FARO Reports First Quarter 2019 Financial Results
PR Newswire

LAKE MARY, Fla., May 1, 2019 /PRNewswire/ -- FARO® (NASDAQ: FARO), the world's most trusted source for 3D measurement and imaging solutions for 3D manufacturing, construction BIM, 3D design, public safety forensics, and photonics applications, today announced its financial results for the first quarter ended March 31, 2019.

"We continue to drive top line growth with new product introductions, as well as with expansion and improvements to our global sales organization," stated Dr. Simon Raab, President and Chief Executive Officer.  "Our first quarter 2019 sales increased 1 percent with orders up 5 percent, which included a 4 percent negative impact from foreign exchange rates year-over-year.  Our construction BIM and emerging vertical segments performed well by leveraging our sales headcount investments and new products in highly unaddressed market opportunities, with orders up 17 percent and 46 percent year-over-year, respectively.  However, our 3D manufacturing segment orders declined by 5 percent due to a short-term sales disruption resulting from the reorganization of its sales force into multiple application portfolios and higher sales headcount turnover in the quarter.  Due to the new product introductions over the last year and breadth of our product offerings, a restructuring of the sales force was needed to help ensure all products were adequately represented.  While disruptive in the short-term, we believe that it will help us to achieve continued high growth rates and increased sales force efficiencies.

Our 2019 business initiatives are focused on increasing profitability with early success showing profit in all segments this quarter.  We continued our increase in gross margin toward our 60 percent long-term objective by reaching 58.8 percent in the quarter due to our service margin improvements.  We decreased selling and marketing expense as a percent of sales year-over-year, and controlled R&D spending below fourth quarter 2018.  We were very pleased to announce that Michael Burger will assume my duties as President and CEO starting June 17th.  We are focused on a successful leadership transition and are confident that Michael shares our drive and focus on technology leadership and increased profitability towards our long-term objectives of building and leading the 3D information revolution."

Total sales were $93.6 million for first quarter 2019, up 0.8% as compared with $92.8 million for first quarter 2018.  Foreign exchange rates had a negative impact on sales of $4.0 million, decreasing our overall sales growth rate by approximately 4.3 percentage points.  Our sales increase was primarily driven by service revenue growth and an increase in product unit sales in our construction BIM and emerging vertical segments, offset partially by a decrease in product unit sales in our 3D manufacturing segment.

Our new order bookings were $100.7 million for first quarter 2019, up 4.8% as compared with $96.1 million for first quarter 2018.   With our trailing 12 months new order bookings of $429.9 million and our trailing 12 months sales full-time experienced ("FTE") headcount of 612, our trailing 12 months orders per sales FTE metric was approximately $703,000, up from $698,000 in first quarter 2018.

Gross margin was 58.8% for the quarter, up 0.9 percentage points as compared with 57.9% in the same prior year period, reflecting an increase in our service margin from double-digit revenue growth and improved efficiencies in our customer service repair process.

Operating income was $0.4 million for first quarter 2019, as compared with $0.7 million for the first quarter last year.  Operating margin was 0.4% for first quarter 2019, down 0.3 percentage points as compared with first quarter 2018.  Our operating expenses for first quarter 2019 included aggregate incremental general and administrative expenses of $1.8 million related to our Chief Executive Officer succession, and the advisory fees incurred during the quarter in connection with our previously disclosed matter related to General Services Administration Federal Supply Schedule contracts (the "GSA Matter").

Net income for first quarter 2019 was $0.2 million or $0.01 per share, as compared with $0.5 million or $0.03 per share in the first quarter last year.

The company continues to maintain its strong capital structure with high liquidity and no debt.  As of March 31, 2019, cash and short-term investments totaled $135.5 million.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties, such as statements about demand for and customer acceptance of FARO's products, FARO's product development and product launches, FARO's growth, strategic and continuous improvement initiatives and FARO's growth potential. Statements that are not historical facts or that describe the Company's plans, objectives, projections, expectations, assumptions, strategies, or goals are forward-looking statements.  In addition, words such as "is," "will" and similar expressions or discussions of FARO's plans or other intentions identify forward-looking statements. Forward-looking statements are not guarantees of future performance and are subject to various known and unknown risks, uncertainties, and other factors that may cause actual results, performances, or achievements to differ materially from future results, performances, or achievements expressed or implied by such forward-looking statements. Consequently, undue reliance should not be placed on these forward-looking statements.

