FARO Reports First Quarter 2018 Financial Results
FARO Reports First Quarter 2018 Financial Results
LAKE MARY, Fla., April 25, 2018 /PRNewswire/ -- FARO(®) (NASDAQ: FARO), the world's most trusted source for 3D measurement and imaging solutions for 3D factory, construction BIM, product design, and public safety forensics, today announced its financial results for the first quarter ended March 31, 2018. Highlights from the quarter included:
-- Quarterly sales of $92.8 million, up 13.8% year-over-year
-- Construction BIM segment quarterly sales of $22.7 million, up 19.8%
year-over-year
-- Increased gross margin year-over-year to 57.9% for the quarter
-- Decreased G&A expense to 11.9% of sales, down 1.2 percentage points
year-over-year
"Our first quarter performance provides another quarter that validates our vertical market strategy and growth initiatives with our third consecutive quarter of double digit sales growth and gross margin increase year-over-year," stated Dr. Simon Raab, President and Chief Executive Officer. "We continued our innovation in the construction BIM market by releasing FARO BuildIT Construction software to leverage laser scanner technology to eliminate waste and enhance quality control in construction projects. Our emerging verticals of product design and public safety forensics combined to deliver strong year-over-year sales growth, demonstrating the high growth potential in these markets and the returns associated with our sales headcount investments. Quarterly earnings were affected by our intentional acceleration of R&D activities for the fast-growing BIM and 3D machine vision markets. In the quarter, we kicked off our global lean continuous improvement initiative named FARO Best! to further drive efficiencies and improvement in operating margin. With these initiatives and continued investment in R&D, both organically and through the acquisition of strong talent and technologies, we continue to provide more value to our customers and shareholders."
Total sales increased by $11.2 million, or 13.8%, to $92.8 million for the quarter ended March 31, 2018 from $81.6 million for the quarter ended March 31, 2017. Our sales increase was primarily driven by a strong increase in product unit sales in our construction BIM segment, higher average selling prices in our 3D factory segment, and continued service revenue growth. New order bookings increased by $9.2 million, or 10.6%, to $96.1 million for the quarter ended March 31, 2018 from $86.9 million for the quarter ended March 31, 2017.
Gross margin for the quarter was 57.9%, up 4.3 percentage points compared with 53.6% in the same prior year period, reflecting a strong increase in our product gross margin, mostly due to higher average selling prices especially in our 3D factory segment and improved manufacturing efficiencies with our volume increases in the construction BIM and public safety forensics verticals.
Operating income was $0.7 million for the first quarter of 2018, reflecting an increase of $2.7 million compared with an operating loss of $2.0 million in the first quarter last year. This increase was primarily driven by the execution of our strategic initiatives to deliver double digit sales growth and a strong increase in gross margin by developing next-generation, market-leading products and expanding our sales headcount across our vertical markets.
Net income for the first quarter of 2018 was $0.5 million or $0.03 per share, compared with a net loss of $1.5 million or $0.09 per share in the first quarter last year.
As of March 31, 2018, cash and short-term investments totaled $149.8 million, of which $93.9 million was held by foreign subsidiaries.
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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:
-- 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, 2017 and in
Part II, Item 1A. Risk Factors in the Company's Quarterly Report on Form
10-Q for the quarter ended March 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.
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
-- 3D Machine Vision - 3D vision for both control and measurement to the
manufacturing floor through 3D sensors and custom solutions
-- 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, 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
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)), FARO Cobalt Array Imager, and Tracer 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, 2018 March 31, 2017
---------------------------------------------- -------------- --------------
Sales
Product $70,581 $62,380
Service 22,253 19,182
------ ------
Total sales 92,834 81,562
------ ------
Cost of Sales
Product 26,884 27,058
Service 12,164 10,755
------ ------
Total cost of sales (exclusive of depreciation and amortization, 39,048 37,813
shown separately below)
Gross Profit 53,786 43,749
Operating Expenses
Selling and marketing 28,271 22,872
General and administrative 11,073 10,699
Depreciation and amortization 4,343 3,718
Research and development 9,406 8,466
----- -----
Total operating expenses 53,093 45,755
------ ------
Income (loss) from operations 693 (2,006)
--- ------
Other expense (income)
Interest income (73) (82)
Other expense, net 184 8
--- ---
Income (loss) before income tax expense (benefit) 582 (1,932)
