Henry Bros. struggles through 2009, but sees light on horizon for 2010

Tuesday, March 16, 2010

FAIR LAWN, N.J.—Two-thousand-eight was a banner year for Henry Bros. Electronics. The company turned a profit for the first time in years, grew its revenues eight percent, and was ranked 32 by Fortune Magazine on its list of the fastest growing small public companies.

Emboldened by 2008’s performance, CFO John Hopkins provided guidance to investors for growth of as much as 29 percent, to near $80 million.

However, 2009 was as tough on Henry Bros. as it was on many companies. By year’s end, revenues had actually shrunk by 11 percent, to $55 million, and, said CEO Jim Henry, “our business continues to suffer from a protracted recessionary climate. It’s deeper and longer than many of us expected.”

Henry does not believe the company is mortally wounded, though. “We still operate in a significant and growing field,” he said, “and while many of our peers have seen their business simply go away, ours has mostly slipped further out.”

Henry’s opinion is that the sales cycle has simply gotten longer, rather than the buys not happening at all. For evidence, he points to his backlog. “Our bookings were on par with 2008’s bookings,” he said. “Now we’re $4.3 million higher than we were at the end of 2008. Seven-point-two million didn’t flow through—those jobs were pushed farther out ... Our core business is still strong, but the cycle has doubled or tripled.”

He also points to good signs. For example, the company’s gross margin was up four tenths of a point in 2009, and the company’s emphasis on recurring revenue and service is just starting to take hold, emboldened by a new software piece the company has developed that will grow service revenue.

Saying that Henry Bros. believes a market bottom is a good time to invest, Henry also noted the company increased sales and general administration expenses by $2.2 million in 2009. “We invested in training and brought in computerized monitoring software, the Heart program, which is important as we increase the recurring revenue we capture,” he said, noting the company did about 10 percent of its revenues in service in 2009.

“The services business is becoming more intellectual rather than just alarm monitoring,” Henry said. “I do see that we’re going to increase the white collar nature of what we do in the complexity of our systems we install and the assessment of compliance with regulations that we provide.”

Because of these investments and his reading of the market, “we are comfortable in saying we’ll be profitable in 2010, and will increase our revenues over 2009,” Henry said.