- We protect over 150,000 people across North America
- Over 20 years experience in the industry
- One of the few alarm companies to manufacture our own technology
- You deal directly with AlarmForce at all times
- Lowest prices and best value in the business
Financial Information
To Our Shareholders:
In addition to the annual growth in revenues of 20% generated from our exclusively organic model of creating accounts, we realized economies of scale and higher gross profit margins. Gross profit increased by 22% to $20,006,000, representing 80% of revenue in 2007.
In 2007, our budgeted marketing expenses increased from the 2006 level by over $3 million, including expenses in both Canada and the US. In both market segments, subscriber growth was record-setting. The impact of the higher marketing program expenses, which are charged against income in the period, is reflected in the decrease in operating bottom line results. The increase in expenses was offset by the 21% annual growth rate and higher gross margins. Therefore, Income before taxes decreased by $405,000 and Net income decreased by $212,000, relative to 2006.
Against the increase in marketing expenses in 2007 of over $3 million, the Company’s EBITDA decreased to $4,748,000 in 2007 from $5,217,000 in 2006. Excluding the marketing expenses, EBITDA increased to $14,111,000, up by 24% from 2006. Under the Management’s Discussion and Analysis section, the company has provided a reconciliation of Adjusted EBITDA (before discretionary marketing expenses) to earnings under generally accepted accounting policies. This is a key indicator given the discretionary nature of marketing budgets that constitute an important driver of growth in recurring revenue. Every subscriber account added increases the asset value of the company, and the creation of new accounts has continued to be accretive for the company, being generated without increasing our net debt.
In 2007, the company utilized a line of credit of $1,000,000 to purchase intangibles during the year, resulting in an increase in the long-term debt on our balance sheet. At the same time, the company’s operating revolving debt decreased by $800,000 during the year, highlighting the company’s positive net operating cash flows. At the end of the year, debt per subscriber was approximately $22 per subscriber account including all bank loans. On a net basis, the company was debt-free, reflecting a net positive internal cash position. Our strong balance sheet and financial resources are important in differentiating how we compare with other alarm companies in the industry.
Outlook and Future Growth
We expect to continue to use our organic model to market two-way voice technology and the AlarmForce brand using radio, television, print and other media, in Canada and in the three States which define our US presence. Our monthly recurring revenues, cash flows and subscriber base are expected to grow in 2008, augmented by economies of scale. Cash flows from operations are expected to continue to provide sufficient cash flow to fund investment in new account growth. We expect to continue to expand our subscriber base without any significant reliance on debt.
Our 19 years in the industry have shown AlarmForce to be quite resistant to changes in economic conditions and cyclical factors. We have accomplished much in the past, and we expect to do much more as we continue growing.
In closing, I wish to personally thank each and every member of the AlarmForce team of employees and partners, including our Shareholders. Our success has been made possible by all of those who stood with us and helped us achieve the record figures presented in our report. Thank you for your continuing support.
Respectfully submitted on behalf of the Board of Directors
Joel Matlin
President & Chief Executive Officer