Ascent Capital Group, Inc.
May 9, 2016

CORRECTING & REPLACING: Ascent Capital Group Announces Financial Results for the Three Months Ended March 31, 2016

ENGLEWOOD, Colo., May 09, 2016 (GLOBE NEWSWIRE) -- Weighted average share count and basic and diluted loss per share for the First Quarter ended March 31, 2016  on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) table has been updated. All other information remains unchanged from the original earnings release.

The corrected release reads:

Ascent Capital Group, Inc. ("Ascent" or the "Company") (Nasdaq:ASCMA) has reported results for the three months ended March 31, 2016. 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 March 31, 2016. Monitronics' long-term monitoring contracts provide high margin recurring revenue that results in predictable and stable cash flow.

Highlights1:

*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.

    
  Twelve Months Ended
March 31,
 
   2016 2015 
Beginning balance of accounts 1,090,612  1,046,785  
Accounts acquired 152,078  190,525  
Accounts canceled (148,787) (139,605) 
Canceled accounts guaranteed by dealer and other adjustments (a) (13,177)(b)(7,093)(c)
Ending balance of accounts 1,080,726  1,090,612  
Monthly weighted average accounts 1,089,346  1,060,206  
Attrition rate - Unit (13.7)% (13.2)% 
Attrition rate - RMR (d)  (13.4)% (13.0)% 
Core Attrition (e) (12.9)% (12.6)% 

__________________

(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.

Conference Call

Ascent will host a call today, Monday, May 9, 2016 at 10:00 am ET. To access the call please dial (888) 462-5915 from the United States, or (760) 666-3831 from outside the U.S. The conference call I.D. number is 2663456. Participants should dial in 5 to 10 minutes before the scheduled time and must be on a touch-tone telephone to ask questions.

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.

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 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/.

Contact:
Erica Bartsch
Sloane & Company
212-446-1875
ebartsch@sloanepr.com


ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
Amounts in thousands, except share amounts
(unaudited)
 
 March 31,
 2016
 December 31,
 2015
Assets   
Current assets:   
Cash and cash equivalents$32,529  $5,577 
Restricted cash  55 
Marketable securities, at fair value87,675  87,052 
Trade receivables, net of allowance for doubtful accounts of $2,587 in 2016 and $2,762 in 201513,334  13,622 
Prepaid and other current assets12,204  10,702 
Assets held for sale6,063  6,265 
Total current assets151,805  123,273 
Property and equipment, net of accumulated depreciation of $34,221 in 2016 and $32,158 in 201532,412  32,440 
Subscriber accounts, net of accumulated amortization of $1,034,597 in 2016 and $975,795 in 20151,409,489  1,423,538 
Dealer network and other intangible assets, net of accumulated amortization of $76,036 in 2016 and $73,578 in 201524,197  26,654 
Goodwill563,549  563,549 
Other assets, net3,602  3,851 
Total assets$2,185,054  $2,173,305 
Liabilities and Stockholders' Equity   
Current liabilities:   
Accounts payable$7,751  $8,660 
Accrued payroll and related liabilities4,384  4,385 
Other accrued liabilities48,872   31,573 
Deferred revenue16,267  16,207 
Holdback liability14,258  16,386 
Current portion of long-term debt5,500  5,500 
Liabilities of discontinued operations3,500  3,500 
Total current liabilities100,532  86,211 
Non-current liabilities:   
Long-term debt1,737,071  1,713,868 
Long-term holdback liability3,614  3,786 
Derivative financial instruments25,364  13,470 
Deferred income tax liability, net14,684  13,646 
Other liabilities12,723  17,555 
Total liabilities1,893,988  1,848,536 
Commitments and contingencies   
Stockholders' equity:   
Preferred stock, $0.01 par value. Authorized 5,000,000 shares; no shares issued   
Series A common stock, $.01 par value. Authorized 45,000,000 shares; issued and outstanding 12,345,381 and 12,301,248 shares at March 31, 2016 and December 31, 2015, respectively123   123 
Series B common stock, $.01 par value. Authorized 5,000,000 shares; issued and outstanding 382,359 shares both at March 31, 2016 and December 31, 20154  4 
Series C common stock, $0.01 par value. Authorized 45,000,000 shares; no shares issued    
Additional paid-in capital1,419,555  1,417,895 
Accumulated deficit(1,101,535) (1,078,315)
Accumulated other comprehensive loss, net(27,081) (14,938)
Total stockholders' equity291,066   324,769 
Total liabilities and stockholders' equity$2,185,054  $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
 March 31,
  2016 2015
Net revenue $143,268  138,416 
Operating expenses:    
Cost of services 29,475  25,167 
Selling, general and administrative, including stock-based compensation 32,118  27,596 
Radio conversion costs 9,079  523 
Amortization of subscriber accounts, dealer network and other intangible assets 61,322  63,141 
Depreciation 2,063  2,398 
Gain on disposal of operating assets   (1,050)
  134,057  117,775 
Operating income 9,211  20,641 
Other income (expense), net:    
Interest income 457  516 
Interest expense (31,424) (29,781)
Other income, net 358  926  
  (30,609) (28,339)
Loss from continuing operations before income taxes (21,398) (7,698)
Income tax expense from continuing operations (1,822) (1,977)
Net loss from continuing operations (23,220) (9,675)
Discontinued operations:    
Loss from discontinued operations, net of income tax of $0   (160)
Net loss (23,220) (9,835)
Other comprehensive loss:    
Foreign currency translation adjustments (202) (277)
Unrealized holding losses on marketable securities, net (96) (1,069)
Unrealized loss on derivative contracts, net (11,845) (4,463)
Total other comprehensive loss, net of tax (12,143) (5,809)
Comprehensive loss $(35,363) (15,644)
     
