Investor Relations

Ascent Capital Group Announces Financial Results for the Three and Six Months Ended June 30, 2016

by Moni Blogger | Aug 09, 2016

Englewood, CO – Aug. 9, 2016 – Ascent Capital Group, Inc. ("Ascent" or the "Company") (Nasdaq: ASCMA) (OTCMKTS: ASCMB) has reported results for the three and six months ended June 30, 2016. Ascent is a holding company that owns Monitronics International, Inc. ("Monitronics"). Headquartered in Dallas, Texas, Monitronics provides security alarm monitoring services to nearly 1.1 million residential and commercial customers as of March 31, 2016. 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 12 months ended June 30, 2016 increased 1.5%, to $143.3 million.
  • Ascent's Pre-SAC Adjusted EBITDA*, which adjusts for the expensed portion of LiveWatch subscriber acquisition costs, for the three months ended June 30, 2016, increased 0.9% to $91.8 million.
  • Monitronics Pre-SAC Adjusted EBITDA* for the three months ended June 30, 2016, totaled $93.4 million, flat with the year ago period.
  • Monitronics announced new exclusive co-marketing relationships with AARP and AAA Alliance Club.
  • Delivered meaningful improvements in dealer economics through reductions in certain costs.

Ascent Chairman and Chief Executive Officer, Bill Fitzgerald stated, “The business performed consistent with expectations in the quarter and I continue to be pleased with Jeff’s progress with the business; building out his team, refining his operating goals and strategies, and driving improved performance metrics.

“During the quarter Ascent purchased 389,179 shares or 3.2% of our equity, evidencing our continued belief in the long range prospects of the business.”

Jeffery Gardner, President and Chief Executive Officer of Monitronics, said, “We continued to execute against our operational objectives in the second quarter, further strengthening our free cash flow profile and delivering meaningful improvements in dealer economics through continued reductions in creation costs. We also made great strides in lead generation opportunities, most notably with Monitronics announcing an exclusive partnership with the AAA Alliance Club as well as being named the exclusive AARP-branded provider for professionally installed residential security systems. Our LiveWatch business also continues to scale nicely, delivering solid growth at lower creation multiples. Finally, we continue to place a unique focus on providing the highest levels of customer service and also made several strategic hires in the first half of the year that add depth and experience to our team. I remain confident that we are taking the right steps through the initiatives we are implementing and the foundation we have already built, there is great opportunity ahead.”

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

Results for the Three Months Ended June 30, 2016

For the three months ended June 30, 2016, Ascent reported net revenue of $143.7 million, an increase of 1.5%. For the six months ended June 30, 2016, Ascent reported net revenue of $286.9 million, an increase of 2.5%. The increases in net revenue are attributable to an increase in Monitronics’ average RMR per subscriber to $42.70 as of June 30, 2016 and the inclusion of a full first quarter’s impact of LiveWatch revenue for the six months ended June 30, 2016.

Ascent’s total cost of services for the three months ended June 30, 2016 was flat at $27.6 million. Ascent’s total cost of services for the six months ended June 30, 2016 increased 8.2% to $57.1 million.  The increase for the six months ended June 30, 2016 is attributable to higher cellular service costs, increased lead generation fees at Monitronics and the inclusion of a full first quarter’s impact of LiveWatch’s cost of services. LiveWatch's cost of services includes expensed equipment costs associated with the creation of new subscribers of $2.1 million and $4.3 million for three and six months ended June 30, 2016, respectively, as compared to $1.8 million and $2.5 million for the three and six months ended June 30, 2015, respectively.

Ascent’s selling, general & administrative ("SG&A") costs for the three months ended June 30, 2016, increased 8.2% to $32.1 million and increased 12.2% to $64.3 million for the six months ended June 30, 2016. The increases in SG&A is attributable to higher subscriber acquisition costs incurred at LiveWatch, increased salaries, wages and benefits at Monitronics and, for the six months ended June 30, 2016, the impact of a full first quarter of LiveWatch SG&A costs not related to account creation. Subscriber acquisition costs, which consist of LiveWatch marketing and sales expense, were $3.7 million and $7.5 million in the three and six months ended June 30, 2016, respectively, as compared to $2.8 million and $3.8 million in the three and six months ended June 30, 2015, respectively.

Ascent’s Adjusted EBITDA decreased 0.6% to $87.0 million for the three months ended June 30, 2016 and decreased 3.5% to $172.1 million for the six months ended June 30, 2016. Monitronics’ Adjusted EBITDA decreased 1.5% to $88.6 million during the three months ended June 30, 2016 and decreased 3.3% to $175.7 million in the six months ended June 30, 2016. Monitronics' Adjusted EBITDA as a percentage of net revenue for the three and six months ended June 30, 2016 was 61.7% and 61.2%, respectively, compared to 63.6% and 64.9% for the three and six months ended June 30, 2015, respectively. The decline is primarily attributable to the higher expensed creation costs within LiveWatch.

