The pandemic clipped the wings of many companies on this year’s Flying 40 list of fast-growing technology firms, slowing growth last year among awardees who struggled with economic fallout from the coronavirus.
The challenges continue in 2021. But the state’s high-flying tigers remain upbeat about their prospects going forward, and Flying 40 event organizers say this year’s celebratory event reflects the resilience demonstrated by New Mexico’s homegrown technology firms.
In most years, the annual awards, now in their 24th year, highlight rapid — and often spectacular — growth among the state’s technology companies over a five-year period. And, as usual, the 2021 Flying 40 reflects immense expansion in revenue and employees since 2016 for companies included on the list of honorees.
But this year, in addition to highlighting their yearslong growth, the 2021 annual event is celebrating the ability of Flying 40 awardees to “weather the storm” during the pandemic, said Sherman McCorkle, chairman and CEO of the Sandia Science and Technology Park
Development Corp., a principal sponsor and organizer of the annual awards.
“Our technology companies faced one helluva challenge this past year,” McCorkle said. “But they did a magnificent job of weathering the storm. They showed real resiliency.”
The Flying 40 awards, which launched in 1998, aim to celebrate the success of the homegrown firms included on the annual list, while also drawing the state’s attention to the critical role New Mexico’s technology sector plays in diversifying the local economy.
To be considered for inclusion, company growth is measured over five years, from 2016-2021.
Taken together, the 40 companies honored this year did report a huge jump in their revenue and workforce over the past five years, reaching a combined total of $1.017 billion in revenue and 4,940 employees in 2020.
That represents an 80% hike in income from 2016, when those same companies reported a combined total of $565 million in revenue. And it’s a 50% increase in their joint workforce, up from 3,291 people employed five years ago.
But year-over-year, combined revenue for 2020 among companies listed on the 2021 Flying 40 list is down by $143 million compared with last year, when the 2020 Flying 40 awardees collectively reported $1.16 billion in total revenue for 2019. In fact, in contrast to the 2021 awardees, last year’s Flying 40 saw their combined year-over-year revenue increase by $185 million, or 19%, between 2018 and 2019.
Of the 40 companies on this year’s list, nine firms did report significant year-over-year growth for 2020, despite the pandemic.
The engineering mammoth Applied Research Associates, which is the largest company in the Flying 40, reached $376.8 million in revenue and 1,348 employees in 2020. That’s up from $341.6 million and 1,128 employees in 2019.
Information technology firm ANM also grew its year-over-year revenue by 20% from 2019-2020. And Verus Research — a design, test and evaluation firm for high-power microwaves and nuclear engineering — grew its revenue by 50%.
But 20 of this year’s 40 honorees struggled in the pandemic, with 13 of them reporting a decline in revenue in 2020, and seven others registering just a modest increase, or, at best, flat performance last year.
The remaining 11 honorees on this year’s list include three newcomers to the Flying 40 — limiting year-over-year comparisons for them — plus eight Falcon Award recipients who don’t yet have the five-year history or the minimum $1 million in revenue needed to directly qualify for Flying 40 recognition.
Companies that reported revenue declines or flat performance in 2020 generally blamed the pandemic, which delayed customer orders and payments. Supply-chain interruptions also slowed their production and delivery of products and services.
Data analytics firm RS21, for example, reported a 16% drop in revenue, from $7.1 million in 2019 to $6.1 million last year, which president and CEO Charles Rath attributed to contract delays.
“Growth stalled somewhat in 2020, but not because demand for our digital-based data solutions dropped,” Rath told the Journal. “It’s because all organizations were figuring out what to do in the new reality of the pandemic, and that resulted in delayed deals.”
Those challenges particularly impacted many of the smaller firms on the Flying 40 list, which is divided into three categories of companies: Top revenue-producing firms independent of their annual financial growth, top revenue-growth companies with more than $10 million in annual income, and fast-growing firms with between $1 million and $10 million in revenue.
Of the top 10 companies in the below-$10 million category, six reported income declines in 2020, including RS21, which slid from the No. 1 spot on that list last year to No. 2 this year. In fact, the No. 1 company in the below-$10 million category this year, Goodman Technologies LLC, reported a 28% drop in revenue in 2020, from $1.8 million in 2019 to $1.3 million.
That company— which makes ceramic, metal, polymer and other composite materials engineered to withstand harsh environments — topped the list because its revenue for the five-year period from 2016-2020 grew by nearly 5,000%, up from just $27,000 during its first full year of operations in 2016, when the company launched.
Goodman received a Falcon Award in 2020, because until this year, it didn’t have the full five years of data needed to measure growth for a Flying 40 award.
Last year, however, the pandemic undermined normal company operations, delaying delivery of critical supplies and equipment needed to produce high-tech materials, and at times blocking the firm’s access to third-party labs for testing and evaluation due to business lockdowns, said Dr. Bill Goodman, president and CEO.
“It got down to where I was concerned the company could become insolvent,” Goodman told the Journal. “It went right to the edge, but I applied for PPP (Paycheck Protection Program) assistance. It was less than $50,000, but it allowed us to stay solvent.”
Even companies that grew their revenue last year said the pandemic significantly stunted their expansion. At Verus Research, for example, supply-chain problems, limited ability to meet directly with customers, and challenges in hiring qualified employees for new positions offset growth, said Managing Director Hank Andrews.
“The pandemic affected some of our contracts,” Andrews told the Journal.
Many pandemic-related challenges continue this year, particularly supply-chain interruptions, and, since last spring, an inflationary spiral for most goods and services is impacting the bottom line at many companies.
But most Flying 40 firms are upbeat about the future, having weathered the worst of the pandemic’s impacts. And many say they’re growing much faster this year compared with 2020.
In fact, despite the small drop in total combined Flying 40 revenue this year compared with 2020, overall, 2021 awardees expanded their joint workforce by 5% last year, from 4,692 employees in 2019 to 4,940 in 2020, said Randy Wilson, chief financial officer for the Sandia Science and Technology Park Development Corp.
In addition, it’s unclear how much the pandemic actually accounts for last year’s overall $143 million drop in revenue, because some top-revenue companies included on the Flying 40 for many years opted not to participate this year, skewing the numbers between the 2020 and 2021 awardee lists, Wilson said. That includes Affordable Solar, Positive Energy Solar, and Applied Technology Associates, which together accounted for $229 million in combined Flying 40 revenue on last year’s list.
“The collection of companies in the Flying 40 is not the same each year, because some come and go,” Wilson said. “Affordable Solar and Applied Technology Associates didn’t apply for inclusion this year, and those are big-dollar companies.”
The pandemic clearly did impact firms participating in the 2021 Flying 40, but even so, all the companies managed to adapt and pull through.
“They clearly encountered challenges, but in general that caused a slowdown, not a downturn,” Wilson said. “… It’s the collective impact that these companies continue to have on the state economy that’s important. Together, they’re contributing over $1 billion directly to our economy each year and employing nearly 5,000 people.”