Ascent Capital Group, Inc. (“Ascent” or the “Company”) (Nasdaq:
ASCMA) has reported results for the three months ended March 31,
2019. Ascent is a holding company that owns Monitronics
International, Inc., ("Monitronics", doing business as Brinks Home
Security™), one of the nation’s largest home security alarm
monitoring companies.
Headquartered in the Dallas-Fort Worth area,
Monitronics provides security alarm monitoring services to
approximately 900,000 residential and commercial customers as of
March 31, 2019. Monitronics’ long-term monitoring contracts provide
high margin recurring revenue that produce predictable and stable
cash flow.
Highlights1:
- Ascent’s net revenue for the three
months ended March 31, 2019 totaled $129.6 million.
- Ascent’s net loss for the three
months ended March 31, 2019 totaled $27.8 million. Monitronics’ net
loss for the three ended March 31, 2019 totaled $31.8 million.
- Ascent’s Adjusted EBITDA for the
three months ended March 31, 2019 totaled $72.7 million.
Monitronics’ Adjusted EBITDA for the three ended March 31, 2019
totaled $73.7 million.
Results for the Three Months Ended March
31, 2019
For the three months ended March 31, 2019,
Ascent reported net revenue of $129.6 million, a decrease of 3.1%.
The reduction in revenue for the three months ended March 31, 2019
is due to the lower average number of subscribers in the first
quarter of 2019. This decrease was partially offset by a 1.2%
increase in average recurring monthly revenue (“RMR”) per
subscriber, to $45.28, due to certain price increases enacted
during the past twelve months. In addition, the Company recognized
a $1.7 million decrease in revenue for the three months ended March
31, 2019, as compared to a $325,000 increase in revenue for the
three months ended March 31, 2018 related to changes in Topic 606
contract assets. All revenues of Ascent are generated by its
wholly-owned subsidiary, Monitronics.
Ascent’s cost of services, which are all
incurred by Monitronics, for the three months ended March 31, 2019
decreased 18.2% to $26.8 million. The decrease in cost of services
for the three months ended March 31, 2019 is primarily attributable
to decreased field service costs due to a lower volume of retention
and move jobs being completed and a decrease in expensed subscriber
acquisition costs. Subscriber acquisition costs, which include
expensed equipment and labor costs associated with the creation of
new subscribers, decreased to $1.8 million for the three months
ended March 31, 2019, as compared to $3.6 million for the three
months ended March 31, 2018.
Ascent’s selling, general & administrative
("SG&A") costs for the three months ended March 31, 2019,
decreased 13.1% to $32.5 million. The decrease in SG&A for the
three months ended March 31, 2019 is attributable to reduced
subscriber acquisition costs. Subscriber acquisition costs in
SG&A decreased to $5.5 million for the three months ended March
31, 2019, as compared to $8.1 million for the three months ended
March 31, 2018. Additionally, there was $3.0 million and $892,000
of severance expense related to transitioning Ascent executive
leadership and rebranding expense, respectively, that was
recognized in the three months ended March 31, 2018 with no
corresponding costs incurred during the three months ended March
31, 2019. Offsetting these decreases were increased consulting fees
on integration/implementation of company initiatives. Other
increases in SG&A contributing to the overall change period
over period include deferred and incentive-based compensation costs
and Topic 606 contract asset impairment costs.
1 Comparisons are year-over-year unless
otherwise specified.
Monitronics’ SG&A costs for the three months
ended March 31, 2019 were $31.2 million as compared to $32.0
million for the three months ended March 31, 2018.
Monitronics’ consolidated creation multiple,
including both expensed subscriber acquisition costs and other
capitalized creation costs, was 36.8x for the three months ended
March 31, 2019.
Ascent reported a net loss for the three months
ended March 31, 2019 of $27.8 million, compared to net loss of
$30.8 million in the three months ended March 31, 2018. The
decrease in net loss is primarily attributable to a decrease in
operating expenses, including Cost of Services and SG&A as
discussed above, partially offset by a decrease in net revenues and
an unrealized loss on derivative financial instruments of $7.8
million recognized during the three months ended March 31,
2019.
