FARO Reports Third Quarter 2017 Financial Results
LAKE MARY, Fla., Oct. 26, 2017 /PRNewswire/ -- FARO(®) (NASDAQ: FARO), the world's most trusted source for 3D measurement and imaging solutions for factory metrology, construction BIM-CIM, product design, public safety forensics and 3D machine vision, today announced its financial results for the third quarter and nine months ended September 30, 2017. The third quarter of 2017 was the first quarter following the completion of FARO's Going Vertical in Harmony (GVH) initiative; and the improvement in new order bookings, sales, gross margin and profitability reinforces FARO's commitment to its strategic objectives.
Third Quarter 2017
New order bookings for third quarter 2017 were $90.5 million, an increase of 13.4%, compared with $79.8 million for third quarter 2016. Sales increased to $90.3 million, an increase of 13.4%, for the three months ended September 30, 2017 from $79.6 million for the three months ended September 30, 2016. The sales increase was driven by a strong increase in product unit sales in our Construction BIM-CIM and Other segment which includes the Public Safety Forensics and Product Design verticals, higher average selling prices, and continued service revenue growth.
Gross margin for third quarter 2017 increased to 57.7%, compared with 53.6% for the third quarter last year. The increase was related primarily to the introduction of our technically advanced, next-generation products resulting in higher average selling prices and our growing service revenue.
Operating income for third quarter 2017 was $2.4 million, compared with operating income of $0.8 million in the third quarter last year. This increase is primarily due to the execution of our strategic initiatives to drive sales growth and improve gross margin.
Net income for third quarter 2017 was $1.6 million or $0.10 per share, compared with net income of $1.1 million or $0.07 per share in the third quarter last year.
As of September 30, 2017, cash and short-term investments was $140.8 million, of which $99.8 million was held by foreign subsidiaries.
Nine months ended September 30, 2017
New order bookings for the nine months ended September 30, 2017 were $266.4 million, an increase of 13.4%, compared with $234.9 million for the nine months ended September 30, 2016. Sales increased to $254.5 million, an increase of 8.8%, for the nine months ended September 30, 2017 from $233.9 million for the nine months ended September 30, 2016. Similar to our third quarter results, the sales increase was primarily driven by a strong increase in product unit sales within the Construction BIM-CIM vertical, higher average selling prices, and continued growth in service revenue.
Gross margin for the first nine months of 2017 increased to 56.0%, compared with 55.3% for the same prior year period. Similar to our third quarter results, the increase was related primarily to the introduction of our technically advanced, next-generation products resulting in higher average selling prices and our growing service revenue.
Operating loss for the first nine months of 2017 was $3.8 million, compared with an operating income of $9.7 million for the first nine months last year. This decrease was primarily due to our strategic decision to grow our global sales headcount to drive sales growth, which included $7.4 million in start-up sales headcount costs, and an additional $3.8 million in acquisition-related R&D costs.
Net loss for the first nine months of 2017 was $3.5 million or $0.21 per share, compared with net income of $7.6 million or $0.45 per share in the first nine months of 2016.
"We are selectively continuing to grow the salesforce to drive the top line. Consistent with our strategy, we grew our trailing 12-month average sales full time experienced (FTE) headcount by 18.2% over the same prior year period. As previously discussed, start-up sales headcount requires approximately 12 months to become FTE headcount. Hence, our costs reflected the onboarding of this personnel, but our sales do not yet reflect the full benefits. Our third quarter performance demonstrated continued progress towards our long-term financial objectives. The increase in sales, the gross margin increases, and the two percent of sales decline in G&A expense underscore our commitment to drive operating margin and resulted in our return to quarterly profit," stated Simon Raab, Ph.D., FARO's President and CEO. "We continued our aggressive new product drumbeat and in the past 12 months we have launched next generation products across all our core platforms, including our next generation Quantum Arm product line in August 2017. The Construction BIM-CIM vertical team has capitalized on its market-leading laser scanner technology to deliver strong 2017 performance with year-to-date sales growth exceeding 27%. Our vertical market approach coupled with our investment in sales headcount, release of new products, and expense controls has re-energized the growth of the company and represent important steps towards our long-term financial objectives."
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, and FARO's product development and product launches. 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:
-- 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; 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, 2016 and Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017.
