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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Greetings and welcome to the ADT Incorporated First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host today, Mr. Jason Smith, Senior Vice President of Finance and Investor Relations Manager for ADT. Please proceed, sir.
Good morning and thank you for joining us on ADT's first quarter 2018 earnings conference call. This morning, we issued a press release with our first quarter 2018 results. A copy of the release is available on our website at investor.adt.com. Today's call is being webcast and is accompanied by a slide presentation, which is also available on our website.
Please refer now to page 2 of that presentation. Our remarks and answers will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks that could cause actual results to be materially different from those expressed or implied by such forward-looking statements. These risks include, among others, matters that we have described in our press release issued this morning, the prospectus related to our initial public offering filed with the SEC, and other filings we make with the SEC. Please note that all forward-looking statements speak only as of the date of this call and we disclaim any obligation to update these forward-looking statements.
During our call today, 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 on future uncertainties. For a complete reconciliation of historical non-GAAP to GAAP financial measures, please refer to our press release issued this morning and our slide presentation, both of which are available on our website at investor.adt.com.
Joining me on the call today are our CEO, Tim Whall; our President, Jim DeVries; and our CFO, Jeff Likosar.
I'll now turn the call over to Tim.
Thanks, Jason. Good morning. Thank you for joining our call to discuss first quarter performance. We move to slide 3. 2018 begins with a strong first quarter with positive momentum across all areas of the business. We delivered on our five financial targets, increasing revenue by 5% year-over-year, increasing EBITDA by 7%, reducing our payback period on new customers and reducing our customer attrition by 90 basis points, all of which led to free cash flow generation of $187 million. Jeff will speak in greater detail about the financial performance in a moment.
In the quarter, we continue to strengthen our foundation for growth. Our commercial team had the best month of sales since the P1-ADT merger. This excludes any M&A results. We also were able to expand our talent capabilities in the commercial space with the Aronson and Acme acquisitions. We also launched our ADT Go app in Q1, extending security from the premise to the individual. And we kicked off our e-commerce initiative to be launched later in 2018.
Moving to slide 4, this is a slide you've seen before. We included it again as a reminder and emphasize of proven, consistent, disciplined approach. Our operating approach is based on three objectives that we combine with growing revenue. You guys know it is retaining our existing customers is critical, acquiring new customers more efficiently and of course, optimizing profitability. Each would lead to improved long-term cash flow generation.
We shared a lot to-date on retaining our existing customers and the metric we use, which is gross attrition, a conservative metric. We've improved our attrition by over 200 basis points and now this quarter, we've experienced our best month of attrition ever. Today, we're going to provide a little added color on acquiring customers more efficiently. Revenue payback is critical, because it allows us to grow revenue and cash flow without having to increase the SAC spend.
At this time, I'll turn the call over to Jim to explain this in a little greater detail for you.
Thanks, Tim. Tim spoke about several of our new growth opportunities, ADT Go and the commercial business specifically and we're equally excited about opportunities to grow revenue, EBITDA and cash flow by continuing to improve our core operations. We've discussed the benefits of attrition improvement a number of times and today I'll describe a bit more about the power of also improving our subscriber acquisition cost efficiency. I'll direct your attention to slide 5 and there are four central points that I'd like to share with you.
Point one, lower attrition and improved revenue payback, essentially SAC efficiency generate significantly improved cash flow or alternatively can be used to fund revenue growth. SAC efficiency is driven by a number of factors, including labor productivity, reduced equipment cost, sales and marketing efficiency and more upfront revenue from the customer at the time of installation.
Point two, the chart in the upper right corner demonstrates the cash flow impact from reducing the revenue payback multiple. Every 0.1 times improvement in revenue payback saves approximately $60 million in SAC at our current investment levels. We've achieved improvements against each of these factors that I've mentioned, lower equipment costs, improved productivity et cetera. On a trailing 12-month basis, Q1 revenue payback improved from 2.7x in 2016 to 2.6x in Q1 2017 to 2.5x in Q1 2018. The improvement was driven by improved installation revenue per customer, equipment cost savings, efficiency and installation labor and more focused sales and marketing.
Point three, on the bottom left of slide 5, you'll see the influence of improved attrition as well. Every 100 basis points in lower attrition reduces SAC required to replace lost customers by approximately $100 million.
