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FARO Reports Fourth Quarter and Fiscal Year 2017 Financial Results

LAKE MARY, Fla., Feb. 21, 2018 — (PRNewswire) —  FARO® (NASDAQ: FARO), the world's most trusted source for 3D measurement and imaging solutions for factory metrology, 3D machine vision, construction BIM-CIM, product design, and public safety forensics, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2017.

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

"In 2017, we executed well on our strategic initiatives in completing our vertical reorganization by mid-year, reinvigorating our product portfolio with next generation technology, and investing in expanding our sales force to make meaningful progress towards our long-term financial objectives," stated Dr. Simon Raab, President and Chief Executive Officer.  "Our team delivered double-digit new order bookings and sales growth for 2017, and at the same time increased gross margin progressively through the year to reach 58.3% in the fourth quarter. Our second half performance strongly indicates that we are gaining traction from our vertical focus, investments in new products, and additional sales headcount as highlighted by our remarkable 47.2% increase in fourth quarter construction BIM-CIM sales. As we have discussed before, there is a natural, short-term cost to these investments. However, we expect sustained returns from these initiatives and we will continue with our vertical strategies while optimizing our operations through our 2018 global lean initiatives, which are aimed at reinvigorating the FARO culture of continuous improvement and technological superiority in all of our vertical markets."

Fourth Quarter 2017
Total sales increased by $14.7 million, or 16.1%, to $106.4 million for the quarter ended December 31, 2017 from $91.7 million for the quarter ended December 31, 2016.  Our sales increase was primarily driven by a strong increase in product unit sales in our construction BIM-CIM and our other segment (which includes the public safety forensics and product design verticals), higher average selling prices, and continued service revenue growth.  New order bookings increased by $14.8 million, or 15.5%, to $110.6 million for the quarter ended December 31, 2017 from $95.8 million for the quarter ended December 31, 2016.

Gross margin for the quarter was 58.3%, up 5.2 percentage points compared with 53.1% in the same prior year period reflecting a strong increase in our product gross margin mostly due to higher average selling prices from our technological leadership and improved manufacturing efficiencies.

Operating income was $9.2 million for the fourth quarter of 2017, reflecting an increase from $3.6 million in the same prior year period driven mainly by our double-digit sales growth and strong increase in gross margin offset partly by our strategic growth initiatives to increase sales headcount and accelerate new product development.  Operating margin was 8.6% in the fourth quarter of 2017, compared with 3.9% in the fourth quarter of 2016.

Our net loss of $11.1 million, or $0.66 per share, for the fourth quarter of 2017 included a provisional charge of $19.4 million, or $1.16 per share, recorded in income tax expense related to the enactment of the U.S. Tax Cuts and Jobs Act (U.S. Tax Reform)1.  This charge was comprised of $2.0 million related to the re-measurement of our deferred tax assets arising from a lower U.S. corporate tax rate and $17.4 million related to the transition tax on the mandatory deemed repatriation of foreign earnings.  Excluding the impact of U.S. Tax Reform, net income for the fourth quarter of 2017 would have been $8.3 million, or $0.50 per share.

Fiscal Year 2017
Total sales increased by $35.3 million, or 10.9%, to $360.9 million for the year ended December 31, 2017 from $325.6 million for the year ended December 31, 2016.  Our sales increase was primarily driven by a strong increase in our construction BIM-CIM segment, growth in warranty revenue, and increase in average selling prices.  New order bookings increased by $46.3 million, or 14.0%, to $377.0 million for the year ended December 31, 2017 from $330.7 million for the year ended December 31, 2016.

Gross margin was 56.7% for fiscal year 2017, up 2.0 percentage points over the prior year, mostly due to higher average selling prices from our technological leadership and improved manufacturing efficiencies.

Operating income was $5.3 million for fiscal year 2017, reflecting a decrease from $13.3 million for fiscal year 2016.  This decrease was primarily due to an intentional increase in operating expenses related to our strategic growth initiatives, including a start-up selling expense of $9.5 million driven by a 17.7% increase in our period ending sales headcount from 536 as of December 31, 2016 to 631 as of December 31, 2017 and increases in R&D spending from recent technology acquisitions.  Operating margin was 1.5% for fiscal year 2017, compared with 4.1% for fiscal year 2016.

