Investor Relations

Ascent Capital Group Announces Financial Results for the Three and Nine Months Ended September 30, 2014

by User Not Found | Nov 11, 2014

Englewood, CO – Nov. 10, 2014 – Ascent Capital Group, Inc. ("Ascent" or the "Company") (Nasdaq: ASCMA) (OTCMKTS: ASCMB) has reported results for the three and nine months ended September 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 million 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 nine months ended September 30, 2014 increased 17.4% and 26.8%, respectively
  • Ascent's Adjusted EBITDA2 for the three and nine months ended September 30, 2014 increased 17.1% and 21.5%, respectively
  • Monitronics' Adjusted EBITDA3 for the three and nine months ended September 30, 2014 increased 17.4% and 24.5%
  • Ascent announced the Board of Directors' authorization of an increase of $25 million to its stock repurchase program

Ascent Chairman and Chief Executive Officer Bill Fitzgerald stated, "We continue to execute well against our long-term business strategy and continue to deliver solid financial and operational results.  The predictable and stable nature of the Monitronics business model within this rapidly developing industry sector serves to offer expansive opportunities for growth, while the main tenets that attracted us to this investment remain sound, including strong free cash flow generation.  We remain very bullish on the long-term outlook for continued profitable growth of our core operations.

"Additionally, we continue to exercise a disciplined approach to capital allocation.  The authorization to repurchase an additional $25 million in stock underscores our confidence in the long-term growth prospects of the business and our commitment to continued shareholder value creation."

Mike Haislip, President and Chief Executive Officer of Monitronics, said, "Monitronics delivered solid growth in revenue and Adjusted EBITDA in the quarter. Our accounts acquired in the quarter were up 17.5 percent year-over-year, and we continued to see strong demand for our home automation offerings. Attrition was flat with the year ago period and increased modestly quarter-over-quarter. Moving forward, we are focused on identifying additional growth opportunities in the form of bulk account purchases and the continued recruitment of new dealers."

Three and Nine Months Ended September 30, 2014

Ascent Capital Group, Inc.

For the three months ended September 30, 2014, Ascent reported net revenue of $136.0 million, an increase of 17.4% compared to $115.8 million for the three months ended September 30, 2013. For the nine months ended September 30, 2014, net revenue increased 26.8% to $403.6 million. The increase in net revenue for the three and nine month time periods is predominately 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 nine months ended September 30, 2014 increased 23.2% and 37.2% to $24.8 million and $69.9 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 2.0% to $24.3 million for the three months ended September 30, 2014 and increased 19.2% to $77.6 million for the first nine 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 for the nine month period 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 17.1% to $88.6 million during the quarter and 21.5% to $265.1 million for the nine months ended September 30, 2014. This increase is primarily due to revenue and subscriber growth at Monitronics.

Ascent reported net losses from continuing operations for the three and nine months ended September 30, 2014 of $11.0 million and $30.9 million, compared to net losses of $7.7 million and $5.1 million in the same periods in 2013.

Monitronics International, Inc.

For the three months ended September 30, 2014, Monitronics reported net revenue of $136.0 million, an increase of 17.4% compared to $115.8 million for the three months ended September 30, 2013. For the nine months ended September 30, 2014, net revenue increased 26.8% to $403.6 million. The increase in net revenue is attributable to the growth in the number of subscriber accounts and the increase in average RMR per subscriber to $41.36. The growth in subscriber accounts reflects the acquisition of over 200,000 accounts from Security Networks in August 2013 and the acquisition of over 150,000 accounts through Monitronics' authorized dealer program subsequent to September 30, 2013.  Net revenue for the three and nine months ended September 30, 2013 also reflects the negative impact of an approximate $2,500,000 fair value adjustment that reduced deferred revenue acquired in the Security Networks Acquisition.

