Alarm.com Acquires OpenEye

By John Honovich, Published Oct 21, 2019, 05:56pm EDT (Info+)

Alarm.com is targeting commercial expansion and now they have a commercial cloud VMS with the acquisition of OpenEye.

In this note, based on speaking with executives at both companies, we examine the pros and cons of the acquisition, how it impacts Alarm.com in the commercial space and what it does for OpenEye.

For background on OpenEye, see our OpenEye Apex Cloud VMS Test Results.

Financials / *********

***** *** ************ *** *** ******** revenue *** ***** ****, ** ***** expect ** ** ** ** *** $50 ** $*** ******* ***** ***** on ********** ******* ******* ** *** low **** ** ********. ******* *** not ** **** ** ** *********** and *****.*** *** * ****** ****** valuation ** *****.*** ***** **** ** and ***** ****** ****** * ******* for *******.

****** - ******* *** ****** ** ~$72 ******* ** *** ****, **** Alarm.com ****** $**.* ******* *** ** 85% *****. ************, "** ****-*** ** up ** ** ********** $**.* ******* is ******* ** ******* ******** **** targets *** ***."

Fit *****

** ***** *** *** ** *****. Alarm.com ****** * ********** *** ******** to ****** ****** *** ***** ** commercial *********. ******* ****** ******* *** can ******* **** * ****** ******* to **** *** ********.

********, *** *** **** * **** shot ** ******** * ***** ****** in *** ********** ******.

OpenEye ********** ******* *****, ** **** ****-****

*** ******** ******* ** **** **** is **** ** ** * "********-***** acquisition", *** * ***% ***********, **** OpenEye ***** ********* * ******** *****. OpenEye **** **** ***** **** *********** in *** ****** ** *** **** term. ** ** **** ********** *** Alarm.com ******* ******* ***** **** ****** incentives ** **** *** **** *** business.

Brand, ********, ********** *******

*****.*** **** ****:

******* **** ** * ********** ** Alarm.com. *** ******* **** ******** ********** under *** ******* ***** *** ** led ** *** ******** ********** ****.

**** ** ********** ** ** ***** OpenEye ** ********* **** ******** *****, their ******** **** **** **** ******* since ******* (~** *****) *** ** do *** ****** ** ** *** type *** **** ** ******* ***** something ***.

** ** ********** ** ******* *** future, *** **** ***** **** *** type ** **** ***** ********** ***** indefinitely ****** ******** ***** **** **** as **** ** **** *** (*.*.,*****/****).

Giant ** ***********

*****.*** ** * ***** ****** ** residential, **** **** * ******* *********** and **** $*** ******* ** ****** revenue ******* ~**% ********:

*** * ***** ***** ** **********, Alarm.com's ******* ** ***** ** ********'* ~$500 *******.

Minor ** **********

***** *****.***'* ******* ** ***** ** Avigilon's *******, *****.*** ** ** ************* player ** **********, ****** ******* ** and ******* *** ****** *** ** their ********* ** ***********.

*** ****** ** ********** *** *****.*** is **** ** ** * ***** market (**** ** ****** ** ******* depending ** *** ** ** *******) and ** ** *** ************ ****** to *** *****.

********* ******* *** ***** *****.*** * base ****** *** ********** ****** ** grow.

Funding *******, ***** ******, **** ******

*****.*** ** ******* ** ***-***** ******, not ******* *** *********. ******* ********* excitement ***** *** ********* **** *****.*** is ******* ** *** *** ******* to ************* ****** ***** ***** ********* engineering *** *****.

Relationship ** ******-* *** ***********

**** ** *** *** ***** ******* acquisition *****.*** *** ****. ** ****,*****.*** ******** ******-*, **** ***** ** ** **** AVHS *******. **** *** *** ****** a *********** *****.*** ********. **** ********,*****.*** ******** ****** *****'* *&* ****, * **** **** ******** ** their ****** ***** ***** ********* ********. We ** *** *** *** ******** with ******-* *** ***** ** ********* for ***** ***** ***** ***** ********* with *******, *** ** *** * specialist ** *********.

Competitive ***** **********

******* ** *** **** ********** *********** for *****.***'* ********** *********. *** *******, in ******** **** ****** ** ******* *****.***, Arcules, ***** ***, *******, ******* *** Verkada.*****.*** ****** **** **********,******* ** (* ***********) **** ** Milestone, ***** / ***** *** ***** have ******** ** *********** *******, ******* is **** ******* ******* *** ******* would **** ******** (******** *********).

Outlook - ******** *** *** ******?

