Shares of ADT (NYSE:ADT) fell by more than 12% Tuesday morning after the home security systems provider reported a fourth-quarter loss and predicted 2019 earnings would come in below expectations.
ADT reported fourth-quarter revenue of $1.19 billion, up 7% year over year and ahead of the $1.16 billion consensus estimate, but the company's adjusted loss of $0.04 per share was significantly below the expected profit of $0.12 per share. The company also said it expects full-year 2019 EBITDA of between $2.46 billion and $2.5 billion, short of the $2.56 billion expectation.
The company also said it expects free cash flow to grow by 6% to 13% this year, well below the 33% growth it reported in 2018, as ADT ramps up spending on hiring and marketing. CFO Jeffrey Likosar on a call with investors said, "[W]e will make selective brand investments as we continue to solidify ADT's position as the leader in home automation and in security."
With the drop, ADT is now down 46% since its January 2018 initial public offering.
ADT's bread-and-butter home monitoring system has come under pressure from a new generation of self-installed security products, including Alphabet's Nest, available at a lower monthly fee.
The company has a competing product, called Pulse, and is working on a partnership with Amazon.com. It also has acquired do-it-yourself home security provider Lifeshield for $25 million to bolster its offering. But these investments will take time to pan out, and investors on Tuesday were in no mood to hold tight and wait for that improvement.