IASG Integrated Alarm Services Grp (MM)

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 first quarter of fiscal 2006 ending March 31, 2006. Revenue for the first quarter of 2006 was $24.1 million down 1 percent over the same period in 2005 and down 6 percent from the fourth the quarter of 2005. The net loss for the first quarter ending March 31, 2006 was $3.4 million, or $0.14 per share, compared to a net loss of $2.6 million, or $0.10 per share, in the first quarter of 2005, and a net loss of $8.0 million, or $0.32 per share, in the fourth quarter of 2005. First quarter achievements and activities included: -- Annualized first quarter attrition of 10.6 percent, a 30 percent reduction from the 15.3 percent for fourth quarter of 2005. -- Margin of 60.9 percent in the first quarter, a 13 percent improvement over the 53.7 percent recorded in the fourth quarter of 2005. -- A 24 percent or $2.2 million reduction in first quarter general and administrative expenses from the fourth quarter of 2005. -- A 17 percent or $1.3 million reduction in first quarter depreciation and amortization from the fourth quarter of 2005. -- First quarter EBITDA of $7.5 million, a 72 percent increase over fourth quarter 2005. -- A first quarter increase of the dealer loan portfolio of 15 percent to $18.7 million from the fourth quarter of 2005. In announcing the year-end results, Timothy M. McGinn, Chairman and CEO, said, "IASG made significant operational progress in the first quarter 2006 versus the fourth quarter of 2005. Our operational performance, particularly on the expense management side was consistent with the guidance we offered in the 2005 year-end conference call. Attrition results also showed excellent progress in the first quarter. However, as I commented in the past one should not put too much emphasis on any single period. The trend is important and the trend is clearly in the correct direction. The principle disappointment in the quarter was revenue growth." At March 31, 2006, IASG had $19.6 million in cash, $18.7 million of secured notes receivable from dealers and stockholders' equity of $116.7 million. The Company had $125.7 million of debt and capital leases at March 31, 2006 and ended the first quarter of 2006 with a net debt (debt less cash) to equity ratio of .91 to 1. IASG had no outstanding balance on the $30 million senior credit facility at March 31, 2006. -0- *T IASG Portfolio Data: Annualized Attrition Rate 1st 2nd 3rd 4th 1st Annualized Qtr Qtr Qtr Qtr Qtr 4 Quarters 2005 2005 2005 2005 2006 to 3/31/06 ----- ----- ----- ----- ----- ----------- IASG Owned Portfolio Legacy Portfolio 13.7% 17.8% 20.0% 18.3% 12.1% 16.0% New Residential 11.7% 12.9% 22.4% 17.5% 12.1% 15.3% New Commercial 5.2% 12.3% 2.6% 6.2% 5.3% 6.4% Aggregate Owned Portfolio 10.9% 13.8% 17.8% 15.3% 10.6% 13.6% Annualized Growth Rate - excluding acquisitions 1st 2nd 3rd 4th 1st Annualized Qtr Qtr Qtr Qtr Qtr 4 Quarters 2005 2005 2005 2005 2006 to 3/31/06 ---- ------ ------- ------ ------ ----------- Wholesale Monitoring Accounts 2.3% (4.9%) (16.6%) (9.6%) (4.8%) (8.7%) *T IASG ended the first quarter of fiscal 2006 with an owned portfolio of approximately 154,000 contract equivalents generating RMR of approximately $4.6 million and wholesale monitoring of over 700,000 alarms (including IASG's owned portfolio accounts) generating approximately $3.0 million in RMR. Revenue from the owned portfolio is split 80 percent residential and 20 percent commercial. The Company employed 817 employees at March 31, 2006 down from 837 at December 31, 2005 and 902 at March 31, 2005. See the attached financial highlights for the first quarter of 2006 and comparative periods. 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. -0- *T INTEGRATED ALARM SERVICES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET As of ------------------------ December 31, March 31, 2005 2006 ------------ ----------- (UNAUDITED) (in thousands, except for share data) Assets Current assets: Cash and cash equivalents $ 16,239 $ 19,559 Current portion of notes receivable 6,108 7,364 Accounts receivable less allowance for doubtful accounts 5,158 4,306 Inventories 1,477 1,653 Prepaid expenses 1,084 1,248 Due from related parties 87 65 ------------ ----------- Total current assets 30,153 34,195 Property and equipment, net 7,843 7,961 Notes receivable net of current portion and allowance for doubtful accounts 10,085 11,300 Dealer relationships, net 33,000 31,869 Customer contracts, net 80,532 77,815 Deferred customer acquisition costs, net 7,874 8,204 Goodwill 94,919 94,025 Debt issuance costs, net 4,596 4,355 Other identifiable intangibles, net 2,790 2,631 Restricted cash 758 758 Other assets 524 321 ------------ ----------- Total assets $ 273,074 $ 273,434 ============ =========== Liabilities and Stockholders' Equity Current liabilities: Current portion of capital lease obligations $350 $313 Accounts payable 2,306 1,752 Accrued expenses 9,256 13,427 Current portion of deferred revenue 8,724 8,541 Other liabilities 390 415 ------------ ----------- Total current liabilities 21,026 24,448 Long-term debt, net of current portion 125,000 125,000 Capital lease obligations, net of current portion 461 421 Deferred revenue, net of current portion 4,830 5,077 Deferred income taxes 1,582 1,690 Due to related parties 61 69 ------------ ----------- Total liabilities 152,960 156,705 ------------ ----------- 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 207,162 207,191 Accumulated deficit (86,073) (89,487) Treasury stock - common, at cost, 312,626 shares (1,000) (1,000) ------------ ----------- Total stockholders' equity 120,114 116,729 ------------ ----------- Total liabilities and stockholders' equity $ 273,074 $ 273,434 ============ =========== INTEGRATED ALARM SERVICES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) For the Three Months Ended March 31, ----------------------- 2005 2006 ----------- ----------- (in thousands, except share and per share data) Revenue: Monitoring fees $ 7,822 $ 7,833 Revenue from customer accounts 14,282 13,676 Related party monitoring fees 33 26 Service, installation and other revenue 2,321 2,613 ----------- ----------- Total revenue 24,458 24,148 ----------- ----------- Expenses: Cost of revenue (excluding depreciation and amortization) 10,319 9,451 Selling and marketing 1,159 1,273 Depreciation and amortization 6,114 6,378 (Gain) loss on sale or disposal of assets - (10) General and administrative 6,107 6,954 ----------- ----------- Total expenses 23,699 24,046 ----------- ----------- Income (loss) from operations 759 102 Other income (expense): Amortization of debt issuance costs (274) (242) Interest expense (4,186) (4,117) Interest income 1,255 1,035 ----------- ----------- Income (loss) before income taxes (2,446) (3,222) Income tax expense 140 192 ----------- ----------- Net income (loss) $ (2,586) $ (3,414) =========== =========== Basic and diluted income (loss) per share $ (0.10) $ (0.14) =========== =========== Weighted average number of common shares outstanding 24,681,462 24,368,836 =========== =========== INTEGRATED ALARM SERVICES GROUP, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP MEASURES (UNAUDITED) Three Months Ended: March 31, December 31, March 31, 2005 2005 2006 ---------- ------------ --------- (in thousands) Net income (loss) $ (2,586) $ (7,978) $ (3,414) Adjust for: Income tax expense (benefit) 140 187 192 Interest expense 4,186 4,208 4,117 Amortization of debt issuance costs 274 242 242 Depreciation and amortization 6,114 7,702 6,378 ---------- ------------ --------- EBITDA $ 8,128 $ 4,361 $ 7,515 ========== ============ ========= *T