Integrated Alarm Services (NASDAQ:IASG)
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Integrated Alarm Services Group, Inc. (NASDAQ: IASG) a
total solution provider to independent security alarm dealers located
throughout the United States announced results for the second quarter
of fiscal 2006 ending June 30, 2006.
Revenue for the second quarter of 2006 was $23.0 million down 7
percent over the same period in 2005 and down 5 percent from the first
quarter of 2006. The net loss for the second quarter ending June 30,
2006 was $6.4 million, or $0.26 per share, compared to a net loss of
$6.3 million, or $0.26 per share, in the second quarter of 2005, and a
net loss of $3.4 million, or $0.14 per share, in the first quarter of
2006.
Revenue for the first half of fiscal 2006 ending June 30, 2006 was
$47.2 million down 4 percent from the same period in 2005. The net
loss for the first half of 2006 was $9.9 million, or $0.40 per share,
compared to a loss of $8.9 million, also $0.36 per share, for the
first half of fiscal 2005.
In announcing the financial results, Charles May, acting President
and Chief Executive Officer, said, "The second quarter of 2006
witnessed a major transition for our Company. During the quarter new
executive leadership was put in place and significant change occurred
at the Board of Director level. John Mabry was elected Chairman of the
Board of Directors, Jason Mudrick, portfolio manager of Contrarian
Capital; joined our Board and two founders of IASG resigned from the
Board. It is the objective of the Board and the management team to
effectively serve our customers, efficiently manage our business
activities and build shareholder value."
May continued, "We made operating progress in the second quarter,
however results continue to be unacceptable. Second quarter 2006
aggregate attrition was 12 percent, up from the first quarter but down
significantly from second half of 2005. Second quarter 2006 operating
expenses declined five percent, or $1.4 million, from the year earlier
period. Earnings before interest, taxes, depreciation and
amortization, EBITDA, for in the second quarter was the same in both
2006 and 2005 at $5.5 million. Finally, as the second quarter drew to
a close we sold alarm contract assets generating recurring monthly
revenue, RMR, of approximately $210,000 in the mountain states of
Colorado, Idaho and Utah. The sale of these non-strategic assets
generated consideration of $7.3 million."
At June 30, 2006, IASG had $17.6 million in cash, $16.3 million of
secured notes receivable from dealers and stockholders' equity of
$110.4 million. The Company had $125.5 million of debt and capital
leases at June 30, 2006 and ended the second quarter of 2006 with a
net debt (debt less cash) to equity ratio of 0.97 to 1. IASG had no
outstanding balance on the $30 million senior credit facility at June
30, 2006.
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IASG Portfolio Data:
Annualized Attrition Rate
Annualized
2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 4 Quarters
2005 2005 2005 2006 2006 to 6/30/06
---- ---- ---- ---- ---- ----------
IASG Owned Portfolio
Legacy Portfolio 17.8% 20.0% 18.3% 12.1% 11.8% 14.7%
New Residential 12.9% 22.4% 17.5% 12.1% 11.9% 15.1%
New Commercial 12.3% 2.6% 6.2% 5.3% 12.5% 6.5%
Aggregate Owned
Portfolio 13.8% 17.8% 15.3% 10.6% 12.0% 13.2%
Annualized Growth Rate - excluding acquisitions
Annualized
2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 4 Quarters
2005 2005 2005 2006 2006 to 6/30/06
---- ---- ---- ---- ---- ----------
Wholesale Monitoring
Accounts (4.9%) (16.6%) (9.6%) (4.8%) 14.7% (4.4%)
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IASG ended the second quarter of fiscal 2006 with an owned
portfolio of approximately 142,000 contract equivalents generating RMR
of approximately $4.3 million and wholesale monitoring of over 745,000
alarms generating approximately $3.0 million in RMR (including IASG's
owned portfolio accounts). Revenue from the owned portfolio is split
76 percent residential and 24 percent commercial.
The Company had 762 employees at June 30, 2006 down from 837 at
December 31, 2005.
See the attached financial highlights for the second quarter of
2006 and comparative periods.
Conference Call
IASG will hold a conference call at 8:30 AM EDT on Thursday
August, 10 2006 to discuss second quarter financial results. Investors
may participate in the conference call by dialing 800-291-9234 and
entering the access code of 75011864 or by logging onto the investor
relations section of the IASG website at www.iasg.us. The
international dial in number is 617-614-3923 with the same access
code. A replay of the conference call will be available through August
31, 2006 by dialing 888-286-8010 (international dial in - 617
801-6888) and entering the access code of 56201403 or by visiting the
investor relations section of the IASG website.
About IASG
Integrated Alarm Services Group provides total integrated
solutions to independent security alarm dealers located throughout the
United States to assist them in serving the residential and commercial
security alarm market. IASG's services include alarm contract
financing including the purchase of dealer alarm contracts for its own
portfolio and providing loans to dealers collateralized by alarm
contracts. IASG, with approximately 5,000 independent dealer
relationships, is also the largest wholesale provider of alarm
contract monitoring and servicing. For more information about IASG
please visit our web site at http://www.iasg.us.
This press release may contain statements, which are not
historical facts and are considered forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements contain projections of IASG's future
results of operations, financial position or state other
forward-looking information. In some cases you can identify these
statements by forward looking words such as "anticipate", "believe",
"could", "estimate", "expect", "intend", "may", "should", "will", and
"would" or similar words. You should not rely on forward-looking
statements because IASG's actual results may differ materially from
those indicated by these forward looking statements as a result of a
number of important factors. These factors include, but are not
limited to: general economic and business conditions; our business
strategy for expanding our presence in our industry; anticipated
trends in our financial condition and results of operation; the impact
of competition and technology change; existing and regulations
effecting our company and business, and other risks and uncertainties
discussed under the heading "Risks Related to our Business" in IASG's
Form 10-K report for the period ending December 31, 2005 as filed with
the Securities and Exchange Commission on March 16, 2006, and other
reports IASG files from time to time with the Securities and Exchange
Commission. IASG does not intend to and undertakes no duty to update
the information contained in this press release.
