Ascent Capital Group Reports Q2 Earnings
The Monitronics holding company said its unit attrition rate for the 12 months ended June 30 was 13.2%, compared to 12.6% for the 12 months ended June 30, 2015.
ENGLEWOOD, Colo. – Ascent Capital Group (NASDAQ: ASCMA), a holding company that owns Monitronics Int’l and DIY business LiveWatch, on Tuesday reported second quarter net revenue for the three months ending June 30 increased 1.5% to $143.7 million.
The increase in net revenue was attributed to an increase in Monitronics’ average RMR per subscriber to $42.70 as of June 30 and the inclusion of a full first quarter’s impact of LiveWatch revenue for the six months ended June 30.
Ascent’s pre-subscriber acquisition cost (pre-SAC) adjusted EBITDA – which adds back the expense portion of LiveWatch creation cost – for the three months ending June 30 increased 0.9% to $91.8 million.
Monitronics’ pre-SAC adjusted EBITDA for the three months ended June 30 remained flat at $93.4 million compared to same period the previous year. As of June 30, Dallas-based Monitronics had 1.1 million residential and commercial customers.
Ascent reported a net loss from continuing operations for the three and six months ended June 30 of $22.2 million and $45.4 million, respectively, compared to net loss from continuing operations of $18.5 million and $28.2 million in the respective prior year periods.
Monitronics reported a net loss for the three and six months ended June 30 of $16.5 million and $36.7 million, respectively, compared to a net loss of $16.0 million and $24.3 million in the prior year periods.
During an earnings call Tuesday, Monitronics President and CEO Jeffery Gardner noted that in the first quarter the company lowered its creation multiples to 36.1, the first year-over-year reduction in more than eight quarters. During the second quarter, Monitronics further lowered its creation multiple to 35.5. Since acquiring LiveWatch in February 2015, the monthly average RMR per new customer has grown to $38, up substantially year-over-year, he said.
Gardner cited two new co-marketing partnerships that support the company’s lead-generation efforts. Monitronics has been selected as the exclusive provider of security services to AARP, which will provide access to the organization’s 38 million members. The company also struck an exclusive partnership with AAA Alliance Club, an organization with 5.8 million members.
In the second quarter, core attrition (excluding the impact of Monitronics’ acquisition of bulk accounts from Pinnacle Security and costs associated with 2G radio conversions) rose modestly on a sequential basis to 13.2%, which was in line with expectations, Gardner said.
Gardner noted the progress the company has made during the previous eight quarters in converting 2G radios ahead of AT&T’s expected sunset of its 2G network sometime after Dec. 31. 2G conversions resulted in a modest increase in cancellations in Q2, totaling approximately 4,000 accounts as the company moved aggressively to convert customers.
“As of today, we have just over 20,000 remaining customers that need to be converted and we are working hard to address those accounts by year end,” he said.
Monitronics incurred expenses related to 2G radio conversions of approximately $7.6 million in the second quarter and $16.7 million for the first six months. Gardner said that was in line with the company’s previous estimates. He said the company expects to spend $2 million to $3 million for the remainder of the year to complete the 2G conversion project.
Regarding attrition on an RMR basis, Monitronics CFO Michael Meyers said the company has experienced significant improvement, driven by new price increase strategies implemented in the second half of 2015. In the last 12 months, RMR attrition was 12.5% versus unit attrition of 13.9%.
“Given our average RMR of $42.70, we believe we have the opportunity to continue to do similar price increases going forward without affecting unit attrition,” Meyers said.
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