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The 2023 SDM 100: Solving the Labyrinth
SDM 100 companies reported a wide variety of experiences in 2022, very much depending on the path, location and unique set of challenges that made up their business conditions last year. As a group, however, they continue to rise to the challenges put before them and find their individual path to success.
This year’s SDM 100 companies’ answers when asked to describe their business success in 2022 were truly a puzzle. As soon as one would say “best year ever” another company would describe the market as “flat.” Some said supply chain issues were quickly resolving, while others predicted they would still loom large in 2023. And some described certain technologies or markets as very strong — residential or commercial, fire or video, for example — only for the next company to say the exact opposite.
No. 9, Pye-Barker Fire & Safety, which realized 155 percent RMR growth over 2021 and moved up the rankings from 15 last year, described 2022 as “ the strongest I’ve seen in my 15-year career.”
2023 SDM 100 Preview
| Rank 2023 | Rank 2022 | Company/ Headquarters | Recurring Monthly Revenue, Dec. 31, 2022 |
|---|---|---|---|
| 1 | 1 | ADT Boca Raton, Fla |
$374,178,000 |
| 2 | Securitas Technology Uniontown, Ohio |
$86,000,000 | |
| 3 | 3 | Brinks Home Security Farmers Branch, Texas |
$38,000,000 |
| 4 | 4 | Vector Security Warrendale, Pa. |
$19,229,000 |
| 5 | 7 | Pavion, formerly CTSI Chantilly, Va. |
$15,100,000 |
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No. 37, Peak Alarm Co., was also bullish on last year, but with more cautious notes, writing, “The market was strong in 2022 with a surge from pent-up demand left over from COVID and supply chain issues of 2021. We saw all sectors increase spending in the beginning of the year, with the end of the year starting to flatten due to the impacts of inflation and concerns with the overall market. We still experienced long backorders in our fire side of the business, and that definitely kept a lid on our revenues for that sector. However, increased demand for camera systems, access systems and burg helped lift our sales overall. Peak Alarm’s greatest accomplishment in 2022 was being able to rise above the one-two punch of inflation and workforce shrinkage to come out with stronger than expected financial results.”
“Peak Alarm’s greatest accomplishment in 2022 was being able to rise above the one-two punch of inflation and workforce shrinkage to come out with stronger than expected financial results.”
- Peak Alarm
No. 96, LVC Companies, however, found just the opposite, writing, “Early in 2022 the market was sluggish as opportunities slowed in mid-2021 due to the continued pandemic challenges, so the fallout was more realized in early 2022. As the pandemic slowed, we saw an increase in opportunities in mid-2022. It started out weaker than hoped but continued to get stronger as the year progressed. Best was video surveillance and card access opportunities, although supply chain hindered revenue. Intrusion was sluggish. Supply chain and logistics, including additional tariffs and fees, were difficult to navigate as there were constant and consistent changes happening. All impacts related to the pandemic caused margin erosion due to the unknown changes before, during and at time of proposals and well after contract execution.”
While companies more focused on commercial customers generally seemed to have more positive experiences, that wasn’t always the case.
For example, No. 80, Vortex 1 Security, wrote: “The market was relatively soft during the year compared to 2021. We did put a larger focus on CCTV and access control sales during the year and that was our biggest growth during the year. We did not see any impacts from COVID-19, and supply chain issues got better as the year went on. … I think inflationary concerns within the economy held back our residential customers from spending like they have in the past.”
