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FARO Reports Second Quarter 2018 Financial Results

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FARO Reports Second Quarter 2018 Financial Results

PR Newswire

LAKE MARY, Fla., July 25, 2018 /PRNewswire/ -- FARO® (NASDAQ:FARO), the world's most trusted source for 3D measurement and imaging solutions for factory metrology, construction BIM, product design, public safety forensics, and 3D machine vision applications, today announced its financial results for the second quarter and six months ended June 30, 2018. Highlights from the second quarter included:

  • Quarterly sales of $98.2 million, up 18.8% year-over-year
  • 3D factory quarterly sales up 13.3% year-over-year, construction BIM up 25.0%, emerging verticals up 50.3%
  • Strengthened gross margin to 58.7% for the quarter
  • Increased quarterly operating margin by 7.0 percentage points year-over-year

FARO logo. (PRNewsFoto/FARO Technologies, Inc.)

"For the fourth consecutive quarter, we delivered double-digit sales growth and increased gross margin year-over-year demonstrating improved execution of our strategy and FARO's technological leadership in our vertical markets," stated Dr. Simon Raab, President and Chief Executive Officer.  "All segments reported strong year-over-year orders and sales growth, highlighted by our 3D factory segment.  In the second quarter and extending into the current quarter, important new product releases will continue the expansion of our product range to better meet the technical needs and budgets of our customers.  We have also accelerated our pace of acquisitions this year, having completed four year-to-date and adding important new technologies including 3D scanning for the dental market.  Our global initiative of FAROBest! is aimed at operational excellence and will contribute to controlling our G&A and R&D expenses as a percentage of sales.  Our actions delivered a 7-point improvement in operating margin year-over-year for the quarter."

Second Quarter 2018 
Total sales increased by $15.5 million, or 18.8%, to $98.2 million for the quarter ended June 30, 2018 from $82.7 million for the quarter ended June 30, 2017.  Our second quarter sales increase was primarily a result of growth in product unit sales across all segments and higher average selling prices, primarily in our 3D factory segment.  New order bookings increased by $17.5 million, or 19.7%, to $106.5 million for the quarter ended June 30, 2018 from $89.0 million for the quarter ended June 30, 2017.

Gross margin for the quarter was 58.7%, up 2.1 percentage points compared with 56.6% for the same prior year period primarily due to higher average selling prices and improved manufacturing efficiencies.

Our operating income increased by $6.1 million to $1.9 million for the second quarter of 2018, compared with an operating loss of $4.2 million for same prior year period.  Operating margin increased to 2.0% for the second quarter of 2018, up 7.0 percentage points compared with the second quarter of 2017.

Net income for the second quarter of 2018 was $1.2 million or $0.07 per share, compared with a net loss of $3.6 million or loss of $0.22 per share for the second quarter last year.

Six months ended June 30, 2018 
Total sales increased by $26.9 million, or 16.3%, to $191.1 million for the six months ended June 30, 2018 from $164.2 million for the six months ended June 30, 2017.  Our sales increase was primarily driven by strong growth of product unit sales in our construction BIM and emerging verticals segments, higher average selling prices in our 3D factory segment, and service revenue growth.  New order bookings increased by $26.8 million, or 15.2%, to $202.6 million for the six months ended June 30, 2018 from $175.8 million for the six months ended June 30, 2017.

Gross margin was 58.3% for the first six months of 2018, up 3.2 percentage points over the same prior year period mostly due to higher average selling prices and improved manufacturing efficiencies.

Operating income was $2.6 million for the six months ended June 30, 2018, reflecting an increase of $8.8 million compared with an operating loss of $6.2 million for the same prior year period.

Our net income for the six months ended June 30, 2018 was $1.7 million, or $0.10 per share, compared with a net loss of $5.1 million or loss of $0.30 per share for the first six months of 2017.

As of June 30, 2018, cash and short-term investments totaled $144.6 million, of which $88.4 million was held by foreign subsidiaries.

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 - 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 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 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.

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, 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.

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


 

 

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



Three Months Ended


Six Months Ended

(in thousands, except share and per share data)

June 30, 2018


June 30, 2017


June 30, 2018


June 30, 2017

Sales








Product

$

75,720



$

62,533



$

146,301



$

124,913


Service

22,524



20,149



44,777



39,331


Total sales

98,244



82,682



191,078



164,244


Cost of Sales








Product

27,878



24,455



54,762



51,513


Service

12,675



11,467



24,839



22,222


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

40,553



35,922



79,601



73,735


Gross Profit

57,691



46,760



111,477



90,509


Operating Expenses








Selling and marketing

30,084



26,022



58,355



48,894


General and administrative

11,320



11,877



22,393



22,576


Depreciation and amortization

4,377



3,989



8,720



7,707


Research and development

9,983



9,045



19,389



17,511


Total operating expenses

55,764



50,933



108,857



96,688


Income (loss) from operations

1,927



(4,173)



2,620



(6,179)


Other expense (income)








Interest income, net

(87)



(89)



(160)



(171)


Other expense, net

509



459



693



467


Income (loss) before income tax expense (benefit)

1,505



(4,543)



2,087



(6,475)


Income tax expense (benefit)

300



(918)



427



(1,389)


Net income (loss)

$

1,205



$

(3,625)



$

1,660



$

(5,086)


