Third Quarter Key Highlights1:
- Net revenue of
$130.9 million , up 8.3% year-over- year - Net loss of
$19.2 million , as compared to net income of$673.6 million in the prior year period, which included a one-time$702.8 million gain from restructuring - Adjusted EBITDA of
$68.5 million , up 9.6% year-over-year - Successful integration of over 110,000 Protect America bulk buy accounts acquired in
mid-June 2020 William Niles named permanent CEO onSeptember 30, 2020
“To enable this transformation, we have made several key hires across our organization to ensure we have the right leadership to drive a culture of customer centricity and execution. We also continue to take smart actions to manage our cost structure and strengthen our balance sheet. We believe we have a compelling strategic plan that will accelerate profitable growth, generate cash, and improve margins and long-term shareholder value.”
Customer & Attrition Data
The Company has two principal sales channels including its direct-to-consumer sales channel (the "Direct to Consumer Channel" or “DTC”), which offers both Do-It-Yourself and professional installation security solutions and through its exclusive authorized dealer network (the "Dealer Channel"), which provides product and installation services, as well as support to customers. In addition, from time to time, the Company acquires accounts through negotiated bulk account acquisitions.
Accounts Added
The Company added 17,111 customers in the third quarter of 2020, as compared to 21,228 accounts for the same period in the prior year. Both the Company’s Dealer and the DTC Channels experienced year-over-year declines in customers added. The decline in the Dealer Channel was primarily due to the Company's election to cease purchasing accounts from two dealers in the fourth quarter of 2019 and restrictions on door-to-door selling and other impacts related to the outbreak of COVID-19. The decline in the DTC Channel production was primarily due to the Company's election to leverage more profitable organic leads. There were no bulk account acquisitions during the third quarter of 2020 or 2019.
_____________________________
1 Year-over-year comparisons based on the pro forma net revenue, net loss and adjusted EBITDA for
Attrition
Twelve Months Ended | ||||||
2020 | 2019 | |||||
Beginning balance of accounts not subject to Earnout Payments | 865,848 | 942,157 | ||||
Accounts acquired | 75,627 | 84,899 | ||||
Accounts cancelled | (128,736 | ) | (156,047 | ) | ||
Cancelled accounts guaranteed by dealer and other adjustments (a) | (5,276 | ) | (5,161 | ) | ||
Ending balance of accounts not subject to Earnout Payments | 807,463 | 865,848 | ||||
Accounts subject to Earnout Payments | 107,929 | — | ||||
Ending balance of accounts | 915,392 | 865,848 | ||||
Attrition rate - Core Unit (c) | 15.4 | % | 17.3 | % | ||
Attrition rate - Core RMR (b) (c) | 17.7 | % | 17.6 | % |
(a) | Includes cancelled accounts that are contractually guaranteed to be refunded from holdback. | |
(b) | The RMR of cancelled accounts follows the same definition as subscriber unit attrition as noted above. RMR attrition is defined as the RMR of cancelled 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. | |
(c) | Core Unit and RMR attrition rates exclude the impact of the Protect America bulk buy, where the Company is funding the purchase price through an earnout payment structure (the “Earnout Payments”). | |
Core Unit attrition, which excludes accounts subject to earnout payments, was down for the twelve months ended
Core RMR attrition increased year-over-year due to a combination of lower RMR for accounts generated in the Company’s DTC Channel, as a minimal equipment subsidy is offered, lower production in the Dealer Channel, which typically enjoys higher RMR, and rate reductions relating to the Company’s at-risk retention program. Further, in light of COVID-19, starting in
Presentation of Predecessor and Successor Financial Results
Apart from interest and amortization expense, Brinks Home Security’s operating results and key operating performance measures on a consolidated basis were not materially impacted by the reorganization of the Company in
Three Months Ended
Three Months Ended | Non-GAAP Combined Three Months Ended | Period from | Period from | |||||||||||||||
2020 | 2019 | 2019 | 2019 | |||||||||||||||
Net revenue | $ | 130,852 | $ | 120,878 | $ | 36,289 | $ | 84,589 | ||||||||||
Cost of services | 31,383 | 28,962 | 8,976 | 19,986 | ||||||||||||||
Selling, general and administrative, including stock-based and long-term incentive compensation | 31,572 | 32,370 | 11,390 | 20,980 | ||||||||||||||
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets | 57,240 | 49,810 | 17,302 | 32,508 | ||||||||||||||
Interest expense | 20,033 | 34,586 | 7,474 | 27,112 | ||||||||||||||
Income tax expense | 717 | 642 | 204 | 438 | ||||||||||||||
Net (loss) income | (19,164 | ) | 673,578 | (10,807 | ) | 684,385 | ||||||||||||
Adjusted EBITDA | 68,512 | 62,502 | 17,144 | 45,358 | ||||||||||||||
The Company reported net revenues of
RMR acquired during the quarter was
Cost of Services was
Selling, General and Administrative costs were
Net loss totaled
Adjusted EBITDA was
___________________________________
2All variances are year-over-year unless otherwise noted.
