Investor Relations

Ascent Capital Group Announces Financial Results For The Three and Six Months Ended June 30, 2014

by Moni Blogger | Aug 15, 2014

Englewood, CO – August 15, 2014 – Ascent Capital Group, Inc. (“Ascent” or the “Company”) (Nasdaq: ASCMA) has reported results for the three and six months ended June 30, 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 1,000,000 residential and commercial customers. Monitronics’ long-term monitoring contracts provide high margin recurring revenue that results in predictable and stable cash flow.

Highlights1:

  • Ascent’s net revenue for the three and six months ended June 30, 2014 increased 31.7% and 32.2%, respectively.
  • Ascent’s Adjusted EBITDA2 for the three and six months ended June 30, 2014 increased 24.3% and 23.8%, respectively.
  • Monitronics’ Adjusted EBITDA3 for the three and six months ended June 30, 2014 increased 28.2% and 28.4%.
    • Monitronics subscriber accounts as of June 30, 2014 increased 25.9% to 1,056,106.
    • The growth in subscriber accounts reflects the effects of the acquisition of Security Networks as well as strong performance in the core account generation engine.
    • Average RMR per subscriber4 as of June 30, 2014 increased 3.2% to $41.26.

Ascent Chairman and Chief Executive Officer, Bill Fitzgerald stated, “We are very pleased with the performance of the business during the first half of 2014 with Monitronics delivering strong growth in revenue, Adjusted EBITDA and total subscribers in the first half of the year. At the holding company level, we repurchased over 116,000 shares in the quarter and continue to explore the most appropriate uses of our capital, including acquisition opportunities within alarm monitoring and related sectors.”

Mike Haislip, President and Chief Executive Officer of Monitronics said, “Monitronics posted solid second quarter results and delivered strong operational execution across all areas of the business. Revenue and Adjusted EBITDA increased a solid 31% and 28%, respectively and total subscriber accounts were up over 25% on strong growth attributable to the acquisition of Security Networks and account purchases through our dealer program. Our attrition level remained unchanged from the first quarter at 12.3%. Looking ahead, we believe we remain positioned well going forward into the second half of 2014.”

Three and Six Months Ended June 30, 2014 Results

Ascent Capital Group, Inc.

For the three months ended June 30, 2014, Ascent reported net revenue of $134.7 million, an increase of 31.7% compared to $102.3 million for the three months ended June 30, 2013. For the six months ended June 30, 2014, net revenue increased 32.2% to $267.6 million. The increase in net revenue for the three and six month time periods is predominantly attributable to increases in Monitronics' subscriber accounts and average RMR per subscriber, which were both driven primarily by the August 16, 2013 acquisition of Security Networks.

Ascent’s total cost of services for the three and six months ended June 30, 2014 increased 47.4% and 46.4% to $23.0 million and $45.1 million, respectively. This increase is primarily attributable to Monitronics' subscriber growth over the last twelve months, as well as increases in the number of HomeTouch customers and service costs, as described in more detail below.

Selling, general & administrative (“SG&A”) costs increased 24.3% to $26.7 million for the three months ended June 30, 2014 and increased 29.2% to $53.3 million for the first six months of 2014. The increase is a result of higher Monitronics SG&A costs, which are attributable to subscriber growth over the last twelve months, redundant staffing in Dallas in advance of the transition of Security Networks operations from Florida to Texas and integration costs related to the acquisition of Security Networks.

Ascent’s Adjusted EBITDA increased 24.3% to $88.5 million during the quarter and 23.8% to $176.5 million for the six months ended June 30, 2014. This increase is primarily due to revenue and subscriber growth at Monitronics.

Ascent reported a net loss from continuing operations for the three and six months ended June 30, 2014 of $10.5 million and $19.9 million, compared to net income from continuing operations of $212,000 and $2.5 million in the same periods in 2013.

Monitronics International, Inc.

For the three months ended June 30, 2014, Monitronics reported net revenue of $134.7 million, an increase of 31.7% compared to $102.3 million for the three months ended June 30, 2013. For the six months ended June 30, 2014, net revenue increased 32.2% to $267.6 million. The increase in net revenue is attributable to a 25.9% increase in the number of subscriber accounts and a 3.2% increase in the average RMR per subscriber to $41.26 as of June 30, 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 146,000 accounts through Monitronics’ authorized dealer program subsequent to June 30, 2013.

Monitronics’ total cost of services for the three and six months ended June 30, 2014 increased 47.4% and 46.4% to $23.0 million and $45.1 million, respectively. The increases are primarily attributable to subscriber growth over the last twelve months, as well as increases in the number of HomeTouch customers and service costs. HomeTouch services include home automation services monitored across the cellular network.

Monitronics’ SG&A costs increased 27.7% to $23.1 million for the three months ended June 30, 2014 and increased 35.5% to $46.1 million for the first six months of 2014. The increase is a result of higher Monitronics SG&A costs, which are attributable to subscriber growth over the last twelve months and redundant staffing and operating costs at Monitronics' Dallas, Texas headquarters in advance of transitioning Security Networks' operations from Florida to Texas. In addition, the Company incurred integration costs of $1.1 million and $2.2 million for the three and six months ended June 30, 2014, which primarily were for professional services related to the Security Networks transition.

