November 27, 2012 / 11:16 AM / in 5 years

ADT profit meets forecasts as price hikes lift sales

(Reuters) - Price increases helped lift sales and earnings at ADT Corp (ADT.N) in its initial quarter as an independent company, and the home security services provider said more customers were adopting its high-margin “Pulse” monitoring services.

The former Tyco TYC.N unit also said on Tuesday that its board had approved buying back up to $2 billion in stock over three years and was considering taking on more debt to invest in its business, partly at the urging of a large shareholder.

Corvex Management LP disclosed a 5 percent stake in ADT last month. The investment firm was founded by Keith Meister, one of activist investor Carl Icahn’s longtime associates.

“They asked us to rethink ... what our capital structure should be and the opportunity to take on more debt,” ADT Chief Executive Officer Naren Gursahaney said in an interview.

“We’ll be looking at the debt markets over the next few weeks,” he said. “(The fiscal cliff) could affect what availability is, and the price of debt, so we’ll keep an eye on how markets respond.”

ADT reported net earnings of $94 million, or 40 cents per share, for the fourth quarter ended on September 28, up from $93 million, or 39 cents per share, a year earlier.

Excluding restructuring and separation costs, ADT earned 43 cents a share, meeting Wall Street expectations, according to Thomson Reuters I/B/E/S.

Sales rose 2 percent to $812 million, with recurring revenue from existing customers accounting for almost all of the total.

The Boca Raton, Florida-based company forecast a 4.9 percent to 5.2 percent rise in recurring revenue in fiscal 2013. It did not immediately provide an earnings-per-share outlook.

Shares of ADT were up 2.3 percent at $44.10 in trading before the market opened.

    The company is the market leader in security monitoring services for homes and small businesses in North America, while Tyco retains the ADT name in other regions.

    ADT has described the U.S. and Canadian home security market as highly fragmented and said it would use acquisitions to increase its subscriber base, grow in the small business market and move into other businesses such as home health monitoring.

    Recent price hikes by ADT lifted average revenue per user but also led some customers to cut off service, pushing up attrition rates to 13.8 percent.

    Despite the higher attrition, the net number of customer accounts rose in the quarter. The higher revenue per user also reflected a shift by some customers to the more-expensive Pulse home monitoring system.

    ADT said it had about 180,000 Pulse customers, about 3 percent of its total customer base of 6.4 million.

    Reporting by Nick Zieminski in New York; Editing by Lisa Von Ahn

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