Monitronics reported a net loss for the three
months ended March 31, 2019 of $31.8 million, compared to a net
loss of $26.2 million in the three months ended March 31, 2018. The
increase in Monitronics’ net loss is primarily due to $5.2 million
in refinancing expenses.
Ascent’s Adjusted EBITDA increased 5.6% to $72.7
million for the three months ended March 31, 2019. Monitronics’
Adjusted EBITDA increased 5.3% to $73.7 million for the three
months ended March 31, 2019. This increase is attributable to
reduced subscriber acquisition costs, net of creation revenue, of
$5.6 million for the three months ended March 31, 2019, as compared
to $10.2 million for the three months ended March 31, 2018 and
decreases in Cost of Services for the three months ended March 31,
2019, as discussed above. Monitronics’ Adjusted EBITDA as a
percentage of net revenue for the three months ended March 31, 2019
was 56.9%, as compared to 52.4% in the three months ended March 31,
2018.
For a reconciliation of net loss from continuing
operations to Adjusted EBITDA, please see the Appendix of this
release.
|
LTM Subscriber Rollforward and Attrition |
|
|
Twelve Months Ended March 31, |
|
2019 |
|
2018 |
Beginning balance of accounts |
958,719 |
|
|
1,036,794 |
|
Accounts acquired |
111,376 |
|
|
87,957 |
|
Accounts canceled |
(164,221 |
) |
|
(159,845 |
) |
Canceled accounts guaranteed
by dealer and other adjustments (a) |
(4,681 |
) |
|
(6,187 |
) |
Ending balance of
accounts |
901,193 |
|
|
958,719 |
|
Monthly weighted average
accounts |
936,430 |
|
|
998,137 |
|
Attrition rate – Unit |
17.5 |
% |
|
16.0 |
% |
Attrition rate - RMR (b) |
17.0 |
% |
|
13.9 |
% |
|
(a) Includes canceled accounts that are contractually
guaranteed to be refunded from holdback. |
(b) 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 16.0% for the
twelve months ended March 31, 2018 to 17.5% for the twelve months
ended March 31, 2019. The RMR attrition rate for the twelve
months ended March 31, 2019 and 2018 was 17.0% and 13.9%,
respectively. Contributing to the increase in unit and RMR
attrition were fewer customers under contract or in the dealer
guarantee period for the twelve months ended March 31, 2019, as
compared to the prior period, increased non-pay attrition as well
as some impact from competition from new market entrants. The
increase in the RMR attrition rate for the twelve months ended
March 31, 2019 was also impacted by a less aggressive price
increase strategy in first quarter of 2019.
During the three months ended March 31, 2019,
Monitronics acquired 20,003 subscriber accounts, as compared to
21,547 subscriber accounts in the three months ended March 31,
2018.
Ascent Liquidity and Capital
Resources
At March 31, 2019, on a consolidated basis,
Ascent had $76.3 million of cash and cash equivalents. Subsequent
to March 31, 2019, Ascent used approximately $19.8 million of its
cash to pay holders of its Convertible Notes as part of an Amended
Tender Offer (as defined below). Ascent may use a portion of our
remaining cash and cash equivalents to fund operations, decrease
debt obligations, fund stock repurchases, or fund potential
strategic acquisitions or investment opportunities.
