Englewood, CO – May 9, 2016 – Ascent Capital Group, Inc. ("Ascent" or the "Company") (Nasdaq: ASCMA) (OTCMKTS: ASCMB) has reported results for the three months ended March 31, 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.
*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 the non-GAAP measures included herein.
Ascent Chairman and Chief Executive Officer, Bill Fitzgerald stated, "I am pleased with the progress we made in the first quarter executing against our operational objectives. I am as confident as ever that the strong underlying fundamentals of the business are sound and that Jeff and his team are taking the right actions that will serve to create value for our shareholders."
Jeffery Gardner, President and Chief Executive Officer of Monitronics, said, "Monitronics is off to a solid start in 2016. Execution by our team strengthened our free cash flow profile and helped drive improvements in our operational performance. Notably, we made meaningful progress in improving the economics of our dealer relationships through reductions in creation costs and streamlining our operations in Dallas.
"We also continued to identify initiatives that we believe will enhance customer satisfaction and ultimately lead to reduced attrition in the long term. Finally, our focus on customer service continues to drive service levels to all-time highs at both the LiveWatch and Monitronics call centers. I am excited about the opportunities ahead and remain confident that the operational initiatives we have implemented will strengthen Monitronics over the long term." 1 Comparisons are year-over-year unless otherwise specified.
Results for the Three Months Ended March 31, 2016
For the three months ended March 31, 2016, Ascent reported net revenue of $143.3 million, an increase of 3.5%. The increase in net revenue is primarily attributable to the inclusion of a full quarter's impact of LiveWatch revenue and an increase in Monitronics' average RMR per subscriber to $42.17 as of March 31, 2016.
Ascent's total cost of services for the three months ended March 31, 2016 increased 17.1% to $29.5 million. $2.2 million of the increase is attributable to the inclusion of a full 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 $2.3 million and $643,000 for three months ended March 31, 2016 and 2015, respectively. The increase also reflects higher cellular and field service costs at Monitronics related to the increase in the number of subscribers with interactive and home automation services.
Ascent's selling, general & administrative ("SG&A") costs for the three months ended March 31, 2016, increased 16.4% to $32.1 million. The primary driver of the increase in SG&A expense for the three months ended March 31, 2016 is attributable to $3.7 million of LiveWatch marketing and sales expense related to the creation of new subscribers. LiveWatch SG&A also includes the accrual of $900,000 and $519,000 for the three months ended March 31, 2016 and 2015, respectively, related to certain contingent bonuses payable in the future to key members of LiveWatch management in accordance with their employment agreements. The increase in SG&A is also attributable to increased salaries, wages, and benefits at Monitronics, as compared to the prior year. In connection with certain cost cutting initiatives, Monitronics executed a reduction in force in March 2016. This action resulted in one-time termination benefits of $245,000 being expensed for the three months ended March 31, 2016.
Ascent's Adjusted EBITDA decreased 6.3% to $85.0 million and Monitronics' Adjusted EBITDA decreased 5.1% to $87.0 million during the three months ended March 31, 2016. Monitronics' Adjusted EBITDA as a percentage of revenue was 60.7% in the first quarter of 2016, compared to 66.2% for the three months ended March 31, 2015. The decline is primarily attributable to the higher expensed creation costs within LiveWatch.
Ascent's Pre-SAC Adjusted EBITDA for the three months ended March 31, 2016 decreased 2.1% to $89.9 million. Monitronics' Pre-SAC Adjusted EBITDA decreased 1.0% to $91.9 million for the three months ended March 31, 2016. Monitronics' Pre-SAC Adjusted EBITDA as a percentage of Pre-SAC net revenue for the three months ended March 31, 2016 was 64.6%. 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 months ended March 31, 2016 of $23.2 million, compared to net loss from continuing operations of $9.7 million in the prior year period.
Monitronics reported a net loss for the three months ended March 31, 2016 of $20.2 million compared to a net loss of $8.3 million in the prior year period.
The table below presents subscriber data for the twelve months ended March 31, 2016 and 2015:
Twelve Months Ended March 31
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 (d)
Core attrition (e)
(a) Includes canceled accounts that are contractually guaranteed to be refunded from holdback.
(b) Includes an estimated 3,170 accounts included in our Radio Conversion Program that canceled in excess of their expected attrition.
(c) Includes 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 in April 2014.
(d) 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.
(e) 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 March 31, 2016 was 12.9%, compared to 12.6% for the twelve months ended March 31, 2015. Overall unit attrition increased from 13.2% for the twelve months ended March 31, 2015 to 13.7% for the twelve months ended March 31, 2016. The increase in attrition is primarily associated with approximately 113,000 accounts acquired in the Pinnacle Security bulk purchases 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 March 31, 2016 and 2015, Monitronics acquired 29,211 and 66,074 subscriber accounts, respectively. Accounts acquired for the three months ended March 31, 2016 reflect bulk buys of approximately 400 accounts. Accounts acquired for the three months ended March 31, 2015 include approximately 1,100 of bulk buys and 31,919 accounts from the LiveWatch Acquisition in February 2015.
Ascent Liquidity and Capital Resources
At March 31, 2016, on a consolidated basis, Ascent had $120.2 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.
At March 31, 2016, the existing long-term debt includes the principal balance of $1.8 billion under the Monitronics' Senior Notes, Credit Facility term loans, and Credit Facility revolver and Ascent's Convertible Notes. The Convertible Notes have an outstanding principal balance of $96.8 million as of March 31, 2016 and mature July 15, 2020. The Senior Notes have an outstanding principal balance of $585.0 million as of March 31, 2016 and mature on April 1, 2020. The Credit Facility term loans have an outstanding principal balance of $948.3 million as of March 31, 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. The Credit Facility revolver has an outstanding balance of $155.2 million as of March 31, 2016, unused availability of $159.8 million and becomes due on December 22, 2017.
Ascent hosted a call on Monday, May 9, 2016 at 10 a.m. ET. A replay of the call can be accessed through June 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 2663456.
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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