Imperial Capital Security Investor Conference Company ... Interface - Imperial Capital... · Security Investor Conference Company Presentation . ... American market for IP video surveillance

Interface Security Systems Holdings, Inc.

December 11, 2014

Imperial Capital

Security Investor Conference

Company Presentation

2 Interface Security Systems ® 2014

Interface at a Glance

• Founded in 1995

• Recognized leader and pioneer 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 PCI

Compliant Nationwide Secure Broadband Network

• Real time monitoring of these cloud-based security

services

• Headquarters in St. Louis, MO

~700 employees and ~76,300 customer sites

• SunTx Capital Partners owns ~88% of the voting power

of the Company

• $7.8 million RMR as of September 2014; $2.5 million of installable RMR in contracted backlog

• $88.6 million total revenue for the nine months ended September 30, 2014 and $126.7 million

for the year ended December 2013

• 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


Michael Shaw: CEO

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: COO

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: CFO

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: Executive Vice President – Sales

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 since 2012

Experienced Senior Management Team

4 Interface Security Systems ®

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 registration statement on Form S-4 declared

effective by the Securities and Exchange Commission on July 30, 2014.


Company Profile

Secure Managed

Broadband

PCI

Compliance

Managed

Digital Voice

Physical Security Secured Network

Managed

Wireless Networks

Fire/Life

Safety Systems

Interactive Video

Surveillance

Alarm/Event

Monitoring

Managed

Access Control

• 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

• 70% of revenue is contracted RMR

• ARPU of $102.08 – up over 28% year over year

• Industry leading attrition rates

Interface is a leading national provider of physical security and secured network

services to primarily large, commercial multi-site customers


2001 2007 2008 2010 2011 2006 2009 2012 2013

SunTx

acquisition

Acquired Loss

Prevention

Management:

resulted in the

integration of

Secure Managed

Broadband

platform and ISS

Monitoring Center

Raised $115

million in

Senior

Contingent

Cash Pay

Notes in

private

markets

Completed

installation

of 10,000+

Dollar

General

Stores

Created first to

market IP

Managed Service

Provider in

convergence of

physical security

and secured

network services

Expanded

to CA, TX

and upper/

lower MI

with key

acquisitions

Added

$2.5MM of

net new

RMR

Added

Michael’s

Stores and

Dollar General

to Customer

Base

Certification as

Cisco Managed

Service Channel

Partner

Acquired Westec

the leading

provider of remote

interactive video

monitoring

Raised $230

million in

Senior

Secured Notes

in public

markets

2014

Company History

Focus on continuing to scale the business


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 (via

smartphone, tablet or PC) with real-time updates and

remote-control

GSM wireless transmission as both primary 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


Secure Managed Broadband “SMB”

Interface has adopted its life safety / emergency response culture and has applied the same

quality of service and level of urgency in monitoring SMB

Private, closed-loop secured network infrastructure

Custom configured on a store level and national scale

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

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


Digital Witness Interactive Video

Proprietary video surveillance technology - allows for

remote event-based monitoring

Offered through Westec acquisition (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


Top National Vertical Penetration Rate

Interface

monitors over

one million

devices across

North America

and responds to

more than three

million events

every year.

Retail

Jewelry

Quick Service

Restaurant

Casual

Dining

Lodging/

Hospitality

5 of the Top 10 Jewelry Retailers

5 of the Top 15 Largest Retailers

8 of the Top 10 QSRs

7 of the Top 10 Dine-In Restaurants

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)


Nationwide coverage through regional service centers, field technicians and partner

networks allows Interface to serve over 76,000 customer sites

St. Louis, MO

Data Center Regional Service Center Field Technicians SOC/NOC

Dallas, TX

Salt Lake City, UT

Sales and Service Coverage

Atlanta, GA


Bundled service offering leads to higher than industry ARPU and low attrition rates

Historical Average Net Attrition

ARPU of $102.08

$139.27 for commercial customers

$30.66 for residential customers

Average net attrition rate of 9.1%

Lower residential attrition due to 1Q14 Hawk

Sale

Reduce exposure to attrition

National account customers with IP Managed

Services at 7.0% attrition rate for 3Q14

ARPU

RMR – Commercial vs. Residential

($ in millions)