And my final point, point four, the fundamental takeaway on this slide is this, as we improve our attrition and revenue payback, we're able to either drive more growth for the same SAC spend or we can reduce our SAC spend and maintain the same growth. The chart on the lower right nicely illustrates this point. Q1 brought continued progress and attrition with, as Tim mentioned, our best month ever recorded and revenue payback improved as well to 2.5x on a trailing 12-month basis. We're confident in our operating plans to continue these positive trends.
With that, I'd like to turn the call over to Jeff Likosar. Jeff?
Thanks, Jim and thanks, everyone for joining the call today. I'd like to spend the next few minutes summarizing our first quarter financial results with a focus on the core metrics we use to evaluate and monitor our business. We plan to file our Form 10-Q later today, which will include additional details. Overall, as Tim described, we're pleased with our start to 2018 and our first quarter results reflect continued progress against our core objectives.
As you can see on slide 6, we continued our improvement in customer attrition and reached a new low of 13.6% on a trailing 12-month basis, reflecting a 90-basis-point improvement year-over-year. Our progress results from both smarter customer selection and the improved service we are delivering every day. Our total revenue grew by 5% in the first quarter to $1.116 billion. Our monitoring and services revenue of $1.017 billion grew by $20 million or 2%. The drivers here include continued attrition improvements and recurring revenue additions along with continued pricing improvement.
In addition, installation and other revenue grew by approximately $38 million reflecting our continued commercial expansion and efforts to collect more upfront revenue on outright sales. Approximately $14 million of this growth comes from improvements in organic outright sales revenue and $16 million is from the commercial acquisitions we have added to our portfolio during the past several months. The remainder was from higher amortization of deferred installation revenue. Acquisitions did not have a material effect on monitoring and services revenue.
As a reminder, we adopted the new ASC 606 revenue recognition standards in the quarter, which did not have a material effect on revenue overall. It will, however, shift a small amount of revenue out of monitoring and services and into installation revenue. As you can see on the slide, this is less than $2 million in the first quarter.
Slide 7 highlights our continued progress in customer acquisition efficiency. The left side shows our customer revenue payback on a trailing 12-month basis, which we have reduced from 2.7 times in 2016 to 2.6 times as of the first quarter of 2017 to 2.5 years as of the most recent quarter. This metric reflects the number of years it takes us to recover our net subscriber acquisition costs or SAC through the generation of new recurring revenue in a period. SAC has comprised of our expenditures to acquire new customer revenue and to install equipment net of revenue we collect upon installation.
Most of this band is on costs associated with subscriber system assets where we retain ownership of the equipment or where we purchase accounts generated by our dealer network. The remainder, which includes advertising and certain selling expenses along with net installation costs associated with outright sales of equipment is expensed as incurred.
The right side of the page shows our total SAC spending for the first quarter, which you can see at $354 million is down 3% compared to the first quarter of last year. Because of our improved revenue payback, as Jim described, we were able to grow our additions to recurring monthly revenue by 5% in the first quarter on this lower spending. I won't repeat the key efficiency actions, Jim already mentioned, but we are encouraged by our progress to-date and optimistic about the remaining opportunities.
Moving to slide 8, you can see that we generated $620 million of adjusted EBITDA in the first quarter, which is 7% higher than last year's level. I want to call out that the first quarter results include a net benefit of $15 million that was primarily attributable to a deceptive sales practice dispute. Our EBITDA growth performance was driven by margin on increased revenue, lower expensed net SAC and other cost reductions.
We're also happy with our adjusted net income performance, as you can see on the right side of the slide. Adjusted net income is a performance measurement that reflects EBITDA less capitalized SAC expenditures, cash interest, and cash taxes. We grew from $197 million last year to $249 million this year with the improvement driven by EBITDA growth along with lower cash taxes and interest payments.
We also grew our free cash flow excluding special items, which you can see on slide 9 from $175 million last year to $187 million this year. The drivers here are the same as adjusted net income growth with an offset resulting primarily from this year's annual bonus payments, which occurred in the first quarter.
As I have described previously, our positive and growing cash generation is evidence of the strength of our business model and our effective balancing of our core objectives to reduce attrition, improve customer acquisition efficiency, and optimize our EBITDA.
Slide 10 summarizes our capital structure and capital allocation framework. A key event during the first quarter, of course, was the completion of our IPO in January, which raised $1.47 billion. After deal costs, we used the proceeds to redeem $594 million of principal on our second lien notes and we escrowed $750 million to redeem the principal balance of our Koch Preferred Security (sic) [Koch Preferred Securities] (00:12:03).
