Monitronics CEO Sums Up 2G Conversion, Attrition Rate Reduction Efforts
During an earnings conference call, Jeff Gardner discussed the company’s strategies for upgrading 2G customers, as well as its ongoing battle to reduce its problematic attrition rate.
An earnings conference call on Tuesday hosted by Ascent Capital Group to discuss its first quarter results included some insightful details about how the company is contending with 2G conversions and its pesky battle to reduce attrition.
During the call, Monitronics CEO Jeff Gardner said he was pleased with the company’s efforts to transition away from 2G radios. In the first quarter, the company reduced its customers with 2G from AT&T by almost 50% or 47,000 accounts. Monitronics currently has less than 40,000 2G customers remaining and expects to meet its overall 2G conversion objectives.
Gardner said the company incurred approximately $9 million in 2G conversion expenses during the first quarter and remains on track for incremental spending for the remainder of 2016 of between $8 million and $12 million to complete the 2G conversion project.
READ NEXT: Ascent Capital Group Reports Q1 Earnings
“As expected, 2G conversions resulted in a modest increasing cancellations in Q1 totaling approximately 3,200 accounts. This represents roughly 0.2 of attrition,” Gardner said. “On our call at year-end, we estimated incremental 2G disconnects could result in 0.5% of incremental attrition in 2016 and 1% to 1.5% in 2017 assuming AT&T shuts down the network in Q1 of 2017.”
Gardner said he expects incremental 2G disconnects will be in range of that estimate, although the split between 2016 and 2017 could change during the course of the year.
Excluding the 2G impact, unit attrition increased to 13.7% in the first quarter from 13.2% in the prior-year period, driven mainly by the bulk purchase of accounts from Pinnacle in 2012. Core attrition increased from 12.6% to 12.9% reflecting the mix of accounts coming to term.
Those roughly 93,000 Pinnacle subscriber accounts were purchased for $131 million, but Monitronics has continued to be pained by an elevated attrition rate ever since. Many of the Pinnacle accounts came to end of contract in 2014 and continue to do so because a portion of them are five-year subscriptions. The attrition rate ticked upward following the acquisition, just as the company said it would; however, the rate has stubbornly remained above the company’s historical range of 11.5% to 12% longer than expected by about 120 basis points (1.2%).
Nonetheless, Gardner is bullish on the company’s current efforts to reduce the attrition rate later in the year.
“Overall, core attrition continues to track our pool attrition curve which remains largely stable and in line with historical trends in underwriting expectations,” Gardner said. “We expect our core attrition to tick up modestly through the second quarter before moderating in the back half of the year.”
If you enjoyed this article and want to receive more valuable industry content like this, click here to sign up for our FREE digital newsletters!
Security Is Our Business, Too
For professionals who recommend, buy and install all types of electronic security equipment, a free subscription to Security Sales & Integration is like having a consultant on call. You’ll find an ideal balance of technology and business coverage, with installation tips and techniques for products and updates on how to add sales to your bottom line.
A free subscription to the #1 resource for the residential and commercial security industry will prove to be invaluable. Subscribe today!