Good morning, and thank you for joining us today to discuss ADT's second quarter 2026 results. Speaking on today's call are Jim DeVries, our Chairman, President and Chief Executive Officer, and Jeff Likosar, our Chief Financial Officer.

Following their prepared remarks, we'll be joined by Omar Khan, our Chief Business Officer, and we'll open the call for analyst questions. Earlier today, we issued a press release and an earnings presentation summarizing our results.

Both are available on the Investor Relations section of our website. During today's call, we'll reference certain non-GAAP financial measures.

Reconciliations to the most comparable GAAP measures are included in the earnings presentation on our website. Unless otherwise noted, all financials and metrics discussed reflect continuing operations.

Our remarks today also include forward-looking statements made under the safe harbor provisions of the Private Securities Litigation Reform Act. These statements are subject to risks and uncertainties that are described in the earnings presentation and in our SEC filings.

Actual results may differ materially. Please refer to our SEC filings for more details.

With that, I'm happy to turn the call over to Jim.

Thanks, Elizabeth. Good morning, everyone, and thank you for joining us today.

I'll focus my remarks this morning mainly on the key highlights in the second quarter and our continued progress on the strategic priorities we shared earlier this year. Then I'll turn the call over to Jeff to walk through our financial results and outlook in more detail.

Let me start with a few key takeaways from the quarter. We delivered a solid second quarter with continued strength in cash flow and disciplined execution across the business.

Cash generation was again a highlight, with adjusted free cash flow, including interest rate swaps, up nearly 50% versus last year. Through the first half of the year, our strong cash generation has supported significant returns to shareholders, totaling $684 million.

During the second quarter, Apollo sold its remaining holdings in a secondary offering, and following the closing of that offering, is now no longer an ADT shareholder. ADT repurchased 29 million shares in connection with that secondary offering, reflecting our conviction in the value of our business and our disciplined approach to capital allocation.

Total second quarter revenue grew 2% to $1.3 billion, and our end-of-period recurring monthly revenue was $360 million. Adjusted earnings per diluted share was 23 cents, flat to last year.

Based on our first-half financial performance, we are modestly raising our full-year outlook, which Jeff will describe in more detail later on our call. Turning to our operational metrics, trailing 12-month attrition remains at approximately 13%.

Subscriber and recurring revenue trends remain consistent with the first quarter, with softness in our dealer channel and relatively stronger performance in direct. Also during the quarter, we completed a bulk purchase of approximately 10,000 accounts.

By comparison, last year's second quarter included a bulk purchase of approximately 50,000 accounts. As we've shared previously, the pipeline for quality bulks can be episodic, and we'll continue to evaluate bulk and other acquisition opportunities with a focus on attractive economics.

We're operating well in a dynamic and competitive environment, and our priority remains on generating strong economic returns while improving core metrics. This includes balancing growth, retention, and cash generation in a way that drives long-term value creation.

We remain focused on the strategy we laid out earlier this year. We believe ADT is well-positioned as the leader in smart home security, with a differentiated model built on our trusted brand, professional monitoring, and integrated technology platform.

We continue to invest in three priority areas during 2026: product technology, service excellence, and customer acquisition efficiency improvement. Let me briefly walk through how we're executing against our key initiatives.

First, on product technology, we continue to expand the capabilities of our ADT+ ecosystem and advance our roadmap to include more intelligent, connected solutions. As part of that evolution, we broadened our reach this quarter with the launch of ADT Blue, a lower-cost, self-installed security solution that pairs the convenience of do-it-yourself setup with the flexibility of the ADT+ platform and professional monitoring.

While it is very early, we are pleased with the customer receptiveness and reviews. Separately, our third-party dealer network, which has historically represented more than a third of our gross additions, is beginning to transition to the ADT+ platform.

We expect to migrate dealers onto our proprietary ecosystem in phases over the next year. Through the first half of this year, approximately 30% of our new customer additions were on ADT+.