The existing long-term debt of the Company at
March 31, 2019 includes the aggregate principal balance of $1.9
billion under (i) the Ascent Convertible Notes totaling $21.1
million in aggregate principal amount, maturing on July 15, 2020
and bearing interest at 4.00% per annum (ii) the Monitronics senior
notes totaling $585.0 million in principal, maturing on April 1,
2020 and bearing interest at 9.125% per annum (the "Senior Notes"),
and (iii) the $1.1 billion senior secured term loan and $295.0
million super priority revolver under the sixth amendment to the
Monitronics secured credit agreement dated March 23, 2012, as
amended (the "Credit Facility"). The Convertible Notes had an
outstanding principal balance of $21.1 million as of March 31,
2019. Following the consummation of the Amended Tender Offer (as
defined below), an aggregate principal amount of $260,000 of
Convertible Notes remain outstanding as of April 1, 2019. The
Senior Notes have an outstanding principal balance of $585 million
as of March 31, 2019. The Credit Facility term loan has an
outstanding principal balance of $1.1 billion as of March 31, 2019
and requires principal payments of $2.8 million per quarter with
the remaining amount becoming due on September 30, 2022. The Credit
Facility revolver has an outstanding balance of $181.4 million and
an aggregate of $1.0 million under two standby letters of credit
issued as of March 31, 2019, which becomes due on September 30,
2021.
On February 14, 2019, the Company repurchased
$75.7 million in aggregate principal amount of then outstanding
Convertible Notes from certain then holders of Convertible Notes
pursuant to the previously announced Settlement and Note Repurchase
Agreement and Release (the “Settlement Agreement”), dated February
11, 2019, between Ascent and its directors and executive officers,
on the one hand, and certain holders of Convertible Notes, on the
other hand. Convertible Notes repurchased pursuant to the
Settlement Agreement were cancelled.
On February 19, 2019, Ascent commenced a cash
tender offer to purchase any and all of its outstanding Convertible
Notes (the “Tender Offer”). On March 22, 2019, Ascent entered
into transaction support agreements with holders of approximately
$18.6 million in aggregate principal amount of the Convertible
Notes then outstanding, pursuant to which Ascent agreed to increase
the purchase price for the Convertible Notes in the Tender Offer to
$950 per $1,000 principal amount of Convertible Notes, with no
accrued and unpaid interest to be payable (as so amended, the
“Amended Tender Offer”) and such holders agreed to tender, or cause
to be tendered, into the Amended Tender Offer all Convertible Notes
held by such holders. The Amended Tender Offer was settled on April
1, 2019. A total of $20.8 million in aggregate principal amount of
Convertible Notes were accepted for payment pursuant to the Amended
Tender Offer.
The maturity date for each of the term loan and
the revolving credit facility under the Credit Facility is subject
to a springing maturity 181 days prior to the scheduled maturity
date of the Senior Notes, or October 3, 2019, if Monitronics is
unable to refinance the Senior Notes by that date. Furthermore,
Monitronics received a going concern qualification in connection
with its standalone external audit report of its Annual Report on
Form 10-K, for the year ended December 31, 2018, which constitutes
a default under Monitronics’ Credit Facility (the "Going Concern
Default"), and will report that its Consolidated Senior Secured
Eligible RMR Leverage Ratio (as defined in the Credit Facility)
exceeds the limits provided in the Credit Agreement for the quarter
ended March 31, 2019 (the “Financial Covenant Default”), which
constitutes an event of default under Monitronics’ Credit
Facility. Any default under the Credit Facility may, upon the
passage of time, mature into an event of default. At any time
after the occurrence of an event of default under the Credit
Facility, the lenders thereunder may, among other options, declare
any amounts outstanding under the Credit Facility immediately due
and payable and the revolving loan lenders thereunder may terminate
any commitment to make further loans under the revolving credit
facility under the Credit Facility. Any such acceleration may
constitute an event of default under the indenture governing the
Senior Notes.
Additionally, in connection with management's
negotiations with its creditors, Monitronics did not make its
Senior Notes interest payment of $26,691,000 due on April 1,
2019. The indenture governing the Senior Notes provides for a
30-day cure period on past due interest payments (the non-payment
of the interest following the expiration of the 30-day cure period,
the "Senior Notes Default"). The 30-day cure period under the
indenture governing the Senior Notes has expired.