As we described during our March call, we plan to deploy capital on an ongoing basis towards a combination of the things you see on the upper left side of the slide, including organic and inorganic growth, capital return and debt pay down. We paid our first quarterly dividend in April and the board of directors today declared an additional dividend of $0.035 per share payable on July 10. We also have formally agreed with Koch that we will redeem the $750 million preferred security in July of this year, consistent with the terms we described in our S-1.
One other noteworthy capital transaction in the period is that we consolidated and repriced our revolving credit arrangements into a single $350 million facility maturing in 2023, consistent with our first lien debt facility. Our leverage ratio at 4 times EBITDA is down from 4.7 times pre-IPO. Overall, we are comfortable with our capital structure and liquidity position and we plan to reduce our leverage and drive improved capital efficiency over time.
Page 11 is a reminder of the total year 2018 guidance we shared on our March call. As we described then, we plan to continue to execute our strategy to drive progress in each of our key objectives. We initially issued this guidance less than two months ago and we do not plan to change any of the ranges today. However, I will say that we are increasingly optimistic about reaching the high end of the range on our EBITDA guidance.
As you model individual quarters, I want to also point out that our results may not be linear through the year due to some seasonal dynamics in our business, which lead to more SAC and revenue additions in the summer compared to the winter and due to the timing of cash interest expense. We expect our cash interest expense in the second quarter, for example, to be more than double the $94 million of cash interest we incurred in the first quarter due to the timing of payments on our second lien notes, which are due in May and November.
We will provide an update to our overall annual guidance after getting through the second quarter during our August earnings call. Overall, we are pleased with our first quarter as a public company and we remain very optimistic about our prospects to deliver another strong year in 2018.
Now, I'm going to return the call to Tim, who will share some concluding thoughts and discuss our competitive landscape before opening the call up to Q&A.
Hey, thank you, Jeff. And we're going to close today discussing our leading best-in-class residential business. And as Jeff alluded to, the competitive landscape is not just similar to three to five years ago, when we had the new entrants, cables and telcos coming into this space and characterize with much larger companies, bigger budgets, primary business not necessarily being security who want to spend to subsidize their way to get into something else. Most of those entrants have since left the space and few of security is the priority today.
Past forward ADT, we're a much stronger company than three to five years ago, where market penetration remains in the 20% plus range. Today's new entrants may yield the different results. There is room for optimism that market penetration may expand. Today's new entrants are focused on smaller systems that are DIY in nature with a home automation focus. ADT will look forward to competing and growing in this DIY market, partnering with Samsung, while we continue to be the leading provider to the roughly 20% of the market that rely on larger security systems, professional installations, serviced by a local technician and supported by call centers responding with a live answer.
Turning to page 13, customers that want to seamlessly connect with the best technology has to offer. This is an area I'd like to highlight the depth of experience we have at ADT. Home automation isn't new for ADT. We've got well over 2 million interactive service customers and growing and we're a high volume installer of home automation devices including locks, indoor cameras, outdoor cameras, video doorbells, thermostats et cetera.
We get the choice to choose between manufacturer partners and focus on the quality when we go to connect devices to our system. We then integrate to our backend, which allows the customer a seamless experience with their interactive services. Our systems have the latest professional safety and security devices. We feel we're connected to the best automation technology. We're partnered with leading providers whether it's the Nest Thermostats, whether it's providing controls via Alexa devices to include ADT. We seamlessly control program and monitor many different types of devices – of devices in the home today. In short, ADT's got a long history of doing everything to DIY offerings, but much more.
And as the leading provider for security and a full interactive home experience, we now look to extend what security means, moving from the premise-only, the premise to include the individual when they're outside the premise as well as the network that they connect to, as we move forward.
To close this up, it was a strong first quarter and a good start to 2018, we look forward to leading the professionally installed residential market, we look forward to competing and growing in the DIY market and accelerating our growth in the commercial channel. Most importantly, we look forward to delivering higher revenue, higher earnings, higher cash flow, lower attrition and lower cost to create customers. I continue to thank the ADT team and our dealer partners for their efforts.
At this point, operator, we'll now turn the call over to you for the Q&A portion. Thank you.
Thank you. At this time we will conduct a question-and-answer session. Our first question comes from George Tong with Goldman Sachs. Please proceed with your question.
Hi, thanks. Good morning. Your attrition rate improved 90 basis points on a year-over-year basis and 10 bps on a quarter-over-quarter basis. Can you elaborate on the initiatives you have to drive the remaining improvement in attrition you expect this year?
