ADT Q1 2022 Earnings Call Transcript

Quartr
Provided by Quartr
May 5, 2022

Key Takeaways

  • Positive Sentiment: ADT delivered a strong Q1 with total revenue up 18%, adjusted EBITDA rising 11%, and a $52 million net profit, while reaching a record $365 million recurring monthly revenue balance.
  • Positive Sentiment: The Consumer & Small Business segment achieved 30% higher installation revenue per unit year-over-year and gross customer attrition hit a record low of 12.9%, driving improved retention and SAC efficiency.
  • Positive Sentiment: Early Google partnership traction includes over 60,000 Google Nest Doorbell sales, the launch of mesh Wi-Fi, and planned indoor/outdoor camera rollouts by Q3 to boost attachment and cross-sell rates.
  • Positive Sentiment: ADT’s virtual service platform now handles nearly half of all service visits, eliminating over 165,000 truck rolls in Q1, lowering costs and carbon footprint while maintaining high customer satisfaction.
  • Positive Sentiment: Post-acquisition ADT Solar installed 5,500 systems in Q1 (up ~80% year-over-year) and is already generating about 20% of solar sales through ADT’s ecosystem cross-sell initiatives.
AI Generated. May Contain Errors.
Earnings Conference Call
ADT Q1 2022
00:00 / 00:00

There are 12 speakers on the call.

Operator

Greetings. Welcome to the ADT First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded.

Operator

I will now turn the conference over to your host, Elizabeth Landers, Senior Director of Investor Relations. You may begin.

Speaker 1

Thanks, operator, and good morning, everyone. We appreciate you joining ADT's Q1 2022 earnings call. Speaking on today's call will be ADT's President and CEO, Jim DeVries and our CFO and President of Corporate Development, Jeff Lecazar. Jim will provide an overview of our recent performance and how that links to the mission and long term strategy we laid out in our Investor Day in March. Jeff will then cover our financial performance.

Speaker 1

Joining us for Q and A are Don Young, Chief Operating Officer Ken Topora, EVP of Finance And Joe Greer, SVP of Finance, Investor Relations and Communications. Earlier this morning, we issued a press release and slide presentation of our financial results. These materials are available on our website at investor. Adt.com. And before we start, I do need to tell you that today's remarks include forward looking statements.

Speaker 1

These forward looking statements are subject to risks and uncertainties that could cause actual results to materially differ from those forward looking statements. Some of the factors that may cause differences are described in our SEC filings. We'll also include non GAAP financial measures on the call. For a complete reconciliation of our non GAAP financial measures, please refer to our earnings press release. And with that, I'll turn the call over to Jim.

Speaker 2

Thanks and welcome everyone to our call. ADT released our earnings results this morning, beginning the year with solid first quarter Delivering strong year over year improvements in total revenue and adjusted EBITDA and a $52,000,000 net profit. We continue to see solid demand for ADT products and services, helping drive our subscriber growth and producing the highest RMR balance in our history. We're also seeing good traction with SAC efficiency in our Consumer and Small Business segment With record high installation revenue per unit that was up more than 30% versus prior year, Aided by higher attachment rate for our Google Doorbell Sales and increased pull through of additional products, The extraordinary service provided by our employees is reflected in improved customer satisfaction rates And Enhance Brand Loyalty, gross customer attrition over the last 12 months was 12.9%, A record low, down 20 basis points versus prior year and sequentially from the 4th quarter. This trend is consistent with expected retention characteristics of our interactive customers with more advanced And larger systems, I want to express my gratitude to our employees and dealer partners for a tremendous start to the year.

Speaker 2

Our people are ADT's greatest asset and our results are evidence of what can be achieved when 25,000 Of the best professionals in the industry focus on taking great care of our customers, at our Investor Day in March, We presented our mission and laid out our long term strategy. ADT is a trusted brand and synonymous with safety and peace of mind. We are positioned to drive growth across all our business segments By leveraging our unique strategic advantages, our innovative offerings, unrivaled safety and premium customer experience, The strategy we outlined at Investor Day focused strongly on our customers, growing our subscriber base, Expanding the share of wallet from each customer and strengthening our brand loyalty and customer retention. Simply stated, we are giving customers even more reasons to choose ADT, stay with ADT and spend more with ADT. We are already demonstrating progress against our plan with several achievements in the Q1 that I'd like to highlight.

