and confidential information related to our customers, employees and business partners, as well as proprietary information related to our business, such as business plans and license agreements. This makes us vulnerable to cyber attacks and other attempts to gain unauthorized access to our information and technology networks and systems, including work from home environments and third-party systems that are interconnected with ours. Cyber attacks have previously originated, and may in the future originate, from various methods, including phishing, malware, and ransomware. While we implement and require security measures within our products, services, operations, and, to a limited extent, within third parties’ systems, cyber attacks continue to evolve in sophistication and increase in volume and frequency and we have not in the past and may not in the future be able to timely detect or prevent cybersecurity breaches on our systems or within third-party systems that are interconnected with ours, including the unauthorized access, capture, or alteration of information; the exposure or exploitation of potential security vulnerabilities; distributed denial of service attacks; the installation of malware or ransomware; acts of vandalism; computer viruses; or misplaced data or data loss that could materially adversely impact our reputation, business, financial condition, results of operations, and cash flows.
Despite our security measures, we and third parties whose systems are interconnected with ours have been the target of and/or subject to a number of these methods of cyber attacks, and we will likely continue to be the target of and/or subject to such attacks in the future. These cyber attacks have previously resulted, and may in the future result, in certain impacts to us or interconnected third-parties, including disrupted operations, system instability, theft of our confidential or proprietary or other information, increased cybersecurity protection, consulting and legal costs, litigation, and reputational damage. These cyber attacks have previously exposed, and may in the future expose, us to an increased risk of future cyber attacks and threats, including through an increase in more sophisticated and targeted cyber attacks from various methods, including phishing, malware, and ransomware, among other methods. In addition, cyber attacks could result in misstated or misappropriated financial data or impair our ability to effectively manage our financial reporting process. We may be subject to regulatory scrutiny or exposed to litigation or other claims by affected persons including our customers, employees, and business partners. While we maintain insurance coverage that is intended to address certain aspects of data security risks, such insurance coverage may not be sufficient to cover all losses or all types of claims that have arisen or may arise, and in the future may not be available at reasonable costs or at all.
In addition, following the Commercial Divestiture, certain of our information systems and our information security protocols remained interdependent on those of our divested Commercial Business, including dependence for a transitional period on its information systems for billing and alarm monitoring for a small portion of our clients’ accounts, which exposed us to increased risks related to cyber attacks. Moreover, certain employees of our former Commercial Business have had and will have access to our financial and other internal systems for a period of time which has exposed and will continue to expose us to increased risks related to information theft and unauthorized system access. For more information on the continuing services relationship between ADT and our former Commercial Business, see “ADT is a less diversified business following the Commercial Divestiture, the ADT Solar Exit, and the sale of our multifamily business, which may adversely affect ADT’s results of operations and financial condition.”
This interconnection with our former Commercial Business has in the past exposed us to increased risks related to cyber attacks. Cyber attacks and threats at our former Commercial Business have in the past led, and may in the future lead, to cyber attacks and threats to our systems and assets. Any measures we have taken or may take in the future to protect against cyber attacks and threats, including those at our former Commercial Business, or against employees, including employees of our former Commercial Business, who may wrongfully or negligently use or access such technology, intellectual property, or information, or negligently or wrongfully disclose such technology and intellectual, confidential, proprietary, or any other information to third parties, including our competitors, may prove insufficient and cannot provide absolute protection against such attacks and threats.
Our business also requires us to share confidential information with suppliers and other third parties. Third parties, including our partners and vendors, could also be a source of cybersecurity risk to us, or cause disruptions to our normal operations, in the event of a failure of their own products, components, networks, security systems, and infrastructure. In addition, some of the products we sell and provide services for are categorized as IoT and may become targets for cybercriminals and other actors, including for actors attempting to gain unauthorized access. The significant number of our employees working from home further exposes us to security risks. Although we take steps to secure confidential, proprietary, or other information that is provided to or accessible by third parties working on our behalf, we cannot be certain that advances in criminal capabilities (including the use of artificial intelligence), new discoveries in the field of cryptography, or other developments will not compromise or breach the technology protecting the networks that access our products and services or third-party networks or systems that host or store our data.
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A significant actual or perceived (whether or not valid) theft, loss, fraudulent use or misuse of customer, employee, or other personally identifiable or other sensitive data, whether by us, our partners and vendors, or other third parties, or as a result of employee error or malfeasance or otherwise, non-compliance with applicable industry standards or our contractual or other legal obligations regarding such data, or a violation of our privacy and information security policies with respect to such data, could result in significant remediation costs, administrative fines, litigation or other claims by third parties, or regulatory actions against us. Such an event could additionally result in unfavorable publicity and therefore materially and adversely affect the market’s perception of the security and reliability of our products and services and our credibility and reputation with our customers, which may lead to customer dissatisfaction and could result in lost sales and increased customer revenue attrition.
