In the middle of establishing the infrastructure and necessary staffing for a turnkey screening services program in Mexico, not to mention operating a similar program at seaports in Puerto Rico, OSI Systems [OSIS] says it is ready to take on more of these kinds of projects.
The company has the infrastructure, management and leadership for new contracts that involve providing turnkey screening services to other customers, Deepak Chopra, OSI’s president and CEO, says on the company’s year-end earnings call.
Operations for the Puerto Rico Ports Authority are going “exceptionally well for us” and are “meeting internal projections,” says Alan Edrick, OSI’s chief financial officer. “But we are very, very pleased with the type of returns that have seen, have been consistent with what we had modeled, and we’d be happy to take on more of these projects as we win them going forward.”
Chopra says that the project in Puerto Rico is already profitable and that the company expects that the contract with Mexico’s customs authority will also make money. All phases of the Mexico project are on track, he says.
In its just completed fiscal year, OSI spent $7 million on establishing is screening and staffing infrastructure in Mexico and expects these costs to increase heading into FY ’13 as it installs more equipment and hires and trains more staff, Edrick says.
OSI expects to begin generating significant revenues from the Mexico contract in the second half of FY ’13. In February OSI said it expects the Mexico program to be worth $900 million over six years (HSR, Feb. 29).
For both projects in Mexico and Puerto Rico OSI’s Rapiscan security division is providing its screening equipment as well as staff to operate the equipment to scan cargo and vehicles. The company will be paid on a fee-per-scan basis, which is expected to give it a steady revenue stream, at least from these operations.
Benchmark Capital security and defense analyst Josephine Millward believes that OSI is establishing “strong credentials” with the projects in Puerto Rico and Mexico, which she says will help it with bids on other international turnkey screening projects.
American Science and Engineering [ASEI], a competitor of Rapiscan’s in the security detection equipment market, is planning to enter the turnkey screening services market as well (see story above).