Investor Relations

Ascent Capital Group Announces Financial Results for the Three and Nine Months Ended September 30, 2016

by Moni Blogger | Nov 11, 2016

ENGLEWOOD, Colo., Nov. 7, 2016 – Ascent Capital Group, Inc. ("Ascent" or the "Company") (Nasdaq: ASCMA) (OTCMKTS: ASCMB) has reported results for the three and six months ended Sept. 30, 2016. Ascent is a holding company that owns MONI, one of the nation's largest home security alarm monitoring companies.

Headquartered in Dallas, Texas, MONI provides security alarm monitoring services to more than 1 million residential and commercial customers as of Sept. 30, 2016. MONI's 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, 2016 increased 0.6% and 1.9% to $142.8 million and $429.7 million, respectively, and net loss for the three and nine months ended September 30, 2016 totaled $27.0 million and $72.5 million, respectively.
  • Ascent's Pre-SAC Adjusted EBITDA, which adjusts for the expensed portion of LiveWatch subscriber acquisition costs, for the three and nine months ended September 30, 2016 totaled $90.5 million and $272.2 million, respectively
  • MONI's Pre-SAC Adjusted EBITDA for the three and nine months ended September 30, 2016 totaled $92.3 million and 277.6 million, respectively
  • On September 29, 2016, Monitronics began a new era of smart home security, announcing the rebranding of the business as MONI
  • On September 30, 2016, MONI completed a refinancing of its existing Credit Facility

Ascent Chairman and Chief Executive Officer, Bill Fitzgerald stated, "I am pleased with the steps Jeff and his team are taking to strengthen MONI's operating performance and to keep pace in an evolving home security market. The MONI rebranding and the completion of the Credit Facility refinancing are both integral steps in our continued evolution and I am confident that the efforts we are taking today will position the business well for the long term."

Jeffery Gardner , President and Chief Executive Officer of MONI said, "It was another busy quarter for our business as we continued to make meaningful progress against our operational initiatives. Most notably, we completed a rebranding of the Monitronics business to MONI, placing an even greater emphasis on customer-centric personalization in a changing smart home security market. J.D. Power & Associates also recently ranked MONI highest in overall customer satisfaction, a nod to our continued efforts to provide the best in customer service to those we serve. We also are seeing the benefits of our price increase initiatives across our base with average RMR per subscriber increasing to $42.84, while RMR attrition came down year-over-year 120 basis points to 12.2%. Finally, we successfully completed the refinancing of our credit facility, providing us with greater financial flexibility over the long term."

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

Results for the Three Months and Nine Months Ended Sept. 30, 2016

For the three months ended September 30, 2016, Ascent reported net revenue of $142.8 million, an increase of 0.6%. For the nine months ended September 30, 2016, Ascent reported net revenue of $429.7 million, an increase of 1.9%. The increases in net revenue are attributable to an increase in MONI's average RMR per subscriber to $42.84 as of September 30, 2016 from $41.63 as of September 30, 2015 and the inclusion of a full first quarter's impact of LiveWatch revenue for the nine months ended September 30, 2016.

Ascent's total cost of services for the three months ended September 30, 2016 increased 2.8% to $29.0 million. The increase for the three months ended September 30, 2016 is attributable to increases in field service costs. Ascent's total cost of services for the nine months ended September 30, 2016 increased 6.4% to $86.2 million.  The increase for the nine months ended September 30, 2016 is attributable to higher cellular service costs, increased lead generation fees at MONI 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 $6.5 million for three and nine months ended September 30, 2016, respectively, as compared to $2.2 million and $4.7 million for the three and nine months ended September 30, 2015, respectively.

