Ascent Capital Group, Inc. (“Ascent” or the “Company”) (Nasdaq:
ASCMA) has reported results for the three and six months ended June
30, 2018. Ascent is a holding company that owns Brinks Home
Security, one of the nation’s largest home security alarm
monitoring companies.
Headquartered in the Dallas / Fort Worth area,
Brinks Home Security provides security alarm monitoring services to
over 950,000 residential and commercial customers as of June 30,
2018. Brinks Home Security’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 six months ended June
30, 2018 totaled $135.0 million and $268.8 million,
respectively
- Ascent’s net loss for the three and six months ended June 30,
2018 totaled $244.4 million and $275.2 million, respectively.
Brinks Home Security’s net loss for the three and six months ended
June 30, 2018 totaled $241.8 million and $268.0 million,
respectively
- Ascent’s Adjusted EBITDA for the three and six months ended
June 30, 2018 totaled $69.4 million and $138.3 million,
respectively. Brinks Home Security’s Adjusted EBITDA for the three
and six months ended June 30, 2018 totaled $72.2 million and $142.2
million, respectively
- The Brinks Home Security brand name was officially launched on
May 28, 2018 with the Company’s Direct to Consumer and Dealer
channels now going to market under one, unified brand name
Ascent Chief Executive Officer, William Niles
stated, “I am pleased with our execution in the quarter. The team’s
continued progress toward strengthening its operating performance
and the launch of the Brinks Home Security brand give me confidence
in the long term prospects for the business.”
Jeffery Gardner, President and Chief Executive
Officer of Brinks Home Security said, “We continued to build
momentum around our strategic operating initiatives in the second
quarter. New subscribers grew 40% year-over-year and 73%
sequentially, bolstered by an improved performance in our Direct to
Consumer channel and a 10,250 bulk account purchase. Improved
consolidated creation costs of 34.3 times resulted from favorable
economics in our bulk purchase combined with solid performance in
our Direct to Consumer channel. We also made incremental progress
on RMR attrition, which improved 30 basis points sequentially to
13.6%. We will continue to focus on driving improvements in all of
our attrition metrics.”
“Finally, we officially launched the Brinks Home
Security brand name in late May. Our Direct to Consumer and Dealer
channels are now going to market under one unified brand and
initial feedback from partners and customers has been positive. We
are encouraged by our progress and remain committed to executing
against our strategic initiatives to drive long term shareholder
value.”
1 Comparisons are year-over-year unless
otherwise specified.
Results for the Three and Six Months
Ended June 30, 2018
For the three months ended June 30, 2018, Ascent
reported net revenue of $135.0 million, a decrease of 3.9%. For the
six months ended June 30, 2018, net revenue totaled $268.8 million,
a decrease of 4.6%. The reduction in revenue for the three and six
months ended June 30, 2018 is due to the lower average number of
subscribers in 2018. This decrease was partially offset by an
increase in average recurring monthly revenue (“RMR”) per
subscriber to $45.01 due to certain price increases enacted during
the past twelve months. In addition, the Company realized a $2.4
million and $2.8 million increase in revenue for the three and six
months ended June 30, 2018 from the favorable impact of the new
revenue recognition guidance, ASC Topic 606 (“Topic 606”), adopted
effective January 1, 2018.
Ascent’s total cost of services for the three months ended June
30, 2018 increased 11.6% to $33.0 million. For the six months ended
June 30, 2018 Ascent’s total cost of services increased 10.3% to
$65.7 million. The increase for the three and six months ended June
30, 2018 is primarily due to expensing certain direct and
incremental field service costs on new contracts obtained in
connection with a subscriber move ("Moves Costs") of $2.2 million
and $4.6 million for the three and six months ended June 30, 2018,
respectively. Upon adoption of Topic 606, all Moves Costs are
expensed, whereas prior to adoption, certain Moves Costs were
capitalized on the balance sheet. Moves Costs capitalized as
Subscriber accounts, net for the three and six months ended June
30, 2017 were $3.6 million and $7.5 million, respectively.
