CAPITAL GROUP INC. Investor Presentation. December 2014

Transcription

1 Investr Presentatin December 2014

2 Frward Lking Statements This presentatin cntains r may cntain certain frward-lking statements within the meaning f the Private Securities Litigatin Refrm Act f 1995, including statements abut ur cnslidated perfrmance after giving effect t the integratin f Security Netwrks, LLC, business strategies, ur ability t perfrm well in a challenging cmpetitive envirnment, market ptential, future financial perfrmance, the grwth and develpment f ur cre business, grwth expectatins regarding ur HmeTuch ffering, the predictability f ur pl attritin curve, ur acquisitin pprtunities and prspects and ther matters that are nt histrical facts. These frward-lking statements invlve many risks and uncertainties that culd cause actual results t differ materially frm thse expressed r implied by such statements, including, withut limitatin, the perating perfrmance f Mnitrnics netwrk, the cntinued prductivity f Mnitrnics dealer netwrk, Mnitrnics ability t realize estimated synergies frm the acquisitin f Security Netwrks, LLC, cmpetitive issues, subscriber preferences, cntinued access t capital n terms acceptable t Ascent and Mnitrnics, ur ability t capitalize n acquisitin pprtunities, general market cnditins and regulatry issues. These frward lking statements speak nly as f the date heref, and Ascent expressly disclaims any bligatin r undertaking t disseminate any updates r revisins t any frward-lking statement cntained herein t reflect any change in Ascent's r Mnitrnics' expectatins with regard theret r any change in events, cnditins r circumstances n which any such statement is based. This presentatin will discuss certain nn-gaap financial measures, including Adjusted EBITDA. As cmpanies ften define nn-gaap financial measures differently, Adjusted EBITDA as calculated by us may nt be cmparable t similarly titled measures reprted by ther cmpanies. Please see Mnitrnics Quarterly Reprt n Frm 10-Q fr the three mnths ended September 30, 2014 filed with the Securities and Exchange Cmmissin ( SEC ) n Nvember 12, Fr applicable definitins and recnciliatins, see the Appendix at the end f this presentatin. December

3 NASDAQ traded hlding cmpany Intrductin Significant evlutin since spin frm Discvery Hlding C. in Sept Exited challenging media services sectr Entered recurring revenue, leverageable cash flw business with strng grwth prspects Transfrmed peratins + imprved capitalizatin = strng equity returns Current assets include: Mnitrnics perating business 2 nd largest U.S. residential security alarm mnitring prvider 1,000,000+ subscribers Largest independent dealer netwrk in U.S. High margin, predictable, stable, tax efficient, leverageable cash flws $155 millin cash, cash equivalents and marketable securities (1) Cmmercial real estate assets (nn-strategic prperties with bk value f $32 millin) (1) Ascent Capital cash and marketable securities as f September 30, 2014 adjusted fr $26.7 millin that was used t make the semi-annual Senir Ntes interest payment n Octber 1, 2014 December

4 Favrable Industry Dynamics Highly Leverageable Operating Platfrm Investment Highlights Attractive Capitalizatin 59% Thusands f Others 25% ADT 4% 4% Vivint 3% Prtectin 1 2% Slmins 2% Guardian <1% MSOs Cmbined 10k Subs 5k Subs 1k Subs <1k Subs Surce: Bain 2013 analysis Mnitrnics subscribers as f 9/30/2014 December

5 Attractive Industry Highly fragmented industry Lw penetratin Stable grwth Attractive cnnected hme trends Nn-cyclical December

6 Industry leader Leverageable and naturally de-levering mdel Strng Operating Cre Predictable attritin Strng, experienced mgmt team Asset-light dealer mdel Service ffering expansin pprtunity Strng grwth trends Full cnnected hme capabilities Technlgy agnstic December

7 Hw the Dealer Business Mdel Wrks Mnitrnics recruits and screens dealers natinwide t becme exclusive Authrized Dealers Dealer creates the accunt, installs the equipment and handles mst field wrk HOME OWNER $ Installatin Fee DEALER Mnitrnics acquires the accunt and handles all centralized functins. Dealers guarantee accunts fr ne year Sells & Installs Alarm Systems Mnitrnics wrks with Dealers t ptimize their business mdels Mnitrnics fcuses n lw fixed cst, high-margin mnitring peratins December