Ascent's selling, general & administrative ("SG&A") costs for the three months ended September 30, 2016, increased 4.9% to $32.9 million and increased 9.6% to $97.1 million for the nine months ended September 30, 2016. The increases in SG&A are attributable to an increase in new account production at LiveWatch, increased salaries, wages, benefits and rebranding expense at MONI and, for the nine months ended September 30, 2016, the impact of a full first quarter of LiveWatch SG&A costs. Subscriber acquisition costs, which consist of LiveWatch marketing and sales expense, were $4.5 million and $12.0 million in the three and nine months ended September 30, 2016, respectively, as compared to $3.3 million and $7.1 million in the three and nine months ended September 30, 2015, respectively.

Ascent reported a net loss from continuing operations for the three and nine months ended September 30, 2016 of $27.0 million and $72.5 million, respectively, compared to net loss from continuing operations of $27.3 million and $55.5 million in the respective prior year periods.

MONI reported a net loss for the three and nine months ended September 30, 2016 of $23.0 million and $59.7 million, respectively, compared to a net loss of $21.4 million and $45.7 million in the prior year periods.

Ascent's Adjusted EBITDA decreased 1.6% to $84.9 million for the three months ended September 30, 2016 and decreased 2.9% to $257.0 million for the nine months ended September 30, 2016. MONI's Adjusted EBITDA decreased 1.7% to $86.8 million during the three months ended September 30, 2016 and decreased 2.8% to $262.5 million in the nine months ended September 30, 2016. MONI's Adjusted EBITDA as a percentage of net revenue for the three and nine months ended September 30, 2016 was 60.8% and 61.1%, respectively, compared to 62.2% and 64.0% for the three and nine months ended September 30, 2015, respectively. The decline is primarily attributable to the higher expensed creation costs within LiveWatch associated with growth in new RMR production.

Ascent's Pre-SAC Adjusted EBITDA for the three months ended September 30, 2016 decreased 0.2% to $90.5 million and decreased 0.5% to $272.2 million in the nine months ended September 30, 2016. MONI's Pre-SAC Adjusted EBITDA for the three and nine months ended September 30, 2016 totaled $92.3 million and $277.6 million, compared to $92.6 million and $278.8 million for the three and nine months ended September 30, 2015, respectively. MONI's Pre-SAC Adjusted EBITDA as a percentage of Pre-SAC net revenue for the three and nine months ended September 30, 2016 was 65.2% and 65.1%, respectively, compared to 65.8% and 66.6% in the three and nine months ended September 30, 2015, respectively. For a reconciliation of net loss from continuing operations to Adjusted EBITDA to Pre-SAC Adjusted EBITDA for MONI, please see the Appendix of this release.

 


Twelve Months Ended Sept. 30

2016

2015

Beginning balance of accounts

1,091,627

 

1,056,734

Accounts acquired

136,414

189,590

Accounts canceled

(150,091)

(142,181)

Canceled accounts guaranteed by dealer and other adjustments (a)

(18,316) (b)

(9,516)

Ending balance of accounts

1,059,634

1,091,627

Monthly weighted average accounts

1,079,100

1,078,367

Attrition rate - Unit

13.9%

13.5%

Attrition rate - RMR (c)

12.2%

13.4%

Core attrition (d)

13.3%

12.5%


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

(b) Includes an estimated 10.488 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 MONI's base by excluding the one-time bulk buy of 113,000 accounts from Pinnacle Security in 2012 and 2013.

MONI's core account portfolio unit attrition rate for the twelve months ended September 30, 2016, which excludes attrition of the Pinnacle Security accounts, was 13.3%, compared to 12.5% for the twelve months ended September 30, 2015. An increase in the number of subscriber accounts reaching the end of their initial contract term contributed to the increase in attrition in the period. Overall unit attrition increased from 13.5% for the twelve months ended September 30, 2015 to 13.9% for the twelve months ended September 30, 2016.  Overall attrition reflects the impact of the Pinnacle Security bulk buys, where MONI 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 September 30, 2016 and 2015, MONI acquired 32,570 and 44,776 subscriber accounts, respectively.