We are also making progress on our path to commercialization of a new presence sensing offering based on the technology we acquired earlier this year. We advanced manufacturing and integration of a Wi-Fi-based smart plug that will bring privacy-preserving presence sensing into the ADT+ platform for security and aging-in-place use cases.

We expect customer pilots to begin this fall ahead of a planned launch in early 2027. Next on our initiatives is service excellence, where we remain focused on improving both customer experience and operating efficiency.

We are seeing good momentum from our AI initiatives. During the quarter, we combined AI-driven call routing with our virtual AI agents to improve first-call resolution and reduce transfers.

As a result, we handled nearly 20% fewer customer contacts through human agents and reduced service tickets by a similar amount, all while achieving improved customer satisfaction. Our deployment of these technologies is generating both a better customer experience and more efficient service model, including cost savings.

Looking ahead, we will be expanding AI across the enterprise. In the third quarter, we will begin transcribing and analyzing our sales and service calls, enabling customers to engage with our virtual agents through SMS, and rolling out AI-enabled fleet safety technology across our technician fleet.

These efforts are designed to improve responsiveness, increase containment, and ultimately drive better outcomes for both our customers and our business, including customer retention and sales conversion. We believe we're still in the early stages of this opportunity and that these initiatives will be a meaningful contributor to both growth and margin expansion.

Importantly, ADT employees continue to handle situations where human expertise matters most, such as during emergencies or when an on-site, highly trained service technician is the best way to resolve a customer issue. In the third area, customer acquisition efficiency, a key objective this year is migration to lower-cost sales tactics and channels.

A highlight in our quarter that I already mentioned was our ADT Blue launch, which is now available through phone and online channels, including Amazon. This offering broadens ADT's reach to more value-conscious and DIY-oriented customers, a market segment we have not historically targeted.

Over time, it also gives us a path to convert a subset of these customers to our professionally monitored solutions. During the second half of the year, we will scale our presence on Amazon and build ADT Blue momentum through additional advertising.

We expect volumes to begin to grow in the third and fourth quarters. Beyond ADT Blue, we're continuing to drive efficiency across our go-to-market activities, including rationalizing spend in our highest-cost channels.

As we've said, some of these changes may temporarily affect subscriber additions, but are designed to improve our long-term returns. We're working to improve the economics in our most costly channels as we optimize long-term economics.

Through these changes, our direct DIFM sales engine continues to perform well, with residential adds up in the high single digits and SMB up mid-single digits for the quarter. Across all of these key initiatives, our focus is consistent: driving better customer engagement, improving efficiency, and ultimately supporting more sustainable growth.

In closing, our financial performance demonstrates the resilience of our model, with strong cash generation, disciplined cost management, and consistent capital allocation. I want to thank our employees, partners, and customers for their dedication and their contributions through the first half of the year.

I'm excited about the opportunities ahead. With that, I'll turn the call over to Jeff.

Thanks, Jim, and good morning, everyone. I'll start by adding some detail on our second quarter results, and then share an update on our outlook for the remainder of the year.

As Jim noted, we again delivered solid financial performance, with very strong cash generation as a continued highlight. Adjusted free cash flow, including interest rate swaps, was $406 million, up $133 million, or 48%, compared to last year.

On a year-to-date basis, we have generated $820 million, up more than $300 million, or 64%, versus the prior year. This result was driven primarily by working capital timing, lower cash taxes and interest, and lower subscriber acquisition spending.

Our cash flow was also stronger than we expected entering the quarter due to the benefits of some tax planning progress and working capital management as we repurchase shares, including in Apollo's secondary offering. On the top line, we delivered total revenue of $1.3 billion, up 2%.

Monitoring and services revenue was down 1%, with an ending recurring monthly revenue balance of $360 million, reflecting the revenue loss from the multifamily business we divested last October. Installation revenue was $230 million, up 17%, due to a higher mix of outright equipment sales.

