Englewood, CO – August 10, 2015 – Ascent Capital Group, Inc. ("Ascent" or the "Company") (Nasdaq: ASCMA) (OTCMKTS: ASCMB) has reported results for the three and six months ended June 30, 2015. 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 nearly 1.1 million residential and commercial customers as of June 30, 2015. Monitronics' long-term monitoring contracts provide high-margin recurring revenue that results in predictable and stable cash flow.
- Ascent's net revenue for the three and six ended June 30, 2015 increased 5.1% and 4.6%, respectively.
- Ascent's Pre-SAC Adjusted EBITDA*, which adjusts for the expensed portion of LiveWatch subscriber acquisition costs, for the three and six months ended June 30, 2015, increased 2.3% and 3.4%, respectively.
- Monitronics Pre-SAC Adjusted EBITDA* for the three and six months ended June 30, 2015, increased 3.0%and 3.5% respectively.
- Monitronics' subscriber accounts as of June 30, 2015 increased 3.5% to 1,092,812.
*LiveWatch is a direct-to-consumer business, and as such recognizes certain revenue and expenses associated with subscriber acquisition (subscriber acquisition costs, or "SAC"). This is in contrast to Monitronics, which capitalizes payments to dealers to acquire accounts. Because Pre-SAC Adjusted EBITDA accounts for the different treatment for LiveWatch, the Company believes that it is a meaningful measure of Monitronics' financial performance in servicing its customer base. Please see the Appendix to this release for additional information about this non-GAAP measure.
Ascent Chairman and Chief Executive Officer, Bill Fitzgerald stated, “The business performed in line with expectations in the second quarter, delivering solid financial and operational results. Further, our acquisition of LiveWatch continued to provide a healthy new pipeline of subscriber additions and is on pace for continued growth in the back half of the year.”
"We were also very pleased with the strong reception we received in the credit markets for the refinancing of a significant portion of our Term B debt and expansion of the revolver facility, the combination of which served to extend our maturities and create additional credit capacity and flexibility. In addition to the capital deployed for the LiveWatch acquisition during the quarter, we also spent $9.5 million on share repurchases and completed the sale of one of our largest real estate properties realizing $18.8 million."
Mike Haislip, President and Chief Executive Officer of Monitronics said, "We executed well in the second quarter, delivering growth in revenue, Pre-Sac Adjusted EBITDA and overall subscriber accounts. In line with expectations, unit attrition ticked up modestly to 13.4% quarter-over-quarter, largely due to a prior significant bulk acquisition that resulted in a higher percentage of accounts reaching the end of their initial contract term. We are also seeing the benefits of our acquisition of LiveWatch as the business continued to exceed expectations in its first full quarter as part of Monitronics, delivering profitable RMR and account growth in the quarter. Moving forward, we are focused on identifying additional growth opportunities in the form of a deliberate approach to acquiring high quality subscribers and internal account acquisitions through LiveWatch."
Results for the Three and Six Months Ended June 30, 2015
For the three months ended, June 30, 2015, Ascent reported net revenue of $141.5 million, an increase of 5.1%. For the six months ended June 30, 2015 net revenue increased 4.6% to $280.0 million. The increase in net revenue is primarily attributable to increases in Monitronics' subscriber accounts and average recurring monthly revenue ("RMR") per subscriber. Monitronics’ subscriber accounts increased 3.5% for the twelve months ended June 30, 2015, reflecting the acquisition of over 148,000 accounts through Monitronics’ authorized dealer program subsequent to June 30, 2014, as well as 31,919 accounts acquired in the LiveWatch acquisition in February, 2015. Monitronics’ average RMR per subscriber increased to $41.62 as of June 30, 2015. Excluding accounts acquired through the LiveWatch acquisition, which had an average RMR of $28.46, Monitronics’ average RMR per subscriber was $42.02 as of June 30, 2015.
Ascent’s total cost of services for the three and six months ended June 30, 2015 increased 22.1% and 19.2% to $28.1 million and $53.7 million, respectively. This increase is attributable to the inclusion of LiveWatch, which expenses equipment costs associated with new customers. The increase is also attributable to the growth in the number of HomeTouch® customers and service costs for upgrades to customer systems. HomeTouch® services include home automation monitored across the cellular network. Monitronics' service costs for the three and six months ended June 30, 2015 also included $450,000 and $973,000 related to labor and materials expense incurred in relation to the Radio Conversion Program, which was implemented in 2014 to upgrade Monitronics' subscribers' alarm monitoring systems that communicate across certain 2G networks that are expected to be discontinued at the end of 2016. For the three and six months ended June 30, 2014 Monitronics incurred $441,000 in relation to the Radio Conversion Program.
Ascent's selling, general & administrative ("SG&A") costs for the three and six months ended increased 11.0% and 7.5% to $29.7 million and $57.3 million, respectively. The increase is attributable to SG&A incurred at LiveWatch including marketing and sales cost related to creation of new subscribers and one-time costs incurred by Monitronics of $946,000, related to professional services rendered in connection with the LiveWatch acquisition. LiveWatch SG&A for the three and six months ended June 30, 2015 includes the accrual of $1.3 million and $1.8 million for certain contingent bonuses payable in the future to key members of LiveWatch management in accordance with their employment agreements. These increases were partially offset by decreases in Monitronics' staffing and operating costs as a result of the completion of the Security Networks integration in April 2014. SG&A for the three and six months ended June 30, 2014 includes approximately $1.1 million and $2.2 million of one-time professional fees rendered in relation to the Security Networks' integration.