Furthermore, subscriber acquisition costs, which include expensed
equipment and labor costs associated with the creation of new
subscribers, increased to $4.3 million and $7.9 million for the
three and six months ended June 30, 2018, respectively, as compared
to $2.8 million and $5.5 million for the three and six months ended
June 30, 2017, respectively, attributable to increased production
volume in the direct sales channels. These increases were offset by
reduced salary and wage expense due to lower headcount.
Ascent’s selling, general & administrative ("SG&A")
costs for the three and six months ended June 30, 2018, decreased
46.9% to $34.4 million and 28.9% to $71.8 million, respectively.
The decrease in SG&A for the three and six months ended June
30, 2018 is primarily attributable to the $28.0 million legal
settlement recognized in the second quarter of 2017 in relation to
putative class action litigation of alleged violation of
telemarketing laws. Additionally, there were decreases in
consulting fees related to company cost reduction initiatives,
stock-based compensation expense and LiveWatch acquisition
contingent bonus charges for the three and six months ended June
30, 2018, due to recent settlements or renegotiations of certain
key agreements governing these costs. The decline was offset by
increases in direct marketing and other SG&A subscriber
acquisition costs associated with the creation of new subscribers.
Subscriber acquisition costs in SG&A increased to $8.8 million
and $16.9 million for the three and six months ended June 30, 2018,
respectively as compared to $6.6 million and $13.0 million for the
three and six months ended June 30, 2017, respectively.
Ascent reported a net loss from continuing
operations for the three and six months ended June 30, 2018 of
$244.4 million and $275.2 million, respectively, compared to net
loss from continuing operations of $43.5 million and $62.5 million
in the prior year periods. Brinks Home Security reported a net loss
for the three and six months ended June 30, 2018 of $241.8 million
and $268.0 million, respectively, compared to a net loss of $50.1
million and $71.1 million in the prior year periods. The increase
in net loss from continuing operations at Ascent and Brinks Home
Security is primarily attributable to a $214.4 million goodwill
impairment recognized in the second quarter of 2018.
Ascent’s Adjusted EBITDA decreased 10.7% to
$69.4 million for the three months ended June 30, 2018. Ascent’s
Adjusted EBITDA for the six months ended June 30, 2018 decreased
12.3% to $138.3 million. Brinks Home Security’s Adjusted
EBITDA decreased 10.5% and 12.7% to $72.2 million and $142.2
million during the three and six months ended June 30, 2018,
respectively. The decrease for the three and six months ended June
30, 2018 is due to lower revenues, the expensing of subscriber
moves costs, and an increase in total subscriber acquisition costs,
net of related revenue. Total subscriber acquisition costs, net of
related revenue, increased to $11.9 million and $22.1 million for
the three and six months ended June 30, 2018 as compared to $8.2
million and $15.8 million for the three and six months ended June
30, 2017. The increase is primarily the result of increased
production in the Company’s direct-to-consumer sales channel
year-over-year. Brinks Home Security’s Adjusted EBITDA, as a
percentage of net revenue, for the three and six months ended June
30, 2018 was 53.4% and 52.9%, respectively, as compared to 57.4%
and 57.8% in the prior year periods.
For a reconciliation of net loss from continuing
operations to Adjusted EBITDA, please see the Appendix of this
release.
|
|
Twelve Months Ended June 30, |
|
2018 |
|
2017 |
Beginning balance of
accounts |
1,020,923 |
|
|
1,074,922 |
|
Accounts acquired |
98,561 |
|
|
114,955 |
|
Accounts canceled
(b) |
(158,233 |
) |
|
(161,622 |
) |
Canceled accounts
guaranteed by dealer and other adjustments (a) (b) |
(5,398 |
) |
|
(7,332 |
) |
Ending balance of
accounts |
955,853 |
|
|
1,020,923 |
|
Monthly weighted
average accounts |
980,008 |
|
|
1,047,754 |
|
Attrition rate - Unit
(b) |
16.1 |
% |
|
15.4 |
% |
Attrition rate - RMR
(b) (c) |
13.6 |
% |
|
14.0 |
% |
(a) Includes canceled accounts that are
contractually guaranteed to be refunded from
holdback.(b) Accounts canceled for the twelve months
ending June 30, 2017 were recast to include an estimated 6,653
accounts included in Brinks Home Security’s 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.