*** *** ********* *** ****** ********* better *** *** ***********. *** *** question ** *** ****** ** *** they *** ****** ** **********. ******* has ********* **** ******* ***** **** out ***** *** ************ *********. *****.*** has ***** **** * ***** ********** player. *** ****-**** ******** ** **** the *** ********** **** ***** ******** and **** *** *** ***** ********* is *** **** **** ***** ***********, working ********, ******* ********** **** * combination, *** ** **** ******* *** stronger ** *** ********** *****.

Vote / ****

Comments (23)

We can add more details. I published this quickly to get our initial analysis up. Questions, areas we did not cover, etc., please let us know.

Agree
Disagree
Informative
Unhelpful
Funny

Congrats to Rick and the team on the Sale!

Agree: 3
Disagree
Informative
Unhelpful
Funny

"Hi...I'm Ali, cofounder of Alarm.com....Give me your tired, your poor, your huddled dealers yearning to breathe free, the wretched refuse of your teeming market"

Agree
Disagree
Informative: 1
Unhelpful: 7
Funny: 5

Can you explain that remark/joke? Ali is 'Alison Slavin' or?

Agree: 1
Disagree
Informative
Unhelpful
Funny

John.

Ali does radio commercials that start out with..."Hi, I'm Ali, cofounder of Alarm.com." I was referencing the fact that many alarm dealers are facing diminishing ROI as monthly monitoring fees drop, and as more homeowners have alarms sent directly to their smartphones, bypassing central station monitoring. The text is a play on words found at the base of the Statue of Liberty, (slightly modified), telling alarm dealers that Alarm.com has a program to help them grow their business and profitability, especially as they grow into the commercial side of the business.

Agree
Disagree: 1
Informative: 2
Unhelpful
Funny: 4

Thanks #1, I don't listen to radio!

many alarm dealers are facing diminishing ROI as monthly monitoring fees drop, and as more homeowners have alarms sent directly to their smartphones

That's an interesting point. I am curious myself; my outsider perception of the residential market is that this is a big risk / issue. The best example supporting your point may be ADT's push into commercial.

Agree: 2
Disagree
Informative
Unhelpful
Funny

Definitely seems like a good match. Congrats to the team and 20 years of hard work. I wonder if Open Eye will pitch a full hardware and software solution like Avigilon or build stronger partnerships with hardware partners and concentrate on VMS demand.

Agree
Disagree
Informative
Unhelpful
Funny

wonder if Open Eye will pitch a full hardware and software solution like Avigilon

OpenEye responded:

A big part of our value is the “open cloud platform” so we want to expand that ecosystem as much as possible.

My perception is that Avigilon is open but clearly sees and markets their own cameras as superior while OpenEye markets its cameras more as a budget or simplicity sale.

Agree
Disagree
Informative
Unhelpful
Funny

Will this have any effect on Arecont and their Contera VMS (OEM’d by OpenEye)?

Agree: 1
Disagree
Informative
Unhelpful
Funny: 1

OpenEye says business as usual. More generally, Alarm.com does not really overlap or conflict with what OpenEye does. For example, if hypothetically, OpenEye wanted to do a deal with Honeywell integrating TotalConnect (a direct / core Alarm.com competitor), I could see that being an issue but what OpenEye does with Arecont is not a factor to Alarm.com generally, from what I see.

Agree: 1
Disagree
Informative
Unhelpful
Funny

John

A major distributor told me recently that they, and many of their alarm dealer customers, feel that the small to medium sized residential alarm installation business is going to be severely impacted by the DIY alarm direct suppliers.

Central stations are rapidly expanding their video verification services, which may be required by many municipalities in the near future. I have heard that some law enforcement agencies will now not respond to alarms without video verification. If this is a strengthening trend, video verification by the central station will raise the cost of monthly fees to the consumer, as it is much more labor intensive than straight alarm reporting, which is very automated.

Tie that to Alarm.com's purchase/merger with OpenEye, and the independent alarm dealers that sign up with them may see a way to offset the reduction in alarm-only monitoring income.

A large central station owner told me recently that they are going to add video verification that ties seamlessly into their existing software platform, and offer a full package with video verification for dealers to sell.

Perhaps that is where Alarm.com is heading?

Agree: 1
Disagree
Informative: 1
Unhelpful
Funny

#1, interesting points. Again, IPVM doesn't know the residential space as well so I can't be sure though as I mentioned previously I think there is a risk.

But even if residential does not decline, Alarm.com has the risk of saturating their core residential market. If it wants to continue growing 25% a year, they need to expand.

Alarm.com's purchase/merger with OpenEye

As a point of clarification, this is definitely not a merger, Alarm.com does ~10x the revenue of OpenEye.

