The Transportation Security Administration (TSA) this month awarded Implant Sciences Corp. [IMSC] a potential $162 million indefinite delivery, indefinite quantity contract to provide benchtop explosive trace detectors (ETDs) to the agency for passenger and baggage screening, the largest award in the company’s history and one it believes will provide opportunities for additional sales to other customers domestically and internationally.
The company has now “passed the inflection point” and “our trajectory is forever altered and we believe the company is now on a path to achieve grand new heights,” Glenn Bolduc, Implant’s CEO, tells investors Nov. 14 on the company’s third quarter earnings call.
Implant says that under the new contract it received an initial delivery order for 1,170 of its QS-B220 benchtop ETDs. A TSA spokeswoman tells HSR via an email response to questions that the order is valued at $21.6 million and contains an option for a second year warranty and additional consumables. However, she says there are no other options and that the ID/IQ contract is for one year and includes monies from fiscal years 2014, 2008, 2005 and 2004.
Bolduc says a “good part” of the order for the 1,170 units will be shipped in Implant’s current fiscal year, which ends in June 2015. The company reported $1.8 million in sales in its first quarter and with the TSA contracts sees more than $20 million for the fiscal year, he says.
Bolduc, however, says that the ID/IQ contract has options that could extend the contract into future years, although the number of years it can be extended for “is anyone’s guess.” He suggests that the $162 million potential says something about TSA’s needs and expects the new business to continue into the federal government’s fiscal year 2016, which begins on Oct. 1, 2015.
In addition to being put on TSA’s Qualified Products List for passenger and baggage screening—making the QS-B220 the first ETD with a non-radioactive source to be approved by the agency for this purpose—in early October the system was approved by European regulators for airport checkpoint screening passengers and bags.
The QS-B220 is the first ETD to be approved by regulators in both the U.S. and Europe for aviation security screening of passengers and bags, Bolduc says. He adds that it is also the only product approved in Europe for both aviation security and air cargo screening.
Bolduc says the TSA provides Implant with a stable revenue base and a foundation for additional growth. Moreover, he says the agency’s stamp of approval, which the company’s competitors have said in the past means “‘look no further than what TSA buys,’” means Implant is well positioned to attract additional business.
After several years of flat to declining sales for the overall ETD market, Bolduc says “transformational events” this year in Europe and the U.S. will propel a period of growth in the industry and also “shape our future.” These events include the European Civil Aviation Conference finalization of new performance standards for trace detection equipment and subsequent enactment by the European Union “that will significantly expand the use of trade detection equipment in European airports,” he says.
The TSA has also indicated it will be acquiring more ETDs, Bolduc says, which will also likely help “accelerate” the market. The TSA’s approval also opens up additional opportunities with the U.S. government such as the Defense and State Departments, Customs and Border Protection, and others.
He also says the company won about one-third of air cargo security screening sales in the past year, a “preview of what is coming as this industry enters a period of growing sales.”
Still, Bolduc says, the company has to win future business in competitive evaluations. Unlike in the U.S., where the TSA acquires the security equipment, in many countries the airports purchase the equipment, and each will host their own evaluations, so “some times it will take a little bit more time” to complete a competition. There is business, though, four “thousands of units” in the next few years, he adds.
In addition to the U.S. and Europe, Bolduc says the company has a strong pipeline of business opportunities in Asia, the Middle East and South America.
Prior to the TSA award, Implant’s largest previous awards include one with India in 2012 valued at around $6 million and another with China’s Railway Administration about six years ago that the company said at the time was worth multi-millions of dollars.
TSA typically competes the contract for ETDs for passenger and baggage screening on an annual basis with previous awards going either to Britain’s Smith Detection, or Morpho Detection, which is part of France’s Safran Group.