"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
| |||||||
|
| |||||||
|
| 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
| |||||||
|
| |||||||
(in thousands, except share and per share data) | March 31, 2019 (unaudited) |
| December 31,
| ||||
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,
| 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
| |||||||
|
| |||||||
|
| 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
|
|
|
| ||||
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
| |||||||
|
| |||||||
|
| 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
| |||||||||||
|
| |||||||||||
|
|
| Three Months Ended | |||||||||
(sales in thousands) |
| Q1 2019
|
| Q1 2018
|
| % 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
| |||||||||
|
| |||||||||
|
| New Order
(in millions) |
| Ending
|
| Sales FTE
|
| Trailing 12 Months
|
| Trailing 12 Months
|
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. | |||||||||
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SOURCE FARO Technologies, Inc.
| Contact: |
| Company Name: FARO Technologies, Inc.
Nancy Setteducati Email Contact Web: http://www.faro.com Financial data for FARO Technologies, Inc. |
