ADT Inc (ADT) 2018 Q2 法說會逐字稿

Greetings, and welcome to the ADT Second Quarter 2018 Earnings Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce Jason Smith, Senior Vice President of Finance and Investor Relations. Please go ahead, sir.

Good evening, and thank you, everyone, for joining us on ADT's Second Quarter 2018 Earnings Conference Call. This afternoon, we issued a press release and slide presentation on our quarterly 2018 results. Both are available on our website at investor.adt.com.

Our remarks today will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These risks include, among others, matters that we've described in our press release issued this afternoon and our filings with the SEC. Please note that all forward-looking statements speak only as of the date of this call. We disclaim any obligation to update these forward-looking statements.

During today's call, we'll make reference to non-GAAP financial measures. Our forward-looking non-GAAP financial measures exclude special items which are difficult to predict and are mainly dependent upon future uncertainties. For a complete reconciliation of historical non-GAAP to GAAP financial measures, please refer to our press release issued this afternoon and our slide presentation, both of which are available on our website at investor.adt.com.

Joining me on today's call are CEO, Tim Whall; and our CFO, Jeff Likosar.

I'll now turn the call over to Tim.

Thank you, Jason, and thank you, everyone, for joining us today.

I'll walk through our strong results and provide some perspective on our growth initiatives and key operating metrics, and then Jeff will add more detail on our financial results and guidance before we take your questions.

During the second quarter, we generated growth across our key financial measures, including revenue, adjusted EBITDA and free cash flow. We also made progress on our operational initiatives, and I'm very excited about the opportunities ahead.

Starting with our quarterly performance, our 6% revenue growth was driven by our efforts to balance top line expansion with optimizing profitability and free cash flow. We produced higher revenues in commercial and multi-site accounts, grew residential pulse penetration and had stronger retention of existing customers versus a year ago. Our adjusted EBITDA grew 5% on this higher revenue and was $610 million for the second quarter. Perhaps most importantly, we produced $123 million in free cash flow before special items, bringing our year-to-date free cash flow generation to $310 million compared to $191 million in the first half of 2017.

We generated these financial results by having our organization aligned and focused on initiatives that includes maximizing customer retention and acquiring our new customers more efficiently as reflected by improved net subscriber acquisition costs, or SAC.

I'll now walk you through some of our largest growth initiatives that have us so excited about the future. The interactive home is an important theme for us, and many of you are familiar with ADT Pulse, our primary interactive platform. This service puts us at the center of the interactive home, allowing our customers to connect and remotely control their security, lighting, thermostats, cameras and more, all through the intelligent ADT Pulse app. We partner with Amazon, Z-Wave, Kwikset, NETGEAR, Ring, Nest and others, and our Pulse app is compatible with a large variety of connected home devices. Interactive customers are valuable to ADT due to their higher revenues and higher retention rates.

During the second quarter, about 3/4 of our new customers opted for Pulse, which is up from about 2/3 a year ago. The percentage of our total base now using interactive services is approaching 40%. We see embedded growth opportunities as this 40% figure gradually moves towards the current take rate. ADT Go, launched in the first quarter, extends personal security beyond the home from the premises to the person so that families and individuals can be safer and more secure no matter where they are. With features that include SOS emergency response, crash detection, driver reports and location sharing, what I like about this new service is that it represents innovation around the trusted ADT brand. And we're already off to a quick start, reaching more than 150,000 downloads just since the first quarter launch.

Next is our expansion into the commercial business, and we're seeing continued momentum with new commercial and national account sales. The commercial business represents both fast growth and efficiency of capital. It's a major factor in driving the improvement in our expense net SAC. The Aronson and Acme acquisitions, which we just closed in March, continue to perform well.

Subsequent to the quarter, we closed on 2 acquisitions during July. The first is Access Systems Integration, or ASI. This is a systems integrator based in Eatontown, New Jersey, that brings new talent and commercial capabilities to ADT. ASI specializes in the design, delivery, installation and servicing of state-of-the-art commercial security system. The second, as announced yesterday, is Secure Designs Inc., or SDI. Based in Greensboro, North Carolina, SDI is an established leader in providing effective, high-value managed Internet security services for micro, small and midsize businesses.

We welcome both the ASI and SDI teams to the ADT family. On a day-to-day basis, we have the team focused on the blocking and tackling of improving the metrics that we know are most important to driving our financial success.