Monitronics' total cost of services for the three and nine months ended September 30, 2014 increased 23.2% to $24.8 million and 37.2% to $69.9 million, respectively. The increase is primarily attributable to subscriber growth as explained above, 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 3.0% to $20.6 million for the three months ended September 30, 2014 and increased 23.5% to $66.7 million for the first nine months of 2014. The increases are attributable to subscriber growth over the last twelve months.  In addition, for the nine months ended September 30, 2014, the Company incurred redundant staffing and operating costs at Monitronics' Dallas headquarters in advance of transitioning Security Networks' operations from Florida to Texas, which was completed in April 2014. Professional fees incurred in relation to the transition effort totaled $2.2 million for the nine months ended September 30, 2014, as compared to $535,000 for the corresponding year ago period.

Monitronics' Adjusted EBITDA for the three months ended September 30, 2014 was $91.1 million, an increase of 17.4% over the three months ended September 30, 2014. For the nine months ended September 30, 2014, Monitronics' Adjusted EBITDA increased 24.5% to $270.7 million. The increase is primarily due to revenue growth. Monitronics' Adjusted EBITDA as a percentage of revenue was unchanged at 67.0% in the third quarter of 2014, compared to the year ago period. Monitronics' Adjusted EBITDA as a percentage of revenue for the nine months ended September 30, 2014 was 67.1%, compared to 68.3% for the prior year period.

Monitronics reported a net loss for the three months ended September 30, 2014 of $8.3 million compared to $4.5 million in the prior year period. Monitronics reported a net loss for the nine months ended September 30, 2014 of $24.7 million compared to $2.5 million in the prior year period.

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

Twelve Months Ended September 30

2014

2013

Beginning balance of accounts

1,041,740

717,488

Accounts acquired

155,568

437,860

Accounts cancelled

(132,153)

(106,859)

Canceled accounts guaranteed by dealer and acquisition adjustment

(8,014) (a)

(6,749) (b)

Ending balance of accounts

1,057,141

1,041,740

Monthly weighted average accounts

1,049,454

847,673

Attrition rate

(12.6)%

(12.6)%


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

(b) Includes a net increase of 1,385 subscriber accounts related to the Security Networks Acquisition. These acquisition adjustments include 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. The favorable adjustment was partially offset by 118 subscriber accounts that were proactively canceled in October 2013 because they were active with both Monitronics and Security Networks.

(c) Includes 1,946 subscriber accounts that were proactively canceled during the third quarter of 2013 because they were active with both Monitronics and Security Networks.

Monitronics' trailing twelve months attrition for the period September 30, 2014 was unchanged at 12.6%, compared to the year ago period.

Ascent Liquidity and Capital Resources

At September 30, 2014, on a consolidated basis, Ascent had $182.1 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. Of this amount, $26.7 million was used to pay our semi-annual Senior Notes interest payment on October 1, 2014.

During the nine months ended September 30, 2014, Monitronics used cash of $202.4 million to fund subscriber account acquisitions, net of holdback and guarantee obligations.

At September 30, 2014, the existing long-term debt principal balance of $1.7 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 September 30, 2014 and mature on July 15, 2020. Monitronics' Senior Notes have an outstanding principal balance of $585.0 million as of September 30, 2014 and mature on April 1, 2020. The Credit Facility term loans have an outstanding principal balance of $900.6 million as of September 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 $225 million Credit Facility revolver has an outstanding balance of $77.1 million as of September 30, 2014 and becomes due on December 22, 2017.

On November 10, 2014, Ascent announced the Board of Directors' authorization of an increase of $25 million to its stock repurchase program, which combined with the remaining availability under Ascent's existing stock repurchase program will enable Ascent to purchase up to an aggregate of $28.15 million of its Series A Common Stock. Ascent may also purchase shares of Series B Common Stock under its increased program. Ascent may acquire from time to time its common stock through open market transactions and/or privately negotiated transactions, which may include derivative transactions. The timing of the repurchase of shares pursuant to the program will depend on a variety of factors, including market conditions. The program may be suspended or discontinued at any time.

Conference Call

Ascent will host a conference call today, November 10, 2014, at 5:00 p.m. EST. 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 23254330. 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 January 10, 2015 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 23254330.

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) (OTCMKTS: ASCMB) 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 nine months ended September 30, 2014 totaled $11.1 million and $31.1 million, respectively.

3  Monitronics' net loss for the three and nine month periods totaled $8.3 million and $24.7 million, respectively.

4  Calculated as the average recurring monthly revenue per subscriber.


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