8 Cmparisn t Other Business Mdels Dealer Mdel Third-party dealers sell, install and service accunts Capital deplyed directly in RMRgenerating assets Mre flexible business mdel with easy exit and entry t different markets Dealers with lcal market presence als capitalize n rising natinal awareness Minimal fixed verhead as mdel requires n lcal branch ffices Traditinal Security Internal sales reps/field techs sell, install and service accunts Dependent n sales and marketing with assciated fixed infrastructure Difficult t fully absrb cst f branch ffices Higher fixed csts Density is critical Minimal sales and marketing expense December

9 Operatins Snapsht Secnd largest U.S. residential security alarm mnitring service prvider Mnitrs signals arising frm burglaries, fire, medical emergencies and ther events Mre than 1 millin subscribers in all 50 states, Puert Ric and Canada High credit quality subscriber prtfli averaging a 720 credit scre Largest exclusive natinwide netwrk f independent dealers in U.S. High margin, predictable, stable, tax efficient cash flw Lyal custmer base with predictable attritin levels and an 8-year average life Scalable platfrm that has facilitated the executin f several large, accretive acquisitins December

10 Q Mnitrnics Earnings Update Recent Develpments Q3 Perfrmance highlights as fllws: Net revenue increased 17.4% Y--Y driven by increases in subscriber accunts, average RMR per subscriber and the acquisitin f Security Netwrks, which was nly partially included in Q Q3 Perfrmance Update Q vs. Q Results 3 Mnths Ending 9 Mnths Ending 9/30/2014 9/30/2013 % Change 9/30/2014 9/30/2013 % Change Revenue $136.0 $ % $403.6 $ % Adj. EBITDA (1) % % Adjusted EBITDA (1) increased 17.4% Y--Y reflecting strng revenue grwth RMR % % After grwing 26% in the third quarter f 2013 with the acquisitin f Security Netwrks, RMR grew 3.1% Y--Y t $43.7 millin LTM Attritin Rate 12.6% 12.6% 12.6% 12.6% LTM attritin remained flat at 12.6%. Attritin will mve higher thrugh mid-2015 befre mderating in the 2 nd half f 2015 as a large number f accunts acquired thrugh a 2012 bulk buy cme t the end f their initial term Strng Y--Y grwth acrss all perating and financial metrics Surce: Cmpany filing (1) Fr applicable definitins and recnciliatins, see Mnitrnics Quarterly Reprt n Frm 10-Q filed with the Securities and Exchange Cmmissin n Nvember 12, Mnitrnics reprted a net lss f $8.3 and $4.5 millin fr the three mnths ended September 30, 2014 and September 30, 2013, respectively. In additin, Mnitrnics reprted a net lss f $24.7 and $2.5 millin fr the nine mnths ended September 30, 2014 and September 30, 2013, respectively. December

11 % f Subscriber Accunts Remaining Predictable Attritin Curve (1) Attritin must be evaluated relative t histrical pl curve Results have generally tracked clsely t ur histrical pl curves, creating a very predictable attritin experience While the biggest cmpnents f attritin have cnsistently been attributable t custmer mves, ther service prviders and nn-payment, the primary driver f changes in attritin is the number f accunts cming t term Perids f higher attritin are indicative f a higher level f cancellatins as a larger number f accunts reach the end f their initial term 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Recent vintages have generally utperfrmed the verall pl curve Initial indicatins suggest that accunts with HmeTuch experience lwer attritin RMR attritin is lwer than the subscriber attritin we qute due t increasing ARPU Accelerated decline in accunt base during year 4 is a result f end f initial term fr 36-mnth cntracts Year f Cntract (1) Weighted average attritin f vintages riginated since Fr bulk purchases f aged accunts, the purchase date differs frm the actual cntract riginatin date. Year 1 attritin is net f dealer accunt replacements under the 12-mnth guarantee. When yu als factr in dealer reimbursements (ecnmic replacements), year 1 attritin typically <1% December