During the second quarter, we improved our gross customer revenue attrition on a trailing 12-month basis by 50 basis points versus a year ago to 13.6%. To drive this metric in the right direction, we focused on high-quality customer selection and providing quality service every day. We're focused on continuing to drive attrition improvement during the seasonally active second half of the year. We continue to optimize our net SAC with our customer revenue payback improvement to 2.4 years versus 2.6 years a year ago on a trailing 12-month basis. This is the result of our efforts to increase installation revenues and drive efficiency in selling and installation costs. We note that every 1/10 of a point of improvement in revenue payback equates to approximately $60 million in annualized cash savings, and this is an important lever for us.

Looking ahead, we believe our brand and our favorable positioning provides significant competitive advantages. We're the leading security provider, offering a fully interactive home experience that we're now extending to the individual while they're outside their home.

While we remain focused on the largest segment of the industry, which is the professionally installed residential market, we now have a similar opportunity in the commercial space as well as the smaller but quickly growing opportunity in the do-it-yourself market. We have the team and the right approach to continue a very successful year in which we're driving growth and focusing on free cash flow generation by executing on our balanced and disciplined sales and service approach. These are the differentiators that help ADT stand out, and our team's passion for driving results aligns us well the interest of shareholders.

Speaking of the team, I do want to publicly welcome Jochen Koedijk, who's joined ADT to serve as our Chief Marketing Officer. Jochen most recently served as VP of Marketing at Chewy.com, and prior to that, he was at Amazon, where he led a team of 70 and oversaw worldwide social media and new channel advertising. We're excited to have Jochen join us at a time when attracting new customers is increasingly driven by digital engagement, and his leadership and market innovation will be a tremendous asset. Welcome aboard, Jochen.

With that, I'll hand it over to Jeff for a closer look at our financial performance and outlook. Jeff?

Thanks, Tim, and thank everyone for joining the call today.

I'll spend the next few minute sharing some highlights of our second quarter results and some updated guidance for the rest of the year.

We are pleased with our overall second quarter results and our accomplishments through the first half of 2018, which reflect our ongoing balanced approach to improving revenue, EBITDA and cash flow while continuing to deliver superior customer service. As Tim mentioned, our overall second quarter revenue grew by 6% versus the same quarter of last year. The drivers of our monitoring and service revenue growth, which increased by 2%, include higher average pricing, continued gross attrition improvements and recurring revenue additions. Growth in installation and other revenue, which grew by 78%, was primarily the result of increased commercial and multi-site sales, including revenue from the commercial acquisitions we have added to our portfolio during the past year.

Our adjusted EBITDA at $610 million grew by 5% mainly due to the flow-through margin on higher recurring revenue along with reductions in expensed net subscriber acquisition costs. Our adjusted net income expanded to $113 million, up from $37 million in the prior year period. This improvement was driven mainly by growth in adjusted EBITDA and lower cash interest outflows.

A key focus for us is generating efficient cash flow, and our free cash flow before special items came in strong at $123 million for the quarter and $310 million for the first half of the year. This compares to $191 million for the first half of last year. An important driver of our free cash flow is our efficiency in spending on net subscriber acquisition costs, and Tim mentioned earlier, our improvement in revenue payback to 2.4 years on a trailing 12-months basis. We achieved this by reducing our net SAC by 3% during the second quarter while at the same time, our recurring monthly revenue, or RMR additions, were up 3% and came in at $13 million. This marks our third consecutive quarter of adding more RMR in the prior year period while also reducing our net SAC spend. This efficient growth is an important component of our long-term free cash flow generation strategy.

I also want to say a few words about our capital structure, which we believe positions us well for the future. While our overall structure did not change materially during the second quarter, a noteworthy subsequent event is that on July 2, we redeemed our $750 million Koch preferred securities for total consideration of approximately $950 million, including the make-whole premium in accumulated dividends.

As a reminder, our full year free cash flow guidance is exclusive of outflows associated with the preferred securities. And I also want to point out that our third quarter GAAP results will include a charge of approximately $215 million arising from the extinguishment of the securities and the make-whole premium.

During the second quarter, we also swapped $1.5 billion of floating-rate debt to a fixed LIBOR curve. Additionally, we paid out a second quarter dividend of $0.035 per share in July. Today, we have declared a third quarter dividend of the same amount to be paid in October.

Now that we are through the first half of the year, I want to provide some updates on our outlook for the full year relative to the guidance we originally shared in March.

