UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2018

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-34176

ASCENT CAPITAL GROUP, INC.

(Exact name of Registrant as specified in its charter)



State of Delaware		26-2735737
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)



5251 DTC Parkway, Suite 1000
Greenwood Village, Colorado		80111
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (303) 628-5600

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ý No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer o		Accelerated filer x
Non-accelerated filer o		Smaller reporting company o
~~(Do not check if a smaller reporting company)~~		Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

The number of outstanding shares of Ascent Capital Group, Inc.’s common stock as of ~~April 25,~~October 19, 2018 was:

Series A common stock ~~12,017,149~~12,068,496 shares; and Series B common stock 381,528 shares.

Table of Contents

TABLE OF CONTENTS



		Page

PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	2

	Condensed Consolidated Balance Sheets (unaudited)	2

	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited)	3

	Condensed Consolidated Statements of Cash Flows (unaudited)	4

	Condensed Consolidated Statement of Stockholders’ ~~Equity~~Deficit (unaudited)	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2224

Item 3.	Quantitative and Qualitative Disclosure about Market Risk	3133

Item 4.	Controls and Procedures	3133

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	3234

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3335

Item 6.	Exhibits	3336

	SIGNATURES	3437

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Item 1. Financial Statements (unaudited)

ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

Amounts in thousands, except share amounts

(unaudited)


	March 31, 2018			December 31, 2017		September 30, 2018			December 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	30,087		10,465		$	137,561		10,465
Restricted cash	93			—		133			—
Marketable securities, at fair value	107,450			105,958		—			105,958
Trade receivables, net of allowance for doubtful accounts of $3,632 in 2018 and $4,162 in 2017	12,300			12,645
Trade receivables, net of allowance for doubtful accounts of $3,630 in 2018 and $4,162 in 2017						13,162			12,645
Prepaid and other current assets	23,498			11,175		25,883			11,175
Total current assets	173,428			140,243		176,739			140,243
Property and equipment, net of accumulated depreciation of $40,537 in 2018 and $37,915 in 2017	34,070			32,823
Subscriber accounts and deferred contract acquisition costs, net of accumulated amortization of $1,468,359 in 2018 and $1,439,164 in 2017	1,224,937			1,302,028
Dealer network and other intangible assets, net of accumulated amortization of $45,859 in 2018 and $42,806 in 2017	3,941			6,994
Property and equipment, net of accumulated depreciation of $46,195 in 2018 and $37,915 in 2017						36,568			32,823
Subscriber accounts and deferred contract acquisition costs, net of accumulated amortization of $1,570,729 in 2018 and $1,439,164 in 2017						1,215,831			1,302,028
Dealer network and other intangible assets, net of accumulated amortization of $48,500 in 2018 and $42,806 in 2017						—			6,994
Goodwill	563,549			563,549		349,149			563,549
Other assets	27,633			9,348		36,819			9,348
Total assets	$	2,027,558		2,054,985		$	1,815,106		2,054,985
Liabilities and Stockholders’ Equity
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities:
Accounts payable	$	12,910		11,092		$	11,661		11,092
Accrued payroll and related liabilities	6,145			3,953		6,513			3,953
Other accrued liabilities	66,584			52,329		46,840			52,329
Deferred revenue	13,477			13,871		12,069			13,871
Holdback liability	7,601			9,309		10,766			9,309
Current portion of long-term debt	11,000			11,000		11,000			11,000
Total current liabilities	117,717			101,554		98,849			101,554
Non-current liabilities:
Long-term debt	1,783,253			1,778,044		1,869,502			1,778,044
Long-term holdback liability	2,191			2,658		2,031			2,658
Derivative financial instruments	6,553			13,491		1,139			13,491
Deferred income tax liability, net	13,973			13,311		15,298			13,311
Other liabilities	3,259			3,255		2,858			3,255
Total liabilities	1,926,946			1,912,313		1,989,677			1,912,313
Commitments and contingencies
Stockholders’ equity:
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 12,002,103 and 11,999,630 shares at March 31, 2018 and December 31, 2017, respectively	120			120
Series B common stock, $.01 par value. Authorized 5,000,000 shares; issued and outstanding 381,528 shares at both March 31, 2018 and December 31, 2017	4			4
Series A common stock, $.01 par value. Authorized 45,000,000 shares; issued and outstanding 12,052,703 and 11,999,630 shares at September 30, 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 September 30, 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	1,424,068			1,423,899		1,425,379			1,423,899
Accumulated deficit	(1,331,281		)	(1,277,118	)	(1,615,743		)	(1,277,118	)
Accumulated other comprehensive income (loss), net	7,701			(4,233	)	15,668			(4,233	)
Total stockholders’ equity	100,612			142,672
Total liabilities and stockholders’ equity	$	2,027,558		2,054,985
Total stockholders’ (deficit) equity						(174,571		)	142,672
Total liabilities and stockholders’ (deficit) equity						$	1,815,106		2,054,985

See accompanying notes to condensed consolidated financial statements.

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ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

Amounts in thousands, except per share amounts

(unaudited)


	Three Months Ended March 31,					Three Months Ended September 30,					Nine Months Ended September 30,
	2018			2017		2018			2017		2018			2017
Net revenue	$	133,753		141,200		$	137,156		138,211		$	405,922		419,909
Operating expenses:
Cost of services	32,701			29,969		35,059			30,213		100,807			89,799
Selling, general and administrative, including stock-based and long-term incentive compensation	37,406			36,245		38,199			35,793		109,992			136,809
Radio conversion costs	—			232		—			74		—			383
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets	54,411			59,547		52,671			59,384		160,973			178,896
Depreciation	2,621			2,127		2,886			2,176		8,378			6,435
Loss on goodwill impairment						—			—		214,400			—
Gain on disposal of operating assets	—			(6,638	)	—			—		—			(21,217	)
	127,139			121,482		128,815			127,640		594,550			391,105
Operating income	6,614			19,718
Operating income (loss)						8,341			10,571		(188,628		)	28,804
Other expense (income), net:
Interest income	(481		)	(395	)	(624		)	(617	)	(1,879		)	(1,575	)
Interest expense	38,652			37,486		40,943			38,360		120,017			114,011
Other income, net	(2,065		)	(242	)
Refinancing expense						6,731			—		6,731			—
Other expense (income), net						40			222		(2,236		)	(242	)
	36,106			36,849		47,090			37,965		122,633			112,194
Loss from continuing operations before income taxes	(29,492		)	(17,131	)	(38,749		)	(27,394	)	(311,261		)	(83,390	)
Income tax expense from continuing operations	1,346			1,814		1,346			1,766		4,039			8,241
Net loss from continuing operations	(30,838		)	(18,945	)	(40,095		)	(29,160	)	(315,300		)	(91,631	)
Discontinued operations:
Income from discontinued operations, net of income tax of $0	—			92		—			—		—			92
Net loss	(30,838		)	(18,853	)	(40,095		)	(29,160	)	(315,300		)	(91,539	)
Other comprehensive income (loss):
Foreign currency translation adjustments	—			58		—			(16	)	—			626
Unrealized holding gain (loss) on marketable securities, net	(3,077		)	551		—			279		(3,900		)	1,366
Unrealized gain on derivative contracts, net	14,406			1,049
Total other comprehensive income, net of tax	11,329			1,658
Unrealized gain (loss) on derivative contracts, net						3,269			227		23,196			(4,501	)
Total other comprehensive income (loss), net of tax						3,269			490		19,296			(2,509	)
Comprehensive loss	$	(19,509	)	(17,195	)	$	(36,826	)	(28,670	)	$	(296,004	)	(94,048	)

Basic and diluted income (loss) per share:
Continuing operations	$	(2.51	)	(1.56	)	$	(3.24	)	(2.39	)	$	(25.57	)	(7.53	)
Discontinued operations	—			0.01		—			—		—			0.01
Net loss	$	(2.51	)	(1.55	)	$	(3.24	)	(2.39	)	$	(25.57	)	(7.52	)

See accompanying notes to condensed consolidated financial statements.

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ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

Amounts in thousands

(unaudited)


	Three Months Ended March 31,					Nine Months Ended September 30,
	2018			2017		2018			2017
Cash flows from operating activities:
Net loss	$	(30,838	)	(18,853	)	$	(315,300	)	(91,539	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Income from discontinued operations, net of income tax	—			(92	)	—			(92	)
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets	54,411			59,547		160,973			178,896
Depreciation	2,621			2,127		8,378			6,435
Stock-based and long-term incentive compensation	226			1,576		1,600			5,968
Deferred income tax expense	662			1,052		1,987			3,158
Gain on disposal of operating assets	—			(6,638	)	—			(21,217	)
Legal settlement reserve						—			23,000
Refinancing expense						6,731			—
Amortization of debt discount and deferred debt costs	2,959			2,673		9,108			8,227
Bad debt expense	3,017			2,557		8,511			7,888
Loss on goodwill impairment						214,400			—
Other non-cash activity, net	41			1,872		(186		)	4,887
Changes in assets and liabilities:
Trade receivables	(2,672		)	(1,659	)	(9,028		)	(7,225	)
Prepaid expenses and other assets	851			1,506		(8,359		)	(3,535	)
Contract asset, net	(70		)	—
Subscriber accounts - deferred contract acquisition costs	(898		)	(754	)	(4,529		)	(2,299	)
Payables and other liabilities	17,644			4,491		(4,752		)	4,770
Operating activities from discontinued operations, net	—			(3,408	)	—			(3,408	)
Net cash provided by operating activities	47,954			45,997		69,534			113,914
Cash flows from investing activities:
Capital expenditures	(3,310		)	(1,693	)	(11,513		)	(9,999	)
Cost of subscriber accounts acquired	(24,560		)	(46,708	)	(111,531		)	(119,081	)
Purchases of marketable securities	(7,998		)	(2,627	)	(39,022		)	(22,633	)
Proceeds from sale of marketable securities	5,495			997		143,316			1,108
Proceeds from the disposal of operating assets	—			12,090		—			32,612
Increase in restricted cash	(93		)	—
Net cash used in investing activities	(30,466		)	(37,941	)	(18,750		)	(117,993	)
Cash flows from financing activities:
Proceeds from long-term debt	50,000			64,750		218,950			159,850
Payments on long-term debt	(47,750		)	(42,600	)	(136,600		)	(132,500	)
Payments of financing costs						(5,734		)	—
Value of shares withheld for share-based compensation	(116		)	(268	)	(171		)	(670	)
Net cash provided by financing activities	2,134			21,882		76,445			26,680
Net increase in cash and cash equivalents	19,622			29,938
Cash and cash equivalents at beginning of period	10,465			12,319
Cash and cash equivalents at end of period	$	30,087		42,257
Net increase in cash, cash equivalents and restricted cash						127,229			22,601
Cash, cash equivalents and restricted cash at beginning of period						10,465			12,319
Cash, cash equivalents and restricted cash at end of period						$	137,694		34,920
Supplemental cash flow information:
State taxes paid, net	$	—		3		$	2,710		3,107
Interest paid	22,920			22,643		98,260			93,753
Accrued capital expenditures	830			780		882			386

See accompanying notes to condensed consolidated financial statements.

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ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders’ ~~Equity~~Deficit

Amounts in thousands

(unaudited)


						Additional Paid-in Capital						Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity											Additional Paid-in Capital					Accumulated Other Comprehensive Income (Loss)			Total Stockholders' (Deficit) Equity
	Preferred Stock		Common Stock					Accumulated Deficit						Preferred Stock				Common Stock							Accumulated Deficit
	Preferred Stock		Series A	Series B	Series C			Accumulated Deficit		Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)			Preferred Stock				Series A		Series B		Series C			Accumulated Deficit			Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2017	$	—	120	4	—		1,423,899					(1,277,118	)	(4,233	)	142,672		$	—		120		4		—		1,423,899				(1,277,118	)	(4,233	)	142,672
Impact of adoption of Topic 606	—		—	—	—		—					(22,720	)	—		(22,720	)	—			—		—		—		—				(22,720	)	—		(22,720	)
Impact of adoption of ASU 2017-12	—		—	—	—	—			(605	)		605			—		—			—		—		—		—			(605	)	605			—
Adjusted balance at January 1, 2018	—		120	4	—	1,423,899			(1,300,443	)		(3,628	)		119,952		$	—		120		4		—		1,423,899			(1,300,443	)	(3,628	)		119,952
Net loss	—		—	—	—	—			(30,838	)		—			(30,838	)	—			—		—		—		—			(30,838	)	—			(30,838	)
Other comprehensive income	—		—	—	—	—			—			11,329			11,329		—			—		—		—		—			—		11,329			11,329
Stock-based compensation	—		—	—	—	285			—			—			285		—			—		—		—		285			—		—			285
Value of shares withheld for minimum tax liability	—		—	—	—	(116	)		—			—			(116	)	—			—		—		—		(116	)		—		—			(116	)
Balance at March 31, 2018	$	—	120	4	—	1,424,068			(1,331,281	)		7,701			100,612		$	—		120		4		—		1,424,068			(1,331,281	)	7,701			100,612
Net loss																	—			—		—		—		—			(244,367	)	—			(244,367	)
Other comprehensive income																	—			—		—		—		—			—		4,698			4,698
Stock-based compensation																	—			—		—		—		684			—		—			684
Value of shares withheld for minimum tax liability																	—			—		—		—		(28	)		—		—			(28	)
Balance at June 30, 2018																	$	—		120		4		—		1,424,724			(1,575,648	)	12,399			(138,401	)
Net loss																	—			—		—		—		—			(40,095	)	—			(40,095	)
Other comprehensive income																	—			—		—		—		—			—		3,269			3,269
Stock-based compensation																	—			1		—		—		682			—		—			683
Value of shares withheld for minimum tax liability																	—			—		—		—		(27	)		—		—			(27	)
Balance at September 30, 2018																	$	—		121		4		—		1,425,379			(1,615,743	)	15,668			(174,571	)

See accompanying notes to condensed consolidated financial statements.

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ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(1) Basis of Presentation

The accompanying Ascent Capital Group, Inc. ("Ascent Capital" or the "Company") condensed consolidated financial statements represent the financial position and results of operations of Ascent Capital and its consolidated subsidiaries. Monitronics International, Inc. ~~("MONI"~~and its consolidated subsidiaries (collectively, "Brinks Home Security^TM") is, are the primary, wholly owned ~~operating subsidiary~~subsidiaries of the Company. ~~MONI~~Brinks Home Security provides residential customers and commercial client accounts with monitored home and business security systems, as well as interactive and home automation ~~services. MONI is supported by a network of independent Authorized Dealers providing products and support to customers~~services, in the United States, Canada and Puerto Rico. MONI’s wholly owned subsidiary, LiveWatch Security LLC (“LiveWatch”) is a Do-It-Yourself home security firm, offering professionally monitored security services through a direct-to-consumer sales channel.

On February 26, 2018, MONI entered into an exclusive, long-term, trademark licensing agreement with The Brink’s Company ("Brink's"), which will result in a complete rebranding of MONI and LiveWatch as Brinks Home Security^TM~~. Under the terms of the agreement, MONI will have exclusive use of the BRINKS and~~ Brinks Home Security ~~trademarks related~~customers are obtained through its direct-to-consumer sales channel or its Authorized Dealer network, which provides product and installation services, as well as support to ~~the residential smart home~~customers. Its direct-to-consumer channel offers both Do-It-Yourself ("DIY") and ~~home~~professional installation security ~~categories in the U.S. and Canada. Effective April 1, 2018, MONI will pay Brink’s customary licensing fees and minimum and growth-based royalties that will increase over time as~~solutions.

The rollout of the Brinks Home Security brand is reintroduced. The agreement provides for an initial term of seven years and, subject to certain conditions, allows for subsequent renewal periods whereby MONI can extend the agreement beyond 20 years. The Company is currently completing rebranding tasks, as well as integration tasks, such that the MONI and LiveWatch sales channels will be combined under the Brinks Home Security brand. The brand rollout is expected to occur in the second quarter of ~~2018.~~2018 included the integration of our business model under a single brand. As part of the integration, we reorganized our business from two reportable segments, "MONI" and "LiveWatch," to one reportable segment, Brinks Home Security. Following the integration, the Company's chief operating decision maker reviews internal financial information on a consolidated Brinks Home Security basis, which excludes corporate Ascent Capital activities and consolidation eliminations not associated with the operation of Brinks Home Security. Total assets related to corporate Ascent Capital activities are $110,937,000 and $113,698,000 as of September 30, 2018 and December 31, 2017, respectively. Net gain (loss) from continuing operations before income taxes related to corporate Ascent Capital activities was $(6,026,000) and $(13,232,000) for the three and nine months ended September 30, 2018, as compared to $(3,628,000) and $7,932,000 for the three and nine months ended September 30, 2017.

