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AlarmForce Announces 2012 Results

TORONTO, ONTARIO -- (Marketwire) -- 01/28/13 -- AlarmForce Industries Inc. (TSX:AF), Canada's largest manufacturer and installer of live two-way voice home alarms systems, is pleased to announce annual results for the year ended October 31, 2012:


----------------------------------------------------------------------------
                                                                     Change 
                                  Oct. 31, 2012  Oct. 31, 2011   (year over 
                                   (year ended)   (year ended)        year) 
                                --------------------------------------------
                                                                            
Revenue                          $   44,837,000 $   40,854,000          +10%
Gross profit                                                                
                                 $   33,643,000 $   31,215,000          + 8%
Net income                       $    1,163,000 $    3,335,000         - 65%
                                                                            
Cash flow from operations        $    4,635,000 $    8,622,000         - 46%
Cash flow from operations                                                   
 excluding working capital       $    5,351,000 $    7,333,000         - 27%
                                                                            
EBITDA                           $    6,237,000 $    9,989,000          -38%
EBITDA/share                     $         0.51 $         0.82         - 38%
EBITDA before marketing expenses $   23,371,000 $   20,766,000          +13%
                                                                            
Basic Net income / share         $         0.10 $         0.27          -65%
Diluted Net income / share       $         0.09 $         0.27          -65%
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(i)  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 Industries Inc. added 26,200 new accounts in the fiscal year ended October 31, 2012, and closed the year with a subscriber base of 134,100 accounts.

Mr. Matlin said that, "The annualized net growth rate in the subscriber base was 8% and gross revenue increased to a record total of $44.8 million representing an increase of $3.9 million or 10% over 2011. Diluted earnings per share decreased from 27 cents per share to 9 cents per share and net income decreased from $3.3 million to $1.1 million, or 65%. Marketing expenditures increased by $6.5 million this year, to promote the introduction of VideoRelay in all our service territories, as well as foster expansion into the Florida market. The increase in total expenditure more than offset the increase in revenues, resulting in a decrease in reported earnings. Gross profit increased by 8% for the year, while as a percentage of sales decreased marginally from 76% to 75%.

"In interpreting these results it is important to remember the our organic growth model creates new subscriber accounts that represent long-term recurring monthly revenues, which will generate recurring cash flows over the life of the subscriber relationship. The costs to create accounts are expensed up-front in the year in which the account is created, unlike competitors who grow by acquiring accounts and capitalizing their acquisition costs. It is therefore important to look at other performance metrics and the increase in the economic value of the business from net subscriber growth.

"EBITDA decreased from $10.0 million to $6.2 million, reflecting the significant impact of marketing expenses. Excluding the impact of marketing expenses, in 2012 EBITDA increased by 13% to $23.4 million from $20.8 million. This compares with a 3% increase from 2010 to 2011.

"Despite a reduction in cash flows from operations by 46% to $4.6 million in 2012, we continue to fund all our costs of growth, including marketing, and research and development, from internal cash flows.

"We are optimistic that VideoRelay provides a competitive advantage, both as a stand-alone installation or when bundled with an AlarmForce system. Our subscriber growth should be positively impacted in the future as market acceptance of VideoRelay grows. We installed 3,100 VideoRelay systems in 2012, and anticipate that our video technology installations will continue to grow as the market demand for video enabled services increases."

Mr. Matlin closed by saying: "We look ahead to growth in subscribers and in earnings over the long term, as our brand continues to offer leading edge technology and the best affordable value to consumers in the home alarm and video markets. I would like to thank our subscribers, investors, employees and Directors for their continuing support and confidence in AlarmForce."

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

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