We have raised our full year revenue outlook to a range of $4.5 billion to $4.55 billion. We have raised our adjusted EBITDA outlook to a range of $2.425 billion to $2.435 billion, and we have raised our outlook for free cash flow before special items to a range of $500 million to $525 million.

We have maintained our gross revenue attrition outlook of 13% to 13.3%.

All these elements of guidance reflect continued improvement over 2017, as you can see on Slide 13 of our quarterly presentation.

Before I conclude, I want to also address a few housekeeping items that have periodically come up in conversations with investors. The first is that our full year free cash flow guidance includes full year interest of slightly more than $600 million. The second is that our stock compensation expense was significantly higher in the first half than we expect it to be in the second half, primarily due to the accelerated vesting of certain shares distributed upon conversion of B units in connection with our IPO. The third is that we do not expect any material movements in our share count between now and the end of the year.

Lastly, I want to note that we've added some additional information to the slide deck available on our website, including 8 quarters of historical trend data and further detail on some of our GAAP line items. We encourage you to have a look.

With that, I would like to thank everyone again for joining us today, and operator, you may now open the call for questions.

(Operator Instructions) Our first question today is coming from George Tong from Goldman Sachs.

You indicated you saw improved subscriber acquisition cost efficiency this quarter. Can you discuss how this translated into gross subscriber and gross RMR performance in 2Q versus earlier quarters?

It's Jeff. So this is our third consecutive quarter of having grown our RMR additions, while at the same time decreasing our subscriber acquisition spend, net of the revenues, which is the main driver of the improvement in our revenue payback. So we were focused on balanced efficient growth, and we're very pleased to have 3 quarters in a row of having grown our RMR additions.

Got it. And then what about your actual gross subscriber count additions? How would you comment qualitatively on trends there?

We were at about 7.2. We were at 7.2 at the end of last quarter. You'll see in our 10-Q, we'll reference the same 7.2 million subscribers, so no material change.

On a net basis?

Right.

Got it. Amazon and Google, you probably saw it, recently launched new competitive offerings in the lower-end monitoring and DIY space. Can you discuss any changes to customer behaviors that you may be seeing following these recent new offerings and what you might be doing in response?

Yes. Again, great offers, for -- we feel for the renters, for sure. Those folks that are looking to add 1 or 2 devices. Traditionally, not an area we've played in, George. Our typical customer's buying a larger system, systems that we have installed this year, slightly larger and more devices than last year. I think we see the home getting more complicated, and our traditional buyer enjoys that full-service of our tech. So again, we're not seeing a difference in our buyers. We do see it as a chance to increase the market share and bring some new buyers into the space that hadn't previously been there. And of course, we're working to put a DIY offering out there. I think we've announced that before with our partnership with Samsung and try and take advantage of their -- if we get to see growth in that market. But 2 different buyers from what we're seeing, and very pleased to see the opportunity to expand the market.

Got it. That's helpful. And then lastly, can you discuss your progress in winning commercial clients, how growth in commercial this quarter compared to 1Q and what expectations for commercial are included in your updated guidance?

Yes, the commercial story is an exciting one for us. Unfortunately, it doesn't move the needle yet when you take a look at the size of our consumer base. It's just the way it is. We'd love it if it was a more meaningful part of what we're doing. It's an exciting part of the business. It's something we've had great success in, in past ventures. And I think you guys understand -- the gist of the commercial business, you pay less to get the account. The SAC or the subscriber acquisition cost can be materially lower. Oftentimes, you get a little better attrition with those customers. The guys have had another great quarter in the commercial business in our national accounts as well as our multi-location, so they did a terrific job. Moving forward, we look forward to just continuing to grow that channel. It's a nice part of growth for the company for us.

(Operator Instructions) Our next question is coming from Toni Kaplan for Morgan Stanley.

I wanted to ask about attrition. It didn't improve sequentially, and the reduction over prior quarters had been slowing. So I guess what's been driving that slowdown and what gives you the confidence that you'll be able to get to 13% to 13.3% by the end of the year?

Yes, a couple of things. I mean, progress in this is not always linear on a sequential quarter basis. We did improve by 50 basis points year-over-year and affirmed the guidance, as you said. Comfortable with the tactics we've used. And again, I think we would -- we've discussed on these calls variance performance management. Certain branches get out a little earlier and get a little better numbers going. Certain ones play to the middle. You've got certain ones that are more at the bottom end of the spectrum. There's a touch of seasonality into the business with this. I think you guys know in the summer months, so where we thought we'd be at this point. And we can confirm or affirm the guidance for the year, but we'll stick to the tools we've been using. I think we announced before we've introduced some voice analytics in our call centers, which is kind of exciting for us. But kind of taking a look at that variance performance management learning from the branches that are a little ahead of the others, taking those learnings back to the other branches and moving them as a group.

