Sector Alarm Q3 Adj. EBITDA Up 36% YoY to NOK 289M Due to Strong Portfolio EBITDA Growth, Churn Rises to 8.3% but Customer Acquisition Costs Show Signs of Having Peaked

Norwegian home security system group Sector Alarm’s third-quarter earnings improved 36% year over year, driven by top-line growth and the group’s increasing portfolio of recurring customers. The acquisition cost per customer continued to rise, climbing 13% year over year during the quarter, but has started to fall sequentially, sources said.

Revenue increased 15% year over year to 879 million Norwegian kroner (€74.5 million) in the third quarter from NOK 765 million in the same quarter last year. The jump was partly driven by the continued softening of the Norwegian krone against the euro (revenue increased 9% year over year on a constant currency basis), and partly by the total customer base rising 2% year over year to 643,987 customers as well as improved average revenue per user, or ARPU, as a result of price increases.

Adjusted EBITDA increased to NOK 289 million from NOK 213 million the same quarter last year as a result of adjusted portfolio EBITDA growing 19% year over year to NOK 512 million, which together with further cost-savings offset another 13% year-over-year jump in average customer acquisition costs. Sector Alarm achieved NOK 160 million of run-rate savings by the end of the third quarter out of a NOK 200 million target, which helped increase earnings per customer by 16% year over year to NOK 266. However, attrition rates maintained their upward trajectory, increasing to 8.3% from 8% in the previous quarter and 6.3% the same quarter last year.

The group remained free cash flow negative as a result of continuing to invest in new customer acquisition, burning another NOK 90 million during the quarter. However, following the shareholders’ equity injection during the second quarter, liquidity was still comfortable. Sector Alarm had NOK 52 million of cash and €65 million available under its €100 million RCF at the end of the third quarter.

After peaking at 8.5x during the first quarter, the group’s net leverage has been trending downward again, improving to 7.5x at the end of the third quarter.

The group’s capital structure as of Sept. 30 is below:

According to Reorg’s CLO database, Sector Alarm’s loans are held by the following managers. Click HERE to see the full list of holders in the database.

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