Monitronics obtained a waiver (as amended, the
“Credit Facility Waiver”), from the required revolving lenders
under the Credit Facility, which expired May 10, 2019, with respect
to, among other things, the Going Concern Default and the Senior
Notes Default, subject to the terms and conditions of the Credit
Facility Waiver. The Credit Facility Waiver obtained from the
Credit Facility revolving loan lenders allowed Monitronics to
continue to borrow under the revolving credit facility under the
Credit Facility, up to $195,000,000 at an alternate base rate plus
3.00%. Monitronics is seeking to amend and extend the Credit
Facility Waiver including a waiver with respect to the Financial
Covenant Default and such discussions are ongoing. However,
there can be no assurance that Monitronics will receive such a
waiver and therefore, there can be no assurance that Monitronics
will have availability of additional borrowings under the Credit
Facility revolver.
Monitronics has obtained a forbearance, as
amended, from the required term lenders under the Credit Facility,
through May 15, 2019, with respect to, among other things, the
Going Concern Default, the Senior Notes Default and the Financial
Covenant Default, subject to the terms and conditions of the
forbearance. The forbearance obtained from the Credit
Facility term lenders provides that the term loan lenders will not
exercise remedies with respect to an event of default that may
occur from the Going Concern Default, the Senior Notes Default or
the Financial Covenant Default. Despite the forbearance obtained
from the Credit Facility term lenders, the Going Concern Default,
the Senior Notes Default and the Financial Covenant Default, and
any resulting event of default under the Credit Facility, are
continuing, and will continue, absent a waiver from the required
revolving and term loan lenders, as applicable.
Additionally, Monitronics has obtained a
forbearance from the required holders of Senior Notes, through May
15, 2019, with respect to, among other things, the Senior Notes
Default, subject to the terms and conditions of the forbearance.
The forbearance obtained from the holders of Senior Notes provides,
subject to the terms of the forbearance, that the holders of Senior
Notes will not exercise remedies with respect to the Senior Notes
Default.
Given these factors, management continues to
conclude there is substantial doubt regarding the Company’s ability
to continue as a going concern within one year from the issuance
date of its condensed consolidated financial statements as of and
for the three months ended March 31, 2019.
Ascent and Monitronics have engaged financial
and legal advisors to assist them in considering potential
alternatives to address the issues described above. As of the
issuance date of these condensed consolidated financial statements,
Monitronics has not refinanced the Senior Notes and there can be no
assurance that any refinancing or an alternative restructuring of
its outstanding indebtedness will be possible on acceptable terms,
if at all.
Monitronics’ failure to refinance the Senior
Notes or to reach an agreement with its stakeholders on the terms
of a restructuring would have a material adverse effect on its and
our liquidity, financial condition and results of operations and
may result in it filing a voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code in order to
implement a restructuring plan.
The Company’s condensed consolidated financial
statements as of March 31, 2019 have been prepared on a going
concern basis, which contemplates the realization of assets and the
settlement of liabilities and commitments in the normal course of
business.
Conference Call
Ascent will not host an earnings call or webcast
due to its previously disclosed decision to consider strategic
alternatives with respect to Ascent or Monitronics. Ascent has not
set a definitive timetable for completing the review, and there can
be no assurance that the process will result in a transaction or a
restructuring of Monitronics. Ascent does not intend to disclose
developments or provide updates on the progress or status of this
process or discuss its results of operations with investors unless
and until further disclosure is appropriate or required. No
assurance can be given of the outcome of the strategic alternatives
review process, including whether any transaction will result or
the associated timing or terms.