ARPU and RMR

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

2009 2010 2011 2012 2013 3Q14

Commercial Accounts Residential Accounts

$2.3 $2.9

$4.1

$6.1 $6.7 $7.0

$1.6 $1.6

$1.7

$1.7 $1.7 $0.8

59.3% 63.5%70.3%

77.8% 79.8%89.7%

10.0%

100.0%

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

2009 2010 2011 2012 2013 3Q14

Commercial Accounts Residential Accounts % of RMR - Commercial

8.5%9.4%

8.2% 8.4%10.0%

9.1%

0.0%

4.0%

8.0%

12.0%

2009 2010 2011 2012 2013 3Q14


Industry Overview


Highly Competitive and Fragmented Security Monitoring Market

Rank

RMR

12/31/13 Avg. RMR

Gross

Revenue 2013

2013 Company Location ($ mm) Subscribers per Sub FTEs ($ mm)

1 ADT Boca Raton, FL $253.4 6,428,266 39.42$ 16,000 $3,378.4

2 Tyco Integrated Security Boca Raton, FL 63 500,000 125.00 10,000 3,891.0

3 Stanley Convergent Security Indianapolic, IN 54.2 550,000 98.55 8,300 1,260.0

4 Monitronics International Dallas, TX 42.8 1,046,155 40.91 1,100 451.0

5 Vivint Inc. Provo, UT 42.2 801,773 52.63 2,546 500.9

6 Protection 1 Remoeoville, Il 28.0 1,500,000 18.67 2,743 429.6

7 Slomins Inc. Hicksville, NY 17.4 302,358 57.55 670 314.1

8 Diebold Security Untiontown, OH 13.8 200,000 69.00 0 2,857.0

9 Vector Security Inc. Pittsburgh, PA 13.5 285,077 47.36 0 256.2

10 Guardian Alarm Company Warrendale, PA 11.5 278,736 41.26 929 158.3

11 ASG Security Beltsville, MD 8.8 218,361 40.30 1,090 132.6

12 Interface Security Systems Holdings Earth City, MO 8.4 103,692 81.01 842 126.7

13 Bay Alarm Company Pacheco, CA 7.8 119,622 65.21 687 112.0

14 Central Security Group Inc. Tulsa, OK 6.3 195,645 32.20 380 74.3

15 Protect America Inc. Austin, TX 6.1 158,854 38.40 389 70.2

16 Security Systems Inc. Cromwell, CT 5.7 150,329 37.92 196 60.0

17 Alarm Capital Alliance Newtown Square, PA 5.0 145,411 34.39 420 59.0

18 Guardian Alarm Company Sounthfield, MI 4.9 116,500 42.06 441 85.6

19 CPI Security Systems, Inc. Charlotte, NC 4.7 111,760 42.05 448 61.9

20 Kastle Systems Falls Chruch, VA 4.5 n/a n/a 0 74.0

Security Monitoring Market

Top Security Monitoring Companies


Business Strategy


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

Large Video Market Growth Opportunity


National account sales initiatives are driving consistent and substantial RMR growth

Nationwide presence through 16 regional service centers

Nationally distributed sales team

Steady growth in RMR at historical investment levels with year-on year increases in monitoring and

managed service revenues

~ 67% of total company RMR is from national account customers

Ending National Account RMR ($ in thousands)

CAGR: 66%

* Includes $2.5M of national account contracted backlog.

Strong National Account Growth

$1,143

$2,292

$4,341$4,817

$7,726

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

2010 2011 2012 2013 3Q14*


National Partnership Ecosystem Driving Growth

….and 400+ other local service providers

®


Financial Overview


Financial Overview

CAGR: 15%

($ in millions) ($ in millions)

($ in millions)

CAGR: 14%

($ in millions)

$3.9 $4.5

$5.8

$7.8 $8.4

$10.3

2009 2010 2011 2012 2013 2014LQA*

* Includes $2.5M of contracted backlog.

$0.7

$1.1

$1.8

$1.2

$1.5

$1.8

2009 2010 2011 2012 2013 P 2014

* Includes $0.9M of sold Residential RMR.

$67.5 $67.3

$87.4

$110.4

$126.7 $129.6

2009 2010 2011 2012 2013 2014 LQA

$3.9 $4.5

$5.8

$7.8 $8.4

$7.8

2009 2010 2011 2012 2013 2014 LQA

Total Revenue RMR

New RMR RMR with Backlog


Summary of Key Company Attributes

Operating Model Creates “Stickier” Customers

Established Blue Chip Customer Base

Significant Contracted Backlog and Pipeline

Experienced Management Team

Leader In Bundled Physical Security and Secured Network Services

High ARPU Customers with Low Creation Costs

Strong Financial Profile

Total Managed IP Technology Solution

Documents

Imperial Capital Security Investor Conference Company ... Interface - Imperial Capital... · Security Investor Conference Company Presentation . ... American market for IP video surveillance