The SDM Industry Forecast Panel: 2022

The Panel Talks Revenue Expectations for 2022

SDM: What is your revenue forecast/expectation for 2022? What one factor do you feel will most significantly affect sales of security systems by your company next year?

Becker: We are forecasting total revenue in 2022 will increase by 8 to 9 percent over 2021. We are growing our staff in a tight labor market. We have so much to offer, and as we expand our geographical territory, we continue to explain and train the ADS way of delivering great customer experiences.

Smith: Due to a number of factors, we expect total revenue to increase by 25 to 35 percent in 2022 compared to 2021. If I am narrowing this down to one and assuming demand in this economy remains strong, the most important factor impacting our sales will be internal — our ability to execute our strategy.

Boulgarides: We are projecting 5 percent top-line growth and 20 percent growth in our managed services business. Since we are a Los Angeles-based business, continued progress with vaccinations and COVID-19 levels is critical to us. We really need to see the reopening of business and folks returning to work. A backslide on the COVID front would be a problem.

Oliveri: This is hard to predict; however, if supply chain improves, we anticipate revenue growth in 2022.

The Panel Talks Ongoing COVID-19 Impacts

SDM: What has been the impact of the ongoing pandemic to your business? Have things gotten back to normal or are you still having issues such as supply chain problems or customers not going forward with projects?

Oliveri: The greatest impact of the ongoing pandemic remains with supply chain. All of our manufacturers continue to struggle with material delays, which in turn delays our ability to complete projects, which creates inefficiency with our labor — including design, engineering, installation, and support resources. Project delays and labor inefficiencies are having an adverse impact on margins. We continue to see more client vaccine requirements, which puts greater stress on our workforce as some of our employees are choosing not to get vaccinated.  

Becker: We have had back-to-back years of solid performance despite the pandemic. With the uncertainty that existed in early 2020 and continues today, our team has risen to the occasion and delivered our customers the excellent service they have come to expect.

We see ourselves as a service organization, and we go to great lengths to ensure our customers have a great experience. Therefore, I would say we did better than expected by capitalizing on this value proposition. Our customers understood the stability and quality of our service and trusted that we would be here at a high level to solve their needs.

Boulgarides: We are still seeing issues with supply chain and surcharges on equipment. Many orders are pushing into 2022. The adoption of cloud and remotely managed system and services gained a lot of traction in 2021. As more and more people are working remotely, being able to access their security and all aspects of their program remotely is critical for our customers. I do not see this slowing down in 2022.

Smith: We have dealt with supply chain issues sporadically only over the past six months or so and most have been short lived for us. Our team has planned well for inventory shortages and we have been keeping a keen eye on that particular issue while staving off most if not all shortages.

Throughout the pandemic and everything in its wake, we have experienced unprecedented demand for all our products and services. With some demand possibly linked to the pandemic itself, most has been related to robust growth in the economy that was present pre-COVID, then pent-up demand from release from lockdowns provided another jolt. The pandemic has directly and indirectly contributed to a change in the landscape of competitors, clients, and client-requested solutions, which have all been positive for us. We have experienced some negative aspects from the pandemic not unique to us that have impacted our company as well, but overall minor comparatively.

The Panel Talks RMR

SDM: How did your company’s 2021 recurring monthly revenue (RMR) change compared with 2020? And how do you expect 2022 RMR will change compared with 2021? Have you increased any service-based offerings such as managed or hosted access or video?

Smith: 2021 was a good year for organic RMR growth at Fortress and was steady as compared to 2020. If we execute our strategy well it is our expectation that we’ll have another great year with gross RMR gains of over 20 percent.

Cloud services for access systems is beginning to grow at an accelerated pace, with cloud video maintaining a steady growth. Over the past year, we have seen an increase in the velocity of acceptance of cloud services, especially for access systems, whereas a few years ago we received quite a bit of resistance to pay for those monthly services, with most clients requesting a stand-alone system. We offer cloud services for access and video on every proposal and expect this area of RMR to continue to grow.

Becker: Our recurring monthly revenue in 2021 is expected to be 5 percent higher than in 2020; in 2022, RMR is expected to increase by roughly 7 to 8 percent compared to 2021.

Oliveri: RMR in 2021 increased, primarily by our continued increase in CTSI Subscription Services, which enable our customers to consume technology on a monthly Op-Ex subscription versus one-time Cap-Ex. Demand for subscription continues to increase, which increases our RMR forecast for 2022; however, this growth is also paced by supply chain.

Boulgarides: We had a great year from an RMR standpoint. We expect to see similar if not greater growth in 2022. We are all-in on managed services and systems. In Q4, we have inked deals with multiple manufacturing partners that touch robotics, weapons detection, identity management, and other offerings.

The Panel Talks Opportunities for 2022

SDM: What are the biggest growth opportunities you see for your business in 2022?

Smith: Generally, the commercial space will still be our No. 1 area of growth and more specifically in fire alarm and access control systems.

Boulgarides: We are focused on being a holistic security provider. We provide the greatest benefit to our customers in that existing space between security systems and security personnel. We allow companies to leverage their security systems to augment and/or reduce their existing staff. This provides a lot of value for our customers as more work is being done remotely and they can access their security program from any device, anytime, anywhere.

Oliveri: We see subscription services as our largest growth opportunity in 2022.

Becker: First, we are targeting acquisitions more aggressively than we have in the last few years. We have put together a team whose focus is to identify and analyze deals. Second, we are investing a lot in growing our organic sales organization by adding new teams in our residential and commercial groups to cover more ground in our market areas.

We are a full-service company, from residential and small commercial to large enterprise systems. While we certainly provide a wide breadth of solutions from video to access control, to fire alarms, our growth has come from strategically targeting vertical markets where we are strong. From financial services, property management, and marijuana companies, our focus has been to integrate multiple products and services into key markets.

Podcast

SDM spoke with three of our panelists — Louis Boulgarides, Amy Becker, and Joe Oliveri — about three of the most talked-about issues recently: supply chain shortages, the “great resignation,” and mergers and acquisitions.  

The Panel Talks Competition

SDM: What or who do you view as your company’s greatest competition in 2022?

Smith: I’m always happy to see ADT do well because their strength is to our benefit in a lot of ways. Our greatest competition will come from small or regional players in our markets who can compete with us in experience, talent, speed, and price. We enjoy a nice advantage as a moderately sized company in a huge Texas market, so another one of our greatest challenges will be to maintain our forecasted headcount or reports to managers and meet our hiring goals to fulfill our sales, installation, and service quotas.

Becker: We are beginning the next 50 years of our company with a new management structure. ADS created the position of chief operating officer this year, and I am now filling that role. With this transition, we plan to examine the business with fresh eyes to improve every area and be even better than we have been for the last 50-plus years. We are our own greatest competition.

Oliveri: Supply chain, labor capacity, and vaccine mandates.

Boulgarides: The consolidation of security system companies presents both an opportunity and a threat. As one of the last large regional integrators in the greater Los Angeles area, we provide a more hands-on experience for our customers — but we do not have the resources of some of the national players.