Agree
Disagree
Informative
Unhelpful
Funny

Wow congrats to Rick and the whole team at OpenEye. Well deserved and solid group of talent at OpenEye. Looking forward to see whats to come.

Agree: 3
Disagree
Informative
Unhelpful
Funny

Couldn't be any happier for Rick and their team at Open Eye. Have gotten to know them pretty well over the last three years and this team is rock solid and focused. I feel with this cash injection it will help them achieve their product goals even faster to keep up with our fast paced industry. Good luck you all!

Agree: 6
Disagree
Informative
Unhelpful
Funny

I have been super happy with the OpenEye product and team. I just hope that this doesn't affect the relationship that they have with DMP. The OpenEye/DMP integration is second to none and offers solutions that no-one else has. DMP's Virtual Keypad is also a competitor with Alarm.com so I am hoping that this doesn't change things at OpenEye.

Our customers have been much happier with OpenEye than Avigilon or Exacq. The app and interface (although much simpler) is superior for non security staff operation.

Agree: 2
Disagree
Informative: 3
Unhelpful
Funny

OpenEye response about DMP question:

Connecting and analyzing event data from integrated solutions, and turning it into actionable intelligence, is one of the primary benefits of OpenEye Web Services. We are committed to an open cloud platform and working with integration partners to bring more value to our customers. This includes our integration with DMP.

Agree
Disagree
Informative: 2
Unhelpful
Funny

Congrats to the team at Openeye

they are a great group of folks

this sounds like great news

i look forward to seeing what the future will bring

Agree: 1
Disagree
Informative
Unhelpful
Funny

awesome move for Alarm.com. they continue to diversify and distinguish themselves to be much more than just a remote management service for alarm panels.

Agree: 2
Disagree
Informative
Unhelpful
Funny

The question now, does Alarm.com go after a commercial access control manufacturer to round out the offering? If so Who??

Agree
Disagree
Informative: 1
Unhelpful
Funny

It is an interesting question.

Alarm.com recently introduced their own access offering (we covered in Alarm.com Business Market Expansion) that uses Mercury Security hardware and their web-based platform that results essentially in 'hosted' access management.

The access solution now is for small-medium businesses and has no on-premise server, panel, or PC but uses an EP or LP series controller.

We will be tracking ADC's access control moves and developments.

Agree: 1
Disagree
Informative: 1
Unhelpful
Funny

That shows that they are serious about entering this space because that Mercury hardware comes with a hefty annual volume commitment. I guess the next question is will the dealers look to them as a viable access control partner in commercial...This is a whole different world then changing codes on someones front door of their home or showing the status of the garage door.

Agree: 1
Disagree
Informative: 1
Unhelpful
Funny

Update: OpenEye's Q3 2019 financials revealed the price paid and we've updated the report with it, copied below:

OpenEye was valued at ~$72 million in the deal, with Alarm.com paying $61.3 million for an 85% stake. Additionally, "An earn-out of up to an additional $11.0 million is payable if certain calendar 2020 targets are met."

Also, in the Q3 call transcript, Alarm.com discussed OpenEye at length but nothing that I found particularly surprising.

Agree
Disagree
Informative
Unhelpful
Funny

John.. you asked… “In this note, we examine …. what is going wrong in the market (remote-monitored residential) and how it might get worse”? Plus the “stress in the residential markets”. Here we add to the back-story.
>
Some of us remember when auto alarms would blare day and night, in most parking lots, residential street parking, or whenever an auto was left unattended. Law enforcement halted all site-response except for witnessed threats, and fined the vehicle owner for noise abatement laws. The same trend is developing for millions of monitored deterrent home alarms…. slow or no response, causing very high attrition; expensive fines/fees. Auto alarms are now a basic accessory to all vehicles everywhere… with near zero disruptive false alarms. The vehicle false alarm problem was successfully solved by the vehicle alarm suppliers, not by government legislation and passing blame. Thereafter the auto alarm business grew exponentially, worldwide and still growing. Good model to follow…. knowing residential property alarm systems are beginning to get about same police priority as vehicle alarms.... unless a 911 type threat is witnessed…. The new world of Alarm.com/ OpenEye, (including monitored vehicles). Often more theft incentive is in locked vehicles than private homes. Special note… law enforcement response has changed because now can lose their sovereign immunity if they DO respond, but not when police DO NOT respond to calls from monitoring firms.
Source: Lee Jones, Support Services Group

Agree
Disagree
Informative: 1
Unhelpful: 1
Funny
Login to read this IPVM report.
Why do I need to log in?
IPVM conducts reporting, tutorials and software funded by subscriber's payments enabling us to offer the most independent, accurate and in-depth information.
Loading Related Reports