Basic and diluted loss per share:    
Continuing operations $(1.86) (0.73)
Discontinued operations   (0.01)
Net loss $(1.86) (0.74)
     
Weighted Average Series A and Series B Shares - basic and diluted 12,450,892  13,266,941 
Total issued and outstanding Series A and Series B shares at period end 12,727,740  13,309,996 
       
See accompanying notes to condensed consolidated financial statements. 


 
ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Amounts in thousands
(unaudited)
 
 Three Months Ended
 March 31,
 2016 2015
Cash flows from operating activities:   
Net loss$(23,220) (9,835)
Adjustments to reconcile net loss to net cash provided by operating activities:   
Loss from discontinued operations, net of income tax  160 
Amortization of subscriber accounts, dealer network and other intangible assets61,322  63,141 
Depreciation2,063  2,398 
Stock-based compensation1,695  1,626 
Deferred income tax expense1,052  1,021 
Gain on disposal of operating assets  (1,050)
Amortization of debt discount and deferred debt costs2,628  2,400 
Bad debt expense2,544  2,375 
Other non-cash activity, net579  (177)
Changes in assets and liabilities:   
Trade receivables(2,256) (2,265)
Prepaid expenses and other assets(1,378) (607)
Subscriber accounts - deferred contract costs(660)  
Payables and other liabilities11,532  6,292 
Operating activities from discontinued operations, net  (100)
Net cash provided by operating activities55,901  65,379 
Cash flows from investing activities:   
Capital expenditures(2,276) (2,728)
Cost of subscriber accounts acquired(46,670) (61,053)
Cash paid for acquisition, net of cash acquired  (56,343)
Purchases of marketable securities(5,036)  
Proceeds from sale of marketable securities4,403  27,020 
Decrease (increase) in restricted cash55  (105)
Proceeds from the disposal of operating assets  18,813 
Net cash used in investing activities(49,524)  (74,396)
Cash flows from financing activities:   
Proceeds from long-term debt59,250  91,400 
Payments on long-term debt (38,675) (33,892)
Payments of financing costs  (551)
Purchases and retirement of common stock  (9,473)
Net cash provided by financing activities20,575  47,484 
Net increase in cash and cash equivalents26,952  38,467 
Cash and cash equivalents at beginning of period5,577  12,612 
Cash and cash equivalents at end of period$32,529  51,079 
Supplemental cash flow information:   
State taxes paid, net$19   
Interest paid16,152  14,750 
  