Yeah. Thanks, George. Guys are working hard right now and we've shared in the past collaborating between our branches and our centers, like most of you know that the vast majority of our calls from our clients go into the centers, bringing the branches back in where we can get an immediate response to what a customer is doing, understand the concept no one wakes up hoping they give us a call that day.
So, what can we do when they do call, we're getting the call answered by a live agent right away. If I need a branch report, how do I partner better with those folks. In the backside, the guys are doing a lot of analytics about, hey, when this customer calls, what's happened at that premise, did they have a technician out last week, did they have an alarm event last night, how is the bill et cetera? And we're trying to identify in advance of the customer's call, what the potential issue might be and how to best solve it.
So, really just a lot of blocking and tackling right now, the front side. The main initiative is partnering with our branches and our centers to operate as one, putting the customer at the center of that conversation. So, whatever they need, they get a seamless experience, would call into ADT, if you need a tech out, we take care of it; if you need to response to something, we take care of it. Quicker response to the customer with a better answer to what they're asking for is kind of the meat and potatoes of it, George.
Hi, George. One thing I would add. This is Jeff. As Tim mentioned it briefly and you see it on the slide, but we also in the quarter we had the best month of attrition, the best as we can tell we've ever had in history of the company.
Yeah. Very helpful. Earlier, Tim, you touched on some of the competitive dynamics you're seeing. Can you discuss your progress in forming new partnerships either monetizable or not yet monetizable with technology in smart home device companies in the space?
Yeah. This is a – ADT is in a great spot, because there's no manufacturer of a product that doesn't want to have a conversation with us. Jay Darfler and the team keep us involved with the new tech coming out of Palo Alto, whether it's artificial intelligence, machine learning. I mean, there's a fascinating amount of new products coming. In a short amount of time, you've seen the DIY landscapes got very crowded very quickly and when you walk to the retail establishment, you see the different choices that are available to you, so our ability to forge relationships with people, never been better, there's conversations we're having across the board, because we are as a service provider, we're in a great spot as something becomes more popular in the home and a couple years ago, we assume, I make sure I can see that my garage door is down, put that on our ADT app. I want to see somebody through the doorbell now, great, put that on our app.
So, we continue to evaluate the opportunities. We continue to evaluate the technology that's coming out. We continue to evaluate what consumers are most interested in having in the home. And as we sign anything different or new obviously, we'll keep you guys aware of it, but we spent no short amount of time making sure we're staying up on what's new in technology and what's of the most interest to our clients, as we continue to help automate the homes.
Very helpful. Thank you.
Our next question comes from Peter Christiansen with Citibank. Please proceed with your question.
Good morning, guys. Thank you. Nice trends. So, one of your competitors seems to be – one of your multiline competitors seems to be de-emphasizing home security recently and I guess from a share perspective, are you seeing any behavioral shifts competitively out there? And then as a follow-up, how do you think about marketing – I know its early days, but how do you think about marketing the DIY space and is there any marketing conflict that you're trying to navigate? Is this going to be a Samsung-led effort or is this more of an ADT kind of approach?
Yeah. So, on the first part, obviously, entrants come and go. This is a capital intensive business traditionally and your ability to grab share or enough share to make an impact kind of is the end of the day influencer. And as new entrants come, some will stay with us, some will exit. In terms of marketing DIY, I think it's an overall good question for us, be it like, how do we – there's two kinds of buyers as we're looking at that, traditional person has always looked at security, where crime goes on in the neighborhood and it's a person who buy something or who got a new home or who got a new child, those are traditional buyers that buy 15 devices to 30 devices and secure the premise versus kind of the new buyer that might not be interested in many devices, might be interested in a smaller setups. And how do we position the ADT, so it's relevant to those buyers as we go forward.
In DIY, I think it's technology. We announced we've kicked off up our e-commerce, because a lot of those buyers are actually go into the web to learn and make their purchase decisions and we want to make sure they have a choice. If you want that small basic system, fantastic, ADT can deliver that for you. If you want that larger professional installed with a local service tech, we can take care of that as well.
And from an advertising, we're looking that as an ADT advertising campaign, although we are partners with Samsung in this particular one or a couple of the other initiatives where we could do some co-marketing to bring new offers to the marketplace.
Thanks, Tim. Nice Job.
Thank you.
Our next question comes from Toni Kaplan with Morgan Stanley. Please proceed with your question.
