DVTEL, Inc - Experts & Thought Leaders

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Imperial Capital estimates DVTEL has revenues of $35 to $45 million, growing at well over 10 percent annually On 30th November 2015, FLIR Systems announced it acquired DVTEL Inc., a provider of enterprise-class security and video surveillance solutions, for $92 million in cash. Commenting on the transaction, Imperial Capital views the announcement very positively. DVTEL is a leader in software and hardware technologies for advanced video surveillance. Imperial Capital estimates the company has revenues of $35 to $45 million, growing at well over 10 percent annually. Therefore, the price FLIR is paying for a highly-regarded industry technology and full solutions leader, at about 2x revenue, is not high, according to Imperial Capital. The following additional commentary on the FLIR/DVTEL deal is provided by Jeff Kessler and Saliq Khan of Imperial Capital. View We are maintaining our Outperform rating and our one-year price target of $40 on FLIR shares; our price target is about 30% above the recent share price. Many may still consider FLIR as just a premier provider of very high-end cameras in the bellies of Bell Helicopters in a very uncertain government sector. However, this 35-year-old company is a global leader in thousands of infrared detector cores and thermography equipment markets and also provides lower-priced products to the commercial and consumer security customers as well as other customers (e.g., automotive, boating, Original Equipment Manufacturers [OEM], smart grid.) Rationale DVTEL is a privately-held company and, though its brand may not be as well-known as other companies, its technology and industry vision has always been at the industry forefront, and it has won many product awards. DVTEL develops true broad-based video solutions, for large companies such as Google, mainly for the enterprise level market, but the company’s medium business solutions include: Open platform for other camera manufacturers; A highly rated “Latitude” Network Video Management System (NVMS); A full set of video analytics developed through its acquisition of ioimage in 2010, one of the strongest analytics suites on the market; Cameras, encoders and video analytics. DVTEL developed an industry-firstmobile video application that turnsmobile smartphones intofull-featured IP video surveillancecameras DVTEL has developed many cutting edge products over time that remain innovative, but under FLIR could be marketed and commercialised with a strong brand behind them, particularly because FLIR is an industry leader in providing cloud-based services in which customers can view and manage each of their site installations, gain access system health reports, receive email alerts upon system status changes, etc., allowing end users to detect and cope with problems before they occur, saving time, money and on-site visits. Storage and transmission improvements DVTEL developed an industry-first mobile video application that turns mobile smartphones into full-featured IP video surveillance cameras that stream video into DVTEL’s Latitude Network Video Management System. [They are a] leader in the new group of 4K super high definition cameras that can be used for gaining four times the evidentiary detail with minimal impact to storage costs, relative to the older standard 1080 pixel, that can drastically improve the stability, range, and detail of video images for evidence. Meanwhile, DVTEL is developing storage and transmissions improvements to keep both bandwidth and cost issues in line. Mixing strengths and weaknesses DVTEL’s technology and solution focus is “cool,” but there are additional reasons supporting our positive view on the new acquisition. There are several strategic fits of mixing strength and fixing weaknesses in acquiring DVTEL: The acquisition of DVTEL is a directchallenge to the integration communityto now take a full solution from FLIRseriously FLIR has already demonstrated it knows how to integrate video acquisitions, such as the October 2012 acquisition of Lorex Technology, which take up the low and medium end of video cameras and total video solutions.   Right now, FLIR is still known in the security industry as a high quality niche participant in thermal infrared imaging for specialty purposes, even though its generation security camera offerings have garnered wards of their own. The company is now known as a full video solutions provider, which is what Canon is trying to do with its recent acquisitions of Axis Communications (cameras) and Milestone Systems (VMS).  The acquisition of DVTEL allows FLIR to become a major participant in the full solutions market, by already being a significant and respected manufacturer of cameras, and core miniaturisation, along with thermal technology and a developing hybrid visible light/thermal capability.   