FARO Reports Third Quarter 2018 Financial Results

LAKE MARY, Fla., Oct. 31, 2018 /PRNewswire/ -- FARO^® (NASDAQ: FARO), the world's most trusted source for 3D measurement and imaging solutions for 3D factory, construction BIM, 3D design, public safety forensics, and photonics applications, today announced its financial results for the third quarter and nine months ended September 30, 2018. Highlights from the first nine months of 2018 results included:

• Continued our double-digit year-over-year sales growth at 14.3% year-to-date
• Decreased operating expenses as a percentage of sales by 1.1 pts.
• Continued our new product drumbeat with 14 new product releases
• Increased ending sales headcount by 11.3% with improved salesforce efficiency

"We continued our new product drumbeat by releasing eight new important products since the start of July, highlighted by the introduction of our 6DoF Vantage Laser Tracker platform with 6Probe to expand the reach of large volume measurement," stated Dr. Simon Raab, President and Chief Executive Officer.  "We continued our trend of year-over-year double-digit sales growth for a fifth consecutive quarter and invested in increasing our sales headcount while maintaining our trailing 12 months orders per sales FTE metric from the prior quarter. We added to our vertical footprint with a new Photonics vertical through a combination of acquisitions aimed at being a technology leader in laser steering. We enter our important fourth quarter with the most technically advanced and expansive product portfolio in our history."

Nine months ended September 30, 2018

Total sales increased by $36.3 million, or 14.3%, to $290.8 million for the nine months ended September 30, 2018 from $254.5 million for the nine months ended September 30, 2017.  Our sales increase was primarily driven by strong growth of units sold 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 $36.7 million, or 13.8%, to $303.1 million for the nine months ended September 30, 2018 from $266.4 million for the nine months ended September 30, 2017.

During the third quarter of 2018, we performed an analysis of our inventory reserves in connection with our recent new product introductions and acquisitions and recorded a charge of $4.7 million, or approximately 5% of total inventory, increasing our reserve for excess and obsolete inventory based on the determination that quantities on-hand for certain legacy products exceeded our revised sales projections.

Gross margin increased to 56.3% for the first nine months of 2018, compared with 56.0% for the same prior year period mostly due to higher average selling prices and improvements in manufacturing efficiencies offset partly by the increase in our inventory reserve during the third quarter.  Excluding the $4.7 million increase in the inventory reserve during the third quarter of 2018, gross margin would have been 58.0%, up 2.0 percentage points compared with the same prior year period.

Net loss for the first nine months of 2018 was $0.8 million or a loss of $0.05 per share, compared with a net loss of $3.5 million or loss of $0.21 per share for the first nine months of 2017. Excluding the $4.7 million increase in the inventory reserve during the third quarter of 2018, net income would have been $3.2 million or $0.19 per share, up $0.40 per share compared with the same prior year period.

Third Quarter 2018

Total sales increased by $9.4 million, or 10.5%, to $99.7 million for the quarter ended September 30, 2018 from $90.3 million for the quarter ended September 30, 2017. Our third quarter sales increase was primarily driven by higher units sold and average selling prices across all segments, highlighted by a 17.4% year-over-year sales growth for our Asia Pacific region.  We entered the third quarter last year with additional order backlog of approximately $5 million between construction BIM and public safety forensics, as demand for our new Focus laser scanner models exceeded our production capacity at that time.  We shipped this additional backlog in the third quarter last year which shifted the timing of our quarterly sales with the third quarter in 2017 driven higher than our typical seasonality.

New order bookings increased by $10.0 million, or 11.0%, to $100.5 million for the quarter ended September 30, 2018 from $90.5 million for the quarter ended September 30, 2017. With our trailing 12 months new order bookings of $413.7 million and sales FTE headcount at 586, our trailing 12 months orders per sales FTE metric was approximately $706,000, same as prior quarter.

Gross margin was 52.5% for the third quarter of 2018, compared with 57.7% for the same prior year period, primarily driven by the increase in the inventory reserve, the product mix of used demo sales, and lower service margin. Excluding the $4.7 million increase in the inventory reserve, gross margin would have been 57.2%, down 0.5 percentage points compared with the same prior year period.

Net loss was $2.5 million or loss of $0.15 per share for the third quarter of 2018, compared with net income of $1.6 million or $0.10 per share for the third quarter last year. Excluding the $4.7 million increase in the inventory reserve, net income would have been $1.5 million or $0.09 per share, down $0.01 per share compared with the same prior year period.

As of September 30, 2018, cash and short-term investments totaled $135.0 million, of which $71.4 million was held by foreign subsidiaries.

Non-GAAP Financial Measures

This press release contains information about our financial results that are not presented in accordance with U.S. generally accepted accounting principles ("GAAP").  These non-GAAP financial measures, including adjusted gross profit, adjusted gross margin, adjusted net income (loss) and adjusted net income (loss) per share, exclude the impact of the increase in our inventory reserve resulting from the analysis of our inventory reserves performed in the third quarter of 2018 in connection with our recent new product introductions and acquisitions. These non-GAAP financial measures are provided to enhance investors' overall understanding of our historical operations and financial performance. Management believes that these non-GAAP financial measures provide investors with relevant period-to-period comparisons of our core operations. These financial measures are not recognized terms under GAAP, and should not be considered in isolation or as a substitute for a measure of financial performance prepared in accordance with GAAP. These non-GAAP financial measures have limitations that should be considered before using these measures to evaluate a company's financial performance. These non-GAAP financial measures, as presented, may not be comparable to similarly titled measures of other companies due to varying methods of calculation. The financial statement tables that accompany this press release include a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures.

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:

• 3D Factory - 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
• 3D Design - Capture and edit part geometries 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 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE FARO Technologies, Inc.