Unit attrition increased from 15.4% for the
twelve months ended June 30, 2017 to 16.1% for the twelve months
ended June 30, 2018. Contributing to the increase in the unit
attrition rate was the relative proportion of the number of new
customers under contract or in the dealer guarantee period in the
twelve months ended June 30, 2018, as compared to the prior year
period. There was also a modest increase to attrition attributed to
subscriber losses related to the impacts of Hurricane Maria on
Brinks Home Security’s Puerto Rico customer base.
RMR attrition for the twelve months ended June
30, 2018 decreased to 13.6% from 14.0% for the twelve months ended
June 30, 2017, due to the Company’s more aggressive price increase
strategy.
During the three and six months ended June 30,
2018, Brinks Home Security acquired 37,383 and 58,930 subscriber
accounts, respectively, as compared to 26,782 and 56,158 subscriber
accounts in the three and six months ended June 30, 2017.
Ascent Liquidity and Capital
Resources
At June 30, 2018, on a consolidated basis,
Ascent had $109.7 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, 2018, the existing long-term debt
includes the principal balance of $1.8 billion under the Brinks
Home Security Senior Notes, Credit Facility term loan, Credit
Facility revolver and Ascent’s Convertible Notes. The
Convertible Notes have an outstanding principal balance of $96.8
million as of June 30, 2018 and mature July 15, 2020. The Senior
Notes have an outstanding principal balance of $585.0 million as of
June 30, 2018 and mature on April 1, 2020. The Credit
Facility term loan has an outstanding principal balance of $1.1
billion as of June 30, 2018 and requires principal payments of
approximately $2.8 million per quarter with the remaining amount
becoming due on September 30, 2022. As of June 30, 2018, the
Credit Facility revolver has an outstanding balance of $84.1
million and becomes due on September 30, 2021. For additional
information about our debt arrangements, please see the Long-Term
Debt note in the Company’s condensed consolidated financial
statements.
Conference Call
Ascent will host a call today, Thursday, August
2, 2018 at 5:00 pm 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 5688325.
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
August 16, 2018 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
5688325.
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, development of the Direct to Consumer
Channel, market potential and expansion, the success of new
products and services, account creation and related costs,
subscriber attrition, anticipated account generation, launch of the
Brinks Home Security brand and the anticipated benefits of the
rebranding initiative, 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 Brinks Home
Security, 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 and Brinks
Home Security
Ascent Capital Group, Inc. (Nasdaq: ASCMA) is a
holding company whose primary subsidiary operates as Brinks Home
Security™, one of the largest home security and alarm monitoring
companies in the U.S. Headquartered in the Dallas / Fort Worth
area, Brinks Home Security secures approximately 1 million
residential and commercial customers through highly responsive,
simple security solutions backed by expertly trained professionals.
The company has the nation’s largest network of independent
