FARO - Earnings call transcript Q1 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, everyone, and welcome to FARO Technologies Conference Call First Quarter 2019 Earnings Release.

For opening remarks and introductions, I will now turn the call over to Chief Financial Officer, Bob Seidel. Please go ahead.

Robert Seidel

Thank you, and good morning, everyone. Yesterday after the market close, we released our financial results for the first quarter of 2019. and available for www.faro.com. on release of first press is XXXX FARO's related Form the XX-Q quarter The website at order some better results, you course to company call. In its and of understand this management statements forward-looking the make during the may help plan, similar can anticipate, words. identified will, be objective, goal, statements words, such continue, These expect, intend, as by believe, potential, may and the from statements. possible that company's those in is may materially actual It differ forward-looking projected these results to results company's differ are factors the that quarter actual Important XX, release and the cause in ended forth in year XXXX, XXXX. press the Form materially yesterday's XX-Q XX, may set for for Form March ended and December XX-K our business and return now of financial a we'll turn our initiatives, review call with will Simon the on to results. to afterwards, I update over provide an prepared questions your After call will trading. up to we our the start of open for remarks, the

Simon Raab

of efficiency. revolution. steering applications. to is We which a in for we In light processing we structured the create a itself sales better first Open To process new modernized orders quarter sales key a acquired which now we through and our When reinspired of created applications. series the regional products and to customers' quality years has new that to investing our people player namely reshape XXXX the achieve from businesses XX-month to people dental We start number intentions, of rate. a year. the geographies. performance same as communicate the this XD the or to per XD entrepreneurial At XXX expand the good our a new introducing sales the into experienced mid-teens to new markets Thanks, returned sales X Photonics full-time CEO In and At XXXX, XX% market a be I to we increased with across footprint have unaddressed web to in customers and to our new aimed and XD growth year-over-year strategic development the new made time, which into Technologies, force of verticals. company the and same the expands solutions the positioning on the an for laser new of a indicator, becoming end expand X by are trailing global the XD chosen large vertical, technology which sales at demonstrations, and July market, aggressive sales time, of headcount. lidar our the address our to sales going our in accelerated deployment product At drumbeat one leader over our global future visionary light by an market vertical better verticals we vision in unaddressed We to to spirit of product We capital is a with reorganized space is acquire for it to markets. sales to position pace create headcount important vehicles. morning, imaging force now demonstrations led been as XXXX, and headcount XD growth increase medium very measurement by channel technology and goal, which the to an our FARO shown Bob, improve from we strategy FARO a our be sales for vertical significantly start to in had the first leverages our acquisitions in I reach how everyone. investment outlined XXXX, growth technologies ago, autonomous our to XD of

technology via increases develop market first the growth line that top have represents revolution. XX.X% year line channel in quarter being aimed XXX of quarter $X.X force, reached top develop employ mindset sales first better to effectiveness. drive realizing expansion in the results, our which force. long-term expand both to continue Each to of margin first by increased been impact yet has XD our to XXXX, In was sales product by and after investments margin to strategy its a gross we making FARO new may to the not over new new the focused products introduction our and quarter's Our XXXX. sales the expanded verticals for the with potential global technologies, expended and We leader. our acquire long-term gross force, We XXXX but representatives XX.X% in new drive from our which million positions sales to products, full

Over months, our bookings XX the $XXX new up order trailing year-over-year. million, totaled XX.X%

year-over-year, the first for milestone orders increase Our X.X% XXXX the company's rate. quarter time million which history exchange from impact X% a exceeded an included first QX negative of at foreign the $XXX.X million, $XXX in

in and Our Emerging first performed and by with Verticals respectively. headcount XX% quarter leveraging Construction year-over-year, new and BIM markets, investments new XXXX unaddressed products sales bookings order well the segments in up XX%

and featured BIM the Last control software legacy Tracer projection Construction XD BuildIT CAD-based for XD our FARO is quality unique construction disrupting with systems. vertical control information. scanners with laser year, SI we Construction the our first called construction Focus introduced Our market use fully quality

Our and is years our customers the to to our construction products manufacturing metrology industry, costly that inefficiencies the benefits process rework value ago. industrial brought to proposition help similar reduce

XXXX, a objective is foreign exchange XX-plus growth the rates. negative quarter percentage included Construction BIM from long-term impact for We in XX% year-over-year. percent X achieved of first Our the which

