The ADT Corporation (NYSE: ADT) today reported diluted earnings per
share of $0.44 for the first quarter of 2013, and diluted earnings per
share before special items of $0.44. Using the company's cash tax rate,
EPS before special items was $0.701.
Naren Gursahaney, ADT's Chief Executive Officer, said, "We are pleased to start the new fiscal year with a very solid quarter characterized by continued strong growth in recurring revenue and EBITDA margin, along with stabilization in attrition rates. During the quarter we also began to execute on our previously announced share repurchase program, further supported by the implementation of an accelerated share repurchase initiative, announced today." Gursahaney added, "Looking ahead to the balance of the year we will continue to focus on our ultimate objective of creating long-term value for our shareholders by reinvesting in our business to drive profitable growth, and returning excess cash to our shareholders."
Recurring revenue, which made up 92% of total revenue in the quarter, was up 5.1%. Recurring revenue growth was driven by a 4.7% increase in ending average revenue per customer, which rose to $39.27, and 0.5% net growth in ending customer accounts. Non-recurring revenue declined 25.3% as the company's mix of newly installed systems continues to shift toward more ADT-owned systems, increasing deferred revenue and reducing current period installation revenue. Total revenue of $809 million increased 1.8%, compared to the first quarter of 2012. Attrition was flat sequentially at 13.8%. ADT added 257,000 new customers and closed the quarter with 6.4 million customer accounts.
EBITDA before special items was $417 million, 6.1% higher than the first quarter of the prior year, and EBITDA margin before special items was 51.5%, a 210 basis point improvement. The margin expansion was mainly due to the favorable impact from the mix shift to more ADT-owned systems and was also aided by cost control initiatives that helped to offset the expense impact of dis-synergies caused by the separation from the Tyco commercial business and Hurricane Sandy.
Operating cash flow for the twelve month period ended December 28, 2012 was $1.6 billion. Steady-state free cash flow before special items, calculated on a pre-tax and unlevered basis for the twelve month period ended December 28, 2012 was $982 million, up 0.8% over the prior year's twelve month trailing period.
SHARE REPURCHASE PROGRAM
Under its previously announced $2 billion authorization, during the quarter the company repurchased 567 thousand of its shares for $26 million, and in January the company repurchased an additional 1.6 million of its shares for $74 million.
The company announced today that it has entered into an accelerated share repurchase agreement with Credit Suisse International, under which it will repurchase approximately $600 million of its common stock. The company will acquire the shares under its previously authorized share repurchase program and will fund the repurchase using proceeds from its recently concluded debt offering. Under the terms of the agreement with Credit Suisse International, ADT will pay Credit Suisse International $600 million on February 4, 2013 and on that date will receive initial deliveries of approximately 10 million shares, representing a substantial majority of the shares expected to be retired over the course of the agreement. The total number of shares ultimately repurchased under the agreement will generally be based on the volume-weighted average share price of the company's common stock during the calculation period of the accelerated share repurchase program, less a discount, and subject to a cap provision that will establish a minimum number of shares repurchased. The accelerated share repurchase is expected to be completed by July 26, 2013, although the completion date may be accelerated at Credit Suisse International's option after an initial fixed period. The actual number of shares repurchased will be determined at the completion of the accelerated share repurchase program.
AFFIRMING FISCAL YEAR 2013 GUIDANCE
Recurring revenue growth of 4.9%-5.2%
EBITDA margin before special items of 49.5%-50.5%
Free cash flow before special items of $375-$425 million
Steady-state free cash flow before special items of $950 million - $1.0 billion
Recurring revenue of $744 million, up 5.1% Net income of $105 million, up 12.9% EBITDA before special items of $417 million, up 6.1% GAAP diluted earnings per share of $0.44 and earnings per share before special items of $0.44 ADT Pulse overall take rate at 18.6% in the quarter, up from 7.2% last year
($ in millions, except per-share amounts)
Q1 2013 Q1 2012 Change
Recurring revenue $744 $708 5.1%
Other revenue $65 $87 -25.3%
Total revenue $809 $795 1.8%
Net income $105 $93 12.9%
EBITDA before special items(1) $417 $393 6.1%
EBITDA margin before special items(1) 51.5% 49.4% 210 bps
Diluted earnings per share $0.44 $0.39 12.8%
Diluted earnings per share before special items(1) $0.44 $0.41 7.3%
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