By Robert Kraft, Editor-in-Chief - StockNewsNow.com
Security and security procedures are woven into the fabric of our society. Whether it’s making sure our loved ones are protected in the calm of night, or our children are in a safe and protected environment so as to focus on their studies. Over the last few years, there have been (too) many incidents that are too close to home: at our schools, movie theaters; at institutions that pride themselves on providing a safe place for individuals to conduct their business.
Thankfully, according to the Bureau of Justice Statistics, in a study that surveying Household Burglary from 1994-2011, “The rate of household burglary decreased 56% from 1994 to 2011, from a peak of 63.4 victimizations per 1,000 U.S. households in 1994 to 27.6 victimizations per 1,000 households in 2011” (Source: Household Burglary, 1994-2011). However, when it comes to purchasing security systems with alarms and proper locks, for many new homeowners and individuals who own multiple properties, we want (need) to make sure our homes/investments are protected. Furthermore, although these numbers are down, burglars are becoming smarter and more tech-savvy. Take a look at the recent cyber-security has been a national topic for quite some time since the Sony hack late last year (and continues to be).
I spoke with Richard Soloway, CEO and President of NAPCO Security Technologies, Inc. (NASDAQ: NSSC) to discuss security, how NAPCO, for over 35 years, has been delivering security solutions globally, and keeping up with new technology innovations.
Stock News Now: Richard, thank you for taking the time to answer a few questions. Let’s start with an overview of NAPCO Security Technologies.
RS: NAPCO Security Technologies is one of the world’s most diversified security companies, which is divided into four major divisions: NAPCO Intrusion, Connected Home and Life Safety; Alarm Lock Access Control Locking Systems; Continental Enterprise Class Access Control & Surveillance; and Mark’s Super-Premium Architectural Hardware. NAPCO competes in a vast array of markets and product categories, and fields major entries in the Connected Home, Wireless Alarm Communicator, Intrusion & Fire Control Systems, Enterprise Access Control and Surveillance Systems Hardware and Software, Standalone and Wireless Access Control Locking Systems and Architectural Locking Hardware and Exit Devices.
Our major philosophy, from a new product development standpoint, when entering a category is to always field a superior product with a tangible point of difference. As an example, our StarLink Wireless Alarm Communicators have super-optimized antenna technology, which makes them communicate more effectively in problem areas, versus our competitors.
Additionally, several years ago, NAPCO began to enter markets which delivered a recurring revenue service component to the Company. We realized subscription-based products would position us well in driving consistent profitable growth. iBridge Connected Home Services, iSee Video Remote Video Monitoring, Starlink Alarm Monitoring Service and even Continental Access Control are all businesses for us to continue to generate quickly growing service revenue for us.
Stock News Now: When we spoke on the phone, you mentioned that you are the only company in the security industry that sells products to all three of the following verticals: Alarms & Connectivity, Locking and Access Control & Surveillance. Can you elaborate on this?
RS: It all begins with our engineering base of technologies, all invented and owned by NAPCO. Because of our heritage and tenure in the industry, we are experts in dozens of areas, such as passive infrared detection, proprietary local wireless communication, addressable fire and intrusion technology, cellular communication, low power-consumption circuitry, IP communication, mechanical locking, systems networking software, Z-Wave and the list goes on and on. All of our competitors may have expertise in some of these technologies, but no one possesses the diversity we have. For example, we have three major locking companies with considerable capabilities in locking technology we compete against, but none of those have any intrusion, fire or enterprise-class access control entries in the marketplace.
Another facet unique to NAPCO is we have managed to combine technologies very successfully. For instance, Alarm Lock Access Control Locking is the leader in its category, because we combined our substantial knowledge of all things mechanical, along with our electronics and low-power consumption technologies. This yielded a superior product offering. Additionally, we went on to introduce our considerable wireless expertise, creating a wireless access control lock-based product called Networx, which has been a resounding success.
Finally, with the introduction of iSee Video about five years ago, we were one of the first security companies to launch an IP-based product entry. Recognizing IP is the future, we were one of the first to considerably augment our engineering resource in this area.
Stock News Now: Because you serve three different verticals, you don’t have one direct competitor – but you do have competitors in each?
RS: Yes, absolutely, but we have certain advantages over our competitors. End-user customers in a variety of vertical markets, health care, education, government, business, are all screaming for integration of systems. Particularly since most home and business control systems of any kind are networked. Some of our locking competition can offer hardware, but they have a tougher time providing a school, for instance, with a networked solution. Also, some of our networked access control and intrusion competitors do a great job of networking the same school with access control and intrusion, but they have absolutely no locking technology to offer.