Hi. Good morning.
Good morning, Toni.
So, what are your thoughts on Amazon now providing technicians to install security products. I guess with other DIY products in the past, there's been a form of commoditized monitoring, if you will, but not installation. So, can you just share your thoughts on whether you view this as a bigger threat than those products and I guess what the perception you would think would be on it and yeah, anything around that would be helpful? Thanks.
Yeah. Again, that – I saw the recent article, there's somebody who've been doing for a while in a few test markets where they'll send a consultant out to the home and kind of give you some different choices on home automation, so that with difference you could schedule the appointment. That same person will come out there and can help you get started on putting the equipment in.
So different offering of the same color, obviously they've got their own goals of what they want to get installed in that home. But I look at it not dissimilar, Toni, the – kind of how we've looked at it from the beginning. New competitors are coming in the space, how does ADT stack up against them where we want to make sure that people know at ADT, whether it's the homes, the businesses that we secure what we bring to the table.
We sell hard on the fact that security is what we do, in this particular case, being able to automate your home, protecting your data, not sharing it. These are talk points that we'll use when we get into a competitive environment. But again, they're a new competitor coming into the space and in some of the markets they do have folks going out, so we'll have to see how that works out going forward.
Great. And I just want you to allow two metrics ones in here. Were net adds in resi positive or negative in the quarter? And then second can you just talk about the dynamics with regard to seasonality and attrition? Thanks.
Okay. So on the net add ones, this is when we get pretty regularly and I think I've shared in the past. I look at this one when I'm talking to my general managers out there, I expect them to grow their RMR. And net RMR growth is always what we've seen is the key metric, because you have to focus on your new revenue, you've got to focus on your cancellation, you've got to focus on growing your base. We did put in our subscriber accounts last quarter for the year, just because we're sensitive to the fact that so many people are used to it being reported that way.
And again, as we go forward, at least annually, we'll put that data out for you, Toni. So, again, it's not how we look at running the company. As I look at my general managers, they can only keep so many plates spinning as we go. As far as RMR itself, I mean, it grew 5% in the quarter and that's the real positive story for what everybody's out there doing with the different teams.
And Toni, it's Jeff. One thing I'd add to is that our – as you may recall, our RMR additions declined for each of the past two years, it increased in the second – in the fourth quarter of last year, increased in the first quarter of this year. So, we're in the process of turning a corner to where we have positive RMR adds year-on-year.
Yeah.
With, I should mention, lower SAC spending.
Thanks.
Our next question comes from Manav Patnaik with Barclays. Please proceed with your question.
Yeah. Thank you. Good morning, gentlemen. Tim, I was hoping the slide 12 that you showed, the traditional versus the DIY competition, I was hoping you could put some cost parameters to it. I guess one of the misunderstandings might just be, the basic package that they're selling at a low price versus the complete package that the traditional guys like yourselves have been offering, like would you be able to just talk through that a little bit?
Yeah. It's really a multiplication factor. Any one device looks pretty good when it's in the advertising space and says hey, for $99 or $149 you can have this. It's when you start adding multiple devices to secure the entire premise, if you need one camera at the door, that's fine, what if you put three cameras in? And I think you've seen that with some of our bigger competitors that joined as new entrants in the last few years, a real attractive first price but then as you move on and add devices and that's why when we look at DIY, again, we feel it's an opportunity to grow the market. We also don't feel it competes directly with our special install. Imagine getting a box with 15 devices to 30 devices, shipped to your home and then say, you're going to put that in for yourself. To your specific question, the financial cost keeps going up as you add those devices. So, the ability to attract with a low entry point only works when you get a very few number of devices.
Got it. And then just my follow-up question, Jeff. The confidence in reaching the high end of the EBITDA guidance, is that because of that settlement that you had and I guess, had you assumed that when you initially gave guidance?
Yeah, we were aware of that settlement when we initially gave guidance and in fact, we even issued a press release on it back in the first quarter. So, it's not news. I am sharing confidence on the EBITDA range more just based on some other trends and dynamics we're seeing in the business with respect to overall business performance.
Got it. Okay. That's helpful. Thanks, guys.
Our next question comes from David Ridley-Lane with Bank of America Merrill Lynch. Please proceed with your question.
Good morning, Tim. Thanks for the overview of ADT's connected home capabilities. How many Pulse customers are there today, or if it's easier to talk about the percentage, what portion of your resi customer base is on Pulse today?
