Ascent Capital Group Announces Financial Results for the Three and Six Months Ended June 30, 2016
Headquartered in
Highlights1:
- Ascent's net revenue for the three months ended
June 30, 2016 increased 1.5% to$143.7 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 endedJune 30, 2016 totaled$93.4 million , flat with the year ago periodMonitronics announced new exclusive co-marketing relationships withAARP andAAA Alliance Club - Delivered meaningful improvements in dealer economics through continued creation multiple reductions
Ascent Chairman and Chief Executive Officer,
"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."
_________________________
1 Comparisons are year-over-year unless otherwise specified.
Results for the Three Months Ended
For the three months ended
Ascent's total cost of services for the three months ended
Ascent's selling, general & administrative ("SG&A") costs for the three months ended
Ascent's Adjusted EBITDA decreased 0.6% to
Ascent's Pre-SAC Adjusted EBITDA for the three months ended
Ascent reported a net loss from continuing operations for the three and six months ended
| Twelve Months Ended | |||||||
| 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' core account portfolio unit attrition rate for the twelve months ended
During the three months ended
Ascent Liquidity and Capital Resources
At
At
Conference Call
Ascent will host a call today, Tuesday, August 9, 2016 at 5:00 pm ET. To access the call please dial (888) 462-5915 from
A replay of the call can be accessed through
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, 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
About
| ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES | |||||||
| Condensed Consolidated Balance Sheets | |||||||
| Amounts in thousands, except share amounts | |||||||
| (unaudited) | |||||||
2016 | 2015 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 5,140 | $ | 5,577 | |||
| Restricted cash | — | 55 | |||||
| Marketable securities, at fair value | 81,131 | 87,052 | |||||
| Trade receivables, net of allowance for doubtful accounts of | 13,884 | 13,622 | |||||
| Prepaid and other current assets | 8,738 | 10,702 | |||||
| Assets held for sale | 5,687 | 6,265 | |||||
| Total current assets | 114,580 | 123,273 | |||||
| Property and equipment, net of accumulated depreciation of | 31,998 | 32,440 | |||||
| Subscriber
accounts, net of accumulated amortization of | 1,410,669 | 1,423,538 | |||||
| Dealer network and other intangible assets, net of accumulated amortization of | 21,739 | 26,654 | |||||
| 563,549 | 563,549 | ||||||
| Other assets, net | 3,526 | 3,851 | |||||
| Total assets | $ | 2,146,061 | $ | 2,173,305 | |||
| Liabilities and Stockholders' Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 8,168 | $ | 8,660 | |||
| Accrued payroll and related liabilities | 4,407 | 4,385 | |||||
| Other accrued liabilities | 33,116 | 31,573 | |||||
| Deferred revenue | 16,202 | 16,207 | |||||
| Holdback liability | 14,212 | 16,386 | |||||
| Current portion of long-term debt | 5,500 | 5,500 | |||||
| Liabilities of discontinued operations | 3,500 | 3,500 | |||||
| Total current liabilities | 85,105 | 86,211 | |||||
| Non-current liabilities: | |||||||
| Long-term debt | 1,737,683 | 1,713,868 | |||||
| Long-term holdback liability | 3,614 | 3,786 | |||||
| Derivative financial instruments | 30,073 | 13,470 | |||||
| Deferred income tax liability, net | 15,710 | 13,646 | |||||
| Other liabilities | 12,567 | 17,555 | |||||
| Total liabilities | 1,884,752 | 1,848,536 | |||||
