US sales up 113% for Irish digital security firm Netwatch

Fast-growing digital security company Netwatch, which raised €19.5 million in investment last summer to drive international growth, saw US sales rise by 113 per cent in 2015.

The Carlow-based company, which uses a combination of high-quality security cameras and intelligent software to monitor client sites and detect suspicious events, moved into the US market in 2012. It now has offices in Boston, New York, Pittsburgh and Chicago.

The firm, which claims to have prevented more than 40,000 crimes since it was established in 2003, currently monitors in excess of 330,000 cameras across the globe to over 3,200 businesses.

According to recently filed accounts for the group, overall sales jumped 20 per cent from €9.3 million to €11.2 million in 2015, with new contract wins rising by 45 per cent from €11 million to €16 million.

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However, the company, which increased its workforce by 17 per cent in 2015 to 140 and recently announced plans to create a further 85 jobs, recorded a €2.2 million pre-tax loss for the year, up from €547,182 a year earlier.

Chief executive David Walsh said the company was continuing to build on the strong momentum seen in 2015.

"2016 was a great year for Netwatch with growth across all core markets. Revenue grew by 32 per cent across the group and with the sales pipeline and signed contracts at December 31st we are budgeting 40 per cent revenue growth in 2017," he told The Irish Times.

“Our core markets are Ireland, the UK and the US and we will continue to invest in each of this markets. Our value proposition is very well received in the US and we are predicting 70 per cent of new revenue in 2017 coming from that country,” Mr Walsh added.

Changes in reporting standard

Netwatch attributed the increase in 2015 losses to its decision to change its accounting basis from Irish GAAP to International Financial Reporting Standards (IFRS) because its future growth is focused on overseas markets, and in particular the US.

The move means a change to the group’s revenue recognition polices so that costs previously accounted for over the life of a typical five-year contract are now reported up front.

“From a timing perspective this has led to profit being recognised later over the life of contracts, although the business model, the profitability of contracts and the cash-flow generation capability of the business remains unchanged,” the company said.

Netwatch said the upfront capital commitment to acquire new contracts during 2015 culminated in consolidated earnings before interest, taxes, depreciation and amortisation (ebitda) of €171,000, down from €856,000 a year earlier.

In addition, recent changes to Irish reporting standards combined with the move to IFRS, meant overheads on site acquisition were reported differently, leading to a €2.9 million impact on group reserves.

The rise in headcount in 2015 led to a jump in employee expenses to €7 million from €4.76 million in the preceding year. Administrative costs rose to €6.3 million from €4.6 million.

The company, which held talks with the Irish Stock Exchange about a possible flotation in 2015, raised €19.5 million in an investment round co-funded by BDO Development Capital Fund and Bank of Ireland last July.

The latest accounts show a group re-organisation took place a month before the investment was announced which led to a new class of shares being issued and a dividend of €2 million being declared and paid out.