IASGE Integrated Alarm Services Grp. (MM)

Integrated Alarm Services Group, Inc. (NASDAQ: IASGE), a total solution provider to independent security alarm dealers located throughout the United States, announced results for the first quarter ended March 31, 2005. A management conference call and simultaneous webcast to discuss first quarter results will be held on Wednesday, June 29, 2005 at 4:30 p.m. EDT. Revenue for the first quarter of fiscal 2005 was $24.5 million up 34.3 percent over the fiscal 2004 first quarter revenue of $18.2 million and up 17.9 percent sequentially over the fourth quarter of 2004. The net loss for the first quarter ended March 31, 2005 was $2.6 million, or $0.10 per share, compared to a net loss of $1.1 million, or $0.04 per share in the first quarter of 2004. The aggregate owned portfolio annualized attrition rate for the first quarter of 2005 was 10.9 percent down from 13.4 percent in the same period in 2004 and 11.3 percent in the fourth quarter of 2004. During the first quarter of 2005 the Company added 16,600 contract equivalents to its owned portfolio. Approximately 14,400 contracts were acquired during the quarter at a gross purchase price multiple of 28.7 and 2,200 contract equivalents were added through internal sales and marketing activities. In announcing the results, Timothy M. McGinn, Chairman and CEO, said, "These results show substantial progress. First quarter EBITDA increased to $8.1 million from $3.1 million in the fourth quarter and first quarter annualized attrition at 10.9 percent is below our full-year 2005 target of 11 percent. During this difficult time, I am pleased that our operating management has been able to stay focused on serving the customer and improving financial performance. Clearly the past few months have been distracting relative to our acquisition activities and this is reflected in our first quarter account additions. We have several acquisition opportunities in our pipeline and I remain confident in our ability to add 80,000 contract equivalents in 2005." McGinn closed by saying, "The filing of our Form 10-Q fulfills our filing obligations with the SEC and NASDAQ. I expect the fifth letter to be removed from our stock symbol shortly." At March 31, 2005, IASG had $26.9 million in cash, $27.6 million of collateralized notes receivable from dealers and stockholders' equity of $140.5 million. The Company had $130.9 million of debt and capital leases at March 31, 2005 and ended the first quarter of fiscal 2005 with a net debt (debt less cash) to equity ratio of 0.74 to 1. In the first quarter IASG used approximately $9.9 million of cash to acquire accounts. The Company had no outstanding balance on the $30 million senior credit facility at the end of the first quarter 2005. IASG Portfolio Data: -0- *T ---------------------------------------------------------------------- 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2004 2004 2004 2004 2005 ---------------------------------------------------------------------- Annualized Attrition Rate ---------------------------------------------------------------------- IASG Owned Portfolio ---------------------------------------------------------------------- Legacy Portfolio 17.7% 10.8% 15.2% 14.6% 13.7% ---------------------------------------------------------------------- New Residential 13.5% 9.9% 12.5% 11.3% 11.7% ---------------------------------------------------------------------- New Commercial 9.1% 13.4% 10.4% 8.6% 5.2% ---------------------------------------------------------------------- Aggregate Owned Portfolio 13.4% 11.2% 12.6% 11.3% 10.9% ---------------------------------------------------------------------- ---------------------------------------------------------------------- Annualized Growth Rate - excluding acquisitions ---------------------------------------------------------------------- Wholesale Monitoring Accounts 4.0% (17.9%) (9.1%) 0.5% 2.3% ---------------------------------------------------------------------- *T IASG ended the first quarter 2005 with an owned portfolio of approximately 162,000 contract equivalents generating RMR of approximately $4.9 million and wholesale monitoring of approximately 720,000 alarms (including IASG's owned portfolio accounts) generating approximately $3.0 million in RMR. Revenue from the owned portfolio is split 80 percent residential and 20 percent commercial. Investors may participate in the conference call to discuss first quarter results by dialing 800 599-9829 and entering the access code of 96829488 or by logging onto the investor relations section of the IASG website at www.iasg.us. The international dial in number is 617 847-8703 with the same access code. A replay of the conference call will be available through July 20, 2005 by dialing 888 286-8010 (international dial in - 617 801-6888) and entering the access code of 96607367 or by visiting the investor relations section of the IASG website. See the attached financial highlights for the first quarter ended 2005. About IASG Integrated Alarm Services Group provides total integrated solutions to independent security alarm dealers located throughout the United States to assist them in serving the residential and commercial security alarm market. IASG's services include alarm contract financing including the purchase of dealer alarm contracts for its own portfolio and providing loans to dealers collateralized by alarm contracts. IASG, with approximately 5,600 independent dealer relationships, is also the largest wholesale provider of alarm contract monitoring and servicing. For more information about IASG please visit our website at http://www.iasg.us. This press release may contain statements, which are not historical facts and are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements contain projections of IASG's