2014 SDM 100: Small Gains, Individual Successes
With a respectable 3.3 percent gain in RMR, the industry’s largest security dealers continue to find opportunities, while keeping an eye on new competition.
The financial performance of the largest security system providers in the United States — the SDM 100 — was measured and healthy in 2013. SDM 100 companies, which earn their revenues from the sale/installation, leasing, service, hosting and monitoring of electronic security systems, collectively grew their recurring monthly revenue (RMR) just over 3 percent in 2013 to $663 million. Approximately nine of every 10 companies recorded an increase in RMR, while the remainder of companies was flat or declined by no more than 2 percent each.
“The market was strong,” emphasizes Ackerman Security Systems, ranked No. 22. “Just as the industry continued to outpace our economy, we had another profitable and successful year utilizing cutting-edge technologies.” Ackerman Security’s three best-performing vertical markets were education, healthcare and commercial. The company grew RMR by 19.1 percent during 2013.
No. 6-ranked Protection 1, which experienced a 7.7 percent increase in RMR, attributes 2013’s healthy market in part to previously stifled demand. “We saw substantial growth in our national account and integrated systems division. In addition, we started to see companies release planned budgets in 2013 that were pent up in 2012 due to weaker financial markets,” the company notes. Protection 1’s strongest growth areas in 2013 were retail, banking/financial and industrial markets.
World Wide Security & GC Alarm Inc., ranked No. 73, concurs there was “greater demand for security services and an increase in budgets to accomplish security goals.” The company, which logged a 3.2 percent increase in RMR, notes the best growth areas were video and managed services.
Valley Alarm grew its RMR billings by 5.7 percent during 2013, landing at No. 86 on the SDM 100. The company acknowledges that 2013 was “slightly better [than 2012] due to pent-up demand caused by deferred spending during the past few years’ recession and stagnant economy.”
SDM 100 companies that weighed in on the active market segments seem to agree that business in commercial markets outpaced residential, with the exception of multi-family sales. “All markets seem to be trending upwards in our area and the most significant growth happened in the commercial market,” notes Fleenor Security, No. 100. “It seems commercial lending relaxed a little, making funds for commercial growth available and thus trickled down to our industry.”
Some of the lucrative areas noted by SDM 100 companies were technology businesses, medical/healthcare, manufacturing/distribution, utilities, energy, corporate office space, and small commercial business. The fire protection market also provided generous sales and service opportunities in 2013, according to the SDM 100, as did conversions from analog to digital technology in video surveillance systems.
“In the healthcare market, [growth] is due to the increased regulations surrounding HIPAA and needing to track and audit access to records, medications and physical space. In the education market, it is due to the continued the threats to schools and our children and how to protect them in all ways possible,” comments Custom Alarm, No. 91.
New construction showed promise; several dealers were able to tap into large projects for the first time since the recession ended. “The market was strong and the construction market grew, allowing us to get into some new locations as well as replace systems that consumers were holding off on,” notes Per Mar Security Services, which grew its RMR by 6.9 percent and moved up two places to rank at No. 29. “The economy is continuing to come back from the recession and people are getting more comfortable spending money on capital expenditures and security again.”
Despite some dealers saying their residential business was flat or down, those dealers who specialize in residential generally had a positive year, marked by increased spending on home automation capabilities and interactive services.
“The market was stronger in 2013 than 2012, especially in the adoption of home automation,” says Vivint Inc., ranked No. 5, with 23.1 percent growth in RMR. The company reports that almost all of its 2013 systems were home automation-enabled, while 61 percent of customers adopted at least one home automation feature, up 8 percent from 2012.
“The market was strong. We experienced our highest growth in our home technologies department in our company history,” says Security Force Inc., which had a 70.4 percent surge in RMR and moved up to No. 57.
Security Force is an AiN Group dealer, along with Guardian Protection Services, which noted that home automation services are “on the rise.” Guardian Protection Services, up 12.5 percent in RMR, is vigilant about the residential segment experiencing “significant competition with respect to the various service offerings out in the market and sizable new entrants into the security space.”