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 and expansion, the
success of new products and services, account creation and related
costs, anticipated account generation, future financial performance
and prospects, anticipated sources and uses of capital, obtaining
or maintaining any waiver or forbearance with respect to the Credit
Facility and Senior Notes, the ability of Ascent and Monitronics to
continue as going concerns, potential restructurings and strategic
transactions 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 and
Monitronics
Ascent Capital Group, Inc. (Nasdaq: ASCMA) is a
holding company whose primary subsidiary is Monitronics
(“Monitronics”), one of the largest home security and alarm
monitoring companies in the U.S. Headquartered in the Dallas-Fort
Worth area, Monitronics secures approximately 900,000 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 |
|
|
March 31, 2019 |
|
December 31, 2018 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
76,300 |
|
|
105,921 |
|
Restricted cash |
118 |
|
|
189 |
|
Trade receivables, net of allowance for doubtful accounts of $3,239
in 2019 and $3,759 in 2018 |
12,438 |
|
|
13,121 |
|
Prepaid and other current assets |
35,018 |
|
|
32,202 |
|
Total current assets |
123,874 |
|
|
151,433 |
|
Property and equipment, net of
accumulated depreciation of $43,985 in 2019 and $40,827 in
2018 |
37,160 |
|
|
36,549 |
|
Subscriber accounts and
deferred contract acquisition costs, net of accumulated
amortization of $1,670,228 in 2019 and $1,621,242 in 2018 |
1,176,776 |
|
|
1,195,463 |
|
Deferred income tax asset,
net |
783 |
|
|
783 |
|
Operating lease right-of-use
asset |
19,840 |
|
|
— |
|
Other assets |
25,615 |
|
|
29,316 |
|
Total assets |
$ |
1,384,048 |
|
|
1,413,544 |
|
Liabilities and Stockholders’ Deficit |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
13,083 |
|
|
12,668 |
|
Other accrued liabilities |
49,653 |
|
|
36,006 |
|
Deferred revenue |
12,698 |
|
|
13,060 |
|
Holdback liability |
12,041 |
|
|
11,513 |
|
Current portion of long-term debt |
1,859,109 |
|
|
1,895,175 |
|
Total current liabilities |
1,946,584 |
|
|
1,968,422 |
|
Non-current liabilities: |
|
|
|
Long-term holdback liability |
1,979 |
|
|
1,770 |
|
Derivative financial instruments |
9,287 |
|
|
6,039 |
|
Operating lease liabilities |
16,567 |
|
|
— |
|
Other liabilities |
2,912 |
|
|
2,742 |
|
Total liabilities |
1,977,329 |
|
|
1,978,973 |
|
Commitments and
contingencies |
|
|
|
Stockholders’ deficit: |
|
|
|
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 12,092,846 and 12,080,683 shares at March 31, 2019
and December 31, 2018, respectively |
121 |
|
|
121 |
|
Series B common stock,
$.01 par value. Authorized 5,000,000 shares; issued and outstanding
381,528 shares at both March 31, 2019 and December 31,
2018 |
4 |
|
|
4 |
|
Series C common stock,
$0.01 par value. Authorized 45,000,000 shares; no shares
issued |
— |
|
|
— |
|
Additional paid-in
capital |
1,425,780 |
|
|
1,425,325 |
|
Accumulated deficit |
(2,026,326 |
) |
|
(1,998,487 |
) |
Accumulated other
comprehensive income, net |
7,140 |
|
|
7,608 |
|
Total stockholders’ deficit |
(593,281 |
) |
|
(565,429 |
) |
Total liabilities and stockholders’ deficit |
$ |
1,384,048 |
|
|
1,413,544 |
|
|
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 March 31, |
|
2019 |
|
2018 |
Net revenue |
$ |
129,606 |
|
|
133,753 |
|
Operating expenses: |
