"Having been at FARO for a full quarter now, I believe we can deliver long-term sales and profit growth. FARO's product roadmap, broad customer base and market position create the foundation for a much more customer focused and scalable sales model. With those goals in mind, we have augmented our management team and made significant progress on our strategic and tactical plans," stated Michael Burger, President and Chief Executive Officer. "I am not satisfied with our current financial performance, notwithstanding the soft macro environment. However, I am confident we will be successful in the implementation of our plans to enhance shareholder value."
Third Quarter 2019 Financial Summary
Total sales were $90.5 million for third quarter 2019, as compared with $99.7 million for third quarter 2018. The decrease was a result of continuing demand softness in the Asian market due primarily to the uncertainty surrounding ongoing trade disputes and the outlook for the industrial manufacturing sector.
Product sales were $63.6 million, down 16% when compared to $75.8 million in the third quarter 2018. Service sales were $26.9 million, up 13% when compared to $23.9 million in the third quarter 2018. New order bookings were $94.8 million for the third quarter 2019, down 6% as compared to $100.5 million for the third quarter 2018.
Gross margin was 56.1% for the third quarter 2019, as compared to 50.8% for the same prior year period. Non-GAAP gross margin was 56.4% for the third quarter 2019 compared to 55.8% for the third quarter 2018.
Loss from operations was $5.9 million for the third quarter 2019, as compared to loss from operations of $2.7 million for the third quarter 2018, driven by the lower demand environment. Non-GAAP loss from operations was $0.1 million for the third quarter 2019.
Net loss was $6.2 million, or $0.36 per share, for the third quarter 2019, as compared to a net loss of $2.5 million, or $0.15 per share, for the third quarter 2018. Non-GAAP net loss was $0.2 million, or $0.01 per share, for the third quarter 2019.
* A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is provided in the financial schedules portion at the end of this press release. An additional explanation of these measures is included below under the heading "Non-GAAP Financial Measures".
The Company's cash and short-term investments decreased modestly to $144.0 million as of the end of the third quarter of 2019, and the Company remained debt-free.
The Company will host a conference call to discuss these results on Thursday, October 31, 2019 at 8:00 a.m. ET. Interested parties can access the conference call by dialing (800) 894-5910 (U.S.) or +1 (785) 424-1052 (International) and using the passcode FARO. A live webcast will be available in the Investor Relations section of FARO's website at: https://www.faro.com/about-faro/investor-relations/conference-calls/
A replay webcast will be available in the Investor Relations section of the company's web site approximately two hours after the conclusion of the call and will remain available for approximately 30 calendar days.
FARO is the world's most trusted source for 3D measurement and imaging solutions. The Company develops and markets computer-aided measurement and imaging devices and software for the following vertical markets:
- 3D Manufacturing - 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 events, plan security activities and provide virtual reality training for public safety personnel
- 3D Design - Capture and edit 3D shapes of products, people, and/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'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
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 non-GAAP total sales, non-GAAP total sales by reporting segment, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP (loss) income from operations, non-GAAP other expense, net, non-GAAP net (loss) income and non-GAAP net (loss) income per share, exclude the GSA sales adjustment (as defined in the tables below), the impact of purchase accounting intangible amortization expense, stock-based compensation, advisory fees incurred related to the GSA Matter (as defined in the tables below), imputed interest expense recorded related to the GSA Matter, costs incurred in connection with our executive officer transitions, including severance costs, sign-on bonuses and relocation costs, the charge increasing our reserve for excess and obsolete inventory, the impairment charge related to our equity investment in present4D GmbH, changes in our reserve for uncertain tax positions due to a change in our judgment on the recognition of a tax position and return-to-provision adjustments identified in the preparation of our 2018 U.S. tax return and are provided to enhance investors' overall understanding of our historical operations and financial performance. In addition, we present EBITDA, which is calculated as net income (loss) before interest (income) expense, net, income tax expense (benefit) and depreciation and amortization, and Adjusted EBITDA, which is calculated as EBITDA, excluding loss on foreign currency transactions, the GSA sales adjustment, stock-based compensation, advisory fees incurred related to the GSA Matter, costs incurred in connection with our executive officer transitions, including severance costs, sign-on bonuses and relocation costs, the charge increasing our reserve for excess and obsolete inventory and the impairment charge related to our equity investment in present4D GmbH, as a measure of our operating profitability. The most directly comparable GAAP measure to EBITDA and Adjusted EBITDA is net income (loss). Management believes that these non-GAAP financial measures provide investors with relevant period-to-period comparisons of our core operations using the same methodology that management employs in its review of the Company's operating results. 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.