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Honeywell fired up about latest tech

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Wednesday, June 17, 2015

The other day I sat in on Honeywell’s virtual press conference on its latest industry trends in commercial life safety systems. The company had a nice lineup of their pros on hand to discuss their work and what they'll be highlighting at next week's NFPA World Safety Conference and Expo. 

Brian Carlson, manager of strategic marketing, Gamewell-FCI, said the S3 Series fire alarm system for small- and medium-sized buildings allays users’ fears about “pressing the wrong button” and thus eases stress and confusion during an emergency.

As the industry’s only small, addressable panel with a color touch-screen, “everything that needs to be pressed is highlighted. It gives people confidence,” Carlson said. Building owners especially like the custom function and shortcut function keys, he added.

Susan Adam, NOTIFIER’s marketing director, talked about how SWIFT—Smart Wireless Integrated Fire Technology—is helping dealers win jobs at construction sites and renovation projects because of its easy installation and removability when the job is finished. Sites and even separate building areas under construction or renovation still need to be protected, she emphasized, “and SWIFT can differentiate dealers.” SWIFT recently was installed at two large temporary buildings at the World Ski Championships in Vail, Colo., and at a 100-year-old mansion in Massachusetts that was being renovated.

On the Fire-Lite Alarms, Silent Knight, side of things, marketing director Richard Conner discussed the company’s growth with low-frequency alarms, especially for children, young adults and the hearing-impaired. I spoke with Conner about this at ISC West, but learned a little more this time around about the alarms’ use in college dormitories, motels, hotels, assisted living facilities and the like. Studies have shown that the low-frequency signal is most effective in waking up children and young adults, he said during the press conference, and are more effective than bed- and pillow-shakers.

Christa Poss, senior manager of product marketing, System Sensor, said the latest addition to the FAAST smoke detector product portfolio, FAAST XS, targets smaller areas, up to 5,000 square feet. Those areas include elevator shafts, cable ducts and boiler rooms. FAAST XS offers “extension communication and connectivity options all without the need for new hardware,” Poss said. FAAST is now available in three varieties to protect from 5,000 square feet to up to 28,800 square feet.

Charles Simek, industrial, product and technology specialist, Honeywell Industrial Safety, gave an overview of Honeywell’s optical flame detection analytics’ success, and Gene Pecora, business leader, industrial fire, Honeywell Fire Safety, discussed areas where Honeywell is getting into new areas or expanding its capabilities.

“Incidents occur in the petrochem industry all the time,” Pecora said, to the tune of $20b a year. It’s not uncommon in process locations to have small incidents that don’t make the news as the big events do, but those incidents need accurate and reliable equipment just the same, he said.

He said Honeywell’s new HS-81 is a unique, “all-in-one-solution” for smoke, flame, gas and extinguishing that meets global certifications.

The red herring: Where is Alarm.com in the IPO process now?

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Wednesday, June 17, 2015

The red herring: Where is Alarm.com in the IPO process now? We got some new information about the Alarm.com IPO on Monday, June 15, when the interactive service provider filed its preliminary prospectus for its IPO. It will offer 7 million shares of Alarm.com for “between $13 and $15 per share,” according to the document. Assuming shares go for $14, Alarm.com will raise $98 million.

Monday’s announcement comes about three weeks after its May 22 IPO S-1 filing with the SEC, which was valued at $75 million. Here’s my report on that filing.

Why did the value of the IPO change in three weeks and what’s the prognosis here? To get up to speed on Alarm.com’s  IPO process and what to expect in coming weeks, I made a few calls to some friendly finance mavens for an IPO primer.

Below is what I learned.

The first step, which Alarm.com took on May 22, is the filing of its S-1 with the SEC. That’s the 250-page tome that commandeered my office printer for a while and is now sitting on a shelf in my office. As part of the filing, Alarm.com has to provide various required documents to the SEC and to the other organizations. They also have to choose underwriters.

