Loading, Please Wait...

CST: 26/06/2019 17:15:34   

Ascent Capital Group Announces Financial Results for the Three and Twelve Months Ended December 31, 2018

85 Days ago

ENGLEWOOD, Colo., April 01, 2019 (GLOBE NEWSWIRE) -- Ascent Capital Group, Inc. (“Ascent” or the “Company”) (Nasdaq: ASCMA) has reported results for the three and twelve months ended December 31, 2018. Ascent is a holding company that owns Brinks Home Security™, one of the nation’s largest home security alarm monitoring companies.

Headquartered in the Dallas-Fort Worth area, Brinks Home Security provides security alarm monitoring services to approximately 922,000 residential and commercial customers as of December 31, 2018. Brinks Home Security’s long-term monitoring contracts provide high margin recurring revenue that results in predictable and stable cash flow.

Highlights1:

  • Ascent’s net revenue for the three and twelve months ended December 31, 2018 totaled $134.4 million and $540.4 million, respectively
  • Ascent’s net loss for the three and twelve months ended December 31, 2018 totaled $382.7 million and $698.0 million, respectively. Brinks Home Security’s net loss for the three and twelve months ended December 31, 2018 totaled $376.9 million and $678.8 million, respectively. Net loss for the three and twelve months ended December 31, 2018 includes goodwill impairment charges of $349.1 million and $563.5 million, respectively. 
  • Ascent’s Adjusted EBITDA for the three and twelve months ended December 31, 2018 totaled $75.6 million and $280.8 million, respectively. Brinks Home Security’s Adjusted EBITDA for the three and twelve months ended December 31, 2018 totaled $76.0 million and $289.4 million, respectively

Results for the Three and Twelve Months Ended December 31, 2018

For the three months ended December 31, 2018, Ascent reported net revenue of $134.4 million, an increase of 0.7%. The increase in revenue for the three months ended December 31, 2018 included a $1.1 million favorable impact of the adoption of Topic 606, discussed below. For the twelve months ended December 31, 2018, net revenue totaled $540.4 million, a decrease of 2.4%. The reduction in revenue for the twelve months ended December 31, 2018 is due to the lower average number of subscribers in 2018. This decrease was partially offset by an increase in average recurring monthly revenue (“RMR”) per subscriber to $45.27 due to certain price increases enacted during the past twelve months. In addition, the Company recognized an $8.1 million increase in revenue for the twelve months ended December 31, 2018 from the favorable impact of the new revenue recognition guidance, Topic 606, adopted effective January 1, 2018. All revenues of Ascent are generated by its wholly-owned subsidiary, Brinks Home Security.

Ascent’s total cost of services, which are all incurred by Brinks Home Security, for the three months ended December 31, 2018 decreased 4.3% to $28.1 million. The decrease in cost of services for the three months ended December 31, 2018 is attributable to lower production volume in the direct to consumer sales channel which reduced expensed subscriber acquisition costs to $2.2 million for the three months ended December 31, 2018 as compared to $3.4 million for the three months ended December 31, 2017. Expensed subscriber acquisition costs include equipment and labor costs associated with the creation of new subscribers. Further contributing to the decrease in cost of services for the three months ended December 31, 2018 was fewer field service retention jobs, which reduced certain field service costs, and favorable impacts from a lower headcount. These decreases are partially offset by expensing $1.5 million of direct and incremental field service costs on new alarm monitoring agreements obtained in connection with a subscriber move (“Moves Costs”) for the three months ended December 31, 2018. Moves Costs, net, for the three months ended December 31, 2017 of $2.6 million were capitalized to the balance sheet, as discussed further below.

For the twelve months ended December 31, 2018, Ascent’s total cost of services increased 8.2% to $128.9 million. The increase for the twelve months ended December 31, 2018 is primarily due to expensing Moves Costs of $8.6 million for the twelve months ended December 31, 2018. Upon adoption of the new revenue recognition guidance, Topic 606, all Moves Costs are expensed, whereas prior to adoption, certain Moves Costs were capitalized on the balance sheet. Moves Costs capitalized as Subscriber accounts, net, for the twelve months ended December 31, 2017 were $14.4 million. Subscriber acquisition costs in cost of services increased to $14.7 million for the twelve months ended December 31, 2018 as compared to $12.2 million for the twelve months ended December 31, 2017, which is attributable to increased production volume in the direct to consumer sales channel year-over-year. These increases were offset by reduced salary and wage expense due to lower headcount for the full year ended December 31, 2018.