12 Cmprehensive Prduct and Service Offering BURGLARY & INTRUSION 24/7 prtectin fr subscribers families and pssessins FIRE, SMOKE & ENVIRONMENTAL Wrks even when the alarm is nt armed. Fire, carbn mnxide and water leak detectin TWO-WAY VOICE A hands-free speaker system which enables a subscriber t cmmunicate directly with the mnitring center HmeTuch (HOME AUTOMATION) Custmers can remtely cntrl and receive ntices frm their security systems n their smart phnes/tablets and can cntrl lights, thermstats, dr lcks and cameras remtely PERS (PERSONAL EMERGENCY RESPONSE SYSTEM) Medical panic buttns Apprximately 66% f new custmers signed up fr HmeTuch hme autmatin services in the 3 rd quarter f 2014 Expect cntinued grwth in demand fr HmeTuch services Apprximately 38% f ur custmers currently have interactive service r hme autmatin Apprximately 11% f ur custmers currently have medical pendants December

13 Strategic Directin and Pririties Ascent creates lng-term sharehlder value by investing financial and peratinal resurces t ptimize: Mnitrnics Grwth Ascent Capital Allcatin Overall Capital Structure Expanding dealer netwrk Dealer netwrk efficiency Enhanced custmer retentin Innvative prduct fferings Attractive bulk buys Drive new mnitred service fferings such as DIY and PERS thrugh existing and/r newly acquired channels Utilize Ascent balance sheet fr initiatives beynd Mnitrnics accunt purchases M&A supprting Mnitrnics grwth engine, sales channels and new service initiatives such as DIY and PERS Other strategic investments that leverage the Mnitrnics perating platfrm Opprtunistic share repurchases Leverage levels that maximize risk-adjusted returns t sharehlders Ensure Mnitrnics ability t internally fund nging peratins and grwth Optimized capitalizatin structure December

14 Summary/Investment Highlights Stable and reliable perating business with attractive cre grwth pprtunities 2 nd largest U.S. residential prvider with largest netwrk f dealer affiliates Asset-light mdel drives highly prductive, tax efficient, cash flw characteristics Large, fragmented industry with significant cnslidatin pprtunity Strng, stable balance sheet with sufficient liquidity and access t capital markets t fund strategic grwth pprtunities Capitalizatin structure and capital allcatin pririties t drive highly attractive equity returns December

15 Appendix December

16 Nn-GAAP Measures and Recnciliatins (Mnitrnics) ($ in Thusands) Fr the Quarter Ended September 30, Fr the Nine Mnths Ended September 30, Actual Actual Actual Actual Net Incme (Lss) ($8,332) ($4,487) ($24,708) ($2,546) Amrtizatin f subscriber accunts, dealer netwrk and ther intangible assets 64,341 55, , ,059 Depreciatin 2,246 1,910 6,827 5,119 Restructuring charges Stck-based cmpensatin expense ,407 1,125 Security Netwrks acquisitin related csts - 1,032-2,470 Security Netwrks integratin related csts , Interest expense 30,422 25,732 89,404 66,325 Incme tax expense 1,899 (3,582) 5,211 (2,017) Adjusted EBITDA $91,138 $77,649 $270,674 $217,472 Mnitrnics generally defines Adjusted EBITDA as net incme (lss) befre interest, taxes, depreciatin and amrtizatin (including the amrtizatin f subscriber accunts, dealer netwrk and ther intangible assets) and ther nn-cash r nn-recurring charges such as acquisitin related prfessinal fees, restructuring charges and stck-based cmpensatin. Adjusted EBITDA des nt represent cash flw frm peratins as defined by generally accepted accunting principles, shuld nt be cnstrued as an alternative t net incme r lss and is indicative neither f Mnitrnics results f peratins nr f cash flws available t fund all f its cash needs. It is, hwever, a measurement Mnitrnics believes is useful t investrs t evaluate its perating perfrmance. Adjusted EBITDA is als a measure that Mnitrnics believes is custmarily used by financial analysts t evaluate the financial perfrmance f cmpanies in the security alarm mnitring industry and is ne f the financial measures, subject t adjustments, by which Mnitrnics cvenants are calculated under the agreements gverning its debt bligatins. Surce: Cmpany filings December