AlarmForce Industries Inc.
TSX : AF

AlarmForce Industries Inc.

September 11, 2017 20:00 ET

AlarmForce Reports Third Quarter 2017 Financial Results

TORONTO, ONTARIO--(Marketwired - Sept. 11, 2017) - AlarmForce Industries (TSX:AF) -

Third Quarter Operating Highlights

  • As reported in June 2017, AlarmForce successfully sold the US subscription base to Select Security of Lancaster, PA. The Company continues to provide a level of transition services to Select Security as agreed upon in the transaction. Accordingly, Q3's results reflect the sale and split of the business into Continuing Operations (Canada) and Discontinued Operations (US).
  • Consolidated revenue for continuing operations increased by 2% or $0.2 million for Q3 to a total of $10.0 million compared to $9.8 in the comparative period in 2016.
  • Recurring monthly revenue for continuing operations was $3.18 million at the end of Q3 2017, up 1.6% from Q2 2017 and up 0.7% from the comparative period in 2016.
  • EBITDA from continuing operations for the third quarter increased by $3.1 million to $0.2 million from the comparative period in 2016 mostly due to a reduction of $2.9 million in one time expenses related to the previously disclosed accounting matters incurred in Q3 2016. EBITDA excluding non-recurring expenses for Q3 increased by $0.14 million to $0.26 million from $0.11 million for the comparative period in 2016.
  • Net income (loss) for continuing operations for the third quarter improved by $3.3 million to ($0.48) million from the comparative period in 2016. The increase is mostly due to a reduction in one time expenses incurred in Q3 2017 relative to the comparable period in 2016 related to the previously disclosed accounting matters.
  • Net income and comprehensive income from discontinued operations in third quarter totaled $11.3 million due to the proceeds from the sale of the US subscriber base.
  • Diluted loss per share for continuing operations for Q3 2017 improved by $0.28 to ($0.04) per share compared to Q3 2016.
  • Average revenue per new Canadian alarm subscriber during Q3 was $41.26, up from $35.06 for all of fiscal 2016.
  • Total subscribers for continuing operations declined by 715 or 0.7% during Q3 to 102,004.

Year-to-Date Operating Highlights

  • Revenues from continuing operations increased by 0.8% or $0.2 million in the first three quarters of 2017 to a total of $29.7 million compared to $29.5 million in the comparative period of 2016.
  • Net Income (loss) from continuing operations improved by $2.8 million to ($1.4) million from $(4.2) million during the same period for 2016, diluted loss per share of $(0.13) versus $(0.37) for 2016.
  • Net income and comprehensive income from discontinued operations for the first nine months was $15.5 million attributable to the elimination of marketing and advertising expenditures in the US and the sale of the US subscriber base.
  • EBITDA increased by 125% or $1.2 million to $2.1 million year-over-year. EBITDA for continuing operations and excluding non-recurring expenses in the first three quarters decreased by $1.4 million or 30% to $3.3 million due primarily to a foreign exchange translation loss, higher salary and benefits costs and higher non-cash write-offs of installed legacy equipment related to customer upgrades and cancellations, partially offset by higher capitalization of deferred costs related to upgrades and new customer installations.
  • ARPNU for the first nine months of 2017 of $40.28, up from $35.06 for all of fiscal 2016, an increase of 15%.
Three months ended Nine months ended
Continuing Operations July 31,
2017
July 31,
2016
Change July 31,
2017
July 31,
2016
Change
($ in thousands, except per share and subscriber amounts)
Total revenue $ 10,025 $ 9,816 2 % $ 29,725 $ 29,495 1 %
Recurring monthly revenue (RMR) $ 3,177 $ 3,153 1 % $ 3,177 $ 3,153 1 %
EBITDA* $ 192 $ (2,897 ) 107 % $ 2,112 $ 940 125 %
Net income $ (476 ) $ (3,769 ) 87 % $ (1,435 ) $ (4.236 ) 66 %
Shares outstanding, diluted 11,494 11,570 -1 % 11,470 11,571 -1 %
Diluted net income per share $ (0.04 ) $ (0.33 ) 86 % $ (0.13 ) $ (0.37 ) 66 %
Total subscribers 102,004 106,360 -4 % 102,004 106,360 -4 %

*EBITDA is a non-IFRS financial measure and is defined in the disclosure section accompanying this press release.

AlarmForce Industries announced today its third quarter financial results for the period ending July 31, 2017. Unless otherwise indicated all amounts are expressed in Canadian dollars.