Ascent’s selling, general & administrative ("SG&A") costs for the three months ended December 31, 2018, decreased 33.6% to $20.6 million which included an aggregate of $12.5 million in insurance receivable settlements reached with multiple carriers in connection with the 2017 legal settlement for class action litigation of alleged violation of telemarketing laws. Additionally, subscriber acquisition costs in SG&A decreased to $6.8 million for the three months ended December 31, 2018 as compared to $7.2 million for the three months ended December 31, 2017 on lower production volume in the direct to consumer sales channel. Offsetting these decreases were approximately $1.1 million in expenses associated with the Brinks Home Security rebranding and severance expense of $1.0 million related to a reduction in headcount event at Brinks Home Security. 

Ascent’s SG&A costs for the twelve months ended December 31, 2018, decreased 22.2% to $130.6 million. The decrease in SG&A for the twelve month period is primarily attributable to a $28.0 million legal settlement recognized in the second quarter of 2017 for class action litigation of alleged violation of telemarketing laws and the 2018 recognition of an aggregate of $12.5 million in related insurance receivable settlements as discussed above. Additionally, there were decreases in stock based compensation expense, consulting fees related to Brinks Home Security cost reduction initiatives and general and administrative headcount. These decreases were offset by year over year increases in subscriber acquisition costs associated with the creation of new subscribers at Brinks Home Security. Subscriber acquisition costs in SG&A increased to $33.2 million for the twelve months ended December 31, 2018, as compared to $28.2 million for the twelve months ended December 31, 2017. Other increases in SG&A year-over-year included increased professional legal fees at Ascent, Brinks Home Security rebranding expense and severance expense related to transitioning Ascent executive leadership and a reduction in headcount at Brinks Home Security.

Brinks Home Security SG&A costs for the three and twelve months ended December 31, 2018 were $20.0 million and $118.9 million, respectively, as compared to $29.1 million and $155.9 million, respectively, for the three and twelve months ended December 31, 2017.

Ascent reported a net loss from continuing operations for the three and twelve months ended December 31, 2018 of $382.7 million and $698.0 million, respectively, compared to net loss from continuing operations of $16.0 million and $107.7 million in the prior year periods. The increase in net loss from continuing operations is primarily related to a goodwill impairment of $214.4 million recognized in the second quarter of 2018 and a further goodwill impairment of $349.1 million recognized in the fourth quarter of 2018, combined with the decreases in operating income discussed above.

Brinks Home Security reported a net loss for the three and twelve months ended December 31, 2018 of $376.9 million and $678.8 million, respectively, compared to a net loss of $14.6 million and $111.3 million in the prior year periods.

Ascent’s Adjusted EBITDA increased 3.8% to $75.6 million for the three months ended December 31, 2018. Ascent’s Adjusted EBITDA for the twelve months ended December 31, 2018 decreased 8.3% to $280.8 million. Brinks Home Security’s Adjusted EBITDA increased 3.0% to $76.0 million for the three months ended December 31, 2018. This increase is attributable to reduced subscriber acquisition costs, net of creation revenue, of $7.8 million for the three months ended December 31, 2018, as compared to $9.4 million for the three months ended December 31, 2017 and the increase in net revenue for the three months ended December 31, 2018 as discussed above. Brinks Home Security’s Adjusted EBITDA decreased 7.7% to $289.4 million in the twelve months ended December 31, 2018. This decrease is due to lower revenues, the expensing of Moves Costs, and higher subscriber acquisition costs, net of related revenue. Total subscriber acquisition costs, net of related revenue, for the year ended December 31, 2018 increased to $43.2 million, as compared to $35.5 million for the year ended December 31, 2017. Brinks Home Security’s Adjusted EBITDA as a percentage of net revenue for the three and twelve months ended December 31, 2018 was 56.5% and 53.6%, respectively, as compared to 55.2% and 56.7% in the prior year periods.

