By Calvin Biesecker
Believing its products, technologies and solutions are in the sweet spot of the nation’s security needs, ICx Technologies [ICXT] expects to be able to deliver annual organic growth exceeding 30 percent, Hans Kobler, president and CEO of ICX, which went public in November, said at a Needham & Co. investor conference on Tuesday.
ICx will report earnings publicly for the first time late next month. Through the first three quarters of its current fiscal year the company achieved organic growth of 53 percent, with the third quarter alone hitting 63 percent, Kobler said.
The company has recorded seven consecutive quarters of organic growth at 20 percent or higher, Kobler said. It started at 20 percent and accelerated from there, he said.
That rapid growth will continue regardless of which political parties are in charge in Washington, D.C., and whether the United States military draws down its presence in Iraq, Kobler said.
In 2006 ICx had sales of $90.1 million, which was exceeded by a net loss of $127.5 million. But Kobler said that as the company grows it will expand its margins and shift to profitability in the future.
“In the next couple of years we ought to be able to get our gross margins in the mid-50 percent range,” he said. ICx will do that largely through a shift toward more product sales, he added. On the basis of earnings before interests, taxes, depreciation and amortization, Kobler believes ICx can attain margin rates in the mid-20 percent area.
ICx divides its business into three divisions: Detection; Surveillance; and Solutions. The Detection division encompasses its broad array of products and technology it develops and sells for chemical, biological, radiological, nuclear and explosives detection. The Surveillance division includes develops and produces radar imaging devices, watch towers, radars, thermal imagers and infrared sensors. The Solutions division has software products to integrate cameras and other sensors for command and control.
ICx sells its Fido explosives detector to the Marine Corps and to the Transportation Security Administration. The company was recently awarded a contract by Boeing [BA] to provide ground radars for the DHS Secure Border Initiative network program.
ICx has development contracts with DoD and the Department of Homeland Security and also sells to those organizations as well as to states and localities, systems integrators and international customers. Kobler said that ICx is beginning to eye larger opportunities than it has before that are in the range of $50 million to $100 million.
One of the reasons Kobler believes ICx will eventually return handsome profits is because the company will be able to charge a premium for its products as long as it maintains “technological leadership” in its market areas.
The company plans to continue to increase absolute spending levels on research and development although these numbers will drop as a percentage of sales, he said. R&D spending as a percentage of sales will be around 20 percent, he said.
The company’s contribution will be in the 6 to 8 percent range with government contracts making up the rest, he said.
ICx was built over the past few years through a series of small acquisitions. The company has been integrating its various business units over the past year and developing the ICx brand. Acquisitions will continue to be a staple of ICx’s growth, Kobler said. Ideal targets are companies with innovative technology and solutions that are too small to compete for large awards but don’t want to work for large firms like General Electric [GE] and Northrop Grumman [NOC], he said.