EX-99.1 2 faroex9916302018.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1

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FARO Reports Second Quarter 2018 Financial Results

LAKE MARY, FL, July 25, 2018 - 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

“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.