For a reconciliation of net loss from continuing operations to Adjusted EBITDA, please see the Appendix of this release.

  Year Ended December 31,
  2018   2017
Beginning balance of accounts 975,996     1,046,791  
Accounts acquired 112,920     95,786  
Accounts canceled (b) (162,579 )   (159,630 )
Canceled accounts guaranteed by dealer and other adjustments (a) (b) (4,587 )   (6,951 )
Ending balance of accounts 921,750     975,996  
Monthly weighted average accounts 950,705     1,016,798  
Attrition rate – Unit (b) 17.1 %   15.7 %
Attrition rate - RMR (b) (c) 14.9 %   14.1 %

(a) Includes canceled accounts that are contractually guaranteed to be refunded from holdback.
(b) Accounts canceled for the twelve months ending December 31, 2017 were recast to include an estimated 4,532 accounts included in Brinks Home Security’s Radio Conversion Program that canceled in excess of their expected attrition.
(c) The RMR of canceled accounts follows the same definition as subscriber unit attrition as noted above. RMR attrition is defined as the RMR of canceled 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.

Unit attrition increased from 15.7% for the twelve months ended December 31, 2017 to 17.1% for the twelve months ended December 31, 2018. The RMR attrition rate for the twelve months ended December 31, 2018 and 2017 was 14.9% and 14.1%, respectively. Contributing to the increase in unit and RMR attrition was fewer customers under contract or in the dealer guarantee period in the twelve months ended December 31, 2018, as compared to the prior period, and increased competition from new market entrants. The increase in the RMR attrition rate for the twelve months ended December 31, 2018 is partially offset by Brinks Home Security's more aggressive price increase strategy.

During the three and twelve months ended December 31, 2018, Brinks Home Security acquired 20,925 and 112,920 subscriber accounts, respectively, as compared to 18,363 and 95,786 subscriber accounts in the three and twelve months ended December 31, 2017. Accounts acquired for the years ended December 31, 2018 and 2017 reflect bulk buys of approximately 17,800 and 3,500 accounts, respectively. Bulk buys for the three months ended December 31, 2018 and 2017 were negligible.

Ascent Liquidity and Capital Resources

At December 31, 2018, on a consolidated basis, Ascent had $105.9 million of cash and cash equivalents. Subsequent to December 31, 2018, Ascent used an aggregate of approximately $70.7 million of its cash to make payments pursuant to the terms of the Settlement Agreement (as defined below) and an additional approximately $19.8 million of its cash to pay holders of its outstanding 4.00% Convertible Senior Notes due 2020 (the “Convertible Notes”) whose Convertible Notes were accepted for payment in the Amended Tender Offer (as defined below). Ascent may use a portion of its remaining cash and cash equivalents to decrease debt obligations, fund stock repurchases, or fund potential strategic acquisitions or investment opportunities.

At December 31, 2018, the existing long-term debt includes the principal balance of $1.9 billion under the Brinks Home Security 9.125% Senior Notes due 2020 (the “Senior Notes”), term loan and revolving credit facility under Brinks Home Security’s Credit Agreement, dated March 23, 2012 (as amended and restated, the “Credit Facility”) and Ascent’s Convertible Notes. The Convertible Notes had an outstanding principal balance of $96.8 million as of December 31, 2018 and mature July 15, 2020. Following the consummation of the transactions contemplated by the Settlement Agreement (as defined below) and the consummation of the Amended Tender Offer (as defined below), an aggregate principal amount of $260,000 of Convertible Notes remain outstanding. The Senior Notes have an outstanding principal balance of $585.0 million as of December 31, 2018 and mature on April 1, 2020. The Credit Facility term loan has an outstanding principal balance of $1.1 billion as of December 31, 2018 and requires principal payments of approximately $2.8 million per quarter with the remaining amount becoming due on December 31, 2022. As of December 31, 2018, the Credit Facility revolver has an outstanding balance of $144.2 million and a $600,000 standby letter of credit issued, which becomes due on September 30, 2021.