Factors that could cause actual results to differ materially from what is expressed or forecasted in such forward-looking statements include, but are not limited to:

  • the results of the Company's and its outside legal counsel's review of the GSA Matter; the outcome of the U.S. Government's review of, or investigation into, the GSA Matter; any resulting penalties, damages, or sanctions imposed on the Company and the outcome of any resulting litigation to which the Company may become a party; loss of future government sales; and potential impacts on customer and supplier relationships and the Company's reputation;
  • development by others of new or improved products, processes or technologies that make the Company's products less competitive or obsolete;
  • the Company's inability to maintain its technological advantage by developing new products and enhancing its existing products;
  • declines or other adverse changes, or lack of improvement, in industries that the Company serves or the domestic and international economies in the regions of the world where the Company operates and other general economic, business, and financial conditions;
  • the impact of fluctuations in foreign exchange rates; and
  • other risks detailed in Part I, Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.

Forward-looking statements in this release represent the Company's judgment as of the date of this release. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, unless otherwise required by law.

About FARO

FARO is the world's most trusted source for 3D measurement and imaging solutions. The Company develops and markets computer-aided measurement and imaging devices and software for the following vertical markets:

  • 3D Manufacturing - High-precision 3D measurement, imaging and comparison of parts and complex structures within production and quality assurance processes
  • Construction BIM - 3D capture of as-built construction projects and factories to document complex structures and perform quality control, planning and preservation
  • Public Safety Forensics - Capture and analysis of on-site real world data to investigate crash, crime and fire events, plan security activities and provide virtual reality training for public safety personnel
  • 3D Design - Capture and edit 3D shapes of products, people, and/or environments for design purposes in product development, computer graphics and dental and medical applications
  • Photonics - Develop and market galvanometer-based laser measurement products and solutions

FARO's global headquarters is located in Lake Mary, Florida.  The Company also has a technology center and manufacturing facility consisting of approximately 90,400 square feet located in Exton, Pennsylvania containing research and development, manufacturing and service operations of our FARO Laser Tracker and FARO Tracer Laser Projector product lines.  The Company's European regional headquarters is located in Stuttgart, Germany and its Asia-Pacific regional headquarters is located in Singapore. FARO has other offices in the United States, Canada, Mexico, Brazil, Germany, the United Kingdom, France, Spain, Italy, Poland, Turkey, the Netherlands, Switzerland, India, China, Malaysia, Thailand, South Korea, Japan, and Australia.

More information is available at http://www.faro.com

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)



Three Months Ended

(in thousands, except share and per share data)

March 31, 2019


March 31, 2018

Sales




Product

$

68,800



$

70,581


Service

24,817



22,253


Total sales

93,617



92,834


Cost of Sales




Product

26,128



26,884


Service

12,470



12,164


Total cost of sales (exclusive of depreciation and amortization, shown separately below)

38,598



39,048


Gross Profit

55,019



53,786


Operating Expenses




Selling and marketing

26,753



28,271


General and administrative

13,224



11,073


Depreciation and amortization

4,749



4,343


Research and development

9,935



9,406


Total operating expenses

54,661



53,093


Income from operations

358



693


Other expense (income)




Interest income, net

(144)



(73)


Other expense, net

195



184


Income before income tax expense

307



582


Income tax expense

155



127


Net income

$

152



$

455


Net income per share - Basic

$

0.01



$

0.03


Net income per share - Diluted

$

0.01



$

0.03


Weighted average shares - Basic

17,280,365



16,837,754


Weighted average shares - Diluted

17,868,816



17,142,770


 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands, except share and per share data)

March 31, 2019

(unaudited)


December 31,
2018

ASSETS




Current assets:




Cash and cash equivalents

$

110,696



$

108,783


Short-term investments

24,831



24,793


Accounts receivable, net

76,237



88,927


Inventories, net

74,586



65,444


Prepaid expenses and other current assets

24,210



28,795


Total current assets

310,560



316,742


Property and equipment:




Machinery and equipment

80,586



76,048


Furniture and fixtures

6,141



6,749


Leasehold improvements

20,311



20,304


Property and equipment at cost

107,038



103,101


Less: accumulated depreciation and amortization

(76,188)



(72,684)


Property and equipment, net

30,850



30,417


Operating lease right-of-use asset

18,876




Goodwill

71,097



67,274


Intangible assets, net

29,507



33,054


Service and sales demonstration inventory, net

38,351



39,563


Deferred income tax assets, net

14,696



14,719


Other long-term assets

4,416



4,475


Total assets

$

518,353



$

506,244


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

14,351



$

20,093


Accrued liabilities

31,389



36,327


Income taxes payable

3,747



5,081


Current portion of unearned service revenues

34,189



32,878


Customer deposits

2,847



3,144


Lease liability

6,446




Total current liabilities

92,969



97,523


Unearned service revenues - less current portion

16,319



15,505


Lease liability - less current portion

14,363




Deferred income tax liabilities

2,541



736


Income taxes payable - less current portion

12,247



12,247


Other long-term liabilities

3,326



3,624


Total liabilities

141,765



129,635


Shareholders' equity:




Common stock - par value $.001, 50,000,000 shares authorized; 18,731,586 and 18,676,059 issued,
respectively; 17,317,875 and 17,253,011 outstanding, respectively

19



19


Additional paid-in capital

252,840



251,329


Retained earnings

175,178



175,353


Accumulated other comprehensive loss

(20,047)



(18,483)


Common stock in treasury, at cost; 1,413,711 and 1,423,048 shares, respectively

$

(31,402)



$

(31,609)


Total shareholders' equity

$

376,588



$

376,609


Total liabilities and shareholders' equity

$

518,353



$

506,244


 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)



Three Months Ended

(in thousands)

March 31, 2019


March 31, 2018

Cash flows from:




Operating activities:




Net income

$

152



$

455


Adjustments to reconcile net income to net cash provided by (used in) operating
activities:




Depreciation and amortization

4,749



4,343


Stock-based compensation

2,564



1,553


(Recoveries) provisions for bad debts, net

(100)



24


Loss on disposal of assets

57



127


Provision for excess and obsolete inventory

896



312


Deferred income tax expense (benefit)

8



(128)


Change in operating assets and liabilities:




Decrease (Increase) in:




Accounts receivable

12,410



1,808


Inventories

(10,908)



(5,208)


Prepaid expenses and other current assets

4,463



(936)


(Decrease) Increase in:




Accounts payable, accrued liabilities, and lease liability

(9,172)



(4,846)


Income taxes payable

(1,323)



(2,571)


Customer deposits

(310)



(213)


Unearned service revenues

2,324



1,231


Net cash provided by (used in) operating activities

5,810



(4,049)


Investing activities:




Purchases of property and equipment

(1,543)



(2,243)


Payments for intangible assets

(529)



(650)


Acquisition of businesses



(3,966)


Net cash used in investing activities

(2,072)



(6,859)


Financing activities:




Payments on finance leases

(90)



(46)


Payments of contingent consideration for acquisitions

(250)




Payments for taxes related to net share settlement of equity awards

(1,138)




Proceeds from issuance of stock related to stock option exercises

292



6,785


Net cash (used in) provided by financing activities

(1,186)



6,739


Effect of exchange rate changes on cash and cash equivalents

(639)



2,035


Increase (decrease) in cash and cash equivalents

1,913



(2,134)


Cash and cash equivalents, beginning of period

108,783



140,960


Cash and cash equivalents, end of period

$

110,696



$

138,826


 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)



Three Months Ended

(in thousands)

March 31, 2019


March 31, 2018

Net income

$

152



$

455


Currency translation adjustments

(1,564)



5,214


Comprehensive (loss) income

$

(1,412)



$

5,669


 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED SUPPLEMENTAL DATA




Three Months Ended

(sales in thousands)


Q1 2019
Sales


Q1 2018
Sales


% Change

Reporting Segments







3D Manufacturing(1)


$

56,567



$

60,657



(6.7)

%

Construction BIM(2)


25,440



22,682



12.2

%

Emerging Verticals(3)


11,610



9,495



22.3

%

Total


$

93,617



$

92,834



0.8

%


(1) The 3D Manufacturing reporting segment contains solely our 3D Manufacturing vertical.

(2) The Construction BIM reporting segment contains solely our Construction BIM vertical.

(3) The Emerging Verticals reporting segment includes our 3D Design, Public Safety Forensics, and Photonics verticals.

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED SUPPLEMENTAL DATA



New Order
Bookings

(in millions)


Ending
Sales
Headcount


Sales FTE
Headcount(1)


Trailing 12 Months
Sales FTE
Headcount(1)


Trailing 12 Months
Orders per Sales FTE
(in thousands)(1)

Q2-16

$81.6


468


424


419


$782

Q3-16

$79.8


507


435


424


$790

Q4-16

$95.8


536


454


432


$766

Q1-17

$86.9


593


486


450


$765

Q2-17

$89.0


627


516


473


$743

Q3-17

$90.5


635


548


501


$723

Q4-17

$110.6


631


568


530


$711

Q1-18

$96.1


653


581


553


$698

Q2-18

$106.5


672


591


572


$706

Q3-18

$100.5


707


604


586


$706

Q4-18

$122.2


733


621


599


$710

Q1-19

$100.7


737


633


612


$703


(1) Sales full-time experienced ("FTE") is a metric whereby sales headcount is measured as a time-weighted average with the first year contribution of a new employee discounted by an experience factor.

 

 

Cision View original content:http://www.prnewswire.com/news-releases/faro-reports-first-quarter-2019-financial-results-300842109.html

SOURCE FARO Technologies, Inc.

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