| Commitments and contingencies | |||||||
| Stockholders' equity: | |||||||
| Preferred stock, | — | — | |||||
| Series A common stock, | 119 | 123 | |||||
| Series B common stock, | 4 | 4 | |||||
| Series C common stock, | — | — | |||||
| Additional paid-in capital | 1,414,096 | 1,417,895 | |||||
| Accumulated deficit | (1,123,737 | ) | (1,078,315 | ) | |||
| Accumulated other comprehensive loss, net | (29,173 | ) | (14,938 | ) | |||
| Total stockholders' equity | 261,309 | 324,769 | |||||
| Total liabilities and stockholders' equity | $ | 2,146,061 | $ | 2,173,305 | |||
| See accompanying notes to condensed consolidated financial statements. | |||||||
| ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES | |||||||||||||
| Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) | |||||||||||||
| Amounts in thousands, except per share amounts | |||||||||||||
| (unaudited) | |||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||
| Net revenue | $ | 143,656 | 141,543 | $ | 286,924 | 279,959 | |||||||
| Operating expenses: | |||||||||||||
| Cost of services | 27,637 | 27,603 | 57,112 | 52,770 | |||||||||
| Selling, general and administrative, including stock-based compensation | 32,133 | 29,685 | 64,251 | 57,281 | |||||||||
| Radio conversion costs | 7,596 | 450 | 16,675 | 973 | |||||||||
| Amortization of subscriber accounts, dealer network and other intangible assets | 61,937 | 63,526 | 123,259 | 126,667 | |||||||||
| Depreciation | 2,114 | 2,585 | 4,177 | 4,983 | |||||||||
| Gain on disposal of operating assets | — | (104 | ) | — | (1,154 | ) | |||||||
| 131,417 | 123,745 | 265,474 | 241,520 | ||||||||||
| Operating income | 12,239 | 17,798 | 21,450 | 38,439 | |||||||||
| Other income (expense), net: | |||||||||||||
| Interest income | 588 | 746 | 1,045 | 1,262 | |||||||||
| Interest expense | (31,587 | ) | (30,893 | ) | (63,011 | ) | (60,674 | ) | |||||
| Refinancing expense | — | (4,468 | ) | — | (4,468 | ) | |||||||
| Other income (expense), net | (1,677 | ) | 351 | (1,319 | ) | 1,277 | |||||||
| (32,676 | ) | (34,264 | ) | (63,285 | ) | (62,603 | ) | ||||||
| Loss from continuing operations before income taxes | (20,437 | ) | (16,466 | ) | (41,835 | ) | (24,164 | ) | |||||
| Income tax expense from continuing operations | (1,765 | ) | (2,030 | ) | (3,587 | ) | (4,007 | ) | |||||
| Net loss from continuing operations | (22,202 | ) | (18,496 | ) | (45,422 | ) | (28,171 | ) | |||||
| Discontinued operations: | |||||||||||||
| Income (loss) from discontinued operations, net of income tax of | — | 87 | — | (73 | ) | ||||||||
| Net loss | (22,202 | ) | (18,409 | ) | (45,422 | ) | (28,244 | ) | |||||
| Other comprehensive income (loss): | |||||||||||||
| Foreign currency translation adjustments | (354 | ) | 346 | (556 | ) | 69 | |||||||
| Unrealized holding gain (loss) on marketable securities, net | 2,959 | (884 | ) | 2,863 | (1,953 | ) | |||||||
| Unrealized gain (loss) on derivative contracts, net | (4,697 | ) | 1,002 | (16,542 | ) | (3,461 | ) | ||||||
| Total other comprehensive income (loss), net of tax | (2,092 | ) | 464 | (14,235 | ) | (5,345 | ) | ||||||
| Comprehensive loss | $ | (24,294 | ) | (17,945 | ) | $ | (59,657 | ) | (33,589 | ) | |||
| Basic and diluted income (loss) per share: | |||||||||||||
| Continuing operations | $ | (1.80 | ) | (1.41 | ) | $ | (3.66 | ) | (2.14 | ) | |||
| Discontinued operations | — | 0.01 | — | — | |||||||||
| Net loss | $ | (1.80 | ) | (1.40 | ) | $ | (3.66 | ) | (2.14 | ) | |||
