Security technology and services company ADT (NYSE:ADT) reported results in line with analysts' expectations in Q1 CY2024, with revenue down 25% year on year to $1.21 billion. It made a non-GAAP profit of $0.16 per share, improving from its profit of $0.14 per share in the same quarter last year.
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ADT (ADT) Q1 CY2024 Highlights:
- Revenue: $1.21 billion vs analyst estimates of $1.21 billion (small miss)
- EPS (non-GAAP): $0.16 vs analyst estimates of $0.15 (6.2% beat)
- Full year EPS (non-GAAP) guidance: $0.65, maintained from previous, in line with analyst estimates
- Gross Margin (GAAP): 80.5%, up from 68.1% in the same quarter last year
- Free Cash Flow of $323 million, up from $94 million in the previous quarter
- Market Capitalization: $5.75 billion
“We are off to a strong start in 2024 with continued momentum in CSB segment revenue and Adjusted EBITDA as well as cash flow growth. During the quarter, we continued rolling out our new professionally installed ADT+ platform, positioning us to expand nationally in the coming months. We are excited about this new platform, related innovative use cases, and more diverse and flexible offerings for our customer base,” said ADT Chairman, President, and CEO, Jim DeVries.
Founded in 1874 and headquartered in Boca Raton, Florida, ADT (NYSE:ADT) is a provider of security, automation, and smart home solutions, offering comprehensive services for home and business protection.
Specialized Consumer Services
Some consumer discretionary companies don’t fall neatly into a category because their products or services are unique. Although their offerings may be niche, these companies have often found more efficient or technology-enabled ways of doing or selling something that has existed for a while. Technology can be a double-edged sword, though, as it may lower the barriers to entry for new competitors and allow them to do serve customers better.
Sales Growth
A company’s long-term performance can give signals about its business quality. Any business can put up a good quarter or two, but many enduring ones muster years of growth. ADT's annualized revenue growth rate of 2.3% over the last five years was weak for a consumer discretionary business. 
Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. ADT's recent history shows a reversal from its already weak five-year trend as its revenue has shown annualized declines of 2.6% over the last two years.
This quarter, ADT reported a rather uninspiring 25% year-on-year revenue decline to $1.21 billion of revenue, in line with Wall Street's estimates. Looking ahead, Wall Street expects revenue to decline 6% over the next 12 months.
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Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Over the last two years, ADT has shown decent cash profitability, giving it some reinvestment opportunities. The company's free cash flow margin has averaged 12.3%, slightly better than the broader consumer discretionary sector.
ADT's free cash flow came in at $323 million in Q1, equivalent to a 26.7% margin and up 185,532% year on year.
Key Takeaways from ADT's Q1 Results
It was good to see ADT beat analysts' EPS expectations this quarter. On the other hand, its revenue missed slightly, as did operating margin. For the full year, the company maintained its EPS guidance from the previous outlook, showing that the environment in which it operates and its internal expectations haven't changed much from roughly three months ago. Overall, the results were mixed. The stock is flat after reporting and currently trades at $6.4 per share.
So should you invest in ADT right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.