Okay. Strong free cash flow performance in the quarter, and you did raise the midpoint of the range and -- well, at least increased the bottom of the range by the $25 million. I guess, was there anything onetime to call out in this quarter driving that strong free cash flow growth and just anything to think about in the back half of the year that would impact free cash flow maybe being more volatile?

Yes, and I'll let Jeff answer the back half of this question. On the front side, our strategy is clearly, we've got to grow the revenue, grow the earnings. We're very disciplined in terms of our sales growth. As we mentioned earlier, when the cost to acquire accounts goes down, when attrition is lower and you're able to grow the RMR base, those things combine to a very powerful cash flow number. That's how we've always looked at the business. Terrific performance for the quarter. Other than things that you don't foresee, been doing this a long time, there's always a couple of things that pop up that you didn't think of going forward. But very comfortable with the guidance Jeff put out for the remainder of the year. Any other comments here, Jeff?

Yes. And Toni, there's no one thing I would call out. I would, as a general comment, note that the timing of certain inflows and outflows can vary a bit from quarter-to-quarter and year-to-year just because of even things like when does the -- when did the quarter happen and relative to when a pay cycle occurs and do we have an extra week or one week's less payroll in one period than the next. So we feel good about our guidance. There is some seasonality, nothing in particular I would call out. Third quarter tends to be a higher SAC spending quarter than some of the other quarters historically.

Our next question today is coming from Manav Patnaik from Barclays.

The first question is just around, I guess, the new CMO hiring and the switch you made there. I guess, I've noticed a few more TV ads and so forth. Is there a change in strategy? Can you just help us understand what prompted that switch?

Yes, again, we're a little more of a digital presence, digital sales. Had an opportunity to bring Jochen to join the team. Terrific background. Got us very excited. Jamie Haenggi, who's kind of carried double duty for us since she started, also owns our customer service experience. So in effect, we're kind of doubling down. She's taking a more full-time active role on that, where she's been kind of carrying 2 jobs, whereas Jochen brings his -- some new experiences on the digital side that we think will play very well for us in terms of our ability to attract new customers.

Okay. And maybe just on the commercial side, a lot of these acquisitions, especially the ones that have, I guess, cyber capabilities, are these all complementary capabilities or -- meaning the different cyber acquisitions? Or are they more sort of geographic plays that give you presence somewhere else?

Yes, so it's -- again, our premise from the get-go was take security outside of just the premises. We announced ADT Go for the security to the person when they're outside the home, and then, of course, protect their networks as well. The first acquisition was much more of the commercial enterprise-level type customers and kind of gave us some high-end capability. The recent acquisition of SDI is much more in the small business arena. So -- and again, cyber is a big business. There's a trusted brand with ADT. We've done a fair amount of market research where we play well. We think being able to protect networks, whether it's in the consumer side or in the small biz or the enterprise, makes sense for us. But we're particularly targeted in where we think we can play well in that space. SDI, with Larry and his team, strong acquisition for us to really open up that small business area as we move forward.

Our next question is coming from Peter Christiansen from Citigroup.

A quick question -- thanks for the Pulse data. That's very helpful. Just generally, can you characterize what the attrition trends are in Pulse versus traditional and if there's any dramatic difference? Do you think that's going to play a role in driving overall gross attrition lower?

We haven't shared specific numbers in that area, Pete, but obviously, the more devices, the more that people use the system, the more they get connected, there's an attach rate issue that plays well. But also, they're larger systems, as I mentioned before, the larger systems. One of the key indicators for how long the customer stays, of course, is the money they pay upfront when they get it. And that's played very well for us. Again, as these larger systems get installed, the upfront money has gone up nicely for us as we pushed. And we expect to get favorable attrition characteristics as we go forward.

And then I know you've talked about 3Q being pretty important in terms of possibly introducing Internet buying with better information in terms of the breakdown of costs that would make you -- at least illustrate to customers that you're more competitive than many may think on the surface. Do we still think that's on track? And also, with new equipment coming on in the second half, do you see that as an upside opportunity to market?