Adjusted EBITDA for the quarter was $671 million, and adjusted income from continuing operations was $180 million, or 23 cents per diluted share. On a year-to-date basis, our adjusted EPS is 47 cents, up 3 cents.

Beyond the effect of revenue and gross margins, our earnings reflect ongoing efficiency actions and cost controls, some offsetting investment in growth initiatives, and increased amortization, including from our Origin acquisition. On a per share basis, we also benefited from lower share count due to the repurchases enabled by our cash generation and efficient capital structure.

We added 190,000 gross new subscribers in the quarter, with $11.9 million of RMR. As Jim mentioned, we had fewer bulk account purchases than last year, along with softness in our dealer channel, which we partially offset with growth in direct subscriber and RMR additions.

Net cash SAC was $345 million, down 7%, driven primarily by fewer bulk purchases, partially offset by the timing of consumer financing flows. Attrition was 13.1%, flat to last quarter, with revenue payback also holding at 2.3 years.

Now, turning to capital allocation, a core attribute of our business is consistently strong cash generation, and we continue to deploy that capital in a disciplined manner to drive returns. Through the first half, we directly returned $684 million to shareholders, including $594 million to repurchase and retire 86 million shares, and $90 million of dividends.

Through this week, we have repurchased approximately 89 million shares, and we have approximately $885 million remaining under our $1.5 billion, three-year repurchase authorization. Our overall capital structure and liquidity position remain strong, with our $800 million revolving credit facility undrawn.

In May, we secured an additional $100 million of borrowings under our 2030 Term Loan A. While we used these proceeds to fund repurchases, we expect this incremental debt to ultimately support our August 2027 notes refinancing.

We ended the quarter with net debt of approximately $7.4 billion, with leverage of 2.8 times adjusted EBITDA, at a weighted average cost of approximately 4.3%. We remain very comfortable with our capital structure, and our overall capital allocation priorities are unchanged.

We will invest in the business where returns are compelling, both organically and through periodic acquisitions, we will return capital directly to shareholders, and we will maintain a healthy balance sheet with an objective of further reducing leverage, targeting 2.5 times. Turning to our expectations for the rest of the year, we are modestly raising our full-year 2026 outlook based on our year-to-date performance and share repurchases, and expected progress in the second half.

We now expect total revenue to grow approximately 2%, mainly reflecting installation revenue trends. We expect adjusted EPS to also grow 2%, with the improvement a result of the timing of share repurchases.

We expect adjusted free cash flow to grow approximately 30%, with the improvement driven primarily by tax planning and working capital management. While we are very pleased with our full-year 2026 cash generation, we do expect higher cash taxes and cash interest in 2027.

As Jim outlined, our primary focus during the second half is execution of our investments in growth initiatives and improvement in our new subscriber additions and retention. Within the second half, we expect fourth quarter income to be somewhat higher than the third quarter due to the timing of some of these investments, seasonal dynamics, and other items.

We expect revenue and cash to be similar in the third and fourth quarters. Our full-year outlook and our performance through the first half reflect the resilience of our model and our disciplined execution, while we also continue to invest in our business for the long term.

I'm very excited by the advancement in our technologies and capabilities and the new ways we will be able to serve our customers to deliver peace of mind with innovative offerings, unrivaled safety, and a premium experience. Thank you again for joining us and for your continued support.

Operator, please open the call for questions.

Hi, thanks. Good morning.

Gross RMR additions fell 17% year-over-year, and gross unit additions declined 22%, which you attributed largely to fewer dealer and bulk account purchases. How much of the current pressure reflects intentional changes to your acquisition strategy versus underlying end-market demand, and what does the path back to gross additions growth look like?

Good morning, George. It's Jim.

I'll share a little bit of overall context on gross adds and ask Jeff if he has anything to contribute on this question as well. You're correct on the biggest difference between this quarter and Q2 of last year being related to unit bulks.

