3VR's Financial Results and Competitive Positioning ExaminedAuthor: John Honovich, Published on Aug 21, 2011
3VR is one of the best funded companies in the history of video surveillance. With $50 Million plus total investment, 3VR has focused on deeply embedding video intelligence / analytics into video management appliances. In this note, we review the company's recent (2009-2011) financial results and examine their competitive positioning with video analytic companies such as Object Video, Cernium and VideoIQ as well as video management companies such as Exacq, Genetec and Milestone.
3VR Financial Performance
Let's start with a review of their financial performance:
- 3VR is predicting between $20 and $30 Million revenue in 2011, says that it is not profitable currently but predicts hitting profitability within the year.
- In 2009, 3VR forecasted between $15 and $20 Million revenue in 2009.
- In 2010, 3VR's revenue was $14.4 Million USD as reported by INC 500.
- In a recent press releas, 3VR claims 'explosive growth' with 100% growth per year for the last 3 years. Citing its status as a private company, 3VR declined to elaborate further on these rates / revenue levels.
- 3VR has 2 publicly announced flagship accounts - Wells Fargo and T-Mobile - that represent a significant portion of their total revenue. 3VR reports 1,100 T-Mobile stores deploying 3VR since 2008 and 4,000 Wells Fargo branches in a similar time frame. Estimating ~$4,000 in revenue for 3VR per store, total revenue is likely in the $20 - 25 Million range just for these two customers.
- 3VR was founded in 2002 and is nearly a decade old.
3VR Competitor / Peer Review
To better appreciate 3VR's positioning, it is useful to understand how similar companies are performing. Since 3VR is half analytics / half recorder provider, we will contrast to both sides.
On the video analytics side:
- Object Video has raised similar, and probably greater, funding than 3VR. Object Video's revenue is likely lower (though OV claims it is profitable). More importantly, since Object Video's risky and dramatic shift of pursuing patent infringement against the rest of the industry, it is unlikely that OV has a sustainable business model outside of collecting royalties or doing custom development projects.
- Cernium has raised a significant level of funding, likely in the ~$30 Million range, but less than 3VR. Cernium 'pivoted' a number of times and recently underwent a significant restructuring / layoff.
- VideoIQ's funding level is similar to Cernium's. While VideoIQ pivoted a few years ago, since their shift to providing smart cameras, the company has grown significantly and it has emerged as the leader in smart cameras for general surveillance use (eclipsing ioimage).
None of the video analytic companies have had an easy path and most of them continue to struggle with achieving market acceptance. 3VR's performance has been above average compared to video analytic companies.
On the VMS / recorder side:
- Milestone reports 2010 revenue of ~$40 Million USD and 56% revenue growth over 2009. Milestone raised minimal funding until 2008 when it raised $27 Million. Milestone says that they were profitable at that time and continue to be profitable.
- Genetec disclosed 2009 revenue of $36 Million. Genetec's never raised any VC funding and is profitable.
- Exacq disclosed 2009 revenue of ~$19 Million on nearly %100 growth. The company has raised minimal amounts of external funding (~$3.7 Million) and is profitable.
In contrast to the video analytic companies, the VMS providers are generating significantly more revenue and profits while consuming far less investment capital. 3VR fares poorly to the financial performance of each of these companies.
This is even more apparant when normalizing revenue levels between 3VR and the VMS providers. While 3VR sells mostly appliances, VMS providers typically sell software licenses. Licenses generate significantly less revenue than appliances but much higher gross margins.
While 3VR is certainly not struggling like Cernium and Object Video, it has significant work to do to match the financial performance or overall industry impact of leading VMS software providers.
What is the Future for 3VR?
3VR's most significant competitive advantage over VMS software providers is 3VR's deep integration of video analytics / intelligence inside its system. 3VR offers facial recognition, LPR, object tracking and people counting as pre-loaded modules inside its appliances. Additionally, 3VR says that in Summer 2011, they are adding queue line analysis, customer traffic analysis and dwell and loitering analytics. By contrast, the VMS software providers typically partner and loosely integrate such functionalities as add-ons. This increases cost and complexity while often decreasing usability. On the other hand, as the comparative financial results indicate, historically buyers have generally preferred to buy VMS software without analytics embedded.
For 3VR to succeed, it will need buyers to shift spending patterns to prefer deep embedding of analytics, especially in the retail market that looks to be the most promising for their approach. On the other hand, two other approaches to enhancing retail intelligence exist that look to be strong emerging competitors to 3VR:
- Managed Video: Companies like Envysion are offering inexpensive retail solutions that make using video much easier including deep embedding of PoS integration and exception based reporting. Last year, Envysion also launched a platform to allow 3rd party providers to tap in and provide additional services to their customer base.
- Auditing Services: Companies like Agilence are offering remote video auditing and data analytics that can greatly reduce losses from shrinkage and operational errors.
While video analytics has massive 'potential', the challenges in making it work well and inexpensively in real world deployments remains a key challenge. To date, 3VR has yet to break through with broad real world success, lagging non-analytic VMS providers. With video analytic's operational challenges and newer threats in the retail market, we believe 3VR will continue to have an up hill battle to become a major market player.
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