The unaudited interim financial information of the Company has been prepared in accordance with Article 10 of the Securities and Exchange Commission’s (the "SEC") Regulation S-X. Accordingly, it does not include all of the information required by generally accepted accounting principles in the United States ("GAAP") for complete financial statements. The Company’s unaudited condensed consolidated financial statements as of ~~March 31,~~September 30, 2018, and for the three and nine months ended ~~March 31,~~September 30, 2018 and 2017, include Ascent Capital and all of its direct and indirect subsidiaries. The accompanying interim condensed consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results for such periods. The results of operations for any interim period are not necessarily indicative of results for the full year. These condensed consolidated financial statements should be read in conjunction with the Ascent Capital Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 5, 2018.

The Company adopted Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) ("Topic 606") using the modified retrospective approach on January 1, 2018, at which time it became effective for the Company. The Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings.

The Company ~~also~~ adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12") which ~~simplifies~~amends the hedge accounting rules to align risk management activities and financial reporting by simplifying the application of hedge accounting guidance. The ~~standard was~~guidance expands the ability to hedge nonfinancial and financial risk components and eliminates the requirement to separately measure and report hedge ineffectiveness. Additionally, certain hedge effectiveness assessment requirements may be accomplished qualitatively instead of quantitatively. The Company early adopted ASU 2017-12 effective January 1, 2018, and ~~the Company recognized~~as such, an opening equity adjustment ~~to reduce~~of $605,000 was recognized that reduced Accumulated deficit, offset by a gain in Accumulated other comprehensive income (loss). This adjustment primarily relates to the derecognition of the cumulative ineffectiveness recorded on the Company's interest rate swap derivative instruments, as well as adjustments to cumulative dedesignation adjustments. The Company does not expect this adoption to have a material impact on its financial position, results of operations or cash flows on an ongoing basis.

The Company early adopted ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). Prior to the adoption of ASU 2017-04, the fair value of the reporting unit was compared with the carrying value of the reporting unit (identified as "Step 1"). If the fair value of the reporting unit was lower than its carrying amount, then the implied fair value of goodwill was calculated. If the implied fair value of goodwill was lower than the carrying value of goodwill, an impairment was recognized (identified as "Step 2"). ASU 2017-04 eliminated Step 2 from the impairment test; therefore, a goodwill impairment is recognized as the difference of the fair value and the carrying value of the reporting unit.

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The comparative information has not been restated and continues to be reported under the accounting standards in effect during those periods. See note ~~2, Recent Accounting Pronouncements~~4, Revenue Recognition, and note ~~3, Revenue Recognition~~6, Goodwill, in the notes to the condensed consolidated financial statements for further discussion.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of revenue and expenses for each reporting period. The significant estimates made in preparation of the Company’s condensed consolidated financial statements primarily relate to valuation of subscriber accounts, valuation of deferred tax assets and valuation of goodwill. These estimates are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts them when facts and circumstances change. As the effects of future events cannot be determined with any certainty, actual results could differ from the estimates upon which the carrying values were based.

(2) Going Concern

Brinks Home Security has substantial indebtedness, including $585,000,000 principal of senior notes at September 30, 2018, maturing on April 1, 2020 (the "Senior Notes"), and an existing credit facility with a term loan in principal of $1,078,000,000 as of September 30, 2018, maturing September 30, 2022, and a revolving credit facility with an outstanding balance of $159,100,000 as of September 30, 2018, maturing September 30, 2021 (the term loan and the revolver, together, the "Credit Facility"). The maturity date for each of the term loan and the revolving credit facility under the Credit Facility 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. In addition, if Brinks Home Security is unable to refinance the Senior Notes, or demonstrate the ability to meet its financial covenants for a period of twelve months after the issuance date, prior to the filing with the SEC of their Annual Report on Form 10-K for the year ended December 31, 2018, they may be subject to a going concern qualification in connection with their external audit report, which would be an event of default under the Credit Facility. 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. These matters raise substantial doubt regarding the Company's ability to continue as a going concern within one year from the date these financial statements are issued.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. As a result, the Company’s consolidated financial statements as of September 30, 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.

On September 24, 2018, Ascent Capital and Brinks Home Security entered into a Transaction Support Agreement (which was amended and restated pursuant to the Amended and Restated Transaction Support Agreement, entered into on October 30, 2018 (the "Amended and Restated Support Agreement")) with certain holders collectively owning or controlling not less than $380 million aggregate principal amount of the Senior Notes, representing approximately 65% of the Senior Notes (collectively, the "Consenting Noteholders"). The Amended and Restated Support Agreement incrementally included a group of lenders for the Credit Facility term loan holding over 50% of the aggregate outstanding principal amount of the Credit Facility term loan (collectively, the "Credit Facility Lenders"). The Consenting Noteholders and Credit Facility Lenders have committed to support and fully participate in proposed agreed upon transactions that would result in the refinancing of the Senior Notes, if consummated. See Note 14, Subsequent Events, for further information. While management continues to negotiate refinancing terms with its debt holders, as of the issuance date of these financial statements, Brinks Home Security has not refinanced the Senior Notes and there can be no assurances that the negotiations management is pursuing will result in the consummation of transactions that would refinance the Senior Notes.

(3) Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the "FASB") issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 requires the lessee to recognize assets and liabilities for leases with lease terms of more than twelve months. For leases with a term of twelve months or less, the Company is permitted to make an accounting policy election by

class of underlying asset not to recognize lease assets and lease liabilities. Further, ASU 2016-02 requires a finance lease to be recognized as both an interest expense and an amortization of the associated asset. Operating leases generally recognize the associated expense on a straight line basis. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018. ASU 2018-10, Codification Improvements to Topic 842, Leases, clarifies certain aspects of ASU 2016-12 and the two updates will be adopted concurrently. ASU 2016-02 requires leases to be recognized and measured at the ~~Company to adopt~~beginning of the ~~standard~~earliest period presented using a modified retrospective approach upon adoption. However, ASU 2018-11, Leases (Topic 842): Targeted Improvements provides an alternative transition method by which leases are recognized at the date

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of adoption and ~~becomes effective on January 1, 2019.~~a cumulative-effect adjustment to the opening balance of retained earnings is recognized in the period of adoption. The Company plans to adopt using this alternative and is currently evaluating the impact that ~~ASU 2016-02~~these standards will have on its financial position, results of operations and cash flows.

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~ ("ASU 2017-04"). Currently, the fair value of the reporting unit is compared with the carrying value of the reporting unit (identified as "Step 1"). If the fair value of the reporting unit is lower than its carrying amount, then the implied fair value of goodwill is calculated. If the implied fair value of goodwill is lower than the carrying value of goodwill an impairment is recognized (identified as "Step 2"). ASU 2017-04 eliminates Step 2 from the impairment test; therefore, a goodwill impairment will be recognized as the difference of the fair value and the carrying value. ASU 2017-04 becomes effective on January 1, 2020 with early adoption permitted. The Company is currently evaluating when to adopt the standard.

In August 2017, the FASB issued ASU 2017-12 to amend the hedge accounting rules to align risk management activities and financial reporting by simplifying the application of hedge accounting guidance. The guidance expands the ability to hedge nonfinancial and financial risk components and eliminates the requirement to separately measure and report hedge ineffectiveness. Additionally, certain hedge effectiveness assessment requirements may be accomplished qualitatively instead of quantitatively. ASU 2017-12 is effective for annual and interim periods beginning after December 15, 2018 with early adoption permitted. The Company early adopted ASU 2017-12 effective January 1, 2018, and as such, an opening equity adjustment of $605,000 was recognized that reduced Accumulated deficit, offset by a gain in Accumulated other comprehensive income (loss). This adjustment primarily relates to the derecognition of the cumulative ineffectiveness recorded on the Company's interest rate swap derivative instruments, as well as adjustments to cumulative dedesignation adjustments. The Company does not expect this adoption to have a material impact on its financial position, results of operations or cash flows on an ongoing basis.

~~(3)~~(4) Revenue Recognition

Topic 606 amends and supersedes FASB Accounting Standards Codification ("ASC") Topic 605, Revenue Recognition ("Topic 605"). The core principle of Topic 606 is that revenue will be recognized when the transfer of promised goods or services to customers is made in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Accounting Policy for Periods Commencing January 1, 2018

~~The Company~~Brinks Home Security offers its subscribers professional alarm monitoring services, as well as interactive and home automation services, through equipment at the subscriber's site that communicates with ~~the Company’s~~Brinks Home Security’s central monitoring station and interfaces with other equipment at the site and third party technology companies for interactive and home automation services. These services are typically provided under alarm monitoring agreements (“AMAs”) between ~~the Company~~Brinks Home Security and the subscriber. The equipment at the site is either obtained independently from ~~the Company’s~~Brinks Home Security’s network of third party Authorized Dealers or directly from ~~the Company,~~Brinks Home Security via its direct-to-consumer sales channel. ~~The Company~~Brinks Home Security also offers equipment sales and installation services and, to its existing subscribers, maintenance services on existing alarm equipment. ~~The Company~~Brinks Home Security also collects fees for contract monitoring, which are services provided to other security alarm companies for monitoring their accounts on a wholesale basis and other fees from subscribers for late fee or insufficient fund charges.

Revenue under subscriber AMAs is allocated to alarm monitoring revenue and, if applicable, product and installation revenue based on the stand alone selling prices (“SSP”) of each performance obligation as a percentage of the total SSP of all performance obligations. Allocated alarm monitoring revenue is recognized as the monthly service is provided. Allocated product and installation revenue is recognized when the product sale is complete or shipped and the installation service is provided, typically at inception of the AMA. Product and installation revenue is not applicable to AMA's acquired from Authorized Dealers in their initial term. Any cash not received from the subscriber at the time of product sale and installation is recognized as a contract asset at inception of the AMA and is subsequently amortized over the subscriber contract term as a reduction of the amounts billed for professional alarm monitoring, interactive and home automation services. If a subscriber cancels the AMA within the negotiated term, any existing contract asset is determined to be impaired and is immediately expensed in full to Selling, general and administrative expense on the condensed consolidated statement of operations.

Maintenance services are billed and recognized as revenue when the services are completed in the home and agreed to by the subscriber under the subscriber AMA. Contract monitoring fees are recognized as alarm monitoring revenue as the monitoring

service is provided. Other fees are recognized as other revenue when billed to the subscriber which coincides with the timing of when the services are provided.

Disaggregation of Revenue

Revenue is disaggregated by source of revenue as follows (in thousands):


	Three Months Ended March 31,			Three Months Ended September 30,			Nine Months Ended September 30,
	2018		2017	2018		2017	2018		2017
Alarm monitoring revenue	$	124,840	136,891	$	125,004	134,317	$	374,689	407,660
Product and installation revenue	8,147		3,294	11,360		2,899	28,984		9,328
Other revenue	766		1,015	792		995	2,249		2,921
Total Net revenue	$	133,753	141,200	$	137,156	138,211	$	405,922	419,909

Contract Balances

The following table provides information about receivables, contract assets and contract liabilities from contracts with customers (in thousands):

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	March 31, 2018		At adoption	September 30, 2018		At adoption
Trade receivables, net	$	12,300	12,645	$	13,162	12,645
Contract assets, net - current portion (a)	13,543		14,197	13,836		14,197
Contract assets, net - long-term portion (b)	11,101		10,377	16,621		10,377
Deferred revenue	13,477		12,892	12,069		12,892

(a) Amount is included in Prepaid and other current assets in the unaudited condensed consolidated balance sheets.

(b) Amount is included in Other assets in the unaudited condensed consolidated balance sheets.

Changes in Accounting Policies

The Company adopted Topic 606, effective January 1, 2018, using the modified retrospective transition method. Under the modified retrospective transition method, the Company evaluated active AMAs on the adoption date as if each AMA had been accounted for under Topic 606 from its inception. Some revenue related to AMAs originated through ~~our~~Brinks Home Security's direct-to-consumer channel or through extensions that would have been recognized in future periods under Topic 605 were recast under Topic 606 as if revenue had been accelerated and recognized in prior periods, as it ~~will be~~was allocated to product and installation performance obligations. A contract asset was recorded as of the adoption date for any cash that has yet to be collected on the accelerated revenue. As this transition method requires that the Company not adjust historical reported revenue amounts, the accelerated revenue that would have been recognized under this method prior to the adoption date was recorded as an adjustment to opening retained earnings and, thus, will not be recognized as revenue in future periods as previously required under Topic 605. Therefore, the comparative information has not been adjusted and continues to be reported under Topic 605.

Under Topic 605, revenue provided under the AMA was recognized as the services were provided, based on the recurring monthly revenue amount billed for each month under contract. Product, installation and service revenue generally was recognized as billed and incurred. Under Topic 606, the Company concluded that certain product and installation services sold or provided to our customers at AMA inception are capable of being distinct and are distinct within the context of the contract. As such, when ~~the Company~~Brinks Home Security initiates an AMA with a customer directly and provides equipment and installation services, each component is considered a performance obligation that must have revenue allocated accordingly. The allocation is based on the SSP of each performance obligation as a percentage of the total SSP of all performance obligations multiplied by the total consideration, or cash, expected to be received over the contract term. These AMAs may relate to new customers originated by ~~the Company~~Brinks Home Security through its direct-to-consumer channel or existing customers who agree to new contract terms through customer service offerings. For AMAs with multiple performance obligations, management notes that a certain amount of the revenue billed on a recurring monthly basis is recognized earlier under Topic 606 than it was recognized under Topic 605, as a portion of that revenue is allocated to the equipment sale and installation, which is satisfied upon delivery of the product and performance of the installation services at AMA inception.

Revenue on AMAs originated through the Authorized Dealer program are not impacted by Topic 606 in their initial term, as the customer contracts for the equipment sale and installation separately with the Authorized Dealer prior to ~~the Company~~Brinks Home Security purchasing the AMA from the Authorized Dealer. Revenue on these customers is recognized as the service is provided based on the recurring monthly revenue amount billed for each month of the AMA. Maintenance service revenue for repair of existing alarm equipment at the subscribers' premises will continue to be billed and recognized based on their SSP at the time ~~the Company~~Brinks Home Security performs the services.

Topic 606 also requires the deferral of incremental costs of obtaining a contract with a customer. Certain direct and incremental costs were capitalized under Topic 605, including on new AMAs obtained in connection with a subscriber move (“Moves Costs”). Under Topic 606, Moves Costs are expensed as incurred to accompany the allocated revenue recognized upon product and installation performance obligations recognized at the AMA inception. There are no other significant changes in contract costs that are capitalized or the period over which they are expensed.

Impacts on Financial Statements

The significant effects of adopting Topic 606 are changes to Prepaid and other current assets, Subscriber accounts, net, Other assets, net, Net revenue, Cost of services, Selling, general and administrative and Amortization of subscriber accounts for the period beginning January 1, 2018 for AMAs initiated by ~~the Company~~Brinks Home Security with the customer directly with multiple

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performance obligations, as a portion of that revenue is allocated to the equipment sale and installation, which is satisfied upon delivery of the product and performance of the installation services at AMA inception.