Who are these underwriters?  They’re investment banks that agree to underwrite or take risk on the new shares. In the Alarm.com case, the underwriters are –well, about every bank you’ve ever heard of: Goldman, Sachs & Co.; Credit Suisse; BofA; Merrill Lynch; Stifel; Raymond James; William Blair; and Imperial Capital.

What do the underwriters do? It’s their obligation to stand behind the stock in the IPO process. They weigh in on the preliminary prospectus, particularly on the business description. Did I mention that the preliminary prospectus is a second 250-page document, which I did not print out.

Between the S-1 and the preliminary prospectus, the estimated value of the IPO went from $75 million in the S-1 filing to $98 million in the preliminary prospectus. That jump represents what the lead underwriter believes the market will bear.

The preliminary prospectus has another name. It’s called a “red herring.” Not a very flattering name for a document you’re going to base an investment on, if you ask me. But that’s because I didn’t know the third definition of red herring until today.

Here are three possible meanings for a red herring:

1. A smoked fish, which is red and has a pungent smell.
2. Something intended to divert attention from the real problem or matter at hand; a misleading clue.
3. Also called red-herring prospectus. Finance. a tentative prospectus circulated by the underwriters of a new issue of stocks or bonds that is pending approval by the U.S. Securities and Exchange Commission: so called because the front cover of such a prospectus must carry a special notice printed in red.

Now we’re ready for the next step: The road show. “Red herring” in hand, the underwriters and Alarm.com folks visit big cities and talk to investors about how great Alarm.com is.

The roadshow will last one- to two weeks while underwriters "build a book"—that is, compile a list of potential investors. Their goal is to build the book to well beyond what they need to sell. So if they have to sell 7 million shares, for example, they want to get orders of more than 7 million. That’s because in the aftermarket, there are people who may flip the stock for a small profit.

Most of the stock will still be owned by the Alarm.com management and their private equity investors. Those guys cannot sell the stock for a certain period of time—roughly 150 days.

Typically an IPO represents only 25- to 40 percent of the value of the company sold to the public. The public shareholders are the ones who could possibly flip the stock. Still, it’s good to have lots of orders for the stock above and beyond what’s required. It stabilizes the price in the case of flippers.

Once the underwriters are comfortable that the book is robust enough, the IPO happens.

About a week after the IPO, the final prospectus comes out and anyone who owns stock gets this final prospectus.  It is no longer a red herring! It includes information on final commissions, who sold what stock, disclosures about how much the underwriters got paid, and ultimately the net proceeds.

Alarm.com and the underwriters are in road trip mode now. If all goes well the IPO should happen by the end of the month. In the first week or so of July, we should have a new and improved number on the value of the IPO and the fully diluted market value for Alarm.com.

According to the red herring prospectus, the common stock to be outstanding after this IPO will be 44,846,440 shares. The underwriters will get a 30-day over- allotment option to purchase up to an additional 525,000 shares.

 

Hawaii-based PERS dealer acquired

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Wednesday, June 17, 2015

Tunstall Americas on June 9 announced its acquisition of Kupuna Monitoring Systems, a PERS dealer based in Aiea, Hawaii. While the number of accounts and the price of the deal were not released, Allison Frazer, Tunstall Americas’ director of marketing, told me it was part of an ongoing company strategy.

Tunstall focuses on supplying and monitoring PERS devices for seniors. As such, Frazer said the company is actively looking to have a larger presence in warmer climates, which tend to have higher concentrations of seniors, Frazer said. “Hawaii alone has over 40,000 seniors who we believe can benefit from our services," she said.

These accounts will be monitored from Tunstall’s 87,000 square-foot “Connected Care Center” in Pawtucket, R.I. Kupuna’s accounts were previously monitored by Philips. 

Frazer said that Kupuna would start offering Tunstall systems, which it hadn’t done previously, and will transition all existing Kupuna customers to Tunstall equipment. 

"We are proud of the work we have done the past 10 years to support the elder community throughout Hawaii, and very grateful for the trust people have put in KMS,” Cullen Hayashida, president and founder of KMS, said in a prepared statement.