For instance, we just launched a multi-faceted product called ArchiTech, which combines architecturally pleasing locks, in hundreds of designs, with our wireless access control technology and made it work seamlessly within a networked, enterprise-class environment. We are the only company providing a product, which integrates all of these capabilities and end-user solutions, all under one roof.
Stock News Now: Tell us more about your customer base – a 10,000+ re-seller dealer network. How does the sales process work?
RS: We have a dedicated sales force for each Division, which sells to their respective channel. The NAPCO Division sells to alarm, fire and connected home automation dealers. Continental sells primarily to system integrators and also interacts a great deal with end-users, in providing the optimal solutions. Alarm Lock sells to contract hardware and locking professionals, along with system integrators. And Marks targets contract hardware and locking dealers. Both Alarm Lock and Marks spend a considerable amount of time and effort in working with end-user customers, such as schools or hospitals, to professionally equip their needs. Uniquely, all of our sales efforts are driven by arriving at the right solution for the eventual customer. And with the integration of our systems you’ll find a high level of cross-selling products across divisions.
Stock News Now: How does the company keep up with the rapidly changing technology environment? For instance, does the company sell wireless products?
RS: There is quite a bit of cross-pollination within our Engineering department, among technologies and disciplines and we find this leads to quite a lot of innovative thinking. As I mentioned before, we were among the first companies to introduce an IP-based video viewing product, iSee Video, which gave us a head start on the Connected Home front.
Yes, in 1997 we pioneered a local wireless intrusion system with wireless transmitters and devices you could just install around the home or business, and it remains the highest performing wireless alarm system on the market today because of its crystal-controlled transmission technology. We were also among the first to launch a wireless access-control locking system, Alarm Lock Networx, in 2013. Also, if we’re talking about long-range wireless communicators, the kind which transmit alarm signals, our StarLink Alarm Communicators are among the fastest growing in the industry and are generating accelerating levels of monthly reoccurring revenue for NAPCO.
Stock News Now: We also touched on the concept, “Internet of Things” – is the company developing product with this in mind?
RS: We have been innovators in this area, having launched iSee Video in 2010, a product which enabled consumers to see their homes or businesses, via the internet, on their smartphones or computers.
We took the lead in IoT, and about two years ago launched iBridge Connected Home, which enables consumers to control their security systems, lighting, locking, video cameras, thermostats and small appliances, remotely, via smart phones, tablets or PCs. The system can also run scenes, so as an example; a user can come home and on a single app command, unlock the front door, turn off the alarm system, adjust the thermostat, bring up the lights and brew some coffee. The system can also send a text message and/or email, called iBridge Messenger, notifying the user of any and every event which happens at the home or place of business. iBridge is unique versus other IoT notification systems as we can embed a video clip in the text notification. This comes in handy when, let’s say, your pool gate is opened, while you’re away from home. It’s great to just get a text notification, but the consumer’s next question is typically, “Who just opened it?” Our system embeds a video clip, so the user can tell if it was a child or just the lawn service. The iBridge Connected Home and Business System also generates accelerating monthly reoccurring revenues for NAPCO.
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Stock News Now: According to Yahoo Finance, the Security and Protection Services Industry is worth approximately $45 Billion. How does the company continue to gain market share?
RS: By continuing to engineer and market unique solutions for both residential and commercial audiences that provide a superior value in the marketplace. NAPCO has also targeted vibrant and growing vertical markets with its new product lines. Examples of these would be the Connected Home and Business, Health Care, Education, Government, Alarm Communications and Commercial Fire, Intrusion and Life Safety.
Stock News Now: As smart phones replace plain old telephone lines are your products more or less in demand?
RS: A great deal of our growth is driven by the continuing obsolescence of POTS lines and the advent of mobile devices and IP communication. As an example, our StarLink Cellular Alarm Communicators, which generates reoccurring revenues for us and our dealers, are sold and installed by our dealers, anytime a traditional telephone line is not available for alarm communication. In fact, most alarm dealers today are installing alarms with wireless communicators, even if a phone line is present, in order to future-proof the installation and to avoid a service call in the future when the inevitable happens.
Additionally, our current line of Starlink Alarm Communicators works on the 3G/4G and CDMA wireless networks. We are experiencing good sales growth as dealers are in the process of replacing 2G communicators, which face a sunset in 2017, with our more advanced StarLink product.