|
|
|
Cost of services |
26,764 |
|
|
32,701 |
|
Selling, general and administrative, including stock-based and
long-term incentive compensation |
32,512 |
|
|
37,406 |
|
Amortization of subscriber accounts, deferred contract acquisition
costs and other intangible assets |
49,145 |
|
|
54,411 |
|
Depreciation |
3,158 |
|
|
2,621 |
|
|
111,579 |
|
|
127,139 |
|
Operating income |
18,027 |
|
|
6,614 |
|
Other expense (income),
net: |
|
|
|
Interest income |
(544 |
) |
|
(481 |
) |
Interest expense |
37,894 |
|
|
38,652 |
|
Unrealized loss on derivative financial instruments |
7,773 |
|
|
— |
|
Refinancing expense |
331 |
|
|
— |
|
Other income, net |
(259 |
) |
|
(2,065 |
) |
|
45,195 |
|
|
36,106 |
|
Loss before income taxes |
(27,168 |
) |
|
(29,492 |
) |
Income tax expense |
671 |
|
|
1,346 |
|
Net loss |
(27,839 |
) |
|
(30,838 |
) |
Other comprehensive income
(loss): |
|
|
|
Unrealized holding loss on marketable securities, net |
— |
|
|
(3,077 |
) |
Unrealized gain (loss) on derivative contracts, net |
(468 |
) |
|
14,406 |
|
Total other comprehensive income (loss), net of tax |
(468 |
) |
|
11,329 |
|
Comprehensive loss |
$ |
(28,307 |
) |
|
(19,509 |
) |
|
|
|
|
Basic and diluted loss per
share: |
|
|
|
Net loss |
$ |
(2.24 |
) |
|
(2.51 |
) |
|
|
|
|
Weighted average Series A and Series B shares - basic and
diluted |
12,429,810 |
|
|
12,298,922 |
|
Total issued and outstanding Series A and Series B shares at period
end |
12,474,374 |
|
|
12,383,631 |
|
|
See accompanying notes to condensed consolidated financial
statements. |
ASCENT CAPITAL GROUP, INC. AND
SUBSIDIARIES |
Condensed Consolidated Statements of Cash
Flows |
Amounts in thousands |
|
|
Three Months Ended March 31, |
|
2019 |
|
2018 |
Cash flows from operating
activities: |
|
|
|
Net loss |
$ |
(27,839 |
) |
|
(30,838 |
) |
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
Amortization of subscriber accounts, deferred contract acquisition
costs and other intangible assets |
49,145 |
|
|
54,411 |
|
Depreciation |
3,158 |
|
|
2,621 |
|
Stock-based and long-term incentive compensation |
805 |
|
|
226 |
|
Deferred income tax expense |
— |
|
|
662 |
|
Amortization of debt discount and deferred debt costs |
150 |
|
|
2,959 |
|
Unrealized loss on derivative financial instruments |
7,773 |
|
|
— |
|
Refinancing expense |
331 |
|
|
— |
|
Bad debt expense |
3,335 |
|
|
3,017 |
|
Other non-cash activity, net |
(264 |
) |
|
41 |
|
Changes in assets and liabilities: |
|
|
|
Trade receivables |
(2,652 |
) |
|
(2,672 |
) |
Prepaid expenses and other assets |
3,428 |
|
|
781 |
|
Subscriber accounts - deferred contract acquisition costs |
(863 |
) |
|
(898 |
) |
Payables and other liabilities |
11,306 |
|
|
17,644 |
|
Net cash provided by operating activities |
47,813 |
|
|
47,954 |
|
Cash flows from investing
activities: |
|
|
|
Capital expenditures |
(2,999 |
) |
|
(3,310 |
) |
Cost of subscriber accounts acquired |
(28,850 |
) |
|
(24,560 |
) |
Purchases of marketable securities |
— |
|
|
(7,998 |
) |
Proceeds from sale of marketable securities |
— |
|
|
5,495 |
|
Net cash used in investing activities |
(31,849 |
) |
|
(30,373 |
) |
Cash flows from financing
activities: |
|
|
|
Proceeds from long-term debt |
43,100 |
|
|
50,000 |
|
Payments on long-term debt |
(79,316 |
) |
|
(47,750 |
) |
Payments of financing costs |
(9,436 |
) |
|
— |
|
Value of shares withheld for share-based compensation |