SDM 100: 5-Year Snapshot
The table above presents aggregate figures for the SDM 100 group of companies, which are ranked by their recurring monthly revenue (RMR) — an industry standard of valuation of a security installation/monitoring business. Most of the SDM 100 companies are privately held. Submitting RMR is required for ranking; other figures are not required, but mostly provided. Most companies — but not all — also reported their total annual revenue, number of subscribers, installation revenues, employees and acquisition activity. Therefore, one should exercise caution in using this information to extrapolate industry totals or to benchmark. Note that some figures — such as total annual revenue, subscribers, and residential and non-residential sales revenue — fluctuate from year to year due to both acquisitions and inconsistent reporting by the ranked companies. Every effort is made by SDM to maintain consistency in reporting. // SOURCE: 2023 SDM 100, SDM MAGAZINE, MAY 2023
SDM 100 RMR Down 5 Percent to $668 Million
Total SDM 100 recurring monthly revenue (based on 12/31 in $ millions)
Recurring monthly revenue (RMR) in 2022 for SDM 100 companies slipped 5 percent to closer to 2020 levels. Still, 91 percent of companies reported some RMR growth in 2022. While five out of the top 25 companies reported lower RMR than 2021, most of the declines were minor and a few had very strong growth. Stand-out companies among the top 25 in RMR growth are: Pye-Barker Fire & Safety, with 155 percent; AMP Smart with 43 percent; Tech Systems Inc. at 18 percent; Kastle Systems, 15 percent; and Guardian Alarm Company, 11 percent. Two companies were unable to report their previous year RMR numbers, but would represent a large increase: Securitas Technology, which completed its acquisition of STANLEY last year; and Zeus Fire and Security, which formed in 2021 and is reporting for the first time. // SOURCE: 2023 SDM 100, SDM MAGAZINE, MAY 2023
Total Annual Revenue: $15.1 Billion
Total SDM 100 Annual Revenue ($ billions)
Total annual revenue for the SDM 100 companies rose a whopping 32 percent in 2022 to its highest level since 2016. This year, ALERT 360, AMAROK and Vivint all elected not to report, but were offset by Securitas coming back to the ranking, along with Cook and Boardman, as well as a new company, Zeus Fire and Security. In addition, Pye-Barker made a number of acquisitions this year, resulting in substantial growth. // Source: 2023 SDM 100, SDM Magazine, May 2023
Dealers Say 2023 Revenue Will Be Up
SDM 100 dealer optimism has stayed steady from 2022 to 2023, with predictions remaining virtually unchanged from predictions in 2022. Of those who predict an increase, the average anticipated increase is 11 percent, down just 1 percent from last year. // Source: 2023 SDM 100, SDM Magazine, May 2023
SDM 100: PRODUCT Category Segments
Security companies derive their total revenue from a wide variety of product segments, including the three most sizable — integrated non-residential systems, video surveillance and intrusion (burglar) alarm systems. (Integrated-technology systems comprise two or more types of technologies.) This year intrusion fell 4 percentage points, while video and fire each gained 1 percentage point. // Source: 2023 SDM 100, SDM Magazine, May 2023
SDM 100: SERVICE Category Segments
Security companies derive their revenue from a wide variety of categories of service, the two most sizable of which — sales/installation, and monitoring ― made up nearly 80 percent of SDM 100 companies’ service revenue in 2022. // Source: 2023 SDM 100, SDM Magazine, May 2023
Installation & Tech Service Top Opportunities at SDM 100 Companies
Average percentage of staff employed in various departments at SDM 100 companies
The best opportunities for employment among SDM 100 companies are in installation (27 percent) and technical service (20 percent), followed by marketing (12 percent). This chart shows the average percentage of each position within an SDM 100 company’s total employee base. The most significant changes in the distribution of these positions compared with the prior year is installation rose by 5 percentage points. Other changes were insignificant. // Source: 2023 SDM 100, SDM Magazine, May 2023
Profits Increased In 2022
SDM 100 companies were asked, “Did your company’s net profit margin increase, decrease or stay about the same in 2022 compared with 2021?”
The percentage of SDM 100 companies reporting increased profits rose 6 percentage points, with 52 percent of security dealers reporting an increase in profit margins in 2022, compared to 46 percent in 2021. Among businesses that improved, their average profit margin increase was an impressive 40 percent. // Source: 2023 SDM 100, SDM Magazine, May 2023
SDM 100 Average Net Profit Margin: 14%
SDM 100 companies were asked, “What was your company’s net profit margin in 2022?”
14%*
*average percentage, based on 66 responses
Of the SDM 100 companies who reported their actual net profit margins, responses ranged from -1 percent to 55 percent, with the average net profit in 2022 of 14 percent — down slightly from 2021, when it was 16 percent. // Source: 2023 SDM 100, SDM Magazine, May 2023
SDM 100 Dealers Gained 8 Percent Subscribers in 2022
Percentage of subscribers gained or lost in each of the following years:
Looking at the number of subscribers that dealers indicated they gained or lost in 2022, SDM 100 companies in aggregate gained 8 percent more subscriber accounts in 2022, continuing a four-year upward trend. The comparison is among companies that reported number of subscribers for both the prior year (2021) and end of year 2022. // Source: 2023 SDM 100, SDM Magazine, May 2023
Over 9,000 Security Vehicles in Use in 2022
Percentage of subscribers gained or lost in each of the following years:
SDM asked companies how many vehicles are in their company fleet that are used for technical service, sales, and other purposes. A total of 85 companies (not including many of the larger SDM 100 businesses), reported 9,327 vehicles in use in 2022, once again up significantly from 7,403 in 2021 and almost double the 2020 numbers when 4,940 were reported in use. // Source: 2023 SDM 100, SDM Magazine, May 2023
No. 83, KMT Systems Inc., however, described both residential and commercial segments as strong, adding: “We grew in residential sales from year over year, organically along with two acquisitions. The major increase was in commercial sales. We as an organization will be focusing on more SMB and enterprise sales for 2023 forward.”