The following tables summarize the impacts of adopting Topic 606 on the Company’s condensed consolidated financial statements as of and for the three and nine months ended ~~March 31,~~September 30, 2018 (in thousands):

i. Condensed consolidated balance sheets


	Impact of changes in accounting policies							Impact of changes in accounting policies
	As reported March 31, 2018			Adjustments		Balances without adoption of Topic 606		As reported September 30, 2018			Adjustments		Balances without adoption of Topic 606
Assets
Current assets:
Cash and cash equivalents	$	30,087		—		30,087		$	137,561		—		137,561
Restricted cash	93			—		93		133			—		133
Marketable securities, at fair value	107,450			—		107,450		—			—		—
Trade receivables, net of allowance for doubtful accounts	12,300			—		12,300		13,162			—		13,162
Prepaid and other current assets	23,498			(13,543	)	9,955		25,883			(13,836	)	12,047
Total current assets	173,428			(13,543	)	159,885		176,739			(13,836	)	162,903
Property and equipment, net of accumulated depreciation	34,070			—		34,070		36,568			—		36,568
Subscriber accounts and deferred contract acquisition costs, net of accumulated amortization	1,224,937			48,249		1,273,186		1,215,831			47,095		1,262,926
Dealer network and other intangible assets, net of accumulated amortization	3,941			—		3,941		—			—		—
Goodwill	563,549			—		563,549		349,149			—		349,149
Other assets, net	27,633			(11,101	)	16,532		36,819			(16,621	)	20,198
Total assets	$	2,027,558		23,605		2,051,163		$	1,815,106		16,638		1,831,744
Liabilities and Stockholders’ Equity
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities:
Accounts payable	$	12,910		—		12,910		$	11,661		—		11,661
Accrued payroll and related liabilities	6,145			—		6,145		6,513			—		6,513
Other accrued liabilities	66,584			—		66,584		46,840			—		46,840
Deferred revenue	13,477			1,192		14,669		12,069			1,133		13,202
Holdback liability	7,601			—		7,601		10,766			—		10,766
Current portion of long-term debt	11,000			—		11,000		11,000			—		11,000
Total current liabilities	117,717			1,192		118,909		98,849			1,133		99,982
Non-current liabilities:
Long-term debt	1,783,253			—		1,783,253		1,869,502			—		1,869,502
Long-term holdback liability	2,191			—		2,191		2,031			—		2,031
Derivative financial instruments	6,553			—		6,553		1,139			—		1,139
Deferred income tax liability, net	13,973			—		13,973		15,298			—		15,298
Other liabilities	3,259			—		3,259		2,858			—		2,858
Total liabilities	1,926,946			1,192		1,928,138		1,989,677			1,133		1,990,810
Commitments and contingencies
Stockholders’ equity:
Stockholders’ (deficit) equity:
Preferred stock	—			—		—		—			—		—
Series A common stock	120			—		120		121			—		121
Series B common stock	4			—		4		4			—		4
Series C common stock	—			—		—		—			—		—
Additional paid-in capital	1,424,068			—		1,424,068		1,425,379			—		1,425,379
Accumulated deficit	(1,331,281		)	22,413		(1,308,868	)	(1,615,743		)	15,505		(1,600,238	)
Accumulated other comprehensive income, net	7,701			—		7,701		15,668			—		15,668
Total stockholders’ equity	100,612			22,413		123,025
Total liabilities and stockholders’ equity	$	2,027,558		23,605		2,051,163
Total stockholders’ (deficit) equity								(174,571		)	15,505		(159,066	)
Total liabilities and stockholders’ (deficit) equity								$	1,815,106		16,638		1,831,744

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ii. Condensed consolidated statements of operations and comprehensive income (loss)


	Impact of changes in accounting policies							Impact of changes in accounting policies
	As reported three months ended March 31, 2018			Adjustments		Balances without adoption of Topic 606		As reported three months ended September 30, 2018			Adjustments		Balances without adoption of Topic 606
Net revenue	$	133,753		(325	)	133,428		$	137,156		(4,216	)	132,940
Operating expenses:
Cost of services	32,701			(1,922	)	30,779		35,059			(1,774	)	33,285
Selling, general and administrative, including stock-based and long-term incentive compensation	37,406			21		37,427		38,199			(103	)	38,096
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets	54,411			1,883		56,294		52,671			1,870		54,541
Depreciation	2,621			—		2,621		2,886			—		2,886
Loss on goodwill impairment								—			—		—
	127,139			(18	)	127,121		128,815			(7	)	128,808
Operating income	6,614			(307	)	6,307
Operating loss								8,341			(4,209	)	4,132
Other expense (income), net:
Interest income	(481		)	—		(481	)	(624		)	—		(624	)
Interest expense	38,652			—		38,652		40,943			—		40,943
Other income, net	(2,065		)	—		(2,065	)
Refinancing expense								6,731			—		6,731
Other expense, net								40			—		40
	36,106			—		36,106		47,090			—		47,090
Loss before income taxes	(29,492		)	(307	)	(29,799	)	(38,749		)	(4,209	)	(42,958	)
Income tax expense	1,346			—		1,346		1,346			—		1,346
Net loss	(30,838		)	(307	)	(31,145	)	(40,095		)	(4,209	)	(44,304	)
Other comprehensive income (loss):
Unrealized holding loss on marketable securities, net	(3,077		)	—		(3,077	)	—			—		—
Unrealized gain on derivative contracts, net	14,406			—		14,406		3,269			—		3,269
Total other comprehensive income, net of tax	11,329			—		11,329		3,269			—		3,269
Comprehensive loss	$	(19,509	)	(307	)	(19,816	)	$	(36,826	)	(4,209	)	(41,035	)

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	Impact of changes in accounting policies
	As reported nine months ended September 30, 2018			Adjustments		Balances without adoption of Topic 606
Net revenue	$	405,922		(6,986	)	398,936
Operating expenses:
Cost of services	100,807			(5,292	)	95,515
Selling, general and administrative, including stock-based and long-term incentive compensation	109,992			(112	)	109,880
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets	160,973			5,633		166,606
Depreciation	8,378			—		8,378
Loss on goodwill impairment	214,400			—		214,400
	594,550			229		594,779
Operating loss	(188,628		)	(7,215	)	(195,843	)
Other expense (income), net:
Interest income	(1,879		)	—		(1,879	)
Interest expense	120,017			—		120,017
Refinancing expense	6,731			—		6,731
Other income, net	(2,236		)	—		(2,236	)
	122,633			—		122,633
Loss before income taxes	(311,261		)	(7,215	)	(318,476	)
Income tax expense	4,039			—		4,039
Net loss	(315,300		)	(7,215	)	(322,515	)
Other comprehensive income (loss):
Unrealized holding loss on marketable securities, net	(3,900		)	—		(3,900	)
Unrealized gain on derivative contracts, net	23,196			—		23,196
Total other comprehensive income, net of tax	19,296			—		19,296
Comprehensive loss	$	(296,004	)	(7,215	)	(303,219	)

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iii. Condensed consolidated statements of cash flows


	Impact of changes in accounting policies							Impact of changes in accounting policies
	As reported three months ended March 31, 2018			Adjustments		Balances without adoption of Topic 606		As reported nine months ended September 30, 2018			Adjustments		Balances without adoption of Topic 606
Cash flows from operating activities:
Net loss	$	(30,838	)	(307	)	(31,145	)	$	(315,300	)	(7,215	)	(322,515	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets	54,411			1,883		56,294		160,973			5,633		166,606
Depreciation	2,621			—		2,621		8,378			—		8,378
Stock-based and long-term incentive compensation	226			—		226		1,600			—		1,600
Deferred income tax expense	662			—		662		1,987			—		1,987
Refinancing expense								6,731			—		6,731
Amortization of debt discount and deferred debt costs	2,959			—		2,959		9,108			—		9,108
Bad debt expense	3,017			—		3,017		8,511			—		8,511
Goodwill impairment								214,400			—		214,400
Other non-cash activity, net	41			—		41		(186		)	—		(186	)
Changes in assets and liabilities:
Trade receivables	(2,672		)	—		(2,672	)	(9,028		)	—		(9,028	)
Prepaid expenses and other assets	851			—		851		(8,359		)	7,016		(1,343	)
Contract asset, net	(70		)	70		—
Subscriber accounts - deferred contract acquisition costs	(898		)	63		(835	)	(4,529		)	89		(4,440	)
Payables and other liabilities	17,644			388		18,032		(4,752		)	(825	)	(5,577	)
Net cash provided by operating activities	47,954			2,097		50,051		69,534			4,698		74,232
Cash flows from investing activities:
Capital expenditures	(3,310		)	—		(3,310	)	(11,513		)	—		(11,513	)
Cost of subscriber accounts acquired	(24,560		)	(2,097	)	(26,657	)	(111,531		)	(4,698	)	(116,229	)
Purchases of marketable securities	(7,998		)	—		(7,998	)	(39,022		)	—		(39,022	)
Proceeds from sale of marketable securities	5,495			—		5,495		143,316			—		143,316
Increase in restricted cash	(93		)	—		(93	)
Net cash used in investing activities	(30,466		)	(2,097	)	(32,563	)	(18,750		)	(4,698	)	(23,448	)
Cash flows from financing activities:
Proceeds from long-term debt	50,000			—		50,000		218,950			—		218,950
Payments on long-term debt	(47,750		)	—		(47,750	)	(136,600		)	—		(136,600	)
Payments of financing costs								(5,734		)	—		(5,734	)
Value of shares withheld for share-based compensation	(116		)	—		(116	)	(171		)	—		(171	)
Net cash provided by financing activities	2,134			—		2,134		76,445			—		76,445
Net increase in cash and cash equivalents	19,622			—		19,622
Cash and cash equivalents at beginning of period	10,465			—		10,465
Cash and cash equivalents at end of period	$	30,087		—		30,087
Net increase in cash, cash equivalents and restricted cash								127,229			—		127,229
Cash, cash equivalents and restricted cash at beginning of period								10,465			—		10,465
Cash, cash equivalents and restricted cash at end of period								$	137,694		—		137,694

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~~(4)~~(5) Investments in Marketable Securities

In the third quarter of 2018, Ascent Capital ~~owns~~divested of all marketable securities, which primarily ~~consisting~~consisted of diversified corporate bond funds. The following table presents a summary of amounts recorded on the condensed consolidated balance sheets (amounts in thousands):


	As of March 31, 2018					As of September 30, 2018
	Cost Basis (b)		Unrealized Gains	Unrealized Losses	Total	Cost Basis		Unrealized Gains	Unrealized Losses	Total
Mutual funds ~~(a)~~	$	106,627	823	—	107,450	$	—	—	—	—
Ending balance	$	106,627	823	—	107,450	$	—	—	—	—

	As of December 31, 2017					As of December 31, 2017
	Cost Basis (b)		Unrealized Gains	Unrealized Losses	Total	Cost Basis		Unrealized Gains	Unrealized Losses	Total
Equity securities	$	3,432	2,039	—	5,471	$	3,432	2,039	—	5,471
Mutual funds (a)	98,628		1,859	—	100,487	98,628		1,859	—	100,487
Ending balance	$	102,060	3,898	—	105,958	$	102,060	3,898	—	105,958


(a)	Primarily consists of corporate bond funds.

~~(b)~~

When an other-than-temporary impairment occurs, the Company reduces the cost basis of the marketable security involved. In the third quarter of 2017, the Company recognized a non-cash charge for an other-than-temporary impairment of $220,000 on its equity securities. The equity security impairment was primarily attributable to foreign exchange losses based on weakening of the trading currency of the underlying investment. The equity securities were sold in the first quarter of 2018 for a realized gain of $2,063,000 due to a third party completing the acquisition of the underlying investee.

The following table provides the realized and unrealized investment gains and losses ~~and~~recognized in the ~~total proceeds received from the sale~~condensed consolidated statements of ~~marketable securities~~operations (amounts in thousands):

Three Months Ended
March 31,
2018 2017
Gross realized gains $ 2,063
6
Gross realized losses $ —
—
Total proceeds $ 5,495
997



	Three Months Ended September 30,					Nine Months Ended September 30,
	2018			2017		2018		2017
Net gains and (losses) recognized during the period on trading securities	$	(40	)	(2	)	$	2,234	1
Less: Net gains and (losses) recognized during the period on trading securities sold during the period	(40		)	(2	)	2,234		1
Unrealized gains and (losses) recognized during the reporting period on trading securities still held at the reporting date	$	—		—		$	—	—

~~(5)~~(6) Goodwill

The following table provides the activity and balances of goodwill by reporting unit (amounts in thousands):

MONI LiveWatch Total
Balance at 12/31/2017 $ 527,502
$ 36,047
$ 563,549
Period activity —
—
—
Balance at 3/31/2018 $ 527,502
$ 36,047
$ 563,549



	MONI			LiveWatch			Brinks Home Security		Total
Balance at 12/31/2017	$	527,502		$	36,047		$	—	$	563,549
Goodwill impairment	(214,400		)	—			—		(214,400		)
Reporting unit reallocation	(313,102		)	(36,047		)	349,149		—
Balance at 9/30/2018	$	—		$	—		$	349,149	$	349,149

The Company accounts for its goodwill pursuant to the provisions of FASB ASC Topic 350, Intangibles - Goodwill and Other ("FASB ASC Topic 350"). In accordance with FASB ASC Topic 350, goodwill is not amortized, but rather tested for impairment annually, or earlier if an event occurs, or circumstances change, that indicate the fair value of a reporting unit may be below its carrying amount.

~~In the first quarter~~As of May 31, 2018, the Company determined that a triggering event had occurred due to a sustained decrease in the Company's share price. In response to the triggering event, the Company performed a quantitative impairment test ~~noting that~~for both the MONI and LiveWatch reporting units. Fair value was determined using a combination of the income-based approach (using a discount rate of 8.50%) and market-based approach for the MONI reporting unit and an income-based approach (using a discount rate of 8.50%) for the LiveWatch reporting unit. Based on the analysis, the fair value of the LiveWatch reporting unit substantially exceeded its carrying value, while the carrying amount for the MONI reporting unit exceeded its estimated fair value, ~~for each of~~which indicated an impairment at the ~~Company's~~MONI reporting ~~units exceeded the carrying amount of the underlying assets. Thus no impairment was indicated.~~unit.

~~(6)~~

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The Company early adopted ASU 2017-04, which eliminated Step 2 from the goodwill impairment test, and as such, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. Applying this methodology, we recorded an impairment charge of $214,400,000 for the MONI reporting unit during the three months ended June 30, 2018. Factors leading to the impairment are primarily the experience of overall lower account acquisition in recent periods. Using this information, we adjusted the growth outlook for this reporting unit, which resulted in reductions in future cash flows and a lower fair value calculation under the income-based approach. Additionally, decreases in observable market share prices for comparable companies in the quarter reduced the fair value calculated under the market-based approach.

In early June 2018, the reportable segments known as MONI and LiveWatch were combined and presented as Brinks Home Security. Refer to Note 1, Basis of Presentation, for further discussion on the change in reportable segments. As a result of the change in reportable segments, goodwill assigned to these former reporting units of $313,102,000 and $36,047,000, for MONI and LiveWatch, respectively, have been reallocated and combined as of June 30, 2018 under the Brinks Home Security reporting unit.

(7) Other Accrued Liabilities

Other accrued liabilities consisted of the following (amounts in thousands):


	March 31, 2018		December 31, 2017		September 30, 2018		December 31, 2017
Interest payable	$	28,287	$	15,927	$	28,403	$	15,927
Income taxes payable	3,598		2,950		2,289		2,950
Legal settlement reserve (a)	23,000		23,000		—		23,000
Other	11,699		10,452		16,148		10,452
Total Other accrued liabilities	$	66,584	$	52,329	$	46,840	$	52,329

(a) See note ~~12,~~13, Commitments, Contingencies and Other Liabilities, for further information.

~~(7)~~(8) Long-Term Debt

Long-term debt consisted of the following (amounts in thousands):

March 31,
2018 December 31,
2017
Ascent Capital 4.00% Convertible Senior Notes due July 15, 2020 with an effective rate of 8.9% $ 83,795
$ 82,614
MONI 9.125% Senior Notes due April 1, 2020 with an effective rate of 9.5% 580,658
580,159
MONI term loan, matures September 30, 2022, LIBOR plus 5.50%, subject to a LIBOR floor of 1.00%, with an effective rate of 7.7% 1,058,020
1,059,598
MONI $295 million revolving credit facility, matures September 30, 2021, LIBOR plus 4.00%, subject to a LIBOR floor of 1.00%, with an effective rate of 6.0% 71,780
66,673
1,794,253
1,789,044
Less current portion of long-term debt (11,000 ) (11,000 )
Long-term debt $ 1,783,253
$ 1,778,044



	September 30, 2018			December 31, 2017
Ascent Capital 4.00% Convertible Senior Notes due July 15, 2020 with an effective rate of 9.1%	$	86,285		$	82,614
Brinks Home Security 9.125% Senior Notes due April 1, 2020 with an effective rate of 9.5%	581,686			580,159
Brinks Home Security term loan, matures September 30, 2022, LIBOR plus 5.50%, subject to a LIBOR floor of 1.00%, with an effective rate of 8.2%	1,054,933			1,059,598
Brinks Home Security $295 million revolving credit facility, matures September 30, 2021, LIBOR plus 4.00%, subject to a LIBOR floor of 1.00%, with an effective rate of 3.5%	157,598			66,673
	1,880,502			1,789,044
Less current portion of long-term debt	(11,000		)	(11,000		)
Long-term debt	$	1,869,502		$	1,778,044

Ascent Capital Convertible Senior Notes

The Ascent Capital convertible senior notes total $96,775,000 in aggregate principal amount, mature on July 15, 2020 and bear interest at 4.00% per annum (the "Convertible Notes"). Interest on the Convertible Notes is payable semi-annually on January 15 and July 15 of each year. ~~The~~On August 30, 2018, Ascent Capital entered into a Supplemental Indenture in which the Company surrendered its right to elect to deliver shares of common stock or a combination of cash and shares of common stock upon conversion of the Convertible Notes ~~are convertible, under~~(the "Convertible Notes Supplemental Indenture"). Following the execution of the Supplemental Indenture, the Company may satisfy its conversion obligation solely in cash.

