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Does RMR tell the whole story?

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Wednesday, September 4, 2013

Today, Ken Kirschenbaum, an industry attorney, broached the topic of valuation in the alarm industry in his email to subscribers. In the monitoring space, a company’s valuation is based “exclusively on a multiple of RMR,” Kirschenbaum explains. A reason for this is that, in a sale, an alarm company isn't selling its ongoing business so much as its subscriber accounts. 

While the RMR multiple can shed light on the value of a company on the verge of a sale, it doesn’t tell everything. In fact, as Kirschenbaum explains in the preface to an article by Dorsie Mosher of the Davis Group, RMR multiples can fall into a wide range based on several variables, such as contract stipulations, as well as financing and accounting decisions within the company. 

This is why investors and financial institutions tend to prefer EBITDA—earnings before interest, taxes, depreciation and amortization—to RMR. They regard the former as the more telling valuation metric, says Mosher, because, simply put, the figure is less prone to flux due to uncontrollable variables. Through EBITDA, investors can get a better idea of how much cash will be generated to pay debts and finance future growth. 

“A company can have $1 million in RMR and still be losing money, which is certainly not what the investor is looking for,” Mosher writes.

Kirschenbaum, for his part, believes EBITDA is not about to replace RMR multiples as the primary valuation metric in the alarm monitoring space. But when it comes to mergers, acquisitions and financing, it’s worth keeping in mind that RMR isn’t the only valuation category all parties are taking into account. 

Another shake-up at the top for DEFENDER Direct

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Wednesday, September 4, 2013

Just last year, I wrote about leadership changes at DEFENDER Direct, the country’s leading ADT dealer, when longtime employee Marcia Barnes took over as CEO and president, replacing company founder David Lindsey, who was stepping down to do philanthropic work.

Now, about 15 months later, Barnes is out and Lindsey is back in his old job, according to a recent news release from the Indianapolis-based company.

Here’s some of what the company had to say:
 

Lindsey replaces Marcia Barnes, who has left the company to pursue other business interests. …  “The board and I are grateful for Marcia’s 13 years of leadership in the company, which helped us achieve our strong growth,” said Lindsey.  “Our company is at an exciting point in its journey and I look forward to continuing that momentum.”

The release also said that, “the company has named Brad Cumings as chief marketing officer and has promoted Scott DeNardin to the role of regional VP of its HVAC business division.”

Founded in 1998, DEFENDER bills itself as the nation’s leading ADT dealer. It has more than 2,400 employees in 50 states and more than 140 branch offices, according to the company. Its residential services include offerings from Williams Comfort Air, a heating, cooling and plumbing company.

Barnes had been with the company since its early years and worked closely with Lindsey, rising to the rank of president before she became CEO. I’ve got a call in to DEFENDER to learn more about what the latest leadership change will mean for the company. Stay posted!

 

Business Optimization Center is key element of integrator's new world HQ

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Wednesday, August 28, 2013

Aronson Security Group, the Washington-based independent integrator,  is opening a new world headquarters in Renton, Wash. next week.

I'll be speaking with Phil Aronson on Aug. 29 about the new headquarters and other ASG news. Look for that story next week. The official opening is Wednesday, Sept. 5., so if you're in the Seattle area, give ASG a call to see if you can attend and get a tour of their new facility. The event starts at 3 and tours will go until 6 p.m.

In a prepared statement, Aronson said guests will tour ASG's new Business Optimization Center that "provides tangible examples" of how ASG ensures that an end user's security system aligns with organizational goals and also "follows a proper technology roadmap." The tour will illuminate how security data from "people, processes and ... technologies ... is gathered, organized, consumed and measured."

Aronson's father founded the company in 1963, so the opening of the new HQ coincides with the systems integrator's 50th year in business.

 

 

‘Canary’ survives coal mine, scores nearly $2 million

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Wednesday, August 28, 2013

Canary, a New York City startup with what it bills as the “the first smart home security device for everyone,” has managed to raise nearly $2 million in 35 days from prospective customers and supporters through crowdfunding.