Of course, there are always differences in experiences due to size, region and business focus, but last year added extra challenges on top of the past few years of upheaval, leading each of these companies to find new paths when coming across an obstacle on the one they were on.
This was especially true of those hardest hit by supply chain shortages. Many found themselves searching out new manufacturing partners, new ways of doing business with their customers and storing more stock than they ever had to before.
No. 74, Custom Alarm, SDM’s 2022 Dealer of the Year, wrote: “Supply chain issues are continuing to impede, more so on the scheduling aspect. Due to not receiving all the necessary parts for a job, we are not able to complete jobs in their entirety, causing multiple return trips not budgeted into the job, and also preventing us from billing a job complete and collecting. This puts a cash crunch on us as a company and erodes our profitability. … We navigated through the challenges of staffing, supply chain compounded by pricing increases by our manufacturers causing us to change some product offerings. We started working with some new partner manufacturers, which required training of our technical staff during our most busy year yet. At the end of the year, we had our highest revenue and highest profits to date and are proud of the work the team did together to accomplish all this.”
Variations of this story abound throughout the comments from this year’s top 100 security dealers. But collectively, they did as well, and in many cases much better than last year, according to the numbers. This year’s group garnered $668 million in RMR — down from $702 million last year, but still the second highest in the last five years. Ninety-one percent of the companies reported at least some RMR growth in 2022. Both residential and non-residential sales revenue were up, as was total revenue, with residential sales up 17 percent, and non-residential up a whopping 40 percent over last year’s aggregate group number. Total subscribers continued its multi-year slide. But despite dueling headwinds of both supply chain shortages and inflation driving up costs, profits were up a healthy 6 percentage points over last year.
Read on to learn more about what these top security dealers experienced in 2022, as well as their predictions for where the path will lead in 2023.
Read More: Pricing in an Inflation Economy
With many of this year’s SDM 100 companies expressing concerns about inflation, rising costs and price increases from their suppliers, Mike Barnes, president of Barnes Associates, addresses the need to consider raising installation AND monitoring prices.
Resi vs. Commercial
One trend that has been ongoing for many years is the increasing numbers of formerly residential-only security dealers getting into the commercial market to offset the challenges brought by DIY and the large competitors. This path, while having the benefit of diversification for security dealers, also means more to think about, both opportunity and challenge-wise.
On the residential side, results for 2022 were mixed, with more companies describing the pure residential market as soft, down or the same. But those who persevere in this market are seeing an uptick in certain technologies and smart home-type solutions. Builder programs were especially challenged as the year wore on with ever increasing interest rates slowing the new construction market. But not all experienced that.
No. 7, Guardian Protection’s Vice President of Sales April Maloney, wrote: “The residential channel had average-minimal growth in 2022; however, there was increased interest in automation and video devices, enhancing the desire for a connected smart home. This contributed to additional services and recurring revenue in the small business and builder channels. While our builder channel started 2022 extremely strong with high home sales and buyers wanting monitored security and a connected smart home, the same channel experienced a decline in sales due to climbing interest rates causing significantly decreased home sales in the second half of the year. We continued to experience price increases from vendors, creating additional challenges in all our channels, but particularly in the builder channel — which already felt pinched by interest rates — causing builders to ask vendors for pricing reductions and concessions.”
No. 64, Crime Prevention Security Systems, wrote: “The market for residential security was very weak in 2022. We experienced many cancellations due to moves and finances. [But] the high-end residential market remained strong for us. We had several projects in new construction with custom and semi-custom builders.” Looking ahead, the company added, “Residentially, I believe we are going to see our traditional security numbers decline. I believe that homeowners in high-end homes will continue to invest in their security, Wi-Fi and entertainment. Video is strong in this market sector.”
No. 61, Fleenor Security Systems, wrote that both its commercial and residential markets were good in 2022: “We found 2022 to be another strong year in both the residential and commercial spaces, keeping pace with 2021. We approached 2022 with some cautious optimism thinking the commercial and housing markets would see some considerable slowdowns due to high inflation and rapidly rising interest rates, but thankfully, this was not the case.”
AMP Smart, No. 19, summed up the residential space this way: “The residential market faces headwinds but remains strong for seasoned operators.”
“The residential market faces headwinds but remains strong for seasoned operators.”
- AMP Smart LLC
Both residential and commercial customers were very interested in video solutions, according to multiple responses. But perhaps no two answers better demonstrate the dichotomy that was this year’s individual experiences than No. 53, Electronix Systems Central Station Alarms and No. 54, Valley Alarm.