Under certain circumstances, ~~into cash, shares of Ascent Capital's Series A common stock, par value $0.01 per share (the "Series A Common Stock"), or any combination thereof at Ascent Capital’s election.~~

~~Holders~~holders of the Convertible Notes ("Noteholders") have the right, at their option, to convert all or any portion of such Convertible Notes, subject to the satisfaction of certain conditions, at an initial conversion rate of 9.7272 shares of Series A Common Stock per $1,000 principal amount of Convertible Notes (subject to adjustment in certain

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situations), which represents an initial conversion price per share of Series A Common Stock of approximately $102.804 (the "Conversion Price"). ~~Ascent Capital is entitled to settle any such conversion by delivery of cash, shares of Series A Common Stock or any combination thereof at Ascent Capital's election.~~ In addition, Noteholders have the right to submit Convertible Notes for conversion, subject to the satisfaction of certain conditions, in the event of certain corporate transactions.

In the event of a fundamental change (as such term is defined in the indenture governing the Convertible Notes) at any time prior to the maturity date, each Noteholder shall have the right, at such Noteholder’s option, to require Ascent Capital to repurchase for cash any or all of such Noteholder’s Convertible Notes on the repurchase date specified by Ascent Capital at a repurchase price equal to 100% of the principal amount thereof, together with accrued and unpaid interest, including unpaid additional interest, if any, unless the repurchase date occurs after an interest record date and on or prior to the related interest payment date, as specified in the indenture.

The Convertible Notes are within the scope of FASB ASC Subtopic 470-20, Debt with Conversion and Other Options, and as such are required to be separated into a liability and equity component. The carrying amount of the liability component is calculated by measuring the fair value of a similar liability (including any embedded features other than the conversion option) that does not have an associated conversion option. The carrying amount of the equity component is determined by deducting

the fair value of the liability component from the initial proceeds ascribed to the Convertible Notes as a whole. The excess of the principal amount of the liability component over its carrying amount, treated as a debt discount, is amortized to interest cost over the expected life of a similar liability that does not have an associated conversion option using the effective interest method. ~~The equity component is not remeasured as long as it continues to meet~~Upon the execution of the Convertible Notes Supplemental Indenture, the conversion option no longer meets the conditions for equity classification as prescribed in FASB ASC Subtopic 815-40, Contracts in an Entity’s Own Equity. As such, the conversion option is bifurcated as a separate derivative and recorded as a liability. Given the significant variance in the Conversion Price and the current market price per share of the Series A Common Stock, the conversion option derivative liability is immaterial.

The Convertible Notes are presented on the consolidated balance sheet as follows (amounts in thousands):


	As of March 31, 2018			As of December 31, 2017			As of September 30, 2018			As of December 31, 2017
Principal	$	96,775		$	96,775		$	96,775		$	96,775
Unamortized discount	(12,157		)	(13,263		)	(9,825		)	(13,263		)
Deferred debt costs	(823		)	(898		)	(665		)	(898		)
Carrying value	$	83,795		$	82,614		$	86,285		$	82,614

The Company is using an effective interest rate of 14.0% to calculate the accretion of the debt discount, which is being recorded as interest expense over the expected remaining term to maturity of the Convertible Notes. The Company recognized contractual interest expense of ~~$968,000~~$967,000 and $2,903,000 for both of the three and nine months ended ~~March 31,~~September 30, 2018 and 2017. The Company amortized ~~$1,181,000~~$1,266,000 and $3,671,000 of the Convertible Notes debt discount and deferred debt costs into interest expense for the three and nine months ended ~~March 31,~~September 30, 2018, compared to ~~$1,027,000~~$1,102,000 and $3,194,000 for the three and nine months ended ~~March 31,~~September 30, 2017.

Hedging Transactions Relating to the Offering of the Convertible Notes

In connection with the issuance of the Convertible Notes, Ascent Capital entered into separate privately negotiated purchased call options (the "Bond Hedge Transactions"). The Bond Hedge Transactions require the counterparties to offset Series A Common Stock deliverable or cash payments made by Ascent Capital upon conversion of the Convertible Notes in the event that the volume-weighted average price of Series A Common Stock on each trading day of the relevant valuation period is greater than the strike price of $102.804, which corresponds to the Conversion Price of the Convertible Notes. The Bond Hedge Transactions cover, subject to anti-dilution adjustments, approximately 1,007,000 shares of Series A Common Stock, which is equivalent to the number of shares initially issuable upon conversion of the Convertible Notes, and are expected to reduce the potential dilution with respect to the Series A Common Stock, and/or offset potential cash payments Ascent Capital is required to make in excess of the principal amount of the Convertible Notes upon conversion.

Concurrently with the Bond Hedge Transactions, Ascent Capital also entered into separate privately negotiated warrant transactions with each of the call option counterparties (the "Warrant Transactions"). The warrants are European options, and are exercisable in tranches on consecutive trading days starting after the maturity of the Convertible Notes. The warrants cover the same initial number of shares of Series A Common Stock, subject to anti-dilution adjustments, as the Bond Hedge Transactions. The Warrant Transactions require Ascent Capital to deliver Series A Common Stock or make cash payments to

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the counterparties on each expiration date with a value equal to the number of warrants exercisable on that date times the excess of the volume-weighted average price of the Series A Common Stock over the strike price of $118.62, which effectively reflects a 50% conversion premium on the Convertible Notes. As such, the Warrant Transactions may have a dilutive effect with respect to the Series A Common Stock to the extent the Warrant Transactions are settled with shares of Series A Common Stock. Ascent Capital may elect to settle its delivery obligation under the Warrant Transactions in cash.

The Bond Hedge Transactions and Warrant Transactions are separate transactions entered into by Ascent Capital, are not part of the terms of the Convertible Notes and will not affect the Noteholders’ rights under the Convertible Notes. The Noteholders will not have any rights with respect to the Bond Hedge Transactions or the Warrant Transactions.

~~MONI~~Brinks Home Security Senior Notes

The ~~MONI senior notes~~Brinks Home Security Senior Notes total $585,000,000 in principal, mature on April 1, 2020 and bear interest at 9.125% per ~~annum (the "Senior Notes").~~annum. Interest payments are due semi-annually on April 1 and October 1 of each year. The Senior Notes are guaranteed by all of ~~MONI’s~~Brinks Home Security’s existing domestic subsidiaries. Ascent Capital has not guaranteed any of ~~MONI's~~Brinks Home Security's obligations under the Senior Notes. As of ~~March 31,~~September 30, 2018, the Senior Notes had deferred financing costs and unamortized premium, net of accumulated amortization of ~~$4,342,000.~~$3,314,000.

~~MONI~~Brinks Home Security Credit Facility

On September 30, 2016, ~~MONI~~Brinks Home Security entered into an amendment ("Amendment No. 6") with the lenders of its existing senior secured credit agreement dated March 23, 2012, and as amended and restated on April 9, 2015, February 17, 2015, August 16, 2013, March 25, 2013, and November 7, 2012 (the "Existing Credit Agreement"). Amendment No. 6 provided for, among other things, the issuance of a $1,100,000,000 senior secured term loan at a 1.5% discount and a new $295,000,000 super priority revolver (the Existing Credit Agreement together with Amendment No. 6, the "Credit Facility").

On ~~March 29,~~September 27, 2018, ~~MONI~~Brinks Home Security borrowed an incremental $26,691,000 on its Credit Facility revolver to fund its ~~April 2,~~October 1, 2018 interest payment due under the Senior Notes.

As of ~~March 31,~~September 30, 2018, the Credit Facility term loan has a principal amount of ~~$1,083,500,000,~~$1,078,000,000, maturing on September 30, 2022. The term loan requires quarterly interest payments and quarterly principal payments of $2,750,000. The term loan bears interest at LIBOR plus 5.5%, subject to a LIBOR floor of 1.0%. The Credit Facility revolver has a principal amount outstanding of ~~$73,500,000~~$159,100,000 as of ~~March 31,~~September 30, 2018 and matures on September 30, 2021. The Credit Facility revolver bears interest at LIBOR plus 4.0%, subject to a LIBOR floor of 1.0%. There is a commitment fee of 0.5% on unused portions of the Credit Facility revolver. As of ~~March 31,~~September 30, 2018, ~~$221,500,000~~$135,900,000 is available for borrowing under the Credit Facility revolver subject to certain financial covenants.

The maturity date for ~~both~~each of the term loan and the revolving credit facility under the Credit Facility ~~are~~is subject to a springing maturity 181 days prior to the scheduled maturity date of the Senior Notes, or October 3, 2019 (the "Springing Maturity"), if ~~MONI~~Brinks Home Security is unable to refinance the Senior Notes by that date. In addition, atif Brinks Home Security is unable to refinance the Senior Notes, or demonstrate the ability to meet its financial covenants for a period of twelve months after the issuance date, prior to the filing with the SEC of their Annual Report on Form 10-K for the year ended December 31, 2018, they may be subject to a going concern qualification in connection with their external audit report, which would be an event of default under the Credit Facility. 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. Also, failure to comply with restrictions contained in the Senior Notes could lead to an event of default under the Credit Facility.

The Credit Facility is secured by a pledge of all of the outstanding stock of ~~MONI~~Brinks Home Security and all of its existing subsidiaries and is guaranteed by all of ~~MONI's~~Brinks Home Security's existing domestic subsidiaries. Ascent Capital has not guaranteed any of ~~MONI's~~Brinks Home Security's obligations under the Credit Facility.

As of ~~March 31,~~September 30, 2018, ~~MONI~~Brinks Home Security has deferred financing costs and unamortized discounts, net of accumulated amortization, of ~~$27,200,000~~$24,569,000 related to the Credit Facility.

In order to reduce the financial risk related to changes in interest rates associated with the floating rate term loan under the Credit Facility term loan, ~~MONI~~Brinks Home Security has entered into interest rate swap agreements with terms similar to the Credit Facility term loan (all outstanding interest rate swap agreements are collectively referred to as the “Swaps”). The Swaps have been designated as effective hedges of the Company’s variable rate debt and qualify for hedge accounting. As a result of these

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interest rate swaps, ~~MONI's~~Brinks Home Security's effective weighted average interest rate (excluding the impacts of non-cash amortization of deferred debt costs and discounts) on the borrowings under the Credit Facility term loan was ~~7.98%~~7.99% as of ~~March 31,~~September 30, 2018. See note 8,9, Derivatives, for further disclosures related to these derivative instruments.

The terms of the Convertible Notes, the Senior Notes and the Credit Facility provide for certain financial and nonfinancial covenants. As of ~~March 31,~~September 30, 2018, the Company was in compliance with all required covenants under these financing arrangements.

As of ~~March 31,~~September 30, 2018, principal payments scheduled to be made on the Company’s debt obligations, assuming no Springing Maturity of the Credit Facility, are as follows (amounts in thousands):


Remainder of 2018	$	8,250	$	2,750
2019	11,000		11,000
2020	692,775		692,775
2021	84,500		170,100
2022	1,042,250		1,042,250
2023	—		—
Thereafter	—		—
Total principal payments	1,838,775		1,918,875
Less:
Unamortized deferred debt costs, discounts and premium, net	44,522		38,373
Total debt on condensed consolidated balance sheet	$	1,794,253	$	1,880,502

~~(8)~~(9) Derivatives

~~MONI~~Brinks Home Security utilizes Swaps to reduce the interest rate risk inherent in ~~MONI's~~Brinks Home Security's variable rate Credit Facility term loan. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatility. The Company incorporates credit valuation adjustments to appropriately reflect the respective counterparty’s nonperformance risk in the fair value measurements. See note 9,10, Fair Value Measurements, for additional information about the credit valuation adjustments.

All of the Swaps are designated and qualify as cash flow hedging instruments, with the effective portion of the Swaps' change in fair value recorded in Accumulated other comprehensive income (loss). Changes in the fair value of the Swaps recognized in Accumulated other comprehensive income (loss) are reclassified to Interest expense when the hedged interest payments on the underlying debt are recognized. Amounts in Accumulated other comprehensive income (loss) expected to be recognized as a reduction of Interest expense in the coming 12 months total approximately ~~$1,114,000.~~$1,810,000.

As of ~~March 31,~~September 30, 2018, the Swaps’ outstanding notional balances, effective dates, maturity dates and interest rates paid and received are noted below:

Notional Effective Date Maturity Date Fixed Rate Paid Variable Rate Received
$ 190,982,778
March 23, 2018 April 9, 2022 3.110% 3 mo. USD-LIBOR-BBA, subject to a 1.00% floor (a)
249,375,000
March 23, 2018 April 9, 2022 3.110% 3 mo. USD-LIBOR-BBA, subject to a 1.00% floor (a)
49,875,000
March 23, 2018 April 9, 2022 2.504% 3 mo. USD-LIBOR-BBA, subject to a 1.00% floor
376,057,500
March 23, 2018 September 30, 2022 1.833% 3 mo. USD-LIBOR-BBA, subject to a 1.00% floor



Notional		Effective Date	Maturity Date	Fixed Rate Paid	Variable Rate Received
$	189,998,331	March 23, 2018	April 9, 2022	3.110%	3 mo. USD-LIBOR-BBA, subject to a 1.00% floor (a)
248,125,000		March 23, 2018	April 9, 2022	3.110%	3 mo. USD-LIBOR-BBA, subject to a 1.00% floor (a)
49,625,000		March 23, 2018	April 9, 2022	2.504%	3 mo. USD-LIBOR-BBA, subject to a 1.00% floor
374,172,500		March 23, 2018	September 30, 2022	1.833%	3 mo. USD-LIBOR-BBA, subject to a 1.00% floor

(a)

On September 30, 2016, ~~MONI~~Brinks Home Security negotiated amendments to the terms of these interest rate swap agreements (the "Existing Swap Agreements," as amended, the "Amended Swaps"). The Amended Swaps are held with the same counterparties as the Existing Swap Agreements. Upon entering into the Amended Swaps, ~~MONI~~Brinks Home Security simultaneously dedesignated the Existing Swap Agreements and redesignated the

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Amended Swaps as cash flow hedges for the underlying change in the swap terms. The amounts previously recognized in Accumulated other comprehensive income (loss) relating to the dedesignation are recognized in Interest expense over the remaining life of the Amended Swaps.

The impact of the derivatives designated as cash flow hedges on the condensed consolidated financial statements is depicted below (amounts in thousands):


	Three Months Ended March 31,					Three Months Ended September 30,					Nine Months Ended September 30,
	2018			2017		2018			2017		2018			2017
Effective portion of gain (loss) recognized in Accumulated other comprehensive income (loss)	$	13,668		(733	)	$	3,165		(914	)	$	21,929		(8,890	)
Effective portion of loss reclassified from Accumulated other comprehensive income (loss) into Net loss (a)	$	(738	)	(1,782	)	$	(104	)	(1,141	)	$	(1,267	)	(4,389	)
Ineffective portion of amount of loss recognized into Net loss (a)	$	—		18		$	—		(65	)	$	—		(157	)

(a) Amounts are included in Interest expense in the unaudited condensed consolidated statements of operations and comprehensive income (loss). Upon the adoption of ASU 2017-12 on January 1, 2018, ineffectiveness is no longer measured or recognized.

~~(9)~~(10) Fair Value Measurements

According to the FASB ASC Topic 820, Fair Value Measurement, fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants and requires that assets and liabilities carried at fair value are classified and disclosed in the following three categories:

Level 1 - Quoted prices for identical instruments in active markets.

Level 2 - Quoted prices for similar instruments in active or inactive markets and valuations derived from models where all significant inputs are observable in active markets.

Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable in any market.

The following summarizes the fair value level of assets and liabilities that are measured on a recurring basis at ~~March 31,~~September 30, 2018 and December 31, 2017 (amounts in thousands):

Level 1 Level 2 Level 3 Total
March 31, 2018

Investments in marketable securities (a) $ 107,450
—
—
107,450
Interest rate swap agreements - assets (b) —
13,833
—
13,833
Interest rate swap agreements - liabilities (b) —
(6,553 ) —
(6,553 )
Total $ 107,450
7,280
—
114,730
December 31, 2017

Investments in marketable securities (a) $ 105,958
—
—
105,958
Interest rate swap agreements - assets (b) —
7,058
—
7,058
Interest rate swap agreements - liabilities (b) —
(13,817 ) —
(13,817 )
Total $ 105,958
(6,759 ) —
99,199



	Level 1		Level 2		Level 3	Total
September 30, 2018
Interest rate swap agreements - assets (a)	$	—	17,564		—	17,564
Interest rate swap agreements - liabilities (a)	—		(1,139	)	—	(1,139	)
Total	$	—	16,425		—	16,425
December 31, 2017
Investments in marketable securities (b)	$	105,958	—		—	105,958
Interest rate swap agreements - assets (a)	—		7,058		—	7,058
Interest rate swap agreements - liabilities (a)	—		(13,817	)	—	(13,817	)
Total	$	105,958	(6,759	)	—	99,199


(a)	~~Level 1 investments primarily consist of diversified corporate bond funds.~~


~~(b)~~	Swap asset values are included in non-current Other assets and Swap liability values are included in non-current Derivative financial instruments on the condensed consolidated balance sheets.