The company’s experience suggests this is a funding approach other security companies may want to take a look at.

I wrote about Canary—which is both the name of the company and the home security device it sells—back in July when it launched the campaign on Indiegogo. Like a canary in a coal mine, the company was trying to see how much support it could garner from crowdfunding and set its goal at a modest $100,000.

But it exceeded that on the first day. Now, with the campaign recently concluded, Canary has raised a total of $1,961,494 from 7,460 funders, according to Indiegogo’s site. Most paid to receive one or more of the devices when they’re made and shipped early next year, but 123 people paid $5 each just as supporters of the product who want to be kept updated on it as it goes into production.

Was Canary’s crowdfunding experience unusual? According to a website called Android Police, the answer is "yes." Here’s what was recently written about Canary on that site:
 

Relying on crowdfunding is inherently risky. Regardless of whether a project's on Kickstarter or Indiegogo, some never get a fraction of the funding they aim for. Others fall slightly short or, if they're lucky, barely manage to crawl over the finish line. Still, a select few completely blow the doors off. The Canary [is one of them].

Now, is this because Canary is truly the unique product it's billed to be or do crowdfunders just really like home security? Time will tell us the answer, I guess.

 

Honeywell joins PPVAR

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Tuesday, August 27, 2013

Over the weekend, the Partnership for Priority Video Alarm Response, a public-private partnership comprising stakeholders in property crime, announced the addition of a major manufacturer to its membership ranks. The company? Honeywell Security.

After speaking with some in the industry involved with PPVAR, including Keith Jentoft, president of Videofied and RSI Video Technologies, it is increasingly clear to me why this carries major implications for the future of video monitored alarm systems. A recurring theme I’m hearing is that Honeywell’s decision to come on board with PPVAR reflects significant progress toward “mainstreaming” such systems.

In a PPVAR statement, Donald Young, president of PPVAR and chief information officer at Protection 1, said the following: “Honeywell will help us in our efforts to strengthen our partnerships with law enforcement using monitored video alarm as a mainstream solution.” In the same statement, Scott Harkins, president of Honeywell Security Products Americas, stated: “Honeywell is pleased that the PPVAR supports continued police response to all burglar alarms. We also recognize that video verification is an important product category as we look to the future of security.”

If you synthesize these two statements, PPVAR’s message becomes clear. The organization encourages the mainstream adoption of video verification alarm systems in both commercial and residential settings, since this appears to be the trajectory monitored alarms are on. But what’s also apparent in the statement, particularly through Harkins’ quote, is that both the organization and its members remain firmly positioned as allies of the monitored alarm industry and its stakeholders in general—whether we’re talking about video monitored alarm systems or traditional ones. PPVAR's emphasis is on priority response. 

With monitored video alarm systems becoming more affordable, it may only be a matter of time before video verified alarm systems reach a tipping point in their adoption. It’s a development that some in the industry, as well as in law enforcement, will hail—especially as municipalities across the country continue to search for ways to mitigate false alarms.

Honeywell’s membership status with PPVAR only helps advance the industry closer to that adoption tipping point. On that front it is a major illustration of progress. Equally instrumental for achieving broader adoption, however, could be PPVAR’s positioning itself not as a threat to the existing, largely non-video installer base, but as an ally. 

Linear execs: 2GIG still innovating

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Wednesday, August 21, 2013

2GIG is still innovating. That's the message I got yesterday from a briefing with Bruce Ehlers, SVP engineering for Linear, and Mike O'Neal, Linear president. It's also working with some providers it did not work with previously. The 2GIG panel has historically worked with alarm.com software. Ehlers and O'Neal emphasized that it still works with alarm.com, but it now also will work with iControl, Telular and Uplink.

"We are not walking away from alarm.com. We have a strong relationship with alarm.com. But, we're now providing an alternative [for dealers] who want an alternative," O'Neal said.

