Investor Relations

Ascent Capital Group Announces Financial Results for the Three Months and Full Year Ended Dec. 31, 2014

by Moni Blogger | Mar 03, 2015

Announces Acquisition of LiveWatch Security, LLC

Acquisition adds over 32,000 Customer Accounts and Creates Unique Presence in High Growth DIY Security Market


Englewood, CO – Feb. 26, 2015 – Ascent Capital Group, Inc. ("Ascent" or the "Company") (Nasdaq: ASCMA) (OTCMKTS: ASCMB) has reported results for the three months and full year ended December 31, 2014. Ascent is a holding company that owns Monitronics International, Inc. ("Monitronics"), the nation's second-largest home security alarm monitoring company.

Headquartered in Dallas, Texas, Monitronics provides security alarm monitoring services to more than 1 million residential and commercial customers as of Dec. 31, 2014. 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 twelve months ended December 31, 2014 increased 2.3% and 19.6%, respectively.
  • Ascent's Adjusted EBITDA2 for the three and twelve months ended December 31, 2014 increased 3.1% and 16.5%, respectively
  • Monitronics Adjusted EBITDA3 for the three and twelve months ended December 31, 2014 increased 3.4% and 18.7%
    • Monitronics RMR as of Dec. 31, 2014, increased 3.1% to $44.1 million.
    • Average RMR per subscriber increased 1.8% to $41.64.
  • Monitronics has acquired LiveWatch Security, LLC, a Do-It-Yourself ("DIY") home security provider offering interactive and home automation services, for approximately $67 million.
    • LiveWatch services over 32,000 accounts nationwide and has over $900,000 over recurring monthly revenue.

Ascent Chairman and Chief Executive Officer Bill Fitzgerald stated, "Monitronics delivered another year of solid operating performance in 2014, with strong year over year growth in revenue and Adjusted EBITDA..

"In an effort to continue expanding Monitronics' service offerings and distribution channels, we are pleased to announce the acquisition of LiveWatch Security, a significant player in the rapidly growing DIY home security space. This acquisition will allow Monitronics to diversify its service offerings with entry into the developing and complementary DIY home service category. In addition to bringing an additional 32,000 customer accounts to the Monitronics platform, it will also provide a very robust production engine that is expected to continue generating a high volume of new accounts and RMR."

Mike Haislip, President and Chief Executive Officer of Monitronics, said, "Monitronics' performance in the fourth quarter and 2014 reflects our disciplined approach to managing our operations. We delivered solid revenue and Adjusted EBITDA growth in 2014. As previously predicted, attrition levels increased to 12.9%, largely due to a significant prior bulk acquisition that has resulted in a higher percentage of accounts reaching the end of their initial contract terms. Our predictive data continues to indicate that this bulk purchase will lead to a modest incremental increase in attrition through the first half of 2015 before seeing it moderate in the second half of the year. Overall, we were very pleased with our operating performance for the year."

LiveWatch Security, LLC

On Feb. 23, Monitronics acquired LiveWatch Security, LLC, a Do-It-Yourself ("DIY") home security provider offering interactive and home automation services for approximately $67 million, which includes $6 million of retention bonuses to be paid on the second anniversary of the closing.

With over $900,000 of recurring monthly revenue, LiveWatch provides professionally monitored security system services to over 32,000 customers across all fifty states and Puerto Rico.

In conjunction with this transaction, Monitronics has expanded its revolving credit facility by $90 million. The transaction was financed with debt under the expanded revolver and cash from Ascent.

About the acquisition Monitronics Chief Executive Officer, Michael Haislip, commented, "We are excited to have acquired LiveWatch, an established player in the rapidly expanding DIY space, a compelling channel that we have long been interested in entering. LiveWatch provides Monitronics with innovative and diversified account generation potential that, over time, can be expanded into adjacent product and service offerings beyond traditional home security monitoring."