We completed a 10,000-unit bulk this quarter, 50,000 bulk in Q2 of last year, and when comparing quarter to last year, absent the difference in bulk, we had about 10,000 fewer adds this quarter. That was attributable really to two things.

The first is, we talked about in earlier quarters, dialing back our reliance on expensive channels like affiliate channels, and so we've seen some decline in affiliate. Then we've had some softness in our dealer channel as well, one one dealer actually in particular.

Between affiliates and dealer and the bulk, that makes up more than the gross add shortfall versus Q2 of last year. Worth mentioning, our core DIFM business, our direct organic business, is up high single digits year-to-date.

SMB is up organically about 4% over last year. We feel good about the organic muscle.

It's going to take us a little bit of time to replace the volume from affiliate and some of the softness in dealer, but the underlying engine we feel excellent about. One one last thing and I'll give it to Jeff: also worth mentioning, the per-unit economics remain really strong for us.

Installation revenue per unit, net SAC is really solid.

Yes, I'd add just a couple comments. We always want more adds, but focused on the strong economics, as Jim described.

We feel really good about our overall quarter, and even the adds was generally consistent with our expectations, and very excited about the growth initiatives that start to contribute later this year and into next year. Even more pleased that we were able to raise our guidance across each of the three measurements: revenue, and earnings per share, and especially our really strong cash outlook for the rest of the year.

That very helpful.

Then as a follow-up, as you think about improving retention rates and service costs and customer economics, those attributes are basically central elements of the ADT+ thesis, should help with all those things. With the dealer roll-out beginning in the second half of this year, when would you expect ADT+ platform adoption to become large enough to produce measurable improvements in attrition, service costs, and customer lifetime value?

Omar, you want to take that one? Yeah.

Hi, George. We began at the beginning of this month rolling out ADT+ to dealers.

We've launched our Western region, we're in the process of actually launching our Eastern region. The initial feedback, George, from the dealer community has been very positive, both from the training and uptake, as well as the installation progress on ADT+.

It's going to be about a three to four-quarter migration of the dealer community across the board. We're being very thoughtful and very intentional about that roll-out.

As about a third of our adds come from the dealer community, it's going to be, like I said, about a three-quarter to four-quarter transition for the dealer community to ADT+. You'll see that benefit phasing in over time over the next call it 9 to 12 months.

George, a couple I'm going to add to that, not directly related to ADT+, but a couple items worth sharing with you, short-term, I'd say, proof points for us. NPS is modestly up over Q2 of last year.

All of our operating metrics and customer service, first-call resolution, digital self-service, are tracking nicely, relatively speaking. Retention team, we have lower employee turnover in the retention team than we've ever had before.

Then a little bit longer-term influence here is we've tightened up our credit standards a bit. There's been some changes around how we do proactive save offers, some of the process changes that we made, I think will start to layer in to help us move the needle on attrition.

Then to Omar's point into your question, I think product experience, essentially deeper, more frequent customer engagement, bodes well for us longer term.

Got it. Very helpful.

Thank you.

Thank you.

Thanks for taking my question. Really strong momentum in free cash flow.

I was just wondering if you could help parse out some of the tailwinds that we are seeing from some of the working capitals, tax planning, but also lowered SAC. If you could quantify that.

Also, if you could just provide some preliminary color on how should we think about some of the interest expense and cash taxes in '27. Maybe a follow-up on this would be just how should we think about the free cash flow trajectory now over the midterm?

The free cash flow obviously has significantly exceeded our expectation and your original guidance as well. How should we think about over the midterm?

Thanks, Jeff.

I'll I'll take that. It's Jeff.

We feel, as I already mentioned, really good about our cash performance so far in the year. The most significant reason that we were able to increase our outlook is progress on some tax planning initiatives that we've undertaken.

Setting that aside and just looking at the results, we're up on a year-to-date basis a little bit more than $300 million. About half of that is working capital management.

