Security Investor Conference Company Presentation Interface Security Systems Holdings, Inc. December 10, 2015
Interface at a Glance Recognized leader and pioneer in providing a proprietary, comprehensive bundle of monitored, mission-critical managed network, physical security, interactive video monitoring and business intelligence ( BI ) services over a private payment card industry ( PCI ) compliant cloud-based network to many of North America s most recognized companies across multiple business sectors including the retail, hospitality, dining, jewelry and QSR industries. Bundled solutions enable multi-site customers to SIMPLIFY TO THE POWER OF ONE Streamlines system operations and administration Enhances network efficiency and security Integrated services provide customers with superior data gathering and BI analytics capabilities Headquarters in St. Louis, MO ~670 employees and over 81,000 customer sites Secure Operations Center ( SOC ) / Network Operations Center ( NOC ) in St. Louis and Dallas Data Centers in Salt Lake City and Atlanta Supported by superior proprietary software and monitoring technology and technical know-how $10.1 million RMR as of September 2015 with $1.7 million of installable RMR in contracted backlog Pro Forma RMR of $11.8 million Ranked #12 in 2015 SDM 100 rankings of companies that provide electronic security systems and services (includes both commercial and residential revenue) #7 in 2015 SDM 100 rankings of companies for most commercial installation revenue 2 Interface Security Systems, LLC 2015
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 1973-1986 Co-Founder and COO SecurityLink Corporation 1986-1991 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 1985-1993 VP Operations Sonitrol Corporation 1993-1998 National VP of Operations Security Technologies Group 1998-2000 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 1995-1997 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 2012 2015 CMO of Interface since July 2015
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 our Annual Report on Form 10-K for the year ended December 31, 2014. 4 Interface Security Systems, LLC 2015
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 82% of revenue is contracted RMR Commercial ARPU of $162.67 in 3Q15 up almost 17% year over year Industry leading attrition rates Physical Security Secured Network Alarm/Event Monitoring Interactive Video Surveillance Secure Managed Broadband PCI Compliance Proximity Beacons Managed Access Control Fire/Life Safety Systems Managed Digital Voice Managed Wireless Networks Energy Mgmt Services 5 Interface Security Systems, LLC 2015
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 2001 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 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 Added $2.2 million of RMR to Contracted Backlog YTD 2015 Focus on continuing to scale the business 6 Interface Security Systems, LLC 2015
Interface Security Systems: Bundling IP Services Physical Security Secure Network Services Alarm/Event Monitoring Secure Managed Broadband Proximity Beacons Solution Interactive Video Surveillance Managed Access Control PCI Compliance Managed Digital Voice Fire/Life Safety Systems Managed Wireless Networks Energy Management Services = 7 Interface Security Systems, LLC 2015
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
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
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
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
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
Installation & Sales Coverage With over 80,000 customer sites across North America, Interface maintains a robust installation and service network. SOC/NOC Data Center 13 Interface Security Systems, LLC 2015
ARPU and RMR ARPU of $124.70 $162.67 for commercial customers $32.48 for residential customers Average ARPU for new national account sales in 3Q15 was $253.07 4.1% attrition rate in 3Q15 for national account customers with IP Managed Services Average net attrition rate of 6.7% $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 ARPU 2010 2011 2012 2013 2014 3Q15 Commercial Accounts Residential Accounts Historical Average Net Attrition RMR Commercial vs. Residential 12% ($ in millions) $12 $10 63.5% 70.3% 77.8% 79.8% 90.5% 92.1% $0.8 100.0% 8% 4% 9.4% 8.2% 8.4% 10.0% 10.4% 6.7% $8 $6 $4 $2 $1.6 $2.9 $1.7 $4.1 $1.7 $6.1 $1.7 $6.7 $0.8 $7.6 $9.3 0% 2010 2011 2012 2013 2014 3Q15 $0 10.0% 2010 2011 2012 2013 2014 3Q15 Commercial Accounts Residential Accounts % of RMR - Commercial Bundled service offering leads to higher than industry ARPU and low attrition rates 14 Interface Security Systems, LLC 2015
Industry Overview 15 Interface Security Systems, LLC 2015
