Imperial Capital Global Opportunities Conference Company Presentation. Interface Security Systems Holdings, Inc. September 17, 2015

Transcription

1 Imperial Capital Global Opportunities Conference Company Presentation Interface Security Systems Holdings, Inc. September 17, 2015

2 Interface at a Glance Founded in 1995 Recognized pioneer and leader in the Bundled Managed Security Services Provider industry in the U.S. helping primarily large multi-site customers Simplify to the Power of One by combining managed IP physical and network security solutions into one highly efficient integrated bundle over a Private managed Payment Card Industry ( PCI ) Compliant Nationwide Secure Broadband Network Real-time monitoring of these cloud-based security services Headquarters in St. Louis, MO with ~650 employees and ~78,300 customer sites SunTx Capital Partners owns ~88% of the voting power of the Company $9.8 million RMR as of June 30, 2015; $1.9 million of installable RMR in contracted backlog as of July 31, 2015 $76.8 million total revenue for the six months ended June 30, 2015 and $122.8 million for the year ended December 31, 2014 Ranked #12 in 2014 SDM 100 rankings that provide electronic security systems and services (includes both commercial and residential revenue) #7 in 2014 SDM 100 companies for most commercial installation revenue 2 Interface Security Systems, LLC 2015

3 Experienced Senior Management Team 3 Interface Security Systems, LLC 2015 Michael Shaw: Chief Executive Officer 40+ years building and operating subscriber based service companies Founder and CEO Sonitrol Security Systems Co-Founder and COO SecurityLink Corporation Founder and CEO Interface since 1995 Michael McLeod: Chief Operating Officer 30+ years of senior operations management experience in security industry General Manager API Security VP Operations Sonitrol Corporation National VP of Operations Security Technologies Group COO of Interface since 2000 Ken Obermeyer: Chief Financial Officer 20+ years of senior financial management experience in security industry Various accounting positions in Ohio-based security businesses VP of Finance Centennial Security Systems CFO of Interface since 1997 Chuck Moeling: Chief Marketing Officer 20+ years of strategy, sales, operations and IP technology experience 12 years consulting with Bain & Company and Accenture/Andersen Consulting Vice President of Retail at Radiant Systems (now NCR) Executive Vice President and Chief Marketing Officer with Westec Intelligent Surveillance Executive Vice President of Sales at Interface CMO of Interface since July 2015

4 Company Overview This presentation contains forward-looking statements that are based on our management s current expectations, estimates and projections about our business and operations and are subject to a number of risks and uncertainties. Our actual results may differ from the results referred to in the forward-looking statements, and such differences may be material. See Cautionary Statement Regarding Forward-Looking Statements and Risk Factors in Annual Report on Form 10-K for the year ended December 31, Interface Security Systems, LLC 2015

5 Company Profile Interface is a leading national provider of physical security and secured network services to primarily large, commercial multi-site customers Real-time monitoring of physical and logical cloud-based security services Most comprehensive technology-enabled managed security solution in the market First to market with IP enabled managed bundled service offerings 75% of revenue is contracted RMR ARPU of $ in 2Q15 up over 28.2% year over year Industry leading attrition rates Physical Security Secured Network Alarm/Event Monitoring Interactive Video Surveillance Secure Managed Broadband PCI Compliance Managed Access Control Fire/Life Safety Systems Managed Digital Voice Managed Wireless Networks 5 Interface Security Systems, LLC 2015

6 Company History SunTx acquisition Created first to market IP Managed Service Provider in convergence of physical security and secured network services Added Michael s Stores and Dollar General to Customer Base Raised $230 million in Senior Secured Notes in public markets Signed agreement to provide managed services to all Family Dollar locations Raised $67 million in Unsecured Notes in private markets Expanded to CA, TX and upper/ lower MI with key acquisitions Acquired Loss Prevention Management: resulted in the integration of Secure Managed Broadband platform and ISS Monitoring Center Added $2.5 million of net new RMR Completed installation of 10,000+ Dollar General Stores Merged with Westec, the leading provider of remote interactive video monitoring Raised $115 million in Senior Contingent Cash Pay Notes in private markets Over $1.6 million added to Contracted Backlog during June and July 2015 Focus on continuing to scale the business 6 Interface Security Systems, LLC 2015

7 Bundling IP Services Physical Security Network Security Alarm/Event Monitoring Secure Managed Broadband Interactive Video Surveillance Managed Access Control PCI Compliance Managed Digital Voice Fire/Life Safety Systems Managed Wireless Networks = 7 Interface Security Systems, LLC 2015