X% XD negative and are foreign laser the orders rates. which product Construction vehicle our total scene manufacturing crime for from including Emerging Verticals for by year-over-year, constant processing rapid BIM increasing a into XD autonomous jury, XX% medical segments declined XD in X% in our steering prototyping or Verticals and expanding and broad, virtual our walk-throughs exchange technology by applications. in Despite and reach of included untouched design dental, Emerging XX% laser Our for currency, market, gaming, segment impact

year-over-year, single we XXXX. XD digits Our growth is manufacturing in which long-term orders objective achieved high for

our number range sales carrying address of line and geographical better new manager may sales without XXXX, Our the accommodate BIM new growth multiple the year sales first introduction short-term higher-than-expected naturally product its force quality. force This customer manufacturing later X Throughout longer and a the continue in the quarter to reorganization focused due sales growth a of long-term until the applications headcount into portfolios: sales We will will a headcount and XD sales introductions of no expanded product manufacturing with expansion. volume, employ reorganization portfolios many especially portfolio conflict. reorganized large product These With of quarter. disruption to orders in in sales enables force to was force of small manufacturing turnover. the impact the our territory same account on channel for portfolios. have will on expanding measurement teams. need intend XD we assembly third new and application and impacted The sales product appropriately reorganization benefit introductions, add manufacturing, the XD to Construction into portfolio higher all end portfolio same changes the portfolio X leverages XD restructuring products in the to We by multiple coverage could and volume growth applications.

retaining Over about then hire them XX-month a full-time become training FTE. new process right the of in them. two people, the importance to This repeatedly past that experienced and spoken well order have maturation a we or for years, the reinforces sales hiring

We retain our an continue to evolve quarter, sales every our increase X%. XD or recruiting by we In and FTE. the first impacted in aspect our and quarter higher-than-expected did orders force $X training experience on-boarding, first which to estimated segment, of sales management manufacturing talent million turnover

portfolio to for of that quarter. higher-than-expected actively the maturation by the roles, we first X we XX period-ending increase about on recruiting our our strategy, earnings intended be our are FTE, the per XXXX to or next increments In by turnover. first during only over an impact sales by quarters. communicated headcount an We sales but these XD headcount quarter the replace relating increase in manufacturing equal ending there we increased growth XX% quarter, call, to may line XX-month quarter On an time orders X new given

our higher first quarter XX% the quarter headcount XXXX than However, was last first year.

from full-time first our orders and months sales million headcount $XXX,XXX, leaders Our of quarter $XXX.X trailing our FTE approximately in sales XX goal XX% sales recruiting accelerate recruiting with to sales in team months efforts order our to With bookings position XXXX. , the the metric new is quarter months our second or vertical experienced $XXX,XXX full trailing our XXX working XX year. trailing XX meet was hard of to per the of for up FTE us the

in X.X verticals. markets We an developing leads are FARO industry introduce XD to of public differently late prime adopter versus being sectors construction deal as a the early mover the the sales in example. more of in and the introductions. There all, of market are new relating industry, challenges differences versus personality the emerging we XD effectively and to new adaptable established what markets model implementing we to first are into and product safety sophistication After the to entire Sales with creation portable call the and significant manage

demonstrated increasing our R&D gross expenses XXXX Our are first maintaining XXXX rates. profitability initiatives success We for G&A, at increasing signs tangible initiatives. of business those by run the focused in quarter on margin underlying and

for our margin and marketing year improvements. our adhering the controls percentage XXXX to our line X.X force. to by with spending selling in We increase service programs full We by by expense our in year-over-year We quarter gross our marketing we sales our decreased sales objective decreased to spending our numerous points activities, long-term due as increased and of With the service continued service on R&D streamline percentage maintaining XX% below steady expense points quarter percentage year-over-year. to by margin prior XX.X% reaching goal in a margin goal. tight X.X

grow world our new enabled President on to the continue XX. turn over I assume the to objectives drive executing and to I the our business The support operational deeply for second starting that pleased your Finally, in the appreciate I until announce shareholders change hard past and team that his of of FARO our XD vision June the the have global a years us now leadership focused to successful Bob. the and together. over work thank towards were as I plan us CEO the executive assumes call the measurement team I'll Burger to Michael in XXXX you transition for CEO role. we position will and appreciate quarter. to support future. duties X the are