DVTEL brings FLIR a very high technology capability analytics (something that FLIR has been stressing in all its trade show and security conference meetings and in meetings with investors), as well as a well-respected VMS.   DVTEL brings a true open system capability to FLIR with a wider range of SDKs (software development kit) than even FLIR has.   Despite some major successes in the last couple of years, DVTEL still lacks a big brand name and has little impact in the consumer and small and medium business (SMB) space, where FLIR has made a big impact with its acquisition of Lorex Technology.   The acquisition of DVTEL is a direct challenge to the integration community to now take a full solution from FLIR seriously, as the other major North American choice has had some controversial management moves. Whether or not FLIR can challenge the full solution being put together (albeit with declared strong “Chinese Walls”) of Canon Inc., Axis Communications and Milestone Systems has yet to be seen. We still believe the low-cost camera arena is increasingly being dominated the large Chinese manufacturers, who may eventually get smarter about offering more open, better full video solutions However, our understanding is that there may be some resistance by end-customers to Asian video analytics solutions at the SMB and Enterprise level of the security industry. Jeffrey KesslerInstitutional ResearchImperial Capital Saliq KhanVice President of Institutional ResearchImperial Capital

The acquisition of DVTEL will allow FLIRto offer differentiated and highlyaccurate perimiter security solutions  FLIR Systems, Inc., announced that it has acquired DVTEL, Inc. ("DVTEL"), a leader in software and hardware technologies for advanced video surveillance, for approximately $92 million in cash. Expanding business operations DVTEL, based in Ridgefield Park, New Jersey, is a global leader in enterprise-class security and surveillance solutions. The company develops and distributes integrated video management system (VMS) software, advanced video analytics software, visible and thermal security cameras, and related servers and encoders. The combination enables FLIR, with its existing FLIR-branded thermal and visible cameras as well as its Lorex-branded security systems, to be a full-spectrum end-to-end security system provider, serving the consumer, small and medium business, enterprise, and infrastructure-level markets.FLIR - full-spectrum end-to-end security system provider "FLIR's strong position in thermal imaging together with DVTEL's extensive video analytics and VMS capability will position us well to offer differentiated and highly accurate perimeter security solutions for the upper corner of our Security segment's product value ladder," said Andy Teich, President and CEO of FLIR. "DVTEL adds a suite of professional-grade security software and hardware that is very complementary to our current solutions and fits very well with our strategy to offer end-to-end solutions in the enterprise and infrastructure segments of the security market." FLIR anticipates this transaction will be neutral to 2015 net earnings and accretive thereafter. The acquisition of DVTEL will allow FLIR to offer differentiated and highly accurate perimeter security solutions

I have been unpacking from last week’s ASIS show in Orlando. It was a good show, except if you compare it to last spring’s ISC West in Las Vegas, which was especially well attended and generated a lot of excitement in the market. ASIS was definitely smaller, lower key and less crowded. And there were no big product announcements. But there was still plenty of technology on display. In particular, I saw the show reflecting several ongoing trends in the market. Impact of M&As Mergers and acquisitions have been big news in the security market for the last year or two, and there was evidence at ASIS of how M&As are changing the market. For example, Axis Communications, now owned by Japanese giant Canon, is taking over the marketing of Canon’s small (by comparison) selection of video surveillance equipment. Thus ends (quietly) one of the big questions in the market: Why would a company like Canon want to compete against itself? Even more reflective of the changing Canon/Axis world is a new 20-megapixel camera highlighted at ASIS. It was developed through cooperation by the two companies, with Canon providing the lenses and Axis providing the rest of the camera, including image processing. It’s being positioned as an opportunity to combine the best capabilities of both companies. Mergers and acquisitions have been big news in the security market for the last year or two, and there was evidence at ASIS M&As changing the market Vanderbilt is expanding its cloud and video management offerings – in addition to access control – with acquisition of Access Control Technology (ACT) in Dublin. A company built on acquisitions, Vanderbilt will be looking to unify their product offerings in coming months – combining technologies from various