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ADT Bets On Google Partnership To Drive Revenue: WSJ

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Security-system provider ADT Inc (NYSE: ADT) is capitalizing on its partnership with Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) Google’s smart-home business to increase revenue, the Wall Street Journal reported.

What Happened: In 2020, Google had acquired a 6.6% stake in ADT for $450 million. The companies also partnered to create intelligent home security offerings.

In late April, ADT began selling Google’s hardware, including its smart display and speakers, to its home-security customers. The two companies integrate their devices to ensure that ADT’s systems recognize Google voice commands and temperature controls. They are also drawing up plans for new products and services.

ADT reported a net loss of $48 million during Q1, due in part to fewer installations during the pandemic, compared with a $300 million loss a year earlier. It has not reported a full-year profit since its 2018 public listing.

The Q1 revenue slipped 5%, to $1.3 billion. ADT expects sales to bounce back with the economic recovery, particularly in light of the recent housing boom.

ADT’s recurring revenue from providing alarm monitoring and other services produced 80% of ADT’s total quarterly revenue in Q1.

It aims to drive its recurring revenue from new customers who want to use Google’s Nest products. It had around 6.6 million recurring customers.

ADT acquires the Nest hardware it offers to customers directly from Google.

Why It Matters: Home security systems have historically required professional installation. However, the growth of smartphone-connected and do-it-yourself products in recent years has expanded the market.

Around 34% of U.S. households with broadband access had a home security system in 2020, up from 27% five years earlier.

Both companies also agreed to invest $150 million under the seven-year partnership toward engineering, designing, and marketing new products. ADT also repaid $300 million in debt.

The companies are exploring ways to develop new offerings like cameras, doorbells, thermostats, and analytics capabilities.

Apollo Global Management Inc (NYSE: APO) acquired ADT in 2016 and merged it with two other companies, Protection 1 and ASG Security. Apollo still owns a 73.4% stake in ADT.

Price action: ADT shares traded lower by 0.59% at $11.05 on the last check Monday.

Photo: Graceoftheshire via Wikimedia.

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