There's a discrete item or two associated with timing of some payroll outflows, and aside from that, it's inventory and payables. We we also benefit, as as you'll see in our results, meaningfully from not having made a material cash tax payment this year, related to the point I already made.

Then our interest is also lower year-over-year, driven mainly by coupon timing, along with the benefits of all of our recent refinancing activities. Then SAC's a little bit lower.

There's always a lot of puts and takes in cash flow and working capital timings specifically. I'll also note that we, while we always manage working capital tightly, we did so especially this quarter due to the attractiveness of our stock price and in support of Apollo's secondary to be able to repurchase shares.

Then your your question about about longer-range outlook, you we, of course, haven't given any particular guidance or specific guidance beyond the current year, but taxes, we would expect to become a bigger cash taxpayer next year. We exhausted our NOLs a couple years ago.

Last year, last year, our cash taxes were $142 million. We expect less this year, but probably more next year.

We're always working to to optimize and minimize, but likely headwind there. Then likewise on interest expense, this year, I mentioned lower than last year, but we do still have some attractive interest rate swaps that expire the end of this year, and our upcoming refinancing next year is at 3 and 3/8, and unlikely in current market conditions we'd be able to refinance at that rate.

Both of those items are probably $50 to $100 million each of headwind next year. Of course, we will continue to work to optimize that and find other ways to continue to generate strong cash.

That's very, very helpful color. Maybe if I can just ask a quick question on ADT Blue.

I was just wondering if you could share any initial feedback from the launch, and then as this scales, how do you think about the ARPU and SAC for ADT Blue compared to your more traditional customer acquisition channel? Thank you.

Yeah. For ADT Blue, it's still very early from a progress perspective.

We just launched. The ARPU is obviously lower because we have plans starting at around $10 per month for video-only.

We're encouraged with the initial results, and it's going to play out over time as we expand our channels, but the initial results show a majority of customers adopting and engaging with us in the fully monitored security package, which tends to obviously price higher at $34.99 and above, depending on the choices of accessories. We're seeing very good progress from an ADT Blue perspective, and while the overall ARPU is lower, we're trending higher than general market in terms of adoption of full security packages as well as fully monitored security.

That's going to play out over time. The initial results are positive.

A little context here, Ashish. For DIY, for ADT Blue, our launch was almost exclusively on the Amazon platform in the second quarter.

The customer response to Omar's point has been really positive. We feel great about customer receptivity, but we're really early in the process and just now starting to put some advertising fuel behind ADT+, that we're optimistic will get us some incremental volume.

Maybe worth mentioning too that the economics that we seek on our self-install offerings are very similar with respect to the returns that we will generate on the SAC that we deploy. Even though the average pricing is lower and other characteristics are different, it's important to note that the subscriber acquisition cost to take on these customers is also much lower.

That's very helpful color. Thank you and congrats on such a strong free cash flow.

Thanks.

Thanks, Ashish.

Hi, good morning. This is Ronan Kennedy on for Manav.

Thank you for taking our questions. I was hoping to please, if I may, unpack attrition and the trends and drivers there.

Also, if you could comment on the impact of non-pay cancellations, the trends there relative to where you exited '25, and any retention benefits you're seeing from ADT+, my safety, trusted neighbor, and/or increasing engagement with the ecosystem?

Good morning, Ronan. It's Jim.

I'll answer that one for you. We ended the quarter rounding to 13.1 attrition, flat sequentially.

The metric, as measures trailing 12 months. If we zoom in to the last three months, we're actually flat to last year.

A little more color and specific to your question: relocation losses were flat. There was modest pressure from non-payment cancellations.

They were higher than last year, but only modestly so. Voluntary cancels were better than last year.

I mentioned earlier on the call that our customer service metrics are tracking very, very nicely, and we're seeing the benefit of that in fewer voluntary cancels. The sale of multifamily was a small headwind for us compared to last year, and small business was flat to last year, about 14% or so attrition for small business.