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.   Ascent Capital believes that Adjusted EBITDA is an important indicator of the operational strength and performance of its business, including the business' ability to fund its ongoing acquisition of subscriber accounts, to fund its capital expenditures and to service its debt.  In addition, this measure is used by management to evaluate operating results and perform analytical comparisons and identify strategies to improve performance.   Adjusted EBITDA is also a measure that is customarily used by financial analysts to evaluate the financial performance of companies in the security alarm monitoring industry and is one of the financial measures, subject to certain adjustments, by which Monitronics' covenants are calculated under the agreements governing their debt obligations.  Adjusted EBITDA does not represent cash flow from operations as defined by generally accepted accounting principles ("GAAP"), should not be construed as an alternative to net income or loss and is indicative neither of our results of operations nor of cash flows available to fund all of our cash needs.  It is, however, a measurement that Ascent Capital believes is useful to investors in analyzing its operating performance.  Accordingly, Adjusted EBITDA should be considered in addition to, but not as a substitute for, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP.  Adjusted EBITDA is a non-GAAP financial measure.  As companies often define non-GAAP financial measures differently, Adjusted EBITDA as calculated by Ascent Capital should not be compared to any similarly titled measures reported by other companies.

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 Monitronics, which capitalizes payments to dealers to acquire accounts. "Pre-SAC Adjusted EBITDA" is a measure that eliminates the impact of acquiring accounts at the LiveWatch business that is recognized in operating income. Pre-SAC Adjusted EBITDA is defined as total Adjusted EBITDA excluding LiveWatch's SAC and the related revenue. We believe Pre-SAC Adjusted EBITDA is a meaningful measure of the Company's financial performance in servicing its customer base. Pre-SAC Adjusted EBITDA should be considered in addition to, but not as a substitute for, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. Pre-SAC Adjusted EBITDA is a non-GAAP financial measure. As companies often define non-GAAP financial measures differently, Pre-SAC Adjusted EBITDA as calculated by Monitronics should not be compared to any similarly titled measures reported by other companies.

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
 March 31,
  2016 2015
Net loss from continuing operations $(23,220) (9,675 )
Amortization of subscriber accounts, dealer network and other intangible assets 61,322  63,141 
Depreciation 2,063  2,398 
Stock-based compensation 1,695  1,626 
Radio conversion costs 9,079  523 
LiveWatch acquisition related costs   946 
LiveWatch acquisition contingent bonus charges 900  519 
Reduction in force separation costs 245   
Rebranding marketing program 173   
Interest income (457) (516)
Interest expense 31,424  29,781 
Income tax expense from continuing operations 1,822  1,977 
Adjusted EBITDA 85,046  90,720 
Gross subscriber acquisition cost expenses 5,999  1,632 
Revenue associated with subscriber acquisition cost (1,125) (496)
Pre-SAC Adjusted EBITDA $89,920  91,856 
        

The following table provides a reconciliation of Monitronics' net loss to total Adjusted EBITDA to Pre-SAC Adjusted EBITDA for the periods indicated (amounts in thousands):

 Three Months Ended
 March 31,
 2016 2015
Net loss$(20,210) (8,334)
Amortization of subscriber accounts, dealer network and other intangible assets61,322  63,141 
Depreciation1,975  2,297 
Stock-based compensation522  374 
Radio conversion costs9,079  523 
LiveWatch acquisition related costs  946 
LiveWatch acquisition contingent bonus charges900  519 
Reduction in force separation costs245   
Rebranding marketing program173   
Interest expense31,224  30,240 
Income tax expense1,790  1,961 
Adjusted EBITDA87,020  91,667 
Gross subscriber acquisition cost expenses5,999  1,632 
Revenue associated with subscriber acquisition cost(1,125) (496)
Pre-SAC Adjusted EBITDA$91,894  $92,803 
Pre-SAC Adjusted EBITDA as a percentage of Pre-SAC net revenue (a)64.6% 67.3%

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(a)   Presented below is the reconciliation of Net revenue for Monitronics and Ascent Capital to Pre-SAC net revenue (amounts in thousands):

  Three Months Ended March 31, 
  2016 2015 
Net revenue, as reported $143,268  138,416  
LiveWatch revenue related to SAC (1,125) (496) 
Pre-SAC net revenue 142,143  137,920  


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Source: Ascent Capital Group

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