Income tax expense (benefit) 127 (471)
--- ----
Net income (loss) $455 $(1,461)
==== =======
Net income (loss) per share - Basic $0.03 $(0.09)
===== ======
Net income (loss) per share - Diluted $0.03 $(0.09)
===== ======
Weighted average shares - Basic 16,837,754 16,684,164
========== ==========
Weighted average shares - Diluted 17,142,770 16,684,164
========== ==========
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data) March 31, December 31,
2018 2017
(unaudited)
--- ----------
ASSETS
Current assets:
Cash and cash equivalents $138,826 $140,960
Short-term investments 10,957 10,997
Accounts receivable, net 71,631 72,105
Inventories, net 58,376 53,786
Prepaid expenses and other current assets 19,119 16,311
------ ------
Total current assets 298,909 294,159
------- -------
Property and equipment:
Machinery and equipment 69,355 66,514
Furniture and fixtures 6,853 6,945
Leasehold improvements 20,230 19,872
------ ------
Property and equipment at cost 96,438 93,331
Less: accumulated depreciation and amortization (64,907) (61,452)
------- -------
Property and equipment, net 31,531 31,879
------ ------
Goodwill 54,511 52,750
Intangible assets, net 25,399 22,540
Service and sales demonstration inventory, net 41,703 39,614
Deferred income tax assets, net 15,738 15,606
Other long-term assets 2,861 2,030
----- -----
Total assets $470,652 $458,578
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $11,145 $11,569
Accrued liabilities 24,367 27,362
Income taxes payable 2,104 4,676
Current portion of unearned service revenues 30,976 29,674
Customer deposits 2,456 2,604
----- -----
Total current liabilities 71,048 75,885
Unearned service revenues - less current portion 12,531 11,815
Deferred income tax liabilities 700 695
Income taxes payable - less current portion 15,952 15,952
Other long-term liabilities 2,092 2,165
Total liabilities 102,323 106,512
------- -------
Commitments and contingencies
Shareholders' equity:
Common stock - par value $.001, 50,000,000 shares authorized; 18,416,020 and 18 18
18,277,142 issued, respectively; 16,955,679 and 16,796,884 outstanding, respectively
Additional paid-in capital 231,209 223,055
Retained earnings 171,444 168,624
Accumulated other comprehensive loss (2,608) (7,822)
Common stock in treasury, at cost; 1,460,341 and 1,480,258 shares, respectively (31,734) (31,809)
------- -------
Total shareholders' equity 368,329 352,066
------- -------
Total liabilities and shareholders' equity $470,652 $458,578
======== ========
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
(in thousands) March 31, 2018 March 31, 2017
------------- -------------- --------------
Cash flows from:
Operating activities:
Net income (loss) $455 $(1,461)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization 4,343 3,718
Stock-based compensation 1,553 1,417
Provision for bad debts 24 89
Loss on disposal of assets 127 77
Provision for excess and obsolete inventory 312 567
Deferred income tax (benefit) expense (128) 6
Change in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable 1,808 1,722
Inventories (5,208) (2,480)
Prepaid expenses and other current assets (936) (1,181)
(Decrease) increase in:
Accounts payable and accrued liabilities (4,846) (2,442)
Income taxes payable (2,571) (618)
Customer deposits (213) (123)
Unearned service revenues 1,231 430
----- ---
Net cash used in operating activities (4,049) (279)
------ ----
Investing activities:
Purchases of property and equipment (2,243) (1,745)
Payments for intangible assets (650) (332)
Acquisition of businesses (3,966) -
Net cash used in investing activities (6,859) (2,077)
------ ------
Financing activities:
Payments on capital leases (46) (2)
Proceeds from issuance of stock related to stock option exercises 6,785 268
----- ---
Net cash provided by financing activities 6,739 266
----- ---
Effect of exchange rate changes on cash and cash equivalents 2,035 1,779
----- -----
Decrease in cash and cash equivalents (2,134) (311)
Cash and cash equivalents, beginning of period 140,960 106,169
Cash and cash equivalents, end of period $138,826 $105,858
======== ========
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended
(in thousands) March 31, 2018 March 31, 2017
------------- -------------- --------------
Net income (loss) $455 $(1,461)
Currency translation adjustments, net of income tax 5,214 4,159
----- -----
Comprehensive income $5,669 $2,698
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FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED SUPPLEMENTAL DATA
(revenue in thousands) Q1 2018 Q1 2017 % Change
Revenue Revenue
------- -------
Reporting Segments
3D Factory(1) $61,358 $57,222 7.3%
Construction BIM(2) 22,682 18,941 19.8%
Emerging Verticals(3) 8,794 5,399 62.9%
----- ----- ----
Total $92,834 $81,562 13.8%
(1) The 3D Factory reporting
segment (formerly known as
Factory Metrology) includes our
Factory Metrology and 3D
Machine Vision verticals.
(2) The Construction BIM
reporting segment contains
solely our Construction BIM
vertical (formerly known as
Construction BIM-CIM).
(3) The Emerging Verticals
reporting segment (formerly
known as Other) includes our
Product Design and Public
Safety Forensics verticals.
CONTACT: Nancy Setteducati, nancy.setteducati@faro.com, 1-407-3339911x1082
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SOURCE FARO Technologies, Inc.