Liquidity
As of
The Company’s existing long-term debt at
Quarterly Report on Form 10-Q
Brinks Home Security’s financial statements and related footnotes will be available in its Quarterly Report on Form 10-Q for the quarter ended
Conference Call
Brinks Home Security will host a conference call on
A replay of the call can also be accessed via phone through
About Brinks Home Security
Brinks Home Security (OTC: SCTY) is one of the largest home security and alarm monitoring companies in North America. Headquartered in the
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, the launch of Brinks Home Security's consumer financing solution; the anticipated benefits of the Brinks Home Security’s rebranding; customer retention; account creation and related cost; anticipated account generation; future financial performance; debt refinancing; recovery of insurance proceeds 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 us, our ability to capitalize on acquisition opportunities, general market and economic conditions, including global economic concerns due to the COVID-19 outbreak, and changes in law and government regulations. These forward-looking statements speak only as of the date of this press release, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in our 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
1) Adjusted EBITDA and the Non-GAAP Combined Three Months Ended
Contact:
212-446-1875
ebartsch@sloanepr.com
MONITRONICS INTERNATIONAL, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets Amounts in thousands, except share amounts | |||||||
2020 | 2019 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 12,759 | $ | 14,763 | |||
Restricted cash | 133 | 238 | |||||
Trade receivables, net of allowance for doubtful accounts of | 10,854 | 12,083 | |||||
Inventories, net | 6,878 | 5,242 | |||||
Prepaid and other current assets | 20,387 | 19,953 | |||||
Total current assets | 51,011 | 52,279 | |||||
Property and equipment, net of accumulated depreciation of | 41,516 | 42,096 | |||||
Subscriber accounts and deferred contract acquisition costs, net of accumulated amortization of | 1,089,198 | 1,064,311 | |||||
Dealer network and other intangible assets, net of accumulated amortization of | 118,952 | 136,778 | |||||
— | 81,943 | ||||||
Deferred income tax asset, net | 684 | 684 | |||||
Operating lease right-of-use asset | 18,345 | 19,277 | |||||
Other assets | 18,651 | 21,944 | |||||
Total assets | $ | 1,338,357 | $ | 1,419,312 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 13,369 | $ | 16,869 | |||
Other accrued liabilities | 45,806 | 24,954 | |||||
Deferred revenue | 11,065 | 12,008 | |||||
Holdback liability | 8,583 | 8,191 | |||||
Current portion of long-term debt | 8,225 | 8,225 | |||||
Total current liabilities | 87,048 | 70,247 | |||||
Non-current liabilities: | |||||||
Long-term debt | 979,550 | 978,219 | |||||
Long-term holdback liability | 1,761 | 2,183 | |||||
Operating lease liabilities | 15,648 | 16,195 | |||||
Other liabilities | 66,989 | 6,390 | |||||
Total liabilities | 1,150,996 | 1,073,234 | |||||
Commitments and contingencies | |||||||
Stockholders' equity: | |||||||
Preferred stock, | — | — | |||||
Common stock, | 225 | 225 | |||||
Additional paid-in capital | 379,175 | 379,175 | |||||
Accumulated deficit | (189,779 | ) | (33,331 | ) | |||
Accumulated other comprehensive (loss) income, net | (2,260 | ) | 9 | ||||
Total stockholders' equity | 187,361 | 346,078 | |||||
Total liabilities and stockholders' equity | $ | 1,338,357 | $ | 1,419,312 | |||
MONITRONICS INTERNATIONAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Amounts in thousands, except shares and per share amounts | ||||||||||||
Three Months Ended | Period from | Period from | ||||||||||
2020 | 2019 | 2019 | ||||||||||
Net revenue | $ | 130,852 | $ | 36,289 | $ | 84,589 | ||||||
Operating expenses: | ||||||||||||
Cost of services | 31,383 | 8,976 | 19,986 | |||||||||