acquisitions into a unified whole. It’s been a big year for FLIR, which has swallowed up DVTEL and now offers a complete range of video surveillance products. Reaching way beyond FLIR’s historic presence as a thermal imaging company, the new FLIR is looking to educate the market about its versatility. Meeting end user demands End users demand more integrated systems, and you heard it repeatedly at ASIS. For example, Tyco Security Products says their products are now more connected, reflecting further deterioration of the silos that used to exist. More effective user interfaces are getting attention. One I saw at ASIS was by Honeywell’s Connected Buildings business. A big screen at their booth showed a map with multiple locations in an enterprise; clicking on a location brings up a schematic showing where cameras are located. If you click on a camera icon, you see video from that camera. They also previewed a smart phone app that runs off the same database, which can be used by guards working in the field. Bosch also has a neat integration of their access control, intrusion and video systems, all tied together using their intrusion system to provide intuitive controls. Ameristar, an ASSA ABLOY subsidiary, offers Perimeter InSite software, providing a virtual view of any perimeter security construction project as it is planned and built – stage by stage – with no surprises. Mobile credentialing, wireless locks A leader in mobile credentialing, HID Global is emphasising how the technologies are being implemented in the market – more customer references and case studies are paving the way for broader adoption. Other companies are also onboard with mobile credentialing, including Brivo and Lenel. A leader in mobile credentialing, HID Global is emphasising how the technologies are being implemented in the market Wireless is continuing to evolve. Stanley Security offers the WiQ wireless product line, emphasising that installation of wireless locks is half the cost of wired, but there are downsides (such as slight access delays) compared to wired. Allegion continues to expand its Engage wireless portfolio, too. Paxton Access, a British company, has restructured and is investing in the U.S. market. Their Paxton BLU cloud-based access control system uses Amazon web services and is an opportunity for dealer/integrators to earn more recurring monthly revenue (RMR) Security in the headlines Violence in the headlines often screams out for security solutions, and there were some at ASIS. Stanley highlighted its Shelter product that enables a wireless lockdown in an active shooter situation in the education environment. It solves a high-profile challenge, but Stanley emphasises that it’s just part of a broader school security programme – that’s what’s really needed. A different approach on the active shooter scenario is offered by risk assessment and consultancy company Control Risks, which offers active shooter education programmes for enterprises, including an e-learning module to teach employees how to react in an active shooter situation. New video capabilities Video grabbed attention at ASIS. As Hikvision and Dahua continue their energetic push into the U.S. markets, they were among the largest (and most crowded) booths. Several companies – including Bosch and Tyco -- are adding video analytics to their cameras at the factory. Vicon previewed its new Valerus VMS system, based on ONVIF protocols and totally compatible with their legacy ViconNet VMS. They see open systems as a strong selling point, but they will also continue selling hardware and “total systems". "Suspect search" can search video to deliver additional examples of video involving a subject that has been identified by a single frame “Suspect search” is a new feature showing up on video surveillance systems. The feature can search captured video from throughout a system to deliver additional examples of video involving a subject that has been identified by a single frame of video – find the girl in the blue dress, or the man wearing a red shirt. Searching a whole system, rather than a single camera feed, expands an operator’s ability to investigate an incident. Avigilon introduced its version, called “Appearance Search” at ASIS, and Qognify also highlighted its version, called “Suspect Search,” which I first saw at IFSEC. I notice Exacq also has a flavour of this, and I am sure there are others. Perimeter security evolving Perimeter security is changing. Long considered a “low-tech” wing of the security market, there is a lot going on in the area of perimeter security. Visiting a couple of booths at ASIS opened my eyes. For example, Senstar has every kind of sensor, and their Tungsten product is a security appliance that offers cyber-security at the edge of the network, tying together the sensors and other devices. Protech offers solar-powered wireless sensors that don’t require trenching, another money-saver (more to come about them).