Our net loss of $14.5 million, or $0.87 per share, for fiscal year 2017 included a provisional charge of $19.4 million, or $1.16 per share, recorded in income tax expense related to the enactment of U.S. Tax Reform.  Excluding the impact of U.S. Tax Reform, net income for fiscal year 2017 would have been $4.8 million, or $0.29 per share.

As of December 31, 2017, cash and short-term investments totaled $152.0 million, of which $98.8 million was held by foreign subsidiaries.

The financial information included in this press release is preliminary as the Company has not yet issued its audited financial statements and may differ from those results.

1 Preliminary.  Represents the estimated fourth quarter 2017 and fiscal year 2017 impact of the enactment of the Tax Cuts and Jobs Act (U.S. Tax Reform), which was signed into law on December 22, 2017.  The final impact of U.S. Tax Reform may differ from these estimates due to, among other things, changes in interpretations and assumptions made by FARO, additional guidance that may be issued by the U.S. Department of the Treasury, and actions that FARO may take.

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:

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, imaging and realization technology. The Company develops and markets computer-aided measurement and imaging devices and software for the following vertical markets:

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


Twelve Months Ended

(in thousands, except share and per share data)

December 31,
2017


December 31,
2016


December 31,
2017


December 31,
2016

Sales








Product

$

84,446



$

73,778



$

277,922



$

256,010


Service

21,977



17,920



82,995



69,574


Total sales

106,423



91,698



360,917



325,584


Cost of Sales








Product

31,957



33,032



110,143



107,965


Service

12,372



9,989



46,137



39,659


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

44,329



43,021



156,280



147,624


Gross Profit

62,094



48,677



204,637



177,960


Operating Expenses








Selling and marketing

28,660



23,634



103,544



79,870


General and administrative

10,924



9,477



43,807



40,813


Depreciation and amortization

4,513



4,135



16,588



13,868


Research and development

8,846



7,815



35,376



30,125


Total operating expenses

52,943



45,061



199,315



164,676


Income from operations

9,151



3,616



5,322



13,284


Other expense (income)








Interest income

(73)



(54)



(319)



(212)


Other (income) expense, net

(510)



(2)



(190)



822


Interest Expense

7



9



4



48


Income before income tax expense (benefit)

9,727



3,663



5,827



12,626


Income tax expense

20,785



118



20,343



1,519


Net (loss) income

$

(11,058)



$

3,545



$

(14,516)



$

11,107


Net (loss) income per share - Basic

$

(0.66)



$

0.21



$

(0.87)



$

0.67


Net (loss) income per share - Diluted

$

(0.66)



$

0.21



$

(0.87)



$

0.67


Weighted average shares - Basic


16,738,400




16,676,764




16,711,534




16,654,786


Weighted average shares - Diluted

16,738,400



16,720,571



16,711,534



16,681,710


 

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


(in thousands, except share and per share data)

December 31,
2017


December 31,
2016

ASSETS




Current assets:




Cash and cash equivalents

$

140,960



$

106,169


Short-term investments

10,997



42,942


Accounts receivable, net

72,105



61,364


Inventories, net

53,786



51,886


Prepaid expenses and other current assets

16,311



16,304


Total current assets

294,159



278,665


Property and equipment:




Machinery and equipment

66,514



57,063


Furniture and fixtures

6,945



6,099


Leasehold improvements

19,872



18,778


Property and equipment at cost

93,331



81,940


Less: accumulated depreciation and amortization

(61,452)



(50,262)


Property and equipment, net

31,879



31,678


Goodwill

52,750



46,744


Intangible assets, net

22,540



22,279


Service and sales demonstration inventory, net

39,614



29,136


Deferred income tax assets, net

15,606



14,307


Other long-term assets

2,030



905


Total assets

$

458,578



$

423,714


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

11,569



$

11,126


Accrued liabilities

27,362



24,572


Income taxes payable

4,676



618


Current portion of unearned service revenues

29,674



27,422


Customer deposits

2,604



2,872


Total current liabilities

75,885



66,610


Unearned service revenues - less current portion

11,815



13,813


Deferred income tax liabilities

695



1,409


Income taxes payable - less current portion

15,952




Other long-term liabilities

2,165



2,225


Total liabilities

106,512



84,057


Shareholders' equity:




Common stock - par value $.001, 50,000,000 shares authorized; 18,277,142 and 18,170,267
issued; 16,796,884 and 16,680,791 outstanding, respectively

18



18


Additional paid-in capital

223,055



212,602


Retained earnings

168,624



183,436


Accumulated other comprehensive loss

(7,822)



(24,561)


Common stock in treasury, at cost - 1,480,258 shares and 1,489,476, respectively

(31,809)



(31,838)


Total shareholders' equity

352,066



339,657


Total liabilities and shareholders' equity

$

458,578



$

423,714


 

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



Years Ended December 31,

(in thousands)

2017


2016


2015

CASH FLOWS FROM:






OPERATING ACTIVITIES:






Net (loss) income

$

(14,516)



$

11,107



$

12,813


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






Depreciation and amortization

16,588



13,868



11,217


Compensation for stock options and restricted stock units

6,450



5,374



4,306


Provision for bad debts (net recovery of)

370



898



346


Loss on disposal of assets

451



860



947


Write-down of inventories

1,734



4,134



10,878


Deferred income tax benefit

(1,740)



(2,002)



(655)


Income tax benefit from exercise of stock options



(357)



(313)


Change in operating assets and liabilities:






Decrease (increase) in:






Accounts receivable, net

(6,766)



6,727



9,584


Inventories, net

(10,926)



(6,729)



(18,021)


Prepaid expenses and other assets

(253)



3,588



(2,834)


(Decrease) increase in:






Accounts payable and accrued liabilities

1,103



534



(6,401)


Income taxes payable

20,011



618




Customer deposits

(461)



(1,310)



1,114


Unearned service revenues

(1,690)



273



5,051


Net cash provided by operating activities

10,355



37,583



28,032


INVESTING ACTIVITIES:






Proceeds from sale of investments

32,000





22,001


Purchases of property and equipment

(8,970)



(7,720)



(14,169)


Payments for intangible assets

(2,377)



(1,657)



(2,140)


Acquisition of business, net of cash received

(5,596)



(27,708)



(12,066)


Net cash provided by (used in) investing activities

15,057



(37,085)



(6,374)


FINANCING ACTIVITIES:






Payments on capital leases

(108)



(8)



(8)


Payments of contingent consideration for acquisitions

(521)



(774)




Repurchase of common stock





(22,763)


Income tax benefit from exercise of stock options



357



313


Proceeds from issuance of stock, net

3,594



674



2,287


Net cash provided by (used in) financing activities

2,965



249



(20,171)


EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

6,414



(1,934)



(3,420)


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

34,791



(1,187)



(1,933)


CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

106,169



107,356



109,289


CASH AND CASH EQUIVALENTS, END OF YEAR

$

140,960



$

106,169



$

107,356


 

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)




Years ended December 31,

(in thousands)


2017


2016


2015

Net (loss) income


$

(14,516)



$

11,107



$

12,813


Currency translation adjustments, net of income tax


16,739



(4,700)



(13,166)


Comprehensive income (loss)


$

2,223



$

6,407



$

(353)


 

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

UNAUDITED SUPPLEMENTAL DATA


(revenue in thousands)


Q4 2017
Revenue


Q4 2016
Revenue


% Change


2017
Revenue


2016
Revenue


% Change

Reporting Segments













Factory Metrology


$

71,583



$

67,895



5.4

%


$

245,114



$

236,313



3.7

%

Construction BIM-CIM


25,799



17,527



47.2

%


86,349



65,056



32.7

%

Other


9,041



6,276



44.1

%


29,454



24,215



21.6

%

Total


$

106,423



$

91,698



16.1

%


$

360,917



$

325,584



10.9

%

 

Cision View original content with multimedia: http://www.prnewswire.com/news-releases/faro-reports-fourth-quarter-and-fiscal-year-2017-financial-results-300602291.html

SOURCE FARO Technologies, Inc.

Contact:
Company Name: FARO Technologies, Inc.
Nancy Setteducati, 1-407-333-9911
Email Contact
Web: http://www.faro.com
Financial data for FARO Technologies, Inc.