8 Alarm and Event Monitoring State-of-the-art IP system serves as upgrade over traditional land-line phone systems Faster & more reliable over a secure network Less expensive Faster response times Managed 24 hours a day Monitor and report events such as intrusion, fire / smoke, sprinkler and carbon monoxide levels Scheduled and random event monitoring lowers employee and customer theft, and raises overall security Ability to connect to system from any location to support Bring Your Own Device (via smartphone, tablet or PC) with real-time updates and remote-control GSM wireless transmission as both primary and back-up means of communication and back-up Alarm verification using two-way voice and live video reduces false alarm rates and improves response times IP alarm and event monitoring offers leading value over traditional land-line alarm systems 8 Interface Security Systems, LLC 2015

9 Secure Managed Broadband SMB Private, closed-loop secured network infrastructure Custom configured on a national scale down to the store level All physical and network security services are safely and easily connected through one broadband connection Protect sales transactions and reduce the risk of fines, penalties and loss of payment card privileges Compliant with PCI Data Security Standards Secure Operations Center ( SOC ) / Network Operations Center ( NOC ) monitors and manages the network 24/7/365 Ensures 99+% up-time Customers receive immediate alerts regarding the health of their network and can monitor events from any web-based device in real-time Eliminates time and cost of managing a network for customers Large multi-site customers can retrieve point-of-sale and other store operations data from the Data Center to their back-of-house headquarters Commercial / Retail Location Data Center SOC / NOC Interface has adopted its life safety / emergency response culture and has applied the same quality of service and level of urgency in monitoring SMB 9 Interface Security Systems, LLC 2015

10 Digital Witness Interactive Video Proprietary video surveillance technology - allows for remote, event-based monitoring Offered through the merger of Westec (now re-branded as Digital Witness) in March 2012 ~4,400 active monitoring sites in the luxury retail, dining, QSR and hospitality vertical sectors Interactive services include: Video tours Video verification Rapid response Video escorts Snapshot audits Largest, most sophisticated interactive video monitoring Central Command Center ( C3 ) in the U.S. located in Plano, Texas handling over 2.0 million events per year Only Dual Certified Video Monitoring Center in U.S. Proprietary technology enables best-in-class video surveillance service offering that is unrivaled in the industry 10 Interface Security Systems, LLC 2015

11 New Services 2015: Energy Management and Proximity Interface Energy Management Interface Proximity Interface Energy Management is a robust platform that provides in-depth intelligence and control of HVAC systems, lighting, refrigeration and more. enhance operational efficiency maximize guest comfort detect hidden maintenance issues and reduce energy usage while giving control and visibility over all of your retail locations. Interface Proximity is a managed Bluetooth network and mobile platform that improves customer engagement and retail analytics. Recognize, track and engage customers Target customer messages to personalize shopping Measure traffic flow, dwell, demographics, redemption, and conversion rates instantly Combine with loyalty and store apps Dwell Times - Visitor Dwell Time per store and per department. Visit Frequencies - Visits per time of day, store and department. Offer Conversion Rates - Direct insight in offer performance and usage. 11 Interface Security Systems, LLC 2015

12 Top National Vertical Penetration Rate Retail 5 of the Top 15 Largest Retailers Jewelry Quick Service Restaurant Dine-In Restaurant 5 of the Top 10 Jewelry Retailers 8 of the Top 10 QSRs 7 of the Top 10 Dine-In Restaurants Interface monitors over one million devices across North America and responds to more than 3 million events every year. Lodging/ Hospitality 6 of the Top 10 Lodging/Hospitality * Ranking based on site count. Note: Sources include Chain Store Guide (Feb 2014), National Jeweler (12/14), Nations Restaurant News (12/14), and Hospitality Crossing. (12/14) 12 Interface Security Systems, LLC 2015

13 Company Overview Salt Lake City, UT St. Louis, MO Dallas, TX Atlanta, GA SOC/NOC Data Center Regional Service Center Field Technicians Nationwide coverage through regional service centers, field technicians and partner networks allows Interface to serve over 78,000 customer sites 13 Interface Security Systems, LLC 2015

