Henry Bros. financials for 1Q

First quarter numbers are coming in throughout the industry (I'll have Mace later). Here's how one of our few public integrators did: Eh.
Henry Bros. Electronics, Inc. Reports First Quarter 2009 Results FAIR LAWN, N.J., May 14 /PRNewswire-FirstCall/ -- Henry Bros. Electronics, Inc. (NASDAQ:HBE) , a turnkey provider of technology-based integrated electronic security solutions, today announced results for the first quarter ended March 31, 2009. The Company reported revenue of $15.3 million for the first quarter of 2009, representing a 3.8% decrease over revenue of $15.9 million for the same period a year ago. The slight decrease in revenue in the recent first quarter is primarily due the winding down of work completed on contracts for several large public agencies in the New York Metropolitan area, as well as a decline in revenue from the Company's Arizona and California operations. Partially offsetting these declines was an increase in revenue from the Company's Colorado and Virginia operations and revenue recorded under the Tactical Video Capture System ("TVCS") contract with L-3 Communications.
So, down, but not badly down, even in a brutal quarter that crushed any number of businesses. But this makes sense to me, considering that these are primarily long-term jobs that wouldn't just go away because the economy's in the tank. The effects of that 1Q will probably be felt late this year, early next year, when the pipeline is dry because nothing new was generated (that's just a guess, obviously).
The Company reported net income of $166,122 or $0.03 per diluted share, for the first quarter ended March 31, 2009, compared to net income of $283,957, or $0.05 per diluted share, in the comparable period of 2008. The Company's decrease in net income is principally the result of higher personnel related costs as part of a strategic growth initiative to increase the sales force by 62%. This initiative was implemented in order to take advantage of an anticipated increase in security spending related to public projects and the expansion of the Company's footprint into Houston, Texas and Grand Junction, Colorado.
Earning $166,000 on $15.3 million in sales is living dangerously. That's roughly a net margin of 1.1 percent. Thin.
The Company's backlog as of March 31, 2009 was $20,133,794, compared to $22,404,437 at March 31, 2008. The aforementioned work completed on several large public agency jobs in the New Jersey / New York area during the year ended December 31, 2008 is the primary factor in the decline in the backlog, partially offset by the L-3 Contract bookings.
The backlog's down, but not overwhelmingly so. That L-3 deal is big, obviously.
Jim Henry, CEO of Henry Bros. Electronics, commented, "While the revenue and net income that we generated during the first quarter was down slightly from last year's comparable period, bookings were in line with the prior year's quarter of $11.7 million and the proposal dollar volume doubled in the first quarter of 2009 versus the prior year. In addition, we have undertaken several reinvestment initiatives in the last several months including the expansion of our geographic footprint, an increase in sales staff, and the introduction of new products and services. Our management team and Board take pride in our ability to effectively anticipate and react accordingly to changes. This was true before the current recession when we curtailed spending and increased system efficiencies, and is true now as we increase staff to prepare for the anticipated project growth in our industry."
Well, if you invest in increasing your sales staff by almost 70 percent, I hope the bookings are at least flat and the proposals are almost doubled. Otherwise, you've just increased your people spend without getting anything in return. I'm not sure that's a good sign, even with the bad 1Q.
Henry continued, "As the new administration prepares to increase spending in areas in which our company has cultivated a strong operational expertise, we have worked to ensure that we have the right regional teams in place to effectively compete for these large infrastructure projects. This increased push to capture a significant number of these jobs is against the backdrop of the very successful management of our TVCS project, which began in October 2008. We strongly believe that our continuing work with several large municipalities and government organizations, coupled with our strong performance with the TVCS project, puts us in a very good position to increase our capture rate of projects related to the integrated security needs of the government as they look to improve our nation's infrastructure. For these reasons we are reiterating our guidance for a 6% operating margin on consolidated revenue of $80 million in 2009".
That operating margin seems awful low to be sustainably profitable. I'm assuming that's taking into account the investments in people and geography and 2010 will be aiming higher.