The ADT Corporation is a leading provider of electronic security, interactive
home and business automation and related monitoring services in the United States
and Canada. ADT has one of the most trusted and well-known brands in the security
industry today. . We deliver an integrated customer experience by maintaining
the industrys largest sales, installation and service field force as well as
a robust monitoring network, all backed by the support. Our broad and pioneering
set of products and services, including interactive home and business solutions
and home health services, meet a range of customer needs for todays active
and increasingly mobile lifestyles. We believe we are well positioned to continue
to lead the large and growing residential and small business security market,
and that our demonstrated expertise and established footprint will help us to
become a leader in the evolving market for integrated security, home health
monitoring, lifestyle and business productivity solutions.
We originated in 1874 as the American District Telegraph Company, a consortium
of 57 telegraph operators. During the early part of the 20th century, we began
offering fire and burglar alarm solutions. Over the years, we engaged in a variety
of communications related activities and by 1987 had become one of the leading
electronic security services providers. In 1997, we were acquired by Tyco International
Ltd. (“Tyco”). In 2010, we acquired our largest competitor, Broadview
Security.
The Company was incorporated in Delaware in 2012 as a wholly-owned subsidiary
of Tyco. As part of a plan to separate Tyco into three independent companies,
Tyco transferred the equity interests of the entities that held all of the assets
and liabilities of its residential and small business security business in the
United States and Canada to ADT.
In order to optimize the financial performance of our business, we focus on
several key business drivers, including customer additions, costs to add a new
customer, average revenue per customer, costs incurred to provide services to
customers and customer tenure. We believe we have a proven track record of successfully
balancing these key business drivers to optimize our returns. We use a structured
customer acquisition process designed to generate new customers with attractive
characteristics, high adoption of automatic payment methods and strong credit
scores, which we believe results in long average customer tenure.
The majority of the monitoring and home/business automation services and a
large portion of the maintenance services we provide to our customers are governed
by multi-year contracts with automatic renewal provisions. This provides us
with significant recurring revenue, which for the year ended September 27, 2013,
was approximately 92% of our revenue. We believe that the recurring nature of
the majority of our revenue, combined with our large customer base and increasing
average revenue per customer, enables us to invest continuously in growing and
optimizing our business. This includes investments in technologies to further
enhance the attractiveness of our solutions to current and potential customers,
to continue development and training to enable our direct sales, installation,
customer service and field service personnel to more effectively deliver exceptional
service to our customers, to expand our dealer and partner network and to make
continued enhancements to operations efficiency.
We will continue to manage our business by optimizing the key business drivers
noted above to maximize the value from our residential customers. We also believe
there is significant opportunity to increase our share of the monitored security
and premises automation market for small businesses. Therefore, we intend to
grow our share of small business customers by continuing to expand our small
business field sales force and strengthening our small business marketing support
to build a larger, more robust partner network and to assist in marketing additional
value-added services, including ADT PulseTM, our remote monitoring and home
automation system.
We serve our customer base from approximately 200 sales and service offices
located throughout the United States and Canada. From these locations our staff
of approximately 4,300 installation and service technicians provides security
and home/business automation system installations and field service and repair.
We staff our field offices to efficiently and effectively make sales calls,
install systems and provide service support based on customer needs and our
evaluation of growth opportunities in each market. We maintain the relevant
and necessary licenses related to the provision of installation and security
and related services in the jurisdictions in which we operate.
We operate eight redundant monitoring facilities located across the United
States and Canada. We employ approximately 4,000 monitoring center customer
care professionals, who are required to complete extensive initial training
and receive ongoing training and coaching. All of our monitoring facilities
are listed by Underwriters Laboratories, Inc. ("U.L.") as protective
signaling services stations. To obtain and maintain a U.L. listing, a security
system monitoring center must be located in a building meeting U.L.s structural
requirements, have back-up computer and power systems and meet U.L. specifications
for staffing and standard operating procedures. Many jurisdictions have laws
requiring that security systems for certain buildings be monitored by U.L. listed
facilities. In addition, a U.L. listing is required by insurers of certain customers
as a condition of insurance coverage. In the event of an emergency at one of
our monitoring facilities (e.g., fire, tornado, major interruption in telephone
or computer service or any other event affecting the functionality of the facility),
all monitoring operations can be automatically transferred to another monitoring
facility. All of our monitoring facilities operate 24 hours a day on a year-round
basis.
We maintain a service culture aimed at “Creating Customers for Life”
because developing customer loyalty and continually increasing customer tenure
is an important value driver for our business. To maintain our high standard
of customer service, we provide ongoing high quality training to call center
and field employees and to dealer personnel. We also continually measure and
monitor key operating and financial metrics, including customer satisfaction
oriented metrics across each customer touch point.
Customer care specialists answer non-emergency inquiries regarding service,
billing and alarm testing and support. Our monitoring centers provide customers
with telephone and Internet coverage 24 hours a day on a year-round basis. To
ensure that technical service requests are handled promptly and professionally,
all requests are routed through our customer contact centers. Customer care
specialists help customers resolve minor service and operating issues related
to security and home/business automation systems and in many cases are able
to remotely resolve customer concerns. We continue to implement new customer
self-service tools via interactive voice response systems and the Internet,
which will provide customers additional choices in managing their services.
Industry and Competition
We believe the primary factors driving industry growth include heightened concerns
about crime, especially for an aging population that is increasingly concerned
about security related to break-ins and theft of high-value items. We believe
that a combination of increasing customer interest in lifestyle and business
productivity and technology advancements, which are decreasing the cost of Internet
Protocol-enabled security equipment, will support the increasing penetration
of interactive services and home/business automation.
The security systems market in the United States and Canada is highly competitive
and fragmented, with a number of major firms and thousands of smaller regional
and local companies. The high fragmentation of the industry is primarily the
result of relatively low barriers to entering the business in local geographies
and the availability of wholesale monitoring (whereby smaller companies outsource
their monitoring to operations that provide monitoring services but do not maintain
the customer relationship). We believe that our principal competitors within
the residential and small business security systems market are Protection One,
Inc., Monitronics International, Inc. and Vivint, Inc.
Success in acquiring new customers in the residential and small business security
and home/business automation markets is dependent on a variety of factors, including
company brand and reputation, market visibility, service and product capabilities,
quality, price and the ability to identify and sell to prospective customers.
Competition is often based primarily on price in relation to value of the solutions
and service. Rather than compete purely on price, we emphasize the quality of
our electronic security and home/business automation services, the reputation
of our industry leading brands and our knowledge of customer needs, which together
allow us to deliver an outstanding customer experience. In addition, we are
increasingly offering added features and functionality, such as those in our
ADT Pulse interactive services offering, which provide new services and capabilities
that serve to further differentiate our offering and support a pricing premium.
We face new competition from competitors such as cable and telecommunications
companies in the interactive services and home automation space. However, we
believe our robust field sales force, including our nationwide team of in-home
sales consultants, our solid reputation for and expertise in providing reliable
security and monitoring services through our in-house network of fully redundant
monitoring centers, our reliable product solutions and our highly skilled installation
and service organization position us well to compete with these new competitors.
The market leader in the PERS space is Phillips/Lifeline. We believe we have
the opportunity to enhance our position in this segment, and that as the demographics
of the United States and Canada continue to change towards an increasingly older
population, the market is poised to experience significant growth.
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