On February 14, 2019, Ascent repurchased approximately $75.7 million in aggregate principal amount of then outstanding Convertible Notes from certain then holders of Convertible Notes pursuant to the previously announced Settlement and Note Repurchase Agreement and Release (the “Settlement Agreement”), dated February 11, 2019, between Ascent and its directors and executive officers, on the one hand, and certain holders of Convertible Notes, on the other hand. Convertible Notes repurchased pursuant to the Settlement Agreement were cancelled.

On February 19, 2019, Ascent commenced a cash tender offer to purchase any and all of its outstanding Convertible Notes (the “Tender Offer”). On March 22, 2019, Ascent entered into transaction support agreements with holders of approximately $18.6 million in aggregate principal amount of the Convertible Notes then outstanding, pursuant to which Ascent agreed to increase the purchase price for the Convertible Notes in the Tender Offer to $950 per $1,000 principal amount of Convertible Notes, with no accrued and unpaid interest to be payable (as so amended, the “Amended Tender Offer”) and such holders agreed to tender, or cause to be tendered, into the Amended Tender Offer all Convertible Notes held by such holders. The Amended Tender Offer expired at 5:00 pm Eastern time on March 29, 2019 and the settlement date of the Amended Tender Offer was April 1, 2019. A total of $20.8 million in aggregate principal amount of Convertible Notes were accepted for payment pursuant to the Amended Tender Offer. The information in this press release shall not constitute an offer to purchase nor a solicitation of an offer to sell the Convertible Notes or any other securities of Ascent, nor shall there be any offer, solicitation or sale of such securities in any state or other jurisdiction in which such an offer, solicitation or sale would be unlawful.

The maturity date for each of the Credit Facility revolver and the Credit Facility term loan is subject to a springing maturity 181 days prior to the scheduled maturity date of the Senior Notes, or October 3, 2019, if Brinks Home Security is unable to refinance the Senior Notes by that date. As there is substantial doubt about Brinks Home Security’s ability to continue as a going concern, Brinks Home Security has received a going concern qualification in connection with its standalone external audit of its Annual Report on Form 10-K for the year ended December 31, 2018, which constitutes a default under the Credit Facility. Any default under the Credit Facility, if not waived or cured, may mature into an event of default thereunder. At any time after the occurrence of an event of default under the Credit Facility, the lenders may, among other options, declare any amounts outstanding under the Credit Facility immediately due and payable and terminate any commitment to make further loans under the Credit Facility. Such a default under the Credit Facility is also an event of default under the Senior Notes. Further, in connection with management’s negotiations with its creditors, Brinks Home Security did not make its Senior Notes interest payment due on April 1, 2019. The indenture governing the Senior Notes provides for a 30-day cure period on past due interest payments. If an event of default occurs and is continuing under the indenture governing the Senior Notes, the holders of the Senior Notes may declare the aggregate principal amount of the Senior Notes and any accrued interest on the Senior Notes to be immediately due and payable. 

Brinks Home Security has obtained a waiver from the required revolving lenders under the Credit Facility and a forbearance from the required term lenders under the Credit Facility, in each case with respect to, among other things, the default in connection with the going concern qualification contained in Brinks Home Security’s external audit report of their Annual Report on Form 10-K for the year ended December 31, 2018 (the “Going Concern Default”), and, in each case through April 30, 2019, subject to the terms and conditions of the waiver and forbearance. The waiver obtained from the Credit Facility revolving loan lenders allows Brinks Home Security to continue to borrow under the revolving credit facility under the Credit Facility, up to $195,000,000 at an alternate base rate plus 3.00%. The forbearance obtained from the Credit Facility term lenders provides that the term loan lenders will not exercise remedies with respect to an event of default that may occur from the Going Concern Default. The Going Concern Default and any resulting event of default under the Credit Facility would continue, absent a waiver from the required revolving and term loan lenders, as applicable. 

