MDI turns first profit in seven years by selling direct

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Monday, December 1, 2008

SAN ANTONIO--MDI, Inc., the parent company of longtime access control manufacturer MDI Security Systems, announced in October its first profitable quarter since 2001, with sales of $5.3 million in 3Q 2008 and a $70,000 operating profit.

J. Collier Sparks, the company’s CEO and president, said the turnaround was long in coming, but was mainly the result of putting the focus on the end user, generally selling direct, and bringing in integrator partners who understand the new IT-based security world after the fact. “Dealers continue to rely on the manufacturer to technically support the product,” Sparks said. “The dealer makes the mark-up on the product that they sell, they make the margin on the service. Then the manufacturer ends up at odds with the dealer who doesn’t maintain his certifications and training, and expects the manufacturer to pick up the pieces. I think that’s wrong.”

Sparks said MDI Security Systems’ new engineering and integration program allowed the company last year to sell direct and see growth along the lines of 30 percent each month. The 3Q revenue numbers are 186 percent better than the same period in 2007. “And we don’t just sell MDI products,” Collier said. “We sell whatever the end user wants.”

Revenue is also coming from MDI’s acquisition of FAS Construction Management, an all-stock deal completed roughly a year ago. Collier said 75 percent of MDI’s revenue comes evenly from the Security Systems and FAS divisions, with the rest coming from its LearnSafe (offering holistic school security) and newly launched Structure (real-estate development) divisions.

“Part of the success we’ve seen in the Beltway and with our legacy customer base,” said Mike Garcia, vice president of marketing, “is because we changed the paradigm. We said we’re going to touch the customer, show them what we can do ... We’re the ones cutting the deals. We’re making the play for the budget dollars. But we also choose who’s going to do the work for us as a sub-contractor.”

“IT integrators have a completely different thought process than security integrators,” said Collier. “If the manufacturer says, ‘I want you to work for me,’ they love it. They have no problem at all with that. You try that with a security integrator, they say, ‘No, I don’t want you to come on site.’ Then, when it doesn’t work, we have to come fix it. I don’t get paid for that.”