Robert Seidel

XXXX. were Total of Simon. for for quarter first XXXX, million quarter as million you, compared $XX.X increase $XX.X X.X% sales Thank with first an

negative million, on a a X had rates on percentage impact approximately exchange percentage $X.X negative point to rates as impact points. second X.X Based X sales quarter sales sales by overall we our exchange growth Foreign rate foreign of foreign rates from for exchange of decreasing anticipate on XXXX. today,

government. an Our week inquiries In relating and GSA disclosed by the this to outside sales products in unit Services sales first matter. adjustments Verticals have increase do double-digit service process reported GSA, Office and the not to driven to GSA our sold material increase sales been reporting, General offset the was since we Construction our our growth quarter We and the lower in segment. XXXX revenue related BIM unit potential Emerging product or to first noncompliance and working General product quarter and the in manufacturing on matter. Administration, with in the that segments, U.S. remediation partly Inspector reported February, mainly we counsel for by in its our XD sales reporting services legal of to We've

$XX.X our efforts quarter partially to manufacturing In sales, in by the compared prior first unit with are X.X% $XX.X revenue. a mostly product segment, XD matter driven as growth year by the service and were decrease sales quickly lower of same was for million, We continuing period. our continued This million for offset efficiently. resolve XXXX decrease

sales sales revenue. product for the scanner in $XX.X Construction with first Even introduction basis. $XX.X as China and year-over-year growth first in in million, a increase reflecting as XXXX. and the XXXX, to the in XX.X% with for compared broad segment, Our constant-currency quarter increased Pacific to higher laser software continue mainly demand XD well market regions EMEA October for increase service quarter million a an of we hardware This an quarters. were on in manufacturing BIM for our In additional import decreased past Asia Americas solid and was sales sales modestly as realize two tariffs XXXX of portfolio the related increase unit of strong

in compared have XX.X% of service was sales a double-digit markets improved the $XX.X in our Asia-Pacific with were process. growth and $XX highlighted a we million developing Verticals Gross an revenue demand as higher were our increase region, of In XXXX new BIM XX.X%, XX.X% year-over-year margin say with million mainly Construction strong quarter our potential XXXX, segment, historical this created approximately Our for BIM X.X for annual that outside Construction Emerging first core service in customer an for By repair This customer XXXX, first sales for verticals can as of result quarter the emphasizing compared investing for in points region. our sales first in in percentage to since XXXX. related sectors. by growth sales and increase year was efficiencies we increase prior same $X.X these quarter million period. margin emerging high

We represents expenses, sales for were quarter quarter communicated step driven quarter to mostly expenses as $XX.X offset expenses mostly as quarter $XX.X remained This XX% expense, the CEO stock-based acceleration million objective XXXX margin. connection discretionary lower of is to administrative quarter marketing period. Our Previously, increase objective year an XX.X% outstanding rate. marketing expense forward this spending well a our and Selling was XX.X% controlling with commission same for sales to of as increase Selling by headcount. with compared $XX.X objective for our as achieved GSA to first increase by succession, in for we sales decrease compared that manage first as with awards lower for incurred were This XX.X% our recognized higher marketing to gross for matter. and expense the XXXX run and was XXXX. full year in sales year. incremental of quarter X.X% our related XXXX, line first additional long-term XXXX million in prior last with of of General actively million, an compensation the compared $X.X partly million in we cost for service first were margin a $XX.X first first decrease strategic quarter and due million marketing our with during expenses fees advisory of and of XXXX the objective.

succession second expense XXXX, CEO as were As same and million decrease This first Research to million increase may as for for XXXX and the a percent matter for GSA of with compared anticipate expenses the increase expenses million CEO expenses activities relatively succession these we related sales, and X.X% related our headcount the that of general We prior will were to related XX.X% general mostly an of time, increase quarter and the with anticipate excluding unchanged incremental compared first the of cost to quarter. compared to GSA for approximately year-over-year year. for by the to first in $X.X XXXX. as from sales administrative quarter Research $X.X first expenses were additional expenses year and matter. XX.X% sales of prior XXXX acquisitions. the At development incremental $X.X engineering fourth quarter that third and XXXX quarter our our was quarter development administrative period. and XXXX, this compared

is to objective. objective to XXXX achieved and our run with full first manage quarter and expense objective line actively our in research XXXX We Our in rates. remain this development year

per quarter for was or income XXXX. to million million for first compared XXXX share $X.X quarter per $X.XX $X.XX Our first net share $X.X or

debt. totaled a XXXX, short-term end first At the to the continue high liquidity and maintain cash structure million. with and of investments of $XXX.X quarter strong no capital We

now operations. quarter investments We cash Form your end for call. of presentation the million world. call deeply today's our driven the for around increased XXXX and Thank open is Our to appreciate more and of in dedication of short-term attendance for available shareholders XX-Q quarter we by by XXXX, from of our first employees the the will of questions our XX, positive $X.X from support the complete market on trading. March and flow start And the cash our XXXX. discussion you ended results A up the

