It has only been 7 months since the last Security Letter was released in 2019, but in that short span of time, so much has changed in the world. Founded by Dr. Robert McCrie, with help from Keith Oringer of Security ProAdvisors and Jeff DiDomenico of Trackforce Valiant, the Security Letter has been a long-standing benchmark for the security industry. For the past two decades, the Security Letter has provided an overview on the top physical security firms in North America.
This year’s letter feels a bit different. Coming out in a time when the industry is in a fluid state, it will be interesting to see how the companies in this letter will change the next time around. With that in mind, there are some interesting takeaways and trends to look at as we compare 2019 to 2020 letters. Let’s take a look and see what trends and analysis we find.
The Challenge with the 2020 Security Letter
As stated above, the challenge with looking at this security letter when compared to the previous versions stems from the unforeseen turn of events in 2020. It is worth noting that each year, the reporting on the letter is strictly voluntary, so it includes only those companies that wish to participate. This year, the letter will present pre COVID-19 numbers. As we await how the industry will respond post COVID-19, we should expect the 2021 Security Letter to reflect how companies have recovered from the global shutdown. However, let’s examine the interesting findings we do derive from the 2020 version.
Movement in the Industry and on the List
The first thing to notice are the new “faces” on this list. Seven new companies have emerged on the list; and, despite this year’s letter having 4 additional slots than the previous year, this only explains some, not all, of the movement. The most notable additions include Constellis, Paladin and Prosegur joining their peers on the letter.
There have been a lot of mergers and acquisitions in the market last year, which not only consolidates the market, but also creates growth for emerging firms. A notable name missing from the list is SOS security, who was purchased by Allied Universal late last year. This move solidifies Allied’s position as the leader in our market.
Revenue Increased 18% From Previous Years – With a Catch
When imagining the Security Letter as the “S&P” of the Security industry, we can see a good indication of how the market has grown, changed, and evolved. In December of 2019, we saw the total revenue of the group hover near $17B. This year we are looking at an overall revenue figure of just under $19B – that’s 18% up from 2019. The top 6 companies on this list still hold the majority of the revenue with nearly 90%.
What does this tell us? Often, these revenue figures represent a combination of growth and acquisition. With the acquisition of SOS last year, Allied added over $500 million in revenue to their business. The data also fluctuates as new companies join the list. As this report is voluntary, the overall numbers change with the number of reporting companies.
In reviewing the top 4 companies, we can see how they maintained top positions from 2019 to 2020, indicating that their movement is inline with the market. The top four had a 12% increase from 2019 to 2020, which is a combination of M&A, expansion of services, and continued growth of the industry.
Positive Indications with Cautious Optimism
The 2020 Security Letter data shows positive movement in the industry. Revenues are moving in the right direction and there are more participants on the list reflecting movement in the industry. What we await to see is the impact the global crisis has had on our industry. Although the general unemployment numbers were low at the time the letter was drafted, we still see an abundance of resources and clients as they were before. Now, despite some industries having completely shut down, there are others that have thrived in the new normal.
Just like the S&P 500, indications from the experts say the economy will bounce back from this artificially induced recession. We too hope the security market will come back stronger than ever. Regardless of the current situation, it is important to have benchmarks such as Dr. McCrie’s Letter that give us a snapshot into the evolving world of Physical Security.