14 ARPU and RMR ARPU of $ $ for commercial customers $32.12 for residential customers Average net attrition rate of 7.1% 5.7% attrition rate in 2Q15 for national account customers with IP Managed Services $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 ARPU Q15 Commercial Accounts Residential Accounts 12% 8% 4% 0% Historical Average Net Attrition RMR Commercial vs. Residential ($ in millions) $ % 70.3% 77.8% 90.5% 91.8% 79.8% 100.0% $10 $0.8 $8 $0.8 $1.7 $ % 10.0% 10.4% $6 $1.7 $ % 8.4% $4 $1.6 $ % $6.1 $6.7 $2 $4.1 $2.9 $0 10.0% Q Q15 Commercial Accounts Residential Accounts % of RMR - Commercial Bundled service offering leads to higher than industry ARPU and low attrition rates 14 Interface Security Systems, LLC 2015

15 Industry Overview 15 Interface Security Systems, LLC 2015

16 Security Monitoring Market Top Security Monitoring Companies Gross Rank 12/31/2014 Avg. RMR Revenue Company Location ($ mm) Subscribers per Sub FTEs ($ mm) 1 ADT Boca Raton, FL $ ,663,000 $ ,000 $3, Tyco Integrated Security Boca Raton, FL , ,000 3, Stanley Convergent Security Indianapolic, IN , ,300 1, Vivint Inc. Provo, UT , , Monitronics International Dallas, TX ,059, , Protection 1 Remoeoville, Il ,501, , Diebold Security Untiontown, OH , , Vector Security Inc. Pittsburgh, PA , , Guardian Alarm Company Warrendale, PA , , ASG Security Beltsville, MD , , Bay Alarm Company Pacheco, CA , Interface Security Systems Holdings Earth City, MO , Central Security Group Inc. Tulsa, OK , Alarm Capital Alliance Newtown Square, PA , CPI Security Systems, Inc. Charlotte, NC , Protect America Austin, TX , Safe Security Companies San Ramon, CA , Guardian Alarm Company Sounthfield, MI , n/a Kastle Systems Falls Chruch, VA 4.6 n/a n/a Ackerman Security Systems Atlanta, GA , Source: SDM Magazine 2015 SDM 100. Highly Competitive and Fragmented Security Monitoring Market 16 Interface Security Systems, LLC 2015

17 Business Strategy 17 Interface Security Systems, LLC 2015

18 Large Video Market Growth Opportunity According to Allied Market Research, the North American market for IP video surveillance and Video Surveillance-as-a-Service (VSaaS) is forecast to expand dramatically, rising from $2.4 billion in 2013 to $18 billion by % compound annual growth rate Winners in the market will be companies that provide integrated services According to BIS Research, the North American market for IP video surveillance and Video Surveillance-as-a- Service (VSaaS) is also forecast to expand dramatically, rising from $4.56 billion in 2013 to $15.81 billion by % compound annual growth rate Projecting greater demand for VSaaS 18 Interface Security Systems, LLC 2015

19 Strong National Account Growth Nationwide presence through 15 regional service centers Nationally distributed sales team National account sales initiatives are driving consistent and substantial RMR growth ~ 75% of total company RMR is from national account customers ($ in thousands) Ending National Account RMR $8,000 $7,000 $6,000 CAGR: 51% $5,945 $7,374 $5,000 $4,000 $4,341 $4,817 $3,000 $2,000 $1,000 $1,143 $2,292 $ Q15 National account sales initiatives are driving consistent and substantial RMR growth 19 Interface Security Systems, LLC 2015

20 National Partnership Ecosystem Driving Growth.and 400+ other local service providers 20 Interface Security Systems, LLC 2015

21 Financial Overview 21 Interface Security Systems, LLC 2015

22 Financial Overview Total Revenue RMR ($ in millions) ($ in millions) CAGR: 18% CAGR: 25% $154.0 $9.8 $110.4 $126.7 $122.8 $6.9 $7.5 $8.4 $67.3 $87.4 $3.6 $ LQA Q15 * 2010 through 2013 PF for $0.9M of sold Hawk Residential RMR. New RMR RMR with Backlog ($ in millions) ($ in millions) $11.4 $2.7 $6.9 $7.5 $8.4 $1.1 $1.8 $1.2 $1.5 $1.8 $3.6 $ Q15 LQA Q15* * Includes $1.6M of contracted backlog. 22 Interface Security Systems, LLC 2015

23 Summary of Key Company Attributes Leader In Bundled Physical Security and Secured Network Services Total Managed IP Technology Solution Operating Model Creates Stickier Customers High ARPU Customers with Low Creation Costs Established Blue Chip Customer Base Significant Contracted Backlog and Pipeline Strong Financial Profile Experienced Management Team 23 Interface Security Systems, LLC 2015

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