Adjacent on the SDM 100 ranking, their experiences of commercial trends were polar opposites. “Sales were up in 2022 compared to 2021 where shutdowns affected installation and service capabilities. The best growth was seen in fire systems whereas the worst growth was in CCTV,” wrote Electronix, which is based in New York.
On the other side of the country in California, Valley Alarm wrote: “The market was generally strong, but not much different than 2021. CCTV was strongest and analytics were key. Fire alarms were a little weaker than previous.”
Other companies faced issues due to the markets they specialized in, like No. 88, The Olivier Corporation, writing: “We are primarily focused on the corporate real estate market. While last year was hard for them, this year is tougher. We are trying to diversify.” Even so, the company noted they grew RMR by over 20 percent and had a better 2022 over 2021 overall.
There were many positives on the commercial side as well, with many pointing to access control, video, AI and return-to-work trends driving projects last year and this year.
“In its commercial and national account business units, Guardian experienced growth in most verticals in 2022 as employers made efforts to bring employees back to the office safely,” wrote Kevin Santelli, vice president — commercial and national accounts business. “These employers were also seeking new ways to efficiently manage multi-site locations and overcome labor shortages evidenced by new investments into AI and cloud-based systems.”
Read More: Positive Outlook for the Security Industry Amid Economic Headwinds
Mark Melendes, managing director and commercial regional manager, Security Industry Group at CIBC, talks trends and deals they are seeing from their clients that will likely impact 2023.
Challenges & Expectations
With so much upheaval and uncertainty in the past few years, it is particularly impressive what these top 100 companies have been able to accomplish, individually and collectively. But what do they anticipate for 2023 and beyond?
Not surprisingly, inflation concerns weighed heavy in many of their answers, and several expect some softening later in the year. No. 98, Enterprise Security Inc., described this as “the lurking economy and interest rates.” Labor shortages were another issue frequently mentioned.
No. 78, Sonitrol of Evansville Inc., wrote: “We are struggling to hire new installers. We are significantly backed up and don’t see this changing anytime soon. The short supply of workers is driving up hourly rates quickly and will likely affect smaller companies the most.”
“Businesses in the security systems industry will need to stay vigilant and adapt to changing market conditions and trends to remain competitive in 2023. This will require ongoing investment in R&D, cybersecurity and supply chain management, as well as a focus on delivering innovative solutions that meet the evolving needs of customers.”
- Minuteman Security & Life Safety
But overall, the SDM 100 companies continue to express confidence in their ability to weather any downturn that may occur or other obstacles that may be in their path.
No. 5, Pavion (formerly CTSI), wrote: “We have concerns about inflationary headwinds, continued supply chain delays, material costs increases and global unrest. We will continue to adapt and manage as these economic and market pressures adjust. We still anticipate significant organic and acquisitive growth through 2023.”
No. 25, General Security Inc., shared: “We expect the general economy and marketplace to soften a little in 2023. Headwinds from the housing market volume declines and rising interest rates should impact demand to some extent.”
Minuteman Security & Life Safety, No. 47, listed several factors that will greatly impact business in 2023, including ongoing supply chain disruptions, labor shortages, cybersecurity, DIY and self-monitoring trends. But on the positive side, the company writes that current events will be a boon for the security industry: “Ongoing geopolitical tensions and social unrest may increase demand for security solutions and drive innovation in the industry. For example, recent mass shootings have led to increased demand for active shooter detection and response solutions. … Businesses in the security systems industry will need to stay vigilant and adapt to changing market conditions and trends to remain competitive in 2023. This will require ongoing investment in R&D, cybersecurity and supply chain management, as well as a focus on delivering innovative solutions that meet the evolving needs of customers.”
“We are tightening our belt as we brace for a possible recession. We continue to be optimistic as our industry has weathered ups and downs in the U.S. economy and continued to grow and thrive.”
- Advanced Security Systems
No. 60, Advanced Security Systems, summed up what many answers seemed to get at: “Supply chain issues continue to be a problem with no immediate end in sight. Also, inflation had made business less profitable as we struggle to hold prices to our customers competitive. We are tightening our belt as we brace for a possible recession. We continue to be optimistic as our industry has weathered ups and downs in the U.S. economy and continued to grow and thrive.”
No. 76, Dehart Alarm Systems Inc. noted an interesting phenomenon, which might explain why the predicted recession either won’t happen, or as experts suggest, will be a soft landing: “Even with inflation, the consumer has adjusted to this being the new norm. Unless there is a hard recession I believe the consumer will continue to purchase the services and products we offer.”