authorized dealers – providing products and support to customers in
the U.S., Canada and Puerto Rico – as well as direct-to-consumer
sales of DIY and professionally installed products. For more
information on Ascent, see http://ir.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
|
|
June 30, 2018 |
|
December 31,
2017 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
4,185 |
|
|
10,465 |
|
Restricted cash |
104 |
|
|
— |
|
Marketable securities, at fair value |
105,515 |
|
|
105,958 |
|
Trade
receivables, net of allowance for doubtful accounts of $3,390 in
2018 and $4,162 in 2017 |
12,456 |
|
|
12,645 |
|
Prepaid
and other current assets |
23,185 |
|
|
11,175 |
|
Total
current assets |
145,445 |
|
|
140,243 |
|
Property and equipment,
net of accumulated depreciation of $43,309 in 2018 and $37,915 in
2017 |
36,603 |
|
|
32,823 |
|
Subscriber accounts and
deferred contract acquisition costs, net of accumulated
amortization of $1,519,406 in 2018 and $1,439,164 in
2017 |
1,222,485 |
|
|
1,302,028 |
|
Dealer network and
other intangible assets, net of accumulated amortization of $47,288
in 2018 and $42,806 in 2017 |
1,213 |
|
|
6,994 |
|
Goodwill |
349,149 |
|
|
563,549 |
|
Other assets |
31,707 |
|
|
9,348 |
|
Total
assets |
$ |
1,786,602 |
|
|
2,054,985 |
|
Liabilities and Stockholders’ (Deficit)
Equity |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
12,779 |
|
|
11,092 |
|
Accrued
payroll and related liabilities |
5,231 |
|
|
3,953 |
|
Other
accrued liabilities |
56,829 |
|
|
52,329 |
|
Deferred
revenue |
12,965 |
|
|
13,871 |
|
Holdback
liability |
9,740 |
|
|
9,309 |
|
Current
portion of long-term debt |
11,000 |
|
|
11,000 |
|
Total
current liabilities |
108,544 |
|
|
101,554 |
|
Non-current
liabilities: |
|
|
|
Long-term
debt |
1,793,364 |
|
|
1,778,044 |
|
Long-term
holdback liability |
2,031 |
|
|
2,658 |
|
Derivative financial instruments |
3,313 |
|
|
13,491 |
|
Deferred
income tax liability, net |
14,635 |
|
|
13,311 |
|
Other
liabilities |
3,116 |
|
|
3,255 |
|
Total
liabilities |
1,925,003 |
|
|
1,912,313 |
|
Commitments and
contingencies |
|
|
|
Stockholders’ (deficit)
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 12,032,370 and 11,999,630 shares at June 30,
2018 and December 31, 2017, respectively |
120 |
|
|
120 |
|
Series B common
stock, $.01 par value. Authorized 5,000,000 shares; issued and
outstanding 381,528 shares at both June 30, 2018 and
December 31, 2017 |
4 |
|
|
4 |
|
Series C common
stock, $0.01 par value. Authorized 45,000,000 shares; no shares
issued |
— |
|
|
— |
|
Additional paid-in
capital |
1,424,724 |
|
|
1,423,899 |
|
Accumulated
deficit |
(1,575,648 |
) |
|
(1,277,118 |
) |
Accumulated other
comprehensive income (loss), net |
12,399 |
|
|
(4,233 |
) |
Total
stockholders’ (deficit) equity |
(138,401 |
) |
|
142,672 |
|
Total
liabilities and stockholders’ (deficit) equity |
$ |
1,786,602 |
|
|
2,054,985 |
|
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 shares
and per share amounts
|
|
|
|
|
Three Months Ended June
30, |
|
Six Months Ended June
30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net revenue |
$ |
135,013 |
|
|
$ |
140,498 |
|
|
$ |
268,766 |
|
|
281,698 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Cost of
services |
33,047 |
|
|
29,617 |
|
|
65,748 |
|
|
59,586 |
|
Selling,
general and administrative, including stock-based and
long-term incentive compensation |
34,387 |
|
|
64,771 |