Monitronics’ Adjusted EBITDA for the three months ended June 30, 2014 was $90.3 million, an increase of 28.2% over the three months ended June 30, 2013. For the six months ended June 30, 2014, Monitronics’ Adjusted EBITDA increased 28.4% to $179.5 million. The increase is primarily due to revenue and subscriber growth at Monitronics driven by the acquisition of Security Networks and accounts acquired through Monitronics' authorized dealer program. Monitronics’ Adjusted EBITDA as a percentage of revenue was 67.0% in the second quarter of 2014, compared to 68.8% for the three months ended June 30, 2013. Monitronics’ Adjusted EBITDA as a percentage of revenue for the six months ended June 30, 2014 was 67.1%, compared to 69.1% for the prior year period.

Monitronics reported a net loss for the three months ended June 30, 2014 of $8.5 million compared to net income of $592,000 in the prior year period. Monitronics reported a net loss for the six months ended June 30, 2014 of $16.4 million compared to net income of $1.9 million in the prior year period.

The table below presents subscriber data for the twelve months ended June 30, 2014 and 2013:

Twelve Months Ended June 30

2014

2013

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

838,723

711,832

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

352,973

228,040

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

(125,096)

(98,107)

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

(10,494)

(3,042)

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

1,056,106

838,723

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

1,014,902

787,735

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

(12.3)%

(12.5)%


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

(b)  Includes a net reduction of 561 subscriber accounts of acquisition adjustments related to the acquisition of Security Networks. These acquisition adjustments include 2,064 subscriber accounts that were proactively canceled following the acquisition of Security Networks in August 2013 because they were active with both Monitronics and Security Networks. The impact of these cancellations were partially offset by a favorable adjustment of 1,503 accounts associated with multi-site subscribers that were considered single accounts prior to the completion of the Security Networks integration in April 2014.

 

During the three months ended June 30, 2014 and 2013, Monitronics acquired 42,851 and 47,733 subscriber accounts, respectively, including bulk purchases of 2,900 accounts in the second quarter of 2014 and bulk purchases of 18,200 accounts in the same period of 2013. During the six months ended June 30, 2014 and 2013, Monitronics acquired 74,625 and 76,193 subscriber accounts, respectively. Acquired contracts for the twelve months ended June 30, 2014 include 203,898 accounts acquired in the Security Networks acquisition and approximately 2,900 accounts purchased in a bulk buy in the second quarter of 2014. Subscriber accounts acquired for the twelve months ended June 30, 2013 include approximately 111,200 accounts purchased in various bulk buys throughout the period.

Monitronics’ trailing twelve month attrition for the period ending June 30, 2014 was 12.3% compared to 12.5% for the period ended June 30, 2013.

Ascent Liquidity and Capital Resources

At June 30, 2014, on a consolidated basis, Ascent had $155.2 million of cash, cash equivalents and marketable securities. A portion of these assets may be used to decrease debt obligations or fund stock repurchases, strategic acquisitions or investment opportunities.

During the six months ended June 30, 2014, Monitronics used cash of $126.6 million to fund subscriber account acquisitions, net of holdback and guarantee obligations.

At June 30, 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 June 30, 2014 and mature on July 15, 2020. Monitronics' Senior Notes have an outstanding principal balance of $585.0 million as of June 30, 2014 and mature on April 1, 2020. The Credit Facility term loans have an outstanding principal balance of $902.9 million as of June 30, 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 $41.5 million as of June 30, 2014 and becomes due on December 22, 2017.

On June 16, 2011, the Company announced that it received authorization to implement a stock repurchase program, pursuant to which it may purchase up to $25.0 million of shares of the Company’s Series A common stock, par value $0.01 per share (the “Series A Common Stock”), from time to time. On November 14, 2013, the Company’s Board of Directors authorized the repurchase of an additional $25.0 million of its shares of Series A Common Stock. During the six months ended June 30, 2014, the Company purchased 308,609 shares of Series A Common Stock pursuant to these authorizations for approximately $22.2 million. Over $3.4 million in shares of Series A Common Stock may still be purchased under the authorizations.

Conference Call

Ascent will host a conference call today, August 7, 2014, at 5:00 p.m. ET. 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 78864467. 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 October 7, 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 78864467.

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

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, the continuation of our stock repurchase program 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 (including those conducive to stock repurchases), 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 1,000,000 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.

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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 for the three and six months ended June 30, 2014 totaled $10.3 million and $20.0 million, respectively.

 3 Monitronics’ net loss for the three and six months ended totaled $8.5 million and $16.4 million, respectively.

4 Calculated as the average recurring monthly revenue per subscriber.

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

(b)  Includes a net reduction of 561 subscriber accounts of acquisition adjustments related to the acquisition of Security Networks.  These acquisition adjustments include 2,064 subscriber accounts that were proactively canceled following the acquisition of Security Networks in August 2013 because they were active with both Monitronics and Security Networks.  The impact of these cancellations were partially offset by a favorable adjustment of 1,503 accounts associated with multi-site subscribers that were considered single accounts prior to the completion of the Security Networks integration in April 2014.



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