AlarmForce Announces Record Third Quarter Revenue



    TORONTO, Sept. 10 /CNW/ - TSX - Trading symbol - AF

    AlarmForce Industries Inc., Canada's largest manufacturer and installer
of live two-way voice home alarms 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(*)                3,417,000          3,407,000                  -
    Diluted net income
     per share                    0.08               0.09               -  9%
    Subscriber base             75,000             64,000               + 17%

    (*) 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's strong
revenue growth reflects the increasing recurring revenues from monitored
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' s EBITDA held up
at about the same level as last year. Excluding marketing 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's cash 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'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 75,000 subscriber accounts.





For further information:

For further information: Investors Relations Dept., Tel: (416) 445-2001
ext 225, Fax: (416) 445-9381, E-mail: investor@alarmforce.com

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