Brad Morehead, CEO of LiveWatch, added, "The home security industry is experiencing a rapid technological evolution and we believe that we are at the forefront of that change. Partnering with Monitronics, a well-respected industry leader, will enable LiveWatch to accelerate its innovation, leverage scale opportunities, and enhance the overall customer experience."

LiveWatch will operate as a standalone subsidiary of Monitronics.

Three and Twelve Months Ended December 31, 2014

Ascent Capital Group, Inc.

Ascent reported net revenue of $135.9 million, an increase of 2.3% compared to $132.8 million for the three months ended December 31, 2013. For the twelve months ended December 31, 2014 net revenue increased 19.6% to $539.4 million. The increase in net revenue for the three and twelve month time periods is primarily attributable to increases in Monitronics' subscriber accounts and average RMR per subscriber.

Ascent's total cost of services for the three and twelve months ended December 31, 2014 increased 7.0% and 27.8% to $24.8 million and $94.7 million, respectively. The 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. Service costs for the year ended December 31, 2014 also included $1.1 million of non-recurring costs related to the Radio Conversion Program, as described in more detail below.

Selling, general & administrative ("SG&A") expenses for the three months ended December 31, 2014 decreased 8.9% to $24.5 million, and increased 11.0% to $102.1 million for the full year 2014. Decreased SG&A costs for the three months ended December 31, 2014, are attributable to Monitronics' elimination of duplicate costs related to the Security Networks acquisition that closed in August 2013. The increase for the twelve month period is a result of higher Monitronics SG&A costs, which are attributable to subscriber growth over the last twelve months and redundant staffing through April 2014, when the transition of Security networks operations from Florida to Texas was completed.

Ascent's Adjusted EBITDA increased 3.1% to $88.9 million during the quarter and 16.5% to $354.8 million for the twelve months ended December 31, 2014. This increase is primarily due to revenue and subscriber growth at Monitronics.

Ascent reported net losses from continuing operations for the three and twelve months ended December 31, 2014 of $6.6 million and $37.4 million, respectively, compared to net losses of $16.5 million and $21.6 million for the same periods in 2013.

Monitronics International, Inc.

For the three and twelve months ended December 31, 2014, Monitronics reported net revenue of $135.9 million and $539.4 million, increases of 2.3% and 19.6%, respectively. 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 $41.64. The growth in subscriber accounts reflects the acquisition of over 200,000 accounts from Security Networks in August 2013 and the acquisition of over 145,000 accounts through Monitronics' authorized dealer program subsequent to December 31, 2013. Net revenue for the year ended December 31, 2013 also reflects the negative impact of an approximate $2,715,000 fair value adjustment that reduced deferred revenue acquired in the Security Networks Acquisition.

Monitronics' total cost of services for the three and twelve months ended December 31, 2014 increased 7.0% to $24.8 million and 27.8% to $94.7 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. Service cost for the year ended December 31, 2014 included $1.1 million of labor and materials expense incurred in relation to the Radio Conversion Program, which was implemented in 2014 to upgrade subscribers' alarm monitoring systems that communicate across certain 2G networks that are expected to be discontinued at the end of 2016.

Monitronics' SG&A costs decreased 8.2% to $21.3 million for the three months ended December 31, 2014 and increased 14.0% to $87.9 million for the full year. The decreased SG&A costs for the three months ended December 31, 2014 are attributable to the elimination of duplicate costs from the Security Networks acquisition, which include reduced payroll and facility costs. Additionally, SG&A costs for the three months ended December 31, 2013 included $729,000 of professional fees incurred in relation to the Security Networks integration. For the twelve months ended December 31, 2014, the increase is attributable to subscriber growth over the last twelve months. In addition and as noted above, Monitronics incurred redundant staffing and operating costs at its Dallas headquarters in advance of transitioning Security Networks' operations from Florida to Texas, which was completed in April 2014.

