CAPITAL GROUP INC. Imperial Capital Global Opportunities Conference

Transcription

1 Imperial Capital Glbal Opprtunities Cnference September 18, 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, 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, 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 and Steady State Free Cash Flw. As cmpanies ften define nn-gaap financial measures differently, Adjusted EBITDA and Steady State Free Cash Flw as calculated by us may nt be cmparable t similarly titled measures reprted by ther cmpanies. Please see Ascent s Quarterly Reprt n Frm 10-Q fr the three mnths ended June 30, 2014 filed with the Securities and Exchange Cmmissin ( SEC ) n August 8, Fr applicable definitins and recnciliatins, see the Appendix at the end f this presentatin tgether with Ascent's Current Reprt n Frm 8-K filed with the SEC n Octber 14, 2011 (as amended n March 6, 2012). September

3 Intrductin NASDAQ traded hlding cmpany 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/Security Netwrks perating businesses 2 nd largest U.S. residential security alarm mnitring prvider 1,000,000+ custmers Largest independent dealer netwrk in U.S. High margin, predictable, stable, leverageable cash flws Acquired Security Netwrks with ver 200K accunts and apprximately $8.8M f RMR (1) $155 millin cash, cash equivalents and marketable securities (2) Real estate assets (1) As f August 16, Includes apprximately $0.1 millin f whlesale RMR (2) Ascent Capital cash and marketable securities as f June 30, 2014 September

4 Cmpany Overview Media services assets and peratins rlled up by Liberty Media under the Ascent name Ascent spun frm Discvery Hlding Cmpany t create Ascent Media Crp Creative Services and Media Services businesses sld t Deluxe Entertainment Services Grup Refinanced Mnitrnics securitized debt thrugh the issuance f $410 millin f High Yield Ntes and $550 millin f term lans Mnitrnics acquired Security Netwrks frm Oak Hill Capital Partners Jul 2005 Sep 2008 Dec 2010 Feb 2011 Mar 2012 Oct 2012 Aug 2013 Ascent spun frm Liberty in cnjunctin with the creatin f Discvery Hlding Cmpany Acquired Mnitrnics Internatinal frm ABRY Partners Cntent Distributin business sld t Encmpass Digital Media Mnitrnics acquired 93,000 custmers frm Pinnacle Security Ascent Media Grup December 2008 Revenue $601M Adj. OIBDA $70M Trading as f 12/31/2008 Mkt Cap (1) $307M TEV (1) $(24)M 2 years Mnitrnics December 2010 LQA Revenue $284M Adj. EBITDA $196M Subscribers 670K RMR $24.3M Trading as f 12/31/2010 Mkt Cap (1) $554M TEV (1) $1,389M 3½ years Mnitrnics June 2014 LQA PF Revenue $539M +90% Adj. EBITDA $361M +84% Subscribers 1,056K +58% RMR $43.6M +79% Trading as f 6/30/2014 Mkt Cap (1) $910M +64% TEV (1)(2) $2,390M +72% (1) Market capitalizatins and ttal enterprise values based n stck price, basic shares utstanding and net debt as f 12/31/2008, 12/31/2010 and 6/30/2014, respectively (2) Calculatin includes as debt $28 millin f unamrtized discunt related t Ascent s cnvertible bnds as reflected in Ascent s lng term debt per U.S. GAAP September

5 ASCENT Strng Leveraged Equity Returns Investment Highlights 25% stck price CAGR (9/30/10 9/11/14) Strng Organic and Acquired Grwth Operating Metrics Grwth (12/31/10 6/30/14) Revenue 90% Adj. EBITDA 84% Subscribers 58% RMR 79% Dynamic Operating Platfrm Favrable Industry Dynamics Attractive Capitalizatin Experienced management Track recrd f success Efficient perating mdel with attractive cash flw characteristics Highly leverageable perating platfrm Underpenetrated Fragmented Rising awareness Increasing market grwth ptential Apprpriate use f leverage Significant cash reserves Lwer cst f capital than mst incumbents September

6 Operatins Snapsht Secnd largest U.S. residential security alarm mnitring prvider Mnitrs signals arising frm burglaries, fire, medical emergencies and ther events Mre than 1 millin custmers in all 50 states, Puert Ric and Canada High credit quality subscriber prtfli averaging 720 credit scre Largest exclusive natinwide netwrk f independent dealers in U.S. High margin, predictable, stable cash flw Lyal custmer base with lw attritin levels and an 8-year average life Acquired apprximately 93K high quality accunts frm Pinnacle Security in Octber 2012 Acquired Security Netwrks, with ver 200K accunts and apprx. $8.8M f RMR (1), in August 2013 (1) As f August 16, Includes apprximately $0.1 millin f whlesale RMR September