"The main highlight of the third quarter was the successful close of the sale of our US subscription base," said Graham Badun, President and CEO of AlarmForce Industries Inc. "As outlined in our strategic plan, the Company's higher-costs of operating and acquiring customers in the US and low shareholder value made us determined to vacate this market. With the successful divestiture near completed, the Canadian market will now be our sole focus. During the third quarter we also launched our partnership with Google Home. This partnership represents our continued effort to offer state of the art home automation related products to our customers. Over 5.1 per cent of Canadian homes now have this technology and the number is expected to reach 27.7 per cent in 2021 (Statista). Our bundle offerings continue to grow. Through the first nine months of this fiscal year our new subscribers include AlarmForce Secure at 28%, AlarmForce Connect at 49%, AlarmForce Control at 5%, and AlarmForce Command at 18%. This is a clear indication that Canadians are seeking more comprehensive home automation packages and AlarmForce is properly positioned to meet this growing demand."

During the first nine months of 2017, the Company paid quarterly cash dividends to shareholders totaling $1,560,276 compared to $1,562,925 in the comparative period of 2016. The Board of Directors declared a cash dividend of $0.045 payable for all issued and outstanding shares of the Company on record as at July 31, 2017, paid on August 18, 2017.

Sale of US Subscription Base

As reported in June, 2017, AlarmForce successfully sold the US subscription base to Select Security of Lancaster, PA for US$11.6M. US$8.7M was paid upon closing (including consideration for transition services) and the balance will be received in December, 2018. The Company continues to provide a level of transition services to Select Security as agreed upon in the transaction. It is the Company's intention to adjust its cost structure to incorporate the impact of the US sale subsequent to the end of the transition.

NCIB

With the Company's Normal Course Issuer Bid ("NCIB") approved by the Toronto Stock Exchange in March 2017, the Company purchased 100,600 common shares for a total cost of $1,095,226. The Board believes repurchasing shares for cancellation at the right price is in the best interest of the Company and such purchases constitute an attractive investment opportunity and a desirable use of cash that enhances shareholder value.

About AlarmForce

Founded in 1988, AlarmForce Industries is a leader in security alarm monitoring, personal emergency response monitoring, video surveillance and other home automation related products and services to residential and commercial subscribers throughout Canada. AlarmForce Industries is a publicly traded company on the Toronto Stock exchange (TSX:AF). More information about the company's products and services can be found at alarmforce.com.

Disclosure

EBITDA is defined as earnings before interest expenses, income taxes, depreciation and amortization. EBITDA is a key measure used in the security industry to assist in understanding and comparing operating results and is often referred to by our competitors. Management views EBITDA as a measure to assess the operating performance of the Company. Yet, since it does not have any standardized meaning defined by IFRS, it may not be considered in isolation of IFRS measures such as net income/loss or cash flows, as a measure of liquidity. The Company, however, utilizes these measures in making operating decisions and assessing its performance. Management believes that it allows the Company to assess its ongoing business without the impact of depreciation or amortization expenses. Since EBITDA is not a defined term under IFRS, it is unlikely to be comparable to similar measures presented by other issuers.

Forward-Looking Statements

Certain statements contained in this press release constitute forward-looking statements or information (collectively forward-looking statements) within the meaning of applicable securities legislation. Forward-looking statements are often identified by words such as "may", "will", "should", "could", "anticipate", "believe", "expect", "intend", "plan", "potential", "continue" and similar expressions. Forward-looking statements contained or referred to in this press release includes, but may not be limited to, the Company's expectation that its focus on the Canadian markets will continue to yield encouraging results.

The forward‐looking statements in this press release reflect the current expectations, assumptions and/or beliefs of AlarmForce about future events based on information currently available to AlarmForce. In connection with the forward‐looking statements contained in this press release, AlarmForce has made assumptions about, among other things: the quality of its subscriber base will improve through a focus on the Canadian markets; no significant events occur outside of AlarmForce's normal course of business; general economic conditions; the Company's business plans; hiring and labour trends and conditions; timing and payment of dividends; treatment under governmental regulatory regimes and tax laws; and currency, exchange and interest rates.

Although AlarmForce believes that the expectations reflected in the forward‐looking statements contained in this press release, and the assumptions on which such forward‐looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward‐looking statements included in this press release, as there can be no assurance that the plans, intentions or expectations upon which the forward‐looking statements are based will occur. By their nature, forward‐looking statements involve risks, uncertainties and other factors that could cause actual events, results, liabilities and financial results in future periods to differ materially from those expressed or implied by such forward‐looking statements. These risks and uncertainties include, among other things: the Company may be unsuccessful in improving the quality and the size of its subscriber base and other risks, and the risks discussed in the "Risk Factors" section of the Company's Annual Information Form and the "Risks and Uncertainties" section of the Company's MD&A, copies of which may be obtained at www.sedar.com.

The forward-looking statements contained in this press release speak only as of the date of this press release. Except as may be required by applicable securities laws, AlarmForce disclaims any intent or obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise.

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