Speaker 2

Our Google partnership remains positioned to help accelerate the transformation of our business. We launched the Google Nest Doorbell in early January and have seen great success with over 60,000 Nest Doorbell Sales As of the end of the Q1. Additionally, offering the branded Google product is driving higher attachment rates, Higher pull through of other devices and higher installation revenue than we were seeing with our previous white label doorbell. Moving quickly to maintain our momentum, we rolled out mesh WiFi a few weeks ago and we're targeting the launch Google indoor and outdoor cameras by the end of Q3. In our dealer channel, we're expanding distribution And also beginning to introduce Google products throughout the network.

Speaker 2

So while we're still in the early innings of our full Google product rollout, We're very encouraged by our early successes. Based on favorable customer feedback, We are also expanding our ADT virtual service platform. Today, almost half of our service visits Are now being successfully conducted virtually. Virtual visits are delivering high customer satisfaction And in the Q1 alone, we eliminated over 165,000 truck rolls, reducing not only our expenses, but also our carbon footprint. We are continuing to evaluate and expand this program with additional ADP services.

Speaker 2

We are also continuing the rollout of our next generation monitoring technology. Our patented technology delivers Unrivaled safety by helping to prioritize response events and sending data directly to emergency response centers. Obviously, this is critically important in situations where every second matters. We are also expanding this capability for our commercial Today, our technology is in approximately 70 emergency response centers and our goal is to be in 1 1,000 centers by the end of the year. ADT Commercial showcased several innovations at the recent ISC West Conference.

Speaker 2

We specifically showcase the capabilities and uses of robots and indoor drones, Innovations we believe provide opportunities for disrupting the traditional man guard industry. Commercial also received 3 SAMI Awards, recognizing our best in class marketing and advertising efforts. I would like to take a moment to comment on ADT Solar, our newest business segment. Following ADT's acquisition of Sunpro In December, we have now completed our Q1 with ADT Solar reporting as part of our business, And we are very pleased with our performance. The cut over to the ADT Solar brand is now complete And you will begin seeing branded vehicles and uniforms out in the market soon.

Speaker 2

ADT Solar installed 5,500 systems in the Quarter, an increase of approximately 80% versus legacy Sunpro in the Q1 of last year. We have begun to launch our solar dealer program to existing ADT dealers, and we're seeing the early benefits. Between our dealer launch and other cross sell initiatives, we're already seeing about 20% of solar sales Generating from the ADT Ecosystem. As I discussed at Investor Day, we are integrating ESG into our business operations. Just this week, we published our 1st corporate ESG report, which outlines all that ADT is doing to embed ESG into our business.

Speaker 2

We truly believe that our ESG principles underpin our core mission, Empowering people to protect and connect what matters most. In closing, I am encouraged by our performance this quarter. We are delivering on the plan we laid out at our Investor Day a few months ago, and I'm increasingly excited about the opportunities ahead. And now I will turn the call over to Jeff to cover our financial performance and the quarter in more detail.

Speaker 3

Thank you, Jim, and thank you everyone for joining our call today. As Jim described, we've started the year with solid momentum across the business and are pleased with our Q1 results. Total company revenue in the Q1 was $1,550,000,000 up 18%, which includes the benefit of our Solar acquisition. Excluding solar, our revenue grew approximately 4%. Importantly, our recurring monthly revenue or RMR base Grew to $365,000,000 the record level Jim mentioned and was $60,000,000 higher than last year.

