WOBURN, Mass.—Traditionally focused primarily on providing customers with detection equipment to screen for explosives and other threats, L3 Technologies [LLL] Security & Detection Systems (SDS) unit is beginning to expand its offerings to a broader solutions set that relies heavily on software that networks sensors and other equipment to provide operators and authorities a wide range of valuable information to enhances operations and processes, says Tom Ripp, president of L3 SDS.
Ripp says L3 SDS will always provide and acquire “the best-in-class product … but we’ll also focus on buying and providing, and developing internally, the capabilities to provide a broader base solution to the market. And that’s what we’re doing now.” He adds that, “It may be just in its infancy in terms of catching on, but customers, airports, regulators, are asking for a broader solution and they’re asking us to do more than provide product.”
A key ingredient to this new focus that goes well beyond its sensor business was the acquisition last November of United Kingdom-based MacDonald Humfrey (MacH), whose most visible product in the security environment are automated bin return and traveler divestment systems that are used with X-Ray systems at airport checkpoints to improve passenger processing and speed throughput. But Ripp says MacH is more valuable than the hardware it provides.
The company offers a suite of software products that link any manufacturer’s sensors and other systems at the checkpoint, including boarding pass scanners and CCTV, to collect and analyze data and create operational efficiencies. That software allows for extensive reporting and other capabilities such as management, throughput, compliance, training and the collection of other operational data that enables cost savings and optimized staffing levels, Ripp and other SDS executives tell HSR in a recent interview at the company’s headquarters.
“And I think the MacH acquisition was a cornerstone of that capability and that thrust for us because very quickly, with an acquisition, we gained the capability right now tying all the checkpoint pieces of equipment together into a solution to provide other capabilities besides just detection,” Ripp says. “So we suddenly had this capability that was borne out of their process ingenuity grown in the automotive industry. And if there is one thing I can say that I’m hearing consistently from every customer set we have, it’s help us do what we do more efficiently.”
The U.S. Transportation Security Administration (TSA), working with airlines, has deployed the MacH automated passenger divestment stations and bin return systems at several airports and has seen immediate improvements in passenger throughput exceeding 30 percent. These TSA Innovation Lane enhancements have also including using the MacH software in the screening systems, giving the agency immediate access to information that it didn’t have before, Ripp says.
The MacH software also can network with other security equipment such video systems used for perimeter surveillance and access control systems to provide a more holistic security picture, Ripp says.
L3 has had its own security management software that it has sold to customers previously, but the applications have been limited. For example, the company provides eXaminer reduced-size, medium and high-speed explosives detection systems (EDS) to customers worldwide for screening checked baggage at airports and typically networks the sensors for improved efficiencies. Ripp says the MacH software, combined with L3 SDS’ existing capabilities, will take that to a higher level, with near-term possibilities allowing for centralized remote screening of passengers and their carry-on bags at checkpoints and of checked bags.
Eventually, Ripp says, networking sensors together combined with new technologies destined for the checkpoint such as computed tomography EDS systems that automatically alert for explosives in carry-on bags will lead to much faster passenger throughputs.
Security Management Project for CBP
L3 is using its legacy open architecture security management solutions in a pilot project for U.S. Customs and Border Protection (CBP) to network the agencies inspection systems at several seaports and an airport to provide centralized remote screening and useful data for training and reporting across the enterprise, Ripp says.
“It’s a scalable platform of secured network applications that provides a common user interface to a wide range of sensor types from multiple manufacturers in the security and detection environment,” Ripp says. “It creates a single portal to access a range of technologies, including X-Ray scanners, radiation portals, license plate readers, CCTV, access control systems, and customer databases. It operates independently of the hardware, and will allow algorithms and data analytics to be leveraged in a common and consistent manner across the enterprise.”
Ripp says that CBP is looking to grow this capability across its operations and tie it with other information to strengthen situational awareness around threats.
“It really is going to help them reduce the operating costs of providing and implementing their mission for the scanning of goods coming into the United States,” he says. “At the end of the day this is all about helping them improve their processing.”
The additional data and intelligence L3 SDS will get from its strengthened security information system suite of software products will allow the company to also expand its business models from traditional product and service sales to more service-based market initiatives that give customers more options, Ripp says.
In addition to EDS systems for checked baggage screening, L3 SDS has sold thousands of its ProVision people scanners and explosives trace detection (ETD) systems to customers worldwide, including TSA. The ETD business was acquired late last year from Implant Sciences, filling a gap in the company’s product portfolio.
Ripp’s unit, along with the company’s competitors, is also developing a CT-based system for screening carry-on bags at checkpoints and he expects TSA to begin testing its ClearScan system at an airport in the coming months. More than a dozen ClearScan units are already in operations at several airports worldwide, he says.
L3 SDS also sells cargo inspection equipment to international customers and is eyeing CBP’s new procurement program for replacing legacy Radiation Portal Monitors that screen containers arriving in the U.S. for potential radiological threats.
Following its acquisitions of Implant and MacH last year, L3 said that its SDS business would be going from $370 million in sales to over $500 million this year. The company doesn’t typically break out is revenue by business unit so the disclosure was a rare peek into SDS’ top line.
Publicly traded companies in the security and detection space have typically reported lumpy revenue streams over the years, with large orders and contracts one year followed by a dearth of business opportunities the next. Ripp says that SDS’ broad product portfolio and split between domestic and international business has helped even out its sales results from year to year.
Growth Opportunities
While Ripp declined to provide a revenue outlook for SDS, he says that the business is growing, including organically. He highlighted the company’s EDS product line, which has been a core business for SDS.
The TSA continues to recapitalize a portion of its installed base of EDS systems, spending millions of dollars each of the past two years buying medium-speed systems from L3 and its competitor Morpho Detection, which is now part of Britain’s Smiths Group. Ripp points out that in Europe, most of the airports still need to upgrade from X-Ray systems used to screen checked bags to the EDS systems in order to meet threat detection requirements over the next three to five years, “so there’s a big market out there” for the EDS systems.
There are more sales opportunities for U.S. and international customers for the ProVision system as well, he said, including for critical infrastructure protection.
Going forward, Ripp sees growing opportunity for SDS’ networked solutions and services.
“The future, we believe, is in the service model, and in providing a broader range of solutions, not just products, we will always provide products, but we want to provide solutions to the customers and to the customer base,” he says. “And we think that’s what they’re asking us for. That’s what they’re pulling us to do. And so we’re preparing to do that.”
Mergers and acquisitions will remain a part of the SDS growth and business strategy, Ripp says. Technologies and products around things like biometrics, video, perimeter security, and software are among the product categories that SDS is interested in, he says, adding that these capabilities could be obtained in various ways, including acquisitions and partnerships.
Ripp and his team also outlined a number of technology improvements that are planned for all of the company’s detection products. For example, prior to acquiring the ETD product line, Implant was already working to expand the capabilities and applications of its trace products and that will continue, Ripp says.
The ProVision Advanced Imaging Technology scanners are undergoing a technology upgrade to improve system performance, company officials say.