(b)	Level 1 investments primarily consist of diversified corporate bond funds.

The Company has determined that the significant inputs used to value the Swaps fall within Level 2 of the fair value hierarchy. As a result, the Company has determined that its derivative valuations are classified in Level 2 of the fair value hierarchy.

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Carrying values and fair values of financial instruments that are not carried at fair value are as follows (amounts in thousands):


	March 31, 2018		December 31, 2017	September 30, 2018		December 31, 2017
Long term debt, including current portion:
Carrying value	$	1,794,253	1,789,044	$	1,880,502	1,789,044
Fair value (a)	1,642,644		1,709,342	1,707,626		1,709,342


(a)	The fair value is based on market quotations from third party financial institutions and is classified as Level 2 in the hierarchy.

Ascent Capital’s other financial instruments, including cash and cash equivalents, accounts receivable and accounts payable are carried at cost, which approximates their fair value because of their short-term maturity.

~~(10)~~(11) Stockholders’ Equity

Common Stock

The following table presents the activity in Series A Common Stock and Ascent Capital's Series B Common Stock, par value $0.01 per share (the "Series B Common Stock"), for the ~~three~~nine months ended ~~March 31,~~September 30, 2018:


	Series A Common Stock		Series B Common Stock	Series A Common Stock		Series B Common Stock
Balance at December 31, 2017	11,999,630		381,528	11,999,630		381,528
Issuance of stock awards	13,153		—	13,153		—
Restricted stock canceled for tax withholding	(10,680	)	—	(10,680	)	—
Balance at March 31, 2018	12,002,103		381,528	12,002,103		381,528
Issuance of stock awards				51,036		—
Restricted stock canceled for tax withholding				(20,769	)	—
Balance at June 30, 2018				12,032,370		381,528
Issuance of stock awards				29,591		—
Restricted stock canceled for tax withholding				(9,258	)	—
Balance at September 30, 2018				12,052,703		381,528

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Accumulated Other Comprehensive Income (Loss)

The following table provides a summary of the changes in Accumulated other comprehensive income (loss) for the period presented (amounts in thousands):


	Foreign Currency Translation Adjustments			Unrealized Holding Gains and Losses on Marketable Securities, net (a)		Unrealized Gains and Losses on Derivative Instruments, net (b)		Accumulated Other Comprehensive Income (Loss)		Foreign Currency Translation Adjustments			Unrealized Holding Gains and Losses on Marketable Securities, net		Unrealized Gains and Losses on Derivative Instruments, net (a)		Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2017	$	(758	)	3,900		(7,375	)	(4,233	)	$	(758	)	3,900		(7,375	)	(4,233	)
Impact of adoption of ASU 2017-12	—			—		605		605		—			—		605		605
Adjusted balance at January 1, 2018	(758		)	3,900		(6,770	)	(3,628	)	$	(758	)	3,900		(6,770	)	(3,628	)
Gain (loss) through Accumulated other comprehensive income (loss), net of income tax of $0	—			(1,014	)	13,668		12,654		—			(1,014	)	13,668		12,654
Reclassifications of loss (gain) into Net loss, net of income tax of $0	—			(2,063	)	738		(1,325	)	—			(2,063	)	738		(1,325	)
Net current period Other comprehensive income (loss)	—			(3,077	)	14,406		11,329
Net period Other comprehensive income (loss)										—			(3,077	)	14,406		11,329
Balance at March 31, 2018	$	(758	)	823		7,636		7,701		$	(758	)	823		7,636		7,701
Gain (loss) through Accumulated other comprehensive income (loss), net of income tax of $0										—			(611	)	5,096		4,485
Reclassifications of loss (gain) into Net loss, net of income tax of $0										—			(212	)	425		213
Net period Other comprehensive income (loss)										—			(823	)	5,521		4,698
Balance at June 30, 2018										$	(758	)	—		13,157		12,399
Gain through Accumulated other comprehensive income (loss), net of income tax of $0										—			—		3,165		3,165
Reclassifications of loss into Net loss, net of income tax of $0										—			—		104		104
Net period Other comprehensive income										—			—		3,269		3,269
Balance at September 30, 2018										$	(758	)	—		16,426		15,668


(a)	~~Amounts reclassified into net loss are included in Other income, net on the condensed consolidated statement of operations. See~~ ~~note 4, Investments in Marketable Securities, for further information.~~


~~(b)~~	Amounts reclassified into net loss are included in Interest expense on the condensed consolidated statement of operations. See note 8,9, Derivatives, for further information.

~~(11)~~

(12) Basic and Diluted Earnings (Loss) Per Common Share—Series A and Series B

Basic earnings (loss) per common share ("EPS") is computed by dividing net income (loss) by the weighted average number of shares of Series A and Series B Common Stock outstanding for the period. Diluted EPS is computed by dividing net income (loss) by the sum of the weighted average number of shares of Series A and Series B Common Stock outstanding and the effect of dilutive securities, including the Company's outstanding stock options, unvested restricted stock and restricted stock units.

For all periods presented, diluted EPS is computed the same as basic EPS because the Company recorded a loss from continuing operations, which would make potentially dilutive securities anti-dilutive. Diluted shares outstanding excluded an aggregate of ~~193,239 stock options,~~581,891 unvested restricted shares and performance units for the three and nine months ended ~~March 31,~~September 30, 2018 because their inclusion would have been anti-dilutive. Diluted shares outstanding excluded an aggregate of ~~384,606 stock options,~~247,148 unvested restricted shares and performance units for the three and nine months ended ~~March 31,~~September 30, 2017 because their inclusion would have been anti-dilutive.

Three Months Ended
March 31,
2018 2017
Weighted average number of shares of Series A and Series B Common Stock 12,298,922
12,134,061



	Three Months Ended September 30,		Nine Months Ended September 30,
	2018	2017	2018	2017
Weighted average number of shares of Series A and Series B Common Stock	12,361,495	12,207,649	12,329,497	12,170,367

~~(12)~~

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(13) Commitments, Contingencies and Other Liabilities

~~MONI~~Brinks Home Security was named as a defendant in multiple putative class actions consolidated in U.S. District Court (Northern District of West Virginia) on behalf of purported class(es) of persons who claim to have received telemarketing calls in violation of various state and federal laws. The actions were brought by plaintiffs seeking monetary damages on behalf of all plaintiffs who received telemarketing calls made by a ~~Monitronics~~Brinks Home Security Authorized Dealer, or any Authorized Dealer’s lead generator or sub-dealer. In the second quarter of 2017, ~~MONI~~Brinks Home Security and the plaintiffs agreed to settle this litigation for $28,000,000 ("the Settlement Amount"). MONI is actively seeking to recover the Settlement Amount under its insurance policies. The settlement agreement remains subject to court approval and the court’s entry of a final order dismissing the actions. In the third quarter of 2017, ~~MONI~~Brinks Home Security paid $5,000,000 of the Settlement Amount pursuant to the settlement agreement with the plaintiffs. In the third quarter of 2018, Brinks Home Security paid the remaining $23,000,000 of the Settlement Amount. Brinks Home Security is actively seeking to recover the Settlement Amount under its insurance policies held with multiple carriers. On November 1, 2018, Brinks Home Security settled its claim against one such carrier in which the carrier agreed to pay Brinks Home Security $9,750,000 in the fourth quarter of 2018. This amount will be recognized in the consolidated statement of operations at such time. Brinks Home Security continues to seek to recover additional funds under its insurance policies from the remaining carriers.

In addition to the above, the Company is also involved in litigation and similar claims incidental to the conduct of its business, including from time to time, contractual disputes, claims related to alleged security system failures and claims related to alleged violations of the U.S. Telephone Consumer Protection Act. Matters that are probable of unfavorable outcome to the Company and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, management's estimate of the outcomes of such matters and experience in contesting, litigating and settling similar matters. In management's opinion, none of the pending actions are likely to have a material adverse impact on the Company's financial position or results of operations. The Company accrues and expenses legal fees related to loss contingency matters as incurred.

~~(13) Reportable Business Segments~~Other Legal Proceedings

~~Description~~On August 27, 2018, holders purporting to own approximately 68% of ~~Segments~~the Convertible Notes filed a complaint in the Court of Chancery in the State of Delaware against Ascent Capital and each of its directors and executive officers.

On September 5, 2018, holders purporting to own approximately 69% of the Convertible Notes filed an amended complaint in the Court of Chancery of the State of Delaware against Ascent Capital and each of its directors and executive officers, and a motion for a preliminary injunction seeking to prevent Ascent Capital from consummating the exchange offer related to the Senior Notes of Brinks Home Security announced by Ascent Capital and Brinks Home Security on August 30, 2018.

On October 1, 2018, holders purporting to own approximately 78% of the Convertible Notes filed a second amended complaint in the Court of Chancery of the State of Delaware against Ascent Capital and each of its directors and executive officers, and an amended motion for a preliminary injunction seeking to prevent Ascent Capital from consummating the transactions announced by Ascent Capital and Brinks Home Security on September 25, 2018.

On October 22, 2018, the Court of Chancery of the State of Delaware entered a Third Scheduling Order Governing Plaintiffs’ Motion for Preliminary Injunction (“the Scheduling Order”). The Scheduling Order provides, among other things, that the preliminary injunction hearing will be held on December 5, 2018.

On November 2, 2018, holders purporting to own approximately 53% of the Convertible Notes (the “Plaintiffs”) filed a third amended complaint (the “Third Amended Complaint”) in the Court of Chancery of the State of Delaware against Ascent Capital and each of its directors and executive officers. The Third Amended Complaint alleges that Ascent Capital’s participation in the transactions announced by Ascent Capital and Brinks Home Security on October 30, 2018 (the “October 30th Transactions”) would be detrimental to Ascent Capital and, if consummated, would result in Ascent Capital becoming insolvent. The Third Amended Complaint further alleges that the October 30th Transactions would (i) result in a breach of Ascent Capital’s directors’ fiduciary duties to Ascent Capital and (ii) constitute a constructive or intentional fraudulent transfer by using assets of Ascent Capital necessary for the repayment of the Notes for other purposes. The Third Amended Complaint seeks (i) injunctive relief to prevent Ascent Capital from engaging in the October 30th Transactions, which would allegedly dissipate Ascent Capital’s assets, and (ii) a declaratory judgment that approval of the October 30th Transactions constitutes a breach of fiduciary duty by Ascent Capital’s directors and that consummation of the October 30th Transactions would constitute a fraudulent transfer by Ascent Capital. Also on November 2, 2018, the Plaintiffs filed an amended motion for a preliminary injunction seeking to prevent Ascent Capital from consummating the October 30th Transactions.

The ~~Company operates through two reportable business segments according~~Third Amended Complaint could be amended, or similar claims could be brought, challenging the October 30th Transactions, and we cannot assure you that such claims will be unsuccessful, will not require us to pay damages (including costs and expenses of the action) or will not have a material effect on any such October 30th Transactions. Ascent Capital

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believes that the claims in the Third Amended Complaint are meritless, and Ascent Capital intends to vigorously defend against this action.

(14) Subsequent Events

On October 30, 2018, Ascent Capital and Brinks Home Security entered into the Amended and Restated Support Agreement. Under the agreement, Brinks Home Security will commence an Exchange Offer for its Senior Notes (the "Exchange Offer") and commence a consent solicitation for certain proposed amendments to its Credit Facility (the "Bank Amendments"), both described in the Amended and Restated Support Agreement. Ascent Capital will contribute $75 million in cash to Brinks Home Security under the terms of the Amended and Restated Support Agreement.

Pursuant to the ~~nature~~Bank Amendments, the interest rate per annum payable in respect of the Credit Facility term loan shall be increased by 100 basis points and ~~economic characteristics~~the interest rate per annum payable in respect of the Credit Facility revolver shall be increased by 75 basis points. In addition, Brinks Home Security would seek to amend certain restrictive covenants in the Credit Facility as described in the Amended and Restated Support Agreement, including the ability for Brinks Home Security to issue second lien notes. Additionally, the total availability under the Credit Facility revolver would be permanently decreased from $295 million to $250 million.

Pursuant to the Exchange Offer, Brinks Home Security would make an offer to eligible holders of its ~~services as well as~~Senior Notes to exchange them for new Second Lien Notes due 2023 (the "Second Lien Notes") and solicit the ~~manner~~consent of such holders to eliminate or waive all or substantially all restrictive covenants and events of default in ~~which~~ the ~~information issued internally by~~indenture governing the ~~Company's key decision maker, who is~~Senior Notes. The interest payable in respect of the ~~Company's Chief Executive Officer. The Company's business segments are as follows:~~new Second Lien Notes will be paid 5.5% per annum in cash and 6.5% per annum in kind.

~~MONI~~If the Bank Amendments are not completed by a certain date, Brinks Home Security will commence an alternative exchange offer of new unsecured notes and cash in exchange for the existing Senior Notes.

~~The MONI segment is engaged~~Ascent Capital, Brinks Home Security, the Consenting Noteholders and the Credit Facility Lenders all have certain termination rights as defined in the ~~business of providing security alarm monitoring services: monitoring signals arising from burglaries, fires, medical alerts~~Amended and other events through security systems at subscribers' premises, as well as providing customer service and technical support. MONI primarily outsources the sales, installation and most of its field service functions to its dealers.Restated Support Agreement.

~~LiveWatch~~

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LiveWatch is a Do-It-Yourself home security provider offering professionally monitored security services through a direct-to-consumer sales channel. LiveWatch offers a differentiated go-to-market strategy through direct response TV, internet and radio advertising. When a customer initiates the process to obtain monitoring services, LiveWatch pre-configures the alarm

monitoring system based on customer specifications. LiveWatch then packages and ships the equipment directly to the customer. The customer self-installs the equipment on-site and activates the monitoring service over the phone.

~~Other Activities~~

~~Other Activities primarily consists of Ascent Capital's corporate costs, including administrative and other activities not associated with the operation of the reportable segments, and eliminations.~~

As they arise, transactions between segments are recorded on an arm's length basis using relevant market prices. The following table sets forth selected data from the accompanying condensed consolidated statements of operations for the periods indicated (amounts in thousands):

MONI LiveWatch Other Consolidated
Three Months Ended March 31, 2018
Net revenue $ 125,773
$ 7,980
$ —
$ 133,753
Depreciation and amortization $ 55,236
$ 1,790
$ 6
$ 57,032
Net loss from continuing operations before income taxes $ (17,629 ) $ (7,232 ) $ (4,631 ) $ (29,492 )

Three Months Ended March 31, 2017
Net revenue $ 134,408
$ 6,792
$ —
$ 141,200
Depreciation and amortization $ 60,508
$ 1,159
$ 7
$ 61,674
Net loss from continuing operations before income taxes $ (13,299 ) $ (5,930 ) $ 2,098
$ (17,131 )

~~The following table sets forth selected data from the accompanying condensed consolidated balance sheets for the periods indicated (amounts in thousands):~~

MONI LiveWatch Other Consolidated
Balance at March 31, 2018
Subscriber accounts and deferred contract acquisition costs, net of amortization $ 1,203,996
$ 20,941
$ —
$ 1,224,937
Goodwill $ 527,502
$ 36,047
$ —
$ 563,549
Total assets $ 1,980,081
$ 62,453
$ (14,976 ) $ 2,027,558

Balance at December 31, 2017
Subscriber accounts and deferred contract acquisition costs, net of amortization $ 1,280,813
$ 21,215
$ —
$ 1,302,028
Goodwill $ 527,502
$ 36,047
$ —
$ 563,549
Total assets $ 1,996,240
$ 63,233
$ (4,488 ) $ 2,054,985

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our business, marketing and operating strategies, integration of acquired businesses, new service offerings, the availability of debt refinancing, the consummation of proposed debt refinancing transactions, financial prospects and anticipated sources and uses of capital. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:

general business conditions and industry trends;

macroeconomic conditions and their effect on the general economy and on the U.S. housing market, in particular single family homes, which represent ~~MONI's~~Brinks Home Security's largest demographic;

uncertainties in the development of our business strategies, including the rebranding to ~~BRINKS~~Brinks Home Security ~~and partnership with Nest,~~ and market acceptance of new products and services;

the competitive environment in which ~~MONI~~Brinks Home Security operates, in particular, increasing competition in the alarm monitoring industry from larger existing competitors and new market entrants, including technology, telecommunications and cable companies;

the development of new services or service innovations by competitors;

~~MONI's~~Brinks Home Security's ability to acquire and integrate additional accounts, including competition for dealers with other alarm monitoring companies which could cause an increase in expected subscriber acquisition costs;

integration of acquired assets and businesses;

the regulatory environment in which we operate, including the multiplicity of jurisdictions, state and federal consumer protection laws and licensing requirements to which ~~MONI~~Brinks Home Security and/or its dealers are subject and the risk of new regulations, such as the increasing adoption of "false alarm" ordinances;

technological changes which could result in the obsolescence of currently utilized technology with the need for significant upgrade expenditures;

the trend away from the use of public switched telephone network lines and the resultant increase in servicing costs associated with alternative methods of communication;

the operating performance of ~~MONI's~~Brinks Home Security's network, including the potential for service disruptions at both the main monitoring facility and back-up monitoring facility due to acts of nature or technology deficiencies, and the potential of security breaches related to network or customer information;

the outcome of any pending, threatened, or future litigation, including potential liability for failure to respond adequately to alarm activations;

the ability to continue to obtain insurance coverage sufficient to hedge our risk exposures, including as a result of acts of third parties and/or alleged regulatory violations;

changes in the nature of strategic relationships with original equipment manufacturers, dealers and other ~~MONI~~Brinks Home Security business ~~partners, such as Nest;~~partners;

the reliability and creditworthiness of ~~MONI's~~Brinks Home Security's independent alarm systems dealers and subscribers;

changes in ~~MONI's~~Brinks Home Security's expected rate of subscriber attrition;

the availability and terms of capital, including the ability of ~~MONI~~Brinks Home Security to refinance its existing debt or obtain future financing to grow its business;

~~MONI's~~Brinks Home Security's high degree of leverage and the restrictive covenants governing its indebtedness; and

availability of qualified personnel.

