Revenues rise, attrition falls for Monitronics in fiscal 2003

October 9, 2003 DALLAS - Less than a week after completing a $500 million refinancing deal, Monitronics International reported revenue increases for both its fourth quarter and fiscal year 2003, which ended on June 30. Total revenues for 2003 increased by 14 percent to $126 million. The increase also reflects the company’s restatement of its 2002 sales, which were lowered from $111.9 million to $111.3 million. Monitronics President and Chief Executive Officer Jim Hull said while the increase was primarily based on adding new accounts, the company “certainly benefited a small amount by a small price increase” for its monitoring service. One of the factors that should allow Monitronics to continue its gains in 2004 is the implementation of an activation fee by its dealers, Hull said. Under this program, which began in the fourth quarter of fiscal 2003, dealers charge customers a $69 activation fee at the point of sale. This allows Monitronics to acquire the customer account for $69 less than it would pay otherwise, contributing to the company’s bottom line. “What the company feels will happen in the future and what we believe will be a benefit to all the industry is that the subscriber will pay increasingly more at the time of installation, thereby offsetting the actual purchase price that the company will have to pay for the account,” Hull said. “The dealer will end up with the same amount of cash for the system and Monitronics will benefit by having a lower purchase price multiple.” Thanks in large part to a summer program that saw a handful of Monitronics’ dealers hire college students to make a big push for sales, Hull said the first quarter of fiscal 2004, which ended Sept. 30, exceeded expectations. Numbers for that quarter have not yet been published. “The summer program did better than what we anticipated in terms of numbers,” Hull said. “As we approach this coming year, I believe we will expand in terms of absolute number of purchases more than we did last year. On an average, I think overall this coming year should be as good if not better than our current year.” In fiscal 2003, Monitronics spent $106.5 million on contract acquisitions, compared to $79 million in 2002, when the company purchased fewer contracts. Attrition decreased to 11.8 percent from 12.7 percent, a trend Hull said he expects to continue when the first quarter 2004 numbers are published.