Ascent Liquidity and Capital Resources

At September 30, 2016, on a consolidated basis, Ascent had $112.1 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.

At September 30, 2016, the existing long-term debt includes the principal balance of $1.8 billion under the MONI Senior Notes, Credit Facility term loans, Credit Facility revolver and Ascent's Convertible Notes. On September 30, 2016, MONI entered into an amendment ("Amendment No. 6") with the lenders of its existing senior secured credit agreement dated March 23, 2012, and as amended and restated on April 9, 2015, February 17, 2015, August 16, 2013, March 25, 2013, and November 7, 2012.  Amendment No. 6 provided for, among other things, the issuance of a $1.1 billion six year senior secured Term B-2 loans.   Amendment No. 6 also provides for a new $295.0 million super priority revolver.

MONI used the net proceeds to retire $403.8 million of its existing Term B loans, which were due March 2018, and $543.1 million of its existing Term B-1 Loan which was due April 2022.  Additionally, the Company retired its $315.0 million revolving credit facility in the amount of $138.9 million.

The Convertible Notes have an outstanding principal balance of $96.8 million as of September 30, 2016 and mature July 15, 2020. The Senior Notes have an outstanding principal balance of $585.0 million as of September 30, 2016 and mature on April 1, 2020. The Credit Facility term loan has an outstanding principal balance of $1.1 billion as of September 30, 2016 and requires principal payments of approximately $2.8 million per quarter with the remaining amount becoming due on September 30, 2022.  As of September 30, 2016, the Credit Facility revolver has an outstanding balance of $48.4 million and becomes due on September 30, 2021.

Changes to the Board of Directors

Ascent announced that it has named Jeffery Gardner , Executive Vice President at Ascent Capital Group and President and Chief Executive Officer of MONI, to its Board of Directors, effective November 4, 2016. The Company also announced that Rana Kashyap has resigned from the Company's Board of Directors, effective immediately. Mr. Kashyap joined Ascent's Board in March of 2016, with his term originally expiring at the Company's 2017 Annual Meeting of Stockholders.

Bill Fitzgerald , Ascent's Chairman and Chief Executive Officer commented, "I am thrilled to have Jeff join the Ascent Board of Directors.  As CEO of MONI, Jeff has proven himself to be a tremendous leader. In addition to driving operational efficiencies in key areas of the business, he is continually identifying opportunities that serve to position MONI as a leading player in the evolving smart home security market.  I look forward to Jeff's continued contributions."

Mr. Gardner joined MONI as CEO in August, 2015, bringing with him more than 25 years of experience in the telecommunications industry. Mr. Gardner currently serves on the Board of Directors of Qorvo, a provider of innovative RF solutions and CalAmp, a provider of wireless products, services and solutions.

Mr. Fitzgerald continued, "On behalf of the Board of Directors, I would like to thank Mr. Kashyap for his contribution and service to the company and we look forward to his continued support."

Mr. Kashyap commented, "During my time as a member of Ascent's Board, MONI has made significant progress to create value for shareholders. Between completing an attractive refinancing, moderating creation multiples and executing on several new initiatives to support future growth, I am pleased with the current direction of the business and have full confidence in the management team going forward. As a result, I have decided now is an appropriate time to resign from my duties as a Director of Ascent and look forward to my continued involvement as a supportive shareholder."

Conference Call

Ascent hosted a call on Monday, Nov. 7, 2016 at 5 p.m. ET. A replay of the call can be accessed through Dec. 7, 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 7713097.

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 MONI, 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, MONI, and through MONI, LiveWatch Security, LLC. Ascent also retains ownership of certain commercial real estate assets. MONI, headquartered in the Dallas Fort-Worth area, secures more than one million residential customers and commercial client accounts with monitored home and business security system services. MONI is supported by the nation's largest network of independent Authorized Dealers, providing products and support to customers in the U.S., Canada and Puerto Rico.  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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