For additional risk factors, please see Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2017 (the "2017 Form 10-K") and Part II, Item 1A, Risk Factors in this Quarterly Report on Form ~~10-Q.~~10-Q and in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2018 and June 30, 2018. These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Quarterly Report, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based.

The following discussion and analysis provides information concerning our results of operations and financial condition. This discussion should be read in conjunction with our accompanying condensed consolidated financial statements and the notes thereto included elsewhere herein and the 2017 Form 10-K.

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Overview

Ascent Capital Group, Inc. ("Ascent Capital" or the "Company") is a holding company and its assets primarily consist of its wholly-owned subsidiary, Monitronics International, Inc. ~~("MONI"~~and its operating subsidiaries (collectively, "Brinks Home Security"). ~~MONI~~Brinks Home Security provides residential customers and commercial client accounts with monitored home and business security systems, as well as interactive and home automation ~~services. MONI is supported by a network of independent Authorized Dealers providing products and support to customers~~services, in the United States, Canada and Puerto Rico. MONI’s wholly owned subsidiary, LiveWatch Security LLC (“LiveWatch”) is a Do-It-Yourself home security firm, offering professionally monitored security services through a direct-to-consumer sales channel.

On February 26, 2018, MONI entered into an exclusive, long-term, trademark licensing agreement with The Brink’s Company ("Brink's"), which will result in a complete rebranding of MONI and LiveWatch as Brinks Home Security^TM~~. Under the terms of the agreement, MONI will have exclusive use of the BRINKS and~~ Brinks Home Security ~~trademarks related to the residential smart home~~customers are obtained through its direct-to-consumer sales channel or its Authorized Dealer network, which provides product and ~~home security categories in the U.S. and Canada. The Company is currently completing rebranding tasks,~~installation services, as well as ~~integration tasks, such that the MONI~~support to customers. Its direct-to-consumer channel offers both Do-It-Yourself ("DIY") and ~~LiveWatch sales channels will be combined under~~professional installation security solutions.

The rollout of the Brinks Home Security ~~brand. The new~~ brand ~~rollout is expected to occur~~ in the second quarter of ~~2018.~~2018 included the integration of our business model under a single brand. As part of the integration, we reorganized our business from two reportable segments, "MONI" and "LiveWatch," to one reportable segment, Brinks Home Security. Following the integration, the Company's chief operating decision maker reviews internal financial information on a consolidated basis. The change in reportable segments had no impact on our previously reported historical condensed consolidated financial statements.

~~In the first quarter of~~Effective January 1, 2018, the Company adopted Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) ("Topic 606") using the modified retrospective approach, which means the standard is applied to only the current period. Any significant impact as a result of this adoption is discussed in the results of operations detail below. See note 3,4, Revenue Recognition, in the notes to the accompanying condensed consolidated financial statements for further discussion.

The Company early adopted ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04") which requires a goodwill impairment to be recognized as the difference of the fair value and the carrying value of the reporting unit. See note 6, Goodwill, in the notes to the accompanying condensed consolidated financial statements for further discussion.

The Company also adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12") which simplifies the application of hedge accounting guidance. The standard was early adopted effective January 1, 2018, and an opening equity adjustment of $605,000 was recognized that reduced Accumulated deficit, offset by a gain in Accumulated other comprehensive income (loss). There was no material impact as a result of this adoption to the results of operations detail below. See note ~~2, Recent Accounting Pronouncements~~1, Basis of Presentation, in the notes to the accompanying condensed consolidated financial statements for further discussion.

Attrition

Account cancellation, otherwise referred to as subscriber attrition, has a direct impact on the number of subscribers that ~~MONI~~Brinks Home Security services and on its financial results, including revenues, operating income and cash flow. A portion of the subscriber base can be expected to cancel its service every year. Subscribers may choose not to renew or to terminate their contract for a variety of reasons, including relocation, cost, switching to a competitor's service and limited use by the subscriber and thus low perceived value. The largest categories of canceled accounts relate to subscriber relocation or the inability to contact the subscriber. ~~MONI~~Brinks Home Security defines its attrition rate as the number of canceled accounts in a given period divided by the weighted average of number of subscribers for that period. ~~MONI~~Brinks Home Security considers an account canceled if payment from the subscriber is deemed uncollectible or if the subscriber cancels for various reasons. If a subscriber relocates but continues its service, this is not a cancellation. If the subscriber relocates, discontinues its service and a new subscriber takes over the original subscriber's service continuing the revenue stream, this is also not a cancellation. ~~MONI~~Brinks Home Security adjusts the number of canceled accounts by excluding those that are contractually guaranteed by its dealers. The typical dealer contract provides that if a subscriber cancels in the first year of its contract, the dealer must either replace the canceled account with a new one or refund to ~~MONI~~Brinks Home Security the cost paid to acquire the contract. To help ensure the dealer's obligation to ~~MONI, MONI~~Brinks Home Security, Brinks Home Security typically maintains a dealer funded holdback reserve ranging from 5-8% of subscriber accounts in the guarantee period. In some cases, the amount of the holdback liability is less than actual attrition experience.

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The table below presents subscriber data for the twelve months ended ~~March 31,~~September 30, 2018 and 2017:


	Twelve Months Ended March 31,				Twelve Months Ended September 30,
	2018		2017		2018		2017
Beginning balance of accounts	1,036,794		1,080,726		998,087		1,059,634
Accounts acquired	87,957		125,457		110,358		103,650
Accounts canceled (b)	(159,845	)	(162,086	)	(161,657	)	(157,896	)
Canceled accounts guaranteed by dealer and other adjustments (a) (b)	(6,187	)	(7,303	)	(4,631	)	(7,301	)
Ending balance of accounts	958,719		1,036,794		942,157		998,087
Monthly weighted average accounts	998,137		1,059,526		965,026		1,033,150
Attrition rate - Unit (b)	16.0	%	15.3	%	16.8	%	15.3	%
Attrition rate - RMR (b) (c)	13.9	%	13.4	%	14.1	%	13.9	%


(a)	Includes canceled accounts that are contractually guaranteed to be refunded from holdback.


(b)	Accounts canceled for the twelve months ending ~~March 31,~~September 30, 2017 were recast to include an estimated ~~9,522~~4,945 accounts included in ~~MONI's~~Brinks Home Security's Radio Conversion Program that canceled in excess of their expected attrition.


(c)	The recurring monthly revenue ("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.

The unit attrition rate for the twelve months ended ~~March 31,~~September 30, 2018 and 2017 was ~~16.0%~~16.8% and 15.3%, respectively. Contributing to the increase in the unit attrition ~~rates were the number of subscriber accounts with 5-year contracts reaching the end of their initial contract term in the period, the relative proportion of the number of new~~rate was fewer customers under contract or in the dealer guarantee period in the twelve months ended September 30, 2018, as compared to the prior period, and ~~MONI's~~increased competition from new market entrants. The RMR attrition rate for the twelve months ended September 30, 2018 and 2017 was 14.1% and 13.9%, respectively. The relatively smaller increase in the RMR attrition rate for the twelve months ended September 30, 2018 was due to Brinks Home Security's more aggressive price increase strategy. There was also a modest increase to attrition attributed to subscriber losses related to the impacts of Hurricane Maria on ~~MONI's~~Brinks Home Security's Puerto Rico customer base. ~~See~~ ~~Impact from Natural Disasters~~ ~~below for further information.~~

~~MONI~~Brinks Home Security analyzes its attrition by classifying accounts into annual pools based on the year of acquisition. ~~MONI~~Brinks Home Security then tracks the number of accounts that cancel as a percentage of the initial number of accounts acquired for each pool for each year subsequent to its acquisition. Based on the average cancellation rate across the pools, ~~MONI's~~Brinks Home Security's attrition rate is very low within the initial 12 month period after considering the accounts which were replaced or refunded by the dealers at no additional cost to ~~MONI.~~Brinks Home Security. Over the next few years of the subscriber account life, the number of subscribers that cancel as a percentage of the initial number of subscribers in that pool gradually increases and historically has peaked following the end of the initial contract term, which is typically three to five years. Subsequent to the peak following the end of the initial contract term, the number of subscribers that cancel as a percentage of the initial number of subscribers in that pool declines.

Accounts Acquired

During the three months ended ~~March 31,~~September 30, 2018 and 2017, ~~MONI~~Brinks Home Security acquired ~~21,547~~33,065 and ~~29,376~~21,268 subscriber accounts, respectively, through its dealer and ~~direct~~direct-to-consumer sales channels. During the nine months ended September 30, 2018 and 2017, Brinks Home Security acquired 91,995 and 77,423 subscriber accounts, respectively, through its dealer and direct-to-consumer sales channels. Accounts acquired for the three and nine months ended ~~March 31,~~September 30, 2018 reflect bulk buys of approximately 6,700 and 17,600 accounts, respectively. There were no bulk buys during the three months ended September 30, 2017. Accounts acquired for the nine months ended September 30, 2017 reflect bulk buys of approximately ~~300 and 3,000~~3,500 accounts, respectively. The ~~decrease~~increase in accounts acquired ~~excluding bulk buys,~~ for the three months is due to ~~lower production~~bulk buys and year over year growth in the dealer and direct-to-consumer sales channels. The increase in accounts acquired for the nine months is due to bulk buys and year over year growth in the direct-to-consumer sales channel which was partially offset by year over year decline in accounts acquired from the dealer channel. Contributing to the lower production was the fact that MONI discontinued its relationship with its largest dealer, at the time, in the third quarter of 2017 in connection with the Telephone Consumer Protection Act ("TCPA") settlement. The decrease was partially offset by year over year growth in the direct to consumer sales channels.

RMR acquired during the three months ended ~~March 31,~~September 30, 2018 and 2017 was ~~$987,000~~$1,589,000 and ~~$1,437,000,~~$1,028,000, respectively. RMR acquired during the nine months ended September 30, 2018 and 2017 was $4,335,000 and $3,768,000, respectively.

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Strategic Initiatives

Given the recent decreases in the generation of new subscriber accounts in ~~our~~Brinks Home Security's dealer channel and trends in subscriber attrition, ~~the Company~~it has implemented several initiatives related to account growth, creation costs, attrition and margin improvements.

Account Growth

~~MONI~~Brinks Home Security believes that generating account growth at a reasonable cost is essential to scaling its business and generating shareholder value. In recent years, acquisition of new subscriber accounts through its dealer channel has declined due to the attrition of large dealers, efforts to acquire new accounts from dealers at lower purchases prices, changes in consumer buying behavior and increased competition from technology, telecommunications and cable companies in the market. ~~The Company~~Brinks Home Security currently has several initiatives in place to improve account growth, which include:

Enhancing ~~our~~its brand recognition with consumers, which was recently bolstered by the ~~signing of the Brink's licensing agreement,~~rebranding to Brinks Home Security,

Recruiting high quality dealers into the ~~MONI~~Brinks Home Security Authorized Dealer Program,

Assisting new and existing dealers with training and marketing initiatives to increase productivity,

Acquiring bulk accounts to supplement account generation,

Offering third party equipment financing to consumers which is expected to assist in driving account growth at lower creation costs, and

Growing the ~~MONI Direct~~direct-to-consumer sales ~~and LiveWatch DIY sales channels~~channel under the ~~BRINKS~~Brinks Home Security brand.

Although MONI has seen some increases in new subscriber accounts from its internal sales channel, such increases have not been able to offset the declines in the dealer channel. MONI has increased the efforts of its internal sales channels to increase account growth by developing relationships with third parties, such as Nest, to bring in new leads and account growth opportunities.

Creation Costs

~~MONI~~Brinks Home Security also considers the management of creation costs to be a key driver in improving ~~the Company's~~its financial results, as lower creation costs would improve ~~the Company's~~its profitability and cash flows. The initiatives related to managing creation costs include:

Growing the ~~MONI Direct~~direct-to-consumer sales ~~and LiveWatch DIY sales channels~~channel with expected lower creation cost multiples, and

Negotiating lower subscriber account purchase price multiples in its dealer channel.

In addition, ~~MONI~~Brinks Home Security expects that new customers who subscribe to its services through its partnership with Nest will also contribute to lower creation cost multiples as it is expected that Nest equipment will be purchased up front by the consumer as opposed to subsidized by ~~MONI.~~Brinks Home Security.

Attrition

~~MONI~~Brinks Home Security has also experienced higher subscriber attrition rates in the past few years. While there are a number of factors impacting its attrition rate, ~~MONI~~Brinks Home Security expects subscriber cancellations relating to a number of subscriber accounts that were acquired in bulk purchases during 2012 and 2013 from Pinnacle Security ~~as well as the cancellations by subscribers following AT&T's decision to take its 2G cellular networks offline,~~ to decrease in the future.

Notwithstanding the anticipated decrease in future cancellations for these specific subscriber accounts, ~~MONI~~Brinks Home Security has continued to develop its efforts to manage subscriber attrition, which it believes will help drive increases in its subscriber base and shareholder value. ~~MONI~~Brinks Home Security currently has several initiatives in place to reduce subscriber attrition, which include:

Maintaining high customer service levels,

Using predictive modeling to identify subscribers with a higher risk of cancellation and engaging with these subscribers to obtain contract extensions on terms favorable to ~~the Company,~~Brinks Home Security, and

Implementing effective pricing strategies.

Margin Improvement

~~MONI~~Brinks Home Security has also adopted initiatives to reduce expenses and improve its financial results, which include:

Reducing its operating costs by right sizing the cost structure to the business and leveraging its scale,

Implementing more sophisticated purchasing techniques, and

Increasing use of automation.

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While the uncertainties related to the successful implementation of the foregoing initiatives could impact ~~MONI's~~Brinks Home Security's ability to achieve net profitability and positive cash flows in the near term, ~~MONI~~Brinks Home Security believes it will position itself to improve its operating performance, increase cash flows and create shareholder value over the long-term.

~~Impact from Natural Disasters~~

Hurricanes Harvey, Irma and Maria, made landfall in Texas, Florida and Puerto Rico, respectively, in the third quarter of 2017. MONI had approximately 38,000, 55,000 and 36,000 subscribers in areas impacted by Harvey, Irma and Maria, respectively. In the fourth quarter of 2017, MONI recognized approximately $2,000,000 in revenue credits or refunds to subscribers due to service interruptions or other customer service incentives to retain subscribers impacted from these natural disasters. A vast majority of these credits were issued to subscribers in Puerto Rico, where damage from the hurricanes had been the most severe and widespread.

In the first quarter of 2018, MONI recognized approximately $900,000 in hurricane related revenue credits, substantially all due to continued customer service retention efforts on Puerto Rico subscribers. There continues to be a modest increase to last twelve months' attrition related to these events. As recovery from Hurricane Maria in Puerto Rico is still ongoing, MONI may continue to experience increased revenue credits or refunds, field service costs and higher attrition in future periods. However, the extent to which we may experience these impacts cannot currently be estimated. We will continue to assess the impact of these events.

Adjusted EBITDA

We evaluate the performance of our 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 Capital believes that Adjusted EBITDA is an important indicator of the operational strength and performance of its business, including the business' ability to fund its ongoing acquisition of subscriber accounts, its capital expenditures and to service its 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 ~~MONI's~~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 results of operations nor of cash flows available to fund all of our cash needs. It is, however, a measurement that Ascent Capital believes is useful to investors in analyzing its 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 Capital should not be compared to any similarly titled measures reported by other companies.

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Results of Operations

The following table sets forth selected data from the accompanying condensed consolidated statements of operations and comprehensive income (loss) for the periods indicated (dollar amounts in thousands).


