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Ascent Capital Group Announces Financial Results For The Three Months Ended March 31, 2014

by Moni Blogger | May 09, 2014

Englewood, CO – May 8, 2014 – Ascent Capital Group, Inc. (“Ascent or the “Company”) (Nasdaq: ASCMA) has reported results for the three months ended March 31, 2014. Ascent is a holding company that owns Monitronics International, Inc. (“Monitronics”), one of the nation’s largest and fastest-growing home security alarm monitoring companies.

Headquartered in Dallas, Texas, Monitronics provides security alarm monitoring services to more than 1 million residential and commercial customers. Monitronics’ long-term monitoring contracts provide high margin recurring revenue that results in predictable and stable cash flow.

Highlights[1]:

  • Ascent’s net revenue for the three months ended March 31, 2014 increased 32.7%
  • Ascent’s Adjusted EBITDA[2] for the three months ended March 31, 2014 increased 23.3%
  • Monitronics’ Adjusted EBITDA[3] for three months ended March 31, 2014 increased 28.6%
    • Monitronics subscriber accounts as of March 31, 2014 increased 27.9% to 1,046,785
    • Average RMR per subscriber[4] as of March 31, 2014 increased 3.5% to $41.15
  • Management completed the transitioning of Security Networks’ operations from Florida to Texas in April 2014

Ascent Chairman and Chief Executive Officer, Bill Fitzgerald stated, “We are pleased with Monitronics’ solid financial performance and the successful completion of the Security Networks integration, which was finalized in April.”

“At the holding company level, our balance sheet remains strong and we continue to pursue productive and accretive investments in the alarm monitoring industry and adjacent sectors, while being opportunistic about share repurchases.”

Mike Haislip, President and Chief Executive Officer of Monitronics said, “During the first quarter Monitronics revenue increased 32% while Adjusted EBITDA grew a solid 28%, despite severe winter weather that periodically affected our dealers across the country. Total subscriber accounts were up 28% over the first quarter of last year and our attrition level increased modestly from 12.2% to 12.3%, and was unchanged from year-end.

“The first quarter also included the ongoing Security Networks’ integration and, due to the strong efforts of our operating team, on April 24th we successfully completed the transition of all Security Networks accounts to be serviced and monitored out of our call center in Dallas. We originally projected that operational efficiencies from the combined business would drive $4-6 million in annual cost savings, and we are on track to exceed those estimates. We are excited about where our business stands and its future prospects.”


Three Months Ended March 31, 2014 Results

Ascent Capital Group, Inc.

For the three months ended March 31, 2014, Ascent reported net revenue of $132.9 million, an increase of 32.7% compared to $100.2 million for the three months ended March 31, 2013. This increase in net revenue is primarily attributable to increases in Monitronics’ subscriber accounts and average RMR per subscriber, which were both driven in part by the August 16, 2013 acquisition of Security Networks.

Ascent’s total cost of services for the three months ended March 31, 2014 increased 45.3% to $22.1 million. This increase is primarily attributable to Monitronics’ subscriber growth over the last twelve months, as well as increases in cellular and service costs, as described in more detail below. 

Selling, general & administrative (“SG&A”) costs for the three months ended March 31, 2014 increased 34.5% to $26.5 million. The increase is primarily attributable to increases in Monitronics SG&A expenses as well as the inclusion of Security Networks SG&A of $3.9 million for the three months ended March 31, 2014. The increase in Monitronics SG&A is partly attributable to redundant staffing and operating costs at our Dallas, Texas headquarters and integration costs incurred in advance of transitioning Security Networks’ operations from Florida to Texas.

For the quarter, Ascent’s Adjusted EBITDA increased 23.3% to $87.9 million. This increase is primarily due to revenue and subscriber growth at Monitronics.

Ascent reported a net loss from continuing operations for the three months ended March 31, 2014 of $9.4 million, compared to net income of $2.3 million for the same period in 2013.

Monitronics International, Inc.

 

For the three months ended March 31, 2014, Monitronics reported net revenue of $132.9 million, an increase of 32.7% compared to $100.2 million for the three months ended March 31, 2013. The increase in net revenue is attributable to a 27.9% increase in the number of subscriber accounts and a 3.5% increase in the average RMR per subscriber to $41.15 as of March 31, 2014. The growth in subscribers reflects the Security Networks acquisition in August 2013, which included over 200,000 subscriber accounts, as well as the acquisition of over 135,000 accounts through Monitronics’ authorized dealer program subsequent to March 31, 2013, and the purchase of approximately 18,200 accounts in bulk buys over the last 12 months.

Monitronics’ total cost of services for the three months ended March 31, 2014 increased 45.3% to $22.1 million. The increase for the three months ended March 31, 2014 is primarily attributable to subscriber growth over the last twelve months, as well as increases in cellular and service costs. Cellular costs increased due to more accounts being monitored across the cellular network, which often include home automation services. This has also resulted in higher service costs as existing subscribers upgrade their systems.

Monitronics’ SG&A costs for the three months ended March 31, 2014 increased 44.5% to $23.0 million compared to the prior year period. The increase is primarily attributable to subscriber growth over the last twelve months.  Increased SG&A costs are also attributable to redundant staffing and operating costs at Monitronics’ Dallas, Texas headquarters and integration costs incurred in advance of transitioning Security Networks’ operations from Florida to Texas. Integration costs for the three months ended March, 31, 2014, were $1.1 million, which primarily relate to professional services rendered. 