Yes. And as ADT -- a lot of our competitors sell something of what ADT sells. ADT has got the largest breadth of products out there, and we think going to e-commerce will give us a better chance to kind of showcase this with buyers. Also following the trend that people are using digital buying as a way to secure purchases, and something we haven't done before. So again, if we can sell one, it's one more than we used to sell. But I also think it's a chance for us to kind of highlight the different areas of the business so consumers can see for themselves, it's not ADT doesn't sell this one product. I think you guys know we're a technology aggregator. We're partnering with many people's different products that are out there. Our Pulse app is a terrific app. We're helping simplify the home by putting a lot of different devices into our one app as they go forward. So on track to introduce our first set of products, e-commerce in the third quarter. And again, I do -- I am excited about -- from a growth, how do you bring new services to this large customer base that we have? We're very encouraged by how our ADT Go services rolled out to our customers. I think we've put in the deck over 150,000 downloads at the end of June as we go forward. And a couple of new services like that to our existing base have us excited about the future growth.

Our next question is coming from David Ridley-Lane from Bank of America Merrill Lynch.

Sure. I wanted to ask about the installation revenue. It's rising fairly dramatically. Excluding the effect of the -- recognizing the amortization of deferred subscriber acquisition, that core installation revenue, up really strongly. So I'm wondering, is that an increase in upfront revenue per installation? Or is it increasing the number of gross units that you're installing? Is it a mix of both? Just trying to better understand the drivers in kind of that core installation revenue growth.

Yes, David, it's Jeff. A couple of things I'll point out. One, our install revenue is comprised of what I'll describe as 3 separate categories. One is organic outright sales. So our organic outright sales grew, and that's driven by what you just said. It's more outright sales overall. It's pushing for more revenue collection. It's some of what Tim described of more full-featured system, but it's only outright sales. If it's not an outright sale, it wouldn't be in the number. That drives about $17 million of the growth. Another component of the growth is M&A, as I mentioned in my prepared remarks, so about 20 -- slightly more than $20 million of the growth is M&A. And those M&A targets and acquisitions, as Tim has described a little bit on this call, but more detail on prior calls, generally, they are commercial. Generally, they are integrators and/or installers more so than they are sources of recurring revenue. We seek to bring them in and then drive recurring revenue over time. But the acquisitions generally are installed revenue. And then the third component, as you pointed out, it's amortization of deferred revenue that we collected in prior periods. So nice improvement in all 3 of those areas, but I thought I'd share that little color to break it down for you.

Any additional disclosure around Pulse customers? Is there a rule of thumb you could help us with on in terms of the revenue benefit from every 1% shift to Pulse as a percentage of your client base mix?

Nothing specific that we'd share. What I would tell you is that when we lose a customer, typically, the customer we take on to replace that customer is at a -- priced at several dollars higher than the customer we lose. That's largely driven by the fact that new customers are taking a much higher percentage of interactive systems and some of the other features that Tim described.

Our next question is coming from Jeff Kessler from Imperial Capital.

There are a lot of companies working on technology, particularly analytics technology, a couple of whom you've probably -- you've bought, a couple of whom you've worked with in the form of like Alarm.com. What I'm interested in is what are you doing, particularly when it comes analytics and video, to reduce the amount of false alarms or reduce the amount of dispatches that you can make, so that the customer experience gets better and so you don't have to spend as much and so your attrition goes down as well?

Yes, great area for us. Daniel has kind of spearheaded this initiative over the last 10 years in prior deals. I'm happy to have him here with us. I think you should know it, Jeff. I mean, past, present PPVAR. Very closely tied with our police chiefs across the country, et cetera. But our center in Dallas, I think, it's kind of cutting edge in terms of what we do with video response -- verified video response as well as even ring-down services that we provide on the commercial side. On the consumer side, obviously, verified response has been important for us. We have, as I think the industry has seen, increasing numbers of cameras being put in out there that are helpful to us in terms of the determining exactly what's going on at the premise before we send a dispatch.

Okay. Second question -- a solid question is we've seen 1 or 2 companies in the industry who have gotten approvals to do it, have been able, and you know who they are, to finance customers. It's generally been able -- they've generally been able to reduce the amount of spend they have upfront and also help, hopefully, be able to spend more on that customer later on if they spend less. What type of -- I wouldn't call it schemes -- but what type of options are you mulling at this point with regard to the way you can market, the way your customers spend upfront on your systems?