A major industry player is getting even bigger. FLIR’s acquisition of DVTEL will make FLIR a full-spectrum security systems provider, covering the consumer, SMB, Enterprise and large infrastructure segments of the market. The acquisition of DVTEL strengthens and broadens FLIR’s Enterprise market segment, complementing the existing security product lineup by offering a new set of software-based video surveillance technologies. FLIR already has solutions at either end of the traditional Enterprise business – Consumer and Borders, as examples – and FLIR’s existing solutions will be strengthened further with the addition of DVTEL’s products, technologies, and development capabilities. “We believe this is a unique position in the overall market,” says John Distelzweig, Vice President and General Manager of FLIR’s Security Segment, who also provided other insights into the benefits of the recent acquisition. SourceSecurity.com: Was there any aspect of DVTEL that made it an especially attractive acquisition target? Distelzweig: DVTEL adds key video management software and video analytics software to FLIR’s product suite to allow FLIR to offer an end-to-end solution for customers. SourceSecurity.com: How will the "sum be greater than the parts?" Distelzweig: DVTEL gives FLIR an impressive VMS platform from which to brand FLIR, expanding our presence from a strictly Enterprise market to the SMB (small- and medium-sized business) market. DVTEL’s video analytics algorithms are widely viewed as the industry’s best, and FLIR will incorporate them into our existing products to create a best-of-breed, highly-reliable and advanced automated alarming solution. This will help drive incremental value for existing FLIR products. Additionally, expanding the DVTEL camera lineup with FLIR cameras at either end will drive incremental revenue on a per-project basis.  SourceSecurity.com: FLIR in the security market still tends to be associated with thermal cameras. This acquisition seems to be an additional way to expand beyond that core technology (and its perception as an expensive option). FLIR has been an innovator inthe Thermal Security Space foryears. The addition of industry-leading Video Analytics isclearly complementary Distelzweig: FLIR has historically been a high-end, even military, brand. However, in the past two years, with the integration of Lorex, FLIR now has an established brand in the SMB space and even in Consumer IP (FLIR FX for example). With this most recent move, the FLIR brand stands for best value and performance in every category. SourceSecurity.com: Did the broader appeal of thermal cameras in the market (based in part on lower costs) impact the decision to buy DVTEL (i.e., make it a better “fit”)? Distelzweig: In short, Yes. FLIR has been an innovator in the Thermal Security Space for years. The addition of industry-leading Video Analytics is clearly complementary to this positon. With the introduction of the Lepton thermal micro-core, we are positioned to push the price points for perimeter solutions to a completely new level. Expect exiting things to come in this regard. SourceSecurity.com: FLIR is active in so many markets, what does this acquisition say about the company's "commitment" to video surveillance? Is there any aspect of this acquisition that could impact any other markets the company serves? Distelzweig: FLIR is very committed to all of its markets. Video Surveillance is a component in the products in four of our existing segments today (Security, Surveillance, [OEM/emerging markets/intelligent traffic systems], and even in Maritime). In each of these cases the products and/or technologies from DVTEL will bring improvements to the solutions being offered today. SourceSecurity.com: Can you tell us anything about the changes that are likely to occur related to DVTEL's personnel, locations, use of the brand name(s), etc.? Distelzweig: DVTEL will report in our existing security segment. The DVTEL sales force will be folded into our existing team, adding complementary regional and functional positions. DTVEL product development will remain in their current locations, and FLIR will utilize them for more innovation under its long-term strategy in the Security market.