| Weighted average Series A and Series B shares - basic and diluted | 12,364,767 | 13,110,540 | 12,407,830 | 13,188,309 | |||||||||
| Total issued and outstanding Series A and Series B shares at period end | 12,326,568 | 13,302,140 | |||||||||||
| See accompanying notes to condensed consolidated financial statements. | |||||||||||||
| ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES | ||||||
| Condensed Consolidated Statements of Cash Flows | ||||||
| Amounts in thousands | ||||||
| (unaudited) | ||||||
| Six Months Ended June 30, | ||||||
| 2016 | 2015 | |||||
| Cash flows from operating activities: | ||||||
| Net loss | $ | (45,422 | ) | (28,244 | ) | |
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||
| Loss from discontinued operations, net of income tax | — | 73 | ||||
| Amortization of subscriber accounts, dealer network and other intangible assets | 123,259 | 126,667 | ||||
| Depreciation | 4,177 | 4,983 | ||||
| Stock-based compensation | 3,445 | 3,182 | ||||
| Deferred income tax expense | 2,105 | 2,050 | ||||
| Gain on disposal of operating assets | — | (1,154 | ) | |||
| Amortization of debt discount and deferred debt costs | 5,315 | 5,055 | ||||
| Refinancing expense | — | 4,468 | ||||
| Bad debt expense | 5,083 | 4,645 | ||||
| Other non-cash activity, net | 3,236 | 1,531 | ||||
| Changes in assets and liabilities: | ||||||
| Trade receivables | (5,395 | ) | (4,440 | ) | ||
| Prepaid expenses and other assets | 2,197 | (2,195 | ) | |||
| Subscriber accounts - deferred contract costs | (1,294 | ) | — | |||
| Payables and other liabilities | (5,567 | ) | (6,342 | ) | ||
| Operating activities from discontinued operations, net | — | 40 | ||||
| Net cash provided by operating activities | 91,139 | 110,319 | ||||
| Cash flows from investing activities: | ||||||
| Capital expenditures | (3,100 | ) | (8,168 | ) | ||
| Cost of subscriber accounts acquired | (106,805 | ) | (129,544 | ) | ||
| Cash paid for acquisition, net of cash acquired | — | (56,343 | ) | |||
| Purchases of marketable securities | (5,036 | ) | (24,448 | ) | ||
| Proceeds from sale of marketable securities | 11,950 | 31,004 | ||||
| Decrease (increase) in restricted cash | 55 | (35 | ) | |||
| Proceeds from the disposal of operating assets | — | 20,173 | ||||
| Net cash used in investing activities | (102,936 | ) | (167,361 | ) | ||
| Cash flows from financing activities: | ||||||
| Proceeds from long-term debt | 88,200 | 674,050 | ||||
| Payments on long-term debt | (69,700 | ) | (605,990 | ) | ||
| Payments of financing costs | — | (6,232 | ) | |||
| Purchases and retirement of common stock | (7,140 | ) | (9,473 | ) | ||
| Net cash provided by financing activities | 11,360 | 52,355 | ||||
| Net decrease in cash and cash equivalents | (437 | ) | (4,687 | ) | ||
| Cash and cash equivalents at beginning of period | 5,577 | 12,612 | ||||
| Cash and cash equivalents at end of period | $ | 5,140 | 7,925 | |||
| Supplemental cash flow information: | ||||||
| State taxes paid, net | $ | 2,758 | 3,485 | |||
| Interest paid | 57,043 | 55,149 | ||||
| See accompanying notes to condensed consolidated financial statements. | ||||||
Adjusted EBITDA
We evaluate the performance of our operations based on financial measures such as revenue and "Adjusted EBITDA." Adjusted EBITDA is defined as net income (loss) before interest expense, interest income, income taxes, depreciation, amortization (including the amortization of subscriber accounts, dealer network and other intangible assets), stock-based compensation, and other non-cash or nonrecurring charges.