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, imaging and realization technology. The Company develops and markets computer-aided measurement and imaging devices and software for the following vertical markets:
-- Factory Metrology - High-precision 3D measurement, imaging and comparison of parts and complex structures within production and quality assurance processes -- Construction BIM-CIM - 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, plan security activities and provide virtual reality training for public safety personnel -- Product Design - Capture detailed and precise 3D data from existing products permitting CAD analysis and redesign, after market design and legacy part replication -- 3D Machine Vision - 3D vision for both control and measurement to the manufacturing floor through 3D sensors and custom solution
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(TM) and FARO Cobalt Array Imager 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 Nine Months Ended (in thousands, except share and per share data) September 30, September 30, September 30, September 30, 2017 2016 2017 2016 ---- ---- ---- ---- Sales Product $68,563 $61,280 $193,476 $182,232 Service 21,687 18,320 61,018 51,654 ------ ------ ------ ------ Total sales 90,250 79,600 254,494 233,886 ------ ------ ------- ------- Cost of Sales Product 26,673 25,880 78,186 74,938 Service 11,543 11,042 33,765 29,665 ------ ------ ------ ------ Total cost of sales (exclusive of depreciation and 38,216 36,922 111,951 104,603 amortization, shown separately below) --- Gross Profit 52,034 42,678 142,543 129,283 Operating Expenses: Selling and marketing 25,990 19,781 74,884 56,399 General and administrative 10,307 10,747 32,883 31,139 Depreciation and amortization 4,368 3,381 12,075 9,733 Research and development 9,019 7,928 26,530 22,344 ----- ----- ------ ------ Total operating expenses 49,684 41,837 146,372 119,615 ------ ------ ------- ------- Income (loss) from operations 2,350 841 (3,829) 9,668 ----- --- ------ ----- Other (income) expense Interest income, net (78) (21) (249) (119) Other (income) expense, net (147) (167) 320 824 ---- ---- --- --- Income (loss) before income tax expense (benefit) 2,575 1,029 (3,900) 8,963 Income tax expense (benefit) 947 (61) (442) 1,401 --- --- ---- ----- Net income (loss) $1,628 $1,090 $(3,458) $7,562 ====== ====== ======= ====== Net income (loss) per share - Basic $0.10 $0.07 $(0.21) $0.45 ===== ===== ====== ===== Net income (loss) per share - Diluted $0.10 $0.07 $(0.21) $0.45 ===== ===== ====== ===== Weighted average shares - Basic 16,708,446 16,674,176 16,697,729 16,647,662 ========== ========== ========== ========== Weighted average shares - Diluted 16,796,518 16,701,617 16,697,729 16,669,550 ========== ========== ========== ==========
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data) September 30, December 31, 2017 2016 (unaudited) ---------- ASSETS Current assets: Cash and cash equivalents $129,841 $106,169 Short-term investments 10,970 42,942 Accounts receivable, net 60,449 61,364 Inventories, net 59,044 51,886 Prepaid expenses and other current assets 20,919 16,304 ------ ------ Total current assets 281,223 278,665 ------- ------- Property and equipment: Machinery and equipment 66,049 57,063 Furniture and fixtures 6,863 6,099 Leasehold improvements 19,588 18,778 ------ ------ Property and equipment, at cost 92,500 81,940 Less: accumulated depreciation and amortization (60,189) (50,262) ------- ------- Property and equipment, net 32,311 31,678 ------ ------ Goodwill 52,567 46,744 Intangible assets, net 22,983 22,279 Service and sales demonstration inventory, net 35,250 29,136 Deferred income tax assets, net 14,498 14,307 Other long-term assets 1,049 905 ----- --- Total assets $439,881 $423,714 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $11,964 $11,126 Accrued liabilities 22,507 24,572 Income taxes payable - 618 Current portion of unearned service revenues 29,080 27,422 Customer deposits 3,065 2,872 ----- ----- Total current liabilities 66,616 66,610 Unearned service revenues - less current portion 12,665 13,813 Deferred income tax liabilities 1,683 1,409 Other long-term liabilities 2,191 2,225 ----- ----- Total liabilities 83,155 84,057 ------ ------ Shareholders' equity: Common stock - par value $.001, 50,000,000 shares authorized; 18,197,628 and 18,170,267 18 18 issued, respectively; 16,711,152 and 16,680,791 outstanding, respectively Additional paid-in capital 218,242 212,602 Retained earnings 179,682 183,436 Accumulated other comprehensive loss (9,387) (24,561) Common stock in treasury, at cost; 1,486,476 and 1,489,476 shares, respectively (31,829) (31,838) ------- ------- Total shareholders' equity 356,726 339,657 ------- ------- Total liabilities and shareholders' equity $439,881 $423,714 ======== ========
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended (in thousands) September 30, September 30, 2017 2016 ---- ---- Cash flows from: Operating activities: Net (loss) income $(3,458) $7,562 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation and amortization 12,075 9,733 Stock-based compensation 4,823 4,068 Provision for bad debts 321 727 Loss on disposal of assets 263 814 Provision for excess and obsolete inventory 1,271 2,937 Deferred income tax expense (benefit) 224 (734) Income tax benefit from exercise of stock options - (354) Change in operating assets and liabilities: Decrease (increase) in: Accounts receivable 3,701 12,850 Inventories (11,450) (8,689) Prepaid expenses and other current assets (3,834) (995) (Decrease) increase in: Accounts payable and accrued liabilities (2,774) 1,128 Income taxes payable (598) - Customer deposits (6) (1,155) Unearned service revenues (1,326) 559 ------ --- Net cash (used in) provided by operating activities (768) 28,451 ---- ------ Investing activities: Proceeds from sale of investments 32,000 11,000 Purchases of property and equipment (6,081) (5,272) Payments for intangible assets (1,345) (1,440) Acquisition of business (5,496) (20,911) ------ ------- Net cash provided by (used in) investing activities 19,078 (16,623) ------ ------- Financing activities: Payments on capital leases (6) (6) Payment of contingent consideration for acquisitions (521) (434) Income tax benefit from exercise of stock options - 354 Proceeds from issuance of stock 387 519 --- --- Net cash (used in) provided by financing activities (140) 433 ---- --- Effect of exchange rate changes on cash and cash equivalents 5,502 1,732 ----- ----- Increase in cash and cash equivalents 23,672 13,993 Cash and cash equivalents, beginning of period 106,169 107,356 Cash and cash equivalents, end of period $129,841 $121,349 ======== ========
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) Three Months Ended Nine Months Ended (in thousands) September 30, September 30, September 30, September 30, 2017 2016 2017 2016 ---- ---- ---- ---- Net income (loss) $1,628 $1,090 $(3,458) $7,562 Currency translation adjustments, net of income tax 3,875 1,339 15,174 6,165 ----- ----- ------ ----- Comprehensive income $5,503 $2,429 $11,716 $13,727 ====== ====== ======= =======
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SOURCE FARO Technologies, Inc.