|
|
71,793 |
|
|
101,016 |
|
Radio
conversion costs |
— |
|
|
77 |
|
|
— |
|
|
309 |
|
Amortization of subscriber accounts, deferred contract acquisition
costs and other intangible assets |
53,891 |
|
|
59,965 |
|
|
108,302 |
|
|
119,512 |
|
Depreciation |
2,871 |
|
|
2,132 |
|
|
5,492 |
|
|
4,259 |
|
Loss on
goodwill impairment |
214,400 |
|
|
— |
|
|
214,400 |
|
|
— |
|
Gain on
disposal of operating assets |
— |
|
|
(14,579 |
) |
|
— |
|
|
(21,217 |
) |
|
338,596 |
|
|
141,983 |
|
|
465,735 |
|
|
263,465 |
|
Operating
income (loss) |
(203,583 |
) |
|
(1,485 |
) |
|
(196,969 |
) |
|
18,233 |
|
Other expense (income),
net: |
|
|
|
|
|
|
|
Interest
income |
(774 |
) |
|
(563 |
) |
|
(1,255 |
) |
|
(958 |
) |
Interest
expense |
40,422 |
|
|
38,165 |
|
|
79,074 |
|
|
75,651 |
|
Other
income, net |
(211 |
) |
|
(222 |
) |
|
(2,276 |
) |
|
(464 |
) |
|
39,437 |
|
|
37,380 |
|
|
75,543 |
|
|
74,229 |
|
Loss from
continuing operations before income taxes |
(243,020 |
) |
|
(38,865 |
) |
|
(272,512 |
) |
|
(55,996 |
) |
Income tax expense from
continuing operations |
1,347 |
|
|
4,661 |
|
|
2,693 |
|
|
6,475 |
|
Net loss
from continuing operations |
(244,367 |
) |
|
(43,526 |
) |
|
(275,205 |
) |
|
(62,471 |
) |
Discontinued
operations: |
|
|
|
|
|
|
|
Income
from discontinued operations, net of income tax of $0 |
— |
|
|
— |
|
|
— |
|
|
92 |
|
Net
loss |
(244,367 |
) |
|
(43,526 |
) |
|
(275,205 |
) |
|
(62,379 |
) |
Other comprehensive
income (loss): |
|
|
|
|
|
|
|
Foreign
currency translation adjustments |
— |
|
|
584 |
|
|
— |
|
|
642 |
|
Unrealized holding gain (loss) on marketable securities, net |
(823 |
) |
|
536 |
|
|
(3,900 |
) |
|
1,087 |
|
Unrealized gain (loss) on derivative contracts, net |
5,521 |
|
|
(5,777 |
) |
|
19,927 |
|
|
(4,728 |
) |
Total
other comprehensive income (loss), net of tax |
4,698 |
|
|
(4,657 |
) |
|
16,027 |
|
|
(2,999 |
) |
Comprehensive loss |
$ |
(239,669 |
) |
|
$ |
(48,183 |
) |
|
$ |
(259,178 |
) |
|
(65,378 |
) |
|
|
|
|
|
|
|
|
Basic and diluted
income (loss) per share: |
|
|
|
|
|
|
|
Continuing operations |
$ |
(19.82 |
) |
|
$ |
(3.58 |
) |
|
$ |
(22.35 |
) |
|
(5.14 |
) |
Discontinued operations |
— |
|
|
— |
|
|
— |
|
|
0.01 |
|
Net
loss |
$ |
(19.82 |
) |
|
(3.58 |
) |
|
$ |
(22.35 |
) |
|
(5.13 |
) |
|
|
|
|
|
|
|
|
Weighted
average Series A and Series B shares - basic and diluted |
12,327,387 |
|
|
12,168,582 |
|
|
12,313,233 |
|
|
12,151,417 |
|
Total
issued and outstanding Series A and Series B shares at period
end |
|
|
|
|
12,413,898 |
|
|
12,355,256 |
|
See accompanying notes to condensed consolidated
financial statements.
ASCENT CAPITAL GROUP, INC. AND
SUBSIDIARIES
Condensed Consolidated Statements of Cash
Flows
Amounts in thousands
|
|
|
Six Months Ended June
30, |
|
2018 |
|
2017 |
Cash flows from
operating activities: |
|
|
|
Net
loss |
$ |
(275,205 |
) |
|
(62,379 |
) |
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
Income from discontinued operations, net of income tax |
— |
|
|
(92 |
) |
Amortization of subscriber accounts, deferred contract
acquisition costs and other intangible assets |
108,302 |
|
|
119,512 |
|
Depreciation |
5,492 |
|
|
4,259 |
|
Stock-based and long-term incentive compensation |
945 |
|
|
3,575 |
|
Deferred income tax expense |
1,324 |
|
|
2,104 |
|
Gain on disposal of operating assets |
— |
|
|
(21,217 |
) |
Legal settlement reserve |
— |
|
|
28,000 |
|