7 Hw the Business Mdel Wrks Mnitrnics recruits and screens dealers natinwide t becme Authrized Dealers. Typical terms: 3-year cntract establishes purchase terms Dealer guarantees accunt fr ne year 5-10% hldback n purchase price 15-year nn-slicit n these accunts Dealer creates the accunt and handles mst field wrk Sales, installatin and service 3-5 year mnitring cntract Strng limit f liability HOME OWNER $ Installatin Fee DEALER Mnitrnics acquires the accunt and handles all centralized functins Highly develped due diligence prcess Mnitring, custmer service and billing Sells & Installs Alarm Systems Mnitrnics wrks with Dealers t ptimize business mdel Sales and perating training Incentives fr quality Mnitrnics fcuses n lw fixed cst, high-margin mnitring peratins September

8 Attractive 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 63% f new custmers signed up fr HmeTuch hme autmatin services in the 2 nd quarter f 2014 Expect cntinued grwth in demand fr HmeTuch services Apprximately 35% f ur custmers currently have interactive service r hme autmatin Apprximately 11% f ur custmers currently have medical pendants September

9 Mnitrnics Steady State FCF Generatin ($ in Millins) Fr The Quarter Ended June 30, 2014 Actual LQA Adjusted EBITDA (1) $361.0 Steady State RMR Purchases Ttal Prtfli Average RMR fr Perid (2) $43.3 Lifecycle RMR Attritin Rate (3) x 11.5% Dealer Creatin Cst Multiple x 34.5 Steady State RMR Purchases $171.8 Annualized Maintenance Capital Expenditures (4) $1.5 Steady State Free Cash Flw (5) $187.7 In a steady state scenari, Mnitrnics wuld generate higher margins due t its ability t reduce variable csts and experience a reduced dealer creatin cst multiple given lwer vlumes, neither f which have been included in the abve analysis (1) Adjusted EBITDA fr the quarter ended June 30, 2014 annualized; see Appendix fr a definitin and discussin f Adjusted EBITDA (2) Weighted average RMR fr the quarter in millins (3) Estimated annual RMR attritin ver the life f ur accunts. The Cmpany s RMR attritin rate has generally been lwer than unit attritin due t net rate changes being psitive (4) Annualized maintenance capital expenditures represents estimated capital expenditures required t maintain steady-state custmer base (5) See Appendix fr a definitin and discussin f Adjusted EBITDA and Steady State Free Cash Flw September

10 Operatins Highlights Large & Stable Industry ~$13 billin U.S. and Canada market (1) Recessin resistant Lw 19% residential penetratin (2) Excellent Management Team Highly experienced Strng depth f management Track recrd f success Optimally Psitined Largest dealer-nly mdel Gegraphically diverse, primarily residential custmer base Strng Financial Results Grwth thrughut ecnmic cycles High EBITDA and SSFCF yields Stable and predictable Ability t manage grwth and cash flw Superir Business Mdel Lw-risk, flexible peratins with high quality accunts Efficient, scalable cst structure Relatively lw, predictable attritin (1) Surce: IMS/ADT, estimated fr 2012 residential and small business sales, installatin, mnitring and service (2) Barnes Assciates September

11 Strategic Directin Overall Objective Superir sharehlder value creatin Operating Strategy Successfully integrate acquisitins Leverage perating platfrm drive scale ecnmies Create abve-market subscriber and financial grwth Capitalizatin Strategy Cntinue t use lwer cst debt t minimize verall cst f capital Maintain peratinal flexibility Evaluate multiple financing ptins and maintain ptimal leverage levels Acquisitin Strategy Leverage Mnitrnics platfrm High quality bulk accunt purchases Strategic acquisitin pprtunities security mnitring M&A/partnership pprtunities health/medical mnitring, technlgy, etc. Undervalued businesses with similar mdels September

12 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 t drive highly attractive equity returns September

13 Appendix September

14 Nn-GAAP Measures and Recnciliatins ($ in Thusands) Fr the Quarter Ended June 30, Net Incme (Lss) ($8,525) $592 Amrtizatin f subscriber accunts, dealer netwrk and ther intangible assets 63,261 45,998 Depreciatin 2,198 1,721 Restructuring charges Stck-based cmpensatin expense Security Netwrks acquisitin related csts - 1,438 Security Netwrks integratin related csts 1,123 - Interest expense 29,638 19,466 Incme tax expense 1, Adjusted EBITDA $90,261 $70,408 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. Mnitrnics als believes the measurement, Steady State Free Cash Flw, is useful t investrs t understand its financial perfrmance befre the impact f expenditures fr new subscribers t grw its business. Mnitrnics defines Steady State Free Cash Flw as Adjusted EBITDA less (i) capital expenditures necessary t maintain its existing infrastructure and (ii) the cst t replace attrited accunts. Actual Actual Surce: Cmpany filings September