Brinks Home Security has engaged financial and legal advisors to advise it regarding potential alternatives to address the issues described above. There can be no assurance that any restructuring will be possible on acceptable terms, if at all. Brinks Home Security may not be able to come to an agreement that is acceptable to all of its stakeholders. Brinks Home Security’s failure to reach an agreement on the terms of a restructuring with its stakeholders would have a material adverse effect on its and Ascent’s liquidity, financial condition and results of operations, including potentially requiring Brinks Home Security to file a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in order to implement a restructuring plan.

These matters raise substantial doubt regarding Ascent’s ability to continue as a going concern within one year from the date Ascent’s financial statements as of and for the year ended December 31, 2018 are issued. As a result, Ascent’s consolidated financial statements as of and for the year ended December 31, 2018 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

Conference Call

Ascent will not host an earnings call or webcast due to its previously disclosed decision to consider strategic alternatives with respect to Ascent or Brinks Home Security. Ascent has not set a definitive timetable for completing the review, and there can be no assurance that the process will result in a transaction or a restructuring of Brinks Home Security. Ascent does not intend to disclose developments or provide updates on the progress or status of this process or discuss its results of operations with investors unless and until further disclosure is appropriate or required. No assurance can be given of the outcome of the strategic alternatives review process, including whether any transaction will result or the associated timing or terms.

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, account creation and related costs, anticipated account generation, future financial performance and prospects, anticipated sources and uses of capital, obtaining or maintaining any waiver or forbearance with respect to the Credit Facility and Senior Notes, the ability of Ascent and Brinks Home Security to continue as going concerns, potential restructurings and strategic transactions 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 Ascent and/or Brinks Home Security, our ability to capitalize on acquisition opportunities, general market and economic conditions and changes in law and government regulations. These forward-looking statements speak only as of the date of this press release, and Ascent expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Ascent's 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 Ascent, including the most recent Forms 10-K and 10-Q for additional information about Ascent and about the risks and uncertainties related to Ascent's business which may affect the statements made in this press release.

About Ascent Capital Group and Brinks Home Security

Ascent Capital Group, Inc. (Nasdaq: ASCMA) is a holding company whose primary subsidiary operates as Brinks Home SecurityTM, one of the largest home security and alarm monitoring companies in the U.S. Headquartered in the Dallas-Fort Worth area, Brinks Home Security secures approximately 922,000 residential and commercial customers through highly responsive, simple security solutions backed by expertly trained professionals. The company has the nation’s largest network of independent authorized dealers – providing products and support to customers in the U.S., Canada and Puerto Rico – as well as direct-to-consumer sales of DIY and professionally installed products. For more information on Ascent, see http://ir.ascentcapitalgroupinc.com.

Contact:
Erica Bartsch
Sloane & Company
212-446-1875
ebartsch@sloanepr.com

ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
Amounts in thousands, except share amounts

