2012 SDM 100 Breaking Through
Not only does the SDM 100 now have a new top 3, but signs of the SDM 100 becoming more of a services-focused business model are apparent.
Since the SDM 100 began ranking security companies by their recurring monthly revenue (RMR) in 2007, the top three companies have been ADT, Protection 1 and Monitronics (with the exception of Brink’s Home Security/Broadview, which subsequently was acquired by ADT).
But that long-standing order got shattered this year — Stanley Convergent Security moved up to No. 2, and Vivint Inc. moved into the No. 3 spot. ADT retained the No. 1 position in the SDM 100 report.
Stanley’s story is that parent Stanley Black & Decker acquired systems integrator Niscayah in 2011. Not only had Niscayah reported $200 million in North American systems integration revenue (2010) to SDM’s Top Systems Integrators Report, but the company also generated a significant amount of RMR — adding greatly to Stanley Convergent Security’s numbers.
“Niscayah is a very unique and industry-leading, top tier systems integrator,” said Brett Bontrager, senior vice president and group executive, Stanley Security Solutions. “It specializes not only in comprehensive global enterprise security solutions, but also provides a complete line of security services, such as monitoring, maintenance plans, program management, tests and inspections, and video cloud storage, to name a few. Thus, Niscayah adds significantly to our installed base and recurring monthly revenue. More importantly, Niscayah adds to our capabilities and resources to deliver best-in-class security solutions.”
Stanley nearly doubled its RMR, reporting $35.7 million (Dec. 31, 2011) compared with $18.7 million (Dec. 31, 2010). Additionally, the company reported one-half-million subscriber accounts in 2011, compared with just over 300,000 in the prior year.
APX Alarm Security Solutions Inc. debuted on the SDM 100 in 2007 at No. 18, and has been steadily moving up the ranks since then. Last year it made No. 4 with $20.6 million in RMR (Dec. 31, 2010) and a new name — Vivint Inc.
This year, Vivint ranks as No. 3, reporting $27.8 million in RMR (Dec. 31, 2011) and nearly 573,000 subscriber accounts. The company spent 2011 rebranding and marketing its expanded services which include home automation and energy management solutions. In December 2011, Vivint was honored as SDM’s Dealer of the Year.
On the whole, another break-through came in the way of improved RMR for the SDM 100 companies collectively. Growth of 8 percent — from $510.7 million to $552.3 million — was logged. On an individual basis, nine of 10 ranked companies registered an increase in their RMR. Collectively, the SDM 100 also grew their subscriber base 9 percent to 13.3 million customers.
A recurring theme was tied to the upward jolt in recurring revenue: services. Security dealers and integrators repeated the word over and over again — “managed services,” “hosted services,” “interactive services,” “specialty monitoring services.”
One cannot ignore the sharp competitive edge that such services can give security companies. (See related article in “Editor’s Angle” on page 14.) Representative of that trend is a recent announcement about the merger of Interface Security with Westec Interactive. (See related article, “Interface & Westec Merge to Offer Enhanced Managed Services,” on page 17.)
“Our company’s strategic decision in 2007 to expand into the IP managed services market with both physical security and logical security services along with IP-based remote video and digital voice services has proven to be extremely successful: We have more than doubled our RMR in the last four years as a result and expect to add over $2 million of new RMR in 2012 all through organic growth,” Interface Security Systems reported to SDM. The company grew RMR from $4.5 million (Dec. 31, 2010) to $5.8 million (Dec. 31, 2011).
Overall, only 1 percent of total revenue for SDM 100 companies, collectively, stemmed from hosted and managed services (see page 70); however, that figure is expected to increase substantially next year.
Those companies that experienced growth in the residential sector often pointed to interactive functionality and remote control of security systems as technology solutions that stimulated growth. In the words of Central Security Group Inc., ranked No. 14, “Demand for interactive security has increased exponentially, driving both volume and RMR growth.”
Compared with 2010’s “bleak to average” summation of the state of the market, this year’s comments were much more upbeat. In general, SDM 100 companies thought that the marketplace was anywhere from “stable” to “strong” in 2011.
