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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.

ESA Leadership Summit homes in on growth

Event will bring together perspectives from inside and outside the industry
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10/08/2013

IRVING, Texas—The design of the 2014 ESA Leadership Summit is as inclusive as it is basic: The summit will cater to companies, whatever their size or revenue, with ambition to grow their accounts.

North America owns 70 percent of mobile video surveillance market

A robust American market continues to dominate the global share on the strength of school bus and police car verticals
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10/07/2013

LONDON—By a vast margin, North America remains the dominant sales region for mobile video surveillance equipment, according to a recent report from IHS, a global market research firm.

NFPA 2014 National Electrical Code now available

Changes include new language on fire resistant cable systems, modular data centers and surge protection for emergency systems
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09/30/2013

QUINCY, Mass.—The 2014 National Electrical Code, available in digital format and as a hard copy, contains changes of import to dealers and installers.

Is the 2G sunset causing outages?

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Friday, September 27, 2013

AT&T’s 2012 announcement that it would phase out 2G service left most in the alarm industry, well, unfazed. With wireless technology, such changes come with the territory. Moreover, it’s not the alarm industry but the mobile phone industry that dictates network “sunsets.” As Lou Fiore, Chairman of the Alarm Industry Communications Commission, put it in a recent conversation: “As long as you go cellular, there is no endgame here.”

A few months after the initial announcement, AT&T attached a deadline (Jan 1, 2017) to its 2G sunset. Since that time, the AICC has established a regular line of communication with AT&T, which sends a representative to attend the organization’s quarterly meetings.

AT&T informed AICC that, while interim changes would take place in advance of the 2G sunset, the changes would not affect the alarm industry. AICC members, Fiore said, were “skeptical.”

“We tried to impress upon [AT&T] the fact that our control sets hang on the wall, and if you change the operating parameters of that network, it may not work anymore,” Fiore said. “You can’t ask the homeowner to move the unit around to see if it works.”

Fiore, who is in the process of gathering information regarding possible outages for units tied to AT&T’s 2G network, said that in given locations, customers might still get 2G coverage but that there’s a chance it “won’t be as deep as it was before.”

Fortunately, there are some steps alarm companies can take to mitigate outages. Companies can switch to AT&T's 3G or 4G network by choosing matching hardware from a cellular alarm communicator, or to one of AT&T's competitors (the 3G and 4G networks of Verizon and Sprint are an option, Fiore said). Certain companies may be able to go with a wired network, but this is highly contingent upon business model, Fiore noted.

Still three years from the deadline, AT&T’s 2G sunset promises to be a story with several more chapters. I’ll be watching closely to see what kind of ripple effects it has on the industry.

Integrators get a sales edge with edge storage

More manufacturers offering video recording on the camera itself
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09/27/2013

Steve Gorski has experienced some déjà vu at recent trade shows. As GM Americas for Mobotix, a network camera company that takes a decentralized approach to storage, Gorski has been evangelizing the benefits of storage onboard the camera for a while.

Integrators get a sales edge with edge storage

More manufacturers offering video recording on the camera itself
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09/27/2013

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Skyhawk Security completes acquisition

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Wednesday, September 25, 2013

In another illustration of the industry’s evolution, Baton Rouge La.-based Skyhawk Security, which offers remote video monitoring, IP camera systems and access control systems for commercial customers (most in Louisiana, but some as distant as California), acquired local IT firm Big Networks. With the purchase of the firm’s assets and intellectual property, the Skyhawk Group (the name of the merged company) will have an in-house IT unit to supplement its security offerings.

The move establishes an interesting hybridized security company in the Louisiana capital. Brett Lofton, one of three managing members with Skyhawk, said the acquisition, in addition to bringing in an “in-house IT decision maker,” also presents some major cross-selling opportunities, particularly with respect to some of the clients the company inherited through the Big Networks buy.

Lofton said some of these accounts could potentially be a boon to Skyhawk’s security business. “We’ll certainly be cross-selling and trying to get in front of them to talk about [our security offerings],” Lofton noted, adding that this applies especially to companies with guards—customers who could find the security services palatable. Commercial customers may find value in the prospect of replacing or supplementing nightshifts with video monitoring, Lofton said.

Skyhawk also plans to explore cross-selling its hosted access control service, which Lofton believes is gaining traction. It will be interesting to follow what kind of role video monitoring and access control play in the company’s primary near-term plan: organic growth—much of which could be fueled by business in its own backyard. Stay tuned for more on Skyhawk’s plans and near-term goals in Louisiana and beyond.

Axis enters access control market

AXIS A101 Network Door Controller introduced at ASIS; will launch first in U.S. market, during Q4 of 2013
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09/24/2013

Updated on Sept. 26 with an interview with Fredrik Nilsson, GM Americas for AXIS Communications.

CHICAGO—Network camera provider AXIS Communications is now also a provider of network access control.

SIA eyes federal budget resolution

Sequestration could be a factor in determining funding for major security grant programs
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09/24/2013

WASHINGTON—The crisis in Syria only further roils what was already expected to be a turbulent few months in Congress leading up to the holidays. Despite the din, the Security Industry Association has developed a plan to advance some of its own objectives, of which there are many.

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