Henry Bros. CEO sees second year of rapid growth as validation

Thursday, March 23, 2006

SADDLE BROOK, N.J.--Henry Brothers Electronics, a systems integrator trading on the American Stock Exchange, reported 42-percent growth YTD for the year ended Dec. 31, 2005, with revenues of $42.2 million. With a current backlog of $16 million in business, Henry Bros. is forecasting 2006 revenues of $45 million to $48 million, with an operating margin of six percent.
This represents the second straight year of more than 40-percent growth. The company is now roughly four times larger than when it went public in 2001 as Diversified Security Solutions. Henry Brothers reverted back to its original name in August of 2005.
Chairman and chief executive officer James Henry, son of one of the company's three founding brothers, sees this two-year growth as validation. "I think we've fulfilled the vision that we had when we went public," Henry said. "I think we've adapted to the pace of homeland funding and budgeting that the private sector has been wrestling with. A lot of companies jumped into our market expecting all this low hanging fruit and it just wasn't to be. We've paced our growth and managed our growth to strike a good balance."
Henry noted that the company launched as an $11 million operation in 2001, grew by acquisition to $18 million in 2002, then remained flat in 2003. "We anticipated a big growth in homeland spending and built our overhead accordingly," he said, "and it didn't happen." He said initial government spending after Sept. 11, 2001, was largely in guarding and consulting. Then, in 2004, Henry Brothers saw the money come to integration.
"We were patient through '03," Henry said, "Then we went from $18 million to $29 million in '04, and then you see what we did this year. A lot of that success was seeds that were being planted back then. There are a lot of seven-figure jobs out there that weren't around before, and they have longer gestations."
"What we've seen is a sign of a wise choice in '03 to not just manage with a rearview mirror. If you don't manage with some vision and gut as to where the market is going, you're going to be in trouble."
Henry has no illusions about sustaining this rate of growth, nor does he see his company growing to challenge the industry's integration monoliths. Rather, he sees Henry Bros. looking "to team with those people. We're built to be able to handle $10 to $15 million jobs; some are coming out now at $250 million. We can't go after those. But the big guys need expertise, sometimes they need access to products they don't have, relationships with customers they don't have. I see more and more a partnering and teaming with those billion-dollar giants."