AlarmForce's results rosy during ousted CEO's tenure

Exactly why the board of Toronto-based AlarmForce forced out the company's CEO and founder, Joel Matlin, this summer remains unclear. Deepening the mystery is the fact that over the past year, the publicly traded company did very well with Matlin still at the helm, according to its recently released third quarter results.

I've gotten one side of the story: Matlin told me in August that his ouster in July as company CEO and president was “a mutiny created by my CFO, Anthony Pizzonia.”

Pizzonia, who is now interim CEO and president as the company searches for a replacement for Matlin, has not responded to my repeated requests for comment.

Matlin, who resigned from the company's Board of Directors after his ouster, also told me that the company he founded in 1988 is “probably one of the best growing alarm companies in North America, with zero debt.” Third quarter figures released earlier this month confirm AlarmForce is very healthy.

For example, the company said in a news release that “revenue in the third quarter grew by $3 million to $36 million, or 9 percent, over the comparative period of 2012. Canadian revenue was up 4 percent to $28.0 million and U.S. revenue was up 29 percent to $8.5 million over the comparative period of 2012.”

Also, it said that RMR “increased by 8 percent in the third quarter and accounted for 91 percent of the total revenue. RMR growth was driven by an increase in subscribers and by a 2.5 percent increase in average revenue per subscriber, which rose to $27.07 as compared to $26.40 in the third quarter of 2012.” RMR is now more than $3.7 million.

The release also confirmed that the company has no debt and “funded all growth and product development from internal cash resources.”

Pizzonia said in a prepared statement: “For the remaining balance of the fiscal year, we will focus on growing our subscribers, increasing operating efficiencies, pursuing accretive investments that drive organic growth and returning excess cash to shareholders in the form of both dividends and share buybacks.”

AlarmForce provides security alarm monitoring, PERS, video surveillance and related services to residential and commercial customers throughout Canada and in the United States. The company is a leading provider of two-way voice alarm systems in Canada.

When I reached out to Matlin this month about the company's earnings, he said his lawyer had advised him not to comment. Pizzonia has not responded to another request for comment.

Matlin had told me previously that he was working with his legal team to hold a proxy vote that he believes will result in the replacing of the board that forced him out.

However, the company already has moved to replace Matlin on the board. AlarmForce said Tobias Behrenwaldt “would serve as an independent director of the company until election at the next annual meeting of shareholders in 2014.” Behrenwaldt is currently a partner in Behrenwaldt Investment GmbH, the company said.

Matlin previously had complained to me that the board has too many investment types on it. “Now you have the financial guys running the company, certainly not the marketing guys,” he said. The board this summer also suspended Matlin's son, a key member of AlarmForce's marketing team, Matlin said.

Marketing expenses last year were substantial, according to the company's third-quarter results release: “EBITDA increased to $7.6 million, or 78 percent, due to the reduction of advertising expenses related to the launch of VideoRelay in 2012. Excluding the impact of these marketing expenses that result in a charge to operating income, adjusted EBITDA increased by 1 percent to $17.4 million from $17.2 million.”

Was this an issue? Your guess is as good as mine. Stay posted as I follow this story.