Net income (loss) per share - Basic

$

0.07



$

(0.22)



$

0.10



$

(0.30)


Net income (loss) per share - Diluted

$

0.07



$

(0.22)



$

0.10



$

(0.30)


Weighted average shares - Basic

16,966,928



16,700,718



16,902,390



16,692,500


Weighted average shares - Diluted

17,264,642



16,700,718



17,210,054



16,692,500


 


 

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands, except share and per share data)

June 30, 2018 (unaudited)


December 31, 2017

ASSETS




Current assets:




Cash and cash equivalents

$

133,554



$

140,960


Short-term investments

10,998



10,997


Accounts receivable, net

71,641



72,105


Inventories, net

60,349



53,786


Prepaid expenses and other current assets

21,086



16,311


Total current assets

297,628



294,159


Property and equipment:




Machinery and equipment

70,332



66,514


Furniture and fixtures

6,650



6,945


Leasehold improvements

20,039



19,872


Property and equipment at cost

97,021



93,331


Less: accumulated depreciation and amortization

(66,321)



(61,452)


Property and equipment, net

30,700



31,879


Goodwill

53,584



52,750


Intangible assets, net

23,842



22,540


Service and sales demonstration inventory, net

38,346



39,614


Deferred income tax assets, net

15,691



15,606


Other long-term assets

4,678



2,030


Total assets

$

464,469



$

458,578


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

11,764



$

11,569


Accrued liabilities

24,950



27,362


Income taxes payable

1,672



4,676


Current portion of unearned service revenues

30,179



29,674


Customer deposits

2,944



2,604


Total current liabilities

71,509



75,885


Unearned service revenues - less current portion

13,291



11,815


Deferred income tax liabilities

590



695


Income taxes payable - less current portion

14,578



15,952


Other long-term liabilities

1,798



2,165


Total liabilities

101,766



106,512


Shareholders' equity:




Common stock - par value $.001, 50,000,000 shares authorized; 18,440,073 and
18,277,142 issued, respectively; 16,978,758 and 16,796,884 outstanding, respectively

18



18


Additional paid-in capital

233,755



223,055


Retained earnings

172,649



168,624


Accumulated other comprehensive loss

(11,985)



(7,822)


Common stock in treasury, at cost; 1,461,315 and 1,480,258 shares, respectively

$

(31,734)



$

(31,809)


Total shareholders' equity

$

362,703



$

352,066


Total liabilities and shareholders' equity

$

464,469



$

458,578


 

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



Six Months Ended

(in thousands)

June 30, 2018


June 30, 2017

Cash flows from:




Operating activities:




Net income (loss)

$

1,660



$

(5,086)


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




Depreciation and amortization

8,720



7,707


Stock-based compensation

3,400



3,195


Provision for bad debts

211



230


Loss on disposal of assets

165



122


Provision for excess and obsolete inventory

504



736


Deferred income tax (benefit) expense

(190)



168


Change in operating assets and liabilities:




Decrease (increase) in:




Accounts receivable

252



4,771


Inventories

(6,664)



(10,107)


Prepaid expenses and other current assets

(3,526)



(6,489)


(Decrease) increase in:




Accounts payable and accrued liabilities

(2,901)



1,610


Income taxes payable

(4,378)



(590)


Customer deposits

382



(163)


Unearned service revenues

2,372



(472)


Net cash provided by (used in) operating activities

7



(4,368)


Investing activities:




Proceeds from sale of investments



21,000


Purchases of property and equipment

(5,164)



(3,669)


Payments for intangible assets

(1,186)



(645)


Acquisition of businesses

(3,965)



(5,496)


Equity investments and advances to affiliates

(1,786)




Net cash (used in) provided by investing activities

(12,101)



11,190


Financing activities:




Payments on capital leases

(46)



(4)


Proceeds from issuance of stock related to stock option exercises

7,133



284


Net cash provided by financing activities

7,087



280


Effect of exchange rate changes on cash and cash equivalents

(2,399)



4,323


(Decrease) increase in cash and cash equivalents

(7,406)



11,425


Cash and cash equivalents, beginning of period

140,960



106,169


Cash and cash equivalents, end of period

$

133,554



$

117,594


 

 

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)



Three Months Ended


Six Months Ended

(in thousands)

June 30, 2018


June 30, 2017


June 30, 2018


June 30, 2017

Net income (loss)

$

1,205



$

(3,625)



$

1,660



$

(5,086)


Currency translation adjustments, net of income tax

(9,377)



7,140



(4,163)



11,299


Comprehensive (loss) income

$

(8,172)



$

3,515



$

(2,503)



$

6,213


 

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

UNAUDITED SUPPLEMENTAL DATA
















Three Months Ended


Six Months Ended

(revenue in thousands)


Q2 2018
Sales


Q2 2017
Sales


% Change


Q2 2018
Sales


Q2 2017

Sales


% Change

Reporting Segments













3D Factory(1)


$

64,970



$

57,363



13.3

%


$

126,328



$

114,584



10.2

%

Construction BIM(2)


23,567



18,859



25.0

%


46,249



37,800



22.4

%

Emerging Verticals(3)


9,707



6,460



50.3

%


18,501



11,860



56.0

%

Total


$

98,244



$

82,682



18.8

%


$

191,078



$

164,244



16.3

%


(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.

 


 

 

 

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SOURCE FARO

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