Ascent’s Adjusted EBITDA decreased 1.6% to $87.5 million during the quarter and increased 0.8% to $178.3 million for the six months ended June 30, 2015. Monitronics’ Adjusted EBITDA decreased 0.8% to $90.0 million during the quarter and increased 0.9% to $181.6 million for the six months ended June 30, 2015. Adjusted EBITDA is negatively impacted by certain revenue and expenses associated with the acquisition of subscriber accounts. Monitronics' Adjusted EBITDA as a percentage of revenue was 63.6% in the second quarter of 2015, compared to 67.3% for the three months ended June 30, 2014. Monitronics' Adjusted EBITDA as a percentage of revenue for the six months ended June 30, 2015 was 64.9%, compared to 67.3% for the prior year period.
Monitronics capitalizes payments to dealers to acquire accounts. In contrast, LiveWatch, a direct-to-consumer business, recognizes certain revenue and expenses associated with the acquisition of subscribers (subscriber acquisition costs, or "SAC") in the current period. Because Pre-SAC Adjusted EBITDA accounts for the different treatment for LiveWatch, the Company believes that it is a meaningful measure of Monitronics' financial performance in servicing its customer base.
For the three and six months ended June 30, 2015, Ascent's Pre-SAC Adjusted EBITDA increased 2.3% and 3.4% to $91.0 million and $182.9 million, respectively. Monitronics Pre-SAC Adjusted EBITDA for the three and six months ended June 30, 2015 increased 3.0% and 3.5% to $93.4 million and $186.3 million, respectively. Monitronics' Pre-SAC Adjusted EBITDA as a percentage of Pre-SAC Revenue for the three and six months ended June 30, 2015 was 66.6% and 66.9%, respectively. For a reconciliation of Adjusted EBITDA to Pre-SAC Adjusted EBITDA for Monitronics, please see appendix of this release.
Ascent reported a net loss from continuing operations for the three and six months ended June 30, 2015 of $18.5 million and $28.2 million, compared to net losses from continuing operations of $10.5 million and $19.9 million in the same periods in 2014.
Monitronics reported a net loss for the three ended June 30, 2015 of $16.0 million compared to a net loss of $8.5 million in the prior year period. For the six months ended June 30, 2015, Monitronics reported a net loss of $24.3 million, compared to $16.4 million in the prior year period.
The table below presents subscriber data for the twelve months ended June 30, 2015 and 2014:
Twelve Months Ended June 30
Beginning balance of accounts
Canceled accounts guaranteed by dealer and acquisition adjustment (a)
Ending balance of accounts
Monthly weighted average accounts
Attrition rate - Unit
Attrition rate - RMR (c)
(a) Includes canceled accounts that are contractually guaranteed to be refunded from holdback.
(b) Includes a net reduction of 963 subscriber accounts related to the Security Networks Acquisition. 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 was partially offset by a favorable adjustment of 1,101 accounts associated with multi-site subscribers that were considered single accounts prior to the completion of the Security Networks integration April 2014.
(c) The RMR of canceled accounts follows the same definition as subscriber unit attrition as noted above. RMR attrition is defined as the RMR of canceled accounts in a given period, adjusted for the impact of price increases or decreases in that period, divided by the weighted average of RMR for that period.
During the three months ended June 30, 2015 and 2014, Monitronics acquired 40,742 and 42,851 subscriber accounts, respectively. During the six months ended June 30, 2015 and 2014, Monitronics acquired 106,816 and 74,625 subscriber accounts, respectively. Accounts acquired for the six months ended June 30, 2015 includes 31,919 accounts from the LiveWatch Acquisition in February 2015. Accounts acquired for the three months and six months ended June 30, 2014 include approximately 2,900 purchased in bulk buys.
Ascent Liquidity and Capital Resources
At June 30, 2015, on a consolidated basis, Ascent had $122.4 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, 2015. A portion of these assets may also be used to decrease debt obligations or fund stock repurchases, strategic acquisitions or investment opportunities.
During the six months ended June 30, 2015, Monitronics used cash of $129.5 million to fund subscriber account acquisitions, net of holdback and guarantee obligations.
At June 30, 2015, 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 June 30, 2015 and mature on July 15, 2020. Monitronics' Senior Notes have an outstanding principal balance of $585.0 million as of June 30, 2015 and mature on April 1, 2020. The Credit Facility term loans have an outstanding principal balance of $952.4 million as of June 30, 2015 and require principal payments of approximately $1.4 million per quarter with $403.8 million becoming due on March 23, 2018 and the remaining amount becoming due on April 9, 2022. The Credit Facility revolver has an outstanding balance of $87.2 million as of June 30, 2015 and becomes due on December 22, 2017.
During the six months ended June 30, 2015, the Company repurchased 229,168 shares of Series A Common Stock pursuant to the Share Repurchase Authorizations for approximately $9.5 million. These repurchased shares were all canceled and returned to the status of authorized and unissued. As of June 30, 2015, the remaining availability under the Company's Share Repurchase Authorizations will enable the Company to purchase up to an aggregate of approximately $5.4 million of Series A and Series B Common Stock.
Ascent hosted a call today on Monday, August 10, 2015 at 5:00 PM ET. A replay of the call can be accessed through October 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 95463020.
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 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 through Monitronics, LiveWatch Security, LLC. Ascent also retains ownership of certain commercial real estate assets. Monitronics, headquartered in Dallas, TX, is the nation's second largest home security alarm monitoring company, providing security alarm monitoring services to more than one million residential and commercial customers in the United States, Canada and Puerto Rico through its network of nationwide, independent Authorized Dealers. LiveWatch Security, LLC ®, is a Do-It-Yourself ("DIY") home security firm, offering professionally monitored security services through a direct-to-consumer sales channel. For more information on Ascent, see http://ascentcapitalgroupinc.com/.
1 Comparisons are year-over-year unless otherwise specified.
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