“We believe that our local service delivery and strong relationships with healthcare institutions and government agencies combined with Tunstall's world-class connected care monitoring products and services will create new opportunities to serve Hawaii’s kupuna and their families,” Hayashida continued, in the statement.

According to the release, Kupuna is the Hawaiian word for elder.

Tunstall also operates back up facility in Long Island City, N.Y.

Huronia Alarms sees very low attrition rates

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Wednesday, June 10, 2015

I talk to central stations across the gambit—large and small, national and regional—but the one thing I always like hearing about is what makes each stand out. For Huronia Alarms, based in Midland, Ontario, that’s a low attrition rate and its status as a “boutique” central station.

Huronia has an attrition rate of about 4 percent, Kevin Leonard, Huronia president and CEO told me.“Most of that attrition is just because people have sold their houses. We don't have a lot of customers leave us [because they’re unhappy].”

“Because we’re smaller, we can do the oddball things. We do a lot of work for process plants like water treatment plants … where it’s not your typical burg or fire alarm that’s coming through. It could be a high-chlorine alarm, or a clarifier alarm,” Leonard said.

The company currently monitors about 6,500 accounts, mostly their own with some third party monitoring. Huronia’s account growth is both organic and through acquisitions.

Leonard said that an emerging market in the area is monitoring for seniors, as more people are choosing to retire within Huronia’s footprint.

Huronia’s central station is CSAA Five Diamond certified. In addition to security, it has departments in fire and life safety, home audio and theater, locksmithing. The company has about 50 employees, Leonard said.

Drako-Brivo deal and ‘the new security dealer’

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Wednesday, June 10, 2015

There’s been a lot of talk about cloud services and managed services proliferating in the security industry, but “to a large degree it has been a head fake,” according to John Mack, EVP and co-head of investment banking at Imperial Capital.

Many of the so-called cloud products are not true cloud-based systems, and managed services is in it infancy as well, Mack said.
 
He believes that the news that Dean Drako, owner of cloud-based VMS provider Eagle Eye and founder of Barracuda Networks, has purchased Brivo, the original cloud-based access control system, may help propel the emergence of a new kind of security dealer.

“These guys will be the leader,” he said.

“My guess is that we will see the evolution of a new class of dealer focused on the managed services and cloud-based model” who will do high volumes of business with small- and medium-sized businesses, Mack told me.

The combination of Brivo and Eagle Eye products (the companies will offer an integrated version of their products beginning in July) would provide a “complete solution” for dealers to sell as a managed services offering to the SMB market and multi-site location businesses, Mack said.

This new managed services security dealer would have to be more like an alarm dealer who focuses on RMR as opposed to an integrator who focuses on install revenue. They would also have to be “sales oriented guys not tech-oriented guys,” Mack said.

But, they’ll have to have the technical sophistication to deal with SMB owners, he said.

This model involves high-volume work, which requires capital to subsidize the installation, larger dealers would likely have to secure a lines of credit from banks.
 
But the RMR would be much higher than the alarm model. It could be as much as a couple hundred dollars versus $40 for an alarm monitoring contract, Mack said. Importantly, the attrition rate for Brivo customers “is meaningfully lower than the 12 percent you hear about [in the residential market],” Mack said.

“It will be a great business model that can create a ton of value for dealers,” Mack said. With a lot of managed services RMR, that dealer would be an attractive acquisition target for ADT, Stanley, Protection 1, and Diebold that want to increase their presence in the SMB and multi-location business market.

Who knows, Mack surmised, the future may find a Monitronics-type business that runs a dealer program and buy accounts from security dealers who sell Eagle-Eye/Brivo-type products. “That would take bank capital- raising out of the equation.”

“A lot of positive things for dealers could spin out of this business model,” Mack said.

Imperial Capital advised Brivo in the deal.

 
 

Siemens Security Products now part of Vanderbilt

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Wednesday, June 3, 2015

Vanderbilt Industries on Monday announced it has completed the acquisition of the Security Products business from Siemens.