Finally, we see a huge opportunity with the discontinuance of POTS lines in the commercial fire area. NAPCO is currently in the process of launching a complete line of StarLink Commercial Fire Wireless Communicators with U.L. certification. The wave of replacing the millions of commercial fire systems still out there which currently communicate with a traditional telephone line, with a cellular communicator is just beginning.
Stock News Now: Can you explain your future growth outside the U.S.?
RS: We see tremendous opportunity in two major areas globally for NAPCO. Number one is the enterprise-class access control market, with our Continental Division, which can integrate access control globally, in most cases. We provide access control to several Fortune 500 companies and they are continually integrating their systems across an increasing number of countries. This also provides us with a great list of international references with which to penetrate international markets.
Also, iBridge Connected Home has the potential to grow globally as many international markets have higher IP and smartphone household penetration than we have here in the U.S. IBridge also gives us an international opportunity to grow profitability going forward, as many international traditional intrusion alarm markets have been commoditized, making them too focused on price.
Stock News Now: School shootings, unfortunately, have been in the news a lot over the last few years. Does NAPCO have any product that addresses School Security?
RS: These unfortunate incidents happen all too frequently. All of our Company’s divisions have superior education vertical solutions to control active-shooter style incidents. From key fobs which enable a teacher to lock-down multiple classroom doors with the touch of a button to centralized access control systems which enable total campus lockdown within seconds. However, our Company took a more active and I think progressive role in helping to provide and empower the staff to keep the schools safer and possibly to control aspects of these events.
NAPCO wrote a white paper after interviewing dozens of school security experts across the country and put together an unbiased approach to enhancing security against these kinds of incidents. The white paper recommends several courses of action, but the main invention, which came out of our collaboration within the security industry was the creation of the S.A.V.I. (School Access-Control Vulnerability Index) Index, Audit and Certification Process.
The S.A.V.I. Index is comprised of a report card, which outlines all of the school-specific security systems and features a school needs to have in place to limit and possibly prevent an active shooter event. It is a holistic approach to school security and encompasses the need for everything from bullet-proof glass, to ID checking vestibules to simple locks which can be locked from the inside of the classroom by the teacher and so on. NAPCO trains its dealers across all divisions to approach schools and administer what is called a S.A.V.I. Audit. In a digital file the dealer enters the present or lack of security features and systems at the school. The model then generates a grade, or a S.A.V.I. Index. Schools are encouraged to score 75% or better, to demonstrate a high level of controlling access from a potential intruder. The S.A.V.I. system guarantees no less than four access control points to be present between the main entrance and a person reaching a classroom. After the score is determined, the dealer then recommends the installation of systems and/or even the change of construction in the building, such as the addition of a security vestibule.
The progressive part of S.A.V.I. is it objectively empowers our dealers to act as specialized school security consultants and to truly solve the school security problem, not just push whatever solution they happen to be selling. We have trained hundreds of our dealers in S.A.V.I. and are in the process of spreading the word as we want this to become an industry-wide approach to school security.
Stock News Now: What is your background?
RS: I have 30+ years of experience in the international security industry. I am a global expert and counselor in security trends and issues including domestic and institutional security breaches leading to human injury and loss of life, kidnapping, loss of property, as well as robberies, burglaries, terrorism and espionage. I am the Founder, Chairman of the Board and CEO of NAPCO Security Technologies, Inc., (Nasdaq: NSSC); a worldwide leader in patented electronic and mechanical security system design and manufacturing.
My experience in innovative development of security and surveillance technology spans from the New York City Lindsay administration, when the predecessor company to NAPCO I also founded, provided a customized security system integrating proprietary technology and available manpower for teachers in the New York City School System. I have been honored with numerous awards, among them being the ‘Champion for Safety Through Education,’ awarded by the Guardian Angels and as winner of the Ernst & Young ‘Entrepreneur of the Year’, awarded by CNN, USA Today, and NASDAQ.
I have always had a passion for creating electronic products and began designing and manufacturing electronic sound and light equipment for rock bands in the late 1960’s for such notable artists as Eric Clapton, Jim Morrison, Jimi Hendrix, and The Monkees.
In the early 1970’s, I identified a growing need for commercial and residential security, and in 1972, founded NAPCO Security Technologies, Inc., as a public company (NASDAQ: NSSC) on Long Island, New York, which today employs more than 1,000 employees worldwide.
For more information about Napco Security Technologies, Inc., go to: www.NapcoSecurity.com
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