Attrition MeasurementUpdate Year End 2011Developing MeaningfulTrends

Prepared By: TRG Associates, Inc.860-395-0548www.trgassociates.com

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Defining AttritionGross Attrition

• The loss of existing customers and their associated recurring monthly revenue (RMR) for contracted services during a particular customer / calendar cycle

Net Attrition• Gross Attrition plus the add back of “like

customer” gains thru resigns of the existing locations – - The Home/Business location is your ultimate

customer- Price increases for inflation- Price increases for additional services or

technology

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Defining Attrition

The Short Version• The measurement of customer

dissatisfaction with or need for the system

Why Measure?• Attrition measures customer

dissatisfaction which, for the most part, is company caused.

• The Attrition Tracking Process should be managed to identify, focus on, and rectify those causes within each organization.

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Attrition MeasurementMethodology

Weighted Ending RMR Attrition Method

Step 1: Cancelled RMR for the Reporting Period = Monthly Attrition

Sum of Ending RMR for Each Month

Step 2: Monthly Attrition (from Step 1)* 12 = Annualized Attrition

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Benefits of Weighted Ending RMR Method

• Accounts for and weights RMR acquisitions• Accounts for timing of acquired RMR• Accounts for rapid internal growth and the timing

thereof• Similar to many lending/equity institution’s

preferred calculation.

The Geography of Attrition

• NE/Mid Atlantic• Southeast• Midwest• Southwest• West• International w

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Annual TrendDollars of RMR*

Region 2009 2010 2011

Northeast $ 29,312,561 $ 34,255,218 $ 38,123,162

Southeast $ 30,717,788 $ 34,551,487 $ 42,678,957

Midwest $ 22,194,576 $ 25,343,869 $ 32,755,145

Southwest $ 11,666,058 $ 14,451,746 $ 20,315,471

West $ 33,418,789 $ 33,359,003 $ 39,705,534

International$

12,601,570 $ 14,982,984 $ 5,035,296

$139,911,34

2 $ 156,944,307

$ 178,613,564

*Recurring Monthly Revenue

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Annual TrendDollars of RMR

Size 2009 2010 2011*

3-50 $ 248,301 $ 237,446 $ 291,596

51-100 $ 684,232 $ 728,794 $ 659,794

101-200 $ 3,187,759 $ 2,637,789 $ 2,578,119

201-500 $14,846,63

1 $ 16,257,476 $ 17,103,573

501+$

120,944,419 $ 137,082,80

2 $ 157,980,482

Total$

139,911,342 $ 156,944,30

7 $ 178,613,564

*Includes branches of companies reflected by RMR size/Attrition if provided

Annual TrendDollars of RMR

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Customer Source 2009 2010 2011

Dealer $ 37,684,131

$49,061,372

$49,127,653

Traditional $ 79,688,494

$80,388,844

$85,279,682

Mass Market $ 22,538,71

7

$27,494,091

$44,206,230

Total $ 139,911,942

$156,944,307

$178,613,564

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Annual TrendDollars of RMR

Customer Type 2009 2010 2011

Residential $ 69,568,717 $ 74,839,754 $ 101,339,459

Commercial $

70,342,625 $ 82,104,553 $ 77,274,105

Total$

139,911,342 $ 156,944,30

7 $ 178,613,564

Attrition Updatethrough Year End 2011

2009 2010 2011

Region Gross Net Gross Net Gross Net

Northeast10.06

% 7.96%10.02

% 7.66% 10.34% 7.94%

Southeast11.92

% 9.81%11.46

% 9.15% 11.63% 9.47%

Midwest11.29

% 8.18%10.92

% 7.89% 10.92% 9.23%

Southwest13.70

%11.12

%12.35

% 9.75% 11.98% 10.06%

West12.34

% 9.26%11.58

% 8.73% 11.43% 9.16%

International

11.64% 9.00%

11.74% 8.83% 10.76% 9.42%

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Attrition Updatethrough Year End 2011

2009 2010 2011

Co. Size Gross Net Gross Net Gross Net

3-50 9.69% 7.58% 7.57% 5.04% 7.26% 4.80%

51-10010.13

% 8.73% 9.26% 6.55% 9.69% 6.68%

101-20010.89

% 8.73% 8.67% 6.00% 9.30% 7.10%

201-50011.22

% 9.03% 9.92% 8.02% 9.46% 7.83%

501+11.74

% 9.09%11.41

% 8.68%11.43

% 9.02%

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Attrition Updatethrough Year End 2011

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2009 2010 2011

Source Gross Net Gross Net Gross Net

Dealer13.19

%11.07

%12.55

%10.10

% 12.36% 9.91%

Traditional11.16

% 8.31%10.66

% 7.85% 10.70% 8.60%

Mass Market

10.85% 8.40%

10.33% 7.87% 10.84% 9.14%

Attrition Updatethrough Year End 2011

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2009 2010 2011

Customer Type Gross Net Gross Net Gross Net

Residential12.04

% 9.72%11.37

% 8.92% 11.26% 9.17%

Commercial11.27

% 8.43%11.03

% 8.23% 11.10% 9.00%

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Impact on Attrition Measurement with Publicly Held Company Results

Excluding PHC Including PHC

2010 2011 2010 2011

501+ RMR Companies $137.5M $158.0M $427.8M $448.7M

Net Attrition

Company Size 8.68% 9.02% 11.42% 11.73%

Residential 8.92% 9.17% 11.06% 11.44%

Commercial 8.23% 9.00% 11.41% 11.83%

Sources: SDM May 2012 – SDM 100 SEC Filings 10K Public Quarterly Company Reviews

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Top Reasons for Attrition

Collecti

on/Non Paym

ent

Move

d

Poor Servi

ce

Lost

to Competition

No Longer U

sing Sy

stem

Sold/O

ut of B

usiness

Financia

l Diffi

culties

RMR Reducti

on

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

20102011

Reason Code Analysis

Cancellation Reason 2008 2009 2010 2011

Collection/Non Payment 14.7% 20.9% 21.6% 19.1%

Moved 29.9% 38.4% 31.3% 33.9%

Poor Service 2.6% 1.9% 7.7% 2.0%

Lost to Competition 16.6% 9.1% 7.9% 13.5%

No Longer Using System 11.1% 14.1% 9.4% 7.6%

Sold/Out of Business 12.8% 7.3% 6.3% 6.8%

Financial Difficulties 4.9% 5.8% 9.3% 6.2%

Property Abandoned/Vacant 0.3% 0.0% 0.2% 0.3%

End of Contract Term 2.2% 0.3% 0.4% 0.8%

Deceased/Rest home 1.3% 0.4% 1.2% 0.7%

PI Rescinded/RMR Reduction 3.4% 0.6% 4.7% 9.1%

Natural Disaster/Military 0.2% 1.2% 0.0% 0.0%

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TRG Maintains Full Confidentiality of Participant’s Figures

• Summary results as presented will be available on CSAA Web-Site (www.csaaintl.org)TRG Web-Site (www.trgassociates.com)

• Next update for 2012 – May 2013Posted in June 2013