Monitronics' Adjusted EBITDA for the three months ended December 31, 2014 was $90.8 million, an increase of 3.4% over the three months. For the twelve months ended December 31, 2014, Monitronics' Adjusted EBITDA increased 18.7% to $362.2 million. The increase is primarily due to revenue growth. Monitronics' Adjusted EBITDA as a percentage of revenue was 66.8% in the quarter ended December 31, 2014, compared to 66.1% for the three months ended December 31, 2013. Monitronics' Adjusted EBITDA as a percentage of revenue for the twelve months ended December 31, 2014 totaled 67.1%, compared to 67.7% for the year-ago period.

Monitronics reported net losses for the three and twelve months ended December 31, 2014 of $5.0 million and $29.7 million, respectively, compared to net losses of $14.1 million and $16.7 million for the same periods in 2013.

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

Twelve Months Ended December 31

2014

2013

Beginning balance of accounts

1,046,155

812,539

Accounts acquired

156,225

354,541

Accounts cancelled

(135,940)

(111,889)

Canceled accounts guaranteed by dealer and acquisition adjustment

(7,174) (a)

(9,036) (b)

Ending balance of accounts

1,059,266

1,046,155

Monthly weighted average accounts

1,052,756

908,921

Attrition rate - Unit

(12.9)%

(12.3)%

Attrition rate - RMR (d)

(12.6)%

(12.2)%


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

(b) Includes an increase of 1,503 subscriber accounts associated with multi-site subscribers that were considered single accounts prior to the completion of the Security Networks integration in April 2014.

(c) Includes 2,046 subscriber accounts that were proactively canceled during 2013 because they were active with both Monitronics and Security Networks.

(d) The RMR of canceled accounts follows the same definition as subscriber unit cancellations. RMR attrition is defined as the RMR of canceled accounts in a given period, adjusted for the impact of price increases or decreases in a given period, divided by the weighted average RMR for that period.

During the three months ended December 31, 2014 and 2013, Monitronics acquired 37,998 subscriber accounts and 37,341 subscriber accounts, respectively. During the years ended December 31, 2014 and 2013, Monitronics acquired 156,225 and 150,643 subscriber accounts, respectively, without giving effect to the Security Networks Acquisition which included 203,898 accounts acquired at the completion of the acquisition in August of 2013.

Ascent Liquidity and Capital Resources

At December 31, 2014, on a consolidated basis, Ascent had $135.2 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 twelve months ended December 31, 2014, Monitronics used cash of $268.2 million to fund subscriber account acquisitions, net of holdback and guarantee obligations.

At December 31, 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 principal balance of $103.5 million as of December 31, 2014 and mature on July 15, 2020. Monitronics' Senior Notes have an outstanding principal balance of $585.0 million as of December 31, 2014 and mature on April 1, 2020. The Credit Facility term loans have an outstanding principal balance of $898.3 million as of December 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 $70.5 million as of December 31, 2014 and becomes due on December 22, 2017.

Conference Call

Ascent will host a conference call today, February 26, 2015, 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 80046849. 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 April 26, 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 80046849.

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, market potential, consumer demand for interactive and home automation services, the anticipated benefits of the LiveWatch acquisition, 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 Form 10-K 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/.

About LiveWatch Security, LLC

LiveWatch Security®, a DIY home security system provider offering smartphone-enabled alarm systems and home automation, has revolutionized home security in America with its Plug & Protect® home security system featuring the patented ASAPer® (As Soon As Possible Emergency Response) service. Founded in 2002, LiveWatch is headquartered in Evanston, IL and serves customers in all 50 states, Puerto Rico and Canada. LiveWatch (including its e-Commerce division SafeMart) was honored with the 2014 Gold Stevie Award for Customer Service, 2013 Silver Stevie Award for eCommerce Customer Service, and was recognized as an enterprise leader by The Economist. For more information, please visit LiveWatch.com and SafeMart.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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