No. 87, Advent Security Corporation, also felt the pinch from the new home security/automation competitors, saying, “The market itself was strong but the number of telco companies has devalued the purchase price, making the profit margin go down.”
More than half of SDM 100 companies reported that they increased their net profit margins in 2013, and among those that did, the average rate of increase was 10.6 percent.
Approximately three in 10 companies had no change in net profit.
Even for security dealers who marked 2013 as an “average year” for sales and revenue growth, several expect 2014 to show improvement in sales opportunities, RMR gains, and profitability. Dealers continue to view 2008 as the “baseline” for exceptional performance, and admit that while 2013 was not near the 2008 level, business continues to strengthen each year.
“The overall climate continued to show an improvement. We saw strong growth in some verticals, with flat results in others. Overall, we see a moderate 6 percent to 8 percent growth trend,” says RFI Communications & Security Systems, No. 52.
Now in its 24th year of publication, the SDM 100 Report continues to prove that security is a significant concern of both homeowners and business leaders. As this fact continues to drive interest in and sales of security systems, dealers also are benefiting from an ongoing “technology refresh,” RFI observes, riding the wave of change from analog to IP-based technology, and capitalizing on the metamorphosis of security into a services-based industry marked by mobile platforms and interactivity.
Key to Using the SDM 100
The 2014 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 an audited or reviewed financial statement, or a copy of their income tax return.
The main table, which begins on this page, ranks 100 companies by their recurring monthly revenue (RMR) of December 31, 2013. The company 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, 2013, RMR.
- Prior year rank.
- Company name, as used in the marketplace, and headquarters location.
- Amount of RMR billed on December 31, 2013.
- Percentage of RMR increase/decrease compared with December 31, 2012.
- Number of subscribers (recurring-billable customers) at year-end 2013.
- Amount of sales revenue from residential system installations in 2013.
- Amount of sales revenue from non-residential system installations in 2013.
- Total gross revenue in millions of dollars. This number represents total revenue in calendar-year or (the company’s) fiscal-year 2013 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.
To find a company by name, use the alphabetical index on page 80 of the digital edition.
On the Job: Projects That Shine
2.0 University Place is an inner-city construction project in Philadelphia, and is the city’s first LEEDS Platinum Pre-Certified “green” office building. Completed in the summer of 2013, Security and Data Technologies Inc. (SDT) provided the building-wide fire alarm and detection system as well as tenant-specific integrated security solutions. As part of an overall integrated security package, for the U.S. Citizenship and Immigration Services (a tenant in the 2.0 University Place facility), SDT provided a FICAM (Federal Identity, Credential and Access Management), HSPD-12 (Homeland Security Presidential Directive 12)-compliant access control system, using FIPS200-compliant card readers. A security system and IP-based HD CCTV were also supplied and integrated with the access control system.
Protection 1 did a conversion for Rite Aid, a customer with 4,600 stores who needed the entire process completed within a six-month time frame. P1 put its “Seal Team” on the project. Seal Team is a group of highly trained Protection 1 technicians named for their quick effectiveness and mobile attributes. In the first month, the Seal Team was able to convert 500 custom sites with minimal disruption to the customer. Over the six months of working on the Rite Aid project, the Seal Team hit a max at 740 conversions in one month. Each store was considered custom because there were number of variables to work with; stores had many different types of legacy security systems that needed to be converted or replaced completely. Additionally, some Rite Aid locations had pharmacies that had special requirements; some were part of a green initiative that allowed for lower electric bills if lighting controls were activated with the alarm system; and some required multiple communication paths.
P1 also credits its National Account Operations Center (NAOC) in Irving, Texas. “The NAOC houses our national account support team who communicated daily with the customer and the Seal Team to discuss status updates, subsequent store conversions and to help resolve any issues quickly,” the company described.
Advent Security Corp.