  December 31,
2018
  December 31,
2017
Assets      
Current assets:      
Cash and cash equivalents $ 105,921     10,465  
Restricted cash 189      
Marketable securities, at fair value     105,958  
Trade receivables, net of allowance for doubtful accounts of $3,759 in 2018 and $4,162 in 2017 13,121     12,645  
Prepaid and other current assets 32,202     11,175  
Total current assets 151,433     140,243  
Property and equipment, net of accumulated depreciation of $40,827 in 2018 and $37,915 in 2017 36,549     32,823  
Subscriber accounts and deferred contract acquisition costs, net of accumulated amortization of $1,621,242 in 2018 and $1,439,164 in 2017 1,195,463     1,302,028  
Dealer network and other intangible assets, net of accumulated amortization of $0 in 2018 and $42,806 in 2017     6,994  
Goodwill     563,549  
Deferred income tax asset, net 783      
Other assets 29,316     9,348  
Total assets $ 1,413,544     2,054,985  
Liabilities and Stockholders’ (Deficit) Equity      
Current liabilities:      
Accounts payable $ 12,668     11,092  
Other accrued liabilities 36,006     56,282  
Deferred revenue 13,060     13,871  
Holdback liability 11,513     9,309  
Current portion of long-term debt 1,895,175     11,000  
Total current liabilities 1,968,422     101,554  
Non-current liabilities:      
Long-term debt     1,778,044  
Long-term holdback liability 1,770     2,658  
Derivative financial instruments 6,039     13,491  
Deferred income tax liability, net     13,311  
Other liabilities 2,742     3,255  
Total liabilities 1,978,973     1,912,313  
Commitments and contingencies      
Stockholders’ (deficit) equity:      
Preferred stock, $0.01 par value. Authorized 5,000,000 shares; no shares issued      
Series A common stock, $.01 par value. Authorized 45,000,000 shares; issued and outstanding 12,080,683 and 11,999,630 shares at December 31, 2018 and December 31, 2017, respectively 121     120  
Series B common stock, $.01 par value. Authorized 5,000,000 shares; issued and outstanding 381,528 shares at both December 31, 2018 and December 31, 2017 4     4  
Series C common stock, $0.01 par value. Authorized 45,000,000 shares; no shares issued      
Additional paid-in capital 1,425,325     1,423,899  
Accumulated deficit (1,998,487 )   (1,277,118 )
Accumulated other comprehensive income (loss), net 7,608     (4,233 )
Total stockholders’ (deficit) equity (565,429 )   142,672  
Total liabilities and stockholders’ (deficit) equity $ 1,413,544     2,054,985  

See accompanying notes to condensed consolidated financial statements.

ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income (Loss)
Amounts in thousands, except shares and per share amounts

  Year Ended December 31,
  2018   2017   2016
Net revenue $ 540,358     553,455     570,372  
Operating expenses:          
Cost of services 128,939     119,193     115,236  
Selling, general and administrative, including stock-based and long-term incentive compensation 130,637     167,887     125,892  
Radio conversion costs     450     18,422  
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets 211,639     236,788     246,753  
Depreciation 11,457     8,844     8,435  
Loss on goodwill impairment 563,549          
Gain on disposal of operating assets     (21,217 )    
  1,046,221     511,945     514,738  
Operating income (loss) (505,863 )   41,510     55,634  
Other expense (income), net:          
Interest income (2,439 )   (2,446 )   (2,282 )
Interest expense 191,202     152,257     132,269  
Unrealized loss on derivative financial instruments 3,151          
Refinancing expense 13,356         9,500  
Other expense (income), net (1,478 )   (242 )   140  
  203,792     149,569     139,627  
Loss from continuing operations before income taxes (709,655 )   (108,059 )   (83,993 )
Income tax expense (benefit) from continuing operations (11,611 )   (408 )   7,251  
Net loss from continuing operations (698,044 )   (107,651 )   (91,244 )
Discontinued operations:          
Income from discontinued operations, net of income tax of $0     92      
Net loss (698,044 )   (107,559 )   (91,244 )
Other comprehensive income (loss):          
Foreign currency translation adjustments 758     782     (1,032 )
Unrealized holding gain (loss) on marketable securities, net (3,900 )   2,828     1,956  
Unrealized gain on derivative contracts, net 14,378     1,582     4,589  
Total other comprehensive income (loss), net of tax 11,236     5,192     5,513  
Comprehensive loss $ (686,808 )   $ (102,367 )   $ (85,731 )
           
Basic and diluted income (loss) per share:          
Continuing operations $ (56.54 )   $ (8.83 )   $ (7.44 )
Discontinued operations     0.01      
Net loss $ (56.54 )   $ (8.82 )   $ (7.44 )
           
Weighted average Series A and Series B shares - basic and diluted 12,346,804     12,195,530     12,256,895  
Total issued and outstanding Series A and Series B shares at period end 12,462,211     12,381,158     12,351,011  

See accompanying notes to condensed consolidated financial statements.

ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Amounts in thousands

  Year Ended December 31,
  2018   2017   2016
Cash flows from operating activities:          
Net loss $ (698,044 )   (107,559 )   (91,244 )
Adjustments to reconcile net loss to net cash provided by operating activities:          
Income from discontinued operations, net of income tax     (92 )  
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets 211,639     236,788     246,753  
Depreciation 11,457     8,844     8,435  
Stock-based and long-term incentive compensation 1,451     7,431     6,984  
Deferred income tax expense (benefit) (14,094 )   (4,474 )   4,201  
Gain on disposal of operating assets     (21,217 )    
Non-cash legal settlement reserve (related insurance recovery) (2,750 )   23,000      
Amortization of debt discount and deferred debt costs 41,430     11,111     10,670  
Refinancing expense 13,356         9,500  
Unrealized loss on derivative financial instruments 3,151          
Bad debt expense 12,300     11,014     10,785  
Loss on goodwill impairment 563,549          
Other non-cash activity, net (2,199 )   (4,057 )   (3,210 )
Changes in assets and liabilities:          
Trade receivables (12,776 )   (9,790 )   (11,032 )
Prepaid expenses and other assets (14,576 )   (1,669 )   325  
Subscriber accounts - deferred contract acquisition costs (5,418 )   (3,064 )   (2,947 )
Payables and other liabilities (15,545 )   (6,361 )   (317 )
Operating activities from discontinued operations, net     (3,408 )    
Net cash provided by operating activities 92,931     136,497     188,903  
Cash flows from investing activities:          
Capital expenditures (14,903 )   (14,393 )   (9,180 )
Cost of subscriber accounts acquired (140,450 )   (142,909 )   (201,381 )
Purchases of marketable securities (39,022 )   (26,634 )   (5,036 )
Proceeds from sale of marketable securities 143,316     1,108     15,184  
Proceeds from the disposal of operating assets     32,612      
Net cash used in investing activities (51,059 )   (150,216 )   (200,413 )
Cash flows from financing activities:          
Proceeds from long-term debt 248,800     187,950     1,280,700  
Payments on long-term debt (184,100 )   (175,250 )   (1,238,059 )
Payments of financing costs (10,739 )       (16,946 )
Value of shares withheld for share-based compensation (188 )   (835 )   (358 )
Purchases and retirement of common stock         (7,140 )
Net cash provided by financing activities 53,773     11,865     18,197  
Net increase (decrease) in cash, cash equivalents and restricted cash 95,645     (1,854 )   6,687  
Cash, cash equivalents and restricted cash at beginning of period 10,465     12,319     5,632  
Cash, cash equivalents and restricted cash at end of period $ 106,110     10,465     12,319  
Supplemental cash flow information:          
State taxes paid, net $ 2,517     2,713     2,645  
Interest paid 150,003     140,706     120,873  
Accrued capital expenditures 552     272     558  

See accompanying notes to condensed consolidated financial statements.

Adjusted EBITDA

We evaluate the performance of our and Brinks Home Security's operations based on financial measures such as revenue and "Adjusted EBITDA." Adjusted EBITDA 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. Ascent believes that Adjusted EBITDA is an important indicator of the operational strength and performance of its and Brinks Home Security's business, including the ability to fund its and Brinks Home Security's ongoing acquisition of subscriber accounts, its and Brinks Home Security's capital expenditures and to service its and Brinks Home Security's debt. 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 Brinks Home Security's covenants are calculated under the agreements governing its debt obligations. Adjusted EBITDA does not represent cash flow from operations as defined by generally accepted accounting principles in the United States ("GAAP"), should not be construed as an alternative to net income or loss and is indicative neither of our nor Brinks Home Security's results of operations nor of cash flows available to fund all of our or Brinks Home Security's cash needs. It is, however, a measurement that Ascent believes is useful to investors in analyzing its and Brinks Home Security's operating performance. Accordingly, Adjusted EBITDA should be considered in addition to, but not as a substitute for, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. Adjusted EBITDA is a non-GAAP financial measure. As companies often define non-GAAP financial measures differently, Adjusted EBITDA as calculated by Ascent and Brinks Home Security should not be compared to any similarly titled measures reported by other companies.