Speaker 3

This is the result of the cumulative effect of our recent growth in customer retention progress. Our gross new additions to RMR were down slightly in the Q1 as planned due to last year's initial Ackerman account acquisitions. Our revenue growth combined with efficiency improvements, especially within our CSB segment, Generate an 11% increase in adjusted EBITDA at $601,000,000 On a segment basis, Consumer and Small Business or CSB delivered total revenue of $1,063,000,000 an increase of 2% or $24,000,000 versus last year. This performance was largely driven by the increase in monitoring and service revenue from the higher RMR bounce I mentioned earlier. We continue to see an increasing number of customers choose interactive, integrated and more comprehensive systems.

Speaker 3

In addition to the retention benefits Jim described, The resulting mix shift has also helped improve our average revenue per subscriber. We expect this base of interactive customers to grow We add more Google products to our portfolio. CSV adjusted EBITDA increased by more than $40,000,000 representing the largest contribution to our overall improvement. This was driven by the higher revenue combined with strong cost performance. A key driver of this cost performance was the virtual service initiative Jim mentioned, which allowed us to service our growing and increasingly interactive customer base, while keeping our service costs relatively flat.

Speaker 3

We are also seeing continued improving performance in our commercial segment. 1st quarter commercial revenue grew by 9% to $290,000,000 With increases in both installation and monitoring and services revenue, we have continued to recover from COVID-nineteen challenges and capture market share as conditions have improved. Commercial adjusted EBITDA was up slightly as these higher revenues were offset by some inflation driven challenges on parts, labor and fuel. The commercial team has moved quickly to take actions to offset much of this inflation. Our new solar business also delivered strong results the 1st full quarter since our December acquisition of Sunpro with revenue of $192,000,000 and adjusted EBITDA of $17,000,000 Solar installation revenue included a $30,000,000 headwind from the amortization of the pre acquisition backlog, which will not affect subsequent quarters.

Speaker 3

Like commercial, solar has moved quickly to recover cost inflation pressures. As Jim described, we are pleased with some early indicators of cross selling opportunities And we remain very excited about our new solar business as we continue to integrate within our ADT ecosystem. Turning to cash flow and the balance sheet. Adjusted free cash flow was negative $42,000,000 which was slightly better than our internal plan for the quarter. We remain on track for our full year guidance for adjusted free cash flow in addition to our guidance for adjusted EBITDA and revenue.

Speaker 3

Our quarterly cash flows are uneven for a variety of reasons, including especially the timing of interest payments, which are much higher in the 1st and third quarters. Additionally, this year's Q1 included the effects of a variety of working capital and timing items, including our annual incentive compensation payment. We expect 2nd quarter adjusted free cash flow to be around $200,000,000 higher than the 1st quarter, about half of which is due to lower interest payments. We remain very comfortable with our capital structure and our liquidity overall. Our next significant maturity is our 700,000,000 Dollar first lien note due next year.

Speaker 3

We plan to access the capital markets later this year to refinance that debt with the exact timing, amount and structure dependent upon market conditions. As a reminder, we plan to reduce our net debt by $1,000,000,000 by 2025. Before concluding, I want to touch on a couple of non cash items. Our depreciation and amortization was up slightly in the quarter as we have grown our business. However, we expect year over year reductions of $50,000,000 to $75,000,000 for each of the next four quarters.

Speaker 3

This is the result of the roll off of intangible assets acquired in 2015 2016 transactions associated with Apollo's acquisitions of Protection 1 And ADT. Additionally, our GAAP interest expense was down year over year with the decline driven by mark to market adjustments on our interest rate swaps, which have increased in value with rising rates. The resulting $145,000,000 reduction to interest expense, net of the associated tax effects, Drove our 1st quarterly GAAP profit since 2017. To conclude, I want to reiterate that we are executing on the strategy and committed to delivering the financial While only a couple of months have passed, we are very pleased with the progress we made in the Q1 of this year as we continue to balance near term results with building for the longer term. I want to add my thanks to all the ADT employees, dealers, Suppliers, customers, communities and investors who have enabled our progress, thank you for joining our call And thank you for your support of our company.

Speaker 3

Operator, please open the call for questions.

Operator

And at this time, we will be conducting a question and answer session. A confirmation tone will indicate your line is in the question It may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. And our first question comes from the line of George Tong with Goldman Sachs. Please proceed with your question.