You'll remember that Linear's parent company, Nortek, aquired 2GIG in February. Here's that story. Linear and 2GIG's relationship goes back to 2007, however, when the companies began working together to develop the Go!Control panel. Once it was developed, Linear manufactured the panel, and it continues to manufacture it today.

2GIG and summer-model giant Vivint have always been separate companies, but they had the same owners until the Nortek acquisition in February. Now, "Linear and 2GIG are one and VIvint is a customer, one that we intend to support for a long time, but a customer," Ehlers said.

One of the benefits of the acquisition, Ehlers said, is that there was a perception previously that dealers who bought the 2GIG product were buying a Vivint product. The perception is going away, particularly as Linear continues to develop new feature sets for the panel and to develop new partnerships, Ehlers said.

O'Neal said there was some concern six months ago that "somehow Linear would pull the 2GIG product in and rest on our laurels of the past. But what you're seeing now is that we're taking the product further. In the next six to 12 months you'll see more innovation than what you've seen in the past. Bruce and his team are taking the historical product well beyond where it has been."

"Linear is investing in the innovation that was the hallmark of VIvint and 2GIG in the past. We're not taking our foot off the pedal," O'Neal said.

The acquisition and separation from Vivint "is opening up a pent-up demand for 2GIG," he said. More dealers are signing up and non-Vivint sales of the 2GIG panel are 30 percent ahead of where they were one year ago, according to O'Neal. The company is also recruiting 50 engineers to work on this and other Linear products, he said.

 

 

 

IQ Certification and public perceptions about the industry

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Monday, August 19, 2013

Over the course of June and July, fourteen companies renewed their eligibility with IQ Certification, an installation quality certification program for alarm companies. The group of re-certifiers includes COPS Monitoring, based in Williamstown, N.J., Monitoring America Alarm Co-op of Tulsa, Okla., and General Monitoring Services, based in Huntington Beach, Calif.

Founded in 1997, the IQ Certification Program, headquartered in Erie, Pa., is based on one fundamental principle: security systems that are properly designed, professionally installed, feature the best equipment, and are monitored correctly tend to function free of failure or false alarms. A fifth component of a sound security system, according to the website, is providing users with education and training as well. 

To earn IQ Certification, alarm companies must undergo a rigorous evaluation by the IQ Certification Board, which is comprised of law enforcement, fire, state regulatory and insurance industry representatives, the program’s website notes. The certification standards are extensive and specific. The website features a code of ethics and PDFs on program bylaws and polices and guidelines. To become re-certified, companies must demonstrate to the board on an annual basis that they meet the required standards.

The expansion of a program like IQ Certified, first and foremost, reflects the industry’s dual commitment to mitigating flaws, such as false alarms, and making users better attuned to managing their systems. The guidelines expounded on the website also demonstrate a concerted push for cohesiveness and standardization in the interest of quality and functionality.

Interestingly enough, I began learning about the IQ Certification Program mere minutes after reading an opinion piece, published on MSN Money, titled “14 reasons monitored home security isn’t worth it.” The article, while somewhat disconcerting, is nevertheless worth a read, if only because it offers a window into certain non-industry attitudes about home security.

Yes, the opinion piece is critical of monitored systems, often unduly so. The tone is one of exasperation and hyperbole. But few things can better counteract the negative perceptions detailed in this piece than a rigorous, quality-focused program like IQ Certification, an organization aimed at rectifying problems rather than dwelling on them. 

AT&T nears goal of 50 markets for Digital Life

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Monday, August 19, 2013

AT&T just launched Digital Life, its home automation/home security product, this April. But it’s already approaching its goal of expanding into 50 markets by the end of 2013.

The Dallas-based telecom announced today that as of Friday, Aug. 23, it will introduce Digital Life in six more markets: Orlando, Fla.; Providence, R.I.; Virginia Beach, Va.; and the cities of Rochester, Buffalo and Syracuse in New York.

That will bring the number of markets for Digital Life to 39, just 11 shy of the company’s year-end goal of 50 new markets.