Operator

first with we'll And our Greg Instructions]. Craig-Hallum. from take question [Operator Palm

Gregory Palm

more. wanted that a in I more a something disruption into bit was size impacted you dig was force geographies, to area? a specific Can surprised. as Or all that all I the segments? sales decent that was pronounced characterize across

Simon Raab

sales was manufacturing, we XD don't that cause. We literally among of it scores, needed to then product creating a was lines did renew leads we of transition lower these PMI the primary the feel significantly in also I and training with correlation contacts different portfolio. lower sales regions. of that each force and line expertise did by Well, but the product impact the regions it around portfolios, only and in had and meant each see the disrupted forces, for that, we expanded all sales which mean the as

was than So the be, necessary more as described disruptive we it but for growth imagined it it we was in the future would call.

Robert Seidel

the And Greg, we are follow-on one portfolio the evaluating Construction to is then later the strategy just expand year. BIM in that

Gregory Palm

Got it.

little least all level think, -- I near to in least bit comfort you about the improvements persist this what's disruption at year the a And you or done, more next? of later Simon, at terms term. said and that made that? in mean maybe I I comment expect is Can talk you early when a guess your

Simon Raab

products generating reason the reasons for new of of is we take call because we out. it reasons, of which getting drumbeat and expertise that really extent would itself product the were the work other were that, marketplace. to that becoming orphaned the experience we Well, weren't attention call the product problem for the and mentioned They of orphaned. The in the what a motivated that quarters I couple arose, because think that the in line, of portfolios,

point a fact So of in developing your there's to to if adapt it. channel new for not products purpose doing lot that acquisitions and can

company. became obvious for to and It necessary long-term start needed And it take force does we so and to make the portfolios. advantages create that sales our

First created line. in But mean of which cases though customer we It having sales have will some quality small why conflict. allows and in without over split a in large concentration an multiple growing same the also to a and product all, customer. to the you and/or work pay where channel and portfolios. now you there's territory group, that between set particular get is get to then volume, force a the be overlap then people hugely does reason same which because the volume, together to layer limited it expanding small the built territories X volume in off with product better creates on you'll deal But structured future it large portfolios an marketplace, sales in dynamic also constantly

Robert Seidel

quarters other FTE out up may to and to manufacturing come next his impact X%. manufacturing prepared those takes headwind the of be then rehire factors XD Greg, model remarks, headcount in other or our the as the higher-than-expected in to full one the had effectiveness. course for quantify several sales That point individuals of XD it that a time because side, we that of the is Simon about on that one to And million pointed is turnover. $X We

Operator

next take Jim Ricchiuti our from And we Needham. with question will

James Ricchiuti

you And the this I sales was market? rate churn more saw -- not it can it unusual. But the some did about you was you force? actually in -- the is of concentrated of U.S. in covered. sure I'm dropped so if kind clearly off, It talk was

Robert Seidel

direct anticipated, the see in disclosed than turnover at just on had see really Where was look didn't our see correlation. disclose directly we on kind it's And results higher force, down especially of and rate. a X% to about if is our So It we what was higher year-over-year. Americas saw XD that that so financial Q, the manufacturing. correlation our we you'll results basis you really regional the that you churn that we region sales in you the

look saw the If at factor factor, Americas, where of manufacturing being, we then PMI, South out, more XD you Asia, business Korea, the countries of outside the about in the of pointed India. was a Japan, as it Simon less

overall So results. sales sales see headcount, America, you that in

Simon Raab

the salespeople, causes changes. a course, reduce order the of to potential then to a I required for mid-teens for always color world. sell the to around better the and groups meant changes. there's which and we reorganize the That sales undertook territorial entertainment, around use to the the T&E, in the But turnover commitment controls each we industry force staff. portfolio meant add expenses meant expenses sales new additional That want sales There's a lines. or the an had and average, structure cost of That more some commission in of product better lot typical new changes some in -- sales around to, for training. -- for And processes. the travel sales it's

is So the many in this the resulted in inevitable intention some took long X. our to It a ripping Band-Aid as flat in done. force. course, in getting actions prepared the we and was are the net-net, we of an for of work And the disruption remarks, of matter term. we off of noted sales that all, And

we're take percentage X the exchange rates, point down over prior the If quarter. you only

the disruptions. undertook, along we But huge that all in it did that So we however, and changes making we inevitable, was sales think force. executed, given the that we with have all changes well fairly goes made the