Monitronics’ Adjusted EBITDA for the three months ended March 31, 2014 was $89.3 million, an increase of 28.6% over the three months ended March 31, 2013. The increase is primarily due to revenue and subscriber growth at Monitronics driven by accounts acquired through Monitronics’ authorized dealer program, the acquisition of Security Networks and bulk account purchases over the last twelve months. Monitronics’ Adjusted EBITDA as a percentage of revenue was 67.2% in the first quarter of 2014, compared to 69.3% for the three months ended March 31, 2013.

Monitronics’ reported a net loss for the three months ended March 31, 2014 of $7.9 million compared to net income of $1.3 million in the prior year period.

The table below presents subscriber data for the twelve months ended March 31, 2014 and 2013:

Twelve Months Ended
March 31,

2014

2013

Beginning balance of accounts .............................................

818,335

706,881

Accounts acquired ...............................................................

357,855

206,665

Accounts cancelled ..............................................................

(118,688

)

(92,696

)

Canceled accounts guaranteed by dealer and acquisition adjustment (a) (b) ..............................................................

(10,717

)

(2,515

)

Ending balance of accounts .................................................

1,046,785

818,335

Monthly weighted average accounts .....................................

962,527

759,180

Attrition rate .........................................................................

(12.3

)%

(12.2

)%


(a)  Canceled accounts that are contractually guaranteed to be refunded from holdback.

(b)  Includes 2,064 subscriber accounts that were proactively cancelled following the acquisition of Security Networks in August 2013 because they were active with both Monitronics and Security Networks.

During the three months ended March 31, 2014, Monitronics acquired 31,774 subscriber accounts. Acquired contracts for the twelve months ended March 31, 2014 include 203,898 accounts acquired in the Security Networks acquisition, which was completed on August 16, 2013.  In addition, subscriber accounts acquired for the twelve months ended March 31, 2013 include approximately 93,000 accounts purchased in a bulk buy on October 25, 2012. 

Monitronics’ trailing twelve month attrition for the period ending March 31, 2014 was 12.3%, compared to 12.2% for the period ended March 31, 2013.

Ascent Liquidity and Capital Resources

At March 31, 2014, on a consolidated basis, Ascent had $189.5 million of cash, cash equivalents and marketable securities, of which $26.7 million was used to fund Monitronics’ semi-annual interest payment on its Senior Notes on April 1, 2014.  A portion of these assets may also be used to decrease debt obligations or fund stock repurchases, strategic acquisitions or investment opportunities.

During the three months ended March 31, 2014, Monitronics used cash of $53.8 million to fund subscriber account acquisitions, net of holdback and guarantee obligations.

At March 31, 2014 the existing long-term debt principal balance of $1.6 billion includes Monitronics’ Senior Notes, Credit Facility and Credit Facility revolver and Ascent’s Convertible Notes. The Convertible Notes have an outstanding principle balance of $103.5 million as of March 31, 2014 and mature on July 15, 2020. Monitronics’ Senior Notes have an outstanding principal balance of $585.0 million as of March 31, 2014 and mature on April 1, 2020. The Credit Facility term loans have an outstanding principal balance of $905.2 million as of March 31, 2014 and require principal payments of approximately $2.3 million per quarter with the remaining outstanding balance becoming due on March 23, 2018. The Credit Facility revolver has an outstanding balance of $37.5 million as of March 31, 2014 and becomes due on December 22, 2017.

Conference Call

Ascent will host a conference call today, May 8, 2014, at 5:00 p.m. EDT. To access the call please dial (888) 462-5915 from the United States, or (760) 666-3831 from outside the U.S. The conference call I.D. number is 34486038. Participants should dial in 5 to 10 minutes before the scheduled time and must be on a touch-tone telephone to ask questions.

A replay of the call can be accessed through July 8, 2014 by dialing (800) 585-8367 from the U.S., or (404) 537-3406 from outside the U.S. The conference call I.D. number is 34486038.

This call will also be available as a live webcast which can be accessed at Ascent’s Investor Relations Website at http://www.ascentcapitalgroupinc.com/Investor-Relations.aspx.

Forward Looking Statements

This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about business strategies, acquisition opportunities, market potential, consumer demand for interactive and home automation services, benefits from the integration of Security Networks’ operations, future financial prospects and other matters that are not historical facts. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, possible changes in market acceptance of our services, technological innovations in the alarm monitoring industry, competitive issues, continued access to capital on terms acceptable to Ascent, our ability to capitalize on acquisition opportunities, general market and economic conditions, and changes in law and government regulations. These forward-looking statements speak only as of the date of this press release, and Ascent expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Ascent’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Please refer to the publicly filed documents of Ascent, including the most recent Forms 10-K and 10-Q for additional information about Ascent and about the risks and uncertainties related to Ascent’s business which may affect the statements made in this press release.

About Ascent Capital Group, Inc.

 

Ascent Capital Group, Inc. (Nasdaq: ASCMA) is a holding company that owns 100 percent of its operating subsidiary, Monitronics International Inc. and certain former subsidiaries of Ascent Media Group, LLC. Monitronics International, headquartered in Dallas, TX, is one of the nation's largest, fastest-growing home security alarm monitoring companies, providing security alarm monitoring services to more than 1 million residential and commercial customers in the United States, Canada and Puerto Rico through its network of nationwide, independent Authorized Dealers. For more information, see http://ascentcapitalgroupinc.com/ 

###

            Contact:

            Erica Bartsch

            Sloane & Company

            212-446-1875

            ebartsch@sloanepr.com



[1] Comparisons are year-over-year unless otherwise specified.

[2] For a definition of Adjusted EBITDA and applicable reconciliations, see the Appendix to this release. Ascent’s net loss from continuing operations for the three months ended March 31, 2014 totaled $9.4 million.

[3] Monitronics’ net loss for the three months ended March 31, 2014 totaled $7.9 million.

[4] Calculated as the average recurring monthly revenue per subscriber.

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