Speaker 4

Hi, thanks. Good morning. Can you discuss how you're seeing inflation impact the business and then That's that you're taking to mitigate the impact. I know you're rolling out virtual services, Which should help drive some savings and then pricing as well. If you can elaborate on those factors, that'd be great.

Speaker 3

Hey, George, it's Jeff. So like all companies, we're Working our way through the macro environment and navigating inflation, especially parts, labor, fuel, managing it quite well in Our residential business where we have a smaller number of SKUs and very strong relationships With a more concentrated number of suppliers, it's more complicated and challenging in our commercial business where we have much, Much longer tail of lower volume parts with a much greater number of suppliers, so more challenging there. And then our solar business, of course, is new and subject to the same pressures. We're navigating it with a host of actions, including qualifying alternate suppliers in a number of cases, including having strategically built some inventory and then including some actions that we've taken To attempt to pass along some of those challenges via pricing and other actions. So It's a challenge for sure, spending a lot more time on it than we were a year and certainly compared to 2 years ago, but we think we're navigating it well.

Speaker 2

George, my comments it's Jim here. My comments mirror Jeff's, But I'll just share a couple of other things quickly. We have already taken price actions in solar and taken price actions in commercial to Jeff's point, the markets are Absorbing those increases and we've not had any impact from a growth or retention perspective.

Speaker 4

Very helpful context. And then secondly, with respect to the Google partnership, You talked about rolling out the doorbell earlier in January. You have the mesh Wi Fi launched several weeks ago and then indooroutdoor cameras to The Google partnership and how would you expect that to impact your operating and financial performance?

Speaker 2

Yes. So I'll share some perspective on Google overall and then get specifically to your question, George. We feel great about the relationship with Google. We had earlier expanded our home automation product set with The Hub and Hub Max and voice assistant, the Google Video Doorbell was launched in January. We have an attachment rate that is Coaching 50%.

Speaker 2

We just launched the mesh Wi Fi product. Specific to your question, indoor and outdoor Cameras will be next. We'll launch those in Q3. And then I'll mention as a reminder, we're going to be going to market, co brand Both organizations are working toward full integration with the next generation app and technology platform that we'll have in 2023. But the next milestone for us will be Some work we're looking forward to on co branding and the cameras in Q3.

Speaker 4

Got it. Very helpful. Thank you.

Speaker 2

Thank you.

Operator

Our next question comes from the line of Pete Christiansen with Citi. Please proceed with your question.

Speaker 5

Good morning. Thanks for the question. Really nice trends here guys. Jim, I was just wondering if on the attrition number coming down, any recent Attribution deeper in the numbers there that gives you confidence that the value proposition transformation is really occurring. That would be helpful.

Speaker 5

And then, as a follow-up, the virtual service ticket Number looked really, really good, and certainly great traction towards your goal of targeting 40% increase in virtual service tickets overall. How do you think about that feature changing the labor intensity of the business going forward or maybe longer term. Thank you.

Speaker 2

Thank you, Pete. I'll take the first Question on attrition and then Don Young, who's leading the efforts around virtual service will take your question on the service On attrition, yes, we feel great about it. Ended the quarter at 12.9%, a decrease of 20 bps. That's an all time record for ADT. We see continued momentum.

Speaker 2

We know that The more customers use a system, the higher the retention. We know the more customers invest in the system, the higher the retention. We know that our interactive customers retain at a higher rate and all of those trends bode well for us. We're getting more sophisticated in our save efforts reactively and proactively. And then there's some lead indicators that are positive.

Speaker 2

The mix of credit scores, our service Fog is at a historical low. So retention is going to move around from quarter to quarter, but we're long term bullish About the metric and we think that there's just a whole host of positive trends that should serve as tailwinds for us.

Speaker 6

So Pete, this is Don. On the virtual side, hard not to get excited about this. It was Really born out of necessity last year when our costs were exceeding our plan. We leaned into it slightly with Basically, 1,000 virtual appointments per day. We're up to 4,000 virtual appointments per day now.