Selling, general and administrative, including stock-based and long-term incentive compensation | 31,572 | 11,390 | 20,980 | |||||||||
Radio conversion costs | 5,612 | 825 | 931 | |||||||||
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets | 57,240 | 17,302 | 32,508 | |||||||||
Depreciation | 3,459 | 925 | 1,073 | |||||||||
129,266 | 39,418 | 75,478 | ||||||||||
Operating income (loss) | 1,586 | (3,129 | ) | 9,111 | ||||||||
Other (income) expense: | ||||||||||||
Gain on restructuring and reorganization, net | — | — | (702,824 | ) | ||||||||
Interest expense | 20,033 | 7,474 | 27,112 | |||||||||
20,033 | 7,474 | (675,712 | ) | |||||||||
(Loss) income before income taxes | (18,447 | ) | (10,603 | ) | 684,823 | |||||||
Income tax expense | 717 | 204 | 438 | |||||||||
Net (loss) income | (19,164 | ) | (10,807 | ) | 684,385 | |||||||
Other comprehensive loss: | ||||||||||||
Unrealized loss on derivative contracts, net | (475 | ) | — | — | ||||||||
Total other comprehensive loss, net of tax | (475 | ) | — | — | ||||||||
Comprehensive (loss) income | $ | (19,639 | ) | $ | (10,807 | ) | $ | 684,385 | ||||
Basic and diluted income per share: | ||||||||||||
Net loss | $ | (0.85 | ) | $ | (0.48 | ) | $ | — | ||||
Weighted average Common shares - basic and diluted | 22,500,000 | 22,500,000 | — | |||||||||
Total issued and outstanding Common shares at period end | 22,500,000 | 22,500,000 | — | |||||||||
MONITRONICS INTERNATIONAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Amounts in thousands, except shares and per share amounts | ||||||||||||
Nine Months Ended | Period from | Period from | ||||||||||
2020 | 2019 | 2019 | ||||||||||
Net revenue | $ | 374,235 | $ | 36,289 | $ | 342,286 | ||||||
Operating expenses: | ||||||||||||
Cost of services | 87,017 | 8,976 | 75,286 | |||||||||
Selling, general and administrative, including stock-based and long-term incentive compensation | 108,566 | 11,390 | 80,365 | |||||||||
Radio conversion costs | 14,103 | 825 | 931 | |||||||||
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets | 164,889 | 17,302 | 130,791 | |||||||||
Depreciation | 10,019 | 925 | 7,348 | |||||||||
81,943 | — | — | ||||||||||
466,537 | 39,418 | 294,721 | ||||||||||
Operating (loss) income | (92,302 | ) | (3,129 | ) | 47,565 | |||||||
Other (income) expense: | ||||||||||||
Gain on restructuring and reorganization, net | — | — | (669,722 | ) | ||||||||
Interest expense | 60,582 | 7,474 | 105,081 | |||||||||
Realized and unrealized loss, net on derivative financial instruments | — | — | 6,804 | |||||||||
Refinancing expense | — | — | 5,214 | |||||||||
60,582 | 7,474 | (552,623 | ) | |||||||||
(Loss) income before income taxes | (152,884 | ) | (10,603 | ) | 600,188 | |||||||
Income tax expense | 1,937 | 204 | 1,775 | |||||||||
Net (loss) income | (154,821 | ) | (10,807 | ) | 598,413 | |||||||
Other comprehensive loss: | ||||||||||||
Unrealized loss on derivative contracts, net | (2,269 | ) | — | (940 | ) | |||||||
Total other comprehensive loss, net of tax | (2,269 | ) | — | (940 | ) | |||||||
Comprehensive (loss) income | $ | (157,090 | ) | $ | (10,807 | ) | $ | 597,473 | ||||
Basic and diluted income per share: | ||||||||||||
Net loss | $ | (6.88 | ) | $ | (0.48 | ) | $ | — | ||||
Weighted average Common shares - basic and diluted | 22,500,000 | 22,500,000 | — | |||||||||
Total issued and outstanding Common shares at period end | 22,500,000 | 22,500,000 | — | |||||||||
Adjusted EBITDA
We evaluate the performance of our operations based on financial measures such as revenue and "Adjusted EBITDA." Adjusted EBITDA is a non-GAAP financial measure and 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. We believe that Adjusted EBITDA is an important indicator of the operational strength and performance of our business. 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 our covenants are calculated under the agreements governing our debt obligations. Adjusted EBITDA does not represent cash flow from operations as defined by generally accepted accounting principles in