For the second year in a row, Canon made the biggest M&A move in the security marketplace in 2015. How could Canon top the industry shockwaves it created in 2014 when the Japanese giant acquired VMS company Milestone Systems? That’s easy: They bought Axis Communications for $2.8 billion in 2015.   Although the Canon-Axis deal grabbed the most headlines and was easily the most shocking M&A announcement of 2015, it was certainly not the only big news on the mergers and acquisitions (M&A) front. Consolidation seemed to be breaking out all over, although the announcements were generally positioned as “strategic” rather than in response to market forces. Here’s a look at the Top 10 M&A stories in 2015, as covered by SourceSecurity.com: 1. Canon buys Axis Canon Inc. made a public offer to the shareholders of Axis Communications to transfer all of their shares in Axis to Canon. The total value of the offer was approximately $2.8 billion – Canon’s biggest acquisition to date. The move was further evidence of Canon’s confidence in the video surveillance market – and its intent to be a big player in the market. 2. Phybridge buys NVT Phybridge made its mark in the communications industry as a manufacturer of long-reach transmission technology. Looking to target the security industry as a lucrative new market for that technology, Phybridge agreed to purchase NVT, a well-known supplier of IP and PoE transmission. Phybridge is looking to leverage NVT’s position and reputation in the security market to boost its sales of long-reach PoE and Ethernet over new or legacy coax and UTP cable. 3. 3xLOGIC buys infinias Cloud-based integrated security solutions provider 3xLOGIC saw how well its products fit with those of infinias and announced acquisition of the cloud access control company. Adding access control is a natural extension of 3xLOGIC’s video products, including the VIGIL VMS and business intelligence, data management and cloud-based services. Access control was the “missing piece” in their overall product offering. FLIR Systems and DVTEL were late additions to our Top 10 M&As, with a $92 million acquisition in late November 2015  4. ASSA ABLOY acquires Quantum Secure ASSA ABLOY has made hundreds of acquisitions since 1994, and continued the pattern this year. Given ASSA ABLOY business unit HID Global’s focus on identity, it makes perfect sense they would acquire Quantum Secure, whose SAFE software suite is a robust, policy-driven application to will help enterprise customers achieve their identity management goals. The SAFE software suite allows organisations to manage identities across multiple sites for employees, visitors, vendors, and contractors. 5. OnSSI acquires SeeTec AG Video management software (VMS) company On-Net Surveillance Systems, Inc. (OnSSI) announced a definitive agreement to acquire SeeTec AG, a privately held German-based company providing VMS solutions to European markets. As one of the first providers of network-based video management applications, SeeTec provides offers targeted solutions aligned with customer requirements and industry-specific processes. Among other factors, the acquisition supplies OnSSI a new software recorder and ended their longtime OEM agreement with Milestone. 6. NICE Systems sells Physical Security unit (now Qognify) NICE Systems entered into an agreement to sell its Physical Security business unit to Battery Ventures, a technology investment firm. NICE’s Physical Security business unit provides video surveillance technologies and capabilities to help organisations be more security-aware. The NICE security business later announced its new name – Qognify. 7. Entrepreneur Dean Drako acquires Brivo Brivo announced that the cloud-based access control company had been wholly acquired by Dean Drako, entrepreneur, president and CEO of Eagle Eye Networks. With this acquisition, Drako pledged to apply the strategy and execution processes he used at his other successful companies, including Barracuda Networks, to leverage Brivo’s technology lead and growth trajectory. Combining Brivo’s cloud access control with Drako’s cloud video surveillance company Eagle Eye Networks seems to make a lot of sense. Consolidation was a recurring theme of 2015, and seems to be poised to continue in 2016  8. Panasonic buys Video Insight Panasonic Corporation of North America entered into an agreement to acquire all shares of Houston, Texas-based Video Insight, Inc., a developer of video management software, as part of its strategy to expand business opportunities for both companies in the education market in North America. Founded in 2002, Video Insight provides enterprise-class video management solutions for security systems to over 25,000 customers in the financial, government, retail and transportation sectors as well as 6,500 K-12 school and college customers. 9. Securitas buys Diebold Security business Consolidation extended to the integrator market, too, as evidenced by this large deal. Securitas agreed to acquire the commercial contracts and operational assets of Diebold Incorporated’s Electronic Security business in North America, and will operate as Securitas Electronic Security Inc. Diebold´s North American Electronic Security business, based in Green, Ohio, USA, is the third largest commercial electronic security provider in North America. 10. FLIR acquires DVTEL Late in 2015, FLIR Systems, Inc., announced that it had acquired DVTEL, Inc., specialising in software and hardware technologies for advanced video surveillance, for approximately $92 million in cash. DVTEL develops and distributes integrated video management system (VMS) software, advanced video analytics software, visible and thermal security cameras, and related servers and encoders. The combination enables FLIR to be a full-spectrum end-to-end security system provider, serving the consumer, small and medium business, enterprise, and infrastructure-level markets.   See the full coverage of 2015/2016 Review and Forecast articles here