FARO Reports Q2 2017 Financial Results and Announces the Completion of the Global Reorganization

LAKE MARY, Fla., Aug. 1, 2017 — (PRNewswire) —  FARO® (NASDAQ: FARO), the world's most trusted source for 3D measurement and imaging solutions for factory metrology, construction BIM-CIM, product design, public safety forensics and 3D machine vision, today announced its financial results for the first six months and second quarter of 2017.  The company also announced the successful completion of its 18-month global reorganization and highlighted its 3-year strategic objectives.

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

Six months ended June 30, 2017

New order bookings for the six months ended June 30, 2017 were $175.8 million, an increase of 13.3%, compared with $155.1 million for the six months ended June 30, 2016.  Sales increased to $164.2 million, an increase of 6.5%, for the six months ended June 30, 2017 from $154.3 million for the six months ended June 30, 2016.  Excluding an unfavorable foreign exchange impact of approximately $2.7 million, sales for the first six months of 2017 would have increased by 8.2% compared with the same prior year period.  Our sales increase was primarily driven by higher service revenue and an increase in product unit sales, especially in Construction BIM-CIM.

The book-to-bill ratio at the end of second quarter 2017 was 1.08 compared to 1.04 at the end of second quarter 2016. The increase in book-to-bill ratio was primarily due to the demand for the newly introduced FARO FocusM 70 laser scanner in both the Construction BIM-CIM and Public Safety Forensics verticals, which temporarily exceeded our production capacity late in the second quarter.

Gross margin for the first six months of 2017 decreased to 55.1%, compared with 56.1% for the same prior year period.  The year-over-year decrease is related primarily to the production start-up of new core platform products and lower average product selling prices reflecting increased sales of aged sales demonstration and service inventory.

Operating loss for the first six months of 2017 was $6.2 million, compared with an operating income of $8.8 million for the first six months last year.  This decrease is primarily due to an intentional increase in operating expenses related to our strategic initiatives, including a 34% increase in the global vertical salesforce from 468 at the end of second quarter 2016 to 627 at the end of second quarter 2017 and increases in R&D spending from recent technology acquisitions, as well as a modest decline in gross margin.

Net loss for the first six months of 2017 was $5.1 million or $0.30 per share, compared with net income of $6.5 million or $0.39 per share in the first six months of 2016.

Second Quarter 2017

New order bookings for second quarter 2017 were $89.0 million, an increase of 9.1%, compared with $81.6 million for second quarter 2016.  Sales increased to $82.7 million, an increase of 5.3%, for the three months ended June 30, 2017 from $78.5 million for the three months ended June 30, 2016.  Excluding an unfavorable foreign exchange impact of approximately $1.4 million, sales for second quarter 2017 would have increased by 7.0% compared with the same prior year period.  Our sales increase was primarily driven by continued service revenue growth and higher average selling prices.

Gross margin for second quarter 2017 increased to 56.6%, compared with 55.9% for the second quarter last year, and increased 3.0 percentage points compared with first quarter 2017.  The increase is related primarily to higher average product selling prices and improved production efficiency in our Factory Metrology vertical.

Operating loss for second quarter 2017 was $4.2 million, compared with operating income of $4.5 million in the second quarter last year.  This decrease is primarily due to an increase in operating expenses related to our strategic initiatives, including front-end loading the expansion of our salesforce and increased R&D spending to support our new products and newly acquired technologies for our new verticals.

Net loss for second quarter 2017 was $3.6 million or $0.22 per share, compared with net income of $3.4 million or $0.20 per share in the second quarter last year.

As of June 30, 2017, cash and short-term investments was $139.6 million, of which $99.9 million was held by foreign subsidiaries.

"The end of our second quarter marks the successful completion of an extraordinary 18-month process," stated Simon Raab, Ph.D., FARO's President and CEO.  "Today, there is an exciting energy across the whole company.  We are focused on growing the top line of our verticals.  Over the first half of 2017, our team delivered 13.3% orders growth overall with over 30% growth in Construction BIM-CIM and 9% in Factory Metrology by effectively executing our strategy to deliver a new product drumbeat and rapidly expand our salesforce.

Over the last six quarters, we have used our cash, know-how, and global marketing reach to build a far more agile and efficient platform to support FARO's long-term growth.  We have harmonized literally hundreds of global processes, rapidly expanded our salesforce personnel over last year, built new web-based demonstration studios, activated the verticals, increased R&D, initiated aggressive new product development, and acquired new next-generation technology.

Our investment initiatives, including the natural one-year maturation of new salespeople, system improvements and acquisitions require the necessary amount of time to realize the resulting top and bottom line impacts.  The aggressive front-end loading of sales staff in the new global verticals is aimed at accelerating the achievement of our 3-year strategic plan objectives of double digit revenue growth and operating margins.   While our loss year-to-date is substantially attributable to these intentional strategic initiatives and the related costs, we can already see the benefits of these investments and are confident in the value being created.

In our upcoming earnings call I will review many of our current initiatives in further detail."

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.

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