The deal, announced in October, expands Vanderbilt’s footprint, R&D capabilities and product portfolio. The Siemens' division has been rebranded as Vanderbilt and is headquartered in Wiesbaden, Germany.

Joseph Grillo, Vanderbilt managing director, spoke to Security Systems News in November about the deal. Here's a llink to that story where he said Vanderbilt will look for more acquisitions.

And here's a link to a story about proprietary versus open systems. It's based on a TechSec educational session that Grillo participated in.

In Monday's announcement, Vanderbilt said it will expand beyond its presence here in North America and in Europe and is particularly interested in South America and Asia Pacific.
 


The Security Products division brings with it access control, intrusion alarm and video surveillance products. Its brand names include: Aliro, Alarmcom, Bewator, Cotag, Europlex, SPC and Vectis. Vanderbilt plans to retain existing brand names.
 


In a prepared statement, Grillo said the company has "a commitment to reinvest at least 10 percent of our annual revenue into new research and development, and therefore, look forward to introducing new innovations that exceed industry expectations and drive sustained growth

Monitoring companies called to action on NFPA vote

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Wednesday, June 3, 2015

The alarm monitoring industry is taking notice of the NFPA. There are two motions proposed for vote at NFPA’s meeting this year that could have a serious impact on the industry. This pair of motions directly refers to the NFPA 72 Nation Fire Alarm and Signaling Code, which, in the current draft of the 2016 edition states that listed central stations can be used for fire alarm monitoring. A group based in northern Illinois opposes this language, and seeks to alter it, giving local municipalities more authority in the matter.

“What’s happening in Chicago is that some of these communities are operating their own monitoring center. … This [code] would enable that community to have an effective monopoly on alarm monitoring,” said Kevin Lehan, executive director for the Illinois Electronic Security Association and EMERgency24’s manager of public relations.

Lehan noted that, while the authority pushing these motions is from Chicago, it is still a national code. “This is a nationwide problem. If this can happen in Illinois … it could happen in [any community].”

Jay Hauhn, CSAA's executive director, agreed, saying that if either of the motions passed, “other municipalities may see it as a revenue opportunity and also seek to prohibit the use of non-government monitoring centers.”

“The big problem is: This is happening in Illinois, and it’s being challenged by the Illinois fire inspectors,” Ed Bonifas, executive VP of Alarm Detection Systems, told me. “The fire departments that feel this way the most can come out in force, because it happens to be here.”

The vote will be held at the NFPA’s 2015 meeting, at McCormick Place in Chicago, June 25. In order to vote, you must have been a member of NFPA before Dec. 25, 2014, and you must be there in person to vote.

“Right now the language that is in place … for the revised 2016 edition states that the AHJ shall allow central stations to provide this service,” Lehan said. The first motion, 72-8, seeks to alter this language, adding the prefix "When permitted by the Authority Having Jurisdiction,” again giving the AHJ the ability to disallow independent central stations as an option for fire alarm monitoring. This motion would revert the language to how it appeared in the previous, 2013, edition.

The second motion affecting this code, motion 72-9, would entirely strike the line referring to central stations, 26.5.3.1.3, from the code. CSAA, as well as others in the industry, are pushing for a negative vote for both motions.

“If either one of those motions passes, customers will not necessarily … have the ability to use UL-listed monitoring centers for their [fire monitoring],” Hauhn said. 

“The alarm industry here in Illinois has been struggling with the fire service that wants to monitor alarms and prevent alarm companies from doing the same,” Bonifas said. “It’s my contention that there’s a huge conflict of interest when the authority—the fire department—is participating in the business, and then is able to be the one to decide who else can participate,” he said.

A negative vote on both motions would not exclude municipalities from providing monitoring, but instead, ensure that listed central stations are an option.

“All the monitoring industry is trying to do is level the playing field so that government run monitoring centers must meet the same high standards that commercially operated monitoring centers adhere to,” Hauhn said.