The following table provides a reconciliation of Net (loss) income to total Adjusted EBITDA for the periods indicated (amounts in thousands):
Three Months Ended | Non-GAAP Combined Three Months Ended | Period from | Period from | |||||||||||||||
2020 | 2019 | 2019 | 2019 | |||||||||||||||
Net (loss) income | $ | (19,164 | ) | $ | 673,578 | $ | (10,807 | ) | $ | 684,385 | ||||||||
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets | 57,240 | 49,810 | 17,302 | 32,508 | ||||||||||||||
Depreciation | 3,459 | 1,998 | 925 | 1,073 | ||||||||||||||
Radio conversion costs | 5,612 | 1,756 | 825 | 931 | ||||||||||||||
Stock-based compensation | — | 266 | — | 266 | ||||||||||||||
Long-term incentive compensation | 2 | 107 | 67 | 40 | ||||||||||||||
Severance expense (a) | 47 | — | — | — | ||||||||||||||
Integration / implementation of company initiatives | 566 | 2,583 | 1,154 | 1,429 | ||||||||||||||
Gain on restructuring and reorganization, net | — | (702,824 | ) | — | (702,824 | ) | ||||||||||||
Interest expense | 20,033 | 34,586 | 7,474 | 27,112 | ||||||||||||||
Income tax expense | 717 | 642 | 204 | 438 | ||||||||||||||
Adjusted EBITDA | $ | 68,512 | $ | 62,502 | $ | 17,144 | $ | 45,358 | ||||||||||
Expensed Subscriber acquisition costs, net | ||||||||||||||||||
Gross subscriber acquisition costs (b) | $ | 3,102 | $ | 8,041 | $ | 2,499 | $ | 5,542 | ||||||||||
Revenue associated with subscriber acquisition costs | (1,527 | ) | (1,925 | ) | (534 | ) | (1,391 | ) | ||||||||||
Expensed Subscriber acquisition costs, net | $ | 1,575 | $ | 6,116 | $ | 1,965 | $ | 4,151 |
_____________________
(a) | Severance expense related to transitioning executive leadership in 2020. | |
(b) | Gross subscriber acquisition costs for the three months ended | |
The following table provides a reconciliation of Net (loss) income to total Adjusted EBITDA for the periods indicated (amounts in thousands):
Nine Months Ended | Non-GAAP Combined Nine Months Ended | Period from | Period from | |||||||||||||||
2020 | 2019 | 2019 | 2019 | |||||||||||||||
Net (loss) income | $ | (154,821 | ) | $ | 587,606 | $ | (10,807 | ) | $ | 598,413 | ||||||||
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets | 164,889 | 148,093 | 17,302 | 130,791 | ||||||||||||||
Depreciation | 10,019 | 8,273 | 925 | 7,348 | ||||||||||||||
Radio conversion costs | 14,103 | 1,756 | 825 | 931 | ||||||||||||||
Stock-based compensation | — | 42 | — | 42 | ||||||||||||||
Long-term incentive compensation | 403 | 657 | 67 | 590 | ||||||||||||||
LiveWatch acquisition contingent bonus charges | — | 63 | — | 63 | ||||||||||||||
Legal settlement reserve (related insurance recovery) | (700 | ) | (4,800 | ) | — | (4,800 | ) | |||||||||||
Severance expense (a) | 4,289 | — | — | — | ||||||||||||||
Integration / implementation of company initiatives | 8,710 | 5,997 | 1,154 | 4,843 | ||||||||||||||
81,943 | — | — | — | |||||||||||||||
Gain on restructuring and reorganization, net | — | (669,722 | ) | — | (669,722 | ) | ||||||||||||
Interest expense | 60,582 | 112,555 | 7,474 | 105,081 | ||||||||||||||
Realized and unrealized loss, net on derivative financial instruments | — | 6,804 | — | 6,804 | ||||||||||||||
Refinancing expense | — | 5,214 | — | 5,214 | ||||||||||||||
Income tax expense | 1,937 | 1,979 | 204 | 1,775 | ||||||||||||||
Adjusted EBITDA | $ | 191,354 | $ | 204,517 | $ | 17,144 | $ | 187,373 | ||||||||||
Expensed Subscriber acquisition costs, net | ||||||||||||||||||
Gross subscriber acquisition costs (b) | $ | 14,693 | $ | 22,818 | $ | 2,499 | $ | 20,319 | ||||||||||
Revenue associated with subscriber acquisition costs | (4,831 | ) | (6,021 | ) | (534 | ) | (5,487 | ) | ||||||||||
Expensed Subscriber acquisition costs, net | $ | 9,862 | $ | 16,797 | $ | 1,965 | $ | 14,832 |
_____________________
(a) | Severance expense related to transitioning executive leadership in 2020. | |
(b) | Gross subscriber acquisition costs for the nine months ended | |
Source: Brinks Home Security
2020 GlobeNewswire, Inc., source