future results of operations, financial position or state other forward-looking information. In some cases you can identify these statements by forward-looking words such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "should", "will", and "would" or similar words. You should not rely on forward-looking statements because IASG's actual results may differ materially from those indicated by these forward-looking statements as a result of a number of important factors. These factors include, but are not limited to: general economic and business conditions; our business strategy for expanding our presence in our industry; anticipated trends in our financial condition and results of operation; the impact of competition and technology change; existing and regulations effecting our company and business, and other risks and uncertainties discussed under the heading "Risks Related to our Business" in IASG's Form 10-K report for the period ending December 31, 2004 as filed with the Securities and Exchange Commission on June 13, 2005, and other reports IASG files from time to time with the Securities and Exchange Commission. IASG does not intend to and undertakes no duty to update the information contained in this press release. -0- *T INTEGRATED ALARM SERVICES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of --------------------------- December 31, March 31, 2004 2005 ------------- ------------- (unaudited) Assets Current assets: Cash and cash equivalents $31,554,609 $26,853,950 Current portion of notes receivable 5,186,965 19,510,397 Accounts receivable, net 6,289,787 6,737,464 Inventories 1,233,785 1,078,899 Prepaid expenses 1,127,581 1,536,522 Due from related parties 70,655 136,448 ------------- ------------- Total current assets 45,463,382 55,853,680 Property and equipment, net 7,926,324 7,774,069 Notes receivable, net 22,211,283 5,068,331 Dealer relationships, net 34,529,962 33,381,747 Customer contracts, net 85,169,085 93,280,544 Deferred installation costs, net 5,946,059 7,069,169 Goodwill 91,434,524 91,194,427 Debt issuance costs, net 5,322,089 5,334,144 Other identifiable intangibles, net 3,054,247 2,909,259 Restricted cash 757,104 1,399,714 Other assets 270,122 236,663 ------------- ------------- Total assets $302,084,181 $303,501,747 ============= ============= Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $5,225,000 $4,970,000 Current portion of capital lease obligations 459,987 374,645 Accounts payable 3,720,197 1,933,887 Accrued expenses 9,185,263 13,904,706 Current portion of deferred revenue 9,756,134 10,311,003 Other liabilities 160,809 106,509 ------------- ------------- Total current liabilities 28,507,390 31,600,750 Long-term debt, net of current portion 125,000,000 125,000,000 Capital lease obligations, net of current portion 575,502 506,937 Deferred revenue, net of current portion 4,034,675 4,636,130 Deferred income taxes 1,112,778 1,222,158 Other liabilities - 45,190 Due to related parties 4,009 8,065 ------------- ------------- Total liabilities 159,234,354 163,019,230 ------------- ------------- Commitments and Contingencies Stockholders' equity: Preferred stock, $0.001 par value; authorized 3,000,000 shares and none issued and outstanding - - Common stock, $0.001 par value; authorized 100,000,000 shares; issued and outstanding 24,681,462 at December 31, 2004 and March 31, 2005 24,682 24,682 Paid-in capital 206,566,067 206,785,008 Accumulated deficit (63,740,922) (66,327,173) ------------- ------------- Total stockholders' equity 142,849,827 140,482,517 ------------- ------------- Total liabilities and stockholders' equity $302,084,181 $303,501,747 ============= ============= INTEGRATED ALARM SERVICES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) For the Three Months Ended March 31, ------------------------------------ 2004 2005 ------------------ ----------------- Revenue: Monitoring fees $5,787,406 $7,822,068 Revenue from customer accounts 11,178,804 14,281,782 Related party monitoring fees 25,480 32,736 Service, installation and other revenue 1,216,060 2,321,349 ------------------ ----------------- Total revenue 18,207,750 24,457,935 Cost of revenue (excluding depreciation and amortization) 7,067,994 10,285,449 ------------------ ----------------- 11,139,756 14,172,486 ------------------ ----------------- Operating expenses: Selling and marketing 1,115,962 1,159,358 Depreciation and amortization 5,012,521 6,113,608 Loss (gain) on sale of assets 402 187 General and administrative 5,058,998 6,140,157 ------------------ ----------------- Total operating expenses 11,187,883 13,413,310 ------------------ ----------------- Income (loss) from operations (48,127) 759,176 Other income (expense): Other income, net (3,080) - Amortization of debt issuance costs (259,850) (274,200) Interest expense (1,705,172) (4,185,515) Interest income 324,671 1,254,669 ------------------ ----------------- Income (loss) before income taxes (1,691,558) (2,445,870) Income tax expense (benefit) (620,542) 140,381 ------------------ ----------------- Net income (loss) $(1,071,016) $(2,586,251) ================== ================= Basic and diluted income (loss) per share $(0.04) $(0.10) ================== ================= Weighted average number of common shares outstanding 24,639,949 24,681,462 ================== ================= INTEGRATED ALARM SERVICES GROUP, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP MEASURES (unaudited) Three Months Ended March 31, 2004 2005 -------------- ------------- Net income (loss) $(1,071,016) $(2,586,251) Adjust for: Income tax expense (benefit) (620,542) 140,381 Interest expense 1,705,172 4,185,515 Amortization of debt issuance costs 259,850 274,200 Depreciation and amortization 5,012,521 6,113,608 -------------- ------------- EBITDA $5,285,985 $8,127,453 ============== ============= *T