AlarmForce Industries Inc.
TSX : AF

AlarmForce Industries Inc.

September 10, 2007 11:14 ET

AlarmForce Announces Record Third Quarter Revenue

TORONTO, ONTARIO--(Marketwire - Sept. 10, 2007) - AlarmForce Industries Inc. (TSX:AF), Canada' largest manufacturer and installer of live two-way voice home alarms s systems, is pleased to announce results for the nine months ended July 31, 2007:



July 31, 2007 July 31, 2006 Change
-------------- -------------- ---------
(9 months ended) (9 months ended) (Over same period)
$ $
Revenue 18,473,000 15,420,000 + 20%
Gross margin 14,591,000 11,542,000 + 26%
Cash flow from
operating activities 2,226,000 2,572,000 - 14%
Income before taxes 1,463,000 1,671,000 - 12%
Net income 921,000 1,051,000 - 12%
EBITDA(a) 3,417,000 3,407,000 -
Diluted net income
per share 0.08 0.09 - 9%
Subscriber base 75,000 64,000 + 17%

(a) EBITDA (Earnings Before Interest, Income Taxes, Depreciation, and
Amortization) is a key measure in the security industry and should not be
interpreted as GAAP)


Joel Matlin, President and CEO, said that, "We closed the third quarter with the highest ever revenue, reaching $6,448,000 in total revenue for the quarter. Nine-month revenue to July 31, 2007 reached $18,473,000, an increase of $3,053,000 or 20% from the comparative period in 2006. The Company' strong revenue growth reflects the increasing recurring revenues from monitoreds accounts in our subscriber base, which is up to approximately 75,000 accounts. The increase in subscriber accounts reflects an annual growth of 17%."

Mr. Matlin added that, "A significant trend this year is the increased investment in our marketing programs, which drive subscriber growth, and the impact of significantly higher marketing program expenditure is reflected in the numbers. Our marketing expenses during the quarter increased by $1.5 million from the third quarter of 2006, while cumulatively they increased by $2.4 million in the nine-month period. Despite this increased charge against operating results, our 20% annual growth rate and higher gross margins absorbed the drag caused by the increased marketing budget. Therefore we recorded a decrease in Income before taxes of only $208,000 and a decrease in Net income of only $130,000, relative to the same period in 2006. Likewise, despite the higher marketing expenses in 2007, the Company' EBITDA held up at about the same level as last year. Excluding marketings expenses, EBITDA increased to $10.3 million for the nine months ended July 31, 2007, up by 30%."

"We fully anticipated the impact of the increased expenses relative to the prior period, and given the strong revenue growth that we achieved, we are extremely satisfied with the results. We are on track with our current growth plan, focusing increased resources to creating new subscriber accounts. We expect to continue to increase the value of our company through organic growth resulting in higher future recurring revenues. At the same time the drag on operating results will continue to be felt because the costs to create the new accounts organically are expensed immediately against income, rather than capitalized and amortized over the life of the new accounts."

"As a result of the increase in revenue, gross profit for the nine months increased to $14,591,000, up by $3,049,000 or 26% from the same period a year ago. As a percentage of Revenue, gross profit amounted to 79%, continuing the trend of economies of scale from our expanding subscriber base."

"Cash flows from total operating activities decreased by $346,000 to $2,572,000, primarily as a result of the increased cash expenditures on marketing and growth. Therefore, the Company' cashs flows before marketing expenditures continued to grow at 29% per annum and we reinvested $6.9 million into marketing programs without additional bank borrowings. With our investment in growth being internally funded, we continued to operate with zero net financial debt on our balance sheet at the end of the third quarter."

"With increasing economies of scale and cash flows from recurring revenues, we were able to fund the cost of continuing brand-building in the US entirely from our internal cash flows from Canadian operations. As part of our expansion this year, we added a seventh centre, Atlanta, to our footprint in the US. With a population exceeding 5 million, this city represents the largest centre yet that we have entered. Replicating our Canadian model, we are continuing to execute on our marketing programs and brand-building to create the same powerful brand for AlarmForce in the US as in Canada."

Mr. Matlin ended by saying: "We are excited by the record achieved for total revenue as well as the results from our expansion of the subscriber base, which the Company has achieved organically. We are aiming to surpass the previous record for new accounts added this fiscal year, and we expect monthly recurring revenues, cash flows and subscriber accounts to continue to grow strongly in the foreseeable future."

AlarmForce Industries Inc. is Canada' largest manufacturer and installer of two-way voice homes alarm systems and line-cut protection with offices serving all major markets in Canada and strategically selected markets in the United States, with a base of 75,000 subscriber accounts.

Contact Information

  • AlarmForce Industries Inc.
    Investors Relations Dept.
    (416) 445-2001 ext#225
    (416) 445-9381 (FAX)
    Email: investor@alarmforce.com