AlarmForce Reports First Quarter 2017 Financial Results

TORONTO, ONTARIO--(Marketwired - March 10, 2017) - AlarmForce Industries Inc. (TSX:AF)

First Quarter Operating Highlights

• Recurring monthly revenue (RMR) was $4.45 million at the end of Q1 2017, flat to the end of fiscal 2016 (an increase of 1% in constant currency)
  
  
• EBITDA for the first quarter decreased by 32% or $1.2 million to $2.7 million year-over-year driven by the one-time legal and advisory fees incurred in relation to the consumer contract and employment classification issues. Adjusting for one-time items, EBITDA would have been $3.6 million
  
  
• Net income for Q1 decreased by 49% ($1.045 million from $2.031 million during the same period in 2016)
  
  
• Diluted earnings per share for Q1 2017 decreased to $0.09 ($0.18 during Q1 2016). Adjusted for one-time items, diluted earnings per share would have been $0.15
  
  
• Total subscribers declined during Q1 to 134,743 reflecting the change in cancellation practices related to last year's restatement, lower advertising expenditures and a focus on higher quality subscribers in the Canadian market
  
  
• Average revenue per new subscriber at the end of Q1 was $38.32, up 5% year-over-year, or 6% in constant currency; In Canada, average revenue per new alarm subscriber grew to 38.96, up 17.7% in Q1 compared to the same period last year - this follows the introduction of our new products and bundled pricing
  
  
• Annualized RMR attrition, a new performance indicator for us, was less than 5.0% for the Canadian alarm business for the quarter compared to 10.4% for the same period in 2016. Canadian alarm subscriber attrition tracked higher in the quarter over the comparable period in 2016 due to the previously identified contract issues, change in cancellation practices and lower starting subscriber base
  
  

		Three months ended January 31,
		2017			2016 (restated)			Change
($ in thousands, except per share and subscriber amounts)
Total revenue		$	13,870		$	14,243		-3	%
Recurring monthly revenue (RMR)		$	4,450		$	4,645		-4	%
EBITDA*		$	2,699		$	3,942		-32	%
Net income		$	1,045		$	2,031		-49	%
Shares outstanding, diluted			11,570			11,592		0	%
Diluted net income per share		$	0.09		$	0.18		-48	%
Total subscribers			134,743			143,104		-6	%
*EBITDA is a non-IFRS financial measure and is defined in the disclosure section accompanying this press release.

Total revenues for the first three months of 2017 were $13.9 million vs. $14.2 million over the same period in 2016, or a decrease of 3% (2% in constant currency). Recurring Monthly Revenue (RMR) remained flat at $4.45 million at the end of Q1 2017 from $4.45 million at the end of fiscal 2016 (an increase of 1% in constant currency). Gross profit totaled $9.1 million compared to $9.9 million or a decline of 8% over the same period in 2016. Net income decreased year over year from the same period of 2016 to $1.045 million from $2.03 million. These results were driven by a lower average subscriber base and the incurrence of one-time costs related to the consumer contract and employment classification issues totaling $0.9 million. Diluted earnings per share decreased to $0.09 compared to $0.18 in the same period of 2016. Adjusted earnings per share would be $0.15.

"At the end of the first quarter, we completed the review process and adjoining restatements fulfilling our filing requirements," said Graham Badun, President and CEO of AlarmForce Industries Inc. "Our ongoing efforts to improve the underlying quality of our subscriber base through a focus on the Canadian markets has started to yield encouraging results. This can be seen in our Canadian alarm RMR attrition rate which is less than 5% and the 17.7% increase in average revenue per new Canadian alarm user versus the same period last year. We can now collectively focus our entire team on continuing to improve operations and increasing our subscription base through a number of strategic initiatives including marketing, product innovations and new partnerships."

In the first three months of the year the Company returned $0.5 million to shareholders through dividends paid.

Subsequent Events

Subsequent to the end of the first quarter and as a result of completing the Q3 and full year regulatory filings, the Company received notice from the OSC regarding the removal of the Management Cease Trade Order (MCTO). Accordingly, members of management are no longer precluded from trading the Company's common shares.

With the termination of the management cease trade order, the Company intends to seek approval from the TSX to initiate a normal course issuer bid and will announce the details accordingly.

About AlarmForce

AlarmForce provides security alarm monitoring, personal emergency response monitoring, video surveillance and related services to residential and commercial subscribers throughout Canada and the United States. 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.