Popular laser scanner brand blames soft economy in Europe, Asia
FARO Technologies, Inc. on Tuesday posted a 23 percent drop in second quarter profit on sales of $68.3 million, up 2.2 percent, but lower than the consensus estimate from analysts polled by Thomson/Reuters of $70.6 million.
The Lake Mary, Fla.-based 3D imaging hardware and software manufacturer said in a securities filing Tuesday that it attributes the decrease in product sales primarily to the “decline of the global economy.”
Product sales decreased 0.5 percent, to $55.2 million for the second quarter. Service revenue jumped 16.1 percent to $13.1 million for the quarter, primarily due to an increase in warranty revenue.
FARO reported net income of $3.6 million, or $0.21 adjusted EPS, for the second quarter ended June 29, compared to $4.7 million, or $0.28 adjusted per share, in the second quarter of 2012. That missed consensus estimates of $0.29 from analysts’ polled by Thomson/Reuters, according to Analyst Ratings.
“Our results in the second quarter were impacted by ongoing economic softness in Europe and Asia. While interest in FARO products remains strong, many customers have deferred purchase decisions in light of economic uncertainty,” said Jay Freeland, FARO CEO. “The Americas region continues to show signs of strength, generating double-digit sales growth in the quarter and our product development pipeline remains robust.”
Shares of FARO fell 10 percent at the opening bell Wednesday to $33.50 but quickly rebounded into positive territory, reaching $37.30, up 1.8 percent, in mid-morning trading.
The stock closed Tuesday at $36.66, down 1.7 percent and traded down nearly 5 percent in after hours trading. The stock’s 52-week price ranges from $31.10 to $45.88. FARO has a market capitalization of $627 million and a P/E ratio of 30.16.
FARO manufactures, markets and supports software-based, 3D measurement and imaging systems for manufacturing, industrial, building construction and forensic applications for the automobile, aerospace, heavy equipment, and law enforcement industries.
Its principal products are electromechanical measuring devices including the FaroArm, FARO Laser ScanArm, FARO Gage, and the FARO Laser Tracker Vantage, FARO Focus3D and FARO 3D Imager AMP, all laser-based measuring devices. Most of FARO’s sales are generated by its FaroArm, FARO Laser ScanArm, FARO Gage, FARO Laser Tracker and FARO Focus3D products, and their related software.
FARO products have been purchased by about 15,000 customers worldwide, ranging from small machine shops to such large manufacturing and industrial companies as Audi, Bell Helicopter, Bombardier, Boeing, British Aerospace, Caterpillar, Daimler, Ford, General Electric, General Motors, Honda, Johnson Controls, Komatsu America International, Lockheed Martin, NASA, Nissan, Northrup Grumman, Siemens and Volkswagen.
FARO manages and reports its global sales in three regions: the Americas, Europe/Africa and Asia/Pacific. In the six months ended June 29:F
- 40.7 percent of sales were in the Americas compared to 38.5 percent in the same period last year
- 33.7 percent were in the Europe/Africa region compared to 35 percent in the first six months of 2012
- 25.6 percent of sales were in the Asia/Pacific region compared to 26.5 percent in the same period last year
Sales by region
- Sales in the Americas region increased 10.5 percent to $28.4 million for the quarter
- Product sales in the Americas region increased 7.7 percent to $22.5 million
- Service revenue in the Americas region increased 21.7 percent to $5.9 million, primarily due to an increase in warranty revenue
- Sales in the Europe/Africa region were $23.2 million for the quarter
- Product sales in the Europe/Africa region decreased 4.3 percent to $18.2 million
- Service revenue in the Europe/Africa region increased 20 percent to $5 million, primarily due to an increase in warranty revenue
- Sales in the Asia/Pacific region fell 6.7 percent to $16.7 million
- Product sales in the Asia/Pacific region decreased 6.8 percent to $14.5 million
- Service revenue in the Asia/Pacific region remained at $2.3 million for the quarter
Net income for the first six months of 2013 was $8.2 million, a 29 percent decrease from the same six-month period in 2012. New order bookings for the second quarter were $66.7 million, down 6.1 percent compared to the same period last year.
Gross margin was 54 percent for the quarter, down 1.5 percent, primarily due to lower average selling prices for certain metrology products.
FARO’s operating margin for the second quarter fell to 8 percent from 10.3 percent in the second quarter of 2012 as operating expenses increased due to staffing costs and $1.8 million in related expenses for the company’s sales and R&D groups.
Freeland said staff was added to “capitalize on anticipated improvement in our markets,” which weighs on second quarter results but “positions the company well looking forward.”
“We expect the second half of 2013 should provide an opportunity for improvement driven by the global increase in new sales account managers,” Freeland said.
He also warned if the global economy remains stagnant for the rest of 2013, “our markets may remain under some pressure.”
Prior to 2009, FARO had a history of sales and earnings growth, including 26 consecutive profitable quarters through 2008. “However, [FARO’s] historical financial performance is not indicative of its future financial performance,” the company said in its 10-K filing.
