Genetec's Financials and Competitiveness Examined

Genetec is well known as one of the largest and most advanced VMS systems in the market, growing from obscurity a decade ago to become a leading choice of large enterprises. The question, though, is how much has Genetec grown recently and how big is it today, especially in light of the major shifts within the VMS market over the last 2 years. In this note, we examine those numbers and positioning.

Let's start first with a review of Genetec's key financial metrics:

• 2009 total revenue was just over $36 Million CAD
• 2010 total revenue was just $41.8 Million CAD (confirmed by Gentec and extrapolated from Deloitte published financial rankings)
• 2010 revenue growth rate was ~16%

With those fundamental points noted, there are important limitations in using these numbers:

• Genetec manufacturers access control and LPR. Results in those segments could skew the total results relative to performance in their core VMS market segments
• Fluctuations in exchange rates can misrepresent 'actual' product uptake, especially as the USD - CAD exchange rates have been volital over the past few years.

Genetec declined to comment on the skewing that these two factors might have relative to VMS adoption.

Analysis

With total revenue growth of ~16%, even assuming some skewing due to the factors above, it appears to us that Genetec is losing ground to companies like Avigilon, Exacq and Milestone. We see that it in our own discussions with integrators. While Genetec remains very highly respected, we are seeing a lot of integrator's choosing the more basic but easier to use Avigilon and Exacq VMSes (both of whom had over 75% growth last year and are achieving fairly significant share themselves).

We attribute this revenue / market shift to an increased competitiveness of the mid market for VMSes. While companies like Avigilon and Exacq have gotten better in the last few year and Milestone has lead the charge to drop prices, Genetec has not made major moves for its mid market offerings. That noted, Genetec certainly continues to innovate at the high end (e.g., Security Center and edge based recording) but it will be interesting to watch what Genetec chooses to do to compete more effectively in the low to middle of the VMS market.