Advent Security combined several existing burglar and fire alarm systems in a building that was multi-level and multi-purpose (residential and commercial). The original systems were installed separately. This involved combining the systems using some existing equipment, installing new equipment and reconfiguring all of the zones (some of which were unknown). A portion of the building was under construction and the installation was further complicated by the plans and township requirements continually being changed.
Guardian Protection Services
One of Guardian Protection Services’ larger commercial clients is based on a campus environment comprised of 12 buildings with an additional four remote facilities located in the same region. Over the years, guards were deployed to each building and the alarms and cameras for each were terminated at the guard station in each lobby. About a year ago Guardian Protection began discussions with the end user that involved the development of a central security command center located on the main campus, where all of these assets would be concentrated for a greater unity of command. The final result was the design and installation work which included: Converting the remaining analog video to IP while containing cost by using the existing cable; installing custom cabinetry that houses eight 42-inch DVI display panels; and interfacing these with a VMS server rendering a virtual matrix and spot monitor screen for the 240 cameras at all 16 buildings. One of the screens is dedicated to serving as an event log of the access control system for all 248 doors on the system. Alarms from all 16 buildings also are integrated into the access software and appear in the event log along with the event-driven video. The end user greatly reduced the number of guards while increasing their efficiency and accountability.
First Alarm installed an integrated intrusion, access, and IP video system in a multi-building office complex. Access control breaches or intrusion events from the system are viewed at First Alarm’s central station, and mobile patrol officers respond to investigate when appropriate.
Ackerman Security Systems
For a major food service company, Ackerman Security Systems recently replaced a 32-camera analog video system with a 24-terabyte hybrid DVR. Additions to the system were 11 8MP 180-deg. IP cameras inside and 11 outside, plus nine additional 2MP IP bullet cameras and two 1.3MP mini domes. Four 42-inch LED TVs were added to the break room with HDMI extenders, for presentations from a laptop. One 42-inch LED TV was installed in the dock office to monitor the camera system; and several office software clients were set up to view the cameras from their PCs. At the client’s request, an IT cabinet was added to the warehouse cooler area with a 48-port switch, and fiber optics run between the main IDF room and the new IDF cabinet. Forty-eight new network drops were performed to various locations throughout the warehouse and warehouse office, and 10 AP devices were added for handheld scanners. Working with the customer’s telephone vendor, Ackerman agreed to install 28 additional speakers, two amplifiers, and a digital stereo tuner to the warehouse areas for the PA system.
Custom Alarm is very proud of the integrated security and fire alarm system it completed in 2013 for a new school. The system consists of an integrated IP intercom system tied in with the access control with lockdown, as well as more than 60 IP cameras and tied in with the fire alarm and PA system. The Custom Alarm team worked with the customer to identify the areas for access and CCTV views through a custom-designed building map system. With one click, the customer can check status on a point on the map. The access system also operates as their intrusion system which ties in with their PA system. When the system is arming or armed up, it will communicate through the PA system, notifying anyone in the building that the system is changing to an armed status. “The successful completion of this installation ahead of deadline and exceeding the customer’s expectations was a big win for all involved at Custom Alarm,” the company described.
How to Purchase the SDM 100 Directory
Wouldn’t it be useful to have more information about each of the 100 companies ranked here? The 2014 SDM 100 Directory includes contact names, mailing addresses, telephone numbers, website URLs, product buyer names, and more. The SDM 100 Directory comes in Microsoft Excel format. To order, contact Heidi Fusaro at (630) 518-5470 or by e-mail to firstname.lastname@example.org.
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 revenue associated with the contractual agreement between a security company and its subscriber — derived from customer billing for services such as monitoring, contracted service/system maintenance, security-as-a-service/managed solutions, and leasing of security systems — and is typically the basis for valuation of a security company. RMR is the language of security company executives and is meaningful in comparative analysis among industry peers. Of the 100 security dealers ranked, 38 of them earned more than $1 million in RMR in 2013.
Click here to see the full SDM 100 Report