From the Editor: High Volume Doesn’t Mean Loud

For years, the term "high volume" in the custom industry referred to how high you could crank up the sound on a pair of 2-channel speakers.

Not any more.

Today, "high volume" refers to the growing group of integrators who have strategically shunned long-term, sophisticated, integrated installations that target affluent homeowners in favor of cookie-cutter, lower-cost jobs that are typically contracted with large production homebuilders.

So today's "high-volume" message is loud and clear: An integrator can produce high revenues without catering to the ultra-high-end.

Never has this trend been so apparent than in this issue of CE Pro, which presents our eighth annual CE Pro 100 list of the highest revenue residential integration companies in North America. The rankings are based on multi-subsystem installation revenue only.

It was somewhat controversial last year when CE Pro made the decision to no longer separate the hybrid retailers from traditional custom installation firms in the CE Pro 100.

However, this year, I am preparing to don a flak jacket as the list becomes more heavily smattered with high-volume companies with roots primarily from retail, electrical contracting and security.

It's not that there are more cookie-cutter companies on the list. It's about the same number as in years before. It's just that they are much, much higher on the list than before. While the typical traditional custom integration firm on the CE Pro 100 list saw a modest increase in revenues in 2005 versus 2004, most of the cookie-cutter companies experienced skyrocketing revenues last year.

For example, No. 6 on the CE Pro 100 for 2005 is Florida-based S&S Electric, which happens to have been the Consumer Electronics Association TechHome Division's Dealer of the Year in 2004. S&S Electric has a sizable high-voltage electrical business.

Back in 2004, the company reported doing $4.2 million in integrated low-voltage electronics revenue. In 2005, S&S did a whopping $18 million, a mind-boggling 428 percent increase in one year. That's just its multi-subsystem installation revenue.

Overall, S&S did nearly $33 million in residential revenue last year. In all, they jumped an amazing 37 spots in the CE Pro 100.

Another big success story is Guardian Protection Services, an $84 million Pittsburgh-based alarm company reporting $18.8 million in integration revenues for 2005. The company comes in at No. 5, a solid 13 spots higher than 2004, when it reported $7.4 million in multi-subsystem revenue.

There is also the top two companies in the CE Pro 100: Tweeter and Brink's. No. 1 Tweeter's publicly reported $80 million in installation revenue represents no increase over last year, while No. 2 Brink's $25 million from its Home Technologies division is 20 percent higher than 2004's figure.

My conclusion: There will continue to be a growing influence in the custom-installation market from larger, high-volume companies.

By the way, I have not mentioned profitability in terms of the high-volume companies. We have no way of knowing their cash flow, EBITDA and profit. However, it is interesting to note this: Several CE Pro 100 members in the past few years have declared bankruptcy.

All of those defunct companies were traditional integrators, while none of them specialized in the low-cost, cookiecutter market.

Hmmmm.

Ed. note: The print version of this article referred to S&S Electric as number 4 in the CE Pro 100; they are number 6. This version has been updated with the correct information.