Amortization of debt discount and deferred debt costs |
5,994 |
|
|
5,415 |
|
Bad debt expense |
5,623 |
|
|
4,987 |
|
Loss on goodwill impairment |
214,400 |
|
|
— |
|
Other non-cash activity, net |
(805 |
) |
|
3,542 |
|
Changes
in assets and liabilities: |
|
|
|
Trade receivables |
(5,434 |
) |
|
(3,949 |
) |
Prepaid expenses and other assets |
(2,001 |
) |
|
(1,192 |
) |
Subscriber accounts - deferred contract acquisition
costs |
(2,586 |
) |
|
(1,547 |
) |
Payables and other liabilities |
7,623 |
|
|
(8,143 |
) |
Operating
activities from discontinued operations, net |
— |
|
|
(3,408 |
) |
Net cash provided by operating activities |
$ |
63,672 |
|
|
69,467 |
|
Cash flows from
investing activities: |
|
|
|
Capital
expenditures |
(8,928 |
) |
|
(5,752 |
) |
Cost of
subscriber accounts acquired |
(69,695 |
) |
|
(88,287 |
) |
Purchases
of marketable securities |
(39,022 |
) |
|
(2,626 |
) |
Proceeds
from sale of marketable securities |
37,841 |
|
|
1,057 |
|
Proceeds
from the disposal of operating assets |
— |
|
|
32,612 |
|
Net cash used in investing activities |
$ |
(79,804 |
) |
|
(62,996 |
) |
Cash flows from
financing activities: |
|
|
|
Proceeds
from long-term debt |
105,300 |
|
|
95,550 |
|
Payments
on long-term debt |
(95,200 |
) |
|
(82,350 |
) |
Value of
shares withheld for share-based compensation |
(144 |
) |
|
(431 |
) |
Net cash provided by financing activities |
$ |
9,956 |
|
|
12,769 |
|
Net increase (decrease) in cash, cash equivalents and
restricted cash |
$ |
(6,176 |
) |
|
19,240 |
|
Cash, cash equivalents
and restricted cash at beginning of period |
10,465 |
|
|
12,319 |
|
Cash, cash equivalents
and restricted cash at end of period |
$ |
4,289 |
|
|
31,559 |
|
Supplemental cash flow
information: |
|
|
|
State
taxes paid, net |
$ |
2,710 |
|
|
3,105 |
|
Interest
paid |
72,899 |
|
|
70,226 |
|
Accrued
capital expenditures |
616 |
|
|
493 |
|
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), restructuring charges, stock-based
compensation, and other non-cash or non-recurring charges. Ascent
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, 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 Brinks Home Security's covenants are
calculated under the agreements governing its debt
obligations. Adjusted EBITDA does not represent cash flow
from operations as defined by generally accepted accounting
principles in the United States ("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 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 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 for the
periods indicated (amounts in thousands):
|
|
|
|
|
Three Months Ended June
30, |
|
Six Months Ended June
30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net loss from
continuing operations |
$ |
(244,367 |
) |
|
(43,526 |
) |
|
$ |
(275,205 |
) |
|
(62,471 |
) |
Amortization of
subscriber accounts, deferred contract acquisition costs and other
intangible assets |
53,891 |
|
|
59,965 |
|
|
108,302 |
|
|
119,512 |
|
Depreciation |
2,871 |
|
|
2,132 |
|
|
5,492 |
|
|
4,259 |
|
Stock-based
compensation |
685 |
|
|
1,999 |
|
|
970 |
|
|
3,575 |
|
Radio conversion
costs |
— |
|
|
77 |
|
|
— |
|
|
309 |
|
Legal settlement
reserve |
— |
|
|
28,000 |
|
|
— |
|
|
28,000 |
|
Severance expense
(a) |
— |
|
|
— |
|
|
2,955 |
|
|
27 |
|
LiveWatch acquisition
contingent bonus charges |
62 |
|
|
387 |
|
|
124 |
|
|
1,355 |
|
Rebranding marketing
program |
2,403 |