James Ricchiuti

there of Is apart hiring replacing think from way the plans the to lost? incremental you've some a folks who about

Simon Raab

sure I'm sorry, I'm question. the not understand I

James Ricchiuti

this year, salespeople going adding Well, right? be you're clearly to additional

Simon Raab

Yes. Right.

James Ricchiuti

you've sense you you've adding? so incrementally, get salespeople a is, to replace trying I'm turnover. to above the be needed what additional had might -- just people and And also but over

Simon Raab

were understand QX force. increase sales only XX% Well, no, I up that year-over-year we still of it. in committed XX% overall out the We noted prepared pointed as -- In to we've the 'XX. on we remarks,

though, going people we're changing because We the quarter point we wish we So the of had increased the only XX. kept target. expected to out, that first I the ahead of so QX in we'd We sales had of target. in in X respect, because turnover more we be had while would have one on by reduction we're in be that else as be process, not the organization, about of to the going we to there's the much the -- effect T&E did or that natural QX everything this year. commissions, of for a turnover calming the portfolios, customer territories, the and sales

that a So hired the will people stable in environment caused I expect be we into disruption much than more QX.

Robert Seidel

understanding actively just may end as by of this leaders, be get And up second income our of think, -- human the our the working end get really team to Jim, the we forward to the quarter go caught to statement where on first quarter wanted second by trying flow I the as to for quarter. how your are vertical Simon and resources of through our stated, is, we

catch that will to certainly we part in QX. QX try early up of So and

kind certainly course accordingly. could come of second and selling of those quarter up go you people expense So in our the see the on board

Simon Raab

the make an the industrial it's to range average is think important and I mid-teens in annually. -- low-teens turnover that well point as mid-teens that typical

we I that HR. So the for -- challenge deal we improvements can that, people. XX% is to handle place year-over-year quite both our system the to reflects increase force it, and I and think we natural are to retain involuntary the making for sales voluntary accommodate turnovers, suggests necessary the all the think a QX and it with think But and in

James Ricchiuti

about back you sustainable? feel was have level do just certainly may queue. year-over-year, ask other at are we're like I service margins question and unusual I'll some sequentially. stepped in of there up a service but the If perhaps margins even The jump the Or that really Wondering you're one more anything QX? -- gross now

Simon Raab

sustainable. maintain continue so. goal that that fluctuations that, think sustainable. margin and and we the efficiencies we as long-term believe demonstrating experiment service even improve But a is is we're for think be There believe upon we the perhaps team, we I that in service minor I this will with department. It's different it. leadership to may

Operator

take DeGasperi from our question Andrew next And we'll Berenberg. with

Andrew DeGasperi

I environment the and just macro how may generally be impacting you. one a on quick had that

I is certain you are think April, things on the and U.S. today going think, Do of in in region. as down on touched you through there? slowing what a Europe, PMIs bit given

Simon Raab

not the have I indicators in quarter. any would don't that part of beginning worse the situation any getting say do indicate that We it's signals the the preliminary deteriorating.

Robert Seidel

What I'd quarter least those can That's comment, say, be, would where really in XD Korea. at probably our past the saw we we PMI India on South of really, Andrew, Asia business. correlation closest impact in manufacturing the the countries Japan, and

If our region, EMEA in EMEA. we in our good very results you look quarter at a had

Andrew DeGasperi

environment metrology Right. today, the competitive anything either And maybe BIM? changed just has on in or Construction

Simon Raab

People they are number sectors. I revolution of quality of many in introductions software. total in construction, would missed realizing that the say that a of in occurred that are Construction BIM, the market control There is industrial waking quality new the up.

large. small so a new means and we in see definite That competitors, And pickup. interest

environment. competitive So it will and be an aggressive

Andrew DeGasperi

Got it. And lastly then for me.