The following table provides a reconciliation of Ascent's Net loss from continuing operations to total Adjusted EBITDA for the periods indicated (amounts in thousands):

  Three Months Ended December 31,   Year Ended December 31,
  2018   2017   2018   2017
Net loss from continuing operations $ (382,744 )   (16,020 )   (698,044 )   (107,651 )
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets 50,666     57,892     211,639     236,788  
Depreciation 3,079     2,409     11,457     8,844  
Stock-based compensation (37 )   1,261     1,615     7,229  
Radio conversion costs     67         450  
Legal settlement reserve (related insurance recovery) (12,500 )       (12,500 )   28,000  
Severance expense (a) 1,059     88     4,014     1,363  
LiveWatch acquisition contingent bonus charges 63     (1,557 )   250     189  
Rebranding marketing program 1,055         7,410     880  
Integration / implementation of company initiatives 321     5     516     2,425  
Gain on revaluation of acquisition dealer liabilities         (240 )   (1,358 )
Impairment of capitalized software             713  
Loss on goodwill impairment 349,149         563,549      
Gain on disposal of operating assets             (21,217 )
Interest income (560 )   (871 )   (2,439 )   (2,446 )
Interest expense 71,185     38,246     191,202     152,257  
Unrealized loss on derivative financial instruments 3,151         3,151      
Refinancing expense 6,625         13,356      
Unrealized (gain) loss on marketable securities, net         (3,251 )   220  
Release of foreign currency translation adjustments 758         758      
Income tax expense (benefit) from continuing operations (15,650 )   (8,649 )   (11,611 )   (408 )
Adjusted EBITDA $ 75,620     72,871     280,832     306,278  
               
Expensed Subscriber acquisition costs, net              
Gross subscriber acquisition costs $ 8,951     10,554     47,874     40,312  
Revenue associated with subscriber acquisition costs (1,189 )   (1,158 )   (4,678 )   (4,852 )
Expensed Subscriber acquisition costs, net $ 7,762     9,396     43,196     35,460  

(a) Severance expense for the year ended December 31, 2018 related to transitioning executive leadership at Ascent and a reduction in headcount event at Brinks Home Security. Severance expense for the year ended December 31, 2017 related to transitioning executive leadership and a reduction in headcount event at Brinks Home Security.

The following table provides a reconciliation of Brinks Home Security’s Net loss to total Adjusted EBITDA for the periods indicated (amounts in thousands):

  Three Months Ended December 31,   Year Ended December 31,
  2018   2017   2018   2017
Net loss $ (376,911 )   (14,642 )   (678,750 )   (111,295 )
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets 50,666     57,892     211,639     236,788  
Depreciation 3,074     2,403     11,434     8,818  
Stock-based compensation (329 )   222     474     2,981  
Radio conversion costs     67         450  
Legal settlement reserve (related insurance recovery) (12,500 )       (12,500 )   28,000  
Severance expense (a) 1,059     88     1,059     1,363  
LiveWatch acquisition contingent bonus charges 63     (1,557 )   250     189  
Rebranding marketing program 1,055         7,410     880  
Integration / implementation of company initiatives 321     5     516     2,425  
Gain on revaluation of acquisition dealer liabilities         (240 )   (1,358 )
Impairment of capitalized software             713  
Loss on goodwill impairment 349,149         563,549      
Interest expense 66,220     36,512     180,770     145,492  
Unrealized loss on derivative financial instruments 3,151         3,151      
Refinancing expense 6,541         12,238      
Income tax expense (benefit) (15,591 )   (7,223 )   (11,552 )   (1,893 )
Adjusted EBITDA $ 75,968     73,767     289,448     313,553  
               
Expensed Subscriber acquisition costs, net              
Gross subscriber acquisition costs $ 8,951     10,554     47,874     40,312  
Revenue associated with subscriber acquisition costs (1,189 )   (1,158 )   (4,678 )   (4,852 )
Expensed Subscriber acquisition costs, net $ 7,762     9,396     43,196     35,460  

(a) Severance expense for the year ended December 31, 2018 related to a reduction in headcount event. Severance expense for the year ended December 31, 2017 related to transitioning executive leadership and a reduction in headcount event.

1 Comparisons are year-over-year unless otherwise specified.

Is your business listed correctly on America’s largest city directory network of 1,000 portals?