Interestingly, and I think noteworthy, non-pay cancels in small business were actually a little bit better than last year. While attrition is flat overall, cancel demand is down modestly, and a handful of leading indicators that I mentioned earlier: team stability, customer service metrics, the process changes that we're making are all moving in the right direction.

Then a question about credit losses, the drivers there are very similar. It's almost just a different manifestation of the exact same dynamics.

For non-pay, there is some different recognition of that expense as we have more outright sales, because with that outright sale, we record the install revenue, much of it is financed, therefore we record our estimate of the credit loss at the time that we record that install revenue. It's a cost we consider when we evaluate subscriber economics, almost like a cost of sale.

We're always fine-tuning our credit policies, while credit losses and related provisions are elevated year-over-year, generally it's in line with our expectations.

That's very helpful. Thank you.

Then shifting gears, please, if I may, I think you had highlighted nearly 20% fewer customer contacts handled by human agents and a similar reduction in service tickets, and then also commented on how AI initiatives could potentially be a meaningful contributor. Just looking for some more context on this in terms of say what AI applications currently have the highest ROI and are expected to, whether that's customer care, marketing, sales conversion, the field optimization, even the product innovation?

Then can you help us think about how much of that benefit is already showing up, I think that would be primarily now from the cost standpoint, and then the opportunities there over say the next 12 to 24 months?

Thanks, Ronan. There's a lot there, I'll give you some true tops perspective on the business and where we're deploying AI and the progress that we've made, and maybe a couple of comments about some areas that will be leaning into here in the back half of the year, and then invite Omar to talk about AI on the product side and share some perspective.

Most of our focus in AI so far has been around the call center: call routing technology, and virtual AI agents, and driving more calls to AI agents and more chats to AI agents, and doing so while we continue to improve NPS. I'd say, generally, that's going pretty well.

We're no longer in the early innings, we're in the middle innings now, and beginning to focus our next generation of AI efforts in areas like call transcription and insights, two-way SMS, essentially lead nurturing. We're deploying Gemini across the enterprise to move AI from a buzzword to a employee productivity tool.

We're using it in fleet safety. Virtually every area of the organization is being exposed to AI as we ramp up and more fully scale it.

Then, Omar, maybe a couple comments on the product side? Yep.

Thank you. This is Omar.

A couple things. I'll first talk about AI in terms of internal efficiencies on the product side.

We started using AI from a coding perspective and software perspective third quarter of last year, and the first year, we've seen incredible uptake across our software organization from an adoption and efficiency perspective. Last month, as an example, over three quarters of our code generated by our product software team was generated and accepted and committed from AI.

We're moving very quickly, and that helps us improve our efficiency of new feature launches and prototyping in our software organization. Shifting to the product side specifically, there's two areas that you're going to see from us over the next several quarters in terms of AI impact for customer experience in the app.

One area is, which we can talk about a little bit more deeply, is Origin AI. The AI features from Origin that include everything from motion intelligence, the ability to classify motion, alarm event intelligence, which is in the event of an alarm guiding first responders in terms of how to respond to that alarm event, and then zone-based intelligence in the home are all AI model-driven capabilities that will be rolling out starting in the first half of 2027 to our customers.

Then video analytics and video-based AI solutions in terms of insights generated by AI processing of our video for customer insights, as well as helping our monitoring centers as well. Those are all the areas that we are both working on and will start to roll out at the beginning of next year to our customers through ADT+.

Thank you. Appreciate it.

Thanks, Ronan.

Hi, everyone. Good morning.

Thanks for taking my question. I want to go back to Ashish's question on ADT Blue.

I think Omar, you said the majority of customers are adopting the fully monitored package. I just wanted to clarify that.

Do you mean one of the monitoring? You don't mean the professionally monitored, because I know uptake of that in this channel tends to be pretty low.

Then maybe just to double-click, of ADT Blue customers, how many are choosing the professionally monitored $35 package? Thanks.