	Three Months Ended March 31,					Three Months Ended September 30,					Nine Months Ended September 30,
	2018			2017		2018			2017		2018			2017
Net revenue	$	133,753		141,200		$	137,156		138,211		$	405,922		419,909
Cost of services	32,701			29,969		35,059			30,213		100,807			89,799
Selling, general and administrative, including stock-based and long-term incentive compensation	37,406			36,245		38,199			35,793		109,992			136,809
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets	54,411			59,547		52,671			59,384		160,973			178,896
Interest expense	38,652			37,486		40,943			38,360		120,017			114,011
Income tax expense from continuing operations	1,346			1,814		1,346			1,766		4,039			8,241
Net loss from continuing operations	(30,838		)	(18,945	)	(40,095		)	(29,160	)	(315,300		)	(91,631	)
Net loss	(30,838		)	(18,853	)	(40,095		)	(29,160	)	(315,300		)	(91,539	)

Adjusted EBITDA (a)
MONI business Adjusted EBITDA	$	70,039		82,222
Brinks Home Security business Adjusted EBITDA						$	71,282		76,910		$	213,480		239,786
Corporate Adjusted EBITDA	(1,170		)	(2,222	)	(4,339		)	(1,239	)	(8,268		)	(6,379	)
Total Adjusted EBITDA	$	68,869		80,000		$	66,943		75,671		$	205,212		233,407
Adjusted EBITDA as a percentage of Net revenue
MONI business	52.4		%	58.2	%
Brinks Home Security business						52.0		%	55.6	%	52.6		%	57.1	%
Corporate	(0.9		)%	(1.6	)%	(3.2		)%	(0.9	)%	(2.0		)%	(1.5	)%

Expensed Subscriber acquisition costs, net
Gross subscriber acquisition costs	$	11,690		9,033		$	14,098		11,275		$	38,923		29,758
Revenue associated with subscriber acquisition costs	(1,512		)	(1,392	)	(722		)	(1,051	)	(3,489		)	(3,694	)
Expensed Subscriber acquisition costs, net	$	10,178		7,641		$	13,376		10,224		$	35,434		26,064


(a)	See reconciliation of Net loss from continuing operations to Adjusted EBITDA below.

Net revenue. Net revenue decreased ~~$7,447,000,~~$1,055,000, or ~~5.3%~~0.8%, and $13,987,000, or 3.3%, for the three and nine months ended ~~March 31,~~September 30, 2018, respectively, as compared to the corresponding prior year ~~period.~~periods. The decrease in net revenue is attributable to the lower average number of subscribers in ~~the first quarter of~~ 2018. This decrease was partially offset by an increase in average RMR per subscriber due to certain price increases enacted during the past twelve months. Average RMR per subscriber increased from ~~$43.63~~$43.79 as of ~~March 31,~~September 30, 2017 to ~~$44.76~~$45.12 as of ~~March 31,~~September 30, 2018. In addition, the Company recognized $4,216,000 and $6,986,000 increases in revenue for the three and nine months ended September 30, 2018, respectively, from the favorable impact of the new revenue recognition guidance, Topic 606, adopted effective January 1, 2018.

Cost of services. Cost of services increased ~~$2,732,000,~~$4,846,000, or ~~9.1%~~16.0%, and $11,008,000, or 12.3%, for the three and nine months ended ~~March 31,~~September 30, 2018, respectively, as compared to the corresponding prior year ~~period.~~periods. The increase ~~for the three months ended March 31, 2018~~ is primarily due to expensing certain direct and incremental field service costs on new ~~AMAs~~contracts obtained in connection with a subscriber move ("Moves Costs") of ~~$2,405,000~~$2,437,000 and $7,074,000 for the three and nine months ended ~~March 31, 2018.~~September 30, 2018, respectively. 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. For comparative purposes, Moves Costs capitalized as Subscriber accounts, net for the three and nine months ended ~~March 31,~~September 30, 2017 were ~~$3,889,000.~~$4,278,000 and $11,761,000, respectively. Furthermore, subscriber acquisition costs, which include expensed equipment and labor costs associated with the creation of new subscribers, ~~for MONI and LiveWatch,~~ increased to ~~$3,610,000~~$4,591,000 and $12,521,000 for the three and nine months ended ~~March 31,~~September 30, 2018, respectively, as compared to ~~$2,664,000~~$3,307,000 and $8,774,000 for the three and nine months ended ~~March 31,~~September 30, 2017, respectively. The increase is attributable to increased production volume in the Company's direct sales ~~channels. These increases were offset by reduced salary and wage expense due to lower headcount.~~channel. Cost of services as a percent of net revenue increased from ~~21.2%~~21.9% and 21.4% for the three and nine months ended ~~March 31,~~September 30, 2017, respectively, to ~~24.4%~~25.6% and 24.8% for the three and nine months ended ~~March 31, 2018.~~September 30, 2018, respectively.

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Selling, general and administrative. Selling, general and administrative costs ("SG&A") increased ~~$1,161,000,~~$2,406,000, or ~~3.2%~~6.7%, for the three months ended ~~March 31,~~September 30, 2018, as compared to the corresponding prior year period. The increase is primarily attributable to ~~$2,955,000 of severance and related costs in conjunction with transitioning executive leadership~~rebranding expense at Brinks Home Security, increased professional legal fees incurred at Ascent Capital and subscriber acquisition costs in SG&A associated with the creation of new subscribers. Subscriber acquisition costs in SG&A increased to $9,507,000 for the three months ended September 30, 2018 as compared to $7,968,000 for the three months ended September 30, 2017. These increases were offset by reduced stock-based compensation expense and severance expense. SG&A as a percent of net revenue increased from 25.9% for the three months ended September 30, 2017 to 27.9% for the three months ended September 30, 2018.

SG&A decreased $26,817,000, or 19.6%, for the nine months ended September 30, 2018, as compared to the corresponding prior year period. The decrease is primarily attributable to the $28,000,000 legal settlement recognized in the second quarter of 2017 in relation to class action litigation of alleged violation of telemarketing laws. Additionally, there were decreases in stock-based compensation expense and consulting fees related to company cost reduction initiatives. These decreases were offset by increases in ~~direct marketing and other~~ SG&A subscriber acquisition costs associated with the creation of new su

~~bscribers.~~subscribers. Subscriber acquisition costs ~~in SG&A~~ increased to ~~$8,080,000~~$26,402,000 for the ~~three~~nine months ended ~~March 31,~~September 30, 2018 as compared to ~~$6,369,000~~$20,984,000 for the ~~three~~nine months ended ~~March 31,~~September 30, 2017. ~~These~~Other increases ~~were offset by decreases~~ in ~~stock-based compensation~~SG&A contributing to the overall change period over period included increased professional legal fees at Ascent Capital, Brinks Home Security rebranding expense and ~~LiveWatch acquisition contingent bonus charges for the three months ended March 31, 2018, due~~severance expense related to recent settlements or renegotiations of certain key agreements governing these costs. Furthermore, there was $713,000 and $641,000 of software impairment charges and consulting fees on integration / implementation of company initiatives, respectively, that were recognized in the three months ended March 31, 2017 with no corresponding costs being incurred in the three months ended March 31, 2018.transitioning Ascent Capital executive leadership. SG&A as a percent of net revenue ~~increased~~decreased from ~~25.7%~~32.6% for the ~~three~~nine months ended ~~March 31,~~September 30, 2017 to ~~28.0%~~27.1% for the ~~three~~nine months ended ~~March 31,~~September 30, 2018.

Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets. Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets decreased ~~$5,136,000,~~$6,713,000 and $17,923,000, or ~~8.6%~~11.3% and 10.0%, for the three and nine months ended ~~March 31,~~September 30, 2018, respectively, as compared to the corresponding prior year ~~period.~~periods. The decrease is related to a lower number of subscriber accounts purchased in the last twelve months ended ~~March 31,~~September 30, 2018 compared to the prior corresponding period as well as the timing of amortization of subscriber accounts acquired prior to the ~~first~~third quarter of 2017, which have a lower rate of amortization in 2018 based on the applicable double declining balance amortization method. Additionally, as discussed above, Moves Costs are expensed under Topic 606, whereas prior to adoption, these Moves Costs were capitalized on the balance sheet and amortized. This change resulted in a ~~$1,883,000~~$1,870,000 and $5,633,000 decrease in amortization ~~expense.~~expense for the three and nine months ended September��30, 2018, respectively. The decrease is partially offset by increased amortization related to accounts acquired subsequent to ~~March 31,~~September 30, 2017.

Interest expense. Interest expense increased ~~$1,166,000,~~$2,583,000 and $6,006,000, or ~~3.1%~~6.7% and 5.3%, for the three and nine months ended ~~March 31,~~September 30, 2018, respectively, as compared to the corresponding prior year ~~period.~~periods. The increase in interest expense is attributable to increases in the Company's revolving credit facility activity, higher interest rates from increasing LIBOR rates and increased amortization of debt discount and deferred debt costs under the effective interest rate method.

Income tax expense from continuing operations. The Company had pre-tax loss from continuing operations of ~~$29,492,000~~$38,749,000 and $311,261,000 and income tax expense from continuing operations of $1,346,000 and $4,039,000 for the three and nine months ended ~~March 31, 2018.~~September 30, 2018, respectively. The Company had pre-tax loss from continuing operations of ~~$17,131,000~~$27,394,000 and $83,390,000 and income tax expense from continuing operations of ~~$1,814,000~~$1,766,000 and $8,241,000 for the three and nine months ended ~~March 31, 2017.~~September 30, 2017, respectively. Income tax expense for the three and nine months ended ~~March 31,~~September 30, 2018 and 2017 is attributable to ~~MONI's~~Brinks Home Security's state tax expense and the deferred tax impact from amortization of deductible goodwill related to ~~MONI's~~Brinks Home Security's business acquisitions. The decrease in income tax expense is primarily attributable to the impact of the decrease in the U.S. federal corporate income tax rate from 35% to 21% as a result of new tax reform legislation enacted in the fourth quarter of 2017.

Net loss from continuing operations. The Company had net loss from continuing operations of ~~$30,838,000~~$40,095,000 for the three months ended ~~March 31,~~September 30, 2018, as compared to ~~$18,945,000~~$29,160,000 for the three months ended ~~March 31,~~September 30, 2017. The ~~change~~increase in net loss is primarily attributable to the ~~reduction~~$6,731,000 refinancing expense incurred in ~~Net~~the third quarter of 2018 related to the Senior Notes. The remaining increase is driven by decreases in operating income (which is discussed above) and increases in interest expense.

The Company had net loss from continuing operations of $315,300,000 for the nine months ended September 30, 2018, as compared to $91,631,000 for the nine months ended September 30, 2017. The increase in net loss is primarily attributable to the $214,400,000 goodwill impairment recognized in the second quarter of 2018, reductions in net revenue and the gains on sale of Ascent Capital properties recognized in 2017 offset by the $28,000,000 legal settlement reserve recognized in the second quarter of 2017 as discussed above.

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


	Three Months Ended March 31,					Three Months Ended September 30,					Nine Months Ended September 30,
	2018			2017		2018			2017		2018			2017
Net loss from continuing operations	$	(30,838	)	(18,945	)	$	(40,095	)	(29,160	)	$	(315,300	)	(91,631	)
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets	54,411			59,547		52,671			59,384		160,973			178,896
Depreciation	2,621			2,127		2,886			2,176		8,378			6,435
Stock-based compensation	285			1,576		682			2,393		1,652			5,968
Radio conversion costs	—			232		—			74		—			383
Legal settlement reserve						—			—		—			28,000
Severance expense (a)	2,955			27		—			1,248		2,955			1,275
LiveWatch acquisition contingent bonus charges	62			968		63			391		187			1,746
Rebranding marketing program	892			847		3,060			—		6,355			880
Integration / implementation of company initiatives	—			641		195			390		195			2,420
Gain on revaluation of acquisition dealer liabilities						(240		)	(954	)	(240		)	(1,358	)
Impairment of capitalized software	—			713		—			—		—			713
Gain on disposal of operating assets	—			(6,638	)	—			—		—			(21,217	)
Loss on goodwill impairment						—			—		214,400			—
Interest income	(481		)	(395	)	(624		)	(617	)	(1,879		)	(1,575	)
Interest expense	38,652			37,486		40,943			38,360		120,017			114,011
Reversal of other-than-temporary impairment losses on sale of marketable securities	(1,036		)	—
Refinancing expense						6,731			—		6,731			—
Unrealized (gain) loss on marketable securities, net						(675		)	220		(3,251		)	220
Income tax expense from continuing operations	1,346			1,814		1,346			1,766		4,039			8,241
Adjusted EBITDA	$	68,869		80,000		$	66,943		75,671		$	205,212		233,407


(a)	Severance expense related to transitioning executive leadership at Ascent Capital in 2018 and ~~MONI~~a reduction in headcount event and transitioning executive leadership at Brinks Home Security in 2017.

Adjusted EBITDA decreased ~~$11,131,000,~~$8,728,000, or ~~13.9%~~11.5%, and $28,195,000, or 12.1%, for the three and nine months ended ~~March 31,~~September 30, 2018, respectively, as compared to the corresponding prior year ~~period.~~periods. The decrease is primarily the result of lower revenues, the expensing of subscriber moves in 2018, ~~and~~ an increase in subscriber acquisition costs and Ascent Capital professional legal fees as discussed above.

~~MONI's~~Brinks Home Security's consolidated Adjusted EBITDA was ~~$70,039,000~~$71,282,000 and $213,480,000 for the three and nine months ended ~~March 31,~~September 30, 2018, respectively, as compared ~~$82,222,000~~to $76,910,000 and $239,786,000 for the three and nine months ended ~~March 31, 2017.~~September 30, 2017, respectively.

Expensed Subscriber acquisition costs, net. Subscriber acquisition costs, net increased to ~~$10,178,000~~$13,376,000 and $35,434,000 for the three and nine months ended ~~March 31,~~September 30, 2018, respectively, as compared to ~~$7,641,000~~$10,224,000 and $26,064,000 for the three and nine months ended ~~March 31, 2017.~~September 30, 2017, respectively. The increase in subscriber acquisition costs, net is primarily attributable to increase in volume of direct sales subscriber acquisitions year over year.

Liquidity and Capital Resources

At ~~March 31,~~September 30, 2018, we had ~~$30,087,000~~$137,561,000 of cash and cash ~~equivalents and $107,450,000 of marketable securities on a consolidated basis.~~equivalents. We may use a portion of these assets to decrease debt obligations, fund stock repurchases, or fund potential strategic acquisitions or investment opportunities.

Additionally, our other source of funds is our cash flows from operating activities which are primarily generated from the operations of ~~MONI.~~Brinks Home Security. During the ~~three~~nine months ended ~~March 31,~~September 30, 2018 and 2017, our cash flow from operating activities was ~~$47,954,000~~$69,534,000 and ~~$45,997,000,~~$113,914,000, respectively. The primary ~~driver~~drivers of our cash flow from operating activities ~~is Adjusted EBITDA. Fluctuations~~are the fluctuations in ~~our Adjusted EBITDA~~revenues and ~~the components of that measure are~~operating expenses as discussed in “Results of Operations” above. In addition, our cash flow from operating activities may be significantly impacted by changes in working capital.

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During the ~~three~~nine months ended ~~March 31,~~September 30, 2018 and 2017, the Company used cash of ~~$24,560,000~~$111,531,000 and ~~$46,708,000,~~$119,081,000, respectively, to fund subscriber account acquisitions, net of holdback and guarantee obligations. In addition, during the ~~three~~nine months ended ~~March 31,~~September 30, 2018 and 2017, the Company used cash of ~~$3,310,000~~$11,513,000 and ~~$1,693,000,~~$9,999,000, respectively, to fund its capital expenditures.

On ~~March 29,~~September 27, 2018, ~~MONI~~Brinks Home Security borrowed an incremental $26,691,000 on ~~the revolver under the~~its Credit Facility revolver (as defined below) to fund its ~~April 2,~~October 1, 2018 interest payment due under the Senior ~~Notes (as defined below).~~Notes.