“The 2016 draft of the code that’s being considered right now has new language in it that says that listed central stations can monitor alarms. … That sets up a competitive landscape; government can monitor alarms, and private companies can if they follow the code,” Bonifas said. “Competition is good for the consumer because it creates better pricing, but it also creates better service."

Wait, what year is this?

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Wednesday, June 3, 2015

My colleague, Spencer Ives, has been keeping me updated on our latest Security Systems News Poll about women in the security industry.

What do I have to say?

Here’s what I say: I am appalled.

I can’t believe I am even writing these words in 2015. Some of the comments responding to our poll are unbelievable, so misogynistic that I can’t even put them on here. (Hint: It’s better for a woman to be barefoot and pregnant.)

While some respondents talk about how vital it is to have women in the physical security workplace, others—women—speak of how they’ve been discriminated against, how they’ve had to leave their jobs because of harassment; the “good old boys’ network” has a complete and solid divide when it comes to women in security positions.

I have met so many enthusiastic women in the security field. Dynamic, smart and successful women. I have attended Women's Security Council gatherings to honor women who have served so well and who do such a great job at the executive level.

I have also met many men in the industry who would never, ever, say a disparaging remark about their female coworkers. They're partners; they work to the best of their abilities to serve their customers. 

Here's to all of you who do such great job, no matter your gender!

Former Vivint CFO on the Alarm.com IPO

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Wednesday, May 27, 2015

Alarm.com's announcement that it will go public has a lot of people talking inside and outside of the security industry. Many of the insiders, however, will not talk on the record, at least not right now.  

I was interested in talking to someone who knows IPOs, understands the security industry and is familiar with Alarm.com, and I came up with Chris Black. Black is the former CFO of Vivint who helped Vivint prepare for the sale to Blackstone. He's also helped other companies go public. Today he works outside of the industry as CFO of Viamedia and as a board member of Sports Information Group which owns the Daily Racing Form.  

In an email interview Black called Alarm.com "a terrific company with a strong management team that I gained a lot of respect for during my interactions with them while I was at Vivint."

He said an IPO can "have a transformational impact on the business" and a positive affect on the industry.

"The IPO will provide them with access to another source of capital to continue to grow the business and invest in new products and opportunities. I also think it is a great event for the security industry as a whole. It serves as further validation of the space and will bring in new equity investors that may or may not have looked at security companies in the past,"

The only potential downside, Black said "is the amount of time the management team, particularly the CEO and CFO, are required to spend on investor relations activities including calls with equity analysts, investors and presentations at equity conferences and the like."

How might the IPO affect customers?

"This is really just another form of financing the growth of the business and shouldn't have an immediate impact on Alarm.com's customers one way or the other. Longer term, one could assume that access to public equity will allow the company to invest in the business and continue to develop new products and enhance existing ones either organically or through acquisitions, or both," he said.

Who are your brightest end users?

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Tuesday, May 26, 2015

The alumni list for Security Systems News’ “20 under 40” awards for end users is outstanding. Past winners work for hospitals, public school districts, utilities, Google, retail chains big and small, Facebook, universities and major corporations.

We’re seeking nominations now for more of these young, intelligent and dedicated end users for our upcoming awards.

Please take a few moments and think of your customers: Who is the most up-to-date on the latest technology and knows what they need to physically secure their workplaces? Who is dedicated and passionate about their responsibilities?  Or, maybe, you just need to look in the mirror. Do you fit the bill? You are perfectly welcome to nominate yourself.

Honoring these men and women means a lot to them. I’ve heard from past winners who say the award helped them advance in their careers and gave them more cred with the c-suite.

In addition to being profiled on the SSN website and in our print publication, each of our past “20 under 40” end user winners, who we honor at the annual TechSec Solutions in February in Delray Beach, Fla., have added greatly to the conference’s discussions and networking. Many of them have served on educational panels at the event; some have become members of our expert advisory panel. All in all, their input is vital to the success of the show.

Nominate them here. The deadline is July 1. I’m looking forward to getting to know them.

 

 

 

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