AlarmForce Announces Record 76% Net Income Increase in Third Quarter

TORONTO, Sept. 14 /CNW/ - TSX.AF - 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, 2009:

    
    -------------------------------------------------------------------------
                                         July 31,      July 31,
                                            2009          2008        Change
                                       (9 months     (9 months    (over same
                                           ended)        ended)       period)
                                     ------------  ------------  ------------
    Revenue                          $25,277,000   $21,993,000            15%

    Net income                       $ 3,099,000   $ 1,758,000            76%

    Cash flow from operations        $ 4,617,000   $ 4,169,000            11%

    EBITDA                           $ 7,476,000   $ 4,949,000            51%

    EBITDA before marketing expenses $14,401,000   $11,209,000            28%

    Basic & Diluted Net
     Income / Share                  $      0.26   $      0.15            73%
    -------------------------------------------------------------------------
    * EBITDA (Earnings Before Interest, Income Taxes, Depreciation, and
        Amortization) is a key measure in the security industry and should
        not be interpreted as a GAAP measure.
    

Joel Matlin, President and CEO, said "We are pleased to report results for our third quarter in which the company's revenue increased to $8,528,000, higher by 13% than the comparative quarter of 2008. Nine month Revenues increased to $25.3 million, a 15% increase over 2008, and Net Income increased by 76% to $3.1 million. The AlarmForce subscriber base increased to 98,700 accounts, reflecting an annual growth of 13%."

"Profitable growth is a key objective for us and the consistent growth in subscribers and revenues resulted in an earnings per share increase of 73% for the nine months. The increases in both recurring revenues and net income in the third quarter represent a continuous trend in the company's successful subscriber growth. Despite a deep financial downturn, AlarmForce was able to achieve all-time record numbers, thanks to our growth model of creating home-grown subscribers rather than purchasing subscriber accounts. The organic growth model benefits us through a much lower cost to create new accounts, higher operating margins, and leverages our scalable central monitoring and manufacturing capabilities. Reflecting the significant positive effect of both double-digit growth and increased efficiencies through economies of scale, Income before income taxes increased to $4.6 million in the nine-month period, which represents an annualized increase of 73%."

"For the nine months, net cash flows from operating activities increased by 11% to $4.6 million. However, this also includes the effect of working capital items that will fluctuate over the course of the year. Excluding these items, operating cash flow increased by 59% to $5.6 million. After applying cash to reduce debt by $225,000, total cash resources increased by $1.2 million. We continue to remain virtually debt-free on a net basis as cash exceeds debt."

"EBITDA before marketing expenditures increased by 28% to $14.4 million, while EBITDA after deducting marketing expenditures increased by 51% to $7.5 million for the nine months. National advertising programs are a significant marketing expenditure in our business, being the engine for creating new subscriber accounts. The advertising expenses charged against current earnings are a significant portion of the total cost to create a new subscriber account, which is an enduring asset that continues to generate high-margin cash flows into the future. It is important to know this about our business and the way we report our results. For each new account added, we continue to earn high-margin, recurring revenues over the entire term of the subscriber contract and subsequent renewals. Typically the initial cost incurred is paid back from monthly subscriber revenues after several years before a break-even point is reached. This means that expenses on new subscribers are front-ended, but we expect to earn higher-margin future revenues from each new account added to the net ending subscriber account base. This aspect of subscriber growth is over and above the current reported earnings."

Mr. Matlin went on to add "We continued to see increases in total AlarmForce accounts in both the Canadian base and in the US expansion now reaching four States. In addition to home alarm subscribers, the AlarmCare subscriber service was launched last year, which represents a growing number of subscribers of personal emergency response systems or PERS. PERS revenue is on track to continue growing in the next few years, and is expected to benefit particularly from the fast-growing retirement segment. We create new accounts primarily through advertising programs and referrals from existing subscribers."

Mr. Matlin ended by saying that "We are very positive for continued growth for both our AlarmVoice and AlarmCare services. In addition, we expect to see new breakthroughs as a result of our internal research and development efforts, which are aimed at new revenue streams from existing as well as new subscribers. AlarmForce's interactive wireless technology is well positioned to exploit ongoing advances in Internet and broadband devices. These efforts represent our continuing investment in our brand as well as innovations designed to enhance our value proposition for residential subscribers in North America. We expect to close a record year and look forward to the next few years with optimism."

AlarmForce Industries Inc. is Canada's largest manufacturer and installer of two-way voice home 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 98,700 subscriber accounts.

SOURCE AlarmForce Industries Inc.

For further information: For further information: Investors Relations Dept., Tel: (416) 445-2001 ext No. 225, Fax: (416) 445-9381, E-mail: investor@alarmforce.com

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