Ascent's Pre-SAC Adjusted EBITDA for the three months ended June 30, 2016 increased 0.9% to $91.8 million and decreased 0.6% to $181.7 million in the six months ended June 30, 2016. Monitronics' Pre-SAC Adjusted EBITDA for the three and six months ended June 30, 2016 totaled $93.4 million and $185.3 million, compared to $93.4 million and $186.3 million for the three and six months ended June 30, 2015, respectively. Monitronics' Pre-SAC Adjusted EBITDA as a percentage of Pre-SAC net revenue for the three and six months ended June 30, 2016 was 65.5% and 65.1%, respectively, compared to 66.6% and 66.9% in the three and six months ended June 30, 2015, respectively. For a reconciliation of Adjusted EBITDA to Pre-SAC Adjusted EBITDA for Monitronics, please see the Appendix of this release.

Ascent reported a net loss from continuing operations for the three and six months ended June 30, 2016 of $22.2 million and $45.4 million, respectively, compared to net loss from continuing operations of $18.5 million and $28.2 million in the respective prior year periods.

Monitronics reported a net loss for the three and six months ended June 30, 2016 of $16.5 million and $36.7 million, respectively, compared to a net loss of $16.0 million and $24.3 million in the prior year periods.

The table below presents subscriber data for the twelve months ended June 30, 2016 and 2015:


Twelve Months Ended June 30

2016

2015

Beginning balance of accounts

1,092,083

1,055,701

Accounts acquired

148,620

188,416

Accounts canceled

(150,703)

(142,951)

Canceled accounts guaranteed by dealer and other adjustments (a)

(15,078) (b)

(9,083)

Ending balance of accounts

1,074,922

1,092,083

Monthly weighted average accounts

1,085,600

1,069,860

Attrition rate - Unit

13.9%

13.4%

Attrition rate - RMR (c)

12.5%

13.2%

Core attrition (d)

13.2%

12.6%


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

(b) Includes an estimated 7,200 accounts included in our Radio Conversion Program that canceled in excess of their expected attrition.

(c) The recurring monthly revenue ("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.

(d) Core Attrition reflects the long-term attrition characteristics of Monitronics base by excluding the one-time bulk buy of 113,000 accounts from Pinnacle Security in 2012 and 2013.

Monitronics’ core account portfolio unit attrition rate for the twelve months ended June 30, 2016, which excludes attrition of the Pinnacle Security accounts and 2G cancellations, was 13.2%, compared to 12.6% for the twelve months ended June 30, 2015. Overall unit attrition increased from 13.4% for the twelve months ended June 30, 2015 to 13.9% for the twelve months ended June 30, 2016. The increase in attrition is primarily the result of an increase in the number of subscriber accounts reaching the end of their initial contract term in the period.  Overall attrition reflects the impact of the Pinnacle Security bulk buys, where Monitronics purchased approximately 113,000 accounts from Pinnacle Security in 2012 and 2013, which are now experiencing normal end-of-term attrition. We believe core attrition best reflects the long run characteristics of our customer base.

During the three months ended June 30, 2016 and 2015, Monitronics acquired 37,284 and 40,742 subscriber accounts, respectively. Accounts acquired for the three months ended June 30, 2016 reflect bulk buys of approximately 6,300 accounts.

Ascent Liquidity and Capital Resources

At June 30, 2016, on a consolidated basis, Ascent had $86.3 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.

At June 30, 2016, the existing long-term debt includes the principal balance of $1.8 billion under the Monitronics’ Senior Notes, Credit Facility term loans, Credit Facility revolver and Ascent’s Convertible Notes. The Convertible Notes have an outstanding principal balance of $96.8 million as of June 30, 2016 and mature July 15, 2020. The Senior Notes have an outstanding principal balance of $585.0 million as of June 30, 2016 and mature on April 1, 2020. The Credit Facility term loans have an outstanding principal balance of $946.9 million as of June 30, 2016 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 April 9, 2022. As of June 30, 2016, the Credit Facility revolver has an outstanding balance of $154.5 million which becomes due on December 22, 2017 and unused availability of $160.5 million.

Conference Call

Ascent hosted a call on Monday, Aug. 9, 2016 at 10 a.m. ET. A replay of the call can be accessed through Sept. 9, 2016 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 59285579.

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, including development of and access to multiple sales channels, market potential and expansion, consumer demand for interactive and home automation services, account creation and related costs, subscriber attrition, anticipated account generation at LiveWatch, 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 and/or Monitronics, 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.

###

Contact:

Erica Bartsch
Sloane & Company
212-446-1875

ebartsch@sloanepr.com

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