of the the or restructuring half Should quarter timeline? three Factory? two Construction of you that BIM, terms in should like year. some sort saw Or a a we expect might it be a disruption of shorter XD little in -- mentioned see You second less coming we in

Simon Raab

the -- learned BIM. of we there Well, think restructuring in are XD, they to with of terms take in lessons I intend advantage were certainly more portfolio going which to

I'm expecting of a disruption. less So

kind market was vertical in core we that our any course, -- have. because of that also that think others the of a years years of an less we absorb sales sector force, growth the that for enough growing We will that's established have. not dynamics that rates disruption have that And there's

some much So disruption, I'm less but that certainly yes, XD be than hoping in there manufacturing. will likely it's

Operator

next And Hendi our Susanto G. Research. take we will from with question

Hendi Susanto

goal in disruption should two like margin quarters growth be to double-digit more in XD XXXX? the operating do still that that maintain to a and to in manufacturing regard does its take plan FARO would said QX we of With QX? reorg questions. First later beyond Or BIM, you expect achieved technology similar Construction

Simon Raab

are make controls provide goal. Verticals is sales our disruption and margins are to believe still to and at rate our That double effects, geared we any a the Emerging that increasing for sufficient those And up cost digit.

So That's yes, we still maintain our that. goal.

Robert Seidel

about, forward of to those margin. R&D. One -- there the to pieces get as margin. things get a made seen of costs, at our We controlled is look We that gross our really is quarter selling service we talked to to the and a the with step XX% the one control results marketing in in

the is in steps place. there So

that to in start really QX. You see

Hendi Susanto

would When understand And XX, in the sales then to the anticipate QX second reported FARO reorg question, turnover timing February not like did force on and sales I manufacturing. XD X early quickly we decided would I'm of the in And wondering sales in disrupt was turnover QX. the force these and sales sales whether headcount March? March. executed in headcount Was observed come and reorg

Simon Raab

portfolio. decided we we had of we the realize didn't -- were to going knew it of cause. head We Well, kind direction would in the disruption

new commission and had We controls. of a cost also policies around number structure

how thought. core be things to have those is in and done. decided we go both one the that done to we going though, product course, and rates. has a growth But ahead course, manufacturing our the you our lot them, of as the start other good core and in It's -- to that being A to was in various them when you restructuring When was you. making of first realize quarter. disruption than get it salespeople do with long-term sales. lines strategic do to started long-established more expertise so that still verticals, quarter the of just we which, where most of when saw, first that's up XD get one The to maintained have So change, we you of one, there impacted the most decided we of

So created advantage things the And inevitably, build And do to going those if was it take and we're changes that remedy it hoping of all very changes. disruption. some that to product market really got you're of business just you to one long-term the quickly. to

Operator

from our take next Richard we'll with And question Baird. Eastman

Richard Eastman

How we years reorganizing. of is made of some much in the ago? mean kind of pick X to investments we the that people. topic on Just added same I this or XD here up unwinding unwinding the

I churn not what that quite what underlying in reason understand are -- to of the kind turnover? understand the three the time, here the ago? commissions? big so doing in of we we've markets. for that is cutting years we place I are -- our that's verticalized is in X years -- what here actions And sure why after investing from put trying think, I'm it headcount. different We mean I reshuffling territories? put at is we place I'm you Are what you

Simon Raab

Well, of The all, increase first that did of headcount let's perspective. put year. in of QX previous by XX%

tier were a were So commission around the were The redone. churn. sales expectations costs commissions were we controls The increased. restructured people increased. -- had structure performance higher-than-expected The on by

this. Now that no -- side all operational overall kind that company. in of of But is change around concept the the sales. imagine of was just the the verticalization There

product expanded line. an have You

X widely scale, you instead have a in quality have have diverse people the you that now, carry expertise and sales let's building of large small products to bag of say, around and control. and two who areas, also in these scale primary have manufacturing So actual products

were ignored problem we've customer we the products that of new products a X when added we So -- X has or option that we to an extensive had into were basically because all sell X things. he goes a have things of because that having being salesman

limitation. so even a it And was demonstration

or do You each that -- if X can you month, of say, you those demos a do two demos you products. could in of most had XX XX would let's demonstrate only products, that mean if

inevitably so no a it structure. just And longer viable was

sales So force. same exact the we took

just hundred attention one products. each have split of now five show get And you get instead the can and selling you don't them then products, you orphaned it couple a so having say, three and each products of that people, two they're products. two the into those Let's up necessary groups

being same with need. come So salesperson their a even products added vertical's they specialized around the the different it's the for rate, products it's not a exposure adding XX own vertical of to remotely give that impossible a products within binder at absolutely is -- products. these evolution continue and we if in now the it's It listing mean sales I new and a natural force.

