Security Sales & Integration February 2023 - 37

(IoT), the attack surface for bad actors to target
has grown exponentially. With more than
14 billion physical devices connected to the
Internet, cyber protections are critical to defending
against a hostile takeover of the device
or having it serve as an easy entry point into
a broader network. This increased need for
cyber protection of physical security devices
is driving the intersection of physical and cybersecurity
capabilities. In addition, publicity
surrounding recent security breaches at Microsoft,
Crypto.com, and others, have forced
organizations to move security requirements
to the forefront of budgeting and planning
discussions.
These real-world demands for security
have stoked continued M&A and investor
interest in the industry, especially in certain
subsegments such as managed security service
providers (MSSPs), artificial intelligence
(AI)-driven security technologies, mobile access
control, and extended detection and response
(XDR)-related companies. The M&A
market for both physical and cybersecurity
remained strong through 2022 compared to
many other sectors with both private equity
firms and strategic buyers showing significant
appetite for acquisitions.
STOCK PERFORMANCES
Physical Security,
Strong Performers
Vivotek Inc (TWSE: 3454)
▶ 136.9% stock price increase on a YoY
basis ending Dec. 30.
▶ Revenue increased by 73% from 5.6
billion to 9.4 billion Taiwanese dollars
over the LTM period ending Dec. 30.
▶ Enterprise value-to-revenue multiple
increased from 1.2x to 2.1x for the 12
months ending Dec. 30.
ShotSpotter (NasdaqCM: SSTI)
▶ 14.6% stock price increase on a YoY
basis ending Dec. 30.
▶ Revenue increased by 39.9% from $58.2
million to $81.4 million over the LTM
period ending Dec. 30.
▶ Enterprise value-to-revenue multiple
decreased from 5.8x to 5.5x for the 12
months ending Dec. 30.
securitysales.com
Public Market Conditions
Significant factors impacting public markets
in 2022 were higher interest rates and the
potential for an economic recession.
As inflationary pressures increased after the
COVID-19 pandemic, the Federal Reserve
took action to slow the rapid increase in prices
by raising interest rates. However, higher interest
rates negatively impacted the stock market
as investors shifted assets to alternative investments
such as bonds. High growth stocks, such
as some of those in cybersecurity, generally declined
in value.
The risk of the economy slipping into a recession
may impact some sectors more significantly
than others. However, security remains
mission critical as companies and individuals
continue protecting their existing physical and
virtual assets.
A representative index of 28 physical security
and 50 cybersecurity stocks compiled
by Capstone Partners experienced an average
decline of 20% and 26% respectively
in 2022. The following is a sample of some
of the strongest- and weakest-performing
stocks in the physical and cybersecurity industries
in 2022.
NAPCO Security Technologies
(NasdaqGS: NSSC)
▶ 10% stock price increase on a YoY
basis ending Dec. 30.
▶ Revenue increased by 17.7% from $143.6
million to $168.9 million over the LTM
period ending June 30.
▶ Enterprise value-to-revenue multiple
decreased from 7.2x to 6.4x for the 12
months ending Dec. 30.
ADT Security Services (NYSE: ADT)
▶ 7.9% stock price increase on a YoY
basis ending Dec. 30.
▶ Revenue increased by 21% from $5.307
billion to $6.369 billion over the LTM
period ending Dec. 30.
▶ Enterprise value-to-EBITDA multiple
decreased from 8.2 to 7.4x for the 12
months ending Dec. 30.
Honeywell (NasdaqGS: HON)
▶ 2.8% stock price increase on a YoY
basis ending Dec. 30.
▶ Revenue increased by 3.4% from $34.392
FEBRUARY 2023 Security Sales & Integration
37
The broader stock
market came
under pressure
in 2022 due to
a confluence of
macro factors.
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Security Sales & Integration February 2023

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