The existing long-term debt of the Company at ~~March 31,~~September 30, 2018 includes the aggregate principal balance of ~~$1,838,775,000~~$1,918,875,000 under (i) the Ascent Capital convertible senior notes totaling $96,775,000 in aggregate principal amount, maturing on July 15, 2020 and bearing interest at 4.00% per annum (the “Convertible Notes”), (ii) the ~~MONI~~Brinks Home Security senior notes totaling $585,000,000 in principal, maturing on April 1, 2020 and bearing interest at 9.125% per annum (the “Senior Notes”), and (iii) the $1,100,000,000 senior secured term loan and $295,000,000 super priority revolver under the sixth amendment to the ~~MONI~~Brinks Home Security secured credit agreement dated March 23, 2012, as amended (the “Credit Facility”). The Convertible Notes have an outstanding principal balance of $96,775,000 as of ~~March 31,~~September 30, 2018. The Senior Notes have an outstanding principal balance of $585,000,000 as of ~~March 31,~~September 30, 2018. The Credit Facility term loan has an outstanding principal balance of ~~$1,083,500,000~~$1,078,000,000 as of ~~March 31,~~September 30, 2018 and requires principal payments of $2,750,000 per quarter with the remaining amount becoming due on September 30, 2022. The Credit Facility revolver has an outstanding balance of ~~$73,500,000~~$159,100,000 as of ~~March 31,~~September 30, 2018 and becomes due on September 30, 2021. The maturity date for ~~both~~each of the term loan and the revolving credit facility under the Credit Facility ~~are~~is subject to a springing maturity 181 days prior to the scheduled maturity date of the Senior ~~Notes. Accordingly,~~Notes, or October 3, 2019, if ~~MONI~~Brinks Home Security is unable to refinance the Senior Notes by ~~October 3, 2019, both~~that date. In addition, if Brinks Home Security is unable to refinance the ~~term loan and~~Senior Notes, or demonstrate the ~~revolving credit facility~~ability to meet its financial covenants for a period of twelve months after the issuance date, prior to the filing with the SEC of their Annual Report on Form 10-K for the year ended December 31, 2018, they may be subject to a going concern qualification in connection with their external audit report, which would ~~become~~be an event of default under the Credit Facility. 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.~~payable and terminate any commitment to make further loans under the Credit Facility.

In considering our liquidity requirements for the ~~remainder of 2018,~~next twelve months, we evaluated our known future commitments and obligations. WeOn September 24, 2018, Ascent Capital and Brinks Home Security entered into a Transaction Support Agreement (which was amended and restated pursuant to the Amended and Restated Transaction Support Agreement, entered into on October 30, 2018 (the "Amended and Restated Support Agreement")) with certain holders collectively owning or controlling not less than $380 million aggregate principal amount of the Senior Notes, representing approximately 65% of the Senior Notes (collectively, the "Consenting Noteholders"). The Amended and Restated Support Agreement incrementally included a group of lenders for the Credit Facility term loan holding over 50% of the aggregate outstanding principal amount of the Credit Facility term loan (collectively, the "Credit Facility Lenders"). The Consenting Noteholders and Credit Facility Lenders have committed to support and fully participate in proposed agreed upon transactions that would result in the refinancing of the Senior Notes, if consummated. While management continues to negotiate refinancing terms with its debt holders, as of the issuance date of these financial statements, Brinks Home Security has not refinanced the Senior Notes and there can be no assurances that the negotiations management is pursuing will result in the consummation of transactions that would refinance the Senior Notes.

Excluding consideration of a springing maturity event or going concern qualification, we will require the availability of funds to finance the strategy of our primary operating subsidiary, ~~MONI,~~Brinks Home Security, which is planned to grow through the acquisition of subscriber accounts. We considered the expected cash flow from ~~MONI,~~Brinks Home Security, as this business is the driver of our operating cash flows. In addition, we considered the current borrowing capacity of ~~MONI's~~Brinks Home Security's Credit Facility revolver, under which ~~MONI~~Brinks Home Security could borrow an additional ~~$221,500,000~~$135,900,000 as of ~~March 31,~~September 30, 2018, subject to certain financial covenants. ~~Based on this analysis, we~~We expect that cash on hand, cash flow generated from operations and available borrowings under ~~MONI's~~Brinks Home Security's Credit Facility revolver will provide sufficient liquidity ~~given~~to finance the strategy of our ~~anticipated current and future requirements.~~primary operating subsidiary, Brinks Home Security.

We may seek external equity or debt financing in the event of any new investment opportunities, additional capital expenditures or our operations requiring additional funds, but there can be no assurance that we will be able to obtain equity or debt financing on terms that would be acceptable to us or at all. Our ability to seek additional sources of funding depends on our future financial position and results of operations, which are subject to general conditions in or affecting our industry and our customers and to general economic, political, financial, competitive, legislative and regulatory factors beyond our control.

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Item 3. Quantitative and Qualitative Disclosure about Market Risk

Interest Rate Risk

We have exposure to changes in interest rates related to the terms of our debt obligations. ~~MONI~~Brinks Home Security uses derivative financial instruments to manage the exposure related to the movement in interest rates. The derivatives are designated as hedges and were entered into with the intention of reducing the risk associated with variable interest rates on the debt obligations. We do not use derivative financial instruments for trading purposes.

Tabular Presentation of Interest Rate Risk

The table below provides information about our outstanding debt obligations and derivative financial instruments that are sensitive to changes in interest rates. Interest rate swaps are presented at their fair value amount and by maturity date as of ~~March 31,~~September 30, 2018. Debt amounts represent principal payments by maturity date as of ~~March 31,~~September 30, 2018, assuming no springing maturity of both the term loan and the revolving credit facility under the Credit Facility.


Year of Maturity	Fixed Rate Derivative Instruments, net (a)			Variable Rate Debt		Fixed Rate Debt		Total		Fixed Rate Derivative Instruments, net (a)			Variable Rate Debt		Fixed Rate Debt		Total
	(Amounts in thousands)									(Amounts in thousands)
Remainder of 2018	$	—		$	8,250	$	—	$	8,250	$	—		$	2,750	$	—	$	2,750
2019	—			11,000		—		11,000		—			11,000		—		11,000
2020	—			11,000		681,775		692,775		—			11,000		681,775		692,775
2021	—			84,500		—		84,500		—			170,100		—		170,100
2022	(7,280		)	1,042,250		—		1,034,970		(16,425		)	1,042,250		—		1,025,825
2023	—			—		—		—		—			—		—		—
Thereafter	—			—		—		—		—			—		—		—
Total	$	(7,280	)	$	1,157,000	$	681,775	$	1,831,495	$	(16,425	)	$	1,237,100	$	681,775	$	1,902,450

(a)

The derivative financial instruments reflected in this column include four interest rate swaps with a maturity date in 2022. As a result of these interest rate swaps, ~~MONI's~~Brinks Home Security's effective weighted average interest rate on the borrowings under the Credit Facility term loans was ~~7.98%~~7.99% as of ~~March 31,~~September 30, 2018. See notes 7, 8, 9 and 910 to our accompanying condensed consolidated financial statements included in this Quarterly Report for further information.

Item 4. Controls and Procedures

In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company carried out an evaluation, under the supervision and with the participation of management, including its chief executive officer and chief financial officer (the "Executives"), of the effectiveness of its disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Executives concluded that the Company’s disclosure controls and procedures were effective as of ~~March 31,~~September 30, 2018 to provide reasonable assurance that information required to be disclosed in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There has been no change in the Company’s internal controls over financial reporting that occurred during the three months ended ~~March 31,~~September 30, 2018 that has materially affected, or is reasonably likely to materially affect, its internal controls over financial reporting.

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PART II - OTHER INFORMATION

Item 1.Legal Proceedings

On August 27, 2018, holders purporting to own approximately 68% of the Convertible Notes filed a complaint in the Court of Chancery of the State of Delaware against Ascent Capital and each of its directors and executive officers.

The Third Amended Complaint could be amended, or similar claims could be brought, challenging the October 30th Transactions, and we cannot assure you that such claims will be unsuccessful or will not have a material effect on any such October 30th Transactions. Ascent Capital believes that the claims in the Third Amended Complaint are meritless, and Ascent Capital intends to vigorously defend against this action.

Item 1A. Risk Factors

Except as discussed below, there have been no material changes in our risk factors from those disclosed in Part I, Item 1A of the 2017 Form ~~10-K.~~10-K and Part II, Item 1A of our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2018 and June 30, 2018.

~~MONI’s business operates~~If the value of our Series A Common Stock falls below the minimum share price and market value thresholds in ~~a regulated industry.~~

MONI’s business, operations and dealers are subject to various U.S. federal, state and local consumer protection laws, licensing regulation and other laws and regulations, and, to a lesser extent, similar Canadian laws and regulations. While there are no U.S. federal laws that directly regulate the security alarm monitoring industry, MONI’s advertising and sales practices and that of its dealer network are subject to regulation by the U.S. Federal Trade Commission (the “FTC”) in addition to state consumer protection laws. The FTC and the Federal Communications Commission have issued regulations that place restrictions on, among other things, unsolicited automated telephone calls to residential and wireless telephone subscribers by means of automatic telephone dialing systems and the use of prerecorded or artificial voice messages. If MONI (through its direct marketing efforts) or MONI’s dealers were to take actions in violation of these regulations, such as telemarketing to individuals on the “Do Not Call” registry, itNasdaq’s continued listing requirements for 30 consecutive trading days, our Series A Common Stock could be subject to ~~fines, penalties, private actions, investigations or enforcement actions by government regulators. MONI has~~delisting, which could have an adverse impact on the trading volume, liquidity and market price of our common stock and could lead to a default under the indenture for the Convertible Notes and the Credit Facility.

Our Series A Common Stock is listed on the Nasdaq Global Select Market. As a Nasdaq listed company, we are required to satisfy Nasdaq’s continued listing requirements, which require, among other things, that the share price of our Series A Common Stock is at least $1.00 per share and the market value of our publicly held shares is at least $15 million. From time to time this year, we have not been ~~named, and may be named~~in compliance with those requirements. If, in the future, such non-compliance were to continue for 30 consecutive trading days, our Series A Common Stock would be subject to delisting from Nasdaq.

If our Series A Common Stock ceases to be listed on Nasdaq or another U.S. national securities exchange, this would constitute a “fundamental change,” as defined in the indenture governing our Convertible Notes. As a ~~defendant in litigation arising from alleged violations~~result, each noteholder would have the right, at such noteholder’s option, to require Ascent Capital to repurchase for cash any or all of such noteholder’s Convertible Notes on the repurchase date specified by Ascent Capital at a repurchase price equal to 100% of the TCPA. While MONI endeavors to comply with the TCPA, no assurance can be given that MONI will not be exposed to liability as a result of its or its dealers’ direct marketing efforts or debt collections. For example, MONI recognized a legal settlement reserve in the second quarter of 2017 related to a class action lawsuit based on alleged TCPA violations. In addition, although MONI has taken steps to insulate itself from any such wrongful conduct by its dealers, and to require its dealers to comply with these laws and regulations, no assurance can be given that it will not be exposed to liability as result of its dealers’ conduct. If MONI or any such dealers do not comply with applicable laws, MONI may be exposed to increased liability and penalties, and there can be no assurance, in the event of such liability, that MONI would be adequately covered, if at all, by its insurance policies. Further, to the extent that any changes in law or regulation further restrict the lead generation activity of MONI or its dealers, these restrictions could result in a material reduction in subscriber acquisition opportunities, reducing the growth prospects of its business and adversely affecting its financial condition and future cash flows. In addition, most states in which MONI operates have licensing laws directed specifically toward the monitored security services industry. MONI’s business relies heavily upon wireline and cellular telephone service to communicate signals. Wireline and cellular telephone companies are currently regulated by both federal and state governments. Changes in laws or regulations could require MONI to change the way it operates, which could increase costs or otherwise disrupt operations. In addition, failure to comply with any such applicable laws or regulations could result in substantial fines or revocation of its operating permits and licenses, including in geographic areas where its services have substantial penetration, which could adversely affect its business and financial condition. Further, if these laws and regulations were to change or MONI failed to comply with such laws and regulations as they exist today or in the future, its business, financial condition and results of operations could be materially and adversely affected.principal

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amount thereof, together with accrued and unpaid interest. We may not have sufficient funds or be able to obtain financing if we are required to repurchase the Convertible Notes, which could cause us to default under the indenture. A default under the indenture would also cause an event of default under the Credit Facility.

In addition, a delisting of our Series A Common Stock from Nasdaq would negatively impact us because it could, among other things: (i) reduce the liquidity and market price of our common stock; (ii) reduce the amount of news and analyst coverage for our company; (iii) reduce the number of investors willing to hold or acquire our common stock, which could negatively impact our ability to raise equity financing; (iv) limit our ability to use a registration statement to offer and sell freely tradable securities, thereby preventing us from accessing the public capital markets; (v) impair our ability to provide liquid equity incentives to our employees; and (vi) have negative reputational impact for us with our customers, suppliers, employees and other persons with whom we transact from time to time.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The Company did not purchase any of its own equity securities during the three months ended ~~March 31,~~September 30, 2018. The following table sets forth information concerning shares withheld in payment of withholding taxes, in each case, during the three months ended ~~March 31,~~September 30, 2018.

Period
Total Number
of Shares
Purchased
(Surrendered) (1)

Average Price
Paid per Share

Total Number of
Shares (or Units)
Purchased as Part
of Publicly
Announced Plans
or Programs

Maximum Number (or
Approximate Dollar
Value) or Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs (1)
1/1/2018 - 1/31/2018 8,621
(2) $ 11.85
—

2/1/2018 - 2/28/2018 2,059
(2) 6.76
—

3/1/2018 - 3/31/2018 —
—
—

Total 10,680
$ 10.87
—



Period	Total Number of Shares Purchased (Surrendered) (1)		Average Price Paid per Share		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) or Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1)
7/1/2018 - 7/31/2018	6,790	(2)	$	3.08	—
8/1/2018 - 8/31/2018	2,468	(2)	2.32		—
9/1/2018 - 9/30/2018	—		—		—
Total	9,258		$	2.88	—

(1)

On June 16, 2011, the Company announced that it received authorization to implement a share repurchase program, pursuant to which it could purchase up to $25,000,000 of its shares of Series A Common Stock, from time to time. On November 14, 2013, November 10, 2014 and September 4, 2015, the Company’s Board of Directors authorized, at each date, the repurchase of an incremental $25,000,000 of its Series A Common Stock. As of ~~March 31,~~September 30, 2018, 2,391,604 shares of Series A Common Stock had been purchased, at an average price paid of $40.65 per share, pursuant to these authorizations. As of ~~March 31,~~September 30, 2018, the remaining availability under the Company's existing share repurchase program will enable the Company to purchase up to an aggregate of approximately $2,771,000 of Series A Common Stock. The Company may also purchase shares of its Series B Common Stock, under the remaining availability of the program.


(2)	Represents shares withheld in payment of withholding taxes upon vesting of employees' restricted share awards.

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Item 6. Exhibits

Listed below are the exhibits which are included as a part of this Report (according to the number assigned to them in Item 601 of Regulation S-K):



4.1		Supplemental Indenture, dated as of August 30, 2018, to the Indenture, dated as of July 17, 2013, between Ascent Capital Group, Inc. (“Ascent Capital”) and U.S. Bank National Association, as trustee, (incorporated by reference to Exhibit 4.1 to Ascent Capital’s Current Report on Form 8-K (File No. 001-34176), filed with the Securities and Exchange Commission (the “Commission”) on August 31, 2018).
10.1		Transaction Support Agreement, dated as of September 24, 2018, by and among Ascent Capital, Monitronics International, Inc. (“MONI”) and certain holders of MONI’s 9.125% Senior Notes due 2020 (the "Consenting Noteholders") (incorporated by reference to Exhibit 10.1 to Ascent Capital’s Current Report on Form 8-K (File No. 001-34176), filed with the Commission on September 25, 2018).
10.2		First Amendment to Transaction Support Agreement, dated as of October 16, 2018, by and among Ascent Capital, MONI and the Consenting Noteholders (incorporated by reference to Exhibit 10.1 to Ascent Capital’s Current Report on Form 8-K (File No. 001-34176), filed with the Commission on October 17, 2018).
10.3		Amended and Restated Transaction Support Agreement, dated as of October 30, 2018, by and among Ascent Capital, MONI, the Consenting Noteholders and a group of holders of Term B-2 Loans under MONI’s Credit Facility (incorporated by reference to Exhibit 10.1 to Ascent Capital’s Current Report on Form 8-K (File No. 001-34176), filed with the Commission on October 30, 2018).
31.1		Rule 13a-14(a)/15d-14(a) Certification. *
31.2		Rule 13a-14(a)/15d-14(a) Certification. *
32		Section 1350 Certification. **
101.INS		XBRL Instance Document. *
101.SCH		XBRL Taxonomy Extension Schema Document. *
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document. *
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document. *
101.LAB		XBRL Taxonomy Extension Labels Linkbase Document. *
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document. *



*	Filed herewith.
**	Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



			ASCENT CAPITAL GROUP, INC.


Date:	~~May 10,~~November 5, 2018	By:	/s/ William E. Niles
			William E. Niles
			Chief Executive Officer, General Counsel and Secretary


Date:	~~May 10,~~November 5, 2018	By:	/s/ Fred A. Graffam
			Fred A. Graffam
			Senior Vice President and Chief Financial Officer
			(Principal Financial and Accounting Officer)

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