rates were ignored the process. recover. a of it that so high salesperson year. about was arms on sales So a arms over think X, this the Part an small for vertical quickly who manufacturing. selling. people -- exchange will last was we focused products X we single disruption, Like evolution And said, that of we other XD That's the natural is even other basically challenge forward say, with were they are I given were talking let's that you digits

as and expertise the to needed -- on be to to that had the be retrained we expertise had were they well there. ensure other So products

pain growing all it's to evolution adding. with force new that the of deal So the a I we're natural think products and sales just

Richard Eastman

FARO global sales? person? And Does person same head the a of that have is

Simon Raab

of Well, and global a Yes. we the now. of is the XD that -- we head have the a of global head verticals, same person have each right

Richard Eastman

a much $X.X Okay. that legal? you is Bob, of around flagged, question, The how that And just million then the G&A.

Robert Seidel

going total relates for and for So million for $X.X compensation number fourth similar look then about, quarter we second and CEO the talked quarter. a $X us, the recruiting. GSA would is the the prepared expense. $XXX,XXX and of third we in matter potentially the in and the $X.X about That's million down progression million the then to remarks with What in GSA about

Richard Eastman

$X the million go would in to first from the in So GSA $XXX,XXX second? expense

Robert Seidel

continued million and incoming No, quarter, the of also new our second in the primarily the quarter year GSA acceleration, in second is of then the would the stock and later expenses CEO. includes $X the that be half option

Richard Eastman

But my at question. You a to people? before. -- that is it's when believe, by have question I up one XXX at gross I I just points, fewer degree? came look service service. improve then a last -- question efficiency And mean you I just service When just Okay. service margin basis the do definition, the up the being how look is

fewer year-over-year? experience break/fix meaningfully -- have that either how ratio, have or less you you So you people, but you how drive efficiency can can else

Simon Raab

application part the warranties is doing nonwarranty as training for Well, of a the is engineers service. pricing as service course, for responsible in that well and because training of selling and all actual warranties of it, department

in to time, the So marketplace. efficiencies that the are At sure to had. rates were there right -- make be the just want same we we priced

actually mean by in there a that's also as configured and amount significant the parts diagnostic reliability have efficiencies. are that tooling We incredibly way too. increases well. and actual of to has the effort And as significantly certainly, replacement a -- such -- the had reduce the of time R&D I department are required repair, contributed cost to provide diagnostic product important

department department more of So a sure, to reliable. the that service strong as products the they're R&D with blending out, go make

pieces that So it's actually many, little contribute. many

Robert Seidel

other statement, piece a it the say, would in recorded really we had I face service. XX.X% can and the see the you mentioned, in year-over-year sales we of income growth

so And some started that's the really team sales stream. of an to recurring activities that we time inside revenue one is selling ago that dedicated in

gross the activities to the is And piece what other is to drive helping revenue, which margin. really so those are that driving service

dynamics. gross So it's understand margin, really driving you X just that's the the pieces so

Richard Eastman

Very good. Okay.

Now I understand.

new seeing competitive we're and price. seeing revenue new and continues to basically question, The higher side products. price, again. our conversely, we're We're orphaned here sell? literally products a last difficult sales, value gross my between there and products, in more higher. product move higher more suggesting correlation the Is to less slow, margin And have Just churn growth around any

Simon Raab

is mean products not I I problem. pure you in arithmetic the mean No. the orphaned it. a way put

demos have sales products force of for certain them you to number have do when can You too your many demo.