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INTEGRATED ALARM SERVICES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of
---------------------
December 31, June 30,
2005 2006
--------- --------
(UNAUDITED)
(in thousands, except
for share data)
Assets
Current assets:
Cash and cash equivalents $ 16,239 $ 17,627
Current portion of notes receivable 6,108 6,207
Accounts receivable less allowance for doubtful
accounts 5,158 4,133
Inventories 1,477 1,331
Prepaid expenses 1,084 1,492
Due from related parties 87 73
---------- ---------
Total current assets 30,153 30,863
Property and equipment, net 7,843 7,643
Notes receivable net of current portion and
allowance for doubtful accounts 10,085 10,140
Dealer relationships, net 33,000 30,737
Customer contracts, net 80,532 68,584
Deferred customer acquisition costs, net 7,874 8,396
Goodwill 94,919 91,265
Debt issuance costs, net 4,596 4,161
Assets of business transferred - 8,178
Other identifiable intangibles, net 2,790 2,472
Restricted cash 758 287
Other assets 524 326
---------- ---------
Total assets $ 273,074 $263,052
========== =========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of capital lease obligations $ 350 $ 216
Accounts payable 2,306 1,423
Accrued expenses 9,256 8,601
Current portion of deferred revenue 8,724 7,701
Other liabilities 390 418
---------- ---------
Total current liabilities 21,026 18,359
Long-term debt, net of current portion 125,000 125,000
Capital lease obligations, net of current
portion 461 274
Deferred revenue, net of current portion 4,830 5,274
Liabilities of business transferred - 1,050
Advance payment 827
Deferred income taxes 1,582 1,776
Other liabilities -
Due to related parties 61 76
---------- ---------
Total liabilities 152,960 152,636
---------- ---------
Committments and Contingencies - -
Stockholders' equity:
Preferred stock, $0.001 par value, authorized
3,000,000 shares, none issued and outstanding - -
Common stock, $0.001 par value, authorized
100,000,000 shares, 24,681,462 shares issued 25 25
Paid-in capital 207,162 207,325
Accumulated deficit (86,073) (95,934)
Treasury stock - common, at cost, 312,626
shares (1,000) (1,000)
---------- ---------
Total stockholders' equity 120,114 110,416
---------- ---------
Total liabilities and stockholders' equity $ 273,074 $263,052
========== =========
INTEGRATED ALARM SERVICES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
----------------------- --------------------------
2005 2006 2005 2006
----------- ----------- ----------- -----------
(in thousands, except share and per share data)
Revenue:
Monitoring fees $ 7,750 $ 7,574 $ 15,572 $ 15,407
Revenue from
customer accounts 15,419 12,952 29,701 26,628
Related party
monitoring fees 34 24 67 50
Service,
installation and
other revenue 1,485 2,520 3,806 5,133
------------ ------------ ------------ ------------
Total revenue 24,688 23,070 49,146 47,218
------------ ------------ ------------ ------------
Expenses:
Cost of revenue
(excluding
depreciation and
amortization) 10,429 9,751 20,748 19,202
Selling and
marketing 1,360 1,404 2,519 2,677
Depreciation and
amortization 7,142 7,416 13,256 13,794
(Gain) loss on
sale or disposal
of assets 442 (19) 442 (29)
Loss on business
transferred - 500 - 500
General and
administrative 8,054 6,953 14,161 13,907
------------ ------------ ------------ ------------
Total expenses 27,427 26,005 51,126 50,051
------------ ------------ ------------ ------------
Income (loss) from
operations (2,739) (2,935) (1,980) (2,833)
Other income
(expense):
Amortization of debt
issuance costs (282) (242) (556) (484)
Interest expense (4,301) (4,160) (8,487) (8,277)
Interest income 1,123 1,035 2,378 2,070
------------ ------------ ------------ ------------
Income (loss) before
income taxes (6,199) (6,302) (8,645) (9,524)
Income tax expense 141 145 281 337
------------ ------------ ------------ ------------
Net income (loss) $ (6,340) $ (6,447) $ (8,926) $ (9,861)
============ ============ ============ ============
Basic and diluted
income (loss) per
share $ (0.26) $ (0.26) $ (0.36) $ (0.40)
============ ============ ============ ============
Weighted average
number of common
shares outstanding 24,681,462 24,368,836 24,681,462 24,368,836
============ ============ ============ ============
INTEGRATED ALARM SERVICES GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(UNAUDITED)
Three Months Ended
June 30, 2005 June 30, 2006
------------- -------------
Net income (loss) $(6,340) $(6,447)
Adjust for:
Income tax expense 141 145
Interest expense 4,301 4,160
Amortization of debt issuance costs 282 242
Depreciation and amortization 7,142 7,416
-------- --------
EBITDA $ 5,526 $ 5,516
======== ========
Six Months Ended
June 30, 2005 June 30, 2006
------------- -------------
Net income (loss) $(8,926) $(9,861)
Adjust for:
Income tax expense 281 337
Interest expense 8,487 8,277
Amortization of debt issuance costs 556 484
Depreciation and amortization 13,256 13,794
-------- --------
EBITDA $13,654 $13,031
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