In addition, we depend on our information technology infrastructure, and that of our third party partners or vendors, for business-to-business and business-to-consumer electronic commerce. Cyber attacks to, or threats against, our infrastructure or that of third parties whose systems are interconnected with ours or whose systems contain ADT information could create prolonged system disruptions and shutdowns that could negatively impact our operations. Increasingly, our products and services are accessed through the Internet, and a significant number of service calls happen virtually, and cyber attacks and/or threats in connection with the delivery of our services via the Internet may affect us and could be detrimental to our reputation, business, financial condition, results of operations, and cash flows. There can be no assurance that our continued investments in new and emerging technology and other solutions to protect our network and information systems will prevent any of the risks described herein. In addition, any delay in making such investments due to conflicting budget priorities or otherwise could have a material adverse effect on our business, financial condition, results of operations, and cash flows. There can be no assurance that our insurance will be sufficient to protect against all our losses from any future disruptions or cyber attacks on our systems or other events as described herein.
Uncertainty in the development, deployment, and use of AI, including generative AI, in our products and services and across our operations could adversely affect our business, financial condition, results of operations, and reputation.
We increasingly use AI‐enabled tools and systems to support customer interactions, product functionality, monitoring capabilities, and internal operations, and to drive efficiencies within our workforce. AI technologies are complex and rapidly evolving, and their use may involve risks relating to, among other things, accuracy, reliability, bias, cybersecurity vulnerabilities, data privacy, intellectual property, and regulatory compliance. AI systems may produce unintended or incorrect outputs, fail to perform as expected, or be misused by employees, customers, or third parties. In addition, any latency, disruption, or failure in our AI systems or data infrastructure could result in data loss, delays, or errors in our offerings or operational activities. Developing, testing, and deploying resource-intensive AI solutions may require significant investment and could increase our costs. We can provide no assurance that our development or use of, or our investments in, AI-enabled or AI-integrated systems and tools will enhance these systems and tools or be beneficial to our business.
In addition, evolving legal and regulatory frameworks governing AI, as well as heightened public and investor scrutiny of AI use, may require us to modify our practices, incur additional compliance costs, or limit certain applications of AI. Any failure or perceived failure to responsibly develop, deploy, or govern AI‐enabled solutions could result in, among other things, legal liability, regulatory action, reputational harm, or reduced customer trust, any of which could materially adversely affect our business.
There also may be real or perceived social harm, unfairness, or other impacts to human rights, privacy, employment, or other social issues or outcomes that undermine public confidence in the use and deployment of AI. In addition, competitors may more effectively use AI to better serve customers, develop new or enhanced products or services, or improve internal processes, or third parties may otherwise deploy AI solutions in a manner that reduces customer demand for our products and services. Use of AI by our employees could also cause loss or theft of intellectual property, as well as subject us to risks related to intellectual property infringement or misappropriation, data privacy and cybersecurity. Any of the foregoing may result in decreased demand for our products or material harm to our business, results of operations, brand, or reputation.
The legal and regulatory landscape surrounding AI is rapidly evolving and uncertain including in the areas of intellectual property, cybersecurity, privacy, and data protection. For example, there is uncertainty around the validity and enforceability of intellectual property rights related to our use or development of AI tools. Compliance with new or changing laws, regulations or industry standards related to AI may impose significant operational costs and may limit our ability to apply AI technologies in certain use cases. Failure to appropriately respond to this evolving landscape may result in legal liability, regulatory scrutiny or action, or brand and reputational harm.
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We depend on third-party providers and suppliers for components of our security and automation systems, third-party software licenses for our products and services, and third-party providers to transmit signals to our monitoring facilities and provide other services to our customers. Any failure or interruption in products or services provided by these third parties could harm our ability to operate our business.
The components for the security and automation systems that we install or consume are manufactured by original equipment manufacturers (“OEM”), original design manufacturers (“ODM”), contract manufacturers (“CM”) and/or third-party suppliers. While we have implemented robust supply chain management practices designed to mitigate the risk of supply chain interruptions, there is no assurance that these practices will be effective, and interruptions may occur from time to time.
Certain key suppliers may experience difficulties in obtaining necessary components, which may impact our ability to meet customer demands and complete critical initiatives. For instance, we are currently monitoring and responding to the global memory chip shortage, which may increase our equipment costs and could lead to future fulfillment delays or the requirement to re-engineer hardware components on short notice to accommodate available alternative parts. In addition, our suppliers are susceptible to disruptions from fire, natural disasters, weather-related incidents, and the effects of climate change (such as sea level rise, drought, flooding, wildfires, and increased storm severity), as well as health epidemics and pandemics, transmission interruptions, extended power outages, human or other error, information systems and network-related events, such as technology failures, malicious acts, including cyber attacks, terrorism, war, sabotage, and government actions, or other concerns impacting their local workforce or operations, all of which are beyond our and their control. While we actively monitor supplier operations, require compliance with business continuity and disaster recovery plans, maintain alternative sourcing options where feasible, carry a surplus of finished goods in inventory, exercise limited control over our raw material suppliers through demand forecasting and supply planning processes, and have contract terms that require transparency in sourcing, quality assurance commitments, and escalation protocols, there is no assurance that these practices will be effective and supplier disruptions, including any financial or other difficulties our providers may face, may have a material adverse effect on our business.