Speaker 6

The reality is that the customers have a large To go ahead and get immediate satisfaction, which is obvious, but also education on how we can go ahead and enhance the value of the solutions that we give them, whether it's Safety or convenience. Reality is that most of the problems that customers call us for Are either door window sensors or broadband issues? Well, both of those can be solved easily given the trend in wireless We have a question and answer session. We have a question and answer session. Hi, good morning, everyone.

Speaker 6

I'm And their home to resolve their problem if it could be done satisfactorily a lot quickly without them us entering the home. And literally, this is just the launching pad At 4,000, so a lot of other areas of the business that we consider ourselves doing virtually, and then really just Kind of kick starting our whole plan all along to digitize the experience.

Speaker 3

And then Pete, to Don's credit to add to Matt to his beautiful equation there. As you said, the CSV segment

Speaker 7

is up about almost 300 bps year over year in margin. Virtual service is a star of that show. We hit that a little

Operator

Our next question comes from the line of Ashish Sabadra with RBC Capital Markets.

Speaker 8

Hi. This is John Mazzoni filling in for Ashish. Maybe quickly on solar, other installers have indicated Strong demand for residential solar across the U. S, largely driven by increasing utility rates and homeowners' desire for energy independence. Could you talk about the demand environment

Speaker 2

We're out of the gates nicely. We think that the demand is going to continue to be a catalyst for growth in this space. There's only 3.5% penetration and we think that we can get more than our fair share of the growth. We mentioned earlier that Our Q1 was up 80% year over year versus legacy Sunpro, And we're just really just getting started. We're beginning to rebrand to ADT Solar.

Speaker 2

We're at a point where about 20% of the Sales volume is coming from ADT sources and we're going to be disciplined about our growth, keep our eye on the customer, But we think that this is going to be a very meaningful business for us and the growth catalyst is real.

Speaker 8

Great. Thank you. And maybe quickly on labor. Is there any other comments you could share on The hiring environment and perhaps what you're doing these days, it seems like the virtual servicing will help. But On the technician side and other hiring fronts, it would be great to get an update there.

Speaker 8

Thanks.

Speaker 2

You bet. So we're seeing some inflationary pressure And from labor, I'd say it's not material at this time. Labor and staffing overall are absolutely a focus area for us. We're seeing in the marketplace record turnover job vacancies across the country. It's obviously a tight labor market.

Speaker 2

Like many employers, we're working through talent acquisition strategies across a broad range of our positions. We're focused also on training because that's part of the equation. It's not just a lack of candidates, but it's a lack of candidates with the About 400 basis points down and we are just beginning to look at some offshoring For some of our more transactional roles, that will provide us some savings, but The real driver for that decision is access to talent. So net net, we're Talent labor shortages are on our radar screen. Talent acquisition, ensuring we have an attractive employee value proposition has never Been more important and the inflationary pressure is real, but we've been able to offset it at this point And it's not material at this time.

Speaker 8

Great. Thanks for the color. Congratulations again on strong results.

Speaker 2

Thank you.

Operator

Our next question comes from the line of Philip Shen with ROTH Capital Partners. Please proceed with your question.

Speaker 9

Hey guys, thanks for taking my questions. As a follow-up in terms of solar, There is this anti circumvention case out there with a threat of potential retroactive tariff. And with that as well as LG pulling out of the module market, I was wondering if you could talk through how your module supply looks for the rest of the year?

Speaker 2

Yes. Phil, thanks for the question. It's Jim. So we are now working with 3 different module manufacturing partners. We don't anticipate disruption in the supply chain.

Speaker 2

We've seen an increase in panels of about $20 per panel, give or take 10% increase in costs. At the end of Q1, we increased our prices in solar to help absorb The cost on the labor front and on the panel front, we think that it's not had an impact from a demand perspective. April was a record all time record sales month for us in solar. So we feel pretty good About managing the supply chain and absorbing the costs by increasing prices to maintain our margins.

Speaker 9

Great. Thanks, Jim. And then, you had a really nice and strong year over year growth in Q1. What kind of volume would you expect other revenue or megawatts or customers to see In Q2, Q3 and Q4, what should

Operator

we expect to add? Thanks.