X So have happen. things to

start the salesman products of expect have number first you demo. to have You that to the reducing to

have So the sales. portfolios. demos that's per you back up, that's vertical then that get product. to so get right And where to replenish of catch way And the you number do you to the the the you need

value is Now against This people's equipment. are was problem. -- so to prices sell higher the much charge competitive new mean prepared for technology have. can equipment have we we people pricing respect used with advanced We'll purely those a I that a and that pay throughput premium and catch And to proposition we other that's And pricing. the portfolios a again have we broader just the have better for had advertise the product force. line, And split up in back product to also different on sales with why ways. have side leads too we to and to because we do job much we we the

done going start what all we that to I'm for were process product news development In -- verticals could So have with really to a had on have force the will going drumbeat to bit QX. efficiently, same this we wake-up learned, well. evolve in continue been term. sales to evolve other It's the done But we that my long that's the and in to we to this that, and it its kind to at the a view, was way to really little of perhaps was sustain good that the were it's not call and, certainly time, as us for had sure. and be about adapt something and more lessons of

Operator

Greg Palm another with take Craig-Hallum. from we'll question And

Gregory Palm

few headwinds disruptions. segment, continuation force a about of these talked in you sales continued me. obviously, manufacturing Within FX follow-ups for and, the Just of some XD QX

in a segment in going seasonal So I if this everything than uptick in from given curious sequential I'm to mean, QX. just on, revenue on basis maybe is past. more expect usually, there you be growth year that But some QX in years muted

Robert Seidel

factors footprint. similar would the business, is really you the our would XD I at look if say we've company, the is which, talked FX that manufacturing into company's to percentage for be estimate to the QX is to that our represented points, it going X affected X overall

turnover The certainly those we FTEs the that up. to continue other getting headcount piece saw is and

there year. headwinds that the half that we look So to some when challenges be for I items, those there will at But and us. of quarter better QX, think second there's two going in be between second

Gregory Palm

guess? sales terms best that of jumped terms off? -- some just that level in your of inventory, time didn't projections, comfort Okay. maybe the expected. in working line of Presumably, noticed And enough. I Fair But up QX. obviously, of What's what's as the come your in there again in

Robert Seidel

increased business at past look are improving. year level it our their you turns the just with if the So over the sales has growth, with

forward. So that's a step positive

is, back and it refurbish the our from continuing piece demo field to the other inventory we're cycle The into sell it. inventory,

down of continue forward, sales going this and quarter-to-quarter you looking would to I going through also we're through as as to business, below, go the bring capital in you're just say a it we over go slightly end with But to some that be actively turns if quarter, that in inventory by process. time. get And increase spending your our just inventory. managing there'll inventories are an So the are cyclicalities and then we that the increase

Simon Raab

to both of have piece, another that and to course, we product more that to force have is different accommodate of well and sustain the that sales. for the have is of a sales you as that you products variety There and minimum number

lines. a increase well natural be because well. to should increase managed, the but natural product going there's a it be be So Nevertheless, there different as of will

Operator

with Ricchiuti take Needham. And from next question will our we again Jim

James Ricchiuti

high-profile a aircraft Are very company environment market of automotive supplier. seeing market. The the impact you of in those either with seen these question any really macro specific? softness the verticals of verticals. commercial to from one the in issues, some We've relates the in automotive macro some couple both challenges seeing -- global in We're and

Robert Seidel

We it in term down. important us, to end That's XD to we is in we that quarters. where create us that's really first and, the to being see that headwinds Simon manufacturing an At would certainly XD being in you're see for most necessarily Japan, our this broadly, saw is say automotive market with that for their quarter I end can PMI. manufacturing the direct more saw -- Jim, where where space. related least in had manufacturing we is most an in of that with future quarter, And segment. first correlation slow, we in impact down with some PMI the the markets an certainly most in but relationship those market aerospace lower levels, directly as as our talked industry supplier, going about, of would would say that

just would for Japan us. though, markets So it X first significant really automotive I and slowing South are quarter, India mostly market was for the Korea. say, those and directly then in in the

James Ricchiuti

as appears But, Bob, of persist. some mean, think the quarters, that about of these next may it we I couple issues

concern how So is a that -- of that? much is

Robert Seidel

X We of say, what a point it verification. between a or redefinition than view, had to that around assembly seen business do our portfolio globe. have X with of would a we years concern our because, I relationship broader we've from XD in manufacturing offset the and is the historically, PMIs help products those portfolio ago, of

the offsetting XD that's manufacturing would factor. stronger bit So machine the the working -- automotive brisk, in little certainly, metal was more But if feel we an market, aerospace certainly a the several the about market, next quarters.

Operator

you, turn over further this closing it any we I'll speakers, no seems the call for At the have remarks. to questions. time,

Simon Raab

you speaking for all to forward your attention to today, we and you look soon. Thank

FARO (FARO) 5 May 192019 Q1 Earnings call transcript