We've put in the thing, it's over $2 million, it's getting closer to $2.5 million when you combine the ADT and Protection One together, as well as what we've been doing in new sales over the last couple of years, but we're comfortable putting in the deck over $2 million, but it's getting closer to $2.5 million at this point.
Got it. And how much of a benefit is that rising Pulse adoption having on your average pricing?
The more services we're able to sell into the home, obviously the better that does for us in the pricing. We talked about introducing ADT Go in the first quarter, pretty exciting service for us that allows you – a parent, if you want to see where the child is at a glance. I like the idea that as a father of daughters, they get into a situation they're not totally comfortable pressing a button, you can be talking to an ADT operator, texting with an ADT operator, right out of the gate. We're also looking at announcing in 2018, what we can do to protect your networks against cyber issues as we go forward. So, obviously the mix of the business is a big difference in terms of what goes on with pricing force and you'll see that obviously ADT goes more to full service. You're seeing the effects of that as well.
All right. Thank you very much.
Our next question is from Jeff Kessler with Imperial Capital. Please proceed with your question.
Thank you. I'd like to switch the conversation over to your growth in – or your introduction of commercial business. You've obviously had a commercial piece for a while, but now you're moving quite more rapidly than you were before with a couple of big – with a couple of important acquisitions and also, just internally. So, if you could go into perhaps – if you could give us some more in-depth detail on what are you doing in terms of dissecting either verticals, or going to using, what I'd call, the ADT formula to look at what dealers you have are the ones who can focus on commercial, do you have opportunities to get more sales people for the ADT commercial business and where should we be looking at a commercial by the end of 2019?
Yeah. So, the obviously the commercial multi-site growth have proven growth opportunity, something we've – this leadership teams had the opportunity to do before. ADT is well known in the space. I think we would say talent and experience are the key for us, as well as you mentioned selective tuck-in M&A, quick shout out to Bobby Dale and the team, they've been on fire for literally 18 months in our multi-site growth and I would say, again, it's talent and experience as opposed to a particular vertical.
We did mention that our commercial team had their best month, that's excluding any M&A that it came along with us. And again, the first as we've made so far have been a terrific job, jumping into ADT and putting those numbers, but again, our core promotional team has had their best months. It's a little bit of future, as we look at thinking of more dealers, MSPs out there who – joining with what we do on the cyber side. There is an opportunity to partner with them in selling video that we think is a natural, as we go forward.
So, we've got many avenues to continue to push down. Obviously, as you know, Jeff, video and access, very popular products as we go forward, but really I think Bobby and team has had the greatest success with the service levels and the way that we manage the activity at the sites and reduce that activity for our buyers that's been key as we push forward. In terms of guidance, we've stayed away from it at this point with specific numbers. But again, it becomes more meaningful we'd expect that to start going into conversations, yeah.
Okay. My second question – or my follow-up question is, how do you answer those who continue to say that even though you may be offering full service, there's so much out there that's not full service that maybe millennials want at the beginning? And number two, that maybe they can go through – some people are getting the service through the wholesale and independent monitoring channel, which also could be cheaper. What is the value proposition that you give and you talked about it, but what is the value proposition that you have for folks who say that they can give you almost good enough service, but for a cheaper price?
Yeah. So, this is the one where it's does the lower price cannibalize the current business or does it actually grow the opportunity. We believe it's going to grow the opportunity as we push forward. Obviously, our value propositions, we take care of it. We're experts, we've been doing this for a long time. There's no – you can't think of a place in the United States a commercial vendor out there that we're not doing business with.
So, as we continue to push forward and I'll think that value proposition sells. I think the idea that you want us to take care of this for you, you call us, you want someone on the phone in one or two rings, you need a technician, technician comes out in a few hours. These are things that sell very well for us. And again, it does – there's room for optimism that we're going to see the market penetration rise with some of these newer offerings.
So, again, I'm feeling very optimistic we had a very strong first quarter. Again, our commercial team is knocking it out, Bobby and the guys knocking it out. Our model revenue growth and like I say, introducing ADT Go is a real nice step for our residential base. And as we get out there and offer some solutions, that will protect the network, we're set up to have a great year in 2018.
Great. Shout out to Bobby from for me too.
At this time, I would like to turn the call back to management for closing comments.
Hey, appreciate the time, appreciate the support and I look forward to getting back on at the end of the second quarter continue to deliver on our five financial metrics for you. So, thank you very much.
Thanks, everybody. Have a good day.
This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.