Speaker 2

Yes. So we had Yes. I sort of intimated, Phil, that we would be right around $800,000,000 in revenues For the business, that's about a 20% increase from 2021 for Sunpro, Obviously, on the heels of a fantastic Q1, we're feeling really good about that. Our internal plans Are obviously above 20%. We'll take it a quarter at a time, but couldn't be more bullish about the growth in solar.

Speaker 3

And one thing I'd add to that, I mentioned in prepared remarks is that we had some Headwind from a one time purchase accounting where we were not able to recognize some revenues that was for the backlog at the time Of the acquisition, so our run rate supports getting to the numbers Jim described We're holding our guidance for now, but very optimistic about the trends we see in solar and for that matter the rest of the business.

Speaker 9

Great. Thanks, Jeff. One more, if I may, in terms of the EBITDA, you had a nice improvement there year over year. I was wondering if you Expect to see that 9% -ish maintain for solar as we get through the rest of 2022?

Speaker 7

It's Ken. Again, strong first quarter, especially some of the We're likely to work in Q1,

Speaker 3

all from food and commercial

Speaker 7

and solar. So we're not giving you Initial quarterly guidance is as you can tell we reaffirm for the full year and really like where we came out in the Q1. Again that virtual service On top of some of the other initiatives that we have are increasing the margin and then from both from the top line stuff that we represented in Q1 as well. So

Speaker 3

Hey, one thing I'd add to or really emphasize or reiterate is that we're navigating the year to deliver The guidance that we shared, but we're always making trade offs between optimizing near term results and making the investments for the longer term. So that's Of course, Truman Solar navigating supply chain and some of the things we're talking about earlier. Truman Commercial, Truman CSB also.

Speaker 9

Okay. Thanks everyone. I'll pass it

Speaker 2

on. Thanks, Phil.

Operator

Our next question comes the line of Brian Ruttenberg with Imperial Capital, please proceed with your question. Great.

Speaker 10

Thank you very much. First of all, Easy question. Attrition at all time lows, I believe, unless I haven't been Tracking more than 20 years, is there have you ever had anything lower than 12.9% in terms of attrition?

Speaker 2

Yes. I think that's a record for us. It's I'll also mention that's a gross attrition number. So our net attrition, give or take 250, 300 basis points better than that. So, we feel really good about it.

Speaker 10

And Brian, I've been here Okay.

Speaker 7

Brian, I've been here 23 years and Jim for some reason looked at me when you asked my question. I felt like the old guy in the room.

Speaker 10

Is that maintainable and approvable from those levels?

Speaker 2

Yes, we think so. I mentioned earlier, it's not going to be linear, but the retention improvement was really across The Board relocation was a contributor. Our voluntary losses are improved. Our lost Competition is better. It's in all regions of the country.

Speaker 2

We've got a little bit of headwind on non pay, But long term, we feel great about it. Brian, as you know, the more a Customer invests in a system, the higher the retention rate and we're also at record levels for customer investment upfront. Installation revenue per unit has never been higher. So I think there's cause for optimism on Customer retention.

Speaker 3

And one thing I'd add to this is a different flavor on the point I was making earlier about balancing long term And shorter term is and we talk about this often, but our IRR equation and that's really what we're focused on. It's a combination of the margin rate that we're able to generate. It's how long we keep our customers or attritionretention and it's how much It costs us to take on customers the SAC efficiency. So if we were seeking to optimize any one of those measures, we for sure could do so or seeking to Overall, we've made progress and we'll continue to make progress in each of them. But I just want to emphasize that we're really focused on is generating strong returns on Investing capital including especially subscriber acquisition costs.

Speaker 10

Great. And then just switching subjects real quick. Can Can you give us some kind of update on the new initiatives like insurance and maybe talk about potential Structures, it may be too early for you to address that too much, but given Vivint is going down the road of the insurance Raul, I believe that you're open to the idea. Maybe you can give us an update on what your thoughts are on that front.

