FARO Technologies Inc. (NASDAQ:FARO) Q2 2018 Earnings Conference Call - Final Transcript

Jul 26, 2018 • 08:15 am ET

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FARO Technologies Inc. (NASDAQ:FARO) Q2 2018 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning, everyone, and welcome to FARO Technologies Conference Call in conjunction with its second quarter 2018 earnings release. For opening remarks and introduction, I will now turn the call over to CFO, Bob Seidel. Please go ahead.

Executive
Bob Seidel

Thank you, and good morning to everyone. Yesterday after the market close, we released our financial results for the second quarter and first six months of 2018. The press release is available in FARO's website at www.faro.com.

(Forward-Looking Cautionary Statements)

I will now turn the call over to Simon to provide an update on our company's strategic initiatives and afterwards will return with a review of our financial results. After the prepared remarks, we will open the call for questions.

Executive
Simon Raab

Thanks, Bob, and good morning, everyone. In our second quarter earnings release last year, we announced the completion of a challenging comprehensive global reorganization of FARO. We refocused our sales, marketing and product management teams into vertical markets. We realigned our support functions to be globally harmonized leveraging best practices. Our R&D teams introduced all new next generation hardware and software products across every technology platform. The team has delivered important performance over the past four quarters. We've taken tangible steps each quarter towards our long-term financial objective of mid-teen sales growth, 60% gross margin and mid-teens operating margin.In the second quarter, gross profit increased year-over-year by $10.9 million or 23.4% and operating expenses grew only $4.8 million or 9.5%. This resulted in a $6.1 million increase in operating income or 7 percentage points of increase in operating margin. We believe that we remain on track to meet our long-term financial goals. Our quarterly sales of $98.2 million grew 18.8% year-over-year. For the first time since releasing the metric, our trailing 12-month orders per sales FTE increased quarter-over-quarter to $706,000.

Our gross margin of 58.7% increased 2.1 percentage points year-over-year and our operating income of $1.9 million improved from a loss of $4.2 million last year. We delivered EPS of $0.07 per share in the second quarter of 2018 compared with a loss of $0.22 per share last year. The hard work, dedication and time to completely reorganize the company and deliver the new product has produced four quarters of mid-teens growth and profit improvement.

All our vertical segments delivered strong year-over-year sales growth in the quarter. Our 3D factory segment delivered an outstanding quarter of 13.3% year-over-year sales growth; construction BIM was up 25% and the emerging verticals, which include public safety forensics and product design was up 50.3%.

I sense our success in the quarter not just by how we delivered the quarter's financial results compared with our expectations, but also how we build for the future with our new product drumbeat and acquisition.

In the second quarter, we expanded our Quantum Arm platform portfolio in order to better match the technology needs and budgets of our customers.

In May, we introduced the new versions of the Quantum Arm and laser line probe, which provides our customers with an entry-level value-priced