“Market was definitely stronger in 2011,” commented No. 78, Richmond Alarm Co. “We saw growth in all our normal sectors. Residential grew for existing homeowners, but not new construction. Commercial was up pretty much across the board.”
Noted No. 28, Electric Guard Dog, “The market appears to be continuing the steady improvement from the bottom of the recession, but still hasn’t completely returned.”
A shift in the average percentage of total revenue from both integrated commercial and integrated residential systems may be pointing to a trend — meaning that stand-alone security systems are having a lesser role in a security company’s sales, while integrated systems that encompass multiple product categories are becoming more of a core offering. As evidence, SDT Inc., No. 96, commented that large integrated security systems were the company’s greatest growth area in 2011.
Despite break-throughs in certain markets, 2011 was not without challenges. For one, companies noted that because installation prices have fallen, that demands a higher quantity of sales in order to maintain goals.
And, alarmingly, the number of full-time people employed at SDM 100 companies fell by more than 5 percent to 53,219. The greatest loss was in the area of installation and technical staff, which in 2010 comprised 40 percent of a security company’s workforce, but in 2011 made up just 32 percent.
Central station staff increased from 10 percent to 14 percent of total workforce (see page 76) — not a surprising fact given the number of SDM 100 companies preparing for the future of security as a service.
The SDM 100 is a ranking by RMR of the largest security companies in the United States. SDM 100 companies earn their revenues from the sale, installation, service and monitoring of electronic security systems. Now in its 22nd year of publication, the SDM 100 Report continues to prove that security is a significant concern of both homeowners and business leaders.
Key to Using the SDM 100
The 2012 SDM 100 ranks U.S. companies that provide electronic security systems and services to both residential and non-residential customers. This ranking is based on information provided to or, in few cases, estimated by SDM. Ranked companies were asked to submit either an audited or reviewed financial statement, or a copy of their income tax return showing total gross receipts for the stated period. The vast majority of the firms ranked are privately held.
The main table ranks 100 firms by their recurring monthly revenue (RMR) of December 31, 2011. The firm with the highest RMR is ranked as No. 1, and so on. For each of the 100 companies, the following information is provided, from left to right:
- Current year rank, which is based on December 31, 2011, RMR.
- Prior year rank.
- Company name, as used in the marketplace, and headquarters location.
- Amount of RMR billed on December 31, 2011.
- Indication of whether the RMR amount increased, decreased or stayed the same as RMR of December 31, 2010.
- Number of subscribers (recurring-billable customers) at year-end 2011.
- Amount of sales revenue from residential system installations in 2011.
- Amount of sales revenue from non-residential system installations in 2011.
- Total gross revenue in millions of dollars. This number represents total revenue in calendar-year or (the company’s) fiscal-year 2011 from security system sales/installation, service, leasing, and monitoring.
- Number of full-time employees.
- Number of business locations, including headquarters.
Note: An e following the figure indicates it is an SDM estimate.
SDM 100: Its Purpose & Approach
The SDM 100 has been published since 1991. Its primary objective is to measure consumer dollars gained by alarm companies, in order to present an account of the size of the market captured by the 100 largest security providers. SDM 100 firms are ranked by their recurring monthly revenue. RMR is the amount of contractually recurring revenues due from customers, for such services as monitoring, contracted service and system maintenance, and leasing of security systems. It is the revenue associated with the contractual agreement between an alarm company and its subscriber — derived from customer billing for services such as monitoring, contracted service, managed solutions, and leasing of security systems — and is typically the basis for valuation of an alarm company. RMR is the language of alarm company executives and is meaningful in comparative analysis among industry peers. Of the 100 security dealers ranked, 35 of them earned more than $1 million in RMR in 2011.
How to Purchase the SDM 100 Directory
Wouldn’t it be useful to have more information about each of the 100 firms ranked here? The 2012 SDM 100 Directory includes contact names, mailing addresses, telephone numbers, Web site URLs, branch office locations, product buyer names, installation data, revenue sources, and more. The SDM 100 Directory comes in Microsoft Excel format. To order the SDM 100 Directory, contact Heidi Fusaro at (630) 518-5470 or by e-mail to email@example.com.