|
|
33 |
|
|
3,295 |
|
|
880 |
|
Integration /
implementation of company initiatives |
— |
|
|
1,389 |
|
|
— |
|
|
2,030 |
|
Gain on revaluation of
acquisition dealer liabilities |
— |
|
|
(404 |
) |
|
— |
|
|
(404 |
) |
Impairment of
capitalized software |
— |
|
|
— |
|
|
— |
|
|
713 |
|
Gain on disposal of
operating assets |
— |
|
|
(14,579 |
) |
|
— |
|
|
(21,217 |
) |
Loss on goodwill
impairment |
214,400 |
|
|
— |
|
|
214,400 |
|
|
— |
|
Interest income |
(774 |
) |
|
(563 |
) |
|
(1,255 |
) |
|
(958 |
) |
Interest expense |
40,422 |
|
|
38,165 |
|
|
79,074 |
|
|
75,651 |
|
Unrealized (gain) loss
on marketable securities, net |
(1,540 |
) |
|
— |
|
|
(2,576 |
) |
|
— |
|
Income tax expense from
continuing operations |
1,347 |
|
|
4,661 |
|
|
2,693 |
|
|
6,475 |
|
Adjusted EBITDA |
$ |
69,400 |
|
|
77,736 |
|
|
$ |
138,269 |
|
|
157,736 |
|
|
|
|
|
|
|
|
|
Expensed subscriber
acquisition costs, net |
|
|
|
|
|
|
|
Gross
subscriber acquisition costs |
$ |
13,135 |
|
|
9,450 |
|
|
$ |
24,825 |
|
|
18,483 |
|
Revenue
associated with subscriber acquisition costs |
(1,255 |
) |
|
(1,251 |
) |
|
(2,767 |
) |
|
(2,643 |
) |
Expensed
Subscriber acquisition costs, net |
$ |
11,880 |
|
|
8,199 |
|
|
$ |
22,058 |
|
|
15,840 |
|
(a) Severance expense related to transitioning executive
leadership at Ascent in 2018 and Brinks Home Security in 2017.
The following table provides a reconciliation of Brinks Home
Security’s Net loss to total Adjusted EBITDA for the periods
indicated (amounts in thousands):
|
|
|
|
|
Three Months Ended June
30, |
|
Six Months Ended June
30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net loss |
$ |
(241,792 |
) |
|
$ |
(50,104 |
) |
|
$ |
(267,999 |
) |
|
(71,117 |
) |
Amortization of
subscriber accounts, deferred contract acquisition costs and
other intangible assets |
53,891 |
|
|
59,965 |
|
|
108,302 |
|
|
119,512 |
|
Depreciation |
2,865 |
|
|
2,125 |
|
|
5,480 |
|
|
4,245 |
|
Stock-based
compensation |
383 |
|
|
930 |
|
|
430 |
|
|
1,448 |
|
Radio conversion
costs |
— |
|
|
77 |
|
|
— |
|
|
309 |
|
Legal settlement
reserve |
— |
|
|
28,000 |
|
|
— |
|
|
28,000 |
|
Severance expense
(a) |
— |
|
|
— |
|
|
— |
|
|
27 |
|
LiveWatch acquisition
contingent bonus charges |
62 |
|
|
387 |
|
|
124 |
|
|
1,355 |
|
Rebranding marketing
program |
2,403 |
|
|
33 |
|
|
3,295 |
|
|
880 |
|
Integration /
implementation of company initiatives |
— |
|
|
1,389 |
|
|
— |
|
|
2,030 |
|
Gain on revaluation of
acquisition dealer liabilities |
— |
|
|
(404 |
) |
|
— |
|
|
(404 |
) |
Impairment of
capitalized software |
— |
|
|
— |
|
|
— |
|
|
713 |
|
Loss on goodwill
impairment |
214,400 |
|
|
— |
|
|
214,400 |
|
|
— |
|
Interest expense |
38,600 |
|
|
36,477 |
|
|
75,473 |
|
|
72,315 |
|
Income tax expense |
1,347 |
|
|
1,779 |
|
|
2,693 |
|
|
3,563 |
|
Adjusted EBITDA |
$ |
72,159 |
|
|
80,654 |
|
|
$ |
142,198 |
|
|
162,876 |
|
|
|
|
|
|
|
|
|
Expensed subscriber
acquisition costs, net |
|
|
|
|
|
|
|
Gross
subscriber acquisition costs |
$ |
13,135 |
|
|
9,450 |
|
|
$ |
24,825 |
|
|
18,483 |
|
Revenue
associated with subscriber acquisition costs |
(1,255 |
) |
|
(1,251 |
) |
|
(2,767 |
) |
|
(2,643 |
) |
Expensed
Subscriber acquisition costs, net |
$ |
11,880 |
|
|
8,199 |
|
|
22,058 |
|
|
15,840 |
|
(a) Severance expense related to transitioning executive
leadership at Brinks Home Security.
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