Security Monitoring Market Top Security Monitoring Companies Gross Rank 12/31/2014 Avg. RMR Revenue 2014 2015 Company Location ($ mm) Subscribers per Sub FTEs ($ mm) 1 ADT Boca Raton, FL $262.3 6,663,000 $ 39.37 16,000 $3,408.0 2 Tyco Integrated Security Boca Raton, FL 62.5 500,000 125.00 10,000 3,876.0 3 Stanley Convergent Security Indianapolic, IN 53.8 300,000 179.33 8,300 1,700.0 4 Vivint Inc. Provo, UT 48.7 894,175 54.46 10,210 564.0 5 Monitronics International Dallas, TX 44.1 1,059,266 41.63 1,100 539.5 6 Protection 1 Remoeoville, Il 29.7 1,501,000 19.79 2,755 468.0 7 Diebold Security Untiontown, OH 14.2 200,000 71.00 1,000 628.0 8 Vector Security Inc. Pittsburgh, PA 14.1 289,275 48.74 1,275 288.2 9 Guardian Alarm Company Warrendale, PA 12.9 295,098 43.71 1,030 169.9 10 ASG Security Beltsville, MD 10.0 208,826 47.89 1,163 145.8 11 Bay Alarm Company Pacheco, CA 8.7 128,395 67.76 761 122.3 12 Interface Security Systems Holdings Earth City, MO 8.4 77,403 108.52 666 122.8 13 Central Security Group Inc. Tulsa, OK 7.1 209,450 33.90 410 82.0 14 Alarm Capital Alliance Newtown Square, PA 6.6 183,956 35.88 515 76.9 15 CPI Security Systems, Inc. Charlotte, NC 5.5 124,133 44.31 480 70.1 16 Protect America Austin, TX 5.3 129,594 40.90 304 65.0 17 Safe Security Companies San Ramon, CA 5.1 129,328 39.43 355 51.9 18 Guardian Alarm Company Sounthfield, MI 5.0 116,787 42.81 n/a 69.8 19 Kastle Systems Falls Chruch, VA 4.6 n/a n/a 415 78.0 20 Ackerman Security Systems Atlanta, GA 3.1 123,476 25.11 300 50.8 Source: SDM Magazine 2015 SDM 100. Highly Competitive and Fragmented Security Monitoring Market 16 Interface Security Systems, LLC 2015
Business Strategy 17 Interface Security Systems, LLC 2015
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 2020 33% 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 2020 19% compound annual growth rate Projecting greater demand for VSaaS 18 Interface Security Systems, LLC 2015
National Account Growth Installed $2.1 million of net new national account RMR YTD Q3 2015 76% of total company RMR and 94% of sold RMR is from national accounts pipeline National accounts with IP bundle attrition was 4.1% during YTD Q3 2015 target attrition of 4-5% National account sales initiatives are driving consistent and substantial RMR growth - over 40% annual growth since 2011 and expected growth rates of 20%+ for 2016 to 2018 Ending National Account RMR ($ in thousands) $10.0 100% $8.0 $7.7 $6.0 $4.0 $2.4 $4.3 63% $4.8 64% $5.9 70% 76% 80% 60% $2.0 $- 48% 2011A 2012A 2013A 2014A 3Q15A 40% National Account RMR National Account RMR as % of Total National account sales initiatives are driving consistent and substantial RMR growth 19 Interface Security Systems, LLC 2015
Sustainable Core Growth from Existing Customers Existing customers provide a significant growth channel through both new store location openings and service upgrades Most of the Company s national accounts are expecting continued net new store growth The new store sales from existing customers will continue to grow faster than attrition creating a bigger net positive annual contribution over time ($ in thousands) $900 RMR from Existing Customers vs. Attrition $800 $810 $833 $700 $759 $733 $600 YTD 9/30/15 Annualized Existing Customer RMR Creation Q3 '15 Annualized Net Attrition Stable, Sustainable Growth from Existing Customer Base More Than Offsets Attrition Before Any New Sales RMR Contribution from the Company s Sales Force 20 Interface Security Systems, LLC 2015
National Partnership Selling Ecosystem Driving Growth.and 690+ other local service providers Select Partnership Awards and Recognition Honeywell Dealer of the Year (Dec 2014) CradlePoint Partner of the Year (Feb 2015) Cisco Systems Partner Summit notable Deal of the Year (Mar 2015) Star2Star Partner of the Year (Mar 2015) Three-peat Channel Partner 360 Business Value Award winner (Mar 2013, 2014, and 2015) Recognizes solution providers that create business value for their customers taking a holistic approach to technology solutions One of the largest Verizon Wireless Partner in North America (2015) 21 Interface Security Systems, LLC 2015
Financial Overview 22 Interface Security Systems, LLC 2015
Financial Overview Total Revenue RMR ($ in millions) ($ in millions) CAGR: 18% CAGR: 24% $87.4 $110.4 $126.7 $122.8 $148.4 $6.9 $7.5 $8.4 $10.1 $67.3 $4.9 $3.6 ($ in millions) 2010 2011 2012 2013 2014 3Q15 LQA New RMR 2010 2011 2012 2013 2014 3Q15 * 2010 through 2013 PF for $0.9M of sold Hawk Residential RMR. ($ in millions) RMR with Backlog $2.9 $11.8 $1.1 $1.8 $1.2 $1.5 $1.8 $3.6 $4.9 $6.9 $7.5 $8.4 2010 2011 2012 2013 2014 3Q15 YTDA 2010 2011 2012 2013 2014 3Q15* * Includes $1.7M of contracted backlog. 23 Interface Security Systems, LLC 2015
Summary of Key Company Attributes Leader in Monitored and Managed Network, Physical Security and Business Intelligence Services High ARPU Bundled Service Customers Exceptionally Low Attrition New Sales from Existing Customers Exceeds Attrition Replacement Low Subscriber Acquisition Costs Established Blue Chip Customer Base High Growth - Significant Contracted Backlog and Pipeline Proprietary Technology Platform Sales, Installation, Service and Monitoring Strong Financial Profile Experienced Management Team 24 Interface Security Systems, LLC 2015
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