AlarmForce Announces Q3 Revenues

TSX - Trading symbol - AF

TORONTO, Sept. 10, 2012 /CNW/ - AlarmForce Industries Inc., Canada's largest manufacturer and installer of live two-way voice home alarm systems, is pleased to announce results for the nine months ended July 31, 2012:

    July 31, 2012   July 31, 2011   Change  
    (9 months ended)   (9 months ended)   (over same period)
             
Revenue   $ 33,440,000   $ 30,297,000   +10%  
               
Income before income taxes      $ 622,000      $ 4,715,000    -87%  
               
Net income   $ 455,000   $ 3,321,000     -86%  
               
Cash flow from operations       $ 1,951 ,000   $ 5,603,000     -65%  
               
EBITDA   $ 4,257,000   $ 7,803,000     -45%  
             
EBITDA/share   $ 0.38   $   0.65     -42%  
             
EBITDA before marketing expenses   $ 17,202,000   $ 15,293,000      +12%  
                 
Basic Net income / share   $0.04   $0.27     -85%  
Diluted Net income / share   $0.04   $0.27     -85%  
 
* EBITDA (Earnings Before Interest, Income Taxes, Depreciation, and Amortization) is a key measure in the
security industry and should not be interpreted as IFRS)

EBITDA is defined as earnings before interest expenses, income taxes, depreciation and amortization. EBITDA is a 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 Canadian 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.

Joel Matlin, President and CEO, announced that, "AlarmForce closed the third quarter with revenues of $33.4 million for the nine months ended July 31, 2012. Total subscribers increased to 132,100, reflecting an annualized growth rate of 9% in the net subscriber base.

Nine month revenues increased by 10% over the comparative period and three month revenues increased by 11% over the comparative period. Net income for the nine month period decreased by 86% from $3.3 million to $0.5 million. The increase in marketing costs to launch and promote VideoRelay and enter the Florida market more than offset revenue growth. The impact of these expenses on income is a reflection of our organic growth model, in which the costs to create new subscriber accounts are expensed even though the new accounts represent long-term recurring monthly revenues over the life of the subscriber relationship. The Company's organic account creation model puts downward pressure on net income, even though the value of the business continues to grow with the growth in subscribers.  While marketing costs will exceed revenues in the short term, management expects VideoRelay to contribute to earnings as the product establishes brand recognition and gains market acceptance.

As mentioned, in previous announcements, the transition to VideoRelay will bear a front-loaded impact, due to the significant investment in increased marketing costs and hiring and training skilled personnel. We have also expanded installation, sales and support, and engineering staff to support future growth across all our service territories." This will position the Company for future growth in revenues from both existing and new subscribers seeking technology-enhanced services.

For the nine months ended July 31, 2012, EBITDA decreased from $7.8 million to $4.3 million, a 45% decrease. However, excluding the impact of the marketing expenses, EBITDA increased from $15.3 million to $17.2 million, a 12% increase.

Our cash flows from operations decreased from $5.6 million to $2.0 million for the nine months, a decrease of $3.6 million. Notwithstanding the fact that the increase in advertising expenditures exceeded revenue growth and decrease in other cash expenses, we funded all growth, branding and product development from internal cash resources. We continue to show zero debt on our balance sheet."

Mr. Matlin continued: "VideoRelay puts our brand at the forefront of technology with enhanced features that are designed and manufactured exclusively by AlarmForce. We anticipate accelerated growth as we gain traction in our existing markets. We believe that consumers are seeking more interactive services which are not offered by competitor systems and our brand is well positioned as the consumer market accepts our leading-edge technology."

Mr. Matlin closed by saying: "As we continue the transition to new, enhanced products and services, we look ahead optimistically to increasing our market share in both the home alarm and the consumer video market. I would like to thank our subscribers, investors, employees and Directors for their continuing support and confidence in our future."

AlarmForce provides security alarm monitoring, personal emergency response monitoring, video surveillance and related services to residential and commercial subscribers throughout Canada and selected centres across the United States. AlarmForce is a leading provider of two-way voice alarm systems in Canada. More information about the Company's products and services can be found at www.alarmforce.com and www.videorelay.com.

SOURCE Alarmforce Industries Inc.



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