After successful trials of Digital Life last year in Dallas and Atlanta, AT&T in April launched the service in 15 additional major markets nationwide, ranging from San Francisco to Miami, and has rapidly been adding on other markets.

In July, for example, AT&T introduced the service in Cincinnati; Columbus, Ohio; Indianapolis; San Diego; San Jose, Calif.; and Tampa, Fla.

Digital Life is professionally installed and also professionally monitored by At&T's two monitoring centers, one here and one in Atlanta. In June, the company announced that had received Five Diamond certification from the Central Station Alarm Association for its monitoring capabilities.

Customers can use their existing home broadband provider and any wireless phone service to use Digital Life, the company said.

COPS Monitoring strengthens Southwestern presence

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Wednesday, August 14, 2013

More than a year after opening its fifth central station in Dallas, COPS Monitoring continues to enhance its presence in the region. The Williamstown, N.J.-based wholesale monitoring is expanding support of the 8,000-square-foot facility by adding two new account executives, Julie Jordan and T.J. Cornwall. Jordan will manage East Texas and Louisiana, while Cornwall will cover West Texas, Oklahoma, Kansas and Nebraska.

While the account regions are obviously large, covering large swathes of urban and rural areas, the most important dealer markets are likely to be in the Dallas-Fort Worth metro area, along with some of the other major urban areas of Texas, including Houston, Austin and San Antonio.

David Smith, director of marketing and communication for COPS, said the new additions represent part of the company’s broader “hometown” strategy of providing a personable level of professional service.

“While we can’t be local to every alarm dealer, we do try to select strategic geographic regions to better serve our dealers and to strengthen the reliability of our network of central stations,” Smith said. “By operating regional central stations, we also have the ability to become more involved in local associations and with local dealers so we can better understand how we can help them overcome regional challenges and capitalize on opportunities.”

Because of the sheer sprawl of the Dallas-Fort Worth area (it’s the fourth most populous urban area in the U.S.), Cornwall will manage the Fort Worth dealers, while Jordan will work with Dallas-based accounts. 

Pushing the IP tipping point with sales training

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Wednesday, August 14, 2013

An announcement from Axis Communications that landed in my inbox this week caught my eye. It's a new “sales essentials" training program, a one-day training program that starts Aug. 27 and will be offered in 40 cities in the U.S. and Canada. It is the first all-sales focused training session the network video provider has offered.

James Marcella, Axis director of technical services, said the session offers attendees the best answer to “Why network video?”

That very basic question is one that a large segment of installers need and want training on, according to installers that Security Systems News spoke to this month for a market trends report on the status of hosted video today.  Look for that report online later this month and in the September printed publication.

I spoke to Marcella and he said: "One thing we’re seeing is that the technology has matured to the point where IP surveillance is now cost effective for small systems and the installer base that serves those small systems is the last to take up IP surveillance,” he said.

For those installers who are just making the leap from analog to IP cameras, “there’s a real learning curve on the technical and the sales side.” The cameras may be “easy to install and configure, but we still need to educate on the sales side.”

The course will address the “video surveillance sales cycle, selling against objection and developing communications strategies that focus on the value of network video to meet the customer’s needs," according to the announcement. The best way to demonstrate network cameras and the benefits of the Axis Channel Partners, “including pre- and post-sales support, vertical market solutions and the complete ecosystem of the Axis partner network.”

The first course will take place in Detroit on Aug. 27. U.S. cities on the tour include: Chicago, Cincinnati, Denver, Houston, Miami, Minneapolis, New Orleans, Philadelphia, San Diego, Seattle and at Axis headquarters in Chelmsford, Mass. In Canada, training will begin in Toronto on Oct. 2. Other locations in Canada area; Montreal, Calgary and Vancouver.

Marcella said the Axis’ training sessions have evolved over the past decade in response to channel partner requests. Sales training was always part of the training until a couple years ago when integrators really wanted “a deeper dive on the technology side” but then Marcella said, Axis “started to hear that they were missing the sales aspect, that [installers] had new sales people who’ve come on board [who needed training].”

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