Yes, we'd like to leave it so the customer chooses, if you could imagine, kind of 2 bar graphs in front of you. If the one on the left was the installation dollars or the amount you want to pay upfront and the one on the right was the recurring services you want to pay, we envision where the customer just kind of self-selects into -- pay higher upfront and lower monthly or I'd pay -- I'll take the lower upfront, but I'll take the higher monthly. So they're selecting kind of what feels best for them to buy, where we can maximize market share going forward. And again, staying with our disciplined approach and the credit check policy and those kinds of things as we move forward.

You don't need a third party to do this?

Again, the internal rate of return is what we'd look at. If there's a financing option that provides a better return, we'd look at it. But currently, we don't need to do that unless it's a better IRR than what we're getting today.

Our next question is a follow-up from Peter Christiansen from Citigroup.

Two questions. I think last quarter, you provided an attribution of the top line outlook between net RMR adds, pricing and upgrades, commercial and multi-site. I was just wondering if there's any commentary on one of those legs of the stool if one is kind of outperforming or underperforming, puts and takes there as we pass 2Q.

Yes, I don't -- there's nothing in particular I would call out, Pete. I don't recall exactly what you're referring to. But if you look at our full year revenue guidance, it's tracking towards the higher end of the range I described. There's some M&A included in there, and then our -- otherwise, our mix between monitoring and service revenue and install revenue is largely as we had originally anticipated it. The fact that the rev-rec standard changed, which we called out in the last quarter, we didn't address it specifically here, but that shifts a little bit more into install and out of monitoring and service. And then some of our initiatives around technician upsell leads to, in some cases, selling more into outright sales that otherwise would've been monitoring and service revenue. But nothing terribly different from how we originally modeled it.

Okay, that's fair. And then my last question, a bit theoretical and following up on my Internet buying question from before. We've seen this happen in other industries, and perhaps with DIY and Amazon coming into the business, fully transparent pricing sometimes can be disruptive to any industry. Is this something that ADT has considered? Or is this somehow -- would it be in any way prohibitive for you, considering you rely heavily on a dealer network? Just any color on that would be helpful, moving from more of a quote-based kind of pricing mechanism to more fully transparent kind of pricing menu.

Yes, we actually see it as a positive because, as you know, our traditional sale is subsidized upfront dollars for higher RMR, and that can skew what a customer thinks we're charging for something versus a lower-priced option. So we actually see this as a benefit that if you wanted to pay for the devices upfront, we'd be able to offer competitive monthly fees. And we think that's a real positive for ADT. It's also a chance for us to show some of the new services as opposed to just protecting the premises. Like I say, that personal -- the Go has been received very well in the marketplace. And as Jay Darfler and the team introduce new services to our existing customer base, it's another chance for us to educate them on the website. So we actually think this is a great opportunity for ADT moving forward versus traditionally, we've been you call in, talk to one of our reps or have someone come out to your house. And that was the way you actually -- we're able to get a price. Whereas, a lot of today's buyers, they'll shop on their own. And I feel like we're losing out a little bit of share by not being able to let them see exactly what we could give to them. So I see it as positive, Pete.

Have you considered with an upfront equipment purchase, perhaps introducing some type of financing product as well?

Yes, we've looked at it for sure. And again, you can imagine someone who's maybe credit score constrained to get the deal they'd want on the lower monthly, perhaps have an arrangement where we're able to finance that purchase of the equipment where we'd want them to pay a little bit more for us.

Pete, it's Jeff. And 2 other points I'll make, too, from your original questions just as I'm thinking back to the last call. We have talked in the past about price escalations being less than 1% growth. That's tracking generally as we originally planned. And then second point I'd make is that there is more flexibility in install revenue. So to be at the higher end of a range or exceed a range when we start into get to the second half of the year, your install revenue is more likely to drive us to the high end of the range just because monitoring and service revenue, if we take on a new customer today, we only have 4, 5 months of the year left. Whereas, in install, we get the full revenue whenever we complete the job.

We've reached the end of our question-and-answer session. I'd like to turn the floor back over to Tim for any further or closing comments.

Thank you, operator.

And I want to thank the many people of ADT and our dealer partners for their hard work and dedication that are driving the results.

We certainly appreciate everyone joining the call today. We hope you share our enthusiasm over our favorable position in the security industry and our plans to extend our well-known brand and operating abilities to new and exciting growth opportunities.

Have a good evening, and we look forward to updating you again next quarter.

That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.