Speaker 2

Yes. It's very early for us on the insurance front. I'd say we're open to it. It's Not a priority, not today anyway. The and most likely the way that we would enter would be via partnerships versus selling as an exclusive agent or an independent agent or MGA selling insurance on our own.

Speaker 2

So if we enter, it'd be a partnership, it wouldn't be a solo act. And for now, it's not a high priority for us.

Speaker 10

Great. Thank you very much.

Speaker 2

Thank you.

Operator

And our next question comes from the line of Manav Patnaik with Barclays. Please proceed with

Speaker 11

Hi, good morning. This is actually Ronen Kennedy on for Manav. Thank you for taking the call and the question. On the back of that Question with regards to insurance. Just wondering if you could please give an update on some of the other partnerships more Typically, Canopy with Ford, West, DH, Horton, etcetera, just an update on those partnerships and what the expected benefits are to be?

Speaker 2

Yes. So generally going well, our relationship with Lyft continues to deepen. The partnership with Doctor Horton is going well. That will be give or take about 100,000 home builds over the next 12 months, we'll convert something in the zone of 60% of those. We feel great about Canopy.

Speaker 2

That's new for us. For those of you who aren't aware, ADT and Ford partnered to invest $150,000,000 In a joint venture called Canopy, the intention is to service support Vehicle security and that will involve both an aftermarket product and an integrated product, both of which will be available in the first half of twenty twenty three. So no material impact no impact at all in 2022, but it will start to cut in, in 2023 2024 and thereafter. It opens up a pretty significant New TAM for us and the largest customer of Canopy out of the gate will be Ford. So it's going to pay dividends long term.

Speaker 2

It's an exciting new opportunity for us.

Speaker 11

Thank you. And then if I may as a follow-up, can you just comment on SoSecure, the rollout of that potential

Speaker 2

So I'll comment on Sure. And offer some mic to anybody else that wants to comment on innovation. SoSecure is our product that essentially provides Virtual a virtual companion via GPS and the phone. We will be eventually integrating So secure into the application that customers use to control their homes, the interactive, What we're calling ADT Plus, so I can control my life locks doors, I can arm and disarm a system And I'll also have SoSecure embedded in that application. So we think it's a really Useful add on feature for us helps differentiate our application from everybody else.

Speaker 11

Okay. Thank you. And sorry, if I may please just sneak in one more. Could you comment on ADP's Recession resiliency and your assessment of how using ADT would perform, if there were to be a recession?

Speaker 3

Yes. We feel like we have a lot of characteristics that give us some Recession resistance, one of course is just the recurring revenue base. During times of recession, there's a variety of macro factors that tend to move in our favor. People tend to move less Which means that they don't tend to cancel their accounts because they're moving often in recessions. People tend to be more concerned about things like safety and security.

Speaker 3

And then it's Generally, the case that if people take peace of mind from having a security system, that's not the first thing that they would cut in times of financial challenges. We've talked about this a lot. I've been with the company, talked about this a lot, never having It's through us, but I would also offer that the way in which we are able to navigate the challenges associated with COVID in 2020 and into 2021 It's almost a proof point that shows we are able to navigate through a challenging set of conditions favorably. So yes, we're hoping the best for the Overall macroeconomic conditions, of course, but we think we're very well situated. And maybe one other point I'd make too We have a lot of discretion in our capital allocation model.

Speaker 3

So even if some of what I said earlier, we're not to play out the way I describe I fully believe it will. We have levers at our disposal to manage our liquidity and our financing And debt obligations, even if things were to take a turn in a more negative direction, but we feel really good overall.

Speaker 11

Great. Thank you very much. Appreciate it.

Operator

And we have reached the end of the question and answer session. I'll now turn the Call back over to Jim DeVries for closing remarks.

Speaker 2

Okay. I'd like to extend my appreciation to our ADT Employees and dealers, we had a very strong quarter. I'm proud of our collective efforts. Thanks as well to everyone joining our earnings call this morning. As you heard, we're optimistic about continuing the year strong And looking forward to the growth ahead.

Speaker 2

Have a great day everybody.

Operator

And this concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.

Powered by Quartr