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Henry Edmonds presents on PERS valuations

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Wednesday, October 9, 2013

As I encounter new theories and projections about PERS valuations, I continue to find a refreshing lack of consensus among the experts. That’s not to say there aren’t areas of agreement. There are. Those watching the market often cite similar determinants of valuation, such as attrition rates, cash flow and the costs of creating new accounts. But experts seldom invest the same metrics with equal importance.     

For example, Barry Epstein, president of Dallas-based Vertex Capital, believes reducing attrition rates to be a critical component of increasing PERS valuations. Conversely, Mark Sandler, a principal with SPP Advisors, downplayed the importance of churn, saying instead that a company’s value hinges more on how efficiently they can redeploy their units.

Today I came across a presentation on PERS valuations delivered by Henry Edmonds, president of The Edmonds Group, at the Medical Alert Monitoring Association conference held last week in Orlando. Edmonds’ insights reflect another nuanced interpretation of the market. In the presentation, he boiled PERS valuations down to four key metrics: cash flow; churn (attrition rate); growth rate/new account volume; and creation cost.

Just as vital for maximizing value is the ability of dealers to compile solid data on these metrics, Edmonds noted in one of the slides.

Edmonds developed some pretty in-depth calculations that he believes dealers should be cognizant of. For instance, churn rate metrics should account for total lost RMR on a trailing 12-month or trailing six-month basis. That figure should then be divided by average outstanding RMR. With respect to the cash flow, Edmonds advises dealers to focus on adjusted EBITDA and steady state free cash flow.

Edmonds’ presentation also offered a trove of information about buyers. He noted that buyers will create finance models for target companies, develop key assumptions based on a target company’s past performance and determine a capital structure based on current market conditions.

Edmonds also provided the following aphorism: “Buyers never pay more than they think they have to.”

In the coming weeks I plan to speak with Henry Edmonds himself to get a more in-depth take on PERS valuations and the state of the market in general. Stay tuned.

Customizing PERS to specific health needs

Essence USA president says new PERS system has many options, can function in large radius, monitor an individual’s temperature and routine
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09/11/2013

HOBOKEN, N.J.—Essence USA, a manufacturer and developer of security systems and monitoring and health care solutions that is based here, has launched its third-generation PERS product—the EverGuard-Care, a wireless home health monitoring system.

TrendNet: A Cautionary Tale?

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Wednesday, September 11, 2013

Hundreds of TrendNet customers found out the hard way that products they purchased, billed as home security cameras, weren’t all that secure. In January 2012, a hacker was able to breach TrendNet’s website, circumvent security credentials and access some 700 live-camera feeds monitoring inside customers' homes. Many of the videos were then disseminated on the Internet, a curious fact by itself in light of the complaint filed by the Federal Trade Commission, which said security flaws in the cameras allowed for the “unauthorized surveillance of infants sleeping in their cribs, young children playing, and adults engaging in typical daily activities.” The online community continues to recover from the trauma of being exposed to such tedium.

But for obvious reasons, customers were unnerved. The FTC wasn't happy either. The oversight committee’s complaint alleging that TrendNet misrepresented its software as secure and failed to adequately protect its customers resulted in a settlement, which was reached last week, according to multiple reports.

The story reached mainstream news. Unsurprisingly, it’s on the alarm monitoring industry’s radar as well, as I discovered in a short conversation with Stephen Doyle, executive vice president and CEO of CSAA. Doyle said he just returned from an Alarm Industry Communications Committee meeting in which 65 industry members were briefed by an industry lawyer on the legal ins and outs of the TrendNet snafu.

In terms of pertinence to the industry, the case seems fringy in some respects, relevant in others. It’s true, after all, that TrendNet cameras are unattached to alarms, and designed specifically for remote monitoring of homes via smartphones and other mobile devices. But it's relevant to the industry insofar as it deals with a few topics in the forefront of people's minds.

One of those topics is the viability and security of do-it-yourself monitoring systems. Another is cloud security, a topic that stands to grow in significance with the spread of IP panels, and as more companies migrate information and services to the cloud. Whether a company’s data becomes more or less secure when it’s transferred to the cloud is a hot-button industry debate with little consensus. Cloud adoption is likely to expand, but that doesn’t mean there won’t be skeptics. Either way, the TrendNet case perhaps intensifies the debate.

At TechSec 2014, Jeremy Brecher, VP of technology, electronic security at Diebold, will tackle some issues in this vein as part of the educational program, while also exploring ways security companies can thrive in an increasingly cloud-based environment.

SAFE Security gets new CFO and COO

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09/03/2013

SAN RAMON, Calif.—SAFE Security has announced a pair of management changes.

Fired AlarmForce CEO fighting his ouster

Joel Matlin, who founded the company, says he has a legal strategy to remove board members who forced him out
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08/07/2013

TORONTO—The recently ousted CEO of AlarmForce Industries, one of Canada’s largest security companies, said he’s planning a legal strategy designed to replace the board members who fired him.

Yesterday is gone, tomorrow is here: Notes from the webinar

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Thursday, August 1, 2013

Earlier today I listened in on a technology webinar, hosted by Ken Kirschenbaum, an industry attorney, that featured several voices both in the industry and in intersecting fields. Many of the speakers are at the forefront of technological innovation as it pertains to the central station space, so naturally the discussion dealt primarily with how to stay competitive by leveraging new technology that can improve retention and carve out new sources of RMR.

