FARO TECHNOLOGIES INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - April 25, 2018

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8-K - 8-K - FARO TECHNOLOGIES INCfaro-3312018pressrelease8k.htm




Exhibit 99.1

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FARO Reports First Quarter 2018 Financial Results
LAKE MARY, FL, April 25, 2018 - 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.

*****

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 TrackerTM, 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, shown separately below)
39,048

 
37,813

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,
2018
(unaudited)
 
December 31,
2017
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 18,277,142 issued, respectively; 16,955,679 and 16,796,884 outstanding, respectively
18

 
18

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






FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED SUPPLEMENTAL DATA
 
(revenue in thousands)
 
Q1 2018 Revenue
 
Q1 2017 Revenue
 
% Change
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.


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