Pre-SAC Adjusted EBITDA
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
The following table provides a reconciliation of Ascent's net loss from continuing operations to total Adjusted EBITDA to Pre-SAC Adjusted EBITDA for the periods indicated (amounts in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||
| Net loss from continuing operations | $ | (22,202 | ) | (18,496 | ) | $ | (45,422 | ) | (28,171 | ) | |||
| Amortization of subscriber accounts, dealer network and other intangible assets | 61,937 | 63,526 | 123,259 | 126,667 | |||||||||
| Depreciation | 2,114 | 2,585 | 4,177 | 4,983 | |||||||||
| Stock-based compensation | 1,750 | 1,557 | 3,445 | 3,182 | |||||||||
| Radio conversion costs | 7,596 | 450 | 16,675 | 973 | |||||||||
| LiveWatch acquisition related costs | — | — | — | 946 | |||||||||
| LiveWatch acquisition contingent bonus charges | 1,092 | 1,276 | 1,992 | 1,795 | |||||||||
| Reduction in force separation costs | — | — | 245 | — | |||||||||
| Rebranding marketing program | 64 | — | 237 | — | |||||||||
| Other-than-temporary impairment losses on marketable securities | 1,904 | — | 1,904 | — | |||||||||
| Interest income | (588 | ) | (746 | ) | (1,045 | ) | (1,262 | ) | |||||
| Interest expense | 31,587 | 30,893 | 63,011 | 60,674 | |||||||||
| Refinancing expense | — | 4,468 | — | 4,468 | |||||||||
| Income tax expense from continuing operations | 1,765 | 2,030 | 3,587 | 4,007 | |||||||||
| Adjusted EBITDA | 87,019 | 87,543 | 172,065 | 178,262 | |||||||||
| Gross subscriber acquisition cost expenses | 5,821 | 4,644 | 11,820 | 6,276 | |||||||||
| Revenue associated with subscriber acquisition cost | (1,050 | ) | (1,171 | ) | (2,175 | ) | (1,667 | ) | |||||
| Pre-SAC Adjusted EBITDA | $ | 91,790 | 91,016 | $ | 181,710 | 182,871 | |||||||
The following table provides a reconciliation of
| Three Months
Ended June 30, | Six Months Ended June 30, | |||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||
| Net loss | $ | (16,509 | ) | (15,987 | ) | $ | (36,719 | ) | (24,321 | ) | ||||
| Amortization of subscriber accounts, dealer network and other intangible assets | 61,937 | 63,526 | 123,259 | 126,667 | ||||||||||
| Depreciation | 2,025 | 2,484 | 4,000 | 4,781 | ||||||||||
| Stock-based compensation | 667 | 455 | 1,189 | 829 | ||||||||||
| Radio conversion costs | 7,596 | 450 | 16,675 | 973 | ||||||||||
| LiveWatch acquisition related costs | — | — | — | 946 | ||||||||||
| LiveWatch acquisition contingent bonus charges | 1,092 | 1,276 | 1,992 | 1,795 | ||||||||||
| Reduction in force separation costs | — | — | 245 | — | ||||||||||
| Rebranding marketing program | 64 | — | 237 | — | ||||||||||
| Interest expense | 30,024 | 31,291 | 61,248 | 61,531 | ||||||||||
| Refinancing expense | — | 4,468 | — | 4,468 | ||||||||||
| Income tax expense | 1,743 | 2,011 | 3,533 | 3,972 | ||||||||||
| Adjusted EBITDA | 88,639 | 89,974 | 175,659 | 181,641 | ||||||||||
| Gross subscriber acquisition cost expenses | 5,821 | 4,644 | 11,820 | 6,276 | ||||||||||
| Revenue associated with subscriber acquisition cost | (1,050 | ) | (1,171 | ) | (2,175 | ) | (1,667 | ) | ||||||
| Pre-SAC Adjusted EBITDA | $ | 93,410 | 93,447 | $ | 185,304 | 186,250 | ||||||||
_________________________
Presented below is the reconciliation of Net revenue for
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||
| Net revenue, as reported | $ | 143,656 | 141,543 | $ | 286,924 | 279,959 | |||||||
| LiveWatch revenue related to SAC | (1,050 | ) | (1,171 | ) | (2,175 | ) | (1,667 | ) | |||||
| Pre-SAC net revenue | $ | 142,606 | 140,372 | $ | 284,749 | 278,292 | |||||||
RMR Attrition:
The Company overstated RMR attrition and understated average RMR per subscriber for the periods ended
| RMR Attrition | |||||||||||
| As reported | 13.4 | % | 13.7 | % | 13.6 | % | |||||
| As Adjusted | 12.8 | % | 13.4 | % | 13.4 | % | |||||
| Variance | 0.6 | % | 0.3 | % | 0.2 | % | |||||
Management concluded the effect on average RMR per subscriber was de minimus and no further action is required.
Contact:Erica Bartsch Sloane & Company 212-446-1875 [email protected]
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