A recurring theme of the talk, unsurprisingly, was the emergence of the cableco and telecom giants, and what the competitive implications are with respect to their entry.

In 10-minute intervals, panelists presented commentary on a range of products and services. Some were pretty compelling, not only from a novelty standpoint, but also because many of the products seem like they could have some allure for monitoring companies and their distributors.

One of the more non-traditional services was presented by John Hoffe, president and CEO of Linked24, a product suite with several applications for mobile devices. Designed for dealers, the service features a GPS locator which, depending on the mobile device, can report an updated location of a loved one every three minutes. But that may actually be the company’s least buzzworthy product.

Another offering from Linked24 is its “Safe Text” service, which monitors incoming and outgoing messages for anything untoward, such as “inappropriate language and acronyms,” according to the website. If it detects any one of more than 750 pre-selected words, the text is uploaded to a customer portal for review. It’s a helicopter parent’s dream, and, brave new world though it is, it’s tough to imagine this product won’t find a home somewhere. But we’ll have to wait and see if that home will be among the dealer networks of wholesale monitoring companies.  

That’s not all. There’s also an “Emergency Shake” product that allows a customer in dire straits to open a Linked24 application then shake or drop their phone, whereupon a camera is engaged to shoot a 10-second video clip. The administrator of the account is then automatically notified.

Some of these offerings may come across as a bit intense from a personal privacy position, but there’s no question some have the potential to thwart an unforeseen problem, particularly the phone shake feature. And, with the mobile surge in full swing, it’s not unrealistic to imagine dealers giving strong consideration to products of this ilk to help boost their RMR.

It dawned on me just now that I’ve alluded to one speaker thus far, despite the fact there were several more who offered insight and product commentary that were more than worthy of mention. In my next blog or two, I’ll be sure to highlight the most resonant points offered by some of the other knowledgeable panelists. Stay tuned...

Credit scores and attrition: Correlation?

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Monday, July 15, 2013

The quest to reduce the dreaded attrition rate remains a high priority for anyone in the monitoring space, and companies continue to explore new ways to predict and prevent cancellations. Companies don’t just track attrition rates; they look for clues, like usage patterns, that could yield information about whether certain customers may be more prone to stay or go. 

While usage patterns remain a valuable tool for evaluating customers and forming effective business strategies (conventional wisdom says upsell to active users, and reduce prices to the less engaged), it’s not the only predictor companies use. There is also a significant correlation between credit scores, or Beacon scores, and attrition rates, according to Michael Barnes, a partner in the consulting and advisory firm Barnes Associates, who in a response on the CSAA’s Accent forum, said his firm reviewed data on over 2 million accounts. Here’s a bit of what he had to say:

“Generally speaking, the correlation changes over four ranges of scoring. Below 600, the statistical experience is very bad. That is, the accounts have a very high cancellation rate. Between 600 and 650 the results improve dramatically, with a general inflection point around 620+/-, which is why so many dealer programs (and, in some cases credit facilities) have restrictions around this area of scoring.”

Barnes added that scores above 700, in terms of attrition and retention, tend to behave the same as scores around 800. Scores in the ballpark of 650 tend to have poor cumulative performance, with the rates of cancellation almost twice as high over the first four years, Barnes notes. Unsurprisingly, rates of “infant mortality’—cancellations within the first year of existence—were exceedingly high among those with sub-650 Beacon scores, according to Barnes’ data.

While the data sample is large enough to provide a thorough understanding of the relationship between credit scores and attrition, Barnes points out that some qualifications are needed, since a slew of factors can create exceptions. Some of these key variables include installation fees, services provided, pricing and payment method, and even geographic location.

The above graph, made for SSN in 2009 by the Edmonds Group, also charts the correlation between attrition rates and Beacon credit scores. 

NationWide Digital opens N.C. sales branch

The new office will meet the needs of the company’s dealer program, which has a strong presence in the region
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07/02/2013

HOLLY SPRINGS, N.C.—NationWide Digital Monitoring Co., a Freeport, N.Y.-based central station monitoring service, just extended its reach in the Southeast with the opening of a regional sales office here.

Greetings!

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Tuesday, July 2, 2013

For my “Monitor This!” debut, I’d like to use this space to introduce myself, now that I’ve completed my switch to associate editor at Security Systems News.

My name is Leif Kothe, and I’ve covered the security industry since September 2012, when I joined SSN as web editor. In that capacity, I covered—and learned about—most facets of the security industry, while also writing for other trade journals at United Publications, not all of them security-related. The position was as edifying as it was unfocused. As associate editor, I welcome the opportunity to zoom in on the central station side of things. And I am equally eager to cover the legislative topics of most relevance to the industry.

My wish is to make the transition as seamless as possible. In the interest of continuity, you'll find that we’ve kept many things the same. The blog has retained its title, it occupies the same spot on the homepage, and it will still cover topics germane to central station alarm monitoring.

With that said, I encourage those in the monitoring space not to hesitate to reach out to me, whether to offer news leads, or to simply introduce yourselves. In my brief time covering security, I’ve found the industry nothing but welcoming, and I look forward to exploring the industry further and hearing your stories in the process.

CPI reels in pair of CSAA awards

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06/24/2013

NASHVILLE, Tenn.—CPI Security Systems, based in Charlotte, N.C., won a pair of CSAA Excellence Awards at ESX last week, including the award for CSAA Central Station of the Year.

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