We are also subject to supply chain disruptions if we learn that any of our suppliers are in violation of legislation which bans the import of goods based on their method of production, such as using forced labor or otherwise. This may also result in negative publicity regarding our production methods, and the alleged unethical or illegal practices of any of our suppliers could adversely affect our reputation. Our efforts to minimize the risk of a disruption from a single supplier may not always be effective, and we have experienced some disruptions in our supply chain during recent years, and could experience such disruptions in the future. Any continued or significant interruption in supply could cause significant delays in installations and repairs and the loss of current and potential customers. Although some specific shortages may be resolved, they may recur. From time to time, we may also experience product recalls and other unplanned product repairs or replacements with customers. We have occasionally experienced such product service events. There can be no assurance that any such future product service events will not be more extensive or more costly, material to us, and/or require the outlay of cash while we pursue cost recovery from manufacturers and suppliers, and there can be no assurance that we will be successful in pursuing recoveries from those third parties. Although our supplier agreements often include indemnification provisions, such indemnification may be limited in scope or amount, subject to exclusions or conditions, disputed by the supplier, or otherwise unavailable, including due to supplier financial distress or insolvency. If a previously installed component were found to be defective, we might not be able to recover the costs associated with its repair or replacement across our installed customer base, and these costs, or the diversion of technical personnel to address the defect could materially adversely affect our business, financial condition, results of operations, and cash flows. Such incidents may also harm our reputation and may result in litigation or other claims from customers. In the event of a product recall or litigation against our suppliers or us, we could experience a material adverse effect on our business, financial condition, results of operations, and cash flows.
We also rely on third-party software for key automation features in certain of our offerings and on the interoperation of that software with our own, such as our mobile applications and related platforms. In the event a third-party provider experiences any disruption in their IT systems, we could experience service disruptions. We could also experience service disruptions if customer usage patterns for such integrated or combined offerings exceed, or are otherwise outside of, system design parameters and we or our third-party provider is unable to make corrections. Such disruptions in the provision of services could result in our inability to meet customer demand, damage our reputation and customer relationships, and materially and adversely affect our business. We also rely on certain software technology that we license from third parties and use in our products and services to perform key functions and provide critical functionality. For example, we license the software platform for our monitoring operations from third parties. Because a number of our products and services incorporate technology developed and maintained by third parties, we are, to a certain extent, dependent upon such third parties’ ability to update, maintain, or enhance their current products and services; to ensure that their products are free of defects, security vulnerabilities, and compromise; to develop new products and services on a timely and cost-effective basis; and to respond to emerging industry standards, customer preferences, and other technological changes. In addition, certain of our current and future offerings incorporate advanced analytics, artificial intelligence, and sensing‐based technologies, which may increase our dependence on third‐party software, data, and infrastructure and heighten the risk that defects, performance limitations, security vulnerabilities, or regulatory constraints affecting such technologies could disrupt services or impair customer experience.
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Further, these third-party technology licenses may not always be available to us on commercially reasonable terms, or at all. If third-party vendors decide not to renew our existing agreements or to limit our access to their offerings, or the third-party technology becomes obsolete, is incompatible with future versions of our products or services, is unusable due to defects, security vulnerabilities, or compromise or otherwise fails to address our needs, we cannot provide assurance that we would be able to replace the functionality provided by the third-party software with technology from alternative providers. Furthermore, even if we obtain licenses to alternative software products or services that provide the functionality we need, we may be required to replace hardware installed at our monitoring centers, work from home environments, and at our customers’ sites, including security system control panels and peripherals, in order to execute our integration of or migration to alternative software products. Any of these factors could materially adversely affect our business, financial condition, results of operations, and cash flows.
Furthermore, certain components of our security and smart home offerings, including certain sensors and connected devices, rely on wireless communication protocols and radio-frequency spectrum set aside by the FCC for unlicenced use (including protocols such as Z-Wave and other sub‐1 GHz technologies that operate in unlicensed bands). This lower 900MHz band of spectrum is shared with many other devices and is subject to interference, congestion, and changes in technical rules or usage rights. Regulatory proceedings could alter spectrum allocations, power limits, or other operating conditions in ways that increase the risk of harmful interference to low-power devices. If wireless interference, spectrum reconfiguration, or related regulatory changes reduce signal reliability or device performance, customers may experience degraded functionality, missed or delayed signals, or service interruptions. Any such issues could require us to redesign or re-certify products, modify device firmware or network configurations, accelerate replacement of installed equipment, increase service and support costs, and/or incur material capital expenditures. These events could also increase customer dissatisfaction and attrition, expose us to contractual disputes, or litigation, which could materially adversely affect our business, financial condition, results of operations, and cash flows.