What I meant by the comment was specifically around fully monitored, the $35 package. It's still pretty early in the adoption cycle, but the initial data is showing us that customers are choosing the full security package, which includes not just cameras, but sensors and the base, not the camera-only package from a self-monitoring perspective, the fully monitored package.

I do believe that over time we'll see that balance out because our goal is for us to bring in customers from an earlier stage perspective using camera only, in self-monitoring, and moving them up the value chain when it comes to adoption, and for them to adopt security products in addition to their cameras. The goal for us here is to actually get additional customers coming in at the entry level and move them up the chain.

The initial data that we're seeing is a majority of customers choosing the full security packages, which includes sensors and our base.

Okay. Thanks for clarifying.

That's pretty impressive uptake there. Thank you for clarifying.

Then maybe for just a follow-up, you talked about rationalizing marketing spend in your highest-cost channels, which you've been doing for some time. You talked about subscriber adds being temporarily impacted from that.

I just want to think about the strategy going forward. Do you expect to increase adds in other channels to sort of offset that, or is this sort of a change of go-to-market marketing strategy, and you expect adds in the pro install channel to improve?

Just help us think through the puts and takes of those.

That's the objective, absolutely. I'd mentioned this and it's worth sharing again: the core do-it-for-me business, the organic business for us is up high single digit year-to-date, and SMB sort of mid-single digit, I think 4-ish percent or so.

A handful of areas where we have optimism from a units add perspective is related to ADT+ expansion, more assertive, more differentiator-oriented advertising. We have some advances in AI technology in the Origin product, and lastly, DIY entry.

I'd mentioned it's early in the game, Amazon only, but we're just getting to e-commerce, talking to a handful of retail partners, and are generally optimistic on gross adds from DIY.

Thank you.

Thank you.

Thank you. Good morning.

Thanks for the question. Nice execution here.

Just following questions, Jeff, if you can walk us through working capital a little bit deeper here. I know you called out some timing elements and some one-time-ish kind of items.

How should we expect working capital flow over the next two quarters, and how should we think about normalized contribution to free cash flow going forward here?

Over the next couple quarters, I would expect it to be less of a benefit. It's implicit in our cash flow guidance that the second half will be lower than the first half.

There, as I mentioned earlier, there's lots of drivers that go in various directions on timing items, but the net of all of those things is such that I would not expect it to be a benefit. The couple specific things I mentioned earlier, there was a discrete item associated with some payroll timing that benefited us in the first half of this year.

We also, as I think I also mentioned, were very tight on managing working capital because of our desire to repurchase shares at such attractive prices, and most of those things had to do with the management of timing of inventory and payables. As we head into 2027, I wouldn't expect it to be as much of a benefit as it was in 2026, but we're always working to optimize our working capital.

Fair enough. Then on installation, the pick up in installation revenue, the acceleration there, is there a way you can give us a sense of how much outright system sales are contributing to that acceleration?

Yes, our total installation revenue in the quarter was up 17%. Outright sales was up about 30%.

The main driver there, as we've talked about in the past, is us transitioning or moving away from our historic model where we generally retained ownership of the equipment, and with the launch of ADT+, we began transitioning equipment ownership to the customer. There's a variety of reasons that we made that decision and made that change, and during this year we're continually to progress in the direction of moving more and more of our customers to an equipment ownership model where the customer owns the equipment even on non-ADT+ offerings, and that will continue.

I would expect to continue to see higher growth in outright sales in the third and fourth quarter, after which we will have largely completed the transition, less growth in installation revenue next year. I would expect second half to continue to grow like you've seen the last couple quarters.

That's impressive. Thank you so much.

Thanks, Pete.

Thank you, Fern, and thanks, everyone, for taking time to join us today. ADT delivered another solid quarter.

We continue to feel good about the direction of the business, and confident in our 2026 plans, both operational and the investments that we're making for a stronger future. I'd like to extend my appreciation to our ADT employees and dealer partners.

Congrats on a good first half of the year, and thanks again, everyone, and have a great day.