(4 |
) |
|
(116 |
) |
Net cash provided by (used in) financing activities |
(45,656 |
) |
|
2,134 |
|
Net increase (decrease) in cash, cash equivalents and restricted
cash |
(29,692 |
) |
|
19,715 |
|
Cash, cash equivalents and
restricted cash at beginning of period |
106,110 |
|
|
10,465 |
|
Cash, cash equivalents and
restricted cash at end of period |
$ |
76,418 |
|
|
30,180 |
|
Supplemental cash flow
information: |
|
|
|
State taxes paid, net |
$ |
— |
|
|
— |
|
Interest paid |
25,886 |
|
|
22,920 |
|
Accrued capital expenditures |
1,322 |
|
|
830 |
|
|
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 Monitronics' 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
to total Adjusted EBITDA for the periods indicated (amounts in
thousands): |
|
|
Three Months Ended March 31, |
|
2019 |
|
2018 |
Net loss |
$ |
(27,839 |
) |
|
(30,838 |
) |
Amortization of subscriber
accounts, deferred contract acquisition costs and other intangible
assets |
49,145 |
|
|
54,411 |
|
Depreciation |
3,158 |
|
|
2,621 |
|
Stock-based compensation |
459 |
|
|
285 |
|
Long-term incentive
compensation |
286 |
|
|
— |
|
Severance expense (a) |
— |
|
|
2,955 |
|
LiveWatch acquisition
contingent bonus charges |
63 |
|
|
62 |
|
Rebranding marketing
program |
— |
|
|
892 |
|
Integration / implementation
of company initiatives |
1,581 |
|
|
— |
|
Interest income |
(544 |
) |
|
(481 |
) |
Interest expense |
37,894 |
|
|
38,652 |
|
Unrealized loss on derivative
financial instruments |
7,773 |
|
|
— |
|
Refinancing expense |
331 |
|
|
— |
|
Insurance recovery in excess
of cost on Ascent Convertible Note litigation |
(259 |
) |
|
— |
|
Unrealized gain on marketable
securities, net |
— |
|
|
(1,036 |
) |
Income tax expense |
671 |
|
|
1,346 |
|
Adjusted EBITDA |
$ |
72,719 |
|
|
68,869 |
|
|
|
|
|
Expensed Subscriber
acquisition costs, net |
|
|
|
Gross subscriber acquisition costs |
$ |
7,315 |
|
|
11,690 |
|
Revenue associated with subscriber acquisition costs |
(1,703 |
) |
|
(1,512 |
) |
Expensed Subscriber acquisition costs, net |
5,612 |
|
|
10,178 |
|
|
(a) Severance expense related to transitioning executive
leadership at Ascent in 2018. |
The following table provides a reconciliation of Monitronics’ Net
loss to total Adjusted EBITDA for the periods indicated (amounts in
thousands): |
|
|
Three Months Ended March 31, |
|
2019 |
|
2018 |
Net loss |
$ |
(31,770 |
) |
|
(26,207 |
) |
Amortization of subscriber
accounts, deferred contract acquisition costs and other intangible
assets |
49,145 |
|
|
54,411 |
|
Depreciation |
3,154 |
|
|
2,615 |
|
Stock-based compensation |
189 |
|
|
47 |
|
Long-term incentive
compensation |
286 |
|
|
— |
|
LiveWatch acquisition
contingent bonus charges |
63 |
|
|
62 |
|
Rebranding marketing
program |
— |
|
|
892 |
|
Integration / implementation
of company initiatives |
1,581 |
|
|
— |
|
Interest expense |
37,433 |
|
|
36,873 |
|
Unrealized loss on derivative
financial instruments |
7,773 |
|
|
— |
|
Refinancing expense |
5,214 |
|
|
— |
|
Income tax expense |
671 |
|
|
1,346 |
|
Adjusted EBITDA |
$ |
73,739 |
|
|
70,039 |
|
|
|
|
|
Expensed Subscriber
acquisition costs, net |
|
|
|
Gross subscriber acquisition costs |
$ |
7,315 |
|
|
11,690 |
|
Revenue associated with subscriber acquisition costs |
(1,703 |
) |
|
(1,512 |
) |
Expensed Subscriber acquisition costs, net |
5,612 |
|
|
10,178 |
|
|
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