To view this site you need Adobe Flash Player and your browser must allow javaScripts. Go here to get the latest Flash Player. MARKET MONITOR ICx grows despite market turbulence BY PHILIP FINNEGAN ICX TECHNOLOGIES, BASED IN ARLINGTON, VA., IS ONE OF THE MORE DYNAMIC HOMELAND SECURITY COMPANIES AND HAS MANAGED TO SURMOUNT TOUGH CHALLENGES DURING THE TURBULENT PERIOD IN WHICH IT BECAME A PUBLICLY TRADED COMPANY. THIS HAS ALLOWED IT TO WIN KEY COMPETITIONS. The current worldwide economic crisis has led ICx to shift its strategy for now, but it continues to perform on recent, large contract wins, executing on its backlog and driving into international markets. This promises to enable it to continue to grow at 15 percent to 20 percent this year, Hans Kobler, the company executive chairman and cofounder, told Homeland Security Today in an interview. By 2010, Kobler anticipates that the company will be back at an organic growth rate of more than 30 percent annually. The company’s management projects that its earnings before profit, taxes, depreciation and amortization (EBITDA) in 2009 will be positive. ICx reported a $7.6 million adjusted EBITDA loss on sales of $171.7 million in 2008. ICx made its initial public offering (IPO) in November 2007 as the stock market was being pounded downward. The company’s IPO was one of the last before virtually all such offerings ended in the face of market turmoil. CX IS ACTING AS THE I PRIME CONTRACTOR IN DEVELOPING AN ADVANCED TOOL KIT TO RESPOND TO FUTURE CHEMICAL, BIOLOGICAL, RADIOLOGICAL, NUCLEAR AND EXPLOSIVE THREATS. ICx has a precedent for this aggressive growth. It was originally put together from 20 different companies. Venture capital financed the creation of a unified company that was used to merge complementary technologies and derive marketing synergies. Even after the downturn hit, ICx managed to maintain high organic revenue growth rates, reaching 30 percent growth in six of the last seven quarters. Overall, growth in 2008 was 26 percent, rather than the 30 percent originally anticipated in the plan. The company now anticipates it can maintain 15 percent to 20 percent organic growth, demonstrating that ICx serves markets relatively untouched by the economic downturn. Its primary sales are to governments. Yet the market itself offers new challenges with the rapid decline in commercial security sales, Kobler said. As a result, the company has been aggressively cutting costs, reducing its workforce by more than 70 people in 2008. Additional cuts already have been executed this year. The company’s high research and development spending has been cut and is focused on bringing products quickly to market. A rough ride It has not been an easy ride for the company’s stock, which traded as high as $15.50 in November 2007, but dropped to about $4.50 in the middle of April. At times, it plunged by as much as 30 percent in a single day. This market downturn led the company’s management to revise its growth strategy away from the extremely ambitious targets set when it anticipated it could use its stock to make acquisitions, Kobler said. Originally, executives anticipated it could grow 20 percent annually through acquisitions, with another 30 percent annual growth coming from organic growth. Liberty, its technologies are used to provide advanced perimeter surveillance, people screening, access control and command and control. At the Pentagon, it provides air monitoring, biological threat identification, chemical monitoring and access control. At Hoover Dam, it provides advanced perimeter surveillance, integrated command and control and explosives detection. The Customs and Border Protection directorate of the Department of Homeland Security uses its products to guard the border with Mexico. Despite the market downturn, the company has managed to win programs that are significantly larger than those it has won in the past. Under the J2 program, ICx is acting as the prime contractor in developing an advanced tool kit to respond to future chemical, biological, radiological, nuclear and explosive threats. The initial $20 million development program could ultimately be worth $700 million should the system actually move into deployment. ICx beat major US defense prime contractors to win the program. In another important victory, ICx won a three-year, $9.4 million contract to act as lead technology integrator for the Joint Force Protection Advanced Security System program to provide networked force protection. ICx will be integrating some of its own sensor technologies along with other manufacturers’ technologies, including perimeter-security detectors, chemical, biological, radiological and nuclear sensors, and mobile sensors on unmanned and manned platforms. Despite its success with some potentially large contracts, ICx continues to focus on teaming with larger companies, rather than competing with them. The company’s pursuit of international sales is being sharpened, as well. While competitors derive 30 percent to 50 percent of their sales overseas, ICx does only 10 percent of its sales in international markets. The company is addressing that by increasing its marketing staff overseas. HST PHILIP FINNEGAN is the director of corporate analysis at the Teal Group; a firm based in Fairfax, Va., that provides strategic and market analysis to major corporations. He can be reached at pfinnegan@ tealgroup.com. Program involvement ICx is already involved in a number of high profile security programs. At the Statue of Register online today for exclusive online content and eNewsletters Homeland Security Today Magazine | June 2009 21